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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM
10-K
_________________________
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31
, 2023
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
________
to
________
Commission file number:
001-39160
_________________________
FISKER INC.
(Exact name of registrant as specified in its charter)
_________________________
Delaware 82-3100340
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1888 Rosecrans Avenue 90266
,
Manhattan Beach
,
CA
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code:
(
833
)
434-7537
_________________________
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 of $0.00001 per share FSRN OTC Pink Current Information
Securities registered pursuant to Section 12(g) of the Act: None
_________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes
o
No
x
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes
o
No
x
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes
x
No
o
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T ((s)232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit such files).
Yes
x
No
o
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Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer,"
"accelerated filer," "smaller reporting company," and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer o
Non-accelerated filer Smaller reporting company
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.
o
Indicate by check mark whether the registrant has filed a report on and
attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report.
x
If securities are registered pursuant to Section 12(b) of the Act, indicate by
check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial
statements.
x
(See Note 6. Property and Equipment, net)
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-based compensation received by
any of the registrant's executive officers during the relevant recovery period
pursuant to (s)240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act). Yes
o
No
x
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approxima
t
ely $
1.2
billion as of June 30, 2023 (the last business day of the registrant's most
recently completed second fiscal quarter) based upon the closing sale price on
The New York Stock Exchange reported for such date. Shares of Class A Common
Stock held by each officer and director and by each person who may be deemed
to be an affiliate have been excluded. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
As
of April 15, 2024, the
registrant
had
1,385,486,856
sha
re
s of Class A Common Stock, par value $0.00001 per share and
132,354,128
shares of Class B Common Stock, par value $0.00001 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference certain information from the registrant's
definitive proxy statement (the "Proxy Statement") relating to its 2024 Annual
Meeting of Stockholders. The Proxy Statement will be filed with the U.S.
Securities and Exchange Commission within 120 days after the end of the fiscal
year to which this report relates.
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FISKER INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023
TABLE OF CONTENTS
Page
Cautionary Note Regarding Forward-Looking Statements 1
PART I
Item 1. B 3
usiness.
Item 1A. Risk Factors. 19
Item 1B. Unresolved Staff Comments. 51
Item 1C. C 52
ybersecurity
Item 2. Properties. 53
Item 3. Legal Proceedings. 53
Item 4. Mine Safety Disclosures. 53
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 54
Item 6. [Reserved] 56
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 56
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 68
Item 8. Financial Statements and Supplementary Data. 70
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. 113
Item 9A. Controls and Procedures. 113
Item 9B. Other Information. 115
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections. 115
PART III
Item 10. Directors, Executive Officers and Corporate Governance. 116
Item 11. Executive Compensation. 116
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 116
Item 13. Certain Relationships and Related Transactions, and Director Independence. 116
Item 14. Principal Accountant Fees and Services. 116
PART IV
Item 15. Exhibit and Financial Statement Schedules. 117
Item 16. Form 10-K Summary 121
Signatures 122
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this "report") contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), that are forward-looking and as such
are not historical facts. These forward-looking statements include, without
limitation, statements regarding future financial performance, business
strategies, expansion plans, future results of operations, estimated revenues,
losses, projected costs, prospects, plans and objectives of management. These
forward-looking statements are based on our management's current expectations,
estimates, projections and beliefs, as well as a number of assumptions
concerning future events, and are not guarantees of performance or future
events. Such statements can be identified by the fact that they do not relate
strictly to historical or current facts. When used in this report, words such
as "anticipate," "believe," "continue," "could," "estimate," "expect,"
"intend," "may," "might," "plan," "possible," "potential," "predict,"
"project," "seek," "should," "would" and variations thereof and similar words
and expressions are intended to identify such forward-looking statements, but
the absence of these words does not mean that a statement is not forward-looking
. Forward-looking statements in this report may include, for example,
statements about:
.
our ability to continue as a going concern;
.
our ability to grow and manage growth profitably;
.
our ability to enter into additional manufacturing and other contracts with
Magna, OEMs or tier-one suppliers in order to execute on our business plan;
.
our ability to execute our business model, including market acceptance of our
planned products (e.g., Alaska, PEAR and Ronin) and services;
.
our expansion plans and opportunities;
.
our expectations regarding future expenditures;
.
our ability to raise capital in the future;
.
our ability to attract and retain qualified employees and key personnel;
.
the possibility that we may be adversely affected by other economic, business
or competitive factors;
.
changes in applicable laws or regulations;
.
the outcome of any known and unknown litigation and regulatory proceedings;
.
our transition to a Dealer Partnership model; and
.
other factors described in this report, including those described in the
section entitled "
Risk Factors
" under Part I, Item 1A of this report.
The forward-looking statements contained in this report are based on our
current expectations and beliefs concerning future developments and their
potential effects on our business. There can be no assurance that future
developments affecting our business will be those that we have anticipated.
These forward-looking statements involve a number of risks, uncertainties
(some of which are beyond our control) or other assumptions that may cause
actual results or performance to be materially different from those expressed
or implied by these forward-looking statements. These risks and uncertainties
include, but are not limited to, those factors described in the section
entitled "
Risk Factors
" under Part I, Item 1A of this report. Moreover, we operate in a very
competitive and rapidly changing environment. New risks and uncertainties
emerge from time to time and it is not possible for us to predict all such
risk factors, nor can we assess the effect of all such risk factors on our
business or the extent to which any factor or combination of factors may cause
actual results to differ materially from those contained in any forward-looking
statements. Should one or more of these risks or uncertainties materialize, or
should any of the assumptions prove incorrect, actual results may vary in
material respects from those projected in these forward-looking statements.
The forward-looking statements made by us in this report speak only as of the
date of this report. Except to the extent required under the federal
securities laws and rules and regulations of the U.S. Securities and Exchange
Commission
1
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("SEC"), we disclaim any obligation to update any forward-looking statement to
reflect events or circumstances after the date on which the statement is made
or to reflect the occurrence of unanticipated events. In light of these risks
and uncertainties, there is no assurance that the events or results suggested
by the forward-looking statements will in fact occur, and you should not place
undue reliance on these forward-looking statements.
WEBSITE AND SOCIAL MEDIA DISCLOSURE
We use our website (www.fiskerinc.com) and various social media channels as a
means of disclosing information about the company and its products to its
customers, investors and the public (e.g., @fiskerinc, @fiskerofficial,
#fiskerinc, #henrikfisker and #fisker on Twitter, Facebook, Instagram,
YouTube, TikTok and LinkedIn). The information posted on social media channels
is not incorporated by reference in this report or in any other report or
document we file with the SEC. The information we post through these channels
may be deemed material. Accordingly, investors should monitor these channels,
in addition to following our press releases, SEC filings and public conference
calls and webcasts. In addition, you may automatically receive e-mail alerts
and other information about the Company when you enroll your e-mail address by
visiting the "Investor Email Alerts" section of our website at https://investors
.fiskerinc.com.
ADDITIONAL INFORMATION
Unless the context indicates otherwise, references in this Annual Report on
Form 10-K to the "Company," "Fisker," "we," "us," "our" and similar terms
refer to Fisker Inc. (f/k/a Spartan Energy Acquisition Corp.) and its
consolidated subsidiaries (including Fisker Group Inc. or Legacy Fisker).
References to "Spartan" refer to our predecessor company prior to the
consummation of the Business Combination (as defined below).
2
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PART I
Item 1.
Business.
The following discussion contains forward-looking statements that reflect
future plans, estimates, beliefs and expected performance. The forward-looking
statements are dependent upon events, risks and uncertainties that may be
outside of our control. Our actual results could differ materially from those
discussed in these forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those
identified below and those discussed elsewhere in this Form 10-K, particularly
in Part I, Item 1A, Risk Factors. We do not undertake, and expressly disclaim,
any obligation to publicly update any forward-looking statements, whether as a
result of new information, new developments or otherwise, except to the extent
that such disclosure is required by applicable law.
Our Vision
A clean future for all.
Our Mission
Create the world's most emotional and sustainable vehicles.
Overview
We have built a technology-enabled, capital-light automotive business model
that we believe is among the first of its kind and aligned with the future
state of the automotive industry. This involves innovations in vehicle
development, customer experience, and sales and service that improve the
personal mobility experience through technological innovation, ease of use and
flexibility. Fisker brings the legendary design and product development
expertise of Henrik Fisker - the visionary behind such iconic vehicles as the
BMW Z8 sports car and the famed Aston Martin DB9 and V8 Vantage - to deliver
high quality, sustainable, affordable electric vehicles that create a strong
emotional connection with customers. Central to our business model is the
development of platforms designed with engineering flexibility for high
content carryover to reduce development time and lower cost to bring multiple
derivatives to the market. Our Ocean SUV and Alaska mid-size EV pick up are
derived from the same F platform. Fisker also designed the world's first,
low-cost EV platform with 35% fewer parts versus comparable EV's in the market
for lower weight and cost. This, combined with rapid decision-making, focused
supply chain management and outsourced manufacturing, reduces development cost
and time to market, creating a new business model for the industry and one
that gives Fisker an advantage in bringing vehicles to market faster, more
efficiently, and with more modern and advanced technology than many
competitors.
3
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Our first model, the all-electric Fisker Ocean, has already garnered numerous
awards for its design. As of April 16, 2024, the Company has delivered over
6,400 Oceans.
The Fisker Ocean is an all-electric SUV and targets the large and rapidly
expanding "premium with volume" segment (meaning a premium automaker producing
more than 100,000 units of a single model, such as the BMW X3 Series or Tesla
Model 3) of the SUV market. The Fisker Ocean is a five-passenger vehicle with
a certified range, depending on specification, of between 231 and a
class-leading 360-miles (depending on the customer's chosen battery pack,
driving conditions, wheel size and testing procedures).
Our goal is to revolutionize how customers view personal mobility and vehicle
ownership by employing an innovative customer-focused Dealer Partnership model
offering a seamless haggle-free (where permitted) buying experience with an
efficient easy-to-access vehicle service network. Fisker's transformative
strategic efforts will offer outstanding customer service with easy to access
test drives to meet customers' demand for the Fisker Ocean and to prepare for
the launch of additional future models.
Through our design and engineering process combined with rapid product
development decision-making and an intense focus on supply chain management,
our goal is to significantly reduce the capital intensity and investments
typically associated with a new car manufacturing business, accelerate the
development cycle of new products, and expedite the adoption of advanced
technology in several ways, including:
.
Launching with a highly respected brand name in the automotive and EV categories
. The Fisker name is a recognized part of automotive industry history and has
established premium EV brand value in the global EV marketplace. Henrik
Fisker, Fisker's co-founder, Chairman, President and Chief Executive Officer,
is a pioneer in the EV industry, having launched the world's first luxury
plug-in hybrid EV, and has a track record of successful designs as the former
Chief Executive Officer and President of BMW Designworks USA and the former
Design Director for Aston Martin. We enter the market with an established
brand name that is associated with automotive innovation and superior design.
4
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.
Magna collaboration
. We entered into a cooperation agreement with Magna International Inc.
("Magna"), an industry-leading supplier, and manufacturer of premium
high-quality vehicles. The cooperation agreement sets out the main terms and
conditions for certain operational agreements related to manufacturing
engineering, component sourcing and manufacturing for the Fisker Ocean. By
working with an established contract manufacturer such as Magna Steyr, we
accelerated our time to market, reduced risk for quality vehicle assembly, and
gained access to an established global supply chain. We previously entered
into a Non-Exclusive Car Platform Sharing Agreement with a Magna subsidiary
and while that agreement remains in place, we have substantially re-engineered
an original platform proposal with the Fisker owned FM29 platform, which we
have the right to commercialize accordingly.
.
Fisker EV Platforms.
We created FM29, a unique EV platform, that has unique Fisker intellectual
property. Our proprietary FF-PAD process is hardware agnostic which will
enable us to collaborate with multiple suppliers for development of new,
advanced EV platforms. Fisker FM29 Platform is a premium, cross-over SUV
platform developed for global markets that we are exploring to adapt into
other derivatives, such as a pickup truck FT32 (Project Alaska/Kayak). SLV1
(Project PEAR) is a brand new cost-efficient platform which we plan to adapt
into other potential derivatives. A third platform is conceptualized (Project
Ronin) for high-end luxury vehicles at low volumes.
.
Using an existing manufacturing facility
. We are leveraging contract manufacturers with existing modern manufacturing
facilities and trained workforce, which positions us well to meet timing,
cost, and quality expectations while optimally matching our cost structure
with our projected production ramp. Partnering with Magna on manufacturing is
intended to position us to meet our projected production and delivery targets
and will enable us to focus on what we believe will be the key differentiators
for a new car company: delivering truly innovative design features, a superior
customer experience, and a leading user interface that leverages sophisticated
software and other technology advancements.
.
New Dealer Partnership model
. As a high-growth startup, Fisker is transforming its strategic efforts by
offering customers a no haggle (where permitted), transparent sales experience
and improved access to vehicle test drive, delivery and service. As a company,
Fisker intends to improve customer satisfaction, increase sales for the Fisker
Ocean and prepare the foundation for successful new product launches. In
keeping with our asset light strategy, the Dealer Partnership model should
enable Fisker to expand its sales and delivery network at a faster pace.
Manufacturing Approach
We decided to seek out partnerships with existing manufacturers rather than
constructing new production capacity. On June 12, 2021, we executed a binding
Contract Manufacturing Agreement with Magna Steyr Fahrzeugtechnik AG & Co KG
("Magna Steyr") for the manufacture of the Fisker Ocean. This contract
manufacturing approach is intended to lower our upfront costs, while also
supporting our ESG mission by reducing the carbon footprint of our operations.
A significant advantage of working with established manufacturing partners is
that such enterprises are already connected to the existing automotive supply
chain. The maturity of supply chain relationships is critical and is reflected
in the connectivity of business systems and IT infrastructure. A typical
vehicle consists of over 5,000 individual parts and assemblies, each of which
is sourced from an extended supply chain consisting of thousands of suppliers.
Compounding this further is the fact that there is complexity in the vehicle
build specifications to suit customer choice. These parts must be delivered to
the final point of assembly at a rate and in a sequence that matches planned
vehicle production. Considering that a typical automotive facility will
assemble more than 5,000 parts into a complete vehicle at a rate of one
vehicle every 45-120 seconds, the smooth running of that logistics effort
becomes critical to the running of the operation. Such organizational
efficiency is the result of decades of experience and cannot be easily
replicated. These critical relationships extend beyond the simple supply of
parts and into areas such as local government, where support and cooperation
are vital to ensure that local infrastructure updates are considered at a
strategic local government level. Such partnerships are also decades in the
making and are critical to the ongoing success of the enterprise.
Growth Strategy
We intend to implement the following strategies to drive stakeholder value
from the following actions:
5
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.
Re-imagine the customer experience for personal transportation and car ownership
. We believe immense opportunities exist to re-imagine the customer experience
for personal transportation and car ownership. We plan to continue to design
EVs that will be differentiated in the marketplace by proprietary design
innovation and a customer experience delivered through a state-of-the-art,
software-based user interface and experience. We plan to also continue to
develop our proprietary Fisker App to improve the customer experience
throughout the entire personal transportation lifecycle. In addition, we are
designing our EVs to be compliant with the CCS standard and adaption of the
NACS standard in North America, where we have already signed an agreement with
Tesla that will allow all Fisker Ocean owners in North America to use the
Tesla charging network by January 1, 2025. This will allow our vehicles to
charge with existing public charging infrastructure in North America. We have
executed charging network agreements with ChargePoint in North America and
Deftpower in Europe. We've entered into an agreement with ChargePoint and
their roaming partners, who are committed to utilizing renewable energy for
their charging stations.
.
Develop additional high value, sustainable EV models.
We believe the combination of our superior design expertise, along with the
power and versatility of platforms engineered with industry-leading OEMs and
tier-one automotive suppliers, will enable us to efficiently achieve our goal
of providing the world with a range of high value, sustainable EVs. We intend
to utilize one or more platforms over time to develop a lifestyle pickup truck
and a sport crossover to complement the Fisker Ocean. In addition, we also
plan to explore additional EV platform opportunities that will facilitate the
company's mission to revolutionize the personal transportation industry.
Fisker Vehicles
6
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Our first vehicle is the Fisker Ocean, an all-electric premium SUV that we
launched with one of the lowest entry price points in the EV SUV segment. The
Fisker Ocean offers an electric range of 231 to 360 miles per U.S. EPA
standard or 288 to 435 miles per WLTP standard (used in Europe), depending on
the battery pack in the customer's chosen trim, driving conditions, wheel size
and testing procedures.
The Fisker Ocean has many selling points that set Fisker apart from its
competitors, including:
.
California Mode
. Patented California Mode delivers an open-air experience with the push of
"one button". With California Mode, customers can drop the front door windows,
both rear-seat door windows, both rear Doggie windows next to the D-pillar,
and the Rear Lift Gate Window while opening the SolarSky roof at the same
time. The rear liftgate window opening is particularly appealing for an EV SUV
as there are no exhaust fumes from the vehicle that could enter the cabin. The
rear liftgate window opening allows for long items to be transported without
having to drive with an open hatch.
.
Extra wide track
. For the size of the vehicle and category, we believe the Ocean's extra wide
track, among other technical features, gives the Ocean best-in-class ride and
handling while maintaining the same tire aspect ratios. The wide track on
sports cars contribute to a visually powerful "stance," and we believe this
further distinguishes the Ocean's design. It has also allowed for a more
dramatically sculptured body side design and, combined with the dynamic
silhouette, we believe it has achieved a class-leading aesthetically arresting
and emotional design.
.
User Interface
. The Ocean features a revolve screen with integrated physical buttons. We
have done extensive design development on the highest quality user interface
("UI") to enhance the driving experience. We believe combining Ocean's large
17.1" touch screen with several physical buttons provides drivers a
user-friendly interface that allows drivers to access the most-often-used
functions while maintaining their eyes on the road.
.
Autonomy
. The Ocean is engineered with hardware to support future upgrades delivered
through post-production software-based updates. Fisker and Magna are working
together to develop an industry-unique feature set and a suite of software
packages powered by a scalable domain controller architecture. We intend to
equip Fisker Ocean
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with a class-competitive suite of Advanced Driving Assistance System (ADAS)
features supported by a sensor suite that includes state-of-the-art computer
vision technology and digital imaging radar.
.
SolarSky roof
. The Fisker brand is a pioneer and leader in full length curved photo voltaic
roof design and integration into a passenger vehicle. The photo voltaic roof
makes a strong personal statement for those customers that want to fully
optimize for zero emissions and sustainability. Fisker Ocean's SolarSky roof
produces up to 1,500 clean, emissions-free miles per year.
Under ideal conditions may increase to beyond 2,000 miles, all powered by pure
sunshine.
.
Vegan interior
. We offer a full vegan interior in the Fisker Ocean without any leather or
animal sourced materials.
.
Recycled materials throughout the vehicle
. Sustainability is represented throughout the Fisker Ocean. Specifically, the
interior has carpeting and acoustical backing made from recycled polyester and
recycled nylon, seating made from recycled plastic bottles, and coatings
derived from plant-based materials. Like our carbon neutral manufacturing,
some of our key suppliers also produce materials through full carbon neutral
processes.
.
Sustainability
. We designed the Fisker Ocean to be the world's most sustainable vehicle,
measured through the entire life cycle, from upstream sourcing of low carbon
and recycled materials, through logistics, manufacturing, use phase and re-use
and recycling when the vehicles finally come off the road. Use of recycled
materials is enhanced by other features, such as offering a full-length
photo-voltaic roof, and the fact that we are using existing manufacturing
rather than building new plants as part of our asset-light strategy. In
addition, we work with our suppliers to source and produce through highly
sustainable methods. The sustainability features extend to the full vehicle,
where Fisker utilizes innovative materials. Our available SolarSky roof can
add over 1,500 miles of clean, free charging from the sun and materials that
reinforce our focus on recycling and reuse. For example, through the reuse of
tire manufacturing by-products, recycled and bio-based materials, we
significantly reduce the amount of process waste that would otherwise go to
landfill and reduce the overall CO2 footprint of the Fisker Ocean. In the
Fisker Ocean, this deliberate effort delivered the lowest published carbon
footprint of any electric SUV, using over 110 lbs. of recycled and bio-based
materials. We are also working with suppliers who recover and repurpose
materials such as plastics and carbon fiber. These suppliers recover materials
that are landfill and ocean-bound, such as plastic bottles and fishing nets,
and reprocess them into automotive grade feedstock which can then be used to
produce new interior trim, fabrics, acoustic backing, and moldings. In doing
so, we reinforce our requirement to minimize `new' hydrocarbon-based
feedstock, while simultaneously providing an outlet for, and supporting, those
suppliers who are investing in ocean clean up and potentially landfill
commodities as an alternate source of raw material.
Fisker has plans to introduce new vehicles in the next three years. For these
vehicles, we plan to use our own platforms and in-house design and engineering
processes with one or more industry-leading OEMs and suppliers.
New Electronics Architecture
The Fisker Ocean electronics architecture is based around a small number of
key domain controllers, for advanced driver assistance functions, drivetrain
and battery management, and infotainment. A traditional vehicle electronics
architecture typically contains a high number of independent and self-contained
modules, each a black box to the rest of the car. This architecture, based on
domain computers, opens new avenues for integration, sensor fusion, and an
adaptive and evolving user experience. A connectivity module enables full
communication with the Fisker cloud and the possibility for edge computing,
while over-the-air ("OTA") software updates ensure the in-car experience can
stay ahead of market expectations.
We anticipate that future generations of Fisker architecture will integrate
automotive requirements into customized electronic boards, with hardware
accelerators for AI, machine-learning, and computer-vision. This further
reduction in electronics component counts is designed to lower power
consumption, increase computational power, and allow for even greater scope
for feature integration and optimization.
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Digital Car of the Future: Delivered Over the Air
The new electric, digital car is more technologically sophisticated than its
predecessors. Many immediate benefits to the customer of this always-online
car will be evident in the infotainment system. Entertainment and productivity
apps, mobility services, and navigation aids can keep pace with the latest
regional trends. The integrated and fully connected nature of the digital car
opens new opportunities for innovation, and enables functions previously
impossible, such as predictive maintenance and remote fault diagnosis.
Through edge computing and 4G, later ultra-low latency 4G connectivity, it
also becomes possible for cloud computing resources to be used as a seamless
extension of the computing power in the car. Continuous software updates, both
for embedded systems in the car and functions hosted in the cloud, let the
digital car grow and become smarter over its lifetime. Fisker automotive
design is meeting all functional safety requirements as outlined by ISO 26262
and SO/SAE 21434, which covers security management, and cybersecurity within
the Fisker product development lifecycle.
We intend to fully utilize software to improve the powertrain performance,
making the cars more efficient, allowing more instantaneous power output, and
improving the charging experience. In the future, the powertrain parameters
could be tailored to each driver in real time, optimal characteristics of the
motors could be constantly measured and altered, and the level of the
recuperation system could be adjusted. On-board diagnostics, combined with
predictive models and anomaly detection could guide the customer to schedule a
service appointment before they even perceive any symptoms, possibly averting
a costly repair.
We are designing our EVs to always be "connected" Our next-generation
connectivity platform is already heavy at work seamlessly integrating online
services and functions, Fisker-unique as well as third party services.
Features that are visualized on the large 17.1" high-definition center
touchscreen or digital instrument cluster meet strict driver-distraction
guidelines with Fisker's custom UI framework. The My Fisker app seamlessly
connects to the car, ensuring the customer's digital life and driving
experience meet in the car.
With data analysis, cloud computing, and the ability to push OTA updates to
the vehicle, we expect the in-car experience will evolve over time for the
driver and passengers and not the other way around as has traditionally been
the case.
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Sales - Go To Market Strategy
We believe over the next several years, the EV markets in the U.S. and EU will
be broken down into three fundamental segments: the white space segment, the
value segment and the conservative premium segment. All three segments will
attract customers from traditional ICE vehicles, but the largest growth, by
volume, will be the white space segment and the value segment.
EV Segment Attributes of Segment Fisker Plan within Segment
White space segment Currently occupied by Tesla We believe we will be
globally and by a few Chinese the primary alternative
EV independent start-ups to Tesla in this segment with the
operating in China only. Fisker Ocean priced around the base
Appeals to customers who price of the Tesla Model 3 and Model Y.
want to be part of the new We believe other EV startups will
EV movement, who value move into the higher premium
sustainability and ESG. priced segments due to the lack
Can only be occupied by pure EV of volume pricing of components.
brands that only produce EVs We expect to sell approximately 50%
with a clear commitment towards of our vehicles into this segment.
zero emission vehicles.
Value segment Focus on price and value We believe we will penetrate
proposition-customers the upper end of this segment
will buy vehicles in this segment when the by offering a compelling
purchase price and cost and differentiated price/
of maintaining/running performance vehicle, compared
fits the budget and is to other traditional car
better than an ICE vehicle. makers struggling to compete
Yet to be dominated by any auto maker. due to lack of volume pricing.
We expect to sell approximately 10%
of our vehicles into this segment.
Conservative premium segment Emerging segment currently occupied by We believe our vehicles will be very
several traditional auto makers that are attractive to customers sitting "on
trying to keep their own customers from the fence" in this segment, ready to
defecting to EV makers like Tesla. leave their ICE brand, but needing
Vehicles in this segment, assurance of quality and reliability.
produced by the traditional This is a segment where we believe
premium automakers, are struggling with a we can attract new customers that will
clear EV identity as they try to bridge the come from traditional ICE brands.
traditional ICE attributes We believe we will sell approximately
with new EV attributes. 40% of our vehicles into this segment,
but it will grow rapidly, as we will
be able to offer a more emotional
design, an exclusive EV brand, a larger
battery and better equipment for the
price due to our volume pricing versus
the lower volume traditional brands
Service, Marketing and Insurance
Media coverage, digital and non-traditional marketing, and word-of-mouth have
been the primary drivers of Fisker's sales leads, helping us achieve a high
volume of reservations without traditional marketing efforts and with a
relatively low marketing budget. In 2024, we plan to increase our marketing
budget as we roll out our new Dealer Partnership model, while decreasing our
internal spending through the elimination of costs associated with the
direct-to-consumer business model. We plan to continue to expand our social
media presence as a key part of our marketing efforts. We plan to attend and
participate in global events and to activate pop-up show rooms to give
customers the opportunity to experience Fisker vehicles. We support our
customers by providing reference to reputable third-party automotive insurance
options.
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Direct Sales, Service, and Vehicle Financing
We historically marketed and sold our vehicles directly to customers using our
proprietary digital platforms, including the "My Fisker App" and website.
During 2024, we will be transitioning to a dealer model from a direct-to-consume
r model but expect to operate under both models during 2024. Europe will
operate under both models.
New Dealer Partnership
Fisker is making this move to scale for significant acceleration of Fisker
Ocean deliveries and higher volume production of additional future models. The
Dealer Partnership model also aligns with its asset light business strategy.
The Fisker dealer strategy is multi-faceted, designed to benefit customers and
dealers, as well as Fisker.
Fisker dealers will provide retail, service, test drive and delivery functions
for Fisker vehicles.
Fisker dealers will be able to open at a faster pace due to the lower amounts
of upfront capital investment versus traditional dealer strategies employed by
other OEMs.
The reduced facilities related capital investment is consistent with Fisker's
commitment to sustainability principles: use-less, and re-use. Fisker will
offer dealers large market areas and no cost sales and service training
programs for early dealer partners for a period of time.
Dealers may have service area, back-of-house, and administrative functions for
a period of time until the dealer's operation requires dedicated non-customer
facing functions.
However, customer facing dealership personnel will be dedicated to Fisker.
Fisker is selecting its dealers based upon multiple criteria, including a
dealer's ability to deliver a high level of customer satisfaction.
Customer satisfaction will be a key performance metric that dealers will be
expected to achieve.
Vehicle Maintenance
Our vehicles are designed to have no "first mandatory service
"
. We expect service will be needed for mainly two reasons: (1) a fault shows
up in the on-board diagnostics/request to go to service, or (2) the customer
notices something needs to be "fixed" and service is needed. In each case, we
will be alerted by either the vehicle's on-board diagnostics or the customer
and we will then refer the customer to their nearest Fisker dealership.
Fisker Added Value
Fisker's Platform Strategy supports its growth plan objectives, firstly by
intelligent re-use of the Ocean platform to define a new EV market segment
with the Alaska mid-size EV pick up (labelled the Kayak in the EU); followed
by the introduction of an all new, lower cost, higher volume, global platform
for the PEAR and future derivatives. This new platform features Fisker's novel
'Steel++' body structure which has 35% less parts than the industry norm due
to an intensive focus on component integration and advanced tooling methods.
Finally, the ultra low volume, bonded aluminum
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Ronin platform concept will be a technology test bed for future Fisker
products, and features a novel, structurally integrated battery amongst many
other innovations.
Key among the attributes defining Fisker-brand design and engineering is
exterior and interior design language. The Fisker Ocean is establishing the
look and feel of Fisker products going forward-an evolution of the design
language Henrik Fisker developed over his career and with which he has become
synonymous. A key element of this design language is the broad shouldered,
"muscular" stance of the vehicle. In creating an exterior design with these
proportions, our team has taken some key decisions intended to move typical
autobody engineering solutions, such as a fixed hood, to a position more
relevant to EVs. Not only does this give our vehicles a distinctive, unique
look, it also simplifies an otherwise complex manufacturing build tolerance
issue. This approach provides greater control of the front-end package and
removes certain hardware, ultimately facilitating our desire to design a
vehicle with class-leading frontal high-speed impact and pedestrian impact
safety.
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Fisker-brand design and engineering also encompasses our goal to build the
world's most sustainable vehicles. Fisker Ocean offers SolarSky, a large
photo-voltaic glass roof. Our internal testing indicates that this feature has
the capability to deliver annually the equivalent of up to 1,500 miles of
completely carbon free miles in optimum conditions.
Our design language extends further into the interior of the vehicle with the
deployment of our unique UI. In addition to seamless integration of user
devices, such as mobile phones and tablets, Fisker has developed a central
screen display that is the largest in its class. This screen is the
centerpiece of the Fisker UI and will integrate all main vehicle electrical
functions and settings into a single, simple interface. The ergonomics of the
central screen are further enhanced by combining user programmable "soft keys"
on the touch screen surface, with five fixed switches that control the five
most frequently used functions. In this way we expect to deliver a futuristic
EV "glass cockpit" without the annoyance of searching through several menus to
find that critical function, which has been a criticism of similar systems.
The combination of this unique central screen and the digital driver's display
will ensure a class-leading user experience.
Research and Development
Our research and development activities primarily take place at our facilities
located in La Palma, San Francisco, and Culver City, California. The majority
of our current activities are primarily focused on the research and
development of our EVs and software technology platforms. We undertake
significant testing and validation of our products in order to ensure that we
will meet the demands of our future customers. We are working with various
strategic partners to improve the Ocean and to bring other future EV models
into commercialization.
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Sustainability Actions
As demonstrated in our vision and mission, we are committed to sustainability,
which includes our dedication not only to the environment, but also our
communities and other stakeholders. ESG is foundational to Fisker and, as a
purpose driven company, it is embedded in everything we do. We engage with our
community through direct actions such as beach clean-ups and employee food
drives. We are currently evaluating incentives and other programs to support
sustainability and social accountability throughout our corporate activities./
Fisker's Commitment to Building a Leading ESG, Digital Mobility Company
Our commitment is to build the world's leading, digital-first, next generation
mobility company. We are building towards that vision with a commitment to a
broad foundation of environmental, sustainability and ethical governance
policies. Through this approach, we believe we will create a company that can
better serve the needs of all our stakeholders and ultimately deliver greater
returns.
We are committed to leading the automotive industry in alignment with our
mission, from the thorough analysis of the full life-cycle impact of our
vehicles to creating solutions that minimize our carbon footprint and ensuring
we responsibly source all of our materials. Our focus is on the total
environmental and social impacts of our business throughout our supply chain.
We seek to optimize our internal practices and build mutually beneficial
relationships with the communities in which we operate.
We have set strong performance standards through our policies, such as our
Human Rights and Labor Policy and our Responsible Supplier Policy, including
conflict materials chain of custody, of which we will validate. We have
aligned with the United Nations Sustainable Development Goals (UNSDG's), as a
guidance framework for our internal targets and are using Sustainability
Accounting Standards Board (SASB) requirements for measurement and reporting
of our vehicles and related metrics. Through dedicated work streams and
detailed research with investors, we are focused on providing best-in-class
metrics and public ESG disclosures. We published our first ESG Impact Report
in 2022.
In June 2023 we released our
2023 Fisker Ocean Life Cycle Assessment (LCA)
detailing the progress we've made toward our mission of creating the world's
most emotional and sustainable electric vehicles.
Our diverse management team and board of directors is a testament to our
commitment to diversity and inclusion. We will continue to evaluate our
governance structure, hiring practices and pay equity, in accordance with our
company policies, industry benchmarks and reporting agencies. We have also
created an ESG Advisory Council, comprised of non-company ESG leaders, who
will help shape our strategy, our commitments and, work with us to engage in
dialogue with NGO's and other stakeholders on important civic issues. In
addition to the ESG Advisory Board, we have an internal ESG governance
structure, led by the head of ESG, with a leadership planning team that meets
weekly, a monthly executive management strategy review team and review of
critical material by the Board of Directors.
Intellectual Property
Our success depends in part upon our ability to protect its core technology
and intellectual property. We attempt to protect our intellectual property
rights, both in the U.S. and abroad, through a combination of patent,
trademark, copyright and trade secret laws, as well as nondisclosure and
invention assignment agreements with our consultants and employees, and we
seek to control access to and distribution of our proprietary information
through non-disclosure agreements with our vendors and business partners.
Unpatented research, development and engineering skills make an important
contribution to our business, but we pursue patent protection when we believe
it is possible and consistent with our overall strategy for safeguarding
intellectual property.
As of March 6, 2024, we owned 16 issued U.S. patents, have 56 pending or
allowed U.S. patent applications, 51 issued foreign designs and 16 pending
foreign design applications. In addition, we have 162 registered trademarks,
and 13 pending trademark applications. Our patents and patent applications are
directed to, among other things, vehicle design, engineering and battery
technology.
Government Regulation and Credits
We operate in an industry that is subject to extensive environmental
regulation, which has become more stringent over time. The laws and
regulations to which we are subject govern, among others, water use; air
emissions; use of recycled materials; energy sources; the storage, handling,
treatment, transportation and disposal of hazardous materials; the
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protection of the environment, natural resources and endangered species; and
the remediation of environmental contamination. Compliance with such laws and
regulations at an international, regional, national, provincial and local
level is an important aspect of our ability to continue our operations.
Environmental standards applicable to us are established by the laws and
regulations of the countries in which we operate, standards adopted by
regulatory agencies and the permits and licenses granted. Each of these
sources is subject to periodic modifications and what we anticipate will be
increasingly stringent requirements. Violations of these laws, regulations or
permits and licenses may result in substantial civil and criminal fines,
penalties, and possibly orders to cease the violating operations or to conduct
or pay for corrective works. In some instances, violations may also result in
the suspension or revocation of permits and licenses.
Emissions
In the U.S., EU and China, there are vehicle emissions performance standards
that will provide an opportunity for us to sell emissions credits.
United States
In the U.S., the U.S. Environmental Protection Agency ("EPA") promulgates and
enforces emissions standards for motor vehicles under the Clean Air Act. The
EPA requires that Fisker obtain a Certificate of Conformity concerning
emissions for its vehicles before offering them for sale. California also
regulated motor vehicle emissions even before the Clean Air Act's passage.
Therefore, California is permitted to issue its own emissions standards, and
other states may adopt California's standards instead of the EPA's standards.
The California Air Resources Board ("CARB") is responsible for setting
California's emissions standards. CARB requires Fisker to obtain an Executive
Order, confirming that its vehicles conform to California's emissions
standards.
Greenhouse Gases
Both the EPA and California have greenhouse gas emissions standards for motor
vehicles. These regulations restrict the amount of carbon dioxide (CO2) and
non-methane organic gases and nitrous oxide gas (NMOG+NOx) that a vehicle is
permitted to emit. California's greenhouse gas emissions standards were
established in 2012 under California's "Advanced Clean Cars I" program;
Advanced Clean Cars II ("ACCII") was adopted in 2022. California continues to
consider potential amendments to ACCII to further scale down emissions of new
motor vehicles sold in California (and the states which have adopted
California's standards). Both the EPA and CARB enforce their greenhouse gas
standards by issuing credits for over-compliance with the given standard and
penalizing a manufacturer's failure to meet the standard. Manufacturers who
have an excess of these credits may transfer or sell them to a manufacturer
which is deficient in the credits. Because Fisker vehicles are all-electric,
Fisker vehicles will necessarily comply (and over-comply) with these
standards, offering Fisker significant opportunity to sell these credits to
other manufacturers. Fisker already has one such agreement in place. Finally,
because these standards become more stringent over time, Fisker's opportunity
to sell these credits will also increase over time.
Zero Emission Vehicles
California also requires manufacturers to maintain a certain percentage of
zero-emission vehicles ("ZEVs") as part of their overall number of new
vehicles sold in that state. The ZEV program assigns ZEV credits to each
vehicle sold in California. The number of credits is based on the drivetrain
type and the all-electric range ("AER") of the vehicle under the Urban
Dynamometer Driving Schedule Test Cycle. Plug-in hybrid vehicles ("PHEVs")
receive between 0.4 and 1.3 credits per vehicle. Battery electric and fuel
cell vehicles receive between 1 and 4 credits per vehicle, based on range. The
Fisker Ocean receives 3.4 credits or 4.0 credits, depending on trim and wheel
options.
Vehicle manufacturers are then required to maintain ZEV credits equal to a set
percentage of non-electric vehicles sold in California. By 2035, all new
passenger vehicles sold in California must be a ZEV. Similar to the greenhouse
gas standards, CARB permits manufacturers who over-comply with the ZEV
standard of a given model year to sell those credits to a manufacturer who is
not in compliance. CARB has established a $5,000 penalty for each credit that
a manufacturer is short of the standard for that year.
Other states have adopted California's ZEV sales requirements including
Colorado, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York,
Oregon, Rhode Island and Vermont (the "ZEV states"). Additionally, some states
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have legislation to adopt California's ZEV standard beginning in 2025
including Minnesota, Nevada, Virginia, and Washington. New Mexico will adopt
these standards in 2026.
Because of the increasingly stringent ZEV sales requirements and the
increasing number of states adopting these standards, we believe Fisker has
significant opportunity to sell its ZEV credits to manufacturers who do not
meet their quotas.
European Union
Regulation (EU) No. 443/2009 setting emissions performance standards for new
passenger cars in the EU (as amended) provides that if the average CO2
emissions of a manufacturer's fleet exceed its limit value in any Calendar
Year from Calendar Year 2019 onwards, the manufacturer will have to pay to the
European Commission an excess emissions premium of 95 for each subsequent CO2
g/km of exceedance per vehicle registered in the EU.
In the EU, manufacturers of passenger cars may act jointly through a pooling
arrangement to collectively meet their CO2 emissions targets.
The indicative average EU fleet-wide emissions target for new passenger cars
for the calendar year 2019 was 130 CO2 g/km. From 1 January 2020 this target
has been reduced to 95 CO2 g/km. From 1 January 2020 until 31 December 2024
this target will be complemented by additional measures corresponding to a
reduction of 10 CO2 g/km. Between 2025 and 2029 the target will be 15%
stricter compared to 2021. From 1 January 2030, the target will be equal to a
37.5% reduction of the target in 2021.
The European Commission adjusts the Specific Emissions Target each year for
each manufacturer on the basis of the average mass of the relevant passenger
cars using a limit value curve. This is laid down in Implementing Decisions.
Manufacturers of passenger cars are given additional incentives to put on the
European market zero and low-emission passenger cars emitting less than 50 CO2
g/km through a "super-credits" system. These are taken into account for the
calculation of a manufacturer's specific average emissions. Such passenger
cars are to be counted as 2 vehicles in 2020, 1.67 vehicles in 2021, 1.33
vehicles in 2022, and 1 vehicle from 2023 onwards (subject to a cap of 7.5 CO2
g /km over the 2020-2022 period for each manufacturer).
Given that the specific average emissions of CO2 of Fisker's electric
passenger cars will be 0.000 CO2 g/km per vehicle registered in the EU, this
will provide an opportunity for other manufacturers, which may not otherwise
meet their specific CO2 emissions targets, to pay Fisker to consolidate their
fleets with those of Fisker via a pooling arrangement for CO2 emissions
compliance purposes.
Fuel Economy
The United States Department of Transportation, through its agency the
National Highway Transportation Safety Administration ("NHTSA"), sets fuel
economy standards for new vehicles sold in the U.S. NHTSA does so by setting
standards for Corporate Average Fuel Economy ("CAFE"). The CAFE program
assesses a manufacturer's fleet of vehicles for its fuel economy, expressed in
miles per gallon.
Manufacturers who over-comply with NHTSA's CAFE standards are given a credit
for every one-tenth of a mile per gallon by which they exceed the standard.
For manufacturers whose fleet fails to meet the year's standard, NHTSA set a
penalty of $14 per credit deficiency. This penalty increased to $15 per credit
in model year 2022.
Because Fisker vehicles are all electric, they not only comply with NHTSA
standards but also generate CAFE credits. Fisker continues to engage
manufacturers on selling these credits.
Vehicle Safety and Testing
Our vehicles are subject to, and will be required to comply with, numerous
regulatory requirements established by the National Highway Traffic Safety
Administration ("NHTSA"), including applicable U.S. federal motor vehicle
safety standards ("FMVSS"). We intend for the Fisker Ocean to fully comply
with all applicable FMVSSs without the need for
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any exemptions, and expect future Fisker vehicles to either fully comply or
comply with limited exemptions related to new technologies. Additionally,
there are regulatory changes being considered for several FMVSSs, and while we
anticipate compliance, there is no assurance until final regulation changes
are enacted.
On January 11, 2024, NHTSA opened a Preliminary Evaluation regarding the
Ocean's braking performance. On February 14, 2024, NHTSA opened a Preliminary
Evaluation regarding alleged unintended movement. And on April 1, 2024, NHTSA
opened a Preliminary Evaluation regarding alleged failure of the Ocean's latch
and handle that prevents doors from opening. The Company is fully cooperating
with NHTSA with respect to these matters.
As a manufacturer, Fisker must self-certify that its vehicles meet all
applicable FMVSSs, as well as the NHTSA bumper standard, or otherwise are
exempt, before the vehicles can be imported or sold in the U.S. Numerous
FMVSSs will apply to Fisker's vehicles, such as crash-worthiness requirements,
crash avoidance requirements and EV requirements. We will also be required to
comply with other federal laws administered by NHTSA, including the CAFE
standards, Theft Prevention Act requirements, consumer information labeling
requirements, Early Warning Reporting requirements regarding warranty claims,
field reports, death and injury reports and foreign recalls and owner's manual
requirements.
The Automobile Information and Disclosure Act requires manufacturers of motor
vehicles to disclose certain information regarding the manufacturer's
suggested retail price, optional equipment and pricing. In addition, this law
allows inclusion of city and highway fuel economy ratings, as determined by
EPA, as well as crash test ratings as determined by NHTSA if such tests are
conducted.
Fisker vehicles sold outside of the U.S. are subject to similar foreign
safety, environmental and other regulations. Many of those regulations are
different from those applicable in the U.S. and may require redesign and/or
retesting. The EU established new rules regarding additional compliance
oversight, and there is also regulatory uncertainty related to the United
Kingdom's withdrawal from the EU. These changes could impact the rollout of
new vehicle features in the EU. Fisker has completed the homologation testing
process in the EU and U.S. during 2023. The Company has received regulatory
approvals including the European Whole Vehicle Type Approval Certificate, EPA
Certificate of Conformity, and CARB Executive Order, after which we commenced
retail customer deliveries in both the U.S. and EU in 2023.
In addition to the various territorial legal requirements we are obligated to
meet, the Fisker Ocean is engineered to deliver 5-star performance in the two
main voluntary vehicle safety performance assessment programs, U.S. New Car
Assessment Program ("NCAP") and Euro NCAP. Five-star is the maximum attainable
score. These independent organizations have introduced a number of additional
safety related tests aimed at improving the safety of passenger vehicles, both
for occupants and pedestrians involved in collisions with vehicles. Some of
these tests are derived from the legal tests, such as side impact, but have
higher performance requirements. Others are unique to the program. Areas
covered by these tests in 2020 include:
.
Mobile Progressive Deformable Barrier
.
Full Width Rigid Barrier
.
Mobile Side Impact Barrier
.
Side Pole
.
Far Side Impact
.
Whiplash
.
Vulnerable Road Users (Pedestrians and Cyclists)
.
Safety Assist
.
Rescue and Extrication
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Strategic Collaborations
Magna
On October 14, 2020, Legacy Fisker and Spartan entered into a cooperation
agreement with Magna setting forth certain terms for the development of a full
electric vehicle (the "Cooperation Agreement"). The Cooperation Agreement sets
out the main terms and conditions of the operational phase agreements (the
"Operational Phase Agreements") that will extend from the Cooperation
Agreement and other agreements with Magna that are expected to be entered into
by and between us and Magna (or its affiliates). The upcoming Operational
Phase Agreements referenced in the Cooperation Agreement relate to various
platform and manufacturing agreements. The Cooperation Agreement provides that
we would issue to Magna warrants to purchase Class A Common Stock in an amount
equal to six percent (6%) of our capital stock on a fully diluted basis (which
means for these purposes, after giving effect to the deemed conversion or
exercise of all of our options, warrants and other convertible securities
outstanding on the issuance date; provided, however, that the "public
warrants" sold as part of the units issued by Spartan in its initial public
offering which closed on August 14, 2018 shall not be deemed to be exercised
for these purposes) after giving effect to the Business Combination and
issuance of the warrants to purchase such shares to Magna, with an exercise
price of $0.01 per share of (the "Magna Warrants"). On October 29, 2020, we
issued to Magna 19,474,454 Magna Warrants. The Magna Warrants were subject to
the satisfaction of certain vesting criteria related to the development and
start of production of the Fisker Ocean, all of which have been satisfied as
of December 31, 2023.
The shares of Class A Common Stock underlying the Magna Warrants are entitled
to registration rights pursuant to the Amended and Restated Registration
Rights Agreement dated as of October 29, 2020, among us, Spartan Energy
Acquisition Sponsor LLC, Magna, Henrik Fisker, Dr. Geeta Gupta-Fisker and
certain former stockholders of Legacy Fisker.
On December 17, 2020, we announced that our wholly-owned operating subsidiary,
Fisker Group Inc., entered into (i) a non-exclusive car platform sharing
agreement with Steyr USA LLC (an affiliate of Magna), and (ii) an initial
contract manufacturing agreement with Magna, which were originally
contemplated by the Cooperation Agreement. On April 27, 2021 we entered into a
Supplement No 1 to Development Services Agreement with Magna Steyr which
provides for the completion of the development and launch of Fisker Ocean. On
June 12, 2021 Fisker entered into the Detailed Manufacturing Agreement with
Magna Steyr which provides for the contract manufacturing of the Fisker Ocean
by Magna Steyr.
Human Capital Resources
We pride ourselves on the quality of our diverse team by seeking to hire only
employees that are dedicated and aligned with our strategic mission. We work
to leverage partnerships and modulate hiring based on our product roadmap. We
employed approximately 1,560 full-time employees as of December 31, 2023, 760
as of December 31, 2022 and 327 as of December 31, 2021 based primarily in our
California, Munich and Hyderabad facilities. The majority of our employees are
engaged in marketing, sales and service with research and development and
related functions close behind. To date, we have not experienced any work
stoppages and consider our relationships with our employees to be in good
standing. None of our employees are either represented by a labor union or
subject to a collective bargaining agreement.
As of April 19, 2024, we employed approximately 1,135 employees. The decrease
since December 31, 2023 primarily reflects actions taken to reduce our
headcount.
We strive to attract a pool of diverse and exceptional candidates and support
their career growth once they become employees. In addition, we seek to hire
based on talent rather than solely on educational pedigree. We also emphasize
in our evaluation and career development efforts internal mobility
opportunities for employees to drive professional development.
We also believe that our ability to retain our workforce is dependent on our
ability to foster an environment that is sustainably safe, respectful, fair
and inclusive of everyone and promotes diversity, equity and inclusion inside
and outside of our business. We engage diverse networks as key business
resources and sources of actionable feedback. We are also working on diversity
efforts in our supply chain to expand our outreach and support to small- and
large-scale suppliers from underrepresented communities to emphasize this
culture with our own employees.
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Corporate Information
We were originally incorporated in Delaware in October 2017 as a special
purpose acquisition company f/k/a Spartan Energy Acquisition Corp. In October
2020, we consummated our business combination with Fisker Group Inc. (f/k/a
Fisker Inc.) through a reverse merger (the "Business Combination"). In
connection with the closing of the Business Combination, we changed our name
to Fisker Inc.
Our principal executive offices are located at 1888 Rosecrans Avenue,
Manhattan Beach, California 90266. Our telephone number at that location is
(833) 434-7537. Our corporate website address is www.fiskerinc.com.
Information contained on, or that may be accessed through, our website is not
incorporated by reference into this Annual Report on Form 10-K and should not
be considered a part of this Annual Report on Form 10-K.
Fisker is a registered trademark of Fisker Inc. All other brand names or
trademarks appearing in this Annual Report on Form 10-K are the property of
their respective holders. Solely for convenience, the trademarks and trade
names in this Annual Report on Form 10-K are referred to without the
(R)
and
"
symbols, but such references should not be construed as any indicator that
their respective owners will not assert, to the fullest extent under
applicable law, their rights thereto.
Available Information
We make available, free of charge through our website, our annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and
amendments to those reports, filed or furnished pursuant to Sections 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended, as soon as
reasonably practicable after they have been electronically filed with, or
furnished to, the SEC.
The SEC maintains an internet site (http://www.sec.gov) that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC.
Item 1A. Risk Factors.
Our operations and financial results are subject to various risks and
uncertainties, including those described below that could adversely affect our
business, financial condition, results of operations, cash flows and the
trading price of our Class A Common Stock. You should carefully consider the
following risks, together with all of the other information in this Annual
Report on Form 10-K, including our financial statements and the related notes
included elsewhere in this Annual Report on Form 10-K.
RISK FACTORS SUMMARY
Investing in our securities involves a high degree of risk. Below please find
a summary of the principal risks we face. These risks are discussed more fully
below:
Operational Risks
.
There is substantial doubt about our ability to continue as a going concern.
.
Our ability to develop, manufacture and obtain required regulatory approvals
for a car of sufficient quality and appeal to customers on schedule and on a
large scale is unproven.
.
We are substantially reliant on our relationships with suppliers and service
providers for the parts and components in our vehicles, as well as for the
manufacture of our initial vehicles. If any of these suppliers or service
partners choose to not do business with us, then we would have significant
difficulty in procuring and producing our vehicles and our business prospects
would be significantly harmed.
.
Our relationship with automotive suppliers is integral to our platform
procurement and manufacturing plan, and we may not be able to obtain such
commitments in the future. We therefore may seek alternative arrangements with
a number of component suppliers, and contract manufacturers, which we may not
be successful in obtaining.
.
If we are unable to continue to contract with OEMs or suppliers on
manufacturing of our future vehicles, we would need to develop our own
platform and manufacturing facilities, which may not be feasible and, if
feasible at all, would significantly increase our capital expenditure and
would significantly delay production of our vehicles.
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.
There are complex software and technology systems that need to be developed in
coordination with vendors and suppliers in order to reach production for our
electric vehicles, and there can be no assurance such systems will be
successfully developed.
.
We may experience significant delays in the design, manufacture, regulatory
approval, launch and financing of our vehicles, which could harm our business
and prospects.
.
We are dependent on our suppliers, a significant number of which are single or
limited source suppliers, and the inability of our suppliers to deliver
necessary components for our vehicles in a timely manner and at prices and
volumes acceptable to us could have a material adverse effect on our business,
prospects and operating results.
.
Our vehicles make use of lithium-ion battery cells, which have been observed
to catch fire or vent smoke and flame.
.
We have a limited operating history and face significant challenges as a new
entrant into the automotive industry.
.
We are an early-stage company with a history of losses, and we expect to incur
significant expenses and continuing losses in the future.
.
Our limited operating history makes evaluating our business and future
prospects difficult and will increase the risk of investing in us.
.
If our vehicles fail to perform as expected, our ability to develop, market,
and sell or lease our electric vehicles could be harmed.
.
We may not succeed in establishing, maintaining and strengthening our brand,
which would materially and adversely affect customer acceptance of its
vehicles and components and its business, revenues and prospects.
.
Our direct-to-consumer distribution model which we historically deployed has
been different from the predominant current distribution model for automobile
manufacturers. We are transitioning to a dealer sales model, which makes
evaluating our business, operating results and future prospects difficult.
.
We depend on revenue generated from a single model and in the foreseeable
future will be significantly dependent on a limited number of models.
Macroeconomic, Market, and Strategic Risks
.
Our asset-light business model is unique in the automotive industry and any
failure to commercialize our strategic plans would have an adverse effect on
our operating results and business, harm our reputation and could result in
substantial liabilities that exceed our resources.
.
We could experience cost increases or disruptions in supply of raw materials
or other components used in our vehicles. The automotive market is highly
competitive, and we may not be successful in competing in this industry.
.
Our future growth is dependent on the demand for, and upon consumers'
willingness to adopt, electric vehicles.
.
Doing business internationally creates operational and financial risks for our
business.
.
We have identified material weaknesses in our internal control over financial
reporting. If our remediation of such material weaknesses is not effective, or
if we experience additional material weaknesses in the future or otherwise
fail to develop and maintain effective internal control over financial
reporting, our ability to produce timely and accurate financial statements or
comply with applicable laws and regulations could be impaired, which could
adversely affect investor confidence in the accuracy and completeness of our
financial statements and adversely affect our business and operating results
and the market price for our Class A common stock.
.
The issuance of shares of our Class A Common Stock upon the conversion of the
2025 Notes or the exercise of the outstanding Magna Warrants would increase
the number of shares eligible for future resale in the public market and
result in dilution to our stockholders.
Financial Risks
.
Our operating and financial results forecast relies in large part upon
assumptions and analyses developed by us. If these assumptions or analyses
prove to be incorrect, our actual operating results may be materially
different from our forecasted results.
.
Retail vehicle sales depend significantly on affordable interest rates and
availability of credit for vehicle financing and a substantial increase in
interest rates could adversely affect our business, prospects, financial
condition, results of operations, and cash flows.
.
Our business plans require a significant amount of capital. In addition, our
future capital needs are likely to require us to sell additional equity or
debt securities that may dilute our stockholders or introduce covenants that
may restrict our operations or our ability to pay dividends.
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.
Absent relief, as a result of our failure to timely file a periodic report
with the SEC, we are currently ineligible to file a registration statement on
Form S-3, which is likely to impair our ability to raise capital on terms
favorable to us, in a timely manner or at all.
.
Our Class A Common Stock is currently traded on the OTC Market Pink Sheets,
which may have an unfavorable impact on our stock price and liquidity.
Legal and Regulatory Risks
.
Compliance with and changes to state dealer franchise laws could adversely
impact our ability to successfully move to a dealership sales model.
.
We retain certain information about our users and may be subject to various
privacy and consumer protection laws.
.
We may not be able to prevent others from unauthorized use of our intellectual
property, which could harm our business and competitive position.
.
Our patent applications may not issue as patents, which may have a material
adverse effect on our ability to prevent others from commercially exploiting
products similar to ours.
.
Our vehicles are subject to motor vehicle standards and the failure to satisfy
such mandated safety standards would have a material adverse effect on our
business and operating results.
.
We will face risks associated with potential international operations,
including unfavorable regulatory, political, tax and labor conditions, which
could harm our business.
.
The dual class structure of our Common Stock has the effect of concentrating
voting with Henrik Fisker and Dr. Geeta Gupta-Fisker, our co-founders, members
of our Board of Directors and Chief Executive Officer and Chief Financial
Officer, respectively. This may limit or preclude other stockholders' ability
to influence corporate matters, including the outcome of important
transactions, including a change in control.
Risks Related to Our Convertible Senior Notes
.
The 2026 Notes are effectively subordinated to our existing and future secured
indebtedness and structurally subordinated to the liabilities of our
subsidiaries.
.
We did not make a required interest payment of approximately $8.4 million
payable in cash on March 15, 2024 with respect to the 2026 Notes. Under the
indenture governing the 2026 Notes, such non-payment is a default and we had a
30-day grace period to make the interest payment which now has elapsed. Such
non-payment constitutes an Event of Default with respect to the 2026 Notes.
For the quarter ended March 31, 2024, the 2026 Notes (in addition to the 2025
Notes) are expected to be classified as a current liability.
.
We may be unable to raise the funds necessary to repurchase the 2026 Notes for
cash following a fundamental change (as defined in the Indenture) or to pay
any cash amounts due upon conversion, and our other indebtedness limits our
ability to repurchase the 2026 Notes or pay cash upon their conversion.
.
Our indebtedness and liabilities could limit the cash flow available for our
operations, expose us to risks that could adversely affect our business,
financial condition, and results of operations and impair our ability to
satisfy our obligations under the Notes.
.
Our obligations to the Investor pursuant to the 2025 Notes are secured by a
first priority security interest in all of the existing and future assets of
the Company and certain of our subsidiaries, and because of a default, the
Investor could foreclose on, liquidate and/or take possession of such assets.
If that were to happen, we could be forced to curtail, or even to cease, our
operations.
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We have listed below the material risk factors applicable to us grouped into
the following categories: Operational Risks; Macroeconomic, Market, and
Strategic Risks; Financial Risks; Legal and Regulatory Risks; and Risks
Related to Our Convertible Notes.
Operational Risks
There is substantial doubt about our ability to continue as a going concern.
We used $904.9 million in cash in operating and investing activities in 2023,
and our cash balance reduced from $736.5 million at December 31, 2022 to
$325.5 million at December 31, 2023. Our cash and cash equivalents balance
further reduced to $53.9 million of unrestricted and $11.2 million of
restricted at April 16, 2024, reflecting significant payments to certain
suppliers. We expect to require additional cash in 2024 for debt service and
investment needs, and our ability to generate cash from operating activities
will depend on our ability to transition to a dealer model and sell vehicles.
Accordingly, we have concluded there is substantial doubt as to our ability to
continue as a going concern.
Our ability to continue as a going concern is dependent upon our ability to
raise additional debt or equity financings, enter into a strategic partnership
with an OEM, and generate cash from the sale of vehicles. We need significant
additional funding in the near term to execute our business plan and to
continue our operations. We continue to seek and evaluate opportunities to
raise additional funds through the issuance of our securities, through one or
more potential strategic partnerships, and from the sale of vehicles. If
capital is not available to us when, and in the amounts needed, we could be
required to further curtail our operations. Moreover, if we do not raise
capital in the near term or receive a forbearance agreement and/or waivers
from our debt holders (for relief from current defaults), we will be unable to
satisfy our debt service obligations and expect to seek protection under
applicable bankruptcy laws.
Our ability to develop, manufacture and obtain required regulatory approvals
for a car of sufficient quality and appeal to customers on schedule and on a
large scale is unproven.
Our business depends in large part on our ability to develop, manufacture,
market and sell or lease our electric vehicles. Initially, we plan to
manufacture vehicles in collaboration with contract manufacturers such as
Magna Steyr, automotive component and large tier-one automotive suppliers.
Our ability to successfully manufacture vehicles, including the Fisker Ocean,
is subject to risks, including with respect to:
.
securing necessary funding;
.
negotiating and executing definitive agreements with various suppliers for
hardware, software, or services;
.
manufacturing vehicles within specified design tolerances;
.
obtaining required regulatory approvals and certifications;
.
complying with environmental, safety, and similar regulations;
.
securing necessary components, services, or licenses on acceptable terms and
in a timely manner;
.
timely delivering final component designs to our suppliers;
.
attracting, recruiting, hiring, retaining, and training skilled employees;
.
utilizing quality controls;
.
timely receipt of supplies, including raw materials;
.
maintaining arrangements on reasonable terms with its manufacturing partners
and suppliers, engineering service providers, delivery partners, and after
sales service providers; and
.
avoiding delays in manufacturing and research and development of new models,
and cost overruns.
Our ability to develop, manufacture and obtain required regulatory approvals
for a vehicle of sufficient quality and appeal to customers on schedule and on
a large scale is unproven, and our business plan may continue to evolve. We
may be required to introduce new vehicle models and enhanced versions of
existing models. To date, we have limited
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experience, as a company, designing, testing, manufacturing, marketing and
selling or leasing our electric vehicles and therefore cannot assure you that
we will be able to meet customer expectations. Any failure to develop such
manufacturing processes and capabilities within our projected costs and
timelines would have a material adverse effect on our business, prospects,
operating results and financial condition.
We are substantially reliant on our relationships with suppliers and service
providers for the parts and components in our vehicles, as well as for the
manufacture of our initial vehicles. If any of these suppliers or service
partners choose to not do business with us, then we would have significant
difficulty in procuring and producing our vehicles and our business prospects
would be significantly harmed.
We have entered into a number of definitive agreements with third parties in
order to implement our capital-light business model and will need to enter
into definitive agreements with one or more suppliers in order to produce
other vehicles in a manner contemplated by our business plan. Furthermore, we
have explored and intend to secure alternative suppliers and providers for
many of the most material aspects of our business model.
Collaboration with third parties for the manufacturing of vehicles is subject
to risks with respect to operations that are outside our control. We could
experience delays to the extent our current or future partners do not continue
doing business with us, meet agreed upon timelines, experience capacity
constraints or otherwise are unable to deliver components or manufacture
vehicles as expected. There is risk of potential disputes with partners, and
we could be affected by adverse publicity related to our partners whether or
not such publicity is related to their collaboration with us. Our ability to
successfully build a premium brand could also be adversely affected by
perceptions about the quality of our partners' vehicles or other vehicles
manufactured by the same partner. In addition, although we intend to be
involved in material decisions in the supply chain and manufacturing process,
given that we also rely on our partners to meet our quality standards, there
can be no assurance that we will be able to maintain high quality standards.
We may in the future enter into strategic alliances, including joint ventures
or minority equity investments, with various third parties to further our
business purpose. These alliances could subject us to a number of risks,
including risks associated with sharing proprietary information, non-performance
by the third party, and increased expenses in establishing new strategic
alliances, any of which may materially and adversely affect our business.
To sell or lease Fisker vehicles as currently contemplated, we will need to
enter into certain additional agreements and arrangements, some of which are
not currently in place. These include entering into definitive agreements with
third party service partners for fleet management, vehicle storage, dockside
collection, mobile fleet servicing, financing and end of lease collections. If
we are unable to enter into such definitive agreements, or if we are only able
to do so on terms that are unfavorable to us, we may have a material adverse
effect on our business, prospects, operating results and financial condition.
Our relationship with automotive suppliers is integral to our platform
procurement and manufacturing plan, and we may not be able to obtain such
commitments in the future. We therefore may seek alternative arrangements with
a number of component suppliers, and contract manufacturers, which we may not
be successful in obtaining.
To manufacture our vehicles as currently contemplated, we will need to enter
into definitive agreements and arrangements in the future. If we are unable to
enter into definitive agreements or are only able to do so on terms that are
unfavorable to us, we may not be able to timely identify adequate strategic
relationship opportunities, or form strategic relationships, and consequently,
we may not be able to fully carry out our business plans.
If we are unable to continue to contract with OEMs or suppliers on
manufacturing of our future vehicles, we would need to develop our own
platform and manufacturing facilities, which may not be feasible and, if
feasible at all, would significantly increase our capital expenditure and
would significantly delay production of our vehicles.
We may be unable to continue to enter into definitive agreements with OEMs and
suppliers for manufacturing on terms and conditions acceptable to us and
therefore we may need to contract with other third parties or establish our
own production capacity. There can be no assurance that in such event that we
would be able to partner with other third parties or establish our own
production capacity to meet our needs on acceptable terms, or at all. The
expense and time required to complete any transition and to assure that
vehicles manufactured at facilities of new third-party partners comply with
our quality standards and regulatory requirements would likely be greater than
currently anticipated. If we need to develop our
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own manufacturing and production capabilities, which may not be feasible, it
would significantly increase our capital expenditures and would significantly
delay production of our vehicles. This may require that we attempt to raise or
borrow money, which may not be successful. Also, it may require that we change
the anticipated pricing of our vehicles, which would adversely affect our
margins and cash flows. Any of the foregoing could adversely affect our
business, results of operations, financial condition and prospects.
Manufacturing in collaboration with partners is subject to risks.
Our business model relies on outsourced manufacturing of our vehicles.
Collaboration with third parties to manufacture vehicles is subject to risks
that are outside of our control. We could experience delays if our partners do
not meet agreed upon timelines or experience capacity constraints. There is
risk of potential disputes with partners, which could stop or slow vehicle
production, and we could be affected by adverse publicity related to our
partners, whether or not such publicity is related to such third parties'
collaboration with us. Our ability to successfully build a premium brand could
also be adversely affected by perceptions about the quality of our partners'
products. In addition, we cannot guarantee that our suppliers will not deviate
from agreed-upon quality standards.
We may be unable to continue to enter into agreements with manufacturers on
terms and conditions acceptable to us and therefore we may need to contract
with other third parties or significantly add to our own production capacity.
We may not be able to engage other third parties or establish or expand our
own production capacity to meet our needs on acceptable terms, or at all. The
expense and time required to adequately complete any transition may be greater
than anticipated. Any of the foregoing could adversely affect our business,
results of operations, financial condition and prospects.
There are complex software and technology systems that need to be developed in
coordination with vendors and suppliers in order to reach production for our
electric vehicles, and there can be no assurance such systems will be
successfully developed.
Fisker vehicles will use a substantial amount of third-party and in-house
software codes and complex hardware to operate. The development of such
advanced technologies is inherently complex, and we will need to coordinate
with our vendors and suppliers in order to reach production for our electric
vehicles. A late software delivery by one or more of our vendors may cause
resulting delay in whole vehicle integration and validation. Defects and
errors may be revealed over time and our control over the performance of
third-party services and systems may be limited. Thus, our potential inability
to develop the necessary software and technology systems may harm our
competitive position. There can be no assurances that our suppliers will be
able to meet the technological requirements, production timing and volume
requirements to support our business plan. In addition, such technology may
not satisfy the cost, performance useful life and warranty characteristics we
anticipate in our business plan, which could materially adversely affect our
business, prospects and results of operations.
We are relying on third-party suppliers to develop a number of emerging
technologies for use in our products, including lithium-ion battery
technology. These technologies may not be commercially viable. There can be no
assurances that our suppliers will be able to meet the technological
requirements, production timing, and volume requirements to support our
business plan. In addition, the technology may not comply with the cost,
performance useful life and warranty characteristics we anticipate in our
business plan. As a result, our business plan could be significantly impacted
and we may incur significant liabilities under warranty claims which could
adversely affect our business, prospects, and results of operations.
We may experience significant delays in the design, manufacture, regulatory
approval, launch and financing of our vehicles, which could harm our business
and prospects.
Any delay in the financing, design, manufacture, regulatory approval or launch
of our vehicles, including entering into agreements for supply of component
parts, and manufacturing, could materially damage our brand, business,
prospects, financial condition and operating results and could cause liquidity
constraints. Vehicle manufacturers often experience delays in the design,
manufacture and commercial release of new products. To the extent we delay the
launch of our vehicles, our growth prospects could be adversely affected as we
may fail to establish or grow our market share. We rely on third-party
suppliers for the provision and development of the key components and
materials used in our vehicles.
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To the extent our suppliers experience any delays in providing us with or
developing necessary components, we could experience delays in delivering on
our timelines.
We are dependent on our suppliers, a significant number of which are single or
limited source suppliers, and the inability of our suppliers to deliver
necessary components for our vehicles in a timely manner and at prices and
volumes acceptable to us could have a material adverse effect on our business,
prospects and operating results
.
While we obtain components from multiple sources whenever possible, many of
the components used in our vehicles are purchased from a single source. We
believe that we may be able to establish alternate supply relationships and
can obtain or engineer replacement components for many single sourced
components, but we may be unable to do so in the near term (or at all) at
prices or quality levels that are acceptable to us for some single sourced
components. In addition, we could experience delays if our suppliers do not
meet agreed upon timelines or they experience production constraints that in
turn limit our production.
Any disruption in the supply of components, including semiconductor shortages,
whether or not from a single source supplier, could temporarily disrupt
production of our vehicles until an alternative supplier is able to supply the
required components. Changes in business conditions, unforeseen circumstances,
governmental changes, and other factors beyond our control could also affect
our suppliers' ability to deliver components to us on a timely basis. Any of
the foregoing could materially and adversely affect our ability to produce
vehicles, increase our costs and negatively affect our liquidity and financial
performance. For example, the consequences of the conflict between Russia and
Ukraine or the conflicts in the Middle East, including international
sanctions, the potential impact on inflation and increased disruption to
supply chains may impact us, result in an economic downturn or recession
either globally or locally within the U.S. or other economies, reduce business
activity, spawn additional conflicts (whether in the form of traditional
military action, reignited "cold" wars or in the form of virtual warfare such
as cyberattacks) with similar and perhaps wider ranging impacts and
consequences and have an adverse impact on our results of operations,
financial condition and prospects. Such consequences also may increase our
funding cost or limit our access to the capital markets.
If any of our significant suppliers experience substantial financial
difficulties, cease operations, or otherwise face business disruptions, we may
be required to provide financial support or take other measures in an effort
to ensure components and materials remain available to us. Financial support
provided by us to distressed suppliers could adversely impact our liquidity
and results of operations.
Our vehicles make use of lithium-ion battery cells, which have been observed
to catch fire or vent smoke and flame.
The battery packs within our vehicles make use of lithium-ion cells. On rare
occasions, lithium-ion cells can rapidly release the energy they contain by
venting smoke and flames in a manner that can ignite nearby materials as well
as other lithium-ion cells. While the battery pack is designed to contain any
single cell's release of energy without spreading to neighboring cells, once
our vehicles are commercially available, a field or testing failure of battery
packs in our vehicles could occur, which could result in bodily injury or
death and could subject us to lawsuits, product recalls, or redesign efforts,
all of which would be time consuming and expensive and could harm our brand
image. Also, negative public perceptions regarding the suitability of
lithium-ion cells for automotive applications, the social and environmental
impacts of cobalt mining, or any future incident involving lithium-ion cells,
such as a vehicle or other fire, could seriously harm our business and
reputation.
We have a limited operating history and face significant challenges as a new
entrant into the automotive industry.
Fisker was incorporated in September 2016 and we have a short operating
history in the automobile industry, which is continuously evolving. We may not
be able to develop efficient, automated, cost-efficient manufacturing
capability and processes, and reliable sources of component supplies that will
enable us to meet the quality, price, engineering, design and production
standards, as well as the production volumes, required to successfully mass
market the Fisker Ocean and future vehicles. We face significant risks as a
new entrant into the automotive industry, including, among other things, with
respect to our ability to:
.
design and produce safe, reliable and quality vehicles on an ongoing basis;
.
obtain the necessary regulatory approvals in a timely manner;
.
build a well-recognized and respected brand;
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.
establish and expand our customer base;
.
successfully market not just our vehicles but also our other services,
including our Flexee lease and other services we intend to provide;
.
properly price our services, including our charging solutions, financing and
lease options, and successfully anticipate the take-rate and usage of such
services by users;
.
successfully service our vehicles after sales and maintain a good flow of
spare parts and customer goodwill;
.
improve and maintain our operational efficiency;
.
maintain a reliable, secure, high-performance and scalable technology
infrastructure;
.
predict our future revenues and appropriately budget for our expenses;
.
attract, retain and motivate talented employees;
.
anticipate trends that may emerge and affect our business;
.
anticipate and adapt to changing market conditions, including technological
developments and changes in competitive landscape; and
.
navigate an evolving and complex regulatory environment.
If we fail to adequately address any or all of these risks and challenges, our
business may be materially and adversely affected.
We are an early-stage company with a history of losses, and we expect to incur
significant expenses and continuing losses in the future.
We have incurred a net loss since our inception. We expect to incur losses in
future periods as we, among other things, design, develop and manufacture our
vehicles; build up inventories of parts and components for our vehicles;
increase our sales and marketing activities; develop our distribution
infrastructure; and increases our selling, general and administrative
functions to support our growing operations. We may find that these efforts
are more expensive than we currently anticipate or that these efforts may not
result in expected revenues, which would further increase our losses.
We may not be able to accurately estimate the supply and demand for our
vehicles, which could result in a variety of inefficiencies in our business
and hinder our ability to generate revenue. If we fail to accurately predict
our manufacturing requirements, we could incur additional costs or experience
delays.
It is difficult to predict our future revenues and appropriately budget for
our expenses, and we may have limited insight into trends that may emerge and
affect our business. We are required to provide forecasts of our demand to our
suppliers several months prior to the scheduled delivery of products to our
prospective customers. Currently, there is no historical basis for making
judgments on the demand for our vehicles or our ability to develop,
manufacture, and deliver vehicles, or our profitability in the future. If we
overestimate our requirements, our suppliers may have excess inventory, which
indirectly would increase our costs. If we underestimate our requirements, our
suppliers may have inadequate inventory, which could interrupt the
manufacturing of our products and result in delays in shipments and revenues.
In addition, lead times for materials and components that our suppliers order
may vary significantly and depend on factors such as the specific supplier,
contract terms and demand for each component at a given time. If we fail to
order sufficient quantities of product components in a timely manner, the
delivery of vehicles to our customers could be delayed, which would harm our
business, financial condition and operating results.
Our limited operating history makes evaluating our business and future
prospects difficult and will increase the risk of investing in us.
As an early-stage company with a limited operating history, we face various
risks and difficulties. If we do not successfully address these risks, our
business, prospects, operating results and financial condition will be
materially and adversely harmed. We have a very limited operating history on
which investors can base an evaluation of our business, operating results and
prospects. It is difficult to predict our future revenues and appropriately
budget for our expenses, and we have limited insight into trends that may
emerge and affect our business. In the event that actual results differ from
our
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estimates or we adjust our estimates in future periods, our operating results
and financial position could be materially affected.
If our vehicles fail to perform as expected, our ability to develop, market,
and sell or lease our electric vehicles could be harmed.
Our vehicles may contain defects in design and manufacture that may cause them
not to perform as expected or that may require repair, recalls, and design
changes. Our vehicles use a substantial amount of software code to operate and
software products are inherently complex and often contain defects and errors
when first introduced. We have a limited frame of reference by which to
evaluate the long-term performance of our systems and vehicles. There can be
no assurance that we will be able to detect and fix any defects in the
vehicles prior to their sale to consumers. If any of our vehicles fail to
perform as expected, we may need to delay deliveries or initiate product
recalls, which could adversely affect our brand in our target markets and
could adversely affect our business, prospects, and results of operations.
Our services may not be generally accepted by our users. If we are unable to
provide quality customer service, our business and reputation may be
materially and adversely affected.
Our servicing may primarily be carried out through third parties certified by
us or dealers. Although such servicing partners may have experience in
servicing other vehicles, they will initially have limited experience in
servicing Fisker vehicles. There can be no assurance that our service
arrangements will adequately address the service requirements of our customers
to their satisfaction, or that we and our partners will have sufficient
resources to meet these service requirements in a timely manner as the volume
of vehicles we deliver increases.
We have received various complaints relating to the timing of delivery of
titles and registration paperwork. These claims - and any other complaints or
negative publicity about our business practices, our marketing, and
advertising campaigns, our compliance with applicable laws and regulations,
the integrity of the data that we provide to users, our cybersecurity measures
and privacy practices and other aspects of our business - could diminish
customer confidence in our business and adversely affect our brand. Moreover,
the use of social media increases the speed that information, misinformation,
and opinions can be shared and thus the speed that our reputation can be
affected.
In addition, if we are unable to roll out and establish a widespread
dealership and/or service network that complies with applicable laws, user
satisfaction could be adversely affected, which in turn could materially and
adversely affect our reputation and thus our sales, results of operations, and
prospects.
Reservations for our vehicles are cancellable.
Deposits paid to reserve our vehicles are cancellable by our customers.
Because all of our reservations are cancellable, it is possible that a
significant number of customers who submitted reservations may not purchase
Fisker vehicles. Such cancellations could harm our financial condition,
business, prospects, and operating results.
If we fail to manage our future growth effectively, we may not be able to
market and sell or lease our vehicles successfully direct to consumers or
through dealerships.
Assuming we are able to secure sufficient capital, we may expand our
operations, which would require hiring, retaining and training new personnel,
controlling expenses, establishing facilities and experience centers, and
implementing administrative infrastructure, systems and processes. In
addition, because our electric vehicles are based on a different technology
platform than traditional ICE vehicles, individuals with sufficient training
in electric vehicles may not be available to be hired, and we will need to
expend significant time and expense training employees we hire. We also
require sufficient talent in additional areas such as software development.
