UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 21, 2021
Faraday Future Intelligent Electric Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-39395 | 84-4720320 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
| 18455 S. Figueroa Street Gardena, CA |
90248 | |
| (Address of principal executive offices) | (Zip Code) |
(424) 276-7616
(Registrant’s telephone number, including area code)
PROPERTY SOLUTIONS ACQUISITION CORP.
654 Madison Avenue, Suite 1009
New York, New York 10065
(646) 502-9845
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
|
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading Symbol(s) | Name of each exchange on which registered | ||
| Class A common stock, par value $0.0001 per share | FFIE | Nasdaq Stock Market | ||
| Redeemable warrants, exercisable for shares of Class A common stock at an exercise price of $11.50 per share | FFIEW | Nasdaq Stock Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, 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 13(a) of the Exchange Act. ☐
Introductory Note
On July 21, 2021 (the “Closing Date”), Faraday Future Intelligent Electric Inc. (f/k/a Property Solutions Acquisition Corp. (“PSAC”)), a Delaware corporation (the “Company”), consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger, dated as of January 27, 2021 (as amended, the “Merger Agreement”), by and among the Company, PSAC Merger Sub Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands and wholly-owned subsidiary of the Company (“Merger Sub”), and FF Intelligent Mobility Global Holdings Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (“FF”), as amended by the First Amendment to Agreement and Plan of Merger, dated as of February 25, 2021 (the “First Amendment to Merger Agreement”), the Second Amendment to Agreement and Plan of Merger, dated as of May 3, 2021 (“Second Amendment to Merger Agreement”) the Third Amendment to Agreement and Plan of Merger dated as of June 14, 2021 (“Third Amendment to Merger Agreement”) and the Fourth Amendment to Agreement and Plan of Merger dated as of July 12, 2021 (“Fourth Amendment to Merger Agreement”) by and among the Company, Merger Sub, and FF. Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into FF, with FF surviving the merger as a wholly owned subsidiary of the Company (the “Business Combination”). Upon the consummation of the Business Combination (the “Closing”), the registrant changed its name from “Property Solutions Acquisition Corp.” to “Faraday Future Intelligent Electric Inc.”
At the effective time of the Business Combination on July 21, 2021 (the “Effective Time”):
| ● | each outstanding FF share (or indicative FF share, with respect to such outstanding FF converting debt and such other outstanding liabilities of FF) converted into a number of shares of new Class A common stock (or, in the case of FF Top (as defined below), shares of new Class B common stock) of the Company following the Business Combination equal to an exchange ratio (the “Exchange Ratio”) of 0.14130; and |
| ● | each FF option or FF warrant that is outstanding immediately prior to the closing of the Business Combination (and by its terms will not terminate upon the closing of the Business Combination) remained outstanding and converted into the right to purchase a number of shares of Company Class A common stock equal to the number of FF ordinary shares subject to such option or warrant multiplied by the Exchange Ratio at an exercise price per share equal to the current exercise price per share for such option or warrant divided by the Exchange Ratio, with the aggregate amount of shares of Class A common stock issuable upon exercise of such options and warrants to be 44,880,595. |
The Company’s stockholders approved the Business Combination at a special meeting of the stockholders held on July 20, 2021 (the “Special Meeting”). The parties to the Merger Agreement consummated the Business Combination on July 21, 2021.
At the Effective Time, pursuant to the terms of the Merger Agreement, the outstanding FF shares (other than the outstanding FF shares held by FF Top Holding LLC (f/k/a FF Top Holding Ltd.) (“FF Top”)), the outstanding FF converting debt and certain other outstanding liabilities of FF were converted into 153,954,009 shares of new Class A common stock of the Company following the Business Combination and, for FF Top, 64,000,588 shares of new Class B common stock of the Company following the Business Combination. As of the Effective Time, holders of FF options and holders of FF warrants continued to hold such options or warrants, as applicable, but the aggregate amount of shares of Class A common stock issuable upon exercise of such options and warrants became 44,880,595.
Holders of 20,600 shares of PSAC common stock properly exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from PSAC's initial public offering, calculated as of two business days prior to the consummation of the business combination, which was approximately $10.00 per share, or $206,011.70 in the aggregate. At the Effective Time, each non-redeemed outstanding share of PSAC common stock was converted into one share of Class A common stock.
Following the Business Combination, the Company will continue to have outstanding 23,652,119 warrants, consisting of (i) approximately 22,977,568 public warrants (the “Public Warrants”) listed on the Nasdaq Stock Market (the “Nasdaq”) and (ii) 674,551 private warrants (the “Private Warrants” and, collectively with the Public Warrants, the “Warrants”), each exercisable for one share of Company Class A common stock at a price of $11.50 per share.
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In connection with the Business Combination, the Company entered into Subscription Agreements on January 27, 2021 (collectively and as amended, the “Subscription Agreements”) with certain accredited investors or qualified institutional buyers (collectively, the “Subscription Investors”). Pursuant to the Subscription Agreements, the Subscription Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to such Subscription Investors, an aggregate of 76,140,000 shares of PSAC common stock for a purchase price of $10.00 per share, or an aggregate of $761.4 million in gross cash proceeds (the “Private Placement”). Pursuant to the Subscription Agreements, the Company gave certain registration rights to the Subscription Investors with respect to the shares issued and sold in the Private Placement. The closing of the Private Placement occurred immediately prior to the Closing.
A description of the Business Combination and the terms of the Merger Agreement are included in the Company’s definitive proxy statement/consent solicitation statement/prospectus (the “Proxy Statement”) in the sections entitled “The Business Combination Proposal” beginning on page 80 and “Merger Agreement” beginning on page 94 of the Proxy Statement, each of which is incorporated herein by reference. A description of the Subscription Agreements is included in the Proxy Statement in the section entitled “Certain Agreements Related to the Business Combination—Subscription Agreements” beginning on page 104 of the Proxy Statement, which is incorporated herein by reference.
The foregoing description of the Merger Agreement and the Business Combination, including the description of each in the Proxy Statement referenced above, does not purport to be complete and is qualified in its entirety by the full text of the Merger Agreement, as amended by the First Amendment to Merger Agreement, Second Amendment to Merger Agreement and Third Amendment to Merger Agreement, copies of which are included herein as Exhibit 2.1, Exhibit 2.2, Exhibit 2.3 and Exhibit 2.4, respectively, and are incorporated herein by reference.
The foregoing description of the Subscription Agreements, including the description in the Proxy Statement referenced above, does not purport to be complete and is qualified in its entirety by the full text of the form of Subscription Agreement and any amendments thereto, copies of which are included herein as Exhibit 10.2 and are incorporated herein by reference.
| Item 1.01. | Entry into a Material Definitive Agreement. |
Fourth Amendment to Merger Agreement
On July 12, 2021, FF entered into the Fourth Amendment to the Merger Agreement (the “Fourth Amendment to Merger Agreement”). Pursuant to the Fourth Amendment to Merger Agreement, the effective date of the Faraday Future Intelligent Electric Inc. 2021 Stock Incentive Plan was changed from the date of PSAC stockholder approval (July 20, 2021) to the Closing Date (July 21, 2021).
The foregoing description of the Fourth Amendment to Merger Agreement does not purport to be complete and is qualified in its entirety by the terms of the Fourth Amendment to Merger Agreement, a copy of which is attached as Exhibit 2.5 hereto and is incorporated by reference herein.
Shareholder Agreement
On the Closing Date, in connection with the consummation of the Business Combination, the Company, Property Solutions Acquisition Sponsor, LLC, a Delaware limited liability company (the “Sponsor”), and FF Top entered into that certain Shareholder Agreement (the “Shareholder Agreement”). The material terms of the Shareholder Agreement are described in the section of the Proxy Statement entitled “Certain Agreements Related to the Business Combination—Shareholder Agreement” which is incorporated herein by reference. Pursuant to the terms and conditions of the Shareholder Agreement, FF Top is entitled to nominate a number of directors based on its voting power with respect to the Company’s outstanding common stock, which is approximately 37.4% as of the Closing and therefore entitles FF Top to nominate four out of nine directors to the board of directors of the Company subject to the terms and conditions of the Shareholder Agreement.
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The above description of the Shareholder Agreement, including the description in the Proxy Statement referenced above, does not purport to be complete and is qualified in its entirety by the full text of the Shareholder Agreement, which is included herein as Exhibit 10.3 and is incorporated herein by reference.
Amended and Restated Registration Rights Agreement
On the Closing Date, in connection with the consummation of the Business Combination, the Company entered into that certain Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) with PSAC, the Sponsor, EarlyBirdCapital, Inc., and certain FF shareholders (collectively, with each other person who has executed and delivered a joinder thereto, the “RRA Parties”), pursuant to which the RRA Parties are entitled to certain registration rights in respect of the registrable securities under the Registration Rights Agreement. The material terms of the Registration Rights Agreement are described in the section of the Proxy Statement entitled “Certain Agreements Related to the Business Combination—Registration Rights Agreement,” which is incorporated herein by reference.
The above description of the Registration Rights Agreement, including the description in the Proxy Statement referenced above, does not purport to be complete and is qualified in its entirety by the full text of the Registration Rights Agreement, which is included herein as Exhibit 10.1 and is incorporated herein by reference.
Indemnity Agreements
On the Closing Date, the Company entered into indemnity agreements (each, an “Indemnity Agreement”) with certain of its directors and executive officers. These Indemnity Agreements provide such directors and executive officers with contractual rights to indemnification and advancement for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of the Company’s directors or executive officers.
The above description of the Indemnity Agreement does not purport to be complete and is qualified in its entirety by the full text of the form of Indemnity Agreement, which is included herein as Exhibit 10.32 and is incorporated herein by reference.
2021 Stock Incentive Plan
On the Closing Date, in connection with the consummation of the Business Combination, the Company adopted the Faraday Future Intelligent Electric Inc. 2021 Stock Incentive Plan (the “2021 Plan”). The 2021 Plan is described in greater detail in the section of the Proxy Statement entitled “The Incentive Plan Proposal,” beginning on page 136 of the Proxy Statement, which is incorporated herein by reference.
The above description of the 2021 Plan, including the description in the Proxy Statement referenced above, does not purport to be complete and is qualified in its entirety by the full text of the 2021 Plan, which is included herein as Exhibit 10.10 and is incorporated herein by reference.
| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
The disclosure set forth in the “Introductory Note” above is incorporated by reference into this Item 2.01.
FORM 10 INFORMATION
Prior to the Closing, the Company was a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with no operations, formed as a vehicle to effect a business combination with one or more operating businesses. After the Closing, the Company became a holding company whose only assets consist of equity interests in FF.
Item 2.01(f) of Form 8-K (this “Current Report”) states that if the predecessor registrant was a shell company, as the Company was immediately before the Business Combination, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10. Accordingly, the Company is providing the information below that would be included in a Form 10 if we were to file a Form 10.
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Cautionary Note Regarding Forward-Looking Statements
The Company believes that some of the information in this Current Report on Form 8-K constitutes “forward-looking statements” for purposes of the federal securities laws. Forward-looking statements include, but are not limited to, statements regarding the Company’s and the Company's management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “contemplate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Current Report on Form 8-K may include, for example, statements that:
| ● | discuss future expectations; |
| ● | contain projections of future results of operations or financial condition; or |
| ● | state other “forward-looking” information. |
The Company believes it is important to communicate its expectations to its securityholders. However, there may be events in the future that the Company is not able to predict accurately or over which it has no control. The risk factors and cautionary language discussed in this Current Report on Form 8-K provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by the Company in such forward-looking statements, including among other things:
| ● | the ability to maintain the listing of the Company's securities on a national securities exchange; |
| ● | the inability to recognize the anticipated benefits of the Business Combination; |
| ● | changes adversely affecting the business in which the Company is engaged; |
| ● | the Company’s ability to execute on its plans to develop and market its vehicles and the timing of these development programs; |
| ● | the Company’s ability to meet its future capital requirements and manage its indebtedness, including its ability to refinance its current indebtedness; |
| ● | the ability of the Company’s suppliers to deliver necessary components for the Company’s products; |
| ● | the Company’s ability to successfully develop or obtain licenses and other rights to certain technology to reach production for its vehicles; |
| ● | the Company’s ability to remediate the identified material weaknesses in its internal control over financial reporting; |
| ● | the Company’s ability to navigate economic, operational and legal risks specific to operations based in China; |
| ● | the Company’s estimates of the size of the markets for its vehicles; |
| ● | the rate and degree of market acceptance of the Company’s vehicles; |
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| ● | the success of other competing manufacturers; |
| ● | the performance and security of the Company’s vehicles; |
| ● | potential litigation involving the Company; |
| ● | general economic conditions; and |
| ● | the result of future financing efforts. |
Business and Properties
The information set forth in the sections of the Proxy Statement entitled “Other Information Related to PSAC” and “Business of FF” beginning on page 153 and page 161, respectively, of the Proxy Statement is incorporated herein by reference.
The Company’s website is located at www.ff.com. The Company also makes available, free of charge, on its website its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports as soon as reasonably practicable after electronically filing or furnishing those reports to the Securities and Exchange Commission (the “SEC”).
Risk Factors
The information set forth in the section of the Proxy Statement entitled “Forward-Looking Statements” and “Risk Factors” beginning on page 29 and page 31, respectively, of the Proxy Statement is incorporated herein by reference.
Financial Information
The information set forth in the sections of the Proxy Statement entitled “Selected Historical Financial Information of FF” and “Selected Historical Financial Information of PSAC” beginning on page 21 and page 23, respectively, of the Proxy Statement is incorporated herein by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Quantitative and Qualitative Disclosures About Market Risk
The information set forth in the section of the Proxy Statement entitled “FF’s Management’s Discussion and Analysis of Financial Condition and Results Of Operations” beginning on page 182 of the Proxy Statement is incorporated herein by reference.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information known to the Company regarding the beneficial ownership of the Company common stock as of the Closing Date, after giving effect to the Closing, by:
| ● | each person who is known by the Company to be the beneficial owner of more than five percent (5%) of the outstanding shares of the Company common stock; |
| ● | each executive officer and director of the Company; and |
| ● | all current executive officers and directors of the Company, as a group. |
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Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she, or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days.
The beneficial ownership percentages set forth in the table below are based on approximately 324,360,508 shares of Company common stock issued and outstanding as of the Closing Date, after giving effect to the Closing.
Unless otherwise indicated in the footnotes to the table below, and subject to applicable community property laws, the Company believes that all persons named in the table below have sole voting and investment power with respect to their beneficially owned shares of Company common stock.
Unless otherwise indicated, the business address of each person listed in the table below is c/o Faraday Future Intelligent Electric Inc., 18455 S. Figueroa Street, Gardena, California 90248.
Name and Address of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned | Percentage of Outstanding Common Stock | ||||||
| Directors and Executive Officers (1) | ||||||||
| Dr. Carsten Breitfeld | 573,122 | * | ||||||
| Zvi Glasman | 89,490 | * | ||||||
| Yueting Jia (YT Jia) | — | — | ||||||
| Benedikt Hartmann | 105,386 | * | ||||||
| Matthias Aydt | 272,984 | |||||||
| Chui Tin Mok | 517,930 | * | ||||||
| Robert A. Kruse Jr. | 69,657 | * | ||||||
| Hong Rao | 330,996 | * | ||||||
| Jiawei Wang | 1,265,904 | * | ||||||
| Jordan Vogel (2) | 5,173,732 | 1.6 | % | |||||
| Brian Krolicki | 103,620 | — | ||||||
| Edwin Goh | — | — | ||||||
| Qing Ye | 163,270 | * | ||||||
| Lee Liu | — | — | ||||||
| Susan G. Swenson | — | — | ||||||
| Scott D. Vogel | — | — | ||||||
| All executive officers and directors as a group (16 individuals) | 8,666,091 | 2.7 | % | |||||
| Five Percent Holders: | ||||||||
| Season Smart Limited (3) | 66,494,117 | 20.5 | % | |||||
| FF Top Holding LLC (4) | 121,438,964 | 37.4 | % | |||||
| Founding Future Creditors Trust (5) | 19,901,731 | 6.1 | % | |||||
| * | Less than 1%. |
| (1) | Unless otherwise indicated, the business address of each of the individuals is 18455 S. Figueroa Street, Gardena, California 90248. |
| (2) | These shares consist of (i) 4,610,312 shares of Class A common stock and (ii) 563,420 Private Warrants that are exercisable for 664,551 shares of Class A common stock within 60 days of the Closing Date. held by the Sponsor, of which Jordan Vogel and Aaron Feldman are managing members. Accordingly, all securities held by the Sponsor may ultimately be deemed to be beneficially held by Messrs. Vogel and Feldman. Each such person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly. |
| (3) | Season Smart is an indirect subsidiary of China Evergrande Group, a Cayman company. China Evergrande Group holds its interest in Season Smart through a chain of entities, and China Evergrande Group’s direct and indirect subsidiaries through which it holds interest in Season Smart are New Garland Limited (a British Virgin Islands company) Global Development Limited (a Cayman company), Acelin Global Limited (a British Virgin Islands company), Evergrande Health Industry Holdings Limited (a British Virgin Islands company) and China Evergrande New Energy Vehicle Group Limited (a Hong Kong company) (collectively, the “Evergrande Entities”). Each Evergrande Entity, by reason of its ownership of the voting securities of the subsidiary below it in the ownership structure, has the right to elect or appoint a majority of the members of the governing body of that subsidiary and, therefore, to direct the management and policies of that subsidiary. Mr. Hui Ka Yan (“Mr. Hui”) is a controlling shareholder of China Evergrande Group, through his wholly-owned subsidiary, Xin (BVI) Limited (a British Virgin Islands company). Mr. Hui, by reason of his ownership of the voting securities of Xin (BVI) Limited, has the right to elect or appoint the members of the governing body of China Evergrande Group. As a result, each Evergrande Entity, Mr. Hui and Xin (BVI) Limited may be deemed to be the beneficial owner the shares held of record by Season Smart. |
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| (4) | Includes 64,000,588 shares of the Company Class B common stock to be held of record by FF Top and 57,438,376 shares of the Company Class A common stock to be held of record by certain other stockholders subject to voting agreements. Other than Creditor Trust (as defined below), no such other stockholders subject to voting agreements will own more than 5% of the issued and outstanding the Company common stock. FF Top exercises voting power over the shares held by such other stockholders pursuant to voting agreements. |
FF Top is indirectly controlled by Pacific Technology Holding LLC, the managing member of which is FF Global Partners LLC (“FF Global”). FF Global is governed by a board of managers, consisting of eight managers – YT Jia, Matthias Aydt, Jiawei Wang, Tin Mok, Prashant Gulati, Chaoying Deng, Philip Bethell and Carsten Breitfeld. A majority of the board of managers of FF Global is required to approve any actions of FF Global, including actions relating to the voting and disposition of shares of the Company held by FF Top.
| (5) | Founding Future Creditors Trust (“Creditor Trust”) directly holds 19,901,731 shares of the Company common stock. Creditor Trust also holds a 20% preferred membership interest in Pacific Technology Holding LLC but does not control the disposition of any shares of the Company common stock held directly or indirectly by Pacific Technology Holding LLC. Jeffrey D. Prol is the trustee of Creditor Trust (the “Trustee”). The Trustee, solely in his capacity as such and subject to the trust agreement that established and governs Creditor. |
Directors and Executive Officers, Including Description of Board Committees, Director Independence and Executive Compensation
In connection with the Business Combination, the size of the board of directors of the Company (the “Board”) was increased from five to nine members. Each of Aaron Feldman, David Amsterdam, Avi Savar, and Eduardo Abush resigned as directors of the Company, effective as of the Effective Time. As previously disclosed, at the Special Meeting, Dr. Carsten Breitfeld, Matthias Aydt, Qing Ye, Jordan Vogel, Lee Liu, Brian Krolicki (Chairperson), Edwin Goh, Susan G. Swenson and Scott D. Vogel were elected to serve as directors of the Company, effective as of the Effective Time.
The Board has determined that each of Jordan Vogel, Brian Krolicki, Edwin Goh, Lee Liu, Susan G. Swenson and Scott D. Vogel qualify as an independent director as defined under the listing rules of the Nasdaq, and further, the Board consists of a majority of “independent directors,” as defined under the rules of the SEC and the Nasdaq listing rules relating to director independence requirements. Other than those transactions set forth in the section of the Proxy Statement entitled “Certain Relationships and Related Person Transactions” beginning on page 210 of the Proxy Statement, the Board did not consider any other transactions, relationships, or arrangements in determining director independence.
The standing committees of the Board consist of an audit committee (the “Audit Committee”), a compensation committee (the “Compensation Committee”), a nominating committee (the “Nominating Committee”), and a finance and investment committee (the “Finance and Investment Committee”). Each of the committees reports to the Board.
Effective as of the Effective Time;
| ● | the Board appointed Susan Swenson, Edwin Goh, and Scott Vogel to serve on the Audit Committee, with Ms. Swenson serving as chairperson; |
| ● | the Board appointed Lee Liu, Susan Swenson, and Jordan Vogel to serve on the Compensation Committee, with Mr. Liu serving as chairperson; |
| ● | the Board appointed Brian Krolicki, Lee Liu, and Jordan Vogel to serve on the Nominating Committee, with Mr. Krolicki serving as chairperson; and |
| ● | the Board appointed Edwin Goh, Carsten Breitfeld, and Bob Ye to serve on the Finance and Investment Committee, with Mr. Goh serving as chairperson. |
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In connection with the Business Combination, effective as of the Effective Time, the Board appointed Dr. Carsten Breitfeld as Global Chief Executive Officer, Zvi Glasman as Chief Financial Officer and YT Jia as Chief Product & User Ecosystem Officer.
The information set forth in the sections of the Proxy Statement entitled “Management of the Company Following the Business Combination,” “Executive and Director Compensation,” and “Certain Relationships and Related Person Transactions” beginning on page 128, page 143, and page 210 respectively, of the Proxy Statement is incorporated herein by reference. The information set forth in Item 5.02 under the heading “Compensatory Arrangements” of this Current Report is incorporated herein by reference.
The foregoing description of the compensation of the Company’s executive officers, including the description in the Proxy Statement referenced above, does not purport to be complete and is qualified in its entirety by the full text of the officer’s employment agreements and retention agreement, copies of which are attached hereto as Exhibit 10.18, Exhibit 10.19, Exhibit 10.20, Exhibit 10.21, Exhibit 10.22, Exhibit 10.23, Exhibit 10.30, and Exhibit 10.31, respectively, and are incorporated herein by reference.
Certain Relationships and Related Party Transactions
The information set forth in the section of the Proxy Statement entitled “Certain Relationships and Related Person Transactions” beginning on page 210 of the Proxy Statement is incorporated herein by reference.
With respect to the disclosure made about the “Agreement with Riverside Management Group” in the section of the Proxy Statement entitled “Certain Relationships and Related Person Transactions,” following the filing of the Proxy Statement, PSAC entered into an omnibus transaction services fee agreement and acknowledgement with the Sponsor, FF, Riverside Management Group, LLC, a Delaware LLC (“Riverside”) and Philip Kassin, Robert Mancini and James Carpenter (each, a “Service Provider” and, collectively, the “Service Providers”), pursuant to which the Service Providers, together with such other service providers who assisted the Service Providers as identified by the Service Providers, replaced Riverside as the recipients of the cash and share compensations described under the heading “Agreement with Riverside Management Group” in the section of the Proxy Statement entitled “Certain Relationships and Related Person Transactions” in a manner as designated in writing by the Service Providers.
Principal Accountant Fees and Services
The information set forth in the section of the Proxy Statement entitled “Other Information Related to PSAC—Independent Auditors’ Fees” beginning on page 160 of the Proxy Statement is incorporated herein by reference.
Legal Proceedings
The information set forth in the section of the Proxy Statement entitled “Business of FF—Legal Proceedings and Vendor Trust” beginning on page 181 of the Proxy Statement is incorporated herein by reference.
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
Prior to the Closing, the Company’s publicly traded Class A common stock, Public Warrants and units were listed on the Nasdaq Capital Market under the symbols “PSAC,” “PSACW” and “PSACU,” respectively. Upon the Closing, the Company’s common stock and Warrants were listed on the Nasdaq under the symbols “FFIE” and “FFIEW,” respectively. The Company’s publicly traded units automatically separated into their component securities upon the Closing, and as a result, no longer trade as a separate security and were delisted from the Nasdaq.
As of the Closing Date and following the consummation of the Business Combination, the Company had approximately 324,360,508 shares of Company common stock issued and outstanding held of record by 91 holders.
The Company has not paid any cash dividends on shares of its common stock to date. The payment of any cash dividends in the future will be within the discretion of the Board. The payment of cash dividends in the future will be contingent upon the Company’s revenues and earnings, if any, capital requirements, and general financial condition. It is the present intention of Board to retain all earnings, if any, for use in business operations, and accordingly, the Board does not anticipate declaring any dividends in the foreseeable future.
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Recent Sales of Unregistered Securities
The information set forth in Item 3.02 of this Current Report is incorporated herein by reference.
Description of the Registrant’s Securities
A description of the Company common stock and Warrants is included in the section of the Proxy Statement entitled “Description of New FF Securities” beginning on page 223 of the Proxy Statement and is incorporated herein by reference.
Indemnification of Directors and Officers
The information set forth in the section of the Proxy Statement entitled “Description of New FF Securities—Limitation on Liability and Indemnification of Directors and Officers” beginning on page 226 of the Proxy Statement is incorporated herein by reference. The information set forth in Item 1.01 of this Current Report under the heading entitled “Indemnity Agreements” is incorporated herein by reference.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
The information set forth in Item 4.01 of this Current Report is incorporated herein by reference.
Financial Statements and Supplementary Data and Exhibits
The information set forth in Item 9.01 of this Current Report is incorporated herein by reference.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The disclosure set forth in the “Introductory Note” above is incorporated by reference into this Item 3.02.
The securities issued in connection with the Private Placement have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and have been issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. The parties receiving the securities represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution, and appropriate restrictive legends were affixed to the certificates representing the securities (or reflected in restricted book entry with the Company’s transfer agent). The parties also had adequate access, through business or other relationships, to information about the Company.
| Item 4.01. | Changes in the Registrant’s Certifying Accountant. |
On July 21, 2021, the Board informed Marcum LLP (“Marcum”), the Company’s independent registered public accounting firm prior to the Business Combination, that it would be dismissed as the Company’s independent registered public accounting firm following completion of the Company’s review of the quarter ended June 30, 2021, which consists only of the accounts of the pre-Business Combination special purpose acquisition company. The Board approved the engagement of PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the year ending December 31, 2021. PwC served as the independent registered public accounting firm of FF prior to the Business Combination.
The audit report of Marcum on the Company’s financial statements as of December 31, 2020 and for the year ended December 31, 2020 and for the period from February 11, 2020 (date of inception) to December 31, 2020, did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainties, audit scope, or accounting principles except for an explanatory paragraph in such report regarding substantial doubt about the Company’s ability to continue as a going concern.
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During the period from February 11, 2020 (inception) through December 31, 2020, and the subsequent period prior to Marcum’s dismissal on July 21, 2021, there were no “disagreements” (as such term is defined in Item 304(a)(1)(iv) of Regulation S-K) with Marcum on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Marcum, would have caused Marcum to make reference thereto in its reports on PSAC’s financial statements for such periods. During the period from February 11, 2020 (inception) through December 31, 2020 and the subsequent interim period through July 21, 2021, there have been no “reportable events” (as such term is defined in Item 304(a)(1)(v) of Regulation S-K), other than the material weakness in internal controls identified by management related to the accounting for warrants issued in connection with PSAC’s initial public offering, which resulted in the restatement of PSAC’s financial statements as set forth Amendment No. 1 to PSAC’s Form 10-K for the year ended December 31, 2020, as filed with the SEC on May 27, 2021.
During the period from February 11, 2020 (inception) through December 31, 2020 and the subsequent interim period through July 21, 2021, (i) the Company did not both (a) consult with PwC as to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements and (b) receive a written report or oral advice that PwC concluded was an important factor considered by the Company in reaching a decision as to such accounting, auditing, or financial reporting issue; and (ii) the Company did not consult PwC on any matter that was either the subject of a “disagreement” (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a “reportable event” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).
The Company has provided Marcum with a copy of the foregoing disclosures in this Item 4.01 in response to Item 304(a) of Regulation S-K under the Exchange Act (“Regulation S-K”) and has requested that Marcum furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by the registrant in this Item 4.01 in response to Item 304(a) of Regulation S-K and, if not, stating the respects in which it does not agree. A letter from Marcum is attached hereto as Exhibit 16.1.
| Item 5.01. | Changes in Control of the Registrant. |
The information set forth in the “Introductory Note” above and in Item 2.01 of this Current Report is incorporated herein by reference.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
The information set forth above in the sections titled “Directors and Executive Officers, Including Description of Board Committees, Director Independence and Executive Compensation,” "Certain Relationships and Related Party Transactions" and “Indemnification of Directors and Officers” in Item 2.01 to this report is incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
(a) Financial Statements of Businesses Acquired.
The audited consolidated financial statements of FF as of and for the years ended December 31, 2020 and 2019 are included as Exhibit 99.1 and are incorporated herein by reference.
The unaudited condensed consolidated financial statements of FF as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 are included as Exhibit 99.2 and are incorporated herein by reference.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined financial information of the Company for the year ended December 31, 2020 and as of and for the three months ended March 31, 2021 are included as Exhibit 99.3 to this Current Report and incorporated herein by reference.
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(d) Exhibits. The following exhibits are filed with this Current Report:
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| + | Certain schedules and exhibits to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The registrant agrees to furnish supplementally a copy of all omitted schedules and/or exhibits to the Securities and Exchange Commission upon its request. |
| # | Indicates management contract or compensatory plan or arrangement. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: July 22, 2021 | Faraday Future Intelligent Electric Inc. | |
| By: | /s/ Dr. Carsten Breitfeld. | |
| Name: | Dr. Carsten Breitfeld. | |
| Title: | Global Chief Executive Officer | |
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Exhibit 2.5
Execution Version
FOURTH AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS FOURTH AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this “Amendment”) is made as of July 12, 2021 (the “Amendment Date”) by and among Property Solutions Acquisition Corp., a Delaware corporation (“Acquiror”), PSAC Merger Sub Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Merger Sub”), and FF Intelligent Mobility Global Holdings Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (the “Company”). Each of the Company, Merger Sub and Acquiror are referred to herein as a “Party” and together as the “Parties.” Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Merger Agreement (as defined below).
WHEREAS, the Parties entered into that certain Agreement and Plan of Merger, dated as of January 27, 2021, that certain First Amendment to the Agreement and Plan of Merger, dated as of February 25, 2021, that certain Second Amendment to the Agreement and Plan of Merger, dated as of May 3, 2021 and that certain Third Amendment to the Agreement and Plan of Merger, dated as of June 14, 2021 (collectively, the “Merger Agreement”);
WHEREAS, pursuant to Section 11.10 of the Merger Agreement, the Merger Agreement may be amended or modified, in whole or in part, by a duly authorized agreement in writing executed in the same manner as the Merger Agreement that makes reference to the Merger Agreement; and
WHEREAS, the Parties wish to amend the Merger Agreement as set forth in this Amendment.
NOW, THEREFORE, intending to be legally bound and in consideration of the mutual provisions set forth in this Amendment and the Merger Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1
AMENDMENTS TO THE MERGER AGREEMENT
Section 1.1 Amendment to Exhibit K of the Merger Agreement. Exhibit K of the Merger Agreement is hereby amended and restated in its entirety as set forth in Annex A to this Amendment.
ARTICLE 2
MISCELLANEOUS
Section 2.1 No Other Amendment. Except to the extent that any provisions of or any Schedules to the Merger Agreement are expressly amended by Article 1 of this Amendment, all terms and conditions of the Merger Agreement and all other documents, instruments and agreements executed thereunder, shall remain in full force and effect pursuant to the terms thereof. In the event of any inconsistency or contradiction between the terms of this Amendment and the Merger Agreement, the provisions of this Amendment shall prevail and control.
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Section 2.2 Reference to the Merger Agreement. On and after the date hereof, each reference in the Merger Agreement to “this Agreement,” “hereof,” “herein,” “herewith,” “hereunder” and words of similar import shall, unless otherwise stated, be construed to refer to the Merger Agreement as amended by this Amendment. No reference to this Amendment need be made in any instrument or document at any time referring to the Merger Agreement and a reference to the Merger Agreement in any such instrument or document shall be deemed to be a reference to the Merger Agreement as amended by this Amendment.
Section 2.3 General Provisions. Except as set forth in Article 1 of this Amendment, the provisions of Article XI (Miscellaneous) of the Merger Agreement apply equally to this Amendment and are hereby deemed incorporated by reference.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have duly executed this Amendment to be effective as of the Amendment Date.
| PROPERTY SOLUTIONS ACQUISITION CORP. | ||
| By: | /s/ Jordan Vogel | |
| Name: | Jordan Vogel | |
| Title: | Co-Chief Executive Officer & Secretary | |
| PSAC MERGER SUB LTD. | ||
| By: | /s/ Jordan Vogel | |
| Name: | Jordan Vogel | |
| Title: | Director | |
(Signature Page to Fourth Amendment to Agreement and Plan of Merger)
IN WITNESS WHEREOF, the Parties have duly executed this Amendment to be effective as of the Amendment Date.
| FF INTELLIGENT MOBILITY GLOBAL HOLDINGS LTD. | ||
| By: | /s/ Jiawei Wang | |
| Name: | Jiawei Wang | |
| Title: | Director and Vice President | |
(Signature Page to Fourth Amendment to Agreement and Plan of Merger)
ANNEX A
LTIP
(see attached)
FARADAY FUTURE INTELLIGENT ELECTRIC, INC
AMENDED AND RESTATED 2021 STOCK INCENTIVE PLAN
I. INTRODUCTION
1.1 Purposes. The purposes of the Faraday Future Intelligent Electric, Inc. Amended and Restated 2021 Stock Incentive Plan (this “Plan”) are (i) to align the interests of the Company’s stockholders and the recipients of awards under this Plan by increasing the proprietary interest of such recipients in the Company’s growth and success, (ii) to advance the interests of the Company by attracting and retaining Non-Employee Directors, officers, other employees, consultants, independent contractors and agents and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders.
1.2 Certain Definitions.
“Acquisition” shall have the meaning set forth in Section 5.8.
“Agreement” shall mean the written or electronic agreement evidencing an award hereunder between the Company and the recipient of such award.
“Board” shall mean the Board of Directors of the Company.
“Change in Control” shall have the meaning set forth in Section 5.8(b).
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Committee” shall mean the Compensation Committee of the Board, or a subcommittee thereof, or such other committee designated by the Board, in each case, consisting of two or more members of the Board, each of whom is intended to be (i) a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) “independent” within the meaning of the rules of the NASDAQ Capital Market or, if the Common Stock is not listed on the NASDAQ Capital Market, within the meaning of the rules of the principal stock exchange on which the Common Stock is then traded.
“Common Stock” shall mean the Class A common stock, par value $ 0.0001 per share, of the Company, and all rights appurtenant thereto.
“Company” shall mean Faraday Future Intelligent Electric, Inc., a corporation organized under the laws of the State of Delaware, or any successor thereto.
“Data” shall have the meaning set forth in Section 5.15.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Fair Market Value” shall mean the closing transaction price of a share of Common Stock as reported on the NASDAQ Capital Market on the date as of which such value is being determined or, if the Common Stock is not listed on the NASDAQ Capital Market, the closing transaction price of a share of Common Stock on the principal national stock exchange on which the Common Stock is traded on the date as of which such value is being determined or, if there shall be no reported transactions for such date, on the next preceding date for which transactions were reported; provided, however, that if the Common Stock is not listed on a national stock exchange or if Fair Market Value for any date cannot be so determined, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate and in compliance with Section 409A of the Code.
“Free-Standing SAR” shall mean an SAR which is not granted in tandem with, or by reference to, an option, which entitles the holder thereof to receive, upon exercise, shares of Common Stock (which may be Restricted Stock) or, to the extent set forth in the applicable Agreement, cash or a combination thereof, with an aggregate value equal to the excess of the Fair Market Value of one (1) share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of such SARs which are exercised.
“Incentive Stock Option” shall mean an option to purchase shares of Common Stock that meets the requirements of Section 422 of the Code, or any successor provision, which is intended by the Committee to constitute an Incentive Stock Option.
“Non-Employee Director” shall mean any director of the Company who is not an officer or employee of the Company or any Subsidiary.
“Nonqualified Stock Option” shall mean an option to purchase shares of Common Stock which is not an Incentive Stock Option.
“Other Stock Award” shall mean an award granted pursuant to Section 3.4 of the Plan.
“Performance Award” shall mean a right to receive an amount of cash, Common Stock, or a combination of both, contingent upon the attainment of specified Performance Measures within a specified Performance Period.
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“Performance Measures” shall mean the criteria and objectives, established by the Committee, which shall be satisfied or met (i) as a condition to the grant or exercisability of all or a portion of an option or SAR or (ii) during the applicable Restriction Period or Performance Period as a condition to the vesting of the holder’s interest, in the case of a Restricted Stock Award, of the shares of Common Stock subject to such award, or, in the case of a Restricted Stock Unit Award, Other Stock Award or Performance Award, to the holder’s receipt of the shares of Common Stock subject to such award or of payment with respect to such award. One or more of the following business criteria for the Company, on a consolidated basis, and/or for specified Subsidiaries, business or geographical units or operating areas of the Company (except with respect to the total shareholder return and earnings per share criteria) or individual basis, may be used by the Committee in establishing Performance Measures under this Plan: the attainment by a share of Common Stock of a specified Fair Market Value for a specified period of time; increase in stockholder value; earnings per share; return on or net assets; return on equity; return on investments; return on capital or invested capital; total stockholder return; earnings or income of the Company before or after taxes and/or interest; earnings before interest, taxes, depreciation and amortization (“EBITDA”); EBITDA margin; operating income; revenues; operating expenses, attainment of expense levels or cost reduction goals; market share; cash flow, cash flow per share, cash flow margin or free cash flow; interest expense; economic value created; gross profit or margin; operating profit or margin; net cash provided by operations; price-to-earnings growth; and strategic business criteria, consisting of one or more objectives based on meeting specified goals relating to market penetration, customer acquisition, business expansion, cost targets, customer satisfaction, reductions in errors and omissions, reductions in lost business, management of employment practices and employee benefits, supervision of litigation, supervision of information technology, quality and quality audit scores, efficiency, commercial launch of new products, completion of projects, and closing of acquisitions, divestitures, financings or other transactions, or such other goals as the Committee may determine whether or not listed herein. Each such goal may be determined on a pre-tax or post-tax basis or on an absolute or relative basis, and may include comparisons based on current internal targets, the past performance of the Company (including the performance of one or more Subsidiaries, divisions, or operating units) or the past or current performance of other companies or market indices (or a combination of such past and current performance). In addition to the ratios specifically enumerated above, performance goals may include comparisons relating to capital (including, but not limited to, the cost of capital), shareholders’ equity, shares outstanding, assets or net assets, sales, or any combination thereof. In establishing a Performance Measure or determining the achievement of a Performance Measure, the Committee may provide that achievement of the applicable Performance Measures may be amended or adjusted to include or exclude components of any Performance Measure, including, without limitation, foreign exchange gains and losses, asset write-downs, acquisitions and divestitures, change in fiscal year, unbudgeted capital expenditures, special charges such as restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual, infrequently occurring, nonrecurring or one-time events affecting the Company or its financial statements or changes in law or accounting principles. Performance Measures shall be subject to such other special rules and conditions as the Committee may establish at any time.
“Performance Period” shall mean any period designated by the Committee during which (i) the Performance Measures applicable to an award shall be measured and (ii) the conditions to vesting applicable to an award shall remain in effect.
“Person” shall have the meaning set forth in Section 5.8.
“Prior Plans” shall mean the Smart King Ltd. Equity Incentive Plan, the Smart King Ltd. Special Talent Incentive Plan and each other equity plan maintained by FF Intelligent Mobility Global Holdings Ltd. under which awards are outstanding as of the effective date of this Plan.
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“Restricted Stock” shall mean shares of Common Stock which are subject to a Restriction Period and which may, in addition thereto, be subject to the attainment of specified Performance Measures within a specified Performance Period.
“Restricted Stock Award” shall mean an award of Restricted Stock under this Plan.
“Restricted Stock Unit” shall mean a right to receive one (1) share of Common Stock or, in lieu thereof and to the extent set forth in the applicable Agreement, the Fair Market Value of such share of Common Stock in cash, which shall be contingent upon the expiration of a specified Restriction Period and which may, in addition thereto, be contingent upon the attainment of specified Performance Measures within a specified Performance Period.
“Restricted Stock Unit Award” shall mean an award of Restricted Stock Units under this Plan.
“Restriction Period” shall mean any period designated by the Committee during which (i) the Common Stock subject to a Restricted Stock Award may not be sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or disposed of, except as provided in this Plan or the Agreement relating to such award, or (ii) the conditions to vesting applicable to a Restricted Stock Unit Award or Other Stock Award shall remain in effect.
“SAR” shall mean a stock appreciation right which may be a Free-Standing SAR or a Tandem SAR.
“Stock Award” shall mean a Restricted Stock Award, Restricted Stock Unit Award or Other Stock Award.
“Subsidiary” shall mean any corporation, limited liability company, partnership, joint venture or similar entity in which the Company owns, directly or indirectly, an equity interest possessing more than 50% of the combined voting power of the total outstanding equity interests of such entity.
“Substitute Award” shall mean an award granted under this Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, including a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an option or SAR.
“Tandem SAR” shall mean an SAR which is granted in tandem with, or by reference to, an option (including a Nonqualified Stock Option granted prior to the date of grant of the SAR), which entitles the holder thereof to receive, upon exercise of such SAR and surrender for cancellation of all or a portion of such option, shares of Common Stock (which may be Restricted Stock) or, to the extent set forth in the applicable Agreement, cash or a combination thereof, with an aggregate value equal to the excess of the Fair Market Value of one (1) share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of shares of Common Stock subject to such option, or portion thereof, which is surrendered.
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“Tax Date” shall have the meaning set forth in Section 5.5.
“Ten Percent Holder” shall have the meaning set forth in Section 2.1(a).
1.3 Administration. This Plan shall be administered by the Committee. Any one or a combination of the following awards may be made under this Plan to eligible persons: (i) options to purchase shares of Common Stock in the form of Incentive Stock Options or Nonqualified Stock Options; (ii) SARs in the form of Tandem SARs or Free-Standing SARs; (iii) Stock Awards in the form of Restricted Stock, Restricted Stock Units or Other Stock Awards; and (iv) Performance Awards. The Committee shall, subject to the terms of this Plan, select eligible persons for participation in this Plan and determine the form, amount and timing of each award to such persons and, if applicable, the number of shares of Common Stock subject to an award, the number of SARs, the number of Restricted Stock Units, the dollar value subject to a Performance Award, the purchase price or base price associated with the award, the time and conditions of exercise or settlement of the award and all other terms and conditions of the award, including, without limitation, the form of the Agreement evidencing the award. The Committee may, in its sole discretion and for any reason at any time, take action such that (i) any or all outstanding options and SARs shall become exercisable in part or in full, (ii) all or a portion of the Restriction Period applicable to any outstanding awards shall lapse, (iii) all or a portion of the Performance Period applicable to any outstanding awards shall lapse and (iv) the Performance Measures (if any) applicable to any outstanding awards shall be deemed to be satisfied at the target, maximum or any other level. The Committee shall, subject to the terms of this Plan, interpret this Plan and the application thereof, establish rules and regulations it deems necessary or desirable for the administration of this Plan and may impose, incidental to the grant of an award, conditions with respect to the award, such as limiting competitive employment or other activities. All such interpretations, rules, regulations and conditions shall be conclusive and binding on all parties.
The Committee may delegate some or all of its power and authority hereunder to the Board (or any members thereof) or, subject to applicable law, to a subcommittee of the Board, a member of the Board, the Chief Executive Officer or other executive officer of the Company as the Committee deems appropriate; provided, however, that the Committee may not delegate its power and authority to a member of the Board, the Chief Executive Officer or other executive officer of the Company with regard to the selection for participation in this Plan of an officer, director or other person subject to Section 16 of the Exchange Act or decisions concerning the timing, pricing or amount of an award to such an officer, director or other person.
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No member of the Board or Committee, and neither the Chief Executive Officer nor any other executive officer to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Board and the Committee and the Chief Executive Officer or other executive officer shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company’s Certificate of Incorporation and/or By-laws) and under any directors’ and officers’ liability insurance that may be in effect from time to time.
1.4 Eligibility. Participants in this Plan shall consist of such officers, other employees, Non- Employee Directors, consultants, independent contractors, agents, and persons expected to become officers, other employees, Non-Employee Directors, consultants, independent contractors and agents of the Company and its Subsidiaries as the Committee in its sole discretion may select from time to time, provided such persons are eligible to receive awards of shares of Common Stock that are registered on a Form S-8 registration statement. The Committee’s selection of a person to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any other time. Except as otherwise provided for in an Agreement, for purposes of this Plan, references to employment by the Company shall also mean employment by a Subsidiary, and references to employment shall include service as a Non-Employee Director, consultant, independent contractor or agent. The Committee shall determine, in its sole discretion, the extent to which a participant shall be considered employed during an approved leave of absence. The aggregate value of cash compensation and the grant date fair value of shares of Common Stock that may be awarded or granted during any fiscal year of the Company to any Non-Employee Director shall not in the aggregate exceed $750,000.
1.5 Shares Available. Subject to adjustment as provided in Section 5.7 and to all other limits set forth in this Plan, 48,848,050 shares of Common Stock shall initially be available for all awards under this Plan, other than Substitute Awards. Subject to adjustment as provided in Section 5.7, no more than 48,848,050 shares of Common Stock in the aggregate may be issued under the Plan in connection with Incentive Stock Options. The number of shares of Common Stock available under the Plan shall increase annually on the first day of each calendar year, beginning with the calendar year ending December 31, 2022, and continuing until (and including) the calendar year ending December 31, 2031, with such annual increase equal to the lesser of (i) 5% of the number of shares of Stock issued and outstanding on December 31 of the immediately preceding fiscal year and (ii) an amount determined by the Board. The number of shares of Common Stock that remain available for future grants under the Plan shall be reduced by the sum of the aggregate number of shares of Common Stock that become subject to outstanding options, outstanding Free-Standing SARs, outstanding Stock Awards and outstanding Performance Awards denominated in shares of Common Stock, other than Substitute Awards.
Following approval of the Plan by the stockholders of the Company, the Company shall cease granting awards under the Prior Plans. However, outstanding awards previously granted under the Prior Plans shall remain subject to the terms and conditions of the Prior Plans and shall not be not be subject to the terms and conditions of the Plan.
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To the extent that shares of Common Stock subject to an outstanding option, SAR, Stock Award or Performance Award granted under the Plan or a Prior Plan, other than Substitute Awards, are not issued or delivered by reason of (i) the expiration, termination, cancellation or forfeiture of such award (excluding shares subject to an option cancelled upon settlement in shares of a related Tandem SAR or shares subject to a Tandem SAR cancelled upon exercise of a related option) or (ii) the settlement of such award in cash, then such shares of Common Stock shall again be available under this Plan. In addition, shares of Common Stock subject to an award under this Plan or a Prior Plan shall again be available for issuance under this Plan if such shares are (x) shares that were subject to an option or stock-settled SAR and were not issued or delivered upon the net settlement or net exercise of such option or SAR or (y) shares delivered to or withheld by the Company to pay the purchase price or the withholding taxes related to an outstanding award. Notwithstanding the foregoing, shares repurchased by the Company on the open market with the proceeds of an option exercise shall not again be available for issuance under this Plan.
The number of shares of Common Stock available for awards under this Plan shall not be reduced by (i) the number of shares of Common Stock subject to Substitute Awards or (ii) available shares under a stockholder approved plan of a company or other entity which was a party to a corporate transaction with the Company (as appropriately adjusted to reflect such corporate transaction) which become subject to awards granted under this Plan (subject to applicable stock exchange requirements).
Shares of Common Stock to be delivered under this Plan shall be made available from authorized and unissued shares of Common Stock, or authorized and issued shares of Common Stock reacquired and held as treasury shares or otherwise or a combination thereof.
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 Stock Options. The Committee may, in its discretion, grant options to purchase shares of Common Stock to such eligible persons as may be selected by the Committee. Each option, or portion thereof, that is not an Incentive Stock Option, shall be a Nonqualified Stock Option. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of shares of Common Stock with respect to which options designated as Incentive Stock Options are exercisable for the first time by a participant during any calendar year (under this Plan or any other plan of the Company, or any parent or Subsidiary) exceeds the amount (currently $100,000) established by the Code, such options shall constitute Nonqualified Stock Options.
Options shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common Stock subject to an option and the purchase price per share of Common Stock purchasable upon exercise of the option shall be determined by the Committee; provided, however, that the purchase price per share of Common Stock purchasable upon exercise of an option shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such option; provided further, that if an Incentive Stock Option shall be granted to any person who, at the time such option is granted, owns capital stock possessing more than 10 percent of the total combined voting power of all classes of capital stock of the Company (or of any parent or Subsidiary) (a “Ten Percent Holder”), the purchase price per share of Common Stock shall not be less than the price (currently 110% of Fair Market Value) required by the Code in order to constitute an Incentive Stock Option.
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Notwithstanding the foregoing, in the case of an option that is a Substitute Award, the purchase price per share of the shares subject to such option may be less than 100% of the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate purchase price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor company or other entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate purchase price of such shares.
(b) Option Period and Exercisability. The period during which an option may be exercised shall be determined by the Committee; provided, however, that no option shall be exercised later than 10 years after its date of grant; provided further, that if an Incentive Stock Option shall be granted to a Ten Percent Holder, such option shall not be exercised later than five (5) years after its date of grant. The Committee may, in its discretion, establish Performance Measures which shall be satisfied or met as a condition to the grant of an option or to the exercisability of all or a portion of an option. The Committee shall determine whether an option shall become exercisable in cumulative or non-cumulative installments and in part or in full at any time. An exercisable option, or portion thereof, may be exercised only with respect to whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by giving written notice to the Company specifying the number of whole shares of Common Stock to be purchased and accompanying such notice with payment therefor in full (or arrangement made for such payment to the Company’s satisfaction) either (A) in cash or check, (B) by delivery (either actual delivery or by attestation procedures established by the Company) of shares of Common Stock having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (C) authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the date of exercise, equal to the amount necessary to satisfy such obligation, (D) in cash by a broker-dealer acceptable to the Company to whom the participant has submitted an irrevocable notice of exercise, (E) such other methods permitted by applicable law, or (F) a combination of the foregoing, in each case, to the extent set forth in the Agreement relating to the option, (ii) if applicable, by surrendering to the Company any Tandem SARs which are cancelled by reason of the exercise of the option and (iii) by executing such documents as the Company may reasonably request. Any fraction of a share of Common Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the participant. No shares of Common Stock shall be issued and no certificate representing Common Stock shall be delivered until the full purchase price therefor and any withholding taxes thereon, as described in Section 5.5, have been paid (or arrangement made for such payment to the Company’s satisfaction).
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2.2 Stock Appreciation Rights. The Committee may, in its discretion, grant SARs to such eligible persons as may be selected by the Committee. The Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of SARs and Base Price. The number of SARs subject to an award shall be determined by the Committee. Any Tandem SAR related to an Incentive Stock Option shall be granted at the same time that such Incentive Stock Option is granted. The base price of a Tandem SAR shall be the purchase price per share of Common Stock of the related option. The base price of a Free-Standing SAR shall be determined by the Committee; provided, however, that such base price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such SAR (or, if earlier, the date of grant of the option for which the SAR is exchanged or substituted).
Notwithstanding the foregoing, in the case of an SAR that is a Substitute Award, the base price per share of the shares subject to such SAR may be less than 100% of the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate base price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor company or other entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate base price of such shares.
(b) Exercise Period and Exercisability. The period for the exercise of an SAR shall be determined by the Committee; provided, however, that (i) no Tandem SAR shall be exercised later than the expiration, cancellation, forfeiture or other termination of the related option and (ii) no Free-Standing SAR shall be exercised later than 10 years after its date of grant. The Committee may, in its discretion, establish Performance Measures which shall be satisfied or met as a condition to the grant of an SAR or to the exercisability of all or a portion of an SAR. The Committee shall determine whether an SAR may be exercised in cumulative or non-cumulative installments and in part or in full at any time. An exercisable SAR, or portion thereof, may be exercised, in the case of a Tandem SAR, only with respect to whole shares of Common Stock and, in the case of a Free-Standing SAR, only with respect to a whole number of SARs. If an SAR is exercised for shares of Restricted Stock, a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section 3.2(c), or such shares shall be transferred to the holder in book entry form with restrictions on the shares duly noted, and the holder of such Restricted Stock shall have such rights of a stockholder of the Company as determined pursuant to Section 3.2(d). Prior to the exercise of a stock-settled SAR, the holder of such SAR shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such SAR.
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(c) Method of Exercise. A Tandem SAR may be exercised (i) by giving written notice to the Company specifying the number of whole SARs which are being exercised, (ii) by surrendering to the Company any options which are cancelled by reason of the exercise of the Tandem SAR and (iii) by executing such documents as the Company may reasonably request. A Free-Standing SAR may be exercised (A) by giving written notice to the Company specifying the whole number of SARs which are being exercised and (B) by executing such documents as the Company may reasonably request. No shares of Common Stock shall be issued and no certificate representing Common Stock shall be delivered until any withholding taxes thereon, as described in Section 5.5, have been paid (or arrangement made for such payment to the Company’s satisfaction).
2.3 Termination of Employment or Service. All of the terms relating to the exercise, cancellation or other disposition of an option or SAR (i) upon a termination of employment with or service to the Company of the holder of such option or SAR, as the case may be, whether by reason of termination, resignation, disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable Agreement.
2.4 Repricing. The Committee shall have the discretion, without the approval of the stockholders of the Company, to (i) reduce the purchase price or base price of any previously granted option or SAR, (ii) cancel any previously granted option or SAR in exchange for another option or SAR with a lower purchase price or base price or (iii) cancel any previously granted option or SAR in exchange for cash or another award if the purchase price of such option or the base price of such SAR exceeds the Fair Market Value of a share of Common Stock on the date of such cancellation.
2.5 No Dividend Equivalents. Notwithstanding anything in an Agreement to the contrary, the holder of an option or SAR shall not be entitled to receive dividend equivalents with respect to the number of shares of Common Stock subject to such option or SAR.
III. STOCK AWARDS
3.1 Stock Awards. The Committee may, in its discretion, grant Stock Awards to such eligible persons as may be selected by the Committee. The Agreement relating to a Stock Award shall specify whether the Stock Award is a Restricted Stock Award, a Restricted Stock Unit Award or, in the case of an Other Stock Award, the type of award being granted.
3.2 Terms of Restricted Stock Awards. Restricted Stock Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common Stock subject to a Restricted Stock Award and the Restriction Period, Performance Period (if any) and Performance Measures (if any) applicable to a Restricted Stock Award shall be determined by the Committee.
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(b) Vesting and Forfeiture. The Agreement relating to a Restricted Stock Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of the shares of Common Stock subject to such award (i) if the holder of such award remains continuously in the employment of the Company during the specified Restriction Period or (ii) if specified Performance Measures (if any) are satisfied or met during a specified Performance Period, and for the forfeiture of the shares of Common Stock subject to such award (x) if the holder of such award does not remain continuously in the employment of the Company during the specified Restriction Period or (y) if specified Performance Measures (if any) are not satisfied or met during a specified Performance Period.
(c) Stock Issuance. During the Restriction Period, the shares of Restricted Stock shall be held by a custodian in book entry form with restrictions on such shares duly noted or, alternatively, a certificate or certificates representing a Restricted Stock Award shall be registered in the holder’s name and may bear a legend, in addition to any legend which may be required pursuant to Section 5.6, indicating that the ownership of the shares of Common Stock represented by such certificate is subject to the restrictions, terms and conditions of this Plan and the Agreement relating to the Restricted Stock Award. All such certificates shall be deposited with the Company, together with stock powers or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate, which would permit transfer to the Company of all or a portion of the shares of Common Stock subject to the Restricted Stock Award in the event such award is forfeited in whole or in part. Upon termination of any applicable Restriction Period (and the satisfaction or attainment of applicable Performance Measures), subject to the Company’s right to require payment of any taxes in accordance with Section 5.5, the restrictions shall be removed from the requisite number of any shares of Common Stock that are held in book entry form, and all certificates evidencing ownership of the requisite number of shares of Common Stock shall be delivered to the holder of such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise set forth in the Agreement relating to a Restricted Stock Award, and subject to the terms and conditions of a Restricted Stock Award, the holder of such award shall have all rights as a stockholder of the Company, including, but not limited to, voting rights, the right to receive dividends and the right to participate in any capital adjustment applicable to all holders of Common Stock; provided, however, that a distribution or dividend with respect to shares of Common Stock, including a regular cash dividend, shall be deposited with the Company and shall be subject to the same restrictions as the shares of Common Stock with respect to which such distribution was made.
(e) Section 83(b) Election. If a participant makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which such participant would otherwise be taxable under Section 83(a) of the Code, such participant shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service along with proof of the timely filing thereof.
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3.3 Terms of Restricted Stock Unit Awards. Restricted Stock Unit Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(b) Number of Shares and Other Terms. The number of shares of Common Stock subject to a Restricted Stock Unit Award, including the number of shares that are earned upon the attainment of any specified Performance Measures, and the Restriction Period, Performance Period (if any) and Performance Measures (if any) applicable to a Restricted Stock Unit Award shall be determined by the Committee.
(c) Vesting and Forfeiture. The Agreement relating to a Restricted Stock Unit Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of such Restricted Stock Unit Award (i) if the holder of such award remains continuously in the employment of the Company during the specified Restriction Period or (ii) if specified Performance Measures (if any) are satisfied or met during a specified Performance Period, and for the forfeiture of the shares of Common Stock subject to such award (x) if the holder of such award does not remain continuously in the employment of the Company during the specified Restriction Period or (y) if specified Performance Measures (if any) are not satisfied or met during a specified Performance Period.
(d) Settlement of Vested Restricted Stock Unit Awards. The Agreement relating to a Restricted Stock Unit Award shall specify (i) whether such award may be settled in shares of Common Stock or cash or a combination thereof and (ii) whether the holder thereof shall be entitled to receive, on a current or deferred basis, dividend equivalents, and, if determined by the Committee, interest on, or the deemed reinvestment of, any deferred dividend equivalents, with respect to the number of shares of Common Stock subject to such award. Any dividend equivalents with respect to Restricted Stock Units shall be subject to the same vesting conditions as the underlying awards. Prior to the settlement of a Restricted Stock Unit Award, the holder of such award shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such award.
3.4 Other Stock Awards. Subject to the limitations set forth in the Plan, the Committee is authorized to grant other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock, including without limitation shares of Common Stock granted as a bonus and not subject to any vesting conditions, dividend equivalents, deferred stock units, stock purchase rights and shares of Common Stock issued in lieu of obligations of the Company to pay cash under any compensatory plan or arrangement, subject to such terms as shall be determined by the Committee. The Committee shall determine the terms and conditions of such awards, which may include the right to elective deferral thereof, subject to such terms and conditions as the Committee may specify in its discretion. Any distribution, dividend or dividend equivalents with respect to Other Stock Awards shall be subject to the same vesting conditions as the underlying awards.
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3.5 Termination of Employment or Service. All of the terms relating to the satisfaction of Performance Measures and the termination of the Restriction Period or Performance Period relating to a Stock Award, or any forfeiture and cancellation of such award (i) upon a termination of employment with or service to the Company of the holder of such award, whether by reason of termination, resignation, disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable Agreement.
IV. PERFORMANCE AWARDS
4.1 Performance Awards. The Committee may, in its discretion, grant Performance Awards to such eligible persons as may be selected by the Committee.
4.2 Terms of Performance Awards. Performance Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Value of Performance Awards and Performance Measures. The method of determining the value of the Performance Award and the Performance Measures and Performance Period applicable to a Performance Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Performance Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of such Performance Award if the specified Performance Measures are satisfied or met during the specified Performance Period and for the forfeiture of such award if the specified Performance Measures are not satisfied or met during the specified Performance Period.
(c) Settlement of Vested Performance Awards. The Agreement relating to a Performance Award shall specify whether such award may be settled in shares of Common Stock (including shares of Restricted Stock) or cash or a combination thereof. If a Performance Award is settled in shares of Restricted Stock, such shares of Restricted Stock shall be issued to the holder in book entry form or a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section 3.2(c) and the holder of such Restricted Stock shall have such rights as a stockholder of the Company as determined pursuant to Section 3.2(d). Any dividends or dividend equivalents with respect to a Performance Award shall be subject to the same vesting restrictions as such Performance Award. Prior to the settlement of a Performance Award in shares of Common Stock, including Restricted Stock, the holder of such award shall have no rights as a stockholder of the Company.
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4.3 Termination of Employment or Service. All of the terms relating to the satisfaction of Performance Measures and the termination of the Performance Period relating to a Performance Award, or any forfeiture and cancellation of such award (i) upon a termination of employment with or service to the Company of the holder of such award, whether by reason of termination, resignation, disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable Agreement.
V. GENERAL
5.1 Effective Date and Term of Plan. This Plan shall be submitted to the stockholders of the Company for approval at a special meeting of stockholders in 2021 and shall become effective as of the closing of the business combination consummated pursuant to the Agreement and Plan of Merger, dated as of January 27, 2021, as amended by the First Amendment to Agreement and Plan of Merger dated as of February 25, 2021, the Second Amendment to Agreement and Plan of Merger dated as of May 3, 2021, the Third Amendment to Agreement and Plan of Merger dated as of June 14, 2021 and the Fourth Amendment to Agreement and Plan of Merger dated as of July 12, 2021, by and among Property Solutions Acquisition Corp., PSAC Merger Sub Ltd., and FF Intelligent Mobility Global Holdings Ltd. This Plan shall terminate on the 10th anniversary of the date on which the Plan was approved by stockholders, unless terminated earlier by the Board. Termination of this Plan shall not affect the terms or conditions of any award granted prior to termination.
Awards hereunder may be made at any time prior to the termination of this Plan, provided that no Incentive Stock Option may be granted later than 10 years after the date on which the Plan was approved by the Board. In the event that this Plan is not approved by the stockholders of the Company, this Plan and any awards hereunder shall be void and of no force or effect.
5.2 Amendments. The Board or, subject to applicable law, the Committee may amend, modify, or terminate this Plan or any Agreement as it shall deem advisable; provided, however, that no amendment to the Plan or any Agreement shall be effective without the approval of the Company’s stockholders if (i) stockholder approval is required by applicable law, rule or regulation, including any rule of the NASDAQ Capital Market, or any other stock exchange on which the Common Stock is then traded, or (ii) such amendment seeks to modify the Non- Employee Director compensation limit set forth in Section 1.3; provided further, that no amendment may materially impair the rights of a holder of an outstanding award without the consent of such holder. Notwithstanding anything herein to the contrary, the Board may amend the Plan or any Agreement at any time without the consent of a holder of an outstanding award to company with applicable law, including Section 409A of the Code.
5.3 Agreement. Each award under this Plan shall be evidenced by an Agreement setting forth the terms and conditions applicable to such award. No award shall be valid until an Agreement is executed by the Company and, to the extent required by the Company, executed or electronically accepted by the recipient of such award. Upon such execution or acceptance and delivery of the Agreement to the Company within the time period specified by the Company, such award shall be effective as of the effective date set forth in the Agreement.
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5.4 Non-Transferability. No award shall be transferable other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company or, to the extent expressly permitted in the Agreement relating to such award, to the holder’s family members, a trust or entity established by the holder for estate planning purposes, a charitable organization designated by the holder or pursuant to a domestic relations order, in each case, without consideration. Except to the extent permitted by the foregoing sentence or the Agreement relating to an award, each award may be exercised or settled during the holder’s lifetime only by the holder or the holder’s legal representative or similar person. Except as permitted by the second preceding sentence, no award may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any award, such award and all rights thereunder shall immediately become null and void.
5.5 Tax Withholding. The Company shall have the right to require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash pursuant to an award made hereunder, payment by the holder of such award of any federal, state, local or other taxes which may be required to be withheld or paid in connection with such award. An Agreement may provide that (i) the Company shall withhold whole shares of Common Stock which would otherwise be delivered to a holder, having an aggregate Fair Market Value determined as of the date the obligation to withhold or pay taxes arises in connection with an award (the “Tax Date”), or withhold an amount of cash which would otherwise be payable to a holder, in the amount necessary to satisfy any such obligation or (ii) the holder may satisfy any such obligation by any of the following means: (A) a cash or check payment to the Company; (B) delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously owned whole shares of Common Stock having an aggregate Fair Market Value, determined as of the Tax Date, equal to the amount necessary to satisfy any such obligation; (C) authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the Tax Date, or withhold an amount of cash which would otherwise be payable to a holder, in either case equal to the amount necessary to satisfy any such obligation; (D) a cash payment by a broker-dealer acceptable to the Company to whom the participant has submitted an irrevocable notice of exercise or sale, (E) such other methods permitted by applicable law, or (F) a combination of the foregoing, in each case to the extent set forth in the Agreement relating to the award. Shares of Common Stock to be delivered or withheld may not have an aggregate Fair Market Value in excess of the amount determined by applying the minimum statutory withholding rate (or, if permitted by the Company, such other rate as will not cause adverse accounting consequences under the accounting rules then in effect, and is permitted under applicable Internal Revenue Service withholding rules). Any fraction of a share of Common Stock which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder.
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5.6 Restrictions on Shares. Each award made hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of the shares of Common Stock subject to such award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates evidencing shares of Common Stock delivered pursuant to any award made hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder.
5.7 Adjustment. In the event of any equity restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation or any successor or replacement accounting standard) that causes the per share value of shares of Common Stock to change, such as a stock dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary cash dividend, the number and class of securities available under this Plan, the terms of each outstanding option and SAR (including the number and class of securities subject to each outstanding option or SAR and the purchase price or base price per share), the terms of each outstanding Stock Award (including the number and class of securities subject thereto), and the terms of each outstanding Performance Award (including the number and class of securities subject thereto, if applicable), shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding options and SARs in accordance with Section 409A of the Code. In the event of any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Company, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of rights of participants. In either case, the decision of the Committee regarding any such adjustment shall be final, binding and conclusive.
5.8 Change in Control.
(a) Subject to the terms of the applicable Agreements, in the event of a “Change in Control,” the Board, as constituted prior to the Change in Control, may, in its discretion:
| (1) | require that (i) some or all outstanding options and SARs shall become exercisable in full or in part, either immediately or upon a subsequent termination of employment, (ii) the Restriction Period applicable to some or all outstanding Stock Awards shall lapse in full or in part, either immediately or upon a subsequent termination of employment, (iii) the Performance Period applicable to some or all outstanding awards shall lapse in full or in part, and (iv) the Performance Measures applicable to some or all outstanding awards shall be deemed to be satisfied at the target, maximum or any other level; |
| (2) | require that shares of capital stock of the corporation resulting from or succeeding to the business of the Company pursuant to such Change in Control (or a parent corporation thereof) or other property be substituted for some or all of the shares of Common Stock subject to an outstanding award, with an appropriate and equitable adjustment to such award as determined by the Board in accordance with Section 5.7; and/or |
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| (3) | require outstanding awards, in whole or in part, to be surrendered to the Company by the holder, and to be immediately cancelled by the Company, and to provide for the holder to receive (i) a cash payment in an amount equal to (A) in the case of an option or an SAR, the aggregate number of shares of Common Stock then subject to the portion of such option or SAR surrendered, whether or not vested or exercisable, multiplied by the excess, if any, of the Fair Market Value of a share of Common Stock as of the date of the Change in Control, over the purchase price or base price per share of Common Stock subject to such option or SAR; provided, however, that if the purchase price or base price per share of Common Stock subject to such option or SAR exceeds the Fair Market Value of a share of Common Stock as of the date of the Change in Control, such option or SAR may be cancelled for no consideration, (B) in the case of a Stock Award or a Performance Award denominated in shares of Common Stock, the number of shares of Common Stock then subject to the portion of such award surrendered to the extent the Performance Measures applicable to such award have been satisfied or are deemed satisfied pursuant to Section 5.8(a)(i), whether or not vested, multiplied by the Fair Market Value of a share of Common Stock as of the date of the Change in Control, and (C) in the case of a Performance Award denominated in cash, the value of the Performance Award then subject to the portion of such award surrendered to the extent the Performance Measures applicable to such award have been satisfied or are deemed satisfied pursuant to Section 5.8(a)(i); (ii) shares of capital stock of the corporation resulting from or succeeding to the business of the Company pursuant to such Change in Control (or a parent corporation thereof) or other property, having a fair market value not less than the amount determined under clause (i) above; or (iii) a combination of the payment of cash pursuant to clause (i) above and the issuance of shares or other property pursuant to clause (ii) above. |
(b) For purposes of this Plan, a “Change in Control” shall be deemed to have occurred under the following circumstances:
| (1) | Change in Ownership of the Company. A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the shares of the Company that, together with the shares held by such Person, constitutes more than fifty percent (50%) of the total voting power of the shares of the Company (an “Acquisition”); provided, however, that for purposes of this subsection, the acquisition of additional shares by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the shares of the Company will not be considered an Acquisition; provided, further, that any change in the ownership of the shares of the Company as a result of a private financing of the Company that is approved by the Board also will not be considered an Acquisition. Further, if the members of the Company immediately before such change in ownership continue to retain immediately after the change in ownership, in substantially the same proportions as their ownership of shares of the Company’s voting shares immediately prior to the change in ownership, direct or indirect beneficial ownership of fifty percent (50%) or more of the total voting power of the shares of the Company or of the ultimate parent entity of the Company, such event shall not be considered an Acquisition under this Section 5.8(b)(1). For this purpose, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company, as the case may be, either directly or through one or more subsidiary corporations or other business entities; |
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| (2) | Change in Effective Control of the Company. If the Company has a class of securities registered pursuant to Section 12 of the Exchange Act, a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this Section 5.8(b)(2), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered an Acquisition; |
| (3) | Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (c), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets: (A) a transfer to an entity that is controlled by the Company’s members immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a member of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s shares, an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding shares of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (b)(3). For purposes of this Section 5.8(b)(3), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. |
provided, that with respect to any nonqualified deferred compensation that becomes payable on account of the Change in Control, the transaction or event described in clause (1), (2) or (3) also constitutes a “change in control event,” as defined in Treasury Regulation §1.409A-3(i)(5) if required in order for the payment not to violate Section 409A of the Code.
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For purposes of this Section 5.8, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of shares, or similar business transaction with the Company.
Further and for the avoidance of doubt, the following transactions will not constitute an Acquisition: (i) a transaction if its sole purpose is to change the jurisdiction of the Company’s incorporation; (ii) a transaction if its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction or (iii) an acquisition of additional voting power of shares held by FF Top Holding LLC, a Delaware limited liability company, as a result of the increase in voting power attributed to a share of Class B common stock, par value $ 0.0001 per share, of the Company, following the occurrence of a qualifying equity market capitalization of the Company in accordance with the Company’s Second Amended and Restated Certificate of Incorporation (as the same may be amended, restated or otherwise modified from time-to-time).
In addition, a “Person,” as used in this Section 5.8, shall not include (w) the Company or any of its Affiliates; (x) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries; (y) an underwriter temporarily holding securities pursuant to an offering of such securities; or (z) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
5.9 Deferrals. The Committee may determine that the delivery of shares of Common Stock or the payment of cash, or a combination thereof, upon the settlement of all or a portion of any award made hereunder shall be deferred, or the Committee may, in its sole discretion, approve deferral elections made by holders of awards. Deferrals shall be for such periods and upon such terms as the Committee may determine in its sole discretion, subject to the requirements of Section 409A of the Code.
5.10 No Right of Participation, Employment or Service. Unless otherwise set forth in an employment agreement, no person shall have any right to participate in this Plan. Neither this Plan nor any award made hereunder shall confer upon any person any right to continued employment by or service with the Company, any Subsidiary or any affiliate of the Company or affect in any manner the right of the Company, any Subsidiary or any affiliate of the Company to terminate the employment or service of any person at any time without liability hereunder.
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5.11 Rights as Stockholder. No person shall have any right as a stockholder of the Company with respect to any shares of Common Stock or other equity security of the Company which is subject to an award hereunder unless and until such person becomes a stockholder of record with respect to such shares of Common Stock or equity security.
5.12 Designation of Beneficiary. To the extent permitted by the Company, a holder of an award may file with the Company a written designation of one or more persons as such holder’s beneficiary or beneficiaries (both primary and contingent) in the event of the holder’s death or incapacity. To the extent an outstanding option or SAR granted hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to exercise such option or SAR pursuant to procedures prescribed by the Company. Each beneficiary designation shall become effective only when filed in writing with the Company during the holder’s lifetime on a form prescribed by the Company. The spouse of a married holder domiciled in a community property jurisdiction shall join in any designation of a beneficiary other than such spouse. The filing with the Company of a new beneficiary designation shall cancel all previously filed beneficiary designations. If a holder fails to designate a beneficiary, or if all designated beneficiaries of a holder predecease the holder, then each outstanding award held by such holder, to the extent vested or exercisable, shall be payable to or may be exercised by such holder’s executor, administrator, legal representative or similar person.
5.13 Awards Subject to Clawback. The awards granted under this Plan and any cash payment or shares of Common Stock delivered pursuant to such an award are subject to forfeiture, recovery by the Company or other action pursuant to the applicable Agreement or any clawback or recoupment policy which the Company may adopt from time to time, including without limitation any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.
5.14 Section 409A. This Plan is intended to comply with the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. To the extent that any award is subject to Section 409A of the Code, it shall be paid in a manner that will comply with Section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto. Notwithstanding anything herein to the contrary, any provision in this Plan that is inconsistent with Section 409A of the Code shall be deemed to be amended to comply with Section 409A of the Code and to the extent such provision cannot be amended to comply therewith, such provision shall be null and void. The Company shall have no liability to a participant, or any other party, if an award that is intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee or the Company and, in the event that any amount or benefit under this Plan becomes subject to penalties under Section 409A of the Code, responsibility for payment of such penalties shall rest solely with the affected participants and not with the Company. Notwithstanding any contrary provision in this Plan or an Agreement, any payment(s) of “nonqualified deferred compensation” (within the meaning of Section 409A of the Code) that are otherwise required to be made under this Plan to a “specified employee” (as defined under Section 409A of the Code) as a result of such employee’s separation from service (other than a payment that is not subject to Section 409A of the Code) shall be delayed for the first six (6) months following such separation from service (or, if earlier, the date of death of the specified employee) and shall instead be paid (in a manner set forth in the Agreement) upon expiration of such delay period.
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5.15 Data Privacy. As a condition for receiving any award under the Plan, each participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this Section 5.15 by and among the Company and its Subsidiaries and affiliates exclusively for implementing, administering and managing the participant’s participation in the Plan. The Company and its Subsidiaries and affiliates may hold certain personal information about a participant, including the participant’s name, address and telephone number; birthdate; social security, insurance or other identification number; salary; nationality; job title(s); any shares of Common Stock held in the Company or its Subsidiaries and affiliates; and award details, to implement, manage and administer the Plan and awards (the “Data”). The Company and its Subsidiaries and affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a participant’s participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the participant’s country, or elsewhere, and the participant’s country may have different data privacy laws and protections than the recipients’ country. By accepting an award, each participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the participant’s participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the participant may elect to deposit any shares of Common Stock. The Data related to a participant will be held only as long as necessary to implement, administer, and manage the participant’s participation in the Plan. A participant may, at any time, view the Data that the Company holds regarding such participant, request additional information about the storage and processing of the Data regarding such participant, recommend any necessary corrections to the Data regarding the participant or refuse or withdraw the consents in this Section 5.15 in writing, without cost, by contacting the local human resources representative. The Company may cancel participant’s ability to participate in the Plan and, in the Committee’s sole discretion, the participant may forfeit any outstanding awards if the participant refuses or withdraws the consents in this Section 5.15. For more information on the consequences of refusing or withdrawing consent, participants may contact their local human resources representative.
5.16 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan and any award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
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5.17 Prohibition on Executive Officer Loans. Notwithstanding any other provision of the Plan to the contrary, no participant who is a director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
5.18 Governing Law. This Plan, each award hereunder and the related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.
5.19 Foreign Employees. Without amending this Plan, the Committee may grant awards to eligible persons who are foreign nationals and/or reside outside of the United States on such terms and conditions different from those specified in this Plan as may in the judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Committee may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company or its Subsidiaries operates or has employees.
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Exhibit 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PROPERTY SOLUTIONS ACQUISITION CORP.
Property Solutions Acquisition Corp. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (“DGCL”), hereby certifies as follows:
The name of the Corporation is Property Solutions Acquisition Corp. The original Certificate of Incorporation of the Corporation (the “Original Certificate”) was filed with the Secretary of State of the State of Delaware on February 11, 2020. The Corporation amended and restated the Original Certificate, which was filed with the Secretary of State of the State of Delaware on July 21, 2020.
This Second Amended and Restated Certificate of Incorporation in the form of Exhibit A attached hereto has been duly adopted in accordance with the provisions of Sections 211, 242 and 245 of the DGCL.
The text of the Corporation’s Certificate of Incorporation as heretofore amended or supplemented is hereby restated and amended to read in its entirety as set forth in Exhibit A attached hereto. This Second Amended and Restated Certificate of Incorporation shall be effective upon its filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, this Second Amended and Restated Certificate of Incorporation has been signed this 21 day of July, 2021.
| PROPERTY SOLUTIONS ACQUISITION CORP. | ||
| By: | /s/ Jordan Vogel | |
| Name: | Jordan Vogel | |
| Title: | Co-Chief Executive Officer and Secretary | |
EXHIBIT A
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
Article
I
NAME
The name of the corporation is Faraday Future Intelligent Electric Inc. (the “Corporation”).
Article
II
REGISTERED OFFICE AND AGENT
The address of the Corporation’s registered office in the State of Delaware is c/o Vcorp Services, LLC, 1013 Centre Road, Suite 403-B, Wilmington, New Castle County, Delaware 19805. The name of its registered agent at such address is Vcorp Services, LLC.
Article
III
PURPOSE AND DURATION
The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware (the “DGCL”). The Corporation is to have a perpetual existence.
Article
IV
CAPITAL STOCK
Section 4.1 The total number of shares of all classes of capital stock that the Corporation is authorized to issue is 835,000,000, consisting of two classes of stock: (i) 825,000,000 shares of common stock, par value $0.0001 per share (the “Common Stock”), and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share (the “Preferred Stock”). The class of Common Stock shall be divided into two series of stock composed of (i) 750,000,000 shares of Class A common stock (the “Class A Common Stock”) and (ii) 75,000,000 shares of Class B common stock (the “Class B Common Stock”). For the avoidance of doubt, the Class A Common Stock and Class B Common Stock are separate series within a single class of Common Stock, and are referred to herein together as the “Common Stock.” Upon the filing and effectiveness of the Second Amended and Restated Certificate of Incorporation first setting forth this sentence (the “Effective Time”), each share of common stock, par value $0.0001 per share, of the Corporation issued and outstanding immediately prior to the Effective Time shall, automatically and without any further action by the Corporation or any stockholder, be reclassified into one fully paid and nonassessable share of Class A Common Stock. Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of any of the Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation with the power to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL or any successor provision thereof, and no vote of the holders of any of the Common Stock or Preferred Stock voting separately as a class shall be required therefor.
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Section 4.2 Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the “Board of Directors”) is hereby authorized to provide from time to time by resolution or resolutions for the creation and issuance, out of the authorized and unissued shares of Preferred Stock, of one or more series of Preferred Stock by filing a certificate (a “Certificate of Designation”) pursuant to the DGCL, setting forth such resolution and, with respect to each such series, establishing the designation of such series and the number of shares to be included in such series and fixing the voting powers (full or limited, or no voting power), preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, of the shares of each such series. Without limiting the generality of the foregoing, the resolution or resolutions providing for the establishment of any series of Preferred Stock may, to the extent permitted by law, provide that such series shall be superior to, rank equally with or be junior to the Preferred Stock of any other series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may be different from those of any and all other series at any time outstanding. Except as otherwise expressly provided in the resolution or resolutions providing for the establishment of any series of Preferred Stock or otherwise provided in this Second Amended and Restated Certificate (or any Certificate of Designation made hereunder), no vote of the holders of shares of Preferred Stock or Common Stock shall be a prerequisite to the issuance of any shares of any series of the Preferred Stock so authorized in accordance with this Second Amended and Restated Certificate of Incorporation. Unless otherwise provided in the Certificate of Designation establishing a series of Preferred Stock, the Board of Directors may, by resolution or resolutions, increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of such series and, if the number of shares of such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.
Section 4.3 Subject to Section 4.4, the Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to purchase shares of any class or series of the Corporation’s capital stock or other securities of the Corporation, and such rights, warrants and options shall be approved in accordance with the Delaware General Corporation Law (the “DGCL”).
Section 4.4 Notwithstanding anything to the contrary under this Second Amended and Restated Certificate (or any Certificate of Designation made hereunder), without the approval of the holders of a majority of the then-outstanding shares of Class B Common Stock, the Board shall not authorize, allot or create any new class of shares each of which bear or may bear more than one vote per share or having the effect of diluting the voting power of the Class B Common Stock disproportionately.
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Section 4.5
(a) Voting Rights.
(i) Except as otherwise required by law or this Second Amended and Restated Certificate (or any Certificate of Designation made hereunder), the holders of Common Stock shall exclusively possess all voting power with respect to the Corporation. The holders of shares of Class A Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of the Common Stock are entitled to vote. Prior to the occurrence of a Qualifying Equity Market Capitalization, the holders of shares of Class B Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of the Common Stock are entitled to vote. Upon and after the occurrence of a Qualifying Equity Market Capitalization, the holders of shares of Class B Common Stock shall be entitled to ten votes for each such share on each matter properly submitted to the stockholders on which the holders of the Common Stock are entitled to vote. Except as otherwise required by law or this Second Amended and Restated Certificate, the holders of shares of the Common Stock shall at all times vote together as one class on all matters submitted to a vote of the stockholders of the Corporation. For purposes of this Section 4.5(a), the term “Qualifying Equity Market Capitalization” means the Corporation, for any consecutive period of 20 trading days, having a volume weighted average total equity market capitalization of at least $20 billion as determined, in good faith by the Board, for each trading day by multiplying the closing sale price per share of Class A Common Stock of the Corporation on the Nasdaq (or such other securities exchange on which the Corporation’s securities are then listed for trading) on such trading day (as reported by Bloomberg through its “HP” function or, if not available on Bloomberg, as reported by Morningstar) by the then total number of issued and outstanding shares of Class A Common Stock, Class B Common Stock and other shares of the Corporation on such trading day.
(ii) Except as otherwise required by law or this Second Amended and Restated Certificate (or any Certificate of Designation made hereunder), at any annual or special meeting of the stockholders of the Corporation, the holders of the Common Stock shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders. Notwithstanding the foregoing, except as otherwise required by law or this Second Amended and Restated Certificate (or any Certificate of Designation made hereunder), the holders of the Common Stock shall not be entitled to vote on any amendment to this Second Amended and Restated Certificate (or any Certificate of Designation made hereunder) that relates solely to the terms of one or more outstanding series of the Preferred Stock if the holders of such affected series of Preferred Stock are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Second Amended and Restated Certificate (or any Certificate of Designation made hereunder) or the DGCL.
(b) Conversion Right.
(i) Subject to the provisions hereof and to compliance with all laws and regulations applicable thereto, including the DGCL, each holder of shares of Class B Common Stock shall have the right to convert, at such holder’s option, any or all of its shares of Class B Common Stock into shares of Class A Common Stock at a conversion rate equal to one share of Class A Common Stock for each share of Class B Common Stock so converted. For the avoidance of doubt, a holder of shares of Class A Common Stock shall have no right to convert shares of Class A Common Stock into shares of Class B Common Stock under any circumstances.
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(ii) Each share of Class B Common Stock shall be converted at the option of the holder by delivery of written notice (a “Conversion Notice”) by such holder to the Corporation at the principal executive offices of the Corporation to the attention of the Secretary of the Corporation of such holder’s election to convert such share of Class B Common Stock pursuant to this Section 4.5(b), at any time after issue and without the payment of any additional sum, into one fully paid and nonassessable share of Class A Common Stock. Such conversion shall take effect upon the delivery of such Conversion Notice to the Corporation or at such date and time or upon the happening of such event as may be specified in the Conversion Notice (the “Conversion Time”). A Conversion Notice shall not be effective if it is not accompanied by the share certificates (if any) in respect of the relevant shares of Class B Common Stock and such other evidence (if any) as the Board may reasonably require to prove the title of the person exercising such right (or, if such certificates have been lost or destroyed, such evidence of title and such indemnity as the Board may reasonably require). Any and all taxes and stamp, issue and registration duties (if any) arising on conversion shall be borne by the holder of shares of Class B Common Stock requesting conversion.
(iii) At the Conversion Time, each share of Class B Common Stock shall automatically be converted into a share of Class A Common Stock with such rights and restrictions attached thereto and shall rank pari passu in all respects with the shares of Class A Common Stock then in issue, and the Corporation shall enter or procure the entry of the name of the relevant holder of shares of Class B Common Stock as the holder of the same number of shares of Class A Common Stock resulting from the conversion of the shares of Class B Common Stock in the Corporation’s books and shall procure that any certificates in respect of the relevant shares of Class A Common Stock, together with (if applicable) a new certificate for any unconverted shares of Class B Common Stock comprised in any certificate(s) surrendered by the holder of the shares of Class B Common Stock, are issued to the holders thereof.
(iv) Until such time as the shares of Class B Common Stock have been converted into shares of Class A Common Stock, the Corporation shall at all times keep available for issue and free of all liens, charges, options, mortgages, pledges, claims, equities, encumbrances and other third-party rights of any nature, and not subject to any pre-emptive rights out of its authorized but unissued shares of capital stock, such number of authorized but unissued shares of Class A Common Stock as would enable all shares of Class B Common Stock to be converted into shares of Class A Common Stock and any other rights of conversion into, subscription for or exchange into shares of Class A Common Stock to be satisfied in full.
(c) Conversion upon Transfer. Upon any sale, transfer, assignment or disposition of any share of Class B Common Stock by a holder to any person, or upon a change of ultimate beneficial ownership of any share of Class B Common Stock, in each case without the prior written consent of the Corporation (as determined by the Board of Directors) expressly referencing this Section 4.4(c) (each, a “Transfer”), such share of Class B Common Stock shall be automatically and immediately converted into one share of Class A Common Stock. For the avoidance of doubt, the creation of any pledge, charge, encumbrance or other third-party right of whatever description on any share of Class B Common Stock to secure a holder’s contractual or legal obligations shall not be deemed to be a sale, transfer, assignment or disposition unless and until any such pledge, charge, encumbrance or other third-party right is enforced and results in the third party holding legal title to the relevant share of Class B Common Stock, in which case all the related shares of Class B Common Stock shall be automatically converted into the same number of shares of Class A Common Stock. For purposes of this Section 4.5(c), “beneficial ownership” shall have the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended. If the Corporation has reason to believe that a Transfer of Class B Common Stock has occurred, the Corporation may request that the purported holder of Class B Common Stock furnish affidavits or other evidence to the Corporation as it reasonably deems necessary to determine whether a Transfer of Class B Common Stock has occurred, and if such holder does not within ten (10) days after the date of such request furnish sufficient (as determined in good faith by the Board) evidence to the Corporation (in the manner provided in the request) to enable the Corporation to determine that no such Transfer of Class B Common Stock has occurred, any such shares of Class B Common Stock, to the extent not previously converted, shall be automatically converted into shares of Class A Common Stock and such conversion shall thereupon be registered on the books and records of the Corporation.
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(d) Dividend Rights. Subject to applicable law and the rights, if any, of the holders of any outstanding series of the Preferred Stock, the holders of the shares of the Common Stock shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Corporation legally available therefor, and shall share equally on a per share basis in such dividends and distributions. For the avoidance of doubt, shares of Class A Common Stock and Class B Common Stock shall be treated equally, identically and ratably, on a per share basis, with respect to any dividend paid by the Corporation, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock, each voting separately as a class.
(e) Liquidation Rights. Subject to applicable law and the rights, if any, of the holders of any outstanding series of the Preferred Stock, in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of the shares of the Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of the Common Stock held by them. For the avoidance of doubt, shares of Class A Common Stock and Class B Common Stock shall be treated equally, identically and ratably, on a per share basis, with respect to any such distribution paid by the Corporation, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock, each voting separately as a class.
(f) Subdivision, Combination and Reclassification. If the Corporation in any manner subdivides, combines or reclassifies the outstanding shares of Class A Common Stock or Class B Common Stock, the outstanding shares of the other such class will be subdivided, combined or reclassified in the same proportion and manner, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock, each voting separately as a class.
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(g) Mergers, Consolidations and Similar Transactions. In the case of any distribution or payment in respect of the shares of Class A Common Stock or Class B Common Stock upon the merger or consolidation of the Corporation with or into any other entity, or in the case of any other transaction having an effect on stockholders substantially similar to that resulting from a merger or consolidation, shares of Class A Common Stock and Class B Common Stock shall be treated equally, identically and ratably, on a per share basis, with respect to such distribution or payment, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock and by the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock, each voting separately as a class.
Article
V
BOARD OF DIRECTORS
For the management of the business and for the conduct of the affairs of the Corporation it is further provided that:
Section 5.1
(a) The business affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Subject to Section 5.1(d), the number of directors which shall constitute the whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board of Directors. Except as otherwise expressly delegated by resolution of the Board of Directors, the Board of Directors shall have the exclusive power and authority to appoint and remove officers of the Corporation.
(b) Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, at each succeeding annual meeting of stockholders, a director shall be elected and hold office until the next annual meeting of stockholders and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.
Notwithstanding the foregoing provisions of this Article V, each director shall serve until his or her successor is duly elected and qualified or until his or her earlier death, resignation, disqualification, retirement or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
(c) Subject to (i) that certain Shareholder Agreement, dated as of July 21, 2021 (such agreement, as amended, supplemented, restated or otherwise modified from time to time, the “Shareholder Agreement”), by and between the Corporation and FF Top Holding Ltd., an exempted company with limited liability incorporated under the laws of the British Virgin Islands, and (ii) the special rights of the holders of one or more series of Preferred Stock to elect directors, the Board of Directors or any individual director may be removed from office at any time by the affirmative vote of the holders of a majority of the voting power of all the then outstanding shares of voting stock of the Corporation with the power to vote at an election of directors (the “Voting Stock”).
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(d) Subject to (i) the Shareholder Agreement and (ii) the special rights of the holders of one or more series of Preferred Stock to elect directors, any vacancies on the Board of Directors resulting from death, resignation, disqualification, retirement, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders, and except as otherwise required by applicable law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. Subject to the Shareholder Agreement, any director appointed in accordance with the preceding sentence shall hold office for a term that shall coincide with the remaining term of the vacancy to which the director shall have been appointed and until such director’s successor shall have been elected and qualified or until his or her earlier death, resignation, disqualification, retirement or removal.
Section 5.2
(a) In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend, alter or repeal the Bylaws of the Corporation. In addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Second Amended and Restated Certificate of Incorporation (including any Certificate of Designation in respect of one or more series of Preferred Stock), the adoption, amendment or repeal of the Bylaws of the Corporation by the stockholders of the Corporation shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all the then-outstanding shares of the Voting Stock, voting together as a single class; provided that no Bylaws hereafter adopted by the stockholders of the Corporation shall invalidate any prior act of the Board of Directors that would have been valid if such Bylaws had not been adopted.
(b) The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.
Article
VI
STOCKHOLDERS
Section 6.1 Subject to the special rights of the holders of one or more series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation, and the taking of any action by written consent of the stockholders in lieu of a meeting of the stockholders is specifically denied. Notwithstanding anything herein to the contrary, on any matter that the Class B Common Stock is entitled to consent or vote as a separate class, the holders of the Class B Common Stock may take such action by written consent in lieu of a meeting.
Section 6.2 Subject to the special rights of the holders of one or more series of Preferred Stock, special meetings of the stockholders of the Corporation may be called, for any purpose or purposes as is a proper matter for stockholder action under the DGCL, by (i) the Chairperson of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption). Such special meetings may not be called by stockholders or any other person or persons.
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Section 6.3 Advance notice of stockholder nominations for the election of directors and of other business proposed to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.
Article
VII
LIABILITY AND INDEMNIFICATION; CORPORATE OPPORTUNITY
Section 7.1 To the fullest extent permitted by the DGCL, as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is amended after approval by the stockholders of this Article VII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended, automatically and without further action, upon the date of such amendment.
Section 7.2 The Corporation, to the fullest extent permitted by law, shall indemnify and advance expenses to any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate, is or was a director or officer of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as a director or officer at the request of the Corporation or any predecessor to the Corporation.
Section 7.3 The Corporation, to the fullest extent permitted by law, may indemnify and advance expenses to any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate, is or was an employee or agent of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as an employee or agent at the request of the Corporation or any predecessor to the Corporation.
Section 7.4 Neither any amendment nor repeal of this Article VII, nor the adoption by amendment of this Second Amended and Restated Certificate of Incorporation of any provision inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any action or proceeding accruing or arising (or that, but for this Article VII, would accrue or arise) prior to such amendment or repeal or adoption of an inconsistent provision.
Section 7.5 The provisions of this Section 7.5 are set forth to define, to the extent permitted by applicable law, the duties of Exempted Persons (as defined below) to the Corporation with respect to certain classes or categories of business opportunities. “Exempted Persons” means each of Property Solutions Acquisition Sponsor, LLC, a Delaware limited liability company, and its affiliates, successors, directly or indirectly managed funds or vehicles (as applicable), partners, principals, directors, officers, members, managers and employees, including any of the foregoing who serve as directors of the Corporation; provided, that Exempted Persons shall not include the Corporation, any of its subsidiaries or their respective officers or employees.
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(a) To the fullest extent permitted by law, the Exempted Persons shall not have any fiduciary duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Corporation or any of its subsidiaries. To the fullest extent permitted by applicable law, the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to the Exempted Persons, even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and each such Exempted Person shall have no duty to communicate or offer such business opportunity to the Corporation and, to the fullest extent permitted by applicable law, shall not be liable to the Corporation or any of its subsidiaries for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such Exempted Person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries; provided, that the foregoing waiver of corporate opportunities by the Corporation contained in this sentence shall not apply to (i) any such corporate opportunity that is expressly offered to a director of the Corporation in his or her capacity as such (which such opportunity the Corporation does not renounce an interest or expectancy in) or (ii) any other fiduciary duty that may be applicable to such Exempted Person under applicable law.
(b) To the fullest extent permitted by law, no amendment or repeal of this Section 7.5 in accordance with the provisions hereof shall apply to or have any effect on the liability or alleged liability of any Exempted Person for or with respect to any activities or opportunities of which such Exempted Person becomes aware prior to such amendment or repeal. This Section 7.5 shall not limit or eliminate any protections or defenses otherwise available to, or any rights to indemnification or advancement of expenses of, any director or officer of the Corporation under this Second Amended and Restated Certificate of Incorporation, the Bylaws of the Corporation, any agreement between the Corporation and such officer or director, or any applicable law.
(c) Any person or entity purchasing, holding or otherwise acquiring any interest in any shares of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Section 7.5.
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Article
VIII
EXCLUSIVE FORUM
Section 8.1 Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of fiduciary duty owed by any director, officer, employee, agent or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, creditors or other constituents, (c) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, this Second Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation or as to which the General Corporation Law of the State of Delaware confers jurisdiction upon the Court of Chancery of the State of Delaware, or (d) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein; provided that, the provisions of this Article VIII will not apply to suits brought to enforce any liability or duty created by the Securities Act of 1933, as amended, the Securities and Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. To the fullest extent permitted by applicable law, any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VIII. Notwithstanding any other provisions of law, this Second Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article VIII. If any provision or provisions of this Article VIII shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article VIII (including, without limitation, each portion of any sentence of this Article VIII containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.
Section 8.2 If any action the subject matter of which is within the scope of Section 8.1 is filed in a court other than within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts of the State of Delaware in connection with any action brought in any such court to enforce Section 8.1 (an “FSC Enforcement Action”) and (ii) having service of process made upon such stockholder in any such FSC Enforcement Action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
Section 8.3 Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, and/or the Securities Exchange Act of 1934, as amended.
Section 8.4 If any provision or provisions of this Article VIII shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article VIII (including, without limitation, each portion of any sentence of this Article VIII containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VIII.
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Article
IX
AMENDMENTS
Notwithstanding any other provisions of this Second Amended and Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law or by this Second Amended and Restated Certificate of Incorporation (including any Certificate of Designation in respect of one or more series of Preferred Stock), (i) the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal Articles V, VI, VII and VIII and this Article IX, (ii) the affirmative vote of the holders of a majority of the then-outstanding shares of Class B Common Stock, voting separately as a class, shall be required to alter, amend or repeal Section 4.5, Section 4.5 or this clause (ii) in this Article IX, and (iii) the affirmative vote of the holders of a majority of the then-outstanding shares of Class A Common Stock, voting separately as a class, shall be required to alter, amend or repeal Section 4.5 or this clause (iii) in this Article IX.
Article
X
DOCUMENTS AND DETERMINATIONS
When the terms of this Second Amended and Restated Certificate of Incorporation refer to a specific agreement or other document or a decision by any body or person that determines the meaning or operation of a provision hereof, the Secretary of the Corporation shall maintain a copy of such agreement, document or decision at the principal executive offices of the Corporation and a copy thereof shall be provided free of charge to any stockholder who makes a request therefor. Unless otherwise expressly provided in this Second Amended and Restated Certificate of Incorporation, a reference to any specific agreement or other document shall be deemed a reference to such agreement or document as amended from time to time in accordance with the terms of such agreement or document.
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Exhibit 10.1
Execution Version
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
DATED JULY 21, 2021
TABLE OF CONTENTS
| Page | ||
| ARTICLE I DEFINITIONS | 1 | |
| 1.1 | Definitions | 1 |
| ARTICLE II REGISTRATION RIGHTS | 5 | |
| 2.1 | Shelf Registration | 5 |
| 2.1.1 | Resale Registration | 5 |
| 2.1.2 | Subsequent Registration | 6 |
| 2.1.3 | Underwritten Offering | 6 |
| 2.1.4 | Reduction of Underwritten Offering | 7 |
| 2.1.5 | Underwritten Offering Withdrawal | 8 |
| 2.2 | Piggyback Registrations. | 8 |
| 2.2.1 | Piggyback Rights | 8 |
| 2.2.2 | Reduction of Underwritten Offering | 9 |
| 2.2.3 | Piggyback Registration Withdrawal | 9 |
| 2.2.4 | Unlimited Piggyback Registration Rights | 10 |
| 2.3 | Restrictions on Registration Rights | 10 |
| 2.4 | Registration Procedures | 10 |
| 2.4.1 | Filings; Information | 10 |
| 2.4.2 | Registration Expenses | 13 |
| 2.4.3 | Requirements for Participation in Underwritten Offerings | 13 |
| 2.4.4 | Suspension of Sales; Adverse Disclosure | 14 |
| 2.4.5 | Reporting Obligations | 14 |
| 2.5 | Indemnification and Contribution | 14 |
| 2.5.1 | Indemnification | 14 |
| 2.5.2 | Contribution | 16 |
| 2.6 | Delay of Registration | 16 |
| 2.7 | Market Stand-Off Agreement | 16 |
| 2.8 | Termination of Registration Rights | 17 |
| ARTICLE III MISCELLANEOUS | 17 | |
| 3.1 | Governing Laws | 17 |
| 3.2 | Determination of Damages. | 17 |
| 3.3 | Counterparts | 17 |
| 3.4 | Titles and Subtitles | 17 |
| 3.5 | Notices | 18 |
| 3.6 | Amendments | 18 |
| 3.7 | Severability | 18 |
| 3.8 | Entire Agreement | 19 |
| 3.9 | Dispute Resolution | 19 |
| 3.10 | Assignment | 19 |
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (this “Agreement”) is entered into as of July 21, 2021 by and among Faraday Future Intelligent Electric Inc. (formerly known as Property Solutions Acquisition Corp.), a Delaware corporation (the “Company”), and each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an “Investor”.
RECITALS
WHEREAS, the Company and certain of its securityholders (the “Existing Holders”) entered into that certain Registration Rights Agreement, dated as of July 21, 2020 (the “Existing Registration Rights Agreement”), pursuant to which the Company granted to such securityholders certain registration rights with respect to certain securities of the Company;
WHEREAS, the Company has entered into that certain Agreement and Plan of Merger, dated as of January 27, 2021 (as may be amended from time to time, the “Merger Agreement”), with PSAC Merger Sub Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands, and FF Intelligent Mobility Global Holdings Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands, pursuant to which PSAC Merger Sub Ltd. will merge with and into FF Intelligent Mobility Global Holdings Ltd. with FF Intelligent Mobility Global Holdings Ltd. surviving as a wholly-owned subsidiary of the Company;
WHEREAS, pursuant to Section 6.6 of the Existing Registration Rights Agreement, the provisions, covenants and conditions set forth in the Existing Registration Rights Agreement may be amended or modified upon the written consent of the Company and the Existing Holders; and
WHEREAS, in connection with the transactions contemplated by the Merger Agreement, the Company and the Existing Holders desire to amend and restate the Existing Registration Rights Agreement in its entirety and enter into this Agreement, pursuant to which the Company shall grant the Existing Holders and certain new holders certain registration rights with respect to certain securities of the Company, as set forth in this Agreement.
NOW, THEREFORE, in consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions. For purposes of this Agreement:
“Adverse Disclosure” means any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Board, chief executive officer or principal financial officer of the Company, after consultation with counsel to the Company, (i) would be required to be made in any Registration Statement or Prospectus in order for the applicable Registration Statement or Prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (ii) would not be required to be made at such time if the Registration Statement were not being filed, and (iii) the Company has a bona fide business, financial or legal purpose for not making such information public.
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“Affiliate” shall mean with respect to a specified person, each other person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified; provided that no Holder shall be deemed an Affiliate of any other Holder by reason of an investment in, or holding of Common Stock (or securities convertible, exercisable or exchangeable for share of Common Stock) of, the Company. As used in this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities or by contract or other agreement).
“Board” means the board of directors of the Company.
“Closing” has the meaning set forth in the Merger Agreement.
“Common Stock” means the Company’s common stock, $0.0001 par value per share.
“Company” has the meaning set forth in the Preamble.
“Demanding Holder” has the meaning set forth in Section 2.1.3.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Existing Holders” has the meaning set forth in the Recitals.
“Existing Registration Rights Agreement” has the meaning set forth in the Recitals.
“FF Holder Lock-up Period” means, with respect to the Registrable Securities that are held by Season Smart, FF Top or their respective Permitted Transferees, the period ending one hundred eighty (180) days after the date hereof.
“FF Top” means FF Top Holding Ltd., and any Affiliate of FF Top Holding Ltd. that becomes a Holder pursuant to the terms hereunder.
“Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
“Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits forward incorporation of substantial information by reference to other documents filed by the Company with the SEC.
“Founder Shares” shall mean the shares of Class A common stock, par value $0.0001 per share, of the Company and shall be deemed to include the shares of Common Stock issued upon conversion thereof.
“Founder Shares Lock-up Period” shall mean, with respect to the Founder Shares held by certain of the Existing Holders or their respective Permitted Transferees, the period ending on the earlier of (A) one (1) year after the date hereof or (B) the first date the last sale price of the Common Stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any twenty (20) trading days within any thirty (30)-trading day period commencing at least 150 days after the date hereof or (C) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property.
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“Holder” means any holder of Registrable Securities who is a party to this Agreement.
“Investor” has the meaning set forth in the Preamble.
“Lock-up Period” shall mean the Founder Shares Lock-up Period, the Private Placement Lock-up Period and FF Holder Lock-up Period, as applicable.
“Merger Agreement” has the meaning set forth in the Recitals.
“Misstatement” shall mean an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus in the light of the circumstances under which they were made not misleading.
“Permitted Transferees” shall mean any Person (i) to whom a Holder of Registrable Securities is permitted to transfer such Registrable Securities prior to the expiration of the Lock-up Period under the Lock-Up Agreement and any other applicable agreement between such Holder and the Company, and to any transferee thereafter and (ii) who agrees to become bound by the transfer restrictions set forth in this Agreement.
“Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
“Private Placement Lock-up Period” shall mean, with respect to Private Placement Warrants that are held by the initial purchasers of such Private Placement Warrants or their Permitted Transferees, and any shares of Common Stock issued or issuable upon the exercise of the Private Placement Warrants and that are held by the initial purchasers of the Private Placement Warrants or their Permitted Transferees, the period ending thirty (30) days after the date hereof.
“Private Warrants” shall mean the warrants to purchase Common Stock contained in the units issued to (i) Property Solutions Acquisition Sponsor, LLC, pursuant to the Subscription Agreement, dated July 21, 2020, between the Company and Property Solutions Acquisition Sponsor LLC and (ii) EarlyBirdCapital, Inc., pursuant to the Subscription Agreement, dated July 21, 2020, between the Company and EarlyBirdCapital, Inc.
“Prospectus” means the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
“Registrable Securities” means (i) the shares of Common Stock issued to a Holder upon Closing, (ii) the Private Warrants (including any shares of Common Stock issued or issuable upon the exercise of any such Private Warrants) and (iii) any issued and outstanding shares of Common Stock, warrants to purchase Common Stock or any other equity security (including the shares of Common Stock issued or issuable upon the exercise of any other equity security or warrant) of the Company held by a Holder as of the date of this Agreement, and any securities issued in respect thereof, or in substitution therefor, in connection with any share split, dividend or combination, or any reclassification, recapitalization, merger, consolidation or similar transaction; provided, however, that as to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) such securities shall have been otherwise transferred, new certificates or book entry positions for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; (C) such securities shall have ceased to be outstanding; (D) such securities may be sold without registration pursuant to SEC Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the SEC) (but with no volume or other restrictions or limitations); or (E) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.
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“Registration” means a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.
“Registration Expenses” means the out-of-pocket expenses of the Company in a Registration, including, without limitation, the following:
(a) all registration and filing fees (including fees with respect to filings required to be made with FINRA) and any securities exchange on which the Common Stock is then listed;
(b) fees and expenses of compliance with securities or blue sky laws (including reasonable and customary fees and disbursements of counsel for the Underwriters in connection with blue sky qualifications of Registrable Securities);
(c) printing, messenger, telephone and delivery expenses;
(d) reasonable fees and disbursements of counsel for the Company; and
(e) reasonable fees and disbursements of all independent registered public accountants of the Company incurred specifically in connection with such Registration.
“Registration Statement” means any registration statement that covers the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.
“Requesting Holder” has the meaning set forth in Section 2.1.3.
"Season Smart" means Season Smart Limited, one of the Holders, and any Affiliate of Season Smart Limited that becomes a Holder pursuant to the terms hereunder.
"Season Smart Percentage" means a percentage equal to the number of shares of equity securities of the Company owned by Season Smart and its Affiliates, divided by the basic number of shares of equity securities of the Company outstanding.
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“SEC” means the Securities and Exchange Commission.
“SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act (or any successor rule promulgated thereafter by the SEC).
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Shelf” shall mean the Form S-1 Shelf, the Form S-3 Shelf or any Subsequent Shelf Registration, as the case may be.
“Shelf Registration” shall mean a registration of securities pursuant to a registration statement filed with the SEC in accordance with and pursuant to Rule 415 promulgated under the Securities Act (or any successor rule then in effect).
“Underwriter” means a securities dealer who purchases any Registrable Securities as principal in an Underwritten Offering and not as part of such dealer’s market-making activities.
“Underwritten Registration” or “Underwritten Offering” means a Registration in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public.
ARTICLE
II
REGISTRATION RIGHTS
2.1 Shelf Registration.
2.1.1 Resale Registration Statement. As soon as practicable but no later than forty-five (45) calendar days following the Closing (the “Filing Date”), the Company shall file a Registration Statement for a Shelf Registration on Form S-3 (the “Form S-3 Shelf”) or, if the Company is ineligible to use a Form S-3 Shelf, a Registration Statement for a Shelf Registration on Form S-1 (the “Form S-1 Shelf”), in each case, covering the resale of all the Registrable Securities (determined as of two business days prior to such filing) on a delayed or continuous basis and shall use its reasonable best efforts to have such Shelf declared effective as soon as practicable after the filing thereof and no later than the earlier of (x) the ninetieth (90th) calendar day following the Filing Date if the SEC notifies the Company that it will “review” the Shelf and (y) the tenth (10th) business day after the date the Company is notified in writing by the SEC that such Shelf will not be "reviewed" or will not be subject to further review. Such Shelf shall provide for the resale of the Registrable Securities included therein pursuant to any method or combination of methods legally available to, and requested by, any Holder named therein. The Company shall use commercially reasonable efforts to maintain a Shelf in accordance with the terms hereof, and shall use reasonable best efforts to prepare and file with the SEC such amendments, including post-effective amendments, and supplements as may be necessary to keep a Shelf continuously effective, available for use to permit all Holders named therein to sell their Registrable Securities included therein and in compliance with the provisions of the Securities Act until such time as there are no longer any Registrable Securities. In the event the Company files a Form S-1 Shelf, the Company shall use its reasonable best efforts to convert the Form S-1 Shelf (and any Subsequent Shelf Registration) to a Form S-3 Shelf as soon as practicable after the Company is eligible to use Form S-3.
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2.1.2 Subsequent Registration. If any Shelf ceases to be effective under the Securities Act for any reason at any time while Registrable Securities are still outstanding, the Company shall, subject to Section 2.3, use its reasonable best efforts to as promptly as is reasonably practicable cause such Shelf to again become effective under the Securities Act (including using its commercially reasonable efforts to obtain the prompt withdrawal of any order suspending the effectiveness of such Shelf), and shall use its reasonable best efforts to as promptly as is reasonably practicable amend such Shelf in a manner reasonably expected to result in the withdrawal of any order suspending the effectiveness of such Shelf or file an additional registration statement as a Shelf Registration (a “Subsequent Shelf Registration”) registering the resale of all Registrable Securities (determined as of two (2) business days prior to such filing), and pursuant to any method or combination of methods legally available to, and requested by, any Holder named therein. If a Subsequent Shelf Registration is filed, the Company shall use its reasonable best efforts to (i) cause such Subsequent Shelf Registration to become effective under the Securities Act as promptly as is reasonably practicable after the filing thereof (it being agreed that the Subsequent Shelf Registration shall be an automatic shelf registration statement (as defined in Rule 405 promulgated under the Securities Act) if the Company is a well-known seasoned issuer (as defined in Rule 405 promulgated under the Securities Act) at the most recent applicable eligibility determination date) and (ii) keep such Subsequent Shelf Registration continuously effective, available for use to permit all Holders named therein to sell their Registrable Securities included therein and in compliance with the provisions of the Securities Act until such time as there are no longer any Registrable Securities. Any such Subsequent Shelf Registration shall be on Form S-3 to the extent that the Company is eligible to use such form. Otherwise, such Subsequent Shelf Registration shall be on another appropriate form. The Company agrees that, except for the Registrable Securities, no other securities of the Company shall be included in the Shelf Registration and any Subsequent Shelf Registration.
2.1.3 Underwritten Offering. Subject to Section 2.1.4, Section 2.1.5 and Section 2.3, at any time and from time to time after (x) one (1) year after the Closing, the Holders of the Registrable Securities representing a majority-in-interest of Registrable Securities issued and outstanding (on a fully diluted basis) or (y) 180 days after the Closing, Season Smart (the holders contemplated by clauses (x) or (y), as applicable, the “Demanding Holders”) may make a written demand for Registration under the Securities Act of all or part of its Registrable Securities in an Underwritten Offering, provided that such offering of the Registrable Securities held by such Holders shall involve gross proceeds reasonably expected to equal or exceed $50,000,000 and, with respect to Season Smart pursuant to clause (y) only, such Registrable Securities does not exceed more than 10% of the outstanding shares of the Company. Any demand for an Underwritten Offering shall specify the number of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. The Company shall, within ten (10) days of the Company’s receipt of the Underwritten Offering, notify, in writing, all other Holders of such demand, and each Holder who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in such Underwritten Offering (each such Holder that includes all or a portion of such Holder’s Registrable Securities in such Underwritten Offering, a “Requesting Holder”) shall so notify the Company, in writing, within five (5) days after the receipt by the Holder of the notice from the Company. Upon receipt by the Company of any such written notification from a Requesting Holder(s) to the Company, such Requesting Holder(s) shall be entitled to have their Registrable Securities included in such Underwritten Offering and the Company shall use commercially reasonable efforts to effect, as soon thereafter as practicable, the offering of all Registrable Securities requested by the Demanding Holder(s) and Requesting Holder(s) pursuant to such Underwritten Offering. The Company shall not be obligated to effect more than an aggregate of two (2) Underwritten Offerings annually for all Demanding Holders under clause (x) of this Section 2.1.3 or three (3) Underwritten Offerings annually for all Demanding Holders under clause (y) of this Section 2.1.3. Notwithstanding anything in this Section 2.1.3, the Company shall not be obligated to effect an Underwritten Offering, (i) if a Piggyback Registration for all Registrable Securities that the Demanding Holder(s) intend(s) to include in an Underwritten Offering had been available to such Demanding Holder(s) within the ninety (90) days preceding the date of request for the Underwritten Offering, or (ii) during any period (not to exceed ninety (90) days) following the closing of the completion of an offering of equity securities by the Company if such Underwritten Offering would cause the Company to breach a “lock-up” or similar provision contained in the underwriting agreement for such offering. The Demanding Holder(s) and Requesting Holder(s) shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company and reasonably acceptable to the Demanding Holders.
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2.1.4 Reduction of Underwritten Offering. If the managing Underwriter or Underwriters for an Underwritten Offering that is to be an Underwritten Offering, in good faith, advises the Company, the Demanding Holder(s) and the Requesting Holder(s) (if any) of such Underwritten Offering in writing that the dollar amount or number of Registrable Securities which the Demanding Holder(s) and the Requesting Holder(s) (if any) desire to sell, taken together with all other shares of Common Stock or other equity securities which the Company desires to sell and the shares of Common Stock or other equity securities, if any, as to which Registration by the Company has been requested pursuant to rights of other Holders of Registrable Securities hereunder or pursuant to written contractual registration rights held by other security holders of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in such Underwritten Offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such equity securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in such Underwritten Offering, as follows:
(a) with respect to any Underwritten Offering effected pursuant to clause (x) of Section 2.1.3: (i) first, the Registrable Securities of the Demanding Holder(s) and the Requesting Holder(s) (if any) (pro rata based on the respective number of Registrable Securities that each Demanding Holder and Requesting Holder (if any) has requested be included in such Underwritten Registration and the aggregate number of Registrable Securities that the Demanding Holders and Requesting Holders have requested be included in such Underwritten Registration) that can be sold without exceeding the Maximum Number of Securities; (ii) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), the shares of Common Stock or other equity securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Securities; and (iii) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) and (ii), the shares of Common Stock or other equity securities of other Holders of Registrable Securities hereunder or other Persons that the Company is obligated to register in a Registration pursuant to, respectively, rights of other Holders of Registrable Securities hereunder or separate written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Securities.
(b) with respect to any Underwritten Offering effected pursuant to clause (y) of Section 2.1.3 or effected for the Company's account in accordance with Section 2.2: (i) first, on an equal basis, the Registrable Securities of Season Smart, up to a number of shares equal to the Season Smart Percentage multiplied by the Maximum Number of Securities, and the shares of Common Stock or other equity securities that the Company desires to sell, up to the remaining Maximum Number of Securities, (ii) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), any remaining Registrable Securities of Season Smart that Season Smart desires to sell that can be sold without exceeding the Maximum Number of Securities, (iii) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) and (ii), the Registrable Securities of the Requesting Holder(s) (if any) (pro rata based on the respective number of Registrable Securities that each Requesting Holder (if any) has requested be included in such Underwritten Registration and the aggregate number of Registrable Securities that the Requesting Holders have requested be included in such Underwritten Registration) that can be sold without exceeding the Maximum Number of Securities, and (iv) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) through (iii), the shares of Common Stock or other equity securities of other Holders of Registrable Securities hereunder or other Persons that the Company is obligated to register in a Registration pursuant to, respectively, rights of other Holders of Registrable Securities hereunder or separate written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Securities. In the event that securities of the Company that are convertible into Common Stock are included in the offering, the calculations under this Section 2.1.4 shall include such Company securities on an as-converted to Common Stock basis.
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2.1.5 Underwritten Offering Withdrawal. The Demanding Holder(s) initiating an Underwritten Offering or the Requesting Holder(s) (if any) shall have the right to withdraw from an Underwritten Offering for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of their intention to withdraw from such Registration prior to the to the filing of the applicable “red herring” prospectus or prospectus supplement used for marketing such Underwritten Offering. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with an Underwritten Offering prior to its withdrawal under this Section 2.1.5. If the Demanding Holder(s) withdraw(s) from a proposed offering relating to an Underwritten Offering in such event, then such registration shall count as an Underwritten Offering provided for in Section 2.1.3.
2.2 Piggyback Registrations.
2.2.1 Piggyback Rights. If at any time and from time to time after 180 days after the Closing (provided that such 180 day limitation shall not apply to Season Smart) the Company proposes to file a Registration Statement under the Securities Act or effect an Underwritten Offering with respect to the Registration of or an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, for its own account or for the account of security holders of the Company (or by the Company and by the stockholders of the Company, including, without limitation, pursuant to Section 2.1 hereof), other than a Registration Statement (i) filed in connection with any employee share option, share purchase or repurchase, or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing security holders, debt holders or other creditors, (iii) for an offering of debt that is convertible into equity securities of the Company, (iv) a registration on Form S-4 or Form S-8, or any similar or successor registration form under the Securities Act subsequently adopted by the SEC, or (v) for a dividend reinvestment plan, then the Company shall (x) give written notice of such proposed filing to all of the Holders of Registrable Securities as soon as practicable, but in no event less than ten (10) days before the anticipated filing date of such Registration Statement, which notice shall describe the amount and type of securities to be included in such Registration or offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to all of the Holders of Registrable Securities in such notice the opportunity to register the sale of such number of Registrable Securities as such Holder may request in writing within five (5) days following receipt of such notice (a “Piggyback Registration”), provided, that for any such registrations prior to the 180th day after the Closing, the Company shall only be obligated to notify and to offer such participation to Season Smart. To the extent permitted by applicable securities laws, subject to Section 2.2.2, the Company shall, with respect to Season Smart, and shall use its reasonable best efforts to, with respect to all other Holders, cause (i) such Registrable Securities to be included in such Piggyback Registration and (ii) the managing Underwriter or Underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company included in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof.
All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this Section 2.2.1 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company.
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2.2.2 Reduction of Underwritten Offering. If the managing Underwriter or Underwriters for such Piggyback Registration that is to be an Underwritten Offering advises, in good faith, the Company and the Holders of Registrable Securities participating in the Piggyback Registration in writing that the dollar amount or number of shares of Common Stock or other Company’s securities which Company desires to sell, taken together with the (i) shares of Common Stock or other Company securities, if any, as to which Registration has been demanded pursuant to separate written contractual arrangements with Persons other than Holders of Registrable Securities hereunder, (ii) the Registrable Securities as to which Registration has been requested under Section 2.2.1 and (iii) the shares of Common Stock or other Company securities, if any, as to which Registration has been requested pursuant to the separate written contractual piggy-back registration rights of other security holders of the Company (other than Holders of Registrable Securities hereunder), exceeds the Maximum Number of Securities, then:
(a) If the Registration is undertaken for Company’s account: the Company shall include in any such Piggyback Registration in accordance with the prioritization set forth in Section 2.1.4(b);
(b) If the Registration is pursuant to a request by Persons other than Demanding Holder(s), then the Company shall include in any such Registration (i) first, the shares of Common Stock or other equity securities, if any, of such requesting Persons, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (ii) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to Section 2.2.1, pro rata based on the number of Registrable Securities that each Holder has requested be included in such Underwritten Registration and the aggregate number of Registrable Securities that the Holders have requested to be included in such Underwritten Registration, which can be sold without exceeding the Maximum Number of Securities; (iii) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) and (ii), the shares of Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (iv) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i), (ii) and (iii), the shares of Common Stock or other equity securities for the account of other Persons that the Company is obligated to register pursuant to separate written contractual arrangements with such Persons, which can be sold without exceeding the Maximum Number of Securities.
2.2.3 Piggyback Registration Withdrawal. Any Holder of Registrable Securities shall have the right to withdraw from a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his, her or its intention to withdraw from such Piggyback Registration at least five (5) business days prior to the effectiveness of the Registration Statement filed with the SEC with respect to such Piggyback Registration. The Company (whether on its own good faith determination or as the result of a request for withdrawal by Persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the SEC in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement.
Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration prior to its withdrawal under this Section 2.2.3.
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2.2.4 Unlimited Piggyback Registration Rights. For purposes of clarity, any Registration effected pursuant to Section 2.2 hereof shall not be counted as a Registration pursuant to an Underwritten Offering effected under Section 2.1 hereof.
2.3 Restrictions on Registration Rights. Notwithstanding anything to the contrary contained herein, if (A) during the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of the filing of, and ending on a date one hundred and twenty (120) days after the effective date of, a Company initiated Registration and provided that the Company has delivered written notice to the Holders prior to receipt of an Underwritten Offering pursuant to Section 2.1.3 and it continues to actively employ, in good faith, commercially reasonable efforts to cause the applicable Registration Statement to become effective; (B) with respect to an Underwritten Offering pursuant to Section 2.1.3, the Demanding Holder(s) has (or have) requested an Underwritten Registration and the Company and the Demanding Holder(s) is (or are) unable to obtain the commitment of Underwriters to firmly underwrite the offer; or (C) if the negotiation or consummation of a transaction by the Issuer or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event the Issuer’s board of directors reasonably believes, upon the advice of legal counsel (which may be in-house legal counsel), would require additional disclosure by the Issuer in the Registration Statement of material information that the Issuer has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement would be expected, in the reasonable determination of the Issuer’s board of directors, upon the advice of legal counsel (which may be in-house legal counsel), to cause the Registration Statement to fail to comply with applicable disclosure requirements, then in each case the Company shall furnish to such Holders a written notice to effect of (A), (B) or (C) and that it is therefore necessary to defer the filing of such Registration Statement. In such event, the Company shall have the right to defer such filing for a period of not more than ninety (90) days; provided, however, that the Company shall not defer its obligation in this manner more than one hundred and eighty (180) days in any 12-month period. Notwithstanding anything to the contrary contained in this Agreement, no Registration shall be effected or permitted and no Registration Statement shall become effective, with respect to any Registrable Securities held by a Holder whose Registrable Securities are subject to lock-up agreements with the Underwriters or the Company.