Furthermore, as we are a relatively young company, our ability to train and
integrate new employees into its operations may not meet the growing demands
of our business, which may affect our ability to grow. Any failure to
effectively manage our growth could materially and adversely affect our
business, prospects, operating results and financial condition.
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We may not succeed in establishing, maintaining and strengthening our brand,
which would materially and adversely affect customer acceptance of its
vehicles and components and its business, revenues and prospects.
Our business and prospects heavily depend on our ability to develop, maintain
and strengthen the Fisker brand. If we are not able to establish, maintain and
strengthen our brand, we may lose the opportunity to build a critical mass of
customers. Our ability to develop, maintain and strengthen the Fisker brand
will depend heavily on the success of our marketing efforts. The automobile
industry is intensely competitive, and we may not be successful in building,
maintaining and strengthening our brand. Many of our current and potential
competitors, particularly automobile manufacturers headquartered in the United
States, Japan, the European Union and China, have greater name recognition,
broader customer relationships and substantially greater marketing resources
than we do. If we do not develop and maintain a strong brand, our business,
prospects, financial condition and operating results will be materially and
adversely impacted.
Our direct-to-consumer distribution model which we historically deployed has
been different from the predominant current distribution model for automobile
manufacturers. We are transitioning to a dealer sales model, which makes
evaluating our business, operating results and future prospects difficult.
We initially began sales of our vehicles through a direct-to-consumer
distribution model, which is different from the predominant current
distribution model for automobile manufacturers. In January 2024, we announced
that we would begin using a dealer sales model more aligned with the
traditional dealer distribution model used by automobile manufacturers. The
historical use of a direct-to-consumer distribution model and the change to
using a dealer sales model makes evaluating our business, operating results
and future prospects difficult. Our historical direct-to-consumer distribution
model is not common in the automotive industry today. While the dealer sales
model is common in the automotive industry, there are limited instances where
an automobile company has changed its distribution model, which makes it
difficult to assess the impact of such change. Consumers may have been
attracted to our historical direct-to-consumer model and may determine not to
move forward with the purchase of a vehicle for which they have made a deposit
if required to purchase through a dealership. There may be delays in arranging
for all necessary licenses and/or permits to enable us to use a dealer sales
model. During any such delay, we may also be unable to sell cars in a
direct-to-consumer format due to state restrictions on competition with
franchise dealers. Any such delays or restrictions will negatively impact our
ability to sell vehicles and generate revenue. If we are unable to
successfully transition our distribution model, including minimizing loss of
sales to existing deposit holders during the transition, it would have a
material adverse effect on our business, prospects, financial results and
results of operations.
We depend on revenue generated from a single model and in the foreseeable
future will be significantly dependent on a limited number of models.
We depend on revenue generated from a single vehicle model, the Fisker Ocean,
and in the foreseeable future will be significantly dependent on a limited
number of models. Historically, automobile customers have come to expect a
variety of vehicle models offered in a manufacturer's fleet and new and
improved vehicle models to be introduced frequently. Given that for the
foreseeable future our business will depend on a single or limited number of
models, to the extent a particular model is not well-received by the market,
our sales volume, business, prospects, financial condition, and operating
results could be materially and adversely affected.
We are highly dependent on the services of Henrik Fisker, our Chief Executive
Officer.
We are highly dependent on the services of Henrik Fisker, our co-founder and
Chief Executive Officer, and, together with his wife, our Chief Financial
Officer, our largest stockholder. Mr. Fisker is the source of many, if not
most, of the ideas and execution driving Fisker. If Mr. Fisker were to
discontinue his service to Fisker due to death, disability or any other
reason, we would be significantly disadvantaged.
Our business depends substantially on the continuing efforts of our executive
officers and qualified personnel, and our operations may be severely disrupted
if we lose their services.
Our success depends substantially on the continued efforts of our executive
officers and qualified personnel, and our operations may be severely disrupted
if we lose their services. As we build our brand and we become more well
known, the risk that competitors or other companies may poach our talent
increases. The failure to attract, integrate, train, motivate and retain these
personnel could seriously harm our business and prospects.
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Failure of information security and privacy concerns could subject us to
penalties, damage our reputation and brand, and harm our business and results
of operations.
We expect to face significant challenges with respect to information security
and privacy, including the storage, transmission and sharing of confidential
information. We will transmit and store confidential and private information
of our customers, such as personal information, including names, accounts,
user IDs and passwords, and payment or transaction related information.
We have adopted strict information security policies and deployed advanced
measures to implement the policies, including, among others, advanced
encryption technologies, and plans to continue to deploy additional measures
as we grow. However, advances in technology, an increased level of
sophistication and diversity of our products and services, an increased level
of expertise of hackers, new discoveries in the field of cryptography or
others can still result in a compromise or breach of the measures that it
uses. If we are unable to protect our systems, and hence the information
stored in our systems, from unauthorized access, use, disclosure, disruption,
modification or destruction, such problems or security breaches could cause a
loss, give rise to our liabilities to the owners of confidential information
or even subject us to fines and penalties. In addition, complying with various
laws and regulations could cause us to incur substantial costs or require it
to change our business practices, including our data practices, in a manner
adverse to our business.
In addition, we are required to comply with complex and rigorous regulatory
standards enacted to protect business and personal data in the United States,
Europe and elsewhere. For example, the European Union adopted the General Data
Protection Regulation ("GDPR"), which became effective on May 25, 2018 and the
State of California adopted the California Consumer Privacy Act of 2018
("CCPA"), both as amended. Both the GDPR and the CCPA impose additional
obligations on companies regarding the handling of personal data and provides
certain individual privacy rights to persons whose data is stored. Compliance
with existing, proposed and recently enacted laws (including implementation of
the privacy and process enhancements called for under the GDPR) and
regulations can be costly; any failure to comply with these regulatory
standards could subject us to legal and reputational risks.
Compliance with any additional laws and regulations could be expensive, and
may place restrictions on the conduct of our business and the manner in which
we interact with our customers. Any failure to comply with applicable
regulations could also result in regulatory enforcement actions against us,
and misuse of or failure to secure personal information could also result in
violation of data privacy laws and regulations, proceedings against us by
governmental entities or others, and damage to our reputation and credibility,
and could have a negative impact on revenues and profits.
Significant capital and other resources may be required to protect against
information security breaches or to alleviate problems caused by such breaches
or to comply with our privacy policies or privacy-related legal obligations.
The resources required may increase over time as the methods used by hackers
and others engaged in online criminal activities are increasingly
sophisticated and constantly evolving. Any failure or perceived failure by us
to prevent information security breaches or to comply with privacy policies or
privacy-related legal obligations, or any compromise of security that results
in the unauthorized release or transfer of personally identifiable information
or other customer data, could cause our customers to lose trust in us and
could expose us to legal claims. Any perception by the public that online
transactions or the privacy of user information are becoming increasingly
unsafe or vulnerable to attacks could inhibit the growth of online retail and
other online services generally, which may reduce the number of orders we
receive.
Any unauthorized control or manipulation of our vehicles' systems could result
in loss of confidence in us and our vehicles and harm our business.
Our vehicles contain complex information technology systems. For example, our
vehicles are outfitted with built-in data connectivity to accept and install
periodic remote updates from us to improve or update the functionality of our
vehicles. We have designed, implemented and tested security measures intended
to prevent cybersecurity breaches or unauthorized access to our information
technology networks, our vehicles and their systems, and we intend to
implement additional security measures as necessary. However, hackers may
attempt in the future to gain unauthorized access to modify, alter and use
such networks, vehicles and systems to gain control of, or to change, our
vehicles' functionality, user interface and performance characteristics, or to
gain access to data stored in or generated by the vehicle. Vulnerabilities
could be identified in the future, and our remediation efforts may not be
successful. Any unauthorized access to or control of our vehicles or their
systems or any loss of data could result in legal claims or proceedings. In
addition, regardless of their veracity, reports of unauthorized access to our
vehicles, their systems or data, as well as other factors that may result
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in the perception that our vehicles, their systems or data are capable of
being "hacked," could negatively affect our brand and harm our business,
prospects, financial condition and operating results.
Interruption or failure of our information technology and communications
systems could impact our ability to effectively provide our services.
We outfit our vehicles with in-vehicle services and functionality that utilize
data connectivity to monitor performance and timely capture opportunities for
cost-saving preventative maintenance. The availability and effectiveness of
our services depend on the continued operation of information technology and
communications systems, which we have yet to fully develop. Our systems will
be vulnerable to damage or interruption from, among others, fire, terrorist
attacks, natural disasters, power loss, telecommunications failures, computer
viruses, computer denial of service attacks, cyber attacks or other attempts
to harm our systems. Our data centers could also be subject to break-ins,
sabotage and intentional acts of vandalism causing potential disruptions. Some
of our systems will not be fully redundant, and our disaster recovery planning
cannot account for all eventualities. Any problems at our data centers could
result in lengthy interruptions in our service. In addition, our vehicles are
highly technical and complex and may contain errors or vulnerabilities, which
could result in interruptions in our business or the failure of our systems.
We need to continue to improve our operational and financial systems to
support our expected growth, increasingly complex business arrangements, and
rules governing revenue and expense recognition and any inability to do so
will adversely affect our billing and reporting.
To manage the expected growth of our operations and increasing complexity, we
will need to continue to improve our operational and financial systems,
procedures, and controls and continue to increase systems automation to reduce
reliance on manual operations. Any inability to do so will affect our billing
and reporting. Our current and planned systems, procedures and controls may
not be adequate to support our complex arrangements and the rules governing
revenue and expense recognition for our future operations and expected growth.
Delays or problems associated with any improvement or expansion of our
operational and financial systems and controls could adversely affect our
relationships with our customers, cause harm to our reputation and brand and
could also result in errors in our financial and other reporting.
Our management has limited experience in operating a public company.
Our executive officers have limited experience in the management of a publicly
traded company. Their limited experience in dealing with the increasingly
complex laws pertaining to public companies could be a significant
disadvantage in that it is likely that an increasing amount of their time may
be devoted to these activities which will result in less time being devoted to
the management and growth of the combined company. The development and
implementation of the standards and controls necessary for the combined
company to achieve the level of accounting standards required of a public
company in the United States may require costs greater than expected. It is
possible that we will be required to expand our employee base and hire
additional employees to support our operations as a public company, which will
increase our operating costs in future periods.
Macroeconomic, Market, and Strategic Risks
Our asset-light business model is unique in the automotive industry and any
failure to commercialize our strategic plans would have an adverse effect on
our operating results and business, harm our reputation and could result in
substantial liabilities that exceed our resources.
Investors should be aware of the difficulties normally encountered by a new
enterprise, many of which are beyond our control, including substantial risks
and expenses while establishing or entering new markets, setting up operations
and undertaking marketing activities. The likelihood of our success must be
considered in light of these risks, expenses, complications, delays, and the
competitive environment in which we operate. There is, therefore, little at
this time upon which to base an assumption that our asset-light business model
will prove successful, and we may not be able to generate significant revenue,
raise additional capital or operate profitably. We will continue to encounter
risks and difficulties frequently experienced by early commercial stage
companies, including scaling up our infrastructure and headcount, and may
encounter unforeseen expenses, difficulties or delays in connection with our
growth. In addition, as a result of the capital-intensive nature of our
business, it can be expected to continue to sustain substantial operating
expenses without
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generating sufficient revenues to cover expenditures. Any investment in our
company is therefore highly speculative and could result in the loss of your
entire investment.
We could experience cost increases or disruptions in supply of raw materials
or other components used in our vehicles.
We may be unable to adequately control the costs associated with our
operations. We expect to incur significant costs related to procuring raw
materials required to manufacture and assemble our vehicles. We expect to use
various raw materials in our vehicles including steel, recycled rubber,
recycled polyester, carpeting from fishing nets and bottles recycled from
ocean waste. The prices for these raw materials fluctuate depending on factors
beyond our control. Our business also depends on the continued supply of
battery cells for our vehicles. We are exposed to multiple risks relating to
availability and pricing of quality lithium-ion battery cells.
Furthermore, currency fluctuations, tariffs or shortages in petroleum and
other economic or political conditions may result in significant increases in
freight charges and raw material costs. Substantial increases in the prices
for our raw materials or components would increase our operating costs, and
could reduce our margins. In addition, a growth in popularity of electric
vehicles without a significant expansion in battery cell production capacity
could result in shortages, which would result in increased costs in raw
materials to us or impact of prospects.
The automotive market is highly competitive, and we may not be successful in
competing in this industry.
Both the automobile industry generally, and the electric vehicle segment in
particular, are highly competitive, and we will be competing for sales with
both ICE vehicles and other EVs. Many of our current and potential competitors
have significantly greater financial, technical, manufacturing, marketing and
other resources than we do and may be able to devote greater resources to the
design, development, manufacturing, distribution, promotion, sale and support
of our products, including our electric vehicles. We expect competition for
electric vehicles to intensify due to increased demand and a regulatory push
for alternative fuel vehicles, continuing globalization, and consolidation in
the worldwide automotive industry. Factors affecting competition include
product quality and features, innovation and development time, pricing,
reliability, safety, fuel economy, customer service, and financing terms.
Increased competition may lead to lower vehicle unit sales and increased
inventory, which may result in downward price pressure and adversely affect
our business, financial condition, operating results, and prospects.
The automotive industry and its technology are rapidly evolving and may be
subject to unforeseen changes. Developments in alternative technologies,
including but not limited to hydrogen, may adversely affect the demand for our
electric vehicles.
We may be unable to keep up with changes in electric vehicle technology or
alternatives to electricity as a fuel source and, as a result, our
competitiveness may suffer. Developments in alternative technologies, such as
advanced diesel, ethanol, fuel cells, or compressed natural gas, or
improvements in the fuel economy of the ICE, may materially and adversely
affect our business and prospects in ways we do not currently anticipate. Any
failure by us to successfully react to changes in existing technologies could
materially harm our competitive position and growth prospects.
We may be subject to risks associated with autonomous driving technology.
Our vehicles will be designed with connectivity for future installation of an
autonomous hardware suite and our plans to partner with a third-party software
provider in the future to implement autonomous capabilities. However, we
cannot guarantee that we will be able to identify a third party to provide the
necessary hardware and software to enable autonomous capabilities in an
acceptable timeframe, on terms satisfactory to us, or at all. Autonomous
driving technologies are subject to risks and there have been accidents and
fatalities associated with such technologies. The safety of such technologies
depends in part on drive interactions, and drivers may not be accustomed to
using or adapting to such technologies. To the extent accidents associated
with our autonomous driving systems occur, we could be subject to liability,
negative publicity, government scrutiny, and further regulation. Any of the
foregoing could materially and adversely affect our results of operations,
financial condition, and growth prospects.
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Our future growth is dependent on the demand for, and upon consumers'
willingness to adopt, electric vehicles.
Our future growth is dependent on the demand for, and upon consumers'
willingness to adopt electric vehicles, and even if electric vehicles become
more mainstream, consumers choosing us over other EV manufacturers. Demand for
electric vehicles may be affected by factors directly impacting automobile
prices or the cost of purchasing and operating automobiles such as sales and
financing incentives, prices of raw materials and parts and components, cost
of fuel and governmental regulations, including tariffs, import regulation and
other taxes. Volatility in demand may lead to lower vehicle unit sales, which
may result in downward price pressure and adversely affect our business,
prospects, financial condition, and operating results.
In addition, the demand for our vehicles and services will highly depend upon
the adoption by consumers of new energy vehicles in general and electric
vehicles in particular. The market for new energy vehicles is still rapidly
evolving, characterized by rapidly changing technologies, competitive pricing
and competitive factors, evolving government regulation and industry
standards, and changing consumer demands and behaviors.
.
Other factors that may influence the adoption of alternative fuel vehicles,
and specifically electric vehicles, include:
.
perceptions about electric vehicle quality, safety, design, performance and
cost, especially if adverse events or accidents occur that are linked to the
quality or safety of electric vehicles, whether or not such vehicles are
produced by us or other manufacturers;
.
range anxiety;
.
the availability of new energy vehicles, including plug-in hybrid electric
vehicles;
.
the availability of service and charging stations for electric vehicles;
.
the environmental consciousness of consumers, and their adoption of EVs;
.
perceptions about and the actual cost of alternative fuel; and
.
macroeconomic factors.
Any of the factors described above may cause current or potential customers
not to purchase electric vehicles in general, and Fisker electric vehicles in
particular. If the market for electric vehicles does not develop as we expect
or develop more slowly than we expect, our business, prospects, financial
condition and operating results will be affected.
Doing business internationally creates operational and financial risks for our
business.
Our business plan includes operations in international markets, including
initial manufacturing and supply activities in Europe, initial sales in North
America and Europe, and eventual expansion into other international markets.
Conducting and launching operations on an international scale requires close
coordination of activities across multiple jurisdictions and time zones and
consumes significant management resources. If we fail to coordinate and manage
these activities effectively, our business, financial condition or results of
operations could be adversely affected. International sales entail a variety
of risks, including currency exchange fluctuations, challenges in staffing and
managing foreign operations, tariffs and other trade barriers, unexpected
changes in legislative or regulatory requirements of foreign countries into
which we sell our products and services, difficulties in obtaining export
licenses or in overcoming other trade barriers, laws and business practices
favoring local companies, political and economic instability, difficulties
protecting or procuring intellectual property rights, and restrictions
resulting in delivery delays and significant taxes or other burdens of
complying with a variety of foreign laws.
Our business may be adversely affected by labor and union activities.
Although none of our employees are currently represented by a labor union, it
is common throughout the automobile industry generally for many employees at
automobile companies to belong to a union, which can result in higher employee
costs and increased risk of work stoppages. We may also directly and
indirectly depend upon other companies with unionized work forces, such as
parts suppliers and trucking and freight companies, and work stoppages or
strikes organized by such unions could have a material adverse impact on our
business, financial condition or operating results.
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We face risks related to public health issues, including the recent COVID-19
pandemic, which could have a material adverse effect on our business and
results of operations.
We continue to face various risks related to public health issues, including
epidemics, pandemics, and other outbreaks, including the pandemic of
respiratory illness caused by COVID-19. The impact of COVID-19, including
changes in consumer and business behavior, pandemic fears and market
downturns, and restrictions on business and individual activities, has created
significant volatility in the global economy and led to reduced economic
activity. The spread of COVID-19 has also created a disruption in the
manufacturing, delivery and overall supply chain of vehicle manufacturers and
suppliers, and has led to a global decrease in vehicle sales in markets around
the world.
The spread of COVID-19 caused us to modify our business practices, and we may
take further actions as may be required by government authorities or that we
determine is in the best interests of our employees, customers, suppliers,
vendors and business partners. There is no certainty that such actions will be
sufficient to mitigate the risks posed by the virus or otherwise be
satisfactory to government authorities. If significant portions of our
workforce are unable to work effectively, including due to illness,
quarantines, social distancing, government actions or other restrictions in
connection with the COVID-19 pandemic, our operations will be impacted.
Difficult macroeconomic conditions, such as decreases in per capita income and
level of disposable income, increased and prolonged unemployment, or a decline
in consumer confidence as a result of the COVID-19 pandemic could have a
material adverse effect on the demand for our vehicles. Under difficult
economic conditions, potential customers may seek to reduce spending by
forgoing our vehicles for other traditional options or may choose to keep
their existing vehicles and cancel reservations.
We face risks related to natural disasters, health epidemics and other
outbreaks, which could significantly disrupt our operations.
Our facilities or operations could be adversely affected by events outside of
our control, such as natural disasters, wars, health epidemics (as more fully
described in the risk factor "
We face risks related to public health issues, including the COVID-19 pand
emic, which could have a material adverse effect on our business and results
of operations
" located elsewhere in these Risk Factors), a
nd other calamities. Although we have servers that are hosted in an offsite
location, our backup system does not capture data on a real-time basis, and we
may be unable to recover certain data in the event of a server failure. We
cannot assure you that any backup systems will be adequate to protect us from
the effects of fire, floods, typhoons, earthquakes, power loss, telecommunicatio
ns failures, break-ins, war, riots, terrorist attacks or similar events. Any
of the foregoing events may give rise to interruptions, breakdowns, system
failures, technology platform failures or internet failures, which could cause
the loss or corruption of data or malfunctions of software or hardware as well
as adversely affect our ability to provide services.
The military conflicts in Ukraine, Israel, Iran and Gaza, including the
related disruptions to international shipping in the Red Sea and the global
response to these conflicts, may adversely affect our business and results of
operations.
In response to the military conflict between Russia and Ukraine, the U.S.,
U.K. EU, and others have imposed significant new sanctions and export controls
against Russia and certain Russian individuals and entities. This conflict has
also resulted in significant volatility and disruptions to the global markets.
It is not possible to predict the short- or long-term implications of this
conflict, which could include but are not limited to further sanctions,
uncertainty about economic and political stability, increases in inflation
rates and energy prices, supply chain challenges and adverse effects on
currency exchange rates and financial markets. In addition, the U.S.
government has reported that U.S. sanctions against Russia in response to the
conflict could lead to an increased threat of cyberattacks (including
increased risk of data breach and other threats from ransomware, destructive
malware, distributed denial-of-service attacks, as well as fraud, spam, and
fake accounts, or other illegal activity conducted generally by bad actors
seeking to take advantage of us, our partners or end-customers) against U.S.
companies. These increased threats could pose risks to the security of our
information technology systems, our network and our product offerings and/or
service offerings for our products, as well as the confidentiality,
availability and integrity of our data.
We have operations, as well as potential new customers, in Europe. If the
conflict extends beyond Ukraine or further intensifies, it could have an
adverse impact on our operations in Europe or other affected areas. While we
do not offer any services in Ukraine, we are continuing to monitor the
situation in that country and globally as well as assess its
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potential impact on our business, including the supply of natural gas in
Europe. Although neither Russia nor Belarus constitutes a material portion of
our business (if any), a significant escalation or further expansion of the
conflict's current scope or related disruptions to the global markets could
have a material adverse effect on our results of operations.
Our dual class structure may depress the trading price of our Class A Common
Stock.
We cannot predict whether our dual class structure will result in a lower or
more volatile market price of our Class A Common Stock or in adverse publicity
or other adverse consequences. For example, certain index providers have
announced restrictions on including companies with multiple-class share
structures in certain of their indexes. S&P Dow Jones and FTSE Russell have
announced changes to their eligibility criteria for inclusion of shares of
public companies on certain indices, including the S&P 500, pursuant to which
companies with multiple classes of shares of common stock are excluded. In
addition, several stockholder advisory firms have announced their opposition
to the use of multiple class structures. As a result, the dual class structure
of our Common Stock may cause stockholder advisory firms to publish negative
commentary about our corporate governance practices or otherwise seek to cause
Fisker to change our capital structure. Any such exclusion from indices or any
actions or publications by stockholder advisory firms critical of our
corporate governance practices or capital structure could adversely affect the
value and trading market of our Class A Common Stock.
Henrik Fisker and Dr. Geeta Gupta-Fisker are married to each other. The
separation or divorce of the couple in the future could adversely affect our
business.
Henrik Fisker and Dr. Geeta Gupta-Fisker, Fisker's co-founders, members of the
Board of Directors and Chief Executive Officer, and Chief Financial Officer,
respectively, are married to each other. They are two of our executive
officers and are a vital part of our operations. If they were to become
separated or divorced or could otherwise not amicably work with each other,
one or both of them may decide to cease his or her employment with Fisker or
it could negatively impact our working environment. Alternatively, their work
performance may not be satisfactory if they become preoccupied with issues
relating to their personal situation. In these cases, our business could be
materially harmed.
Future sales of shares by existing stockholders may adversely affect the
market price of our Class A common stock.
Sales of a substantial number of shares of our Class A Common Stock in the
public market, or the perception that such sales could occur, could adversely
affect the market price of our Class A Common Stock and may make it more
difficult for you to sell your shares of our Class A Common Stock at a time
and price that you deem appropriate.
We are unable to predict the effect that these sales, particularly sales by
our directors, executive officers and significant stockholders, may have on
the prevailing market price of our Class A Common Stock. If holders of these
shares sell, or indicate an intent to sell, substantial amounts of our Class A
Common Stock in the public market, the trading price of our Class A Common
Stock could decline significantly and make it difficult for us to raise funds
through securities offerings in the future.
We have identified material weaknesses in our internal control over financial
reporting. If our remediation of such material weaknesses is not effective, or
if we experience additional material weaknesses in the future or otherwise
fail to develop and maintain effective internal control over financial
reporting, our ability to produce timely and accurate financial statements or
comply with applicable laws and regulations could be impaired, which could
adversely affect investor confidence in the accuracy and completeness of our
financial statements and adversely affect our business and operating results
and the market price for our Class A common stock.
As a public company, we are required to establish and periodically evaluate
procedures with respect to our disclosure controls and procedures and our
internal control over financial reporting. As discussed in Item 9A, we have
identified material weaknesses in our internal control over financial
reporting. A material weakness is a deficiency, or combination of
deficiencies, in our internal control over financial reporting such that there
is a reasonable possibility that a material misstatement of our annual or
interim consolidated financial statements would not be prevented or detected
on a timely basis. We will not be able to fully remediate these material
weaknesses until appropriate steps have been completed and controls have been
operating effectively for a sufficient period of time.
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Our current controls and any new controls that we develop may become
inadequate because of changes in conditions in our business. Further,
additional weaknesses in our disclosure controls and procedures and internal
control over financial reporting may be discovered in the future. If we are
unable to remediate the material weaknesses in a timely manner and further
implement and maintain effective internal control over financial reporting or
disclosure controls and procedures, our ability to record, process, and report
financial information accurately, and to prepare financial statements within
required time periods could be adversely affected, which could result in
material misstatements in our financial statements that may continue
undetected or a restatement of our financial statements for prior periods.
This may negatively impact the public perception of the Company and cause
investors to lose confidence in the accuracy and completeness of our financial
reports, which could negatively affect the market price of our common stock,
harm our ability to raise capital on favorable terms, or at all, in the
future, and subject us to litigation or investigations by regulatory
authorities, which could require additional financial and management resources
or otherwise have a negative impact on our financial condition.
If securities or industry analysts do not continue to publish research or
reports about our business or publish negative reports about our business, our
share price and trading volume could decline.
The trading market for our Class A Common Stock will depend on the research
and reports that securities or industry analysts publish about us or our
business. If one or more of the analysts who cover Fisker downgrade our shares
or change their opinion of our shares, our share price would likely decline.
If one or more of these analysts cease coverage of Fisker company or fail to
regularly publish reports on Fisker, we could lose visibility in the financial
markets, which could cause our share price or trading volume to decline.
The issuance of shares of our Class A Common Stock upon the conversion of the
2025 Notes or the exercise of the outstanding Magna Warrants would increase
the number of shares eligible for future resale in the public market and
result in dilution to our stockholders.
The holder of the 2025 Notes has and in the future may receive a substantial
number of shares of Class A Common Stock upon conversion of the 2025 Notes.
The conversions are
expected to cause a significant dilution in the relative percentage interests
of the Company's stockholders and lead to volatility in the price of shares of
Class A Common Stock.
Moreover, the Investor may seek to sell their shares. Sales of substantial
amounts of Class A Common Stock in the public market, or the perception that
these sales could occur, coupled with the increase in the outstanding number
of shares of Class A Common Stock, could cause the market price of Class A
Common Stock to decline.
The Magna Warrants entitle Magna to purchase an aggregate of approximately
19,474,454 million shares of our Class A Common Stock. The exercise price of
these warrants are $0.01 per share. To the extent such warrants are exercised,
additional shares of Class A Common Stock will be issued, which will result in
dilution to holders of our Class A Common Stock and increase the number of
shares eligible for resale in the public market. Sales of substantial numbers
of such shares in the public market or the fact that such warrants may be
exercised could adversely affect the market price of our Class A Common Stock.
Financial Risks
Our operating and financial results forecast relies in large part upon
assumptions and analyses developed by us. If these assumptions or analyses
prove to be incorrect, our actual operating results may be materially
different from our forecasted results.
Our projected financial and operating information reflects current estimates
of future performance. Whether actual operating and financial results and
business developments will be consistent with our expectations and assumptions
as reflected in our forecast depends on a number of factors, many of which are
outside our control, including, but not limited to:
.
whether we can obtain sufficient capital to sustain and grow our business;
.
our ability to manage its growth;
.
whether we can manage relationships with key suppliers;
.
the ability to obtain necessary regulatory approvals;
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.
demand for our products and services;
.
the timing and costs of new and existing marketing and promotional efforts;
.
competition, including from established and future competitors;
.
our ability to retain existing key management, to integrate recent hires and
to attract, retain and motivate qualified personnel;
.
the overall strength and stability of domestic and international economies;
.
regulatory, legislative and political changes; and
.
consumer spending habits.
Unfavorable changes in any of these or other factors could materially and
adversely affect our business, results of operations and financial results.
The unavailability, reduction or elimination of government and economic
incentives could have a material adverse effect on our business, prospects,
financial condition and operating results.
Any reduction, elimination, or discriminatory application of government
subsidies and economic incentives because of policy changes, or the reduced
need for such subsidies and incentives due to the perceived success of the
electric vehicle or other reasons, may result in the diminished competitiveness
of the alternative fuel and electric vehicle industry generally or our
electric vehicles in particular. This could materially and adversely affect
the growth of the alternative fuel automobile markets and our business,
prospects, financial condition and operating results. For example, recent
German and U.S. legislative efforts, including the Inflation Reduction Act (the
"
IRA
"
), have eliminated certain tax incentives for purchasers of Fisker vehicles in
those markets.
While certain tax credits and other incentives for alternative energy
production, alternative fuel and electric vehicles have been available in the
past, there is no guarantee these programs will be available in the future. If
current tax incentives are not available in the future, our financial position
could be harmed.
Retail vehicle sales depend significantly on affordable interest rates and
availability of credit for vehicle financing and a substantial increase in
interest rates could adversely affect our business, prospects, financial
condition, results of operations, and cash flows.
In certain regions, including North America and Europe, financing for new
vehicle sales has been available at relatively low interest rates for several
years due to, among other things, expansive government monetary policies. As
interest rates have risen, market rates for new vehicle financing have also
risen, which may make our vehicles less affordable to customers or steer
customers to less expensive vehicles that would be less profitable for us,
adversely affecting our business, prospects, financial condition, results of
operations, and cash flows. Additionally, if consumer interest rates continue
to increase substantially or if financial service providers tighten lending
standards or restrict their lending to certain classes of credit, customers
may not desire or be able to obtain financing to purchase our vehicles. As a
result, a continuing substantial increase in customer interest rates or
tightening of lending standards could have a material adverse effect on our
business, prospects, financial condition, results of operations, and cash
flows.
We may not be able to obtain or agree on acceptable terms and conditions for
all or a significant portion of the government grants, loans and other
incentives for which we may apply. As a result, our business and prospects may
be adversely affected.
We may apply for federal and state grants, loans and tax incentives under
government programs designed to stimulate the economy and support the
production of alternative fuel and electric vehicles and related technologies.
We anticipate that in the future there will be new opportunities for it to
apply for grants, loans and other incentives from the United States, state and
foreign governments. Our ability to obtain funds or incentives from government
sources is subject to the availability of funds under applicable government
programs and approval of our applications to participate in such programs. The
application process for these funds and other incentives will likely be highly
competitive. We cannot assure you that we will be successful in obtaining any
of these additional grants, loans and other incentives. If we are not
successful in obtaining any of these additional incentives and we are unable
to find alternative sources of funding to meet our planned capital needs, our
business and prospects could be materially adversely affected.
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Insufficient warranty reserves to cover future warranty claims could
materially adversely affect our business, prospects, financial condition and
operating results.
We need to maintain warranty reserves to cover warranty-related claims. If our
warranty reserves are inadequate to cover future warranty claims on our
vehicles, our business, prospects, financial condition and operating results
could be materially and adversely affected. We may become subject to
significant and unexpected warranty expenses. There can be no assurances that
our warranty reserves will be sufficient to cover all claims.
Our business plans require a significant amount of capital. In addition, our
future capital needs are likely to require us to sell additional equity or
debt securities that may dilute our stockholders or introduce covenants that
may restrict our operations or our ability to pay dividends.
We expect our expenditures to continue to be significant in the foreseeable
future. The fact that we have a limited operating history means we have
limited historical data on the demand for our products and services. As a
result, our future capital requirements may be uncertain and actual capital
requirements may be different from those we currently anticipate. We need to
seek equity or debt financing to finance our capital expenditures. Such
financing might not be available to us in a timely manner or on terms that are
acceptable, or at all.
Our ability to obtain the necessary financing to carry out our business plan
is subject to a number of factors, including general market conditions and
investor acceptance of our asset-light business model. These factors may make
the timing, amount, terms and conditions of such financing unattractive or
unavailable to us. If we are unable to raise sufficient funds, we will have to
significantly reduce our spending, delay or cancel our planned activities or
substantially change our corporate structure. We might not be able to obtain
any funding, and we might not have sufficient resources to conduct our
business as projected, both of which could mean that we would be forced to
curtail or discontinue our operations.
In addition, our future capital needs and other business reasons require us to
sell additional equity or debt securities or obtain a credit facility, which
is not feasible with the 2025 Notes outstanding. The sale of additional equity
or equity-linked securities could dilute our stockholders. The incurrence of
indebtedness would result in increased debt service obligations and could
result in operating and financing covenants that would restrict our operations
or our ability to pay dividends to our stockholders.
If we cannot raise additional funds when we need or want them, our operations
and prospects could be negatively affected.
Absent relief, as a result of our failure to timely file a periodic report
with the SEC, we are currently ineligible to file a registration statement on
Form S-3, which is likely to impair our ability to raise capital on terms
favorable to us, in a timely manner or at all.
Form S-3 permits eligible issuers to conduct registered offerings using a
short form registration statement that allows the issuer to incorporate by
reference its past and future filings and reports made under the Exchange Act.
In addition, Form S-3 enables eligible issuers to conduct primary offerings
under Rule 415 of the Securities Act. The shelf registration process, combined
with the ability to forward incorporate information, allows issuers to avoid
delays and interruptions in the offering process and to access the capital
markets in a more expeditions and efficient manner than raising capital in a
standard registered offering pursuant to a registration statement on Form S-3.
The ability to newly register securities for resale may also be limited as a
result of the loss of Form S-3 eligibility with respect to such registrations.
As a result of our failure to timely file our Annual Report on Form 10-K for
the fiscal year ended December 31, 2023, absent a waiver of the Form S-3
eligibility requirements, we are ineligible to file new registration
statements on Form S-3 until no earlier than March 1, 2025. In the event of
the absence of a waiver, our S-3 ineligibility may significantly impair our
ability to raise necessary capital needed for our business. If we seek to
access the capital markets through a registered offering pursuant to a new
registration statement on Form S-1, we would be required to disclose the
proposed offering and the material terms thereof before the offering
commences. As a result of such disclosure and potential for SEC review of such
registration statement on Form S-1, we may experience delays in the offering
process and we may incur increased offering and transaction costs and other
considerations. If we are unable to raise capital through a registered
offering, we would be required to raise capital on a private placement basis,
which may be subject to pricing, size and other limitations, or seek other
sources of capital. In addition, absent a waiver of the Form S-3 eligibility
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requirements, we will not be permitted to conduct sales in an "at the market
offering" as defined in Rule 415 under the Securities Act. Any of the
foregoing may impair our ability to raise capital on terms favorable to us, in
a timely manner or at all.
Our Class A Common Stock is currently traded on the OTC Market Pink Sheets,
which may have an unfavorable impact on our stock price and liquidity.
Our Class A Common Stock is currently quoted on the OTC Markets Pink Sheets.
The OTC Markets Pink Sheets is significantly more limited market than the
national securities exchanges such as the New York Stock Exchange, or Nasdaq
stock exchange, and there are lower financial or qualitative standards that a
company must meet to have its stock quoted on the OTC Markets Pink Sheets. OTC
Markets pink Sheets is an inter-dealer quotation system much less regulated
than the major exchanges, and trading in our Class A Common Stock may be
subject to abuses and volatility, which may have little to do with our
operations or business prospects. This volatility could depress the market
price of our Class A Common Stock for reasons unrelated to operating
performance. These factors may result in investors having difficulty reselling
any shares of our Class A Common Stock and could have a long-term adverse
impact on our ability to raise capital in the future.
Legal and Regulatory Risks
Compliance with and changes to state dealer franchise laws could adversely
impact our ability to successfully move to a dealership sales model.
Compliance with and changes to state dealer franchise laws could adversely
affect our ability to successfully move to a dealership sales model. Certain
manufacturers have been challenging state dealer franchise laws in many states
and some have expressed interest in selling directly to customers, including
us prior to our transition to a dealership sales model. Our future dealership
sales model could be adversely affected if new vehicle sales are allowed to be
conducted on the internet without the involvement of franchised dealers, or by
increased market share by direct-to-consumer competitors.
We retain certain information about our users and may be subject to various
privacy and consumer protection laws.
We intend to use our vehicles' electronic systems to log information about
each vehicle's use, such as charge time, battery usage, mileage and driving
behavior, in order to aid us in vehicle diagnostics, repair and maintenance,
as well as to help us customize and optimize the driving and riding
experience. Our users may object to the use of this data, which may harm our
business. Possession and use of our users' driving behavior and data in
conducting our business may subject us to legislative and regulatory burdens
in the United States and other jurisdictions that could require notification
of any data breach, restrict our use of such information, and hinder our
ability to acquire new customers or market to existing customers. If users
allege that we have improperly released or disclosed their personal
information, we could face legal claims and reputational damage. We may incur
significant expenses to comply with privacy, consumer protection and security
standards and protocols imposed by laws, regulations, industry standards or
contractual obligations. If third parties improperly obtain and use the
personal information of our users, we may be required to expend significant
resources to resolve these problems.
We may need to defend against patent or trademark infringement claims brought
against us, which may be time-consuming and would cause us to incur
substantial costs.
Companies, organizations, or individuals, including our competitors, may hold
or obtain patents, trademarks or other proprietary rights that would prevent,
limit or interfere with our ability to make, use, develop, sell, leasing or
market our vehicles or components, which could make it more difficult for us
to operate our business. From time to time, we may receive communications from
holders of patents or trademarks regarding their proprietary rights. Companies
holding patents or other intellectual property rights may bring suits alleging
infringement of such rights or otherwise assert their rights and urge us to
take licenses. Our applications and uses of trademarks relating to our design,
software or artificial intelligence technologies could be found to infringe
upon existing trademark ownership and rights. In addition, if we are
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determined to have infringed upon a third party's intellectual property
rights, we may be required to do one or more of the following:
.
cease selling or leasing, incorporating certain components into, or using
vehicles or offering goods or services that incorporate or use the challenged
intellectual property;
.
pay substantial damages;
.
seek a license from the holder of the infringed intellectual property right,
which license may not be available on reasonable terms, or at all;
.
redesign our vehicles or other goods or services; or
.
establish and maintain alternative branding for our products and services.
In the event of a successful claim of infringement against us and our failure
or inability to obtain a license to the infringed technology or other
intellectual property right, our business, prospects, operating results and
financial condition could be materially and adversely affected. In addition,
any litigation or claims, whether or not valid, could result in substantial
costs, negative publicity and diversion of resources and management attention.
We may not be able to prevent others from unauthorized use of our intellectual
property, which could harm our business and competitive position.
We may not be able to prevent others from unauthorized use of our intellectual
property, which could harm our business and competitive position. We rely on a
combination of patents, trade secrets (including know-how), employee and
third-party nondisclosure agreements, copyrights, trademarks, intellectual
property licenses, and other contractual rights to establish and protect our
rights in its technology. Despite our efforts to protect our proprietary
rights, third parties may attempt to copy or otherwise obtain and use our
intellectual property or seek court declarations that they do not infringe
upon our intellectual property rights. Monitoring unauthorized use of our
intellectual property is difficult and costly, and the steps we have taken or
will take will prevent misappropriation. From time to time, we may have to
resort to litigation to enforce our intellectual property rights, which could
result in substantial costs and diversion of our resources.
Patent, trademark, and trade secret laws vary significantly throughout the
world. A number of foreign countries do not protect intellectual property
rights to the same extent as do the laws of the United States. Therefore, our
intellectual property rights may not be as strong or as easily enforced
outside of the United States. Failure to adequately protect our intellectual
property rights could result in our competitors offering similar products,
potentially resulting in the loss of some of our competitive advantage and a
decrease in our revenue which, would adversely affect our business, prospects,
financial condition and operating results.
Our patent applications may not issue as patents, which may have a material
adverse effect on our ability to prevent others from commercially exploiting
products similar to ours.
We cannot be certain that we are the first inventor of the subject matter to
which we have filed a particular patent application, or if we are the first
party to file such a patent application. If another party has filed a patent
application for the same subject matter as we have, we may not be entitled to
the protection sought by the patent application. Further, the scope of
protection of issued patent claims is often difficult to determine. As a
result, we cannot be certain that the patent applications that we file will
issue, or that our issued patents will afford protection against competitors
with similar technology. In addition, our competitors may design around our
issued patents, which may adversely affect our business, prospects, financial
condition or operating results.
As our patents may expire and may not be extended, our patent applications may
not be granted and our patent rights may be contested, circumvented,
invalidated or limited in scope, our patent rights may not protect us
effectively. In particular, we may not be able to prevent others from
developing or exploiting competing technologies, which could have a material
and adverse effect on our business operations, financial condition and results
of operations.
We cannot assure you that we will be granted patents pursuant to our pending
applications. Even if our patent applications succeed and we are issued
patents in accordance with them, we are still uncertain whether these patents
will be contested, circumvented or invalidated in the future. In addition, the
rights granted under any issued patents may not
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provide us with meaningful protection or competitive advantages. The claims
under any patents that issue from our patent applications may not be broad
enough to prevent others from developing technologies that are similar or that
achieve results similar to ours. The intellectual property rights of others
could also bar us from licensing and exploiting any patents that issue from
our pending applications. Numerous patents and pending patent applications
owned by others exist in the fields in which we have developed and are
developing our technology. These patents and patent applications might have
priority over our patent applications and could subject our patent
applications to invalidation. Finally, in addition to those who may claim
priority, any of our existing or pending patents may also be challenged by
others on the basis that they are otherwise invalid or unenforceable.
We may be subject to damages resulting from claims that we or our employees
have wrongfully used or disclosed alleged trade secrets of our employees'
former employers.
Many of our employees were previously employed by other automotive companies
or by suppliers to automotive companies. We may be subject to claims that we
or these employees have inadvertently or otherwise used or disclosed trade
secrets or other proprietary information of our former employers. Litigation
may be necessary to defend against these claims. If we fail in defending such
claims, in addition to paying monetary damages, we may lose valuable
intellectual property rights or personnel. A loss of key personnel or our work
product could hamper or prevent our ability to commercialize our products,
which could severely harm our business. Even if we are successful in defending
against these claims, litigation could result in substantial costs and demand
on management resources.
Our vehicles are subject to motor vehicle standards and the failure to satisfy
such mandated safety standards would have a material adverse effect on our
business and operating results.
All vehicles sold must comply with international, federal, and state motor
vehicle safety standards. In the United States, vehicles that meet or exceed
all federally mandated safety standards are certified under the federal
regulations. Rigorous testing and the use of approved materials and equipment
are among the requirements for achieving federal certification. Failure by us
to have the Fisker Ocean or any future model electric vehicle satisfy motor
vehicle standards would have a material adverse effect on our business and
operating results.
We are subject to substantial regulation and unfavorable changes to, or our
failure to comply with, these regulations could substantially harm our
business and operating results.
Our electric vehicles, and the sale of motor vehicles in general, are subject
to substantial regulation under international, federal, state, and local laws.
We expect to incur significant costs in complying with these regulations.
Regulations related to the electric vehicle industry and alternative energy
are currently evolving, and we face risks associated with changes to these
regulations.
To the extent the laws change, our vehicles may not comply with applicable
international, federal, state or local laws, which would have an adverse
effect on our business. Compliance with changing regulations could be
burdensome, time consuming, and expensive. To the extent compliance with new
regulations is cost prohibitive, our business, prospects, financial condition
and operating results would be adversely affected.
Internationally, there may be laws in jurisdictions we have not yet entered or
laws we are unaware of in jurisdictions we have entered that may restrict our
sales or other business practices. Even for those jurisdictions we have
analyzed, the laws in this area can be complex, difficult to interpret and may
change over time. Continued regulatory limitations and other obstacles
interfering with our ability to sell or lease vehicles directly to consumers
could have a negative and material impact on our business, prospects,
financial condition and results of operations.
We will face risks associated with potential international operations,
including unfavorable regulatory, political, tax and labor conditions, which
could harm our business.
We will face risks associated with any potential international operations,
including possible unfavorable regulatory, political, tax and labor
conditions, which could harm our business. We anticipate having international
operations and subsidiaries that are subject to the legal, political,
regulatory and social requirements and economic conditions in these
jurisdictions. We have no experience to date selling or leasing and servicing
our vehicles internationally and such expansion would require us to make
significant expenditures, including the hiring of local employees and
establishing
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facilities, in advance of generating any revenue. We will be subject to a
number of risks associated with international business activities that may
increase our costs, impact our ability to sell or lease our EVs and require
significant management attention. These risks include:
.
conforming our vehicles to various international regulatory requirements where
our vehicles are sold which requirements may change over time;
.
difficulty in staffing and managing foreign operations;
.
difficulties attracting customers in new jurisdictions;
.
foreign government taxes, regulations and permit requirements, including
foreign taxes that we may not be able to offset against taxes imposed upon it
in the United States, and foreign tax and other laws limiting our ability to
repatriate funds to the United States;
.
fluctuations in foreign currency exchange rates and interest rates, including
risks related to any foreign currency swap or other hedging activities we
undertake;
.
United States and foreign government trade restrictions, tariffs and price or
exchange controls;
.
foreign labor laws, regulations and restrictions;
.
changes in diplomatic and trade relationships;
.
political instability, natural disasters, war or events of terrorism; and
.
the strength of international economies.
If we fail to successfully address these risks, our business, prospects,
operating results and financial condition could be materially harmed.
Our business could be adversely affected by trade tariffs or other trade
barriers.
In recent years, both China and the United States have each imposed tariffs
indicating the potential for further trade barriers. These tariffs may
escalate a nascent trade war between China and the United States. Tariffs
could potentially impact our raw material prices and impact any plans to sell
vehicles in China. In addition, these developments could have a material
adverse effect on global economic conditions and the stability of global
financial markets. Any of these factors could have a material adverse effect
on our business, financial condition and results of operations.
We may become subject to product liability claims, which could harm our
financial condition and liquidity if we are not able to successfully defend or
insure against such claims.
We may become subject to product liability claims, even those without merit,
which could harm our business, prospects, operating results, and financial
condition. The automobile industry experiences significant product liability
claims, and we face inherent risk of exposure to claims in the event our
vehicles do not perform as expected or malfunction resulting in personal
injury or death. Our risks in this area are particularly pronounced given we
have limited field experience of our vehicles. A successful product liability
claim against us could require us to pay a substantial monetary award.
Moreover, a product liability claim could generate substantial negative
publicity about our vehicles and business and inhibit or prevent commercializati
on of other future vehicle candidates, which would have material adverse
effect on our brand, business, prospects and operating results. Any insurance
coverage might not be sufficient to cover all potential product liability
claims. Any lawsuit seeking significant monetary damages either in excess of
our coverage, or outside of our coverage, may have a material adverse effect
on our reputation, business and financial condition. We may not be able to
secure additional product liability insurance coverage on commercially
acceptable terms or at reasonable costs when needed, particularly if we face
liability for our products and are forced to make a claim under our policy.
We are or will be subject to anti-corruption, anti-bribery, anti-money
laundering, financial and economic sanctions and similar laws, and
non-compliance with such laws can subject us to administrative, civil and
criminal fines and penalties,
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collateral consequences, remedial measures and legal expenses, all of which
could adversely affect our business, results of operations, financial
condition and reputation.
We are or will be subject to anti-corruption, anti-bribery, anti-money
laundering, financial and economic sanctions and similar laws and regulations
in various jurisdictions in which we conduct or in the future may conduct
activities, including the U.S. Foreign Corrupt Practices Act ("FCPA"), the
U.K. Bribery Act 2010, and other anti-corruption laws and regulations. The
FCPA and the U.K. Bribery Act 2010 prohibit us and our officers, directors,
employees and business partners acting on our behalf, including agents, from
corruptly offering, promising, authorizing or providing anything of value to a
"foreign official" for the purposes of influencing official decisions or
obtaining or retaining business or otherwise obtaining favorable treatment.
The FCPA also requires companies to make and keep books, records and accounts
that accurately reflect transactions and dispositions of assets and to
maintain a system of adequate internal accounting controls. The U.K. Bribery
Act also prohibits non-governmental "commercial" bribery and soliciting or
accepting bribes. A violation of these laws or regulations could adversely
affect our business, results of operations, financial condition and
reputation. Our policies and procedures designed to ensure compliance with
these regulations may not be sufficient, and our directors, officers,
employees, representatives, consultants, agents, and business partners could
engage in improper conduct for which we may be held responsible.
Non-compliance with anti-corruption, anti-bribery, anti-money laundering or
financial and economic sanctions laws could subject us to whistleblower
complaints, adverse media coverage, investigations, and severe administrative,
civil and criminal sanctions, collateral consequences, remedial measures and
legal expenses, all of which could materially and adversely affect our
business, results of operations, financial condition and reputation. In
addition, changes in economic sanctions laws in the future could adversely
impact our business.
Our Certificate of Incorporation provides, subject to limited exceptions, that
the Court of Chancery of the State of Delaware will be the sole and exclusive
forum for certain stockholder litigation matters, which could limit our
stockholders' ability to obtain a chosen judicial forum for disputes with us
or our directors, officers, employees or stockholders.
Our Certificate of Incorporation requires to the fullest extent permitted by
law, that derivative actions brought in our name, actions against directors,
officers and employees for breach of fiduciary duty and other similar actions
may be brought in the Court of Chancery in the State of Delaware or, if that
court lacks subject matter jurisdiction, another federal or state court
situated in the State of Delaware. Any person or entity purchasing or
otherwise acquiring any interest in shares of our capital stock shall be
deemed to have notice of and consented to the forum provisions in our
Certificate of Incorporation. In addition, our Certificate of Incorporation
and Bylaws provide that the federal district courts of the United States shall
be the exclusive forum for the resolution of any complaint asserting a cause
of action under the Securities Act and the Exchange Act.
This choice of forum provision may limit a stockholder's ability to bring a
claim in a judicial forum of its choosing for disputes with us or any of our
directors, officers, other employees or stockholders, which may discourage
lawsuits with respect to such claims. Alternatively, if a court were to find
the choice of forum provision contained in our Certificate of Incorporation to
be inapplicable or unenforceable in an action, we may incur additional costs
associated with resolving such action in other jurisdictions, which could harm
its business, operating results and financial condition.
Charter documents and Delaware law could prevent a takeover that stockholders
consider favorable and could also reduce the market price of our stock.
Our Certificate of Incorporation and Bylaws contain provisions that could
delay or prevent a change in control of Fisker. These provisions could also
make it more difficult for stockholders to elect directors and take other
corporate actions. These provisions include:
.
authorizing our Board of Directors to issue preferred stock with voting or
other rights or preferences that could discourage a takeover attempt or delay
changes in control;
.
prohibiting cumulative voting in the election of directors;
.
providing that vacancies on its Board of Directors may be filled only by a
majority of directors then in office, even though less than a quorum;
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.
prohibiting the adoption, amendment or repeal of our Bylaws or the repeal of
the provisions of our Certificate of Incorporation regarding the election and
removal of directors without the required approval of at least two-thirds of
the shares entitled to vote at an election of directors;
.
limiting the persons who may call special meetings of stockholders; and
.
requiring advance notification of stockholder nominations and proposals.
These provisions may frustrate or prevent any attempts by our stockholders to
replace or remove our current management by making it more difficult for
stockholders to replace members of our Board of Directors, which is
responsible for appointing the members of our management. In addition, the
provisions of Section 203 of the General Corporation Law of the State of
Delaware ("DGCL") govern Fisker. These provisions may prohibit large
stockholders, in particular those owning 15% or more of our outstanding voting
stock, from merging or combining with Fisker for a certain period of time
without the consent of its Board of Directors.
These and other provisions in our Certificate of Incorporation and Bylaws and
under Delaware law could discourage potential takeover attempts, reduce the
price investors might be willing to pay in the future for shares of Class A
Common Stock and result in the market price of Class A Common Stock being
lower than it would be without these provisions.
Claims for indemnification by our directors and officers may reduce our
available funds to satisfy successful third-party claims against us and may
reduce the amount of money available to us.
Our Certificate of Incorporation and Bylaws provides that we will indemnify
our directors and officers, in each case to the fullest extent permitted by
Delaware law.
In addition, as permitted by Section 145 of the DGCL, our Bylaws and our
indemnification agreements that we entered into with our directors and
officers provide that:
.
We will indemnify our directors and officers for serving Fisker in those
capacities or for serving other business enterprises at our request, to the
fullest extent permitted by Delaware law. Delaware law provides that a
corporation may indemnify such person if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the
best interests of the registrant and, with respect to any criminal proceeding,
had no reasonable cause to believe such person's conduct was unlawful;
.
We may, in our discretion, indemnify employees and agents in those
circumstances where indemnification is permitted by applicable law;
.
We will be required to advance expenses, as incurred, to our directors and
officers in connection with defending a proceeding, except that such directors
or officers shall undertake to repay such advances if it is ultimately
determined that such person is not entitled to indemnification;
.
We will not be obligated pursuant to our Bylaws to indemnify a person with
respect to proceedings initiated by that person against Fisker or our other
indemnitees, except with respect to proceedings authorized by our Board of
Directors or brought to enforce a right to indemnification;
.
the rights conferred in our Bylaws are not exclusive, and we are authorized to
enter into indemnification agreements with our directors, officers, employees
and agents and to obtain insurance to indemnify such persons; and
.
We may not retroactively amend our amended and restated bylaw provisions to
reduce our indemnification obligations to directors, officers, employees and
agents.
The dual class structure of our Common Stock has the effect of concentrating
voting with Henrik Fisker and Dr. Geeta Gupta-Fisker, our co-founders, members
of our Board of Directors and Chief Executive Officer and Chief Financial
Officer, respectively. This may limit or preclude other stockholders' ability
to influence corporate matters, including the outcome of important
transactions, including a change in control.
Shares of our Class B common stock, par value $0.00001 per share ("Class B
Common Stock") have 10 votes per share, while shares of our Class A Common
Stock have one vote per share. Henrik Fisker and Dr. Geeta Gupta-Fisker,
Fisker's co-founders, members of our Board of Directors and Chief Executive
Officer and Chief Financial Officer,
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respectively, hold all of the issued and outstanding shares of our Class B
Common Stock. Mr. Fisker and Dr. Gupta-Fisker may have interests that differ
from other stockholders. This may have the effect of delaying, preventing or
deterring a change in control of Fisker, could deprive its stockholders of an
opportunity to receive a premium for their capital stock as part of a sale of
Fisker, and might ultimately affect the market price of shares of our Class A
Common Stock.
Our ability to utilize our net operating loss and tax credit carryforwards to
offset future taxable income may be subject to certain limitations.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended
(the "Code"), a corporation that undergoes an "ownership change" is subject to
limitations on its ability to use its pre-change net operating loss
carryforwards, or NOLs, to offset future taxable income. The limitations apply
if a corporation undergoes an "ownership change," which is generally defined
as a greater than 50 percentage point change (by value) in its equity
ownership by certain stockholders over a three-year period. If we have
experienced an ownership change at any time since our incorporation, we may
already be subject to limitations on our ability to utilize our existing NOLs
and other tax attributes to offset taxable income or tax liability. In
addition, the Business Combination and future changes in our stock ownership,
which may be outside of our control, may trigger an ownership change. Similar
provisions of state tax law may also apply to limit our use of accumulated
state tax attributes. As a result, even if we earn net taxable income in the
future, our ability to use our pre-change NOL carryforwards and other tax
attributes to offset such taxable income or tax liability may be subject to
limitations, which could potentially result in increased future income tax
liability to us.
Changes to applicable U.S. tax laws and regulations may have a material
adverse effect on our business, financial condition and results of operations.
New laws and policy relating to taxes may have an adverse effect on our
business, financial condition and results of operations. Further, existing tax
laws, statutes, rules, regulations or ordinances could be interpreted,
changed, modified or applied adversely to us. For example, the U.S. government
enacted the Tax Cuts and Jobs Act (the "Tax Act"), and certain provisions of
the Tax Act may adversely affect us. Changes under the Tax Act include, but
are not limited to, a federal corporate income tax rate decrease to 21% for
tax years beginning after December 31, 2017, a reduction to the maximum
deduction allowed for net operating losses generated in tax years after
December 31, 2017 and the elimination of carrybacks of net operating losses.
Under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES
Act"), which modified the Tax Act, U.S. federal net operating loss
carryforwards generated in taxable periods beginning after December 31, 2017,
may be carried forward indefinitely, but the deductibility of such net
operating loss carryforwards in taxable years beginning after December 31,
2020, is limited to 80% of taxable income. The Tax Act is unclear in many
respects and could be subject to potential amendments and technical
corrections, and is subject to interpretations and implementing regulations by
the Treasury and IRS, any of which could mitigate or increase certain adverse
effects of the legislation. Furthermore, the U.S. government recently enacted
the IRA, which includes changes to the U.S. corporate income tax system,
including a 15% minimum tax based on "adjusted financial statement income" for
certain large corporations, which is effective in 2023, and a 1% excise tax on
share repurchases after December 31, 2022. The IRA also provides financial
incentives in the form of tax credits to incentivize the purchase of clean
vehicles including electric vehicles. To claim the retail tax credit, the IRA
establishes multiple prerequisites, including that the vehicle must be
assembled in North America; the vehicle must be under specified manufacturer
suggested retail prices ("MSRP"); purchaser income limitations; have a
specified percentage of critical minerals that are "extracted or produced" in
the United States, in a country with which the United States has a Free Trade
Agreement, or that is "recycled" in North America, and that have a specified
percentage of "value" of its battery "components" that are "manufactured or
assembled" in North America. The Fisker Ocean is manufactured in Austria and
therefore not eligible for the retail tax credit. In addition, the current
administration has announced a proposal to increase such excise tax to 4%.
While Fisker does not believe that the aforementioned provisions of the IRA
will have a material impact on its consolidated financial statements, any
future corporate tax legislation could have that effect. In addition, it is
unclear how these U.S. federal income tax changes will affect state and local
taxation. Generally, future changes in applicable U.S. tax laws and
regulations, or their interpretation and application could have an adverse
effect on our business, financial condition and results of operations.
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Risks Related to Our Convertible Senior Notes
The 2026 Notes are effectively subordinated to our existing and future secured
indebtedness and structurally subordinated to the liabilities of our
subsidiaries.
In August 2021, we entered into a purchase agreement with certain
counterparties for the sale of an aggregate of $667.5 million principal amount
of 2.50% convertible senior notes due in September 2026 (the "2026 Notes") in
a private offering to qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933, as amended. The 2026 Notes have been
designated as green bonds, whose proceeds will be allocated in accordance with
the Company's green bond framework. The 2026 Notes consisted of a $625 million
initial placement and an over-allotment option that provided the initial
purchasers of the 2026 Notes with the option to purchase an additional $100.0
million aggregate principal amount of the 2026 Notes, of which $42.5 million
was exercised. The 2026 Notes were issued pursuant to an indenture dated
August 17, 2021. The net proceeds from the issuance of the 2026 Notes were
$562.2 million, net of debt issuance costs and cash used to purchase the
capped call transactions ("2026 Capped Call Transactions") discussed below.
The debt issuance costs are amortized to interest expense using the effective
interest rate method.
The 2026 Notes are unsecured obligations which bear regular interest at 2.50%
annually and will be payable semiannually in arrears on March 15 and September
15 of each year, beginning on March 15, 2022. The 2026 Notes will mature on
September 15, 2026, unless repurchased, redeemed, or converted in accordance
with their terms prior to such date. The 2026 Notes are convertible into cash,
shares of our Class A common stock, or a combination of cash and shares of our
Class A common stock, at our election, at an initial conversion rate of
50.7743 shares of Class A common stock per $1,000 principal amount of 2026
Notes, which is equivalent to an initial conversion price of approximately
$19.70 per share of our Class A common stock. The conversion rate is subject
to customary adjustments for certain events as described in the indenture
governing the 2026 Notes. We may redeem for cash all or any portion of the
2026 Notes, at our option, on or after September 20, 2024 if the last reported
sale price of our Class A common stock has been at least 130% of the
conversion price then in effect for at least 20 trading days at a redemption
price equal to 100% of the principal amount of the 2026 Notes to be redeemed,
plus accrued and unpaid interest to, but excluding, the redemption date.
The 2026 Notes are our senior, unsecured obligations and rank equal in right
of payment with our existing and future senior, unsecured indebtedness, senior
in right of payment to our existing and future indebtedness that is expressly
subordinated to the Notes and effectively subordinated to our existing and
future secured indebtedness, to the extent of the value of the collateral
securing that indebtedness.
In addition, because none of our subsidiaries guarantee the 2026 Notes, the
2026 Notes are structurally subordinated to all existing and future
indebtedness and other liabilities, including trade payables, and (to the
extent we are not a holder thereof) preferred equity, if any, of our
subsidiaries. As of December 31, 2023 we had approximately $1,227.0 million in
total indebtedness. Our subsidiaries had no outstanding indebtedness as of
December 31, 2023. The Indenture governing the 2026 Notes does not prohibit us
or our subsidiaries from incurring additional indebtedness, including senior
or secured indebtedness, in the future.
If a bankruptcy, liquidation, dissolution, reorganization, or similar
proceeding occurs with respect to us, then the holders of any of our secured
indebtedness may proceed directly against the assets securing that
indebtedness. Accordingly, those assets will not be available to satisfy any
outstanding amounts under our unsecured indebtedness, including the 2026
Notes, unless the secured indebtedness is first paid in full. The remaining
assets, if any, would then be allocated pro rata among the holders of our
senior, unsecured indebtedness, including the 2026 Notes. There may be
insufficient assets to pay all amounts then due.
If a bankruptcy, liquidation, dissolution, reorganization, or similar
proceeding occurs with respect to any of our subsidiaries, then we, as a
direct or indirect common equity owner of that subsidiary (and, accordingly,
holders of our indebtedness, including the 2026 Notes), will be subject to the
prior claims of that subsidiary's creditors, including trade creditors and
preferred equity holders, if any. We may never receive any amounts from that
subsidiary to satisfy amounts due under the 2026 Notes.
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We may be unable to raise the funds necessary to repurchase the 2026 Notes for
cash following a fundamental change (as defined in the Indenture) or to pay
any cash amounts due upon conversion, and our other indebtedness limits our
ability to repurchase the 2026 Notes or pay cash upon their conversion.
Noteholders may require us to repurchase their 2026 Notes following a
fundamental change (as defined in the Indenture), such as the fundamental
change related to the formal delisting of our Class A Common Stock from the
NYSE, at a cash repurchase price generally equal to the principal amount of
the Notes to be repurchased, plus accrued and unpaid special interest, if any.
In addition, upon conversion, we will satisfy part or all of our conversion
obligation in cash unless we elect to settle conversions solely in shares of
our Class A common stock. We may not have enough available cash or be able to
obtain financing at the time we are required to repurchase the 2026 Notes or
pay the cash amounts due upon conversion. In addition, applicable law,
regulatory authorities and the agreements governing our other indebtedness may
restrict our ability to repurchase the Notes or pay the cash amounts due upon
conversion. Our failure to repurchase 2026 Notes or to pay the cash amounts
due upon conversion when required will constitute a default under the
Indenture.
A default under the Indenture or a fundamental change (as defined in the
Indenture) itself could also lead to a default under agreements governing our
other indebtedness, which may result in that other indebtedness becoming
immediately payable in full. We may not have sufficient funds to satisfy all
amounts due under the other indebtedness and the 2026 Notes.
Our indebtedness and liabilities could limit the cash flow available for our
operations, expose us to risks that could adversely affect our business,
financial condition, and results of operations and impair our ability to
satisfy our obligations under the Notes.
As of December 31, 2023, we had $1,227.0 million indebtedness. We may
anticipate incurring dditional indebtedness to meet future financing needs.
Our indebtedness could have significant negative consequences for our
stockholders and our business, results of operations and financial condition
by, among other things:
.
increasing our vulnerability to adverse economic and industry conditions;
.
limiting our ability to obtain additional financing;
.
requiring the dedication of a substantial portion of our cash flow from
operations to service our indebtedness, which will reduce the amount of cash
available for other purposes;
.
limiting our flexibility to plan for, or react to, changes in our business;
.
diluting the interests of our existing stockholders as a result of issuing
shares of our Class A common stock upon conversion of the 2025 Notes or the
2026 Notes; and
.
placing us at a possible competitive disadvantage with competitors that are
less leveraged than us or have better access to capital.
We cannot provide assurance that we will maintain sufficient cash reserves or
that our business will generate cash flow from operations at levels sufficient
to permit us to pay principal, premium, if any, and interest on our
indebtedness, or that our cash needs will not increase.
If we are unable to generate sufficient cash flow or otherwise obtain funds
necessary to make required payments, or if we fail to comply with the various
requirements of our existing indebtedness or any indebtedness which we may
incur in the future, we would be in default, which would permit the
acceleration of the maturity of such indebtedness, which could have a material
adverse effect on our business, results of operations and financial condition.
The accounting method for the 2026 Notes could adversely affect our reported
financial condition and results.
In August 2020, the Financial Accounting Standards Board published an
Accounting Standards Update, which we refer to as ASU 2020-06, which amends
the accounting standards for convertible debt instruments that may be settled
entirely or partially in cash upon conversion. ASU 2020-06 eliminates
requirements to separately account for liability and equity components of such
convertible debt instruments and eliminates the ability to use the treasury
stock method for calculating diluted earnings per share for convertible
instruments whose principal amount may be settled using shares. Instead, ASU
2020-06 requires (i) the entire amount of the security to be presented as a
liability on the balance sheet and
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(ii) application of the "if-converted" method for calculating diluted earnings
per share. Under the "if-converted" method, diluted earnings per share will
generally be calculated assuming that all the 2026 Notes were converted solely
into shares of common stock at the beginning of the reporting period, unless
the result would be anti-dilutive, which could adversely affect our diluted
earnings per share. However, if the principal amount of the convertible debt
security being converted is required to be paid in cash and only the excess is
permitted to be settled in shares, the if-converted method will produce a
similar result as the "treasury stock" method prior to the adoption of ASU
2020-06 for such convertible debt security.
We early adopted ASU 2020-06 as of January 1, 2021 and as such we did not
bifurcate the liability and equity components of the 2026 Notes on our balance
sheet and used the if-converted method of calculating diluted earnings per
share. In order to qualify for the alternative treatment of calculating
diluted earnings per share under the if-converted method, we would have to
irrevocably fix the settlement method for conversions to combination
settlement with a specified dollar amount of at least $1,000, which would
impair our flexibility to settle conversions of notes, require us to settle
conversions in cash in an amount equal to the principal amount of notes
converted and could adversely affect our liquidity.
Furthermore, if any of the conditions to the convertibility of the 2026 Notes
are satisfied, then, under certain conditions, we may be required under
applicable accounting standards to reclassify the liability carrying value of
the Notes as a current, rather than a noncurrent, liability. This
reclassification could be required even if no noteholders convert their Notes
and could materially reduce our reported working capital.
The Capped Call transactions may affect the value of the 2026 Notes and our
common stock.
In connection with the 2026 Notes, we entered into Capped Call transactions
with certain financial institutions, which we refer to as the "option
counterparties". The Capped Call transactions are expected generally to reduce
the potential dilution to our common stock upon any conversion of the 2026
Notes and/or offset any potential cash payments we are required to make in
excess of the principal amount upon conversion of any 2026 Notes, with such
reduction and/or offset subject to a cap.
In connection with establishing their initial hedges of the Capped Call
transactions, the "option counterparties" and/or their respective affiliates
purchased shares of our common stock and/or entered into various derivative
transactions with respect to our Class A common stock. This activity could
have increased (or reduced the size of any decrease in) the market price of
our Class A common stock or the 2026 Notes at that time.
In addition, the "option counterparties" and/or their respective affiliates
may modify their hedge positions by entering into or unwinding various
derivatives with respect to our common stock and/or purchasing or selling our
common stock in secondary market transactions (and are likely to do so
following any conversion of 2026 Notes, any repurchase of the 2026 Notes by us
on any fundamental change (as defined in the indenture governing the 2026
Notes) repurchase date, any redemption date, or any other date on which the
2026 Notes are retired by us). This activity could also cause or avoid an
increase or a decrease in the market price of our Class A common stock or the
2026 Notes.
The potential effect, if any, of these transactions and activities on the
market price of our common stock or the 2026 Notes will depend in part on
market conditions and cannot be ascertained at this time. Any of these
activities could adversely affect the value of our Class A common stock.
We are subject to counterparty risk with respect to the Capped Call
transactions, and the Capped Calls may not operate as planned.
The "option counterparties" are financial institutions, and we will be subject
to the risk that they might default under the Capped Call transactions. Our
exposure to the credit risk of the "option counterparties" will not be secured
by any collateral. Global economic conditions have from time to time resulted
in the actual or perceived failure or financial difficulties of many financial
institutions. If an option counterparty becomes subject to insolvency
proceedings, we will become an unsecured creditor in those proceedings with a
claim equal to our exposure at that time under our transactions with that
option counterparty. Our exposure will depend on many factors, but, generally,
the increase in our exposure will be correlated with increases in the market
price or the volatility of our common stock. In addition, upon a default by an
option counterparty, we may suffer adverse tax consequences and more dilution
than we currently anticipate with respect to our Class A common stock. We can
provide no assurances as to the financial stability or viability of any option
counterparty.
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In addition, the Capped Call transactions are complex and they may not operate
as planned. For example, the terms of the Capped Call transactions may be
subject to adjustment, modification, or, in some cases, renegotiation if
certain corporate or other transactions occur. Accordingly, these transactions
may not operate as we intend if we are required to adjust their terms as a
result of transactions in the future or upon unanticipated developments that
may adversely affect the functioning of the Capped Call transactions.
The issuance or sale of shares of our common stock, or rights to acquire
shares of our common stock, could depress the trading price of our common
stock and our notes.
We may conduct future offerings of our common stock, preferred stock or other
securities that are convertible into or exercisable for our common stock to
finance our operations or fund acquisitions, or for other purposes. If we
issue additional shares of our common stock or rights to acquire shares of our
common stock, if any of our existing stockholders sells a substantial amount
of our common stock, or if the market perceives that such issuances or sales
may occur, then the trading price of our common stock, and, accordingly, our
2026 Notes may significantly decline. In addition, our issuance of additional
shares of common stock will dilute the ownership interests of our existing
common stockholders, including noteholders who have received shares of our
common stock upon conversion of their 2026 Notes.
The terms of the 2025 Notes restrict our current and future operations,
particularly our ability to respond to changes or take certain actions,
including some of which may affect completion of our strategic plan.
The 2025 Notes contain a number of restrictive covenants that impose operating
restrictions on us and may limit our ability to engage in acts that may be in
our long-term best interest, including restrictions on our ability to incur
indebtedness, incur liens, enter into mergers or consolidations, dispose of
assets, enter into affiliate transactions, pay dividends, make acquisitions
and make investments, loans and advances.
These restrictions may affect our ability to execute on our business strategy,
limit our ability to raise additional debt or equity financing to operate our
business, including during economic or business downturns, and limit our
ability to compete effectively or take advantage of new business opportunities.
Provisions in the 2025 Notes may deter or prevent a business combination that
may be favorable to you.
Under the terms of the 2025 Notes we are prohibited from engaging in certain
mergers or acquisitions unless, among other things, the surviving entity
assumes our obligations under the 2025 Notes. These and other provisions could
prevent or deter a third party from acquiring us, even where the acquisition
could be beneficial to you.
We may not have the ability to pay the installments on the 2025 Notes or to
redeem the 2025 Notes.
The amortization payments with respect to the principal amount of the 2025
Notes were due and payable on July 11, 2023 for the Series A-1 Notes,
September 29, 2023 for the Series B-1 Notes and then on each three-month
anniversary thereafter until each maturity date in 2025. If we are unable to
satisfy certain equity conditions, we will be required to pay all amounts due
on any installment date in cash. As previously disclosed, the Company did not
pay amortization payments due on the March 29, 2024 Installment Date under the
Series B-1 Notes or on the April 11, 2024 Installment Date due under the
Series A-1 Notes, resulting in an event of default under such Notes and the
Company entering the Forbearance Agreement with the Investor as described
below. If a change of control occurs, the Investor may require us to
repurchase, for cash, all or a portion of their 2025 Notes. Our ability to pay
amortization payments and interest on the 2025 Notes, to repurchase the 2025
Notes, to fund working capital needs, and fund planned capital expenditures
depends on our ability to generate cash flow in the future. To some extent,
this is subject to general economic, financial, competitive, legislative and
regulatory factors, and other factors that are beyond our control. We cannot
assure you that we will maintain sufficient cash reserves or that our business
will generate cash flow from operations at a level sufficient to permit us to
pay the interest on the 2025 Notes or to repurchase or redeem the 2025 Notes
or that our cash needs will not increase.
The Investor can defer an installment payment due on any installment date to
another installment date and may, on any installment date accelerate the
payment of amounts due on up to an additional two times the installment
payment of the 2025 Notes at the current installment price until the next
installment date. Therefore, we may be required to repay the entire principal
amount in one lump sum on the maturity date of the 2025 Note. If we are unable
to satisfy certain equity conditions, we will be required to pay all amounts
due whether by deferral or acceleration in cash and we may not have sufficient
funds to repay the 2025 Notes under such circumstances.
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Our failure to make the required payments on the 2025 Notes would permit the
Investor to accelerate our obligations under the 2025 Notes. Such default may
also lead to a default under our agreements governing any of our current and
future indebtedness.
If we are unable to generate sufficient cash flow from our operations in the
future to service our indebtedness and meet our other needs, we may have to
refinance all or a portion of the indebtedness, seek forbearance of a waiver,
obtain additional financing, reduce expenditures, or sell assets that we deem
necessary to our business. We cannot assure you that any of these measures
would be possible or that additional financing could be obtained on favorable
terms, if at all. The inability to obtain additional financing on commercially
reasonable terms would have a material adverse effect on our financial
condition and our ability to meet our obligations to you under the 2025 Notes.
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We are party to a Forbearance Agreement which expires on May 1, 2024, unless
extended by the Investor, and if we are unable to comply with the Forbearance
Agreement, then the Investor could require us to immediately repay the amounts
due under the 2025 Notes.
On April 22, 2024, the Company, certain subsidiaries of the Company who are
guarantors of the 2025 Notes (the "Guarantors" and together with the Company,
the "Obligors") and the Investor (in its capacity as collateral agent and
noteholder) entered into a Forbearance Agreement (the "Forbearance Agreement")
pursuant to which the Investor agreed to, among other things, forbear from
enforcing its right to immediate redemption and forbear from exercising any of
its other rights or remedies (including enforcement and collection actions)
under the Transaction Documents until May 1, 2024, by operation of law or
otherwise against the Obligors or any of the Collateral or other property
owned by the Obligors (including, without limitation, via set-off or
recoupment) with respect to certain defaults and events of default that have
occurred, or that may occur, as described further in the Forbearance Agreement.
A termination event under the Forbearance Agreement consists of, among other
things, the occurrence of a new event of default under the 2025 Notes or the
2026 Notes, or the Company engaging in any transaction (including the
incurrence of Indebtedness), making any divided, investment, payment or
transfer, or taking any other action, in each case, outside the ordinary
course of business (taking into consideration the current circumstances of the
Company and its subsidiaries).
If we fail to comply with the terms of the Forbearance Agreement, or fail to
get the Forbearance Agreement extended as needed, the Investor could declare
all borrowings outstanding, together with accrued and unpaid interest and
fees, to be immediately due and payable. In addition, since the borrowings
under the 2025 Notes are secured by a first priority lien on our assets, upon
such acceleration, the Investor may foreclose on our assets, which would have
a material adverse effect on our business, results of operations and financial
condition.
The market price of shares of Class A Common Stock may decline in the future
as a result of the sale of Class A Common Stock held by the Investor, and the
issuance of shares upon conversion of the 2025 Notes in accordance with the
terms thereof is expected to cause a significant dilution in the relative
percentage interests of the Company's stockholders and may lead to volatility
in the price of shares of Class A Common Stock.
The Investor has and in the future may receive a substantial number of shares
of Class A Common Stock.