2.4 Registration Procedures.
2.4.1 Filings; Information. Whenever Company is required to effect the Registration of any Registrable Securities pursuant to Article II, the Company shall use reasonable best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended plan of distribution thereof, and pursuant thereto the Company shall use reasonable best efforts to, as expeditiously as possible:
(a) prepare and file with the SEC as soon as practicable a Registration Statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such Registration Statement to become effective and remain effective until all Registrable Securities covered by such Registration Statement have been sold;
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(b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be reasonably requested by the Holders of Registrable Securities registered on such Registration Statement or any Underwriter of Registrable Securities or as may be required by the rules, regulations or instructions applicable to the registration form used by the Company or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the Prospectus;
(c) prior to filing a Registration Statement or Prospectus, or any amendment or supplement thereto, furnish without charge to the Underwriters, if any, and the Holders of Registrable Securities included in such Registration, and such Holders’ legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus), and such other documents as the Underwriters and the Holders of Registrable Securities included in such Registration or the legal counsel of such Holders may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holders;
(d) prior to any public offering of Registrable Securities, use its reasonable best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may reasonably request and (ii) take such action reasonably necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject;
(e) cause all such Registrable Securities to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed;
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(f) provide a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of such Registration Statement;
(g) advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;
(h) at least five (5) days prior to the filing of any Registration Statement or Prospectus or any amendment or supplement to such Registration Statement or Prospectus or any document that is to be incorporated by reference into such Registration Statement or Prospectus, furnish a copy thereof to each seller of such Registrable Securities or its counsel;
(i) notify the Holders at any time when a Prospectus relating to such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement, and then to correct such Misstatement as set forth in Section 2.4.4 hereof;
(j) permit a representative of the Holders (such representative to be selected by a majority-in-interest of the participating Holders), the Underwriter(s), if any, and any attorney or accountant retained by such Holders or Underwriter(s) to participate, at each such Person’s own expense, in the preparation of the Registration Statement, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with the Registration; provided, however, that such representative or Underwriter enters into a confidentiality agreement, in form and substance reasonably satisfactory to the Company, prior to the release or disclosure of any such information;
(k) obtain a “cold comfort” letter from the Company’s independent registered public accountants in the event of an Underwritten Registration, in customary form and covering such matters of the type customarily covered by “cold comfort” letters as the managing Underwriter may reasonably request, and reasonably satisfactory to a majority-in-interest of the participating Holders and the applicable placement agent or sales agent, if any;
(l) on the date the Registrable Securities are delivered for sale pursuant to such Registration, obtain an opinion and negative assurance letter, dated such date, of counsel representing the Company for the purposes of such Registration, addressed to the Holders, the placement agent or sales agent, if any, and the Underwriters, if any, covering such legal matters with respect to the Registration in respect of which such opinion is being given as the participating Holders, placement agent, sales agent, or Underwriter may reasonably request and as are customarily included in such opinions and negative assurance letters, and reasonably satisfactory to a majority-in-interest of the participating Holders;
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(m) in the event of any Underwritten Offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing Underwriter of such Underwritten Offering;
(n) make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any successor rule promulgated thereafter by the SEC);
(o) if the Registration involves the Registration of Registrable Securities involving gross proceeds in excess of $50,000,000, use its reasonable best efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter(s) in any Underwritten Offering;
(p) otherwise, in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the participating Holders and the placement agent or sales agent, if any,, in connection with such Registration; and
(q) upon request of a Holder, the Company shall (i) authorize the Company’s transfer agent to remove any legend on share certificates of such Holder’s Common Stock restricting further transfer (or any similar restriction in book entry positions of such Holder) if such restrictions are no longer required by the Securities Act or any applicable state securities laws or any agreement with the Company to which such Holder is a party, including if such shares subject to such a restriction have been sold on a Registration Statement, (ii) request the Company’s transfer agent to issue in lieu thereof shares of Common Stock without such restrictions to the Holder upon, as applicable, surrender of any stock certificates evidencing such shares of Common Stock, or to update the applicable book entry position of such Holder so that it no longer is subject to such a restriction, and (iii) use reasonable best efforts to cooperate with such Holder to have such Holder’s shares of Common Stock transferred into a book-entry position at The Depository Trust Company, in each case, subject to delivery of customary documentation, including any documentation required by such restrictive legend or book-entry notation.
2.4.2 Registration Expenses. The Registration Expenses of all Registrations shall be borne by the Company. The Holders acknowledge that the Holders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ commissions and discounts, brokerage fees, Underwriter marketing costs and all reasonable fees and expenses of any legal counsel representing such Holders.
2.4.3 Requirements for Participation in Underwritten Offerings. No Person may participate in any Underwritten Offering for equity securities of the Company pursuant to a Registration initiated by the Company hereunder unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Company and (b) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements.
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2.4.4 Suspension of Sales; Adverse Disclosure. Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains a Misstatement, each of the Holders shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended Prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and file such supplement or amendment as soon as practicable after the time of such notice), or until he, she or it is advised in writing by the Company that the use of the Prospectus may be resumed. If the filing, initial effectiveness or continued use of a Registration Statement in respect of any Registration at any time would require the Company to make an Adverse Disclosure or would require the inclusion in such Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, the Company may, upon giving prompt written notice of such action to the Holders, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement for the shortest period of time, but in no event more than forty-five (45) days, determined in good faith by the Company to be necessary for such purpose. In the event the Company exercises its rights under the preceding sentence, the Holders agree to suspend, immediately upon their receipt of the notice referred to above, their use of the Prospectus relating to any Registration in connection with any sale or offer to sell Registrable Securities. The Company shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 2.4.4.
2.4.5 Reporting Obligations. As long as any Holder shall own Registrable Securities, the Company, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act. The Company further covenants that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Common Stock held by such Holder without registration under the Securities Act within the limitation of the exemptions provided by SEC Rule 144, including providing any legal opinions. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements.
2.5 Indemnification and Contribution.
2.5.1 Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law, each Holder of Registrable Securities, its officers and directors and each Person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including, without limitation, reasonable attorneys’ fees) caused by any untrue or alleged untrue statement of material fact contained or incorporated by reference in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder expressly for use therein. The Company shall indemnify the Underwriters, their officers and directors and each Person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to the indemnification of the Holders.
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(b) In connection with any Registration Statement in which a Holder of Registrable Securities is participating, such Holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and agents and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses (including without limitation reasonable attorneys’ fees) resulting from any untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such Holder expressly for use therein. The Holders of Registrable Securities shall indemnify the Underwriters, their officers, directors and each Person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to indemnification of the Company. For the avoidance of doubt, For the avoidance of doubt, the obligation to indemnify under this Section 2.5.1(b) shall be several, not joint and several, among the Holders of Registrable Securities, and the total indemnification liability of a Holder under this Section 2.5.1(b) shall be in proportion to and limited to the net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Registration Statement.
(c) Any Person entitled to indemnification herein shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.
(d) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of equity securities.
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2.5.2 Contribution.
(a) If the indemnification provided under Section 2.5.1 hereof from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities and expenses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that the liability of any Holder under this Section 2.5.2(a) shall be limited to the amount of the net proceeds received by such Holder in such offering giving rise to such liability.
(b) The amount paid or payable by a party as a result of the losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in Sections 2.5.1(a), 2.5.1(b) and 2.5.1(c) above, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.5.2 were determined by pro rata allocation or by any other method of allocation, which does not take account of the equitable considerations referred to in this Section 2.5.2. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this Section 2.5.2 from any person who was not guilty of such fraudulent misrepresentation.
2.6 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any Registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Article II.
2.7 Market Stand-Off Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing Underwriter or Underwriters, with respect to any Company-initiated Underwritten Offering, during the period, not to exceed 90 days with respect to any Underwritten Offering, commencing on the date of the final Prospectus relating to the Registration by the Company of shares of its equity securities under the Securities Act on a registration statement on Form S-1 or Form S-3, and ending on the date specified by the managing Underwriter or Underwriters on (1) the publication or other distribution of research reports and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in applicable FINRA rules (or any successor provisions or amendments thereto) (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the Registration statement for such offering or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash, or otherwise, except as expressly permitted by lock-up agreements or in the event the managing Underwriters otherwise agree by written consent. The Underwriters in connection with such Registration are intended third-party beneficiaries of this Section 2.7 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such lock-up agreements as may be reasonably requested by the Underwriters or managing Underwriter in connection with such Registration that are consistent with this Section 2.7 or that are necessary to give further effect thereto.
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2.8 Termination of Registration Rights. The right of any Holder to request inclusion of Registrable Securities in any Registration pursuant to Article II shall terminate on the earlier of the date on which (x) all of the Registrable Securities held by such Holder hereof have been sold pursuant to a Registration Statement (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder (or any successor rule promulgated thereafter by the SEC)) or (y) all of the Holders of the Registrable Securities are permitted to sell the Registrable Securities under SEC Rule 144 (or any similar provision) under the Securities Act without limitation on the amount of securities sold or the manner of sale. The provisions of Section 2.4.5 and Section 2.5 shall survive such termination.
ARTICLE
III
MISCELLANEOUS
3.1 Governing Laws. This Agreement shall be governed by the internal law of the State of New York, without regard to conflict of law principles that would result in the application of any law other than the law of the State of New York.
3.2 Determination of Damages. The parties hereby acknowledge that, with respect to the determination of damages for any breach by the Company of its obligations under Section 2, the value of damages shall be the difference between the trading price for the applicable Registrable Securities had the obligations been complied with, and the actual sale price for such Registrable Securities once such Registrable Securities are actually able to be sold by the applicable Holder.
3.3 Counterparts. This Agreement may be executed in multiple counterparts, including by means of facsimile or PDF counterparts, each of which shall be deemed an original, but all of which together shall constitute the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.
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3.5 Notices. Any notice, designation, request, request for consent or consent provided for in this Agreement shall be in writing and shall be either personally delivered, sent by electronic mail or facsimile or sent by reputable overnight courier service (charges prepaid) to the Company at the address set forth below and to any other recipient at the address indicated on the Company’s records, or at such address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. Notices and other such documents will be deemed to have been given or made hereunder when delivered personally or sent by electronic mail or facsimile (receipt confirmed) and one (1) business day after deposit with a reputable overnight courier service.
(a) If to the Company, to:
c/o
Faraday & Future
18455 S. Figueroa Street
Los Angeles, CA 90248
Attention: General Counsel
E-mail: jarret.johnson@ff.com
with a copy (which shall not constitute notice) to:
Sidley Austin LLP
1999
Avenue of the Stars, 17th Floor
Los Angeles, California 90067
Attention: Vijay S. Sekhon, Esq.
Email: vsekhon@sidley.com
or to such other Person or address as the Company shall furnish to the Holders in writing.
(b) If to any Holder, to such address as indicated on the Schedule of Investors attached as Schedule A hereto or to such other Person or address as the Holder shall furnish to the Company in writing.
3.6 Amendments. This Agreement may be amended only by an instrument in writing executed by the Company and the Holders holding a majority of the Registrable Securities collectively held by them. Any such amendment will apply to all Holders equally, without distinguishing between them, provided, however, that notwithstanding the foregoing, any amendment hereto or waiver hereof that adversely affects one Holder or group of affiliated Holders, solely in his, her or its capacity as a holder of Common Stock or Private Warrants, in a manner that is materially different from the other Holders (in such capacity) shall require the consent of the Holder or group of affiliated Holders so affected.
3.7 Severability. The invalidity or unenforceability of any specific provision of this Agreement shall not invalidate or render unenforceable any of its other provisions. Any provision of this Agreement held invalid or unenforceable shall be deemed reformed, if practicable, to the extent necessary to render it valid and enforceable and to the extent permitted by law and consistent with the intent of the parties to this Agreement.
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3.8 Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to the transactions contemplated hereby and thereby. The registration rights granted under this Agreement supersede any registration, qualification or similar rights granted to one or more Holders under any other agreement with respect to any of the Registrable Securities, and any of such preexisting registration rights are hereby superseded.
3.9 Dispute Resolution. The parties to this Agreement hereby agree to submit to the jurisdiction of the courts of any New York State or United States Federal court sitting in The City of New York, Borough of Manhattan and appellate courts thereof in any action or proceeding arising out of or relating to this Agreement.
3.10 Assignment. Other than Permitted Transferees or any transferee of all Registrable Securities of a Holder, no Holder shall be permitted to assign or transfer any right or obligation under this Agreement without the prior written consent of the Company.
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IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above.
| COMPANY: | ||
| FARADAY FUTURE INTELLIGENT ELECTRIC INC. | ||
| By: | /s/ Dr. Carsten Breitfeld | |
| Name: Dr. Carsten Breitfeld | ||
| Title: Global Chief Executive Officer | ||
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above.
INVESTORS | ||
FF TOP HOLDING LTD. | ||
| By: | /s/ Matthias Aydt | |
| Name: Matthias Aydt | ||
Title: President | ||
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above.
| INVESTORS | ||
SEASON SMART LIMITED | ||
| By: | /s/ Jimmy Fong | |
| Name: Jimmy Fong | ||
Title: Authorised Signatory | ||
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above.
| INVESTORS | ||
PROPERTY SOLUTIONS ACQUISITION SPONSOR, LLC | ||
By: |
/s/ Jordan Vogel | |
| Name: Jordan Vogel | ||
| Title: Co-CEO | ||
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above.
| INVESTORS | ||
EARLYBIRDCAPITAL, INC. | ||
| By: | /s/ Steven Levine | |
| Name: Steven Levine | ||
| Title: CEO | ||
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above.
| INVESTORS | |
| /s/ Robert S. Mancini | |
| Robert S. Mancini |
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above.
| INVESTORS | |
| /s/ Philip Kassin | |
Philip Kassin |
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IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above.
| INVESTORS | |
| /s/ D.James Carpenter | |
| D. James Carpenter |
SCHEDULE A
INVESTORS
| Investors | Notice Address | |
| FF Top Holding Ltd. |
Conyers Trust Company (BVI) Limited
Commerce House, Tortola VG1110, British Virgin Islands
Attention: Matthias Aydt
E-mail: Matthias.Aydt@ff.com | |
| Season Smart Limited |
Season Smart Limited No. 38 Gloucester Road
Attention: Jimmy Fong Kar Chun
E-mail: Jfong@evergrande.com | |
| Property Solutions Acquisition Sponsor, LLC |
c/o Benchmark Real Estate Group
Attention: Jordan Vogel
E-mail: jordan@benchmarkrealestate.com | |
| EarlyBirdCapital, Inc. |
366 Madison Avenue, 8th Floor
Attention: Steve Levine
E-mail: Slevine@ebcap.com | |
| Robert S. Mancini |
5775 Collins Avenue, Suite 403
Attention: Robert S. Mancini
E-mail: rmancini@rmginvestments.com |
| Philip Kassin |
5775 Collins Avenue, Suite 403
Attention: Philip Kassin
E-mail: pkassin@rmginvestments.com | |
| D. James Carpenter |
5775 Collins Avenue, Suite 403
Attention: D. James Carpenter
E-mail: jcarpenter@rmginvestments.com |
Exhibit 10.3
Execution Version
SHAREHOLDER AGREEMENT
DATED JULY 21, 2021
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TABLE OF CONTENTS
| Page | |||
| ARTICLE I DEFINITIONS | 1 | ||
| 1.1 | Definitions | 1 | |
| 1.2 | Construction | 5 | |
| ARTICLE II CORPORATE GOVERNANCE MATTERS | 5 | ||
| 2.1 | Election of Directors. | 5 | |
| 2.2 | Committee | 7 | |
| 2.3 | Compensation | 7 | |
| 2.4 | Reimbursement of Expenses | 7 | |
| 2.5 | Indemnification Priority | 7 | |
| 2.6 | Other Rights of FF Top Designees | 8 | |
| ARTICLE III ADDITIONAL COVENANTS | 8 | ||
| 3.1 | Pledges | 8 | |
| 3.2 | Spin-Offs or Split Offs | 8 | |
| ARTICLE IV GENERAL PROVISIONS | 9 | ||
| 4.1 | Termination | 9 | |
| 4.2 | Notices | 9 | |
| 4.3 | Amendment; Waiver | 9 | |
| 4.4 | Further Assurances | 10 | |
| 4.5 | Assignment | 10 | |
| 4.6 | Third Parties | 10 | |
| 4.7 | Governing Law | 10 | |
| 4.8 | Jurisdiction; Waiver of Jury Trial | 10 | |
| 4.9 | Specific Performance | 11 | |
| 4.10 | Entire Agreement | 11 | |
| 4.11 | Severability | 11 | |
| 4.12 | Table of Contents, Headings and Captions | 11 | |
| 4.13 | Grant of Consent | 11 | |
| 4.14 | Counterparts | 11 | |
| 4.15 | Effectiveness; Termination | 12 | |
| 4.16 | No Recourse | 12 | |
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SHAREHOLDER AGREEMENT
This Shareholder Agreement is entered into as of July 21, 2021 by and between Faraday Future Intelligent Electric Inc., a Delaware corporation (the “Company”), and FF Top Holding LLC, a Delaware limited liability company (“FF Top” or the “Shareholder”).
RECITALS
WHEREAS, the Company, PSAC Merger Sub Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Merger Sub”), and FF Intelligent Mobility Global Holdings Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (“FF Intelligent”), have entered into an Agreement and Plan of Merger, dated January 27, 2021 (as the same may be amended from time to time, the “Merger Agreement”);
WHEREAS, pursuant to the Merger Agreement, subject to the terms and conditions thereof, upon the consummation of the transactions contemplated thereby (the “Closing”), among other matters, Merger Sub will be merged with and into FF Intelligent with FF Intelligent continuing as the surviving entity and a wholly-owned subsidiary of the Company (the “Transaction”); and
WHEREAS, in connection with the Transaction, the Company and the Shareholder wish to set forth certain understandings between such parties, including with respect to certain governance matters.
NOW THEREFORE, in consideration of the foregoing and the mutual promises, covenants and agreements of the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms used in this Agreement shall have the respective meanings set forth below:
“Affiliate” has the meaning set forth in Rule 12b-2 promulgated under the Exchange Act, as in effect on the date hereof; provided that the Company and each of its Subsidiaries shall not be deemed to be Affiliates of the Shareholder.
“Agreement” means this Shareholders Agreement, as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof.
“Beneficially Own” has the meaning set forth in Rule 13d-3 promulgated under the Exchange Act.
“Board” means the Board of Directors of the Company.
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“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York, Los Angeles, California or the Cayman Islands are authorized or required by Law to close.
“Closing” has the meaning set forth in the Recitals.
“Closing Date” means the date of the closing of the Transaction.
“Common Stock” means the Company’s Class A common stock and Class B common stock, in each case with a par value of $0.0001 per share.
“Company” has the meaning set forth in the Preamble.
“Control” (including its correlative meaning, “Controlled”) means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise) of a Person.
“Director” means any director of the Company from time to time.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
“FF Intelligent” has the meaning set forth in the Recitals.
“FF Top” has the meaning set forth in the Recitals.
“FF Top Designee” has the meaning set forth in Section 2.1(b) hereof.
“Governmental Authority” means any federal, state, provincial, municipal, local or foreign government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, court or tribunal.
“Indemnification Agreements” has the meaning set forth in Section 2.5.
“Indemnitee” has the meaning set forth in Section 2.5.
“Independent Director” means an individual serving on the board of directors of a company who is “independent” as determined in accordance with the rules and regulations of the Nasdaq Stock Market and the SEC.
“Law” means any statute, law, regulation, ordinance, rule, injunction, order, judgment, decree, writ, governmental approval, directive, requirement, other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority.
“Observation Election” has the meaning set forth in Section 2.7.
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“Merger Agreement” has the meaning set forth in the Recitals.
“Merger Sub” has the meaning set forth in the Recitals.
“Necessary Action” means, with respect to any party and a specified result, all actions (to the extent such actions are not prohibited by applicable Law, within such party’s control and do not directly conflict with any rights expressly granted to such party in this Agreement, the Merger Agreement, the lock-up agreements, the certificate of incorporation or bylaws of the Company) reasonably necessary and desirable within his, her or its control to cause such result, including, (i) calling special meetings of the Board, any committee of the Board and the shareholders of the Company, (ii) causing the Board or any committee of the Board to adopt relevant resolutions (subject to any applicable fiduciary duties), (iii) voting or providing a proxy with respect to shares of Common Stock and other securities of the Company generally entitled to vote in the election of Directors of the Company Beneficially Owned by such party, (iv) causing the adoption of shareholders’ resolutions and amendments to the certificate of incorporation or the bylaws of the Company, including executing written consents in lieu of meetings, (v) executing agreements and instruments, (vi) causing members of the Board (to the extent such members were elected, nominated or designated by the party obligated to undertake such action) to act (subject to any applicable fiduciary duties) in a certain manner or causing them to be removed in the event they do not act in such a manner and (vii) making, or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such a result.
“NewCo” has the meaning set forth in Section 3.2.
“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or other form of business organization, whether or not regarded as a legal entity under applicable Law, or any Governmental Authority or any department, agency or political subdivision thereof.
“Transaction” has the meaning set forth in the Recitals.
“SEC” means the U.S. Securities and Exchange Commission.
“Secondary Indemnitors” has the meaning set forth in Section 2.5.
“Shareholder” has the meaning set forth in the Preamble.
“Shareholder Share Percentage” means on the date of determination the aggregate voting power of the shares of Common Stock and other securities of the Company generally entitled to vote in the election of Directors of the Company Beneficially Owned (which for the avoidance of doubt, shall include such shares whose voting rights have been granted to FF Top with conditions to be revoked solely based on the fiduciary duty of the trustee or for reason that grant of proxy for a vote will reasonably be expected to materially and adversely affect the interests of the holders of such shares) by the Shareholder and its Affiliates (excluding any shares held by the Company and its Subsidiaries), divided by the total voting power of the then outstanding shares of Common Stock issued as of the record date for any meeting of shareholders of the Company at which (or any solicitation of written consent pursuant to which) Directors are to be elected.
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“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which: (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, representatives or trustees thereof is at the time owned or Controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or any combination thereof; or (ii) if a limited liability company, partnership, association or other business entity, a majority of the total voting power of stock (or equivalent ownership interest) of the limited liability company, partnership, association or other business entity is at the time owned or Controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or any combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall (a) be allocated a majority of limited liability company, partnership, association or other business entity gains or losses, or (b) Control the managing member, managing director or other governing body or general partner of such limited liability company, partnership, association or other business entity.
“Total Number of Directors” means the total number of directors comprising the Board from time to time.
“Transfer” (including its correlative meaning, “Transferee”) means, with respect to any security, directly or indirectly, to sell, contract to sell, give, assign, hypothecate, pledge, encumber, grant a security interest in, offer, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of any economic, voting or other rights in or to such security. When used as a noun, “Transfer” shall have such correlative meaning as the context may require.
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1.2 Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Unless the context otherwise requires: (a) “or” is disjunctive but not exclusive, (b) words in the singular include the plural, and in the plural include the singular, (c) the words “hereof,” “herein,” “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement, and section and subsection references are to this Agreement unless otherwise specified, (d) the term “including” is not limiting and means “including without limitation,” and
(e) whenever the context requires, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms.
ARTICLE II
CORPORATE GOVERNANCE MATTERS
2.1 Election of Directors.
(a) At the Closing Date, the Company and the Shareholder shall take all Necessary Action to cause the Board to be comprised of nine (9) directors, one of whom shall be the Chief Executive Officer of the Company. As of the date hereof, the Chief Executive Officer of the Company is Dr. Carsten Breitfeld. At the Closing Date, the Board shall initially be composed of the following individuals: Dr. Carsten Breitfeld, Jordan Vogel, Brian Krolicki, Lee Liu, Qin Ye, Susan Swenson, Matthias Aydt, Edwin Goh and Scott Vogel (the “Initial Board”), and the Company shall take all Necessary Action to cause the Initial Board to be nominated for another one-year term at the Company’s first annual meeting following such appointment. Susan G. Swenson, Edwin Goh, Brian Krolicki and Lee Liu shall be deemed as the “FF Top Designees” for the Company’s first and second annual meetings following the initial appointment of such directors, the resignation of which and the filling of a vacancy shall be subject to Section 2.1(c). The Shareholder shall take all Necessary Action to cause the election of the Initial Board at the Company’s first annual meeting.
(b) Following the Closing Date and so long as the Shareholder Share Percentage exceeds 5%, FF Top shall have the right, but not the obligation, to nominate, and the individuals nominated for election as Directors by or at the direction of the Board or the Nominating and Corporate Governance Committee shall include, a number of individuals not less than the number equal to the Total Number of Directors multiplied by the Shareholder Share Percentage (rounding up to the next whole director) (the “FF Top Designees”). FF Top agrees that no FF Top Designee shall be subject to any “bad actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) promulgated under the Securities Act of 1933, as amended, and that all such FF Top Designees shall be subject to the prior and reasonable approval of the Nominating and Corporate Governance Committee. FF Top further agrees that, until the Company is a “controlled company” as defined in the rules of the national securities exchange on which the Common Stock is listed, the FF Top Designees shall include a sufficient number of individuals who are Independent Directors such that the Board would be comprised of a majority of Independent Directors assuming the election of the FF Top Designees and the other members of the Board.
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(c) In the event that a vacancy is created at any time by the death, disability, retirement, removal, failure of being elected or resignation of any FF Top Designee or for any other reason, any individual nominated by or at the direction of the Board or the Nominating and Corporate Governance Committee to fill such vacancy shall be, and the Company shall use its reasonable best efforts to cause such vacancy to be filled, as soon as possible, by a new nominee of FF Top who qualifies as an FF Top Designee, and the Company shall use its reasonable best efforts to take or cause to be taken, to the fullest extent permitted by Law, at any time and from time to time, all Necessary Actions to accomplish the same. FF Top has the right to remove any of the FF Top Designees, and the exclusive right to nominate a replacement nominee to fill any vacancy so created by such removal or resignation of such FF Top Designee. The Company shall use its reasonable best efforts to take or cause to be taken, to the fullest extent permitted by Law, at any time and from time to time, all Necessary Actions to facilitate the removal of any of the FF Top Designees that FF Top intends to remove.
(d) The Company shall, to the fullest extent permitted by Law, take all Necessary Actions to (i) include each FF Top Designee in the slate of nominees recommended by the Board at any meeting of shareholders called for the purpose of electing directors (or consent in lieu of meeting), and (ii) include each FF Top Designee in the proxy statement prepared by the management of the Company with respect to the election of members of the Board and at every adjournment or postponement thereof. The Company shall use reasonable best efforts consistent with its efforts with respect to the other Board nominees; provided, that such efforts are customary for a U.S. public traded company, to support the election of the FF Top Designees as directors of the Company; provided, further, that the Company shall not be required to increase the Total Number of Directors.
(e) In addition to any vote or consent of the Board or the shareholders of the Company required by applicable Law or the certificate of incorporation, bylaws or other organizational document of the Company, and notwithstanding anything to the contrary in this Agreement, for so long as this Agreement is in effect, (i) the authorized number of directors on the Board shall be established and remain at nine (9) until the second annual meeting following the Closing Date, and (ii) any action by the Board to increase or decrease the Total Number of Directors shall require the prior written consent of FF Top (which consent shall not be unreasonably withheld, conditioned or delayed), delivered in accordance with Section 4.2 hereof; provided, that in connection with any increase or decrease in the Total Number of Directors, the number of FF Top Designees required to be Independent Directors under Section 2.1(b) shall be increased or decreased as may be necessary.
(f) Upon any decrease in the number of directors that FF Top is entitled to designate for nomination to the Board, FF Top shall, promptly at the request of the Board, take all Necessary Actions to cause the appropriate number of FF Top Designees to offer to tender their resignation.
(g) From and after the Closing until the occurrence of a Qualifying Equity Market Capitalization (as defined in the Company’s Certificate of Incorporation as of the Closing Date), the Company agrees not to elect to be treated as a “controlled company” as defined in the rules of the national securities exchange on which the Common Stock is listed.
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2.2 Committee.
(a) For so long as this Agreement is in effect, the Company shall take all Necessary Actions at any given time so as to cause to be appointed to any committee of the Board a number of FF Top Designees such that the number of FF Top Designees serving on any such committee is proportionate (rounding up to the next whole director) to the number of directors that FF Top is entitled to designate to the Board under this Agreement, to the extent such directors are permitted to serve on such committees under the applicable rules and regulations of the SEC or the applicable stock exchange on which the shares of Common Stock of the Company are listed. It is understood by the parties hereto that FF Top shall not be required to have the FF Top Designees represented on any committee and any failure to exercise such right in this Section 2.2 in a prior period shall not constitute any waiver of such right in a subsequent period.
(b) From and after the Closing, the Company shall, and shall take all Necessary Action to, cause the Board to establish and maintain (i) a Nominating and Corporate Governance Committee comprised solely of Independent Directors, one of whom shall be Jordan Vogel as the sole director designee of Riverside Management Group, LLC and Property Solutions Acquisition Corp. so long as Jordan Vogel is a director of the Company, and (ii) a Finance and Investment Committee that shall include Jerry Wang as a non-voting member so long as Jerry Wang is an officer of the Company.
2.3 Compensation. Except to the extent FF Top may otherwise notify the Company, the FF Top Designees serving on the Board that are not employees of the Company or any of its Subsidiaries shall be entitled to compensation consistent with the compensation received by other non-employee Directors, including any fees and equity awards.
2.4 Reimbursement of Expenses. The Company shall pay the reasonable and documented out-of-pocket expenses incurred by each FF Top Designee serving on the Board in connection with such FF Top Designee’s services provided to or on behalf of the Company, including attending meetings or events on behalf of the Company at the Company’s request.
2.5 Indemnification Priority. The Company hereby acknowledges that, in addition to the rights provided to each FF Top Designee serving on the Board or other indemnified person covered by any such indemnity insurance policy (any such Person, an “Indemnitee”) or any indemnification agreement that such Indemnitee may enter into with the Company from time to time (the “Indemnification Agreements”), the Indemnitees may have certain rights to indemnification, advancement of expenses and/or insurance provided by FF Top or one or more of their respective Affiliates (collectively, the “Secondary Indemnitors”). Notwithstanding anything to the contrary in any of the Indemnification Agreements, the Company hereby agrees that, to the fullest extent permitted by Law, with respect to its indemnification and advancement obligations to the Indemnitees under the Indemnification Agreements, this Agreement or otherwise, the Company (i) is the indemnitor of first resort (i.e., its and its insurers’ obligations to advance expenses and to indemnify the Indemnitees are primary and any obligation of the Secondary Indemnitors or their insurers to advance expenses or to provide indemnification for the same expenses or liabilities incurred by any of the Indemnitees is secondary and excess), and (ii) shall be required to advance the full amount of expenses incurred by each Indemnitee, without regard to any rights such Indemnitees may have against the Secondary Indemnitors or their insurers; provided, such Indemnitee shall have delivered to the Company an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses. The Company agrees that any Secondary Indemnitor or insurer thereof not a party hereto shall be an express third party beneficiary of this Section 2.5, able to enforce such clause according to its terms as if it were a party hereto. Nothing contained in the Indemnification Agreements is intended to limit the scope of this Section 2.5 or the other terms set forth in this Agreement or the rights of the Secondary Indemnitors or their insurers hereunder.
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2.6 Other Rights of Designees. Except as provided in Sections 2.3, 2.4 and 2.5, each FF Top Designee and the other members serving on the Board shall be entitled to the same rights and privileges applicable to all other members of the Board generally or to which all such members of the Board are entitled. In furtherance of the foregoing, subject to Company’s certificate of incorporation and/or bylaws, the Company shall indemnify, exculpate, and advance fees and expenses of the FF Top Designees and the other members serving on the Board (including by entering into an indemnification agreement in a form substantially similar to the Company’s form director indemnification agreement) and provide such FF Top Designees and the other members with director and officer insurance to the same extent it indemnifies, exculpates, reimburses and provides insurance for the other members of the Board pursuant to the certificate of incorporation and/or the bylaws of the Company, applicable Law or otherwise.
ADDITIONAL COVENANTS
3.1 Pledges. Upon the written request of the Shareholder to pledge, hypothecate or grant security interests in any or all of the shares of Common Stock held by it, including to banks or financial institutions as collateral or security for loans, advances or extensions of credit, the Company agrees to cooperate with the Shareholder in taking any action reasonably necessary to consummate any such pledge, hypothecation or grant, including, delivery of letter agreements to lenders in form and substance reasonably satisfactory to such lenders (which may include agreements by the Company in respect of the exercise of remedies by such lenders) and, subject to applicable Law, instructing the transfer agent to transfer any such shares of Common Stock subject to the pledge, hypothecation or grant into the facilities of The Depository Trust Company without restricted legends.
3.2 Spin-Offs or Split Offs. In the event that the Company effects the separation of any material portion of its business into one or more entities (each, a “NewCo”), whether existing or newly formed, including by way of spin-off, split-off, carve-out, demerger, recapitalization, reorganization or similar transaction, and the Shareholder will receive equity interests in any such NewCo as part of such separation, the Company shall cause any such NewCo to enter into a shareholders agreement with the Shareholder that provides the Shareholder with rights vis-á-vis such NewCo that are substantially identical to those set forth in this Agreement.
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ARTICLE IV
GENERAL PROVISIONS
4.1 Termination. Except for Section 2.5 hereof and this Article IV, this Agreement shall terminate at such time as FF Top is no longer entitled to designate a director pursuant to Section 2.1(b) hereof.
4.2 Notices. Any notice, designation, request, request for consent or consent provided for in this Agreement shall be in writing and shall be either personally delivered, sent by electronic mail or sent by reputable overnight courier service (charges prepaid) to the Company at the address set forth below and to any other recipient at the address indicated on the Company’s records, or at such address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. Notices and other such documents will be deemed to have been given or made hereunder when delivered personally or sent by electronic mail during normal business hours (and otherwise as of the immediately following Business Day) and one (1) Business Day after deposit with a reputable overnight courier service.
If to the Company, to:
c/o Faraday & Future
18455 S. Figueroa Street
Los Angeles, CA 90248
Attention: General Counsel
E-mail: jarret.johnson@ff.com
with a copy (which shall not constitute notice) to:
Sidley Austin LLP
1999 Avenue of the Stars, 17th Floor
Attention: Vijay S. Sekhon, Esq.
Email: vsekhon@sidley.com
If to FF Top, to:
Conyers Trust Company (BVI) Limited Commerce House,
Wickhams Cay 1, P.O. Box 3 140, Road Town,
Tortola VG1110, British Virgin Islands
Attention: Matthias Aydt
E-mail: Matthias.Aydt@ff.com
4.3 Amendment; Waiver. This Agreement may be amended, supplemented or otherwise modified only by a written instrument executed by the parties hereto. Neither the failure nor delay on the part of any party hereto to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
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4.4 Further Assurances. The parties hereto will sign such further documents, cause such meetings to be held, resolutions passed, exercise their votes and do and perform and cause to be done such further acts and things necessary, proper or advisable in order to give full effect to this Agreement and every provision hereof. To the fullest extent permitted by Law, the Company shall not directly or indirectly take any action that is intended to, or would reasonably be expected to result in, the Shareholder being deprived of the rights contemplated by this Agreement.
4.5 Assignment. This Agreement may not be directly or indirectly assigned or Transferred (by operation of Law or otherwise) without the express prior written consent of the other party hereto, and any attempted assignment, without such consents, will be null and void; provided, however, that the Shareholder may assign to any of its wholly owned Subsidiaries all of its rights hereunder and, following such assignment, such assignee shall be deemed to be the Shareholder for all purposes of this Agreement. This Agreement will inure to the benefit of and be binding on the parties hereto and their respective successors and permitted assigns.
4.6 Third Parties. Except as provided for in Section 2.1 and Section 2.5, this Agreement does not create any rights, claims or benefits inuring to any person that is not a party hereto nor create or establish any third party beneficiary hereto. For the avoidance of doubt, the parties hereto acknowledge that the named individuals in Section 2.1(a) who are not signatories hereto are intended third party beneficiaries and entitled to enforce this Agreement directly against any party hereto as if such named individuals were named herein as a party.
4.7 Governing Law. THIS AGREEMENT AND ITS ENFORCEMENT AND ANY CONTROVERSY ARISING OUT OF OR RELATING TO THE MAKING OR PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO DELAWARE’S PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT OF A CONFLICT BETWEEN THIS AGREEMENT AND THE COMPANY’S CERTIFICATE OF INCORPORATION AND/OR BYLAWS, THE PROVISIONS OF THIS AGREEMENT SHALL SUPERSEDE THE COMPANY’S CERTIFICATE OF INCORPORATION AND/OR BYLAWS WITH RESPECT TO SUCH CONFLICTING SUBJECT MATTER.
4.8 Jurisdiction; Waiver of Jury Trial. Each party hereto hereby (i) agrees that any action, directly or indirectly, arising out of, under or relating to this Agreement shall exclusively be brought in and shall exclusively be heard and determined by the federal and state courts located in the State of Delaware and (ii) solely in connection with the action(s) contemplated by subsection (i) hereof, (A) irrevocably and unconditionally consents and submits to the exclusive jurisdiction of the courts identified in subsection (i) hereof, (B) irrevocably and unconditionally waives any objection to the laying of venue in any of the courts identified in clause (i) of this Section 4.8, (C) irrevocably and unconditionally waives and agrees not to plead or claim that any of the courts identified in such clause (i) is an inconvenient forum or does not have personal jurisdiction over any party hereto, and (D) agrees that mailing of process or other papers in connection with any such action in the manner provided herein or in such other manner as may be permitted by applicable Law shall be valid and sufficient service thereof. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM OR ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE SERVICES CONTEMPLATED HEREBY.
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4.9 Specific Performance. Each party hereto acknowledges and agrees that in the event of any breach of this Agreement by any of them, the other parties hereto would be irreparably harmed and could not be made whole by monetary damages. Each party accordingly agrees to waive the defense in any action for specific performance that a remedy at Law would be adequate and agrees that the parties, in addition to any other remedy to which they may be entitled at Law or in equity, shall be entitled to specific performance of this Agreement without the posting of a bond.
4.10 Entire Agreement. This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof. There are no agreements, representations, warranties, covenants or understandings with respect to the subject matter hereof or thereof other than those expressly set forth herein and therein. This Agreement supersedes all other prior agreements and understandings between the parties with respect to such subject matter.
4.11 Severability. If any provision of this Agreement, or the application of such provision to any Person or circumstance or in any jurisdiction, shall be held to be invalid or unenforceable to any extent, (i) the remainder of this Agreement shall not be affected thereby, and each other provision hereof shall be valid and enforceable to the fullest extent permitted by Law, (ii) as to such Person or circumstance or in such jurisdiction such provision shall be reformed to be valid and enforceable to the fullest extent permitted by Law, and (iii) the application of such provision to other Persons or circumstances or in other jurisdictions shall not be affected thereby.
4.12 Table of Contents, Headings and Captions. The table of contents, headings, subheadings and captions contained in this Agreement are included for convenience of reference only, and in no way define, limit or describe the scope of this Agreement or the intent of any provision hereof.
4.13 Grant of Consent. Any vote, consent or approval of, or designation by, or other action of, the Shareholder hereunder shall be effective if notice of such vote, consent, approval, designation or other action is provided in accordance with Section 4.2 hereof by the Shareholder as of the latest date any such notice is so provided to the Company.
4.14 Counterparts. This Agreement and any amendment hereto may be signed in any number of separate counterparts, and may be delivered by means of electronic transmission in portable document format, each of which shall be deemed an original, but all of which taken together shall constitute one Agreement (or amendment, as applicable).
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4.15 Effectiveness; Termination. This Agreement shall become effective upon the Closing Date, and shall automatically terminate upon the valid termination of the Merger Agreement pursuant to its terms.
4.16 No Recourse. This Agreement may only be enforced against, and any claims or cause of action that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement, the transactions contemplated hereby or the subject matter hereof may only be made against the parties hereto and no past, present or future Affiliate, director, officer, employee, incorporator, member, manager, partner, shareholder, agent, attorney or representative of any party hereto or any past, present or future Affiliate, director, officer, employee, incorporator, member, manager, partner, shareholder, agent, attorney or representative of any of the foregoing (each, a “Non-Recourse Party”) shall have any liability for any obligations or liabilities of the parties to this Agreement or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby. Without limiting the rights of any party against the other parties hereto, in no event shall any party or any of its Affiliates seek to enforce this Agreement against, make any claims for breach of this Agreement against, or seek to recover monetary damages from, any Non-Recourse Party.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
| FARADAY FUTURE INTELLIGENT ELECTRIC INC. | |||
| By: | /s/ Dr. Carsten Breitfeld | ||
| Name: | Dr. Carsten Breitfeld | ||
| Title: | Global Chief Executive Officer | ||
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
| FF TOP HOLDING LTD. | |||
| By: | /s/ Matthias Aydt | ||
| Name: | Matthias Aydt | ||
| Title: | President | ||
Exhibit 10.10
Faraday Future Intelligent Electric, Inc
Amended and restated 2021 STOCK INCENTIVE PLAN
I. INTRODUCTION
1.1 Purposes. The purposes of the Faraday Future Intelligent Electric, Inc. Amended and Restated 2021 Stock Incentive Plan (this “Plan”) are (i) to align the interests of the Company’s stockholders and the recipients of awards under this Plan by increasing the proprietary interest of such recipients in the Company’s growth and success, (ii) to advance the interests of the Company by attracting and retaining Non-Employee Directors, officers, other employees, consultants, independent contractors and agents and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders.
1.2 Certain Definitions.
“Acquisition” shall have the meaning set forth in Section 5.8.
“Agreement” shall mean the written or electronic agreement evidencing an award hereunder between the Company and the recipient of such award.
“Board” shall mean the Board of Directors of the Company.
“Change in Control” shall have the meaning set forth in Section 5.8(b).
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Committee” shall mean the Compensation Committee of the Board, or a subcommittee thereof, or such other committee designated by the Board, in each case, consisting of two or more members of the Board, each of whom is intended to be (i) a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) “independent” within the meaning of the rules of the NASDAQ Capital Market or, if the Common Stock is not listed on the NASDAQ Capital Market, within the meaning of the rules of the principal stock exchange on which the Common Stock is then traded.
“Common Stock” shall mean the Class A common stock, par value $ 0.0001 per share, of the Company, and all rights appurtenant thereto.
“Company” shall mean Faraday Future Intelligent Electric, Inc., a corporation organized under the laws of the State of Delaware, or any successor thereto.
“Data” shall have the meaning set forth in Section 5.15.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Fair Market Value” shall mean the closing transaction price of a share of Common Stock as reported on the NASDAQ Capital Market on the date as of which such value is being determined or, if the Common Stock is not listed on the NASDAQ Capital Market, the closing transaction price of a share of Common Stock on the principal national stock exchange on which the Common Stock is traded on the date as of which such value is being determined or, if there shall be no reported transactions for such date, on the next preceding date for which transactions were reported; provided, however, that if the Common Stock is not listed on a national stock exchange or if Fair Market Value for any date cannot be so determined, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate and in compliance with Section 409A of the Code.
“Free-Standing SAR” shall mean an SAR which is not granted in tandem with, or by reference to, an option, which entitles the holder thereof to receive, upon exercise, shares of Common Stock (which may be Restricted Stock) or, to the extent set forth in the applicable Agreement, cash or a combination thereof, with an aggregate value equal to the excess of the Fair Market Value of one (1) share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of such SARs which are exercised.
“Incentive Stock Option” shall mean an option to purchase shares of Common Stock that meets the requirements of Section 422 of the Code, or any successor provision, which is intended by the Committee to constitute an Incentive Stock Option.
“Non-Employee Director” shall mean any director of the Company who is not an officer or employee of the Company or any Subsidiary.
“Nonqualified Stock Option” shall mean an option to purchase shares of Common Stock which is not an Incentive Stock Option.
“Other Stock Award” shall mean an award granted pursuant to Section 3.4 of the Plan.
“Performance Award” shall mean a right to receive an amount of cash, Common Stock, or a combination of both, contingent upon the attainment of specified Performance Measures within a specified Performance Period.
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“Performance Measures” shall mean the criteria and objectives, established by the Committee, which shall be satisfied or met (i) as a condition to the grant or exercisability of all or a portion of an option or SAR or (ii) during the applicable Restriction Period or Performance Period as a condition to the vesting of the holder’s interest, in the case of a Restricted Stock Award, of the shares of Common Stock subject to such award, or, in the case of a Restricted Stock Unit Award, Other Stock Award or Performance Award, to the holder’s receipt of the shares of Common Stock subject to such award or of payment with respect to such award. One or more of the following business criteria for the Company, on a consolidated basis, and/or for specified Subsidiaries, business or geographical units or operating areas of the Company (except with respect to the total shareholder return and earnings per share criteria) or individual basis, may be used by the Committee in establishing Performance Measures under this Plan: the attainment by a share of Common Stock of a specified Fair Market Value for a specified period of time; increase in stockholder value; earnings per share; return on or net assets; return on equity; return on investments; return on capital or invested capital; total stockholder return; earnings or income of the Company before or after taxes and/or interest; earnings before interest, taxes, depreciation and amortization (“EBITDA”); EBITDA margin; operating income; revenues; operating expenses, attainment of expense levels or cost reduction goals; market share; cash flow, cash flow per share, cash flow margin or free cash flow; interest expense; economic value created; gross profit or margin; operating profit or margin; net cash provided by operations; price-to-earnings growth; and strategic business criteria, consisting of one or more objectives based on meeting specified goals relating to market penetration, customer acquisition, business expansion, cost targets, customer satisfaction, reductions in errors and omissions, reductions in lost business, management of employment practices and employee benefits, supervision of litigation, supervision of information technology, quality and quality audit scores, efficiency, commercial launch of new products, completion of projects, and closing of acquisitions, divestitures, financings or other transactions, or such other goals as the Committee may determine whether or not listed herein. Each such goal may be determined on a pre-tax or post-tax basis or on an absolute or relative basis, and may include comparisons based on current internal targets, the past performance of the Company (including the performance of one or more Subsidiaries, divisions, or operating units) or the past or current performance of other companies or market indices (or a combination of such past and current performance). In addition to the ratios specifically enumerated above, performance goals may include comparisons relating to capital (including, but not limited to, the cost of capital), shareholders’ equity, shares outstanding, assets or net assets, sales, or any combination thereof. In establishing a Performance Measure or determining the achievement of a Performance Measure, the Committee may provide that achievement of the applicable Performance Measures may be amended or adjusted to include or exclude components of any Performance Measure, including, without limitation, foreign exchange gains and losses, asset write-downs, acquisitions and divestitures, change in fiscal year, unbudgeted capital expenditures, special charges such as restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual, infrequently occurring, nonrecurring or one-time events affecting the Company or its financial statements or changes in law or accounting principles. Performance Measures shall be subject to such other special rules and conditions as the Committee may establish at any time.
“Performance Period” shall mean any period designated by the Committee during which (i) the Performance Measures applicable to an award shall be measured and (ii) the conditions to vesting applicable to an award shall remain in effect.
“Person” shall have the meaning set forth in Section 5.8.
“Prior Plans” shall mean the Smart King Ltd. Equity Incentive Plan, the Smart King Ltd. Special Talent Incentive Plan and each other equity plan maintained by FF Intelligent Mobility Global Holdings Ltd. under which awards are outstanding as of the effective date of this Plan.
“Restricted Stock” shall mean shares of Common Stock which are subject to a Restriction Period and which may, in addition thereto, be subject to the attainment of specified Performance Measures within a specified Performance Period.
“Restricted Stock Award” shall mean an award of Restricted Stock under this Plan.
“Restricted Stock Unit” shall mean a right to receive one (1) share of Common Stock or, in lieu thereof and to the extent set forth in the applicable Agreement, the Fair Market Value of such share of Common Stock in cash, which shall be contingent upon the expiration of a specified Restriction Period and which may, in addition thereto, be contingent upon the attainment of specified Performance Measures within a specified Performance Period.
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“Restricted Stock Unit Award” shall mean an award of Restricted Stock Units under this Plan.
“Restriction Period” shall mean any period designated by the Committee during which (i) the Common Stock subject to a Restricted Stock Award may not be sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or disposed of, except as provided in this Plan or the Agreement relating to such award, or (ii) the conditions to vesting applicable to a Restricted Stock Unit Award or Other Stock Award shall remain in effect.
“SAR” shall mean a stock appreciation right which may be a Free-Standing SAR or a Tandem SAR.
“Stock Award” shall mean a Restricted Stock Award, Restricted Stock Unit Award or Other Stock Award.
“Subsidiary” shall mean any corporation, limited liability company, partnership, joint venture or similar entity in which the Company owns, directly or indirectly, an equity interest possessing more than 50% of the combined voting power of the total outstanding equity interests of such entity.
“Substitute Award” shall mean an award granted under this Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, including a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an option or SAR.
“Tandem SAR” shall mean an SAR which is granted in tandem with, or by reference to, an option (including a Nonqualified Stock Option granted prior to the date of grant of the SAR), which entitles the holder thereof to receive, upon exercise of such SAR and surrender for cancellation of all or a portion of such option, shares of Common Stock (which may be Restricted Stock) or, to the extent set forth in the applicable Agreement, cash or a combination thereof, with an aggregate value equal to the excess of the Fair Market Value of one (1) share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of shares of Common Stock subject to such option, or portion thereof, which is surrendered.
“Tax Date” shall have the meaning set forth in Section 5.5.
“Ten Percent Holder” shall have the meaning set forth in Section 2.1(a).
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1.3 Administration. This Plan shall be administered by the Committee. Any one or a combination of the following awards may be made under this Plan to eligible persons: (i) options to purchase shares of Common Stock in the form of Incentive Stock Options or Nonqualified Stock Options; (ii) SARs in the form of Tandem SARs or Free-Standing SARs; (iii) Stock Awards in the form of Restricted Stock, Restricted Stock Units or Other Stock Awards; and (iv) Performance Awards. The Committee shall, subject to the terms of this Plan, select eligible persons for participation in this Plan and determine the form, amount and timing of each award to such persons and, if applicable, the number of shares of Common Stock subject to an award, the number of SARs, the number of Restricted Stock Units, the dollar value subject to a Performance Award, the purchase price or base price associated with the award, the time and conditions of exercise or settlement of the award and all other terms and conditions of the award, including, without limitation, the form of the Agreement evidencing the award. The Committee may, in its sole discretion and for any reason at any time, take action such that (i) any or all outstanding options and SARs shall become exercisable in part or in full, (ii) all or a portion of the Restriction Period applicable to any outstanding awards shall lapse, (iii) all or a portion of the Performance Period applicable to any outstanding awards shall lapse and (iv) the Performance Measures (if any) applicable to any outstanding awards shall be deemed to be satisfied at the target, maximum or any other level. The Committee shall, subject to the terms of this Plan, interpret this Plan and the application thereof, establish rules and regulations it deems necessary or desirable for the administration of this Plan and may impose, incidental to the grant of an award, conditions with respect to the award, such as limiting competitive employment or other activities. All such interpretations, rules, regulations and conditions shall be conclusive and binding on all parties.
The Committee may delegate some or all of its power and authority hereunder to the Board (or any members thereof) or, subject to applicable law, to a subcommittee of the Board, a member of the Board, the Chief Executive Officer or other executive officer of the Company as the Committee deems appropriate; provided, however, that the Committee may not delegate its power and authority to a member of the Board, the Chief Executive Officer or other executive officer of the Company with regard to the selection for participation in this Plan of an officer, director or other person subject to Section 16 of the Exchange Act or decisions concerning the timing, pricing or amount of an award to such an officer, director or other person.
No member of the Board or Committee, and neither the Chief Executive Officer nor any other executive officer to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Board and the Committee and the Chief Executive Officer or other executive officer shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company’s Certificate of Incorporation and/or By-laws) and under any directors’ and officers’ liability insurance that may be in effect from time to time.
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1.4 Eligibility. Participants in this Plan shall consist of such officers, other employees, Non-Employee Directors, consultants, independent contractors, agents, and persons expected to become officers, other employees, Non-Employee Directors, consultants, independent contractors and agents of the Company and its Subsidiaries as the Committee in its sole discretion may select from time to time, provided such persons are eligible to receive awards of shares of Common Stock that are registered on a Form S-8 registration statement. The Committee’s selection of a person to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any other time. Except as otherwise provided for in an Agreement, for purposes of this Plan, references to employment by the Company shall also mean employment by a Subsidiary, and references to employment shall include service as a Non-Employee Director, consultant, independent contractor or agent. The Committee shall determine, in its sole discretion, the extent to which a participant shall be considered employed during an approved leave of absence. The aggregate value of cash compensation and the grant date fair value of shares of Common Stock that may be awarded or granted during any fiscal year of the Company to any Non-Employee Director shall not in the aggregate exceed $750,000.
1.5 Shares Available. Subject to adjustment as provided in Section 5.7 and to all other limits set forth in this Plan, 49,573,570 shares of Common Stock shall initially be available for all awards under this Plan, other than Substitute Awards. Subject to adjustment as provided in Section 5.7, no more than 49,573,570 shares of Common Stock in the aggregate may be issued under the Plan in connection with Incentive Stock Options. The number of shares of Common Stock available under the Plan shall increase annually on the first day of each calendar year, beginning with the calendar year ending December 31, 2022, and continuing until (and including) the calendar year ending December 31, 2031, with such annual increase equal to the lesser of (i) 5% of the number of shares of Stock issued and outstanding on December 31 of the immediately preceding fiscal year and (ii) an amount determined by the Board. The number of shares of Common Stock that remain available for future grants under the Plan shall be reduced by the sum of the aggregate number of shares of Common Stock that become subject to outstanding options, outstanding Free-Standing SARs, outstanding Stock Awards and outstanding Performance Awards denominated in shares of Common Stock, other than Substitute Awards.
Following approval of the Plan by the stockholders of the Company, the Company shall cease granting awards under the Prior Plans. However, outstanding awards previously granted under the Prior Plans shall remain subject to the terms and conditions of the Prior Plans and shall not be not be subject to the terms and conditions of the Plan.
To the extent that shares of Common Stock subject to an outstanding option, SAR, Stock Award or Performance Award granted under the Plan or a Prior Plan, other than Substitute Awards, are not issued or delivered by reason of (i) the expiration, termination, cancellation or forfeiture of such award (excluding shares subject to an option cancelled upon settlement in shares of a related Tandem SAR or shares subject to a Tandem SAR cancelled upon exercise of a related option) or (ii) the settlement of such award in cash, then such shares of Common Stock shall again be available under this Plan. In addition, shares of Common Stock subject to an award under this Plan or a Prior Plan shall again be available for issuance under this Plan if such shares are (x) shares that were subject to an option or stock-settled SAR and were not issued or delivered upon the net settlement or net exercise of such option or SAR or (y) shares delivered to or withheld by the Company to pay the purchase price or the withholding taxes related to an outstanding award. Notwithstanding the foregoing, shares repurchased by the Company on the open market with the proceeds of an option exercise shall not again be available for issuance under this Plan.
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The number of shares of Common Stock available for awards under this Plan shall not be reduced by (i) the number of shares of Common Stock subject to Substitute Awards or (ii) available shares under a stockholder approved plan of a company or other entity which was a party to a corporate transaction with the Company (as appropriately adjusted to reflect such corporate transaction) which become subject to awards granted under this Plan (subject to applicable stock exchange requirements).
Shares of Common Stock to be delivered under this Plan shall be made available from authorized and unissued shares of Common Stock, or authorized and issued shares of Common Stock reacquired and held as treasury shares or otherwise or a combination thereof.
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 Stock Options. The Committee may, in its discretion, grant options to purchase shares of Common Stock to such eligible persons as may be selected by the Committee. Each option, or portion thereof, that is not an Incentive Stock Option, shall be a Nonqualified Stock Option. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of shares of Common Stock with respect to which options designated as Incentive Stock Options are exercisable for the first time by a participant during any calendar year (under this Plan or any other plan of the Company, or any parent or Subsidiary) exceeds the amount (currently $100,000) established by the Code, such options shall constitute Nonqualified Stock Options.
Options shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common Stock subject to an option and the purchase price per share of Common Stock purchasable upon exercise of the option shall be determined by the Committee; provided, however, that the purchase price per share of Common Stock purchasable upon exercise of an option shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such option; provided further, that if an Incentive Stock Option shall be granted to any person who, at the time such option is granted, owns capital stock possessing more than 10 percent of the total combined voting power of all classes of capital stock of the Company (or of any parent or Subsidiary) (a “Ten Percent Holder”), the purchase price per share of Common Stock shall not be less than the price (currently 110% of Fair Market Value) required by the Code in order to constitute an Incentive Stock Option.
Notwithstanding the foregoing, in the case of an option that is a Substitute Award, the purchase price per share of the shares subject to such option may be less than 100% of the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate purchase price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor company or other entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate purchase price of such shares.
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(b) Option Period and Exercisability. The period during which an option may be exercised shall be determined by the Committee; provided, however, that no option shall be exercised later than 10 years after its date of grant; provided further, that if an Incentive Stock Option shall be granted to a Ten Percent Holder, such option shall not be exercised later than five (5) years after its date of grant. The Committee may, in its discretion, establish Performance Measures which shall be satisfied or met as a condition to the grant of an option or to the exercisability of all or a portion of an option. The Committee shall determine whether an option shall become exercisable in cumulative or non-cumulative installments and in part or in full at any time. An exercisable option, or portion thereof, may be exercised only with respect to whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by giving written notice to the Company specifying the number of whole shares of Common Stock to be purchased and accompanying such notice with payment therefor in full (or arrangement made for such payment to the Company’s satisfaction) either (A) in cash or check, (B) by delivery (either actual delivery or by attestation procedures established by the Company) of shares of Common Stock having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (C) authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the date of exercise, equal to the amount necessary to satisfy such obligation, (D) in cash by a broker-dealer acceptable to the Company to whom the participant has submitted an irrevocable notice of exercise, (E) such other methods permitted by applicable law, or (F) a combination of the foregoing, in each case, to the extent set forth in the Agreement relating to the option, (ii) if applicable, by surrendering to the Company any Tandem SARs which are cancelled by reason of the exercise of the option and (iii) by executing such documents as the Company may reasonably request. Any fraction of a share of Common Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the participant. No shares of Common Stock shall be issued and no certificate representing Common Stock shall be delivered until the full purchase price therefor and any withholding taxes thereon, as described in Section 5.5, have been paid (or arrangement made for such payment to the Company’s satisfaction).
2.2 Stock Appreciation Rights. The Committee may, in its discretion, grant SARs to such eligible persons as may be selected by the Committee. The Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:
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(a) Number of SARs and Base Price. The number of SARs subject to an award shall be determined by the Committee. Any Tandem SAR related to an Incentive Stock Option shall be granted at the same time that such Incentive Stock Option is granted. The base price of a Tandem SAR shall be the purchase price per share of Common Stock of the related option. The base price of a Free-Standing SAR shall be determined by the Committee; provided, however, that such base price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such SAR (or, if earlier, the date of grant of the option for which the SAR is exchanged or substituted).
Notwithstanding the foregoing, in the case of an SAR that is a Substitute Award, the base price per share of the shares subject to such SAR may be less than 100% of the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate base price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor company or other entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate base price of such shares.
(b) Exercise Period and Exercisability. The period for the exercise of an SAR shall be determined by the Committee; provided, however, that (i) no Tandem SAR shall be exercised later than the expiration, cancellation, forfeiture or other termination of the related option and (ii) no Free-Standing SAR shall be exercised later than 10 years after its date of grant. The Committee may, in its discretion, establish Performance Measures which shall be satisfied or met as a condition to the grant of an SAR or to the exercisability of all or a portion of an SAR. The Committee shall determine whether an SAR may be exercised in cumulative or non-cumulative installments and in part or in full at any time. An exercisable SAR, or portion thereof, may be exercised, in the case of a Tandem SAR, only with respect to whole shares of Common Stock and, in the case of a Free-Standing SAR, only with respect to a whole number of SARs. If an SAR is exercised for shares of Restricted Stock, a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section 3.2(c), or such shares shall be transferred to the holder in book entry form with restrictions on the shares duly noted, and the holder of such Restricted Stock shall have such rights of a stockholder of the Company as determined pursuant to Section 3.2(d). Prior to the exercise of a stock-settled SAR, the holder of such SAR shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such SAR.
(c) Method of Exercise. A Tandem SAR may be exercised (i) by giving written notice to the Company specifying the number of whole SARs which are being exercised, (ii) by surrendering to the Company any options which are cancelled by reason of the exercise of the Tandem SAR and (iii) by executing such documents as the Company may reasonably request. A Free-Standing SAR may be exercised (A) by giving written notice to the Company specifying the whole number of SARs which are being exercised and (B) by executing such documents as the Company may reasonably request. No shares of Common Stock shall be issued and no certificate representing Common Stock shall be delivered until any withholding taxes thereon, as described in Section 5.5, have been paid (or arrangement made for such payment to the Company’s satisfaction).
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2.3 Termination of Employment or Service. All of the terms relating to the exercise, cancellation or other disposition of an option or SAR (i) upon a termination of employment with or service to the Company of the holder of such option or SAR, as the case may be, whether by reason of termination, resignation, disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable Agreement.
2.4 Repricing. The Committee shall have the discretion, without the approval of the stockholders of the Company, to (i) reduce the purchase price or base price of any previously granted option or SAR, (ii) cancel any previously granted option or SAR in exchange for another option or SAR with a lower purchase price or base price or (iii) cancel any previously granted option or SAR in exchange for cash or another award if the purchase price of such option or the base price of such SAR exceeds the Fair Market Value of a share of Common Stock on the date of such cancellation.
2.5 No Dividend Equivalents. Notwithstanding anything in an Agreement to the contrary, the holder of an option or SAR shall not be entitled to receive dividend equivalents with respect to the number of shares of Common Stock subject to such option or SAR.
III. STOCK AWARDS
3.1 Stock Awards. The Committee may, in its discretion, grant Stock Awards to such eligible persons as may be selected by the Committee. The Agreement relating to a Stock Award shall specify whether the Stock Award is a Restricted Stock Award, a Restricted Stock Unit Award or, in the case of an Other Stock Award, the type of award being granted.