While the number of shares of Class A Common Stock that will be issued is
uncertain, the issuance of shares upon conversion of the 2025 Notes in
accordance with the terms thereof is expected to cause a significant dilution
in the relative percentage interests of the Company's stockholders and may
lead to volatility in the price of shares of Class A Common Stock.
The Investor may seek to sell their shares. Sales of substantial amounts of
Class A Common Stock in the public market, or the perception that these sales
could occur, coupled with the increase in the outstanding number of shares of
Class A Common Stock, could cause the market price of Class A Common Stock to
decline.
The Company has incurred, and will continue to incur, significant costs in
connection with the offering of 2025 Notes, which may be in excess of those
anticipated by the Company.
The Company has incurred and will continue to incur substantial non-recurring
costs and expenses in connection with the offering of the 2025 Notes. These
costs and expenses include, without limitation, expenses associated with its
entry into the definitive documentation and financial and legal advisory and
other professional fees incurred related to the transactions and costs
associated related to the Forbearance Agreement and any additional forbearance
if needed. Furthermore, the cost to the Company of defending any potential
litigation or other proceeding relating to the transactions could be
substantial. These costs and expenses, as well as other unanticipated costs
and expenses, could have an adverse effect on our financial condition and
operating results.
Our obligations to the Investor pursuant to the 2025 Notes are secured by a
first priority security interest in all of the existing and future assets of
the Company and certain of our subsidiaries, and if we default on those
obligations, the Investor could foreclose on, liquidate and/or take possession
of such assets. If that were to happen, we could be forced to curtail, or even
to cease, our operations.
On December 28, 2023, the Company and certain of its direct and indirect
wholly owned subsidiaries entered into an Amended Pledge Agreement, in favor
of the Investor as collateral agent, pursuant to which the entirety of the
Pledge Agreement was amended and restated to, among other things, amend and
define the scope of the security interest created by the Pledge Agreement in
all of the existing and future assets of the Company and certain of its
subsidiaries. In addition, on December 28, 2023, certain subsidiaries of the
Company entered into the Guaranty in favor of the Investor as collateral
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agent, pursuant to which, among other things, such subsidiaries have
guaranteed the Company's outstanding obligations in respect of the 2025 Notes.
As a result, if we default on our obligations under the 2025 Notes, the
Investor could foreclose on their security interest and liquidate or take
possession of some or all of the assets of the Company and certain of our
subsidiaries, which would harm our business, financial condition and results
of operations and could require us to curtail, or even to cease our operations.
The value of the collateral securing the 2025 Notes may not be sufficient to
pay the amounts owed under the 2025 Notes.
The proceeds of any sale of collateral securing the 2025 Notes following an
event of default with respect thereto may not be sufficient to satisfy, and
may be substantially less than, amounts due on the 2025 Notes. No appraisal of
the value of the collateral securing the 2025 Notes has been made. The value
of the collateral in the event of liquidation will depend upon market and
economic conditions, the availability of buyers and similar factors. The value
of the collateral could be impaired in the future as a result of changing
economic and market conditions, our failure to successfully implement our
business strategy, competition and other factors. By its nature, some or all
of the collateral may not have a readily ascertainable market value or may not
be salable or, if salable, there may be substantial delays in its liquidation.
Bankruptcy laws and other laws relating to foreclosure and sale also could
substantially delay or prevent the ability of the collateral agent or any
holder of the 2025 Notes to obtain the benefit of any collateral securing the
2025 Notes. Such delays could have a material adverse effect on the value of
the collateral.
Some of the collateral is located in foreign jurisdictions, and thus subject
to the laws, procedures and market conditions of such jurisdictions and
applicable bankruptcy laws.
Some of the collateral is located in jurisdictions outside of the United
States. As a result, enforcement of the security interests and any foreclosure
or realization against such collateral will be subject to and depend upon the
laws, procedures and economic and market conditions of such foreign
jurisdictions. Such laws and procedures may vary significantly from
jurisdiction to jurisdiction and may be less favorable than those applicable
in the United States. Additionally, the timing, expense and procedural hurdles
related to enforcement of security interests in foreign jurisdictions may vary
and are difficult to predict.
The rights of the collateral agent and the holders of the 2025 Notes to
enforce remedies may be significantly impaired by application of foreign
bankruptcy, insolvency and restructuring laws. There also can be no assurance
that courts outside of the United States would recognize the jurisdiction of a
U.S. bankruptcy court. Accordingly, difficulties may arise in administering a
U.S. bankruptcy proceeding against the Company or any of its subsidiaries with
respect to collateral and other property located outside of the United States,
and any orders or judgments of a bankruptcy court in the United States may not
be enforceable in certain foreign jurisdictions.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity
While no organization can eliminate cybersecurity risk entirely, we devote
significant resources to our security program that we believe is reasonably
designed to mitigate our cybersecurity and information technology risk. Our
efforts focus on protecting and enhancing the security of our information
systems, software, networks, and other assets. These efforts are designed to
protect against, and mitigate the effects of, among other things,
cybersecurity incidents where unauthorized parties attempt to access
confidential, sensitive, or personal information; potentially hold such
information for ransom; destroy data; disrupt or degrade service or our
operations; sabotage systems; or otherwise cause harm to the Company, our
customers, suppliers, or dealers, or other key stakeholders.
We employ capabilities, processes, and other security measures we believe are
designed to reduce and mitigate these risks and have requirements for our
suppliers to do the same. Despite having thorough due diligence, onboarding,
and cybersecurity assessment processes in place for our suppliers, the
responsibility ultimately rests with our suppliers to establish and uphold
their respective cybersecurity programs. Our ability to monitor the
cybersecurity practices of our suppliers is limited and there can be no
assurance that we can prevent or mitigate the risk of any compromise or
failure in the information systems, software, networks, and other assets owned
or controlled by our suppliers. When we become aware that a supplier's
cybersecurity has been compromised, we attempt to mitigate the risk to the
Company, including, if
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appropriate and feasible, by terminating the supplier's connection to our
information systems. Notwithstanding our efforts to mitigate any such risk,
there can be no assurance that the compromise or failure of supplier
information systems, technology assets, or cybersecurity programs would not
have an adverse effect on the security of the Company's information systems.
To effectively prevent, detect, and respond to cybersecurity threats, we
employ a multi-layered cybersecurity risk management program supervised by our
Chief Information Security Officer, whose team is responsible for leading
enterprise-wide cybersecurity strategy, policy, architecture, education, and
risk management processes. This responsibility includes identifying,
considering, and assessing potentially material cybersecurity incidents on an
ongoing basis, establishing processes designed to prevent and monitor
potential cybersecurity risks, implementing mitigation and remediation
measures, and maintaining our cybersecurity program.
Our cybersecurity program aligns to internationally recognized standards and
best practices for cybersecurity and data protection. We perform, internal and
externally sourced, security testing, 3rd party attack simulations,
application scanning, and IT Security Controls Assessments, to identify
vulnerabilities and evaluate cyber defense capabilities in the enterprise and
in our vehicle product systems. We also perform phishing and social
engineering simulations and provide cybersecurity training to Company
personnel with access to Company information and/or digital assets. We
disseminate security awareness newsletters to employees to highlight emerging
or urgent cybersecurity threats and best practices. Externally, we monitor
notifications from the U.S. Computer Emergency Readiness Team ("CERT"),
Automotive Information Sharing and Analysis Center ("Auto ISAC"), FBI
InfraGard; and review customer, media, and third-party, cybersecurity reports;
and respond to third-parties or security researchers who notify us of
vulnerabilities they can detect in our cyber defenses.
Our capabilities, processes, and other security measures also include, without
limitation:
.
Security Information and Event Management ("SIEM") cloud incident management
platform, that provides a log aggregation and analytics solution for threat
and vulnerability monitoring.
.
Endpoint Detection and Response ("EDR") software, which monitors for malicious
activities on endpoints.
.
Cloud Security Posture and Workload Protection (CSPM/CWPP) infrastructure,
container, and workload monitoring for threats and compliance posture; and
.
Corporate incident response plans, including a product security incident
response plan.
.
Supplier Risk Management processes to monitor contractual cybersecurity
requirements, assess and manage 3rd party cyber and data risk in service and
technical engagements.
We invest in enhancing our cybersecurity capabilities and strengthening our
partnerships with key business partners, service providers, government, and
law enforcement agencies, to understand the range of cybersecurity risks in
the global operating environment, enhance defenses, and improve resiliency
against cybersecurity threats. Additionally, our CISO is a member of the FBI
InfraGard and FBI Executive Advisory Board. Our membership in these public and
private sector groups assists in our efforts to protect the Company against
both enterprise and in-vehicle security risks.
The Company's global cybersecurity incident response is overseen by our Chief
Information Security Officer. Our Chief Information Security Officer has
served in that role for over 2 years and has over 2 decades of cybersecurity
governance, engineering, and operations experience for large global brands.
Our Chief Information Security Officer reports to the Vice President of IT.
The Vice President of IT reports directly to the Senior Vice President of
Enterprise, Digital Operations, and Transformation.
When a cybersecurity threat or incident is identified, our policy is to review
and triage the threat or incident, and to then manage it to conclusion in
accordance with our cybersecurity incident response processes. When a
cybersecurity incident is determined to be significant, it is addressed by
senior management and/or disclosure committee using processes that leverage
subject-matter expertise from across the Company. Furthermore, we may engage
third-party advisors as part of our incident management processes. Any
cybersecurity incident that is identified as having the potential to be highly
significant or material to the Company are brought to the attention of the
Chief Technology Officer and /or General Counsel by the Chief Information
Security Officer as part of our cybersecurity incident response processes.
Cybersecurity risk management is an integral part of our overall enterprise
risk management program. As part of its enterprise risk management efforts,
the Board meets with senior management, including the executive leadership
team,
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to assess and respond to critical business risks. Critical enterprise risks
are assessed by senior management annually and discussed with the Board. Once
identified, each of the risks we view as most significant is assigned an
executive risk owner who is responsible to oversee risk assessment, develop
and implement mitigation plans, and provide regular updates to the Board
(and/or Board committee assigned to the risk). Cybersecurity threats have been
and continue to be identified as one of the Company's top risks, with our
Chief Technology Officer and Chief Information Security Officer assigned as
the executive risk owners. The Board has delegated primary responsibility for
the oversight of cybersecurity and information technology risks, and the
Company's preparedness for these risks, to the Audit Committee. Our Chief
Information Security Officer briefs the Board annually.
As part of its oversight duties, the Audit Committee receives regular updates
on our cybersecurity posture and information security risks from our Chief
Information Security Officer. These regular updates include topics related to
cybersecurity practices, cyber risks, and risk management processes, such as
updates to our cybersecurity programs and mitigation strategies, and other
cybersecurity developments. In addition to these regular updates, as part of
our incident response processes, the Chief Technology Officer, in
collaboration with the Chief Information Security Officer and General Counsel,
provides updates on certain cybersecurity incidents to the Audit Committee
and, in some cases, the Board. The Audit Committee reviews and provides input
into, and oversight of our cybersecurity processes, and in the event the
Company determines it has experienced a material cybersecurity incident, the
Audit Committee is notified about the incident in advance of filing a Current
Report on Form 8-K.
In 2023, we did not identify any cybersecurity threats that have materially
affected or are reasonably likely to materially affect our business strategy,
results of operations, or financial condition. However, despite the
capabilities, processes, and other security measures we employ, that we
believe are designed to prevent, detect, reduce, and mitigate the risk of
cybersecurity incidents, we may not be aware of all vulnerabilities or might
not accurately assess the probability or risk of an incident. Risk management
measures cannot provide absolute security, and may not be sufficient in all
circumstances, or mitigate all potential risks.
Our Cybersecurity program makes a reasonable and ongoing effort to keep pace
with a rapidly changing threat and regulatory landscape.
Item 2. Properties.
Our corporate headquarters are located in Manhattan Beach, California where we
occupy approximately 78,500 square feet of space which we use for an
automobile design studio and general office purposes for its management,
technology, product design, sales and marketing, finance, legal, human
resources, general administrative and information technology teams. The lease
will terminate on November 1, 2026, with no option to extend the lease term.
Fisker's global footprint includes leases for Center+ vehicle viewing
locations, service centers, mixed-use properties and Fisker lounges located
throughout North America, Europe and Asia.
We believe our existing facilities are adequate for our current requirements.
We also believe we will be able to obtain additional or alternative space at
other locations at commercially reasonable terms to support our continuing
expansion.
Item 3. Legal Proceedings.
For a description of any material pending legal proceedings, please see Note
19, Commitments and Contingencies, to the consolidated financial statements
included elsewhere in this Annual Report on Form 10-K.
From time to time, we may become involved in legal proceedings arising in the
ordinary course of business. We are not currently a party to any litigation or
legal proceedings that, in the opinion of our management, are likely to have a
material adverse effect on our business. Regardless of outcome, litigation can
have an adverse impact on us because of defense and settlement costs,
diversion of management resources, negative publicity and reputational harm
and other factors.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
Market Information
On October 29, 2020, our Class A Common Stock and warrants were listed on the
NYSE under the trading symbols of "FSR" and "FSR WS," respectively. On April
19, 2021, we redeemed all of the outstanding Public Warrants and the NYSE
filed a Form 25-NSE with respect to the Public Warrants; the formal delisting
of the Public Warrants became effective ten days thereafter.
On March 25, 2024, the NYSE notified us that it had determined to (A)
immediately suspend trading in our Class A common stock due to "abnormally
low" trading price levels pursuant to Section 802.01D of the NYSE Listed
Company Manual, and (B) commence proceedings to delist our Class A Common
Stock. On April 10, 2024, the NYSE filed a Form 25-NSE with respect to our
Class A common stock; the formal delisting of the Class A common stock became
effective ten days thereafter.
Our Class A common stock is quoted on the OTC Pink platform.
Holders of Common Stock and Warrants
As of April 16, 2024, there were 36 holders of record of our Class A Common
Stock, two holders of our Class B Common Stock, and one holder of the Magna
Warrants. The actual number of stockholders of our Class A Common Stock is
greater than this number of record holders and includes stockholders who are
beneficial owners but whose shares are held in street name by brokers and
other nominees.
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Stock Performance Graph
The information contained in this Stock Performance Graph section shall not be
deemed to be "soliciting material" or "filed" or incorporated by reference in
future filings with the SEC, or subject to the liabilities of Section 18 of
the Exchange Act, except to the extent that we specifically incorporate it by
reference into a document filed under the Securities Act or the Exchange Act.
The following graph shows a comparison, from December 31, 2018 through
December 31, 2023, of the cumulative total return on our common stock, the
NYSE Composite Index, and the NASDAQ OMX Global Automobile Index. Such returns
are based on historical results and are not intended to suggest future
performance. Data for the NYSE Composite Index and the NASDAQ OMX Global
Automobile Index assumes an investment of $100 on December 31, 2018 and
reinvestment of dividends. We have never declared or paid cash dividends on
our common stock nor do we anticipate paying any such cash dividends in the
foreseeable future.
The following table summarizes stock performance graph data points in dollars:
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Dividend Policy
We have never declared or paid any cash dividends on our Common Stock or any
other securities. We anticipate that we will retain all available funds and
any future earnings, if any, for use in the operation of our business and do
not anticipate paying cash dividends in the foreseeable future. In addition,
future debt instruments may materially restrict our ability to pay dividends
on our Common Stock. Payment of future cash dividends, if any, will be at the
discretion of the board of directors after taking into account various
factors, including our financial condition, operating results, current and
anticipated cash needs, the requirements of current or then-existing debt
instruments and other factors the board of directors deems relevant.
Recent Sales of Unregistered Securities
None.
Item 6. [Reserved]
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
For discussion related to changes in financial condition and the results of
operations for fiscal year 2022-related items compared to the fiscal year
ended December 31, 2021, refer to Part II, Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations in our Annual Report
on Form 10-K for fiscal year 2022, which was filed with the Securities and
Exchange Commission on March 1, 2023
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the consolidated
financial statements and related notes thereto included elsewhere in this Form
10-K. The following discussion contains forward-looking statements that
reflect future plans, estimates, beliefs and expected performance. The
forward-looking statements are dependent upon events, risks and uncertainties
that may be outside of our control. Our actual results could differ materially
from those discussed in these forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
identified below and those discussed elsewhere in this Form 10-K, particularly
in Part I, Item 1A, Risk Factors. We do not undertake, and expressly disclaim,
any obligation to publicly update any forward-looking statements, whether as a
result of new information, new developments or otherwise, except to the extent
that such disclosure is required by applicable law.
OVERVIEW
Fisker has built a technology-enabled, asset-light automotive business model
that it believes is among the first of its kind and aligned with the future
state of the automotive industry. This involves a focus on vehicle
development, customer experience, sales and service intended to change the
personal mobility experience through technological innovation, ease of use and
flexibility. Fisker has three important brand pillars - sustainability, design
and innovation. The Company combines the legendary design and engineering
expertise of Henrik Fisker to develop high quality electric vehicles with
strong emotional appeal. Central to Fisker's business model is the Fisker
Flexible Platform Agnostic Design ("FF-PAD"), a proprietary process that
allows the development and design of a vehicle to be adapted to any given
electric vehicle ("EV") platform in the specific segment size. The process
focuses on selecting industry leading vehicle specifications and adapting the
design to crucial hard points on an EV platform and outsourced manufacturing
to reduce development cost and time to market. The first example of this is
Fisker's development of a distinctive base vehicle platform that started with
an architecture provided by Magna Steyr Fahrzeugtechnik AG & Co KG, a limited
liability partnership established and existing under the laws of Austria
("Magna Steyr"), an affiliate of Magna International, Inc. ("Magna"), but that
Fisker substantially modified and re-engineered into Fisker's FM29 Platform.
Fisker believes it is well-positioned through its global premium EV brand, its
renowned design capabilities, its sustainability focus, and its asset-light
and low overhead cost structure, which enables products like the Fisker Ocean
to be priced roughly equivalent to internal combustion engine-powered SUV's
from premium brand competitors.
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The Fisker Ocean is targeting a large and rapidly expanding "premium with
volume" segment (meaning a premium automaker producing more than 100,000 units
of a single model such as the BMW X3 Series or Tesla Model Y) of the electric
SUV market. The Fisker Ocean, a five-passenger vehicle with a 250- to over
350-mile range and state-of-the-art advanced driver assistance capabilities,
will be differentiated in the marketplace by its innovative and timeless
design and a re-imagined customer experience delivered through an advanced
software-based user interface. The Fisker Ocean is made with a high degree of
sustainability, measured across the full vehicle life-cycle. We have
prioritized the proximity of suppliers and materials, and emphasize recycled
and bio-based content. Our vehicle is produced in a carbon-neutral factory and
we are working hard to provide renewable energy sourced charging options and
will have options for remanufacturing, re-using and recycling over 90% of our
vehicle when it finally comes off the road. The optional features for the
Ocean, including the patented California Mode and a solar photovoltaic roof,
resulted in the Fisker Ocean prototype being the most awarded new automobile
at CES 2020 by Time, Newsweek, Business Insider, CNET and others.
Through an innovative partnership strategy, Fisker believes that it will be
able to significantly reduce the capital intensity typically associated with
developing and manufacturing vehicles, while maintaining flexibility and
optionality in component sourcing and manufacturing due to Fisker's FF-PAD
proprietary process. Through Fisker's FF-PAD proprietary process, Fisker, in
collaboration with Magna, has developed a proprietary electric vehicle
platform called FM29 that will underpin Fisker Ocean and at least one
additional nameplate. Fisker intends to cooperate with one or more additional
industry-leading original equipment manufacturers ("OEMs"), technology
companies, and/or tier-one automotive suppliers for access to procurement
networks, while focusing on key differentiators in innovative design, software
and user interface. Multiple platform-sharing partners are intended to
accelerate growth in Fisker's portfolio of electric vehicle offerings. Fisker
recently announced its new Dealer Partnership model in North America and a
hybrid model of dealer partner and direct to consumer sales in Europe.
The Business Combination
Fisker Inc. ("Fisker" or the "Company") was originally incorporated in the
State of Delaware on October 13, 2017 as a special purpose acquisition company
under the name Spartan Energy Acquisition Corp. ("Spartan"), formed for the
purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, recapitalization, reorganization or similar business
combination with one or more businesses. Spartan completed its IPO in August
2018. In October 2020, Spartan's wholly-owned subsidiary merged with and into
Fisker Inc., a Delaware corporation ("Legacy Fisker"), with Legacy Fisker
surviving the merger as a wholly-owned subsidiary of Spartan (the "Business
Combination").
In connection with the consummation of the Business Combination (the
"Closing"), the registrant changed its name from Spartan Energy Acquisition
Corp. to Fisker Inc. The Business Combination was accounted for as a reverse
recapitalization, in accordance with GAAP. Under this method of accounting,
Spartan was treated as the "acquired" company for financial reporting
purposes. Accordingly, the Business Combination was treated as the equivalent
of Legacy Fisker issuing stock for the net assets of Spartan, accompanied by a
recapitalization, whereby no goodwill or other intangible assets was recorded.
Operations prior to the Business Combination are those of Legacy Fisker.
Key Trends, Opportunities and Uncertainties
The Company believes that its future performance and success depends to a
substantial extent on the ability to capitalize on the following opportunities,
which in turn is subject to significant risks and challenges, including those
discussed below and in the section of this Form 10-K titled "
Risk Factors
."
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Industry-Leading Tier-One Automotive Suppliers
On October 14, 2020, the Company and Spartan entered into a Cooperation
Agreement with Magna setting forth certain terms for the development of a full
electric vehicle (the "Cooperation Agreement"). The Cooperation Agreement set
out the main terms and conditions of operational phase agreements (the
"Operational Phase Agreements") that will extend from the Cooperation
Agreement and other agreements with Magna (or its affiliates). On December 17,
2020, the Company entered into the platform-sharing and initial manufacturing
Operational Phase Agreements referenced in the Cooperation Agreement. The
Company and Magna Steyr Fahrzeugtechnik AG & Co KG entered into a Development
Services Agreement on October 22, 2020 and Addendum to Development Services
Agreement on April 7, 2021 providing for the full development and
industrialization of the Company's proprietary FM29 Platform and Fisker Ocean
as the first Fisker vehicle from the Company's proprietary FM29 Platform.
The Company and Magna Steyr also entered into a Contract Manufacturing
Agreement on June 12, 2021 for the launch and manufacture of the Fisker Ocean.
These co-operations allow the Company to focus on vehicle design, strong brand
affiliation and a differentiated customer experience. Fisker intends to
leverage multiple EV platforms to accelerate its time to market, reduce
vehicle development costs and gain access to an established global supply
chain of batteries and other components.
The Company believes it has been able to accelerate its time to market.
Production of the Fisker Ocean commenced in November 2022 and the Company
intends to meet timing, cost and quality expectations while optimally matching
its cost structure with its projected production ramp by leveraging such
partnerships and a trained workforce. Remaining hardware agnostic allows for
selection of partners, components, and manufacturing decisions to be based on
both timeline and cost advantages and enables Fisker to focus on delivering
truly innovative design features, a superior customer experience, and a
leading user interface that leverages sophisticated software and other
technology advancements.
While the Company has entered into agreements with Magna and several other
leading tier-one automotive suppliers, unanticipated events, delays in
execution by third parties and any required changes in the Company's current
business plans could materially and adversely affect its business, margins and
cash flows.
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Market Trends and Competition
The cadence of EV adoption by consumers is likely to vary from year-to-year.
While many independent forecasts suggest that EVs as a percentage of global
auto sales will grow from 3% in 2020 to more than 30% in 2030, growth is
unlikely to be linear. For example, many OEMs experienced softer EV growth in
2023 than initially projected and, as a result, had to lower prices and reduce
their volume forecasts. Over time, EV penetration is expected to grow with the
introduction of more purpose-built EV platforms such as the Fisker Ocean, a
reduction in manufacturing costs that will come with scale, and the continued
build-out of the infrastructure for vehicle charging.
The Company is also working to quantify the sustainability advancements and
claims that the Fisker brand would produce the most sustainable vehicles in
the world, which it believes will be an increasingly important differentiator
among a growing subset of consumers. In the Company's pursuit of these
objectives, it will be in competition with substantially larger and better
capitalized vehicle manufacturers. While the Company believes that the
low-capital-intensity partnership strategy, together with its sales
strategies, provides the Company with an advantage relative to traditional and
other established auto manufacturers. The Company's better capitalized
competitors may seek to undercut the pricing or compete directly with the
Company's designs by replicating their features. In addition, while the
Company believes that its strong management team forms the necessary backbone
to execute on its strategy, the Company expects to compete for talent, as
future growth will depend on hiring qualified and experienced personnel to
operate all aspects of the business.
Commercialization
The Company and its dealer partners have started to establish Fisker Lounges
and dealership or Center+ locations in select cities in North America and
Europe, which has enabled prospective customers to experience Fisker vehicles
through showroom visits, personal interactions with Fisker advisors and test
drives. Fisker, in each launch market, has teamed with dealers and/or vehicle
service organizations with established service facilities, operations and
technicians. This existing setup will be further expanded through our current
and future retail partners and their own service organizations. The Company
offers third-party financing and leasing options in select countries provided
by financial institutions.
Regulatory Landscape
The Company operates in an industry that is subject to and benefits from
environmental regulations, which have generally become more stringent over
time, particularly across developed markets. Regulations in Fisker's target
markets include economic incentives to purchasers of EVs, tax credits for EV
manufacturers, and economic penalties that may apply to a car manufacturer
based on its fleet-wide emissions ratings. See "
Information about Fisker-Government Regulation and Credits
." Further, the registration and sale of Zero Emission Vehicles ("ZEVs") in
California will earn Fisker ZEV credits, which it may be able to sell to other
OEMs or tier-one automotive suppliers seeking to access the state's market.
Several other U.S. states have adopted similar standards. In the European
Union, where European car manufacturers are penalized for excessive fleet-wide
emissions on the one hand and incentivized to produce low emission vehicles on
the other, Fisker believes it will have the opportunity to monetize the ZEV
technology through fleet emissions pooling arrangements with car manufacturers
that may not otherwise meet their CO2 emissions targets. On August 16, 2022,
the IRA was signed into law. While waiting on pending Department of Treasury
regulatory guidance, the Company is continuing to evaluate the ultimate impact
of the tax credits on our financial results, including our net earnings and
cash flow. The IRA impacts taxes and environmental regulations, such as
providing financial incentives in the form of tax credits to incentivize the
purchase of clean vehicles including electric vehicles. To claim the retail
tax credit, the IRA establishes multiple prerequisites, including that the
vehicle must be assembled in North America; the vehicle must be under
specified manufacturer suggested retail prices ("MSRP"); purchaser income
limitations; have a specified percentage of critical minerals that are
"extracted or produced" in the United States, in a country with which the
United States has a Free Trade Agreement, or that is "recycled" in North
America; and that have a specified percentage of "value" of its battery
"components" that are "manufactured or assembled" in North America. Currently
the Fisker Ocean is manufactured in Austria and therefore not eligible for the
retail tax credit. Over time, the Company expects the IRA to benefit Fisker
and the automotive industry in general, but automakers that optimize their
eligibility for their vehicles as compared to Fisker may have a competitive
advantage. While Fisker expects environmental regulations to provide a
tailwind to its growth, it is possible for certain regulations to result in
margin pressures. For example, regulations that effectively impose EV
production quotas on auto manufacturers may lead to an oversupply of EVs,
which in turn could promote price decreases. As a pure play EV company,
Fisker's margins could be particularly and adversely impacted by such
regulatory developments. Trade restrictions and tariffs, while historically
minimal between the European Union and the United States
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where most of Fisker's production and sales are expected, are subject to
unknown and unpredictable change that could impact Fisker's ability to meet
projected sales or margins.
Basis of Presentation
The Company currently conducts its business through one operating segment.
Beginning in June 2023, the Company commenced its core operations - the serial
production and commercialization of its vehicles - in the U.S. and EU. The
Company's historical results are reported under United States generally
accepted accounting principles ("GAAP") and in U.S. dollars. The Company
expects to continue its global operations substantially in the U.S. and the
European Union, and as a result the Company expects future results to be
sensitive to foreign currency transaction and translation risks and other
financial risks that are not reflected in its historical financial statements.
As a result, the Company expects that the financial results it reports for
periods after 2023 will not be comparable to the financial results included in
this Form 10-K or those incorporated by reference from the proxy statement.
Components of Results of Operations
The Company is an early stage company and its historical results may not be
indicative of its future results for reasons that may be difficult to
anticipate. Accordingly, the drivers of the Company's future financial
results, as well as the components of such results, may not be comparable to
the Company's historical or projected results of operations.
Revenues
The Company
generates a significant majority of its revenue from direct sales of Fisker
Ocean SUVs. The Company launched its merchandise "Fisker Edition" where it
sells direct to consumers Fisker branded apparel and goods. The Company is
also a reseller of home charging solutions which started in December 2022.
Merchandise sales and home charging solutions are not a significant portion of
the Company's results.
In accordance with ASC 606,
Revenue from Contracts with Customers
, the Company follows a five-step process in which (i) a contract is
identified, (ii) the related performance obligations are identified, (iii) the
transaction price is determined, (iv) the transaction price is allocated to
the identified performance obligations, and (v) revenue is recognized when (or
as) performance obligations are satisfied. The Company's revenue is primarily
generated from the sale of electric vehicles and accessories to customers, as
well as specific services provided that meet the definition of a performance
obligation under ASC 606, including over-the-air ( "OTA") software updates as
they become available, premium connectivity, roadside assistance, service
packages, specified vehicle upgrades and charging station benefits.
Cost of Goods Sold
Cost of goods sold primarily include vehicle components and parts, including
batteries, direct and indirect costs related to production, including labor,
freight and duties, depreciation and amortization of tooling and capitalized
manufacturing costs, and reserves for estimated warranty expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist mainly of personnel-related
expenses for Fisker's executive and other administrative functions involved
in general corporate, selling and marketing functions, legal, human resources,
facilities and real estate, accounting, finance, tax, and information
technology, and outside professional services, including legal, accounting and
other advisory services.
Research and Development Expenses
The Company's research and development expenses consist primarily of
contracted engineering services incurred in connection with the design,
testing and development of new products, related technologies, and services
and improving existing products and services. Research and development
expenses are expensed as incurred.
Provision for Income Taxes
The Company's provision for income taxes consists of an estimate for U.S.
federal and state income taxes based on enacted rates, as adjusted for
allowable credits, deductions, uncertain tax positions, changes in deferred
tax assets and
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liabilities, and changes in the tax law. Fisker maintains a valuation
allowance against the full value of its U.S. and state net deferred tax assets
because the Company believes the recoverability of the tax assets is not more
likely than not.
Results of Operations
Comparison of the Year Ended December 31, 2023 to the Year Ended December 31,
2022
The following table sets forth the Company's historical operating results for
the periods indicated:
Year Ended December 31,
2023 2022 $ Change % Change
(dollar amounts in thousands)
Revenue $ 272,883 $ 342 $ 272,541 79690 %
Costs of goods sold 558,821 263 $ 558,558 212379 %
Gross margin (285,938) 79 $ (286,017) (362047) %
Operating costs and expenses:
Selling, general and administrative 249,160 106,417 $ 142,743 134 %
Research and development 67,357 423,907 $ (356,550) (84) %
Total operating costs and expenses 316,517 530,324 $ (213,807) (40) %
Loss from operations (602,455) (530,245) $ (72,210) 14 %
Other income (expense):
Other expense (7,190) (119) $ (7,071) 5942 %
Interest income 24,745 10,378 $ 14,367 138 %
Interest expense (18,745) (18,426) $ (319) 2 %
Foreign currency loss (5,389) (2,039) $ (3,350) 164 %
Unrealized loss recognized on equity securities (1,791) (6,860) $ 5,069 (74) %
Fair value adjustment on convertible senior notes and derivative liabilities (327,823) - $ (327,823) 100 %
Total other expense (336,193) (17,066) $ (319,127) 1870 %
Loss before income taxes $ (938,648) $ (547,311) $ (391,337) 72 %
Provision for income taxes $ (1,299) (185) $ (1,114.0) 602 %
Net Loss $ (939,947) $ (547,496) $ (392,451) 72 %
n.m. = not meaningful.
Revenue and cost of goods sold
In the second quarter of 2023, the Company began producing vehicles for
deliveries to its customers and, accordingly, recognized vehicle revenues from
the sale of Fisker Ocean SUVs. Merchandise sales and home charging solutions
are not intended to comprise a significant portion of the Company's revenues.
Over the course of the second half of 2023, the Company continued to ramp
production volumes at a measured pace to ensure the supplier base could
deliver high-quality components in line with our serial production run-rate.
D
uring the year ended
December 31, 2023
, the Company delivered 4,847 vehicles, net of returns and recognized net
revenue of $272.9 million with related cost of revenues totaling $558.8
million resulting in negative gross profit of $285.9 million. The increase in
revenue, cost of goods sold and negative gross profit is due the first partial
year of sales for the Company. The Company had no vehicle sales during the
corresponding year ended December 31, 2022. During the year ended December 31,
2023, the Company recorded a
net realizable value write down of
$232.7 million
. Cost of goods sold also included stock-based compensation expense of
$0.9 million for the year ended
December 31, 2023 and Depreciation and amortizati
on of $46.4 million for
the year ended December 31, 2023.
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Sales of branded apparel, goods and home charging solutions tota
led
$0.8 million w
ith related costs of revenue of
$1.1 million resu
lting in a gross profit of
$0.3 million
during the year ended December 31, 2023 compared to branded appare
l, goods and home charging solutions sales of $0.3 million with related costs
of goods sold of $0.3 million resulting in a gross profit of $79 thousand
during the December 31, 2022
.
Since the Company commenced production and sale of its vehicles, cost of goods
sold includes mainly vehicle components and parts, including batteries, labor
costs, amortized tooling costs and capitalized costs associated with the Magna
warrants, shipping and logistics costs, and reserves for estimated warranty
expenses.
Selling, General and Administrative
Selling, general and administrative expenses increased by $142.7 million,
or
134.1%, to $249.2 million during the year ended
December 31, 2023
as compared to the year ended December 31, 2022. The increase was primarily
attributable to an increase headcount primarily in our sales and marketing
team, resulting in increased compensation, including improved benefits
designed to attract and retain well-qualified employees. In addition, we
increased our spending for targeted marketing, event advertising, openings of
Center+ showrooms, and customer pick-up and service locations, in anticipation
of our launch of the Ocean SUV in the second half of 2023. As we transition to
a dealership model in 2024, we expect certain of our locations under lease
will be converted to subleases.
Selling, general and administrative expenses included stock-based compensation
expense
of $3.3 million
an
d $6.9 million for t
he years ended December 31, 2023 and
2022
, respectively.
Research and Development
Research and development expenses decreased by $356.6 million or 84.1% to
$67.4 million during the year ended
December 31, 2023
as compared to the year ended December 31, 2022. The decrease was primarily
attributable to reductions in design, development and testing of the Ocean
after its start of production. The Company had a change in estimate based on a
settlement reached with a supplier that further reduced expenses. Research and
development expenses incurred during 2022 were associated with the development
phase of our prototype Oceans, and included $107.7 million of prototype parts,
testing and trial production runs to assemble vehicles. The vehicles produced
were used for engineering testing and optimizing vehicle assembly as we
completed the final steps toward achievement of production for serial
production in 2023. Research and development expenses include stock-based
compensation expense of $4.0 million and $12.7 million for the years ended
December 31, 2023 and 2022, respectively.
Other Expense
Other expense, net of $7.2 million during the year ended
December 31, 2023
primarily relates to a $8.4 million provision for a loan made to a supplier.
Interest Income
Interest income increased by $14.4 million, or 138%, from $10.4 million to
$24.7 million during the year ended December 31, 2022 as compared to the year
ended
December 31, 2023
. The increase was due to higher yields from money market funds.
Interest Expense
Interest expense was $18.7 million during the year ended December 31, 2023 and
$18.4 million during the year ended December 31, 2022. The increase is
attributable to the amortization of debt issuance costs of the 2026 Senior
Unsecured Convertible Notes.
Foreign Currency Loss
Th
e Company recorded foreign currency losses of $5.4 million during the year
ended December 31, 2023, compared to losses of $2.0 million during the year
ended December 31, 2022 due to the remeasurement of Euro denominated monetary
assets caused by fluctuating Euro currency rates. In 2024, the Company expects
Euro denomi
nated transactions
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associated with the Company's foreign operations and services provided by
suppliers will increase and will further subject the Company to greater
realized gain and losses from foreign currencies.
Unrealized Losses on Equity Securities
Unrealize
d losses recognized on equity securities held as of
December 31, 2023
totaled $1.8 million during the year ended December 31, 2023 and $6.9 million
during the year ended December 31, 2022.
Fair Value Adjustment on 2025 Convertible Notes and Derivative Liability
During July and September of 2023 the Company issued convertible notes due in
2025 to a single investor via Series A-1 notes and Series B-1 notes
(collectively the
"
2025 Notes
"
), with a combined principal amount of $510.0 million. During 2023, $145.5
million in principal value of the 2025 notes was converted at a fair value of
$213.4 million and charged to Additional paid in capital. The reduction of
outstanding 2025 convertible notes due to conversions recorded at fair value
were offset by a $327.8 million increase in the fair market value of the
remaining unconverted 2025 Notes. The increase in fair value of the 2025 Notes
resulted in a loss of $327.8 million
recorded in Change in fair value measurem
ents on the Consolidated Statements of Operations for the year ended December
31, 2023. The fair value of the 2025 Notes at December 31, 2023 was $564.4
million.
The primary driver of the loss recorded to Change in fair value measurement
was the result of an enriched conversion feature which became available to the
Investor upon the event of default which occurred on November 13, 2023 related
to the Company's late filing of Form 10-Q for the period ended September 30,
2023.
Provision for Income Taxes
The Company's provision for income taxes consists of an estimate for U.S.
federal and state income taxes based on enacted rates, as adjusted for
allowable credits, deductions, uncertain tax positions, changes in deferred
tax assets and liabilities, and changes in the tax law. The Company maintains
a valuation allowance against the full value of its U.S. and state net
deferred tax assets because it believes the recoverability of the tax assets
is not more likely than not.
Provision for income ta
xes totaled $1.3 million for the year ended December 31, 2023 and $0.2 million
for th
e year ended December 31, 2022. The increase is due to the start of production
and European sales.
Liquidity and Capital Resources
See "Item 1A. Risk Factors" for a discussion of the risk associated with the
Company's ability to continue as going concern and Note 20, Subsequent events
for a discussion on covenant waivers.
During the second quarter of
2023
, the Company began to generate revenue from its core business operations. To
date, t
he Company
has funded its capital expenditure and working capital requirements through
proceeds received from the issuance of equity and convertible notes, as
further discussed below.
The Company
's ability to successfully fund its primary commercial operations and expand
its business may depend on many factors, including its working capital needs,
the availability of equity or debt financing and, over time, its ability to
generate cash flows from operations.
As of December 31, 2023, t
he Company
's cash and cash equivalents tot
aled
$325.5 million and the Company had $70.4 million of restricted cash.
In July and September 2023, t
he Company
entered into purchase agreements for t
he sale of an aggregate of $510.0 million principal amount of convertible
senior notes due in 2025. The net proceeds from the issu
ance of the 2025 Notes was $445.1 million, net of debt issuance costs. The
2025 Notes mature in July 2025 and September 2025, unless repurchased,
redeemed, or converted in accordance with their terms prior to such date.
In May 2022, t
he Company
established an
"
at the market
"
equity offering program (the
"
ATM Program
"
) under which J.P. Morgan Securities LLC and Cowen and Company, LLC act as
sales agents (the
"
Agents
"
), pursuant to a distribution agreement that t
he Company
entered into with the Agents (the
"
Distribution Agreement
"
). Pursuant to the ATM Program, t
he Company
may, at its discretion and from time to time during the term of the
Distribution Agreement, sell, through the Agents, shares of its Class A Common
Stock as would result in aggregate gross proceeds to t
he Company
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of
up to $350.0 million by an
y method permitted by law deemed to be an "at-the-market offering" as defined
in Rule 415 of the Securities Act of 1933, as amended, including without
limitation sales made directly on the New York Stock Exchange, on any other
existing trading market for the Class A Common Stock or to or through a market
maker. In addition, the Agents may also sell the shares of Class A Common
Stock by any other method permitted by law, including, but not limited to,
negotiated transactions. The Company issued 21,153,154 shares of Class A
common stock during the year ended December 31, 2023 for gross proceeds of
$135.9 million
, before $2.0 million of commissions and other direct incremental issuance
costs. Effective July 12, 2023, the Company terminated the Distribution
Agreement. As a result, the Company will not offer or sell any further shares
under the May 2022 ATM Program.
In August 2021, t
he Company
entered into a purchase agreement for the sale of an aggregate of $667.5
million principal amount of convertible senior notes due in 2026. The net
proceeds from the issuance of the 2026 Notes were $562.2 million, net of debt
issuance costs and the 2027 Capped Call Transactions discussed furth
er in Note 12. T
he 2026 Notes mature on September 15, 2026, unless repurchased, redeemed, or
converted in accordance with their terms prior to such date. The 2
026 Notes were not convertible as of December 31, 2023.
The Company used
$904.9 million
of cash in operating and investing activities during the year ended December
31, 2023. While it raised
$565.7 million
in financing activities during such period, this usage left the Company with
cash and cash equivalents, net of restricted cash, of
$325.5 million
as of December 31, 2023. Since then, the Company has had to make significant
payments to certain suppliers under its existing contracts and continued to
use cash in operating activities, leaving it with cash and cash equivalents,
net of restricted cash of
$53.9 million
as of April 16, 2024.
The Company did not make a required interest payment of approximately $8.4
million payable in cash on March 15, 2024 with respect to the 2026 Notes. At
the conclusion of a 30-day grace period, the non-payment became an Event of
Default with respect to the 2026 Notes, and resulted in a cross default with
respect to the 2025 Notes. The Company's current forbearance agreement expires
May 1, 2024. If the Company does not receive adequate relief from its debt
holders and additional sufficient liquidity from potential liquidity providers
to meet its current obligations, it expects to seek protection under
applicable bankruptcy laws in multiple jurisdictions within 30 days from the
issuance of these financial statements (see further discussion of, among other
items, waivers, forbearance of the 2025 Notes and delisting considerations
within
Note 20, Subsequent Events
).
The Company believes that its available liquidity will not be sufficient to
meet its current obligations for a period of at least twelve months from the
date of the filing of this Annual Report on Form 10-K. Accordingly, the
Company has concluded there is substantial doubt about its ability to continue
as a going concern.
The Company has been seeking additional financing, attempting to restructure
its current debt obligations and continues to discuss financing alternatives
with potential providers. In addition to reducing expenses, the Company
intends to further reduce its workforce and streamline its operations,
including reducing its physical footprint. There is no assurance that the
Company will be able to restructure its obligations and/or obtain additional
financing on acceptable terms and conditions.
Cash Flows
The following table provides a summary of the Company's cash flow data for the
periods indicated:
Years Ended December 31,
2023 2022 2021
(dollar amounts in thousands)
Net cash used in operating activities $ (668,931) $ (452,537) $ (301,270)
Net cash used in investing activities (235,944) (200,989) (134,386)
Net cash provided by financing activities $ 565,694 $ 187,636 $ 646,937
Cash Flows used in Operating Activities
The Company
's net cash flows used in operating activities to date have been primarily
comprised of costs related to research and development, payroll and other
selling, general and administrative activities. Operating lease commitments at
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December 31, 2023 will result in cash payments of $22.1 million in 2024, $21.4
million for 2025 and $59.8 million for
2026 and thereafter. The Company expects its cash used in operating activities
will increase as a decrease in development costs of the Ocean are offset by
higher working capital throughout 2024. The year over year change in operating
cash outflow
was $216.4 million for the y
ear ended
December 31, 2023
which is primarily attributable to the Company's net loss,
increase in inventory year over year, change in the fair value of the 2025
derivative liability and an increase in accounts payable balances. The
increase in accounts payable balance is primarily due to
the corresponding increase of inventory and components purchased for vehicle
production and invoices as it relates to the ramp up in deliveries.
The year over year increase of
$19.9 million in our cash flows relates to a decrease in Prepaid expenses
primarily due to a decrease in advances to vendors for vehicle components.
In total, the Company is projecting to use cash in a ra
nge of $260.0 million to $310.0 million for combi
ned Selling, general and administrative expenses and Research and development
expenses, excluding stock-based compensation expense, during 2024.
Net cash used in
operating activities increased by approximately $216.4 million from $452.5
million during the year ended December 31, 2022 to $668.9 million during the
year ended December 31, 2023. Net cash used in operating activities increased
by approximately $151.3 million from $301.3 million during the year ended
December 31, 2021 to $452.5 million during the year ended December 31, 2022.
Cash Flows used in Investing Activities
The Company's cash flows used in investing activities, historically, have been
comprised mainly of purchases of property and equipment which is under
construction. During the y
ear ended December 31, 2023, the Company acquired assets related to the
production of the Ocean and its components that totaled $227.6 million
compared to $191.0 million during the year ended December 31, 2022. The
Company expects 2024 capital expenditures for tooling and manufacturing
equipment to range between $60.0 million to $80.0 million of which the Company
ex
pect's at least 50% is denominated in foreign currencies, as serial production
tooling and equipment continue at both vehicle assembly and supplier
facilities during 2024.
The Company used cash
of $235.9 million for inv
esting activity during the year ended December 31, 2023 compared to $201.0
million of cash used during the year ended December 31, 2022.
On July 28, 2021, the Company made
a $10.0 million commitment for a private investment in public equity (PIPE)
supporting the planned merger of leading European EV charging network, Allego
with Spartan Acquisition Corp. III (NYSE: SPAQ), a publicly-listed special
purpose acquisition company. The merger closed in the first quarter of 2022
which triggered our investment commitment resulting in a $10.0 million cash
paym
ent to acquire 1,000,000 class A common shares of Allego (NYSE: ALLG). Fisker
was the exclusive electric vehicle automaker in the PIPE and, in parallel, has
agreed to terms on a strategic partnership to deliver a range of charging
options for its customers in Europe.
Cash Flows from Financing Activities
Through December 31, 2023, the Company has financed its operations primarily
through the sale of equity securities with the ATM Equity Program and issuance
of convertible senior notes.
Net cash from financing activities w
as $565.7 million dur
ing the year ended December 31, 2023, which was primarily due to the proceeds
from the issuance of the 2025 convertible n
ote of $445.1 million, net of issuance costs of $4.9 million, the issuance of
the ATM equity program of $135.9 million, net of stock issuance costs of $1.9
million as well as aggregate proceeds from the exercise of stock options and
collection of related statutory withholding taxes of
$0.0 million.
Net cash from financing activities was $187.6 million during the year ended
December 31, 2022, which was primarily due to the proceeds from the issuance
of the ATM equity program of $190.5 million as well as aggregate proceeds from
the exercise of stock options and collection of related statutory withholding
taxes of $2.2 million.
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Off-Balance Sheet Arrangements
The Company
is not a party to any off-balance sheet arrangements, as defined under SEC
rules.
Critical Accounting Estimates
The Company
's financial statements have been prepared in accordance with U.S. GAAP. In
the preparation of these financial statements,
the Company
is required to use judgment in making estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities as of the date of the financial statements,
as well as the reported expenses incurred during the reporting periods. The
Company considers an accounting judgment, estimate or assumption to be
critical when (1) the estimate or assumption is complex in nature or requires
a high degree of judgment and (2) the use of different judgments, estimates
and assumptions could have a material impact on the consolidated financial
statements. The Company routinely evaluate these estimates, utilizing
historical experience, consultation with experts and other methods we consider
reasonable in the particular circumstances. Nevertheless, actual results may
differ significantly from original estimates, and any effects on the Company's
business, financial position or results of operations resulting from revisions
to these estimates are recorded in the period in which the facts that give
rise to the revision become known.
The Company
's significant accounting policies are described in Note 2 to its audited
consolidated financial statements included elsewhere in this Form 10-K.
Inventory Valuation
Inventories are stated at the lower of cost or net realizable value. Cost is
computed using standard cost for vehicles, which approximates actual cost on a
first-in, first-out basis. The Company records inventory write-downs for
excess or obsolete inventories based upon assumptions about current and future
demand forecasts. If inventory on-hand is in excess of future demand forecast
and market conditions, the excess amounts are written-off.
Inventory is also reviewed to determine whether its carrying value exceeds the
net amount realizable upon the ultimate sale of the inventory. This requires
the Company to determine the selling price of vehicles less the estimated cost
to convert the inventory on-hand into a finished product. Once inventory is
written-down, a new lower cost basis for that inventory is established and
subsequent changes in facts and circumstances do not result in the restoration
or increase in that newly established cost basis.
In the event there are changes in estimates of future selling prices or
production costs, the Company may be required to record additional and
potentially material write-downs. A small change in estimates may result in a
material change in the reported financial results.
2025 Convertible Note
The Company analyzed the purchase option related the Securities Purchase
Agreement dated as of July 10, 2023 and determined that the purchase option
for the Additional Optional Note and Additional Mandatory Note represents a
freestanding instrument that should be classified as a derivative. The Company
has recorded the Option to Purchase Additional Notes as a derivative
liability, which is carried on the Company's balance sheet at fair value. The
derivative liability is marked-to-market each measurement period and any
change in fair value is recorded as a component of the income statement. The
Company fair values the derivative using a Monte Carlo simulation pricing
model. The 2025 convertible notes are valued using an embedded lattice
technique.
As permitted under Financial Accounting Standards Board ("FASB") Accounting
Standards Codification ("ASC") Topic 825, Financial Instruments ("ASC 825"),
the Company elected to account for its convertible promissory notes with
changes in fair value recorded as a component of non-operating loss in the
consolidated statements of operations. As a result of electing the fair value
option, direct costs and fees related to the convertible notes were expensed
as incurred.
The 2025 Convertible Note value is directly related to the fair value of the
Class A common stock. As the value of the common stock increases, the value of
the note increases, and as the value of common stock decreases, the value of
the note decreases.
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Revenue from Contracts with Customers
In accordance with
ASC 606,
Revenue from Contracts with Customers
, the Company follows a five-step process in which (i) a contract is
identified, (ii) the related performance obligations are identified, (iii) the
transaction price is determined, (iv) the transaction price is allocated to
the identified performance obligations, and (v) revenue is recognized when (or
as) performance obligations are satisfied. The Company's revenue is primarily
generated from the sale of electric vehicles and accessories to customers, as
well as specific services provided that meet the definition of a performance
obligation under ASC 606, including over-the-air ( "OTA") software updates as
they become available, premium connectivity, roadside assistance, service
packages, specified vehicle upgrades and charging station benefits.
The value of performance obligations related to the Company's sales represent
stand-alone selling prices estimated by considering the cost to develop and
deliver the service plus margin, third-party pricing of similar services and
other information that may be available. The transaction price is allocated
among the performance obligations based on the proportion of the stand alone
selling prices of the Company's performance obligations to the sum of the
standalone selling prices of all performance obligations in the arrangement.
Payment for EV sales is typically received at or prior to delivery, or
according to agreed upon payment terms.
The Company also recognizes a sales return reserve on vehicle sales, which is
recorded as an offset to revenue.
Warranty
The Company provides base warranties on the vehicles we sell for specific
periods of time and/or mileage and accrues the estimated cost of base warranty
coverages at the time of sale.
The Company establishes an estimate of base warranty obligations using
industry information and historical trends. The Company uses industry
information with regards to the nature, frequency, and average cost of claims.
The Company will reevaluate the estimate of base warranty obligations on a
regular basis and as the Company collects sufficient data. Experience has
shown that initial data for the first year of the Ocean may be volatile;
therefore, the process relies on industry data until sufficient historical
data is available. The Company will then compare the resulting accruals with
present spending and current industry data to assess whether the warranty
reserve is expected to meet future obligations. Based on this data, the
Company will update warranty estimates as necessary.
Due to the uncertainty and potential volatility of the factors used in
establishing estimates, changes in assumptions can materially affect the
Company's financial condition and results of operations.
Long-Lived Asset Impairment
As of December 31, 2023, t
he Company's
long-lived assets were comprised primarily of $570.9 million, $220.7 million
and $87.3 million of net property, plant and equipment, intangible assets and
operating lease right-of-use assets, respectively.
The Company
tests long-lived assets for recoverability annually or whenever events or
changes in circumstances indicate the carrying amount of an asset group may
not be recoverable. Recoverability of an asset group is assessed by comparing
its carrying amount to the estimated future undiscounted net cash flows
expected to be generated by the asset group through operation or disposition,
calculated utilizing the lowest level of identifiable cash flows. If this
comparison indicates that the carrying amount of an asset group is not
recoverable, we are required to recognize an impairment loss. The impairment
loss is measured by the amount by which the carrying amount of the asset
exceeds its estimated fair value. The Company considers recoverability in
respect to evolving business strategy and planned use of assets.
In estimating the recoverability of asset groups for purposes of t
he Company's
long-lived asset impairment testing when indicators or events are present, we
will utilize future cash flow projections that are generally developed
internally. During the second quarter of 2023, the Company commenced retail
deliveries of the Ocean and generated revenues from vehicle sales. Any
estimates of future cash flow projections necessarily involve predicting
unknown future circumstances and events and require significant management
judgments and estimates. In arriving at cash flow projections, the Company
will consider approved budgets and business plans, existing paid reservations
and projected reservations, estimated asset holding periods, and other
relevant factors.
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Determining the future cash flows of an asset group involves the use of
significant estimates and assumptions that are unpredictable and inherently
uncertain. These estimates and assumptions include revenue and expense growth
rates and operating margins used to calculate projected future cash flows.
Future events may indicate differences from management's current judgments and
estimates which could, in turn, result in future impairments. Future events
that may result in impairment charges include not achieving program gateways,
regulatory standards, detailed development and manufacturing agreements or
delays in production milestones, the start of production and/or ramp up
production or a reduction in projected sales volumes. Significant adverse
changes in our future revenues and/or operating margins caused by
higher-than-expected bill-of-material costs, as well as other events and
circumstances, including, but not limited to, increased competition and
changing economic or market conditions, could result in changes in estimated
future cash flows and the determination that long-lived assets are impaired.
Each quarter, the Company evaluates the net carrying amounts of long-term
assets for impairment when impairment indicators are present. The Company
evaluates for impairment triggers based on qualitative factors such as
macroeconomic trends, trends related to EV demand and current and projected
trends related to market conditions. The Company also evaluates for impairment
triggers based on quantitative factors such as historical and projected
revenue and profitability performance trends. The existence of an individual
indicator is not automatically conclusive that the asset may not be
recoverable. The Company exercises judgement and considers the combined effect
of all indicators and developments, both positive and negative when
determining whether an asset may not be recoverable. Management has assessed
whether indicators of impairment exist as of December 31, 2023, considering
the Company's recent start of production in May 2023, concluding that there
were no identified triggering events as of December 31, 2023 that would be
conclusive that the asset may not be recoverable. The recoverability of
long-lived assets continues to be dependent on the market acceptance of the
Company's vehicles.
As a result of a sustained drop in our stock price in violation of NYSE rules,
the NYSE commenced delisting proceedings with the Company on March 25, 2024.
As a result step one of our impairment test was triggered which may result in
impairment of the Company's property and equipment and intangible assets
during our first quarter of 2024. Also, during first quarter 2024 the Company
is exiting certain lease property and this may result in an impairment in
first quarter of 2024 reporting of our right of use assets.
Recent Accounting Pronouncements
See Note 2 to the audited consolidated financial statements included elsewhere
in this Form 10-K for more information about recent accounting pronouncements,
the timing of their adoption, and the Company's assessment, to the extent it
has made one, of their potential impact on t
he Company
's financial condition and its results of operations and cash flows.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risks in the ordinary course of our business.
Market risk represents the risk of loss that may impact our financial position
due to adverse changes in financial market prices and rates. The Company's
market risk exposure is primarily the result of fluctuations in foreign
currency rates, inflationary pressure, interest rates and supply risk.
Foreign Currency Risk
The Company's functional currency is the U.S. dollar, while the Company's
subsidiaries have functional currencies other than the U.S Dollar representing
their principal operating markets. Translation of such subsidiaries' results
of operations in the Company's consolidated financial statements may result in
revenue and earnings volatility from period to period in response to exchange
rates fluctuations.
Many of the Company's significant contracts with OEMs and/or tier-one
automotive suppliers are transacted in Euro or other foreign currencies and
any adverse changes in those currencies relative the U.S. Dollar may result in
foreign currency exchange losses. To date, the Company has not had material
exposure to foreign currency fluctuations and has not hedged such exposure,
although it may do so in the future.
I
nflationary Pressure
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The U.S. economy has experienced increased inflation recently. The Company's
cost to manufacture a vehicle is heavily influenced by the cost of the key
components and materials used in the vehicle, and cost of labor. The Company
expects inflationary pressure to persist for the foreseeable future.
Supply Risk
We are dependent on our suppliers, the majority of which are single-source
suppliers, and the inability of these suppliers to deliver necessary
components of our products according to the schedule and at prices, quality
levels and volumes acceptable to us, or our inability to efficiently manage
these components, could have a material adverse effect on our results of
operations and financial condition.
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Item 8. Financial Statements and Supplementary Data.
FISKER INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm 71
(PCAOB Firm ID
238
)
Consolidated Balance Sheets as of December 31, 202 74
3
and 20
22
Consolidated Statements of Operations for the years ended December 31, 202 75
3
, 20
22
, and 20
21
Consolidated Statements o 76
f
Stockholders' Equity
for the years ended December 31, 202
3
, 20
22
, and 20
21
Consolidated Statements of Cash Flows for the years ended December 31, 202 77
3
, 20
22
, and 20
21
Notes to 79
Consolidated Financial Statements
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Fisker Inc.
Opinions on the Financial Statements and Internal Control over Financial
Reporting
We have audited the accompanying consolidated balance sheets of Fisker Inc.
and its subsidiaries (the "Company") as of December 31, 2023 and 2022, and the
related consolidated statements of operations, of stockholders' equity and of
cash flows for each of the three years in the period ended December 31, 2023,
including the related notes (collectively referred to as the "consolidated
financial statements"). We also have audited the Company's internal control
over financial reporting as of December 31, 2023, based on criteria
established in
Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of December 31, 2023 and 2022, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 2023 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company did not maintain,
in all material respects, effective internal control over financial reporting
as of December 31, 2023, based on criteria established in
Internal Control - Integrated Framework
(2013) issued by the COSO because material weaknesses in internal control over
financial reporting existed as of that date as the Company did not design and
maintain (i) an effective control environment commensurate with its financial
reporting requirements, specifically a lack of a sufficient number of
professionals with an appropriate level of accounting knowledge, training and
experience to appropriately analyze, record and disclose accounting matters
timely and accurately and to achieve complete, accurate and timely financial
accounting, reporting and disclosures, as well as effective controls over the
preparation and review of account reconciliations, (ii) effective controls for
communicating and sharing information between the operations, accounting,
information technology, finance, and legal departments, (iii) effective
controls in response to the risks of material misstatement over the accounting
for (a) inventory and related income statement accounts and (b) revenue and
related balance sheet accounts, and (iv) effective controls related to the
accounting for certain non-routine, complex or unusual events or transactions.
A material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the annual or interim financial
statements will not be prevented or detected on a timely basis. The material
weaknesses referred to above are described in Management's Report on Internal
Control over Financial Reporting appearing under Item 9A. We considered these
material weaknesses in determining the nature, timing, and extent of audit
tests applied in our audit of the 2023 consolidated financial statements, and
our opinion regarding the effectiveness of the Company's internal control over
financial reporting does not affect our opinion on those consolidated
financial statements.
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, among other things, (i)
did not make a required interest payment in March 2024, which resulted in
events of default and (ii) does not believe that its available liquidity will
be sufficient to meet its current obligations for a period of at least twelve
months from the date of the issuance of the financial statements, which raises
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. As
discussed in Note 2, if management's plans are not successful, the Company
expects to seek protection under applicable bankruptcy laws. The consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
Basis for Opinions
The Company's management is responsible for these consolidated financial
statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control
over financial reporting included in management's report referred to above.
Our responsibility is to express opinions on the Company's consolidated
financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with
the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of
material
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misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements 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.
Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets
of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the
current period audit of the consolidated financial statements that were
communicated or required to be communicated to the audit committee and that
(i) relate to accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts
or disclosures to which they relate.
Accounting for Inventory
As described in Notes 2 and 4 to the consolidated financial statements, as of
December 31, 2023, the Company's inventory balance was $406.5 million.
Inventories are stated at the lower of cost or net realizable value and
consist of raw materials, work in progress and finished goods. Inventory value
is determined using standard cost, which approximates actual cost on a
first-in, first-out basis. Fixed production overhead costs are allocated to
inventory based on the estimated normal level of production. For the year
ended December 31, 2023, the Company recorded a write down of total inventory
to net realizable value totaling $232.7 million. As disclosed by management,
inventory is reviewed by management to determine whether its carrying value
exceeds its net realizable value (NRV) upon the ultimate sale of the
inventory. This requires management to determine the selling price of the
vehicles less the estimated cost to convert the inventory on-hand into a
finished product.
The principal considerations for our determination that performing procedures
relating to accounting for inventory is a critical audit matter are (i) the
significant judgment by management in developing estimates for inventory
related to accounting for fixed production overhead costs and in determining
inventory write-downs for lower of cost or net realizable value and (ii) a
high degree of auditor judgment, subjectivity, and effort in performing
procedures and evaluating audit evidence related to the existence, accuracy,
and valuation of inventory. As described in the "Opinions on the Financial
Statements and Internal Control over Financial Reporting" section, a material
weakness was identified related to this matter.
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Addressing the matter involved performing procedures and evaluating audit
evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included, among others, testing the
existence, accuracy, and valuation of inventory. Testing the existence of
inventory involved (i) conducting physical inventory observation procedures,
on a sample basis, by performing test counts of inventory quantities and
testing movements of inventory between the time of the inventory observations
and December 31, 2023 and (ii) confirming, for certain locations, the
inventory balance as of December 31, 2023. Testing the accuracy of the cost of
inventory items involved, on a sample basis, obtaining and inspecting
third-party invoices and other supporting documents and recalculating the cost
of inventory on a first-in, first-out basis. Testing the valuation of
inventory involved testing management's process for developing estimates for
inventory related to accounting for fixed production overhead costs and in
determining inventory write-downs for lower of cost or net realizable value.
Testing management's process included evaluating the appropriateness of the
methods used by management to estimate future production levels, evaluating
the reasonableness of estimates related to the normalized production capacity,
and selling price of the vehicles less the estimated cost to convert the
inventory on-hand into a finished product, and testing the completeness and
accuracy of the underlying data used by management in the estimates.
Accounting for Revenue
As described in Note 2 to the consolidated financial statements, for the year
ended December 31, 2023, the Company recognized revenues of $272.9 million.
The Company's revenue is primarily generated from the sale of electric
vehicles (EV) and accessories to customers, as well as specific services
provided that meet the definition of a performance obligation under ASC 606,
Revenue from Contracts with Customers
, including over-the-air (OTA) software updates as they become available,
premium connectivity, roadside assistance, service packages, specified vehicle
upgrades and charging station benefits. Revenue from the stand-ready
obligation to deliver unspecified OTA software updates when-and-if they become
available is recognized ratably over the basic vehicle warranty term,
commencing when control of the vehicles is transferred to the customer.
Revenue from other performance obligations, including premium connectivity,
roadside assistance and service packages are recognized over the requisite
performance periods. Revenue from specified vehicle upgrades is recognized at
the point in time when the upgrade is complete and delivered to the customer.
The Company recognizes revenue related to the vehicles at a point in time when
the customer obtains control of the vehicle either upon completion of delivery
or upon pick up of the vehicle by the customer. The value of performance
obligations related to the Company's sales represent stand-alone selling
prices estimated by considering the costs to develop and deliver the service
plus margin, third-party pricing of similar services and other information
that may be available. Payment for EV sales is typically received at or prior
to delivery, or according to agreed upon payment terms.
The principal considerations for our determination that performing procedures
relating to accounting for revenue is a critical audit matter are a high
degree of auditor effort in performing procedures and evaluating audit
evidence related to revenue recognized. As described in the "Opinions on the
Financial Statements and Internal Control over Financial Reporting" section, a
material weakness was identified related to this matter.
Addressing the matter involved performing procedures and evaluating audit
evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included, among others (i) testing, on
a sample basis, revenue recognized during the year and subsequent to year end
by obtaining and inspecting source documents, such as sales orders, invoices,
proof of delivery, and cash receipts; (ii) confirming, on a sample basis,
outstanding customer balances as of December 31, 2023 and, for confirmations
not returned, obtaining and inspecting source documents, such as sales orders,
invoices, proof of delivery, and subsequent cash receipts; and (iii) testing
management's process for developing the stand-alone selling price for the
identified performance obligations. Testing management's process included
evaluating the appropriateness of the calculations used by management to
determine the amount of revenue for deferral and testing the completeness and
accuracy of the underlying data used by management in the calculation of
stand-alone selling price.
/s/
PricewaterhouseCoopers LLP
Los Angeles, California
April 22, 2024
We have served as the Company's auditor since 2021.
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Fisker Inc.
Consolidated Balance Sheets
(
In thousands, except share data
)
As of December 31,
2023 2022
Assets
Current assets:
Cash and cash equivalents $ 325,452 $ 736,549
Restricted cash 70,447 -
Accounts receivable 18,018 -
Inventory 406,505 4,276
Prepaid expenses and other current assets 103,732 87,489
Equity investment - 3,140
Total current assets 924,154 831,454
Non-current assets:
Property and equipment, net 570,907 387,137
Intangible asset, net 220,743 246,922
Right-of-use asset, net 87,309 33,424
Other non-current assets 28,574 16,489
Total non-current assets 907,533 683,972
Total assets $ 1,831,687 $ 1,515,426
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 181,839 $ 58,871
Accrued expenses and other 364,691 260,065
Customer advances and deposits 29,453 4,860
Convertible senior notes 291,715 -
Deferred revenue 19,882 -
Operating leases liabilities 15,049 7,085
Total current liabilities 902,629 330,881
Non-current liabilities:
Operating leases liabilities, less current portion 65,723 27,884
Other non-current liabilities 516 15,334
Convertible senior notes 935,228 660,822
Deferred revenue, net of current portion 25,673 -
Total non-current liabilities 1,027,140 704,040
Total liabilities 1,929,769 1,034,921
Commitments and contingencies (Note 19)
Stockholders' equity:
Preferred stock, $ - -
0.00001
par value;
15,000,000
shares authorized;
no
shares issued and outstanding as of December 31, 2023 and 2022
Class A Common stock, $ 3 2
0.00001
par value;
1,250,000,000
shares authorized;
316,589,859
and
187,599,812
shares issued and outstanding as of December 31, 2023 and 2022, respectively
Class B Common stock, $ 1 1
0.00001
par value;
150,000,000
shares authorized;
132,354,128
and
132,354,128
shares issued and outstanding as of December 31, 2023 and 2022
Additional paid-in capital 2,008,602 1,650,196
Accumulated deficit ( (
2,106,688 1,166,741
) )
Receivable for "At-the-market" offering - (
2,953
)
Total stockholders' equity ( 480,505
98,082
)
Total liabilities and shareholders' equity $ 1,831,687 $ 1,515,426
The accompanying notes are an integral part of these consolidated financial
statements.
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Fisker Inc.
Consolidated Statements of Operations
(
In thousands, except share and per share data
)
Year Ended December 31,
2023 2022 2021
Revenue $ 272,883 $ 342 $ 106
Costs of goods sold 558,821 263 88
Gross margin ( 79 18
285,938
)
Operating costs and expenses:
Selling, general 249,160 106,417 42,398
and administrative
Research and development 67,357 423,907 286,856
Total operating 316,517 530,324 329,254
costs and expenses
Loss from operations ( ( (
602,455 530,245 329,236
) ) )
Other income (expense):
Other expense, net ( ( (
7,190 119 402
) ) )
Interest income 24,745 10,378 627
Interest expense ( ( (
18,745 18,426 6,546
) ) )
Change in fair value - - (
of derivatives 138,436
)
Foreign currency (loss) gain ( ( 2,667
5,389 2,039
) )
Unrealized (loss) gain ( ( -
recognized on equity securities 1,791 6,860
) )
Change in fair value measurements ( - -
327,823
)
Total other expense ( ( (
336,193 17,066 142,090
) ) )
Loss before $ ( $ ( $ (
income taxes 938,648 547,311 471,326
) ) )
Provision for income taxes ( ( (
1,299 185 15
) ) )
Net loss attributable $ ( $ ( $ (
to common shareholders 939,947 547,496 471,341
) ) )
Net loss per common share
Net loss per share attributable to Class A and $ ( $ ( $ (
Class B Common shareholders- Basic and Diluted 2.73 1.80 1.61
) ) )
Weighted average shares outstanding
Weighted average Class A and Class B Common 343,978,989 303,366,068 292,004,136
shares outstanding- Basic and Diluted
The accompanying notes are an integral part of these consolidated financial
statements.
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Fisker Inc.
Consolidated Statements of Stockholders' Equity
(
In thousands, except share data
)
Class A Class B Additional Receivable Receivabl
Common Stock Common Stock Paid-in For Warrant "At-the-m
Capital Exercises Offeri
Shares Amount Shares Amount
Balance 144,912,362 $ 1 132,354,128 $ 1 $ 1,055,128 $ ( $ - $ ( $ 907,130
at 96 147,904
December ) )
31,
2020
Stock-based - - - - 5,622 - - - 5,622
compensation
Exercise of 1,656,424 - - - 403 - - - 403
stock options
and
restricted
stock
awards, net
of statutory
tax
withholding
Receivable - - - - - 459 - - 459
for warrant
exercises
collected
Exercise of 27,751,587 1 - - 365,464 ( - - 365,080
warrants 385
)
Shares ( - - - - - - - -
surrendered 9,943,067
upon )
exercise of
warrants
Stock - - - - ( 22 - - -
issuance 22
costs and )
redemption
payments
Purchase - - - - ( - - - (
of capped 96,788 96,788
call option ) )
Recognition - - - - 89,477 - - - 89,477
of
Magna
warrants
Net loss - - - - - - - ( (
471,341 471,341
) )
Balance 164,377,306 $ 2 132,354,128 $ 1 $ 1,419,284 $ - $ - $ ( $ 800,042
at 619,245
December )
31,
2021
Stock-based - - - - 19,602 - - - 19,602
compensation
Exercise of 704,565 - - - 592 - - - 592
stock options
and
restricted
stock
awards, net
of statutory
tax
withholding
Recognition - - - - 20,778 - - - 20,778
of
Magna
warrants
Shares 22,517,941 - - - 189,940 - ( - 186,987
issued under 2,953
"At-the-market" )
offering,
net of
stock
issuance
costs
Net loss - - - - - - - ( (
547,496 547,496
) )
Balance 187,599,812 $ 2 132,354,128 $ 1 $ 1,650,196 $ - $ ( $ ( $ 480,505
at 2,953 1,166,741
December ) )
31,
2022
Stock-based - - - - 8,176 - - - 8,176
compensation
Exercise of 1,707,065 - - - 89 - - - 89
stock options
and
restricted
stock
awards, net
of statutory
tax
withholding
Recognition - - - - 6,000 - - - 6,000
of
Magna
warrants
Shares 21,153,154 - - - 130,704 - 2,953 - 133,657
issued under
"At-the-market"
offering,
net of
stock
issuance
costs
Conversion of 106,129,828 1 - - 213,437 213,438
2025 Senior Notes
Net loss - - - - - - - ( (
939,947 939,947
) )
Balance 316,589,859 $ 3 132,354,128 $ 1 $ 2,008,602 $ - $ - $ ( $ (
at 2,106,688 98,082
December ) )
31,
2023
e for Accumulated Total
arket" Deficit Stockholders'
ng Equity
The accompanying notes are an integral part of these consolidated financial
statements.
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Fisker Inc.
Consolidated Statements of Cash Flows
(
In thousands, except share data
)
Year Ended December 31,
2023 2022 2021
Cash Flows from Operating Activities:
Net loss $ ( $ ( $ (
939,947 547,496 471,341
) ) )
Reconciliation of net loss to net cash used in operating activities:
Stock-based compensation 8,176 19,602 5,622
Amortization of debt discount 1,734 1,474 373
Allowance for note receivable 8,357 - -
Depreciation and amortization 88,878 7,285 699
Amortization of right-of-use asset 10,235 4,463 2,576
Inventory write down 233,929 - -
Change in fair value measurements 327,823 - -
Change in fair value of warrants liability - - 138,436
Unrealized loss recognized on equity securities 1,791 6,860 -
Unrealized (gain) loss on foreign currency transactions 5,947 3,975 (
1,469
)
Changes in operating assets and liabilities:
Inventory ( - -
636,156
)
Accounts receivable ( - -
17,528
)
Deferred revenue 45,555 - -
Prepaid expenses and other assets ( ( (
33,442 53,194 43,797
) ) )
Accounts payable and accrued expenses 205,471 99,578 66,253
Customer deposits 26,677 9,034 2,773
Change in operating lease liability ( ( (
6,431 4,118 1,395
) ) )
Net cash used in operating activities ( ( (
668,931 452,537 301,270
) ) )
Cash Flows from Investing Activities:
Acquisition of equity investment - ( -
10,000
)
Funding of notes receivable ( - -
8,357
)
Purchase of property and equipment and intangible asset ( ( (
227,587 190,989 134,386
) ) )
Net cash used in investing activities ( ( (
235,944 200,989 134,386
) ) )
Cash Flows from Financing Activities:
Proceeds from issuance of convertible notes 450,000 - 667,500
Payments for debt issuance costs 25 - (
209
)
Payments made for capped call options - - (
96,788
)
Payments made to initial purchasers for convertible notes - - (
8,314
)
Proceeds from exercise of warrants - - 89,023
Payments for stock issuance costs and redemption of unexercised warrants - - (
22
)
Payments of finance lease obligations ( - -
18,303
)
Payments to tax authorities for statutory withholding taxes ( ( (
63 1,562 9,869
) ) )
Proceeds from the exercise of stock options ( 2,154 5,616
26
)
Proceeds from stock issuance under "At-the-market" offering 135,928 190,492 -
Payments for "At-the-market" issuance costs ( ( -
1,867 3,448
) )
Net cash provided by financing activities 565,694 187,636 646,937
Effect of exchange rate changes on cash ( - -
1,469
)
Net increase (decrease) in cash and cash equivalents, and restricted cash ( ( 211,281
340,650 465,890
) )
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Cash and cash equivalents, and restricted cash, beginning of the period 736,549 1,202,439 991,158
Cash and cash equivalents and restricted cash, end of the period $ 395,899 $ 736,549 $ 1,202,439
Year Ended December 31,
2023 2022 2021
Cash and cash equivalents, beginning of period $ 736,549 $ 1,202,439 $ 991,158
Restricted cash, beginning of period - - -
Total cash and cash equivalents and restricted cash, beginning of the period 736,549 1,202,439 991,158
Cash and cash equivalents $ 325,452 $ 736,549 $ 1,202,439
Restricted cash 70,447 - -
Total cash and cash equivalents and restricted cash, end of the period 395,899 736,549 1,202,439
Net (decrease) increase in cash and cash equivalents and restricted cash $ ( $ ( $ 211,281
340,650 465,890
) )
Supplemental disclosure of cash flow information
Cash paid for interest $ 16,688 $ 17,985 $ -
Cash paid for income taxes $ 338 $ 46 $ -
The accompanying notes are an integral part of these consolidated financial
statements.
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Fisker Inc.
Notes to Consolidated Financial Statements
1.
Overview of the Company
Fisker Inc. ("Fisker" or the "Company") is an independent automotive company
known for its design, innovation and sustainability of electric vehicles
("EV").
Fisker was originally incorporated in the State of Delaware on October 13,
2017 as a special purpose acquisition company under the name Spartan Energy
Acquisition Corp. ("Spartan") for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, recapitalization,
reorganization or similar business combination with one or more businesses.
Spartan completed its IPO in August 2018. On October 29, 2020, Spartan's
wholly-owned subsidiary merged with and into Fisker Holdings Inc., a Delaware
corporation ("Legacy Fisker"), with Legacy Fisker surviving the merger as a
wholly-owned subsidiary of Spartan (the "Business Combination"). In connection
with the Business Combination, Spartan changed its name to Fisker Inc.
The Company's common stock was listed on the New York Stock Exchange under the
symbols "FSR". The Company's warrants previously traded on the NYSE under the
symbol "FSR WS" and on April 19, 2021, the NYSE filed a Form 25-NSE with
respect to the warrants; the formal delisting of the warrants became effective
ten days thereafter. On March 25, 2024 trading in the Company's Class A common
stock on the NYSE was suspended and the Class A common stock was delisted from
the NYSE. The Company's Class A common stock is currently quoted on the OTC
Pink platform as operated by OTC Markets Group Inc. (the "OTC"). The OTC is a
significantly more limited market than the NYSE, and quotation on the OTC will
result in a less liquid market for existing and potential holders of the Class
A Common Stock to trade the Class A Common Stock.