3.2 Terms of Restricted Stock Awards. Restricted Stock Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common Stock subject to a Restricted Stock Award and the Restriction Period, Performance Period (if any) and Performance Measures (if any) applicable to a Restricted Stock Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted Stock Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of the shares of Common Stock subject to such award (i) if the holder of such award remains continuously in the employment of the Company during the specified Restriction Period or (ii) if specified Performance Measures (if any) are satisfied or met during a specified Performance Period, and for the forfeiture of the shares of Common Stock subject to such award (x) if the holder of such award does not remain continuously in the employment of the Company during the specified Restriction Period or (y) if specified Performance Measures (if any) are not satisfied or met during a specified Performance Period.
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(c) Stock Issuance. During the Restriction Period, the shares of Restricted Stock shall be held by a custodian in book entry form with restrictions on such shares duly noted or, alternatively, a certificate or certificates representing a Restricted Stock Award shall be registered in the holder’s name and may bear a legend, in addition to any legend which may be required pursuant to Section 5.6, indicating that the ownership of the shares of Common Stock represented by such certificate is subject to the restrictions, terms and conditions of this Plan and the Agreement relating to the Restricted Stock Award. All such certificates shall be deposited with the Company, together with stock powers or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate, which would permit transfer to the Company of all or a portion of the shares of Common Stock subject to the Restricted Stock Award in the event such award is forfeited in whole or in part. Upon termination of any applicable Restriction Period (and the satisfaction or attainment of applicable Performance Measures), subject to the Company’s right to require payment of any taxes in accordance with Section 5.5, the restrictions shall be removed from the requisite number of any shares of Common Stock that are held in book entry form, and all certificates evidencing ownership of the requisite number of shares of Common Stock shall be delivered to the holder of such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise set forth in the Agreement relating to a Restricted Stock Award, and subject to the terms and conditions of a Restricted Stock Award, the holder of such award shall have all rights as a stockholder of the Company, including, but not limited to, voting rights, the right to receive dividends and the right to participate in any capital adjustment applicable to all holders of Common Stock; provided, however, that a distribution or dividend with respect to shares of Common Stock, including a regular cash dividend, shall be deposited with the Company and shall be subject to the same restrictions as the shares of Common Stock with respect to which such distribution was made.
(e) Section 83(b) Election. If a participant makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which such participant would otherwise be taxable under Section 83(a) of the Code, such participant shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service along with proof of the timely filing thereof.
3.3 Terms of Restricted Stock Unit Awards. Restricted Stock Unit Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(b) Number of Shares and Other Terms. The number of shares of Common Stock subject to a Restricted Stock Unit Award, including the number of shares that are earned upon the attainment of any specified Performance Measures, and the Restriction Period, Performance Period (if any) and Performance Measures (if any) applicable to a Restricted Stock Unit Award shall be determined by the Committee.
(c) Vesting and Forfeiture. The Agreement relating to a Restricted Stock Unit Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of such Restricted Stock Unit Award (i) if the holder of such award remains continuously in the employment of the Company during the specified Restriction Period or (ii) if specified Performance Measures (if any) are satisfied or met during a specified Performance Period, and for the forfeiture of the shares of Common Stock subject to such award (x) if the holder of such award does not remain continuously in the employment of the Company during the specified Restriction Period or (y) if specified Performance Measures (if any) are not satisfied or met during a specified Performance Period.
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(d) Settlement of Vested Restricted Stock Unit Awards. The Agreement relating to a Restricted Stock Unit Award shall specify (i) whether such award may be settled in shares of Common Stock or cash or a combination thereof and (ii) whether the holder thereof shall be entitled to receive, on a current or deferred basis, dividend equivalents, and, if determined by the Committee, interest on, or the deemed reinvestment of, any deferred dividend equivalents, with respect to the number of shares of Common Stock subject to such award. Any dividend equivalents with respect to Restricted Stock Units shall be subject to the same vesting conditions as the underlying awards. Prior to the settlement of a Restricted Stock Unit Award, the holder of such award shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such award.
3.4 Other Stock Awards. Subject to the limitations set forth in the Plan, the Committee is authorized to grant other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock, including without limitation shares of Common Stock granted as a bonus and not subject to any vesting conditions, dividend equivalents, deferred stock units, stock purchase rights and shares of Common Stock issued in lieu of obligations of the Company to pay cash under any compensatory plan or arrangement, subject to such terms as shall be determined by the Committee. The Committee shall determine the terms and conditions of such awards, which may include the right to elective deferral thereof, subject to such terms and conditions as the Committee may specify in its discretion. Any distribution, dividend or dividend equivalents with respect to Other Stock Awards shall be subject to the same vesting conditions as the underlying awards.
3.5 Termination of Employment or Service. All of the terms relating to the satisfaction of Performance Measures and the termination of the Restriction Period or Performance Period relating to a Stock Award, or any forfeiture and cancellation of such award (i) upon a termination of employment with or service to the Company of the holder of such award, whether by reason of termination, resignation, disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable Agreement.
IV. PERFORMANCE AWARDS
4.1 Performance Awards. The Committee may, in its discretion, grant Performance Awards to such eligible persons as may be selected by the Committee.
4.2 Terms of Performance Awards. Performance Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Value of Performance Awards and Performance Measures. The method of determining the value of the Performance Award and the Performance Measures and Performance Period applicable to a Performance Award shall be determined by the Committee.
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(b) Vesting and Forfeiture. The Agreement relating to a Performance Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of such Performance Award if the specified Performance Measures are satisfied or met during the specified Performance Period and for the forfeiture of such award if the specified Performance Measures are not satisfied or met during the specified Performance Period.
(c) Settlement of Vested Performance Awards. The Agreement relating to a Performance Award shall specify whether such award may be settled in shares of Common Stock (including shares of Restricted Stock) or cash or a combination thereof. If a Performance Award is settled in shares of Restricted Stock, such shares of Restricted Stock shall be issued to the holder in book entry form or a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section 3.2(c) and the holder of such Restricted Stock shall have such rights as a stockholder of the Company as determined pursuant to Section 3.2(d). Any dividends or dividend equivalents with respect to a Performance Award shall be subject to the same vesting restrictions as such Performance Award. Prior to the settlement of a Performance Award in shares of Common Stock, including Restricted Stock, the holder of such award shall have no rights as a stockholder of the Company.
4.3 Termination of Employment or Service. All of the terms relating to the satisfaction of Performance Measures and the termination of the Performance Period relating to a Performance Award, or any forfeiture and cancellation of such award (i) upon a termination of employment with or service to the Company of the holder of such award, whether by reason of termination, resignation, disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable Agreement.
V. GENERAL
5.1 Effective Date and Term of Plan. This Plan shall be submitted to the stockholders of the Company for approval at a special meeting of stockholders in 2021 and shall become effective as of the closing of the business combination consummated pursuant to the Agreement and Plan of Merger, dated as of January 27, 2021, as amended by the First Amendment to Agreement and Plan of Merger dated as of February 25, 2021, the Second Amendment to Agreement and Plan of Merger dated as of May 3, 2021, the Third Amendment to Agreement and Plan of Merger dated as of June 14, 2021 and the Fourth Amendment to Agreement and Plan of Merger dated as of July 12, 2021, by and among Property Solutions Acquisition Corp., PSAC Merger Sub Ltd., and FF Intelligent Mobility Global Holdings Ltd. This Plan shall terminate on the 10th anniversary of the date on which the Plan was approved by stockholders, unless terminated earlier by the Board. Termination of this Plan shall not affect the terms or conditions of any award granted prior to termination.
Awards hereunder may be made at any time prior to the termination of this Plan, provided that no Incentive Stock Option may be granted later than 10 years after the date on which the Plan was approved by the Board. In the event that this Plan is not approved by the stockholders of the Company, this Plan and any awards hereunder shall be void and of no force or effect.
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5.2 Amendments. The Board or, subject to applicable law, the Committee may amend, modify, or terminate this Plan or any Agreement as it shall deem advisable; provided, however, that no amendment to the Plan or any Agreement shall be effective without the approval of the Company’s stockholders if (i) stockholder approval is required by applicable law, rule or regulation, including any rule of the NASDAQ Capital Market, or any other stock exchange on which the Common Stock is then traded, or (ii) such amendment seeks to modify the Non-Employee Director compensation limit set forth in Section 1.3; provided further, that no amendment may materially impair the rights of a holder of an outstanding award without the consent of such holder. Notwithstanding anything herein to the contrary, the Board may amend the Plan or any Agreement at any time without the consent of a holder of an outstanding award to company with applicable law, including Section 409A of the Code.
5.3 Agreement. Each award under this Plan shall be evidenced by an Agreement setting forth the terms and conditions applicable to such award. No award shall be valid until an Agreement is executed by the Company and, to the extent required by the Company, executed or electronically accepted by the recipient of such award. Upon such execution or acceptance and delivery of the Agreement to the Company within the time period specified by the Company, such award shall be effective as of the effective date set forth in the Agreement.
5.4 Non-Transferability. No award shall be transferable other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company or, to the extent expressly permitted in the Agreement relating to such award, to the holder’s family members, a trust or entity established by the holder for estate planning purposes, a charitable organization designated by the holder or pursuant to a domestic relations order, in each case, without consideration. Except to the extent permitted by the foregoing sentence or the Agreement relating to an award, each award may be exercised or settled during the holder’s lifetime only by the holder or the holder’s legal representative or similar person. Except as permitted by the second preceding sentence, no award may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any award, such award and all rights thereunder shall immediately become null and void.
5.5 Tax Withholding. The Company shall have the right to require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash pursuant to an award made hereunder, payment by the holder of such award of any federal, state, local or other taxes which may be required to be withheld or paid in connection with such award. An Agreement may provide that (i) the Company shall withhold whole shares of Common Stock which would otherwise be delivered to a holder, having an aggregate Fair Market Value determined as of the date the obligation to withhold or pay taxes arises in connection with an award (the “Tax Date”), or withhold an amount of cash which would otherwise be payable to a holder, in the amount necessary to satisfy any such obligation or (ii) the holder may satisfy any such obligation by any of the following means: (A) a cash or check payment to the Company; (B) delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously owned whole shares of Common Stock having an aggregate Fair Market Value, determined as of the Tax Date, equal to the amount necessary to satisfy any such obligation; (C) authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the Tax Date, or withhold an amount of cash which would otherwise be payable to a holder, in either case equal to the amount necessary to satisfy any such obligation; (D) a cash payment by a broker-dealer acceptable to the Company to whom the participant has submitted an irrevocable notice of exercise or sale, (E) such other methods permitted by applicable law, or (F) a combination of the foregoing, in each case to the extent set forth in the Agreement relating to the award. Shares of Common Stock to be delivered or withheld may not have an aggregate Fair Market Value in excess of the amount determined by applying the minimum statutory withholding rate (or, if permitted by the Company, such other rate as will not cause adverse accounting consequences under the accounting rules then in effect, and is permitted under applicable Internal Revenue Service withholding rules). Any fraction of a share of Common Stock which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder.
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5.6 Restrictions on Shares. Each award made hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of the shares of Common Stock subject to such award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates evidencing shares of Common Stock delivered pursuant to any award made hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder.
5.7 Adjustment. In the event of any equity restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation or any successor or replacement accounting standard) that causes the per share value of shares of Common Stock to change, such as a stock dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary cash dividend, the number and class of securities available under this Plan, the terms of each outstanding option and SAR (including the number and class of securities subject to each outstanding option or SAR and the purchase price or base price per share), the terms of each outstanding Stock Award (including the number and class of securities subject thereto), and the terms of each outstanding Performance Award (including the number and class of securities subject thereto, if applicable), shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding options and SARs in accordance with Section 409A of the Code. In the event of any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Company, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of rights of participants. In either case, the decision of the Committee regarding any such adjustment shall be final, binding and conclusive.
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5.8 Change in Control.
(a) Subject to the terms of the applicable Agreements, in the event of a “Change in Control,” the Board, as constituted prior to the Change in Control, may, in its discretion:
(1) require that (i) some or all outstanding options and SARs shall become exercisable in full or in part, either immediately or upon a subsequent termination of employment, (ii) the Restriction Period applicable to some or all outstanding Stock Awards shall lapse in full or in part, either immediately or upon a subsequent termination of employment, (iii) the Performance Period applicable to some or all outstanding awards shall lapse in full or in part, and (iv) the Performance Measures applicable to some or all outstanding awards shall be deemed to be satisfied at the target, maximum or any other level;
(2) require that shares of capital stock of the corporation resulting from or succeeding to the business of the Company pursuant to such Change in Control (or a parent corporation thereof) or other property be substituted for some or all of the shares of Common Stock subject to an outstanding award, with an appropriate and equitable adjustment to such award as determined by the Board in accordance with Section 5.7; and/or
(3) require outstanding awards, in whole or in part, to be surrendered to the Company by the holder, and to be immediately cancelled by the Company, and to provide for the holder to receive (i) a cash payment in an amount equal to (A) in the case of an option or an SAR, the aggregate number of shares of Common Stock then subject to the portion of such option or SAR surrendered, whether or not vested or exercisable, multiplied by the excess, if any, of the Fair Market Value of a share of Common Stock as of the date of the Change in Control, over the purchase price or base price per share of Common Stock subject to such option or SAR; provided, however, that if the purchase price or base price per share of Common Stock subject to such option or SAR exceeds the Fair Market Value of a share of Common Stock as of the date of the Change in Control, such option or SAR may be cancelled for no consideration, (B) in the case of a Stock Award or a Performance Award denominated in shares of Common Stock, the number of shares of Common Stock then subject to the portion of such award surrendered to the extent the Performance Measures applicable to such award have been satisfied or are deemed satisfied pursuant to Section 5.8(a)(i), whether or not vested, multiplied by the Fair Market Value of a share of Common Stock as of the date of the Change in Control, and (C) in the case of a Performance Award denominated in cash, the value of the Performance Award then subject to the portion of such award surrendered to the extent the Performance Measures applicable to such award have been satisfied or are deemed satisfied pursuant to Section 5.8(a)(i); (ii) shares of capital stock of the corporation resulting from or succeeding to the business of the Company pursuant to such Change in Control (or a parent corporation thereof) or other property, having a fair market value not less than the amount determined under clause (i) above; or (iii) a combination of the payment of cash pursuant to clause (i) above and the issuance of shares or other property pursuant to clause (ii) above.
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(b) For purposes of this Plan, a “Change in Control” shall be deemed to have occurred under the following circumstances:
(1) Change in Ownership of the Company. A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the shares of the Company that, together with the shares held by such Person, constitutes more than fifty percent (50%) of the total voting power of the shares of the Company (an “Acquisition”); provided, however, that for purposes of this subsection, the acquisition of additional shares by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the shares of the Company will not be considered an Acquisition; provided, further, that any change in the ownership of the shares of the Company as a result of a private financing of the Company that is approved by the Board also will not be considered an Acquisition. Further, if the members of the Company immediately before such change in ownership continue to retain immediately after the change in ownership, in substantially the same proportions as their ownership of shares of the Company's voting shares immediately prior to the change in ownership, direct or indirect beneficial ownership of fifty percent (50%) or more of the total voting power of the shares of the Company or of the ultimate parent entity of the Company, such event shall not be considered an Acquisition under this Section 5.8(b)(1). For this purpose, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company, as the case may be, either directly or through one or more subsidiary corporations or other business entities;
(2) Change in Effective Control of the Company. If the Company has a class of securities registered pursuant to Section 12 of the Exchange Act, a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this Section 5.8(b)(2), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered an Acquisition;
(3) Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (c), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets: (A) a transfer to an entity that is controlled by the Company’s members immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a member of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s shares, an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding shares of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (b)(3). For purposes of this Section 5.8(b)(3), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
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provided, that with respect to any nonqualified deferred compensation that becomes payable on account of the Change in Control, the transaction or event described in clause (1), (2) or (3) also constitutes a “change in control event,” as defined in Treasury Regulation §1.409A-3(i)(5) if required in order for the payment not to violate Section 409A of the Code.
For purposes of this Section 5.8, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of shares, or similar business transaction with the Company.
Further and for the avoidance of doubt, the following transactions will not constitute an Acquisition: (i) a transaction if its sole purpose is to change the jurisdiction of the Company’s incorporation; (ii) a transaction if its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction or (iii) an acquisition of additional voting power of shares held by FF Top Holding LLC, a Delaware limited liability company, as a result of the increase in voting power attributed to a share of Class B common stock, par value $ 0.0001 per share, of the Company, following the occurrence of a qualifying equity market capitalization of the Company in accordance with the Company’s Second Amended and Restated Certificate of Incorporation (as the same may be amended, restated or otherwise modified from time-to-time).
In addition, a “Person,” as used in this Section 5.8, shall not include (w) the Company or any of its Affiliates; (x) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries; (y) an underwriter temporarily holding securities pursuant to an offering of such securities; or (z) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
5.9 Deferrals. The Committee may determine that the delivery of shares of Common Stock or the payment of cash, or a combination thereof, upon the settlement of all or a portion of any award made hereunder shall be deferred, or the Committee may, in its sole discretion, approve deferral elections made by holders of awards. Deferrals shall be for such periods and upon such terms as the Committee may determine in its sole discretion, subject to the requirements of Section 409A of the Code.
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5.10 No Right of Participation, Employment or Service. Unless otherwise set forth in an employment agreement, no person shall have any right to participate in this Plan. Neither this Plan nor any award made hereunder shall confer upon any person any right to continued employment by or service with the Company, any Subsidiary or any affiliate of the Company or affect in any manner the right of the Company, any Subsidiary or any affiliate of the Company to terminate the employment or service of any person at any time without liability hereunder.
5.11 Rights as Stockholder. No person shall have any right as a stockholder of the Company with respect to any shares of Common Stock or other equity security of the Company which is subject to an award hereunder unless and until such person becomes a stockholder of record with respect to such shares of Common Stock or equity security.
5.12 Designation of Beneficiary. To the extent permitted by the Company, a holder of an award may file with the Company a written designation of one or more persons as such holder’s beneficiary or beneficiaries (both primary and contingent) in the event of the holder’s death or incapacity. To the extent an outstanding option or SAR granted hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to exercise such option or SAR pursuant to procedures prescribed by the Company. Each beneficiary designation shall become effective only when filed in writing with the Company during the holder’s lifetime on a form prescribed by the Company. The spouse of a married holder domiciled in a community property jurisdiction shall join in any designation of a beneficiary other than such spouse. The filing with the Company of a new beneficiary designation shall cancel all previously filed beneficiary designations. If a holder fails to designate a beneficiary, or if all designated beneficiaries of a holder predecease the holder, then each outstanding award held by such holder, to the extent vested or exercisable, shall be payable to or may be exercised by such holder’s executor, administrator, legal representative or similar person.
5.13 Awards Subject to Clawback. The awards granted under this Plan and any cash payment or shares of Common Stock delivered pursuant to such an award are subject to forfeiture, recovery by the Company or other action pursuant to the applicable Agreement or any clawback or recoupment policy which the Company may adopt from time to time, including without limitation any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.
5.14 Section 409A. This Plan is intended to comply with the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. To the extent that any award is subject to Section 409A of the Code, it shall be paid in a manner that will comply with Section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto. Notwithstanding anything herein to the contrary, any provision in this Plan that is inconsistent with Section 409A of the Code shall be deemed to be amended to comply with Section 409A of the Code and to the extent such provision cannot be amended to comply therewith, such provision shall be null and void. The Company shall have no liability to a participant, or any other party, if an award that is intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee or the Company and, in the event that any amount or benefit under this Plan becomes subject to penalties under Section 409A of the Code, responsibility for payment of such penalties shall rest solely with the affected participants and not with the Company. Notwithstanding any contrary provision in this Plan or an Agreement, any payment(s) of “nonqualified deferred compensation” (within the meaning of Section 409A of the Code) that are otherwise required to be made under this Plan to a “specified employee” (as defined under Section 409A of the Code) as a result of such employee’s separation from service (other than a payment that is not subject to Section 409A of the Code) shall be delayed for the first six (6) months following such separation from service (or, if earlier, the date of death of the specified employee) and shall instead be paid (in a manner set forth in the Agreement) upon expiration of such delay period.
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5.15 Data Privacy. As a condition for receiving any award under the Plan, each participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this Section 5.15 by and among the Company and its Subsidiaries and affiliates exclusively for implementing, administering and managing the participant’s participation in the Plan. The Company and its Subsidiaries and affiliates may hold certain personal information about a participant, including the participant’s name, address and telephone number; birthdate; social security, insurance or other identification number; salary; nationality; job title(s); any shares of Common Stock held in the Company or its Subsidiaries and affiliates; and award details, to implement, manage and administer the Plan and awards (the “Data”). The Company and its Subsidiaries and affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a participant’s participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the participant’s country, or elsewhere, and the participant’s country may have different data privacy laws and protections than the recipients’ country. By accepting an award, each participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the participant’s participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the participant may elect to deposit any shares of Common Stock. The Data related to a participant will be held only as long as necessary to implement, administer, and manage the participant’s participation in the Plan. A participant may, at any time, view the Data that the Company holds regarding such participant, request additional information about the storage and processing of the Data regarding such participant, recommend any necessary corrections to the Data regarding the participant or refuse or withdraw the consents in this Section 5.15 in writing, without cost, by contacting the local human resources representative. The Company may cancel participant’s ability to participate in the Plan and, in the Committee’s sole discretion, the participant may forfeit any outstanding awards if the participant refuses or withdraws the consents in this Section 5.15. For more information on the consequences of refusing or withdrawing consent, participants may contact their local human resources representative.
5.16 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan and any award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
5.17 Prohibition on Executive Officer Loans. Notwithstanding any other provision of the Plan to the contrary, no participant who is a director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
5.18 Governing Law. This Plan, each award hereunder and the related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.
5.19 Foreign Employees. Without amending this Plan, the Committee may grant awards to eligible persons who are foreign nationals and/or reside outside of the United States on such terms and conditions different from those specified in this Plan as may in the judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Committee may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company or its Subsidiaries operates or has employees.
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Exhibit 10.32
DIRECTOR AND OFFICER
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of the 21st day of July, 2021 (the “Effective Date”), by and between Faraday Future Intelligent Electric Inc., a Delaware corporation (the “Company”), and [●] (“Indemnitee”).
RECITALS
A. The Company is aware that competent and experienced persons are increasingly reluctant to serve or continue serving as directors or officers of companies unless they are protected by comprehensive liability insurance and adequate indemnification due to the increased exposure to litigation costs and risks resulting from service to such companies that often bear no relationship to the compensation of such directors or officers.
B. The statutes and judicial decisions regarding the duties of directors and officers are often insufficient to provide directors and officers with adequate, reliable knowledge of the legal risks to which they are exposed or the manner in which they are expected to execute their fiduciary duties and responsibilities.
C. The Company and the Indemnitee recognize that plaintiffs often seek damages in such large amounts, and the costs of litigation may be so great (whether or not the claims are meritorious), that the defense and/or settlement of such litigation can create an extraordinary burden on the personal resources of directors and officers.
D. The board of directors of the Company has concluded that, to attract and retain competent and experienced persons to serve as directors and officers of the Company, it is not only reasonable and prudent but necessary to promote the best interests of the Company and its stockholders for the Company to contractually indemnify its directors and certain of its officers in the manner set forth herein, and to assume for itself liability for expenses and damages in connection with claims against such directors and officers in connection with their service to the Company as provided herein.
E. Section 145 of the General Corporation Law of Delaware (the “DGCL”) permits the Company to indemnify and advance defense costs to its officers and directors and to indemnify and advance expenses to persons who serve at the request of the Company as directors, officers, employees, or agents of other corporations or enterprises.
F. The Company desires and has requested the Indemnitee to serve or continue to serve as a director and/or officer of the Company, and the Indemnitee is willing to serve, or to continue to serve, as a director and/or officer of the Company if the Indemnitee is furnished the indemnity provided for herein by the Company.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements set forth below, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the corresponding meanings set forth below.
“Change in Control” means each of the following, occurring after the Effective Date:
(i) The date any Person becomes the “Beneficial Owner,” as such term is defined in Rule 13d-3 promulgated under the Exchange Act, of 30% or more of the combined voting power of the Company’s outstanding shares, other than beneficial ownership by (A) the Company or any subsidiary of the Company, (B) any employee benefit plan of the Company or any subsidiary of the Company or (C) any entity of the Company for or pursuant to the terms of any such plan. Notwithstanding the foregoing, a Change in Control shall not occur as the result of an acquisition of outstanding shares of the Company by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by a Person to 30% or more of the shares of the Company then outstanding; provided, however, that if a Person becomes the Beneficial Owner of 30% or more of the shares of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional shares of the Company, then a Change in Control shall be deemed to have occurred; or
(ii) The date the Company consummates a merger or consolidation with another entity, or engages in a reorganization with or a statutory share exchange or an exchange offer for the Company’s outstanding voting stock of any class with another entity or acquires another entity by means of a statutory share exchange or an exchange offer, or engages in a similar transaction; provided that no Change in Control shall have occurred by reason of this paragraph unless either:
(A) the stockholders of the Company immediately prior to the consummation of the transaction would not, immediately after such consummation, as a result of their beneficial ownership of voting stock of the Company immediately prior to such consummation (I) be the Beneficial Owners, directly or indirectly, of securities of the resulting or acquiring entity entitled to elect a majority of the members of the board of directors or other governing body of the resulting or acquiring entity; and (II) be the Beneficial Owners of the resulting or acquiring entity in substantially the same proportion as their beneficial ownership of the voting stock of the Company immediately prior to such transaction; or
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(B) those persons who were directors of the Company immediately prior to the consummation of the proposed transaction would not, immediately after such consummation, constitute a majority of the directors of the resulting entity.
(iii) The date of the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any Person (as defined in paragraph (i) above) other than an affiliate of the Company (meaning any corporation that is part of a controlled group within the meaning of Section 414(b) or (c) of the Internal Revenue Code of 1986, as amended); or
(iv) The date the number of duly elected and qualified directors of the Company who were not either elected by the Company’s Board or nominated by the Board or its nominating/governance committee for election by the shareholders shall constitute a majority of the total number of directors of the Company as fixed by its By-Laws.
The Reviewing Party shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto.
“Claim” means a claim or action asserted by a Person in a Proceeding or any other written demand for relief in connection with or arising from an Indemnification Event.
“Covered Entity” means (i) the Company, (ii) any subsidiary of the Company or (iii) any other Person for which Indemnitee is or was or may be deemed to be serving, at the request of the Company or any subsidiary of the Company, as a director, officer, employee, controlling person, agent or fiduciary.
“Disinterested Director” means, with respect to any determination contemplated by this Agreement, any Person who, as of the time of such determination, is a member of the Company’s board of directors but is not a party to any Proceeding then pending with respect to any Indemnification Event.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
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“Expenses” means any and all direct and indirect fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating, printing and binding costs, telephone charges, postage and delivery service fees and all other disbursements or expenses of any type or nature whatsoever reasonably incurred by Indemnitee (including, subject to the limitations set forth in Section 3(c) below, reasonable attorneys’ fees) in connection with or arising from an Indemnification Event, including, without limitation: (i) the investigation or defense of a Claim; (ii) being, or preparing to be, a witness or otherwise participating, or preparing to participate, in any Proceeding; (iii) furnishing, or preparing to furnish, documents in response to a subpoena or otherwise in connection with any Proceeding; (iv) any appeal of any judgment, outcome or determination in any Proceeding (including, without limitation, any premium, security for and other costs relating to any cost bond, supersedeas bond or any other appeal bond or its equivalent); (v) establishing or enforcing any right to indemnification under this Agreement (including, without limitation, pursuant to Section 2(c) below), the DGCL or otherwise, regardless of whether Indemnitee is ultimately successful in such action, unless as a part of such action, a court of competent jurisdiction over such action determines that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous; (vi) Indemnitee’s defense of any Proceeding instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement (including, without limitation, costs and expenses incurred with respect to Indemnitee’s counterclaims and cross-claims made in such action); (vii) in connection with recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee is ultimately determined to be entitled to such indemnification, advancement or Expenses or insurance recovery, as the case may be, and (viii) any Federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, including all interest, assessments and other charges paid or payable with respect to such payments. For purposes of clarification, Expenses shall not include Losses.
An “Indemnification Event” shall be deemed to have occurred if Indemnitee was or is or becomes, or is threatened to be made, a party to or witness or other participant in, or was or is or becomes obligated to furnish or furnishes documents in response to a subpoena or otherwise in connection with, any Proceeding by reason of the fact that Indemnitee is or was or may be deemed a director, officer, employee, controlling person, agent or fiduciary of any Covered Entity, or by reason of any action or inaction on the part of Indemnitee while serving in any such capacity.
“Independent Legal Counsel” means an attorney or firm of attorneys that is experienced, knowledgeable and qualified in matters of corporate law, or such other specialty as required by the matter in question, and neither presently is, nor in the thirty-six (36) months prior to such designation has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.
“Losses” means any and all losses, claims, damages, liabilities, judgments, fines, penalties, settlement payments, awards and amounts of any type whatsoever incurred by Indemnitee in connection with or arising from an Indemnification Event. For purposes of clarification, Losses shall not include Expenses.
“Organizational Documents” means any and all organizational documents, charters or similar agreements or governing documents, including, without limitation, (i) with respect to a corporation, its certificate of incorporation and bylaws, (ii) with respect to a limited liability company, its operating agreement, and (iii) with respect to a limited partnership, its partnership agreement.
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“Proceeding” means any threatened, pending or completed claim, demand, action, suit, proceeding, arbitration or alternative dispute resolution mechanism, investigation (whether formal or informal), inquiry, administrative hearing or appeal or any other actual, threatened or completed proceeding, whether brought in the right of a Covered Entity or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative, internal or investigative nature.
“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or other entity or government or agency or political subdivision thereof.
“Reviewing Party” means, with respect to any determination contemplated by this Agreement, any one of the following: (i) a majority of the Disinterested Directors, even if such Persons would not constitute a quorum of the Company’s board of directors; (ii) a committee consisting solely of Disinterested Directors, even if such Persons would not constitute a quorum of the Company’s board of directors, so long as such committee was designated by a majority of the Disinterested Directors; (iii) Independent Legal Counsel designated by the Disinterested Directors (or, if there are no Disinterested Directors, the Company’s board of directors) (in which case, any determination shall be evidenced by the rendering of a written opinion); or (iv) in the absence of any Disinterested Directors, the Company’s stockholders; provided, that, in the event that a Change in Control has occurred, the Reviewing Party shall be Independent Legal Counsel (selected by Indemnitee) in a written opinion to the board of directors of the Company, a copy of which shall be delivered to the Indemnitee.
“Securities Act” means the Securities Act of 1933, as amended.
2. Indemnification.
(a) Indemnification of Losses and Expenses. If an Indemnification Event has occurred, then, subject to Section 9 below, the Company shall indemnify and hold harmless Indemnitee, to the fullest extent permitted by the DGCL, as such law may be amended from time to time (but in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than were permitted prior thereto), against any and all Losses and Expenses; provided that the Company’s commitment set forth in this Section 2(a) to indemnify the Indemnitee shall be subject to the limitations and procedural requirements set forth in this Agreement.
(b) Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Losses or Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
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(c) Advancement of Expenses. The Company shall advance Expenses to or on behalf of Indemnitee to the fullest extent permitted by the DGCL, as such law may be amended from time to time (but in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than were permitted prior thereto), as soon as practicable, but in any event not later than 30 days after written request therefor by Indemnitee, which request shall be accompanied by vouchers, invoices or similar evidence documenting in reasonable detail the Expenses incurred or to be incurred by Indemnitee; provided, however, that Indemnitee need not submit to the Company any information that counsel for Indemnitee reasonably deems is privileged and exempt from compulsory disclosure in any Proceeding. Advances shall be made without regard to Indemnitee’s ability to repay the expenses, without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement, and Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Advances shall include any and all reasonable Expenses incurred pursuing a Proceeding to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Without limiting the generality or effect of the foregoing, within thirty (30) days after any request by Indemnitee, the Company shall, in accordance with such request (but without duplication), (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such Expenses. Execution and delivery of this Agreement by the Indemnitee constitutes an undertaking to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined by a court of competent jurisdiction in a final adjudication that Indemnitee is not entitled to be indemnified by the Company as authorized by this Agreement. No other form of undertaking shall be required other than the execution of this Agreement.
(d) Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for Losses or Expenses, in connection with any Proceeding relating to an Indemnification Event under this Agreement, in such proportion as is deemed fair and reasonable by the Reviewing Party in light of all of the circumstances of such Proceeding in order to reflect (1) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving rise to such Proceeding; and (2) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s). The Company hereby agrees to fully indemnify and hold harmless Indemnitee from any claims for contribution which may be brought by officers, directors or employees of the Company (other than Indemnitee) who may be jointly liable with Indemnitee.
3. Indemnification Procedures.
(a) Notice of Indemnification Event. Indemnitee shall give the Company notice as soon as practicable of any Indemnification Event of which Indemnitee becomes aware and of any request for indemnification hereunder, provided that any failure to so notify the Company shall not relieve the Company of any of its obligations under this Agreement, except if, and then only to the extent that, such failure increases the liability of the Company under this Agreement.
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(b) Notice to Insurers. The Company shall give prompt written notice of any Indemnification Event which may be covered by the Company’s liability insurance to the insurers in accordance with the procedures set forth in each of the applicable policies of insurance. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Indemnification Event in accordance with the terms of such policies; provided that nothing in this Section 3(b) shall affect the Company’s obligations under this Agreement or the Company’s obligations to comply with the provisions of this Agreement in a timely manner as provided.
(c) Selection of Counsel. If the Company shall be obligated hereunder to pay or advance Expenses or indemnify Indemnitee with respect to any Losses, the Company shall be entitled to assume the defense of any related Claims, with counsel selected by the Company. After the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the defense of such Claims; provided that: (i) Indemnitee shall have the right to employ counsel in connection with any such Claim at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) counsel for Indemnitee shall have provided the Company with written advice that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, (C) the fees and expenses are non-duplicative and reasonably incurred in connection with Indemnitee’s role in the Proceeding despite the Company’s assumption of the defense, (D) after a Change in Control, the employment of counsel by Indemnitee has been approved by the Independent Legal Counsel, or (E) the Company shall not in fact have employed counsel to assume the defense of such Proceeding or the Company shall not continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company, or as to which Indemnitee shall have made the determination provided for in (B) above. Indemnitee agrees that any such separate counsel retained by indemnitee will be a member of any approved list of panel counsel under the Company’s applicable directors and officers liability insurance policy, should the applicable policy provide for a panel of approved counsel and should such approved panel list comprise law firms with well-established reputations in the type of litigation at issue. (For clarity, the fact of a firm’s being part of a panel shall not be evidence of a firm’s having a well-established national reputation for the type of litigation at issue).
4. Determination of Right to Indemnification.
(a) Successful Proceeding. To the extent Indemnitee has been successful, on the merits or otherwise, in defense of any Proceeding that is the subject of any Indemnification Event referred to in Section 2(a), the Company shall indemnify Indemnitee against Losses and Expenses incurred by him or her in connection therewith. If Indemnitee is not wholly successful in such Proceeding, but is successful, on the merits or otherwise, as to one or more but less than all Claims in such Proceeding, the Company shall indemnify Indemnitee against all Losses and Expenses actually or reasonably incurred by Indemnitee in connection with each successfully resolved Claim. For these purposes and without limitation, Indemnitee will be deemed to have been “successful on the merits” in circumstances including but not limited to the termination of any Proceeding or of any Claim, issue or matter therein, by the winning of a dismissal (with or without prejudice), motion for summary judgment, settlement (with or without court approval), or upon a plea of nolo contendere or its equivalent.
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(b) Other Proceedings. In the event that Section 4(a) is inapplicable, the Company shall nevertheless indemnify Indemnitee as provided in Section 2(a) or 2(b), as applicable, or provide a contribution payment to the Indemnitee as provided in Section 2(d), to the extent determined by the Reviewing Party.
(c) Reviewing Party Determination. A Reviewing Party chosen by the Company’s board of directors shall determine whether Indemnitee is entitled to indemnification, subject to the following:
(i) A Reviewing Party so chosen shall act in the utmost good faith to assure Indemnitee a complete opportunity to present to such Reviewing Party Indemnitee’s case that Indemnitee has met the applicable standard of conduct.
(ii) Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of a Covered Entity, including, without limitation, its financial statements, or on information supplied to Indemnitee by the officers or employees of a Covered Entity in the course of their duties, or on the advice of legal counsel for a Covered Entity or on information or records given, or reports made, to a Covered Entity by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by a Covered Entity. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of a Covered Entity shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 4(c)(ii) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. Any Person seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence.
(iii) If a Reviewing Party chosen pursuant to this Section 4(c) shall not have made a determination whether Indemnitee is entitled to indemnification within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (A) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (B) a prohibition of such indemnification under applicable law; provided, however, that such 30 day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the Reviewing Party in good faith requires such additional time for obtaining or evaluating documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 4(c)(iii) shall not apply if (I) the determination of entitlement to indemnification is to be made by the stockholders of the Company, (II) a special meeting of stockholders is called by the board of directors of the Company for such purpose within thirty (30) days after the stockholders are chosen as the Reviewing Party, (III) such meeting is held for such purpose within sixty (60) days after having been so called, and (IV) such determination is made thereat.
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(d) Appeal to Court. Notwithstanding a determination by a Reviewing Party chosen pursuant to Section 4(c) that Indemnitee is not entitled to indemnification with respect to a specific Claim or Proceeding (an “Adverse Determination”), Indemnitee shall have the right to apply to the court in which that Claim or Proceeding is or was pending or any other court of competent jurisdiction for the purpose of enforcing Indemnitee’s right to indemnification pursuant to this Agreement, provided that Indemnitee shall commence any such Proceeding seeking to enforce Indemnitee’s right to indemnification within one (1) year following the date upon which Indemnitee is notified in writing by the Company of the Adverse Determination. In the event of any dispute between the parties concerning their respective rights and obligations hereunder, the Company shall have the burden of proving that the Company is not obligated to make the payment or advance claimed by Indemnitee.
(e) Presumption of Success. The Company acknowledges that a settlement or other disposition short of final judgment shall be deemed a successful resolution for purposes of Section 4(a) if it permits a party to avoid expense, delay, distraction, disruption or uncertainty. In the event that any Proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such Proceeding with or without payment of money or other consideration), it shall be presumed that Indemnitee has been successful on the merits or otherwise in such Proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence.
(f) Settlement of Claims. The Company shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Company’s written consent. The Company shall not settle any Proceeding in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee’s written consent. Neither the Company nor the Indemnitee will unreasonably withhold their consent to any proposed settlement. The Company shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial award if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action; the Company’s liability hereunder shall not be excused if participation in the Proceeding by the Company was barred by this Agreement. The Company shall not, on its own behalf, settle any part of any Proceeding to which Indemnitee is party with respect to other parties (including the Company) if any portion of such settlement is to be funded from corporate insurance proceeds unless approved by (i) the written consent of Indemnitee or (ii) a majority of the independent directors of the board; provided, however, that the right to constrain the Company’s use of corporate insurance as described in this section shall terminate at the time the Company concludes (per the terms of this Agreement) that (i) Indemnitee is not entitled to indemnification pursuant to this agreement, or (ii) such indemnification obligation to Indemnitee has been fully discharged by the Company.
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5. Additional Indemnification Rights; Non-exclusivity.
(a) Scope. The Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by law, even if such indemnification is not specifically authorized by the other provisions of this Agreement or any other agreement, the Organizational Documents of any Covered Entity or by applicable law. In the event of any change after the Effective Date in any applicable law, statute or rule that expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, controlling person, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule that narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, controlling person, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder except as set forth in Section 9(a) hereof.
(b) Non-exclusivity.
(i) The rights to indemnification, contribution and advancement of Expenses provided in this Agreement shall not be deemed exclusive of, but shall be in addition to, any other rights to which Indemnitee may at any time be entitled under the Organizational Documents of any Covered Entity, any other agreement, any vote of stockholders or Disinterested Directors, the laws of the State of Delaware or otherwise. Furthermore, no right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion of any right or remedy hereunder or otherwise shall not prevent the concurrent assertion of any other right or remedy. The rights to indemnification, contribution and advancement of Expenses provided in this Agreement shall continue as to Indemnitee for any action Indemnitee took or did not take while serving in an indemnified capacity even though Indemnitee may have ceased to serve in such capacity.
(ii) The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of Expenses and/or insurance provided by one or more other Persons, other than a Covered Entity, with whom or which Indemnitee may be associated. The Company hereby acknowledges and agrees:
| (A) | the Company is the indemnitor of first resort with respect to any request for indemnification or advancement of Expenses made pursuant to this Agreement concerning any Proceeding; |
| (B) | the Company is primarily liable for all indemnification and indemnification or advancement of Expenses obligations for any Proceeding, whether created by law, organizational or constituent documents, contract (including this Agreement) or otherwise; |
| (C) | any obligation of any other Persons with whom or which Indemnitee may be associated to indemnify Indemnitee and/or advance Expenses to Indemnitee in respect of any proceeding are secondary to the obligations of the Company’s obligations; and |
10
| (D) | the Company will indemnify Indemnitee and advance Expenses to Indemnitee hereunder to the fullest extent provided herein without regard to any rights Indemnitee may have against any other Person with whom or which Indemnitee may be associated or insurer of any such Person. |
(iii) The Company irrevocably waives, relinquishes and releases any other Person with whom or which Indemnitee may be associated from any claim of contribution, subrogation, reimbursement, exoneration or indemnification, or any other recovery of any kind in respect of amounts paid by the Company to Indemnitee pursuant to this Agreement, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from such other Person, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right.
(iv) In the event any other Person with whom or which Indemnitee may be associated or their insurers advances or extinguishes any liability or loss for Indemnitee, the payor has a right of subrogation against the Company or its insurers for all amounts so paid which would otherwise be payable by the Company or its insurers under this Agreement. In no event will payment by any other Person with whom or which Indemnitee may be associated or their insurers affect the obligations of the Company hereunder or shift primary liability for the Company’s obligation to indemnify or advance Expenses to any other Person with whom or which Indemnitee may be associated.
(v) Any indemnification or advancement of Expenses provided by any other Person with whom or which Indemnitee may be associated is specifically in excess over the Company’s obligation to indemnify and advance Expenses or any valid and collectible insurance (including but not limited to any malpractice insurance or professional errors and omissions insurance) provided by the Company.
6. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment of any amount otherwise indemnifiable hereunder, or for which advancement is provided hereunder, if and to the extent Indemnitee has otherwise actually received such payment, whether pursuant to any insurance policy, the Organizational Documents of any Covered Entity or otherwise; provided, however, that payment made to Indemnitee pursuant to an insurance policy purchased and maintained by Indemnitee at his or her own expense of any amounts otherwise indemnifiable or obligated to be made pursuant to this Agreement shall not reduce the Company’s obligations to Indemnitee pursuant to this Agreement.
11
7. Liability Insurance.
(a) The Company shall maintain liability insurance applicable to directors and officers of the Company and shall cause Indemnitee to be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s officers and directors (other than in the case of an independent director liability insurance policy if Indemnitee is not an independent or outside director). The Company shall advise Indemnitee as to the general terms of, and the amounts of coverage provide by, any liability insurance policy described in this Section 8 and shall promptly notify Indemnitee if, at any time, any such insurance policy is terminated or expired without renewal or if the amount of coverage under any such insurance policy will be decreased.
(b) If, at the time of the receipt of a notice of a Claim pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance coverage in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective directors’ and officers’ liability insurance policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. The Company will instruct the insurers and their insurance brokers that they may communicate directly with Indemnitee regarding such Claim.
(c) In the event of a Change in Control or the Company’s becoming insolvent, the Company shall maintain in force any and all insurance policies then maintained by the Company in providing insurance—directors’ and officers’ liability, fiduciary, employment practices or otherwise—in respect of the individual directors and officers of the Company, for a fixed period of six years thereafter (a “Tail Policy”). Such coverage shall be non-cancellable and shall be placed and serviced for the duration of its term by the Company’s incumbent insurance broker. Such broker shall place the Tail Policy with the incumbent insurance carriers using the policies that were in place at the time of the Change in Control event (unless the incumbent carriers will not offer such policies, in which case the Tail Policy placed by the Company’s insurance broker shall be substantially comparable in scope and amount as the expiring policies, and the insurance carriers for the Tail Policy shall have an AM Best rating that is the same or better than the AM Best ratings of the expiring policies).
8. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee:
(a) against any Losses or Expenses, or advance Expenses to Indemnitee, with respect to Claims initiated or brought voluntarily by Indemnitee, and not by way of defense (including, without limitation, affirmative defenses and counter-claims), except (i) Claims to establish or enforce a right to indemnification, contribution or advancement with respect to an Indemnification Event, whether under this Agreement, any other agreement or insurance policy, the Company’s Organizational Documents of any Covered Entity, the laws of the State of Delaware or otherwise, or (ii) if the Company’s board of directors has approved specifically the initiation or bringing of such Claim;
(b) against any Losses or Expenses, or advance Expenses to Indemnitee, with respect to Claims arising (i) with respect to an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or (ii) pursuant to Section 304 or 306 of the Sarbanes-Oxley Act of 2002, as amended, or any rule or regulation promulgated pursuant thereto; or
(c) if, and to the extent, that a court of competent jurisdiction renders a final, unappealable decision that such indemnification is not lawful.
12
9. Monetary Damages Insufficient/Specific Performance. The Company and Indemnitee agree that a monetary remedy for breach of this Agreement may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm (having agreed that actual and irreparable harm will result in not forcing the Company to specifically perform its obligations pursuant to this Agreement) and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled. The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by the Court, and the Company hereby waives any such requirement of a bond or undertaking. If Indemnitee seeks mandatory injunctive relief, it shall not be a defense to enforcement of the Company’s obligations set forth in this Agreement that Indemnitee has an adequate remedy at law for damages.
10. No Offsets. The Company’s obligation to indemnify, hold harmless, exonerate or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification, hold harmless or exoneration payments or advancement of expenses from such Enterprise. Notwithstanding any other provision of this Agreement to the contrary, (i) Indemnitee shall have no obligation to reduce, offset, allocate, pursue or apportion any indemnification, hold harmless, exoneration, advancement, contribution or insurance coverage among multiple parties possessing such duties to Indemnitee prior to the Company’s satisfaction and performance of all its obligations under this Agreement, and (ii) the Company shall perform fully its obligations under this Agreement without regard to whether Indemnitee holds, may pursue or has pursued any indemnification, advancement, hold harmless, exoneration, contribution or insurance coverage rights against any person or entity other than the Company.
11. Miscellaneous.
(a) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original.
(b) Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns (including with respect to the Company, any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company) and with respect to Indemnitee, his or her spouse, heirs, and personal and legal representatives. The Company shall require and cause any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, to assume and agree to perform this Agreement to the fullest extent permitted by law. This Agreement shall continue in effect with respect to Claims relating to Indemnification Events regardless of whether Indemnitee continues to serve as a director, officer, employee, controlling person, agent or fiduciary of any Covered Entity.
13
(c) Notice. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one (1) business day after the business day of deposit with Federal Express or similar, nationally recognized overnight courier, freight prepaid, or (d) one (1) business day after the business day of delivery by confirmed facsimile transmission, if deliverable by facsimile transmission, with copy by other means permitted hereunder, and addressed, if to Indemnitee, to the Indemnitee’s address or facsimile number (as applicable) as set forth beneath the Indemnitee’s signature to this Agreement, or, if to the Company, at the address or facsimile number (as applicable) of its principal corporate offices (attention: Secretary), or at such other address or facsimile number (as applicable) as such party may designate to the other parties hereto.
(d) Notice by Company. If the Indemnitee is the subject of, or is, to the knowledge of the Company, implicated in any way during an investigation, whether formal or informal, that is related to Indemnitee’s status as a director or officer of one or more Covered Entities and that reasonably could lead to a Proceeding for which indemnification can be provided under this Agreement, the Company shall notify the Indemnitee of such investigation and shall share (to the extent legally permissible) with Indemnitee any information it has provided to any third parties concerning the investigation (“Shared Information”). By executing this Agreement, Indemnitee agrees that such Shared Information is material non-public information that Indemnitee is obligated to hold in confidence and may not disclose publicly; provided, however, that Indemnitee may use the Shared Information and disclose such Shared Information to Indemnitee’s legal counsel and third parties, in each case solely in connection with defending Indemnitee from legal liability.
(e) Enforceability. This Agreement is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.
(f) Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction and venue of the courts of the State of Delaware for all purposes in connection with any Proceeding which arises out of or relates to this Agreement and agree that any Proceeding instituted under this Agreement shall be commenced, prosecuted and continued only in the courts of the State of Delaware.
14
(g) Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the extent manifested by the provision held invalid, illegal or unenforceable.
(h) Choice of Law. This Agreement shall be governed by and its provisions shall be construed and enforced in accordance with, the laws of the State of Delaware, without regard to the conflict of laws principles thereof.
(i) Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
(j) Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in a writing signed by the parties to be bound thereby. Notice of same shall be provided to all parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
(k) No Construction as Employment Agreement. This Agreement is not an employment agreement between the Company and the Indemnitee and nothing contained in this Agreement shall be construed as giving Indemnitee any right to be retained or continue in the employ or service of any Covered Entity.
(l) Supersedes Previous Agreements. This Agreement supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof. All such prior agreements and understandings are hereby terminated and deemed of no further force or effect.
[remainder of page intentionally left blank; signature page follows]
15
In Witness Whereof, the parties hereto have executed this Agreement on and as of the day and year first above written.
COMPANY: | ||
| FARADAY FUTURE INTELLIGENT ELECTRIC, INC., | ||
| a Delaware corporation | ||
| By: | ||
| Name: | ||
| Title: | ||
| INDEMNITEE: | ||
| [●] | ||
16
Exhibit 16.1
July 22, 2021
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Commissioners:
We have read the statements made by Faraday Future Intelligent Electric Inc. (f/k/a Property Solutions Acquisition Corp.), under Item 4.01 of its Form 8-K dated July 22, 2021. We agree with the statements concerning our Firm in such Form 8-K; We are not in a position to agree or disagree with other statements of Faraday Future Intelligent Electric Inc. (f/k/a Property Solutions Acquisition Corp.) contained therein.
Very truly yours,
/s/Marcum LLP
Marcum LLP
Exhibit 21.1
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
DIRECT AND INDIRECT SUBSIDIARIES
| ENTITY NAME | JURISDICTION OF ORGANIZATION | SHAREHOLDER/MEMBER |
| FF Intelligent Mobility Global Holdings Ltd. | Cayman Islands | Faraday Future Intelligent Electric Inc. |
Smart Technology Holdings Ltd. (f/k/a
FF Global Holdings Ltd. |
Cayman Islands | FF Intelligent Mobility Global Holdings Ltd. |
| FF Inc. | California | Smart Technology Holdings Ltd. |
Faraday&Future Inc. (f/k/a LETV ENV INC.) |
California | FF Inc. |
| Faraday SPE, LLC | California | Faraday&Future Inc |
| Fa&Fa Inc | California | Faraday&Future Inc |
| Eagle Prop Holdco LLC | Delaware | FF Inc. |
| FF Equipment LLC | Delaware | Eagle Prop Holdco LLC |
| FF Sales Americas, LLC | Delaware | FF Inc. |
| FF Manufacturing LLC | Delaware | FF Inc. |
| FF JV Holding LLC | Delaware | FF Inc |
| FF The9 China Joint Venture Limited (HK) | Hong Kong | FF JV Holding LLC (50%) The9 EV Limited (50%) |
| Faraday & Future Netherlands B.V. | Netherlands | FF Inc |
FF Europe GmbH (f/k/a Blitz D15-350 GmbH) |
Germany | Smart Technology Holdings Ltd. |
| FF Hong Kong Holding Limited | Hong Kong | Smart Technology Holdings Ltd. |
| FF Automotive (Zhuhai) Co., Ltd. | People’s Republic of China | FF Hong Kong Holding Limited |
| FF Automotive (China) Co. Ltd. | People’s Republic of China | FF
Hong Kong Holding Ltd. (95%) LeSEE Auto Technology (Beijing) Co., Ltd. (5%) |
| Ruiyu Automotive (Beijing) Co. Ltd. | People’s Republic of China | FF Automotive (China) Co. Ltd. |
| ENTITY NAME | JURISDICTION OF ORGANIZATION | SHAREHOLDER/MEMBER |
| Shanghai Faran Automotive Technology Co. Ltd. | People’s Republic of China | FF Automotive (China) Co. Ltd. |
| LeSee Automotive (Beijing) Co., Ltd. | People’s Republic of China | FF Automotive (China) Co. Ltd. (99%) LeSee Zhile Technology (Beijing) Co., Ltd. (1%) |
| LeSEE Hong Kong Holdings Limited | Hong Kong | LeSee Automotive (Beijing) Co., Ltd. |
| Faraday & Future Auto Technology (Shanghai) Co., Ltd. | People’s Republic of China | LeSee Automotive (Beijing) Co., Ltd. |
| LeShare Internet Technology (Beijing) Co. Ltd. [1] | People’s Republic of China | LeSee Automotive (Beijing) Co., Ltd. |
| Deqing LeShare rental co. LTD | People’s Republic of China | LeShare Internet Technology (Beijing) Co. Ltd. |
| LeSEE Auto Technology (Beijing) Co., Ltd. | People’s Republic of China | LeSee Automotive (Beijing) Co., Ltd. |
| LeAutolink Intelligent Technology (Beijing) Co., Ltd. | People’s Republic of China | LeSee Automotive (Beijing) Co., Ltd. |
| LeSEE Automotive (Zhejiang) Co., Ltd. | People’s Republic of China | LeSee Automotive (Beijing) Co., Ltd. |
| Letv new energy automotive technology (deqing) co., LTD | People’s Republic of China | LeSEE Automotive (Zhejiang) Co., Ltd. |
| Chengdu xinneng dianzhuang technology co., LTD | People’s Republic of China | LeSee Automotive (Beijing) Co., Ltd. (19.72%)[2] Yue Xian (32.08%) Liang Zhao (17.14%) Jiong Pan (11.43%) |
| Beijing Dianzhuang Technology co., LTD | People’s Republic of China | LeSee Automotive (Beijing) Co., Ltd. (19.7143%) Yue Xian (55.7408%) Beijing Xinneng Chuangzhan Investment Management Center (Limited) Partnership) (15.9735%) Nanning Yangliu Venture Capital Management Center (Limited Partnership) (8.5714%) |
| [1] | LeShare Internet Technology (Beijing) Co. Ltd. previously owned 50% of Ledian Rental (Beijing) Co. Ltd. (“Ledian”) but later transferred that 50% interest to a transferee who did not make full payment for the transfer. The Company has attempted, but has been unable, to update the ownership information in the commercial registration for Ledian due to the transferee’s unresponsiveness. As a result, although Ledian has been removed from the Organizational Structure Chart, LeShare technically continues to own 50% of Ledian in the public records. |
| [2] | Chengdu xinneng dianzhuang technology co., LTD is listed on the National Equities Exchange and Quotations in China. This schedule only lists the shareholders holding shares above 10%. |
Exhibit 99.1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of FF Intelligent Mobility Global Holdings Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of FF Intelligent Mobility Global Holdings Ltd. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, of convertible preferred stock and stockholders’ deficit, and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has cash outflows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
April 5, 2021
We have served as the Company’s auditor since 2018.
F-1
FF Intelligent Mobility Global Holdings Ltd.
Consolidated Balance Sheets
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
2020 |
2019 |
|||||||
|
Assets |
|
|
|
|
||||
|
Current assets |
|
|
|
|
||||
|
Cash |
$ |
1,124 |
|
$ |
2,221 |
|
||
|
Restricted cash |
|
703 |
|
|
1,133 |
|
||
|
Deposits |
|
6,412 |
|
|
5,164 |
|
||
|
Other current assets |
|
6,200 |
|
|
10,515 |
|
||
|
Total current assets |
|
14,439 |
|
|
19,033 |
|
||
|
Property and equipment, net |
|
293,933 |
|
|
292,526 |
|
||
|
Other non-current assets |
|
8,010 |
|
|
3,658 |
|
||
|
Total assets |
$ |
316,382 |
|
$ |
315,217 |
|
||
|
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit |
|
|
|
|
||||
|
Current liabilities |
|
|
|
|
||||
|
Accounts payable |
$ |
86,601 |
|
$ |
68,648 |
|
||
|
Accrued expenses and other current liabilities |
|
52,382 |
|
|
48,265 |
|
||
|
Related party accrued interest |
|
78,583 |
|
|
42,352 |
|
||
|
Accrued interest |
|
39,707 |
|
|
17,459 |
|
||
|
Related party notes payable |
|
299,403 |
|
|
286,583 |
|
||
|
Notes payable, current portion |
|
182,151 |
|
|
126,922 |
|
||
|
Vendor payables in trust |
|
110,224 |
|
|
115,900 |
|
||
|
Total current liabilities |
|
849,051 |
|
|
706,129 |
|
||
|
Capital leases, less current portion |
|
36,501 |
|
|
41,162 |
|
||
|
Other liability, less current portion |
|
1,000 |
|
|
7,475 |
|
||
|
Deferred rent, less current portion |
|
— |
|
|
113 |
|
||
|
Notes payable, less current portion |
|
9,168 |
|
|
— |
|
||
|
Total liabilities |
|
895,720 |
|
|
754,879 |
|
||
|
Commitments and contingencies (Note 11) |
|
|
|
|
||||
|
Redeemable convertible preferred stock, $0.00001 par value; 470,588,235 shares authorized, issued and outstanding as of December 31, 2020 and 2019; redemption amount of $800,000 as of December 31, 2020 and 2019 |
|
724,823 |
|
|
724,823 |
|
||
|
Class B convertible preferred stock, $0.00001 par value; 600,000,000 shares authorized; 452,941,177 and 600,000,000 shares issued and outstanding as of December 31, 2020 and 2019, respectively; redemption amount of $1,106,988 and $1,466,400 as of December 31, 2020 and 2019, respectively |
|
697,643 |
|
|
924,149 |
|
||
|
Stockholders’ Deficit |
|
|
|
|
||||
|
Class A ordinary stock, $0.00001 par value; 400,000,000 shares authorized; 41,234,448 and 40,879,124 shares issued and outstanding as of December 31, 2020 and 2019, respectively |
|
— |
|
|
— |
|
||
|
Class B ordinary stock, $0.00001 par value; 180,000,000 and 100,000,000 shares authorized as of December 31, 2020 and 2019, respectively; 147,058,823 and zero shares issued and outstanding as of December 31, 2020 and 2019, respectively |
|
1 |
|
|
— |
|
||
|
Additional paid-in capital |
|
395,308 |
|
|
158,704 |
|
||
|
Accumulated other comprehensive loss |
|
(5,974 |
) |
|
(3,284 |
) |
||
|
Accumulated deficit |
|
(2,391,139 |
) |
|
(2,244,054 |
) |
||
|
Total stockholders’ deficit |
|
(2,001,804 |
) |
|
(2,088,634 |
) |
||
|
Total liabilities, convertible preferred stock, and stockholders’ deficit |
$ |
316,382 |
|
$ |
315,217 |
|
||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
FF Intelligent Mobility Global Holdings Ltd.
Consolidated Statements of Operations and Comprehensive Loss
Years Ended December 31, 2020 and 2019
(in thousands, except share and per share data)
|
2020 |
2019 |
|||||||
|
Operating expenses |
|
|
|
|
||||
|
Research and development |
$ |
20,186 |
|
$ |
28,278 |
|
||
|
Sales and marketing |
|
3,672 |
|
|
5,297 |
|
||
|
General and administrative |
|
41,071 |
|
|
71,167 |
|
||
|
Loss on disposal of asset held for sale |
|
— |
|
|
12,138 |
|
||
|
Gain on cancellation of land use rights |
|
— |
|
|
(11,467 |
) |
||
|
Loss on disposal of property and equipment |
|
10 |
|
|
4,843 |
|
||
|
Total operating expenses |
|
64,939 |
|
|
110,256 |
|
||
|
|
|
|
|
|||||
|
Loss from operations |
|
(64,939 |
) |
|
(110,256 |
) |
||
|
Gain on expiration of put option |
|
— |
|
|
43,239 |
|
||
|
Change in fair value measurement of related party notes payable and notes payable |
|
(8,948 |
) |
|
(15,183 |
) |
||
|
Change in fair value measurement of The9 Conditional Obligation |
|
3,872 |
|
|
— |
|
||
|
Gain on extinguishment of related party notes payable, notes payable and vendor payables in trust, net |
|
2,107 |
|
|
— |
|
||
|
Other expense, net |
|
(5,455 |
) |
|
— |
|
||
|
Related party interest expense |
|
(38,995 |
) |
|
(34,074 |
) |
||
|
Interest expense |
|
(34,724 |
) |
|
(25,918 |
) |
||
|
Loss before income taxes |
|
(147,082 |
) |
|
(142,192 |
) |
||
|
Income tax provision |
|
(3 |
) |
|
(3 |
) |
||
|
Net loss |
|
(147,085 |
) |
|
(142,195 |
) |
||
|
Less: Net income attributable to noncontrolling interest |
|
— |
|
|
997 |
|
||
|
Net loss attributable to FF Intelligent Mobility Global Holdings Ltd. |
$ |
(147,085 |
) |
$ |
(143,192 |
) |
||
|
|
|
|
|
|||||
|
Per share information attributable to FF Intelligent Mobility Global Holdings Ltd. |
|
|
|
|
||||
|
Net loss per ordinary share – Class A and Class B – basic and diluted |
$ |
(2.99 |
) |
$ |
(3.52 |
) |
||
|
Weighted average ordinary shares outstanding – Class A and Class B – basic and diluted |
|
49,261,411 |
|
|
40,706,633 |
|
||
|
|
|
|
|
|||||
|
Total comprehensive loss |
|
|
|
|
||||
|
Net loss |
$ |
(147,085 |
) |
$ |
(142,195 |
) |
||
|
Change in foreign currency translation adjustment |
|
(2,690 |
) |
|
(2,533 |
) |
||
|
Total comprehensive loss |
|
(149,775 |
) |
|
(144,728 |
) |
||
|
Less: total other comprehensive income attributable to noncontrolling interest |
|
— |
|
|
997 |
|
||
|
Total other comprehensive loss attributable to FF Intelligent Mobility Global Holdings Ltd. |
$ |
(149,775 |
) |
$ |
(145,725 |
) |
||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
FF Intelligent Mobility Global Holdings Ltd.