Throughout the notes to the consolidated financial statements, unless
otherwise noted, the "Company," "we," "us" or "our" and similar terms refer to
Legacy Fisker and its subsidiaries prior to the consummation of the Business
Combination, and Fisker and its subsidiaries after the consummation of the
Business Combination.
Basis of Presentation
The Company's consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States
of America ("GAAP") as determined by the Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") and pursuant to the
regulations of the U.S. Securities and Exchange Commission ("SEC").
Certain prior period amounts in the consolidated financial statements and
accompanying notes have been reclassified to conform to the current period's
presentation. For all periods presented, net loss equals comprehensive loss.
Principles of Consolidation
The consolidated financial statements include the accounts of Fisker Inc. and
its wholly owned subsidiaries. All inter-company transactions and balances
have been eliminated in consolidation.
2.
Summary of Significant Accounting Policies
Use of Estimates
The preparation of the consolidated financial statements in conformity with
U.S. GAAP required management to make estimates, assumptions and judgments
that affect the reported amounts of assets and liabilities in the consolidated
financial statements and accompanying notes. Significant estimates,
assumptions and judgments made by management include, inventory valuation,
warranty reserve and calculating the standalone selling price for revenue
recognition, fair value of convertible notes payable and other items requiring
judgment. Estimates are based on assumptions that we believe are reasonable
under the circumstances. Due to the inherent uncertainty involved with
estimates, actual results may differ.
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The Company adjusts such estimates and assumptions when facts and
circumstances dictate. Changes in those estimates resulting from continuing
changes in the economic environment will be reflected in the financial
statements in future period
s.
Going Concern, Liquidity and Capital Resources
The Company did not make a required interest payment of approximately $
8.4
million payable in cash on March 15, 2024 with respect to the 2026 Notes. At
the conclusion of a 30-day grace period, the non-payment became an Event of
Default with respect to the 2026 Notes, and resulted in a cross default with
respect to the 2025 Notes. The Company's current forbearance agreement expires
May 1, 2024 and the Company is seeking additional waivers and/or a forbearance
agreement from the holder of the 2025 Notes. If the Company does not receive
adequate relief from its debt holders and additional sufficient liquidity from
potential liquidity providers to meet its current obligations, it expects to
seek protection under applicable bankruptcy laws in multiple jurisdictions
within 30 days from the issuance of these financial statements (see further
discussion of, among other items, waivers, forbearance of the 2025 Notes and
delisting considerations within
Note 20, Subsequent Events
).
The Company believes that its available liquidity will not be sufficient to
meet its current obligations for a period of at least twelve months from the
date of the filing of this Annual Report on Form 10-K. Accordingly, the
Company has concluded there is substantial doubt about its ability to continue
as a going concern.
The Company has been seeking additional financing, attempting to restructure
its current debt obligations and continues to discuss financing alternatives
with potential providers. In addition to reducing expenses, the Company
intends to further reduce its workforce and streamline its operations,
including reducing its physical footprint. There is no assurance that the
Company will be able to restructure its obligations and/or obtain additional
financing on acceptable terms and conditions.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less at acquisition to be cash equivalents. Cash
and cash equivalents include cash held in banks and money market mutual funds,
which are unrestricted and available for the Company's general use.
Restricted Cash
Restricted cash is primarily related to letters of credit issued to suppliers.
The Company's restricted cash balance was $
70.4
million as of December 31, 2023. There was
no
restricted cash as of December 31, 2022.
Concentrations of Credit Risk and Off-balance Sheet Risk
Cash and cash equivalents are financial instruments that are potentially
subject to concentrations of credit risk. The Company's cash and cash
equivalents are deposited in accounts at large financial institutions, and
amounts may exceed federally insured limits. The Company believes it is not
exposed to significant credit risk due to the financial strength of the
depository institutions in which the cash and cash equivalents are held. The
Company has no financial instruments with off-balance sheet risk of loss.
Revenue from Contracts with Customers
In accordance with ASC 606,
Revenue from Contracts with Customers
, the Company follows a five-step process in which (i) a contract is
identified, (ii) the related performance obligations are identified, (iii) the
transaction price is determined, (iv) the transaction price is allocated to
the identified performance obligations, and (v) revenue is recognized when (or
as) performance obligations are satisfied. The Company's revenue is primarily
generated from the sale of electric vehicles and accessories to customers, as
well as specific services provided that meet the definition of a performance
obligation under ASC 606, including over-the-air ( "OTA") software updates as
they become available, premium connectivity, roadside assistance, service
packages, specified vehicle upgrades and charging station benefits.
The Company recognizes revenue related to the vehicles at a point in time when
the customer obtains control of the vehicle either upon completion of delivery
or upon pick up of the vehicle by the customer. Revenue from the stand-ready
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obligation to deliver unspecified OTA software updates when-and-if they become
available is recognized ratably over the basic vehicle warranty term,
commencing when control of the vehicles is transferred to the customer and was
not material. Revenue from other performance obligations, including premium
connectivity, roadside assistance and service packages are recognized over the
requisite performance periods and was not material to the financial statements.
The Company's revenue from the United States was approximately
68
% for the year ended December 31, 2023. The rest of the world as a percentage
was approximately
32
%.
The value of performance obligations related to the Company's sales represent
stand-alone selling prices estimated by considering the cost to develop and
deliver the service plus margin, third-party pricing of similar services and
other information that may be available. The transaction price is allocated
among the performance obligations based on the proportion of the stand alone
selling prices of the Company's performance obligations to the sum of the
standalone selling prices of all performance obligations in the arrangement.
Payment for EV sales is typically received at or prior to delivery, or
according to agreed upon payment terms.
The Company also recognizes a sales return reserve on vehicle sales, which is
recorded as an offset to revenue. The reserve is estimated based on historical
experience and was not material.
Any fees that are paid or payable by the Company to a customer's lender when
financing is arranged are recognized as an offset to vehicles sales. Shipping
and handling is considered a fulfillment activity. Sales taxes collected from
customers are excluded from the transaction price of electric vehicle
contracts.
Deferred revenue is the amount of unrecognized revenue attributable to
performance obligations as of the balance sheet date.
Deferred revenue related to undelivered OTA software updates, premium
connectivity, roadside assistance, service packages, and specified vehicle
upgrades consist of the following (in thousands):
As of December 31, 2023
Deferred revenue - January 1, 2023 $ -
Additions 46,577
Revenue Recognized (
1,022
)
Deferred Revenue - December 31, 2023 $ 45,555
Of the total deferred revenue balance as of December 31, 2023, the Company
expects to recognize $
19.9
million of revenue in the next
12
months, The remaining balance will be recognized over the respective requisite
performance periods ranging from
4
to
10
years.
Other revenue consists of sales of merchandise and home charging solutions and
is not material.
Warranties
The Company provides a basic
six year
manufacturer's warranty on all vehicles sold that covers the costs to repair
or replace faulty parts or components, including those costs incurred under
recalls. The Company records a warranty reserve based on industry benchmarks
and/or actual claims incurred to date and after consideration of the nature,
frequency and costs of future claims. The warranty does not cover any item
where failure is due to normal wear and tear. This assurance-type warranty
does not create a performance obligation as part of the sale of the vehicle.
The amount of warranty claims is included within Accrued expenses and other in
the Consolidated Balance Sheets. The warranty expense is recorded as a
component of Cost of goods sold in the Consolidated Statements of Operations.
Customer Deposits and Advances
Customer deposits are required in order to complete the sales order process,
which includes the selection of the vehicle model, trim and options and will
be applied to the sales price of the vehicle and recognized as revenue when
the vehicle is sold and delivered to the customer. Such deposits are generally
not refundable.
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In the third quarter of
2022
, the Company began accepting customer deposits for Ocean Ones, a
limited-edition trim level of the Ocean. The Company also entered into a
contract for global payment processing with JPMorgan Chase Bank, N.A. Customer
deposits paid directly to the Company are received in the Company's bank
account and available for its use in the subsequent month after the month in
which the customer deposits were placed. For customer deposits made through
credit card transactions, the Company's bank holds cash received from
customers until the vehicle is delivered to the customer at which time the
cash is deposited and available for use.
Advance payments from customers will be received before delivery of a vehicle,
in addition to reservation payments for the future right of a customer to
order an Ocean, PEAR, Alaska or Ronin.
Cost of Goods Sold
Cost of goods sold primarily relates to the cost of production of vehicles and
includes direct parts, material and labor costs, depreciation of machinery and
tooling, amortization of capitalized manufacturing costs, shipping and
logistics costs, reserves for estimated warranty costs related to the
production of vehicles, adjustments related to write down the carrying value
of inventory when it exceeds its estimated net realizable value, as needed,
provisions for excess and obsolete inventory, adjustments associated with
lower levels of production during the ramp-up phase, and losses on firm
purchase commitments, as needed.
Fair Value Measurements
The Company follows the accounting guidance in ASC 820,
Fair Value Measurement
, for its fair value measurements of financial assets and liabilities measured
at fair value on a recurring basis. Fair value is defined as 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 at
the measurement date. 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 a liability.
The accounting guidance requires fair value measurements to be classified and
disclosed in one of the following three categories:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than Level 1 prices, for similar assets or
liabilities that are directly or indirectly observable in the marketplace.
Level 3: Unobservable inputs which are supported by little or no market
activity and that are financial instruments whose values are determined using
pricing models, discounted cash flow methodologies, or similar techniques, as
well as instruments for which the determination of fair value requires
significant judgment or estimation.
The fair value hierarchy also requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value. Assets and liabilities measured at fair value are classified in
their entirety based on the lowest level of input that is significant to the
fair value measurement.
Fair Value Option
Under the ASC 825-10,
Financial Instruments - Overall
, the Company has the irrevocable option to report most financial assets and
financial liabilities at fair value on an instrument-by-instrument basis. The
Company elected the fair value option to account for the 2025 Notes due to the
embedded derivative that would require bifurcation and separate accounting if
the fair value option was not elected. Also, the Company believes the fair
value option provides users of the financial statements with greater ability
to estimate the outcome of future events as facts and circumstances change,
particularly with respect to changes in the fair value of the Common Stock
underlying the conversion and redemption features (See Note 12).
The 2025 convertible notes are valued using an embedded lattice technique,
which represent Level 3 measurements. Significant assumptions include the
expected premium for conversion. The 2025 Notes are presented at fair value in
the Consolidated Balance Sheets and changes in fair value are recorded as a
component of non-operating loss in
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the consolidated statements of operations. There were no material changes in
fair value attributable to instrument-specific credit risk during the period
associated with the 2025 Notes.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to interest
rate, market, or foreign currency risks. The Company evaluates all of its
financial instruments, including notes payable, to determine if such
instruments are derivatives or contain features that qualify as embedded
derivatives. The Company applies significant judgment to identify and evaluate
complex terms and conditions in its contracts and agreements to determine
whether embedded derivatives exist. Embedded derivatives must be separately
measured from the host contract if all the requirements for bifurcation are
met. The assessment of the conditions surrounding the bifurcation of embedded
derivatives depends on the nature of the host contract. Bifurcated embedded
derivatives are recognized at fair value, with changes in fair value
recognized in the statement of operations each period. Bifurcated embedded
derivatives are classified with the related host contract on the Company's
balance sheet.
The Company enters into contracts that meet the definitions of a freestanding
instrument, such as capped call options with equity-linked features, and a
derivative. A freestanding instrument that is a derivative is evaluated by the
Company to determine if it qualifies for an exception to derivative
accounting. The Company determines whether the equity-linked feature is
indexed to the Company's Class A common stock and whether the settlement
provision in the contract is consistent with a fixed-for-fixed equity
instrument. To qualify for classification in stockholder's equity, the Company
evaluates whether the contract requires physical settlement, net share
settlement, or a combination thereof and, when the Company has a choice of net
cash settlement or settlement in the Company's shares, additional criteria are
evaluated to determine whether equity classification is appropriate.
The Company's derivative instrument is related to the investor's rights to
purchase additional 2025 Notes
.
The derivative is valued using the Monte Carlo simulation pricing model.
Refer to Note 12 for additional information regarding the accounting for the
convertible senior notes and capped call options.
Accounts Receivable
Accounts receivable consist of receivables from our customers and from
financial institutions offering financing products to our customers for the
sale of vehicles. The Company provides an allowance against accounts
receivable for any potential uncollectible amounts.
No
allowance was recorded for the Company for the years ended December 31, 2023
and 2022.
Inventory
Inventories are stated at the lower of cost or net realizable value and
consists of raw materials, work in progress and finished goods. Inventory
value is determined using standard cost, which approximates actual cost on a
first-in, first-out basis. The Company records inventory write-downs for
excess or obsolete inventories based upon assumptions about current and future
demand forecasts. If inventory on-hand is in excess of future demand forecast,
the excess amounts are written-off. During 2023, the Company recorded a
provision for excess or obsolete inventory totaling $
1.2
million.
Inventory is also reviewed to determine whether its carrying value exceeds the
net amount realizable upon the ultimate sale of the inventory. This requires
an assessment to determine the selling price of the vehicles less the
estimated cost to convert the inventory on-hand into a finished product. Once
inventory is written down, a new, lower cost basis for that inventory is
established and subsequent changes in facts and circumstances do not result in
the restoration or increase in that newly established cost basis. In the event
there are changes in our estimates of future selling prices or production
costs, additional and potentially material write-downs may be required. During
2023, the Company recorded a write down of inventory totaling $
232.7
million which includes consideration for reductions in the selling price of
vehicles in inventory.
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Long-Lived Assets
Property and equipment are stated at cost less accumulated depreciation and
amortization.
Depreciation and amortization is computed using the straight-line method over
the estimated useful lives of the related assets as follows:
Useful Life (in years)
Tooling 3
-
8
Machinery and equipment 5
-
15
Furniture and fixtures 5
-
10
IT hardware and software 3
-
10
Vehicles 3
-
7
Leasehold improvements Shorter of their estimated life or remaining lease term
Upon retirement or sale, the cost and related accumulated depreciation of an
asset are removed from the balance sheet and the resulting gain or loss is
reflected in the statement of operations. Maintenance and repair expenditures
are expensed as incurred, while major improvements that increase functionality
of the asset are capitalized and depreciated ratably to expense over the
identified useful life.
Construction in progress is comprised primarily of costs incurred to construct
serial production tooling located at affiliates of Magna and our suppliers. No
depreciation is provided for construction in progress until such time the
assets are completed and are ready for use, as intended.
The Company assesses impairment for asset groups, which represent a
combination of assets that produce distinguishable cash flows. Fair value is
determined through various valuation techniques, including discounted cash
flow models, quoted market values, and third-party independent appraisals, as
considered necessary.
Each quarter, the Company evaluates the net carrying amounts of long-term
assets for impairment when impairment indicators are present. The Company
evaluates for impairment triggers based on qualitative factors such as
macroeconomic trends, trends related to EV demand and current and projected
trends related to market conditions. The Company also evaluates for impairment
triggers based on quantitative factors such as historical and projected
revenue and profitability performance trends. The existence of an individual
indicator is not automatically conclusive that the asset may not be
recoverable. The Company exercises judgement and consider the combined effect
of all indicators and developments, both positive and negative, when
determining whether an asset may not be recoverable. Management has assessed
whether indicators of impairment exist as of December 31, 2023, considering
the Company's recent start of production in May 2023, and concluded there were
no such triggering events. The recoverability of long-lived assets continues
to be dependent on the market acceptance of the Company's vehicles.
Leases
The Company classifies arrangements meeting the definition of a lease as
operating or financing leases, and leases are recorded on the consolidated
balance sheet as both a right-of-use asset and lease liability, calculated by
discounting fixed lease payments over the lease term at the rate implicit in
the lease or the Company's incremental borrowing rate. Lease liabilities are
increased by interest and reduced by payments each period, and the right of
use asset is amortized over the lease term. For operating leases, interest on
the lease liability and the amortization of the right-of-use asset result in
straight-line rent expense over the lease term. For finance leases, interest
on the lease liability and the amortization of the right-of-use asset results
in front-loaded expense over the lease term. Variable lease expenses are
recorded when incurred.
In calculating the right-of-use asset and lease liability, the Company elects
to combine lease and non-lease components for all classes of assets. The
Company excludes short-term leases having initial terms of 12 months or less
from the new guidance as an accounting policy election, and instead recognizes
rent expense on a straight-line basis over the lease term.
The current portion of the Company's lease liability is based on lease
payments due within twelve months of the balance sheet date. Variable lease
payments are included in lease payments when the contingency upon which the
payment is dependent is resolved.
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Asset Retirement Obligations
We record an asset retirement obligation (
"
ARO
"
) when it represents a legal obligation associated with the retirement of a
tangible long-lived asset that is incurred upon the acquisition, construction,
development or normal operation of that long-lived asset. The Company
recognizes an asset retirement obligations if a reasonable estimate of the
fair value can be made. The Company's ARO represents the estimated costs to
remove tooling at the Magna facility at the end of the contractual arrangement
with Magna. The ARO is recorded in Other non-current liabilities in the
Consolidated Balance Sheets, while a comparable amount is capitalized as part
of the carrying cost of the tooling asset and depreciated over its useful life.
Debt Issuance Costs
Direct and incremental costs, including amounts paid to initial purchasers of
the Company's convertible notes, are directly attributed to efforts to obtain
debt financing and are debt issuance costs. Upon issuance of debt, the
carrying value is the principal amount of debt reduced by any debt issuance
costs. Debt issuance costs are attributed to interest expense and accreted
over the expected term of the debt using the effective interest rate method
when the fair value option has not been elected. Debt issuance costs incurred
with respect to the 2025 convertible senior notes were expensed as incurred
since the Company elected the fair value option.
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.
Equity Awards
The grant date for an option or stock award is established when the grantee
has a mutual understanding of the key terms and conditions of the option or
award, the award is authorized, including all the necessary approvals unless
approval is essentially a formality or perfunctory, and the grantee begins to
benefit from, or be adversely affected by, underlying changes in the price of
the Company's Class A common shares. An award or option is authorized on the
date that all approval requirements are completed (e.g., action by the
compensation committee approving the award and the number of options,
restricted shares or other equity instruments an individual employee will be
issued).
Foreign Currency Transactions and Remeasurement
The functional currency of the Company's foreign subsidiaries is the U.S.
Dollar. For these subsidiaries, monetary assets and liabilities denominated in
non U.S. currencies are re-measured to U.S. Dollars using current exchange
rates in effect at the balance sheet date. Non-monetary assets and liabilities
denominated in non-U.S. currencies are maintained at historical U.S. Dollar
exchange rates. Expenses are re-measured at average U.S. Dollar monthly rates.
Foreign currency transaction gains and losses are a result of the effect of
exchange rate changes on transactions denominated in currencies other than the
functional currency. Gains and losses arising from foreign currency
transactions and the effects of remeasurements are recorded within Foreign
currency (loss) gain, in the Company's Consolidated Statements of Operations.
Foreign currency transaction gains and losses were not material for the years
ended December 31, 2023, 2022 and 2021.
Stock-based Compensation
The Company expenses stock-based compensation over the requisite service
period based on the estimated grant-date fair value of the awards. The Company
accounts for forfeitures as they occur. The Company recognizes non-employee
compensation costs over the requisite service period based on a measurement of
fair value for each stock award.
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From inception through December 31, 2023, the Company has primarily granted
service and performance based awards. Stock-based compensation expense is
recognized for awards with graded-vesting schedules that are recognized on a
straight-line basis over the requisite service period for each vesting
tranche. The Company estimates the fair value of stock option grants using the
Black-Scholes option pricing model, and the assumptions used in calculating
the fair value of stock-based awards represent management's best estimates and
involve inherent uncertainties and the application of management's judgment.
For stock-based awards with vesting subject to performance conditions,
stock-based compensation expense is recognized over the requisite service
period when the performance conditions become probable of achievement.
Stock-based compensation expense is recorded in Costs of goods sold, Selling,
general and administrative expenses or Research and development expenses in
the Consolidated Statements of Operations based upon the underlying
individual's role at the Company except for the capitalization of costs
associated with the Magna wa
rrants
(see Note 14).
Research and Development Expenses
Research and development costs are expensed as incurred. Research and
development expenses consist primarily of payroll, benefits and stock-based
compensation of those employees engaged in research, design and development
activities, costs related to design and prototype tools, prototype development
work, and related supplies and services.
Advertising Expense
Advertising costs are expensed as incurred and included in Selling, general
and administrative expenses in the Consolidated Statements of Operations.
For the years ended December 31, 2023, 2022 and 2021, advertising expense was $
28.0
million,
$
9.3
million, and $
6.3
million, respectively.
Income Taxes
Income taxes are recorded in accordance with ASC 740,
Income Taxes
("ASC 740"), which provides for deferred taxes using an asset and liability
approach. The Company recognizes deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
consolidated financial statements or tax returns. Deferred tax assets and
liabilities are determined based on the difference between the consolidated
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Valuation allowances are provided, if based upon the weight of available
evidence, it is more likely than not that some or all of the deferred tax
assets will not be realized.
The Company accounts for uncertain tax positions in accordance with the
provisions of ASC 740. When uncertain tax positions exist, the Company
recognizes the tax benefit of tax positions to the extent that the benefit
would more likely than not be realized assuming examination by the taxing
authority. The determination as to whether the tax benefit will more likely
than not be realized is based upon the technical merits of the tax position as
well as consideration of the available facts and circumstances. The Company
recognizes any interest and penalties accrued related to unrecognized tax
benefits as income tax expense.
The Company's income tax provision consists of an estimate for U.S. federal,
foreign and state income taxes based on enacted rates, as adjusted for
allowable credits, deductions, uncertain tax positions, changes in deferred
tax assets and liabilities, and changes in the tax law. The Company maintains
a valuation allowance against the full value of its U.S. and state net
deferred tax assets because the Company believes the recoverability of the tax
assets is not more likely than not
as of December 31, 2023.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments,
litigation, fines, and penalties and other sources are recorded when it is
probable that a liability has been incurred and the amount within a range of
loss can be reasonably estimated. When no amount within the range is a better
estimate than any other amount, the Company accrues for the minimum amount
within the range. Legal costs incurred in connection with loss contingencies
are expensed as incurred.
Net Loss per Share of Common Stock
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Basic net loss per share of common stock is calculated using the two-class
method under which earnings are allocated to both common shares and
participating securities. Undistributed net losses are allocated entirely to
common shareholders since the participating security has no contractual
obligation to share in the losses. Basic net loss per share is calculated by
dividing the net loss attributable to common shares by the weighted-average
number of shares of common stock outstanding for the period. The diluted net
loss per share of common stock is computed by dividing the net loss using the
weighted-average number of common shares and, if dilutive, potential common
shares outstanding during the period. Potential common shares consist of stock
options and warrants to purchase common stock (using the treasury stock
method).
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09,
Income Taxes (Topic 740) - Improvements to Income Tax Disclosures
. This ASU requires 1) specific categories in the rate reconciliation and to
provide additional information for reconciling items that meet certain
quantitative thresholds, 2) additional information on income taxes paid by tax
jurisdiction, and 3) additional disclosures of pretax income (or loss) and
income tax expense (or benefit) by tax jurisdiction. ASU 2023-09 also
eliminates the requirement for all entities to (1) disclose the nature and
estimate of the range of the reasonably possible change in the unrecognized
tax benefits balance in the next 12 months or (2) make a statement that an
estimate of the range cannot be made. The amendments in this Update are
effective for fiscal years beginning after December 15, 2024 and are not
expected to have a material impact on the Company's financial statements or
notes thereto.
In November 2023, the FASB issued ASU 2023-07,
Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures
. This ASU requires 1) enhanced disclosures about significant segment expenses
that are provided to the chief operating decision maker (
"
CODM
"
), 2) disclosures on segment profitability, 3) disclosures of a reportable
segments profitability and assets in interim periods, and 4) disclosures on
other measures used to assess segment performance and deciding how to allocate
resources. The amendments in this Update are effective for fiscal years
beginning after December 15, 2023 and are not expected to have a material
impact on the Company's financial statements or notes thereto.
All other ASUs issued but not yet adopted were assessed and determined to be
not applicable or are not expected to have a material impact on the Company's
consolidated financial statements or financial statement disclosures.
3.
Fair Value Measurements
Cash and cash equivalents
The fair value of the Company's money market mutual funds are determined using
quoted market prices in active markets for identical assets. The carrying
amounts included in Cash and cash equivalents approximate fair value because
of the short-term maturity of these instruments and are classified within
Level 1 of the fair value hierarchy.
Equity Investment
On July 28, 2021, the Company made a commitment for a private investment in
public equity (PIPE) supporting the planned merger of European EV charging
network, Allego B.V. ("Allego") with Spartan Acquisition Corp. III (NYSE:
SPAQ), a publicly-listed special purpose acquisition company. Fisker Inc. was
the exclusive electric vehicle automaker in the PIPE and, in parallel, agreed
to terms to deliver a range of charging options for its customers in Europe.
On March 16, 2022, the merger closed and the Company delivered cash of
$
10.0
million
in exchange for
1,000,000
shares of Allego's Class A common stock (NYSE:ALLG). The Company's ownership
percentage is less than
5
% and does not result in significant influence. Allego filed with the SEC a
registration statement registering the resale of the shares acquired (the
"Registration Statement") that was declared effective by the SEC during the
second quarter of 2022. The Company has classified its equity investment in
Allego as of December 31, 2023 as a Other non-current asset on the
Consolidated Balance Sheets. Unrealized losses recognized during the years
ended December 31, 2023 and 2022 on equity securities held total
ed $
1.8
million and $
6.9
million
, respectively, as shown separately in the Consolidated Statement of Operations.
2026 Senior Unsecured Convertible Notes
The Company's 2026 senior unsecured convertible notes (the "2026 Notes") are
carried at face value less unamortized debt issuance costs on the Consolidated
Balance Sheets. As of December 31, 2023, the fair value of the 2026
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Notes was $
142.2
million. The estimated fair value of the 2026 Notes are classified as Level 2
financial instruments and are determined based on bid prices of the
convertible senior notes in an over-the-counter market on the last business
day of the period.
2025 Senior Secured Convertible Notes
Under the ASC 825-10, Financial Instruments - Overall, the Company has the
irrevocable option to report most financial assets and financial liabilities
at fair value on an instrument-by-instrument basis. The Company elected the
fair value option to account for the 2025 convertible senior notes due to the
embedded derivative that would require bifurcation and separate accounting if
the fair value option was not elected. Also, the Company believes the fair
value option provides users of the financial statements with greater ability
to estimate the outcome of future events as facts and circumstances change,
particularly with respect to changes in the fair value of the Common Stock
underlying the conversion and redemption features. The 2025 convertible notes
are valued using an embedded lattice technique with a Monte Carlo simulation
for the embedded derivative, which represent Level 3 measurements. Significant
assumptions include the expected premium for conversion, and the expected life
of the instrument. The 2025 convertible senior notes are presented at fair
value in the Consolidated Balance Sheet, with changes in fair value recognized
in Change in Fair Value measurements in the Consolidated Statements of
Operations.
Magna Warrants
Upon closing the Business Combination on October 29, 2020, the Company
recognized a $
62.7
million liability for its private and public warrants and a corresponding
non-cash reduction of additional paid-in capital for the same amount. The
Company's derivative liability for its private and public warrants are
measured at fair value on a recurring basis. The private warrants fair value
is determined based on significant inputs not observable in the market, which
causes it to be classified as a Level 3 measurement within the fair value
hierarchy. The valuation of the private warrants uses assumptions and
estimates the Company believes would be made by a market participant in making
the same valuation. The Company assesses these assumptions and estimates on an
on-going basis as additional data impacting the assumptions and estimates are
obtained. The Company uses an option pricing simulation to estimate the fair
value of its private warrants, all of which were exercised in March 2021. The
public warrants fair value is determined using its publicly traded prices
(Level 1). During 2021, the Company completed its redemption of all
outstanding pu
blic warrants (refer to Note 14). C
hanges in the fair value of the derivative liability related to updated
assumptions and estimates are recognized within the Consolidated Statements of
Operations as a non-operating expense. For the year ended December 31, 2021,
the changes in the fair value of the derivative liability resulted from
changes in the fair values of the underlying Class A common shares and its
associated volatility upon exercise in March and April 2021. The change in
fair value of derivatives amounted to a non-cash loss of $
138.4
million attributed to public and private warrants during the year ended
December 31, 2021.
Recurring Fair Value Measurements
The Company's financial assets and liabilities subject to fair value
measurements on a recurring basis and the level of inputs used for such
measurements were as follows (in thousands):
December 31, 2023
Level 1 Level 2 Level 3 Total
Assets included in:
Money market mutual funds included in cash and cash equivalents $ 192,921 $ - $ - $ 192,921
Equity investment 1,350 - - 1,350
Total fair value $ 194,271 $ - $ - $ 194,271
Liabilities included in:
2025 senior secured convertible notes $ - $ - $ 564,386 $ 564,386
Total fair value $ - $ - $ 564,386 $ 564,386
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December 31, 2022
Level 1 Level 2 Level 3 Total
Assets included in:
Money market mutual funds included in cash and cash equivalents $ 601,045 $ - $ - $ 601,045
Equity investment 3,140 - - 3,140
Total fair value $ 604,185 $ - $ - $ 604,185
The following table summarizes financial instruments carried at fair value for
the year ended December 31, 2023 (in thousands):
2025 Notes, at fair value
Fair value - December 31, 2022 $ -
Initial recognition of 2025 Notes 450,000
Conversion of 2025 Notes to Class A Common Stock (
213,437
)
Fair value measurement adjustments 327,823
Fair value - December 31, 2023 $ 564,386
4.
Inventory
Inventory consists of the following as of December 31, 2023 and 2022 (in
thousands):
As of December 31,
2023 2022
Raw materials $ 183,754 $ 698
Work in progress 2,825 -
Finished goods 219,926 3,578
Total $ 406,505 $ 4,276
Inventory is comprised of raw materials, work in progress related to the
production of vehicles for sale and finished goods inventory including new
vehicles available for sale. Expenditures related to services performed
subsequent to the start of production of salable vehicles in the second
quarter of 2023 are expensed when sold in Cost of goods sold in the
Consolidated Statements of Operations.
The Company writes-down inventory for any excess or obsolete inventories or
when the net realizable value of inventories is less than the carrying value.
The Company recorded an excess and obsolescence reserve on inventories of $
1.2
million and recorded a write down of total inventory to net realizable value
totaling $
232.7
million for the year ended December 31, 2023. Fixed production overhead costs
are allocated to inventory based on the estimated normal level of production.
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5.
Prepaid expenses and other current assets
Prepaid expenses and other current assets consists of the following as of
December 31, 2023 and 2022 (in thousands):
As of December 31,
2023 2022
Advance payments to suppliers $ 34,845 $ 46,107
Value-added tax receivables 64,066 27,928
Prepaid insurance 2,784 2,951
Prepaid rent 332 4,999
Other current assets 1,705 5,504
Total $ 103,732 $ 87,489
The Company paid value-added taxes on certain capital expenditures and
submitted requests for refunds from tax authorities in foreign countries with
a concentration in Europe that are pending repayment as of December 31, 2023
and 2022.
6.
Property and Equipment, net
Property and equipment, net, consists of the following as of December 31, 2023
and 2022 (in thousands):
As of December 31,
2023 2022
Tooling $ 483,685 $ -
Machinery and equipment 95,974 9,298
Vehicles 27,442 -
Furniture and fixtures 844 470
IT hardware and software 12,905 6,427
Leasehold improvements 2,477 634
Construction in progress 6,760 372,789
Total property and equipment 630,087 389,618
Less: Accumulated depreciation and amortization ( (
59,180 2,481
) )
Property and equipment, net $ 570,907 $ 387,137
Construction in progress is comprised primarily of costs incurred to construct
serial production tooling located at affiliates of Magna and our suppliers.
Such assets will be depreciated over the estimated useful lives of the assets
once the asset is in the condition necessary for it to operate as intended.
Property and equipment is primarily located in Europe.
Depreciation and amortization for the years ended December 31, 2023, 2022, and
2021 was $
56.7
million, $
1.9
million and $
0.8
million, respectively. As of December 31, 2023 and 2022, accounts payable and
accrued liabilities includes property and equipment of $
161.5
million and $
144.8
million, respectively, which is excluded from net cash used in investing
activities as reported in the Consolidated Statement of Cash Flows.
Total depreciation expense capitalized to inventory for the years ended
December 31, 2023 and 2022 was
$
43.8
million and
nil
, respectively.
In 2023, the Company recognized an asset retirement obligation ("ARO")
totaling $
0.5
million, which represents the estimated costs to remove tooling at the Magna
facility at the end of the contractual arrangement with Magna. The ARO is
recorded in Other non-current liabilities in the Consolidated Balance Sheets,
while a comparable amount is capitalized as part of the cost of the tooling
asset above and depreciated over its useful life.
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The amounts in the table above as of December 31, 2022 have been updated to
correct a disclosure classification error between fixed asset categories such
that Machinery and equipment was overstated and Construction in progress was
understated by $
33.0
million. The Company determined the error was not material to its previously
issued financial statements as it did not affect the Company's financial
position as of December 31, 2022 or its results from operations and cash flows
for the year ended December 31, 2022.
7.
Intangible asset
The Company has the following intangible assets (in thousands):
As of December 31, 2023
Amortization Period Gross Accumulated Net
Carrying Amortization
Amount
Capitalized manufacturing costs 8 $ 258,304 $ ( $ 220,743
years 37,561
)
$ 258,304 $ ( $ 220,743
37,561
)
As of December 31, 2022
Amortization Gross Carrying Accumulated Net
Period Amount Amortization
Capitalized manufacturing costs 8 $ 252,304 $ ( $ 247,047
years 5,257
)
$ 252,304 $ ( $ 247,047
5,257
)
The amount of capitalized manufacturing costs includes platform licensing
costs paid to Magna and the value of warrants granted to Magna related to the
commercialization of the Fisker Ocean. S
ee Note 14 for ad
ditional information on the Magna warrants.
The Company amortizes these capitalized costs over the expected life of the
current contractual arrangements, which began upon initial production in the
fourth quarter of 2022. Amortization expense of capitalized manufacturing
costs for the years ended December 31, 2023 and 2022 was
$
32.3
million and $
5.3
million,
respectively, and was considered in the valuation of our finished goods
inventory. The Company will continually assess the reasonableness of the
estimated life and consider the extent to which the Company enters into new
arrangements that extend the estimated useful life.
Estimated aggregate amortization expense for future years is as follows (in
thousands):
Amount
2024 $ 32,304
2025 32,304
2026 32,304
2027 32,304
2028 32,304
Thereafter 59,223
$ 220,743
8.
Leases
The Company has entered into various operating and finance lease agreements
for office space, manufacturing and warehouse facilities, retail and customer
services locations, equipment, and vehicles. The Company determines whether a
contractual arrangement is or contains a lease, including embedded leases, at
inception and records the lease when the underlying assets is made available
for us by the lessor, or the date of commencement.
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At lease commencement, the Company measures the lease liability at the present
value of lease payments not yet paid. For purposes of calculating lease
liabilities, lease terms include options to extend or renew the lease when it
is reasonably certain that we will exercise such options. Certain operating
leases provide for annual increases to lease payments based on an index or
rate. Lease expense for finance lease payments is recognized as amortization
expense of the finance lease right-of-use asset over the lease term.
Operating leases
During 2023 and 2022, the Company recorded non-cash lease right-of-use assets
of $
87.3
million and $
33.4
million and non-cash lease liabilities of $
80.8
million and $
35.0
million, respectively, on its Consolidated Balance Sheet.
The tables below present information regarding the Company's lease assets and
liabilities (in thousands):
As of December 31, As of December 31,
2023 2022
Assets:
Operating lease right-of-use assets 87,309 33,424
Liabilities:
Operating Lease-Current 15,049 7,085
Operating Lease-Long term 65,723 27,884
The components of lease related expense are as follows (in thousands):
Year Ended Year Ended
December 31, December 31,
2023 2022
Lease costs:
Operating lease expense $ 16,421 $ 5,690
Variable lease expense 2,279 962
Total lease costs $ 18,700 $ 6,652
Other information related to operating leases is as follows (in thousands):
Year Ended Year Ended
December 31, December 31,
2023 2022
Weighted average remaining lease term (in years) 5.6 4.9
Weighted average discount rate 9.60 % 5.66 %
The components of supplemental cash flow information related to leases are as
follows (in thousands):
Year Ended Year Ended
December 31, December 31,
2023 2022
Cash flow information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases $ 15,088 $ 4,348
Non-cash activity:
ROU asset obtained in exchange for operating lease obligations $ 65,151 $ 19,076
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As of December 31, 2023, future minimum payments of our operating lease
liabilities during the next five years and thereafter are as follows (in
thousands):
Fiscal year Operating Leases
2024 $ 22,147
2025 21,355
2026 20,440
2027 12,064
2028 9,516
Thereafter 17,789
Total 103,311
Less: Present value discount (
22,539
)
Total lease liability $ 80,772
The Company's lease agreements do not provide an implicit rate, so the Company
used an estimated incremental borrowing rate, which was derived from
third-party information available at lease inception, in determining the
present value of lease payments. The rate used is for a secured borrowing of a
similar term as the lease.
Finance leases
During 2023 and 2022 the Company recorded gross embedded finance lease
right-of-use assets of $
21.2
million and $
4.3
million, respectively, on its consolidated balance sheet related to certain
equipment and tooling that is controlled and used by the Company for vehicle
manufacturing.
The Company paid for a majority of the costs during 2022 with a remaining
liability of $
2.9
million as of December 31, 2023 to be paid in 2024 which is recorded to
Accrued expenses and other in the Consolidated Balance Sheets.
Amortization of embedded finance lease right-of-use assets is recognized over
a lease term of approximately
8
to
15
years and
totaled $
1.7
million and $
0.1
million for the years ended December 31, 2023 and 2022.
As of December 31, 2023 and 2022, the embedded finance lease right-of-use
assets net of depreciation, totaled $
19.4
million and $
4.5
million and are included in Other non-current assets within the Consolidated
Balance Sheets.
9.
Other non-current assets
Non-current assets consists of the following as of December 31, 2023 and 2022
(in thousands):
As of December 31,
2023 2022
Lease deposits $ 5,267 $ 3,079
Finance leases - right of use assets 19,375 4,481
Other 3,932 8,929
Total $ 28,574 $ 16,489
10.
Accrued expenses and other
A summary of the components of accrued expenses and other is as follows (in
thousands):
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As of December 31,
2023 2022
Vendor liabilities $ 321,579 $ 251,291
Indirect taxes payable 23,373 -
Warranty reserve 7,054 -
Interest payable 4,867 4,867
Payroll and related costs 5,507 1,627
Professional fees 1,976 1,145
Other current liabilities 335 1,135
Total accrued expenses and other $ 364,691 $ 260,065
Vendor liabilities include amounts owed to vendors but not yet invoiced in
exchange for vendor purchases, inventory purchases, and research and
development services. Certain estimates of accrued vendor expenses are based
on costs incurred to date.
11.
Other non-current liabilities
Other non-current liabilities consists of the following as of December 31,
2023 and 2022 (in thousands):
As of December 31,
2023 2022
Reservations from customers $ - $ 15,334
Asset retirement obligation 516 -
Total other non-current liabilities $ 516 $ 15,334
Asset Retirement Obligation
The a
sset retirement obligation (
"
ARO
"
) represents the fair value of costs to remove tooling at the Magna facility
at the end of the contractual arrangement with Magna. The balance of the ARO
will increase over time until the costs to remove the assets are incurred. The
increase in the ARO is attributable to an accretion expense recorded in
Selling, general and administrative expenses in the Consolidated Statement of
Operations, which was not material in 2023.
12.
Convertible Senior Notes
The Company has existing debt agreements with third parties, which consist of
the following (in thousands):
As of December 31,
2023 2022
Convertible Senior Notes
Current liabilities
2025 Notes - secured, carried at fair value $ 291,715 $ -
Net carrying amount $ 291,715 $ -
Non-current liabilities:
2025 Notes - secured, carried at fair value 272,671 -
2026 Notes - unsecured, carried at unamortized cost 662,557 660,822
Net carrying amount $ 935,228 $ 660,822
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2026 Senior Unsecured Convertible Notes
In August 2021, the Company issued an aggregate of $
667.5
million principal amount of
2.50
% convertible senior notes due in September 2026 (the "2026 Notes") in a
private offering to qualified institutional buyers pursuant to Rule 144A under
the Securities Act of 1933, as amended. The 2026 Notes have been designated as
green bonds, whose proceeds will be allocated in accordance with the Company's
green bond framework. The 2026 Notes consisted of a $
625.0
million initial placement and an over-allotment option that provided the
initial purchasers of the 2026 Notes with the option to purchase an additional
$
100.0
million aggregate principal amount of the 2026 Notes, of which $
42.5
million was exercised. The 2026 Notes were issued pursuant to an indenture
dated August 17, 2021. The proceeds from the issuance of the 2026 Notes were $
562.2
million, net of debt issuance costs and cash used to purchase the capped call
transactions ("2026 Capped Call Transactions") discussed below. The debt
issuance costs are amortized to interest expense. (refer to subsequent events,
other in Note 20).
The 2026 Notes are unsecured obligations which bear regular interest at
2.50
% annually and will be payable semiannually in arrears on March 15 and
September 15 of each year, beginning on March 15, 2022. The 2026 Notes will
mature on September 15, 2026, unless repurchased, redeemed, or converted in
accordance with their terms prior to such date. The 2026 Notes are convertible
into cash, shares of our Class A common stock, or a combination of cash and
shares of our Class A common stock, at the Company's election, at an initial
conversion rate of 50.7743 shares of Class A common stock per $1,000 principal
amount of 2026 Notes, which is equivalent to an initial conversion price of
approximately $
19.70
per share of our Class A common stock. The conversion rate is subject to
customary adjustments for certain events as described in the indenture
governing the 2026 Notes. The Company may redeem for cash all or any portion
of the 2026 Notes, at our option, on or after September 20, 2024 if the last
reported sale price of our Class A common stock has been at least
130
% of the conversion price then in effect for at least
20
trading days at a redemption price equal to
100
% of the principal amount of the 2026 Notes to be redeemed, plus accrued and
unpaid interest to, but excluding, the redemption date.
Holders of the 2026 Notes may convert all or a portion of their 2026 Notes at
their option prior to June 15, 2026, in multiples of $1,000 principal amounts,
only under the following circumstances:
.
during any calendar quarter commencing after the calendar quarter ending on
September 30, 2021 (and only during such calendar quarter), if the last
reported sale price of the Class A common stock for at least
20
trading days (whether or not consecutive) during a period of
30
consecutive trading days ending on, and including, the last trading day of the
immediately preceding calendar quarter is greater than or equal to
130
% of the conversion price on each applicable trading day;
.
during the
five
-business day period after any
ten
consecutive trading day period (the "measurement period") in which the trading
price per $1,000 principal amount of the 2026 Notes for each trading day of
the measurement period was less than
98
% of the product of the last reported sale price of our Class A common stock
and the applicable conversion rate of the 2026 Notes on such trading day;
.
if the Company calls the 2026 Notes for redemption, at any time prior to the
close of business on the scheduled trading day immediately preceding the
redemption date, but only with respect to the notes called (or deemed called)
for redemption; or
.
on the occurrence of specified corporate events.
On or after June 15, 2026, the 2026 Notes are convertible at any time until
the close of business on the second scheduled trading day immediately
preceding the maturity date. Holders of the 2026 Notes who convert the 2026
Notes in connection with a make-whole fundamental change, as defined in the
indenture governing the 2026 Notes, or in connection with a redemption may be
entitled to an increase in the conversion rate. Additionally, in the event of
a fundamental change, holders of the 2026 Notes may require us to repurchase
all or a portion of the 2026 Notes at a price equal to
100
% of the principal amount of 2026 Notes, plus any accrued and unpaid interest
to, but excluding, the fundamental change repurchase date.
The Company accounted for the issuance of the 2026 Notes as a single liability
measured at its amortized cost, as no other embedded features require
bifurcation and recognition as derivatives.
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The 2026 Notes consisted of the following (in thousands):
As of December 31,
2023 2022
Convertible Senior 2026 Notes
Principal $ 667,500 $ 667,500
Unamortized debt issuance costs ( (
4,943 6,678
) )
Net carrying amount $ 662,557 $ 660,822
Interest expense related to the amortization of debt issuance costs was $
1.7
million and $
1.5
million for year ended December 31, 2023 and 2022. Contractual interest
expense was $
16.8
million and $
16.7
million for the years ended December 31, 2023 and 2022.
As of December 31, 2023, the if-converted value of the 2026 Notes did not
exceed the principal amount. The 2026 Notes were
no
t eligible for conversion as of December 31, 2023 (see Note 20, Subsequent
Events).
No sinking fund is provided for the 2026 Notes, which means that the Company
is not required to redeem or retire them periodically
.
Capped Call Transactions
In connection with the offering of the 2026 Notes, the Company entered into
the 2026 Capped Call Transactions with certain counterparties at a net cost of
$
96.8
million. The 2026 Capped Call Transactions are purchased capped call options on
33.9
million shares of Class A common stock, that, if exercised, can be net share
settled, net cash settled, or settled in a combination of cash or shares
consistent with the settlement elections made with respect to the 2026 Notes
if converted. The cap price is initially $
32.57
per share of the Company's Class A common stock and subject to certain
adjustments under the terms of the 2026 Capped Call Transactions. The exercise
price is $
19.70
per share of Class A common stock, subject to customary anti-dilution
adjustments that mirror corresponding adjustments for the 2026 Notes.
The 2026 Capped Call Transactions are intended to reduce potential dilution to
holders of our Class A common stock upon conversion of the 2026 Notes and/or
offset any cash payments the Company is required to make in excess of the
principal amount, as the case may be, with such reduction or offset subject to
a cap. The cost of the Capped Call Transactions was recorded as a reduction of
our Additional paid-in capital in our Consolidated Balance Sheets. The Capped
Call Transactions will not be remeasured as long as they continue to meet the
conditions for equity classification.
2025 Senior Secured Convertible Notes
On July 10, 2023, the Company entered into the Securities Purchase Agreement
(the "Original Purchase Agreement") with an institutional investor pursuant to
which the Company sold, and the Investor purchased, $
340.0
million in aggregate principal amount of
0
% senior convertible notes due in 2025 (the "Series A-1 Notes") in a
registered direct offering. The Series A-1 Notes were sold at an original
issue discount of
12
% resulting in gross proceeds to the Company of $
300.0
million. Total transaction costs incurred by the Company totaled $
4.9
million and are included in Selling, general and administrative expenses in
the Consolidated Statements of Operations.
Pursuant to the terms of the Original Purchase Agreement, during the
six-month
period beginning on the one-year anniversary of the issuance of the Series A-1
Notes and ending on the
eighteen-month
anniversary of the issuance of the Series A-1 Notes, the Investor could
purchase up to an additional $
226.7
million in aggregate principal amount of senior convertible notes due
two years
after the date of issuance (the "Investor AIR Notes") in one or more
registered direct offerings. If the Investor elected, during the AIR Period,
to purchase the full amount of Investor AIR Notes, the Company could, at its
option, require the Investor to purchase up to an additional $
113.3
million in aggregate principal amount of senior convertible notes due
2
years after the date of issuance (the "Issuer AIR Notes" and, together with
the Investor AIR Notes, the "Additional Notes").
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The Series A-1 Notes and the Series B-1 Notes (collectively, the "2025 Notes")
are convertible into common stock at any time, in whole or in part, at the
Investor's option at an initial conversion price of $
7.80
with respect to the Series A-1 Notes and $
7.60
with respect to the Series B-1 Notes. The conversion prices are subject to
proportional adjustment upon the occurrence of any stock split, stock
dividend, stock combination, and/or similar transactions. Additionally, the
conversion prices are subject to a full-ratchet adjustment in connection with
a subsequent offering at a per share price less than the fixed conversion
price in effect. Furthermore, in the event of default, the 2025 Notes may be
converted using an alternative conversion price equal to the lower of (i) the
conversion price in effect or (ii)
80
% of the average stock price preceding conversion.
The 2025 Notes were issued as senior obligations of the Company under an
indenture dated July 11, 2023, by and between the Company and Wilmington
Savings Fund Society, FSB, as the trustee, as supplemented by that certain
Second Supplemental Indenture dated September 29, 2023. The Notes bear
interest at the rate of
0
% per annum, however, the interest rate of the Notes will automatically
increase to
18
% per annum (the "Default Rate") upon the occurrence and continuance of an
event of default. The Notes are subject to certain covenants, including a
financial test covenant, that requires the Company to have available cash
equal to or greater than $
340.0
million at the end of each quarter.
The 2025 Notes are repayable in
nine
equal installments on each three-month anniversary beginning July 11, 2023,
with respect to the Series A-1 Notes and September 29, 2023 with respect to
the Series B-1 Notes. The Company may elect to settle each installment in cash
based on
103
% of the principal amount (plus any accrued default interest or late charges)
or in shares of Class A Common Stock, subject to the satisfaction of certain
conditions including trading volume and continued NYSE listing requirements
(see Note 20, Subsequent Events), priced at the lower of (i) the conversion
price in effect of (ii)
93
% of the average stock price preceding such settlement, subject to a floor
price of $
1.16
which is subject to adjustment to stock splits, dividends, combinations, or
other similar events. The investor may elect to defer installments to future
periods.
The Investor's right to purchase the Investor AIR Notes provided for in the
Original Purchase Agreement, and as amended in the Purchase Agreement
Amendment (a net written call option) was determined to be a separate
financial instrument from the 2025 Notes issued to the Investor, as the
Investor could detach and sell the 2025 Notes to other investors while
retaining the rights to purchase the Investor AIR Notes. As a result, the
Company concluded that the written option is required to be accounted for as a
derivative liability which is required to be remeasured to fair value each
balance sheet date with changes in fair value recorded in earnings. The
Company elected the fair value option to account for the 2025 Notes and the
call option, which will subsequently be remeasured to their respective fair
values at the end of each reporting period. The fair value of the derivative
liability was zero as of December 31, 2023.
Amendment No. 1 to the Original Purchase Agreement
On September 29, 2023, the Company and the Investor entered into Amendment No.
1 to the Original Purchase Agreement the "Purchase Agreement Amendment"), in
order to:
.
Increase the aggregate principal amount of Investor AIR Notes available for
purchase to $
566.7
million, to be purchased at any time after (A) with respect to the initial $
170.0
million of Investor AIR Notes, September 27, 2023, (B) with respect to the
next $
226.7
million of Investor AIR Notes, December 29, 2023 or (C) with respect to the
remaining $
170.0
million of Investor AIR Notes, March 29, 2024;
.
Extend the Investor's right to effect a closing of Investor AIR Notes to March
29, 2026;
.
Increase the aggregate principal amount of Issuer AIR Notes to $
226.7
million;
.
Increase the amount of Common Stock required to be reserved by the Company
prior to obtaining the stockholder approval described below to
782,000,000
shares of Class A Common Stock; and
.
Require that the Company either obtain the prior written consent of requisite
stockholders or seek and obtain stockholder approval at a special meeting (in
each case no later than January 31, 2024), in order to (x) approve the
issuance of securities issued or issuable in an Additional Closing (as defined
in the Securities Purchase Agreement) and (y) increase the authorized shares
of the Company from
1,250,000,000
to
2,000,000,000
. If the Company fails to obtain such approval, it will seek approval at an
additional stockholder meeting on or prior to March 31, 2024 and, if
necessary, semi-annually thereafter.
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On September 29, 2023, pursuant to the terms of the Purchase Agreement
Amendment, the Company sold, and the Investor purchased, $
170.0
million of the "Series B-1 Notes" in a registered direct offering. The Series
B-1 Notes were issued at an original issue discount of
12
% resulting in gross proceeds to the Company of $
150.0
million.
As the Purchase Agreement Amendment amended the terms and conditions of the
investor's call option, the Purchase Agreement Amendment was evaluated as a
modification to the freestanding derivative instrument. The effect of the
modified terms resulted in no gain or loss recorded in the Consolidated
Statements of Operations.
Pledge Agreement
On November 22, 2023 the Company entered into a Pledge Agreement (the "Pledge
Agreement") pursuant to which the 2025 Notes will be secured by a first
priority security interest in all of the existing and future assets of the
Company and certain of its subsidiaries, including a pledge of all of the
share capital of certain subsidiaries of the Company.
Amendment and Waiver Agreement
On November 22, 2023, the Company entered into an amendment and waiver
agreement (the "Waiver") with the Investor. Pursuant to the Waiver, the
Investor agreed to waive a covenant event of default resulting from the late
filing of the Company's quarterly report on Form 10-Q for the quarter ended
September 30, 2023. The Investor also agreed to reduce the amount of cash
required under the Financial Test to $
250.0
million from $
340.0
million. The Company assessed the amendment under the modification guidance
and it had no impact. Refer to Note 20, Subsequent events, for further
discussion on covenant waivers.
Amended and Restated Security and Pledge Agreement
On December 28, 2023, the Company entered into an Amended and Restated
Security and Pledge Agreement (the "Amended Pledge Agreement"), pursuant to
which the entirety of the original Pledge Agreement was amended and restated
to define the scope of the security interest in all of the existing and future
assets of the Company and certain of its subsidiaries. An accompanying
guaranty agreement (the "Guaranty") guaranteed the Company's outstanding
obligations in respect of the Notes.
A reconciliation of the beginning and ending balances for the 2025 Notes,
which are measured at fair value is as follows for the year ended December 31,
2023 (in thousands):
2025 Notes, at fair value
Fair value - December 31, 2022 $ -
Initial recognition of 2025 Notes 450,000
Conversion of 2025 Notes to Class A Common Stock (
213,437
)
Fair value measurement adjustments 327,823
Fair value - December 31, 2023 $ 564,386
Conversion of 2025 Notes
Between July 11, 2023 and December 29, 2023, the Investor converted $
145.5
million aggregate principal of the outstanding 2025 Notes issued by the
Company at a conversion price of $
1.17
to $
5.57
per share into
106,129,828
shares of Class A Common Stock. Conversions of the 2025 Notes to Additional
paid-in capital for the year ended
December 31, 2023
totaled $
213.4
million, which represents the conversion at fair value.
Schedule of Principal Maturities of Convertible Senior Notes
The future scheduled principal maturities of convertible senior notes as of
December 31, 2023
are as follows (in thousands):
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Year Ended
December 31, 2023
2024 312,833
2025 51,667
2026 667,500
$ 1,032,000
The Company may elect to settle each installment on the 2025 Notes in cash
based on
103
% of the principal amount (plus any accrued default interest or late charges)
or in shares of Class A Common Stock. The Company's election is subject to the
satisfaction of certain conditions including trading volume and continued NYSE
listing requirements. The Company has classified the 2024 maturities in the
Consolidated Balance Sheets as current liabilities, as the probability of the
Company having the ability to settle in cash or shares is not probable and
will continue to be evaluated in future periods (see Note 20, Subsequent
Events).
13.
Stockholders' equity
Common Stock
On October 29, 2020, the Company's common stock and warrants began trading on
the New York Stock Exchange under the symbol "FSR" and "FSR WS" respectively.
Pursuant to the terms of the Amended and Restated Certificate of Incorporation,
the Company is authorized and has available for issuance the following shares
and classes of capital stock, each with a par value of $
0.00001
per share: (i)
750,000,000
shares of Class A Common Stock; (ii)
150,000,000
shares of Class B Common Stock; (iii)
15,000,000
shares of preferred stock. Immediately following the Business Combination,
there were
144,750,524
shares of Class A Common Stock with a par value of $
0.00001
,
132,354,128
shares of Class B Common Stock, and
47,074,454
warrants outstanding.
The Company has adjusted the shares issued and outstanding prior to October
29, 2020 to give effect to the exchange ratio established in the Business
Combination Agreement.
Class A Common Stock
Holders of Class A Common Stock are entitled to
one
vote per share on matters to be voted upon by stockholders. Holders of Class A
Common Stock have no preemptive rights to subscribe for or to purchase any
additional shares of Class A Common Stock or other obligations convertible
into shares of Class A Common Stock which the Company may issue in the future.
All of the outstanding shares of Class A Common Stock are fully paid and
non-assessable. Holders of Class A Common Stock are not liable for further
calls or assessments.
Class B Common Stock
Holders of Class B Common Stock are entitled to
ten
votes per share on matters to be voted upon by stockholders.
Preferred Stock
As of December 31, 2023 and 2022, the Company is authorized to issue
15,000,000
shares of Preferred Stock with a par value of $
0.00001
, of which
no
shares are issued and outstanding.
Common Stock Outstanding
In conjunction with the Business Combination, Spartan obtained commitments
from certain PIPE Investors to purchase shares of Spartan Class A common
stock, which were automatically converted into
50,000,000
shares of Spartan's Class A common stock for a purchase price of $
10.00
per share, which were automatically converted into shares of the Company's
common stock on a
one
-for-one basis upon the closing of the Business Combination.
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14.
Warrants
Magna Warrants
On October 29, 2020, the Company granted Magna International, Inc. ("Magna")
up to
19,474,454
warrants, each with an exercise price of $
0.01
, to acquire underlying Class A common shares of Fisker Inc., which represents
approximately
6
% ownership in Fisker Inc. on a fully diluted basis as of the grant date. The
right to exercise vested warrants expires on
October 29, 2030
.
The warrants are accounted for as an award issued to non-employees measured on
October 29, 2020 and
three
interrelated performance conditions that are separately evaluated for
achievement:
Milestone Percentage of Number of
Warrants that Warrants that
Vest Upon Vest Upon
Achievement Achievement
(a) (i) Achievement of the "preliminary production 33.3 % 6,484,993
specification" gateway as set forth in the Development
Agreement; (ii) entering into the Platform Agreement; and
(iii) entering into the Initial Manufacturing Agreement
(b) (i) Achievement of the "target agreement" gateway as set 33.3 % 6,484,993
forth in the Development Agreement and (ii) entering into the
Detailed Manufacturing Agreement, which will contain terms and
conditions agreed to in the Initial Manufacturing Agreement
(c) Start of 33.4 % 6,504,468
pre-serial production
19,474,454
The cost upon a
chievement of each milestone is recognized when it is probable that a
milestone will be met. The cost for awards to Magna is recognized in the same
period and in the same manner as if the Company had paid cash for the goods or
services. At December 31, 2022, Magna satisfied the first and second
milestones and the Company capitalized costs as an intangible asset
representing the future economic benefit to Fisker Inc. As of December 31,
2022, the Company determined the third milestone is probable of achievement
and capitalized a portion of the award's fair value corresponding to the
service period beginning at the grant date and ended in the first quarter of
2023. For the year ended December 31, 2023,
the Company
capitalized costs totaling $
6.0
million (a non-cash transaction) associated with achievement of the third
milestone
. The Company will continually assess the reasonableness of the estimated life
and consider the extent to which the Company enters arrangements that extend
the estimated useful life. The Company will also assess the intangible asset
for impairment.
If an indicator of impairment exists, the undiscounted cash flows will be
estimated and then if the carrying amount of the intangible asset is not
recoverable, determine its fair value and, to the extent the fair value is
less than the intangible asset's carrying value, the Company will record an
impairment loss. At December 31, 2023, no indicator of impairment existed.
The fair value of each warrant is equal to the intrinsic value (e.g., stock
price on grant date less exercise price) as the exercise price is $
0.01
. The terms of the warrant agreement require net settlement when exercised.
Using the measurement date stock price of $
8.96
for a share of Class A common stock, the warrant fair values for each tranche
is shown below. Capitalized cost also results in an increase to additional
paid in capital equal to the fair value of the vested warrants. Awards vest
when a milestone is met. Magna has
19,474,454
vested and exercisable warrants to acquire underlying Class A common stock of
Fisker as of
December 31, 2023
,
none
of which are exercised.
Fair value Capitalized at
December 31, 2023
Milestone (a) $ 58,041 $ 58,041
Milestone (b) 58,041 58,041
Milestone (c) 58,215 58,215
$ 174,297 $ 174,297
At-the-market Equity Program
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In May 2022, the Company entered into an at-the-market distribution agreement,
dated May 24, 2022 with J.P. Morgan Securities LLC and Cowen and Company, LLC
as the sales agents (the
"
Distribution Agreement
"
), pursuant to which the Company established an at-the-market equity program
(the "ATM Program"). Pursuant to the ATM Program, Fisker may, at its
discretion and from time to time during the term of the Distribution
Agreement, sell, through the Agents, shares of its Class A Common Stock as
would result in aggregate gross proceeds to the Company of up to
$
350.0
million
by any method permitted by law deemed to be an "at-the-market offering" as
defined in Rule 415 of the Securities Act of 1933, as amended, including
without limitation sales made directly on the New York Stock Exchange, on any
other existing trading market for the Class A Common Stock or to or through a
market maker. In addition, the sales agents may also sell the shares of Class
A Common Stock by any other method permitted by law, including, but not
limited to, negotiated transactions. The Class A Common Stock sold under the
ATM Program is registered with the SEC under the Company's effective shelf
registration statement that permits the Company to issue various securities
for proceeds of up to $
2.0
billion. The Company issu
ed
21,153,154
shares o
f Class A common stock during the year ended December 31, 2023 for gross proceed
s of $
133.7
million
, be
fore $
2.0
million
of commissions and other direct incremental issuance costs. Effective July 12,
2023, the Company terminated the Distribution Agreement. As a result, the
Company will not offer or sell any more shares under the ATM Program.
15.
Loss Per Share
Founders Convertible Preferred Stock are participating securities as the
Founders Convertible Preferred Stock participates in undistributed earnings on
an as-if-converted basis. The Company computes earnings (loss) per share of
Class A Common Stock and Class B Common Stock using the two-class method
required for participating securities. Basic and diluted earnings per share
was the same for each period presented as the inclusion of all potential Class
A Common Stock and Class B Common Stock outstanding would have been
anti-dilutive. Basic and diluted earnings per share are the same for each
class of common stock because they are entitled to the same liquidation and
dividend rights.
The following table sets forth the computation of basic and diluted loss per
Class A Common Stock and Class B Common Stock:
Year Ended December 31,
2023 2022 2021
Numerator:
Net loss $ ( $ ( $ (
939,947 547,496 471,341
) ) )
Denominator:
Weighted average Class A 211,624,861 171,011,940 159,650,008
common shares outstanding
Weighted average Class B 132,354,128 132,354,128 132,354,128
common shares outstanding
Weighted average Class A and Class 343,978,989 303,366,068 292,004,136
B common shares outstanding- Basic
Net loss per share attributable to Class A and $ ( $ ( $ (
Class B Common shareholders- Basic and Diluted 2.73 1.80 1.61
) ) )
The following table presents the potential common shares outstanding that were
excluded from the computation of diluted net loss per share of common stock as
of the periods presented because including them would have been antidilutive:
Year Ended December 31,
2023 2022 2021
Convertible senior notes 359,338,274 33,891,845 33,891,845
Stock options and warrants 36,714,669 37,155,050 30,665,546
Total 396,052,943 71,046,895 64,557,391
16.
Stock Based Compensation
Upon completion of the Business Combination, the 2016 Stock Plan was renamed
the 2020 Equity Incentive Plan (the "Plan"). All outstanding awards under the
2016 Stock Plan are modified to adopt the terms under the 2020 Equity
Incentive Plan. The modifications are administrative in nature and have no
effect on the valuation inputs, vesting conditions or equity classification of
any of the outstanding original awards immediately before and after the close
of the
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Business Combination. The Plan is a stock-based compensation plan which
provides for the grants of options and restricted stock to employees and
consultants of the Company. Options granted under the Plan may be either
incentive options ("ISO") or non-qualified stock options ("NSO"). The Plan
added
24,097,751
shares of Class A Common Stock on October 29, 2020 to increase the maximum
aggregate number of shares that may be issued under the Plan to approximately
48
million shares (subject to adjustments upon changes in capitalization, merger
or certain other transactions). Also, upon completion of the Business
Combination, the Company established a 2020 Employee Stock Purchase Plan (the
"ESPP") under which up to
3,213,034
Class A Common Stock may be issued. As of December 31, 2023
,
no
sha
res have been issued under the ESPP.
Stock-based compensation expense was classified in the Consolidated Statements
of Operations as follows (in thousands):
Year Ended December 31,
2023 2022 2021
Selling, general and administrative $ 3,277 $ 6,861 $ 1,135
Research and development 3,974 12,741 4,487
Cost of goods sold 925 - -
Total $ 8,176 $ 19,602 $ 5,622
Stock options
Options under the Plan may be granted at prices as determined by the Board of
Directors, provided, however, that (i) the exercise price of an ISO and NSO
shall not be less than
100
% of the estimated fair value of the shares on the date of grant, and (ii) the
exercise price of an ISO granted to a
15
% shareholder shall not be less than
110
% of the estimated fair value of the shares on the date of grant. The fair
value of the shares is determined by the Board of Directors on the date of
grants. Stock options generally have a contractual life of
10
years. Upon exercise, the Company issues new shares.
In 2016 and 2017, the Company's founders were granted an aggregate of
15,882,711
options which are fully vested and are not related to performance. Options
granted to other employees and consultants become vested and are exercisable
over a range of up to
six years
from the date of grant.
The following table summarizes option activity under the Plan:
Options Weighted Weighted
Average Average
Exercise Contractual
Price Term (in
Years)
Balance as of December 31, 2021 17,695,560 $ 1.44 5.6
Granted 495,700 10.15
Exercised ( 2.13
213,048
)
Forfeited ( 12.09
297,616
)
Balance as of December 31, 2022 17,680,596 $ 1.51 4.7
Granted 7,000 7.05
Exercised ( 0.44
60,340
)
Forfeited ( 11.87
387,041
)
Balance as of December 31, 2023 17,240,215 $ 1.29 3.3
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The fair value of each stock option grant under the Plan was estimated on the
date of grant using the Black-Scholes option pricing model, with the following
range of assumptions:
Year Ended
December 31,
2023 2022
Expected term (in years) 6.3 6.3
Volatility 74.5 74.9
% to % to
75.2 76.4
% %
Dividend yield 0.0 0.0
% %
Risk-free interest rate 3.4 3.7
% to % to
4.0 4.3
% %
Common stock price $ $
6.98 6.95
to $ to $
7.10 7.99
The Black-Scholes option pricing model requires various highly subjective
assumptions that represent management's best estimates of the fair value of
the Company's common stock, volatility, risk-free interest rates, expected
term, and dividend yield. As the Company's shares have actively traded for a
short period of time subsequent to the Business Combination, volatility is
based on a benchmark of comparable companies within the automotive and energy
storage industries.
The expected term represents the weighted-average period that options granted
are expected to be outstanding giving consideration to vesting schedules.
Since the Company does not have an extended history of actual exercises, the
Company has estimated the expected term using a simplified method which
calculates the expected term as the average of the time-to-vesting and the
contractual life of the awards. The Company has never declared or paid cash
dividends and does not plan to pay cash dividends in the foreseeable future;
therefore, the Company used an expected dividend yield of
zero
. The risk-free interest rate is based on U.S. Treasury rates in effect during
the expected term of the grant. The expected volatility is based on historical
volatility of publicly-traded peer companies.
Additional information regarding stock options exercisable as of December 31,
2023 is summarized below:
Options Exercisable at December 31, 2023
Range of Exercise Price Number Weighted Weighted
Average Average
Exercise Price Contractual
Term (in Years)
$ 17,240,215 $ 1.29 3.3
0.06
- $
24.48
The aggregate intrinsic value represents the total pretax intrinsic value
(i.e., the difference between the fair value of the Company's common stock
price and the exercise price, multiplied by the number of in-the-money
options) that would have been received by the option holders had all option
holders exercised their options. The aggregate intrinsic value of options
outstanding as of December 31, 2023 w
as $
25.8
million.
The intrinsic value of options exercisable
was $
25.8
million
as of December 31, 2023. The total intrinsic value of options exercis
ed was $
0.4
million, $
1.8
million, and
$
26.3
million for the years ended December 31, 2023, 2022, and 2021, respectively.
The weighted-average grant date fair value per share for the stock option
grants during the years ended December 31, 2023, 2022, and 2021
was $
7.05
, $
10.25
, and $
15.96
, respectively. As of December 31, 2023, the total unrecognized compensation
related to unvested stock option awards
granted was $
22.2
million, whi
ch the Company expects to recognize over a weighted-average period of approxi
mately
3.3
years.
Restricted stock unit awards
The Company granted employees, who rendered services during the years ended
December 31, 2021 and December 31, 2020 and were employees of the Company on
the respective grant dates, a restricted stock unit ("RSU") award based in
proportion to the service period beginning from the employee's hire date to
the end of the year. The restricted stock unit awards vested on the grant
dates occurring in May of 2021 and March of 2022 for the respective preceding
years resulted in stock-based compensation exp
ense of $
1.1
million
recognized for the year ended December 31, 2023 and
$
4.6
million
for the year ended December 31, 2022. The Company's founders declined to
receive an award related to performance in 2020 and 2021. In accordance with
the Company's Outside Director Compensation Policy, each
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outside Board of Directors member received an annual RSU equal to $
200,000
granted on the date of the C
ompany's annual shareholders' meeting which vests in
25
% increments at the end of each calendar quarter. Each Outside Director may
elect to convert all or a portion of his or her annual Board of Directors
retainer, excluding any annual retainer that an Outside Director may receive
for serving as Lead Director and any annual retainers for committee service,
into RSUs in lieu of the applicable cash retainer payment ("RSU Election").
The number of Class A common shares granted to Outside Directors annually are
based on the
30-day
average closing trading price of Class A common stock on the day preceding the
grant date ("RSU Value"). When an Outside Director exercises his or her RSU
Election, the number of Class A common shares equal the amount of cash subject
to such RSU Election divided by the applicable RSU Value and are fully vested.
The following table summarizes RSU activity under the Plan:
RSU Awards Weighted Average Grant Date Fair Value
Unvested at December 31, 2021 17,174 $ 13.47
Awarded 494,091 10.25
Vested ( 11.19
498,497
)
Forfeited ( 11.46
1,016
)
Unvested at December 31, 2022 11,752 $ 12.45
Awarded 24,009,880 2.14
Vested ( 7.65
331,873
)
Forfeited ( 4.76
487,519
)
Unvested at December 31, 2023 23,202,240 $ 2.16
Performance-based restricted stock unit awards
In the third quarter of 2021, the Company's compensation committee ratified
and approved performance-based
restricted stock units ("PRSUs") to all employees ("Grantee") the value of
which is determined based on the Grantee's level within the Company ("PRSU
Value"). Each PRSU is equal to
one
underlying share of Class A common stock. Also, PRSUs were awarded to any new
employee hired in the fourth quarter of 2021 and during 2022 on a pro-rata
basis based on a reduction in time of service. The number of shares subject to
a Grantee's PRSU award equals the Grantee's PRSU Value divided by the closing
price per Class A common share on the service inception date, or if the
service inception date is not a trading day, the closing price per Share on
the closest trading day immediately prior to the service inception date; in
each case rounded down to the nearest whole number. Each PRSU award shall vest
as to
50
% of the PRSU Value upon the Committee's determination, in its sole
discretion, and certification of the occurrence of the Ocean Start of
Production and shall vest as to
50
% of the PRSUs upon the first anniversary of the Ocean Start of Production, in
each case, subject to (i) the Grantee's continuous service through the
applicable vesting date, (ii) the Grantee's not committing any action or
omission that would constitute Cause for termination through the applicable
vesting date, as determined in the sole discretion of the Company, and (iii)
the Ocean Start of Production occurring on or before December 31, 2022. The
compensation committee has discretion to reduce or eliminate the number of
PRSUs that shall vest pursuant to each PRSU award upon the certification of
the occurrence of the Ocean Start of Production and/or upon the first
anniversary of the Ocean Start of Production, after considering, any factors
that it deems relevant, which could include but are not limited to (i) Company
performance against key performance indicators, and (ii) departmental
performance against goals. The service inception date precedes the grant dates
for both performance conditions. The grant date for each of the performance
conditions is the date Grantees have a mutual understanding of the key terms
and conditions of the PRSU, which will occur when the performance condition is
objectively determinable and measurable, and the compensation committee has
determined whether it will exercise its discretion to adjust the PRSU award.
Recognition of stock-based compensation occurs when performance conditions are
probable of achievement. Measurement of stock-based compensation attributed to
the PRSU awards will be based on the fair value of the underlying Class A
Common Stock once the grant date is determined (e.g., variable accounting).
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As of December 31, 2023, the Company has approved and authorized PRSUs equal to
1,446,943
shares of Class A common stock with a PRSU value of $
3.4
million of which
1,278,465
awards vested on
March 24, 2023
, the grant and vesting date for the first tranche of the PRSU award. As of
December 31, 2022, achievement of the first tranche of the PRSU awards was
deemed probable resulting in recognition of cumulative expense of $
10.1
million. During the year ended December 31, 2023, the Company measured the
cumulative expense to be recognized upon vesting based on the closing stock
price on the grant and vesting date, which resulted in cumulative expense of $
7.3
million, a reduction of $
2.8
million
from the Company's measurement of compensation expense as of the end of 2022.
As of December 31, 2023, ac
hievement of the second tranche of the PRSU awards was deemed probable
resulting in the recognition of compensation expense of $
3.4
million for the year end
ing December 31, 2023.
However, a grant date has not yet been established for the second tranche
because there has not been a mutual understanding of the key terms and
conditions with the grantees.
Measurement of PRSU compensation expense is based on the closing price on the
last day of the quarter multiplied by the outstanding approved and authorized
PRSUs.
17.
Income taxes
The Company's income/(loss) before provision for income taxes was subject to
taxes in the following jurisdictions for the following periods (in thousands):
For the years ended December 31,
2023 2022 2021
United States $ ( $ ( $ (
943,801 549,514 470,603
) ) )
International 5,153 2,203 (
723
)
Total $ ( $ ( $ (
938,648 547,311 471,326
) ) )
The Company has increasing foreign operations and pre-tax income from its
foreign operations has no material impact on Income tax. Income tax expense
attributable to income/(loss) from continuing operations consists of the
following (in thousands):
For the years ended December 31,
2023 2022 2021
Current
Federal $ - $ - $ -
State - - -
International 1,271 221 15
Total current tax provision $ 1,271 $ 221 $ 15
Deferred
Federal $ - $ - $ -
State - - -
International 28 ( -
36
)
Total deferred tax provision $ 28 $ ( $ -
36
)
Provision for income taxes $ 1,299 $ 185 $ 15
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The effective tax rate of the Company's (provision) benefit for income taxes
differs from the federal statutory rate as follows:
Year Ended December 31,
2023 2022 2021
Expected federal income tax benefit 21.0 % 21.0 % 21.0 %
State taxes net of federal benefit 2.9 % 4.2 % 3.7 %
Tax credits ( % 0.9 % 0.8 %
1.3
)
Valuation allowance ( % ( % ( %
14.5 25.3 20.0
) ) )
Fair value of derivatives ( % 0.0 ( %
7.3 % 6.2
) )
Other ( % ( % 0.7 %
0.9 0.8
) )
Provision for income taxes ( % 0.0 0.0
0.1 % %
)
Effective January 1, 2022, provisions in the Tax Cuts and Jobs Act of 2017
will require the Company to capitalize and amortize research and development
costs rather than deducting the costs as incurred. Unless the effective date
is deferred or the law is modified or repealed, we expect an increase to our
effective tax rate in future years through increased future cash taxes.
Deferred tax assets and liabilities
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) operating
losses and tax credit carryforwards.
The Company records income tax expense for the anticipated tax consequences of
the reported results of operations using the asset and liability method. Under
this method, the Company recognizes deferred tax assets and liabilities for
the expected future tax consequences of temporary differences between the
financial reporting and tax basis of assets and liabilities, as well as for
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using the tax rates that are expected to apply to
taxable income for the years in which those tax assets and liabilities are
expected to be realized or settled. The Company records valuation allowances
to reduce its deferred tax assets to the net amount that it believes is more
likely than not to be realized. Its assessment considers the recognition of
deferred tax assets on a jurisdictional basis. The Company has placed a full
valuation allowance against U.S. federal and state deferred tax assets since
the recovery of the assets is uncertain.