Statements of Convertible Preferred Stock and Stockholders’ Deficit
Years Ended December 31, 2020 and 2019
|
(in thousands, except share data) |
|
|
Additional |
Accumulated |
Accumulated Deficit |
Stockholder’s Deficit |
Noncontrolling interest |
Total |
|||||||||||||||||||||||||||||||||||||||
|
Redeemable Preference |
Class B |
Class A |
Class B |
||||||||||||||||||||||||||||||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
||||||||||||||||||||||||||||||||||||||||
|
Balance as of December 31, 2018 |
470,588,235 |
$ |
724,823 |
600,000,000 |
|
$ |
924,149 |
|
40,485,155 |
|
$ |
— |
— |
$ |
— |
$ |
140,881 |
|
$ |
(751 |
) |
$ |
(2,100,862 |
) |
$ |
(1,960,732 |
) |
$ |
4,556 |
|
$ |
(1,956,176 |
) |
||||||||||||||
|
Stock-based |
— |
|
— |
— |
|
|
— |
|
— |
|
|
— |
— |
|
— |
|
4,610 |
|
|
— |
|
|
— |
|
|
4,610 |
|
|
— |
|
|
4,610 |
|
||||||||||||||
|
Contributions from Redeemable Preference Stockholder |
— |
|
— |
— |
|
|
— |
|
— |
|
|
— |
— |
|
— |
|
7,598 |
|
|
— |
|
|
— |
|
|
7,598 |
|
|
— |
|
|
7,598 |
|
||||||||||||||
|
Exercise of stock |
— |
|
— |
— |
|
|
— |
|
393,969 |
|
|
— |
— |
|
— |
|
62 |
|
|
— |
|
|
— |
|
|
62 |
|
|
— |
|
|
62 |
|
||||||||||||||
|
Foreign currency translation adjustment |
— |
|
— |
— |
|
|
— |
|
— |
|
|
— |
— |
|
— |
|
— |
|
|
(2,533 |
) |
|
— |
|
|
(2,533 |
) |
|
— |
|
|
(2,533 |
) |
||||||||||||||
|
Net (loss) income |
— |
|
— |
— |
|
|
— |
|
— |
|
|
— |
— |
|
— |
|
— |
|
|
— |
|
|
(143,192 |
) |
|
(143,192 |
) |
|
997 |
|
|
(142,195 |
) |
||||||||||||||
|
Distribution to noncontrolling interest |
— |
|
— |
— |
|
|
— |
|
— |
|
|
— |
— |
|
— |
|
8,602 |
|
|
— |
|
|
— |
|
|
8,602 |
|
|
(8,602 |
) |
|
— |
|
||||||||||||||
|
Extinguishment of noncontrolling interest |
— |
|
— |
— |
|
|
— |
|
— |
|
|
— |
— |
|
— |
|
(3,049 |
) |
|
— |
|
|
— |
|
|
(3,049 |
) |
|
3,049 |
|
|
— |
|
||||||||||||||
|
Balance as of December 31, |
470,588,235 |
$ |
724,823 |
600,000,000 |
|
$ |
924,149 |
|
40,879,124 |
|
$ |
— |
— |
$ |
— |
$ |
158,704 |
|
$ |
(3,284 |
) |
$ |
(2,244,054 |
) |
$ |
(2,088,634 |
) |
$ |
— |
|
$ |
(2,088,634 |
) |
||||||||||||||
|
Stock-based |
— |
|
— |
— |
|
|
— |
|
— |
|
|
— |
— |
|
— |
|
9,505 |
|
|
— |
|
|
— |
|
|
9,505 |
|
|
— |
|
|
9,505 |
|
||||||||||||||
|
Conversion of |
— |
|
— |
(147,058,823 |
) |
|
(226,506 |
) |
— |
|
|
— |
147,058,823 |
|
1 |
|
226,505 |
|
|
— |
|
|
— |
|
|
226,506 |
|
|
— |
|
|
226,506 |
|
||||||||||||||
|
Exercise of stock |
— |
|
— |
— |
|
|
— |
|
383,994 |
|
|
— |
— |
|
— |
|
115 |
|
|
— |
|
|
— |
|
|
115 |
|
|
— |
|
|
115 |
|
||||||||||||||
|
Issuance of warrants |
|
|
|
|
|
|
|
|
490 |
|
|
|
|
|
|
490 |
|
|
|
|
490 |
|
|||||||||||||||||||||||||
|
Purchase of ordinary stock |
— |
|
— |
— |
|
|
— |
|
(28,670 |
) |
|
— |
— |
|
— |
|
(11 |
) |
|
— |
|
|
— |
|
|
(11 |
) |
|
— |
|
|
(11) |
|
||||||||||||||
|
Foreign currency translation adjustment |
— |
|
— |
— |
|
|
— |
|
— |
|
|
— |
— |
|
— |
|
— |
|
|
(2,690 |
) |
|
— |
|
|
(2,690 |
) |
|
— |
|
|
(2,690 |
) |
||||||||||||||
|
Net loss |
— |
|
— |
— |
|
|
— |
|
— |
|
|
— |
— |
|
— |
|
— |
|
|
— |
|
|
(147,085 |
) |
|
(147,085 |
) |
|
— |
|
|
(147,085 |
) |
||||||||||||||
|
Balance as of December 31, |
470,588,235 |
$ |
724,823 |
452,941,177 |
|
$ |
697,643 |
|
41,234,448 |
|
$ |
— |
147,058,823 |
$ |
1 |
$ |
395,308 |
|
$ |
(5,974 |
) |
$ |
(2,391,139 |
) |
$ |
(2,001,804 |
) |
$ |
— |
|
$ |
(2,001,804 |
) |
||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
FF Intelligent Mobility Global Holdings Ltd.
Consolidated Statements of Cash Flows
Years Ended December 31, 2020 and 2019
|
(in thousands) |
2020 |
2019 |
||||||
|
Cash flows from operating activities |
|
|
|
|
||||
|
Net loss |
$ |
(147,085 |
) |
$ |
(142,195 |
) |
||
|
Adjustments to reconcile net loss including noncontrolling interest to net cash used in operating activities |
|
|
|
|
||||
|
Depreciation and amortization expense |
|
3,517 |
|
|
5,188 |
|
||
|
Stock-based compensation |
|
9,505 |
|
|
4,610 |
|
||
|
Gain on expiration of put option |
|
— |
|
|
(43,239 |
) |
||
|
Gain on cancellation of land use rights |
|
— |
|
|
(11,467 |
) |
||
|
Loss on disposal of asset held for sale |
|
— |
|
|
12,138 |
|
||
|
Loss on disposal of property and equipment |
|
10 |
|
|
4,843 |
|
||
|
Loss (gain) on foreign exchange |
|
4,108 |
|
|
(11 |
) |
||
|
Non-cash interest expense |
|
66,020 |
|
|
50,807 |
|
||
|
Change in fair value measurement of related party notes payable and notes payable |
|
8,948 |
|
|
15,183 |
|
||
|
Change in fair value measurement of The9 Conditional Obligation |
|
(3,872 |
) |
|
— |
|
||
|
Amortization of related party notes payable and notes payable issuance costs |
|
— |
|
|
834 |
|
||
|
Gain on extinguishment of related party notes payable, notes payable and vendor payables in trust, net |
|
(2,107 |
) |
|
— |
|
||
|
Changes in operating assets and liabilities |
|
|
|
|
||||
|
Other current assets |
|
(1,236 |
) |
|
9,143 |
|
||
|
Other non-current assets |
|
(1,986 |
) |
|
(600 |
) |
||
|
Transfer of payables to vendor trust |
|
(174 |
) |
|
(115,900 |
) |
||
|
Accounts payable |
|
11,500 |
|
|
48,229 |
|
||
|
Accrued expenses and other current liabilities |
|
11,974 |
|
|
(25,156 |
) |
||
|
Deferred rent |
|
(287 |
) |
|
(2,202 |
) |
||
|
Net cash used in operating activities |
$ |
(41,165 |
) |
$ |
(189,795 |
) |
||
|
Cash flows from investing activities |
|
|
|
|
||||
|
Proceeds from sale of land |
|
— |
|
|
16,900 |
|
||
|
Payments for equipment |
|
(607 |
) |
|
(2,256 |
) |
||
|
Proceeds from cancellation of land use rights |
|
— |
|
|
15,902 |
|
||
|
Issuance of notes receivable |
|
— |
|
|
(4,260 |
) |
||
|
Proceeds from payments on notes receivable |
|
3,600 |
|
|
620 |
|
||
|
Net cash provided by investing activities |
$ |
2,993 |
|
$ |
26,906 |
|
||
|
Cash flows from financing activities |
|
|
|
|
||||
|
Contributions of capital from Redeemable Preferred Stockholder |
|
— |
|
|
1,383 |
|
||
|
Proceeds from related party notes payable |
|
10,256 |
|
|
30,622 |
|
||
|
Proceeds from notes payable |
|
40,895 |
|
|
55,272 |
|
||
|
Payments of related party notes payable |
|
(1,969 |
) |
|
(1,500 |
) |
||
|
Payments of notes payable |
|
(1,652 |
) |
|
(58,623 |
) |
||
|
Proceeds from the issuance of The9 Conditional Obligation |
|
— |
|
|
5,000 |
|
||
|
Transfer of payables to vendor trust |
|
174 |
|
|
115,900 |
|
||
|
Payments of payables in vendor trust |
|
(4,500 |
) |
|
— |
|
||
|
Proceeds from failed sale-leaseback |
|
— |
|
|
29,000 |
|
||
|
Payments of capital lease obligations |
|
(1,926 |
) |
|
(1,435 |
) |
||
|
Distribution to acquire noncontrolling interest |
|
— |
|
|
(8,602 |
) |
||
|
Proceeds from exercise of stock options |
|
115 |
|
|
62 |
|
||
|
Payments of notes payable issuance costs |
|
(4,562 |
) |
|
(4,462 |
) |
||
|
Net cash provided by financing activities |
$ |
36,831 |
|
$ |
162,617 |
|
||
|
Effect of exchange rate changes on cash and restricted cash |
|
(186 |
) |
|
(3,906 |
) |
||
|
Net decrease in cash and restricted cash |
$ |
(1,527 |
) |
$ |
(4,178 |
) |
||
|
Cash and restricted cash, beginning of period |
|
3,354 |
|
|
7,532 |
|
||
|
Cash and restricted cash, end of period |
$ |
1,827 |
|
$ |
3,354 |
|
||
F-5
FF Intelligent Mobility Global Holdings Ltd.
Consolidated Statements of Cash Flows — (Continued)
Years Ended December 31, 2020 and 2019
The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets that aggregate to the total of the same such amounts shown in the consolidated statements of cash flows:
|
2020 |
2019 |
|||||
|
Cash |
$ |
2,221 |
$ |
5,664 |
||
|
Restricted cash |
|
1,133 |
|
1,868 |
||
|
Total cash and restricted cash beginning of period |
$ |
3,354 |
$ |
7,532 |
||
|
|
|
|||||
|
Cash |
|
1,124 |
$ |
2,221 |
||
|
Restricted cash |
|
703 |
|
1,133 |
||
|
Total cash and restricted cash |
$ |
1,827 |
$ |
3,354 |
||
|
|
|
|||||
|
Supplemental disclosure of noncash investing and financing activities |
|
|
||||
|
Property and equipment recorded in accounts payable and accrued expenses |
$ |
3,817 |
$ |
10,027 |
||
|
Forgiveness of related party debt |
|
— |
|
6,215 |
||
|
Conversion of customer deposit to notes payable |
|
11,635 |
|
— |
||
|
Extinguishment of noncontrolling interest |
|
— |
|
3,049 |
||
|
Purchase of common stock |
|
11 |
|
— |
||
|
|
|
|||||
|
Supplemental disclosure of cash flow information |
|
|
||||
|
Cash paid for interest |
$ |
3,137 |
$ |
3,670 |
||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
1. Nature of Business and Organization
Nature of Business and Organization
FF Intelligent Mobility Global Holdings Ltd. (the “Company”) is an exempted company formed under the laws of the Cayman Islands founded in 2014. Headquartered in Los Angeles, California, the Company designs and engineers next-generation smart electric connected vehicles. The Company expects to manufacture vehicles at the Company’s production facility in Hanford, California and has additional engineering, sales, and operations capabilities in China. The Company has created innovations in technology, products, and a user centered business model that are being incorporated into its planned electric vehicle platform.
The Company changed its name from Smart King Ltd. to FF Intelligent Mobility Global Holdings Ltd. on February 14, 2020.
The Company’s operations are conducted through its wholly-owned subsidiaries FF Inc. and FF Hong Kong Holding Ltd.
2. Liquidity and Capital Resources and Going Concern
The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
Since inception, the Company has incurred cumulative losses from operations, negative cash flows from operating activities and has an accumulated deficit of $2,391,139 as of December 31, 2020. As of the date of this report, there were $19,196 in related party notes payable and notes payable in default. The Company has funded its operations and capital needs primarily through the net proceeds received from capital contributions, the issuance of related party notes payable and notes payable (Notes 8 and 9) and the sale of preferred and ordinary stock (Note 12). The vast majority of related party notes payable and notes payable and equity have been funded by entities controlled or previously controlled by the Company’s founder and former CEO. Since its formation, the Company has devoted substantial effort and capital resources to strategic planning, engineering, design and development of its planned electric vehicle platform, development of initial electric vehicle models, and capital raising. The achievement of the Company’s operating plans and maintenance of an adequate level of liquidity are subject to various risks associated with the ability to continue to successfully close additional sources of funding, and/or refinance existing related party notes payable and notes payable arrangements. The Company’s forecasts and projections of working capital reflect significant judgment and estimates for which there are inherent risks and uncertainties. Management’s plans include the continued development of its electric vehicle platform and bringing electric vehicle models to market. The Company expects to continue to generate significant operating losses for the foreseeable future. The plans are dependent on the Company being able to continue to raise significant amounts of capital through the issuance of additional notes payable and equity securities.
There can be no assurance that the Company will be successful in achieving its strategic plans, that the Company’s future capital raises will be sufficient to support its ongoing operations, or that any additional financing will be available in a timely manner or on acceptable terms, if at all. If the Company is unable to raise sufficient financing or events or circumstances occur such that the Company does not meet its strategic plans, the Company will be required to reduce certain discretionary spending, alter or scale back vehicle development programs, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures, which would have a material adverse effect on the Company’s financial position, results of operations, cash flows, and ability to achieve its intended business objectives. Based on its recurring losses from operations since inception, expectation of continued operating losses for the foreseeable future, and the need to raise additional capital to finance its future operations, as of April 5, 2021, the date the consolidated financial statements for the year ended December 31, 2020, were available to be issued, the Company has concluded that there is substantial doubt about its ability to continue as a going concern for a period of one year from the date that these consolidated financial statements are issued.
F-7
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
2. Liquidity and Capital Resources and Going Concern (cont.)
The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
COVID-19 Pandemic
The World Health Organization declared a global emergency on March 11, 2020 with respect to the outbreak of a novel strain of coronavirus, or COVID-19 pandemic. There are many uncertainties regarding the current global COVID-19 pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including the impact on its employees, suppliers, vendors, and business partners.
The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place orders, and business shutdowns. For example, the Company’s employees based in California have been subject to stay-at-home orders from state and local governments. These measures may adversely impact the Company’s employees and operations and the operations of suppliers and business partners and could negatively impact the construction schedule of the Company’s manufacturing facility and the production schedule of the FF 91 vehicle. In addition, various aspects of the Company’s business and manufacturing facility cannot be conducted remotely. These measures by government authorities may remain in place for a significant period of time and could adversely affect the Company’s construction and manufacturing plans, sales and marketing activities, and business operations.
The evolution of the virus is unpredictable. A COVID-19 vaccine is being administered, however, the speed and extent of vaccination is unpredictable and any resurgence may slow down the Company’s ability to ramp-up its production program to satisfy investors and potential customers. Any delay to production will delay the Company’s ability to launch the FF 91 vehicle and begin generating revenue. The COVID-19 pandemic could limit the ability of suppliers and business partners to perform, including third party suppliers’ ability to provide components and materials used in the FF 91 vehicle. The Company may also experience an increase in the cost of raw materials. At the time of this report, the Company does not anticipate any material impairments as a result of COVID-19, however, the Company will continue to evaluate the impacts of COVID-19 on an ongoing basis. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations.
3. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, LeSEE Automotive (Beijing) Co. Ltd. (“LeSEE”), formerly a variable interest entity (“VIE”), and now a wholly-owned subsidiary and The9 joint venture for which the Company is the primary beneficiary.
In accordance with the provisions of Accounting Standards Codification (“ASC”) 810, Consolidation, the Company consolidates any VIE of which the Company is the primary beneficiary. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company does not consolidate a VIE in which it has a majority ownership interest when it is not considered the primary beneficiary. The Company evaluates its relationships with its VIEs on an ongoing basis to ensure that the Company continues to be the primary beneficiary.
All intercompany transactions and balances have been eliminated upon consolidation.
F-8
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
3. Summary of Significant Accounting Policies (cont.)
Variable Interest Entity and Joint Venture
In November 2017, as part of a broader corporate reorganization, and to facilitate third-party investment, the Company incorporated its top-level holding company, Smart King, Ltd., in the Cayman Islands to enable effective control over the Company’s Chinese operating entity, FF Hong Kong Holding Ltd., and its subsidiaries without direct equity ownership. The Company entered into a series of contractual arrangements (“VIE contractual arrangements”) with LeSEE and LeSEE Zhile Technology Co., Ltd. (“LeSEE Zhile”), a related party of the Company, to enable the Company to exercise effective control over LeSEE and its subsidiaries, to receive substantially all of the economic benefits of such entities, and to have an exclusive option to purchase all or part of the equity interests in LeSEE.
LeSEE, an entity for which the Company was the primary beneficiary, is in the early stages of developing and producing electric vehicles for the Chinese market. LeSEE consolidates an 80% owned subsidiary, LeSEE Automotive (Zhejiang) Co., Ltd. (“LeSEE Zhejiang”), resulting in a 20% noncontrolling interest. LeSEE Zhejiang held the land use rights in the city of Moganshan. See Note 6 Property and Equipment, Net.
On November 18, 2019, once the land use rights were cancelled and reverted to the government of Zhejiang, the Company purchased the 20% noncontrolling interest from the noncontrolling interest holder for $8,602 and the difference between the consideration paid and the related carrying value of the noncontrolling interest acquired of $3,049 was recorded in additional-paid-in-capital upon extinguishment of the noncontrolling interest. The carrying value of LeSEE’s assets and liabilities, after elimination of any intercompany transactions and balances, in the consolidated balance sheet as of December 31, 2019 are as follows:
|
2019 |
|||
|
Cash |
$ |
843 |
|
|
Restricted cash |
|
493 |
|
|
Deposits |
|
118 |
|
|
Other current assets |
|
2,001 |
|
|
Property and equipment, net |
|
2,713 |
|
|
Other non-current assets |
|
23 |
|
|
Accounts payable |
|
3,996 |
|
|
Accrued expenses and other current liabilities |
|
16,504 |
|
|
Accrued interest |
|
1,554 |
|
|
Related party notes payable |
|
8,601 |
|
|
Notes payable |
|
7,758 |
|
On August 5, 2020, an equity transfer agreement (the “Equity Transfer Agreement”) was entered into between the Company and LeSEE Zhile, pursuant to which, LeSEE Zhile transferred 48% equity of LeSEE to the Company for no consideration. After the transfer, LeSEE Zhile owns 1% of LeSEE and the Company owns 99% of LeSEE, making LeSEE a majority-owned subsidiary of the Company and no longer a VIE since LeSEE is consolidated through majority voting and equity interests.
On March 24, 2019, the Company entered into a Joint Venture Agreement (“JVA”) with The9 Limited (“The9”). Pursuant to the JVA, the Company and The9 agreed to establish an equity joint venture in Hong Kong, which would in turn establish a wholly-owned subsidiary in China, intended to engage in the business of manufacturing, marketing, selling and distributing the planned Faraday Future Icon V9 model electric vehicle in China. The Company and The9 would each be 50% owners of the joint venture. The9 made a $5,000 non-refundable initial deposit (“The9 Conditional Obligation”) to the Company to participate in the joint venture. The9 has the right to convert the initial deposit into various classes of stock in the Company. For accounting purposes, the deposit is a financial instrument that embodies a conditional obligation that the issuer may settle by issuing a variable number of shares. The conditional obligation is measured at fair value and remeasured at each reporting period and represents
F-9
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
3. Summary of Significant Accounting Policies (cont.)
a Level 3 financial instrument under the fair value hierarchy. See Note 4 Fair Value of Financial Instruments. The fair value of the conditional obligation was $1,128 and $5,000 as of December 31, 2020 and 2019, respectively, and was recorded in current liabilities on the consolidated balance sheets. Neither the Company nor The9 have made contributions to the joint venture as of December 31, 2020. The joint venture has yet to commence business activities, and on November 22, 2020, the parties entered into an agreement to convert the initial deposit into Class B Ordinary Stock in the Company. The initial deposit was converted on February 23, 2021.
In September 2020, the Company entered into a non-binding memorandum of understanding with a tier-1 city in China, affiliated entities of which are subscribers in the Private Placement, pursuant to which the Company established a joint venture company (the “JV”) in China. This joint venture is managed and controlled by the Company. The strategic partnership is subject to the condition that the Company will receive capital of no less than $500,000 through the closing of the Merger Agreement (defined below) and related transactions and agreement by the parties by binding definitive agreement. In December 2020, the JV was established as an entity wholly-owned by the Company, which will primarily engage in the activities contemplated in the memorandum of understanding. There has been no activity related to or contributions of assets into the JV by either party during the year ended December 31, 2020.
Foreign Currency
The Company determines the functional and reporting currency of each of its international subsidiaries based on the primary currency in which they operate. The functional currency of the Company’s foreign subsidiaries in China is their local currency, Chinese yuan. For foreign subsidiaries where the functional currency is their local currency, assets and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet date, stockholders’ deficit is translated at the applicable historical exchange rate, and expenses are translated using the average exchange rates during the period. The effect of exchange rate changes resulting from the translation of the foreign subsidiary financial statements is accounted for as a component of accumulated other comprehensive loss on the consolidated balance sheets.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities, and the reported amounts of expenses during the reporting period. The Company bases these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources.
On an ongoing basis, management evaluates its estimates, including those related to the: (i) realization of tax assets and estimates of tax liabilities; (ii) valuation of equity securities; (iii) recognition and disclosure of contingent liabilities, including litigation reserves; (iv) fair value of related party notes payable and notes payable and (v) estimated useful lives of long-lived assets. These estimates are based on historical data and experience, as well as various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Such estimates often require the selection of appropriate valuation methodologies and models and may involve significant judgment in evaluating ranges of assumptions and financial inputs. Actual results may differ from those estimates under different assumptions, financial inputs, or circumstances. Given the global economic climate and unpredictable nature and unknown duration of the COVID-19 pandemic, estimates are subject to additional volatility.
F-10
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
3. Summary of Significant Accounting Policies (cont.)
Revisions
In connection with the preparation of the Company’s 2020 year-end consolidated financial statements, errors primarily related to the extinguishment of a noncontrolling interest of $8,602, a misclassification related to the payables in the Vendor Trust of $10,737, and a misclassification of cash flows related to accounts payable and accrued expenses and other current liabilities of $8,877 within operating cash flows were identified. The errors resulted in an increase to the distribution to noncontrolling interest of $8,602 and extinguishment of noncontrolling interest of $3,049, resulting in a net impact to additional paid-in capital and an increase to vendor payables in trust and decrease to accounts payable of $10,737. The Company has concluded that such errors were not material to the previously issued financial statements. However, the consolidated balance sheet as of December 31, 2019 and the consolidated statements of operations and comprehensive loss, of convertible preferred stock and stockholders’ deficit, and of cash flows for the year ended December 31, 2019 have been revised from previously reported amounts to correct for these errors. These revisions resulted in the following changes to previously reported amounts as of and for the year ended December 31, 2019:
|
As Previously Reported |
Adjustments |
As Revised |
||||||||||
|
Consolidated Balance Sheet |
|
|
|
|
|
|
||||||
|
Accounts payable |
$ |
79,385 |
|
$ |
(10,737 |
) |
$ |
68,648 |
|
|||
|
Vendor payables in trust |
|
105,163 |
|
|
10,737 |
|
|
115,900 |
|
|||
|
Additional paid-in capital |
|
153,151 |
|
|
5,553 |
|
|
158,704 |
|
|||
|
Accumulated deficit |
|
(2,235,452 |
) |
|
(8,602 |
) |
|
(2,244,054 |
) |
|||
|
Noncontrolling interest |
|
(3,049 |
) |
|
3,049 |
|
|
— |
|
|||
|
Total stockholders’ deficit |
|
(2,085,585 |
) |
|
(3,049 |
) |
|
(2,088,634 |
) |
|||
|
Consolidated Statement of Convertible Preferred Stock and Stockholders’ Deficit |
|
|
|
|
|
|
||||||
|
Additional paid-in capital |
$ |
153,151 |
|
$ |
5,553 |
|
$ |
158,704 |
|
|||
|
Accumulated deficit |
|
(2,235,452 |
) |
|
(8,602 |
) |
|
(2,244,054 |
) |
|||
|
Noncontrolling interest |
|
(3,049 |
) |
|
3,049 |
|
|
— |
|
|||
|
Total stockholders’ deficit |
|
(2,085,585 |
) |
|
(3,049 |
) |
|
(2,088,634 |
) |
|||
|
Consolidated Statement of Operations and Comprehensive Loss |
|
|
|
|
|
|
||||||
|
Net (loss) income attributable to noncontrolling interest |
$ |
(7,605 |
) |
$ |
8,602 |
|
$ |
997 |
|
|||
|
Net loss attributable to FF Intelligent Mobility Global Holdings Ltd. |
|
(134,590 |
) |
|
(8,602 |
) |
|
(143,192 |
) |
|||
|
Per share information attributable to FF Intelligent Mobility Global Holdings Ltd. – Net loss per ordinary share basic and diluted |
|
(3.31 |
) |
|
(0.21 |
) |
|
(3.52 |
) |
|||
|
Total other comprehensive (loss) income attributable to noncontrolling interest |
|
(7,605 |
) |
|
8,602 |
|
|
997 |
|
|||
|
Total other comprehensive loss attributable to FF Intelligent Mobility Global Holdings Ltd. |
|
(137,123 |
) |
|
(8,602 |
) |
|
(145,725 |
) |
|||
|
Consolidated Statement of Cash Flows |
|
|
|
|
|
|
||||||
|
Transfer of payables to Vendor Trust |
$ |
(105,163 |
) |
$ |
(10,737 |
) |
$ |
(115,900 |
) |
|||
|
Accounts payable |
|
42,031 |
|
|
6,198 |
|
|
48,229 |
|
|||
|
Accrued expenses and other current liabilities. |
|
(24,881 |
) |
|
(275 |
) |
|
(25,156 |
) |
|||
|
Cash flows used in operating activities |
|
(184,981 |
) |
|
(4,814 |
) |
|
(189,795 |
) |
|||
|
Payments for equipment |
|
(4,935 |
) |
|
2,679 |
|
|
(2,256 |
) |
|||
|
Cash flows provided by investing activities |
|
24,227 |
|
|
2,679 |
|
|
26,906 |
|
|||
|
Distribution to acquire noncontrolling interest |
|
— |
|
|
(8,602 |
) |
|
(8,602 |
) |
|||
|
Transfer of payables to Vendor Trust |
|
105,163 |
|
|
10,737 |
|
|
115,900 |
|
|||
|
Cash flows provided by financing activities |
|
160,482 |
|
|
2,135 |
|
|
162,617 |
|
|||
|
Supplemental disclosure of noncash investing and financing activities |
|
|
|
|
|
|
||||||
|
Extinguishment of noncontrolling interest |
|
— |
|
|
3,049 |
|
|
3,049 |
|
|||
F-11
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
3. Summary of Significant Accounting Policies (cont.)
Cash and restricted cash
Cash consists of cash on deposit with financial institutions. Restricted cash consists of cash held in escrow related to rent and vendor payments.
Fair Value Measurements
The Company applies the provisions of ASC 820, Fair Value Measurement, which defines a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurements. The provisions of ASC 820 relate to financial assets and liabilities as well as other assets and liabilities carried at fair value on a recurring and nonrecurring basis. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
|
Level 1 |
Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds. |
|||
|
Level 2 |
Valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 instruments typically include U.S. government and agency debt securities, and corporate obligations. Valuations are usually obtained through market data of the investment itself as well as market transactions involving comparable assets, liabilities or funds. |
|||
|
Level 3 |
Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. |
ASC 825-10, Financial Instruments, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company has elected to apply the fair value option to certain related party notes payable and notes payable with conversion features as discussed in Note 4 Fair Value of Financial Instruments.
Concentration of Credit Risk
Financial instruments, which subject the Company to concentrations of credit risk, consist primarily of cash, restricted cash, notes receivable and deposits. Substantially all of the Company’s cash and restricted cash is held at financial institutions located in the United States of America and in the People’s Republic of China. The Company maintains its cash and restricted cash with major financial institutions. At times, cash and restricted cash account balances with any one financial institution may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance limits ($250 per depositor per institution) and China Deposit Insurance Regulations limits (RMB 500 per depositor per institution). Management believes the financial institutions that hold the Company’s cash and restricted cash are financially sound and, accordingly, minimal credit risk exists with respect to cash and restricted cash. Cash and restricted cash held by the Company’s non-U.S. subsidiaries and LeSEE is subject to foreign currency fluctuations against the U.S. dollar. If, however, the U.S. dollar is devalued significantly against the Chinese yuan, the Company’s cost to develop its business in China could exceed original estimates.
F-12
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
3. Summary of Significant Accounting Policies (cont.)
The Company has notes receivable of $40 and $3,640 and deposits of $6,412 and $5,164 as of December 31, 2020 and 2019, respectively.
Property and Equipment, Net
Property and equipment are stated at cost less accumulated depreciation and amortization. Expenditures for major renewals and betterments are capitalized, while minor replacements, maintenance and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation or amortization is removed from the accounts, and any gain or loss is included in the consolidated statements of operations and comprehensive loss.
Depreciation and amortization on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets as follows:
|
Useful Life |
||
|
Buildings |
39 |
|
|
Building improvements |
15 |
|
|
Computer hardware |
5 |
|
|
Machinery and equipment |
5 |
|
|
Vehicles |
5 |
|
|
Computer software |
3 |
|
|
Leasehold improvements |
Shorter of 15 years or term of the lease |
Construction in progress (“CIP”) consists of the construction of manufacturing facilities and tooling and equipment built to serve the manufacturing of pre-production and production vehicles. These assets are capitalized and depreciated once put in service. The amounts capitalized in CIP that are held at vendor sites relate to the completed portion of work-in-progress relating to the manufacturing of the tooling and equipment which generally represent longer term construction projects tailored specifically to the Company’s needs. The Company may incur storage fees or interest fees related to CIP which are expensed as incurred. Construction in progress is presented within property and equipment on the consolidated balance sheets.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets, consisting primarily of property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows attributable to such assets including any cash flows upon their eventual disposition to their carrying value. If the carrying value of the assets exceeds the forecasted undiscounted cash flows, then the assets are written down to their fair value. Assets classified as held for sale are also assessed for impairment and such amounts are determined at the lower of the carrying amount or fair value, less costs to sell the asset. No impairment charges were recorded during the years ended December 31, 2020 and 2019.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss encompasses all changes in equity other than those arising from transactions with stockholders. Elements of the Company’s accumulated other comprehensive loss are reported in the accompanying consolidated statements of convertible preferred stock and stockholders’ deficit and consists of equity-related foreign currency translation adjustments, which are presented in the accompanying consolidated statements of operations and comprehensive loss.
F-13
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
3. Summary of Significant Accounting Policies (cont.)
Research and Development
Research and development (“R&D”) costs are expensed as incurred and are primarily comprised of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for employees focused on R&D activities, other related costs, and depreciation. The Company’s R&D efforts are focused on design and development of the Company’s electric vehicles and continuing to prepare the Company’s prototype electric vehicle to achieve industry standards. Advanced payments for future R&D activities have been classified as deposits on the consolidated balance sheets.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for employees focused on sales and marketing, and direct costs associated with sales and marketing activities. Marketing activities include expenses to introduce the brand and the electric vehicle prototype to the market. The Company expenses its advertising costs as incurred. Advertising costs were immaterial for the years ended December 31, 2020 and 2019.
Stock-Based Compensation
The Company’s stock-based compensation awards consist of options granted to employees, directors and non-employees for the purchase of ordinary stock, restricted stock, unrestricted stock and restricted stock units. The Company recognizes stock-based compensation expense in accordance with the provisions of ASC 718, Compensation — Stock Compensation (“ASC 718”). ASC 718 requires the measurement and recognition of compensation expense for all stock-based compensation awards based on the grant date fair values of the awards.
The Company estimates the fair value of stock options using the Black-Scholes option-pricing model. The value of the award is recognized as expense over the requisite service period on a straight-line basis.
Determining the grant date fair value of the awards using the Black-Scholes option-pricing model requires management to make assumptions and judgments, including, but not limited to the following:
Expected term — The estimate of the expected term of awards was determined in accordance with the simplified method, which estimates the term based on an averaging of the vesting period and contractual term of the option grant for employee awards and the contractual term of the stock option award agreement for non-employees.
Expected volatility — Since the Company is a private entity without sufficient historical data on the volatility of its ordinary stock, the expected volatility is based on the volatility of similar entities (referred to as “guideline companies”) for a period consistent with the expected term of the award. In evaluating similarity, the Company considered factors such as industry, stage of life cycle, and size.
Risk-free interest rate — The risk-free interest rate used to value awards is based on the United States Treasury yield in effect at the time of grant for a period consistent with the expected term of the award.
Dividend yield — The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future.
Forfeiture rate — The Company estimates a forfeiture rate to calculate its stock-based compensation expense for its stock-based awards. The forfeiture rate is based on an analysis of actual forfeitures. The Company will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover, and other factors. Changes in the estimated forfeiture rate can have a significant impact on the Company’s stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the estimated forfeiture rate is changed.
F-14
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
3. Summary of Significant Accounting Policies (cont.)
Fair value of ordinary stock — Because there is no public market for the Company’s ordinary stock, the Company’s Board of Directors has determined the fair value of the Company’s ordinary stock at the time of the grant of stock options by considering a number of objective and subjective factors. The fair value of the underlying ordinary stock will be determined by the Company’s Board of Directors until such time as the Company’s ordinary stock commences trading on an established stock exchange or national market system. The fair value has been determined in accordance with applicable elements of the practice aid issued by the American Institute of Certified Public Accountants titled Valuation of Privately Held Company Equity Securities Issued as Compensation. The Company’s Board of Directors grant stock options with exercise prices equal to the fair value of the Company’s ordinary stock on the date of grant.
Income Taxes
The Company accounts for its income taxes using the asset and liability method whereby deferred tax assets and liabilities are determined based on temporary differences between the basis used for financial reporting and income tax reporting purposes. Deferred income taxes are provided based on the enacted tax rates in effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize those tax assets through future operations. The carrying value of deferred tax assets reflects an amount that is more likely than not to be realized.
The Company utilizes the guidance in ASC 740-10, Income Taxes, to account for uncertain tax positions. ASC 740-10 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the positions will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more likely than not of being realized and effectively settled. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and may not accurately forecast actual outcomes.
The Company recognizes interest and penalties on unrecognized tax benefits as a component of income tax expense. There were no interest or penalties for the years ended December 31, 2020 and 2019.
Net Loss Per Share Attributable to Ordinary Stockholders
The Company has two classes of participating securities (Redeemable Preference Stock and Class B Preferred Stock) issued and outstanding as of December 31, 2020 and 2019. Losses are not attributed to the participating security as the Redeemable Preference Stock and Class B Convertible Preferred stockholders are not contractually obligated to share in the Company’s losses. The Redeemable Preference Stock participation rights are contingent in the event the Redeemable Preference Stock consents to a dividend distribution, which no consent has been provided through December 31, 2020. The Class B Preferred Stock participation rights are contingent on the redemption of the Redeemable Preference Stock, which has not been satisfied as of December 31, 2020.
Basic net loss attributable to ordinary stockholders per share is calculated by dividing net loss attributable to ordinary stockholders by the weighted-average number of ordinary shares outstanding.
Diluted net loss per share attributable to ordinary stockholders adjusts the basic net loss per share attributable to ordinary stockholders and the weighted-average number of shares of ordinary stock outstanding for the potentially dilutive impact of stock options, using the treasury stock method.
The net loss per ordinary stock was the same for the Class A and Class B ordinary shares because they are entitled to the same liquidation and dividend rights and are therefore combined on the consolidated statements of operations and comprehensive loss.
F-15
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
3. Summary of Significant Accounting Policies (cont.)
Because the Company reported net losses for all periods presented, all potentially dilutive ordinary stock equivalents are antidilutive for those periods and have been excluded from the calculation of net loss per share.
The following table presents the number of anti-dilutive shares excluded from the calculation of diluted net loss per share as of December 31:
|
2020 |
2019 |
|||
|
Stock-based compensation awards – employees |
215,769,994 |
151,330,989 |
||
|
Stock-based compensation awards – non-employees |
45,932,116 |
7,485,000 |
||
|
Class A Ordinary Stock – warrant |
1,930,147 |
— |
||
|
Redeemable Preference Stock |
470,588,235 |
470,588,235 |
||
|
Class B Convertible Preferred Stock |
452,941,177 |
600,000,000 |
||
|
Total |
1,187,161,669 |
1,229,404,224 |
During 2020, the Company identified an immaterial error in the anti-dilutive shares excluded from the calculation of diluted net loss per share as of December 31, 2019 and adjusted the prior year amounts for such error. This correction did not impact the current and previously reported consolidated balance sheet, consolidated statement of operations and comprehensive loss, statement of convertible preferred stock and stockholders’ deficit, and consolidated statement of cash flows.
Segments
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. Substantially all of the Company’s consolidated operating activities, including its long-lived assets, are located within the United States of America. Given the Company’s pre-revenue operating stage, it currently has no concentration exposure to products, services or customers.
Recently Adopted Accounting Pronouncements
In July 2017, the FASB issued ASU No. 2017-11, Earning Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): (I) Accounting for Certain Financial Instrument with Down Round Features, (II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). The amendments in Part I change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments in Part II recharacterize the indefinite deferral of certain Topic 480, Distinguishing Liabilities from Equity, provisions that now are presented as pending content in the Codification to a scope exception. Those amendments do not have an accounting effect. The amendments in Part I are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted ASU 2017-11 on January 1, 2020. The Company has evaluated the effect that ASU 2017-11 had on the Company’s consolidated financial statements and has determined that the adoption did not have a material impact.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”), which modifies, removes and adds certain disclosure requirements on fair value measurements based on the FASB Concepts Statement, Conceptual Framework for Financial Reporting — Chapter 8: Notes to Financial Statements. The ASU is
F-16
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
3. Summary of Significant Accounting Policies (cont.)
effective for all entities for fiscal years beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted ASU 2018-13 on January 1, 2020. The standard did not have a material impact on the Company’s disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which outlines a comprehensive lease accounting model that supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. In July 2018, the FASB issued ASU 2018-11, which provides the option of an additional transition method that allows entities to initially apply the new lease guidance at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In June 2020, the FASB issued ASU No 2020-05 that delayed the effective date of Topic 842 to fiscal years beginning after December 15, 2021 for private companies. The Company is expected to be an emerging growth company and will delay adopting Topic 842 until such time the standard applies to private companies. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments in this update are effective for fiscal periods beginning after December 15, 2020. Early adoption is permitted. The Company evaluated the effect ASU 2018-15 would have on the Company’s consolidated financial statements and determined that the adoption will not have a material impact.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This amendment was issued to simplify the accounting for income taxes by removing certain exceptions for recognizing deferred taxes, performing intraperiod allocation, and calculating income taxes in interim periods. Further, ASU 2019-12 adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax basis goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The ASU simplifies the accounting for convertible instruments by removing certain separation models in ASC 470- 20, Debt — Debt with Conversion and Other Options, for convertible instruments. The ASU updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract. The convertible debt instruments will be accounted for as a single liability measured at amortized cost. Further, the ASU made amendments to the earnings per share guidance in Topic 260 for convertible instruments, the most significant impact of which is requiring the use of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method. The ASU also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2023, with early adoption permitted. Adoption of the ASU can either be on a modified retrospective or full retrospective basis. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
F-17
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
4. Fair Value of Financial Instruments
Related Party Notes Payable and Notes Payable at Fair Value
The Company entered into a Term Loan Agreement (“TLA”) with BL Mobility Fundco, LLC as the lender, and Birch Lake Fund Management, LP as the agent and collateral agent and a Note Purchase Agreement (“NPA”) with certain lenders identified therein, U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management, LP as the collateral agent both dated as of April 29, 2019. See (7) of Note 9 Notes Payable. Additionally, the Company entered into a Senior Convertible Promissory Note with a third-party lender, FF Ventures SPV IX LLC, on September 9, 2020 and a Secured Promissory Note with BL FF Fundco, LLC as the lender on October 9, 2020. See (8) and (9) of Note 9 Notes Payable. The Company has elected to measure these notes using the fair value option under ASC 825 because of the embedded liquidation premiums with conversion rights that represent embedded derivatives and would require bifurcation and fair value measurement if this election was not made. The Company will record any changes in fair value within change in fair value measurement of related party notes payable and notes payable on the consolidated statements of operations and comprehensive loss. Fair value measurements associated with the related party notes payable and notes payable represent Level 3 valuations under the fair value hierarchy. The Company employed the yield method to value the related party notes payable and notes payable. This valuation method uses a discounted cash flow analysis, estimating the expected cash flows for the debt instrument and then discounting them at the market yield. The market yield is determined using external market yield data, including yields exhibited by publicly traded bonds by S&P credit rating as well as the borrowing rates of guideline public companies.
The Company recognized $105 and $3,410 due to the change in fair value of related party notes payable for the years ended December 31, 2020 and 2019, respectively. The Company recognized $8,842 and $11,773 due to the change in fair value of the notes payable for the years ended December 31, 2020 and 2019, respectively. The amounts were recorded in change in fair value measurement of related party notes payable and notes payable on the consolidated statements of operations and comprehensive loss.
The Company settled the TLA by paying the outstanding principal of $15,000 and the liquidation premium of $6,668 during the year ended December 31, 2019.
Put Option
Pursuant to two put agreements entered into in 2015 (the “Put Agreements”), the Company may have been required to purchase up to 20,325,016 shares of Easy Go, Inc. (“Easy Go”), a company that operates a ride share platform in China, from certain shareholders of Easy Go in exchange for aggregate consideration ranging from approximately $232,700 to $290,900 depending on whether the put arrangements are settled for cash or shares of the Company. As of January 2019, all Put Agreements expired unexercised, resulting in the final remeasurement and removal of the put option liabilities. At the time of execution, Easy Go and other entities that held Easy Go shares subject to the Put Agreements were affiliated with the Company’s founder and former CEO through common ownership interests and accordingly, the Put Agreements were related party transactions.
The Put Agreements constituted freestanding written put options that were accounted for at fair value with changes in fair value recorded in gain on expiration of put option on the consolidated statements of operations and comprehensive loss. Fair value measurements associated with the Put Agreements represented Level 3 valuations under the fair value hierarchy. The Company utilized the probability weighted expected return method to value the Put Agreements, based on the estimated potential liability under different scenarios, assumed probabilities of exercise, and assumed probability of settlement in stock or cash. Because the Put Agreements effectively represented the exchange of cash and share ownership of the Company for shares of Easy Go, the underlying fair value of the equity of the Company and Easy Go, as well as the probabilities associated with likelihood of exercise most significantly impact the value of the Put Agreements. The determination of fair value associated with the equity of both the Company and Easy Go are subject to a number of various assumptions given such shares do not trade in active markets. However, the Company utilized recent third-party sales of the equity securities of Easy Go in
F-18
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
4. Fair Value of Financial Instruments (cont.)
determining the inputs to the valuation model. The Company believes that such inputs represent objective and reliable indications of value. Probabilities associated with the likelihood of exercise were determined based upon an evaluation of the operating activities, growth, liquidity, achievement of milestones and other factors associated with Easy Go and the Company.
The Put Agreements expired unexercised during 2019, therefore the Company is no longer subject to the rights and obligations as specified by the Put Agreements.
The change in fair value due to the expiration of the Put Agreements resulted in a gain of $43,239 recorded in gain on expiration of put option on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2019.
Recurring Fair Value Measurements
Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables present financial assets and liabilities remeasured on a recurring basis as of December 31, 2020 and 2019, by level within the fair value hierarchy:
|
December 31, 2020 |
|||||||||
|
Level 1 |
Level 2 |
Level 3 |
|||||||
|
Related party notes payable |
$ |
— |
$ |
— |
$ |
21,627 |
|||
|
Notes payable |
|
— |
|
— |
|
71,064 |
|||
|
The9 Conditional Obligation |
|
— |
|
— |
|
1,128 |
|||
|
December 31, 2019 |
|||||||||
|
Level 1 |
Level 2 |
Level 3 |
|||||||
|
Related party notes payable |
$ |
— |
$ |
— |
$ |
21,522 |
|||
|
Notes payable |
|
— |
|
— |
|
32,222 |
|||
|
The9 Conditional Obligation |
|
— |
|
— |
|
5,000 |
|||
The carrying amounts of the Company’s financial assets and liabilities, including cash, restricted cash, deposits, and accounts payable approximate fair value because of their short-term nature or contractually defined value.
The following table summarizes the activity of the Level 3 fair value measurements:
|
Related |
Notes |
Put |
The9 |
||||||||||||
|
Balance as of December 31, 2018 |
$ |
— |
$ |
— |
|
$ |
43,239 |
|
$ |
— |
|
||||
|
Proceeds |
|
18,112 |
|
42,117 |
|
|
— |
|
|
5,000 |
|
||||
|
Changes in fair value |
|
3,410 |
|
11,773 |
|
|
— |
|
|
— |
|
||||
|
Settlements/expiration |
|
— |
|
(21,668 |
) |
|
(43,239 |
) |
|
— |
|
||||
|
Balance as of December 31, 2019 |
|
21,522 |
|
32,222 |
|
|
— |
|
|
5,000 |
|
||||
|
Proceeds |
|
— |
|
30,000 |
|
|
— |
|
|
— |
|
||||
|
Changes in fair value |
|
105 |
|
8,843 |
|
|
— |
|
|
(3,872 |
) |
||||
|
Balance as of December 31, 2020 |
$ |
21,627 |
$ |
71,065 |
|
$ |
— |
|
$ |
1,128 |
|
||||
F-19
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
5. Deposits and Other Current Assets
Deposits and other current assets consists of the following as of December 31:
|
2020 |
2019 |
|||||
|
Deposits |
|
|
||||
|
Deposits for tooling and equipment |
$ |
3,308 |
$ |
3,385 |
||
|
Other deposits |
|
3,104 |
|
1,779 |
||
|
Total deposits |
$ |
6,412 |
$ |
5,164 |
||
|
|
|
|||||
|
Other current assets |
|
|
||||
|
Notes receivable |
$ |
40 |
$ |
3,640 |
||
|
Due from affiliate |
|
2,034 |
|
2,715 |
||
|
Prepaid expenses |
|
762 |
|
961 |
||
|
Other current assets |
|
3,364 |
|
3,199 |
||
|
Total other current assets |
$ |
6,200 |
$ |
10,515 |
||
6. Property and Equipment, Net
Property and equipment, net, consists of the following as of December 31:
|
2020 |
2019 |
|||||||
|
Land |
$ |
13,043 |
|
$ |
13,043 |
|
||
|
Buildings |
|
21,899 |
|
|
21,891 |
|
||
|
Building improvements |
|
8,940 |
|
|
8,940 |
|
||
|
Computer hardware |
|
4,058 |
|
|
4,058 |
|
||
|
Machinery and equipment |
|
5,451 |
|
|
5,375 |
|
||
|
Vehicles |
|
583 |
|
|
583 |
|
||
|
Computer software |
|
7,095 |
|
|
7,095 |
|
||
|
Leasehold improvements |
|
298 |
|
|
298 |
|
||
|
Construction in process |
|
251,633 |
|
|
247,133 |
|
||
|
Less: Accumulated depreciation |
|
(19,067 |
) |
|
(15,890 |
) |
||
|
Total property and equipment, net |
$ |
293,933 |
|
$ |
292,526 |
|
||
The Company’s construction in process is primarily related to the construction of tooling, machinery and equipment for the Company’s production facility in Hanford, California. Tooling, machinery and equipment are either held at Company facilities, primarily the Hanford plant, or at the vendor’s location until the tooling, machinery and equipment is completed. Of the $251,633 and $247,133 of CIP, $42,734 and $40,309 is held at Company facilities and $208,899 and $206,824 is held at vendor locations as of December 31, 2020 and 2019, respectively. The Company recorded $1,727 and $1,997 of interest expense related to CIP held at vendor locations during the years ended December 31, 2020 and 2019, respectively, in interest expense on the consolidated statements of operations and comprehensive loss.
Depreciation expense totaled $3,177 and $4,835 and amortization expense totaled $340 and $353 for the years ended December 31, 2020 and 2019, respectively. For the years ended December 31, 2020 and 2019, depreciation and amortization expense of $1,193 and $311, respectively, is classified within research and development expense and $2,324 and $4,877, respectively, is classified within general and administrative expense on the consolidated statements of operations and comprehensive loss.
F-20
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
6. Property and Equipment, Net (cont.)
The Company has capital leases in Hanford, California for its main production facility and Gardena, California for its headquarters. See Note 9 Notes Payable. Capital leases of $43,882 and $43,874 have been capitalized within property and equipment as land, buildings, and building improvements as of December 31, 2020 and 2019, respectively. Accumulated depreciation was $5,573 and $3,592 as of December 31, 2020 and 2019, respectively.
The Company recognized $10 and $4,843 related to losses on the disposal of property and equipment in loss on disposal of property and equipment on the consolidated statements of operations and comprehensive loss during the years ended December 31, 2020 and 2019, respectively. Land and related improvements for property owned in Las Vegas, Nevada classified as held for sale of $29,038 was sold in 2019 for a total of $16,900, which resulted in a $12,138 loss on disposal recognized in loss on disposal of asset held for sale on the consolidated statements of operations and comprehensive loss. The Company originally purchased the 900-acre plot of land in Nevada in 2015 to build a manufacturing facility. Subsequently, a strategic business decision was made to lease a pre-built factory, which would allow the Company to accelerate the progression of its vehicle to market.
In 2017, land use rights were granted by the government of Zhejiang (China) for use of a parcel of land located in the city of Moganshan, based on multiple conditions, including a minimum investment in the construction of a facility of $500,000 and the commencement of construction before December 31, 2017. Based on the terms of the agreement, the Company could use this parcel of land for 50 years with a 10% upfront payment of $6,440 that would be refunded to the Company if certain conditions were met. The land use rights were recorded as an intangible asset at cost plus taxes for $66,332 and was expected to be amortized over a life of 50 years. The value of the land was agreed with the government of Zhejiang and considered the values for similar size and use properties in the area. In addition, the Company had recorded a corresponding liability of $57,960 related to the receipt of a government grant to develop the land equal to 90% of the land cost which was expected to be amortized over 50 years. The Company recognized amortization expense of $735 in general and administrative expense on the consolidated statements of operations and comprehensive loss during the year ended December 31, 2019. Additionally, the Company recognized amortization expense of the grant liability of $913 as a reduction of general and administrative expense on the consolidated statements of operations and comprehensive loss during the year ended December 31, 2019.
During the year ended December 31, 2019, the Company did not meet all requirements necessary to comply with the agreement; therefore, the land use rights were cancelled and reverted to the government of Zhejiang. The Company derecognized the land use rights and the land use grant liability of $58,485 and $51,103, respectively. As part of the cancellation, the Company received cash of $15,902 and incurred tax expense of $2,947, resulting in a gain of $11,467 recorded in gain on cancellation of land use rights on the consolidated statements of operations and comprehensive loss during the year ended December 31, 2019.
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following as of December 31:
|
2020 |
2019 |
|||||
|
Accrued expenses and other current liabilities |
|
|
||||
|
Accrued payroll and benefits |
$ |
19,180 |
$ |
16,717 |
||
|
Accrued legal contingencies |
|
5,025 |
|
3,305 |
||
|
Capital lease, current portion |
|
4,396 |
|
1,661 |
||
|
Deferred rent, current portion |
|
3 |
|
174 |
||
|
Tooling, machinery and equipment received not invoiced |
|
509 |
|
1,389 |
||
|
Deposits from customers |
|
3,523 |
|
14,923 |
||
|
Due to affiliates |
|
5,123 |
|
467 |
||
|
Other current liabilities |
|
14,623 |
|
9,629 |
||
|
$ |
52,382 |
$ |
48,265 |
|||
F-21
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
8. Related Party Notes Payable
The Company has been primarily funded by notes payable and capital contributions from related parties of the Company. As detailed below, these related parties include employees as well as affiliates and other companies controlled or previously controlled by the Company’s founder and former CEO.
Related party notes payable consists of the following as of December 31, 2020 and 2019:
|
December 31, 2020 |
|||||||||||||||||||||
|
Note Name |
Contractual Maturity Date |
Contractual Interest Rates |
Unpaid |
Fair Value Measurement Adjustments |
0% Coupon Discount |
Loss (Gain) on |
Net Carrying Value |
||||||||||||||
|
Related party note(1)** |
June 30, 2021 |
12.00% |
$ |
240,543 |
$ |
— |
$ |
(861 |
) |
$ |
204 |
|
$ |
239,886 |
|||||||
|
Related party note(2) |
Due on Demand |
15.00%* |
|
10,000 |
|
— |
|
— |
|
|
— |
|
|
10,000 |
|||||||
|
Related party notes – NPA tranche(3) |
October 9, 2021 |
10.00% |
|
18,112 |
|
3,515 |
|
— |
|
|
— |
|
|
21,627 |
|||||||
|
Related party notes – China(4) |
Due on Demand |
18.00%* |
|
9,196 |
|
— |
|
— |
|
|
— |
|
|
9,196 |
|||||||
|
Related party notes – China various other(5) |
Due on Demand |
0% coupon, 10.00% |
|
6,548 |
|
— |
|
(190 |
) |
|
(22 |
) |
|
6,336 |
|||||||
|
Related party notes – China various other(5) |
Due on Demand |
8.99% |
|
1,410 |
|
— |
|
— |
|
|
(3 |
) |
|
1,407 |
|||||||
|
Related party notes – Other(6) |
Due on Demand |
0.00% |
|
424 |
|
— |
|
— |
|
|
— |
|
|
424 |
|||||||
|
Related party notes – Other(6) |
June 30, 2021 |
6.99% |
|
4,160 |
|
— |
|
— |
|
|
(50 |
) |
|
4,110 |
|||||||
|
Related party notes – Other(6) |
June 30, 2021 |
8.00% |
|
6,452 |
|
— |
|
— |
|
|
(35 |
) |
|
6,417 |
|||||||
|
$ |
296,845 |
$ |
3,515 |
$ |
(1,051 |
) |
$ |
94 |
|
$ |
299,403 |
||||||||||
|
December 31, 2019 |
|||||||||||||||||
|
Note Name |
Contractual |
Contractual Interest |
Unpaid Balance |
Fair Value Measurement Adjustments |
0% |
Net |
|||||||||||
|
Related party note(1)** |
December 31, 2020 |
12.00% |
$ |
215,940 |
$ |
— |
$ |
— |
|
$ |
215,940 |
||||||
|
Related party note(1)** |
Due on Demand |
0% coupon, 10.00% imputed |
|
24,399 |
|
— |
|
(3,557 |
) |
|
20,842 |
||||||
|
Related party note(2) |
Due on Demand |
15.00%* |
|
10,000 |
|
— |
|
— |
|
|
10,000 |
||||||
|
Related party notes – NPA tranche(3) |
May 31, 2020 |
10.00% |
|
18,112 |
|
3,410 |
|
— |
|
|
21,522 |
||||||
|
Related party notes – China(4) |
Due on Demand |
18.00%* |
|
8,601 |
|
— |
|
— |
|
|
8,601 |
||||||
|
Related party notes – China various other(5) |
Due on Demand |
0% coupon, 10.00% |
|
6,125 |
|
— |
|
(607 |
) |
|
5,518 |
||||||
|
Related party notes – Other(6) |
December 31, 2020 |
6.99% |
|
4,160 |
|
— |
|
— |
|
|
4,160 |
||||||
|
$ |
287,337 |
$ |
3,410 |
$ |
(4,164 |
) |
$ |
286,583 |
|||||||||
____________
* Rate as of December 31, 2020 and 2019, see footnotes for further discussion.
** During 2020, these related party notes payable were restructured into one related party note payable.
(1) During 2016, Faraday & Future (HK) Limited (“F&F HK”) and Leview Mobile (HK) Ltd. (“Leview”) provided the Company with cash contributions for a total of $278,866. F&F HK was previously controlled by the Company’s founder and former CEO and Leview is controlled by the Company’s founder and former CEO. On March 30, 2018, the cash funding was restructured via an agreement in the form of notes payable bearing an annual interest rate of 12.00% and maturing on December 31, 2020. The notes payable are unsecured and there are no covenants associated with these notes payable.
F-22
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
8. Related Party Notes Payable (cont.)
Faraday & Future (HK) Limited
F&F HK provided an aggregate principal loan in the total sum of $212,007 to the Company as part of the agreement on March 30, 2018. On June 27, 2019, the Company entered into a note payable cancellation agreement for a portion of the note payable with F&F HK effective January 1, 2019 and simultaneously the note payable was assumed by a third-party lender. The agreement cancelled $48,374 of principle and $5,805 of unpaid interest due to F&F HK. There was no loss or gain on the extinguishment of note payable due to the net carrying amount of the note payable extinguished being equivalent to the reacquisition price of the new note payable. See Note 9 Notes Payable (1).
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
— |
$ |
149,081 |
||||
|
Accrued interest |
|
— |
|
19,657 |
||||
|
Interest expense |
|
11,959 |
|
17,889 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
Leview Mobile (HK) Ltd
Leview provided an aggregate principal loan in the total sum of $66,859 to the Company as part of the agreement on March 30, 2018.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
— |
$ |
66,859 |
||||
|
Accrued interest |
|
— |
|
16,046 |
||||
|
Interest expense |
|
5,363 |
|
8,023 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
Beijing Bairui Culture Media, Co. Ltd
Between December 2017 and July 2018, the Company executed several notes payable agreements with Beijing Bairui Culture Media Co., Ltd. (“Bairui”) for total principal of $27,329. Bairui was previously controlled by the Company’s founder and former CEO. Each note payable originally matured one year after its issuance. The notes payable originally bore interest of 0% per annum. The notes payable are unsecured and there are no covenants associated with these notes payable. During the year ended December 31, 2019, Bairui forgave $2,487 of the outstanding notes payable.
Due to the notes payable having below market interest rates, the Company imputed interest upon entering into the notes payable resulting in a notes payable discount and a capital contribution due to the related party nature of the arrangements. During the year ended December 31, 2019, the Company recognized interest expense of $3,476 related to the accretion of the discount. As of December 31, 2019, the unamortized discount was $3,557.
On January 1, 2020, the Company executed an amendment to consolidate the notes payable into one note for the same amount, extend the maturity date of this note payable to December 31, 2020, and increased the interest rate from 0% to 12%. Since the cash flows of the modified note payable exceeded the cash flows of the original notes payable by more than 10%, the modification has been accounted for as an extinguishment with a loss on extinguishment of $314 recorded in
F-23
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
8. Related Party Notes Payable (cont.)
gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. The net carrying value of the original note payable of $20,842 was replaced with a note payable with a fair value of $21,156. Additionally, accretion of $2,586 was recorded in interest expense during the year ended December 31, 2020 related to the unamortized discount.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
— |
$ |
24,399 |
||||
|
Accrued interest |
|
— |
|
— |
||||
|
Interest expense |
|
4,073 |
|
3,476 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
443 |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
CYM Tech Holdings LLC
On August 28, 2020, the related party notes payable with F&F HK, Leview, and Bairui were restructured to consolidate the lenders and extend the maturity date through June 30, 2021, transferring both the principal and accrued interest to the new lender, CYM Tech Holdings LLC, wholly-owned subsidiary of F&F HK.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
240,543 |
$ |
— |
||||
|
Accrued interest |
|
64,827 |
|
— |
||||
|
Interest expense |
|
10,134 |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
The related party notes payable that were restructured were the following:
Before Restructuring
|
Lender |
Principal |
||||
|
Faraday & Future (HK) Limited |
$ |
149,081 |
|||
|
Leview Mobile (HK) Ltd |
|
66,859 |
|||
|
Beijing Bairui Culture Media, Co. Ltd |
|
24,603 |
|||
|
Total |
$ |
240,543 |
|||
After Restructuring
|
Lender |
Principal |
||||
|
CYM Tech Holdings LLC |
$ |
240,543 |
|||
The restructuring has been accounted for as a troubled debt restructuring because the Company has been experiencing financial difficulty and the conversion mechanism results in the effective borrowing rate decreasing after the restructuring which was determined to be a concession. Since the future undiscounted cash flows of the restructured note payable exceed the net carrying value of the original notes payable due to the maturity date extension, the restructuring is accounted for
F-24
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
8. Related Party Notes Payable (cont.)
prospectively with no gain or loss recorded in the consolidated statements of operations and comprehensive loss. The Company concluded that the conversion features do not require bifurcation based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity.
(2) On January 28, 2019 and February 1, 2019, the Company borrowed $7,000 and $3,000, respectively from Evergrande Health Industry Group Limited (“China Evergrande”). China Evergrande is an affiliate of a significant shareholder of the Company. The notes payable matured on June 30, 2019 and were in default as of December 31, 2020 and 2019. The notes payable bear interest at an annual rate of 10.00% if repaid through June 30, 2019 and increased to 15.00% per annum thereafter. The notes payable are unsecured and there are no covenants associated with these notes payable.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
10,000 |
$ |
10,000 |
||||
|
Accrued interest |
|
2,839 |
|
1,228 |
||||
|
Interest expense |
|
1,611 |
|
1,228 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
10,000 |
||||
(3) The Company issued 10% interest notes with various related parties through the Note Purchase Agreements (“NPA”).
• In November 2018, the Company entered into a note payable with an employee for total principal of $1,650. The note payable had an original maturity of November 30, 2019 and bore interest at 8.99% per annum. This note was subsequently cancelled and the outstanding principal and accrued interest totaling $1,650 was contributed to the NPA executed on April 29, 2019. During the year ended December 31, 2019, the note payable was extinguished and no loss or gain was recognized as the net carrying amount of the note payable equaled the reacquisition price.
In May 2019, the Company executed a joinder agreement to the NPA with an employee for a convertible note payable with total principal of $1,650. The note payable matured on May 31, 2020 and the interest rate, collateral, and covenants are the same as the NPA. Upon both a preferred stock offering and prepayment notice by the holder or the maturity date of the notes payable, the holder of the note payable may elect to convert all of the outstanding principal and accrued interest of the note payable plus a 20.00% premium into shares of preferred stock of the Company issued in a preferred stock offering. The Company elected the fair value option for this note payable. See Note 4 Fair Value of Financial Instruments. The fair value of the note payable was $1,970 and $1,961 as of December 31, 2020 and 2019, respectively.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
1,650 |
$ |
1,650 |
||||
|
Accrued interest |
|
134 |
|
30 |
||||
|
Interest expense |
|
166 |
|
30 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
62 |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
On April 29, 2019, the Company executed the NPA with U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management, LP as the collateral agent. The aggregate principal amount that may be issued under the NPA is $200,000.
F-25
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
8. Related Party Notes Payable (cont.)
All obligations due under the NPA bear interest of 10% per annum and are collateralized by a first lien, with second payment priority, on virtually all tangible and intangible assets of the Company. The NPA contains non-financial covenants and, as of December 31, 2020, the Company was in compliance with all covenants. See Note 9 Notes Payable (2).
• In July 2019, the Company executed a joinder agreement to the NPA with a company owned by an employee for a convertible note payable with total principal of $16,462. The note payable originally matured on May 31, 2020 and the interest rate, collateral, and covenants are the same as the NPA. Upon both a preferred stock offering and prepayment notice by the holder or the maturity date of the note payable, the holder of the note payable may elect to convert all of the outstanding principal and accrued interest of the note payable plus a 20.00% premium into shares of preferred stock of the Company issued in a preferred stock offering. The Company elected the fair value option for this note payable. See Note 4 Fair Value of Financial Instruments. The fair value of the note payable was $19,657 and $19,561 as of December 31, 2020 and 2019, respectively.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
16,462 |
$ |
16,462 |
||||
|
Accrued interest |
|
2,501 |
|
828 |
||||
|
Interest expense |
|
1,674 |
|
828 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
16,462 |
||||
On October 9, 2020, the Company entered into the Second Amended Restated NPA (“Second A&R NPA”) with Birch Lake and the lenders which extended the maturity dates of all NPA notes to the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified Special Purpose Acquisition Company Merger (“Qualified SPAC Merger”), (iii) the occurrence of a change in control, or (iv) the acceleration of the NPA obligations pursuant to an event of default, as defined in the NPA, as amended.
(4) In April 2017, the Company executed two separate note payable agreements with Chongqing Leshi Small Loan Co., Ltd. (“Chongqing”), for total principal of $8,742. Chongqing was previously controlled by the Company’s founder and former CEO and is a small banking institution. The notes payable matured on April 16, 2018, have no covenants, and are unsecured. The notes bore interest during the note term at 12.00% per annum. As the notes are in default as of December 31, 2020 and 2019, the outstanding balance is subject to an 18.00% interest rate per annum.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
9,196 |
$ |
8,601 |
||||
|
Accrued interest |
|
7,646 |
|
4,542 |
||||
|
Interest expense |
|
2,641 |
|
2,201 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
595 |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
463 |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
(5) The Company issued the following notes with various related parties.
• In April 2017, the Company entered into a $728 note payable with an employee. The note originally matured on October 2, 2017 and bears interest at 0% per year. The note has no covenants and is unsecured.
F-26
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
8. Related Party Notes Payable (cont.)
Due to the note payable having an interest rate below market rates, the Company imputed interest upon executing the note payable resulting in a note payable discount and a capital contribution due to the related party nature of the arrangement. During the years ended December 31, 2020 and 2019, the Company recognized interest expense of $72 and $65, respectively, related to the accretion of the discount. As of December 31, 2020 and 2019, the unamortized discount was $33 and $105, respectively.
On September 25, 2020, the note payable was modified to extend the maturity to June 30, 2021 and add a conversion feature to allow conversion of the note payable into a variable number of SPAC shares if a Qualified SPAC Merger occurs. Since the conversion feature is substantive as it is reasonably possible to be exercised, this modification has been accounted for as an extinguishment. The conversion feature does not require bifurcation because it is clearly and closely related to the debt host since the conversion does not involve a substantial premium or discount. The modification agreement and the accounting conclusions are collectively referred to as the September 2020 Modification. The Company recorded a gain on extinguishment of $35 in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $13 was recorded related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
766 |
$ |
717 |
||||
|
Accrued interest |
|
— |
|
— |
||||
|
Interest expense |
|
72 |
|
65 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
49 |
|
11 |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
• In 2018, the Company entered into a $700 note payable with an employee. The note is payable on demand and bears interest at 0% per year. The note has no covenants and is unsecured. The note payable was in default as of December 31, 2020.
Due to the note payable having an interest rate below market rates, the Company imputed interest upon entering into the note payable resulting in a debt discount and a capital contribution due to the related party nature of the arrangement. During the years ended December 31, 2020 and 2019, the Company recognized interest expense of $34 and $31, respectively, related to the accretion of the debt discount. As of December 31, 2020 and 2019, the unamortized debt discount was $16 and $50, respectively.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
737 |
$ |
689 |
||||
|
Accrued interest |
|
— |
|
— |
||||
|
Interest expense |
|
34 |
|
31 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
48 |
|
11 |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
• The Company has various other unsecured related party borrowings totaling $4,797. These borrowings do not have stated terms or a stated maturity date. The Company was in default on these notes payable as of December 31, 2020.
F-27
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
8. Related Party Notes Payable (cont.)
Due to the notes payable having below market interest rates, the Company imputed interest upon entering into the notes payable resulting in a debt discount and a capital contribution due to the related party nature of the arrangements. During the years ended December 31, 2020 and 2019, the Company recognized interest expense of $310 and $282, respectively, related to the accretion of the debt discount. As of December 31, 2020 and 2019, the unamortized debt discount was $141 and $452, respectively.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
5,045 |
$ |
4,719 |
||||
|
Accrued interest |
|
— |
|
— |
||||
|
Interest expense |
|
310 |
|
282 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
326 |
|
77 |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
• In February 2020, the Company borrowed $1,410 through a note payable from an employee. The note originally matured on August 14, 2020, bears interest at 8.99% per annum, has no covenants and is unsecured.
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $5 in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $2 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
1,410 |
$ |
— |
||||
|
Accrued interest |
|
69 |
|
— |
||||
|
Interest expense |
|
111 |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
42 |
|
— |
||||
|
Proceeds |
|
1,410 |
|
— |
||||
(6) The Company issued the following notes payable with various related parties.
• In November 2019 and December 2019, the Company executed three notes payable with an affiliated company for total principal of $4,160. The notes payable originally matured on December 31, 2020 and bear interest at 6.99%.
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $77 in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $27 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
F-28
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
8. Related Party Notes Payable (cont.)
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
4,160 |
$ |
4,160 |
||||
|
Accrued interest |
|
313 |
|
20 |
||||
|
Interest expense |
|
293 |
|
20 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
4,160 |
||||
• Between January 2020 and August 2020, the Company executed nine notes payable with an affiliated company for a total of $8,422. The notes payable matured on December 31, 2020 and bear interest at 8%, besides one note for $500 which matured on June 30, 2020 and bears interest at 8%. The notes have no covenants and are unsecured.
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $53 in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $18 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
6,452 |
$ |
— |
||||
|
Accrued interest |
|
435 |
|
— |
||||
|
Interest expense |
|
435 |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
1,970 |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
8,422 |
|
— |
||||
• In December 2020, the Company entered into two notes payable for a total of $424. The notes payable do not have a stated maturity or bear interest. The notes have no covenants and are unsecured.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
424 |
$ |
— |
||||
|
Accrued interest |
|
— |
|
— |
||||
|
Interest expense |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
424 |
|
— |
||||
• In December 2018, two employees provided the Company with temporary cash advances $1,500. These borrowings did not have stated terms, no stated interest rate, or stated maturity date. Both loans were repaid on February 6, 2019.
F-29
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
8. Related Party Notes Payable (cont.)
Fair Value of Related Party Notes Payable Not Carried at Fair Value
The estimated fair value, using inputs from Level 3 under the fair value hierarchy, of the Company’s related party notes payable not carried at fair value is $265,663 and $270,690 as of December 31, 2020 and 2019, respectively.
Schedule of Principal Maturities of Related Party Notes Payable
The future scheduled principal maturities of related party notes payable as of December 31, 2020 were as follows:
|
Years ended December 31, |
|||||
|
Due on demand |
$ |
27,578 |
|||
|
2021 |
|
269,267 |
|||
|
$ |
296,845 |
||||
9. Notes Payable
Notes payable consists of the following as of December 31, 2020 and 2019:
|
December 31, 2020 |
||||||||||||||||||
|
Note Name |
Contractual |
Contractual Interest Rates |
Unpaid Balance |
Fair Value Measurement Adjustments |
Gain on Extinguishments |
Net Carrying Value |
||||||||||||
|
Note payable(1) |
Repayment in 10% increments contingent on a specified fundraising event |
12.00 |
% |
$ |
57,293 |
$ |
— |
$ |
— |
|
$ |
57,293 |
||||||
|
Notes payable – NPA tranche(2) |
October 6, 2021 |
10.00 |
% |
|
27,118 |
|
5,263 |
|
— |
|
|
32,381 |
||||||
|
Notes payable(3) |
June 30, 2021 |
12.00 |
% |
|
19,100 |
|
— |
|
— |
|
|
19,100 |
||||||
|
Notes payable(4) |
June 30, 2021 |
1.52 |
% |
|
4,400 |
|
— |
|
(102 |
) |
|
4,298 |
||||||
|
Notes payable(4) |
June 30, 2021 |
8.99 |
% |
|
2,240 |
|
— |
|
(5 |
) |
|
2,235 |
||||||
|
Notes payable(4) |
June 30, 2021 |
8.00 |
% |
|
300 |
|
— |
|
(1 |
) |
|
299 |
||||||
|
Notes payable – China various other(5) |
Various Dates 2021 |
6.00 |
% |
|
4,869 |
|
— |
|
(62 |
) |
|
4,807 |
||||||
|
Notes payable – China various other(5) |
Due on Demand |
9.00 |
% |
|
3,677 |
|
— |
|
(18 |
) |
|
3,659 |
||||||
|
Notes payable – China various other(5) |
Due on Demand |
0.00 |
% |
|
4,597 |
|
— |
|
— |
|
|
4,597 |
||||||
|
Notes payable – various other notes(6) |
June 30, 2021 |
6.99 |
% |
|
1,380 |
|
— |
|
(10 |
) |
|
1,370 |
||||||
|
Notes payable – various other notes(6) |
Due on Demand |
8.99 |
% |
|
380 |
|
— |
|
(1 |
) |
|
379 |
||||||
|
Notes payable – various other notes(7) |
June 30, 2021 |
2.86 |
% |
|
1,500 |
|
— |
|
(29 |
) |
|
1,471 |
||||||
|
Note payable(8) |
March 9, 2021 |
0.00 |
% |
|
15,000 |
|
2,712 |
|
— |
|
|
17,712 |
||||||
|
Note payable(9) |
October 6, 2021 |
12.75 |
% |
|
15,000 |
|
5,972 |
|
— |
|
|
20,972 |
||||||
|
Notes payable(10) |
June 30, 2021 |
8.00 |
% |
|
11,635 |
|
— |
|
(57 |
) |
|
11,578 |
||||||
|
Notes payable(11) |
April 17, 2022 |
1.00 |
% |
|
9,168 |
|
— |
|
— |
|
|
9,168 |
||||||
|
|
$ |
177,657 |
$ |
13,947 |
$ |
(285 |
) |
$ |
191,319 |
|||||||||
F-30
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
|
December 31, 2019 |
||||||||||||||
|
Note Name |
Contractual |
Contractual |
Unpaid |
Fair Value |
Net |
|||||||||
|
Note payable(1) |
Repayment in 10% increments contingent on a specified fundraising event |
12.00 |
% |
$ |
53,185 |
$ |
— |
$ |
53,185 |
|||||
|
Notes payable – NPA tranche(2) |
May 31 2020 |
10.00 |
% |
|
26,218 |
|
4,935 |
|
31,153 |
|||||
|
Notes payable – NPA tranche(2) |
March 6, 2020 |
10.00 |
% |
|
900 |
|
169 |
|
1,069 |
|||||
|
Notes payable(3) |
December 31, 2019 |
12.00 |
% |
|
12,100 |
|
— |
|
12,100 |
|||||
|
Notes payable(3) |
Due on Demand |
12.00 |
% |
|
7,000 |
|
— |
|
7,000 |
|||||
|
Notes payable(4) |
December 31, 2019 |
1.52 |
% |
|
4,400 |
|
— |
|
4,400 |
|||||
|
Notes payable(4) |
July 1, 2020 |
8.99 |
% |
|
2,240 |
|
— |
|
2,240 |
|||||
|
Notes payable – China various other(5) |
Due on Demand |
9.00 |
% |
|
3,440 |
|
— |
|
3,440 |
|||||
|
Notes payable – China various other(5) |
Various Dates 2020 |
6.00 |
% |
|
3,155 |
|
— |
|
3,155 |
|||||
|
Notes payable – China various other(5) |
Due on Demand |
0.00 |
% |
|
4,300 |
|
— |
|
4,300 |
|||||
|
Notes payable – various other notes(6) |
Repayment upon new equity or debt financing in an aggregate amount exceeding $50,000 |
8.99 |
% |
|
500 |
|
— |
|
500 |
|||||
|
Notes payable – various other notes(6) |
Due on Demand |
6.99 |
% |
|
180 |
|
— |
|
180 |
|||||
|
Notes payable – various other notes(6) |
June 3, 2020 |
6.99 |
% |
|
2,700 |
|
— |
|
2,700 |
|||||
|
Notes payable – various other notes(7) |
December 31, 2019 |
2.86 |
% |
|
1,500 |
|
— |
|
1,500 |
|||||
|
|
$ |
121,818 |
$ |
5,104 |
$ |
126,922 |
||||||||
(1) In January 2019, upon extinguishment of a portion of the Faraday and Future (HK) Limited related party notes payable, the Company borrowed $54,179 through notes payable from a Chinese lender. The notes payable originally matured on December 31, 2020, bear interest of 12.00% per annum, have no covenants, and are unsecured.
On December 31, 2020, the notes payable were modified to extend the maturity date to June 30, 2021 and add a conversion feature. The conversion feature, which is contingent upon the closing of a Qualified SPAC Merger, requires the Company to issue Class A ordinary shares to the lender based on a fixed conversion ratios immediately prior to the closing of the Qualified SPAC Merger to settle the outstanding note payable before being exchanged for Qualified SPAC Merger shares upon the Qualified SPAC Merger closing date.
The modification has been accounted for as a troubled debt restructuring because the Company is experiencing financial difficulty and the conversion mechanism results in the effective borrowing rate decreasing after the restructuring. Since the future undiscounted cash flows of the restructured notes payable exceed the net carrying value of the original note payable due to the maturity date extension, the modification has been accounted for prospectively with no gain or loss recorded
F-31
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
in the consolidated statements of operations and comprehensive loss. The Company concluded that the conversion feature does not require bifurcation based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity.
|
As of and for the Year Ended |
|||||||||
|
2020 |
2019 |
||||||||
|
Outstanding principal |
$ |
57,293 |
$ |
53,185 |
|
||||
|
Accrued interest |
|
13,769 |
|
6,382 |
|
||||
|
Interest expense |
|
7,387 |
|
6,382 |
|
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
4,108 |
|
(994 |
) |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
|
||||
|
Principal payments |
|
— |
|
— |
|
||||
|
Interest payments |
|
— |
|
— |
|
||||
|
Proceeds |
|
— |
|
— |
|
||||
(2) The Company issued 10% interest notes with various third parties through the NPA:
• Between November and December 2018, the Company borrowed $11,100 through notes payable from a U.S. based investment firm. The notes originally matured on December 31, 2019 and bore interest of 8.99% per annum. In April 2019, these notes payable were cancelled, and the outstanding principal and accrued interest of $8,100 and $481, respectively, was contributed to the NPA executed on April 29, 2019. No loss or gain was recognized during the year ended December 31, 2019, on contribution as the net carrying amount of the notes payable equaled the reacquisition price.
In April 2019, the Company executed a joinder agreement to the NPA with a U.S. based investment firm for a convertible note payable with total principal of $8,581. The convertible note payable originally matured on May 31, 2020. The interest rate, collateral, and covenants are the same as the NPA. Upon both a preferred stock offering and prepayment notice by the holder or the maturity date of the notes payable, the holder of the note payable may elect to convert all of the outstanding principal and accrued interest of the note payable plus a 20% premium into shares of preferred stock of the Company issued in a preferred stock offering. The Company elected the fair value option for these notes payable. See Note 4 Fair Value of Financial Instruments. The note payable is collateralized by virtually all tangible and intangible assets of the Company. The NPA contains non-financial covenants and as of December 31, 2020, the Company was in compliance with all covenants.
The Company elected the fair value option for the notes payable through the NPA. See Note 4 Fair Value of Financial Instruments. The fair value of the note payable was $10,246 and $10,198 as of December 31, 2020 and 2019, respectively.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
8,581 |
$ |
8,581 |
||||
|
Accrued interest |
|
1,418 |
|
557 |
||||
|
Interest expense |
|
861 |
|
557 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
3,000 |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
• Between June and August 2019, the Company borrowed $17,637 through notes payable under the NPA. The notes originally matured on May 31, 2020 and bear interest of 10% per annum.
F-32
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
The fair value of the notes payable were $21,059 and $20,956 as of December 31, 2020 and 2019, respectively.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
17,637 |
$ |
17,637 |
||||
|
Accrued interest |
|
2,637 |
|
879 |
||||
|
Interest expense |
|
1,768 |
|
879 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
17,637 |
||||
• In May 2019, the Company borrowed $900 through a note payable from a U.S. based investment firm under the NPA. The note payable originally matured on March 6, 2020 and bore interest of 10% per annum.
The fair value of the note payable was $1,075 and $1,069 as of December 31, 2020 and 2019, respectively.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
900 |
$ |
900 |
||||
|
Accrued interest |
|
143 |
|
42 |
||||
|
Interest expense |
|
90 |
|
42 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
900 |
||||
On October 9, 2020, the Company entered into the Second A&R NPA with Birch Lake and the lender, which extended the maturity dates of all NPA notes to the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control, or (iv) the acceleration of the NPA obligations pursuant to an event of default, as defined in the NPA, as amended.
(3) The Company issued the following notes with an interest rate of 12.00% per annum.
• In December 2016, the Company borrowed $10,000 through notes payable issued by a U.S. based investment firm. The notes originally matured on December 31, 2019, have no covenants and are unsecured. During the year ended December 31, 2019, the Company converted $600 of accrued interest into the principal balance of the notes payable.
On November 24, 2020, the note payable was modified to extend the maturity date to June 30, 2021 and add a conversion feature. This feature, contingent upon the closing of a Qualified SPAC Merger, requires the Company to issue Class A ordinary Stock to the lender based on a fixed conversion ratio immediately prior to the closing of the Qualified SPAC Merger to settle the outstanding notes payable before being exchanged for Qualified SPAC Merger shares upon the Qualified SPAC Merger closing date.
The modification has been accounted for as a troubled debt restructuring because the Company is experiencing financial difficulty and the conversion mechanism results in the effective borrowing rate decreasing after the restructuring which was determined to be a concession. Since the future undiscounted cash flows of the restructured
F-33
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
notes payable exceed the net carrying value of the original note payable due to the maturity date extension, the modification has been accounted for prospectively with no gain or loss recorded in the consolidated statements of operations and comprehensive loss. The Company concluded that the conversion features do not require bifurcation based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
10,600 |
$ |
10,600 |
||||
|
Accrued interest |
|
2,547 |
|
1,272 |
||||
|
Interest expense |
|
1,275 |
|
1,272 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
600 |
||||
|
Proceeds |
|
— |
|
— |
||||
During 2020, the Company identified an immaterial error in the disclosure of accrued interest as of December 31, 2019 and adjusted the prior year amounts for such error. This correction did not impact the current and previously reported consolidated balance sheet, consolidated statement of operations and comprehensive loss, statement of convertible preferred stock and stockholders’ deficit, and consolidated statement of cash flows.
• In December 2016, the Company borrowed $1,500 through a note payable from a U.S. based investment firm. The note originally matured on December 31, 2019, has no covenants and is unsecured.
On September 25, 2020, the note payable was modified to extend the maturity date to June 30, 2021 and add a conversion feature. This feature, contingent upon the closing of a Qualified SPAC Merger, requires the Company to issue Class A ordinary stock to the lender based on a fixed conversion ratio immediately prior to the closing of the Qualified SPAC Merger to settle the outstanding notes payable before being exchanged for Qualified SPAC Merger shares upon the Qualified SPAC Merger closing date.
The modification has been accounted for as a troubled debt restructuring because the Company is experiencing financial difficulty and the conversion mechanism results in the effective borrowing rate decreasing after the restructuring which was determined to be a concession. Since the future undiscounted cash flows of the restructured notes payable exceed the net carrying value of the original note payable due to the maturity date extension, the modification has been accounted for prospectively with no gain or loss recorded in the consolidated statements of operations and comprehensive loss. The Company concluded that the conversion features do not require bifurcation based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
1,500 |
$ |
1,500 |
||||
|
Accrued interest |
|
587 |
|
204 |
||||
|
Interest expense |
|
203 |
|
204 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
F-34
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
• In June 2016, the Company borrowed $20,000 through a note payable from a U.S. based investment firm. The note originally matured on October 15, 2019, has no covenants and is unsecured. The Company made principal payments of $13,000 in 2018.
On November 24, 2020, the note payable was modified to extend the maturity date to June 30, 2021 and add a conversion feature. This feature, contingent upon the closing of a Qualified SPAC Merger, requires the Company to issue Class A ordinary stock to the lender based on a fixed conversion ratio immediately prior to the closing of the Qualified SPAC Merger to settle the outstanding notes payable before being exchanged for Qualified SPAC Merger shares upon the Qualified SPAC Merger closing date.
The modification has been accounted for as a troubled debt restructuring because the Company is experiencing financial difficulty and the conversion mechanism results in the effective borrowing rate decreasing after the restructuring which was determined to be a concession. Since the future undiscounted cash flows of the restructured notes payable exceed the net carrying value of the original note payable due to the maturity date extension, the modification has been accounted for prospectively with no gain or loss recorded in the consolidated statements of operations and comprehensive loss. The Company concluded that the conversion features do not require bifurcation based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
7,000 |
$ |
7,000 |
||||
|
Accrued interest |
|
1,682 |
|
840 |
||||
|
Interest expense |
|
842 |
|
840 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
During 2020, the Company identified an immaterial error in the disclosure of accrued interest as of December 31, 2019 and adjusted the prior year amounts for such error. This correction did not impact the current and previously reported consolidated balance sheet, consolidated statement of operations and comprehensive loss, statement of convertible preferred stock and stockholders’ deficit, and consolidated statement of cash flows.
(4) The Company issued the following notes with a third party.
• In July 2017, the Company borrowed $22,400 through a note payable from a U.S. based investment firm. The note originally matured on December 31, 2019, bears interest at 1.52% per annum, has no covenants and is unsecured. During 2017 and 2018, there were a total of $18,000 of principal payments.
F-35
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $157 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $55 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
4,400 |
$ |
4,400 |
||||
|
Accrued interest |
|
314 |
|
230 |
||||
|
Interest expense |
|
84 |
|
50 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
• In December 2019, the Company borrowed an additional $2,240 through a note payable from this U.S. based investment firm. The note originally matured on July 1, 2020, bears interest at 8.99% per annum, has no covenants and is unsecured.
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $7 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $2 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
2,240 |
$ |
2,240 |
||||
|
Accrued interest |
|
202 |
|
17 |
||||
|
Interest expense |
|
185 |
|
17 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
2,240 |
||||
• In January 2020, the Company borrowed an additional $300 through a note payable from this U.S. based investment firm. The note originally matured on June 30, 2020, bears interest at 8% per annum, has no covenants and is unsecured.
F-36
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $2 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $1 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
300 |
$ |
— |
||||
|
Accrued interest |
|
23 |
|
— |
||||
|
Interest expense |
|
23 |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
300 |
|
— |
||||
(5) The Company issued notes with various third parties through its operations in China.
• In April 2017, the Company borrowed $3,496 through a note payable from a Chinese lender. The note originally matured on October 20, 2017, bears interest at 9.00% per annum, has no covenants and is unsecured.
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $27 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $9 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
As of and for the Year Ended |
|||||||||
|
2020 |
2019 |
||||||||
|
Outstanding principal |
$ |
3,677 |
$ |
3,440 |
|
||||
|
Accrued interest |
|
2,314 |
|
1,535 |
|
||||
|
Interest expense |
|
637 |
|
635 |
|
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
237 |
|
(56 |
) |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
142 |
|
— |
|
||||
|
Principal payments |
|
— |
|
— |
|
||||
|
Interest payments |
|
— |
|
— |
|
||||
|
Proceeds |
|
— |
|
— |
|
||||
• Between January 2019 and December 2019, the Company borrowed $11,515 through notes payable from a Chinese lender. The notes payable mature on January 16, 2020 and December 6, 2020, bear interest at 6% per annum, have no covenants and are unsecured. During the year ended December 31, 2019, the Company made principal payments of $8,155 resulting in a realized foreign currency gain of $205.
F-37
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
|
As of and for the Year Ended |
|||||||||
|
2020 |
2019 |
||||||||
|
Outstanding principal |
$ |
4,140 |
$ |
3,155 |
|
||||
|
Accrued interest |
|
569 |
|
299 |
|
||||
|
Interest expense |
|
235 |
|
303 |
|
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
219 |
|
(1 |
) |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
35 |
|
— |
|
||||
|
Realized foreign exchange (gain) on principal |
|
— |
|
(205 |
) |
||||
|
Principal Payments |
|
— |
|
8,155 |
|
||||
|
Interest Payments |
|
— |
|
— |
|
||||
|
Proceeds |
|
766 |
|
11,515 |
|
||||
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $84 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $29 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment.
• In 2017 and 2018, Company borrowed $4,371 through notes payable from various Chinese lenders. The notes payable are payable on demand by the lenders, do not have a stated interest rate, have no covenants and are unsecured. As of December 31, 2020, these notes payable were in default.
|
As of and for the Year Ended |
|||||||||
|
2020 |
2019 |
||||||||
|
Outstanding principal |
$ |
4,597 |
$ |
4,300 |
|
||||
|
Accrued interest |
|
— |
|
— |
|
||||
|
Interest expense |
|
— |
|
— |
|
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
297 |
|
(71 |
) |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
|
||||
|
Principal payments |
|
— |
|
— |
|
||||
|
Interest payments |
|
— |
|
— |
|
||||
|
Proceeds |
|
— |
|
— |
|
||||
• Between June and September 2020, the Company borrowed $761 through notes payable from a Chinese lender. The notes payable are payable on demand by the lender, bear interest at 6% per annum, have no covenants, and are unsecured.
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $13 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $4 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
F-38
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
729 |
$ |
— |
||||
|
Accrued interest |
|
19 |
|
— |
||||
|
Interest expense |
|
19 |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
32 |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
761 |
|
— |
||||
(6) The Company issued the following notes with a third party.
• In March 2019, the Company borrowed $1,500 through a note payable from a U.S. based investment firm. The note originally matured on March 6, 2020, bears interest at 8.99% per annum, has no covenants and is unsecured.
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $1 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
380 |
$ |
500 |
||||
|
Accrued interest |
|
99 |
|
54 |
||||
|
Interest expense |
|
45 |
|
54 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
120 |
|
1,000 |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
1,500 |
||||
• In June 2019, the Company borrowed $3,600 through a note payable from a U.S. based investment firm. The note matured on July 5, 2019, bears interest at 2.99% per annum, has no covenants and is unsecured.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
— |
$ |
— |
||||
|
Accrued interest |
|
4 |
|
4 |
||||
|
Interest expense |
|
— |
|
4 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
3,600 |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
3,600 |
||||
• In September 2019, the Company borrowed $180 through a note payable from a U.S. based investment firm. The note originally matured December 1, 2019, bears interest at 6.99% per annum, has no covenants and is unsecured.
F-39
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $2 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $1 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
180 |
$ |
180 |
||||
|
Accrued interest |
|
10 |
|
4 |
||||
|
Interest expense |
|
6 |
|
4 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
180 |
||||
• In November 2019, the Company borrowed $2,700 through a note payable from a U.S. based investment firm. The note originally matured on June 3, 2020, bears interest at 6.99% per annum, has no covenants and is unsecured.
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $14 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $5 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
1,200 |
$ |
2,700 |
||||
|
Accrued interest |
|
192 |
|
26 |
||||
|
Interest expense |
|
171 |
|
26 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
1,500 |
|
— |
||||
|
Interest payments |
|
5 |
|
— |
||||
|
Proceeds |
|
— |
|
2,700 |
||||
(7) In October 2018, the Company borrowed $1,500 through a note payable from a U.S. based investment firm. The note originally matured on December 31, 2019, bears interest at 2.86% per annum, has no covenants and is unsecured.
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $45 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $16 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
F-40
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
1,500 |
$ |
1,500 |
||||
|
Accrued interest |
|
95 |
|
52 |
||||
|
Interest expense |
|
43 |
|
43 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
The following notes payable were paid in full during the year ended December 31, 2019:
• In May 2018, the Company borrowed $17,000 through a note payable from a U.S. based private commercial real estate lender. The note payable matured on May 22, 2019 and bore interest at 9.75% per annum. The Company’s headquarters property (“HQ”) in Gardena, California was pledged as collateral for this loan. On February 4, 2019, the Company entered into a Purchase and Sale Agreement (“PSA”) for the Company’s HQ with Atlas Capital Investors V, LP (“Atlas”) for a sale price of $29,000. The Company used the proceeds from the sale to settle the principal of $17,000 and accrued interest of $565.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
— |
$ |
— |
||||
|
Accrued interest |
|
— |
|
— |
||||
|
Interest expense |
|
— |
|
565 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
17,000 |
||||
|
Interest payments |
|
— |
|
565 |
||||
|
Proceeds |
|
— |
|
— |
||||
In March 2019, the Company leased the HQ back from Atlas for a term of three years, with an option to repurchase the HQ at any time prior to the expiration of the lease for a purchase price equal to the greater of $44,029 or the fair market value of the HQ, as determined in accordance with the lease. This transaction qualified as a failed sale leaseback given the Company’s option within the PSA to repurchase the HQ. The Company recognized a $29,000 financing obligation recorded in capital leases on the consolidated balance sheets. No gain or loss was record on the failed sale-leaseback. The Company has continued to capitalize and depreciate the HQ long-lived asset. The ongoing lease payments to Atlas are recorded as reductions to the financing obligation and associated interest expense. The Company recorded interest expense of $1,760 and $1,435 during the years ended December 31, 2020 and 2019.
• On April 29, 2019, the Company borrowed $15,000 through a TLA with BL Mobility Fundco, LLC as the lender, and Birch Lake Fund Management, LP as the agent and collateral agent. The TLA matured on September 30, 2019. The obligations due under the TLA are collateralized by a first lien on virtually all tangible and intangible assets of the Company. The interest rate on the loan is 15.50%, 21.50% when in default, and the loan is subject to a liquidation preference premium of up to 63.50% of the original principal amount, of which the borrowers have the right to allow conversion of 30% into equity interests of the Company. The Company determined that this liquidation premium with conversion right represents an embedded derivative to be accounted for at fair value. See Note 4 Fair Value of Financial Instruments.
In October 2019, the Company paid the outstanding principal of $15,000 and $6,668 in loan exit costs to the lender upon extinguishment of the TLA. The Company recorded interest expense for the year ended December 31, 2019 of $213. The Company incurred $3,145 of issuance costs which were expensed in interest expense during the year ended December 31, 2019.
F-41
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
— |
$ |
— |
||||
|
Accrued interest |
|
— |
|
— |
||||
|
Interest expense |
|
— |
|
213 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
21,668 |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
15,000 |
||||
• In November 2018, the Company borrowed $4,200 through a note payable from a U.S. based lender. The note matured on November 8, 2019, bore interest at 13.00% per annum, had no covenants and the Company’s property in Las Vegas was pledged as collateral for this loan. The Company settled the note by paying $4,200 of principal and $420 of interest during the year ended December 31, 2019.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
— |
$ |
— |
||||
|
Accrued interest |
|
— |
|
— |
||||
|
Interest expense |
|
— |
|
208 |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
4,200 |
||||
|
Interest payments |
|
— |
|
420 |
||||
|
Proceeds |
|
— |
|
— |
||||
(8) On September 9, 2020, the Company issued $15,000 of secured convertible promissory notes to a US-based investment firm through entering into a Joinder to the NPA, receiving net proceeds of $13,800, inclusive of an 8% original issue discount. The senior convertible promissory notes bear interest at 0%. The NPA notes mature on the earliest of (i) March 9, 2022, (ii) the Vendor Trust maturity date (See Note 10 Vendor Payables in Trust), as amended, (iii) the maturity of any First Out NPA Notes, which include the notes with Birch Lake and FF Ventures (“First Out Notes”), or (iv) the acceleration of the NPA notes payable pursuant to an event of default.
In the event the Company consummates a Qualified SPAC Merger, an amount equal to 130% of all outstanding principal, accrued and unpaid interest and accrued original issue discount through the date of consummation of the Qualified SPAC Merger will automatically convert into Class A ordinary stock of the SPAC in connection with the Qualified SPAC Merger, and the notes payable and interest thereon shall no longer be outstanding and shall be deemed satisfied in full and terminated. The Company determined that the feature to settle the notes payable with shares upon the occurrence of a Qualified SPAC Merger is a contingent share-settled redemption option and represents an embedded derivative. Additionally, the feature to redeem the notes payable upon a default event is a contingently exercisable put option and represents an embedded derivative. The Company elected the fair value option for this note payable. See Note 4 Fair Value of Financial Instruments. The fair value of the note payable was $17,712 as of December 31, 2020.
In addition, the notes payable included a warrant to purchase ordinary stock. The holder of the warrant has the ability to exercise their right to acquire up to 1,930,147 shares of Class A Ordinary Stock of the Company for a period of up to 7 years, or September 9, 2027. The exercise price of the warrant is $2.72, subject to certain down-round adjustments. The warrants are accounted for in equity at fair value based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity. The Company estimates the fair value of the warrants to be $490 using the Black-Scholes option-pricing model. Determining the fair value of these warrants under this model requires
F-42
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
subjective assumptions, including the fair value of the underlying ordinary stock of $0.38, risk-free interest rate of 0.47%, the expected volatility of the price of the Company’s ordinary stock of 35.81%, and the expected dividend yield of the Company’s ordinary stock of 0%. These estimates involve inherent uncertainties and the application of management’s judgment.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
15,000 |
$ |
— |
||||
|
Accrued interest |
|
— |
|
— |
||||
|
Interest expense |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
15,000 |
|
— |
||||
(9) On October 9, 2020, the Company entered into a Second A&R NPA with Birch Lake borrowing $15,000 in secured convertible notes payable (“BL Notes”). The BL Notes accrue interest at 12.75% per annum through January 31, 2021 and at 15.75% per annum thereafter. The BL Notes mature on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control, or (iv) the acceleration of the NPA obligations pursuant to an event of default. Additionally, the BL Notes contain a liquidation premium that ranges from 35% to 45% depending on the timing of settlement with 50% of this premium convertible into equity and the lender is able to demand repayment if an event of default, change in control, or a Qualified SPAC Merger occurs. The Company determined that the feature to settle the BL Notes at a premium upon the occurrence of a default, change in control, or a Qualified SPAC Merger is a contingently exercisable put option with a liquidation premium and represents an embedded derivative. The Company elected the fair value option for this note payable. See Note 4 Fair Value of Financial Instruments. The fair value of the note payable was $20,972 as of December 31, 2020.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
15,000 |
$ |
— |
||||
|
Accrued interest |
|
— |
|
— |
||||
|
Interest expense |
|
366 |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
366 |
|
— |
||||
|
Proceeds |
|
15,000 |
|
— |
||||
(10) During 2019, a U.S. corporation made deposits of $11,635 with the Company as an advance to purchase FF 91 vehicles. On February 1, 2020, due to production delays the Company entered into a deposit conversion agreement with this corporation to convert the deposit amounts previously paid into a note payable. Upon conversion, the Company reclassified the deposit recorded in other current liabilities as of December 31, 2019 to notes payable as of December 31, 2020. The note matured on December 31, 2020, bears interest at 8.0% per annum, has no covenants and is unsecured.
As a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $87 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally, accretion of $30 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
F-43
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
11,635 |
$ |
— |
||||
|
Accrued interest |
|
1,177 |
|
— |
||||
|
Interest expense |
|
933 |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
— |
|
— |
||||
(11) On April 17, 2020, the Company received loan proceeds from East West Bank of $9,168 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses. The loans and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent, and utilities, as described in the CARES Act. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the later of the first six months or when the amount of the loan forgiveness is determined. The Company used the proceeds for purposes consistent with the PPP requirements. The Company is still in the process of applying for forgiveness and no amounts have been forgiven as of December 31, 2020. The note matures April 17, 2022, has no covenants, and is unsecured.
|
As of and for the Year Ended |
||||||||
|
2020 |
2019 |
|||||||
|
Outstanding principal |
$ |
9,168 |
$ |
— |
||||
|
Accrued interest |
|
65 |
|
— |
||||
|
Interest expense |
|
65 |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on principal |
|
— |
|
— |
||||
|
Unrealized foreign exchange (gain) loss on accrued interest |
|
— |
|
— |
||||
|
Principal payments |
|
— |
|
— |
||||
|
Interest payments |
|
— |
|
— |
||||
|
Proceeds |
|
9,168 |
|
— |
||||
Fair Value of Notes Payable Not Carried at Fair Value
The estimated fair value, using inputs from Level 3 under the fair value hierarchy, of the Company’s outstanding notes payable not carried at fair value are $127,130 and $94,590 as of December 31, 2020 and 2019, respectively.
Schedule of Principal Maturities of Notes Payable
The future scheduled principal maturities of third-party debt as of December 31, 2020 are as follows:
|
Years ended December 31, |
|||
|
Due on demand |
$ |
65,949 |
|
|
2021 |
|
102,541 |
|
|
2022 |
|
9,168 |
|
|
$ |
177,658 |
||
F-44
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
10. Vendor Payables in Trust
On April 29, 2019, the Company established the Faraday Vendor Trust (“Vendor Trust”), which is intended to stabilize the Company’s supplier base by providing suppliers with the ability to exchange their unsecured trade receivables for secured trust interests. Repayment of the trust interests is governed by a Trade Receivables Repayment Agreement dated as of April 29, 2019 (“Trade Receivables Repayment Agreement”). All interests in the Vendor Trust are collateralized by a first lien, with third payment priority, pursuant to applicable intercreditor arrangements, on virtually all tangible and intangible assets of the Company. The applicable interest rate for the vendor trust principal balance is 6.00%. The secured trust interests bear daily non-compounding interest from the date of contribution. The Company determined that the economic substance of the obligations under the Vendor Trust is an in-substance financing. As a result, the Company reported an operating cash outflow and financing cash inflow of $174 and $115,900 on the consolidated statements of cash flows during the years ended December 31, 2020 and 2019.
A total of $111,574 and $115,900 of the Company’s trade payables have been contributed to the Vendor Trust with accrued interest of $11,840 and $4,638 as of December 31, 2020 and 2019, respectively, which is recorded within accrued interest on the Company’s consolidated balance sheets. During the year ended December 31, 2020, the Company made aggregate payments of $4,500 on the Vendor Trust. The Vendor Trust also includes approximately $25.0 million of purchase orders related to goods and services to be provided by certain vendors. These vendors did not contribute any receivables into the Vendor Trust related to these purchase orders as the services are to be provided at a future date. As such, the Company may cancel the vendor’s interest in the Vendor Trust related to these purchase orders until such time that the vendors begin to fulfil the requested goods and services.
On October 30, 2020, the agreement governing the Vendor Trust (the “Vendor Trust Agreement”) was modified to add a conversion feature to allow the conversion of the secured interests in the Vendor Trust into a variable number of SPAC shares if a Qualified SPAC Merger (as defined in the Vendor Trust Agreement) occurs. Since the conversion feature is substantive as it is reasonably possible to be exercised, this modification will be accounted for as an extinguishment with a gain on extinguishment of $1,812 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. The conversion feature does not require bifurcation because it is clearly and closely related to the host instrument since the conversion does not involve a substantial premium or discount. Additionally, accretion of $462 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. These adjustments resulted in the Vendor Trust having a net carrying value of $110,224 as of December 31, 2020.
The estimated fair value, using inputs from Level 3 under the fair value hierarchy, of the Vendor Trust is $109,762 and $112,488 as of December 31, 2020 and 2019, respectively.
During 2020, the Company identified an immaterial error in the disclosure of the fair value of the Vendor Trust as of December 31, 2019 and adjusted the prior year amounts for such error. This correction did not impact the current and previously reported consolidated statement of operations and comprehensive loss and statement of convertible preferred stock and stockholders’ deficit.
Subsequent to December 31, 2020, on March 1, 2021, the maturity date of the secured trust interests in the Vendor Trust was extended to the earliest to occur of October 6, 2021, the closing of a Qualified SPAC Merger, a change in control of FF, or an acceleration of the obligations under certain of FF’s other secured financing arrangements. It is an event of default under the Trade Receivables Repayment Agreement if a Qualified SPAC Merger does not close by July 27, 2021.
F-45
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
11. Commitments and Contingencies
Facility Leases
The Company’s lease agreements include leasehold improvement incentives as well as escalation clauses. The Company records rent expense on a straight-line basis over the lease term.
The Company has several noncancelable operating leases, primarily for office space, with various expiration dates through December 2021. These leases generally contain renewal options for periods ranging from three to five years and require the Company to pay all executory costs such as maintenance and insurance.
The Company recorded rent expense of $2,452 and $4,282 for the years ended December 31, 2020 and 2019, respectively.
The minimum aggregate future obligations under noncancelable operating leases as of December 31, 2020 were as follows:
|
Year ended December 31, |
|||
|
2021 |
$ |
525 |
|
|
$ |
525 |
||
The Company has four capital leases, one in Hanford, California for its main production facility, one in Gardena, California for its headquarters and two equipment leases.
The minimum aggregate future minimum lease payments under capital leases as of December 31, 2020 were as follows:
|
Years ended December 31, |
|||
|
2021 |
$ |
4,395 |
|
|
2022 |
|
3,041 |
|
|
2023 |
|
2,166 |
|
|
2024 |
|
1,757 |
|
|
2025 |
|
1,792 |
|
|
Thereafter |
|
3,692 |
|
|
$ |
16,843 |
||
Legal Matters
The Company is, from time to time, subject to claims and disputes arising in the normal course of business. In the opinion of management, while the outcome of any such claims and disputes cannot be predicted with certainty, its ultimate liability in connection with these matters is not expected to have a material adverse effect on the Company’s results of operations.
As of December 31, 2020 and 2019, the Company accrued contingent liabilities of approximately $ 6,025 and $10,780, respectively, for potential financial exposure related to ongoing legal matters primarily related to breach of contracts and employment matters. As of December 31, 2020 and 2019, contingent liabilities of $5,025 and $3,305, respectively, were recorded in accrued expenses and other liabilities on the Company’s consolidated balance sheets. As of December 31, 2020 and 2019, non-current contingent liabilities of $1,000 and $7,475, respectively, were recorded in other liabilities on the Company’s consolidated balance sheets. These contingent liabilities are related to four and six legal matters as of December 31, 2020, and 2019, respectively, that have been determined to be both probable of loss and reasonably estimable.
F-46
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
11. Commitments and Contingencies (cont.)
During the year ended December 31, 2020, $2,500 of legal claims were settled in cash for amounts consistent with the amount accrued as of December 31, 2019. In addition, during the year ended December 31, 2020, a legal matter associated with a United States Department of Labor investigation was resolved without any additional fines or penalties, resulting in the reversal of accrued expense in the amount of $2,255, which was recorded in general and administrative expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.
During the year ended December 31, 2020, the Company received a judicial decision relating to a dispute for unpaid vendor payments. The judicial decision obligated the Company to pay $6,082 to certain vendors. This amount was not previously accrued in 2019 as the settlement was not considered probable as of December 31, 2019. The Company recorded $6,082 in general and administrative expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2020 and recorded in accrued expenses and other liabilities on the consolidated balance sheets as of December 31, 2020.
During 2019, the Company resolved two separate breach of contract claims related to land in Las Vegas previously owned by the Company. One matter related to a dispute with a vendor was settled for $4,500 and was placed in the Vendor Trust. A second matter with a vendor was settled in cash for $890 during 2019. The Company reversed $12,960 of contingent liabilities associated with the final settlement of these legal matters and recorded the reversal in general and administrative expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2019.
Additionally, during 2019 the Company resolved a wrongful termination claim which was settled for $550 during 2019. The Company reversed $1,725 of contingent liabilities associated with the final settlement of this legal matter and recorded the reversal in general and administrative expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2019.
12. Preferred and Ordinary Stock
The number of authorized, issued and outstanding stock, liquidation value and carrying value as of December 31, 2020 and 2019 were as follows:
|
December 31, 2020 |
||||||||||
|
Authorized |
Issued and |
Liquidation |
Carrying |
|||||||
|
Redeemable Preference Stock |
470,588,235 |
470,588,235 |
$ |
800,000 |
$ |
724,823 |
||||
|
Class B Preferred Stock |
600,000,000 |
452,941,177 |
|
1,106,988 |
|
697,643 |
||||
|
Class A Ordinary Stock |
400,000,000 |
41,234,448 |
|
— |
|
— |
||||
|
Class B Ordinary Stock |
180,000,000 |
147,058,823 |
|
— |
|
1 |
||||
|
1,650,588,235 |
1,111,822,683 |
$ |
1,906,988 |
$ |
1,422,467 |
|||||
|
December 31, 2019 |
||||||||||
|
Authorized |
Issued and |
Liquidation |
Carrying |
|||||||
|
Redeemable Preference Stock |
470,588,235 |
470,588,235 |
$ |
800,000 |
$ |
724,823 |
||||
|
Class B Preferred Stock |
600,000,000 |
600,000,000 |
|
1,466,400 |
|
924,149 |
||||
|
Class A Ordinary Stock |
400,000,000 |
40,879,124 |
|
— |
|
— |
||||
|
Class B Ordinary Stock |
100,000,000 |
— |
|
— |
|
— |
||||
|
Class C Preferred Stock |
1,715,186 |
— |
|
— |
|
— |
||||
|
1,572,303,421 |
1,111,467,359 |
$ |
2,266,400 |
$ |
1,648,972 |
|||||
F-47
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
12. Preferred and Ordinary Stock (cont.)
Amended and Restated Articles of Association
Upon the effectiveness of the Sixth Amended and Restated Articles of Association of the Company on February 13, 2020, the number of shares of capital stock that are authorized to be issued increased to 1,650,588,235, due to an increase of 80,000,000 shares of Class B Ordinary Stock and decrease of 1,715,186 shares of Class C Preferred Stock due to the Company no longer authorized to issue Class C Preferred Stock. No Class C Preferred Stock was ever issued by the Company.
The rights, privileges, and preferences of the Company’s Redeemable Preference Stock, Class B Preferred Stock, (collectively, “Preferred Stock”) and Class A Ordinary Stock and Class B Ordinary Stock, (collectively, “Ordinary Stock”) as set forth in the Company’s Sixth Amended and Restated Articles of Association are as follows:
Voting
The holders of Preferred Stock and Ordinary Stock vote together and not as separate classes. Each holder of Class B Ordinary Stock is entitled to one vote for each share held by such holder. Each holder of Redeemable Preference Stock is entitled to 0.5625 votes for each share held by such holder. Each holder of Class B Preferred Stock is entitled to ten votes for each share held by such holder. The Class A Ordinary Stock does not have any voting rights. Approval of a majority of the Redeemable Preference Stock is required for certain Reserved Matters as defined in the Company’s Sixth Amended and Restated Articles of Association. Such Reserved Matters include: entering into any transaction with a related party not at arm’s length; amending the Company’s Sixth Amended and Restated Articles of Association which alter the terms of the Redeemable Preference Stock in an adverse manner; issuing Redeemable Preference Stock to any other party; issuing equity securities of the Company at a price below a minimum valuation price or ranking senior to the Redeemable Preference Stock on distribution or liquidation; issuing equity securities of any subsidiary other than to certain parties on specified terms; and reducing the Company’s additional paid-in capital or use thereof.
Dividends
The Board is under no obligation to declare dividends; and no rights accrue to the holders of Preferred Stock if dividends are not declared. Any dividends declared are noncumulative, and no dividends on Preferred Stock or Ordinary Stock have been declared by the Board of Directors through December 31, 2020. Unless approved by the holders of the Redeemable Preference Stock, the Company may not declare, pay or set aside any dividends unless all the Redeemable Preference Stock have been redeemed and paid in full. Once the Redeemable Preference Stock have been redeemed and paid in full, when and if dividends are declared by the Board of Directors, such dividends are payable to the holders of Class B Preferred Stock pro rata with the issued and outstanding Ordinary Stock.
Redemption
The Redeemable Preference Stock are callable at the option of the Company at any time within the five-year period after December 31, 2018 upon issuance of a redemption notice. The Redeemable Preference Stock are not redeemable at the option of the holder except in certain circumstances. Mandatory redemption occurs upon a deemed liquidation event, which is upon wind-up, dissolution, liquidation, insolvency, declaration of bankruptcy, or change in control. The contingent redemption upon a deemed liquidation event results in mezzanine equity classification on the Company’s consolidated balance sheets. The redemption price per share is determined by a calculation of the following amounts divided by the number of Redeemable Preference Stock issued as of December 31, 2020: $600,000 if redemption occurs prior to December 31, 2019; $700,000 if redemption occurs on or after December 31, 2019, but prior to December 31, 2020; $800,000 if redemption occurs on or after December 31, 2020, but prior to December 31, 2021; $920,000 if redemption occurs on or after December 31, 2021, but prior to December 31, 2022; and $1,050,000 if redemption occurs on or after December 31, 2022.
F-48
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
12. Preferred and Ordinary Stock (cont.)
The Class B Preferred Stock are contingently redeemable upon a deemed liquidation event. As such, the Company has presented the Class B Preferred Stock in mezzanine equity on the consolidated balance sheets.
Conversion
Each holder of Redeemable Preference Stock may elect to convert its Redeemable Preference Stock to such class of Stock to be held by public stockholders (“Public Shares”) immediately prior to any initial public offering and, on a conversion, each Redeemable Preference Stock will be converted into such number of Public Shares that would give it the same percentage of the share capital of the Company (on a fully diluted basis) that each such Redeemable Preference Stock comprises immediately prior to the conversion.
Class B Preferred Stock are automatically converted to Class B Ordinary Stock on a one for one basis if transferred to another party, which is limited to certain permitted circumstances. Such permitted circumstances include: if the proceeds are used by the founder to exercise his call option to purchase Redeemable Preference Stock; transfer for the purpose of discharging contingent liabilities of the founder and his affiliates; or after an initial public offering and transfer of at least 313,725,490 shares of Redeemable Preference Stock to another party.
Liquidation
In the event of any liquidation or deemed liquidation event such as dissolution, winding up, or loss of control, either voluntary or involuntary, the holders of Preferred Stock are entitled to receive, prior and in preference to any distribution to the holders of Ordinary Stock, first to the redemption in full of the Redeemable Preference Stock. Second to the Class B Preferred Stock. The Class B Preferred Stock are entitled to an amount per share held by them equal to the greater of (a) $2.444 per share plus any declared but unpaid dividends on each Preferred Stock, or (b) the aggregate amount payable in a liquidation to the Preferred Stock assuming the Preferred Stock are paid pro rata along with the Ordinary Stock of the Company. The liquidation preference for the Class B Preferred Stock is $1,106,988 and $1,466,400 as of December 31, 2020 and 2019, respectively. The liquidation preference for the Redeemable Preference Stock is $800,000 and $800,000 as of December 31, 2020 and 2019, respectively.
The Class B Preferred Stockholders are entitled to receive such amounts after the Redeemable Preference Stockholders are redeemed and paid in full. If amounts are not sufficient to pay the foregoing amounts to Class B Preferred Stockholders, then the amounts will be distributed among the holders of Class B Preferred Stock pro rata, in proportion to the full amounts they would otherwise be entitled to receive.
If the holders of Redeemable Preference Stock and Class B Preferred Stock are paid in full, the remaining assets of the Company will be distributed pro rata to the holders of Ordinary Stock in proportion to the number of Ordinary Stock held by them.
Conversion of Class B Preferred Stock
During 2020, 147,058,823 shares of the Company’s Class B Preferred Stock automatically converted into 147,058,823 shares of the Company’s Class B Ordinary Stock at a conversion rate of one for one. Automatic conversion was triggered due to the transfer of the Class B Preferred Stock to another party under the permitted circumstances described above. The conversion was recorded as a transfer from mezzanine equity to additional-paid-in-capital with no impact on accumulated deficit.
F-49
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
13. Stock-Based Compensation
2018 Stock Incentive Plan
On February 1, 2018, the Board of Directors adopted the Equity Incentive Plan (“Equity Incentive Plan”), under which the Board of Directors authorized the grant of up to 300,000,000 incentive and nonqualified stock options, restricted stock, unrestricted stock, restricted stock units, and other stock-based awards for ordinary stock to employees, directors and non-employees.
Options are to be granted at an exercise price not less than fair value of the underlying stock on the date of grant. For individuals holding more than 10% of the voting rights of all classes of stock, the per share exercise price will not be less than 110% of fair value per share on the date of grant. The stock options vest based on the passage of time. The stock option vesting period and vesting rate are determined by the Board of Directors. The Board of Directors has granted options with vesting terms of one to four years and contractual terms of ten years.
As of December 31, 2020 and 2019, the Company had 43,327,415 and 107,789,887 shares of Class A ordinary stock available for future issuance under the Equity Incentive Plan, respectively.
A summary of the Company’s stock option activity under the Equity Incentive Plan is as follows:
|
Number of |
Weighted |
Weighted |
Aggregate |
||||||||
|
Outstanding as of December 31, 2019 |
151,330,989 |
|
$ |
0.35 |
8.86 |
$ |
2,197 |
||||
|
Granted |
96,012,077 |
|
|
0.34 |
|
||||||
|
Exercised |
(383,994 |
) |
|
0.34 |
|
13 |
|||||
|
Expired/forfeited |
(31,189,078 |
) |
|
0.32 |
|
||||||
|
Outstanding as of December 31, 2020 |
215,769,994 |
|
$ |
0.35 |
8.75 |
$ |
885 |
||||
|
|
|
|
|||||||||
|
Exercisable as of December 31, 2020 |
67,772,996 |
|
$ |
0.35 |
7.88 |
$ |
796 |
||||
|
Vested and expected to vest as of December 31, 2020 |
167,962,999 |
|
$ |
0.35 |
8.59 |
$ |
944 |
||||
The weighted-average assumptions used in the Black-Scholes option pricing model are as follows:
|
2020 |
2019 |
|||||||
|
Risk-free interest rate: |
|
0.45 |
% |
|
2.10 |
% |
||
|
Expected term (in years): |
|
6.13 |
|
|
5.90 |
|
||
|
Expected volatility: |
|
37.25 |
% |
|
31.30 |
% |
||
|
Dividend yield: |
|
0.00 |
% |
|
0.00 |
% |
||
|
Grant date fair value per share: |
$ |
0.12 |
|
$ |
0.12 |
|
||
The total grant date fair value of options vested during the years ended December 31, 2020 and 2019 was $4,953 and $ 2,903, respectively.
As of December 31, 2020, the total remaining stock-based compensation expense for unvested stock options was $11,861 which is expected to be recognized over a weighted average period of 3.1 years.
F-50
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
13. Stock-Based Compensation (cont.)
2019 Special Talent Incentive Plan
On May 2, 2019, the Company adopted its Special Talent Incentive Plan (“STI Plan”) under which the Board of Directors may grant up to 100,000,000 incentive and nonqualified stock options, restricted shares, unrestricted shares, restricted share units and other stock-based awards for ordinary stock to employees, directors and non-employees.
The STI Plan does not specify a limit on the number of stock options that can be issued under the plan. Per the terms of the STI Plan the Company shall at all times reserve and keep available such number of shares as shall be sufficient to satisfy the requirements of the STI Plan. As of December 31, 2020, the Company the Company had 45,932,116 shares of Class A ordinary stock available for issuance under the STI Plan.
A summary of the Company’s stock option activity under the STI Plan is as follows:
|
Number of |
Weighted |
Weighted |
Aggregate |
|||||||
|
Outstanding as of December 31, 2019 |
7,485,000 |
$ |
0.36 |
9.46 |
|
— |
||||
|
Granted |
38,447,116 |
$ |
0.35 |
— |
|
— |
||||
|
Exercised |
— |
|
— |
— |
|
— |
||||
|
Expired/Forfeited |
— |
|
— |
— |
|
— |
||||
|
Outstanding as of December 31, 2020 |
45,932,116 |
$ |
0.35 |
9.26 |
$ |
1,174 |
||||
|
|
|
|||||||||
|
Exercisable as of December 31, 2020 |
35,932,116 |
$ |
0.35 |
9.26 |
$ |
910 |
||||
|
Vested and expected to vest as of December 31, 2020 |
45,013,474 |
$ |
0.35 |
9.26 |
$ |
1,168 |
||||
The weighted-average assumptions used in the Black-Scholes option pricing model are as follows:
|
2020 |
2019 |
|||||||
|
Risk-free interest rate: |
|
0.59 |
% |
|
2.20 |
% |
||
|
Expected term (in years): |
|
10 |
|
|
10 |
|
||
|
Expected volatility: |
|
38.42 |
% |
|
36.00 |
% |
||
|
Dividend yield: |
|
0.00 |
% |
|
0.00 |
% |
||
|
Grant date fair value per share: |
$ |
0.15 |
|
$ |
0.18 |
|
||
The total grant date fair value of options vested during the years ended December 31, 2020 and 2019 was $6,860 and $1,302, respectively.
As of December 31, 2020, the total remaining stock-based compensation expense for unvested stock options was $1,109, which is expected to be recognized over a weighted average period of approximately one year.
Common Units of FF Global Partners LLC
During 2020 and 2019, certain executives and employees of the Company were granted the opportunity to subscribe to 24.0 million and 79.8 million common units, respectively, of FF Global Partners LLC (“FF Global Partners”), a significant shareholder of the Company. The subscription price of $0.50 per common unit, payable by the executives and employees of the Company, was financed through non-recourse loans issued by FF Global
F-51
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
13. Stock-Based Compensation (cont.)
Partners payable in equal annual installments over ten years. The common units to be purchased with a non-recourse loan are required to be treated for accounting purposes as stock options granted by FF Global Partners to executives and employees of the Company. The awards were valued using the Black-Scholes option pricing model. The grant date fair value of the units purchased through non-recourse loans was immaterial for the years ended December 31, 2020 and 2019.
The following table presents stock-based compensation expense included in each respective expense category in the consolidated statements of operations and other comprehensive loss for the years ended December 31:
|
2020 |
2019 |
|||||
|
Research and development |
$ |
941 |
$ |
818 |
||
|
Sales and marketing |
|
387 |
|
311 |
||
|
General and administrative |
|
8,177 |
|
3,481 |
||
|
$ |
9,505 |
$ |
4,610 |
|||
14. Income Taxes
As a result of losses incurred, the Company had immaterial current income tax expense for the years ended December 31, 2020 and 2019. The recorded provision for income taxes differs from the expected provision for income taxes based on the federal statutory tax rate of 21% primarily due to the valuation allowance against deferred tax assets.