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The tax effects of significant items comprising the Company's deferred taxes
are as follows (in thousands):
As of December 31,
2023 2022
Deferred tax assets:
Net operating loss carryforwards $ 255,442 $ 147,789
Tax credits 507 11,461
Lease liability 14,033 6,793
Capitalized research and development costs 111,985 82,084
Other 18,274 7,042
Total deferred tax assets 400,241 255,169
Deferred tax liabilities:
ROU asset ( (
16,196 6,902
) )
Other - -
Total deferred tax liabilities ( (
16,196 6,902
) )
Valuation allowance ( (
384,037 248,230
) )
Net deferred tax asset $ 8 $ 37
ASC 740 requires that the tax benefit of net operating losses ("NOLs"),
temporary differences and credit carryforwards be recorded as an asset to the
extent that management assesses that realization is "more likely than not."
Realization of the future tax benefits is dependent on the Company's ability
to generate sufficient taxable income within the carryforward period.
Management believes that recognition of the deferred tax assets arising from
the above-mentioned future tax benefits from operating loss carryforwards is
currently not likely to be realized and, accordingly, has provided a valuation
allowance against its deferred tax assets.
The changes in the valuation allowance related to current year operating
activity was an increase in the amount of $$
135.8
million during the year ended December 31, 2023 (in thousands):
Year Ended December 31,
(in thousands) 2023 2022 2021
Beginning of the year $ 248,230 $ 108,794 14,562
Increase-income tax benefit 135,807 139,436 94,232
End of the year $ 384,037 $ 248,230 $ 108,794
Net Operating Losses
Federal and state laws impose substantial restrictions on the utilization of
NOLs and tax credit carryforwards in the event of an ownership change for tax
purposes, as defined in Section 382 of the Internal Revenue Code. Depending on
the significance of past and future ownership changes, the Company's ability
to realize the potential future benefit of tax losses and tax credits that
existed at the time of the ownership change may be significantly reduced.
As of December 31, 2023, the Company has approximately $
962.0
million and $
798.0
million of federal and state NOLs respectively. Federal NOLs generated prior
to 2017 begin expiring in the calendar year 2036. Under the new Tax Cuts and
Jobs Act, all NOLs incurred after December 31, 2017 are carried forward
indefinitely for federal tax purposes. The Coronavirus Aid, Relief, and
Economic Security Act ("CARES Act") signed in to law on March 27, 2020,
provided that NOLs generated in a taxable year beginning in 2018, 2019, or
2020, may now be carried back
five years
and forward indefinitely. In addition, the
80
% taxable income limitation was temporarily removed, allowing NOLs to fully
offset net taxable income. California has not conformed to the indefinite
carryforward period for NOLs. The NOLs begin expiring in the calendar year
2036
for state purposes.
In the ordinary course of its business, the Company incurs costs that, for tax
purposes, are determined to be qualified research and development ("R&D")
expenditures within the meaning of IRC (s)41. The R&D tax credit carryforward
as of
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December 31, 2023 is $
0.3
million and $
0.4
million for Federal and State, respectively. The R&D tax credit carryforwards
begin expiring in the calendar year
2036
for federal purposes. The Company has adjusted the deferred tax assets related
to Federal R&D credit carryover to account for any expiring tax credits.
Uncertain tax positions
The Company recognizes tax benefits from uncertain tax positions only if it
believes that it is more likely than not that the tax position will be
sustained on examination by the taxing authorities based on the technical
merits of the position. As the Company expands, it will face increased
complexity in determining the appropriate tax jurisdictions for revenue and
expense items. The Company's policy is to adjust these reserves when facts and
circumstances change, such as the closing of a tax audit or refinement of an
estimate. To the extent that the final tax outcome of these matters is
different than the amounts recorded, such differences will affect the income
tax expense in the period in which such determination is made and could have a
material impact on its financial condition and operating results. The income
tax expense includes the effects of any accruals that the Company believes are
appropriate, as well as the related net interest and penalties.
As of December 31, 2023, the Company has total uncertain tax positions of $
0.1
million, which is related to R&D tax credits and recorded as a reduction of
the deferred tax asset.
No
interest or penalties have been recorded related to the uncertain tax positions.
A reconciliation of the beginning and ending balances of unrecognized tax
benefits is as follows (in thousands):
Year Ended December 31,
2023 2022 2021
Beginning of the year $ 2,975 $ 968 $ 229
Increase related to current year tax positions - 2,007 871
Increase related to prior year tax positions - - -
Decrease for tax positions of prior years ( - (
2,875 129
) )
Decrease due to expiration of statute of limitations - - (
3
)
End of the year $ 100 $ 2,975 $ 968
It is not expected that there will be a significant change in uncertain tax
positions in the next 12 months. The Company is subject to U.S. federal and
state income tax and
three
foreign jurisdictions. In the normal course of business, the Company is
subject to examination by tax authorities. There are
no
tax examinations in progress as of December 31, 2023. The Company's federal
and state tax years for
2017
and forward are subject to examination by taxing authorities.
18.
Related party transactions
In July 2019 and in June 2020, the Company entered into bridge note payables
with Roderick K. Randall, a member of the Company's Board of Directors, and
The Randall Group Fisker Series C, for which Mr. Randall is the Managing
Director, for the principal sum of $
100,000
and $
220,000
, respectively. In addition, Legacy Fisker sold
1,236,610
shares of Series A preferred stock to Mr. Randall and Series Fisker, a
separate series of The Randall Group, LLC, for which Mr. Randall is the Series
Manager, for $
924,984
. The bridge notes and Series A preferred stock were converted into
3,402,528
shares of Class A Common Stock at an exchange ratio of
2.7162
upon completion of the Business Combination. The Company also had a consulting
agreement with Mr. Randall dated May 1, 2017. In connection with the
consulting agreement, he received an option grant to purchase
159,769
shares (post business combination) of our Class A common stock. Also, Mr.
Randall received option grants to purchase
67,905
and
13,581
shares (post business combination) of our Class A common stock on June 22,
2020. He also received annual Board of Directors restricted stock unit awards
for
25,658
and
24,271
shares of Class A common stock vesting quarterly over twelve months from the
date of our annual shareholders' meetings held on June 6, 2023 and June 7,
2022, respectively.
In 2018, Legacy Fisker sold
135,000
shares of Series A preferred stock to the Nadine I. Watt Jameson Family Trust,
a trust controlled by Mrs. Watt, a member of the Company's Board of Directors,
and her spouse, G. Andrew Jameson, for $
100,980
. The Series A preferred stock were converted into
366,690
shares of Class A Common Stock at an exchange ratio of
2.7162
upon completion of the Business Combination. Mrs. Watt received an option
grant to purchase
13,581
shares (post business combination) of our Class A common stock on June 22,
2020 and Mr. Jameson received an option grant to
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purchase
14,939
shares (post business combination) of our Class A common stock on September
21, 2020 in exchange for providing consulting services. Under the Company's
Outside Director Compensation Policy, Mrs. Watt received an annual Board of
Directors restricted stock unit award for
36,653
and
24,271
shares of Class A common stock vesting quarterly over
twelve months
from the date of our annual shareholders' meetings held on June 6, 2023 and
June 7, 2022, respectively.
On March 8, 2021, the Company appointed Mitchell Zuklie to its Board of
Directors and granted him a restricted stock unit representing
2,711
shares of Class A common stock, which vested on the date of the Company's
annual meeting held on June 8, 2021. Mr. Zuklie is the chairman of the law
firm of Orrick, Herrington & Sutcliff LLP (``Orrick''), which provides various
legal services to the Company. During the years ended December 31, 2023, 2022
and 2021, the Company incurred expenses for legal services rendered by Orrick
totaling approxim
ately $
1.5
million, $
9.1
million, and $
1.8
million,
respectively. Mr. Zuklie also held
54,461
shares of Class A Common Stock at the time of his appointment to the Board of
Directors. Under the Compa
ny's Outside Director Compensation Policy, Mr. Zuklie received an annual Board
of Directors restricted stock unit award for
40,805
and
24,271
sh
ares of Class A common stock vesting quarterly over
twelve months
from the date of the Company's annual shareholders' meetings held on June 6,
2023 and June 7, 2022, respectively.
19.
Commitments and contingencies
Legal matters
In the normal course of our business, we are named from time to time as a
defendant in various legal actions, including arbitration. The Company accrues
for matters when losses are probable and can be reasonably estimated. At
December 31, 2023 and 2022, the Company's accruals for legal matters were
immaterial.
For certain matters, it is inherently difficult to determine whether a loss is
probable or reasonably possible or to estimate the size or range of the
possible loss. While the Company believes that appropriate accruals have been
established for losses that are probable and can be reasonably estimated, it
is possible that adverse outcomes from such proceedings could exceed the
amounts accrued by an amount that could be material to our results of
operations or cash flows in any particular reporting period.
A putative cla
ss action lawsuit is pending against the Company in the United States District
Court for the Central District of California that alleges claims under the
federal securities laws, including that the Company made false and/or
misleading statements and/or omissions concerning operations, prospects, and
internal control over financial reporting. The Company is currently unable to
estimate any reasonably possible material loss or range of loss that may
result from this action.
Various other legal actions, claims, and proceedings are pending against the
Company, including, but not limited to, matters arising out of alleged product
defects; employment-related matters; product warranties; and consumer
protection laws. The Company also from time to time receives subpoenas and
other inquiries or requests for information from agencies or other
representatives of U.S. federal, state, and foreign governments.
In November 2021, the Company entered into a long-term supply agreement with a
minimum volume commitment with a third party, which provides raw materials.
Any purchase order issued under this supply agreement will be non-cancellable.
To the extent the Company fails to order the minimum volume defined in the
contract at the end of each year, the Company is required to pay the
counterparty in the subsequent year an amount equal to the shortfall, if any,
multiplied by a fee. Based on the facts and circumstances at this time, the
Company believes that the inability to meet the future minimum volume
commitments is probable and an accrual for the shortfall amount has been
accrued. As of
December 31, 2023
the Company recognized as an NRV write down of approximately $
25.6
million estimated shortfall within "Cost of Goods Sold" financial statement
line item on the Statement of operations as of
December 31, 2023
.
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20.
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 issued. 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.
2025 Notes Conversions
Between January 1, 2024 and the date this Annual Report on Form 10-K was
filed, the Investor converted portions of the aggregate principal amount of
the outstanding 2025 Notes of $
181.5
million of principal at a conversion price between
$
0.01
to
$
1.23
per share into
1,039,773,708
shares of Class A Common Stock.
Second Amendment to the 2025 Notes
On January 21, 2024, the Company and the institutional investor that holds the
Company's 2025 Notes entered into a Second Amendment and Waiver Agreement (the
"Second Waiver"), pursuant to which, among other things:
(i) in connection with one or more future transactions with a strategic
automotive partner, the Company has secured a release of all liens previously
granted to the Investor on the intellectual property required by any such
transactions;
(ii) all financial covenants relating to the Company's cash reserves were
waived; and
(iii) the Company obtained a waiver of the use by the Investor of any
remaining remedies arising from the Company's previous late filing of its
quarterly report on Form 10-Q for the quarter ended September 30, 2023.
Amended and Restated Certificate of Incorporation
On March 5, 2024, the Company held a Special Meeting of Stockholders at which
the stockholders approved an amendment to the Company's certificate of
incorporation to increase the total number of shares of Class A Common Stock
that the Company will have the authority to issue from
1,250,000,000
to
2,000,000,000
shares.
Cash on hand
The Company had cash and cash equivalents of $
53.9
million unrestricted and $
11.2
million restricted, as of April 16, 2024, reflecting several large payments to
suppliers in the first quarter of 2024.
Commitment Letter for 2024 Notes
On March 18, 2024 the Company entered into a financing commitment with an
investor providing for the sale of up to $
166.7
million in aggregate principal amount of senior secured convertible notes (the
"2024 Notes"). The 2024 Notes will have a
10
% original issue discount for gross proceeds of up to $
150.0
million. The 2024 Notes will be sold pursuant to a securities purchase
agreement (the "SPA") and issued in
four
tranches. The first tranche equal to $
35.0
million and the remaining three tranches in equal amounts up to the principal
amount.
All amounts due under the 2024 Notes will be convertible at any time into
shares of the Company's Class A common stock at a conversion price equal to
the market price of the Company's Class A common stock as of the SPA closing
date or at the market price as of the date of maturity if both elected and
less than the original conversion price. The 2024 Notes are subject to
full-ratchet anti-dilution protection and standard conversion rate adjustments
upon the occurrence of certain events. The 2024 Notes are secured by
substantially all of the assets and properties of the Company.
The 2024 Notes will mature upon the earlier of (i)
three months
from the date of issuance of the First Tranche, (ii) the effective date of a
registration statement for the primary sale of registered securities by the
Company, or (iii) July 31,
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2024. Interest will accrue at a rate equal to the 3-month secured overnight
financing rate plus
12
% per annum, payable at the Maturity Date.
A fee to the Investor on the undrawn portion of the aggregate principal will
accrue daily until the date of the applicable closing at an interest rate of
the 3-month secured overnight financing rate (SOFR) plus
4
% per annum, payable at the Maturity Date. The Undrawn Investor Fee with
respect to the First Tranche commenced on the date of the Commitment with
additional fees based on the timing of the remaining tranches.
The 2024 Notes will be subject to various covenants and upon the occurrence of
an event of default or a change of control, subject to redemption at the
noteholders election. Through the date of this report no amounts have yet been
funded for the 2024 Notes.
Forbearance Agreements for the 2025 Notes
On April 4, 2024, the Company and the investor entered into a Forbearance
Agreement pursuant to which it was agreed the investor would not enforce the
right to immediate redemption of the 2025 Notes, a right granted to the
investor upon the event of delay in payment of interest due under the 2026
Notes. It was further agreed that the investor would not enforce nor exercise
any of its other rights or remedies including enforcement or collection
actions with respect to any events of default that have occurred or may occur
on the 2025 Notes and 2026 Notes through April 21, 2024. Pursuant to the terms
of the Forbearance Agreement a total fee of $
0.5
million was incurred. On April 21, 2024, the Company and the investor entered
into a second forbearance agreement (the "Second Forbearance Agreement")
pursuant to which the investor agreed, to continue to temporarily forbear from
enforcing its right to immediate redemption as demanded in an Event of Default
Redemption Notice and from exercising any of its other default-related rights
and remedies against the Company with respect to the specified defaults, for a
period commencing on April 21, 2024 and ending on the earlier of (a) May 1,
2024 and (b) the occurrence of any Forbearance Default (as defined in the
Second Forbearance Agreement).
Other
The Company did not make a required interest payment of approximately $
8.4
million payable in cash on March 15, 2024 with respect to the 2026 Notes.
Under the indenture governing the 2026 Notes, such non-payment is a default
and the Company had a 30-day grace period to make the interest payment which
now has elapsed, such non-payment constitutes an Event of Default (as such
term is defined in the 2026 Notes Indenture) with respect to the 2026 Notes.
The non-payment of interest due resulted in a cross default under the
indenture governing the 2025 Notes. On March 18, 2024, the holder of the 2025
Notes waived the cross default, but not the ability to continue to exercise
the enriched conversion feature that will remain in place until a periodic
report is filed within the time allowed by the SEC, excluding any extension
permitted pursuant to Rule 12b-25.
On March 25, 2024 trading in the Company's Class A common stock on the NYSE
was suspended and the Class A common stock commenced delisting proceedings
with the NYSE. The Company's Class A common stock is currently quoted on the
OTC Pink platform as operated by OTC Markets Group Inc. (the "OTC"). The OTC
is a significantly more limited market than the NYSE, and quotation on the OTC
will result in a less liquid market for existing and potential holders of the
Class A Common Stock to trade the Class A Common Stock.
The delisting triggered a requirement to offer to repurchase our unsecured
2026 Notes and caused an event of default under the terms of our 2025 Notes.
Accordingly, in the quarter ended March 31, 2024, the 2026 Notes are expected
to be classified as a current liability in addition to the 2025 Notes.
The Company initiated a process to explore a range of strategic alternatives
to maximize shareholder value and have engaged professional advisors.
Management can make no assurances that any particular course of action,
business arrangement or transaction, or series of transactions, will be
pursued, successfully consummated or lead to increased stockholder value. If
the strategic process is unsuccessful, our Board may need to approve a
liquidation or obtain relief under the US Bankruptcy Code. The Company has
hired advisors to explore strategic alternatives including, if needed, filing
for bankruptcy protection.
As a result of a sustained drop in our stock price in violation of NYSE rules,
the NYSE commenced delisting proceedings with the Company on March 25, 2024.
As a result step one of our impairment test was triggered which may result in
impairment of the Company's property and equipment and intangible assets
during our first quarter of 2024. Also,
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during first quarter 2024 the Company is exiting certain lease property and
this may result in an impairment in first quarter of 2024 reporting of our
right of use assets.
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Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure controls and procedures
The Company maintains disclosure controls and procedures, as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), that are designed to provide reasonable
assurance that information required to be disclosed by us in the reports that
we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC rules and forms, and
that such information is accumulated and communicated to the Company's
management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required financial
disclosures.
Management, with the participation of our Chief Executive Officer and our
Chief Financial Officer, conducted an evaluation (pursuant to Rule 13a-15(b)
under the Exchange Act) of the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this Report. In designing
and evaluating the disclosure controls and procedures, the Company's
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives. In addition, the design of disclosure controls and
procedures must reflect the fact that there are resource constraints and that
management is required to apply judgement in evaluating the benefits of our
controls and procedures relative to their costs. Based on this evaluation, the
Company's Chief Executive Officer and Chief Financial Officer concluded that,
as a result of the material weaknesses in internal control over financial
reporting described below in "Management's Report on Internal Control over
Financial Reporting", the Company's disclosure controls and procedures were
not effective as of December 31, 2023.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act, to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. A material
weakness is a deficiency, or combination of deficiencies, in internal control
over financial reporting, such that there is a reasonable possibility that a
material misstatement of the Company's annual or interim financial statements
will not be prevented or detected on a timely basis.
Management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2023, based on criteria established in
Internal Control-Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on the assessment using this criteria, management concluded
that the Company's internal control over financial reporting was not effective
as of December 31, 2023 due to the material weaknesses identified below.
.
The Company did not design and maintain an effective control environment
commensurate with its financial reporting requirements. Specifically, the
Company has experienced a change in key accounting personnel and, as a result,
lacked a sufficient number of professionals with an appropriate level of
accounting knowledge, training and experience to appropriately analyze, record
and disclose accounting matters timely and accurately, and to achieve complete
financial accounting, reporting and disclosures. Additionally, we did not
design and maintain effective controls over the preparation and review of
account reconciliations.
.
The Company did not design and maintain effective controls for communicating
and sharing information between the operations, accounting, information
technology, finance and legal departments. Specifically, there are
insufficient controls to ensure that the accounting department is consistently
provided with complete and adequate support, documentation and information,
and that matters are resolved in a timely and effective manner.
.
The Company did not design and maintain effective controls in response to the
risks of material misstatement over the accounting for (i) inventory and
related income statement accounts and (ii) revenue and related balance sheet
accounts. Specifically, controls over the accounting for (i) inventory and
related income statement accounts and
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(ii) revenue and related balance sheet accounts were not sufficient to respond
to changes to the risks of material misstatement to financial reporting due to
changes in the business.
These material weaknesses contributed to the following additional material
weakness:
.
The Company did not design and maintain effective controls related to the
accounting for certain non-routine, complex or unusual events or transactions.
Specifically, the Company did not design and maintain effective controls to
timely analyze and account for the financial statement effects of variable
interest entities and valuation of convertible debt and the related derivative
liability.
These material weaknesses resulted in material audit adjustments to revenue,
accounts receivable, deferred revenue, inventory, costs of goods sold,
convertible debt and derivative liability balances during the year ended
December 31, 2023. Additionally, each of the material weaknesses described
above could result in a misstatement of substantially all account balances or
disclosures that would result in a material misstatement to the annual or
interim consolidated financial statements that would not be prevented or
detected.
The effectiveness of our internal control over financial reporting as of
December 31, 2023, was audited by PricewaterhouseCoopers LLP, our independent
registered public accounting firm, as stated in their report appearing under
Item 8.
Remediation Plan for Material Weaknesses in Internal Control over Financial
Reporting
In order to address the identified material weaknesses, the Company has
established a remediation plan which includes the following measures:
.
Evaluating skill set gaps and hiring additional accounting, financial
reporting, and compliance personnel (including both internal and external
resources), as needed, with public company experience to develop and implement
additional policies, procedures, and controls;
.
Designing and implementing controls and processes to facilitate effective
communication sharing between departments, along with accurate documentation
and timely support;
.
Designing and implementing a comprehensive and continuous risk assessment
process that identifies and assesses risks of material misstatement across the
entity and helps ensure that related internal controls are properly designed
and in place to respond to those risks in the Company's financial reporting;
and
.
Designing and implementing controls related to the identification of and
accounting for certain non-routine, unusual or complex transactions, including
the accounting for variable interest entities and valuation of convertible
debt and the related derivative liability.
The Company is committed to remediating the material weaknesses and the
actions the Company is taking are subject to ongoing senior management review,
as well as oversight from the Company's Board of Directors. When fully
implemented and operational, the Company believes the measures described above
will remediate the underlying causes of the control deficiencies that gave
rise to the material weaknesses and strengthen the Company's internal control
over financial reporting. The Company will not be able to fully remediate
these material weaknesses until these steps have been completed and operate
effectively for a sufficient period of time. The Company may also identify
additional measures that may be required to remediate the material weaknesses
in the Company's internal control over financial reporting, necessitating
further action.
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial
reporting during the three months ended December 31, 2023 that have materially
affected, or are reasonably likely to materially affect, the Company's
internal control over financial reporting.
114
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Table of Contents
Index to
Financial
Statements
Item 9B. Other Information.
During the quarter ended December 31, 2023, no director or officer of the
Company
adopted
, modified or
terminated
a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement"
as such terms are defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not applicable.
115
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Table of Contents
Index to
Financial
Statements
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item is incorporated by reference to, and
will be contained in, our Proxy Statement to be filed in connection with our
2024 Annual Meeting of Stockholders.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to, and
will be contained in, our Proxy Statement to be filed in connection with our
2024 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
The information required by this item is incorporated by reference to, and
will be contained in, our Proxy Statement to be filed in connection with our
2024 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
The information required by this item is incorporated by reference to, and
will be contained in, our Proxy Statement to be filed in connection with our
2024 Annual Meeting of Stockholders.
Item 14. Principal Accountant Fees and Services.
The information required by this item is incorporated by reference to, and
will be contained in, our Proxy Statement to be filed in connection with our
2024 Annual Meeting of Stockholders.
116
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Table of Contents
Index to
Financial
Statements
PART IV
Item 15. Exhibit and Financial Statement Schedules.
(a)
The following documents are filed as part of this report:
1.
Financial Statements
See Index to Financial Statements in Part II Item 8 of this Annual Report on
Form 10-K.
2.
Financial Statement Schedules
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3.
Exhibits
The documents listed in the Exhibit Index are incorporated by reference or are
filed with this report, in each case as indicated therein (numbered in
accordance with Item 601 of Regulation S-K).
The following list of exhibits are filed as part of this document.
Incorporated by reference Filed or
furnished
herewith
Exhibit No. Exhibit title Form File No. Exhibit No. Filing date
1.1 Distribution Agreement, dated as 8-K 001-38625 1.1 5/24/2022
of May 24, 2022, between Fisker
Inc., J.P. Morgan Securities LLC
and Cowen and Company, LLC.
2.1* Business Combination Agreement and Plan of 8-K 001-38625 10.3 7/13/2020
Reorganization, dated as of July 10, 2020,
by and among Spartan Energy Acquisition
Corp., Spartan Merger Sub and Fisker Inc.
3.1 Second Amended and 8-K 001-38625 3.1 11/4/2020
Restated Certificate
of Incorporation
of Fisker Inc.
3.2 Cert 8-K 001-38625 3.1 9/22/2023
ificate of Amendment
to the Sec
ond Amend
ed and Restated
Certificate
of Incorporation of F
isker Inc., dated as
of September 22, 2023
3.3 Certificate of Amendment to the 8-K 001-38625 3.1 3/8/2024
Second Amended and Restated
Certificate of Incorporation
of Fisker Inc., dated as of
March 6
, 202
4
3.4 Amended and Restated 8-K 001-38625 3.2 11/4/2020
By-Laws of Fisker Inc.
4.1 Specimen Class S-1/A 333-226274 4.2 7/27/2018
A Common
Stock Certificate.
4.2 Warrant Agreement, dated August 9, S-1/A 333-226274 4.1 7/27/2018
2018, between Continental Stock
Transfer & Trust Company and
Spartan Energy Acquisition Corp.
117
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Table of Contents
Index to
Financial
Statements
Incorporated by reference Filed or
furnished
herewith
Exhibit No. Exhibit title Form File No. Exhibit No. Filing date
4.3 Warrants to Purchase Shares of 8-K 001-38625 4.4 11/4/2020
Class A Common Stock issued
to Magna International Inc.
dated October 29, 2020.
4.4 Specimen Warrant S-1/A 333-226274 4.3 7/27/2018
Certificate.
4.5 Description of Securities X
4.6 S X
eries A-1 Senior Convertible Note due 2025.
4.7 I X
ndenture dated
July 11, 2023
by and
between
Fisker Inc.
and Wilmington Savings Fund
Society, FSB, as Trustee.
4.8 F X
irst Supplemental Indenture
dated July 11, 2023
by and between Fisker Inc. and Wilmington
Savings Fund Society, FSB, as Trustee.
4.9 Series X
B
-1 Senior Convertible Note due 2025.
4.10 Second X
Supplemental Indenture dated
September 29
, 2023 by and between
Fisker Inc. and Wilmington
Savings Fund Society, FSB, as Trustee.
4.11* Third X
Supplemental Indenture dated
November 22
, 2023 by and
among
Fisker Inc.
,
Wilmington Savings Fund
Society, FSB, as Trustee
, and CVI Investments,
Inc., as
Collateral Agent.
10.1 Sponsor Agreement, dated July 8-K 001-38625 10.1 7/13/2020
10, 2020 by and between Spartan
Energy Acquisition Corp. and Spartan
Energy Acquisition Sponsor LLC
.
10.2 Amended and Restated Registration Rights 8-K 001-38625 10.2 11/4/2020
Agreement, dated as of October 29, 2020, by and
among Fisker Inc., Spartan Energy Acquisition
Sponsor LLC and certain other parties.
10.3 Form of Lock-Up 8-K 001-38625 10.3 11/4/2020
Agreement.
10.4 Form of Subscription 8-K 001-38625 10.2 7/13/2020
Agreement.
10.5 Form of Indemnification 8-K 001-38625 10.5 11/4/2020
Agreement between Fisker
Inc. and each of its
officers and directors.
10.6* Cooperation Agreement by and among 8-K 001-38625 10.1 10/15/2020
Fisker Inc., Magna International Inc.,
and Spartan Energy Acquisition Corp.
dated as of October 14, 2020.
118
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Table of Contents
Index to
Financial
Statements
Incorporated by reference Filed or
furnished
herewith
Exhibit No. Exhibit title Form File No. Exhibit No. Filing date
10.7* Sublease Agreement by and 8-K 001-38625 10.7 11/4/2020
between Cosmo Co., USA,
and Fisker Inc., dated as
of September 21, 2020.
10.8 Lease Agreement by and between 8-K 001-38625 10.8 11/4/2020
Continental 830 Nash LLC
and Fisker Group Inc., dated
as of October 2, 2020.
10.9 Fisker Inc. 8-K 001-38625 10.9 11/4/2020
Outside Director
Compensation Policy.
10.10 Fisker Inc. Executive 8-K 001-38625 10.10 11/4/2020
Incentive Bonus Plan.
10.11 Fisker Inc. Form 8-K 001-38625 10.11 11/4/2020
of Executive
Severance Agreement.
10.12 Fisker Inc. 2020 8-K 001-38625 10.12 11/4/2020
Equity Incentive Plan
and related forms of
award agreements.
10.13 Fisker Inc. 8-K 001-38625 10.13 11/4/2020
2020 Employee
Stock Purchase Plan.
10.14 Fisker Inc. 2016 Equity 8-K 001-38625 10.14 11/4/2020
Incentive Plan, as
amended, and related form
of option agreement.
10.15 Letter Agreement, dated August 8-K 001-38625 10.1 8/14/2018
9, 2018, among Spartan Energy
Acquisition Corp. and its officers
and directors and Sponsor.
10.16 First Amendment to Lease by and between Continental 8-K 001-38625 10.1 2/9/2021
830 Nash LLC and Continental Rosecrans
Aviation L.P., as tenants in common, and
Fisker Group Inc. dated as of February 5, 2021
10.17* Project Pear Cooperation Framework 10-Q 001-38625 10.1 5/17/2021
Agreement by and between
Fisker Group Inc. and AFE, Inc.
entered into as of May 13, 2021.
10.18* Detailed Manufacturing Agreement 8-K 001-38625 10.1 6/17/2021
effective June 12, 2021 by and
between Fisker Group Inc. and Magna
Steyr Fahrzeugtechnik AG & Co KG
10.19 Indenture, dated as of August 8-K 001-38625 10.1 8/17/2021
17, 2021 between Fisker Inc.,
as issuer, and U.S. Bank
National Association, as trustee
10.20* S X
ecurities Purchase Agreement dated as of
July 10, 2023
by and
among Fisker Inc.
and the investors listed thereto
.
10.21 A X
mendment No. 1 to Securities Purchase
Agreement dated as of September 29, 2023
by and among Fisker Inc. and
the investors listed thereto.
119
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Table of Contents
Index to
Financial
Statements
Incorporated by reference Filed or
furnished
herewith
Exhibit No. Exhibit title Form File No. Exhibit No. Filing date
10.22 A X
mendment and Waiver Agreement
dated as of November 22
, 2023 by and between Fisker
Inc. and CVI Investments, Inc.
10.23 G X
uaranty dated as of December 28,
2023 by and among the guarantors
named thereto and CVI Investments,
Inc., as Collateral Agent.
10.24 A X
mended and Restated Security
and Pledge Agreement
dated as of December 28,
2023 by and among Fisker Inc
., each of the subsidiaries named
thereto and CVI Investments, Inc.
10.25 Second Amendment and Waiver X
Agreement dated as of January 21,
2024 by and between Fisker
Inc. and CVI Investments, Inc.
10.26 Commitment Letter for 8-K 001-38625 - 3/18/2024
Financin
g
dated as of
March 18, 2024
10.27 Forbearance Agreement 8-K 001-38625 10.1 4/4/2024
dated as of
April 4, 2024
by and between Fi
sker Inc.
, each o
f the s
ubsidiaries named
a
nd the inve
stor
listed t
he
reto
10.28 Forbearance Agreement 8-K 001-38625 10.1 4/22/2024
dated as of April
2
1
, 2024 by and between
Fisker Inc., each of the
subsidiaries named and the
investor listed thereto
21 List of Subsidiaries X
23 Consent of PricewaterhouseCoopers LLP, X
independent registered public
accounting firm of Fisker Inc.
31.1 Certification of Chief X
Executive Officer pursuant to
Rules 13a-14(a) and Rule
15d-14(a) of the Exchange Act.
31.2 Certification of Chief X
Financial Officer pursuant to
Rules 13a-14(a) and Rule
15d-14(a) of the Exchange Act.
32.1** Certification of Chief Executive Officer pursuant X
to Rule 13a-14(b) of the Exchange Act and
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2** Certification of Chief Financial Officer pursuant X
to Rule 13a-14(b) of the Exchange Act and
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
120
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Table of Contents
Index to
Financial
Statements
Incorporated by reference Filed or
furnished
herewith
Exhibit No. Exhibit title Form File No. Exhibit No. Filing date
97 Compensation Clawback X
Policy effective as of Au
gust
4, 2023
101.INS XBRL Instance Document. X
101.SCH XBRL Taxonomy Extension Schema Document. X
101.CAL XBRL Taxonomy Extension X
Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension X
Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension X
Label Linkbase Document.
101.PRE XBRL Taxonomy Extension X
Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted X
as inline XBRL and contained in exhibit 101)
_______________
* The schedules to this Exhibit have been omitted in accordance with
Regulation S-K Item 601(b)(2). Fisker Inc. agrees to furnish supplementally a
copy of any omitted schedule to the Securities and Exchange Commission upon
its request.
** Furnished and not filed.
Indicates a management contract or compensatory plan, contract or arrangement.
Item 16. Form 10-K Summary
None.
121
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Table of Contents
Index to
Financial
Statements
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FISKER INC.
Date: April 22, 2024 /s/ Henrik Fisker
Name: Henrik Fisker
Title: Chairman of the Board, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ Henrik Fisker Chairman of the Board, President April 22, 2024
and Chief Executive Officer
(Principal Executive Officer)
Henrik Fisker
/s/ Geeta Gupta-Fisker Chief Financial Officer, April 22, 2024
Chief Operating Officer and Director
(Principal Financial Officer)
Geeta Gupta-Fisker
/s/ Angel Salinas Chief Accounting Officer April 22, 2024
(Principal Accounting Officer)
Angel Salinas
/s/ John S. Dubel Director April 22, 2024
John S. Dubel
/s/ Wendy J. Greuel Director April 22, 2024
Wendy J. Greuel
/s/ Roderick K. Randall Director April 22, 2024
Roderick K. Randall
/s/ Nadine I. Watt Director April 22, 2024
Nadine I. Watt
/s/ Mitchell S. Zuklie Director April 22, 2024
Mitchell S. Zuklie
122
DESCRIPTION OF REGISTRANT'S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF
THE SECURITIES EXCHANGE ACT OF 1934
The following summary of the material terms of our securities is not intended
to be a complete summary of the rights and preferences of such securities, and
is qualified by reference to Fisker Inc.'s Second Amended and Restated
Certificate of Incorporation (as amended, the "Certificate of Incorporation"),
the Bylaws, the note-related documents described herein and the warrant-related
documents described herein, which are exhibits to Fisker Inc.'s Annual Report
on Form 10-K for the year ended December 31, 2023. We encourage you to read
each of the Certificate of Incorporation, the Bylaws, the note-related
documents, the warrant-related documents described herein and the applicable
provisions of the Delaware General Corporation Law ("DGCL") in their entirety
for a complete description of the rights and preferences of our securities.
On October 29, 2020, Spartan Energy Acquisition Corp., our predecessor
company, consummated the previously announced merger pursuant to that certain
Business Combination Agreement, dated July 10, 2020 (the "Business Combination
Agreement"), by and among Spartan, Spartan Merger Sub Inc., a wholly-owned
subsidiary of Spartan incorporated in the State of Delaware ("Merger Sub"),
and Fisker Group Inc. (f/k/a Fisker Inc.), a Delaware corporation ("Legacy
Fisker"). Pursuant to the terms of the Business Combination Agreement, a
Business Combination between the Company and Legacy Fisker was effected
through the merger of Merger Sub with and into Legacy Fisker, with Legacy
Fisker surviving as the surviving company and as a wholly-owned subsidiary of
Spartan (the "Merger" and, collectively with the other transactions described
in the Business Combination Agreement, the "Business Combination"). On October
29, 2020, and in connection with the closing of the Business Combination,
Spartan Energy Acquisition Corp. changed its name to Fisker Inc.
Unless the context indicates otherwise, references herein to the "Company,"
"Fisker," "we," "us," "our" and similar terms refer to Fisker Inc. (f/k/a
Spartan Energy Acquisition Corp.) and its consolidated subsidiaries (including
Legacy Fisker). References to "Spartan" refer to our predecessor company prior
to the consummation of the Business Combination.
Authorized Capital Stock
The Company is authorized to issue 2,165,000,000 shares of capital stock,
consisting of three classes: 2,000,000,000 shares of Class A common stock,
$0.00001 par value per share ("Class A Common Stock"), 150,000,000 shares of
Class B common stock, $0.00001 par value per share ("Class B Common Stock" and
together with the Class A Common Stock, the "Common Stock"), and 15,000,000
shares of preferred stock, $0.00001 par value per share ("Preferred Stock").
Common Stock
As of December 31, 2023, there were 316,589,859 shares of Class A Common Stock
outstanding, held of record by 36 stockholders. As of December 31, 2023, there
were 132,354,128 shares of Class B Common Stock outstanding, held of record by
two stockholders. The Company's Class A Common Stock is currently quoted on
the OTC Pink platform under "FSRN."
The holders of Class A Common Stock are entitled to one vote for each share
held of record by such holder and each holder of Class B Common Stock has the
right to ten votes per share of Class B Common Stock held of record by such
holder on all matters submitted to a vote of the stockholders. The holders of
shares of Class A Common Stock and Class B Common Stock shall at all times
vote together as a single class on all matters (including the election of
directors) submitted to a vote of our stockholders;
provided, however,
that, except as otherwise required by law, holders of shares of Class A Common
Stock and Class B Common Stock shall not be entitled to vote on any amendment
to the Certificate of Incorporation (including any certificate of designation
relating to any series of preferred stock) that relates solely to the terms of
one or more outstanding series of preferred stock if the holders of such
affected series are entitled, either separately or together as a class with
the holders of one or more other such series, to vote thereon pursuant to the
Certificate of Incorporation (including any certificate of designation
relating to
-------------------------------------------------------------------------------
any series of preferred stock). Subject to preferences that may be applicable
to any outstanding Preferred Stock, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors of
the Company (the "Board") out of funds legally available for that purpose. In
the event of liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities, subject to the prior distribution rights of any
outstanding Preferred Stock. The Common Stock has no preemptive or conversion
rights or other subscription rights. The Class B Common Stock will be
convertible into shares of Class A Common Stock on a one-to-one basis at the
option of the holders of the Class B Common Stock at any time upon written
notice to Fisker. In addition, the Class B Common Stock will automatically
convert into shares of Class A Common Stock immediately prior to the close of
business on the earliest to occur of certain events specified in the
Certificate of Incorporation.
Preferred Stock
The Board has the authority, without further action by the stockholders, to
issue up to 15,000,000 shares of Preferred Stock, in one or more series. The
Board also has the authority to designate the rights, preferences, privileges
and restrictions of each such series, including dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting any
series.
The Certificate of Incorporation provides that shares of Preferred Stock may
be issued from time to time in one or more series. The Board is authorized to
fix the designation, vesting, powers (including voting powers), preferences
and relative, participating, optional or other rights (and the qualifications,
limitations or restrictions thereof) of the shares of each such series and to
increase (but not above the total number of authorized shares of the class) or
decrease (but not below the number of shares of such series then outstanding)
the number of shares of any such series. The number of authorized shares of
Preferred Stock may also be increased or decreased (but not below the number
of shares thereof then outstanding) by the affirmative vote of the holders of
a majority of the voting power of all the then-outstanding shares of our
capital stock entitled to vote thereon, without a separate vote of the holders
of the Preferred Stock or any series thereof, unless a vote of any such
holders is required pursuant to the terms of any certificate of designation
designating a series of Preferred Stock.
The Board will be able to, subject to limitations prescribed by Delaware law,
without stockholder approval, issue Preferred Stock with voting and other
rights that could adversely affect the voting power and other rights of the
holders of the Common Stock and could have anti-takeover effects. The ability
of the Board to issue Preferred Stock without stockholder approval, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, have the effect of delaying,
deferring or preventing a change of control of the Company or the removal of
our management and may adversely affect the market price of Class A Common
Stock and the voting and other rights of the holders of the Company. As of
December 31, 2023, there were no outstanding shares of Preferred Stock.
Warrants
As of December 31, 2023, there were Magna Warrants (as defined below)
outstanding to purchase an aggregate of 19,474,454 shares of Class A Common
Stock.
Magna Warrants
On October 29, 2020, the Company issued warrants exercisable for up to
19,474,454 shares of the Company's Class A Common Stock to Magna International
Inc. (the "Magna Warrants"), subject to adjustment, in a private placement
pursuant to the exemption from the registration requirements of the Securities
Act provided by Section 4(a)(2) of the Securities Act. The Magna Warrants were
issued in connection with a Cooperation Agreement entered into by the Company
and Magna International Inc., the holder of the Magna Warrants (the "Holder"),
dated October 15, 2020.
Magna has 19,474,454 vested and exercisable warrants to acquire underlying
Class A Common Stock as of
December 31, 2023
, none of which are exercised.
-------------------------------------------------------------------------------
The exercise price for the Magna Warrants is $0.01 per share of Class A Common
Stock. The Magna Warrants may be exercised at the election of the Holder, in
whole but not in part, by the tender to the Company of a notice of exercise.
The Magna Warrants will expire on October 29, 2030.
Series A-1 and B-1 2025 Notes
On July 10, 2023, the Company entered into a purchase agreement (as amended,
modified, waved from time to time, the "Original Purchase Agreement") with an
investor for a registered direct offering of $340,000,000 in aggregate
principal amount of Series A-1 senior convertible notes (the "Series A-1 2025
Notes"). The Series A-1 2025 Notes have an original issue discount of
approximately twelve percent (12%) resulting in gross proceeds to the Company
of $300,000,000. On September 29, 2023, pursuant to the terms of the Original
Purchase Agreement, the Company issued $170,000,000 of additional notes, as
Series B-1 senior convertible notes due 2025 (the "Series B-1 2025 Notes") in
a registered direct offering to the investor. The Series B-1 2025 Notes were
issued at an original issue discount of approximately twelve percent (12%)
resulting in gross proceeds to the Company of $150,000,000. All amounts due
under the Series A-1 and B-1 2025 Notes are convertible at any time, in whole
or in part, at the investor's option, into shares of our Class A Common Stock,
at initial conversion prices of $7.80 (for the Series A-1 2025 Notes) and
$7.5986 (for the Series B-1 2025 Notes), which conversion price is subject to
certain limitations. If an event of default has occurred under the Notes, the
investor may alternatively elect to convert the Notes (subject to an
additional 25% redemption premium) at the "Alternate Conversion Price" equal
to the lower of:
.
the fixed conversion price then in effect; and
.
80% of the lower of:
.
the volume weighted average price of our common stock on the trading day
immediately prior to such conversion; and
.
the average volume weighted average price of our common stock during the five
trading days immediately prior to such conversion.
The Series A-1 and B-1 2025 Notes were offered pursuant to a prospectus
supplement to our shelf registration statement on Form S-3 (Registration No.
333-261875).
The Series A-1 and B-1 2025 Notes were issued as senior unsecured obligations
of the Company pursuant to that certain indenture dated July 11, 2023, by and
between the Company and Wilmington Savings Fund Society, FSB, as the trustee,
as supplemented by that certain First Supplemental Indenture and Second
Supplemental Indenture, respectively.
2026 Notes
In August 2021, the Company issued an aggregate of $667.5 million principal
amount of 2.50% convertible senior notes due in September 2026 (the "2026
Notes") in a private offering to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, as amended. The 2026 Notes have
been designated as green bonds, whose proceeds will be allocated in accordance
with the Company's green bond framework. The 2026 Notes consisted of a $625.0
million initial placement and an over-allotment option that provided the
initial purchasers of the 2026 Notes with the option to purchase an additional
$100.0 million aggregate principal amount of the 2026 Notes, of which $42.5
million was exercised. The 2026 Notes were issued pursuant to an indenture
dated August 17, 2021. The proceeds from the issuance of the 2026 Notes were
$562.2 million, net of debt issuance costs and cash used to purchase the
capped call transactions ("2026 Capped Call Transactions") discussed below.
The debt issuance costs are amortized to interest expense.
The 2026 Notes are unsecured obligations which bear regular interest at 2.50%
annually and will be payable semiannually in arrears on March 15 and September
15 of each year, beginning on March 15, 2022. The 2026 Notes will mature on
September 15, 2026, unless repurchased, redeemed, or converted in accordance
with their terms prior to such date. The 2026 Notes are convertible into cash,
shares of our Class A Common Stock, or a combination of cash and shares of our
Class A Common Stock, at the Company's election, at an initial conversion rate
of 50.7743 shares of Class A Common Stock per $1,000 principal amount of 2026
Notes, which is equivalent to an initial
-------------------------------------------------------------------------------
conversion price of approximately $19.70 per share of our Class A Common
Stock. The conversion rate is subject to customary adjustments for certain
events as described in the indenture governing the 2026 Notes. The Company may
redeem for cash all or any portion of the 2026 Notes, at our option, on or
after September 20, 2024 if the last reported sale price of our Class A Common
Stock has been at least 130% of the conversion price then in effect for at
least 20 trading days at a redemption price equal to 100% of the principal
amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to,
but excluding, the redemption date.
Holders of the 2026 Notes may convert all or a portion of their 2026 Notes at
their option prior to June 15, 2026, in multiples of $1,000 principal amounts,
only under the following circumstances:
.
during any calendar quarter commencing after the calendar quarter ending on
September 30, 2021 (and only during such calendar quarter), if the last
reported sale price of the Class A Common Stock for at least 20 trading days
(whether or not consecutive) during a period of 30 consecutive trading days
ending on, and including, the last trading day of the immediately preceding
calendar quarter is greater than or equal to 130% of the conversion price on
each applicable trading day;
.
during the five-business day period after any ten consecutive trading day
period (the "measurement period") in which the trading price per $1,000
principal amount of the 2026 Notes for each trading day of the measurement
period was less than 98% of the product of the last reported sale price of our
Class A Common Stock and the applicable conversion rate of the 2026 Notes on
such trading day;
.
if the Company calls the 2026 Notes for redemption, at any time prior to the
close of business on the scheduled trading day immediately preceding the
redemption date, but only with respect to the notes called (or deemed called)
for redemption; or
.
on the occurrence of specified corporate events.
On or after June 15, 2026, the 2026 Notes are convertible at any time until
the close of business on the second scheduled trading day immediately
preceding the maturity date. Holders of the 2026 Notes who convert the 2026
Notes in connection with a make-whole fundamental change, as defined in the
indenture governing the 2026 Notes, or in connection with a redemption may be
entitled to an increase in the conversion rate. Additionally, in the event of
a fundamental change, holders of the 2026 Notes may require us to repurchase
all or a portion of the 2026 Notes at a price equal to 100% of the principal
amount of 2026 Notes, plus any accrued and unpaid interest to, but excluding,
the fundamental change repurchase date.
No sinking fund is provided for the 2026 Notes, which means that the Company
is not required to redeem or retire them periodically.
In connection with the offering of the 2026 Notes, the Company entered into
the 2026 Capped Call Transactions with certain counterparties at a net cost of
$96.8 million. The 2026 Capped Call Transactions are purchased capped call
options on 33.9 million shares of Class A Common Stock, that, if exercised,
can be net share settled, net cash settled, or settled in a combination of
cash or shares consistent with the settlement elections made with respect to
the 2026 Notes if converted. The cap price is initially $32.57 per share of
the Company's Class A Common Stock and subject to certain adjustments under
the terms of the 2026 Capped Call Transactions. The exercise price is $19.70
per share of Class A Common Stock, subject to customary anti-dilution
adjustments that mirror corresponding adjustments for the 2026 Notes.
The 2026 Capped Call Transactions are intended to reduce potential dilution to
holders of our Class A Common Stock upon conversion of the 2026 Notes and/or
offset any cash payments the Company is required to make in excess of the
principal amount, as the case may be, with such reduction or offset subject to
a cap.
Delaware Anti-Takeover Law and Certificate of Incorporation and Bylaw Provisions
Under Section 203 of the DGCL, the Company will be prohibited from engaging in
any business combination with any stockholder for a period of three years
following the time that such stockholder (the "interested stockholder") came
to own at least 15% of our outstanding voting stock (the "acquisition"),
except if:
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.
the Board approved the acquisition prior to its consummation;
.
the interested stockholder owned at least 85% of the outstanding voting stock
upon consummation of the acquisition; or
.
the business combination is approved by the Board, and by a 2/3 majority vote
of the other stockholders in a meeting.
Generally, a "business combination" includes any merger, consolidation, asset
or stock sale or certain other transactions resulting in a financial benefit
to the interested stockholder. Subject to certain exceptions, an "interested
stockholder" is a person who, together with that person's affiliates and
associates, owns, or within the previous three years owned, 15% or more of our
voting stock.
Under certain circumstances, declining to opt out of Section 203 of the DGCL
will make it more difficult for a person who would be an "interested
stockholder" to effect various business combinations with the Company for a
three-year period. This may encourage companies interested in acquiring the
Company to negotiate in advance with the Board because the stockholder
approval requirement would be avoided if the Board approves the acquisition
which results in the stockholder becoming an interested stockholder. This may
also have the effect of preventing changes in the Board and may make it more
difficult to accomplish transactions which stockholders may otherwise deem to
be in their best interests.
Written Consent by Stockholders
Under the Certificate of Incorporation, subject to the rights of any series of
Preferred Stock then outstanding, any action required or permitted to be taken
by stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing by such
stockholders.
Special Meeting of Stockholders
Under the Certificate of Incorporation, special meetings of stockholders may
be called only by the chairperson of the Board, the chief executive officer or
the Board acting 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, and may not be called by any other person
or persons. Only such business shall be considered at a special meeting of
stockholders as shall have been stated in the notice for such meeting.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
Under the Certificate of Incorporation, advance notice of stockholder
nominations for the election of directors and of business to be brought by
stockholders before any meeting of stockholders shall be given in the manner
and to the extent provided in the Bylaws.
Transfer Agent and Registrar
The transfer agent for our Class A Common Stock is Computershare Trust Company
N.A. The transfer agent's telephone number and address is (303) 262-0678 and
350 Indiana Street, Suite 750, Golden, Colorado 80901.
SERIES A-1 SENIOR CONVERTIBLE NOTE THE PRINCIPAL AMOUNT REPRESENTED BY THIS
NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE
LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE. THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT
("OID"). PURSUANT TO TREASURY REGULATION (s)1.1275-3(b)(1), COREY
MACGILLIVRAY, A REPRESENTATIVE OF THE COMPANY HEREOF WILL, BEGINNING TEN DAYS
AFTER THE ISSUANCE DATE OF THIS NOTE, PROMPTLY MAKE AVAILABLE TO THE HOLDER
UPON REQUEST THE INFORMATION DESCRIBED IN TREASURY REGULATION (s)1.1275-3(b)(1)(
i). THE COMPANY'S CHIEF FINANCIAL OFFICER MAY BE REACHED AT TELEPHONE NUMBER
(833) 434-7537. FISKER INC. Series A-1 SENIOR UNSECURED CONVERTIBLE NOTE
Issuance Date: July 11, 2023 Original Principal Amount: U.S. $340,000,000 FOR
VALUE RECEIVED, Fisker Inc., a Delaware corporation (the "Company"), hereby
promises to pay to the order of CVI Investments, Inc. or its registered
assigns ("Holder") the amount set forth above as the Original Principal Amount
(as reduced pursuant to the terms hereof pursuant to redemption, conversion or
otherwise, the "Principal") when due, whether upon the Maturity Date, on any
Installment Date with respect to the Installment Amount due on such
Installment Date (each as defined below), or upon acceleration, redemption or
otherwise (in each case in accordance with the terms hereof) and upon the
occurrence and continuance of an Event of Default (as defined below) to pay
interest ("Interest") on any outstanding Principal at the applicable Default
Rate (as defined below) from the date set forth above as the Issuance Date
(the "Issuance Date") until the same becomes due and payable, whether upon the
Maturity Date, on any Installment Date with respect to the Installment Amount
due on such Installment Date, or upon acceleration, conversion, redemption or
otherwise (in each case in accordance with the terms hereof). This Series A-1
Senior Unsecured Convertible Note (including all Senior Unsecured Convertible
Notes issued in exchange, transfer or replacement hereof, this "Note") is one
of an issue of Senior Unsecured Convertible Notes (collectively, the "Notes",
and such other Senior Unsecured Convertible Notes, the "Other Notes") issued
pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated
as of July 10, 2023 (the "Subscription Date"), by and among the Company and
the investors (the "Buyers") referred to therein, as amended from time to time
(the "Securities Purchase Agreement"), (ii) the Indenture, (iii) a
Supplemental Indenture, and (iv) the Company's Registration Statement on Form
S-3 (File number 333-261875) (the "Registration Statement"). Certain
capitalized terms used herein are defined in Section 30.
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1. PAYMENTS OF PRINCIPAL. On each Installment Date, the Company shall pay to
the Holder an amount equal to the Installment Amount due on such Installment
Date in accordance with Section 8. On the Maturity Date, the Company shall pay
to the Holder an amount in cash (excluding any amounts paid in shares of
Common Stock on the Maturity Date in accordance with Section 8) representing
all outstanding Principal, accrued and unpaid Interest and accrued and unpaid
Late Charges (as defined in Section 23(c)) on such Principal and Interest.
Other than as specifically permitted or required by this Note, the Company may
not prepay any portion of the outstanding Principal, accrued and unpaid
Interest or accrued and unpaid Late Charges on Principal and Interest, if any.
Notwithstanding anything herein to the contrary, with respect to any
conversion or redemption hereunder, as applicable, the Company shall convert
or redeem, as applicable, First, all accrued and unpaid Late Charges on any
Principal and Interest hereunder and under any other Notes held by the Holder
and all other amounts owed to the Holder under any other Transaction Document,
Second, all accrued and unpaid Interest, if any, hereunder and under any Other
Notes held by such Holder, Third, all other amounts (other than Principal)
outstanding under any Other Notes held by such Holder and, Fourth, all
Principal outstanding hereunder and under any Other Notes held by such Holder,
in each case, allocated pro rata among this Note and such Other Notes held by
such Holder. 2. INTEREST; DEFAULT RATE. No Interest shall accrue hereunder
unless and until an Event of Default (as defined below) has occurred. From and
after the occurrence and during the continuance of any Event of Default,
Interest shall accrue hereunder at eighteen percent (18.0%) per annum (the
"Default Rate") and shall be computed on the basis of a 360-day year and
twelve 30-day months, shall compound each calendar month and shall be payable
in arrears on the first Trading Day of each such calendar month in which
Interest accrues hereunder (each, an "Interest Date"). Accrued and unpaid
Interest, if any, shall also be payable by way of inclusion of such Interest
in the Conversion Amount (as defined below) on each Conversion Date (as
defined below) in accordance with in accordance with Section 3(b)(i) or upon
any redemption in accordance with Section 11 or any required payment upon any
Bankruptcy Event of Default (as defined in Section 4(a) below). In the event
that such Event of Default is subsequently cured (and no other Event of
Default then exists (including, without limitation, for the Company's failure
to pay such Interest at the Default Rate on the applicable Interest Date,
unless waived in writing by the Holder)), the adjustment referred to in the
preceding sentence shall cease to be effective as of the calendar day
immediately following the date of such cure or waiver; provided that the
Interest as calculated and unpaid at such increased rate during the
continuance of such Event of Default shall continue to apply to the extent
relating to the days after the occurrence of such Event of Default through and
including the date of such cure or waiver of such Event of Default, unless
waived in writing by the Holder. 3. CONVERSION OF NOTES. At any time after the
Issuance Date, this Note shall be convertible into validly issued, fully paid
and non-assessable shares of Common Stock (as defined below), on the terms and
conditions set forth in this Section 3. (a) Conversion Right. Subject to the
provisions of Section 3(d), at any time or times on or after the Issuance
Date, the Holder shall be entitled to convert any portion of the outstanding
and unpaid Conversion Amount (as defined below) into validly issued, fully
paid and non-assessable shares of Common Stock in accordance with Section
3(c), at the Conversion Rate (as defined below). The Company shall not issue
any fraction of a share of Common Stock upon any conversion. If the issuance
would result in the issuance of a fraction of a share of Common Stock, the
Company shall round such fraction of a share of Common Stock up to the nearest
whole share. The Company shall pay any and all transfer, stamp, issuance and
similar taxes, costs and expenses (including, without limitation, fees and
expenses of the Transfer Agent (as defined below)) that may be payable with
respect to the issuance and delivery of Common Stock upon conversion of any
Conversion Amount.
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(b) Conversion Rate. The number of shares of Common Stock issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) shall be
determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(the "Conversion Rate"). (i) "Conversion Amount" means the sum of (x) portion
of the Principal to be converted, redeemed or otherwise with respect to which
this determination is being made and (y) all accrued and unpaid Interest with
respect to such portion of the Principal amount and accrued and unpaid Late
Charges with respect to such portion of such Principal and such Interest, if
any. (ii) "Conversion Price" means, as of any Conversion Date or other date of
determination, $7.80, subject to adjustment as provided herein. (c) Mechanics
of Conversion. (i) Optional Conversion. To convert any Conversion Amount into
shares of Common Stock on any date (a "Conversion Date"), the Holder shall
deliver (whether via electronic mail or as otherwise provided in Section
23(a)), for receipt on or prior to 11:59 p.m., New York time, on such date, a
copy of an executed notice of conversion in the form attached hereto as
Exhibit I (each, a "Conversion Notice") to the Company and the Trustee. If
required by Section 3(c)(iii), within two (2) Trading Days following a
conversion of this Note as aforesaid, the Holder shall surrender this Note to
a nationally recognized overnight delivery service for delivery to the Company
(or an indemnification undertaking with respect to this Note in the case of
its loss, theft or destruction as contemplated by Section 17(b)). On or before
the first (1st) Trading Day following the date of receipt of a Conversion
Notice, the Company shall transmit by electronic mail an acknowledgment, in
the form attached hereto as Exhibit II, of confirmation of receipt of such
Conversion Notice and representation that such shares of Common Stock may then
be freely resold by the Holder without restriction (each, an "Acknowledgement")
to the Holder, the Trustee and the Company's transfer agent (the "Transfer
Agent") which confirmation shall constitute an instruction to the Transfer
Agent to process such Conversion Notice in accordance with the terms herein.
On or before the second (2nd) Trading Day following the date on which the
Company
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has received a Conversion Notice (or such earlier date as required pursuant to
the 1934 Act or other applicable law, rule or regulation for the settlement of
a trade initiated on the applicable Conversion Date of such shares of Common
Stock issuable pursuant to such Conversion Notice) (the "Share Delivery
Deadline"), the Company shall (1) provided that the Transfer Agent is
participating in The Depository Trust Company's ("DTC") Fast Automated
Securities Transfer Program ("FAST"), credit such aggregate number of shares
of Common Stock to which the Holder shall be entitled pursuant to such
conversion to the Holder's or its designee's balance account with DTC through
its Deposit/Withdrawal at Custodian system or (2) if the Transfer Agent is not
participating in FAST, upon the request of the Holder, issue and deliver (via
reputable overnight courier) to the address as specified in the Conversion
Notice, a certificate, registered in the name of the Holder or its designee,
for the number of shares of Common Stock to which the Holder shall be entitled
pursuant to such conversion. If this Note is physically surrendered for
conversion pursuant to Section 3(c)(iii) and the outstanding Principal of this
Note is greater than the Principal portion of the Conversion Amount being
converted, then the Company shall as soon as practicable and in no event later
than two (2) Business Days after receipt of this Note and at its own expense,
issue and deliver to the Holder (or its designee) a new Note (in accordance
with Section 17(d)) representing the outstanding Principal (and accrued and
unpaid Interest thereon) not converted. The Person or Persons entitled to
receive the shares of Common Stock issuable upon a conversion of this Note
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on the Conversion Date. In the event of a partial
conversion of this Note pursuant hereto, the Principal amount converted shall
be deducted from the Principal outstanding hereunder, including for purposes
of determining Installment Amount(s) relating to the Installment Date(s) as
set forth in the applicable Conversion Notice. (ii) Company's Failure to
Timely Convert. If the Company shall fail, for any reason or for no reason, on
or prior to the applicable Share Delivery Deadline, if the Transfer Agent is
not participating in FAST, to issue and deliver to the Holder (or its
designee) a certificate for the number of shares of Common Stock to which the
Holder is entitled and register such shares of Common Stock on the Company's
share register or, if the Transfer Agent is participating in FAST, to credit
the balance account of the Holder or the Holder's designee with DTC for such
number of shares of Common Stock to which the Holder is entitled upon the
Holder's conversion of this Note (as the case may be) (a "Conversion
Failure"), then, in addition to all other remedies available to the Holder,
(1) the Company shall pay in cash to the Holder on each day after such Share
Delivery Deadline that the issuance of such shares of Common Stock is not
timely effected an amount equal to one percent (1%) of the product of (A) the
sum of the number of shares of Common Stock not issued to the Holder on or
prior to the Share Delivery Deadline and to which the Holder is entitled,
multiplied by (B) any trading price of the Common Stock selected by the Holder
in writing as in effect at any time during the period beginning on the
applicable Conversion Date and ending on the applicable Share Delivery
Deadline and (2) the Holder, upon written notice to the Company, may void its
Conversion Notice with respect to, and retain or have returned (as the case
may be) any portion of this Note that has not been converted pursuant to such
Conversion Notice, provided that the voiding of a Conversion Notice shall not
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affect the Company's obligations to make any payments which have accrued prior
to the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In
addition to the foregoing, if on or prior to the Share Delivery Deadline if
the Transfer Agent is not participating in FAST, the Company shall fail to
issue and deliver to the Holder (or its designee) a certificate and register
such shares of Common Stock on the Company's share register or, if the
Transfer Agent is participating in FAST, the Transfer Agent shall fail to
credit the balance account of the Holder or the Holder's designee with DTC for
the number of shares of Common Stock to which the Holder is entitled upon the
Holder's conversion hereunder or pursuant to the Company's obligation pursuant
to clause (II) below, and if on or after such Share Delivery Deadline the
Holder acquires (in an open market transaction, stock loan or otherwise)
shares of Common Stock corresponding to all or any portion of the number of
shares of Common Stock issuable upon such conversion that the Holder is
entitled to receive from the Company and has not received from the Company in
connection with such Conversion Failure (a "Buy-In"), then, in addition to all
other remedies available to the Holder, the Company shall, within two (2)
Business Days after receipt of the Holder's request and in the Holder's
discretion, either: (I) pay cash to the Holder in an amount equal to the
Holder's total purchase price (including brokerage commissions, stock loan
costs and other out-of-pocket expenses, if any) for the shares of Common Stock
so acquired (including, without limitation, by any other Person in respect, or
on behalf, of the Holder) (the "Buy-In Price"), at which point the Company's
obligation to so issue and deliver such certificate (and to issue such shares
of Common Stock) or credit the balance account of such Holder or such Holder's
designee, as applicable, with DTC for the number of shares of Common Stock to
which the Holder is entitled upon the Holder's conversion hereunder (as the
case may be) (and to issue such shares of Common Stock) shall terminate, or
(II) promptly honor its obligation to so issue and deliver to the Holder a
certificate or certificates representing such shares of Common Stock or credit
the balance account of such Holder or such Holder's designee, as applicable,
with DTC for the number of shares of Common Stock to which the Holder is
entitled upon the Holder's conversion hereunder (as the case may be) and pay
cash to the Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (x) such number of shares of Common Stock multiplied
by (y) the lowest Closing Sale Price of the Common Stock on any Trading Day
during the period commencing on the date of the applicable Conversion Notice
and ending on the date of such issuance and payment under this clause (II)
(the "Buy-In Payment Amount"). Nothing shall limit the Holder's right to
pursue any other remedies available to it hereunder, at law or in equity,
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock (or to electronically deliver
such shares of Common Stock) upon the conversion of this Note as required
pursuant to the terms hereof. (iii) Registration; Book-Entry. The Trustee
shall maintain a register (the "Register") for the recordation of the names
and addresses of the holders of each Note and the principal amount of the
Notes held by such holders (the "Registered Notes") as provided in Section
2.06 of the Indenture. The entries in the Register shall be conclusive and
binding for all purposes absent manifest error. The Company and the holders of
the Notes shall treat each Person whose name is recorded in the Register as
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the owner of a Note for all purposes (including, without limitation, the right
to receive payments of Principal and Interest hereunder) notwithstanding
notice to the contrary. A Registered Note may be assigned, transferred or sold
in whole or in part only by registration of such assignment or sale on the
Register. Upon its receipt of a written request to assign, transfer or sell
all or part of any Registered Note by the holder thereof, the Trustee shall
record the information contained therein in the Register and issue one or more
new Registered Notes (to be executed by the Company and authenticated and
delivered by the Trustee) in the same aggregate principal amount as the
principal amount of the surrendered Registered Note in the name of the
designated assignee or transferee pursuant to Section 16, provided that if the
Company or the Trustee does not so record an assignment, transfer or sale (as
the case may be) of all or part of any Registered Note within two (2) Business
Days of such a request, then the Register shall be automatically deemed
updated to reflect such assignment, transfer or sale (as the case may be).
Every Registered Note presented or surrendered for registration of transfer,
or for exchange or redemption shall (if so required by the Company or the
Registrar for such Notes presented) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Registrar duly executed, by the holder thereof or his attorney duly authorized
in writing. Notwithstanding anything to the contrary set forth in this Section
3 or in the Indenture or in any applicable Supplemental Indenture, following
conversion of any portion of this Note in accordance with the terms hereof,
the Holder shall not be required to physically surrender this Note to the
Company unless (A) the full Conversion Amount represented by this Note is
being converted (in which event this Note shall be delivered to the Company
following conversion thereof as contemplated by Section 3(c)(i)) or (B) the
Holder has provided the Company with prior written notice (which notice may be
included in a Conversion Notice) requesting reissuance of this Note upon
physical surrender of this Note. The Holder, the Trustee and the Company shall
maintain records showing the Principal, Interest and Late Charges converted
and/or paid (as the case may be) and the dates of such conversions, and/or
payments (as the case may be) or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require physical
surrender of this Note upon conversion. If the Company does not update the
Register to record such Principal, Interest and Late Charges converted and/or
paid (as the case may be) and the dates of such conversions, and/or payments
(as the case may be) within two (2) Business Days of such occurrence, then the
Register shall be automatically deemed updated to reflect such occurrence.
(iv) Pro Rata Conversion; Disputes. In the event that the Company receives a
Conversion Notice from more than one holder of Notes for the same Conversion
Date and the Company can convert some, but not all, of such portions of the
Notes submitted for conversion, the Company, subject to Section 3(d), shall
convert from each holder of Notes electing to have Notes converted on such
date a pro rata amount of such holder's portion of its Notes submitted for
conversion based on the principal amount of Notes submitted for conversion on
such date by such holder relative to the aggregate principal amount of all
Notes submitted for conversion on such date. In the event of a dispute as to
the number of shares of Common Stock issuable to the Holder in connection with
a conversion of this Note, the Company shall issue to the Holder the number of
shares of Common Stock not in dispute and resolve such dispute
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in accordance with Section 22. If a Conversion Notice delivered to the Company
would result in a breach of Section 3(d) below, and the Holder does not elect
in writing to withdraw, in whole, such Conversion Notice, the Company shall
hold such Conversion Notice in abeyance until such time as such Conversion
Notice may be satisfied without violating Section 3(d) below (with such
calculations thereunder made as of the date such Conversion Notice was
initially delivered to the Company). (d) Limitations on Conversions. (i)
Beneficial Ownership. The Company shall not effect the conversion of any
portion of this Note, and the Holder shall not have the right to convert any
portion of this Note pursuant to the terms and conditions of this Note and any
such conversion shall be null and void and treated as if never made, to the
extent that after giving effect to such conversion, the Holder together with
the other Attribution Parties collectively would beneficially own in excess of
4.99% (the "Maximum Percentage") of the shares of Common Stock outstanding
immediately after giving effect to such conversion. For purposes of the
foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by the Holder and the other Attribution Parties shall
include the number of shares of Common Stock held by the Holder and all other
Attribution Parties plus the number of shares of Common Stock issuable upon
conversion of this Note with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would
be issuable upon (A) conversion of the remaining, nonconverted portion of this
Note beneficially owned by the Holder or any of the other Attribution Parties
and (B) exercise or conversion of the unexercised or nonconverted portion of
any other securities of the Company (including, without limitation, any
convertible notes or convertible preferred stock or warrants) beneficially
owned by the Holder or any other Attribution Party subject to a limitation on
conversion or exercise analogous to the limitation contained in this Section
3(d)(i). For purposes of this Section 3(d)(i), beneficial ownership shall be
calculated in accordance with Section 13(d) of the 1934 Act. For purposes of
determining the number of outstanding shares of Common Stock the Holder may
acquire upon the conversion of this Note without exceeding the Maximum
Percentage, the Holder may rely on the number of outstanding shares of Common
Stock as reflected in (x) the Company's most recent Annual Report on Form
10-K, Quarterly Report on Form 10-Q, Current Report on Form 8- K or other
public filing with the SEC, as the case may be, (y) a more recent public
announcement by the Company or (z) any other written notice by the Company or
the Transfer Agent, if any, setting forth the number of shares of Common Stock
outstanding (the "Reported Outstanding Share Number"). If the Company receives
a Conversion Notice from the Holder at a time when the actual number of
outstanding shares of Common Stock is less than the Reported Outstanding Share
Number, the Company shall notify the Holder in writing of the number of shares
of Common Stock then outstanding and, to the extent that such Conversion
Notice would otherwise cause the Holder's beneficial ownership, as determined
pursuant to this Section 3(d)(i), to exceed the Maximum Percentage, the Holder
must notify the Company of a reduced number of shares of Common Stock to be
purchased pursuant to such Conversion Notice. For any reason
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at any time, upon the written (which may be an e-mail) or oral request of the
Holder, the Company shall within one (1) Business Day confirm orally and in
writing or by electronic mail to the Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Note, by the Holder and
any other Attribution Party since the date as of which the Reported
Outstanding Share Number was reported. In the event that the issuance of
shares of Common Stock to the Holder upon conversion of this Note results in
the Holder and the other Attribution Parties being deemed to beneficially own,
in the aggregate, more than the Maximum Percentage of the number of
outstanding shares of Common Stock (as determined under Section 13(d) of the
1934 Act), the number of shares so issued by which the Holder's and the other
Attribution Parties' aggregate beneficial ownership exceeds the Maximum
Percentage (the "Excess Shares") shall be deemed null and void and shall be
cancelled ab initio, and the Holder shall not have the power to vote or to
transfer the Excess Shares. Upon delivery of a written notice to the Company,
the Holder may from time to time increase (with such increase not effective
until the sixty-first (61st) day after delivery of such notice) or decrease
the Maximum Percentage to any other percentage not in excess of 9.99% as
specified in such notice; provided that (i) any such increase in the Maximum
Percentage will not be effective until the sixty-first (61st) day after such
notice is delivered to the Company and (ii) any such increase or decrease will
apply only to the Holder and the other Attribution Parties and not to any
other holder of Notes (each, an "Other Holder", and collectively, the "Other
Holders") that is not an Attribution Party of the Holder. For purposes of
clarity, the shares of Common Stock issuable pursuant to the terms of this
Note in excess of the Maximum Percentage shall not be deemed to be
beneficially owned by the Holder for any purpose including for purposes of
Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to
convert this Note pursuant to this paragraph shall have any effect on the
applicability of the provisions of this paragraph with respect to any
subsequent determination of convertibility. The provisions of this paragraph
shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 3(d)(i) to the extent necessary to
correct this paragraph (or any portion of this paragraph) which may be
defective or inconsistent with the intended beneficial ownership limitation
contained in this Section 3(d)(i) or to make changes or supplements necessary
or desirable to properly give effect to such limitation. The limitation
contained in this paragraph may not be waived and shall apply to a successor
holder of this Note. (ii) Principal Market Regulation The Company shall not
issue any shares of Common Stock upon conversion of this Note or otherwise
pursuant to the terms of this Note if the issuance of such shares of Common
Stock would exceed the aggregate number of shares of Common Stock which the
Company may issue upon conversion of the Notes or otherwise pursuant to the
terms of the Notes without breaching the Company's obligations under the rules
or regulations of the Principal Market (the number of shares which may be
issued without violating such rules and regulations, including rules related
to the aggregate of offerings under Section 312.03(c) of the NYSE Listed
Company Manual, the "Exchange Cap"), except that such limitation shall not
apply in the event that the Company (A) obtains the approval
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of its stockholders as required by the applicable rules of the Principal
Market for issuances of shares of Common Stock in excess of such amount or (B)
obtains a written opinion from counsel to the Company that such approval is
not required, which opinion shall be reasonably satisfactory to the Holder.