The provision for income tax consisted of the following:
|
2020 |
2019 |
|||||||
|
Current: |
|
|
|
|
||||
|
Federal |
$ |
— |
|
$ |
— |
|
||
|
State |
|
3 |
|
|
3 |
|
||
|
Foreign |
|
— |
|
|
— |
|
||
|
Total current |
|
3 |
|
|
3 |
|
||
|
|
|
|
|
|||||
|
Deferred: |
|
|
|
|
||||
|
Federal |
|
(11,456 |
) |
|
(19,855 |
) |
||
|
State |
|
— |
|
|
— |
|
||
|
Foreign |
|
(2,044 |
) |
|
(1,418 |
) |
||
|
Valuation allowance |
|
13,500 |
|
|
21,273 |
|
||
|
Total deferred |
|
— |
|
|
— |
|
||
|
Total provision |
$ |
3 |
|
$ |
3 |
|
||
The components of losses before income taxes, by taxing jurisdiction, were as follows for the years ended December 31:
|
2020 |
2019 |
|||||||
|
U.S. |
$ |
(79,605 |
) |
$ |
(112,197 |
) |
||
|
Foreign |
|
(67,480 |
) |
|
(29,998 |
) |
||
|
Total |
$ |
(147,085 |
) |
$ |
(142,195 |
) |
||
F-52
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
14. Income Taxes (cont.)
The provision for income taxes for the years ended December 31, differs from the amount computed by applying the statutory federal corporate income tax rate of 21% to earnings before income taxes as a result of the following:
|
2020 |
2019 |
|||||
|
Federal income tax expense |
21.0 |
% |
21.0 |
% |
||
|
State income taxes (net of federal benefit) |
0.0 |
% |
0.0 |
% |
||
|
Permanent differences |
(4.6 |
)% |
(2.8 |
)% |
||
|
Foreign tax rate difference |
(6.7 |
)% |
(2.1 |
)% |
||
|
Return-to-provision adjustment |
0.4 |
% |
(1.1 |
)% |
||
|
Expiration of tax attributes |
(1.0 |
)% |
— |
|
||
|
Valuation allowance |
(9.1 |
)% |
(15.0 |
)% |
||
|
Effective tax rate |
0.0 |
% |
0.0 |
% |
||
The main changes in permanent differences related to fair value adjustments on convertible related party notes payable and notes payable and disallowed interest expense due to equity feature. The main changes in foreign tax rate difference and valuation allowance related to higher foreign loss incurred in 2020.
The tax effects of temporary differences for the years ended December 31, that give rise to significant portions of the deferred tax assets and deferred tax liabilities are provided below:
|
2020 |
2019 |
|||||||
|
Deferred Tax Assets: |
|
|
|
|
||||
|
Net operating losses (“NOL”) |
$ |
123,633 |
|
$ |
114,990 |
|
||
|
Research and development credits |
|
7,921 |
|
|
7,921 |
|
||
|
Accrued liabilities |
|
7,564 |
|
|
5,164 |
|
||
|
Construction in progress |
|
3,061 |
|
|
3,061 |
|
||
|
Excess interest expense under section 163(j) |
|
3,670 |
|
|
2,295 |
|
||
|
Capital loss |
|
2,407 |
|
|
2,407 |
|
||
|
Stock-based compensation |
|
428 |
|
|
— |
|
||
|
Other |
|
296 |
|
|
174 |
|
||
|
Gross deferred tax assets |
|
148,980 |
|
|
136,012 |
|
||
|
Valuation allowance |
|
(148,546 |
) |
|
(135,046 |
) |
||
|
Deferred tax assets, net of valuation allowance |
|
434 |
|
|
966 |
|
||
|
Deferred Tax Liabilities: |
|
|
|
|
||||
|
Depreciation |
|
454 |
|
|
(79 |
) |
||
|
State taxes |
|
(888 |
) |
|
(887 |
) |
||
|
Total deferred tax liabilities |
|
(434 |
) |
|
(966 |
) |
||
|
Total net deferred tax assets (liabilities) |
$ |
— |
|
$ |
— |
|
||
During 2020, the Company identified an immaterial error in the deferred tax assets and valuation allowance as of December 31, 2019 and adjusted the prior year amounts for such error. This correction did not impact the current and previously reported consolidated balance sheet, consolidated statement of operations and comprehensive loss, statement of convertible preferred stock and stockholders’ deficit, and consolidated statement of cash flows.
F-53
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
14. Income Taxes (cont.)
The Company has recognized a full valuation allowance as of December 31, 2020 and 2019 since, in the judgment of management given the Company’s history of losses, the realization of these assets was not considered more likely than not. The valuation allowance was $148,546 and $135,046 as of December 31, 2020 and 2019, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment. During 2020 and 2019, management evaluated the realizability of its net deferred tax assets based on available positive and negative evidence. Management concluded that the likelihood of realization of the benefits associated with its net deferred tax assets does not reach the level of more likely than not due to the Company’s history of cumulative pre-tax losses and risks associated with the generation of future income given the current stage of the Company’s business.
As of December 31, 2020, the Company has U.S. federal and foreign net operating loss carryforwards of $428,681 and $134,437, respectively, which will begin to expire in 2034 and 2021, respectively. The U.S. federal net operating loss carryforwards of $348,153 generated post the Tax Cuts and Jobs Act may be carried forward indefinitely, subject to the 80% taxable income limitation on the utilization of the carryforwards. The U.S. federal net operating loss carryforwards of $80,528 generated prior to December 31, 2017 may be carried forward for twenty years.
The Company has an U.S. federal R&D tax credit carryforward of $3,666 and a state R&D tax credit carryforward of $4,230 as of December 31, 2020. The U.S. federal R&D tax credits will begin to expire in 2035, and the state tax credits do not expire and can be carried forward indefinitely.
In accordance with Internal Revenue Code Section 382 (“Section 382”) and Section 383 (“Section 383”), a corporation that undergoes an “ownership change” (generally defined as a cumulative change (by value) of more than 50% in the equity ownership of certain stockholders over a rolling three-year period) is subject to limitations on its ability to utilize its pre-change NOLs and R&D tax credits to offset post-change taxable income and post-change tax liabilities, respectively. The Company’s existing NOLs and R&D credits may be subject to limitations arising from previous ownership changes, and the ability to utilize NOLs could be further limited by Section 382 and Section 383 of the Code. In addition, future changes in the Company’s stock ownership, some of which may be outside of the Company’s control, could result in an ownership change under Section 382 and Section 383 of the Code. The timing and amount of such limitations, if any, has not been determined.
The Company’s intention is to indefinitely reinvest earnings outside the United States. Upon distribution of those earnings in the form of a dividend or otherwise, the Company would be subject to withholding taxes payable to various foreign countries. As of December 31, 2020 and 2019, there was no material cumulative earnings outside the United States due to net operating losses and the Company has no earnings and profits in any jurisdiction, that if distributed, would give rise to a material unrecorded liability.
The Company is subject to taxation and files income tax returns with the U.S. federal government, California, Oregon and China. As of December 31, 2020, the 2017 and 2018 federal returns and 2016 through 2018 state returns are open to exam. The Company’s 2017 and 2018 federal returns are currently under audit by the Internal Revenue Service (“IRS”). The Company is not under any tax audits on its China tax returns. All of the prior year tax returns, from 2015 through 2020, are open under China tax law.
F-54
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
14. Income Taxes (cont.)
Uncertain Income Tax Position
The aggregate change in the balance of unrecognized tax benefits for the years ended December 31, is as follows:
|
2020 |
2019 |
|||||
|
Beginning balance |
$ |
2,598 |
$ |
— |
||
|
Increase related to current year tax positions |
|
68 |
|
2,598 |
||
|
Ending balance |
$ |
2,666 |
$ |
2,598 |
||
In accordance with ASC 740-10, Income Taxes — Overall, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. No interest and penalties related to the Company’s unrecognized tax benefits was accrued as of December 31, 2020 and 2019, as the uncertain tax benefit only reduced the net operating losses. The Company does not expect its uncertain income tax positions to have a material impact on its consolidated financial statements within the next twelve months. As of December 31, 2020 and 2019, the realization of uncertain tax positions were not expected to impact the effective rate due to a full valuation allowance on federal and state deferred taxes.
15. 401(k) Savings Plan
The Company maintains a 401(k) savings plan for the benefit of its employees. Employees can defer up to approximately $19 of their compensation, if under 50 for the years ended December 31, 2020 and 2019. Employees 50 or over can defer up to approximately $25 and $26 of their compensation for the years ended December 31, 2020 and 2019, respectively. The Company currently does not make matching contributions to the 401(k) savings plan. All current employees are eligible to participate in the 401(k) savings plan.
16. Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were available to be issued on April 5, 2021. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
Potential Partnership with Geely Holding
In December 2020, the Company entered into a non-binding memorandum of understanding with Zhejiang Geely Holding Group Co., Ltd. (“Geely Holding”), who is also a subscriber in the Private Placement, pursuant to which the parties contemplate a strategic cooperation in various areas including engineering, technology, supply chain, and contract manufacturing.
In January 2021, FF, the JV, a subsidiary of FF, and Geely Holding entered into a cooperation framework agreement and a license agreement that set forth the major commercial understanding of the proposed cooperation among the parties in the areas of potential investment into the JV, engineering, technology and contract manufacturing support. The foregoing framework agreement and the license agreement may be terminated if the parties fail to enter into the joint venture definitive agreement or to close the Merger Agreement (defined below) and related transactions.
First Amendment to the Second Amended and Restated Note Agreement
On January 13, 2021, the Company entered into the First Amendment to the Second Amended and Restated Note Agreement which permitted, among other things, (x) the issuance of First Out Notes to Birch Lake and the
F-55
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
16. Subsequent Events (cont.)
lender in an aggregate principal amount of $1,333 and (y) First Out Subordinated Promissory Notes (collectively, the “First Out Subordinated Note”) to Birch Lake and the lenders in an aggregate principal amount of up to $15,000. The additional First Out Notes issued to Birch Lake and the lenders are on the same terms as the original First Out Notes issued to Birch Lake and the lenders, respectively, except that the First Out Subordinated Notes are senior to the Last Out Notes but junior to the First Out Notes. The First Out Subordinated Notes accrue interest at the same rate of interest as the Senior Convertible Promissory Notes (with respect to First Out Subordinated Notes issued to the lender) and the BL Notes (with respect to First Out Subordinated Notes issued to Birch Lake).
Second Amendment to the Second Amended and Restated Note Agreement
On March 1, 2021, the Company entered into the Second Amendment to the Second A&R Note Agreement which permitted, among other things, the issuance of Priority Last Out Notes to Ares Capital Corporation, Ares Centre Street Partnership, L.P., Ares Credit Strategies Insurance Dedicated Fund Series Interests of the SALI Multi-Series Fund, L.P., and Ares Direct Finance I LP (collectively, the “Ares Entities”) in an aggregate principal amount of up to $85,000. The Priority Last Out Notes issued to the Ares Entities rank junior to the First Out Notes issued to Birch Lake and the Investment Noteholders, respectively, and senior in priority to the Last Out Notes. The Priority Last Out Notes accrue interest at 14% per annum, with no cash payments of interest until the maturity date. In connection with the issuance of the Priority Last Out Notes, the Ares Entities will be issued a six-year warrant to purchase 20bps of New FF’s Class A common stock for $10 per share in agreed form no later than August 11, 2021 or, if earlier, 15 days after consummation of the Business Combination.
Merger Agreement
On January 27, 2021, Property Solutions Acquisition Corp., a Delaware corporation (“PSAC”), entered into an Agreement and Plan of Merger (“Merger Agreement”) by and among PSAC, PSAC Merger Sub, Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands and wholly-owned subsidiary of PSAC (“Merger Sub”), and the Company.
Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving the merger (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”). As a result of the Transactions, the Company will become a wholly-owned subsidiary of PSAC, with the stockholders of the Company becoming stockholders of PSAC, which will be renamed Faraday Future Intelligent Electric, Inc. (“New FF”).
Under the Merger Agreement, the outstanding shares of the Company and the outstanding convertible debt will be converted into a number of shares of new Class A common stock of PSAC following the Transactions and, for FF Top Holdings LLC (“FF Top”), shares of new Class B common stock of PSAC (referred to herein after the Transaction as “New FF common stock”) following the Transactions based on an exchange ratio (the “Exchange Ratio”), the numerator of which is equal to (i) (A) the number of shares of PSAC common stock equal to $2,716 (plus net cash of the Company, less debt of the Company, plus debt of the Company that will be converted into shares of PSAC common stock, plus any additional bridge loan in an amount not to exceed $100,000), (B) divided by ten dollars, minus (ii) an additional 25,000,000 shares which may be issuable to the Company stockholders as additional consideration upon certain price thresholds, and the denominator of which is equal to the number of outstanding shares of the Company, including shares issuable upon exercise of vested options and vested warrants at the Company (in each case assuming cashless exercise) and upon conversion of outstanding convertible notes.
F-56
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
16. Subsequent Events (cont.)
Additionally, each option or warrant at the Company that is outstanding immediately prior to the closing of the Merger (and by its terms will not terminate upon the closing of the Merger) will remain outstanding and convert into the right to purchase a number of shares of PSAC Class A common stock equal to the number of ordinary stock of the Company subject to such option or warrant multiplied by the Exchange Ratio at an exercise price per share equal to the current exercise price per share for such option or warrant divided by the Exchange Ratio.
Concurrently with the execution of the Merger Agreement, the Company entered into separate subscription agreements with a number of investors (the “PIPE Investors”); pursuant to which the PIPE investors have agreed to purchase an aggregate of 79,500,000 shares of common stock, for a purchase price of ten dollars per share and at an aggregate purchase prices of $795,000, in a private placement (the “PIPE Financing”).
Note Purchase Agreement
On March 1, 2021, pursuant to the Note Purchase Agreement, the Company entered into a promissory note in favor of certain affiliates of Ares Capital Corporation for an aggregate principal of $55,000. Additionally, the Note Purchase Agreement contains a clause that the Company will issue warrants with an aggregate value of $3,993 to the lender at the earlier of 15 days after the completion of a Qualified SPAC Merger or on or before August 11, 2021. The maturity date for this promissory note is the earliest of (i) March 1, 2022, (ii) if the Qualified SPAC Merger contemplated in the Merger Agreement has not been consummated by July 27, 2021, October 6, 2021, (iii) the occurrence of a change in control, or (iv) the occurrence of an acceleration event, such as a default. The notes bear interest at 14% per annum.
On March 8, 2021, pursuant to the Note Purchase Agreement, the Company executed a promissory note in favor of Birch Lake for a total principal of $5,600. The promissory note matures on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control, or (iv) the occurrence of an acceleration event, such as a default. The note bears interest at 15.75% per annum. Additionally, the promissory note contains a liquidation premium that ranges from 42% to 52% depending on timing of settlement with 50% of this premium convertible into equity.
On March 12, 2021, pursuant to the Note Purchase Agreement, the Company executed a promissory note in favor of FF Ventures SPV XI LLC, a third-party investment firm, for an aggregate principal amount of $7,000, receiving net proceeds of $6,440, inclusive of an 8% original issue discount. The promissory note matures on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control, or (iv) the occurrence of an acceleration event, such as a default. The note bears interest at 0% per annum. In the event the Company consummates a Qualified SPAC Merger, then an amount equal to 130% of all outstanding principal, accrued and unpaid interest and accrued original issue discount under the notes through (but not including) the date of consummation of the Qualified SPAC Merger will automatically convert into ordinary stock of the SPAC received by Class A ordinary stockholders of the Company and the notes and interest thereon shall no longer be outstanding and shall be deemed satisfied in full and terminated.
Amendment to Trade Receivables Repayment Agreement and Vendor Trust
On March 1, 2021, the Company entered into Amendment No. 6 related to the Trade Receivables Repayment Agreement. See Note 10 Vendor Payables in Trust. The maturity date of the interests in the Vendor Trust was extended to the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change of control, and (iv) the occurrence of an acceleration event under certain of the Company’s other secured financing arrangements. The Company will be in default under the Trade Receivables Repayment Agreement if a Qualified SPAC Merger agreement has not been consummated on or before July 27, 2021.
F-57
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
16. Subsequent Events (cont.)
Amendment to Lease Agreement
On January 27, 2021, the Company extended one of its four capital leases, located in Hanford, California. This agreement extends the lease to January 31, 2028 and authorizes Industrial Realty Group, LLC (“IRG”) to perform certain financial and management advisory services for the Company including an option agreement to purchase shares in the Company. The option is granted to CH Capital Lending, LLC, an affiliate of IRG (“CH Capital”) for an aggregate amount of 2,827,695 Class A Ordinary Stock under the Special Talent Incentive Plan. See Note 13 Stock-Based Compensation. Should the option be exercised, the accrued outstanding rent payments as of December 31, 2020 of $995 shall be deemed paid. In the event that the value of the option is less than the amount of accrued outstanding rent payments owed, the Company will pay IRG the difference in a single cash payment. The base rent will remain at $130 per month subject to a 2% annual increase.
F-58
Exhibit 99.2
FF Intelligent Mobility Global Holdings Ltd.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
|
March 31, |
December 31, |
|||||||
|
Assets |
|
|
|
|
||||
|
Current assets |
|
|
|
|
||||
|
Cash |
$ |
47,525 |
|
$ |
1,124 |
|
||
|
Restricted cash |
|
5,721 |
|
|
703 |
|
||
|
Deposits |
|
7,854 |
|
|
6,412 |
|
||
|
Other current assets |
|
6,680 |
|
|
6,200 |
|
||
|
Total current assets |
|
67,780 |
|
|
14,439 |
|
||
|
Property and equipment, net |
|
286,919 |
|
|
293,933 |
|
||
|
Other non-current assets |
|
11,070 |
|
|
8,010 |
|
||
|
Total assets |
$ |
365,769 |
|
$ |
316,382 |
|
||
|
Liabilities, convertible preferred stock, and stockholders’ deficit |
|
|
|
|
||||
|
Current liabilities |
|
|
|
|
||||
|
Accounts payable |
$ |
80,123 |
|
$ |
86,601 |
|
||
|
Accrued expenses and other current liabilities |
|
51,002 |
|
|
52,382 |
|
||
|
Related party accrued interest |
|
87,508 |
|
|
78,583 |
|
||
|
Accrued interest |
|
45,256 |
|
|
39,707 |
|
||
|
Related party notes payable |
|
298,667 |
|
|
299,403 |
|
||
|
Notes payable, current portion |
|
285,559 |
|
|
182,151 |
|
||
|
Vendor payables in trust |
|
110,797 |
|
|
110,224 |
|
||
|
Total current liabilities |
|
958,912 |
|
|
849,051 |
|
||
|
Capital leases, less current portion |
|
36,023 |
|
|
36,501 |
|
||
|
Other liability, less current portion |
|
6,000 |
|
|
1,000 |
|
||
|
Notes payable, less current portion |
|
9,168 |
|
|
9,168 |
|
||
|
Total liabilities |
|
1,010,103 |
|
|
895,720 |
|
||
|
Commitments and contingencies (Note 11) |
|
|
|
|
||||
|
Redeemable convertible preferred stock, $0.00001 par value; 470,588,235 shares authorized, issued and outstanding; redemption amount of $800,000 |
|
724,823 |
|
|
724,823 |
|
||
|
Class B convertible preferred stock, $0.00001 par value; 452,941,177 and 600,000,000 shares authorized as of March 31, 2021 and December 31, 2020, respectively; 452,941,177 shares issued and outstanding; redemption amount of $1,106,988 |
|
697,643 |
|
|
697,643 |
|
||
|
Stockholders’ deficit |
|
|
|
|
||||
|
Class A ordinary stock, $0.00001 par value; 665,209,680 and 400,000,000 shares authorized as of March 31, 2021 and December 31, 2020, respectively; 50,113,600 and 41,234,448 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively |
|
— |
|
|
— |
|
||
|
Class B ordinary stock, $0.00001 par value; 180,000,000 shares authorized; 150,052,834 and 147,058,823 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively |
|
1 |
|
|
1 |
|
||
|
Additional paid-in capital |
|
405,329 |
|
|
395,308 |
|
||
|
Accumulated other comprehensive loss |
|
(5,466 |
) |
|
(5,974 |
) |
||
|
Accumulated deficit |
|
(2,466,664 |
) |
|
(2,391,139 |
) |
||
|
Total stockholders’ deficit |
|
(2,066,800 |
) |
|
(2,001,804 |
) |
||
|
Total liabilities, convertible preferred stock, and stockholders’ deficit |
$ |
365,769 |
|
$ |
316,382 |
|
||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
F-1
FF Intelligent Mobility Global Holdings Ltd.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(Unaudited)
|
Three Months Ended |
||||||||
|
2021 |
2020 |
|||||||
|
Operating expenses |
|
|
|
|
||||
|
Research and development |
$ |
6,721 |
|
$ |
6,962 |
|
||
|
Sales and marketing |
|
1,682 |
|
|
1,304 |
|
||
|
General and administrative |
|
10,993 |
|
|
6,781 |
|
||
|
Total operating expenses |
|
19,396 |
|
|
15,047 |
|
||
|
|
|
|
|
|||||
|
Loss from operations |
|
(19,396 |
) |
|
(15,047 |
) |
||
|
Change in fair value measurement of related party notes payable, notes payable, and warrant liabilities |
|
(25,182 |
) |
|
8,077 |
|
||
|
Change in fair value measurement of The9 conditional obligation |
|
(1,735 |
) |
|
— |
|
||
|
Interest expense |
|
(19,856 |
) |
|
(8,391 |
) |
||
|
Related party interest expense |
|
(9,070 |
) |
|
(8,261 |
) |
||
|
Other expense, net |
|
(283 |
) |
|
(473 |
) |
||
|
Loss before income taxes |
|
(75,522 |
) |
|
(24,095 |
) |
||
|
Income tax provision |
|
(3 |
) |
|
— |
|
||
|
Net loss |
$ |
(75,525 |
) |
$ |
(24,095 |
) |
||
|
|
|
|
|
|||||
|
Per share information |
|
|
|
|
||||
|
Net loss per ordinary share – Class A and Class B – basic and diluted |
$ |
(0.38 |
) |
$ |
(0.59 |
) |
||
|
Weighted average ordinary shares outstanding – Class A and Class B – basic and diluted |
|
198,359,348 |
|
|
40,882,205 |
|
||
|
|
|
|
|
|||||
|
Total comprehensive loss: |
|
|
|
|
||||
|
Net loss |
$ |
(75,525 |
) |
$ |
(24,095 |
) |
||
|
Change in foreign currency translation adjustment |
|
508 |
|
|
1,821 |
|
||
|
Total comprehensive loss |
$ |
(75,017 |
) |
$ |
(22,274 |
) |
||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
F-2
FF Intelligent Mobility Global Holdings Ltd.
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except share and per share data)
(Unaudited)
|
Convertible Preferred Stock |
Ordinary Stock |
Additional |
Accumulated |
Accumulated |
Total Stockholders’ |
||||||||||||||||||||||||||||||
|
Redeemable Preference |
Class B |
Class A |
Class B |
||||||||||||||||||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
||||||||||||||||||||||||||||
|
Balance as of December 31, 2020 |
470,588,235 |
$ |
724,823 |
452,941,177 |
$ |
697,643 |
41,234,448 |
$ |
— |
147,058,823 |
$ |
1 |
$ |
395,308 |
$ |
(5,974 |
) |
$ |
(2,391,139 |
) |
$ |
(2,001,804 |
) |
||||||||||||
|
Stock-based compensation |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
— |
|
2,520 |
|
— |
|
|
— |
|
|
2,520 |
|
||||||||||||
|
Conversion of The9 Conditional Obligation |
— |
|
— |
— |
|
— |
— |
|
— |
2,994,011 |
|
— |
|
2,863 |
|
— |
|
|
— |
|
|
2,863 |
|
||||||||||||
|
Exercise of stock options |
— |
|
— |
— |
|
— |
8,879,152 |
|
— |
— |
|
— |
|
2,650 |
|
— |
|
|
— |
|
|
2,650 |
|
||||||||||||
|
Issuance of warrants |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
— |
|
1,988 |
|
— |
|
|
— |
|
|
1,988 |
|
||||||||||||
|
Foreign currency translation adjustment |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
— |
|
— |
|
508 |
|
|
— |
|
|
508 |
|
||||||||||||
|
Net loss |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
— |
|
— |
|
— |
|
|
(75,525 |
) |
|
(75,525 |
) |
||||||||||||
|
Balance as of March 31, 2021 |
470,588,235 |
$ |
724,823 |
452,941,177 |
$ |
697,643 |
50,113,600 |
$ |
— |
150,052,834 |
$ |
1 |
$ |
405,329 |
$ |
(5,466 |
) |
$ |
(2,466,664 |
) |
$ |
(2,066,800 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
Convertible Preferred Stock |
Ordinary Stock |
Additional |
Accumulated |
Accumulated Deficit |
Total Stockholders’ |
||||||||||||||||||||||||||||||
|
Redeemable Preference |
Class B |
Class A |
Class B |
||||||||||||||||||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
||||||||||||||||||||||||||||
|
Balance as of December 31, 2019 |
470,588,235 |
$ |
724,823 |
600,000,000 |
$ |
924,149 |
40,879,124 |
$ |
— |
—, |
$ |
— |
$ |
158,704 |
$ |
(3,284 |
) |
$ |
(2,244,054 |
) |
$ |
(2,088,634 |
) |
||||||||||||
|
Stock-based compensation |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
— |
|
767 |
|
— |
|
|
— |
|
|
767 |
|
||||||||||||
|
Exercise of stock options |
— |
|
— |
— |
|
— |
3,840 |
|
— |
— |
|
— |
|
3 |
|
— |
|
|
— |
|
|
3 |
|
||||||||||||
|
Foreign currency translation adjustment |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
— |
|
— |
|
1,821 |
|
|
— |
|
|
1,821 |
|
||||||||||||
|
Net loss |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
— |
|
— |
|
— |
|
|
(24,095 |
) |
|
(24,095 |
) |
||||||||||||
|
Balance as of March 31, 2020 |
470,588,235 |
$ |
724,823 |
600,000,000 |
$ |
924,149 |
40,882,964 |
$ |
— |
— |
$ |
— |
$ |
159,474 |
$ |
(1,463 |
) |
$ |
(2,268,149 |
) |
$ |
(2,110,138 |
) |
||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
F-3
FF Intelligent Mobility Global Holdings Ltd.
Condensed Consolidated Statements of Cash Flows
(in thousands, except share and per share data)
(Unaudited)
|
Three Months Ended |
||||||||
|
2021 |
2020 |
|||||||
|
Cash flows from operating activities |
|
|
|
|
||||
|
Net loss |
$ |
(75,525 |
) |
$ |
(24,095 |
) |
||
|
Adjustments to reconcile net loss including to net cash used in operating activities |
|
|
|
|
||||
|
Depreciation and amortization expense |
|
988 |
|
|
903 |
|
||
|
Stock-based compensation |
|
2,520 |
|
|
767 |
|
||
|
Change in fair value measurement of related party notes payable, notes payable, and warrant liabilities |
|
25,182 |
|
|
(8,077 |
) |
||
|
Loss on disposal of property and equipment |
|
647 |
|
|
— |
|
||
|
Gain on foreign exchange |
|
(831 |
) |
|
(817 |
) |
||
|
Non-cash interest expense |
|
25,131 |
|
|
16,652 |
|
||
|
Change in fair value measurement of The9 Conditional Obligation |
|
1,735 |
|
|
— |
|
||
|
Loss (gain) on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net |
|
1,309 |
|
|
314 |
|
||
|
Changes in operating assets and liabilities |
|
|
|
|
||||
|
Other current assets |
|
(480 |
) |
|
2,356 |
|
||
|
Deposits and other non-current assets |
|
(1,025 |
) |
|
(3,586 |
) |
||
|
Accounts payable |
|
(635 |
) |
|
8,086 |
|
||
|
Deferred rent, accrued expenses, and other current liabilities |
|
665 |
|
|
(3,421 |
) |
||
|
Net cash used in operating activities |
$ |
(20,319 |
) |
$ |
(10,918 |
) |
||
|
Cash flows from investing activities |
|
|
|
|
||||
|
Proceeds from payments of notes receivable |
|
— |
|
|
3,600 |
|
||
|
Payments for equipment |
|
(711 |
) |
|
(13 |
) |
||
|
Net cash (used in) provided by investing activities |
$ |
(711 |
) |
$ |
3,587 |
|
||
|
Cash flows from financing activities |
|
|
|
|
||||
|
Proceeds from related party notes payable |
|
200 |
|
|
6,862 |
|
||
|
Proceeds from notes payable, net of original issuance discount |
|
76,140 |
|
|
1,006 |
|
||
|
Payments of related party notes payable |
|
(1,528 |
) |
|
— |
|
||
|
Payments of capital lease obligations |
|
(1,110 |
) |
|
(1,094 |
) |
||
|
Proceeds from exercise of stock options |
|
2,650 |
|
|
3 |
|
||
|
Payments of notes payable issuance costs |
|
(3,355 |
) |
|
— |
|
||
|
Net cash provided by financing activities |
$ |
72,997 |
|
$ |
6,777 |
|
||
|
Effect of exchange rate changes on cash and restricted cash |
|
(548 |
) |
|
(494 |
) |
||
|
Net increase (decrease) in cash and restricted cash |
$ |
51,419 |
|
$ |
(1,048 |
) |
||
|
Cash and restricted cash, beginning of period |
|
1,827 |
|
|
3,354 |
|
||
|
Cash and restricted cash, end of period |
$ |
53,246 |
|
$ |
2,306 |
|
||
F-4
FF Intelligent Mobility Global Holdings Ltd.
Condensed Consolidated Statements of Cash Flows — (Continued)
(in thousands, except share and per share data)
(Unaudited)
The following table provides a reconciliation of cash and restricted cash reported within the Condensed Consolidated Balance Sheets that aggregate to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows:
|
Three Months Ended |
||||||
|
2021 |
2020 |
|||||
|
Cash |
$ |
1,124 |
$ |
2,221 |
||
|
Restricted cash |
|
703 |
|
1,133 |
||
|
Total cash and restricted cash, beginning of period |
$ |
1,827 |
$ |
3,354 |
||
|
|
|
|||||
|
Cash |
$ |
47,525 |
$ |
1,567 |
||
|
Restricted cash |
|
5,721 |
|
739 |
||
|
Total cash and restricted cash, end of period |
$ |
53,246 |
$ |
2,306 |
||
|
|
|
|||||
|
Supplemental disclosure of noncash investing and financing activities |
|
|
||||
|
Conversion of customer deposit to notes payable |
$ |
— |
$ |
11,635 |
||
|
Conversion of The9 Conditional Obligation to equity |
|
2,863 |
|
— |
||
|
Supplemental disclosure of cash flow information |
|
|
||||
|
Cash paid for interest |
$ |
772 |
$ |
— |
||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
F-5
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
1. Nature of Business and Organization and Basis of Presentation
Nature of Business and Organization
FF Intelligent Mobility Global Holdings Ltd. (the “Company” or “FF”) is an exempted company formed under the laws of the Cayman Islands founded in 2014 and is headquartered in Los Angeles, California. The Company operates in a single operating segment and designs and engineers next-generation, smart, electric, connected vehicles. The Company expects to manufacture vehicles at its production facility in Hanford, California and has additional engineering, sales, and operations capabilities in China. The Company has created innovations in technology, products, and a user-centered business model that are being incorporated into its planned electric vehicle platform. The Company’s operations are conducted through its wholly-owned subsidiaries FF Inc. and FF Hong Kong Holding Ltd.
The Company changed its name from Smart King Ltd. to FF Intelligent Mobility Global Holdings Ltd. on February 14, 2020.
Principles of Consolidation and Basis of Presentation
The Company consolidates financial statements of all entities in which the Company has a controlling financial interest, including the accounts of any Variable Interest Entity (“VIE”) in which the company has a controlling financial interest and for which it is the primary beneficiary. All intercompany transactions and balances have been eliminated upon consolidation.
The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and are unaudited.
These unaudited Condensed Consolidated Financial Statements do not include all disclosures that are normally included in annual audited financial statements prepared in accordance with GAAP and should be read in conjunction with the Company’s Consolidated Financial Statements. The Condensed Consolidated Balance Sheet as of December 31, 2020, has been derived from the Company’s annual audited Consolidated Financial Statements.
In the opinion of the Company, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of March 31, 2021 and December 31, 2020, its results of operations for the three months ended March 31, 2021 and 2020 and cash flows for the three months ended March 31, 2021 and 2020. The accounting policies used in the preparation of these Condensed Consolidated Financial Statements are the same as those disclosed in the audited Consolidated Financial Statements and related notes for the year ended December 31, 2020.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment that the Company believes are most dependent on the application of estimates and assumptions. On an ongoing basis, management evaluates its estimates, including those related to: (i) realization of tax assets and estimates of tax liabilities; (ii) valuation of equity securities; (iii) recognition and disclosure of contingent liabilities, including litigation reserves; (iv) fair value of related party notes payable and notes payable; (v) estimated useful lives of long-lived assets; and (vi) fair value of warrants. Such estimates often require the selection of appropriate valuation methodologies and financial models and may involve significant judgment in evaluating ranges of assumptions and financial inputs. Actual results may differ from those estimates under different assumptions, financial inputs, or circumstances. Given the global economic climate, unpredictable nature, and unknown duration of the COVID-19 pandemic, estimates are subject to additional volatility.
F-6
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
1. Nature of Business and Organization and Basis of Presentation (cont.)
As of the date of the Company’s Condensed Consolidated Financial Statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates or judgments or to revise the carrying value of its assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in the Company’s consolidated financial statements in future periods. While the Company considered the effects of COVID-19 on its estimates and assumptions, due to the level of uncertainty regarding the economic and operational impacts of COVID-19 on its business, there may be other judgments and assumptions that the Company has not considered. Such judgments and assumptions could result in a meaningful impact on the Company’s financial statements in future periods. Actual results could differ from those estimates and any such differences may have a material impact on the Company’s Condensed Consolidated Financial Statements.
Merger Agreement
On January 27, 2021, Property Solutions Acquisition Corp. (“PSAC”), a Delaware corporation, entered into an Agreement and Plan of Merger (“Merger Agreement”) by and among PSAC, PSAC Merger Sub, Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands and wholly-owned subsidiary of PSAC (“Merger Sub”), and the Company.
Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving the merger (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”). As a result of the Transactions, the Company will become a wholly-owned subsidiary of PSAC, with the stockholders of the Company becoming stockholders of PSAC, which will be renamed Faraday Future Intelligent Electric, Inc. (“New FF”).
The Company has incurred certain merger related costs, primarily consisting of legal costs and other professional services. The Company capitalized $3,278 of Merger related costs for the three months ended March 31, 2021. The Company has capitalized a total of $6,939 of Merger related costs, which is included in Other Non-current Assets on the Condensed Consolidated Balance Sheet as of March 31, 2021. Under the Merger Agreement, the outstanding shares of the Company and the outstanding convertible related party notes payable and notes payable will convert into shares of new Class A common stock of PSAC following the Transactions and, for FF Top Holdings LLC (“FF Top”), shares of new Class B common stock of PSAC (referred to herein after the Transaction as “New FF common stock”) following the Transactions based on an exchange ratio (the “Exchange Ratio”), the numerator of which is equal to (i) (A) the number of shares of PSAC common stock equal to $2,716,000 (plus net cash of the Company, less debt of the Company, plus debt of the Company that will be converted into shares of PSAC common stock, plus any additional bridge loan in an amount not to exceed $100,000), (B) divided by ten dollars, minus (ii) an additional 25,000,000 shares which may be issuable to the Company stockholders as additional consideration upon certain price thresholds, and the denominator of which is equal to the number of outstanding shares of the Company, including shares issuable upon exercise of vested options and vested warrants at the Company (in each case assuming cashless exercise) and upon conversion of outstanding convertible notes.
Additionally, each of the Company’s outstanding options or warrants immediately prior to the closing of the Merger (and by its terms will not terminate upon the closing of the Merger) will remain outstanding and convert into the right to purchase shares of PSAC Class A common stock equal to the number of ordinary stock of the Company subject to such option or warrant multiplied by the Exchange Ratio at an exercise price per share equal to the current exercise price per share for such option or warrant divided by the Exchange Ratio.
Concurrently with the execution of the Merger Agreement, the Company entered into separate subscription agreements with a number of investors (the “PIPE Investors”); pursuant to which the PIPE investors have agreed to purchase an aggregate of 79,500,000 shares of PSAC Class A common stock, for a purchase price of ten dollars per share and at an aggregate purchase prices of $795,000, in a private placement (the “PIPE Financing”)
F-7
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
2. Liquidity and Capital Resources and Going Concern
The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited Condensed Consolidated Financial Statements are available to be issued.
Since inception, the Company has incurred cumulative losses from operations, negative cash flows from operating activities and has an accumulated deficit of $2,466,664 as of March 31, 2021. As of March 31, 2021, there were $13,799 in related party notes payable and notes payable in default. The Company has funded its operations and capital needs primarily through the net proceeds received from capital contributions, the issuance of related party notes payable and notes payable (Note 8. Related Party Notes Payable and Note 9. Notes Payable) and the sale of preferred and ordinary stock (Note 12. Preferred and Ordinary Stock). The vast majority of related party notes payable, notes payable, and equity have been funded by entities controlled or previously controlled by the Company’s founder and former CEO. Since its formation, the Company has devoted substantial effort and capital resources to strategic planning, engineering, design and development of its planned electric vehicle platform, development of initial electric vehicle models, and capital raising. The achievement of the Company’s operating plans and maintenance of an adequate level of liquidity are subject to various risks associated with the ability to continue to successfully close additional sources of funding and/or refinance existing related party notes payable and notes payable arrangements. The Company’s forecasts and projections of working capital reflect significant judgment and estimates for which there are inherent risks and uncertainties. Management’s plans include the continued development of its electric vehicle platform and bringing electric vehicle models to market. The Company expects to continue to generate significant operating losses for the foreseeable future. The plans are dependent on the Company being able to continue to raise significant amounts of capital through the issuance of additional notes payable and equity securities.
There can be no assurance that the Company will be successful in achieving its strategic plans, that the Company’s future capital raises will be sufficient to support its ongoing operations, or that any additional financing will be available in a timely manner or on acceptable terms, if at all. If the Company is unable to raise sufficient financing or events or circumstances occur such that the Company does not meet its strategic plans, the Company will be required to reduce discretionary spending, alter or scale back vehicle development programs, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures. Any such events would have a material adverse effect on the Company’s financial position, results of operations, cash flows, and ability to achieve its intended business objectives. Based on its recurring losses from operations since inception, expectation of continued operating losses for the foreseeable future, and the need to raise additional capital to finance its future operations, as of May 28, 2021, the date the unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2021, were available to be issued, the Company has concluded that there is substantial doubt about its ability to continue as a going concern for a period of one year from the date that these Condensed Consolidated Financial Statements are available to be issued.
During the three months ended March 31, 2021, the Company generated proceeds aggregating $76,140, net of discounts through the issuance of notes payable. (See Note 9. Notes Payable.)
The unaudited Condensed Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the unaudited Condensed Consolidated Financial Statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
COVID-19 Pandemic
The World Health Organization declared a global emergency on March 11, 2020 with respect to the outbreak of a novel strain of coronavirus, or COVID-19 pandemic. There are many uncertainties regarding the current global COVID-19 pandemic. The Company is closely monitoring the impact of the pandemic on all aspects of its business, including the impact on its employees, suppliers, vendors, and business partners.
F-8
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
2. Liquidity and Capital Resources and Going Concern (cont.)
The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place orders, and business shutdowns. For example, the Company’s employees based in California have been subject to stay-at-home orders from state and local governments. These measures may adversely impact the Company’s employees and operations and the operations of suppliers and business partners and could negatively impact the construction schedule of the Company’s manufacturing facility and the production schedule of the FF 91 vehicle. In addition, various aspects of the Company’s business and manufacturing facility cannot be conducted remotely. These measures by government authorities may remain in place for a significant period of time and could adversely affect the Company’s construction and manufacturing plans, sales and marketing activities, and business operations.
The evolution of the virus is unpredictable. A COVID-19 vaccine is being administered, however, the speed and extent of vaccination is unpredictable and any resurgence may slow down the Company’s ability to ramp-up its production program to satisfy investors and potential customers. Any delay to production will delay the Company’s ability to launch the FF 91 vehicle and begin generating revenue. The COVID-19 pandemic could limit the ability of suppliers and business partners to perform, including third party suppliers’ ability to provide components and materials used in the FF 91 vehicle. The Company may also experience an increase in the cost of raw materials. At the time of this report, the Company does not anticipate any material impairments as a result of COVID-19. The Company will continue to evaluate the impacts of COVID-19 on an ongoing basis. As such, it is uncertain as to the full magnitude of the impact that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations.
3. Variable Interest Entities and Joint Ventures
In November 2017, as part of a broader corporate reorganization and to facilitate third-party investment, the Company incorporated its top-level holding company, Smart King, Ltd., in the Cayman Islands to enable effective control over the Company’s Chinese operating entity, FF Hong Kong Holding Ltd., and its subsidiaries without direct equity ownership. The Company entered into a series of contractual arrangements (“VIE contractual arrangements”) with LeSEE and LeSEE Zhile Technology Co., Ltd. (“LeSEE Zhile”), a related party of the company, to enable the Company to exercise effective control over LeSEE and its subsidiaries, to receive substantially all of the economic benefits of such entities, and to have an exclusive option to purchase all or part of the equity interests in LeSEE.
On August 5, 2020, an equity transfer agreement (the “Equity Transfer Agreement”) was entered into between the Company and LeSEE Zhile, pursuant to which, LeSEE Zhile transferred 48% equity of LeSEE to the Company for no consideration. After the transfer, LeSEE Zhile owns 1% of LeSEE and the Company owned 99% of LeSEE, making LeSEE a majority-owned subsidiary of the Company and no longer a VIE, since LeSEE is consolidated through majority voting and equity interests.
On March 24, 2019, the Company entered into a Joint Venture Agreement (“JVA”) with The9 Limited (“The9”). Pursuant to the JVA, the Company and The9 agreed to establish an equity joint venture in Hong Kong, which would in turn establish a wholly-owned subsidiary in China, intended to engage in the business of manufacturing, marketing, selling, and distributing the planned Faraday Future Icon V9 model electric vehicle in China. The Company and The9 would each be 50% owners of the joint venture. The9 made a $5,000 non-refundable initial deposit (“The9 Conditional Obligation”) to the Company to participate in the joint venture. The9 has the right to convert the initial deposit into various classes of stock in the Company. For accounting purposes, the deposit is a financial instrument that embodies a conditional obligation that the issuer may settle by issuing a variable number of shares. The9 Conditional Obligation was measured at fair value, was remeasured at each reporting period, and represents a Level 3 financial instrument under the fair value hierarchy. (See Note 7. Fair Value of Financial Instruments). The fair value of The9 Conditional Obligation was $1,128 as of December 31, 2020 and is recorded in Current Liabilities on the unaudited Condensed Consolidated Balance Sheet. Neither the Company nor The9 have made contributions to the joint venture as of March 31, 2021. The joint venture has yet to commence business
F-9
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
3. Variable Interest Entities and Joint Ventures (cont.)
activities, and on November 22, 2020, the parties entered into an agreement to convert the initial deposit into Class B Ordinary Stock in the Company. The9 Conditional Obligation was converted into 2,994,011 shares of Class B Ordinary Stock on February 23, 2021.
In September 2020, the Company entered into a non-binding memorandum of understanding with a tier-1 city in China, whose affiliated entities are subscribers in the PIPE Financing, pursuant to which the Company established a joint venture company (the “JV”) in China. The Company operates and controls the JV. The strategic partnership is subject to a binding definitive agreement and certain related transactions and agreement by the parties, under which the Company will receive capital of no less than $500,000 through the closing of the Merger Agreement, (See Note 1. Nature of Business and Organization and Basis of Presentation). In December 2020, the JV was established as an entity wholly-owned by the Company, which will primarily engage in the activities contemplated in the memorandum of understanding. There has been no activity related to, or contributions of assets into, the JV by either party as of March 31, 2021.
In December 2020, the Company entered into a non-binding memorandum of understanding with Zhejiang Geely Holding Group Co., Ltd. (“Geely Holding”), who is also a subscriber in the PIPE Financing, pursuant to which the parties contemplate a strategic cooperation in various areas including engineering, technology, supply chain, and contract manufacturing.
In January 2021, the Company and Geely Holding entered into a cooperation framework agreement and a license agreement that set forth the major commercial understanding of the proposed cooperation among the parties in the areas of potential investment into the JV, engineering, technology, and contract manufacturing support. The foregoing framework agreement and the license agreement may be terminated if the parties fail to enter into the joint venture definitive agreement or to close the Merger Agreement and related transactions.
4. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments in this update were effective for fiscal periods beginning after December 15, 2020. The Company adopted ASU 2018-15 as of January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This amendment was issued to simplify the accounting for income taxes by removing certain exceptions for recognizing deferred taxes, performing intra-period allocation, and calculating income taxes in interim periods. Further, ASU 2019-12 adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax basis goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The Company adopted the standard as of January 1, 2021. The adoption did not have a material effect on the Company’s financial position, results of operations, or cash flows.
Recently Issued Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which outlines a comprehensive lease accounting model that supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of
F-10
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
4. New Accounting Pronouncements (cont.)
greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. In July 2018, the FASB issued ASU 2018-11, which provides the option of an additional transition method that allows entities to initially apply the new lease guidance at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In June 2020, the FASB issued ASU No 2020-05 that delayed the effective date of Topic 842 to fiscal years beginning after December 15, 2021 for private companies. The Company is expected to be an emerging growth company and will delay adopting Topic 842 until such time the standard applies to private companies. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an entity’s Own Equity (“ASU 2020-06”). The ASU simplifies the accounting for convertible instruments by removing certain separation models in ASC 470- 20, Debt — Debt with Conversion and Other Options, for convertible instruments. The ASU updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract. The convertible debt instruments will be accounted for as a single liability measured at amortized cost. Further, the ASU made amendments to the earnings per share guidance in Topic 260 for convertible instruments, the most significant impact of which is requiring the use of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method. The ASU also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2023, with early adoption permitted. Adoption of the ASU can either be on a modified retrospective or full retrospective basis. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
5. Property and Equipment, Net
Property and equipment, net, consists of the following as of the following dates:
|
March 31, |
December 31, 2020 |
|||||||
|
Land |
$ |
13,043 |
|
$ |
13,043 |
|
||
|
Buildings |
|
21,899 |
|
|
21,899 |
|
||
|
Building improvements |
|
8,940 |
|
|
8,940 |
|
||
|
Computer hardware |
|
4,058 |
|
|
4,058 |
|
||
|
Machinery and equipment |
|
5,410 |
|
|
5,451 |
|
||
|
Vehicles |
|
583 |
|
|
583 |
|
||
|
Computer software |
|
7,095 |
|
|
7,095 |
|
||
|
Leasehold improvements |
|
298 |
|
|
298 |
|
||
|
Construction in process |
|
245,351 |
|
|
251,633 |
|
||
|
Less: Accumulated depreciation |
|
(19,758 |
) |
|
(19,067 |
) |
||
|
Total property and equipment, net |
$ |
286,919 |
|
$ |
293,933 |
|
||
For the three months ended March 31, 2021, the Company entered into an agreement to finalize the cost of certain construction in process assets. As a result of the agreement, the Company reduced the cost of these assets in construction in process as well as the corresponding liability within Accounts Payable and Accrued Expenses by $5,744 on the Condensed Consolidated Balance Sheet as of March 31, 2021.
F-11
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following as of the following dates:
|
March 31, |
December 31, 2020 |
|||||
|
Accrued expenses and other current liabilities |
|
|
||||
|
Accrued payroll and benefits |
$ |
19,534 |
$ |
19,180 |
||
|
Accrued legal contingencies |
|
6,025 |
|
5,025 |
||
|
Capital lease, current portion |
|
3,417 |
|
4,396 |
||
|
Deferred rent, current portion |
|
— |
|
3 |
||
|
Tooling, machinery and equipment received not invoiced |
|
778 |
|
509 |
||
|
Deposits from customers |
|
3,605 |
|
3,523 |
||
|
Due to affiliates |
|
7,345 |
|
5,123 |
||
|
Other current liabilities |
|
10,298 |
|
14,623 |
||
|
$ |
51,002 |
$ |
52,382 |
|||
7. Fair Value of Financial Instruments
Fair Value Measurements
The Company applies the provisions of ASC 820, Fair Value Measurement, which defines a single authoritative definition of fair value, sets out a framework for measuring fair value, and expands on required disclosures about fair value measurements. The provisions of ASC 820 relate to financial assets and liabilities as well as other assets and liabilities carried at fair value on a recurring and nonrecurring basis. The standard clarifies that fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities, or funds.
Level 2 Valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 instruments typically include U.S. Government and agency debt securities and corporate obligations. Valuations are usually obtained through market data of the investment itself as well as market transactions involving comparable assets, liabilities, or funds.
Level 3 Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models or similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.
The Company has elected to apply the fair value option to certain related party notes payable and notes payable with conversion features as discussed in Note 8. Related Party Notes Payable and Note 9. Notes Payable.
F-12
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
7. Fair Value of Financial Instruments (cont.)
Related Party Notes Payable and Notes Payable at Fair Value
The Company has elected to measure certain related party notes payable and notes payable at fair value issued under the Notes Purchase Agreement, as amended (“the NPA, as amended”) because they contain embedded liquidation premiums with conversion rights that represent embedded derivatives (See Note 8. Related Party Notes Payable and Note 9. Notes Payable). The Company employed the yield method to value the related party notes payable and notes payable. This valuation method uses a discounted cash flow analysis, estimating the expected cash flows for the debt instrument and then discounting them at the market yield. The significant unobservable input used in the fair value measurement is the market yield. The market yield is determined using external market yield data, including yields exhibited by publicly traded bonds by S&P credit rating as well as the borrowing rates of guideline public companies. The yield is affected by the market movements in credit spreads and bond yields. In general, increases in the yield would decrease the fair value of the liability, and conversely, decreases in the yield would increase the fair value of the liability.
The Company recognized expense/(income) related to the change in fair value of related party notes payable of $167 and $(1,750) and expense /(income) related to the change in fair value of the notes payable of $20,155 and $(6,328) during the three months ended March 31, 2021 and 2020, respectively. The fair value adjustments related to related party notes payables and notes payables were recorded in Change in Fair Value Measurement of Related Party Notes Payable, Notes Payable, and Warrant Liabilities on the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.
Warrants
In conjunction with notes payable entered into with Ares Capital Corporation (“Ares”) on March 1, 2021, the Company agreed to issue warrants to purchase a variable number of New FF shares (“the Ares Warrants”). The Ares Warrants meet the definition of a derivative since the Ares Warrants are not indexed to the entity’s own equity and therefore, do not meet the scope exception in ASC 815. The Company records any changes in fair value of the warrant liability in income. The Company initially recorded the warrant liability at its fair value of $5,000 with any difference between the proceeds received and the initial fair values of the debt and warrants recorded in Interest Expense. The warrant liability is recorded in Other Liability, Less Current Portion on the unaudited Condensed Consolidated Balance Sheet as of March 31, 2021, and the fair value adjustments related to the warrants were recorded in Change in Fair Value Measurement of Related Party Notes Payable, Notes Payable, and Warrant Liabilities on the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. (See Note 9. Notes Payable.)
In conjunction with additional notes issued under the NPA, as amended, (see Note 9. Notes Payable) on various dates in January and March 2021, the Company issued warrants to purchase an aggregate of 2,437,454 shares of Class A Ordinary Stock of the Company. The warrants are accounted for in equity at fair value based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity. The Company estimates the fair value of the warrants to be $1,988 which it recorded in Additional Paid-in Capital on the unaudited Condensed Consolidated Balance Sheet as of March 31, 2021, with a corresponding amount recorded in Interest Expense in the unaudited Condensed Statement of Operations and Comprehensive Loss.
The Company used the Black-Scholes option pricing model to value the warrants. The Black Scholes model requires the use of several assumptions including, the exercise price of the warrant, the term over which the warrants can be exercised, the risk-free rate, the stock price, and the volatility of the stock price. Additionally, the Ares Warrants were valued under two scenarios using the Black-Scholes option pricing model, one with an 80 percent probability that the Merger would occur and, a second, with a 20 percent probability, that the Merger would not occur. Fair value measurements associated with the warrant liabilities, the related party notes payable, and notes payable represent Level 3 valuations under the fair value hierarchy.
F-13
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
7. Fair Value of Financial Instruments (cont.)
Recurring Fair Value Measurements
Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables present financial assets and liabilities remeasured on a recurring basis by level within the fair value hierarchy:
|
March 31, 2021 |
|||||||||
|
Level 1 |
Level 2 |
Level 3 |
|||||||
|
Related party notes payable |
$ |
— |
$ |
— |
$ |
21,794 |
|||
|
Notes payable |
|
— |
|
— |
|
175,153 |
|||
|
Warrant liabilities |
|
— |
|
— |
|
5,000 |
|||
|
December 31, 2020 |
|||||||||
|
Level 1 |
Level 2 |
Level 3 |
|||||||
|
Related party notes payable |
$ |
— |
$ |
— |
$ |
21,627 |
|||
|
Notes payable |
|
— |
|
— |
|
71,064 |
|||
|
The9 Conditional Obligation |
|
— |
|
— |
|
1,128 |
|||
The carrying amounts of the Company’s financial assets and liabilities, including cash, restricted cash, deposits, and accounts payable approximate fair value because of their short-term nature or contractually defined value.
The following table summarizes the activity of the Level 3 fair value measurements:
|
Related |
Notes |
The9 |
Warrant |
||||||||||
|
Balance as of December 31, 2020 |
$ |
21,627 |
$ |
71,064 |
$ |
1,128 |
|
$ |
— |
||||
|
Proceeds, net of original issuance discount |
|
— |
|
76,038 |
|
— |
|
|
— |
||||
|
Consent fees |
|
— |
|
1,334 |
|
— |
|
|
— |
||||
|
Original issue discount(1) |
|
— |
|
4,860 |
|
— |
|
|
— |
||||
|
Issue costs paid by lender |
|
— |
|
1,702 |
|
— |
|
|
— |
||||
|
Changes in fair value |
|
167 |
|
20,155 |
|
1,735 |
|
|
— |
||||
|
Conversion to equity |
|
— |
|
— |
|
(2,863 |
) |
|
— |
||||
|
Recognition of warrant liability |
|
— |
|
— |
|
— |
|
|
5,000 |
||||
|
Balance as of March 31, 2021 |
$ |
21,794 |
$ |
175,153 |
$ |
— |
|
$ |
5,000 |
||||
____________
(1) Included in Change in Fair Value Measurement of Related Party Notes Payable, Notes Payable, and Warrant Liabilities on the Condensed Consolidated Statement of Operations and Comprehensive Loss.
F-14
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
8. Related Party Notes Payable
The Company has been significantly funded by notes payable from related parties of the Company. These related parties include employees as well as affiliates and other companies controlled or previously controlled by the Company’s founder and former CEO.
Related party notes payable consists of the following as of March 31, 2021:
|
Note Name |
Contractual |
Contractual |
Unpaid |
Fair Value |
Unamortized |
Net |
Interest |
|||||||||||||
|
Related party note |
June 30, 2021 |
12.00% |
$ |
240,543 |
$ |
— |
$ |
(330 |
) |
$ |
240,213 |
$ |
7,117 |
|||||||
|
Related party note |
Due on Demand |
15.00% |
|
10,000 |
|
— |
|
— |
|
|
10,000 |
|
387 |
|||||||
|
Related party notes – NPA tranche(1) |
October 9, 2021 |
10.00% |
|
18,112 |
|
3,682 |
|
— |
|
|
21,794 |
|
453 |
|||||||
|
Related party notes – |
Due on Demand |
18.00% |
|
9,131 |
|
— |
|
— |
|
|
9,131 |
|
769 |
|||||||
|
Related party notes – China various other |
Due on Demand |
0% coupon, 10.00% imputed |
|
5,639 |
|
— |
|
(87 |
) |
|
5,552 |
|
114 |
|||||||
|
Related party notes – China various other |
Due on Demand |
8.99% |
|
1,410 |
|
— |
|
(2 |
) |
|
1,408 |
|
31 |
|||||||
|
Related party notes – Other |
June 30, 2021 |
6.99% |
|
4,160 |
|
— |
|
(26 |
) |
|
4,134 |
|
72 |
|||||||
|
Related party notes – Other |
June 30, 2021 |
8.00% |
|
6,452 |
|
— |
|
(17 |
) |
|
6,435 |
|
127 |
|||||||
|
$ |
295,447 |
$ |
3,682 |
$ |
(462 |
) |
$ |
298,667 |
$ |
9,070 |
||||||||||
____________
(1) On April 29, 2019, the Company executed the Note Purchase Agreement (“NPA”) with U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management, LP as the collateral agent. The aggregate principal amount that may be issued under the NPA is $200,000. (See Note 9. Notes Payable for more information on the amendments to the NPA.) Upon both a preferred stock offering and prepayment notice by the holder or the maturity date of the note payable, the holder of the note payable may elect to convert all of the outstanding principal and accrued interest of the note payable plus a 20.00% premium into shares of preferred stock of the Company issued in a preferred stock offering. The Company elected the fair value option for these notes payable. (See Note 7. Fair Value of Financial Instruments.)
(2) As of March 31, 2021, the Company was in default on one of its related party notes payable with a principal value of $9,131. The Company is in compliance with all its covenants under the remaining related party notes payable agreements as of March 31, 2021.
Fair Value of Related Party Notes Payable Not Carried at Fair Value
The estimated fair value of the Company’s related party notes payable not carried at fair value, using inputs from Level 3 under the fair value hierarchy, was $215,845 and $265,663 as of March 31, 2021 and December 31, 2020, respectively.
The Company recorded interest expense of $9,070 and $8,261 related to the related party notes payable for the three months ended March 31, 2021 and 2020, respectively. Certain of the related party notes are non-interest bearing and are carried at discounts related to imputed interest.
For the three months ended March 31, 2021, the Company received $200 in proceeds from a related party in the form of a bridge loan, which was fully paid during the period along with $424 of repayments for bridge notes received in December 2020, which are now fully paid.
Schedule of Principal Maturities of Related Party Notes Payable
The future scheduled principal maturities of related party notes payable as of March 31, 2021 were as follows:
|
Due on demand |
$26,180 |
|
2021 |
269,267 |
|
$295,447 |
F-15
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
9. Notes Payable
The Company has entered into notes payable agreements with third parties.
Notes payable consists of the following as of March 31, 2021:
|
Note Name |
Contractual |
Contractual |
Unpaid |
Fair Value |
Unamortized |
Net |
Interest |
||||||||||||
|
Note payable |
Repayment in 10% increments contingent on a specified fundraising event |
12.00% |
$ |
56,462 |
$ |
— |
$ |
— |
|
$ |
56,462 |
1,471 |
|||||||
|
Notes payable – NPA tranche |
October 6, 2021 |
10.00% |
|
27,118 |
|
5,512 |
|
— |
|
|
32,630 |
669 |
|||||||
|
Notes payable(1) |
October 6, 2021 |
14.00% |
|
55,000 |
|
11,501 |
|
— |
|
|
66,501 |
654 |
|||||||
|
Notes payable |
June 30, 2021 |
12.00% |
|
19,100 |
|
— |
|
— |
|
|
19,100 |
571 |
|||||||
|
Notes payable |
June 30, 2021 |
1.52% |
|
4,400 |
|
— |
|
(51 |
) |
|
4,349 |
16 |
|||||||
|
Notes payable |
June 30, 2021 |
8.99% |
|
2,240 |
|
— |
|
(2 |
) |
|
2,238 |
50 |
|||||||
|
Notes payable |
June 30, 2021 |
8.00% |
|
300 |
|
— |
|
(1 |
) |
|
299 |
6 |
|||||||
|
Notes payable(2) |
October 6, 2021 |
8.00% |
|
3,750 |
|
— |
|
— |
|
|
3,750 |
119 |
|||||||
|
Notes payable(2) |
October 6, 2021 |
15.75% |
|
5,600 |
|
2,230 |
|
— |
|
|
7,830 |
59 |
|||||||
|
Notes payable(3) |
October 6, 2021 |
0.00% |
|
18,250 |
|
4,639 |
|
— |
|
|
22,889 |
— |
|||||||
|
Notes payable – China various other |
Various Dates 2021 |
6.00% |
|
4,834 |
|
— |
|
(34 |
) |
|
4,800 |
72 |
|||||||
|
Notes payable – China various other |
Due on Demand |
9.00% |
|
3,652 |
|
— |
|
(9 |
) |
|
3,643 |
166 |
|||||||
|
Notes payable – China various other(6) |
Due on Demand |
0.00% |
|
4,668 |
|
— |
|
— |
|
|
4,668 |
— |
|||||||
|
Notes payable – various other notes |
June 30, 2021 |
6.99% |
|
1,260 |
|
— |
|
(5 |
) |
|
1,255 |
22 |
|||||||
|
Notes payable – various other notes |
Due on Demand |
8.99% |
|
500 |
|
— |
|
— |
|
|
500 |
11 |
|||||||
|
Notes payable – various other notes |
June 30, 2021 |
2.86% |
|
1,500 |
|
— |
|
(15 |
) |
|
1,485 |
10 |
|||||||
|
Note payable(4) |
March 9, 2021 |
0.00% |
|
15,667 |
|
3,982 |
|
— |
|
|
19,649 |
— |
|||||||
|
Note payable(5) |
October 6, 2021 |
12.75% |
|
15,666 |
|
6,238 |
|
— |
|
|
21,904 |
405 |
|||||||
|
Notes payable |
June 30, 2021 |
8.00% |
|
11,635 |
|
— |
|
(28 |
) |
|
11,607 |
230 |
|||||||
|
Notes payable |
April 17, 2022 |
1.00% |
|
9,168 |
|
— |
|
— |
|
|
9,168 |
23 |
|||||||
|
$ |
260,770 |
$ |
34,102 |
$ |
(145 |
) |
$ |
294,727 |
4,554 |
||||||||||
____________
(1) On March 1, 2021, the Company amended the NPA to permit the issuance of additional notes payable with principal amounts up to $85,000.
F-16
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
9. Notes Payable (cont.)
On March 1, 2021, the Company entered into a notes payable agreement with Ares, a US-based investment firm, for total principal of $55,000, receiving net proceeds of $51,510, inclusive of a 4.00% original issue discount and $90 of debt issuance costs paid directly by the lender. The notes payable are collateralized by a first lien on virtually all tangible and intangible assets of the Company and bear interest at 14% per annum. The notes payable mature on the earliest of (i) March 1, 2022, (ii) October 6, 2021, if the Qualified SPAC Merger contemplated in the Merger Agreement has not been consummated by July 27, 2021, (iii) the occurrence of a change in control, or (iv) the occurrence of an acceleration event, such as a default. The Company has elected the fair value option because the notes include features, such as a contingently exercisable put option, which meet the definition of an embedded derivative. Additionally, the notes payable agreement contains a minimum cash provision, which requires the Company to maintain at least $5,000 of cash on hand at all times. The Company has classified the related $5,000 in Restricted Cash on its unaudited Condensed Consolidated Balance Sheet as of March 31, 2021.
In addition, in conjunction with the notes payable, the Company has committed to issue warrants to the lender to purchase ordinary stock no later than August 11, 2021 or, if earlier, 15 days after consummation of the Merger. The warrants will have a term of 6 years, be equal to 0.20% of the fully diluted capitalization of New FF’s Class A common stock and have an exercise price of $10 per share. The warrants meet the definition of a derivative and will be accounted for as a liability and marked to fair value at the end of each reporting period with the changes recorded in the Condensed Consolidated Statement of Operations and Comprehensive Loss. The Company determined the commitment to issue warrants was a liability and estimated the fair value of the warrants to be $5,000 as of March 31, 2021 using the Black-Scholes option-pricing model under two scenarios. (See Note 7. Fair Value of Financial Instruments.)
|
March 31, |
|||||
|
Outstanding principal |
$ |
55,000 |
|||
|
Accrued interest |
|
654 |
|||
|
Interest expense |
|
654 |
|||
|
Original issue discount |
|
3,490 |
|||
|
Debt issuance costs recorded in interest expense |
|
315 |
|||
|
Principal payments |
|
— |
|||
|
Interest payments |
|
— |
|||
|
Net Proceeds |
|
51,510 |
|||
(2) On January 13, 2021, the Company amended the NPA and issued $3,750 of additional notes payable to Birch Lake and permitted the issuance of additional notes payable receiving net proceeds of $3,510, inclusive of a 6.50% original issue discount and $225 of debt issuance costs paid directly by the lender. The additional secured convertible notes payable issued to Birch Lake (“BL Notes”) accrue interest at 8% per annum. The BL Notes mature on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control, or (iv) the acceleration of the NPA obligations pursuant to an event of default. Additionally, the BL Notes contain a liquidation premium that ranges from 35% to 45% depending on the timing of settlement with 50% of this premium convertible into equity. Birch Lake is able to demand repayment if an event of default, change in control, or a Qualified SPAC Merger occurs. The Company determined that the feature to settle the BL Notes at a premium upon the occurrence of a default, change in control, or a Qualified SPAC Merger is a contingently exercisable put option with a liquidation premium and represents an embedded derivative. The Company elected the fair value option for this note payable. (See Note 7. Fair Value of Financial Instruments.)
On March 8, 2021, pursuant to the NPA, as amended, the Company entered into a notes payable agreement with Birch Lake for a total principal of $5,600 receiving net proceeds of $5,240, inclusive of a 6.50% original issue discount and $307 of debt issuance costs paid directly by the lender. The notes payable matures on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, as defined in the note agreement, (iii) the occurrence of a change in control, or (iv) the occurrence of an acceleration event, such as a default. The notes payable bears interest at 15.75% per annum. Additionally, the notes payable contains a liquidation premium that ranges from 42% to 52% depending on timing of settlement with 50% of this premium convertible into equity and the lender is able to demand repayment if an event of default, change in control, or a Qualified SPAC Merger occurs. The Company determined that the feature to settle the BL Notes at a premium upon the occurrence of a default, change in control, or a Qualified SPAC Merger is a contingently exercisable put option with a liquidation premium and represents an embedded derivative. The Company has elected to measure the notes payable at fair value because the notes include features, such as a contingently exercisable put option, which meet the definition of an embedded derivative.
F-17
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
9. Notes Payable (cont.)
|
March 31, |
|||||
|
Outstanding principal |
$ |
9,350 |
|||
|
Accrued interest |
|
— |
|||
|
Interest expense |
|
177 |
|||
|
Original issue discount |
|
1,132 |
|||
|
Debt issuance costs recorded in interest expense |
|
1,502 |
|||
|
Principal payments |
|
— |
|||
|
Interest payments |
|
177 |
|||
|
Net Proceeds |
|
8,218 |
|||
(3) On January 13, 2021, pursuant to the NPA, as amended, the Company entered into a note payable agreement with a US-based investment firm for a total principal of $11,250, receiving net proceeds of $10,350, inclusive of an 8% original issue discount and $480 of debt issuance costs paid directly by the lender. The note payable is collateralized by a first lien on virtually all tangible and intangible assets of the Company and bears interest at 0% per annum. The note payable matures on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control, or (iv) the occurrence of an acceleration event, such as an event of default. In the event the Company consummates a Qualified SPAC Merger, an amount equal to 130% of all outstanding principal, accrued and unpaid interest and accrued original issue discount under the notes through (but not including) the date of consummation of the Qualified SPAC Merger will automatically convert into ordinary stock of the SPAC received by the Company’s Class A ordinary stockholders and the notes and interest thereon shall no longer be outstanding and shall be deemed satisfied in full and terminated. The Company elected the fair value option for this note payable because the inclusion of a conversion feature that allows the lenders to convert the notes payable into preferred stock.
On March 12, 2021, the Company entered into a notes payable agreement for an aggregate principal amount of $7,000, receiving net proceeds of $6,440, inclusive of an 8% original issue discount. The terms of this note payable are the same as the January 13, 2021 notes payable.
In conjunction with the issuance of the notes on various dates during January 2021 and March 2021, the Company issued warrants to purchase 2,437,454 shares of the Company’s Class A Ordinary Stock for a term of seven years. The exercise prices of the warrants range from $2.71 to $2.72, subject to certain down-round adjustments. The warrants are accounted for in equity at fair value based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity. The Company estimates the fair value of the warrants to be $1,988 using the Black-Scholes option-pricing model. (See Note 7. Fair Value of Financial Instruments.)
|
March 31, |
|||||
|
Outstanding principal |
$ |
18,250 |
|||
|
Accrued interest |
|
— |
|||
|
Interest expense |
|
— |
|||
|
Original issue discount |
|
1,960 |
|||
|
Debt issuance costs recorded in interest expense |
|
— |
|||
|
Principal payments |
|
— |
|||
|
Interest payments |
|
— |
|||
|
Net Proceeds |
|
16,310 |
|||
(4) On January 13, 2021, the Company amended the NPA to increase the principal amount of its $15,000 note payable with a US-based investment firm by $667. The Company received no cash proceeds as the increase in principal was used to pay a consent fee to the US-based investment firm. The Company recorded the consent fee in Interest Expense on the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. The consent fee permitted the issuance of additional notes payable to the US-based investment firm of $11,250 and $7,000, as described in (3) above.
(5) On January 13, 2021, the Company amended the NPA to issue an additional note to Birch Lake, with the same tenor as its $15,000 note payable to Birch Lake, in the amount of $666. The Company received no cash proceeds as the additional note was used to pay a consent fee to Birch Lake. The Company recorded the consent fee in Interest Expense on the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. The consent fee permitted the issuance of additional notes payable to Birch Lake of $3,750 and $5,600, as described in (2) above.
F-18
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
9. Notes Payable (cont.)
(6) On January 15, 2021, the Company borrowed $102 from a Chinese lender. The note payable is payable on demand, does not have a stated interest rate, has no covenants, and is unsecured. As of March 31, 2021, the Company was in default on two of its notes payables with an aggregate principal value of $4,668. The Company is in compliance with all its covenants under the remaining notes payable agreements as of March 31, 2021.
Fair value of Notes Payable not Carried at Fair Value
The estimated fair value of the Company’s notes payable not carried at fair value, using inputs from Level 3 under the fair value hierarchy, are $98,250 and $127,130 as of March 31, 2021 and December 31, 2020, respectively.
Schedule of Principal Maturities of Notes Payable
The future scheduled principal maturities of notes payable as of March 31, 2021 are as follows:
|
Due on demand |
$ |
8,820 |
|
|
2021 |
|
242,782 |
|
|
2022 |
|
9,168 |
|
|
$ |
260,770 |
10. Vendor Payables in Trust
On April 29, 2019, the Company established the Faraday Vendor Trust (“Vendor Trust”), with the intention to stabilize the Company’s supplier base by providing suppliers with the ability to exchange their unsecured trade receivables for secured trust interests. Repayment of the trust interests is governed by a Trade Receivables Repayment Agreement dated as of April 29, 2019 (“Trade Receivables Repayment Agreement”). All interests in the Vendor Trust are collateralized by a first lien, with third payment priority, in agreement with applicable intercreditor arrangements, on virtually all tangible and intangible assets of the Company. The applicable interest rate for the vendor trust principal balance is 6.00%, calculated daily from the date of contribution and is non-compounding. The Company determined that the economic substance of the obligations under the Vendor Trust is an in-substance financing.
A total of $111,466 and $111,574 of the Company’s trade payables have been contributed to the Vendor Trust. Accrued interest related to the Vendor Trust aggregated $13,543 and $11,840 as of March 31, 2021 and December 31, 2020, respectively. During the year ended December 31, 2020, the Company made aggregate payments of $4,500 on the Vendor Trust. The Vendor Trust also includes approximately $23,000 and $25,000 of purchase orders related to goods and services to be provided by certain vendors at March 31, 2021 and 2020, respectively. These vendors did not contribute any receivables into the Vendor Trust related to these purchase orders as the services are to be provided at a future date. As such, the Company may cancel the vendor’s interest in the Vendor Trust related to these purchase orders until such time that the vendors begin to fulfil the requested goods and services.
On October 30, 2020, the agreement governing the Vendor Trust (the “Vendor Trust Agreement”) was modified to add a conversion feature to allow the conversion of the secured interests in the Vendor Trust into a variable number of SPAC shares if a Qualified SPAC Merger (as defined in the Vendor Trust Agreement) occurs. The Company accounted for this modification as an extinguishment because the conversion feature is substantive as the conversion feature is reasonably possible to be exercised. The conversion feature does not require bifurcation because it is clearly and closely related to the host instrument, since the conversion did not involve a substantial premium or discount. Accretion of the discount created from the gain recorded on extinguishment of $671 was recorded in Interest Expense in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021. The Vendor Trust net carrying value was $110,797 and $110,224, net of remaining discount, as of March 31, 20201 and December 31, 2020, respectively.
F-19
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
10. Vendor Payables in Trust (cont.)
On March 1, 2021, the maturity date of the secured trust interests in the Vendor Trust was extended to the earliest to occur of October 6, 2021, the closing of a Qualified SPAC Merger, a change in control of FF, or an acceleration of the obligations under certain of FF’s other secured financing arrangements. The Trade Receivables Repayment Agreement includes an event of default if a Qualified SPAC Merger does not close by July 27, 2021.
The estimated fair value of the Vendor Trust, using inputs from Level 3 under the fair value hierarchy, is $110,533 and $109,762 as of March 31, 2021 and December 31, 2020, respectively.
11. Commitments and Contingencies
Legal Matters
The Company is, from time to time, subject to claims and disputes arising in the normal course of business. In the opinion of management, while the outcome of any such claims and disputes cannot be predicted with certainty, its ultimate liability in connection with these matters is not expected to have a material adverse effect on the Company’s results of operations.
As of March 31, 2021 and December 31, 2020, the Company accrued contingent liabilities of approximately $6,025 for potential financial exposure related to ongoing legal matters primarily related to breach of contracts and employment matters. As of March 31, 2021 and December 31, 2020, contingent liabilities of $6,025 and $5,025, respectively, were recorded in Accrued Expenses and Other Liabilities on the Company’s Condensed Consolidated Balance Sheets. As of December 31, 2020, non-current contingent liabilities of $1,000 were recorded in Other Liabilities on the Company’s Condensed Consolidated Balance Sheet. These contingent liabilities are related to four legal matters as of March 31, 2021 and December 31, 2020, that have been determined to be both probable of loss and reasonably estimable.
12. Preferred and Ordinary Stock
The number of authorized, issued and outstanding stock, liquidation value and carrying value as of March 31, 2021 and December 31, 2020, were as follows:
|
March 31, 2021 |
||||||||||
|
Authorized |
Issued and |
Liquidation |
Carrying |
|||||||
|
Redeemable Preference Stock |
470,588,235 |
470,588,235 |
$ |
800,000 |
$ |
724,823 |
||||
|
Class B Preferred Stock |
452,941,177 |
452,941,177 |
|
1,106,988 |
|
697,643 |
||||
|
Class A-1 Preferred Stock |
87,617,555 |
— |
|
— |
|
— |
||||
|
Class A-2 Preferred Stock |
158,479,868 |
— |
|
— |
|
— |
||||
|
Class A-3 Preferred Stock |
1,475,147 |
— |
|
— |
|
— |
||||
|
Class A Ordinary Stock |
665,209,680 |
50,113,600 |
|
— |
|
— |
||||
|
Class B Ordinary Stock |
180,000,000 |
150,052,834 |
|
— |
|
1 |
||||
|
2,016,311,662 |
1,123,695,846 |
$ |
1,906,988 |
$ |
1,422,467 |
|||||
F-20
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
12. Preferred and Ordinary Stock (cont.)
|
December 31, 2020 |
||||||||||
|
Authorized |
Issued and |
Liquidation |
Carrying |
|||||||
|
Redeemable Preference Stock |
470,588,235 |
470,588,235 |
$ |
800,000 |
$ |
724,823 |
||||
|
Class B Preferred Stock |
600,000,000 |
452,941,177 |
|
1,106,988 |
|
697,643 |
||||
|
Class A Ordinary Stock |
400,000,000 |
41,234,448 |
|
— |
|
— |
||||
|
Class B Ordinary Stock |
180,000,000 |
147,058,823 |
|
— |
|
1 |
||||
|
1,650,588,235 |
1,111,822,683 |
$ |
1,906,988 |
$ |
1,422,467 |
|||||
Upon the effectiveness of the Seventh Amended and Restated Articles of Association of the Company on January 27, 2021, the number of shares of capital stock that are authorized to be issued increased to 2,016,311,662, due to the Company authorizing additional shares of Class A Ordinary Stock and the following new classes of preferred stock: 87,617,555 Class A-1 Preferred Stock with par value of $0.00001 per share; 158,479,868 Class A-2 Preferred Stock with par value of $0.00001 per share; 1,475,147 Class A-3 Preferred Stock with par value of $0.00001 per share (collectively “Class A preferred stock”).
The rights, privileges, and preferences of the Company’s Class A preferred stock as set forth in the Company’s Seventh Amended and Restated Articles of Association are as follows:
Voting
The holders of Class A preferred stock are entitled to one vote for each share held by such holder.
Conversion
The Class A preferred stock is convertible into Class A ordinary stock on a one-to-one basis at the option of holders of Class A preferred stock at any time upon written notice to the Company. In connection with the Merger, the Class A preferred stock will be automatically converted into the class of common stock held by the public in the Merger.
Liquidation
In the event of any liquidation or deemed liquidation event such as dissolution, winding up, or loss of control, either voluntary or involuntary, after the Redeemable Preference Shares have been redeemed and paid in full, the holders of Class A preferred stock are entitled to receive, cash, pari passu with the holders of the Class B Preferred Shares and prior and in preference to any payment or distribution and setting apart for payment or distribution of any of the assets or surplus funds of the Company to the holders of any Ordinary Shares, in an amount equal to the greater of (a) $1.67, $1.96, and $1.715 per share for the Class A-1, Class A-2, and Class A-3 Preferred Stock, respectively, plus any declared but unpaid dividends on each such Class A Preferred Stock, or (b) the aggregate amount payable in a liquidation to the Class A preferred stock assuming the Class A Preferred Stock had been converted into the Ordinary Stock of the Company prior to such liquidation.
No Class A Preferred Stock had been issued as of March 31, 2021.
F-21
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
13. Stock-Based Compensation
As of March 31, 2021, the Company had 25,101,451 shares of Class A ordinary stock available for future issuance under its Equity Incentive Plan and The Special Talent Incentive Plan (“STI Plan”).
2018 Stock Incentive Plan
On February 1, 2018, the Board of Directors adopted the Equity Incentive Plan (“Equity Incentive Plan”), under which the Board of Directors authorized the grant of up to 300,000,000 incentive and nonqualified stock options, restricted stock, unrestricted stock, restricted stock units, and other stock-based awards for ordinary stock to employees, directors, and non-employees.
A summary of the Company’s stock option activity under the Equity Incentive Plan is as follows:
|
Number of |
Weighted |
Weighted |
Aggregate |
||||||||
|
Outstanding as of December 31, 2020 |
215,769,994 |
|
$ |
0.348 |
8.75 |
$ |
885 |
||||
|
Granted |
19,740,750 |
|
|
0.391 |
|
||||||
|
Exercised |
(9,137,538 |
) |
|
0.306 |
|
||||||
|
Expired/forfeited |
(1,588,257 |
) |
|
0.339 |
|
||||||
|
Outstanding as of March 31, 2021 |
224,784,949 |
|
$ |
0.353 |
8.52 |
$ |
147,336 |
||||
The weighted-average assumptions used in the Black-Scholes option pricing model for the three months ended March 31, 2021 are as follows:
|
March 31, |
||||
|
Risk-free interest rate: |
|
0.33 |
% |
|
|
Expected term (in years): |
|
4.16 |
|
|
|
Expected volatility: |
|
40.91 |
% |
|
|
Dividend yield: |
|
0.00 |
% |
|
|
Grant date fair value per share: |
$ |
0.391 |
|
|
As of March 31, 2021, the total remaining stock-based compensation expense for unvested stock options was $13,557, which is expected to be recognized over a weighted average period of 3.2 years.
2019 Special Talent Incentive Plan
(“STI Plan”) allows the Board of Directors to grant up to 100,000,000 incentive and nonqualified stock options, restricted shares, unrestricted shares, restricted share units, and other stock-based awards for ordinary stock to employees, directors, and non-employees.
The STI Plan does not specify a limit on the number of stock options that can be issued under the plan. Per the terms of the STI Plan, the Company shall at all times reserve and keep available such number of shares as shall be sufficient to satisfy the requirements of the STI Plan.
F-22
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
13. Stock-Based Compensation (cont.)
On January 27, 2021, in conjunction with entering into a service agreement with its lessor of the facility located in Hanford, California, the Company issued an option agreement allowing an aggregate amount of 2,827,695 shares of Class A Ordinary Stock under the STI Plan. The option will vest in full on January 27, 2022. Should the option be exercised, the accrued outstanding rent payments as of December 31, 2020 of $995 shall be deemed paid. In the event that the value of the option is less than the amount of accrued outstanding rent payments owed, the Company will pay the lessor the difference in a single cash payment.
A summary of the Company’s stock option activity under the STI Plan is as follows:
|
Number of |
Weighted |
Weighted |
Aggregate |
||||||||
|
Outstanding as of December 31, 2020 |
45,932,116 |
|
$ |
0.353 |
9.26 |
|
1,174 |
||||
|
Granted |
2,827,695 |
|
$ |
0.379 |
— |
|
— |
||||
|
Exercised |
— |
|
|
— |
— |
|
— |
||||
|
Expired/forfeited |
(250,000 |
) |
|
0.360 |
— |
|
— |
||||
|
Outstanding as of March 31, 2021 |
48,509,811 |
|
$ |
0.360 |
8.11 |
$ |
24,932 |
||||
The weighted-average assumptions used in the Black-Scholes option pricing model are as follows:
|
March 31, |
||||
|
Risk-free interest rate: |
|
1.04 |
% |
|
|
Expected term (in years): |
|
10 |
|
|
|
Expected volatility: |
|
39.75 |
% |
|
|
Dividend yield: |
|
0.00 |
% |
|
|
Grant date fair value per share: |
$ |
0.62 |
|
|
As of March 31, 2020, the total remaining stock-based compensation expense for unvested stock options was $1,777, which is expected to be recognized over a weighted average period of approximately one year.
The following table presents stock-based compensation expense included in each respective expense category in the unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss for the three months ended March 31:
|
2021 |
2020 |
|||||
|
Research and development |
$ |
591 |
$ |
144 |
||
|
Sales and marketing |
|
199 |
|
55 |
||
|
General and administrative |
|
1,730 |
|
568 |
||
|
$ |
2,520 |
$ |
767 |
|||
F-23
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
14. Net Loss per Share
Net Loss Per Share Attributable to Ordinary Stockholders
The Company has two classes of participating securities (Redeemable Preference Stock and Class B Preferred Stock) issued and outstanding as of March 31, 2021 and 2020. Losses are not attributed to the participating security as the Redeemable Preference Stock and Class B Convertible Preferred stockholders are not contractually obligated to share in the Company’s losses. The Redeemable Preference Stock participation rights are contingent in the event the Redeemable Preference Stock consents to a dividend distribution, which no consent has been provided through March 31, 2021. The Class B Preferred Stock participation rights are contingent on the redemption of the Redeemable Preference Stock, which has not been satisfied as of March 31, 2021.
Basic net loss attributable to ordinary stockholders per share is calculated by dividing net loss attributable to ordinary stockholders by the weighted-average number of ordinary shares outstanding.
Diluted net loss per share attributable to ordinary stockholders adjusts the basic net loss per share attributable to ordinary stockholders and the weighted-average number of shares of ordinary stock outstanding for the potentially dilutive impact of stock options using the treasury stock method.
The net loss per ordinary share was the same for the Class A and Class B ordinary shares because they are entitled to the same liquidation and dividend rights and are therefore, combined on the unaudited Condensed Consolidated Statements of Operations and Comprehensive loss for the three months ended March 31, 2021 and 2020.
Because the Company reported net losses for all periods presented, all potentially dilutive ordinary stock equivalents are antidilutive for those periods and have been excluded from the calculation of net loss per share.
The following table presents the number of anti-dilutive shares excluded from the calculation of diluted net loss per share as of the following dates:
|
March 31, |
March 31, |
|||
|
Stock-based compensation awards – employees |
224,784,949 |
151,330,989 |
||
|
Stock-based compensation awards – non-employees |
48,509,811 |
15,983,500 |
||
|
Warrants |
4,367,601 |
— |
||
|
Redeemable Preference Stock |
470,588,235 |
470,588,235 |
||
|
Class B Convertible Preferred Stock |
452,941,177 |
452,941,177 |
||
|
Total |
1,200,191,773 |
1,090,843,901 |
15. Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited Condensed Consolidated Financial Statements were available to be issued on May 28, 2021. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited Condensed Consolidated Financial Statements.
Conversion of Related Party Notes Payable and Notes Payable
The Company signed agreements with certain of its related party notes payable and notes payable holders to convert related party notes payable and notes payable with aggregating principal amounts of $194,810, into 57,513,412 shares of Class A-1 Preferred Shares with a conversion price of $1.67 per share and 87,003,529 shares of A-2 Preferred Shares with a conversion price of $1.96 per share. The shares will convert into shares of the newly registered company after the consummation of the Business Combination with a conversion price of $10 per share.
F-24
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
15. Subsequent Events (cont.)
Events Subsequent to the Original Issuance of Condensed Consolidated Financial Statements
In connection with the reissuance of the Condensed Consolidated Financial Statements, the Company has evaluated subsequent events through June 23, 2021, the date the Condensed Consolidated Financial Statements were available to be reissued.
Termination of Interests in the Vendor Trust
On June 7, 2021, the Company entered into agreements with two vendors to terminate those vendors’ interests in the Vendor Trust and settled $5,157 of payables owed to those vendors in cash. The vendors’ remaining payables of $18,019 representing the vendors’ interests in the Vendor Trust is payable in cash only in the event the Qualified SPAC Merger closes by July 31, 2021 otherwise the payables remain in the Vendor Trust under the terms of the Vendor Trust Agreement.
In conjunction with the June 9, 2021 amendment of the NPA, the Company agreed to designate $10,000, payable at the election of the Vendor Trust upon closing of the Qualified SPAC Merger, in cash to settle certain interests in the Vendor Trust, instead of converting those interests into equity at the closing of the Qualified SPAC Merger.
Amendment to the NPA
On June 9, 2021, the Company amended the NPA to permit the issuance of two notes payable, each with a principal value of $20,000 (“June 2021 Notes”), to a US-based investment firm. The June 2021 Notes are subordinate to the notes payable issued to Birch Lake on January 13 and March 8, 2021, (See Note 9 — Notes Payable (2)) and the notes payable issued to Ares on March 1, 2021, (See Note 9 - Notes Payable (1)) and senior in priority to the notes payable issued under the NPA prior to September 9, 2020. The June 2021 Notes mature on December 9, 2022, and do not bear interest unless extended beyond its maturity date by the US-based investment firm, in which case, the June 2021 Notes will bear interest at 10% per annum starting upon their maturity. Each of the June 2021 Notes are subject to an original issue discount of 8% and 13%, respectively. The June 2021 Notes contain a liquidation premium that upon a Qualified SPAC Merger the then outstanding principal accrued interest of the notes playable plus a 30% premium will convertible into Class A common shares of the Company. As of June 9, 2021, the Company received net proceeds of $35,603.
As part of the Amendment to the NPA, or prior to the 12-month anniversary of the Qualified SPAC Merger, the US-based investment firm has the option to purchase additional notes for up to $40,000 (“Optional Notes”), subject to similar original issue discounts as the June 2021 Notes. The June 2021 Notes, the Optional Notes, along with the notes previously issued to the same lender, are provided with full ratchet anti-dilution protection.
In connection with the issuance of the June 2021 Notes, the Company issued warrants to the US-based investment firm to purchase up to 5,831,357 of the Company’s Class A common stock for $2.5723 per share (“Exercise Price”) on or before June 9, 2028. Upon the occurrence of (i) a merger of the Company, (ii) a sale of substantially all of the Company’s assets, (iii) a change in control, (iv) a reclassification, reorganization or recapitalization of the Common Stock, or (v) the closing of the Qualified SPAC Merger (collectively, the “Fundamental Transaction”), the warrants shall be exercisable within 15 days and the Exercise Price of the warrants shall be adjusted to equal the lower of (i) $2.5723 per share, (ii) the pre-money valuation ascribed to the Company in connection with the Fundamental Transaction divided by the pro-forma fully diluted capitalization of the Company and (iii) the lowest effective net price per share of Class A common stock paid for by any third party at the time of, or in connection with, the Fundamental Transaction. The Optional Notes are entitled to warrants with the same terms as the June 2021 Notes once the Optional Notes are issued.
F-25
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Defined terms included below have the same meaning as terms defined and included in the Proxy Statement.
PSAC is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information presents the combination of the financial information of PSAC and FF adjusted to give effect to the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”
The historical financial information of PSAC was derived from the unaudited condensed financial statements of PSAC as of March 31, 2021 and for the three months ended March 31, 2021 and the period from February 11, 2020 (Inception) through March 31, 2020, and from the audited financial statements of PSAC as of December 31, 2020 and for the period from February 11, 2020 (inception) through December 31, 2020, incorporated by reference into this Form 8-K from the Proxy Statement. The historical financial information of FF was derived from the unaudited condensed consolidated financial statements of FF as of March 31, 2021 and for the three months ended March 31, 2021 and 2020, and from the audited consolidated financial statements of FF as of December 31, 2020 and for the years ended December 31, 2020 and 2019, incorporated by reference into this Form 8-K from the Proxy Statement. This information should be read together with PSAC’s and FF’s unaudited condensed financial statements and audited financial statements and related notes, the sections titled “PSAC’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “FF’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information incorporated by reference into this Form 8-K from the Proxy Statement.
The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, PSAC will be treated as the “accounting acquiree” and FF as the “accounting acquirer” for financial reporting purposes. FF was determined to be the accounting acquirer primarily because FF stakeholders will collectively own a majority of the outstanding shares of the combined company as of the closing of the merger (67.2% after redemptions of public stockholders of PSAC, see the pro forma common shares table below), FF management have nominated seven of the nine board of directors as of the closing of the merger, and FF’s management will continue to manage the combined company. Additionally, FF’s business will comprise the ongoing operations of the combined company immediately following the consummation of the Business Combination. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of FF issuing shares for the net assets of PSAC, followed by a recapitalization. Accordingly, the consolidated assets, liabilities, and results of operations of FF will become the historical financial statements of New FF, and PSAC’s assets, liabilities and results of operations will be consolidated with FF beginning on the acquisition date.
The unaudited pro forma condensed combined balance sheet as of March 31, 2021 assumes that the Business Combination and related transactions occurred on March 31, 2021. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 and for the year ended December 31, 2020 gives pro forma effect to the Business Combination and related transactions as if they had occurred on January 1, 2020. FF and PSAC have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
These unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would have been obtained had the Business Combination and related transactions actually been completed on the assumed date or for the periods presented, or which may be realized in the future. The pro forma adjustments are based on the information currently available and the assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. New FF will incur additional costs after the Business Combination in order to satisfy its obligations as an SEC-reporting public company.
1
The Business Combination and Related Transactions
The aggregate merger consideration for the Business Combination will be $2,286.0 million, payable in the form of shares of PSAC’s common stock valued at $10.00 per share, as well as contingent consideration of up to 25,000,000 additional shares of Class A common stock in the aggregate in two equal tranches upon the occurrence of each Earnout Triggering Event (the “Earnout Shares”):
| ● | The minimum earnout of 12,500,000 additional shares is triggered if the surviving company common stock VWAP is greater than $13.50 for any period of twenty (20) trading days out of thirty (30) consecutive trading days (the “Minimum Target Shares”); |
| ● | The maximum earnout of an additional 12,500,000 additional shares is triggered if the surviving company common stock VWAP is greater than $15.50 for any period of twenty (20) trading days out of thirty (30) consecutive trading days, (the “Maximum Target Shares”) plus the Minimum Target Shares, if not previously issued |
The Earnout Shares will be recognized at fair value upon the closing of the Business Combination and classified in stockholders’ equity. Because the Business Combination is accounted for as a reverse recapitalization, the issuance of the Earnout Shares will be treated as a deemed dividend and since FF does not have retained earnings, the issuance will be recorded within additional-paid-in-capital (“APIC”) and have a net nil impact on APIC. FF determined the fair value of the Earnout Shares to be approximately $268.7 million based on a valuation using a Monte Carlo simulation with key inputs and assumptions such as stock price, term, dividend yield, risk-free rate, and volatility. The fair value of the Earnout Shares are subject to change as additional information becomes available and additional analyses are performed over the fair value upon the closing of the Business Combination and such changes in fair value could be different from the preliminary estimated fair value. The unaudited pro forma condensed combined financial statements do not reflect pro forma adjustments related to the recognition of the Earnout Shares because there is no net impact on stockholders’ equity on a pro forma combined basis.
Upon the terms and subject to the conditions set forth in the Merger Agreement, at the Closing, PSAC, Merger Sub and FF shall cause Merger Sub to be merged with and into FF (the “Merger”), with FF continuing as the surviving company under the Companies Act (which is sometimes hereinafter referred to for the periods at and after the Effective Time as the “Surviving Company”) following the Merger, being a wholly-owned subsidiary of Acquiror and the separate corporate existence of Merger Sub shall cease. The Merger shall be consummated in accordance with the Merger Agreement and the Companies Act. The pro forma adjustments giving effect to the Business Combination and related transactions are summarized below, and are discussed further in the footnotes to these unaudited pro forma condensed combined financial statements:
| ● | the merger of Merger Sub, a wholly-owned subsidiary of PSAC, with and into FF, with FF continuing as the surviving company; |
| ● | the consummation of the Business Combination and reclassification of cash held in PSAC’s trust account to cash and cash equivalents, net of redemptions (see below); |
| ● | the consummation of the Private Placement; |
| ● | the repayment of FF liabilities and the conversion of certain FF liabilities to equity; |
| ● | the conversion of the Redeemable Preference Shares and Class B Preferred Shares (“FF Preferred Stock”) to permanent equity; |
| ● | the accounting for transaction costs incurred by both PSAC and FF; and |
| ● | the issuance of equity awards to FF employees. |
2
The unaudited pro forma condensed combined financial information also reflects the redemption into cash of PSAC’s common stock by public stockholders of PSAC who elected to exercise their redemption rights for a total of 20,600 shares and an aggregate payment of $0.2 million.
The existing FF stakeholders will hold 217,954,597 of the Class A and Class B public shares immediately after the Business Combination, which approximates a 67.2% ownership level. The following summarizes the pro forma common shares outstanding (excluding the potential dilutive effect of warrants and the Earnout Shares as further described in Note 4):
| Class A Shares | Class B Shares | % | ||||||||||
| Stockholders | ||||||||||||
| Former FF stakeholders | 153,954,009 | 64,000,588 | 67.2 | % | ||||||||
| Private Shares(1) | 6,618,943 | — | 2.0 | % | ||||||||
| Riverside Management Group (RMG) Fee(2) | 690,000 | — | 0.2 | % | ||||||||
| PSAC public stockholders | 22,956,968 | — | 7.1 | % | ||||||||
| Private Placement | 76,140,000 | — | 23.5 | % | ||||||||
| Total shares of FF common stock outstanding at closing of the Transaction | 260,359,920 | 64,000,588 | 100.0 | % | ||||||||
| (1) | PSAC equity known as the Founder’s Shares and the private units, which include Representative Shares and Private Placement Units issued by PSAC. |
| (2) | Equity issued to RMG in exchange for services as financial partner and advisor to PSAC; but excludes the shares being issued to RMG of which an equal amount of shares of the Sponsor are being forfeited. |
3
The following unaudited pro forma condensed combined balance sheet as of March 31, 2021 and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2021 and for the year ended December 31, 2020 are based on the historical financial statements of PSAC and FF. The unaudited pro forma adjustments are based on information currently available, assumptions, and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(in thousands, except share data)
| As of March 31, 2021 | As of March 31, 2021 | |||||||||||||||||
| FF (Historical) | Property Solutions Acquisition Corp. (Historical) | Transaction Accounting Adjustments | Pro Forma Combined | |||||||||||||||
| Assets | ||||||||||||||||||
| Current assets: | ||||||||||||||||||
| Cash | $ | 47,525 | $ | 220 | $ | 229,781 | 3A | $ | 703,425 | |||||||||
| 761,400 | 3D | |||||||||||||||||
| (219,228 | ) | 3E | ||||||||||||||||
| (56,061 | ) | 3I | ||||||||||||||||
| (24,840 | ) | 3I | ||||||||||||||||
| (1,900 | ) | 3J | ||||||||||||||||
| (33,266 | ) | 3F | ||||||||||||||||
| (206 | ) | 3B | ||||||||||||||||
| Restricted cash | 5,721 | — | 5,721 | |||||||||||||||
| Deposits | 7,854 | — | 7,854 | |||||||||||||||
| Prepaid expenses and other current assets | 6,680 | 158 | 6,838 | |||||||||||||||
| Total current assets | 67,780 | 378 | 655,680 | 723,838 | ||||||||||||||
| Property and equipment, net | 286,919 | — | (170 | ) | 3F | 286,749 | ||||||||||||
| Cash and marketable securities held in Trust Account | — | 229,781 | (229,781 | ) | 3A | — | ||||||||||||
| Other non-current assets | 11,070 | — | (6,939 | ) | 3I | 4,131 | ||||||||||||
| Total assets | $ | 365,769 | $ | 230,159 | $ | 418,790 | $ | 1,014,718 | ||||||||||
| Liabilities and stockholders’ (deficit) equity | ||||||||||||||||||
| Current liabilities: | ||||||||||||||||||
| Accounts payable | $ | 80,123 | $ | — | $ | (70,553 | ) | 3E | $ | 7,255 | ||||||||
| (2,315 | ) | 3F | ||||||||||||||||
| Accrued expenses and other current liabilities | 51,002 | 1,992 | (39,373 | ) | 3E | 11,721 | ||||||||||||
| (1,900 | ) | 3J | ||||||||||||||||
| Related party accrued interest | 87,508 | — | (10,484 | ) | 3E | 1,136 | ||||||||||||
| (75,888 | ) | 3F | ||||||||||||||||
| Accrued interest | 45,256 | — | (44,630 | ) | 3F | 626 | ||||||||||||
| Related party notes payable | 298,667 | 500 | (37,308 | ) | 3E | 5,024 | ||||||||||||
| (257,270 | ) | 3F | ||||||||||||||||
| 386 | 3F | |||||||||||||||||
| 49 | 3F | |||||||||||||||||
| Notes payable, current portion | 285,559 | — | (61,510 | ) | 3E | 66,073 | ||||||||||||
| (158,120 | ) | 3F | ||||||||||||||||
| 144 | 3F | |||||||||||||||||
| Vendor payables in trust | 110,797 | — | (76,421 | ) | 3F | 264 | ||||||||||||
| (33,266 | ) | 3F | ||||||||||||||||
| (170 | ) | 3F | ||||||||||||||||
| (676 | ) | 3F | ||||||||||||||||
| Total current liabilities | 958,912 | 2,492 | (869,305 | ) | 92,099 | |||||||||||||
| Capital leases, less current portion | 36,023 | — | 36,023 | |||||||||||||||
| Other liability, less current portion | 6,000 | — | 6,000 | |||||||||||||||
| Notes payable, less current portion | 9,168 | — | 9,168 | |||||||||||||||
| Warrant Liability | 1,593 | 1,593 | ||||||||||||||||
| Total liabilities | $ | 1,010,103 | $ | 4,085 | $ | (869,305 | ) | $ | 144,883 | |||||||||
| Commitments and contingencies (Note 11) | ||||||||||||||||||
| Redeemable convertible preferred stock, $0.00001 par value; 470,588,235 shares authorized, issued and outstanding as of March 31, 2021; redemption amount of $800,000 as of March 31, 2021 | 724,823 | — | (724,823 | ) | 3G | — | ||||||||||||
4
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET — (Continued)
(in thousands, except share data)
| As of March 31, 2021 | As of March 31, 2021 | |||||||||||||||||
| FF (Historical) | Property Solutions Acquisition Corp. (Historical) | Transaction Accounting Adjustments | Pro Forma Combined | |||||||||||||||
| Class B convertible preferred stock, $0.00001 par value; 600,000,000 shares authorized, 452,941,177 issued and outstanding as of March 31, 2021; redemption amount of $1,106,988 as of March 31, 2021 | 697,643 | — | (697,643 | ) | 3G | — | ||||||||||||
| Common stock subject to possible redemption, 22,103,036 shares at redemption value | — | 221,073 | (221,073 | ) | 3C | — | ||||||||||||
| Stockholders’ (deficit) equity: | ||||||||||||||||||
| Preferred stock, $0.0001 par value; 10,000,000 shares authorized; none issued and outstanding | — | — | — | |||||||||||||||
| Class A Common stock, $0.0001 par value; 750,000,000 shares authorized | 1 | 2 | 3C | 9 | ||||||||||||||
| 4 | 3F | |||||||||||||||||
| 1 | 3H | |||||||||||||||||
| 1 | 3G | |||||||||||||||||
| Class B Common stock, $0.0001 par value; 10,000,000 shares authorized | — | — | 1 | 3F | 1 | |||||||||||||
| Class A ordinary stock, $0.00001 par value; 400,000,000 shares authorized; 50,113,600 shares issued and outstanding as of March 31, 2021 | — | — | — | |||||||||||||||
| Class B ordinary stock, $0.00001 par value; 180,000,000 shares authorized; 150,052,834 shares issued and outstanding as of March 31, 2021 | 1 | — | (1 | ) | 3H | — | ||||||||||||
| — | 3G | |||||||||||||||||
| Additional paid-in capital | 405,329 | 9,402 | 724,822 | 3G | 3,445,304 | |||||||||||||
| 697,643 | 3G | |||||||||||||||||
| 221,071 | 3C | |||||||||||||||||
| (4,402 | ) | 3H | ||||||||||||||||
| 761,400 | 3D | |||||||||||||||||
| (63,000 | ) | 3I | ||||||||||||||||
| 614,639 | 3F | |||||||||||||||||
| 6,900 | 3K | |||||||||||||||||
| 16,136 | 3L | |||||||||||||||||
| 55,571 | 3M | |||||||||||||||||
| (206 | ) | 3B | ||||||||||||||||
| Accumulated other comprehensive loss | (5,466 | ) | — | (5,466 | ) | |||||||||||||
| Accumulated deficit | (2,466,664 | ) | (4,402 | ) | 4,402 | 3H | (2,570,013 | ) | ||||||||||
| (24,840 | ) | 3I | ||||||||||||||||
| (49 | ) | 3F | ||||||||||||||||
| (16,136 | ) | 3L | ||||||||||||||||
| (6,900 | ) | 3K | ||||||||||||||||
| 146 | 3F | |||||||||||||||||
| (55,571 | ) | 3M | ||||||||||||||||
| Total stockholders’ (deficit) equity | (2,066,800 | ) | 5,001 | 2,931,634 | 869,835 | |||||||||||||
| Total liabilities, preferred stock, and stockholders’ (deficit) equity | 365,769 | 230,159 | 418,790 | 1,014,718 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial information.
5
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands, except share and per share data)
| Three Months Ended March 31, 2021 | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2021 | ||||||||||||||||
| FF (Historical) | Property Solutions Acquisition Corp. (Historical) | Transaction Accounting Adjustments | Pro Forma Combined | |||||||||||||||
| Operating expenses | ||||||||||||||||||
| Operating costs | $ | — | $ | 885 | $ | — | $ | 885 | ||||||||||
| Research and development | 6,721 | 6,721 | ||||||||||||||||
| Sales and marketing | 1,682 | 1,682 | ||||||||||||||||
| General and administrative | 10,993 | — | — | 10,993 | ||||||||||||||
| Loss on disposal of property and equipment | — | — | ||||||||||||||||
| Total operating expenses | 19,396 | 885 | — | 20,281 | ||||||||||||||
| Loss from operations | (19,396 | ) | (885 | ) | (20,281 | ) | ||||||||||||
| Change in fair value measurement of related party notes payable, notes payable, and warrant liabilities | (25,182 | ) | — | 25,182 | 3GG | — | ||||||||||||
| Change in fair value measurement of The9 Conditional Obligation | (1,735 | ) | — | 1,735 | 3HH | — | ||||||||||||
| Change in fair value of warrants | — | (963 | ) | (963 | ) | |||||||||||||
| Transaction costs | — | — | ||||||||||||||||
| Other expense, net | (283 | ) | — | 754 | 3JJ | 471 | ||||||||||||
| Interest earned on marketable securities held in Trust Account | — | 31 | (31 | ) | 3AA | — | ||||||||||||
| Unrealized gain on marketable securities held in Trust Account | — | — | — | 3AA | — | |||||||||||||
| Related party interest expense | (9,070 | ) | — | 7,903 | 3BB | (1,167 | ) | |||||||||||
| Interest expense | (19,856 | ) | — | 14,322 | 3BB | (5,534 | ) | |||||||||||
| Loss before income taxes | (75,522 | ) | (1,817 | ) | 49,865 | (27,474 | ) | |||||||||||
| Income tax provision | (3 | ) | — | — | 3DD | (3 | ) | |||||||||||
| Net loss | $ | (75,525 | ) | $ | (1,817 | ) | $ | 49,865 | $ | (27,477 | ) | |||||||
| Basic and diluted net loss per share, Common stock subject to possible redemption | $ | — | ||||||||||||||||
| Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption | 22,103,036 | |||||||||||||||||
| Net loss per share of common stock – basic and diluted | $ | (0.25 | ) | |||||||||||||||
| Weighted average shares of common stock outstanding – basic and diluted | 7,227,474 | |||||||||||||||||
| Net loss per share – Class A and Class B – basic and diluted | $ | (0.38 | ) | $ | (0.08 | ) | ||||||||||||
| Weighted average shares outstanding – Class A and Class B – basic and diluted | 198,359,348 | 126,001,160 | 4 | 324,360,508 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial information.
6
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS — (Continued)
(in thousands, except share and per share data)
| Year Ended December 31, 2020 | Period From February 11, 2020 (Inception) Through December 31, 2020 | Year Ended December 31, 2020 | ||||||||||||||||
| FF (Historical) | Property Solutions Acquisition Corp. (Historical Restated) | Transaction Accounting Adjustments | Pro Forma Combined | |||||||||||||||
| Operating expenses | ||||||||||||||||||
| Operating costs | $ | — | $ | 2,218 | $ | — | $ | 2,218 | ||||||||||
| Research and development | 20,186 | 20,186 | ||||||||||||||||
| Sales and marketing | 3,672 | 3,672 | ||||||||||||||||
| General and administrative | 41,071 | — | 24,840 | 3CC | 88,947 | |||||||||||||
| 6,900 | 3EE | |||||||||||||||||
| 16,136 | 3FF | |||||||||||||||||
| Loss on disposal of property and equipment | 10 | 10 | ||||||||||||||||
| Total operating expenses | 64,939 | 2,218 | 47,876 | 115,033 | ||||||||||||||
| Loss from operations | (64,939 | ) | (2,218 | ) | (47,876 | ) | (115,033 | ) | ||||||||||
| Change in fair value measurement of related party notes payable and notes payable | (8,948 | ) | — | 8,948 | 3GG | — | ||||||||||||
| Change in fair value measurement of The9 Conditional Obligation | 3,872 | (3,872 | ) | 3HH | — | |||||||||||||
| Gain (loss) on extinguishment of related party notes payable, notes payable and vendor payables in trust, net | 2,107 | (55,961 | ) | 3II | (53,854 | ) | ||||||||||||
| Change in fair value of warrants | (476 | ) | (476 | ) | ||||||||||||||
| Other expense, net | (5,455 | ) | — | 4,055 | 3JJ | (1,400 | ) | |||||||||||
| Interest earned on marketable securities held in Trust Account | — | 100 | (100 | ) | 3AA | — | ||||||||||||
| Unrealized gain on marketable securities held in Trust Account | — | 9 | (9 | ) | 3AA | — | ||||||||||||
| Related party interest expense | (38,995 | ) | — | 38,625 | 3BB | (370 | ) | |||||||||||
| Interest expense | (34,724 | ) | — | 28,044 | 3BB | (6,680 | ) | |||||||||||
| Loss before income taxes | (147,082 | ) | (2,585 | ) | (28,146 | ) | (177,813 | ) | ||||||||||
| Income tax provision | (3 | ) | — | — | 3DD | (3 | ) | |||||||||||
| Net loss | $ | (147,085 | ) | $ | (2,585 | ) | $ | (28,146 | ) | $ | (177,816 | ) | ||||||
| Basic and diluted net loss per share, Common stock subject to possible redemption | $ | — | ||||||||||||||||
| Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption | 21,779,604 | |||||||||||||||||
| Net loss per share of common stock – basic and diluted | $ | (0.40 | ) | |||||||||||||||
| Weighted average shares of common stock outstanding – basic and diluted | 6,452,794 | |||||||||||||||||
| Net loss per share – Class A and Class B – basic and diluted | $ | (2.99 | ) | $ | (0.55 | ) | ||||||||||||
| Weighted average shares outstanding – Class A and Class B – basic and diluted | 49,261,411 | 275,099,097 | 4 | 324,360,508 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial information.
7
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(in thousands, except share and per share data)
NOTE 1 — BASIS OF PRESENTATION
The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, PSAC will be treated as the “accounting acquiree” and FF as the “accounting acquirer” for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of FF issuing shares for the net assets of PSAC, followed by a recapitalization. The net assets of PSAC will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of FF.
The unaudited pro forma condensed combined balance sheet as of March 31, 2021 assumes that the Business Combination and related transactions occurred on March 31, 2021. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 and for the year ended December 31, 2020 gives pro forma effect to the Business Combination as if it had been completed on January 1, 2020. These periods are presented on the basis that FF is the acquirer for accounting purposes.
The pro forma adjustments reflecting the consummation of the Business Combination and related transactions are based on certain currently available information and certain assumptions and methodologies that PSAC believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. PSAC believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination and related transactions based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information assumes that PSAC’s Private Warrants will be classified as liabilities and PSAC’s Public Warrants will be classified as a component of equity upon completion of the Business Combination.
The Vendor Trust contains interests held by vendors related to approximately $25 million of purchase orders for goods and services not yet provided. Management is currently evaluating with its suppliers and contractors whether these interests will be settled with PSAC equity. Due the uncertainly resulting from the ongoing negotiations, no adjustment has been made in the pro forma financial statements.
The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination and related transactions taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of PSAC and FF.
NOTE 2 — ACCOUNTING POLICIES AND RECLASSIFICATIONS
Upon consummation of the Business Combination, management will perform a comprehensive review of the two entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of the post-combination company. Based on its initial analysis, management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.
As part of the preparation of these unaudited pro forma condensed combined financial statements, certain reclassifications were made to align PSAC’s financial statement presentation with that of FF.
8
NOTE 3 — ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and related transactions and has been prepared for informational purposes only.
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). PSAC has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information. FF and PSAC have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the post-combination company filed consolidated income tax returns during the periods presented. The Company has not reflected the income tax benefit in the pro forma statement of operations, as the Company does not believe that the income tax benefit is realizable and records a full valuation allowance against all deferred tax assets.
The unaudited pro forma condensed combined financial statements do not reflect pro forma adjustments related to the recognition of the Earnout Shares because there is no net impact on stockholders’ equity on a pro forma combined basis.
The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of FF’s shares outstanding, assuming the Business Combination and related transactions occurred on January 1, 2020.
Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
The adjustments included in the unaudited pro forma condensed combined balance sheet as of March 31, 2021 are as follows:
| (A) | Reflects the reclassification of $229.8 million held in PSAC’s trust account to cash and cash equivalents. | |
| (B) | Reflects the reduction in cash and PSAC’s additional-paid-in-capital in the amount of $0.2 million related to the redemption of 20,600 PSAC public stockholders. | |
| (C) | Reflects the reclassification of PSAC’s common stock subject to possible redemption into permanent equity. | |
| (D) | Reflects cash proceeds from the concurrent Private Placement in the amount of $761.4 million and corresponding offset to additional-paid-in-capital. | |
| (E) | Reflects the repayment of $219.2 million of FF liabilities at the time of closing are comprised of the following: |
| ● | related party notes payable of $37.3 million and related accrued interest of $10.5 million; | |
| ● | notes payable of $61.5 million (principal payment only); | |
| ● | accrued employee back payments of $16.4 million; and |
| ● | vendor payments of $93.5 million, of which $70.5 million reduce accounts payable and $23.0 million reduce accrued expenses and other current liabilities. |
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| (F) | Reflects the conversion of $614.6 million of FF liabilities into fully vested shares of PSAC common stock, the elimination of the unaccreted discount of approximately $1.6 million, the forgiveness of $1.9 million of vendor payables in trust, and the settlement of $33.3 million of vendor payables in trust with cash. The liabilities of FF as of March 31, 2021 which will convert to equity at the time of closing are comprised of the following: |
| ● | related party notes payable of $257.2 million, net of approximately $0.4 million unaccreted discount which was expensed and recorded in accumulated deficit and the related accrued interest of $76.0 million; |
| ● | notes payable of $158.1 million, net of $0.1 million of unaccreted discount which was expensed and recorded in accumulated deficit and the related accrued interest of $31.1 million; |
| ● | vendor payables in trust of $90.0 million, net of (i) $1.0 million of unaccreted discount which was recorded in accumulated deficit, (ii) $1.9 million of payables forgiven after the balance sheet date and prior to the closing of the Business Combination (see 3II for additional details) of which $1.7 million was recorded in accumulated deficit and $0.2 million was recorded as a reduction of property and equipment, and (iii) $33.3 million of vendor payables in trust that will be settled in cash, as well as related accrued interest of $13.5 million; and |
| ● | critical vendors of $2.3 million. |
Using an exchange ratio of 0.14130, the $614.6 million of FF liabilities will convert into approximately 54.8 million PSAC shares upon the consummation of the Qualified SPAC Merger.
| (G) | Reflects the conversion of the FF Preferred Stock into permanent equity in accordance with the Business Combination Agreement. |
| (H) | Reflects the elimination of PSAC’s retained earnings and FF’s par value of common shares upon consummation of the Business Combination. |
| (I) | Reflects an adjustment of $80.9 million to reduce cash and $6.9 million to reduced deferred offering costs for transaction costs expected to be incurred by PSAC and FF in relation to the Business Combination and Private Placement, including advisory, banking, printing, legal and accounting services. As part of the Business Combination, $24.8 million was expensed and recorded in accumulated deficit, and the remaining $63.0 million was determined to be equity issuance costs and offset to additional-paid-in-capital. |
| (J) | Reflects the settlement of $1.9 million of accrued offering cost incurred during the PSAC IPO due upon completion of the business combination. |
| (K) | Reflects the issuance of PSAC equity shares to Riverside for management fees. |
| (L) | Reflects the issuance of $16.1 million of fully vested equity awards issued to employees upon consummation of the Business Combination as compensation for prior service. |
| (M) | Reflects a loss on extinguishment of related party notes payable, notes payable and vendor payables in trust, net as a result of certain notes payable and vendor payables settled with PSAC common stock as part of the Business Combination (see tickmark F for the details of the settlement of debt). The settlement of these payables including accrued and unpaid interest was treated as an extinguishment that resulted in a loss because the fair value of the PSAC common stock issued to extinguish the debt exceeded the carrying value of the payables. The loss was calculated using the fair value of the PSAC common stock, which was estimated using the July 16, 2021 closing stock price of $13.26. The loss on extinguishment is reflected as an increase to accumulated deficit and APIC. A 15% increase or decrease in the stock price would change the loss on extinguishment by $33.9 million. The actual loss on extinguishment recorded as of the closing of the Business Combination will be based on the closing stock price as of the closing date. |
Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations
The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 and the year ended December 31, 2020 are as follows:
| (AA) | Elimination of interest income and unrealized gain on the Trust Account. |
| (BB) | Elimination of interest expense which is comprised of ‘third party’ interest expense relating to notes payable and the vendor trust, ‘debt issuance costs’ recorded in interest expense, and related party interest expense on FF liabilities converted to PSAC shares or paid down with cash at the closing of the Business Combination. |
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The remaining interest expense in the Unaudited Pro Forma Condensed Combined Financial Information relates to notes payable that will remain outstanding, capital lease interest, and interest related to accounts payable invoices.
| For the Three Months Ended March 31, 2021 | ||||
| Third Party Interest Expense | $ | 13,397 | ||
| Related Party Interest Expense | 7,903 | |||
| Debt Issuance Costs Recorded in Interest Expense | 925 | |||
| For the Year Ended December 31, 2021 | ||||
| Third Party Interest Expense | $ | 23,482 | ||
| Related Party Interest Expense | 38,625 | |||
| Debt Issuance Costs Recorded in Interest Expense | 4,562 | |||
| (CC) | Reflects the estimated transaction costs of $24.8 million as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statement of operations. This is a non-recurring item. |
| (DD) | The net effect of all adjustments impacting the pro forma statement of operations results in a reduction of the income tax benefit of approximately $6.4 million for the year ended December 31, 2020 and $12.4 million for the three months ended March 31, 2021 based on the application of the blended statutory tax rate of 25%. However, the Company has not reflected the income tax benefit in the pro forma statement of operations, as the Company does not believe that the income tax benefit is realizable and records a full valuation allowance against all deferred tax assets. |
| (EE) | Reflects the expense of $6.9 million related to the issuance of new equity awards related to Riverside management fees. 690,000 Class A shares of PSAC were issued to Riverside in exchange for services as financial partner and advisor to PSAC at $10/share. This is a non-recurring item. |
| (FF) | Reflects the expense of $16.1 million related to the issuance of new equity awards granted to employees upon consummation of the Business Combination. The new equity awards are fully vested and are intended to compensate employees for temporary reductions in salary that occurred prior to the Business Combination. The $16.1 million amount will convert at $10/share into Class A shares of PSAC resulting in the issuance of 1.61 million shares. This is a non-recurring item. |
| (GG) | Elimination of change in fair value measurement of related party notes payable and notes payable. |
| (HH) | Elimination of change in fair value measurement of The9 Conditional Obligation. |
| (II) | Reflects the following adjustments to gain (loss) on extinguishment of related party notes payable, notes payable and vendor payables in trust, net: |
| · | Elimination of historical gain on extinguishment of $2.1 million of related party notes payable, notes payable and vendor payables in trust, net; |
| · | An adjustment to recognize a gain on extinguishment related to vendor payables in trust of $1.7 million that were forgiven after the balance sheet date but prior to the Business Combination. Since this $1.7 million of vendor trust payables were forgiven, these vendor trust payables will not be converted to shares and instead will be recognized as a gain. |
It is noted that there was a total of $1.9 million of vendor trust payables that were forgiven with $0.2 million being recorded as a reduction of property and equipment, net (see 3F); and
| · | Reflects a loss on extinguishment of related party notes payable, notes payable and vendor payables in trust, net in the amount of $55.6 million as a result of certain notes payable and vendor payables, including accrued and unpaid interest being extinguished with PSAC common stock as part of the Business Combination (See 3M). |
| (JJ) | Elimination of change in foreign currency loss related to related party notes payable, notes payable, and vendor payables in trust from other expense. |
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NOTE 4 — EARNINGS PER SHARE
Represents the net earnings per share calculated under the two-class method using the historical weighted average outstanding shares and the issuance of additional shares in connection with the Business Combination and Private Placement, assuming the shares were outstanding since January l, 2020. The Company used the two-class method to compute net income per common share, because it had issued multiple classes of common stock. The two-class method requires earnings for the period to be allocated between multiple classes of common stock based upon their respective rights to receive distributed and undistributed earnings. As the Business Combination and Private Placement are being reflected as if they had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination and Private Placement have been outstanding for the entire period presented. If the maximum number of shares are redeemed, this calculation is retroactively adjusted to eliminate such shares for the entire period.
The unaudited pro forma condensed combined financial information has been prepared for the three months ended March 31, 2021:
| (in thousands, except share data) | ||||||||
| Class A Shares | Class B Shares | |||||||
| Stockholders | ||||||||
| Numerator | ||||||||
| Net loss (in thousands) | $ | (22,055 | ) | $ | (5,422 | ) | ||
| Denominator(1) | ||||||||
| Former FF stakeholders | 153,954,009 | 64,000,588 | ||||||
| Private Shares(3) | 6,618,943 | — | ||||||
| Riverside Management Group (RMG) Fee(2) | 690,000 | — | ||||||
| PSAC public stockholders | 22,956,968 | — | ||||||
| Third party investors in PIPE Investment | 76,140,000 | — | ||||||
| Total shares of FF common stock outstanding at closing of the Transaction | 260,359,920 | 64,000,588 | ||||||
| Net loss per share | ||||||||
| Basic and diluted | $ | (0.08 | ) | $ | (0.08 | ) | ||
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The unaudited pro forma condensed combined financial information has been prepared for the year ended December 31, 2020:
| (in thousands, except share and per share data) | ||||||||
| Class A Shares | Class B Shares | |||||||
| Stockholders | ||||||||
| Numerator | ||||||||
| Net loss (in thousands) | $ | (142,730 | ) | $ | (35,085 | ) | ||
| Denominator(1) | ||||||||
| Former FF stakeholders | 153,954,009 | 64,000,588 | ||||||
| Private Shares(3) | 6,618,943 | — | ||||||
| Riverside Management Group (RMG) Fee(2) | 690,000 | — | ||||||
| PSAC public stockholders | 22,956,968 | — | ||||||
| Third party investors in PIPE Investment | 76,140,000 | — | ||||||
| Total shares of FF common stock outstanding at closing of the Transaction | 260,359,920 | 64,000,588 | ||||||
| Net loss per share | ||||||||
| Basic and diluted | $ | (0.55 | ) | $ | (0.55 | ) | ||
| (1) | Due to the uncertain timing of the Earnout Triggering Events, the denominator excludes the effect of the Earnout Shares |
| (2) | Equity issued to RMG in exchange for services as financial partner and advisor to PSAC but excludes the shares being issued to RMG of which an equal amount of shares of the Sponsor are being forfeited. |
| (3) | PSAC equity known as the Founder’s Shares and the private units, which include Representative Shares and Private Placement Units issued by PSAC. |
PSAC currently has 23,572,119 warrants as of March 31, 2021 and December 31, 2020. Each warrant entitles the holder to purchase one share of common stock at $11.50 per one share. These warrants are not exercisable until 30 days after the closing of the Business Combination. As the combined company is in a loss position in 2021 and 2020, any shares issued upon exercise of these warrants would have an anti-dilutive effect on earnings per share and, therefore, have not been considered in the calculation of pro forma net loss per common share.
FF currently has 2,437,454 warrants as of March 31, 2021 and 1,930,147 warrants as of December 31, 2020. Each warrant entitles the holder to purchase one share of common stock at $2.72 per one share. As the combined company is in a loss position in 2021 and 2020, any shares issued upon exercise of these warrants would have an anti-dilutive effect on earnings per share and, therefore, have not been considered in the calculation of pro forma net loss per common share.
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