Until such approval or such written opinion is obtained, no Buyer shall be
issued in the aggregate, upon conversion of any Notes or otherwise pursuant to
the terms of the Notes, shares of Common Stock in an amount greater than the
product of (i) the Exchange Cap as of the Issuance Date multiplied by (ii) the
quotient of (1) the original principal amount of Notes issued to such Buyer
pursuant to the Securities Purchase Agreement on the Closing Date (as defined
in the Securities Purchase Agreement) divided by (2) the aggregate original
principal amount of all Notes issued to the Buyers pursuant to the Securities
Purchase Agreement on the Closing Date (with respect to each Buyer, the
"Exchange Cap Allocation"). In the event that any Buyer shall sell or
otherwise transfer any of such Buyer's Notes, the transferee shall be
allocated a pro rata portion of such Buyer's Exchange Cap Allocation with
respect to such portion of such Notes so transferred, and the restrictions of
the prior sentence shall apply to such transferee with respect to the portion
of the Exchange Cap Allocation so allocated to such transferee. Upon
conversion in full of a holder's Notes, the difference (if any) between such
holder's Exchange Cap Allocation and the number of shares of Common Stock
actually issued to such holder upon such holder's conversion in full of such
Notes shall be allocated, to the respective Exchange Cap Allocations of the
remaining holders of Notes on a pro rata basis in proportion to the shares of
Common Stock underlying the Notes then held by each such holder of Notes. At
any time after the three month anniversary of the Initial Closing Date (as
defined in the Securities Purchase Agreement), in the event that the Company
is prohibited from issuing shares of Common Stock pursuant to this Section
3(d)(i) (the "Exchange Cap Shares"), the Company shall pay cash in exchange
for the cancellation of such portion of this Note convertible into such
Exchange Cap Shares at a price equal to the sum of (i) the product of (x) such
number of Exchange Cap Shares and (y) the greatest Closing Sale Price of the
Common Stock on any Trading Day during the period commencing on the date the
Holder delivers the applicable Conversion Notice with respect to such Exchange
Cap Shares to the Company and ending on the date of such issuance and payment
under this Section 3(d)(i) and (ii) to the extent of any Buy-In related
thereto, any Buy-In Payment Amount, any brokerage commissions and other
out-of-pocket expenses, if any, of the Holder incurred in connection therewith
(collectively, the "Exchange Cap Share Cancellation Amount"). (e) Right of
Alternate Conversion Upon a Triggering Event. (i) General. Upon the occurrence
of a Triggering Event with respect to this Note or any Other Note, the Company
shall within two (2) Business Days deliver written notice thereof via
electronic mail and overnight courier (with next day delivery specified) (an
"Triggering Event Notice") to the Holder and the Trustee. At any time after
the earlier of the Holder's receipt of an Triggering Event Notice and the
Holder becoming aware of an Triggering Event (such earlier date, the
"Triggering Event Right Commencement Date") and ending (such ending date, the
"Triggering Event Right Expiration Date", and each such period, an "Triggering
Event Redemption Right
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Period") on the twentieth (20th) Trading Day after the later of (x) the date
such Triggering Event is cured and (y) the Holder's receipt of an Triggering
Event Notice that includes (I) a reasonable description of the applicable
Triggering Event, (II) a certification as to whether, in the opinion of the
Company, such Triggering Event is capable of being cured and, if applicable, a
reasonable description of any existing plans of the Company to cure such
Triggering Event and (III) a certification as to the date the Triggering Event
occurred and, if cured on or prior to the date of such Triggering Event
Notice, the applicable Triggering Event Right Expiration Date, but subject to
Section 3(d), (regardless of whether such Triggering Event has been cured, or
if the Company has delivered a Triggering Notice to the Holder or otherwise
notified the Company that a Triggering Event has occurred), the Holder may, at
the Holder's option, convert (each, an "Alternate Conversion", and the date of
each such Alternate Conversion, an "Alternate Conversion Date") all, or any
part of, the Conversion Amount (such portion of the Conversion Amount subject
to such Alternate Conversion, each, an "Alternate Conversion Amount") into
shares of Common Stock at the Alternate Conversion Price. (ii) Mechanics of
Alternate Conversion. On any Alternate Conversion Date, the Holder may
voluntarily convert any Alternate Conversion Amount pursuant to Section 3(c)
(with "Alternate Conversion Price" replacing "Conversion Price" for all
purposes hereunder with respect to such Alternate Conversion and with
"Redemption Premium of the Conversion Amount" replacing "Conversion Amount" in
clause (x) of the definition of Conversion Rate above with respect to such
Alternate Conversion) by designating in the Conversion Notice delivered
pursuant to this Section 3(e) of this Note that the Holder is electing to use
the Alternate Conversion Price for such conversion. Notwithstanding anything
to the contrary in this Section 3(e), but subject to Section 3(d), until the
Company delivers shares of Common Stock representing the applicable Alternate
Conversion Amount to the Holder, such Alternate Conversion Amount may be
converted by the Holder into shares of Common Stock pursuant to Section 3(c)
without regard to this Section 3(e). 4. RIGHTS UPON EVENT OF DEFAULT. (a)
Event of Default. Each of the following events shall constitute an "Event of
Default" and each of the events in clauses (vii), (viii) and (ix) shall
constitute a "Bankruptcy Event of Default": (i) the suspension from trading or
the failure of the Common Stock to be trading or listed (as applicable) on an
Eligible Market for a period of five (5) consecutive Trading Days; (ii) the
Company's (A) failure to cure a Conversion Failure by delivery of the required
number of shares of Common Stock within five (5) Trading Days after the
applicable Conversion Date or exercise date (as the case may be) or (B)
notice, written or oral, to any holder of the Notes, including, without
limitation, by way of public announcement or through any of its agents, at any
time, of its intention not to comply, as required, with a request for
conversion of any Notes into shares of Common Stock that is requested in
accordance with the provisions of the Notes, other than pursuant to Section
3(d);
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(iii) except to the extent the Company is in compliance with Section 10(b)
below, at any time following the tenth (10th) consecutive day that the
Holder's Authorized Share Allocation (as defined in Section 10(a) below) is
less than the Required Reserve Amount (without regard to any limitations on
conversion set forth in Section 3(d) or otherwise); (iv) the Company's failure
to pay to the Holder any amount of Principal, Interest, Late Charges or other
amounts when and as due under this Note (including, without limitation, the
Company's failure to pay any redemption payments or amounts hereunder) or any
other Transaction Document (as defined in the Securities Purchase Agreement)
or any other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby, except, in
the case of a failure to pay Interest and Late Charges when and as due, in
which case only if such failure remains uncured for a period of at least three
(3) Trading Days; (v) the Company fails to remove any restrictive legend on
any certificate or any shares of Common Stock issued to the Holder upon
conversion or exercise (as the case may be) of any Securities (as defined in
the Securities Purchase Agreement) acquired by the Holder under the Securities
Purchase Agreement (including this Note) as and when required by such
Securities or the Securities Purchase Agreement, unless otherwise then
prohibited by applicable federal securities laws, and any such failure remains
uncured for at least five (5) Trading Days; (vi) the occurrence of any default
under, redemption of or acceleration prior to maturity of at least an
aggregate of $25,000,000 of Indebtedness (as defined in the Securities
Purchase Agreement) of the Company or any of its Subsidiaries, other than with
respect to any Other Notes; (vii) bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for the relief of debtors shall
be instituted by or against the Company or any Significant Subsidiary and, if
instituted against the Company or any Subsidiary by a third party, shall not
be dismissed within forty-five (45) days of their initiation; (viii) the
commencement by the Company or any Significant Subsidiary of a voluntary case
or proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree, order, judgment or other similar document in respect of
the Company or any Significant Subsidiary in an involuntary case or proceeding
under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy
or insolvency case or proceeding against it, or the filing by it of a petition
or answer or consent seeking reorganization or relief under any applicable
federal, state or foreign law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver,
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liquidator, assignee, trustee, sequestrator or other similar official of the
Company or any Significant Subsidiary or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors,
or the execution of a composition of debts, or the occurrence of any other
similar federal, state or foreign proceeding, or the admission by it in
writing of its inability to pay its debts generally as they become due, the
taking of corporate action by the Company or any Significant Subsidiary in
furtherance of any such action or the taking of any action by any Person to
commence a Uniform Commercial Code foreclosure sale or any other similar
action under federal, state or foreign law against the assets of the Company
or any Significant Subsidiary; (ix) the entry by a court of (i) a decree,
order, judgment or other similar document in respect of the Company or any
Significant Subsidiary of a voluntary or involuntary case or proceeding under
any applicable federal, state or foreign bankruptcy, insolvency, reorganization
or other similar law or (ii) a decree, order, judgment or other similar
document adjudging the Company or any Significant Subsidiary as bankrupt or
insolvent, or approving as properly filed a petition seeking liquidation,
reorganization, arrangement, adjustment or composition of or in respect of the
Company or any Significant Subsidiary under any applicable federal, state or
foreign law, or (iii) a decree, order, judgment or other similar document
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or any Significant Subsidiary or of
any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree, order,
judgment or other similar document or any such other decree, order, judgment
or other similar document unstayed and in effect for a period of forty-five
(45) consecutive days; (x) a final judgment or judgments for the payment of
money aggregating in excess of $25,000,000 are rendered against the Company
and/or any of its Subsidiaries and which judgments are not, within forty-five
(45) days after the entry thereof, bonded, discharged, settled or stayed
pending appeal, or are not discharged within forty- five (45) after the
expiration of such stay; provided, however, any judgment which is covered by
insurance or an indemnity from a credit worthy party shall not be included in
calculating the $25,000,000 amount set forth above so long as the Company
provides the Holder a written statement from such insurer or indemnity
provider (which written statement shall be reasonably satisfactory to the
Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company or such Subsidiary (as the case may be) will receive
the proceeds of such insurance or indemnity within forty-five (45) days of the
issuance of such judgment; (xi) the Company and/or any Subsidiary,
individually or in the aggregate, either (i) fails to pay, when due, or within
any applicable grace period, any payment with respect to any Indebtedness in
excess of $25,000,000 due to any third party (other than, with respect to
unsecured Indebtedness only, payments contested by the Company and/or such
Subsidiary (as the case may be) in good faith by proper proceedings and with
respect to which adequate reserves have been set aside for the payment thereof
in accordance with GAAP) or is otherwise in breach or violation of any
agreement for monies owed or owing in an amount in excess of $25,000,000, which
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breach or violation (i) results in such indebtedness becoming or being
declared due and payable prior to its stated maturity or (ii) constitutes a
failure to pay the principal or interest of any such debt when due and payable
(after giving effect to any applicable grace periods) at its stated maturity,
upon required repurchase, upon declaration of acceleration or otherwise; (xii)
other than as specifically set forth in another clause of this Section 4(a),
the Company or any Subsidiary breaches any representation or warranty, in any
material respect (other than representations or warranties subject to material
adverse effect or materiality, which may not be breached in any respect) or
any covenant or other term or condition of any Transaction Document, except,
in the case of a breach of a covenant or other term or condition that is
curable, only if such breach remains uncured for a period of five (5)
consecutive Trading Days; (xiii) a false or inaccurate certification
(including a false or inaccurate deemed certification) by the Company that
either (A) the Equity Conditions are satisfied, (B) there has been no Equity
Conditions Failure, or (C) as to whether any Event of Default has occurred;
(xiv) any breach or failure in any respect by the Company or any Subsidiary to
comply with any provision of Section 13(a)-(d), (f), (g) or (h) of this Note;
(xv) any Event of Default (as defined in the Other Notes) occurs and is
continuing with respect to any Other Notes. (b) Notice of an Event of Default;
Redemption Right. Upon the occurrence of an Event of Default with respect to
this Note or any Other Note, the Company shall within two (2) Business Days
deliver written notice thereof via electronic mail and overnight courier (with
next day delivery specified) (an "Event of Default Notice") to the Holder and
the Trustee. The obligation of the Company to deliver an Event of Default
Notice is in addition to, and may not be substituted by, the Trustee's
delivery of notice of the same Event of Default to the Holder in accordance
with Section 10.02 of the Indenture. At any time after the earlier of the
Holder's receipt of an Event of Default Notice and the Holder becoming aware
of an Event of Default (such earlier date, the "Event of Default Right
Commencement Date") and ending (such ending date, the "Event of Default Right
Expiration Date", and each such period, an "Event of Default Redemption Right
Period") on the twentieth (20th) Trading Day after the later of (x) the date
such Event of Default is cured and (y) the Holder's receipt of an Event of
Default Notice that includes (I) a reasonable description of the applicable
Event of Default, (II) a certification as to whether, in the opinion of the
Company, such Event of Default is capable of being cured and, if applicable, a
reasonable description of any existing plans of the Company to cure such Event
of Default and (III) a certification as to the date the Event of Default
occurred and, if cured on or prior to the date of such Event of Default
Notice, the applicable Event of Default Right Expiration Date, the Holder may
require the Company to redeem (regardless of whether such Event of Default has
been cured on or prior to the Event of Default Right Expiration Date) all or
any portion of this Note by delivering written notice
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thereof (the "Event of Default Redemption Notice") to the Company and the
Trustee, which Event of Default Redemption Notice shall indicate the portion
of this Note the Holder is electing to redeem. Each portion of this Note
subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the Company at a price equal to the greater of (i) the product of
(A) the Conversion Amount to be redeemed multiplied by (B) the Redemption
Premium and (ii) the product of (X) the Conversion Rate (calculated assuming
an Alternate Conversion as of the date of the Event of Default Redemption
Notice) with respect to the Conversion Amount in effect at such time as the
Holder delivers an Event of Default Redemption Notice multiplied by (Y) the
greatest Closing Sale Price of the Common Stock on any Trading Day during the
period commencing on the date immediately preceding such Event of Default and
ending on the date the Company makes the entire payment required to be made
under this Section 4(b) (the "Event of Default Redemption Price"). Redemptions
required by this Section 4(b) shall be made in accordance with the provisions
of Section 11. To the extent redemptions required by this Section 4(b) are
deemed or determined by a court of competent jurisdiction to be prepayments of
this Note by the Company, such redemptions shall be deemed to be voluntary
prepayments. Notwithstanding anything to the contrary in this Section 3(e),
but subject to Section 3(d), until the Event of Default Redemption Price
(together with any Late Charges thereon) is paid in full, the Conversion
Amount submitted for redemption under this Section 4(b) (together with any
Late Charges thereon) may be converted, in whole or in part, by the Holder
into Common Stock pursuant to the terms of this Note. In the event of a
partial redemption of this Note pursuant hereto, the Principal amount redeemed
shall be deducted from the Principal outstanding hereunder, including for
purposes of determining the Installment Amount(s) relating to the applicable
Installment Date(s) as set forth in the Event of Default Redemption Notice. In
the event of the Company's redemption of any portion of this Note under this
Section 4(b), the Holder's damages would be uncertain and difficult to
estimate because of the parties' inability to predict future interest rates
and the uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any redemption premium due under this
Section 4(b) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder's actual loss of its investment opportunity
and not as a penalty. Any redemption upon an Event of Default shall not
constitute an election of remedies by the Holder, and all other rights and
remedies of the Holder shall be preserved. (c) Mandatory Redemption upon
Bankruptcy Event of Default. Notwithstanding anything to the contrary herein,
and notwithstanding any conversion that is then required or in process, upon
any Bankruptcy Event of Default, whether occurring prior to or following the
Maturity Date, the Company shall immediately pay to the Holder an amount in
cash representing (i) all outstanding Principal, accrued and unpaid Interest
and accrued and unpaid Late Charges on such Principal and Interest, multiplied
by (ii) the Redemption Premium, in addition to any and all other amounts due
hereunder, without the requirement for any notice or demand or other action by
the Holder or any other person or entity, provided that the Holder may, in its
sole discretion, waive such right to receive payment upon a Bankruptcy Event
of Default, in whole or in part, and any such waiver shall not affect any
other rights of the Holder hereunder, including any other rights in respect of
such Bankruptcy Event of Default, any right to conversion, and any right to
payment of the Event of Default Redemption Price or any other Redemption
Price, as applicable.
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5. RIGHTS UPON FUNDAMENTAL TRANSACTION. (a) Assumption. The Company shall not
enter into or be party to a Fundamental Transaction unless (i) the Successor
Entity assumes in writing all of the obligations of the Company under this
Note and the other Transaction Documents in accordance with the provisions of
this Section 5(a) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders (as defined in the Securities
Purchase Agreement) and approved by the Required Holders prior to such
Fundamental Transaction, including agreements to deliver to each holder of
Notes in exchange for such Notes a security of the Successor Entity evidenced
by a written instrument substantially similar in form and substance to the
Notes reasonably satisfactory to the Required Holders, including, without
limitation, having a principal amount and interest rate equal to the principal
amounts then outstanding and the interest rates of the Notes held by such
holder, having similar conversion rights as the Notes and having similar
ranking to the Notes and (ii) the Successor Entity (including its Parent
Entity) is a publicly traded corporation whose common stock is quoted on or
listed for trading on an Eligible Market. Upon the occurrence of any
Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Note and the other Transaction Documents
referring to the "Company" shall refer instead to the Successor Entity), and
may exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Note and the other Transaction Documents
with the same effect as if such Successor Entity had been named as the Company
herein. Upon consummation of a Fundamental Transaction, the Successor Entity
shall deliver to the Holder confirmation that there shall be issued upon
conversion or redemption of this Note at any time after the consummation of
such Fundamental Transaction, in lieu of the shares of Common Stock (or other
securities, cash, assets or other property (except such items still issuable
under Sections 6 and 14, which shall continue to be receivable thereafter))
issuable upon the conversion or redemption of the Notes prior to such
Fundamental Transaction, such shares of the publicly traded common stock (or
their equivalent) of the Successor Entity (including its Parent Entity) which
the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Note been converted immediately prior to such
Fundamental Transaction (without regard to any limitations on the conversion
of this Note), as adjusted in accordance with the provisions of this Note.
Notwithstanding the foregoing, the Holder may elect, at its sole option, by
delivery of written notice to the Company to waive this Section 5(a) to permit
the Fundamental Transaction without the assumption of this Note. The
provisions of this Section 5 shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any
limitations on the conversion of this Note. (b) Notice of a Change of Control;
Redemption Right. No sooner than twenty (20) Trading Days nor later than ten
(10) Trading Days prior to the consummation of a Change of Control (the
"Change of Control Date"), but not prior to the public announcement of such
Change of Control, the Company shall deliver written notice thereof via
electronic mail and overnight courier to the Holder and the Trustee (a "Change
of
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Control Notice"). At any time during the period beginning after the Holder's
receipt of a Change of Control Notice or the Holder becoming aware of a Change
of Control if a Change of Control Notice is not delivered to the Holder in
accordance with the immediately preceding sentence (as applicable) and ending
on twenty (20) Trading Days after the later of (A) the date of consummation of
such Change of Control or (B) the date of receipt of such Change of Control
Notice or (C) the date of the announcement of such Change of Control, the
Holder may require the Company to redeem all or any portion of this Note by
delivering written notice thereof ("Change of Control Redemption Notice") to
the Company and the Trustee, which Change of Control Redemption Notice shall
indicate the Conversion Amount the Holder is electing to redeem. The portion
of this Note subject to redemption pursuant to this Section 5 shall be
redeemed by the Company in cash at a price equal to the greatest of (i) the
product of (w) the Change of Control Redemption Premium multiplied by (y) the
Conversion Amount being redeemed, (ii) the product of (A) the Conversion
Amount being redeemed multiplied by (B) the quotient determined by dividing
(I) the greatest Closing Sale Price of the shares of Common Stock during the
period beginning on the date immediately preceding the earlier to occur of (1)
the consummation of the applicable Change of Control and (2) the public
announcement of such Change of Control and ending on the date the Holder
delivers the Change of Control Redemption Notice by (II) the Conversion Price
then in effect and (iii) the product of (A) the Conversion Amount being
redeemed multiplied by (B) the quotient of (I) the aggregate cash
consideration and the aggregate cash value of any non-cash consideration per
share of Common Stock to be paid to the holders of the shares of Common Stock
upon consummation of such Change of Control (any such non-cash consideration
constituting publicly-traded securities shall be valued at the highest of the
Closing Sale Price of such securities as of the Trading Day immediately prior
to the consummation of such Change of Control, the Closing Sale Price of such
securities on the Trading Day immediately following the public announcement of
such proposed Change of Control and the Closing Sale Price of such securities
on the Trading Day immediately prior to the public announcement of such
proposed Change of Control) divided by (II) the Conversion Price then in
effect (the "Change of Control Redemption Price"). Redemptions required by
this Section 5 shall be made in accordance with the provisions of Section 11
and shall have priority to payments to stockholders in connection with such
Change of Control. To the extent redemptions required by this Section 5(b) are
deemed or determined by a court of competent jurisdiction to be prepayments of
this Note by the Company, such redemptions shall be deemed to be voluntary
prepayments. Notwithstanding anything to the contrary in this Section 5, but
subject to Section 3(d), until the Change of Control Redemption Price
(together with any Late Charges thereon) is paid in full, the Conversion
Amount submitted for redemption under this Section 5(b) (together with any
Late Charges thereon) may be converted, in whole or in part, by the Holder
into Common Stock pursuant to Section 3. In the event of a partial redemption
of this Note pursuant hereto, the Principal amount redeemed shall be deducted
from the Principal outstanding hereunder, including for purposes of
determining the Installment Amount(s) relating to the applicable Installment
Date(s) as set forth in the Change of Control Redemption Notice. In the event
of the Company's redemption of any portion of this Note under this Section
5(b), the Holder's damages would be uncertain and difficult to estimate
because of the parties' inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any Redemption Premium due under this
Section 5(b) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder's actual loss of its investment opportunity
and not as a penalty.
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6. RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS. (a)
Purchase Rights. In addition to any adjustments pursuant to Sections 7 or 14
below, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to all or substantially all of the record holders of
any class of Common Stock (the "Purchase Rights"), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon complete
conversion of this Note (without taking into account any limitations or
restrictions on the convertibility of this Note and assuming for such purpose
that the Note was converted at the Installment Conversion Price assuming an
Installment Date as of the applicable record date) immediately prior to the
date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the
record holders of shares of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights; provided, however, that to the extent
that the Holder's right to participate in any such Purchase Right would result
in the Holder and the other Attribution Parties exceeding the Maximum
Percentage, then such Purchase Right shall be granted, issued or sold to the
Holder, as applicable, with a limitation on conversion and/or exercise, as
applicable, in the form of 3(d)(i) herein, mutatis mutandis; provided, that,
if such Purchase Right (and/or on any subsequent Purchase Right held
similarly) has an expiration date, maturity date or other similar provision,
such term also shall be extended, on a day-by-day basis, by such aggregate
number of days that the exercise or conversion (as applicable) of such
Purchase Right (and/or any subsequent Purchase Right held similarly) (in each
case, without regard to the limitation on conversion or exercise thereto, as
applicable) would result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage. (b) Other Corporate Events. In addition to
and not in substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which holders of
shares of Common Stock are entitled to receive securities or other assets with
respect to or in exchange for shares of Common Stock (a "Corporate Event"),
the Company shall make appropriate provision to ensure that the Holder will
thereafter have the right to receive upon a conversion of this Note, at the
Holder's option (i) in addition to the shares of Common Stock receivable upon
such conversion, such securities or other assets to which the Holder would
have been entitled with respect to such shares of Common Stock had such shares
of Common Stock been held by the Holder upon the consummation of such
Corporate Event (without taking into account any limitations or restrictions
on the convertibility of this Note) or (ii) in lieu of the shares of Common
Stock otherwise receivable upon such conversion, such securities or other
assets received by the holders of shares of Common Stock in connection with
the consummation of such Corporate Event in such amounts as the Holder would
have been entitled to receive had this Note initially been issued with
conversion rights for the form of such consideration (as opposed to shares
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of Common Stock) at a conversion rate for such consideration commensurate with
the Conversion Rate. Provision made pursuant to the preceding sentence shall
be in a form and substance satisfactory to the Holder. The provisions of this
Section 6 shall apply similarly and equally to successive Corporate Events and
shall be applied without regard to any limitations on the conversion or
redemption of this Note. 7. RIGHTS UPON ISSUANCE OF OTHER SECURITIES. (a)
Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever
on or after the Subscription Date the Company grants, issues or sells (or
enters into any agreement to grant, issue or sell), or in accordance with this
Section 7(a) is deemed to have granted, issued or sold, any shares of Common
Stock (including the granting, issuance or sale of shares of Common Stock
owned or held by or for the account of the Company, but excluding any Excluded
Securities granted, issued or sold or deemed to have been granted, issued or
sold) for a consideration per share (the "New Issuance Price") less than a
price equal to the Conversion Price in effect immediately prior to such
granting, issuance or sale or deemed granting, issuance or sale (such
Conversion Price then in effect is referred to herein as the "Applicable
Price") (the foregoing a "Dilutive Issuance"), then, immediately after such
Dilutive Issuance, the Conversion Price then in effect shall be reduced to an
amount equal to the New Issuance Price. For all purposes of the foregoing
(including, without limitation, determining the adjusted Conversion Price and
the New Issuance Price under this Section 7(a)), the following shall be
applicable: (i) Issuance of Options. If the Company in any manner grants,
issues or sells (or enters into any agreement to grant, issue or sell) any
Options and the lowest price per share for which one share of Common Stock is
at any time issuable upon the exercise of any such Option or upon conversion,
exercise or exchange of any Convertible Securities issuable upon exercise of
any such Option or otherwise pursuant to the terms thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting, issuance or sale of such Option for such price per share. For
purposes of this Section 7(a)(i), the "lowest price per share for which one
share of Common Stock is at any time issuable upon the exercise of any such
Option or upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option or otherwise pursuant to the terms
thereof" shall be equal to (1) the lower of (x) the sum of the lowest amounts
of consideration (if any) received or receivable by the Company with respect
to any one share of Common Stock upon the granting, issuance or sale of such
Option, upon exercise of such Option and upon conversion, exercise or exchange
of any Convertible Security issuable upon exercise of such Option or otherwise
pursuant to the terms thereof and (y) the lowest exercise price set forth in
such Option for which one share of Common Stock is issuable (or may become
issuable assuming all possible market conditions) upon the exercise of any
such Options or upon conversion, exercise or exchange of any Convertible
Securities issuable upon exercise of any such Option or otherwise pursuant to
the terms thereof, minus (2) the sum of all amounts paid or payable to the
holder of such Option (or any other Person) with respect to any one share of
Common Stock upon the granting, issuance or sale of such Option, upon exercise
of such Option and upon
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conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option or otherwise pursuant to the terms thereof plus the
value of any other consideration (including, without limitation, consideration
consisting of cash, debt forgiveness, assets or any other property) received
or receivable by, or benefit conferred on, the holder of such Option (or any
other Person). Except as contemplated below, no further adjustment of the
Conversion Price shall be made upon the actual issuance of such share of
Common Stock or of such Convertible Securities upon the exercise of such
Options or otherwise pursuant to the terms thereof or upon the actual issuance
of such shares of Common Stock upon conversion, exercise or exchange of such
Convertible Securities. (ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells (or enters into any agreement to issue
or sell) any Convertible Securities and the lowest price per share for which
one share of Common Stock is at any time issuable upon the conversion,
exercise or exchange thereof or otherwise pursuant to the terms thereof is
less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale (or the time of execution of such agreement
to issue or sell, as applicable) of such Convertible Securities for such price
per share. For the purposes of this Section 7(a)(ii), the "lowest price per
share for which one share of Common Stock is at any time issuable upon the
conversion, exercise or exchange thereof or otherwise pursuant to the terms
thereof" shall be equal to (1) the lower of (x) the sum of the lowest amounts
of consideration (if any) received or receivable by the Company with respect
to one share of Common Stock upon the issuance or sale (or pursuant to the
agreement to issue or sell, as applicable) of the Convertible Security and
upon conversion, exercise or exchange of such Convertible Security or
otherwise pursuant to the terms thereof and (y) the lowest conversion price
set forth in such Convertible Security for which one share of Common Stock is
issuable (or may become issuable assuming all possible market conditions) upon
conversion, exercise or exchange thereof or otherwise pursuant to the terms
thereof minus (2) the sum of all amounts paid or payable to the holder of such
Convertible Security (or any other Person) with respect to any one share of
Common Stock upon the issuance or sale (or the agreement to issue or sell, as
applicable) of such Convertible Security plus the value of any other
consideration received or receivable (including, without limitation, any
consideration consisting of cash, debt forgiveness, assets or other property)
by, or benefit conferred on, the holder of such Convertible Security (or any
other Person). Except as contemplated below, no further adjustment of the
Conversion Price shall be made upon the actual issuance of such shares of
Common Stock upon conversion, exercise or exchange of such Convertible
Securities or otherwise pursuant to the terms thereof, and if any such
issuance or sale of such Convertible Securities is made upon exercise of any
Options for which adjustment of the Conversion Price has been or is to be made
pursuant to other provisions of this Section 7(a), except as contemplated
below, no further adjustment of the Conversion Price shall be made by reason
of such issuance or sale.
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(iii) Change in Option Price or Rate of Conversion. If the purchase or
exercise price provided for in any Options, the additional consideration, if
any, payable (whether payable by the Company to such Person or from such
Person to the Company, as applicable) upon the issue, conversion, exercise or
exchange of any Options or Convertible Securities, or the rate at which any
Convertible Securities or Options are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time
(other than proportional changes in conversion or exercise prices, as
applicable, in connection with an event referred to in Section 7(b) below),
the Conversion Price in effect at the time of such increase or decrease shall
be adjusted to the Conversion Price which would have been in effect at such
time had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration (whether payable by the
Company to such Person or from such Person to the Company, as applicable) or
increased or decreased conversion rate (as the case may be) at the time
initially granted, issued or sold. For purposes of this Section 7(a)(i), if
the terms of any Option or Convertible Security (including, without
limitation, any Option or Convertible Security that was outstanding as of the
Subscription Date) are increased or decreased in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and
the shares of Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
increase or decrease. No adjustment pursuant to this Section 7(a) shall be
made if such adjustment would result in an increase of the Conversion Price
then in effect. (iv) Calculation of Consideration Received. If any Common
Stock, Option and/or Convertible Security and/or Adjustment Right and/or any
other security (as applicable) is issued in connection with the issuance or
sale or deemed issuance or sale of any other securities of the Company (as
determined by the Holder, the "Primary Security", and such Common Stock,
Option and/or Convertible Security and/or Adjustment Right or any other
security or instrument of the Company intended to convey value to any
participant in such transaction, in any form whatsoever, the "Secondary
Securities"), together comprising one integrated transaction (or one or more
transactions if such issuances or sales or deemed issuances or sales of
securities of the Company either (A) have at least one investor or purchaser
in common, (B) are consummated in reasonable proximity to each other and/or
(C) are consummated under the same plan of financing), the aggregate
consideration per share of Common Stock with respect to such Primary Security
shall be deemed to be equal to the difference of (x) the lowest price per
share for which one share of Common Stock was issued (or was deemed to be
issued pursuant to Section 7(a)(i) or 7(a)(ii) above, as applicable) in such
integrated transaction solely with respect to such Primary Security, minus (y)
with respect to such Secondary Securities, the sum of (I) the Black Scholes
Consideration Value of each such Option, if any, (II) the fair market value
(as determined by the Holder in good faith) or the Black Scholes Consideration
Value, as applicable, of such Adjustment Right, if any, and (III) the fair
market value (as determined by the Holder) of such Convertible Security and/or
any other security or instrument (as applicable), if any, in each case, as
determined on a per share basis in accordance with this Section 7(a)(iv). If
any shares of Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the consideration
received therefor (for the purpose of determining the consideration paid for
such Common Stock, Option or Convertible Security, but not for the purpose of
the calculation of the
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Black Scholes Consideration Value) will be deemed to be the net amount of
consideration received by the Company therefor. If any shares of Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by the Company (for the
purpose of determining the consideration paid for such Common Stock, Option or
Convertible Security, but not for the purpose of the calculation of the Black
Scholes Consideration Value) will be the fair value of such consideration,
except where such consideration consists of publicly traded securities, in
which case the amount of consideration received by the Company for such
securities will be the arithmetic average of the VWAPs of such security for
each of the five (5) Trading Days immediately preceding the date of receipt.
If any shares of Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor (for
the purpose of determining the consideration paid for such Common Stock,
Option or Convertible Security, but not for the purpose of the calculation of
the Black Scholes Consideration Value) will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible Securities
(as the case may be). The fair value of any consideration other than cash or
publicly traded securities will be determined jointly by the Company and the
Holder. If such parties are unable to reach agreement within ten (10) days
after the occurrence of an event requiring valuation (the "Valuation Event"),
the fair value of such consideration will be determined within five (5)
Trading Days after the tenth (10th) day following such Valuation Event, the
Holder may, at its sole option, select an independent, reputable investment
bank to resolve such dispute. The determination of such appraiser shall be
final and binding upon all parties absent manifest error and the fees and
expenses of such appraiser shall be borne by the Company. (v) Record Date. If
the Company takes a record of the holders of shares of Common Stock for the
purpose of entitling them (A) to receive a dividend or other distribution
payable in shares of Common Stock, Options or in Convertible Securities or (B)
to subscribe for or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the
issuance or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase (as the case may be). (b) Adjustment of Conversion Price upon
Subdivision or Combination of Common Stock. Without limiting any provision of
Section 6, Section 14 or Section 7(a), if the Company at any time on or after
the Subscription Date subdivides (by any stock split, stock dividend, stock
combination, recapitalization or other similar transaction) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
will be proportionately reduced. Without limiting any provision of Section 6,
Section 14 or Section 7(a), if the Company at any time on or after the
Subscription Date combines (by any stock split, stock dividend, stock
combination, recapitalization or other similar transaction) one or more
classes of its outstanding shares of Common Stock into a smaller
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number of shares, the Conversion Price in effect immediately prior to such
combination will be proportionately increased. Any adjustment pursuant to this
Section 7(b) shall become effective immediately after the effective date of
such subdivision or combination. If any event requiring an adjustment under
this Section 7(b) occurs during the period that a Conversion Price is
calculated hereunder, then the calculation of such Conversion Price shall be
adjusted appropriately to reflect such event. (c) Holder's Right of Adjusted
Conversion Price. In addition to and not in limitation of the other provisions
of this Section 7 or in the Securities Purchase Agreement, if the Company in
any manner issues or sells or enters into any agreement to issue or sell, any
Common Stock, Options or Convertible Securities (any such securities,
"Variable Price Securities") regardless of whether securities have been sold
pursuant to such agreement and whether such agreement has subsequently been
terminated, prior to or after the Subscription Date that are issuable pursuant
to such agreement or convertible into or exchangeable or exercisable for
shares of Common Stock, in each case, at a price which varies or may vary with
the market price of the shares of Common Stock, including by way of one or
more reset(s) to a fixed price, but exclusive of such formulations reflecting
customary anti-dilution provisions (such as share splits, share combinations,
share dividends and similar transactions) (each of the formulations for such
variable price being herein referred to as, the "Variable Price"), the Company
shall provide written notice thereof via electronic mail and overnight courier
to the Holder on the date of such agreement and the issuance of such Common
Stock, Convertible Securities or Options. From and after the date the Company
enters into such agreement or issues any such Variable Price Securities, the
Holder shall have the right, but not the obligation, in its sole discretion to
substitute the Variable Price for the Conversion Price upon conversion of this
Note by designating in the Conversion Notice delivered upon any conversion of
this Note that solely for purposes of such conversion the Holder is relying on
the Variable Price rather than the Conversion Price then in effect. The
Holder's election to rely on a Variable Price for a particular conversion of
this Note shall not obligate the Holder to rely on a Variable Price for any
future conversion of this Note. In addition, from and after the date the
Company enters into such agreement or issues any such Variable Price
Securities, for purposes of calculating the Installment Conversion Price,
Acceleration Conversion Price and/or Alternate Conversion Price, as
applicable, as of any time of determination, the "Conversion Price" as used
therein shall mean the lower of (x) the Installment Conversion Price,
Acceleration Conversion Price and/or Alternate Conversion Price, as
applicable, as of such time of determination and (y) the Variable Price as of
such time of determination. (d) Other Events. In the event that the Company
(or any Subsidiary) shall take any action to which the provisions hereof are
not strictly applicable, or, if applicable, would not operate to protect the
Holder from dilution or if any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
board of directors shall in good faith determine and implement an appropriate
adjustment in the Conversion Price so as to protect the rights of the Holder,
provided that no such adjustment pursuant to this Section 7(e) will increase
the Conversion Price as otherwise determined pursuant to this Section 7,
provided further that if the Holder does not accept such
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adjustments as appropriately protecting its interests hereunder against such
dilution, then the Company's board of directors and the Holder shall agree, in
good faith, upon an independent investment bank of nationally recognized
standing to make such appropriate adjustments, whose determination shall be
final and binding absent manifest error and whose fees and expenses shall be
borne by the Company. (e) Calculations. All calculations under this Section 7
shall be made by rounding to the nearest cent or the nearest 1/100th of a
share, as applicable. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Company, and the disposition of any such shares shall be considered an issue
or sale of Common Stock. (f) Voluntary Adjustment by Company. Subject to the
rules and regulations of the Principal Market, the Company may at any time
during the term of this Note, with the prior written consent of the Required
Holders (as defined in the Securities Purchase Agreement), reduce the then
current Conversion Price of each of the Notes to any amount and for any period
of time deemed appropriate by the board of directors of the Company. 8.
INSTALLMENT CONVERSION OR REDEMPTION. (a) General. On each applicable
Installment Date, provided there has been no Equity Conditions Failure, the
Company shall pay to the Holder of this Note the applicable Installment Amount
due on such date by converting such Installment Amount in accordance with this
Section 8 (a "Installment Conversion"); provided, however, that the Company
may, at its option following notice to the Holder (with a copy to the Trustee)
as set forth below, pay the Installment Amount by redeeming such Installment
Amount in cash (a "Installment Redemption") or by any combination of an
Installment Conversion and an Installment Redemption so long as all of the
outstanding applicable Installment Amount due on any Installment Date shall be
converted and/or redeemed by the Company on the applicable Installment Date,
subject to the provisions of this Section 8. On the date which is the sixth
(6th) Trading Day prior to each Installment Date (each, an "Installment Notice
Due Date"), the Company shall deliver written notice (each, a "Installment
Notice" and the date all of the holders receive such notice is referred to as
to the "Installment Notice Date"), to each holder of Notes (with a copy to the
Trustee) and such Installment Notice shall (i) either (A) confirm that the
applicable Installment Amount of such holder's Note shall be converted in
whole pursuant to an Installment Conversion or (B) (1) state that the Company
elects to redeem for cash, or is required to redeem for cash in accordance
with the provisions of the Notes, in whole or in part, the applicable
Installment Amount pursuant to an Installment Redemption and (2) specify the
portion of such Installment Amount which the Company elects or is required to
redeem pursuant to an Installment Redemption (such amount to be redeemed in
cash, the "Installment Redemption Amount") and the portion of the applicable
Installment Amount, if any, with respect to which the Company will, and is
permitted to, effect an Installment Conversion (such amount of the applicable
Installment Amount so specified to be so converted pursuant to this Section 8
is referred to herein as the "Installment Conversion Amount"), which amounts
when added together, must at least equal the entire applicable Installment
Amount and (ii) if the applicable Installment Amount is to be paid, in whole
or in part,
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pursuant to an Installment Conversion, certify that there is not then an
Equity Conditions Failure as of the applicable Installment Notice Date. Each
Installment Notice shall be irrevocable. If the Company does not timely
deliver an Installment Notice in accordance with this Section 8 with respect
to a particular Installment Date, then the Company shall be deemed to have
delivered an irrevocable Installment Notice confirming an Installment
Conversion of the entire Installment Amount payable on such Installment Date
and shall be deemed to have certified that there is not then an Equity
Conditions Failure in connection with such Installment Conversion. Except as
expressly provided in this Section 8(a), the Company shall convert and/or
redeem the applicable Installment Amount of this Note pursuant to this Section
8 and the corresponding Installment Amounts of the Other Notes pursuant to the
corresponding provisions of the Other Notes in the same ratio of the
applicable Installment Amount being converted and/or redeemed hereunder. The
applicable Installment Conversion Amount (whether set forth in the applicable
Installment Notice or by operation of this Section 8) shall be converted in
accordance with Section 8(b) and the applicable Installment Redemption Amount
shall be redeemed in accordance with Section 8(c). (b) Mechanics of
Installment Conversion. Subject to Section 3(d), if the Company delivers an
Installment Notice or is deemed to have delivered an Installment Notice
certifying that such Installment Amount is being paid, in whole or in part, in
an Installment Conversion in accordance with Section 8(a), then the remainder
of this Section 8(b) shall apply. The applicable Installment Conversion
Amount, if any, shall be converted on the applicable Installment Date at the
applicable Installment Conversion Price and the Company shall, on such
Installment Date, (A) deliver to the Holder's account with DTC such shares of
Common Stock issued upon such conversion (subject to the reduction
contemplated by the immediately following sentence and, if applicable, the
penultimate sentence of this Section 8(b)), and (B) in the event of the
Conversion Floor Price Condition, the Company shall deliver to the Holder the
applicable Conversion Installment Floor Amount, provided that the Equity
Conditions are then satisfied (or waived in writing by the Holder) on such
Installment Date and an Installment Conversion is not otherwise prohibited
under any other provision of this Note. If the Company confirmed (or is deemed
to have confirmed by operation of Section 8(a)) the conversion of the
applicable Installment Conversion Amount, in whole or in part, and there was
no Equity Conditions Failure as of the applicable Installment Notice Date (or
is deemed to have certified that the Equity Conditions in connection with any
such conversion have been satisfied by operation of Section 8(a)) but an
Equity Conditions Failure occurred between the applicable Installment Notice
Date and any time through the applicable Installment Date (the "Interim
Installment Period"), the Company shall provide the Holder a subsequent notice
to that effect. If there is an Equity Conditions Failure (which is not waived
in writing by the Holder) during such Interim Installment Period or an
Installment Conversion is not otherwise permitted under any other provision of
this Note, then, at the option of the Holder designated in writing to the
Company, the Holder may require the Company to do any one or more of the
following: (i) the Company shall redeem all or any part designated by the
Holder of the unconverted Installment Conversion Amount (such designated
amount is referred to as the "Designated Redemption Amount") and the Company
shall pay to the Holder within five (5) Trading Days of such Installment Date,
by wire transfer of immediately available funds, an amount in cash equal to
125% of such Designated
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Redemption Amount, and/or (ii) the Installment Conversion shall be null and
void with respect to all or any part designated by the Holder of the
unconverted Installment Conversion Amount and the Holder shall be entitled to
all the rights of a holder of this Note with respect to such designated part
of the Installment Conversion Amount; provided, however, the Conversion Price
for such designated part of such unconverted Installment Conversion Amount
shall thereafter be adjusted to equal the lesser of (A) the Installment
Conversion Price as in effect on the date on which the Holder voided the
Installment Conversion and (B) the Installment Conversion Price that would be
in effect on the date on which the Holder delivers a Conversion Notice
relating thereto as if such date was an Installment Date. If the Company fails
to redeem any Designated Redemption Amount by the second (2nd) day following
the applicable Installment Date by payment of such amount by such date, then
the Holder shall have the rights set forth in Section 11(a) as if the Company
failed to pay the applicable Installment Redemption Price (as defined below)
and all other rights under this Note (including, without limitation, such
failure constituting an Event of Default described in Section 4(a)(iv)).
Notwithstanding anything to the contrary in this Section 8(b), but subject to
3(d), until the Company delivers Common Stock representing the Installment
Conversion Amount to the Holder, the Installment Conversion Amount may be
converted by the Holder into Common Stock pursuant to Section 3. In the event
that the Holder elects to convert the Installment Conversion Amount prior to
the applicable Installment Date as set forth in the immediately preceding
sentence, the Installment Conversion Amount so converted shall be deducted
from the Principal outstanding hereunder, including for purposes of
determining the Installment Amount(s) relating to the applicable Installment
Date(s) as set forth in the applicable Conversion Notice. The Company shall
pay any and all taxes that may be payable with respect to the issuance and
delivery of any shares of Common Stock in any Installment Conversion
hereunder. (c) Mechanics of Installment Redemption. If the Company elects or
is required to effect an Installment Redemption, in whole or in part, in
accordance with Section 8(a), then the Installment Redemption Amount, if any,
shall be redeemed by the Company in cash on the applicable Installment Date by
wire transfer to the Holder of immediately available funds in an amount equal
to 103% of the applicable Installment Redemption Amount (the "Installment
Redemption Price"). If the Company fails to redeem such Installment Redemption
Amount on such Installment Date by payment of the Installment Redemption
Price, then, at the option of the Holder designated in writing to the Company
(any such designation shall be a "Conversion Notice" for purposes of this
Note), the Holder may require the Company to convert all or any part of the
Installment Redemption Amount at the Installment Conversion Price (determined
as of the date of such designation as if such date were an Installment Date).
Conversions required by this Section 8(c) shall be made in accordance with the
provisions of Section 3(c). Notwithstanding anything to the contrary in this
Section 8(c), but subject to Section 3(d), until the Installment Redemption
Price (together with any Late Charges thereon) is paid in full, the
Installment Redemption Amount (together with any Late Charges thereon) may be
converted, in whole or in part, by the Holder into Common Stock pursuant to
Section 3. In the event the Holder elects to convert all or any portion of the
Installment Redemption Amount prior to the applicable Installment Date as set
forth in the immediately preceding sentence, the Installment Redemption Amount
so converted shall be deducted from the
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Principal amount outstanding hereunder, including for purposes of determining
the Installment Amounts relating to the applicable Installment Date(s) as set
forth in the applicable Conversion Notice. Redemptions required by this
Section 8(c) shall be made in accordance with the provisions of Section 11.
(d) Deferred Installment Amount. Notwithstanding any provision of this Section
8(d) to the contrary, the Holder may, at its option and in its sole
discretion, deliver a written notice to the Company no later than the Trading
Day immediately prior to the applicable Installment Date electing to have the
payment of all or any portion of an Installment Amount payable on such
Installment Date deferred (such amount deferred, the "Deferral Amount", and
such deferral, each a "Deferral") until any subsequent Installment Date
selected by the Holder, in its sole discretion, in which case, the Deferral
Amount shall be added to, and become part of, such subsequent Installment
Amount and such Deferral Amount shall continue to accrue Interest hereunder.
Any notice delivered by the Holder pursuant to this Section 8(d) shall set
forth (i) the Deferral Amount and (ii) the date that such Deferral Amount
shall now be payable. (e) Acceleration of Installment Amounts. Notwithstanding
any provision of this Section 8 to the contrary, but subject to Section 3(d),
during the period commencing on an Installment Date (a "Current Installment
Date") and ending on the Trading Day immediately prior to the next Installment
Date (each, an "Installment Period"), at the option of the Holder, at one or
more times, the Holder may convert other Installment Amounts (each, an
"Acceleration", and each such amount, an "Acceleration Amount", and the
Conversion Date of any such Acceleration, each an "Acceleration Date"), in
whole or in part, at the Acceleration Conversion Price of such Current
Installment Date in accordance with the conversion procedures set forth in
Section 3 hereunder (with "Acceleration Conversion Price" replacing
"Conversion Price" for all purposes therein), mutatis mutandis; provided, that
if a Conversion Floor Price Condition exists with respect to such Acceleration
Date, with each Acceleration the Company shall also deliver to the Holder the
Acceleration Floor Amount on the applicable Share Delivery Deadline.
Notwithstanding anything to the contrary in this Section 8(e), with respect to
each period commencing on an Installment Date and ending on the Trading Day
immediately prior to the next Installment Date (each, an "Acceleration
Measuring Period"), the Holder may not elect to effect an Acceleration (the
"Current Acceleration", and such date of determination, the "Current
Acceleration Determination Date") during such Acceleration Measuring Period if
the Holder shall have converted pursuant to this Section 8 either on such
Current Installment Date and/or on any Acceleration Date during such
Acceleration Measuring Period, as applicable, such portion of the Conversion
Amount of this Note equal to the sum of (x) the Installment Amount for such
Installment Date (whether on the Current Installment Date or, if subject to a
Deferral, in whole or in part, on any one or more Acceleration Dates during
such Acceleration Measuring Period and prior to such applicable Current
Acceleration Determination Date) and (y) an additional 200% of the Installment
Amount for such Current Installment Date, in whole or in part, on any one or
more Acceleration Dates during such Acceleration Measuring Period and prior to
such applicable Current Acceleration Determination Date (or such greater
amount as the Company and the Holder shall mutually agree).
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9. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its Certificate of Incorporation (as defined in the
Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase
Agreement) or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Note, and will at all times in good
faith carry out all of the provisions of this Note and take all action as may
be required to protect the rights of the Holder of this Note. Without limiting
the generality of the foregoing or any other provision of this Note or the
other Transaction Documents, the Company (a) shall not increase the par value
of any shares of Common Stock receivable upon conversion of this Note above
the Conversion Price then in effect, and (b) shall take all such actions as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
conversion of this Note. Notwithstanding anything herein to the contrary, if
after the sixty (60) calendar day anniversary of the Issuance Date, the Holder
is not permitted to convert this Note in full for any reason (other than
pursuant to restrictions set forth in Section 3(d) hereof), the Company shall
use its best efforts to promptly remedy such failure, including, without
limitation, obtaining such consents or approvals as necessary to permit such
conversion into shares of Common Stock. 10. RESERVATION OF AUTHORIZED SHARES.
(a) Reservation. So long as any Notes remain outstanding, the Company shall at
all times reserve (I) if prior to Reserve Increase Deadline (as defined in the
Securities Purchase Agreement), 275,000,000 shares of Common Stock for
conversion (including without limitation, Installment Conversions, Alternate
Conversions and Accelerations) of all of the Notes then outstanding (without
regard to any limitations on conversions) or (ii) if on or after the Reserve
Increase Deadline, at least 100% of the aggregate number of shares of Common
Stock as shall from time to time be necessary to effect the conversion,
including without limitation, Installment Conversions, Alternate Conversions
and Accelerations, of all of the Notes then outstanding (without regard to any
limitations on conversions and assuming such Notes remain outstanding until
the Maturity Date) at the Floor Price then in effect (the "Required Reserve
Amount"). The Required Reserve Amount (including, without limitation, each
increase in the number of shares so reserved) shall be allocated pro rata
among the holders of the Notes based on the original principal amount of the
Notes held by each holder on the Initial Closing Date or increase in the
number of reserved shares, as the case may be (the "Authorized Share
Allocation"). In the event that a holder shall sell or otherwise transfer any
of such holder's Notes, each transferee shall be allocated a pro rata portion
of such holder's Authorized Share Allocation. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any Notes shall be
allocated to the remaining holders of Notes, pro rata based on the principal
amount of the Notes then held by such holders. (b) Insufficient Authorized
Shares. If, notwithstanding Section 10(a), and not in limitation thereof, at
any time while any of the Notes remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to
satisfy its obligation to reserve for issuance upon conversion of the Notes at
least a number of shares of Common Stock equal to the Required Reserve Amount
(an
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"Authorized Share Failure"), then the Company shall immediately take all
action necessary to increase the Company's authorized shares of Common Stock
to an amount sufficient to allow the Company to reserve the Required Reserve
Amount for the Notes then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than sixty (60) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the
Company shall provide each stockholder with a proxy statement and shall use
its best efforts to solicit its stockholders' approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal. Notwithstanding
the foregoing, if at any such time of an Authorized Share Failure, the Company
is able to obtain the written consent of a majority of the shares of its
issued and outstanding shares of Common Stock to approve the increase in the
number of authorized shares of Common Stock, the Company may satisfy this
obligation by obtaining such consent and submitting for filing with the SEC an
Information Statement on Schedule 14C. In the event that the Company is
prohibited from issuing shares of Common Stock pursuant to the terms of this
Note due to the failure by the Company to have sufficient shares of Common
Stock available out of the authorized but unissued shares of Common Stock
(such unavailable number of shares of Common Stock, the "Authorized Failure
Shares"), in lieu of delivering such Authorized Failure Shares to the Holder,
the Company shall pay cash in exchange for the redemption of such portion of
the Conversion Amount convertible into such Authorized Failure Shares at a
price equal to the sum of (i) the product of (x) such number of Authorized
Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on
any Trading Day during the period commencing on the date the Holder delivers
the applicable Conversion Notice with respect to such Authorized Failure
Shares to the Company and ending on the date of such issuance and payment
under this Section 10(a); and (ii) to the extent the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of Authorized Failure Shares, any
brokerage commissions and other out-of-pocket expenses, if any, of the Holder
incurred in connection therewith. Nothing contained in Section 10(a) or this
Section 10(b) shall limit any obligations of the Company under any provision
of the Securities Purchase Agreement. 11. REDEMPTIONS. (a) Mechanics. The
Company, or at the Company's written direction and at the Company's expense,
the Trustee, shall deliver the applicable Event of Default Redemption Price to
the Holder in cash within five (5) Business Days after the Company's receipt
of the Holder's Event of Default Redemption Notice. If the Holder has
submitted a Change of Control Redemption Notice in accordance with Section
5(b), the Company, or at the Company's direction, the Trustee, shall deliver
the applicable Change of Control Redemption Price to the Holder in cash
concurrently with the consummation of such Change of Control if such notice is
received prior to the consummation of such Change of Control and within five
(5) Business Days after the Company's receipt of such notice otherwise. The
Company shall deliver the applicable Installment Redemption Price to the
Holder in cash on the applicable Installment Date. Notwithstanding anything
herein to the
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contrary, in connection with any redemption hereunder at a time the Holder is
entitled to receive a cash payment under any of the other Transaction
Documents, at the option of the Holder delivered in writing to the Company,
the applicable Redemption Price hereunder shall be increased by the amount of
such cash payment owed to the Holder under such other Transaction Document
and, upon payment in full or conversion in accordance herewith, shall satisfy
the Company's payment obligation under such other Transaction Document. In the
event of a redemption of less than all of the Conversion Amount of this Note,
the Company shall promptly cause to be issued and delivered to the Holder a
new Note (in accordance with Section 17(d)) representing the outstanding
Principal which has not been redeemed. In the event that the Company does not
pay the applicable Redemption Price to the Holder within the time period
required, at any time thereafter and until the Company pays such unpaid
Redemption Price in full, the Holder shall have the option, in lieu of
redemption, to require the Company to promptly return to the Holder all or any
portion of this Note representing the Conversion Amount that was submitted for
redemption and for which the applicable Redemption Price (together with any
Late Charges thereon) has not been paid. Upon the Company's receipt of such
notice, (x) the applicable Redemption Notice shall be null and void with
respect to such Conversion Amount, (y) the Company shall immediately return
this Note, or issue a new Note (in accordance with Section 17(d)), to the
Holder, and in each case the principal amount of this Note or such new Note
(as the case may be) shall be increased by an amount equal to the difference
between (1) the applicable Redemption Price (as the case may be, and as
adjusted pursuant to this Section 11, if applicable) minus (2) the Principal
portion of the Conversion Amount submitted for redemption and (z) the
Conversion Price of this Note or such new Notes (as the case may be) shall be
automatically adjusted with respect to each conversion effected thereafter by
the Holder to the lowest of (A) the Conversion Price as in effect on the date
on which the applicable Redemption Notice is voided, (B) 75% of the Market
Price of the Common Stock for the period ending on and including the date on
which the applicable Redemption Notice is voided and (C) 75% of the Market
Price of the Common Stock for the period ending as of the applicable
Conversion Date (it being understood and agreed that all such determinations
shall be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during such period). The Holder's
delivery of a notice voiding a Redemption Notice and exercise of its rights
following such notice shall not affect the Company's obligations to make any
payments of Late Charges which have accrued prior to the date of such notice
with respect to the Conversion Amount subject to such notice. (b) Redemption
by Other Holders. Upon the Company's receipt of notice from any of the holders
of the Other Notes for redemption or repayment as a result of an event or
occurrence substantially similar to the events or occurrences described in
Section 4(b) or Section 5(b) (each, an "Other Redemption Notice"), the Company
shall immediately, but no later than one (1) Business Day of its receipt
thereof, forward to the Holder by electronic mail a copy of such notice (with
a copy to the Trustee). If the Company receives a Redemption Notice and one or
more Other Redemption Notices, during the seven (7) Business Day period
beginning on and including the date which is two (2) Business Days prior to
the Company's receipt of the Holder's applicable Redemption Notice and ending
on and including the date which is two (2) Business Days after the Company's
receipt of the Holder's applicable Redemption Notice and the Company is unable
to redeem all
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principal, interest and other amounts designated in such Redemption Notice and
such Other Redemption Notices received during such seven (7) Business Day
period, then the Company shall redeem a pro rata amount from each holder of
the Notes (including the Holder) based on the principal amount of the Notes
submitted for redemption pursuant to such Redemption Notice and such Other
Redemption Notices received by the Company during such seven (7) Business Day
period. 12. VOTING RIGHTS. The Holder shall have no voting rights as the
holder of this Note, except as required by law (including, without limitation,
the Delaware General Corporation Law) and as expressly provided in this Note.
13. COVENANTS. Until all of the Notes have been converted, redeemed or
otherwise satisfied in accordance with their terms: (a) Rank. The Company
shall designate all payments due under this Note as senior unsecured
Indebtedness, and (a) the Notes shall rank pari passu with all Other Notes and
(b) shall be at least pari passu in right of payment with all other
Indebtedness of the Company and its Subsidiaries (other than Permitted
Indebtedness secured by Permitted Liens). (b) Incurrence of Indebtedness. The
Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, incur or guarantee, assume or suffer to exist any
Indebtedness (other than (i) the Indebtedness evidenced by this Note and the
Other Notes and (ii) other Permitted Indebtedness). (c) Existence of Liens.
The Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, allow or suffer to exist any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property
or assets (including accounts and contract rights) owned by the Company or any
of its Subsidiaries (collectively, "Liens") other than Permitted Liens;
provided, however, that the Company shall be deemed to be in breach of this
Section 13(c) only if such breach remains uncured for a period of five (5)
Trading Days. (d) Restricted Payments and Investments. The Company shall not,
and the Company shall cause each of its Subsidiaries to not, directly or
indirectly, redeem, defease, repurchase, repay or make any payments in respect
of, by the payment of cash or cash equivalents (in whole or in part, whether
by way of open market purchases, tender offers, private transactions or
otherwise), all or any portion of any Indebtedness (other than the Notes)
whether by way of payment in respect of principal of (or premium, if any) or
interest on, such Indebtedness or make any Investment, as applicable, if at
the time such payment with respect to such Indebtedness and/or Investment, as
applicable, is due or is otherwise made or, after giving effect to such
payment, (i) an event constituting an Event of Default has occurred and is
continuing or (ii) an event that with the passage of time and without being
cured would constitute an Event of Default has occurred and is continuing.
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(e) Restriction on Redemption and Cash Dividends. The Company shall not, and
the Company shall cause each of its Subsidiaries to not, directly or
indirectly, redeem, repurchase or declare or pay any cash dividend or
distribution on any of its capital stock. (f) Restriction on Transfer of
Assets. The Company shall not, and the Company shall cause each of its
Subsidiaries to not, directly or indirectly, sell, lease, license, assign,
transfer, spin-off, split-off, close, convey or otherwise dispose of any
assets or rights of the Company or any Subsidiary owned or hereafter acquired
whether in a single transaction or a series of related transactions, other
than (i) sales, leases, licenses, assignments, transfers, conveyances and
other dispositions of such assets or rights by the Company and its
Subsidiaries (including, without limitation, in connection with joint
ventures) in the ordinary course of business consistent with its past practice
and (ii) sales of inventory and product in the ordinary course of business;
provided, however, that the Company shall be deemed to be in breach of this
Section 13(f) if such breach was an involuntary sale, lease, license,
assignment, transfer, spin-off, split-off, close, conveyance or otherwise
disposal that remains uncured for a period of five (5) Trading Days. (g)
Maturity of Indebtedness. The Company shall not, and the Company shall cause
each of its Subsidiaries to not, directly or indirectly, permit any
Indebtedness of the Company or any of its Subsidiaries to mature or accelerate
prior to the Maturity Date (except, solely from and after the Stockholder
Approval Date (as defined in the Securities Purchase Agreement), up to $100
million of Permitted Indebtedness in any three month period). (h) Change in
Nature of Business. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, engage in any material line
of business substantially different from those lines of business conducted by
or publicly contemplated to be conducted by the Company and each of its
Subsidiaries on the Subscription Date or any business substantially related or
incidental thereto. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, modify its or their corporate
structure or purpose other than for tax or other general corporate purposes
that are not meant to (and do not) change the nature of the business of the
Company currently conducted as of the Issuance Date. (i) Preservation of
Existence, Etc. The Company shall maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, its existence, rights and privileges,
and become or remain, and cause each of its Subsidiaries to become or remain,
duly qualified and in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the transaction
of its business makes such qualification necessary. (j) Maintenance of
Properties, Etc. The Company shall maintain and preserve, and cause each of
its Subsidiaries to maintain and preserve, all of its properties which are
necessary or useful in the proper conduct of its business in good working
order and condition, ordinary wear and tear excepted, and comply, and cause
each of its Subsidiaries to comply, at all times with the provisions of all
leases to which it is a party as lessee or under which it occupies property,
so as to prevent any loss or forfeiture thereof or thereunder.
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(k) Maintenance of Intellectual Property. The Company will, and will cause
each of its Subsidiaries to, take all action necessary or advisable to
maintain all of the Intellectual Property Rights (as defined in the Securities
Purchase Agreement) of the Company and/or any of its Subsidiaries that are
necessary or material to the conduct of its business in full force and effect.
(l) Maintenance of Insurance. The Company shall maintain, and cause each of
its Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations (including, without limitation,
comprehensive general liability, hazard, rent and business interruption
insurance) with respect to its properties (including all real properties
leased or owned by it) and business, in such amounts and covering such risks
as is required by any governmental authority having jurisdiction with respect
thereto or as is carried generally in accordance with sound business practice
by companies in similar businesses similarly situated (including, without
limitation, and for the avoidance of doubt, at least $5,000,000 in director's
and officer's insurance). (m) Transactions with Affiliates. The Company shall
not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend
or be a party to, any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease, transfer or
exchange of property or assets of any kind or the rendering of services of any
kind) with any affiliate, except transactions in the ordinary course of
business in a manner and to an extent consistent with past practice and
necessary or desirable for the prudent operation of its business, for fair
consideration and on terms no less favorable to it or its Subsidiaries than
would be obtainable in a comparable arm's length transaction with a Person
that is not an affiliate thereof. (n) Restricted Issuances. The Company shall
not, directly or indirectly, without the prior written consent of the holders
of a majority in aggregate principal amount of the Notes then outstanding, (i)
issue any Notes (other than as contemplated by the Securities Purchase
Agreement and the Notes) or (ii) issue any other securities that would cause a
breach or default under the Notes. (o) Financial Covenants; Announcement of
Operating Results. (i) The Company shall maintain, as of the end of each
Fiscal Quarter (and/or Fiscal Year, as applicable) a balance of Available Cash
in an aggregate amount equal to or greater than $340,000,000 (the "Financial
Test"). (ii) Operating Results Announcement. Commencing on the Fiscal Quarter
ending September 30, 2023, the Company shall publicly disclose and disseminate
(such date, the "Announcement Date"), if the Financial Test has not been
satisfied for such Fiscal Quarter or Fiscal Year, as applicable, a statement
to that effect no later than (x) if prior to March 31, 2024, the fifteenth
(15th) Trading Day or (y) if on or after March 31, 2024, the tenth (10th)
Trading Day, in either case, after the end of such Fiscal Quarter or Fiscal
Year, as applicable, and such announcement shall include a statement to the
effect that the Company is (or is not, as applicable) in breach of the
Financial Test for such Fiscal Quarter or Fiscal Year, as applicable.
Notwithstanding the foregoing, in the event no
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Financial Covenant Failure (as defined below) has occurred and the Company
reasonably determines, with the advice of legal counsel, that the disclosure
referred to in the immediately preceding sentence does not constitute material
non-public information, the Company shall make a statement to that effect in
the applicable certification required below and no disclosure with the SEC
shall be required to be made by the Company. On the Announcement Date, the
Company shall also provide to the Holder a certification, executed on behalf
of the Company by the Chief Financial Officer of the Company, certifying that
the Company satisfied the Financial Test for such Fiscal Quarter or Fiscal
Year, as applicable, if that is the case. If the Company has failed to meet
the Financial Test for a Fiscal Quarter or Fiscal Year, as applicable, (each a
"Financial Covenant Failure"), the Company shall provide to the Holder a
written certification, executed on behalf of the Company by the Chief
Financial Officer of the Company, certifying that the Financial Test has not
been met for such Fiscal Quarter or Fiscal Year, as applicable (a "Financial
Covenant Failure Notice"). Concurrently with the delivery of each Financial
Covenant Failure Notice to the Holder, the Company shall also make publicly
available (as part of a Quarterly Report on Form 10-Q, Annual Report on Form
10-K or on a Current Report on Form 8-K, or otherwise) the Financial Covenant
Failure Notice and the fact that an Event of Default has occurred under the
Notes. (p) PCAOB Registered Auditor. At all times any Notes remain
outstanding, the Company shall have engaged an independent auditor to audit
its financial statements that is registered with (and in compliance with the
rules and regulations of) the Public Company Accounting Oversight Board. (q)
Stay, Extension and Usury Laws. To the extent that it may lawfully do so, the
Company (A) agrees that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law (wherever or whenever enacted or in force) that may
affect the covenants or the performance of this Note; and (B) expressly waives
all benefits or advantages of any such law and agrees that it will not, by
resort to any such law, hinder, delay or impede the execution of any power
granted to the Holder by this Note, but will suffer and permit the execution
of every such power as though no such law has been enacted. (r) Taxes. The
Company and its Subsidiaries shall pay when due all taxes, fees or other
charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against the Company and its
Subsidiaries or their respective assets or upon their ownership, possession,
use, operation or disposition thereof or upon their rents, receipts or
earnings arising therefrom (except where the failure to pay would not,
individually or in the aggregate, have a material effect on the Company or any
of its Subsidiaries). The Company and its Subsidiaries shall file on or before
the due date therefor all personal property tax returns (except where the
failure to file would not, individually or in the aggregate, have a material
effect on the Company or any of its Subsidiaries). Notwithstanding the
foregoing, the Company and its Subsidiaries may contest, in good faith and by
appropriate proceedings, taxes for which they maintain adequate reserves
therefor in accordance with GAAP.
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(s) Independent Investigation. At the request of the Holder either (x) at any
time when an Event of Default has occurred and is continuing, (y) upon the
occurrence of an event that with the passage of time or giving of notice would
constitute an Event of Default or (z) at any time the Holder reasonably
believes an Event of Default may have occurred or be continuing, the Company
shall hire an independent, reputable investment bank selected by the Company
and approved by the Holder to investigate as to whether any breach of this
Note has occurred (the "Independent Investigator"). If the Independent
Investigator determines that such breach of this Note has occurred, the
Independent Investigator shall notify the Company of such breach and the
Company shall deliver written notice to each holder of a Note of such breach.
In connection with such investigation, the Independent Investigator may,
during normal business hours, inspect all contracts, books, records,
personnel, offices and other facilities and properties of the Company and its
Subsidiaries and, to the extent available to the Company after the Company
uses reasonable efforts to obtain them, the records of its legal advisors and
accountants (including the accountants' work papers) and any books of account,
records, reports and other papers not contractually required of the Company to
be confidential or secret, or subject to attorney-client or other evidentiary
privilege, and the Independent Investigator may make such copies and
inspections thereof as the Independent Investigator may reasonably request.
The Company shall furnish the Independent Investigator with such financial and
operating data and other information with respect to the business and
properties of the Company as the Independent Investigator may reasonably
request. The Company shall permit the Independent Investigator to discuss the
affairs, finances and accounts of the Company with, and to make proposals and
furnish advice with respect thereto to, the Company's officers, directors, key
employees and independent public accountants or any of them (and by this
provision the Company authorizes said accountants to discuss with such
Independent Investigator the finances and affairs of the Company and any
Subsidiaries), all at such reasonable times, upon reasonable notice, and as
often as may be reasonably requested. 14. DISTRIBUTION OF ASSETS. In addition
to any adjustments pursuant to Sections 6 or 7, if the Company shall declare
or make any dividend or other distributions of its assets (or rights to
acquire its assets) to any or all holders of shares of Common Stock, by way of
return of capital or otherwise (including without limitation, any distribution
of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (the "Distributions"), then the Holder will be
entitled to such Distributions as if the Holder had held the number of shares
of Common Stock acquirable upon complete conversion of this Note (without
taking into account any limitations or restrictions on the convertibility of
this Note and assuming for such purpose that the Note was converted at the
Installment Conversion Price assuming an Installment Date as of the applicable
record date) immediately prior to the date on which a record is taken for such
Distribution or, if no such record is taken, the date as of which the record
holders of Common Stock are to be determined for such Distributions (provided,
however, that to the extent that the Holder's right to participate in any such
Distribution would result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage, then the Holder shall not be entitled to
participate in such Distribution to the extent of the Maximum Percentage (and
shall not be entitled to beneficial ownership of such shares of Common Stock
as a result of such Distribution (and beneficial ownership) to the extent of
any such excess)) and in lieu of delivering to the Holder such portion of such
Distribution in excess of the Maximum Percentage, the Holder shall receive a
right to receive such portion of such Distribution, exercisable into such
Distribution at any time, in whole or in part, at the option of the Holder (or
any successor thereto), without the payment of any additional consideration,
but subject to a limitation on exercise in the form of 3(d)(i) herein, mutatis
mutandis.
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15. AMENDING THE TERMS OF THIS NOTE. Except for Section 3(d), which may not be
amended, modified or waived by the parties hereto, the prior written consent
of the Company and the Holder shall be required for any change, waiver or
amendment to this Note; provided, however, no change, waiver or amendment
shall adversely impact the rights, duties, immunities or liabilities of the
Trustee without its prior written consent. 16. TRANSFER. This Note and any
shares of Common Stock issued upon conversion of this Note may be offered,
sold, assigned or transferred by the Holder without the consent of the
Company; provided, that the Holder shall not transfer this Note to any
competitor of the Company without the prior written consent of the Company
(not to be unreasonably withheld). 17. REISSUANCE OF THIS NOTE. (a) Transfer.
If this Note is to be transferred, the Holder shall surrender this Note to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Note (in accordance with Section 16(d)), registered as the
Holder may request, representing the outstanding Principal being transferred
by the Holder and, if less than the entire outstanding Principal is being
transferred, a new Note (in accordance with Section 16(d)) to the Holder
representing the outstanding Principal not being transferred. The Holder and
any assignee, by acceptance of this Note, acknowledge and agree that, by
reason of the provisions of Section 3(c)(iii) following conversion or
redemption of any portion of this Note, the outstanding Principal represented
by this Note may be less than the Principal stated on the face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence), and, in
the case of loss, theft or destruction, of any indemnification undertaking by
the Holder to the Company in customary and reasonable form and, in the case of
mutilation, upon surrender and cancellation of this Note. Upon compliance with
Section 2.02 of the Indenture, the Company shall execute and, following
authentication of such new Note, deliver to the Holder a new Note (in
accordance with Section 17(d)) representing the outstanding Principal. (c)
Note Exchangeable for Different Denominations. This Note is exchangeable, upon
the surrender hereof by the Holder at the principal office of the Company, for
a new Note or Notes (in accordance with Section 16(d) and in principal amounts
of at least $1,000) representing in the aggregate the outstanding Principal of
this Note, and each such new Note will represent such portion of such
outstanding Principal as is designated by the Holder at the time of such
surrender.
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(d) Issuance of New Notes. Whenever the Company is required to issue a new
Note pursuant to the terms of this Note, such new Note (i) shall be of like
tenor with this Note, (ii) shall represent, as indicated on the face of such
new Note, the Principal remaining outstanding (or in the case of a new Note
being issued pursuant to Section 16(a) or Section 16(c), the Principal
designated by the Holder which, when added to the principal represented by the
other new Notes issued in connection with such issuance, does not exceed the
Principal remaining outstanding under this Note immediately prior to such
issuance of new Notes), (iii) shall have an issuance date, as indicated on the
face of such new Note, which is the same as the Issuance Date of this Note,
(iv) shall have the same rights and conditions as this Note, (v) shall be duly
authenticated in accordance with the Indenture and (vi) shall represent
accrued and unpaid Interest and Late Charges on the Principal and Interest of
this Note, from the Issuance Date. 18. REMEDIES, CHARACTERIZATIONS, OTHER
OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this
Note shall be cumulative and in addition to all other remedies available under
this Note and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief),
and nothing herein shall limit the Holder's right to pursue actual and
consequential damages for any failure by the Company to comply with the terms
of this Note. No failure on the part of the Holder to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Holder of any right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. In addition, the exercise of any right or
remedy of the Holder at law or equity or under this Note or any of the
documents shall not be deemed to be an election of Holder's rights or remedies
under such documents or at law or equity. The Company covenants to the Holder
that there shall be no characterization concerning this instrument other than
as expressly provided herein. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the Holder and shall not, except as
expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that
the remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to specific
performance and/or temporary, preliminary and permanent injunctive or other
equitable relief from any court of competent jurisdiction in any such case
without the necessity of proving actual damages and without posting a bond or
other security. The Company shall provide all information and documentation to
the Holder that is requested by the Holder to enable the Holder to confirm the
Company's compliance with the terms and conditions of this Note (including,
without limitation, compliance with Section 7). 19. PAYMENT OF COLLECTION,
ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an
attorney for collection or enforcement or is collected or enforced through any
legal proceeding or the Holder otherwise takes action to collect amounts due
under this Note and/or any other Transaction Document or to enforce the
provisions of this Note and/or any other Transaction Document or (b) there
occurs any bankruptcy, reorganization, receivership of the Company or other
proceedings affecting Company creditors' rights and involving a claim under
this Note, then the Company shall pay the reasonable out-of-pocket costs
incurred by the Holder for such collection, enforcement or action or in
connection with such bankruptcy, reorganization, receivership or other
proceeding, including, without limitation, reasonable attorneys' fees and
disbursements. The Company expressly acknowledges and agrees that no amounts
due under this Note and/or any other Transaction Document, as applicable,
shall be affected, or limited, by the fact that the purchase price paid for
this Note was less than the original Principal amount hereof.
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20. CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by
the Company and the initial Holder and shall not be construed against any such
Person as the drafter hereof. The headings of this Note are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Note. Unless the context clearly indicates otherwise, each pronoun herein
shall be deemed to include the masculine, feminine, neuter, singular and
plural forms thereof. The terms "including," "includes," "include" and words
of like import shall be construed broadly as if followed by the words "without
limitation." The terms "herein," "hereunder," "hereof" and words of like
import refer to this entire Note instead of just the provision in which they
are found. Unless expressly indicated otherwise, all section references are to
sections of this Note. Terms used in this Note and not otherwise defined
herein, but defined in the other Transaction Documents, shall have the
meanings ascribed to such terms on the Initial Closing Date in such other
Transaction Documents unless otherwise consented to in writing by the Holder.
21. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the
Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. No waiver shall be effective unless it
is in writing and signed by an authorized representative of the waiving party.
Notwithstanding the foregoing, nothing contained in this Section 21 shall
permit any waiver of any provision of Section 3(d). 22. DISPUTE RESOLUTION.
(a) Submission to Dispute Resolution. (i) In the case of a dispute relating to
a Closing Bid Price, a Closing Sale Price, a Conversion Price, an Installment
Conversion Price, an Acceleration Conversion Price, an Alternate Conversion
Price, a Black Scholes Consideration Value, a VWAP or a fair market value or
the arithmetic calculation of a Conversion Rate or the applicable Redemption
Price (as the case may be) (including, without limitation, a dispute relating
to the determination of any of the foregoing), the Company or the Holder (as
the case may be) shall submit the dispute to the other party via electronic
mail (A) if by the Company, within two (2) Business Days after learning of the
occurrence of the circumstances giving rise to such dispute or (B) if by the
Holder at any time after the Holder learned of the circumstances giving rise
to such dispute. If the Holder and the Company are unable to promptly resolve
such dispute relating to such Closing Bid Price, such Closing Sale Price, such
Conversion Price, such Installment Conversion Price, such Acceleration
Conversion Price, such Alternate Conversion Price, such Black Scholes
Consideration Value, such VWAP or such fair market value, or the arithmetic
calculation of such Conversion Rate or such applicable Redemption Price (as
the case may be), at any time after the fifth (5th) Business Day following
such initial notice by the Company or the Holder (as the case may be) of such
dispute to the Company or the Holder (as the case may be), then the Holder
may, at its sole option, select an independent, reputable investment bank to
resolve such dispute.
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(ii) The Holder and the Company shall each deliver to such investment bank (A)
a copy of the initial dispute submission so delivered in accordance with the
first sentence of this Section 22 and (B) written documentation supporting its
position with respect to such dispute, in each case, no later than 5:00 p.m.
(New York time) by the fifth (5th) Business Day immediately following the date
on which the Holder selected such investment bank (the "Dispute Submission
Deadline") (the documents referred to in the immediately preceding clauses (A)
and (B) are collectively referred to herein as the "Required Dispute
Documentation") (it being understood and agreed that if either the Holder or
the Company fails to so deliver all of the Required Dispute Documentation by
the Dispute Submission Deadline, then the party who fails to so submit all of
the Required Dispute Documentation shall no longer be entitled to (and hereby
waives its right to) deliver or submit any written documentation or other
support to such investment bank with respect to such dispute and such
investment bank shall resolve such dispute based solely on the Required
Dispute Documentation that was delivered to such investment bank prior to the
Dispute Submission Deadline). Unless otherwise agreed to in writing by both
the Company and the Holder or otherwise requested by such investment bank,
neither the Company nor the Holder shall be entitled to deliver or submit any
written documentation or other support to such investment bank in connection
with such dispute (other than the Required Dispute Documentation). (iii) The
Company and the Holder shall use reasonable best efforts to cause such
investment bank to determine the resolution of such dispute and notify the
Company and the Holder of such resolution no later than ten (10) Business Days
immediately following the Dispute Submission Deadline. The fees and expenses
of such investment bank shall be borne solely by the Company, and such
investment bank's resolution of such dispute shall be final and binding upon
all parties absent manifest error. (b) Miscellaneous. The Company expressly
acknowledges and agrees that (i) this Section 22 constitutes an agreement to
arbitrate between the Company and the Holder (and constitutes an arbitration
agreement) under (s) 7501, et seq. of the New York Civil Practice Law and
Rules ("CPLR") and that the Holder is authorized to apply for an order to
compel arbitration pursuant to CPLR (s) 7503(a) in order to compel compliance
with this Section 22, (ii) a dispute relating to a Conversion Price includes,
without limitation, disputes as to (A) whether an issuance or sale or deemed
issuance or sale of Common Stock occurred under Section 7(a), (B) the
consideration per share at which an issuance or deemed issuance of Common
Stock occurred, (C) whether any issuance or sale or deemed issuance or sale of
Common Stock was an issuance or sale or deemed issuance or sale of Excluded
Securities, (D) whether an agreement, instrument, security or the like
constitutes and Option or Convertible Security and (E) whether a Dilutive
Issuance occurred, (iii) the
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terms of this Note and each other applicable Transaction Document shall serve
as the basis for the selected investment bank's resolution of the applicable
dispute, such investment bank shall be entitled (and is hereby expressly
authorized) to make all findings, determinations and the like that such
investment bank determines are required to be made by such investment bank in
connection with its resolution of such dispute and in resolving such dispute
such investment bank shall apply such findings, determinations and the like to
the terms of this Note and any other applicable Transaction Documents, (iv)
the Holder (and only the Holder), in its sole discretion, shall have the right
to submit any dispute described in this Section 22 to any state or federal
court sitting in The City of New York, Borough of Manhattan in lieu of
utilizing the procedures set forth in this Section 22 and (v) nothing in this
Section 22 shall limit the Holder from obtaining any injunctive relief or
other equitable remedies (including, without limitation, with respect to any
matters described in this Section 22). 23. NOTICES; CURRENCY; PAYMENTS. (a)
Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement, or, with respect to the
Trustee, in accordance with Section 10.02 of the Indenture. The Company shall
provide the Holder and the Trustee with prompt written notice of all actions
taken pursuant to this Note, including in reasonable detail a description of
such action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder and the Trustee
(i) immediately upon any adjustment of the Conversion Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii)
at least fifteen (15) days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution upon
the Common Stock, (B) with respect to any grant, issuances, or sales of any
Common Stock, Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of shares of Common Stock
(including, without limitation, whether a Dilutive Issuance has occurred
hereunder) or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case
that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder. (b) Currency. All
dollar amounts referred to in this Note are in United States Dollars ("U.S.
Dollars"), and all amounts owing under this Note shall be paid in U.S.
Dollars. All amounts denominated in other currencies (if any) shall be
converted into the U.S. Dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation. "Exchange Rate" means, in relation
to any amount of currency to be converted into U.S. Dollars pursuant to this
Note, the U.S. Dollar exchange rate as published in the Wall Street Journal on
the relevant date of calculation (it being understood and agreed that where an
amount is calculated with reference to, or over, a period of time, the date of
calculation shall be the final date of such period of time).
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(c) Payments. Whenever any payment of cash is to be made by the Company to any
Person pursuant to this Note, unless otherwise expressly set forth herein,
such payment shall be made in lawful money of the United States of America by
a certified check drawn on the account of the Company and sent via overnight
courier service to such Person at such address as previously provided to the
Company in writing (which address, in the case of each of the Buyers, shall
initially be as set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement), provided that the Holder may elect to receive a payment
of cash via wire transfer of immediately available funds by providing the
Company with prior written notice setting out such request and the Holder's
wire transfer instructions. Whenever any amount expressed to be due by the
terms of this Note is due on any day which is not a Business Day, the same
shall instead be due on the next succeeding day which is a Business Day. Any
amount of Principal or other amounts due under the Transaction Documents which
is not paid when due (except to the extent such amount is simultaneously
accruing Interest at the Default Rate hereunder) shall result in a late charge
being incurred and payable by the Company in an amount equal to interest on
such amount at the rate of eighteen percent (18%) per annum from the date such
amount was due until the same is paid in full ("Late Charge"). 24.
CANCELLATION. After all Principal, accrued Interest, Late Charges and other
amounts at any time owed on this Note or any other Transaction Documents have
been paid in full, this Note shall automatically be deemed canceled, shall be
surrendered to the Company for cancellation and shall not be reissued. 25.
WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
irrevocably waives demand, notice, presentment, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default
or enforcement of this Note and the Securities Purchase Agreement. 26.
GOVERNING LAW. This Note shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than
the State of New York. Except as otherwise required by Section 22 above, the
Company hereby irrevocably submits to the exclusive jurisdiction of the state
and federal courts sitting in The City of New York, Borough of Manhattan, for
the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. Nothing contained herein (i) shall be deemed or
operate to preclude the Holder from bringing suit or taking other legal action
against the Company in any other jurisdiction to collect on the Company's
obligations to the Holder, or to enforce a judgment or other court ruling in
favor of the Holder or (ii) shall limit, or shall be deemed or construed to
limit, any provision of Section 22. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
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27. JUDGMENT CURRENCY. (a) If for the purpose of obtaining or enforcing
judgment against the Company in any court in any jurisdiction it becomes
necessary to convert into any other currency (such other currency being
hereinafter in this Section 27 referred to as the "Judgment Currency") an
amount due in U.S. dollars under this Note, the conversion shall be made at
the Exchange Rate prevailing on the Trading Day immediately preceding: (i) the
date actual payment of the amount due, in the case of any proceeding in the
courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or (ii) the date on which
the foreign court determines, in the case of any proceeding in the courts of
any other jurisdiction (the date as of which such conversion is made pursuant
to this Section 27(a)(ii) being hereinafter referred to as the "Judgment
Conversion Date"). (b) If in the case of any proceeding in the court of any
jurisdiction referred to in Section 27(a)(ii) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and the date of
actual payment of the amount due, the applicable party shall pay such adjusted
amount as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the Exchange Rate prevailing on the date of
payment, will produce the amount of US dollars which could have been purchased
with the amount of Judgment Currency stipulated in the judgment or judicial
order at the Exchange Rate prevailing on the Judgment Conversion Date. (c) Any
amount due from the Company under this provision shall be due as a separate
debt and shall not be affected by judgment being obtained for any other
amounts due under or in respect of this Note. 28. SEVERABILITY. If any
provision of this Note is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and
enforceable, and the invalidity or unenforceability of such provision shall
not affect the validity of the remaining provisions of this Note so long as
this Note as so modified continues to express, without material change, the
original intentions of the parties as to the subject matter hereof and the
prohibited nature, invalidity or unenforceability of the provision(s) in
question does not substantially impair the respective expectations or
reciprocal obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or
unenforceable provision(s) with a valid provision(s), the effect of which
comes as close as possible to that of the prohibited, invalid or unenforceable
provision(s).
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29. MAXIMUM PAYMENTS. Without limiting Section 9(d) of the Securities Purchase
Agreement, nothing contained herein shall be deemed to establish or require
the payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest required
to be paid or other charges hereunder exceed the maximum permitted by such
law, any payments in excess of such maximum shall be credited against amounts
owed by the Company to the Holder and thus refunded to the Company. 30.
CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have
the following meanings: (a) "1933 Act" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder. (b) "1934 Act" means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. (c) "Acceleration Conversion Price" means, with respect to any
given Acceleration Date, the lower of (i) the Installment Conversion Price for
such Current Installment Date related to such Acceleration Date and (ii) the
greater of (x) the Floor Price and (y) 93% of the Acceleration Market Price.
(d) "Acceleration Market Price" means, with respect to any given Acceleration
Date, the lesser of (i) the VWAP of the Common Stock on the Trading Day
immediately prior to such Acceleration Date and (ii) the quotient of (x) the
sum of the VWAP of the Common Stock for each Trading Day during the five (5)
consecutive Trading Day period ending, and including, the Trading Day
immediately prior to such Acceleration Date, divided by (y) five (5). All such
determinations to be appropriately adjusted for any share split, share
dividend, share combination or other similar transaction during any such
measuring period. (e) "Acceleration Floor Amount" means an amount in cash, to
be delivered by wire transfer of immediately available funds pursuant to wire
instructions delivered to the Company by the Holder in writing, equal to the
product obtained by multiplying (A) the higher of (I) the highest price that
the shares of Common Stock trades at on the Trading Day immediately preceding
the relevant Acceleration Date with respect to such Acceleration and (II) the
applicable Acceleration Conversion Price of such Acceleration Date and (B) the
difference obtained by subtracting (I) the number of shares of Common Stock
delivered (or to be delivered) to the Holder on the applicable Share Delivery
Deadline with respect to such Acceleration from (II) the quotient obtained by
dividing (x) the applicable Acceleration Amount that the Holder has elected to
be the subject of the applicable Acceleration, by (y) the applicable
Acceleration Conversion Price of such Acceleration Date without giving effect
to clause (x) of such definition or clause (x) of the definition of the
Installment Conversion Price, as applicable. (f) "Adjustment Right" means any
right granted with respect to any securities issued in connection with, or
with respect to, any issuance or sale (or deemed issuance or sale in
accordance with Section 7) of shares of Common Stock (other than rights of the
type described in Section 6(a) hereof) that could result in a decrease in the
net consideration received by the Company in connection with, or with respect
to, such securities (including, without limitation, any cash settlement
rights, cash adjustment or other similar rights).
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(g) "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such Person, it being understood for purposes of this definition that
"control" of a Person means the power directly or indirectly either to vote
10% or more of the stock having ordinary voting power for the election of
directors of such Person or direct or cause the direction of the management
and policies of such Person whether by contract or otherwise. (h) "Alternate
Conversion Price" means, with respect to any Alternate Conversion that price
which shall be the lower of (i) the applicable Conversion Price as in effect
on the applicable Conversion Date of the applicable Alternate Conversion, and
(ii) 80% of the Market Price as of the Trading Day of the delivery or deemed
delivery of the applicable Conversion Notice (such period, the "Alternate
Conversion Measuring Period"). All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination, reclassificatio
n or similar transaction that proportionately decreases or increases the
Common Stock during such Alternate Conversion Measuring Period. (i) "Approved
Stock Plan" means any employee benefit plan which has been approved by the
board of directors of the Company prior to or subsequent to the Subscription
Date pursuant to which shares of Common Stock and standard options to purchase
Common Stock may be issued to any employee, officer or director for services
provided to the Company in their capacity as such. (j) "Attribution Parties"
means, collectively, the following Persons and entities: (i) any investment
vehicle, including, any funds, feeder funds or managed accounts, currently, or
from time to time after the Issuance Date, directly or indirectly managed or
advised by the Holder's investment manager or any of its Affiliates or
principals, (ii) any direct or indirect Affiliates of the Holder or any of the
foregoing, (iii) any Person acting or who could be deemed to be acting as a
Group together with the Holder or any of the foregoing and (iv) any other
Persons whose beneficial ownership of the Company's Common Stock would or
could be aggregated with the Holder's and the other Attribution Parties for
purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the
foregoing is to subject collectively the Holder and all other Attribution
Parties to the Maximum Percentage. (k) "Available Cash" means, with respect to
any date of determination, an amount equal to the aggregate amount of the Cash
of the Company and its Subsidiaries (excluding for this purpose cash held in
restricted accounts or otherwise unavailable for unrestricted use by the
Company or any of its Subsidiaries for any reason) and Reclaimable Cash as of
such date of determination held in bank accounts of financial banking
institutions in the United States of America or in bank accounts of reputable
financial banking institutions in such other country or countries as the
Company has a bona fide business purpose to hold such Cash (other than with a
purpose to circumvent or otherwise misrepresent the aggregate amount of
Available Cash required pursuant to the terms and conditions of this Note).
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(l) "Black Scholes Consideration Value" means the value of the applicable
Option, Convertible Security or Adjustment Right (as the case may be) as of
the date of issuance thereof calculated using the Black Scholes Option Pricing
Model obtained from the "OV" function on Bloomberg utilizing (i) an underlying
price per share equal to the Closing Sale Price of the Common Stock on the
Trading Day immediately preceding the public announcement of the execution of
definitive documents with respect to the issuance of such Option, Convertible
Security or Adjustment Right (as the case may be), (ii) a risk-free interest
rate corresponding to the U.S. Treasury rate for a period equal to the
remaining term of such Option, Convertible Security or Adjustment Right (as
the case may be) as of the date of issuance of such Option, Convertible
Security or Adjustment Right (as the case may be), (iii) a zero cost of borrow
and (iv) an expected volatility equal to the greater of 100% and the 30 day
volatility obtained from the "HVT" function on Bloomberg (determined utilizing
a 365 day annualization factor) as of the Trading Day immediately following
the date of issuance of such Option, Convertible Security or Adjustment Right
(as the case may be). (m) "Bloomberg" means Bloomberg, L.P. (n) "Business Day"
means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain
closed; provided, however, for clarification, commercial banks shall not be
deemed to be authorized or required by law to remain closed due to "stay at
home", "shelter-in-place", "non-essential employee" or any other similar
orders or restrictions or the closure of any physical branch locations at the
direction of any governmental authority so long as the electronic funds
transfer systems (including for wire transfers) of commercial banks in The
City of New York generally are open for use by customers on such day. (o)
"Cash" of the Company and its Subsidiaries on any date shall be determined
from such Persons' books maintained in accordance with GAAP, and means,
without duplication, the cash, cash equivalents and Eligible Marketable
Securities accrued by the Company and its wholly owned Subsidiaries on a
consolidated basis on such date. (p) "Change of Control" means any Fundamental
Transaction other than (i) any merger of the Company or any of its, direct or
indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons,
(ii) any reorganization, recapitalization or reclassification of the shares of
Common Stock in which holders of the Company's voting power immediately prior
to such reorganization, recapitalization or reclassification continue after
such reorganization, recapitalization or reclassification to hold publicly
traded securities and, directly or indirectly, are, in all material respects,
the holders of the voting power of the surviving entity (or entities with the
authority or voting power to elect the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities)
after such reorganization, recapitalization or reclassification, or (iii)
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company or any of its Subsidiaries. (q)
"Change of Control Redemption Premium" means 125%.
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(r) "Closing Bid Price" and "Closing Sale Price" means, for any security as of
any date, the last closing bid price and last closing trade price,
respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price
(as the case may be) then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing bid
price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded
as reported by Bloomberg, or if the foregoing do not apply, the last closing
bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the average of the
bid prices, or the ask prices, respectively, of any market makers for such
security as reported in The Pink Open Market (or a similar organization or
agency succeeding to its functions of reporting prices). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price (as the case may be) of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in accordance with the
procedures in Section 22. All such determinations shall be appropriately
adjusted for any stock splits, stock dividends, stock combinations,
recapitalizations or other similar transactions during such period. (s)
"Common Stock" means (i) the Company's shares of Class A common stock,
$0.00001 par value per share, and (ii) any capital stock into which such
common stock shall have been changed or any share capital resulting from a
reclassification of such common stock. (t) "Conversion Floor Price Condition"
means that the relevant Acceleration Conversion Price (including any
Installment Conversion Price referred to therein) or Installment Conversion
Price, as applicable, is being determined based on sub-clause (x) of such
definitions. (u) "Conversion Installment Floor Amount" means an amount in
cash, to be delivered by wire transfer of immediately available funds pursuant
to wire instructions delivered to the Company by the Holder in writing, equal
to the product obtained by multiplying (A) the higher of (I) the highest price
that the shares of Common Stock trades at on the Trading Day immediately
preceding the relevant Installment Date and (II) the applicable Installment
Conversion Price and (B) the difference obtained by subtracting (I) the number
of shares of Common Stock delivered (or to be delivered) to the Holder on the
applicable Installment Date with respect to such Installment Conversion from
(II) the quotient obtained by dividing (x) the applicable Installment Amount
subject to such Installment Conversion, by (y) the applicable Installment
Conversion Price without giving effect to clause (x) of such definition.
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(v) "Convertible Securities" means any stock or other security (other than
Options) that is at any time and under any circumstances, directly or
indirectly, convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any shares of Common Stock.
(w) "Current Public Information Failure" means the Company's failure for any
reason to satisfy the requirements of Rule 144(c)(1), including, without
limitation, the failure to satisfy the current public information requirement
under Rule 144(c) or the Company has ever been an issuer described in Rule
144(i)(1)(i) or becomes such an issuer in the future, and the Company shall
fail to satisfy any condition set forth in Rule 144(i)(2). (x) "Eligible
Market" means the NYSE American, the Nasdaq Global Select Market, the Nasdaq
Global Market, the Nasdaq Capital Market or the Principal Market. (y)
"Eligible Marketable Securities" as of any date means marketable securities
which would be reflected on a consolidated balance sheet of the Company and
its Subsidiaries prepared as of such date in accordance with GAAP, and which
are permitted under the Company's investment policies as in effect on the
Issuance Date or approved thereafter by the Company's Board of Directors. (z)
"Equity Conditions" means, with respect to any given date of determination:
(i) on each day during the period beginning thirty calendar days prior to the
applicable date of determination and ending on and including the applicable
date of determination (the "Equity Conditions Measuring Period"), the Common
Stock (including all Underlying Securities (as defined in the Securities
Purchase Agreement)) is listed or designated for quotation (as applicable) on
an Eligible Market and shall not have been suspended from trading on an
Eligible Market (other than suspensions of not more than two (2) days and
occurring prior to the applicable date of determination due to business
announcements by the Company) nor shall delisting or suspension by an Eligible
Market have been threatened (with a reasonable prospect of delisting occurring
after giving effect to all applicable notice, appeal, compliance and hearing
periods) or reasonably likely to occur or pending as evidenced by (A) a
writing by such Eligible Market or (B) the Company falling below the minimum
listing maintenance requirements of the Eligible Market on which the Common
Stock is then listed or designated for quotation (as applicable); (ii) during
the Equity Conditions Measuring Period, the Company shall have delivered all
shares of Common Stock issuable upon conversion of this Note on a timely basis
as set forth in Section 3 hereof and all other shares of capital stock
required to be delivered by the Company on a timely basis as set forth in the
other Transaction Documents; (iii) any shares of Common Stock to be issued in
connection with the event requiring determination (or issuable upon conversion
of the Conversion Amount being redeemed in the event requiring this
determination) may be issued in full without violating Section 3(d) hereof;
(iv) any shares of Common Stock to be issued in connection with the event
requiring determination (or issuable upon conversion of the Conversion Amount
being redeemed in the event requiring this determination (without regards to
any limitations on conversion set forth herein)) may be issued in full without
violating the rules or regulations of the Eligible Market on which the Common
Stock is then listed or designated for quotation (as applicable); (v) on each
day during the Equity Conditions
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Measuring Period, no public announcement of a pending, proposed or intended
Fundamental Transaction shall have occurred which has not been abandoned,
terminated or consummated; (vi) no Current Public Information Failure then
exists or is continuing; (vii) the Holder shall not be in (and no Other Holder
shall be in) possession of any material, non-public information provided to
any of them by the Company, any of its Subsidiaries or any of their respective
affiliates, employees, officers, representatives, agents or the like; (viii)
on each day during the Equity Conditions Measuring Period, the Company
otherwise shall have been in compliance with each, and shall not have breached
any representation or warranty in any material respect (other than
representations or warranties subject to material adverse effect or
materiality, which may not be breached in any respect) or any covenant or
other term or condition of any Transaction Document, including, without
limitation, the Company shall not have failed to timely make any payment
pursuant to any Transaction Document, in each case, which has not been waived;
(ix) on each Trading Day during the Equity Conditions Measuring Period, there
shall not have occurred any Volume Failure or Price Failure as of such
applicable date of determination; (x) on the applicable date of determination
(A) no Authorized Share Failure shall exist or be continuing and all shares of
Common Stock to be issued in connection with the event requiring this
determination (or issuable upon conversion of the Conversion Amount being
redeemed in the event requiring this determination at the Alternate Conversion
Price then in effect (without regard to any limitations on conversion set
forth herein)) (each, a "Required Minimum Securities Amount") are available
under the certificate of incorporation of the Company and reserved by the
Company to be issued pursuant to the Notes and (B) all shares of Common Stock
to be issued in connection with the event requiring this determination (or
issuable upon conversion of the Conversion Amount being redeemed in the event
requiring this determination (without regards to any limitations on conversion
set forth herein)) may be issued in full without resulting in an Authorized
Share Failure; (xi) on each day during the Equity Conditions Measuring Period,
there shall not have occurred and there shall not exist an Event of Default
(as defined in the Notes) or an event that with the passage of time or giving
of notice would constitute an Event of Default (regardless of whether the
Holder has submitted an Event of Default Redemption Notice), in each case,
which has not been waived; (xii) no bona fide dispute shall exist, by and
between any of holder of Notes, the Company, the Principal Market (or such
applicable Eligible Market in which the Common Stock of the Company is then
principally trading) and/or FINRA with respect to any term or provision of any
Note or any other Transaction Document and (xiii) the shares of Common Stock
issuable pursuant to the event requiring the satisfaction of the Equity
Conditions are duly authorized and listed and eligible for trading without
restriction on an Eligible Market. (aa) "Equity Conditions Failure" means that
on any day during the period commencing twenty (20) Trading Days prior to the
applicable Installment Notice Date through the later of the applicable
Installment Date and the date on which the applicable shares of Common Stock
are actually delivered to the Holder, the Equity Conditions have not been
satisfied (or waived in writing by the Holder).
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(bb) "Excluded Securities" means (i) shares of Common Stock or standard
options to purchase Common Stock issued to directors, officers or employees of
the Company for services rendered to the Company in their capacity as such
pursuant to an Approved Stock Plan (as defined above), provided that (A) all
such issuances (taking into account the shares of Common Stock issuable upon
exercise of such options) after the Subscription Date pursuant to this clause
(i) do not, in the aggregate, exceed more than 5% of the Common Stock issued
and outstanding immediately prior to the Subscription Date and (B) the
exercise price of any such options is not lowered, none of such options are
amended to increase the number of shares issuable thereunder and none of the
terms or conditions of any such options are otherwise materially changed in
any manner that adversely affects any of the holders of Notes; (ii) shares of
Common Stock issued upon the conversion or exercise of Convertible Securities
or Options (other than standard options to purchase Common Stock issued
pursuant to an Approved Stock Plan that are covered by clause (i) above)
issued prior to the Subscription Date, provided that the conversion price of
any such Convertible Securities (other than standard options to purchase
Common Stock issued pursuant to an Approved Stock Plan that are covered by
clause (i) above) is not lowered, none of such Convertible Securities or
Options (other than standard options to purchase Common Stock issued pursuant
to an Approved Stock Plan that are covered by clause (i) above) are amended to
increase the number of shares issuable thereunder and none of the terms or
conditions of any such Convertible Securities or Options (other than standard
options to purchase Common Stock issued pursuant to an Approved Stock Plan
that are covered by clause (i) above) are otherwise materially changed in any
manner that adversely affects any of the holders of Notes; (iii) the shares of
Common Stock issuable upon conversion of the Notes or otherwise pursuant to
the terms of the Notes; provided, that the terms of the Notes are not amended,
modified or changed on or after the Subscription Date (other than antidilution
adjustments pursuant to the terms thereof in effect as of the Subscription
Date); and (iv) shares of Common Stock issued and sold, in one or more
transactions, pursuant to a Permitted ATM (as defined in the Securities
Purchase Agreement), provided that the aggregate purchase price for such
shares of Common Stock in such transaction or transactions shall not exceed
$10,000,000. For the avoidance of doubt, any sales of shares of Common Stock
pursuant to a Permitted ATM in excess of $10,000,000 shall not be included in
this definition of "Excluded Securities". (cc) "Floor Price" means $1.16,
subject to adjustment for stock splits, stock dividends, stock combinations,
recapitalizations or other similar events; provided, that the Company may
reduce the Floor Price to any amount set forth in a written notice to the
Holder with at least five (5) Trading Day prior written notice (or such other
time as the Company and the Holder shall mutually agree); provided, further,
that any such reduction shall be irrevocable and shall not be subject to
increase thereafter. (dd) "Fiscal Quarter" means each of the fiscal quarters
adopted by the Company for financial reporting purposes that correspond to the
Company's fiscal year as of the date hereof that ends on December 31. (ee)
"Fiscal Year" means the fiscal year adopted by the Company for financial
reporting purposes as of the date hereof that ends on December 31.
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(ff) "Fundamental Transaction" means (A) that the Company shall, directly or
indirectly, including through subsidiaries, Affiliates or otherwise, in one or
more related transactions, (i) consolidate or merge with or into (whether or
not the Company is the surviving corporation) another Subject Entity, or (ii)
sell, assign, transfer, convey or otherwise dispose of all or substantially
all of the properties or assets of the Company or any of its Significant
Subsidiaries to one or more Subject Entities, or (iii) make, or allow one or
more Subject Entities to make, or allow the Company to be subject to or have
its Common Stock be subject to or party to one or more Subject Entities
making, a purchase, tender or exchange offer that is accepted by the holders
of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50%
of the outstanding shares of Common Stock calculated as if any shares of
Common Stock held by all Subject Entities making or party to, or Affiliated
with any Subject Entities making or party to, such purchase, tender or
exchange offer were not outstanding; or (z) such number of shares of Common
Stock such that all Subject Entities making or party to, or Affiliated with
any Subject Entity making or party to, such purchase, tender or exchange
offer, become collectively the beneficial owners (as defined in Rule 13d-3
under the 1934 Act) of at least 50% of the outstanding shares of Common Stock,
or (iv) consummate a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with one or more Subject Entities whereby
all such Subject Entities, individually or in the aggregate, acquire, either
(x) at least 50% of the outstanding shares of Common Stock, (y) at least 50%
of the outstanding shares of Common Stock calculated as if any shares of
Common Stock held by all the Subject Entities making or party to, or
Affiliated with any Subject Entity making or party to, such stock purchase
agreement or other business combination were not outstanding; or (z) such
number of shares of Common Stock such that the Subject Entities become
collectively the beneficial owners (as defined in Rule 13d-3 under the 1934
Act) of at least 50% of the outstanding shares of Common Stock, or (v)
reorganize, recapitalize or reclassify its Common Stock, (B) that the Company
shall, directly or indirectly, including through subsidiaries, Affiliates or
otherwise, in one or more related transactions, allow any Subject Entity
individually or the Subject Entities in the aggregate to be or become the
"beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, whether through acquisition, purchase, assignment, conveyance,
tender, tender offer, exchange, reduction in outstanding shares of Common
Stock, merger, consolidation, business combination, reorganization,
recapitalization, spin-off, scheme of arrangement, reorganization,
recapitalization or reclassification or otherwise in any manner whatsoever, of
either (x) at least 50% of the aggregate ordinary voting power represented by
issued and outstanding Common Stock, (y) at least 50% of the aggregate
ordinary voting power represented by issued and outstanding Common Stock not
held by all such Subject Entities as of the date of this Note calculated as if
any shares of Common Stock held by all such Subject Entities were not
outstanding, or (z) a percentage of the aggregate ordinary voting power
represented by issued and outstanding shares of Common Stock or other equity
securities of the Company sufficient to allow such Subject Entities to effect
a statutory short form merger or other transaction requiring other
stockholders of the Company to surrender their shares of Common Stock without
approval of the stockholders of the Company or (C) directly or indirectly,
including through subsidiaries, Affiliates or otherwise, in one or more
related transactions, the issuance of or the entering into any other
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instrument or transaction structured in a manner to circumvent, or that
circumvents, the intent of this definition in which case this definition shall
be construed and implemented in a manner otherwise than in strict conformity
with the terms of this definition to the extent necessary to correct this
definition or any portion of this definition which may be defective or
inconsistent with the intended treatment of such instrument or transaction.
(gg) "GAAP" means United States generally accepted accounting principles,
consistently applied. (hh) "Group" means a "group" as that term is used in
Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder. (ii)
"Holder Pro Rata Amount" means a fraction (i) the numerator of which is the
original Principal amount of this Note issued to the Holder on the Initial
Closing Date and (ii) the denominator of which is the aggregate original
principal amount of all Notes issued to the initial purchasers pursuant to the
Securities Purchase Agreement on the Initial Closing Date. (jj) "Indebtedness"
shall have the meaning ascribed to such term in the Securities Purchase
Agreement. (kk) "Initial Closing Date" shall have the meaning set forth in the
Securities Purchase Agreement, which date is the date the Company initially
issued Initial Notes (as defined in the Securities Purchase Agreement)
pursuant to the terms of the Securities Purchase Agreement. (ll) "Installment
Amount" means the sum of (A) (i) with respect to any Installment Date other
than the Maturity Date, the lesser of (x) the Holder Pro Rata Amount of
$37,777,777.78 and (y) the Principal amount then outstanding under this Note
as of such Installment Date, and (ii) with respect to the Installment Date
that is the Maturity Date, the Principal amount then outstanding under this
Note as of such Installment Date (in each case, as any such Installment Amount
may be reduced pursuant to the terms of this Note, whether upon conversion,
redemption or Deferral), (B) any Deferral Amount deferred pursuant to Section
8(d) and included in such Installment Amount in accordance therewith, (C) any
Acceleration Amount accelerated pursuant to Section 8(e) and included in such
Installment Amount in accordance therewith and (D) in each case of clauses (A)
through (C) above, the sum of any accrued and unpaid Interest as of such
Installment Date under this Note, if any, and accrued and unpaid Late Charges,
if any, under this Note as of such Installment Date. In the event the Holder
shall sell or otherwise transfer any portion of this Note, the transferee
shall be allocated a pro rata portion of each unpaid Installment Amount
hereunder. (mm) "Installment Conversion Price" means, with respect to a
particular date of determination, the lower of (i) the Conversion Price then
in effect, and (ii) the greater of (x) the Floor Price and (y) 93% of the
Market Price of the applicable Installment Date. All such determinations to be
appropriately adjusted for any stock split, stock dividend, stock combination
or other similar transaction during any such measuring period.
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(nn) "Installment Date" means (i) July 11, 2023, (ii) then, each three month
anniversary thereafter until the Maturity Date, and (iii) the Maturity Date;
provided that if any such date is not a Business Day, the next Business Day.
(oo) "Indenture" means that certain Indenture for Debt Securities dated as of
the Initial Closing Date, by and between the Company and the Trustee, as may
be amended, modified or supplemented from time to time, including, without
limitation, by any Supplemental Indenture (as defined below). (pp)
"Investment" means any beneficial ownership (including stock, partnership or
limited liability company interests) of or in any Person, or any loan, advance
or capital contribution to any Person or the acquisition of all, or
substantially all, of the assets of another Person or the purchase of any
assets of another Person for greater than the fair market value of such
assets. (qq) "Market Price" shall mean, as of any given date, the lower of (i)
the VWAP of the Common Stock on the Trading Day immediately prior to such date
and (ii) the quotient of (x) the sum of the VWAP of the Common Stock on each
Trading Day during the five (5) consecutive Trading Day period ending, and
including, the Trading Day immediately prior to such date, divided by (II)
five (5) (it being understood and agreed that all such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during such period). (rr) "Maturity Date" shall
mean July 11, 2025; provided, however, the Maturity Date may be extended at
the option of the Holder (i) in the event that, and for so long as, an Event
of Default shall have occurred and be continuing or any event shall have
occurred and be continuing that with the passage of time and the failure to
cure would result in an Event of Default or (ii) through the date that is
twenty (20) Business Days after the consummation of a Fundamental Transaction
in the event that a Fundamental Transaction is publicly announced or a Change
of Control Notice is delivered prior to the Maturity Date, provided further
that if a Holder elects to convert some or all of this Note pursuant to
Section 3 hereof, and the Conversion Amount would be limited pursuant to
Section 3(d) hereunder, the Maturity Date shall automatically be extended
until such time as such provision shall not limit the conversion of this Note.
(ss) "Options" means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities. (tt) "Parent
Entity" of a Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is
quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest public
market capitalization as of the date of consummation of the Fundamental
Transaction.
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(uu) "Permitted Convertible Securities" means (a) any Convertible Securities
of the Company issued after July 11, 2023 in exchange for Indebtedness of the
Company outstanding as of the Subscription Date; provided, that (i) such
Convertible Securities are pari passu or subordinate to the terms of the
Notes, (ii) the terms of such Convertible Securities are not more favorable to
such holders of Convertible Securities than the terms of the Notes, (iii) the
amounts outstanding under such Convertible Securities do not increase as a
result of such exchange and (iv) such Convertible Securities shall not
prohibit or limit in any manner any term or condition under the Transaction
Documents and/or any amendment, or modification or waiver hereunder or
thereunder, as applicable, including, but not limited to (x) any prohibition
on any payment of cash by the Company in respect of any obligation under the
Notes and (y) any limitation on conversion or the payment of any amounts by
the Company in shares of Common Stock, in accordance with the terms of the
Notes; and (b) any Convertible Securities issued after the 12-month
anniversary of the Initial Closing Date; provided, that (i) such Convertible
Securities are pari passu or subordinate to the terms of the Notes, and (ii)
such Convertible Securities shall not prohibit or limit in any manner any term
or condition under the Transaction Documents and/or any amendment, or
modification or waiver hereunder or thereunder, as applicable, including, but
not limited to (x) any prohibition on any payment of cash by the Company in
respect of any obligation under the Notes and (y) any limitation on conversion
or the payment of any amounts by the Company in shares of Common Stock, in
accordance with the terms of the Notes. (vv) "Permitted Indebtedness" means
(i) Indebtedness evidenced by this Note and the Other Notes, (ii) Indebtedness
set forth on Schedule 3(s) to the Securities Purchase Agreement, as in effect
as of the Subscription Date, (iv) Permitted Convertible Securities, (v)
Indebtedness secured by Permitted Liens or unsecured but as described in
clauses (iv) and (v) of the definition of Permitted Liens, (vi) non-convertible
Indebtedness to trade creditors incurred in the ordinary course of business
(not otherwise excluded from the definition of Indebtedness), including
non-convertible Indebtedness incurred in the ordinary course of business with
corporate credit cards, (vii) non-convertible Indebtedness arising from
letters of credit (or similar instruments) in the ordinary course of business,
(viii) non-convertible Indebtedness arising from operating and financing
leases in the ordinary course of business, (ix) non-convertible Indebtedness
incurred under working capital facilities entered into in the ordinary course
of business, provided such facilities do not exceed $200,000,000 in the
aggregate (the "Permitted WC Facility"), (x) non-convertible intercompany
Indebtedness owed between the Company and/or any Subsidiary (or between any
Subsidiaries), as applicable, (xi) non-convertible Indebtedness consisting of
subsidized loans made, or guaranteed, by a governmental entity, (xii) to the
extent constituting non-convertible Indebtedness, obligations owed to an
insurance company incurred in the ordinary course of business with respect to
premiums payable for property, casualty, or other insurance, so long as such
indebtedness shall not be in excess of the
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amount of the unpaid cost of, and shall be incurred only to defer the cost of,
such insurance for the year in which such indebtedness is incurred and such
indebtedness shall be outstanding only during such year, (xiii) non-
convertible Indebtedness in respect of surety and appeal bonds, performance
bonds, bid bonds, appeal bonds, completion guarantees and similar obligations
incurred in the ordinary course of business, and (xiv) other non- convertible
Indebtedness not to exceed $25,000,000; provided, that (A) all Permitted
Indebtedness must be pari passu or subordinate to the terms of the Notes
(other than Permitted Indebtedness secured by Permitted Liens), and (B) no
Permitted Indebtedness shall prohibit or limit in any manner any term or
condition under the Transaction Documents and/or any amendment, or
modification or waiver hereunder or thereunder, as applicable, including, but
not limited to (x) any prohibition on any payment of cash by the Company in
respect of any obligation under the Notes and (y) any limitation on conversion
or the payment of any amounts by the Company in shares of Common Stock, in
accordance with the terms of the Notes. (ww) "Permitted Liens" means (i) any
Lien for taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, (ii) any statutory Lien arising in the ordinary course
of business by operation of law with respect to a liability that is not yet
due or delinquent, (iii) any Lien created by operation of law, such as
materialmen's liens, mechanics' liens and other similar liens, arising in the
ordinary course of business with respect to a liability that is not yet due or
delinquent or that are being contested in good faith by appropriate
proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the
Company or any of its Subsidiaries to secure the purchase price of such
equipment or Indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment at
the time of its acquisition, provided that the Lien is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
equipment, in either case, with respect to Indebtedness in an aggregate amount
not to exceed $200,000,000, (v) Liens incurred in connection with the
extension, renewal or refinancing of the Indebtedness secured by Liens of the
type described in clause (iv) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the Indebtedness being extended, renewed or
refinanced does not increase, (vi) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payments of custom duties in
connection with the importation of goods, (vii) Liens arising from judgments,
decrees or attachments in circumstances not constituting an Event of Default
under Section 4(a)(x) and (viii) Liens with respect to any accounts
receivables or inventory of the Company and its Subsidiaries securing the
Permitted WC Facility. (xx) "Person" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity or a government or any
department or agency thereof.
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(yy) "Price Failure" means, with respect to a particular date of determination,
the VWAP of the Common Stock on any Trading Day during the twenty (20) Trading
Day period ending on the Trading Day immediately preceding such date of
determination fails to exceed $1.16 (as adjusted for stock splits, stock
dividends, stock combinations, recapitalizations or other similar transactions
occurring after the Subscription Date). All such determinations to be
appropriately adjusted for any stock splits, stock dividends, stock
combinations, recapitalizations or other similar transactions during any such
measuring period. (zz) "Principal Market" means the New York Stock Exchange.
(aaa) "Reclaimable Cash" means, as of any given date of determination, (i)
unavailable Cash as of such date of determination that is eligible to be
returned to the Company or any of its Subsidiaries, as applicable, at the
conclusion of any agreement where such Cash would otherwise not be considered
cash and cash equivalents for purposes of GAAP, but which is reasonably
expected to be released as unrestricted Cash of the Company or any of its
Subsidiaries within 90 days of such date of determination (including, for the
avoidance of doubt, any Cash amounts so restricted due to a letter of credit
supporting supplier contractual obligations) and (ii) order deposits made
through credit card transactions whereby Cash payments are held by financial
institutions until the vehicle being purchased by any such applicable customer
is delivered to such applicable customer (but solely with respect to such Cash
payments that are reasonably expected to be released to the Company or any of
its Subsidiaries, as applicable, within 90 days of such date of determination
upon delivery of such applicable vehicle(s) to such applicable customer(s)
and/or non-refundable payments that with the passage of time will become an
asset of the Company (or such applicable Subsidiary) under GAAP)(regardless of
whether the vehicle(s) is delivered)) at which time the Cash is deposited into
the Company's (or such applicable Subsidiary's) bank account and available for
the Company's (or such applicable Subsidiary's) unrestricted use. (bbb)
"Redemption Notices" means, collectively, the Event of Default Redemption
Notices, the Installment Notices with respect to any Installment Redemption,
and the Change of Control Redemption Notices, and each of the foregoing,
individually, a "Redemption Notice." (ccc) "Redemption Premium" means 125%.
(ddd) "Redemption Prices" means, collectively, Event of Default Redemption
Prices, the Change of Control Redemption Prices, and the Installment
Redemption Prices, and each of the foregoing, individually, a "Redemption
Price." (eee) "SEC" means the United States Securities and Exchange Commission
or the successor thereto. (fff) "Securities Purchase Agreement" means that
certain securities purchase agreement, dated as of the Subscription Date, by
and among the Company and the initial holders of the Notes pursuant to which
the Company issued the Notes, as may be amended from time to time.
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(ggg) "Significant Subsidiaries" or "Significant Subsidiary" means, as of any
time of determination, any of the "significant subsidiaries" (as defined in
Rule 1-02 of Regulation S-X) of the Company as of such time of determination.
(hhh) "Subscription Date" means July 10, 2023. (iii) "Subsidiaries" shall have
the meaning as set forth in the Securities Purchase Agreement. (jjj) "Subject
Entity" means any Person, Persons or Group or any Affiliate or associate of
any such Person, Persons or Group. (kkk) "Successor Entity" means the Person
(or, if so elected by the Holder, the Parent Entity) formed by, resulting from
or surviving any Fundamental Transaction or the Person (or, if so elected by
the Holder, the Parent Entity) with which such Fundamental Transaction shall
have been entered into. (lll) "Supplemental Indenture" shall have the meaning
ascribed to such term in the Securities Purchase Agreement, as each such
supplemental indenture may be amended, modified or supplemented from time to
time. (mmm) "Trading Day" means, as applicable, (x) with respect to all price
or trading volume determinations relating to the Common Stock, any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock
is then traded, provided that "Trading Day" shall not include any day on which
the Common Stock is scheduled to trade on such exchange or market for less
than 4.5 hours or any day that the Common Stock is suspended from trading
during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading
on such exchange or market, then during the hour ending at 4:00:00 p.m., New
York time) unless such day is otherwise designated as a Trading Day in writing
by the Holder or (y) with respect to all determinations other than price
determinations relating to the Common Stock, any day on which The New York
Stock Exchange (or any successor thereto) is open for trading of securities.
(nnn) "Triggering Event" means the occurrence of any Event of Default
(assuming for such purpose that "$10,000,000" replaces "$25,000,000", where
applicable, in each clause of the definition of Event of Default). (ooo)
"Trustee" means Wilmington Savings Fund Society, FSB, in its capacity as
trustee under the Indenture, or any successor or any additional trustee
appointed with respect to the Notes pursuant to the Indenture.
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(ppp) "Volume Failure" means, with respect to a particular date of
determination, if either (x) the aggregate daily dollar trading volume (as
reported on Bloomberg) of the Common Stock on the Principal Market on more
than five (5) Trading Days during the twenty (20) Trading Day period ending on
the Trading Day immediately preceding such date of determination, or (y) the
aggregate daily dollar trading volume (as reported on Bloomberg) of the Common
Stock on the Principal Market on any Trading Day during the five (5) Trading
Day period ending on the Trading Day immediately preceding such date of
determination, as applicable, is less than $25,000,000. (qqq) "VWAP" means,
for any security as of any date, the dollar volume-weighted average price for
such security on the Principal Market (or, if the Principal Market is not the
principal trading market for such security, then on the principal securities
exchange or securities market on which such security is then traded), during
the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New
York time, as reported by Bloomberg through its "VAP" function (set to 09:30
start time and 16:00 end time) or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market
on the electronic bulletin board for such security during the period beginning
at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in The Pink Open Market (or a
similar organization or agency succeeding to its functions of reporting
prices). If the VWAP cannot be calculated for such security on such date on
any of the foregoing bases, the VWAP of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in accordance with the
procedures in Section 22. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination, recapitalizatio
n or other similar transaction during such period. 31. DISCLOSURE. Upon
delivery by the Company to the Holder (or receipt by the Company from the
Holder) of any notice in accordance with the terms of this Note, unless the
Company has in good faith determined that the matters relating to such notice
do not constitute material, non-public information relating to the Company or
any of its Subsidiaries (it being understood that a Dilutive Issuance, which
results in an adjustment of the Conversion Price, shall always be deemed
material for the purpose of this Section 31), the Company shall on or prior to
9:00 am, New York City time on the Business Day immediately following such
notice delivery date, publicly disclose such material, non-public information
on a Current Report on Form 8-K or otherwise. In the event that the Company
believes that a notice contains material, non-public information relating to
the Company or any of its Subsidiaries, the Company so shall indicate to the
Holder explicitly in writing in such notice (or immediately upon receipt of
notice from the Holder, as applicable), and in the absence of any such written
indication in such notice (or notification from the Company immediately upon
receipt of notice from the Holder), the Holder shall be entitled to presume
that information contained in the notice does not constitute material,
non-public information relating to the Company or any of its Subsidiaries.
Nothing contained in this Section 31 shall limit any obligations of the
Company, or any rights of the Holder, under Section 4(l) of the Securities
Purchase Agreement.
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32. ABSENCE OF TRADING AND DISCLOSURE RESTRICTIONS. The Company acknowledges
and agrees that the Holder is not a fiduciary or agent of the Company and that
the Holder shall have no obligation to (a) maintain the confidentiality of any
information provided by the Company or (b) refrain from trading any securities
while in possession of such information in the absence of a written
non-disclosure agreement signed by an officer of the Holder that explicitly
provides for such confidentiality and trading restrictions. In the absence of
such an executed, written non-disclosure agreement, the Company acknowledges
that the Holder may freely trade in any securities issued by the Company, may
possess and use any information provided by the Company in connection with
such trading activity, and may disclose any such information to any third
party. [signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
the Issuance Date set out above. FISKER INC. By: /s/ Dr. Geeta Gupta-Fisker
Name: Dr. Geeta Gupta-Fisker Title: Chief Financial Officer and Chief
Operating Officer CERTIFICATE OF AUTHENTICATION This is one of the Securities
of the series designated herein referred to in the within-mentioned Indenture
and the applicable Supplemental Indenture. Dated: July 11, 2023 WILMINGTON
SAVINGS FUND SOCIETY, FSB By: /s/ Patrick J. Healy Name: Patrick J. Healy
Title: Senior Vice President Senior Convertible Note - Signature Page
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EXHIBIT I FISKER INC. CONVERSION NOTICE Reference is made to the Series
[A][B][C][-][1][2][3][4] Senior Convertible Note (the "Note") issued to the
undersigned by Fisker Inc., a Delaware corporation (the "Company"). In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the Note indicated
below into shares of Class A Common Stock, $0.00001 par value per share (the
"Common Stock"), of the Company, as of the date specified below. Capitalized
terms not defined herein shall have the meaning as set forth in the Note. Date
of Conversion: Aggregate Principal to be converted: Aggregate accrued and
unpaid Interest and accrued and unpaid Late Charges with respect to such
portion of the Aggregate Principal and such Aggregate Interest to be
converted: AGGREGATE CONVERSION AMOUNT TO BE CONVERTED: Please confirm the
following information: Conversion Price: Number of shares of Common Stock to
be issued: Installment Amount(s) to be reduced (and corresponding Installment
Date(s)) and amount of reduction: If this Conversion Notice is being
delivered with respect to an Alternate Conversion, check here if Holder is
electing to use the following Alternate Conversion Price:____________ If this
Conversion Notice is being delivered with respect to an Acceleration, check
here if Holder is electing to use _________ as the Installment Conversion
Price (as applicable) related to the following Installment Date:____________
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Please issue the Common Stock into which the Note is being converted to
Holder, or for its benefit, as follows: Check here if requesting delivery as
a certificate to the following name and to the following address: Issue to:
Check here if requesting delivery by Deposit/Withdrawal at Custodian as
follows: DTC Participant: DTC Number: DTC Participant Phone Number: Account
Number: The source for these shares of Common Stock is reserve account [.],
with an effective date of [.], 20[.]. Date: _____________ __, Name of
Registered Holder By: Name: Title: Tax ID:_____________________ E-mail
Address: Mailing Address:
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Exhibit II ACKNOWLEDGMENT The Company hereby (a) acknowledges this Conversion
Notice, (b) certifies that the above indicated number of shares of Common
Stock are eligible to be resold by the Holder without restriction and hereby
directs _________________ to issue the above indicated number of shares of
Common Stock in accordance with the Transfer Agent Instructions dated
_____________, 20__ from the Company and acknowledged and agreed to by
________________________. FISKER INC. By: Name: Title:
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FISKER INC. as the Company and WILMINGTON SAVINGS FUND SOCIETY, FSB, as
Trustee Senior Indenture Dated as of July 11, 2023 FISKER INC. RECONCILIATION
AND TIE BETWEEN TRUST INDENTURE ACT OF 1939, AS AMENDED, AND INDENTURE, DATED
AS OF JULY 11, 2023
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TRUST INDENTURE ACT SECTION INDENTURE SECTION Section 310(a)(1) 7.11 (a)(2)
7.11 (a)(3) Not Applicable (a)(4) Not Applicable (a)(5) 7.11 (b) 7.03 Section
311(a) 7.03 (b) 7.03 (c) 7.03 Section 312(a) 4.03 (b) 4.03 (c) 4.03 Section
313(a) 7.06 (b) 7.06 (c) 7.05 (d) 7.06 Section 314(a)(1) 4.05 (a)(4) 4.04 (b)
Not Applicable (c)(1) 10.04 (c)(2) 10.04 (c)(3) Not Applicable (d) Not
Applicable (e) 10.04 Section 315(a) 7.02 (b) 7.02 (c) 7.02 (d)(1) 7.02 (d)(2)
7.02 (d)(3) 7.02 (e) 6.12 Section 316(a)(1)(A) 6.05 (a)(1)(B) 6.04 (a)(2) Not
Applicable (b) 6.07 (c) 9.03 Section 317(a)(1) 6.08 (a)(2) 6.09 (b) 7.12
Section 318(a) 10.01 NOTE: This reconciliation and tie shall not, for any
purpose, be deemed to be a part of the Indenture.
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TABLE OF CONTENTS ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE 1
Section 1.01. Definitions 1 Section 1.02. Other Definitions 4 Section 1.03.
Incorporation by Reference of Trust Indenture Act 4 Section 1.04. Rules of
Construction 4 ARTICLE 2 THE SECURITIES 5 Section 2.01. Form and Dating 5
Section 2.02. Execution and Authentication 5 Section 2.03. Form of Certificate
of Authentication 6 Section 2.04. Amount Unlimited; Issuable in Series 6
Section 2.05. Denomination and Date of Securities; Payments of Interest 8
Section 2.06. Registrar and Paying Agent; Agents Generally 8 Section 2.07.
Paying Agent to Hold Money in Trust 9 Section 2.08. Transfer and Exchange 9
Section 2.09. Replacement Securities 11 Section 2.10. Outstanding Securities
12 Section 2.11. Temporary Securities 12 Section 2.12. Cancellation 12 Section
2.13. CUSIP Numbers 13 Section 2.14. Defaulted Interest 13 Section 2.15.
Series May Include Tranches 13 ARTICLE 3 REDEMPTION 13 Section 3.01.
Applicability of Article 13 Section 3.02. Notice of Redemption; Partial
Redemptions 13
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Page Section 3.03. Payment of Securities Called for Redemption 15 Section
3.04. Exclusion of Certain Securities From Eligibility for Selection for
Redemption 15 Section 3.05. Mandatory and Optional Sinking Funds 15 ARTICLE 4
COVENANTS 17 Section 4.01. Payment of Securities 17 Section 4.02. Maintenance
of Office or Agency 17 Section 4.03. Securityholders' Lists 18 Section 4.04.
Certificate to Trustee 18 Section 4.05. Reports by the Company 18 Section
4.06. Additional Amounts 19 ARTICLE 5 SUCCESSOR CORPORATION 19 Section 5.01.
When Company May Merge, Etc. 19 Section 5.02. Successor Substituted 19 ARTICLE
6 DEFAULT AND REMEDIES 20 Section 6.01. Events of Default 20 Section 6.02.
Acceleration 20 Section 6.03. Other Remedies 21 Section 6.04. Waiver of Past
Defaults 21 Section 6.05. Control by Majority 21 Section 6.06. Limitation on
Suits 21 Section 6.07. Rights of Holders to Receive Payment 22 Section 6.08.
Collection Suit by Trustee 22 Section 6.09. Trustee May File Proofs of Claim
22 Section 6.10. Application of Proceeds 22 Section 6.11. Restoration of
Rights and Remedies 23 Section 6.12. Undertaking for Costs 23 Section 6.13.
Rights and Remedies Cumulative 23 Section 6.14. Delay or Omission not Waiver
23 ARTICLE 7 TRUSTEE 24 Section 7.01. General 24 Section 7.02. Certain Rights
of Trustee 24 Section 7.03. Individual Rights of Trustee 25 Section 7.04.
Trustee's Disclaimer 25 Section 7.05. Notice of Default 25 Section 7.06.
Reports by Trustee to Holders 25
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Page Section 7.07. Compensation and Indemnity 26 Section 7.08. Replacement of
Trustee 26 Section 7.09. Acceptance of Appointment by Successor 27 Section
7.10. Successor Trustee by Merger, Etc. 28 Section 7.11. Eligibility 28
Section 7.12. Money Held in Trust 28 ARTICLE 8 SATISFACTION AND DISCHARGE OF
INDENTURE; UNCLAIMED MONEYS 28 Section 8.01. Satisfaction and Discharge of
Indenture 28 Section 8.02. Application by Trustee of Funds Deposited for
Payment of Securities 29 Section 8.03. Repayment of Moneys Held by Paying
Agent 29 Section 8.04. Return of Moneys Held by Trustee and Paying Agent
Unclaimed for Two Years 29 Section 8.05. Defeasance and Discharge of Indenture
29 Section 8.06. Defeasance of Certain Obligations 30 Section 8.07.
Reinstatement 31 Section 8.08. Indemnity 31 Section 8.09. Excess Funds 31
Section 8.10. Qualifying Trustee 31 ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND
WAIVERS 31 Section 9.01. Without Consent of Holders 31 Section 9.02. With
Consent of Holders 32 Section 9.03. Revocation and Effect of Consent 32
Section 9.04. Notation on or Exchange of Securities 33 Section 9.05. Trustee
to Sign Amendments, Etc. 33 Section 9.06. Conformity With Trust Indenture Act
33 ARTICLE 10 MISCELLANEOUS 33 Section 10.01. Trust Indenture Act of 1939 33
Section 10.02. Notices 33 Section 10.03. Certificate and Opinion as to
Conditions Precedent 34 Section 10.04. Statements Required in Certificate or
Opinion 34 Section 10.05. Evidence of Ownership 34 Section 10.06. Rules by
Trustee, Paying Agent or Registrar 35 Section 10.07. Payment Date Other Than a
Business Day 35 Section 10.08. Governing Law 35 Section 10.09. No Adverse
Interpretation of Other Agreements 35 Section 10.10. Successors 35
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Pag e Section 10.11. Duplicate Originals 35 Section 10.12. Separability 35
Section 10.13. Table of Contents, Headings, Etc. 36 Section 10.14.
Incorporators, Stockholders, Officers and Directors of Company Exempt From
Individual Liability 36 Section 10.15. Judgment Currency 36 SENIOR INDENTURE,
dated as of July 11, 2023, between Fisker Inc., a Delaware corporation, as the
Company, and Wilmington Savings Fund Society, FSB, as Trustee. RECITALS OF THE
COMPANY WHEREAS, the Company has duly authorized the issue from time to time
of its senior debentures, notes or other evidences of indebtedness to be
issued in one or more series (the "Securities") up to such principal amount or
amounts as may from time to time be authorized in accordance with the terms of
this Indenture and to provide, among other things, for the authentication,
delivery and administration thereof, the Company has duly authorized the
execution and delivery of this Indenture; and WHEREAS, all things necessary to
make this Indenture a valid indenture and agreement according to its terms
have been done; NOW, THEREFORE: In consideration of the premises and the
purchases of the Securities by the holders thereof, the Company and the
Trustee mutually covenant and agree for the equal and proportionate benefit of
the respective holders from time to time of the Securities or of any and all
series thereof and of the coupons, if any, appertaining thereto as follows:
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01.
Definitions. "Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled
by" and "under common control with") when used with respect to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise. "Agent" means
any Registrar, Paying Agent, transfer agent or Authenticating Agent. "Board
Resolution" means one or more resolutions of the board of directors of the
Company or any authorized committee thereof, certified by the secretary or an
assistant secretary to have been duly adopted and to be in full force and
effect on the date of certification, and delivered to the Trustee. "Business
Day" means any day, other than a Saturday or Sunday, that is neither a legal
holiday nor a day on which banking institutions are authorized or required by
law or regulation to close in The City of New York, with respect
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to any Security the interest on which is based on the offered quotations in
the interbank Eurodollar market for dollar deposits in London, or with respect
to Securities denominated in a specified currency other than United States
dollars, in the principal financial center of the country of the specified
currency. "Capital Lease" means, with respect to any Person, any lease of any
property which, in conformity with GAAP, is required to be capitalized on the
balance sheet of such Person. "Commission" means the Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act
or, if at any time after the execution of this instrument such Commission is
not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time. "Company"
means the party named as such in the first paragraph of this Indenture until a
successor replaces it pursuant to Article 5 of this Indenture and thereafter
means the successor. "Corporate Trust Office" means the office of the Trustee
at which the corporate trust business of the Trustee shall, at any particular
time, be administered, which office is, at the date of this Indenture, located
at 500 Delaware Avenue, Wilmington, DE 19801, Attention: Corporate Trust -
Fisker Inc. "Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default. "Depositary" means, with respect
to the Securities of any series issuable or issued in the form of one or more
Registered Global Securities, the Person designated as Depositary by the
Company pursuant to Section 2.03 until a successor Depositary shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Depositary" shall mean or include each Person who is then a
Depositary hereunder, and if at any time there is more than one such Person,
"Depositary" as used with respect to the Securities of any such series shall
mean the Depositary with respect to the Registered Global Securities of that
series. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States as
in effect as of the date hereof applied on a basis consistent with the
principles, methods, procedures and practices employed in the preparation of
the Company's audited financial statements, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or
in such other statements by such other entity as is approved by a significant
segment of the accounting profession. "Holder" or "Securityholder" means the
registered holder of any Security with respect to Registered Securities and
the bearer of any Unregistered Security or any coupon appertaining thereto, as
the case may be. "Indenture" means this Indenture as originally executed and
delivered or as it may be amended or supplemented from time to time by one or
more indentures supplemental to this Indenture entered into pursuant to the
applicable provisions of this Indenture and shall include the forms and terms
of the Securities of each series established as contemplated pursuant to
Sections 2.01 and 2.03. "Officer" means, with respect to the Company, the
chairman of the board of directors, the president or chief executive officer,
any executive vice president, any senior vice president, any vice president,
the chief financial officer, the general counsel, the treasurer or any
assistant treasurer, or the secretary or any assistant secretary. "Officer's
Certificate" means a certificate signed in the name of the Company by the
chairman of the board of directors, the president or chief executive officer,
an executive vice president, a senior vice president or a vice president, the
chief financial officer, the treasurer or any assistant treasurer, or the
secretary or any assistant secretary, and delivered to the Trustee. Each such
certificate shall comply with Section 314 of the Trust Indenture Act, if
applicable, and include (except as otherwise expressly provided in this
Indenture) the statements provided in Section 10.04, if applicable.
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"Opinion of Counsel" means a written opinion signed by legal counsel, who may
be an employee of or counsel to the Company. Each such opinion shall comply
with Section 314 of the Trust Indenture Act, if applicable, and include the
statements provided in Section 10.04, if and to the extent required thereby.
"Original Issue Date" of any Security (or portion thereof) means the earlier
of (a) the date of authentication of such Security or (b) the date of any
Security (or portion thereof) for which such Security was issued (directly or
indirectly) on registration of transfer, exchange or substitution. "Original
Issue Discount Security" means any Security that provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof pursuant to Section 6.02. "Periodic
Offering" means an offering of Securities of a series from time to time, the
specific terms of which Securities, including, without limitation, the rate or
rates of interest, if any, thereon, the stated maturity or maturities thereof
and the redemption provisions, if any, with respect thereto, are to be
determined by the Company or its agents upon the issuance of such Securities.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof. "Principal" of a Security means the principal amount
of, and, unless the context indicates otherwise, includes any premium payable
on, the Security. "Registered Global Security" means a Security evidencing all
or a part of a series of Registered Securities, issued to the Depositary for
such series in accordance with Section 2.02, and bearing the legend prescribed
in Section 2.02. "Registered Security" means any Security registered on the
Security Register (as defined in Section 2.05). "Responsible Officer" when
used with respect to the Trustee, shall mean an officer of the Trustee in the
Corporate Trust Office (or any successor group of the Trustee) or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because
of such officer's knowledge of and familiarity with the particular subject and
who, in each case, shall have direct responsibility for the administration of
this Indenture. "Securities" means any of the securities, as defined in the
first paragraph of the recitals hereof, that are authenticated and delivered
under this Indenture and, unless the context indicates otherwise, shall
include any coupon appertaining thereto. "Securities Act" means the Securities
Act of 1933, as amended. "Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which a majority of the
capital stock or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article 7 and thereafter shall mean or include each Person who is then a
Trustee hereunder, and if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean the
Trustee with respect to Securities of that series. "Trust Indenture Act" means
the Trust Indenture Act of 1939, as amended (15 U.S. Code (s)(s) 77aaa-77bbbb),
as it may be amended from time to time. "Unregistered Security" means any
Security other than a Registered Security.
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"U.S. Government Obligations" means securities that are (i) direct obligations
of the United States of America for the payment of which its full faith and
credit is pledged or (ii) obligations of an agency or instrumentality of the
United States of America the payment of which is unconditionally guaranteed as
a full faith and credit obligation by the United States of America, and shall
also include a depository receipt issued by a bank or trust company as
custodian with respect to any such U.S. Government Obligation or a specific
payment of interest on or principal of any such U.S. Government Obligation
held by such custodian for the account of the holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of interest on or principal of
the U.S. Government Obligation evidenced by such depository receipt. "Yield to
Maturity" means, as the context may require, the yield to maturity (i) on a
series of Securities or (ii) if the Securities of a series are issuable from
time to time, on a Security of such series, calculated at the time of issuance
of such series in the case of clause (i) or at the time of issuance of such
Security of such series in the case of clause (ii), or, if applicable, at the
most recent redetermination of interest on such series or on such Security,
and calculated in accordance with the constant interest method or such other
accepted financial practice as is specified in the terms of such Security.
Section 1.02. Other Definitions. Each of the following terms is defined in the
section set forth opposite such term: Term Section Authenticating Agent 2.02
Cash Transaction 7.03 Dollars 4.02 Event of Default 6.01 Judgment Currency
10.15(a) mandatory sinking fund payment 3.05 optional sinking fund payment
3.05 Paying Agent 2.05 record date 2.04 Registrar 2.05 Required Currency
10.15(a) Security Register 2.05 self-liquidating paper 7.03 sinking fund
payment date 3.05 tranche 2.14 Section 1.03. Incorporation by Reference of
Trust Indenture Act. Whenever this Indenture refers to a provision of the
Trust Indenture Act, the provision is incorporated by reference in and made a
part of this Indenture. The following terms used in this Indenture that are
defined by the Trust Indenture Act have the following meanings: "indenture
securities" means the Securities; "indenture security holder" means a Holder
or a Securityholder; "indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other obligor
on the Securities. All other terms used in this Indenture that are defined by
the Trust Indenture Act, defined by reference in the Trust Indenture Act to
another statute or defined by a rule of the Commission and not otherwise
defined herein have the meanings assigned to them therein. Section 1.04. Rules
of Construction. Unless the context otherwise requires:
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(a) an accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP; (b) words in the singular include the plural, and words
in the plural include the singular; (c) "herein," "hereof" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; (d) all references to Sections or
Articles refer to Sections or Articles of this Indenture unless otherwise
indicated; and (e) use of masculine, feminine or neuter pronouns should not be
deemed a limitation, and the use of any such pronouns should be construed to
include, where appropriate, the other pronouns. ARTICLE 2 THE SECURITIES
Section 2.01. Form and Dating. The Securities of each series shall be
substantially in such form or forms (not inconsistent with this Indenture) as
shall be established by or pursuant to one or more Board Resolutions or in one
or more indentures supplemental hereto, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have imprinted or otherwise reproduced
thereon such legend or legends or endorsements, not inconsistent with the
provisions of this Indenture, as may be required to comply with any law, or
with any rules of any securities exchange or usage, all as may be determined
by the Officers executing such Securities as evidenced by their execution of
the Securities. Unless otherwise so established, Unregistered Securities shall
have coupons attached. Section 2.02. Execution and Authentication. Two
Officers shall execute the Securities and one Officer shall execute the
coupons appertaining thereto for the Company by facsimile or manual signature
in the name and on behalf of the Company. If an Officer whose signature is on
a Security or coupon appertaining thereto no longer holds that office at the
time the Security is authenticated, the Security and such coupon shall
nevertheless be valid. The Trustee, at the expense of the Company, may appoint
an authenticating agent (the "Authenticating Agent") to authenticate
Securities. The Authenticating Agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such Authenticating Agent. A Security and
the coupons appertaining thereto shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on the
Security or on the Security to which such coupon appertains by an authorized
officer. The signature shall be conclusive evidence that the Security or the
Security to which the coupon appertains has been authenticated under this
Indenture. At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities of any series having
attached thereto appropriate coupons, if any, executed by the Company to the
Trustee for authentication together with the applicable documents referred to
below in this Section, and the Trustee shall thereupon authenticate and
deliver such Securities to or upon the written order of the Company. In
authenticating any Securities of a series, the Trustee shall be entitled to
receive prior to the authentication of any Securities of such series, and
(subject to Article 7) shall be fully protected in relying upon, unless and
until such documents have been superseded or revoked: (a) any Board Resolution
and/or executed supplemental indenture referred to in Sections 2.01 and 2.03
by or pursuant to which the forms and terms of the Securities of that series
were established;
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(b) an Officer's Certificate setting forth the form or forms and terms of the
Securities, stating that the form or forms and terms of the Securities of such
series have been, or, in the case of a Periodic Offering, will be when
established in accordance with such procedures as shall be referred to
therein, established in compliance with this Indenture; and (c) an Opinion of
Counsel substantially to the effect that the form or forms and terms of the
Securities of such series have been, or, in the case of a Periodic Offering,
will be when established in accordance with such procedures as shall be
referred to therein, established in compliance with this Indenture and that
the supplemental indenture, to the extent applicable, and Securities have been
duly authorized and, if executed and authenticated in accordance with the
provisions of the Indenture and delivered to and duly paid for by the
purchasers thereof on the date of such opinion, would be entitled to the
benefits of the Indenture and would be valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, subject to bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws affecting creditors' rights generally,
general principles of equity, and covering such other matters as shall be
specified therein and as shall be reasonably requested by the Trustee. The
Trustee shall not be required to authenticate such Securities if the issue of
such Securities pursuant to this Indenture will affect the Trustee's own
rights, duties or immunities under the Securities and this Indenture or
otherwise in a manner which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Sections 2.01 and 2.02, if, in connection
with a Periodic Offering, all Securities of a series are not to be originally
issued at one time, it shall not be necessary to deliver the Board Resolution
otherwise required pursuant to Section 2.01 or the written order, Officer's
Certificate and Opinion of Counsel otherwise required pursuant to Section 2.02
at or prior to the authentication of each Security of such series if such
documents are delivered at or prior to the authentication upon original
issuance of the first Security of such series to be issued. With respect to
Securities of a series offered in a Periodic Offering, the Trustee may rely,
as to the authorization by the Company of any of such Securities, the forms
and terms thereof and the legality, validity, binding effect and enforceability
thereof, upon the Opinion of Counsel and the other documents delivered
pursuant to Sections 2.01 and 2.02, as applicable, in connection with the
first authentication of Securities of such series. If the Company shall
establish pursuant to Section 2.03 that the Securities of a series or a
portion thereof are to be issued in the form of one or more Registered Global
Securities, then the Company shall execute and the Trustee shall authenticate
and deliver one or more Registered Global Securities that (i) shall represent
and shall be denominated in an amount equal to the aggregate principal amount
of all of the Securities of such series issued in such form and not yet
cancelled, (ii) shall be registered in the name of the Depositary for such
Registered Global Security or Securities or the nominee of such Depositary,
(iii) shall be delivered by the Trustee to such Depositary or its custodian or
pursuant to such Depositary's instructions and (iv) shall bear a legend
substantially to the following effect: "Unless and until it is exchanged in
whole or in part for Securities in definitive registered form, this Security
may not be transferred except as a whole by the Depositary to the nominee of
the Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary." Section 2.03.
Form of Certificate of Authentication. The Trustee's certificate of
authentication shall be in substantially the following form: "This is one of
the Securities of the series designated therein referred to in the
within-mentioned Indenture. WILMINGTON SAVINGS FUND SOCIETY, FSB AS TRUSTEE By
AUTHORIZED SIGNATORY"
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Section 2.04. Amount Unlimited; Issuable in Series. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is unlimited. The Securities may be issued in one or more series.
There shall be established in or pursuant to Board Resolution or one or more
indentures supplemental hereto, prior to the initial issuance of Securities of
any series, subject to the last sentence of this Section 2.03: (a) the
designation of the Securities of the series, which shall distinguish the
Securities of the series from the Securities of all other series; (b) any
limit upon the aggregate principal amount of the Securities of the series that
may be authenticated and delivered under this Indenture and any limitation on
the ability of the Company to increase such aggregate principal amount after
the initial issuance of the Securities of that series (except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, or upon redemption of, other Securities of the series
pursuant hereto); (c) the date or dates on which the principal of the
Securities of the series is payable (which date or dates may be fixed or
extendible); (d) the rate or rates (which may be fixed or variable) per annum
at which the Securities of the series shall bear interest, if any, the date or
dates from which such interest shall accrue, on which such interest shall be
payable and (in the case of Registered Securities) on which a record shall be
taken for the determination of Holders to whom interest is payable and/or the
method by which such rate or rates or date or dates shall be determined; (e)
if other than as provided in Section 4.02, the place or places where the
principal of and any interest on Securities of the series shall be payable,
any Registered Securities of the series may be surrendered for exchange,
notices, demands to or upon the Company in respect of the Securities of the
series and this Indenture may be served and notice to Holders may be
published; (f) the right, if any, of the Company to redeem Securities of the
series, in whole or in part, at its option and the period or periods within
which, the price or prices at which and any terms and conditions upon which
Securities of the series may be so redeemed, pursuant to any sinking fund or
otherwise; (g) the obligation, if any, of the Company to redeem, purchase or
repay Securities of the series pursuant to any mandatory redemption, sinking
fund or analogous provisions or at the option of a Holder thereof and the
price or prices at which and the period or periods within which and any of the
terms and conditions upon which Securities of the series shall be redeemed,
purchased or repaid, in whole or in part, pursuant to such obligation; (h) if
other than minimum denominations of $1,000 and any integral multiple thereof,
the denominations in which Securities of the series shall be issuable; (i) if
other than the principal amount thereof, the portion of the principal amount
of Securities of the series which shall be payable upon declaration of
acceleration of the maturity thereof; (j) if other than the coin or currency
in which the Securities of the series are denominated, the coin or currency in
which payment of the principal of or interest on the Securities of the series
shall be payable or if the amount of payments of principal of and/or interest
on the Securities of the series may be determined with reference to an index
based on a coin or currency other than that in which the Securities of the
series are denominated, the manner in which such amounts shall be determined;
(k) if other than the currency of the United States of America, the currency
or currencies, including composite currencies, in which payment of the
Principal of and interest on the Securities of the series shall be payable,
and the manner in which any such currencies shall be valued against other
currencies in which any other Securities shall be payable;
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(l) whether the Securities of the series or any portion thereof will be
issuable as Registered Securities (and if so, whether such Securities will be
issuable as Registered Global Securities) or Unregistered Securities (with or
without coupons) (and if so, whether such Securities will be issued in
temporary or permanent global form), or any combination of the foregoing, any
restrictions applicable to the offer, sale or delivery of Unregistered
Securities or the payment of interest thereon and, if other than as provided
herein, the terms upon which Unregistered Securities of any series may be
exchanged for Registered Securities of such series and vice versa; (m) whether
the Securities of the series may be exchangeable for and/or convertible into
the common stock of the Company or any other security; (n) whether and under
what circumstances the Company will pay additional amounts on the Securities
of the series held by a person who is not a U.S. person in respect of any tax,
assessment or governmental charge withheld or deducted and, if so, whether the
Company will have the option to redeem such Securities rather than pay such
additional amounts; (o) if the Securities of the series are to be issuable in
definitive form (whether upon original issue or upon exchange of a temporary
Security of such series) only upon receipt of certain certificates or other
documents or satisfaction of other conditions, the form and terms of such
certificates, documents or conditions; (p) any trustees, depositaries,
authenticating or paying agents, transfer agents or the registrar or any other
agents with respect to the Securities of the series; (q) provisions, if any,
for the defeasance of the Securities of the series (including provisions
permitting defeasance of less than all Securities of the series), which
provisions may be in addition to, in substitution for, or in modification of
(or any combination of the foregoing) the provisions of Article 8; (r) if the
Securities of the series are issuable in whole or in part as one or more
Registered Global Securities or Unregistered Securities in global form, the
identity of the Depositary or common Depositary for such Registered Global
Security or Securities or Unregistered Securities in global form; (s) any
other Events of Default or covenants with respect to the Securities of the
series; and (t) any other terms of the Securities of the series (which terms
shall not be inconsistent with the provisions of this Indenture). All
Securities of any one series and coupons, if any, appertaining thereto shall
be substantially identical, except in the case of Registered Securities as to
date and denomination, except in the case of any Periodic Offering and except
as may otherwise be provided by or pursuant to the Board Resolution referred
to above or as set forth in any such indenture supplemental hereto. All
Securities of any one series need not be issued at the same time and may be
issued from time to time, consistent with the terms of this Indenture, if so
provided by or pursuant to such Board Resolution or in any such indenture
supplemental hereto and any forms and terms of Securities to be issued from
time to time may be completed and established from time to time prior to the
issuance thereof by procedures described in such Board Resolution or
supplemental indenture. Unless otherwise expressly provided with respect to a
series of Securities, the aggregate principal amount of a series of Securities
may be increased and additional Securities of such series may be issued up to
the maximum aggregate principal amount authorized with respect to such series
as increased. Section 2.05. Denomination and Date of Securities; Payments of
Interest. The Securities of each series shall be issuable as Registered
Securities or Unregistered Securities in denominations established as
contemplated by Section 2.03 or, if not so established with respect to
Securities of any series, in denominations of $1,000 and any integral multiple
thereof. The Securities of each series shall be numbered, lettered or
otherwise distinguished in such manner or in accordance with such plan as the
Officers of the Company executing the same may determine, as evidenced by
their execution thereof.
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Unless otherwise specified with respect to a series of Securities, each
Security shall be dated the date of its authentication. The Securities of each
series shall bear interest, if any, from the date, and such interest and shall
be payable on the dates, established as contemplated by Section 2.03. The
person in whose name any Registered Security of any series is registered at
the close of business on any record date applicable to a particular series
with respect to any interest payment date for such series shall be entitled to
receive the interest, if any, payable on such interest payment date
notwithstanding any transfer or exchange of such Registered Security
subsequent to the record date and prior to such interest payment date, except
if and to the extent the Company shall default in the payment of the interest
due on such interest payment date for such series, in which case the
provisions of Section 2.13 shall apply. The term "record date" as used with
respect to any interest payment date (except a date for payment of defaulted
interest) for the Securities of any series shall mean the date specified as
such in the terms of the Registered Securities of such series established as
contemplated by Section 2.03, or, if no such date is so established, the
fifteenth day next preceding such interest payment date, whether or not such
record date is a Business Day. Section 2.06. Registrar and Paying Agent;
Agents Generally. The Company shall maintain an office or agency where
Securities may be presented for registration, registration of transfer or for
exchange (the "Registrar") and an office or agency where Securities may be
presented for payment (the "Paying Agent"), which shall be in the Borough of
Manhattan, The City of New York. The Company shall cause the Registrar to keep
a register of the Registered Securities and of their registration, transfer
and exchange (the "Security Register"). The Company may have one or more
additional Paying Agents or transfer agents with respect to any series. The
Company shall enter into an appropriate agency agreement with any Agent not a
party to this Indenture. The agreement shall implement the provisions of this
Indenture and the Trust Indenture Act that relate to such Agent. The Company
shall give prompt written notice to the Trustee of the name and address of any
Agent and any change in the name or address of an Agent. If the Company fails
to maintain a Registrar or Paying Agent, the Trustee shall act as such. The
Company may remove any Agent upon written notice to such Agent and the
Trustee; provided that no such removal shall become effective until (i) the
acceptance of an appointment by a successor Agent to such Agent as evidenced
by an appropriate agency agreement entered into by the Company and such
successor Agent and delivered to the Trustee or (ii) written notification to
the Trustee that the Trustee shall serve as such Agent until the appointment
of a successor Agent in accordance with clause (i) of this proviso. The
Company or any affiliate of the Company may act as Paying Agent or Registrar;
provided that neither the Company nor an affiliate of the Company shall act as
Paying Agent in connection with the defeasance of the Securities or the
discharge of this Indenture under Article 8. The Company initially appoints
the Trustee as Registrar, Paying Agent and Authenticating Agent. If, at any
time, the Trustee is not the Registrar, the Registrar shall make available to
the Trustee ten days prior to each interest payment date and at such other
times as the Trustee may reasonably request the names and addresses of the
Holders as they appear in the Security Register. Section 2.07. Paying Agent to
Hold Money in Trust. Not later than 10:00 a.m. New York City time on each due
date or, in the case of Unregistered Securities, 10:00 a.m. New York City time
on the Business Day prior to the due date, of any Principal or interest on any
Securities, the Company shall deposit with the Paying Agent money in
immediately available funds sufficient to pay such Principal or interest. The
Company shall require each Paying Agent other than the Trustee to agree in
writing that such Paying Agent shall hold in trust for the benefit of the
Holders of such Securities or the Trustee all money held by the Paying Agent
for the payment of Principal of and interest on such Securities and shall
promptly notify the Trustee in writing of any default by the Company in making
any such payment. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee and account for any funds disbursed, and
the Trustee may at any time during the continuance of any payment default,
upon written request to a Paying Agent, require such Paying Agent to pay all
money held by it to the Trustee and to account for any funds disbursed. Upon
doing so, the Paying Agent shall have no further liability for the money so
paid over to the Trustee. If the Company or any affiliate of the Company acts
as Paying Agent, it will, on or before each due date of any Principal of or
interest on any Securities, segregate and hold in a separate trust fund for
the benefit of the Holders thereof a sum of money sufficient to pay such
Principal or interest so becoming due
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until such sum of money shall be paid to such Holders or otherwise disposed of
as provided in this Indenture, and will promptly notify the Trustee in writing
of its action or failure to act as required by this Section. Section 2.08.
Transfer and Exchange. Unregistered Securities (except for any temporary
global Unregistered Securities) and coupons (except for coupons attached to
any temporary global Unregistered Securities) shall be transferable by
delivery. At the option of the Holder thereof, Registered Securities of any
series (other than a Registered Global Security, except as set forth below)
may be exchanged for a Registered Security or Registered Securities of such
series and tenor having authorized denominations and an equal aggregate
principal amount, upon surrender of such Registered Securities to be exchanged
at the agency of the Company that shall be maintained for such purpose in
accordance with and upon payment, if the Company shall so require, of the
charges hereinafter provided. If the Securities of any series are issued in
both registered and unregistered form, except as otherwise established
pursuant to Section 2.03, at the option of the Holder thereof, Unregistered
Securities of any series may be exchanged for Registered Securities of such
series and tenor having authorized denominations and an equal aggregate
principal amount, upon surrender of such Unregistered Securities to be
exchanged at the agency of the Company that shall be maintained for such
purpose in accordance with Section 4.02, with, in the case of Unregistered
Securities that have coupons attached, all unmatured coupons and all matured
coupons in default thereto appertaining, and upon payment, if the Company
shall so require, of the charges hereinafter provided. At the option of the
Holder thereof, if Unregistered Securities of any series, maturity date,
interest rate and original issue date are issued in more than one authorized
denomination, except as otherwise established pursuant to Section 2.03, such
Unregistered Securities may be exchanged for Unregistered Securities of such
series and tenor having authorized denominations and an equal aggregate
principal amount, upon surrender of such Unregistered Securities to be
exchanged at the agency of the Company that shall be maintained for such
purpose in accordance with Section 4.02, with, in the case of Unregistered
Securities that have coupons attached, all unmatured coupons and all matured
coupons in default thereto appertaining, and upon payment, if the Company
shall so require, of the charges hereinafter provided. Registered Securities
of any series may not be exchanged for Unregistered Securities of such series.
Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive. Upon surrender for
registration of transfer of any Registered Security of a series at the agency
of the Company that shall be maintained for that purpose in accordance with
Section 2.05 and upon payment, if the Company shall so require, of the charges
hereinafter provided, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Registered Securities of the same series, of any
authorized denominations and of like tenor and aggregate principal amount. All
Registered Securities presented for registration of transfer, exchange,
redemption or payment shall be duly endorsed by, or be accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company and the Trustee duly executed by, the holder or his attorney duly
authorized in writing. The Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any exchange or registration of transfer of Securities. No service charge
shall be made for any such transaction. Notwithstanding any other provision of
this Section 2.07, unless and until it is exchanged in whole or in part for
Securities in definitive registered form, a Registered Global Security
representing all or a portion of the Securities of a series may not be
transferred except as a whole by the Depositary for such series to a nominee
of such Depositary or by a nominee of such Depositary to such Depositary or
another nominee of such Depositary or by such Depositary or any such nominee
to a successor Depositary for such series or a nominee of such successor
Depositary. If at any time the Depositary for any Registered Global Securities
of any series notifies the Company that it is unwilling or unable to continue
as Depositary for such Registered Global Securities or if at any time the
Depositary for such Registered Global Securities shall no longer be eligible
under applicable law, the Company shall appoint a successor Depositary
eligible under applicable law with respect to such Registered Global
Securities. If a successor Depositary eligible under applicable law for such
Registered Global Securities is not appointed by the Company
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within 90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company will execute, and the Trustee, upon receipt of the
Company's order for the authentication and delivery of definitive Registered
Securities of such series and tenor, will authenticate and deliver Registered
Securities of such series and tenor, in any authorized denominations, in an
aggregate principal amount equal to the principal amount of such Registered
Global Securities, in exchange for such Registered Global Securities. The
Company may at any time and in its sole discretion and subject to the
procedures of the Depositary determine that any Registered Global Securities
of any series shall no longer be maintained in global form. In such event the
Company will execute, and the Trustee, upon receipt of the Company's order for
the authentication and delivery of definitive Registered Securities of such
series and tenor, will authenticate and deliver, Registered Securities of such
series and tenor in any authorized denominations, in an aggregate principal
amount equal to the principal amount of such Registered Global Securities, in
exchange for such Registered Global Securities. Any time the Registered
Securities of any series are not in the form of Registered Global Securities
pursuant to the preceding two paragraphs, the Company agrees to supply the
Trustee with a reasonable supply of certificated Registered Securities without
the legend required by Section 2.02 and the Trustee agrees to hold such
Registered Securities in safekeeping until authenticated and delivered
pursuant to the terms of this Indenture. If established by the Company
pursuant to Section 2.03 with respect to any Registered Global Security, the
Depositary for such Registered Global Security may surrender such Registered
Global Security in exchange in whole or in part for Registered Securities of
the same series and tenor in definitive registered form on such terms as are
acceptable to the Company and such Depositary. Thereupon, the Company shall
execute, and the Trustee shall authenticate and deliver, without service
charge: (a) to the Person specified by such Depositary new Registered
Securities of the same series and tenor, of any authorized denominations as
requested by such Person, in an aggregate principal amount equal to and in
exchange for such Person's beneficial interest in the Registered Global
Security; and (b) to such Depositary a new Registered Global Security in a
denomination equal to the difference, if any, between the principal amount of
the surrendered Registered Global Security and the aggregate principal amount
of Registered Securities authenticated and delivered pursuant to clause (a)
above. Registered Securities issued in exchange for a Registered Global
Security pursuant to this Section 2.07 shall be registered in such names and
in such authorized denominations as the Depositary for such Registered Global
Security, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee or an agent of the Company or the
Trustee. The Trustee or such agent shall deliver such Securities to or as
directed by the Persons in whose names such Securities are so registered. All
Securities issued upon any transfer or exchange of Securities shall be valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange. Notwithstanding anything herein or in the forms or terms
of any Securities to the contrary, none of the Company, the Trustee or any
agent of the Company or the Trustee shall be required to exchange any
Unregistered Security for a Registered Security if such exchange would result
in adverse U.S. federal income tax consequences to the Company (such as, for
example, the inability of the Company to deduct from its income, as computed
for U.S. federal income tax purposes, the interest payable on the Unregistered
Securities) under then applicable U.S. federal income tax laws. The Trustee
and any such agent shall be entitled to rely on an Officer's Certificate or an
Opinion of Counsel in determining such result. The Registrar shall not be
required (i) to issue, authenticate, register the transfer of or exchange
Securities of any series for a period of 15 days before a selection of such
Securities to be redeemed or (ii) to register the transfer of or exchange any
Security selected for redemption in whole or in part. Section 2.09.
Replacement Securities. If any mutilated Security or a Security with a
mutilated coupon appertaining to it is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver, in
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exchange for such mutilated Security or in exchange for the Security to which
a mutilated coupon appertains, a new Security of the same series and of like
tenor and principal amount and bearing a number not contemporaneously
outstanding, with coupons corresponding to the coupons, if any, appertaining
to such mutilated Security or to the Security to which such mutilated coupon
appertains. If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security or coupon and (ii) such security or indemnity as may be required by
them to save each of them and any agent of any of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security or coupon
has been acquired by a bona fide purchaser, the Company shall execute and the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security or in exchange for the Security to which a destroyed, lost or
stolen coupon appertains (with all appurtenant coupons not destroyed, lost or
stolen), a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding, with coupons
corresponding to the coupons, if any, appertaining to such destroyed, lost or
stolen Security or to the Security to which such destroyed, lost or stolen
coupon appertains. In case any such mutilated, destroyed, lost or stolen
Security or coupon has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Security, pay such
Security or coupon (without surrender thereof except in the case of a
mutilated Security or coupon) if the applicant for such payment shall furnish
to the Company and the Trustee such security or indemnity as may be required
by them to save each of them and any agent of any of them harmless, and in the
case of destruction, loss or theft, evidence satisfactory to the Company and
the Trustee and any agent of them of the destruction, loss or theft of such
Security and the ownership thereof; provided, however, that the Principal of
and any interest on Unregistered Securities shall, except as otherwise
provided in Section 4.02 be payable only at an office or agency located
outside the United States of America. Upon the issuance of any new Security
under this Section, the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith. Every new Security of any series, with its
coupons, if any, issued pursuant to this Section in lieu of any destroyed,
lost or stolen Security or in exchange for any mutilated Security, or in
exchange for a Security to which a mutilated, destroyed, lost or stolen coupon
appertains, shall constitute an original additional contractual obligation of
the Company, whether or not the mutilated, destroyed, lost or stolen Security
and its coupons, if any, or the mutilated, destroyed, lost or stolen coupon
shall be at any time enforceable by anyone, and any such new Security and
coupons, if any, shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Securities of that series
and their coupons, if any, duly issued hereunder. The provisions of this
Section are exclusive and shall preclude (to the extent lawful) any other
rights and remedies with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities or coupons. Section 2.10. Outstanding
Securities. Securities outstanding at any time are all Securities that have
been authenticated by the Trustee except for those cancelled by it, those
delivered to it for cancellation, those described in this Section as not
outstanding and those that have been defeased pursuant to Section 8.05. If a
Security is replaced pursuant to Section 2.08, it ceases to be outstanding
unless and until the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a holder in due course. If the
Paying Agent (other than the Company or an affiliate of the Company) holds on
the maturity date or any redemption date or date for repurchase of the
Securities money sufficient to pay Securities payable or to be redeemed or
repurchased on that date, then on and after that date such Securities cease to
be outstanding and interest on them shall cease to accrue. A Security does not
cease to be outstanding because the Company or one of its affiliates holds
such Security, provided, however, that, in determining whether the Holders of
the requisite principal amount of the outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities
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owned by the Company or any affiliate of the Company shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities as to which a
Responsible Officer of the Trustee has received written notice to be so owned
shall be so disregarded. Any Securities so owned which are pledged by the
Company, or by any affiliate of the Company, as security for loans or other
obligations, otherwise than to another such affiliate of the Company, shall be
deemed to be outstanding, if the pledgee is entitled pursuant to the terms of
its pledge agreement and is free to exercise in its or his discretion the
right to vote such securities, uncontrolled by the Company or by any such
affiliate. Section 2.11. Temporary Securities. Until definitive Securities of
any series are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities of such series. Temporary Securities
of any series shall be substantially in the form of definitive Securities of
such series but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the Officers executing the
temporary Securities, as evidenced by their execution of such temporary
Securities. If temporary Securities of any series are issued, the Company will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities of any series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series and tenor upon surrender of such temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 4.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities of any series the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Securities of such series and
tenor and authorized denominations. Until so exchanged, the temporary
Securities of any series shall be entitled to the same benefits under this
Indenture as definitive Securities of such series. Section 2.12. Cancellation.
The Company at any time may deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee for
cancellation any Securities previously authenticated hereunder which the
Company has not issued and sold. The Registrar, any transfer agent and the
Paying Agent shall forward to the Trustee any Securities surrendered to them
for transfer, exchange or payment. The Trustee shall cancel and dispose of in
accordance with its customary procedures all Securities surrendered for
transfer, exchange, payment or cancellation and shall deliver a certificate of
disposition to the Company. The Company may not issue new Securities to
replace Securities it has paid in full or delivered to the Trustee for
cancellation. Section 2.13. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" and "CINS" numbers (if then generally in use), and
the Trustee shall use CUSIP numbers or CINS numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders and no
representation shall be made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of redemption or
exchange. The Company shall promptly notify the Trustee in writing of any
change in any CUSIP number and/or ISIN. Section 2.14. Defaulted Interest. If
the Company defaults in a payment of interest on the Registered Securities, it
shall pay, or shall deposit with the Paying Agent money in immediately
available funds sufficient to pay, the defaulted interest plus (to the extent
lawful) any interest payable on the defaulted interest (as may be specified in
the terms thereof, established pursuant to Section 2.03) to the Persons who
are Holders on a subsequent special record date, which shall mean the 15th day
next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before
such special record date, the Company shall mail to each Holder of such
Registered Securities and to the Trustee a notice that states the special
record date, the payment date and the amount of defaulted interest to be paid.
The Trustee will have no duty whatsoever to determine whether any defaulted
interest is payable or the amount thereof. Section 2.15. Series May Include
Tranches. A series of Securities may include one or more tranches (each a
"tranche") of Securities, including Securities issued in a Periodic Offering.
The Securities of different tranches may have one or more different terms,
including authentication dates and public offering prices, but all the
Securities within each such tranche shall have identical terms, including
authentication date and public offering price. Notwithstanding any other
provision of this Indenture, with respect to Sections 2.02 (other than the
fourth, sixth and seventh paragraphs thereof) through 2.04, 2.07, 2.08, 2.10,
3.01 through 3.05, 4.02, 6.01 through 6.14, 8.01 through 8.07, 9.02 and
Section 10.07, if any series of Securities includes more than one tranche, all
provisions of such sections applicable to any series of Securities shall be
deemed equally applicable to each tranche of any series of
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Securities in the same manner as though originally designated a series unless
otherwise provided with respect to such series or tranche pursuant to Section
2.03. In particular, and without limiting the scope of the next preceding
sentence, any of the provisions of such sections which provide for or permit
action to be taken with respect to a series of Securities shall also be deemed
to provide for and permit such action to be taken instead only with respect to
Securities of one or more tranches within that series (and such provisions
shall be deemed satisfied thereby), even if no comparable action is taken with
respect to Securities in the remaining tranches of that series. ARTICLE 3
REDEMPTION Section 3.01. Applicability of Article. The provisions of this
Article shall be applicable to the Securities of any series which are
redeemable before their maturity or to any sinking fund for the retirement of
Securities of a series except as otherwise specified as contemplated by
Section 2.03 for Securities of such series. Section 3.02. Notice of
Redemption; Partial Redemptions. Notice of redemption to the Holders of
Registered Securities of any series to be redeemed as a whole or in part at
the option of the Company shall be given by mailing by first class mail,
postage prepaid (or delivering by electronic transmission in accordance with
the applicable procedures of the Depositary) notice of such redemption, at
least 30 days and not more than 60 days prior to the date fixed for redemption
to such Holders of Registered Securities of such series at their last
addresses as they shall appear upon the registry books. Notice of redemption
to the Holders of Unregistered Securities of any series to be redeemed as a
whole or in part who have filed their names and addresses with the Trustee
pursuant to Section 313(c)(2) of the Trust Indenture Act, shall be given by
mailing by first class mail, postage prepaid (or delivering by electronic
transmission in accordance with the applicable procedures of the Depositary)
notice of such redemption, at least 30 days and not more than 60 days prior to
the date fixed for redemption, to such Holders at such addresses as were so
furnished to the Trustee (and, in the case of any such notice given by the
Company, the Trustee shall make such information available to the Company for
such purpose). 60 days prior to the date fixed for redemption. Any notice
which is mailed, delivered or published in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives the notice. Failure to give notice by mail or by electronic
transmission, or any defect in the notice to the Holder of any Security of a
series designated for redemption as a whole or in part shall not affect the
validity of the proceedings for the redemption of any other Security of such
series. The notice of redemption to each such Holder shall (i) identify the
Securities to be redeemed (including the CUSIP numbers), (ii) specify the
principal amount of each Security of such series held by such Holder to be
redeemed, , (iii) the date fixed for redemption, (iv) the redemption price, or
if not then ascertainable, the manner of calculation thereof, (v) the place or
places of payment, (vi) the name and address of the Paying Agent, (vii) that
payment will be made upon presentation and surrender of such Securities to the
Paying Agent and, in the case of Securities with coupons attached thereto, of
all coupons appertaining thereto maturing after the date fixed for redemption,
(viii) that such redemption is pursuant to the mandatory or optional sinking
fund, or both, if such be the case, (ix) that interest accrued to the date
fixed for redemption will be paid as specified in such notice and that on and
after said date interest thereon or on the portions thereof to be redeemed
will cease to accrue, (x) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Securities of any series
called for redemption ceases to accrue on and after the redemption date, (xi)
the paragraph or subparagraph of the Securities or the Section of this
Indenture pursuant to which the Securities called for redemption are being
redeemed, and (xii) that no representation is made as to the correctness or
accuracy of the CUSIP or ISIN Number, if any, listed in such notice or printed
on the Securities. In case any Security of a series is to be redeemed in part
only, the notice of redemption shall state the portion of the principal amount
thereof to be redeemed and shall state that on and after the date fixed for
redemption, upon surrender of such Security, a new Security or Securities of
such series and tenor in principal amount equal to the unredeemed portion
thereof will be issued. The notice of redemption of Securities of any series
to be redeemed at the option of the Company shall be given by the Company or,
at the Company's request, by the Trustee in the name and at the expense of the
Company; provided
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that the Company shall have delivered to the Trustee, at least two Business
Days before notice of redemption is required to be sent or caused to be sent
to Holders pursuant to this Section 3.02 (unless a shorter notice shall be
agreed to by the Trustee), an Officer's Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in
such notice as provided in this Section 3.02. On or before 10:00 a.m. New York
City time on the redemption date or, in the case of Unregistered Securities,
on or before 10:00 a.m. New York City time on the Business Day prior to the
redemption date specified in the notice of redemption given as provided in
this Section, the Company will deposit with the Trustee or with one or more
Paying Agents (or, if the Company is acting as its own Paying Agent, set
aside, segregate and hold in trust as provided in Section 2.06) an amount of
money sufficient to redeem on the redemption date all the Securities of such
series so called for redemption at the appropriate redemption price, together
with accrued interest to the date fixed for redemption. If all of the
outstanding Securities of a series are to be redeemed, the Company will
deliver to the Trustee at least 10 days prior to the last date on which notice
of redemption may be given to Holders pursuant to the first paragraph of this
Section 3.02 (or such shorter period as shall be acceptable to the Trustee) an
Officer's Certificate stating that all such Securities are to be redeemed. If
less than all the outstanding Securities of a series are to be redeemed, the
Company will deliver to the Trustee at least 15 days prior to the last date on
which notice of redemption may be given to Holders pursuant to the first
paragraph of this Section 3.02 (or such shorter period as shall be acceptable
to the Trustee) an Officer's Certificate stating the aggregate principal
amount of such Securities to be redeemed. In the case of any redemption of
Securities (a) prior to the expiration of any restriction on such redemption
provided in the terms of such Securities or elsewhere in this Indenture, or
(b) pursuant to an election of the Company which is subject to a condition
specified in the terms of such Securities or elsewhere in this Indenture, the
Company shall deliver to the Trustee, prior to the giving of any notice of
redemption to Holders pursuant to this Section, an Officer's Certificate
evidencing compliance with such restriction or condition. If less than all the
Securities of a series are to be redeemed, the particular Securities to be
redeemed shall be selected by the Trustee, from the outstanding Securities of
such series not previously called for redemption, (a) if the Securities are
listed on an exchange, in compliance with the requirements of such exchange or
(b) on a pro rata basis (or in the case of global Securities, by such method
as required by the Depository). Securities may be redeemed in part in
principal amounts equal to authorized denominations for Securities of such
series. The Trustee shall promptly notify the Company in writing of the
Securities of such series selected for redemption and, in the case of any
Securities of such series selected for partial redemption, the principal
amount thereof to be redeemed. For all purposes of this Indenture, unless the
context otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Security redeemed or to be
redeemed only in part, to the portion of the principal amount of such Security
which has been or is to be redeemed. Section 3.03. Payment of Securities
Called for Redemption. If notice of redemption has been given as above
provided, the Securities or portions of Securities specified in such notice
shall become due and payable on the date and at the place stated in such
notice at the applicable redemption price, together with interest accrued to
the date fixed for redemption, and on and after such date (unless the Company
shall default in the payment of such Securities at the redemption price,
together with interest accrued to such date) interest on the Securities or
portions of Securities so called for redemption shall cease to accrue, and the
unmatured coupons, if any, appertaining thereto shall be void and, except as
provided in Sections 7.12 and 8.02, such Securities shall cease from and after
the date fixed for redemption to be entitled to any benefit under this
Indenture, and the Holders thereof shall have no right in respect of such
Securities except the right to receive the redemption price thereof and unpaid
interest to the date fixed for redemption. On presentation and surrender of
such Securities at a place of payment specified in said notice, together with
all coupons, if any, appertaining thereto maturing after the date fixed for
redemption, said Securities or the specified portions thereof shall be paid
and redeemed by the Company at the applicable redemption price, together with
interest accrued thereon to the date fixed for redemption; provided that
payment of interest becoming due on or prior to the date fixed for redemption
shall be payable in the case of Securities with coupons attached thereto, to
the Holders of the coupons for such interest upon surrender thereof, and in
the case of Registered Securities, to the Holders of such Registered
Securities registered as such on the relevant record date subject to the terms
and provisions of Sections 2.04 and 2.13 hereof. If any Security called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal shall, until paid or duly provided for, bear interest from the date
fixed for redemption at the rate of interest or Yield to Maturity (in the case
of an Original Issue Discount Security) borne by such Security.
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If any Security with coupons attached thereto is surrendered for redemption
and is not accompanied by all appurtenant coupons maturing after the date
fixed for redemption, the surrender of such missing coupon or coupons may be
waived by the Company and the Trustee, if there be furnished to each of them
such security or indemnity as they may require to save each of them harmless.
Upon presentation of any Security of any series redeemed in part only, the
Company shall execute and the Trustee shall authenticate and deliver to or on
the order of the Holder thereof, at the expense of the Company, a new Security
or Securities of such series and tenor (with any unmatured coupons attached),
of authorized denominations, in principal amount equal to the unredeemed
portion of the Security so presented. Section 3.04. Exclusion of Certain
Securities From Eligibility for Selection for Redemption. Securities shall be
excluded from eligibility for selection for redemption if they are identified
by registration and certificate number in a written statement signed by an
authorized officer of the Company and delivered to the Trustee at least 40
days prior to the last date on which notice of redemption may be given as
being owned of record and beneficially by, and not pledged or hypothecated by,
either (a) the Company or (b) an entity specifically identified in such
written statement as directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company. Section 3.05.
Mandatory and Optional Sinking Funds. The minimum amount of any sinking fund
payment provided for by the terms of Securities of any series is herein
referred to as a "mandatory sinking fund payment", and any payment in excess
of such minimum amount provided for by the terms of the Securities of any
series is herein referred to as an "optional sinking fund payment". The date
on which a sinking fund payment is to be made is herein referred to as the
"sinking fund payment date". In lieu of making all or any part of any
mandatory sinking fund payment with respect to any series of Securities in
cash, the Company may at its option (a) deliver to the Trustee Securities of
such series theretofore purchased or otherwise acquired (except through a
mandatory sinking fund payment) by the Company or receive credit for
Securities of such series (not previously so credited) theretofore purchased
or otherwise acquired (except as aforesaid) by the Company and delivered to
the Trustee for cancellation pursuant to Section 2.11, (b) receive credit for
optional sinking fund payments (not previously so credited) made pursuant to
this Section, or (c) receive credit for Securities of such series (not
previously so credited) redeemed by the Company at the option of the Company
pursuant to the terms of such Securities or through any optional sinking fund
payment. Securities so delivered or credited shall be received or credited by
the Trustee at the sinking fund redemption price specified in such Securities.
On or before the sixtieth day next preceding each sinking fund payment date
for any series, or such shorter period as shall be acceptable to the Trustee,
the Company will deliver to the Trustee an Officer's Certificate (a)
specifying the portion of the mandatory sinking fund payment to be satisfied
by payment of cash and the portion to be satisfied by credit of specified
Securities of such series and the basis for such credit, (b) stating that none
of the specified Securities of such series has theretofore been so credited,
(c) stating that no defaults in the payment of interest or Events of Default
with respect to such series have occurred (which have not been waived or
cured) and are continuing and (d) stating whether or not the Company intends
to exercise its right to make an optional sinking fund payment with respect to
such series and, if so, specifying the amount of such optional sinking fund
payment which the Company intends to pay on or before the next succeeding
sinking fund payment date. Any Securities of such series to be credited and
required to be delivered to the Trustee in order for the Company to be
entitled to credit therefor as aforesaid which have not theretofore been
delivered to the Trustee shall be delivered for cancellation pursuant to
Section 2.11 to the Trustee with such Officer's Certificate (or reasonably
promptly thereafter if acceptable to the Trustee). Such Officer's Certificate
shall be irrevocable and upon its receipt by the Trustee the Company shall
become unconditionally obligated to make all the cash payments or delivery of
Securities therein referred to, if any, on or before the next succeeding
sinking fund payment date. Failure of the Company, on or before any such
sixtieth day, to deliver such Officer's Certificate and Securities specified
in this paragraph, if any, shall not constitute a default but shall
constitute, on and as of such date, the irrevocable election of the Company
(i) that the mandatory sinking fund payment for such series due on the next
succeeding sinking fund payment date shall be paid entirely in cash without
the option to deliver or credit Securities of such series in respect thereof
and (ii) that the Company will make no optional sinking fund payment with
respect to such series as provided in this Section.
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If the sinking fund payment or payments (mandatory or optional or both) to be
made in cash on the next succeeding sinking fund payment date plus any unused
balance of any preceding sinking fund payments made in cash shall exceed
$50,000 (or a lesser sum if the Company shall so request with respect to the
Securities of any series), such cash shall be applied on the next succeeding
sinking fund payment date to the redemption of Securities of such series at
the sinking fund redemption price thereof together with accrued interest
thereon to the date fixed for redemption. If such amount shall be $50,000 (or
such lesser sum) or less and the Company makes no such request then it shall
be carried over until a sum in excess of $50,000 (or such lesser sum) is
available. The Trustee shall select, in the manner provided in Section 3.02,
for redemption on such sinking fund payment date a sufficient principal amount
of Securities of such series to absorb said cash, as nearly as may be, and
shall (if requested in writing by the Company) inform the Company of the
serial numbers of the Securities of such series (or portions thereof) so
selected. Securities shall be excluded from eligibility for redemption under
this Section if they are identified by registration and certificate number in
an Officer's Certificate delivered to the Trustee at least 60 days prior to
the sinking fund payment date as being owned of record and beneficially by,
and not pledged or hypothecated by either (a) the Company or (b) an entity
specifically identified in such Officer's Certificate as directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company. The Trustee, in the name and at the expense of the
Company (or the Company, if it shall so request the Trustee in writing) shall
cause notice of redemption of the Securities of such series to be given in
substantially the manner provided in Section 3.02 (and with the effect
provided in Section 3.03) for the redemption of Securities of such series in
part at the option of the Company. The amount of any sinking fund payments not
so applied or allocated to the redemption of Securities of such series shall
be added to the next cash sinking fund payment for such series and, together
with such payment, shall be applied in accordance with the provisions of this
Section. Any and all sinking fund moneys held on the stated maturity date of
the Securities of any particular series (or earlier, if such maturity is
accelerated), which are not held for the payment or redemption of particular
Securities of such series shall be applied, together with other moneys, if
necessary, sufficient for the purpose, to the payment of the Principal of, and
interest on, the Securities of such series at maturity. On or before 10:00
a.m. New York City time on each sinking fund payment date or, in the case of
Unregistered Securities, 10:00 a.m. New York City time on the Business Day
prior to the sinking fund payment date, the Company shall pay to the Trustee
in cash or shall otherwise provide for the payment of all interest accrued to
the date fixed for redemption on Securities to be redeemed on the next
following sinking fund payment date. The Trustee shall not redeem or cause to
be redeemed any Securities of a series with sinking fund moneys or mail any
notice of redemption of Securities of such series by operation of the sinking
fund during the continuance of a Default in payment of interest on such
Securities or of any Event of Default except that, where the mailing of notice
of redemption of any Securities shall theretofore have been made, the Trustee
shall redeem or cause to be redeemed such Securities, provided that it shall
have received from the Company a sum sufficient for such redemption. Except as
aforesaid, any moneys in the sinking fund for such series at the time when any
such Default or Event of Default shall occur, and any moneys thereafter paid
into the sinking fund, shall, during the continuance of such Default or Event
of Default, be deemed to have been collected under Article 6 and held for the
payment of all such Securities. In case such Event of Default shall have been
waived as provided in Section 6.04 or the Default cured on or before the
sixtieth day preceding the sinking fund payment date in any year, such moneys
shall thereafter be applied on the next succeeding sinking fund payment date
in accordance with this Section to the redemption of such Securities. ARTICLE
4 COVENANTS Section 4.01. Payment of Securities. The Company shall pay the
Principal of and interest on the Securities on the dates and in the manner
provided in the Securities and this Indenture. The interest on Securities with
coupons attached (together with any additional amounts payable pursuant to the
terms of such Securities) shall be payable only upon presentation and
surrender of the several coupons for such interest installments as are
evidenced thereby as they severally mature. The interest on any temporary
Unregistered Securities (together with any additional amounts payable pursuant
to the terms of such Securities) shall be paid, as to the installments of
interest evidenced by coupons attached thereto, if any, only upon presentation
and surrender thereof, and, as to the other installments of interest, if any,
only upon presentation of such Unregistered Securities for notation thereon of
the payment of such
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interest. The interest on Registered Securities (together with any additional
amounts payable pursuant to the terms of such Securities) shall be payable
only to the Holders thereof (subject to Section 2.04) and at the option of the
Company may be paid by mailing checks for such interest payable to or upon the
written order of such Holders at their last addresses as they appear on the
Security Register of the Company. Notwithstanding any provisions of this
Indenture and the Securities of any series to the contrary, if the Company and
a Holder of any Registered Security so agree, payments of interest on, and any
portion of the Principal of, such Holder's Registered Security (other than
interest payable at maturity or on any redemption or repayment date or the
final payment of Principal on such Security) shall be made by the Paying
Agent, upon receipt from the Company of immediately available funds by 11:00
a.m., New York City time (or such other time as may be agreed to between the
Company and the Paying Agent), directly to the Holder of such Security (by
wire transfer through the Fedwire Funds Service or otherwise) if the Holder
has delivered written instructions to the Trustee 15 days prior to such
payment date requesting that such payment will be so made and designating the
bank account to which such payments shall be so made and in the case of
payments of Principal, surrenders the same to the Trustee in exchange for a
Security or Securities aggregating the same principal amount as the unredeemed
principal amount of the Securities surrendered. The Trustee shall be entitled
to rely on the last instruction delivered by the Holder pursuant to this
Section 4.01 unless a new instruction is delivered 15 days prior to a payment
date. The Company will indemnify and hold each of the Trustee and any Paying
Agent harmless against any loss, liability or expense (including attorneys'
fees) resulting from any act or omission to act on the part of the Company or
any such Holder in connection with any such agreement or from making any
payment in accordance with any such agreement. The Company shall pay interest
on overdue Principal, and interest on overdue installments of interest, to the
extent lawful, at the rate per annum specified in the Securities. Section
4.02. Maintenance of Office or Agency. The Company will maintain in the United
States of America an office or agency where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the Securities and
this Indenture may be served. The Company hereby initially designates
Wilmington Savings Fund Society, FSB, located at 500 Delaware Avenue,
Wilmington, DE 19801, as such office or agency of the Company. The Company
will give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to furnish
the Trustee with the address thereof, such presentations, surrenders, notices
and demands may be made or served at the address of the Trustee set forth in
Section 10.02. The Company will maintain one or more agencies in a city or
cities located outside the United States of America (including any city in
which such an agency is required to be maintained under the rules of any stock
exchange on which the Securities of any series are listed) where the
Unregistered Securities, if any, of each series and coupons, if any,
appertaining thereto may be presented for payment. No payment on any
Unregistered Security or coupon will be made upon presentation of such
Unregistered Security or coupon at an agency of the Company within the United
States of America nor will any payment be made by transfer to an account in,
or by mail to an address in, the United States of America unless, pursuant to
applicable United States laws and regulations then in effect, such payment can
be made without adverse tax consequences to the Company. Notwithstanding the
foregoing, if full payment in United States Dollars ("Dollars") at each agency
maintained by the Company outside the United States of America for payment on
such Unregistered Securities or coupons appertaining thereto is illegal or
effectively precluded by exchange controls or other similar restrictions,
payments in Dollars of Unregistered Securities of any series and coupons
appertaining thereto which are payable in Dollars may be made at an agency of
the Company maintained in the United States of America. The Company may also
from time to time designate one or more other offices or agencies where the
Securities of any series may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the United States of America for
such purposes. The Company will give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of any
such other office or agency.
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Section 4.03. Securityholders' Lists. The Company will furnish or cause to be
furnished to the Trustee a list in such form as the Trustee may reasonably
require of the names and addresses of the holders of the Securities pursuant
to Section 312 of the Trust Indenture Act of 1939 (a) semi-annually not more
than 15 days after each record date for the payment of semi-annual interest on
the Securities, as hereinabove specified, as of such record date, and (b) at
such other times as the Trustee may request in writing, within thirty days
after receipt by the Company of any such request as of a date not more than 15
days prior to the time such information is furnished. Section 4.04.
Certificate to Trustee. The Company will furnish to the Trustee annually, on
or before a date not more than four months after the end of its fiscal year
(which, on the date hereof, is a calendar year), a brief certificate (which
need not contain the statements required by Section 10.04) from its principal
executive, financial or accounting officer as to his or her knowledge of the
compliance of the Company with all conditions and covenants under this
Indenture (such compliance to be determined without regard to any period of
grace or requirement of notice provided under this Indenture) which
certificate shall comply with the requirements of the Trust Indenture Act.
Such certificate need not include a reference to any non-compliance that has
been fully cured prior to the date as of which such certificate speaks.
Section 4.05. Reports by the Company. So long as any Securities are
outstanding, the Company shall file with the Trustee, within 15 days after the
Company files the same with the Commission, copies of the annual reports and
of the information, documents, and other reports which the Company may be
required to file with the Commission pursuant to Section 13 or Section 15(d)
of the Exchange Act. The Company shall be deemed to have complied with the
previous sentence to the extent that such information, documents and reports
are filed with the Commission via its "EDGAR" system (or any successor
electronic delivery procedure) or posted on its website. Delivery of such
reports, information and documents to the Trustee is for informational
purposes only and the Trustee's receipt of such shall not constitute actual or
constructive knowledge or notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officer's Certificates). The Trustee shall
have no duty to monitor or confirm, on a continuing basis or otherwise, the
Company's or any other Person's compliance with any of the covenants under
this Indenture, to determine whether the Company posts reports, information or
documents on the Commission's website or otherwise, to collect any such
information from the Commission's website, the Company's website or otherwise,
or to review or analyze reports delivered to it to ensure compliance with the
provisions of this Indenture, to ascertain the correctness or otherwise of the
information or statements contained therein or to participate in any
conference calls. Section 4.06. Additional Amounts. If the Securities of a
series provide for the payment of additional amounts, at least 10 days prior
to the first interest payment date with respect to that series of Securities
and at least 10 days prior to each date of payment of Principal of or interest
on the Securities of that series if there has been a change with respect to
the matters set forth in the below-mentioned Officer's Certificate, the
Company shall furnish to the Trustee and the principal paying agent, if other
than the Trustee, an Officer's Certificate instructing the Trustee and such
paying agent whether such payment of Principal of or interest on the
Securities of that series shall be made to Holders of the Securities of that
series without withholding or deduction for or on account of any tax,
assessment or other governmental charge described in the Securities of that
series. If any such withholding or deduction shall be required, then such
Officer's Certificate shall specify by country the amount, if any, required to
be withheld or deducted on such payments to such Holders and shall certify the
fact that additional amounts will be payable and the amounts so payable to
each Holder, and the Company shall pay to the Trustee or such paying agent the
additional amounts required to be paid by this Section. Whenever in this
Indenture there is mentioned, in any context, the payment of the Principal of
or interest or any other amounts on, or in respect of, any Security of any
series, such mention shall be deemed to include mention of the payment of
additional amounts provided by the terms of such series established hereby or
pursuant hereto to the extent that, in such context, additional amounts are,
were or would be payable in respect thereof pursuant to such terms, and
express mention of the payment of additional amounts (if applicable) in any
provision hereof shall not be construed as excluding the payment of additional
amounts in those provisions hereof where such express mention is not made.
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ARTICLE 5 SUCCESSOR CORPORATION Section 5.01. When Company May Merge, Etc. The
Company shall not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its
property and assets (in one transaction or a series of related transactions)
to, any Person unless either (x) the Company shall be the continuing Person or
(y) the Person (if other than the Company) formed by such consolidation or
into which the Company is merged or to which properties and assets of the
Company shall be sold, conveyed, transferred or leased shall be a Person
organized and validly existing under the laws of the United States of America
or any jurisdiction thereof and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, all of the obligations of
the Company on all of the Securities and under this Indenture and the Company
in the case of clauses (x) and (y) shall have delivered to the Trustee (A) an
Opinion of Counsel stating that such consolidation, merger or sale,
conveyance, transfer or lease and such supplemental indenture (if any)
complies with this provision and that all conditions precedent provided for
herein relating to such transaction have been complied with and that such
supplemental indenture (if any) constitutes the legal, valid and binding
obligation of the Company and such successor enforceable against such entity
in accordance with its terms, subject to customary exceptions and (B) an
Officer's Certificate to the effect that immediately after giving effect to
such transaction, no Default shall have occurred and be continuing. Section
5.02. Successor Substituted. Upon any consolidation or merger, or any sale,
conveyance, transfer, lease or other disposition of all or substantially all
of the property and assets of the Company in accordance with Section 5.01 of
this Indenture, the successor Person formed by such consolidation or into
which the Company is merged or to which such sale, conveyance, transfer, lease
or other disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein
and thereafter the predecessor Person, except in the case of a lease, shall be
relieved of all obligations and covenants under this Indenture and the
Securities. ARTICLE 6 DEFAULT AND REMEDIES Section 6.01. Events of Default. An
"Event of Default" shall occur with respect to the Securities of any series
if: (a) the Company defaults in the payment of the Principal of any Security
of such series when the same becomes due and payable at maturity, upon
acceleration, redemption or mandatory repurchase, including as a sinking fund
installment, or otherwise; (b) the Company defaults in the payment of interest
on any Security of such series when the same becomes due and payable, and such
default continues for a period of 30 days; (c) the Company defaults in the
performance of or breaches any other covenant or agreement of the Company in
this Indenture with respect to any Security of such series or in the
Securities of such series and such default or breach continues for a period of
30 consecutive days after written notice to the Company by the Trustee or to
the Company and the Trustee by the Holders of 25% or more in aggregate
principal amount of the Securities of all series affected thereby specifying
such default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; (d) a court having jurisdiction in
the premises shall enter a decree or order for relief in respect of the
Company in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official)
of the Company or for any substantial part of its property or ordering the
winding up or liquidation of its affairs, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days;
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(e) the Company (i) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case under any
such law, (ii) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or for all or substantially all of the property and
assets of the Company or (iii) effects any general assignment for the benefit
of creditors; or (f) any other Event of Default established pursuant to
Section 2.03 with respect to the Securities of such series occurs. Section
6.02. Acceleration. (a) If an Event of Default other than as described in
clauses (d) or (e) of with respect to the Securities of any series then
outstanding occurs and is continuing, then, and in each and every such case,
except for any series of Securities the principal of which shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Securities of any such series then
outstanding hereunder (all such series voting together as a single class) by
notice in writing to the Company (and to the Trustee if given by Securityholders
), may declare the entire principal (or, if the Securities of any such series
are Original Issue Discount Securities, such portion of the principal amount
as may be specified in the terms of such series established pursuant to
Section 2.03) of all Securities of such series, and the interest accrued
thereon, if any, to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. (a) If an Event
of Default described in clause (d) or (e) of Section 6.01 occurs and is
continuing, then the principal amount (or, if any Securities are Original
Issue Discount Securities, such portion of the principal as may be specified
in the terms thereof established pursuant to Section 2.03) of all the
Securities then outstanding and interest accrued thereon, if any, shall be and
become immediately due and payable, without any notice or other action by any
Holder or the Trustee, to the full extent permitted by applicable law. The
foregoing provisions, however, are subject to the condition that if, at any
time after the principal (or, if the Securities are Original Issue Discount
Securities, such portion of the principal as may be specified in the terms
thereof established pursuant to Section 2.03) of the Securities of any series
(or of all the Securities, as the case may be) shall have been so declared or
become due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided,
the Company shall pay or shall deposit with the Trustee a sum sufficient to
pay all matured installments of interest upon all the Securities of each such
series (or of all the Securities, as the case may be) and the principal of any
and all Securities of each such series (or of all the Securities, as the case
may be) which shall have become due otherwise than by acceleration (with
interest upon such principal and, to the extent that payment of such interest
is enforceable under applicable law, on overdue installments of interest, at
the same rate as the rate of interest or Yield to Maturity (in the case of
Original Issue Discount Securities) specified in the Securities of each such
series to the date of such payment or deposit) and such amount as shall be
sufficient to cover all amounts owing the Trustee under Section 7.07, and if
any and all Events of Default under the Indenture, other than the non-payment
of the principal of Securities which shall have become due by acceleration,
shall have been cured, waived or otherwise remedied as provided herein, then
and in every such case the Holders of a majority in aggregate principal amount
of all the then outstanding Securities of all such series that have been
accelerated (voting as a single class), by written notice to the Company and
to the Trustee, may waive all defaults with respect to all such series (or
with respect to all the Securities, as the case may be) and rescind and annul
such declaration and its consequences, but no such waiver or rescission and
annulment shall extend to or shall affect any subsequent default or shall
impair any right consequent thereon. For all purposes under this Indenture, if
a portion of the principal of any Original Issue Discount Securities shall
have been accelerated and declared or become due and payable pursuant to the
provisions hereof, then, from and after such declaration, unless such
declaration has been rescinded and annulled, the principal amount of such
Original Issue Discount Securities shall be deemed, for all purposes
hereunder, to be such portion of the principal thereof as shall be due and
payable as a result of such acceleration, and payment of such portion of the
principal thereof as shall be due and payable as a result of such
acceleration, together with interest, if any, thereon and all other amounts
owing thereunder, shall constitute payment in full of such Original Issue
Discount Securities. Section 6.03. Other Remedies. If a payment default or an
Event of Default with respect to the Securities of any series occurs and is
continuing, the Trustee may pursue, in its own name or as trustee of an
express trust, any available
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remedy by proceeding at law or in equity to collect the payment of Principal
of and interest on the Securities of such series or to enforce the performance
of any provision of the Securities of such series or this Indenture. The
Trustee may maintain a proceeding even if it does not possess any of the
Securities or does not produce any of them in the proceeding. Section 6.04.
Waiver of Past Defaults. Subject to Sections 6.02, 6.07 and 9.02, the Holders
of at least a majority in principal amount (or, if the Securities are Original
Issue Discount Securities, such portion of the principal as is then
accelerable under Section 6.02) of the outstanding Securities of all series
affected (voting as a single class), by notice to the Trustee, may waive an
existing Default or Event of Default with respect to the Securities of such
series and its consequences, except a Default in the payment of Principal of
or interest on any Security as specified in clauses (a) or (b) of Section 6.01
or in respect of a covenant or provision of this Indenture which cannot be
modified or amended without the consent of the Holder of each outstanding
Security affected. Upon any such waiver, such Default shall cease to exist,
and any Event of Default with respect to the Securities of such series arising
therefrom shall be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereto. Section 6.05.
Control by Majority. Subject to Sections 7.01 and 7.02(e), the Holders of at
least a majority in aggregate principal amount (or, if any Securities are
Original Issue Discount Securities, such portion of the principal as is then
accelerable under Section 6.02) of the outstanding Securities of all series
affected (voting as a single class) may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the
Securities of such series by this Indenture; provided, that the Trustee may
refuse to follow any direction that conflicts with law or this Indenture, that
may involve the Trustee in personal liability or that the Trustee determines
in good faith may be unduly prejudicial to the rights of Holders not joining
in the giving of such direction (it being understood that the Trustee does not
have an affirmative duty to ascertain whether or not such direction is unduly
prejudicial to the rights of any such other Holders); and provided further,
that the Trustee may take any other action it deems proper that is not
inconsistent with any directions received from Holders of Securities pursuant
to this Section 6.05. Section 6.06. Limitation on Suits. No Holder of any
Security of any series may institute any proceeding, judicial or otherwise,
with respect to this Indenture or the Securities of such series, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless: (a) such Holder has previously given to the Trustee written notice of
a continuing Event of Default with respect to the Securities of such series;
(b) the Holders of at least 25% in aggregate principal amount of outstanding
Securities of all such series affected shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder; (c) such Holder or Holders have offered to the
Trustee indemnity satisfactory to the Trustee against any costs, liabilities
or expenses to be incurred in compliance with such request; (d) the Trustee
for 60 days after its receipt of such notice, request and offer of indemnity
has failed to institute any such proceeding; and (e) during such 60-day
period, the Holders of a majority in aggregate principal amount of the
outstanding Securities of all such affected series have not given the Trustee
a written direction that is inconsistent with such written request. A Holder
may not use this Indenture to prejudice the rights of another Holder or to
obtain a preference or priority over such other Holder. Section 6.07. Rights
of Holders to Receive Payment. Notwithstanding any other provision of this
Indenture, the right of any Holder of a Security to receive payment of
Principal of or interest, if any, on such Holder's Security on or
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after the respective due dates expressed on such Security, or to bring suit
for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Holder. Section
6.08. Collection Suit by Trustee. If an Event of Default with respect to the
Securities of any series in payment of Principal or interest specified in
clause (a) or (b) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against
the Company for the whole amount (or such portion thereof as specified in the
terms established pursuant to Section 2.03 of Original Issue Discount
Securities) of Principal of, and accrued interest remaining unpaid on,
together with interest on overdue Principal of, and, to the extent that
payment of such interest is lawful, interest on overdue installments of
interest on, the Securities of such series, in each case at the rate or Yield
to Maturity (in the case of Original Issue Discount Securities) specified in
such Securities, and such further amount as shall be sufficient to cover all
amounts owing the Trustee under Section 7.07. Section 6.09. Trustee May File
Proofs of Claim. The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for amounts due the Trustee under Section 7.07)
and the Holders allowed in any judicial proceedings relative to the Company
(or any other obligor on the Securities), its creditors or its property and
shall be entitled and empowered to collect and receive any moneys, securities
or other property payable or deliverable upon conversion or exchange of the
Securities or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay
to the Trustee any amount due to it under Section 7.07. Nothing herein
contained shall be deemed to empower the Trustee to authorize or consent to,
or accept or adopt on behalf of any Holder, any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights
of any Holder thereof, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding. Section 6.10. Application of
Proceeds. Any moneys collected by the Trustee pursuant to this Article in
respect of the Securities of any series shall be applied in the following
order at the date or dates fixed by the Trustee and, in case of the
distribution of such moneys on account of Principal or interest, upon
presentation of the several Securities and coupons appertaining to such
Securities in respect of which moneys have been collected and noting thereon
the payment, or issuing Securities of such series and tenor in reduced
principal amounts in exchange for the presented Securities of such series and
tenor if only partially paid, or upon surrender thereof if fully paid: FIRST:
To the payment of all amounts due the Trustee and its agents and counsel under
Section 7.07 applicable to the Securities of such series in respect of which
moneys have been collected; SECOND: In case the principal of the Securities of
such series in respect of which moneys have been collected shall not have
become and be then due and payable, to the payment of interest on the
Securities of such series in default in the order of the maturity of the
installments of such interest, with interest (to the extent that such interest
has been collected by the Trustee) upon the overdue installments of interest
at the same rate as the rate of interest or Yield to Maturity (in the case of
Original Issue Discount Securities) specified in such Securities, such
payments to be made ratably to the persons entitled thereto, without
discrimination or preference; THIRD: In case the principal of the Securities
of such series in respect of which moneys have been collected shall have
become and shall be then due and payable, to the payment of the whole amount
then owing and unpaid upon all the Securities of such series for Principal and
interest, with interest upon the overdue Principal, and (to the extent that
such interest has been collected by the Trustee) upon overdue installments of
interest at the same rate as the rate of interest or Yield to Maturity (in the
case of Original Issue Discount Securities) specified in the Securities of
such series; and in case such moneys shall be insufficient to pay in full the
whole amount so due and unpaid upon the Securities of such series, then to the
payment of such Principal and interest or Yield to Maturity, without
preference or priority of Principal over interest or Yield to Maturity, or of
interest or Yield to Maturity over Principal, or of any installment of
interest over any other installment of interest, or of any Security of such
series over any other Security of such series, ratably to the aggregate of
such Principal and accrued and unpaid interest or Yield to Maturity; and
FOURTH: To the payment of the remainder, if any, to the Company or any other
person lawfully entitled thereto.
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Section 6.11. Restoration of Rights and Remedies. If the Trustee or any Holder
has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder,
then, and in every such case, subject to any determination in such proceeding,
the Company, the Trustee and the Holders shall be restored to their former
positions hereunder and thereafter all rights and remedies of the Company,
Trustee and the Holders shall continue as though no such proceeding had been
instituted. Section 6.12. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, in either case
in respect to the Securities of any series, a court may require any party
litigant in such suit (other than the Trustee) to file an undertaking to pay
the costs of the suit, and the court may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant (other than the
Trustee) in the suit having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.12 does not
apply to a suit by a Holder pursuant to Section 6.07, a suit instituted by the
Trustee or a suit by Holders of more than 10% in principal amount of the
outstanding Securities of such series. Section 6.13. Rights and Remedies
Cumulative. Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or wrongfully taken Securities in
Section 2.08, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, 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 or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy. Section 6.14. Delay or Omission not Waiver. No delay or omission of
the Trustee or of any Holder to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a waiver
of any such Event of Default or an acquiescence therein. Every right and
remedy given by this Article 6 or by law to the Trustee or to the Holders may
be exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the Holders, as the case may be. ARTICLE 7 TRUSTEE Section
7.01. General. The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act and as set forth herein. Notwithstanding
the foregoing, no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, unless it receives indemnity satisfactory to it against any
loss, liability or expense. Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Article 7. Section 7.02. Certain Rights of Trustee. Subject
to Trust Indenture Act Sections 315(a) through (d): (a) the Trustee may rely
and shall be protected in acting or refraining from acting upon any
resolution, certificate, Officer's Certificate, Opinion of Counsel (or both),
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper person or persons. The Trustee need not investigate any fact or
matter stated in the document, but the Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it may see
fit; (b) before the Trustee acts or refrains from acting, it may require an
Officer's Certificate and/or an Opinion of Counsel, which shall conform to
Section 10.04 and shall cover such other matters as the Trustee may reasonably
request. The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such certificate or opinion. Subject to
Sections 7.01 and 7.02, whenever in the administration of the trusts of this
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Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of gross negligence or bad faith
on the part of the Trustee, be deemed to be conclusively proved and
established by an Officer's Certificate delivered to the Trustee, and such
certificate, in the absence of gross negligence or bad faith on the part of
the Trustee, shall be full warrant to the Trustee for any action taken,
suffered or omitted by it under the provisions of this Indenture upon the
faith thereof; (c) the Trustee may act through its attorneys and agents not
regularly in its employ and shall not be responsible for the misconduct or
negligence of any agent or attorney appointed with due care; (d) any request,
direction, order or demand of the Company mentioned herein shall be
sufficiently evidenced by an Officer's Certificate (unless other evidence in
respect thereof be herein specifically prescribed); and any Board Resolution
may be evidenced to the Trustee by a copy thereof certified by the Secretary
or an Assistant Secretary of the Company; (e) the Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Indenture at the request, order or direction of any of the Holders, unless
such Holders shall have offered to the Trustee security or indemnity against
the costs, expenses and liabilities that might be incurred by it in compliance
with such request or direction; (f) the Trustee shall not be liable for any
action it takes or omits to take in good faith that it believes to be
authorized or within its rights or powers conferred upon it by this Indenture
or for any action it takes or omits to take in accordance with the direction
of the Holders in accordance with Section 6.05 relating to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture; (g) the Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon; and (h) prior
to the occurrence of an Event of Default hereunder and after the curing or
waiving of all Events of Default, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
Officer's Certificate, Opinion of Counsel, Board Resolution, statement,
instrument, opinion, report, notice, request, consent, order, approval,
appraisal, bond, debenture, note, coupon, security, or other paper or document
unless requested in writing so to do by the Holders of not less than a
majority in aggregate principal amount of the Securities of all series
affected then outstanding; provided that, if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it
by the terms of this Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; and (i) the
Trustee shall not be required to give any bond or surety in respect of the
performance of its powers and duties hereunder;(j) The rights, privileges,
protections, immunities and benefits given to the Trustee, including, without
limitation, its right to be indemnified, are extended to, and shall be
enforceable by, the Trustee in each of its capacities hereunder, and each
agent, custodian and other Person employed to act hereunder; and (k) In no
event shall the Trustee be responsible or liable for special, indirect,
punitive or consequential loss or damage of any kind whatsoever (including,
but not limited to, loss of profit) irrespective of whether the Trustee has
been advised of the likelihood of such loss or damage and regardless of the
form of action. Section 7.03. Individual Rights of Trustee. The Trustee, in
its individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not the Trustee. Any Agent may do the
same with like rights. However, the Trustee is subject to Trust Indenture Act
Sections 310(b) and 311. For purposes of Trust Indenture Act Section 311(b)(4)
and (6), the following terms shall mean:
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(a) "cash transaction" means any transaction in which full payment for goods
or securities sold is made within seven days after delivery of the goods or
securities in currency or in checks or other orders drawn upon banks or
bankers and payable upon demand; and (b) "self-liquidating paper" means any
draft, bill of exchange, acceptance or obligation which is made, drawn,
negotiated or incurred by the Company for the purpose of financing the
purchase, processing, manufacturing, shipment, storage or sale of goods, wares
or merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating or
incurring of the draft, bill of exchange, acceptance or obligation. Section
7.04. Trustee's Disclaimer. The recitals contained herein and in the
Securities (except the Trustee's certificate of authentication) shall be taken
as statements of the Company and not of the Trustee and the Trustee assumes no
responsibility for the correctness of the same. Neither the Trustee nor any of
its agents (a) makes any representation as to the validity or adequacy of this
Indenture, the Securities or in any document issued in connection with the
sale of the Securities and (b) shall be accountable for the Company's use or
application of the proceeds from the Securities. Section 7.05. Notice of
Default. If any Default with respect to the Securities of any series occurs
and is continuing and if such Default is known to the actual knowledge of a
Responsible Officer with the Corporate Trust Department of the Trustee, the
Trustee shall give to each Holder of Securities of such series notice of such
Default within 90 days after it occurs to all Holders of Securities of such
series in the manner and to the extent provided in Section 313(c) of the Trust
Indenture Act, unless such Default shall have been cured or waived before the
transmittal of such notice; provided, however, that, except in the case of a
Default in the payment of the Principal of or interest on any Security, the
Trustee shall be protected in withholding such notice if the Trustee in good
faith determines that the withholding of such notice is in the interests of
the Holders. Section 7.06. Reports by Trustee to Holders. The Trustee shall
transmit to Holders such reports concerning the Trustee and its actions under
this Indenture as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant thereto. If required by Section
313(a) of the Trust Indenture Act, the Trustee shall, within 60 days after
each May 15 following the date of this Indenture, deliver to Holders a brief
report, dated as of such May 15, which complies with the provisions of such
Section 313(a). A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed, with the Commission and with the Company. The
Company will promptly notify the Trustee when any Securities are listed on any
stock exchange. Section 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee (in each of its capacities hereunder) such compensation as
shall be agreed upon in writing from time to time for its services. The
compensation of the Trustee shall not be limited by any law on compensation of
a Trustee of an express trust. The Company shall reimburse the Trustee and any
predecessor Trustee upon request for all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by the Trustee or such predecessor
Trustee. Such expenses shall include the reasonable compensation and expenses
of the Trustee's or such predecessor Trustee's agents, counsel and other
persons not regularly in their employ. The Company shall indemnify, defend and
protect each of the Trustee (in its individual capacity and Trustee
capacities), any predecessor Trustee and their officers, directors, agents and
employees for, and hold them harmless against, any and all loss, claim,
liability, damage, cost or expense(including taxes other than taxes based on
the income of the Trustee) incurred by them arising out of or in connection
with the acceptance or administration of this Indenture and the Securities or
the issuance of the Securities or of series thereof or the trusts hereunder
and the performance of duties under this Indenture and the Securities,
including the costs and expenses of enforcing this Indenture against the
Company (whether asserted by the Company or any Holder or any other person)
and defending themselves against or investigating any claim or liability and
of complying with any process served upon them or any of their officers in
connection with the exercise or performance of any of their powers or duties
under this Indenture and the Securities, except that the Company shall not be
obligated to reimburse any expense or indemnify
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against any loss or liability incurred by the Trustee as determined to have
been caused by the Trustee's own negligence or willful misconduct as
determined by a court of competent jurisdiction in a final, non-appealable
judgment . The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel. To secure the Company's payment obligations in this
Section 7.07, the Trustee shall have a lien prior to the Securities on all
money or property held or collected by the Trustee, in its capacity as
Trustee, except money or property held in trust to pay Principal of, and
interest on particular Securities. The obligations of the Company under this
Section to compensate and indemnify the Trustee and each predecessor Trustee
and to pay or reimburse the Trustee and each predecessor Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder
and shall survive the satisfaction and discharge of this Indenture or the
rejection or termination of this Indenture under bankruptcy law or the earlier
resignation or removal of the Trustee. Such additional indebtedness shall be a
senior claim to that of the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the benefit
of the Holders of particular Securities or coupons, and the Securities are
hereby subordinated to such senior claim. Without prejudice to any other
rights available to the Trustee under applicable law, if the Trustee renders
services and incurs expenses following an Event of Default under Section
6.01(d) or Section 6.01(e) hereof, the parties hereto and the holders by their
acceptance of the Securities hereby agree that such expenses are intended to
constitute expenses of administration under any bankruptcy law. Section 7.08.
Replacement of Trustee. A resignation or removal of the Trustee as Trustee
with respect to the Securities of any series and appointment of a successor
Trustee as Trustee with respect to the Securities of any series shall become
effective only upon the successor Trustee's acceptance of appointment as
provided in this Section 7.08. The Trustee may resign as Trustee with respect
to the Securities of any series at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities of any series may remove the Trustee as Trustee with respect to the
Securities of such series by so notifying the Trustee in writing not less than
30 days prior to the effective date of such removal and may appoint a
successor Trustee with respect thereto with the consent of the Company. The
Company may remove the Trustee as Trustee with respect to the Securities of
any series if: (i) the Trustee is no longer eligible under Section 7.11 of
this Indenture; (ii) the Trustee is adjudged a bankrupt or insolvent; (iii) a
receiver or other public officer takes charge of the Trustee or its property;
or (iv) the Trustee becomes incapable of acting. If the Trustee resigns or is
removed as Trustee with respect to the Securities of any series, or if a
vacancy exists in the office of Trustee with respect to the Securities of any
series for any reason, the Company shall promptly appoint a successor Trustee
with respect thereto. Within one year after the successor Trustee takes
office, the Holders of a majority in principal amount of the outstanding
Securities of such series may appoint a successor Trustee in respect of such
Securities to replace the successor Trustee appointed by the Company. If the
successor Trustee with respect to the Securities of any series does not
deliver its written acceptance required by Section 7.09 within 30 days after
the retiring Trustee resigns or is removed, the retiring Trustee (at the
Company's expense), the Company or the Holders of a majority in principal
amount of the outstanding Securities of such series may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
thereto. The Company shall give notice of any resignation and any removal of
the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee in respect of the Securities of such series to all
Holders of Securities of such series. Each notice shall include the name of
the successor Trustee and the address of its Corporate Trust Office.
Notwithstanding replacement of the Trustee with respect to the Securities of
any series pursuant to this Section 7.08 and Section 7.09, the Company's
obligations under Section 7.07 shall continue for the benefit of the retiring
Trustee.
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Section 7.09. Acceptance of Appointment by Successor. In case of the
appointment hereunder of a successor Trustee with respect to all Securities,
every such successor Trustee so appointed shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on the request of the Company
or the successor Trustee, such retiring Trustee shall, upon payment of its
charges and subject to the lien provided for in Section 7.07, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder, subject to the lien provided for in Section 7.07. In case
of the appointment hereunder of a successor Trustee with respect to the
Securities of one or more (but not all) series, the Company, the retiring
Trustee and each successor Trustee with respect to the Securities of one or
more series shall execute and deliver an indenture supplemental hereto wherein
each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of
that or those series to which the appointment of such successor Trustee
relates, (2) if the retiring Trustee is not retiring with respect to all
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such
Trustees co-trustees of the same trust and that each such Trustee shall be
trustee of a trust or trusts hereunder separate and apart from any trust or
trusts hereunder administered by any other such Trustee; and upon the
execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates,
subject to the lien provided for in Section 7.07. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts referred to in the first or second preceding
paragraph, as the case may be. No successor Trustee shall accept its
appointment unless at the time of such acceptance such successor Trustee shall
be eligible under this Article and qualified under Section 310(b) of the Trust
Indenture Act. Section 7.10. Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national
banking association, the resulting, surviving or transferee corporation or
national banking association without any further act shall be the successor
Trustee with the same effect as if the successor Trustee had been named as the
Trustee herein. Section 7.11. Eligibility. This Indenture shall always have a
Trustee who satisfies the requirements of Trust Indenture Act Section 310(a).
The Trustee shall have a combined capital and surplus of at least $25,000,000
as set forth in its most recent published annual report of condition. Section
7.12. Money Held in Trust. The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law and except for money held in trust
under Article 8 of this Indenture. ARTICLE 8
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SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 8.01.
Satisfaction and Discharge of Indenture. If at any time (a) the Company shall
have paid or caused to be paid the Principal of and interest on all the
Securities of any series outstanding hereunder (other than Securities of such
series which have been destroyed, lost or stolen and which have been replaced
or paid as provided in Section 2.08) as and when the same shall have become
due and payable, or (b) the Company shall have delivered to the Trustee for
cancellation all Securities of any series theretofore authenticated (other
than any Securities of such series which shall have been destroyed, lost or
stolen and which shall have been replaced or paid as provided in Section 2.08)
or (c) (i) all the securities of such series not theretofore delivered to the
Trustee for cancellation shall have become due and payable, or are by their
terms to become due and payable within one year or are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption, and (ii) the Company shall have
irrevocably deposited or caused to be irrevocably deposited with the Trustee
as trust funds the entire amount in cash (other than moneys repaid by the
Trustee or any paying agent to the Company in accordance with Section 8.04) or
U.S. Government Obligations, maturing as to principal and interest in such
amounts and at such times as will insure (without consideration of the
reinvestment of such interest) the availability of cash, or a combination
thereof, sufficient, in the opinion of a nationally recognized investment
banking firm, appraisal firm or firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee (in the
case of U.S. Government Obligations), to pay at maturity or upon redemption
all Securities of such series (other than any Securities of such series which
shall have been destroyed, lost or stolen and which shall have been replaced
or paid as provided in Section 2.08) not theretofore delivered to the Trustee
for cancellation, including principal and interest due or to become due on or
prior to such date of maturity or redemption as the case may be, and if, in
any such case, the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company with respect to Securities of such series,
then this Indenture shall cease to be of further effect with respect to
Securities of such series (except as to (i) rights of registration of transfer
and exchange of securities of such series, and the Company's right of optional
redemption, if any, (ii) substitution of mutilated, defaced, destroyed, lost
or stolen Securities, (iii) rights of holders to receive payments of principal
thereof and interest thereon, upon the original stated due dates therefor (but
not upon acceleration) and remaining rights of the holders to receive
mandatory sinking fund payments, if any, (iv) the rights, obligations and
immunities of the Trustee hereunder and (v) the rights of the Securityholders
of such series as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them), and the Trustee, on
demand of the Company accompanied by an Officer's Certificate and an Opinion
of Counsel and at the cost and expense of the Company, shall execute proper
instruments acknowledging such satisfaction of and discharging this Indenture
with respect to such series; provided, that the rights of Holders of the
Securities to receive amounts in respect of Principal of and interest on the
Securities held by them shall not be delayed longer than required by
then-applicable mandatory rules or policies of any securities exchange upon
which the Securities are listed. The Company agrees to reimburse the Trustee
for any costs or expenses thereafter reasonably and properly incurred and to
compensate the Trustee for any services thereafter reasonably and properly
rendered by the Trustee in connection with this Indenture or the Securities of
such series. Section 8.02. Application by Trustee of Funds Deposited for
Payment of Securities. Subject to Section 8.04, all moneys (including U.S.
Government Obligations and the proceeds thereof) deposited with the Trustee
pursuant to Section 8.01, Section 8.05 or Section 8.06 shall be held in trust
and applied by it to the payment, either directly or through any paying agent
to the Holders of the particular Securities of such series for the payment or
redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for Principal and interest; but such money
need not be segregated from other funds except to the extent required by law.
Section 8.03. Repayment of Moneys Held by Paying Agent. In connection with the
satisfaction and discharge of this Indenture with respect to Securities of any
series, all moneys then held by any paying agent under the provisions of this
Indenture with respect to such series of Securities shall, upon demand of the
Company, be repaid to it or paid to the Trustee and thereupon such paying
agent shall be released from all further liability with respect to such
moneys. Section 8.04. Return of Moneys Held by Trustee and Paying Agent
Unclaimed for Two Years. Any moneys deposited with or paid to the Trustee or
any paying agent for the payment of the Principal of or interest on any
Security of any series and not applied but remaining unclaimed for two years
after the date upon which such Principal or interest shall have become due and
payable, shall, upon the written request of the Company and unless otherwise
required by mandatory provisions of applicable escheat or abandoned or
unclaimed property law, be repaid to the Company by the Trustee for such
series or such paying agent, and the Holder of the Security of such
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series shall, unless otherwise required by mandatory provisions of applicable
escheat or abandoned or unclaimed property laws, thereafter look only to the
Company for any payment which such Holder may be entitled to collect, and all
liability of the Trustee or any paying agent with respect to such moneys shall
thereupon cease. Section 8.05. Defeasance and Discharge of Indenture. The
Company shall be deemed to have paid and shall be discharged from any and all
obligations in respect of the Securities of any series, on the 123rd day after
the deposit referred to in clause (i) hereof has been made, and the provisions
of this Indenture shall no longer be in effect with respect to the Securities
of such series (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except as to: (a) rights of
registration of transfer and exchange, and the Company's right of optional
redemption, (b) substitution of apparently mutilated, defaced, destroyed, lost
or stolen Securities, (c) rights of holders to receive payments of principal
thereof and interest thereon, upon the original stated due dates therefor (but
not upon acceleration), (d) the rights, obligations and immunities of the
Trustee hereunder and (e) the rights of the Securityholders of such series as
beneficiaries hereof with respect to the property so deposited with the
Trustee payable to all or any of them; provided that the following conditions
shall have been satisfied: (i) with reference to this provision the Company
has deposited or caused to be irrevocably deposited with the Trustee (or
another qualifying trustee satisfying the requirements of Section 7.11) as
trust funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of the Securities of such series, (A)
money in an amount, or (B) U.S. Government Obligations which through the
payment of interest and principal in respect thereof in accordance with their
terms will provide not later than one day before the due date of any payment
referred to in subclause (x) or (y) of this clause (i) money in an amount, or
(C) a combination thereof, sufficient, in the opinion of a nationally
recognized investment banking firm, appraisal firm or firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee (in the case of U.S. Government Obligations), to pay and discharge
without consideration of the reinvestment of such interest and after payment
of all federal, state and local taxes or other charges and assessments in
respect thereof payable by the Trustee (x) the principal of, premium, if any,
and each installment of interest on the outstanding Securities of such series
on the due dates thereof and (y) any mandatory sinking fund payments or
analogous payments applicable to the Securities of such series on the day on
which such payments are due and payable in accordance with the terms of
Securities of such series and the Indenture with respect to the Securities of
such series; (ii) the Company has delivered to the Trustee (A) either (x) an
Opinion of Counsel to the effect that Holders of Securities of such series
will not recognize income, gain or loss for federal income tax purposes as a
result of the Company's exercise of its option under this Section 8.05 and
will be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred, which Opinion of Counsel must be
based upon a ruling of the Internal Revenue Service to the same effect or a
change in applicable federal income tax law or related treasury regulations
after the date of this Indenture or (y) a ruling directed to the Trustee
received from the Internal Revenue Service to the same effect as the
aforementioned Opinion of Counsel and (B) an Opinion of Counsel to the effect
that the creation of the defeasance trust does not violate the Investment
Company Act of 1940 and after the passage of 123 days following the deposit,
the trust fund will not be subject to the effect of Section 547 of the U.S.
Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law; (iii)
immediately after giving effect to such deposit on a pro forma basis, no Event
of Default, or event that after the giving of notice or lapse of time or both
would become an Event of Default, shall have occurred and be continuing on the
date of such deposit or during the period ending on the 123rd day after the
date of such deposit, and such deposit shall not result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which the Company is a party or by which the Company is bound; (iv) if at
such time the Securities of such series are listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Securities of such series will not be delisted as a result
of such deposit, defeasance and discharge; (v) the Company shall have
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that all conditions precedent to the defeasance and discharge
under this Section have been complied with; and
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(vi) if the Securities of such series are to be redeemed prior to the final
maturity thereof (other than from mandatory sinking fund payments or analogous
payments), notice of such redemption shall have been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee shall have
been made. Section 8.06. Defeasance of Certain Obligations. The Company may
omit to comply with any term, provision or condition set forth in, and this
Indenture will no longer be in effect with respect to, any covenant
established pursuant to Section 2.03(r) and clause (c) (with respect to any
covenants established pursuant to Section 2.03(r)) and clause (f) of Section
6.01 shall be deemed not to be an Event of Default with respect to Securities
of any series, if: (a) with reference to this Section 8.06, the Company has
deposited or caused to be irrevocably deposited with the Trustee (or another
qualifying trustee satisfying the requirements of Section 7.11) as trust funds
in trust, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of the Securities of such series and the Indenture with
respect to the Securities of such series, (i) money in an amount or (ii) U.S.
Government Obligations which through the payment of interest and principal in
respect thereof in accordance with their terms will provide not later than one
day before the due dates thereof or earlier redemption (irrevocably provided
for under agreements satisfactory to the Trustee), as the case may be, of any
payment referred to in subclause (x) or (y) of this clause (a) money in an
amount, or (iii) a combination thereof, sufficient, in the opinion of a
nationally recognized investment banking firm, appraisal firm or firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (in the case of U.S. Government Obligations), to pay
and discharge without consideration of the reinvestment of such interest and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee (x) the principal of,
premium, if any, and each installment of interest on the outstanding
Securities of such series on the due date thereof or earlier redemption
(irrevocably provided for under arrangements satisfactory to the Trustee), as
the case may be, and (y) any mandatory sinking fund payments or analogous
payments applicable to the Securities of such series and the Indenture with
respect to the Securities of such series on the day on which such payments are
due and payable in accordance with the terms of the Indenture and of
Securities of such series and the Indenture with respect to the Securities of
such series; (b) the Company has delivered to the Trustee (i) an Opinion of
Counsel to the effect that Holders of Securities of such series will not
recognize income, gain or loss for federal income tax purposes as a result of
the Company's exercise of its option under this Section 8.06 and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit and defeasance had
not occurred and (ii) an Opinion of Counsel to the effect that the creation of
the defeasance trust does not violate the Investment Company Act of 1940 and
after the passage of 123 days following the deposit, the trust fund will not
be subject to the effect of Section 547 of the U.S. Bankruptcy Code or Section
15 of the New York Debtor and Creditor Law; (c) immediately after giving
effect to such deposit on a pro forma basis, no Event of Default, or event
that after the giving of notice or lapse of time or both would become an Event
of Default, shall have occurred and be continuing on the date of such deposit
or during the period ending on the 123rd day after the date of such deposit,
and such deposit shall not result in a breach or violation of, or constitute a
default under, any other agreement or instrument to which the Company is a
party or by which the Company is bound; (d) if at such time the Securities of
such series are listed on a national securities exchange, the Company has
delivered to the Trustee an Opinion of Counsel to the effect that the
Securities of such series will not be delisted as a result of such deposit,
defeasance and discharge; and (e) the Company shall have delivered to the
Trustee an Officer's Certificate and an Opinion of Counsel, each stating that
all conditions precedent to the defeasance under this Section have been
complied with. Section 8.07. Reinstatement. If the Trustee or paying agent is
unable to apply any monies or U.S. Government Obligations in accordance with
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article until such time as the Trustee
or paying agent is permitted to apply all such monies or U.S. Government
Obligations in accordance with Article 8; provided, however, that if the
Company has made any payment of Principal of or interest on any Securities
because of the reinstatement of its obligations, the Company
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shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the monies or U.S. Government Obligations held by the
Trustee or paying agent. Section 8.08. Indemnity. The Company shall pay and
indemnify the Trustee (or other qualifying trustee, collectively for purposes
of this Section 8.08 and Section 8.02, the "Trustee") against any tax, fee or
other charge, imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 8.01, 8.05 or 8.06 or the principal or interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Securities and any coupons
appertaining thereto. Section 8.09. Excess Funds. Anything in this Article 8
to the contrary notwithstanding, the Trustee shall deliver or pay to the
Company from time to time upon request of the Company, any money or U.S.
Government Obligations (or other property and any proceeds therefrom) held by
it as provided in Section 8.01, 8.05 or 8.06 which, in the opinion of a
nationally recognized investment banking firm, appraisal firm or firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect a discharge or defeasance, as
applicable, in accordance with this Article 8. Section 8.10. Qualifying
Trustee. Any trustee appointed pursuant to Section 8.05 or 8.06 for the
purpose of holding money or U.S. Government Obligations deposited pursuant to
such Sections shall be appointed under an agreement in form acceptable to the
Trustee and shall provide to the Trustee a certificate, upon which certificate
the Trustee shall be entitled to conclusively rely, that all conditions
precedent provided for herein to the related defeasance have been complied
with. In no event shall the Trustee be liable for any acts or omissions of
said trustee. ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.01.
Without Consent of Holders. The Company and the Trustee may amend or
supplement this Indenture or the Securities of any series without notice to or
the consent of any Holder: (a) to cure any ambiguity, defect or inconsistency
in this Indenture; provided that such amendments or supplements shall not
materially and adversely affect the interests of the Holders; (b) to comply
with Article 5; (c) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the Trust Indenture
Act; (d) to evidence and provide for the acceptance of appointment hereunder
with respect to the Securities of any or all series by a successor Trustee and
to add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, pursuant to the requirements of Section
7.09; (e) to establish the form or forms or terms of Securities of any series
or of the coupons appertaining to such Securities as permitted by Section
2.03; (f) to provide for uncertificated or Unregistered Securities and to make
all appropriate changes for such purpose; and (g) to make any change that does
not materially and adversely affect the rights of any Holder. Section 9.02.
With Consent of Holders. Subject to Sections 6.04 and 6.07, without prior
notice to any Holders, the Company and the Trustee may amend this Indenture
and the Securities of any series with the written consent of the Holders of a
majority in principal amount of the outstanding Securities of all series
affected by such amendment (each such series voting as a separate class), and
the Holders of a majority in principal amount of the outstanding
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Securities of all series affected thereby (each such series voting as a
separate class) by written notice to the Trustee may waive future compliance
by the Company with any provision of this Indenture or the Securities of such
series. Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected thereby, an amendment or waiver, including a
waiver pursuant to Section 6.04, may not: (a) change the stated maturity of
the Principal of, or any sinking fund obligation or any installment of
interest on, such Holder's Security; (b) reduce the Principal amount thereof
or the rate of interest thereon (including any amount in respect of original
issue discount); (c) reduce the above stated percentage of outstanding
Securities the consent of whose holders is necessary to modify or amend the
Indenture with respect to the Securities of the relevant series; and (d)
reduce the percentage in principal amount of outstanding Securities of the
relevant series the consent of whose Holders is required for any supplemental
indenture or for any waiver of compliance with certain provisions of this
Indenture or certain Defaults and their consequences provided for in this
Indenture. A supplemental indenture which changes or eliminates any covenant
or other provision of this Indenture which has expressly been included solely
for the benefit of one or more particular series of Securities, or which
modifies the rights of Holders of Securities of such series with respect to
such covenant or provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series or of the
coupons appertaining to such Securities. It shall not be necessary for the
consent of any Holder under this Section 9.02 to approve the particular form
of any proposed amendment, supplement or waiver, but it shall be sufficient if
such consent approves the substance thereof. After an amendment, supplement or
waiver under this Section 9.02 becomes effective, the Company shall give to
the Holders affected thereby a notice briefly describing the amendment,
supplement or waiver. The Company will mail supplemental indentures to Holders
upon request. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture or waiver. Section 9.03. Revocation and Effect of
Consent. Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as the Security
of the consenting Holder, even if notation of the consent is not made on any
Security. However, any such Holder or subsequent Holder may revoke the consent
as to its Security or portion of its Security. Such revocation shall be
effective only if the Trustee receives the notice of revocation before the
date the amendment, supplement or waiver becomes effective. An amendment,
supplement or waiver shall become effective with respect to any Securities
affected thereby on receipt by the Trustee of written consents from the
requisite Holders of outstanding Securities affected thereby. The Company may,
but shall not be obligated to, fix a record date (which may be not less than
five nor more than 60 days prior to the solicitation of consents) for the
purpose of determining the Holders of the Securities of any series affected
entitled to consent to any amendment, supplement or waiver. If a record date
is fixed, then, notwithstanding the immediately preceding paragraph, those
Persons who were such Holders at such record date (or their duly designated
proxies) and only those Persons shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such Persons continue to be such Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date. After an amendment, supplement or waiver becomes effective
with respect to the Securities of any series affected thereby, it shall bind
every Holder of such Securities unless it is of the type described in any of
clauses (a) through (d) of Section 9.02. In case of an amendment or waiver of
the type described in clauses (a) through (d) of Section 9.02, the amendment
or waiver shall bind each such Holder who has consented to it and every
subsequent Holder of a Security that evidences the same indebtedness as the
Security of the consenting Holder.
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Section 9.04. Notation on or Exchange of Securities. If an amendment,
supplement or waiver changes the terms of any Security, the Trustee may
require the Holder thereof to deliver it to the Trustee. The Trustee may place
an appropriate notation on the Security about the changed terms and return it
to the Holder and the Trustee may place an appropriate notation on any
Security of such series thereafter authenticated. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Security
shall issue and the Trustee shall authenticate a new Security of the same
series and tenor that reflects the changed terms. Section 9.05. Trustee to
Sign Amendments, Etc. The Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Officer's Certificate and an Opinion of
Counsel, each stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article 9 is authorized or permitted by
this Indenture, stating that all requisite consents have been obtained or that
no consents are required and stating that such supplemental indenture
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
customary exceptions. The Trustee may, but shall not be obligated to, execute
any such amendment, supplement or waiver that affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise. Section 9.06.
Conformity With Trust Indenture Act. Every supplemental indenture executed
pursuant to this Article 9 shall conform to the requirements of the Trust
Indenture Act as then in effect. ARTICLE 10 MISCELLANEOUS Section 10.01. Trust
Indenture Act of 1939. This Indenture shall incorporate and be governed by the
provisions of the Trust Indenture Act that are required to be part of and to
govern indentures qualified under the Trust Indenture Act. Section 10.02.
Notices. Any notice or communication shall be sufficiently given if written
and (a) if delivered in person when received or (b) if mailed by first class
mail 5 days after mailing, or (c) as between the Company and the Trustee if
sent by facsimile or electronic transmission, when transmission is confirmed,
in each case addressed as follows: if to the Company: Fisker Inc. 1888
Rosecrans Avenue Manhattan Beach, CA 90266 Attention: Dr. Geeta Gupta-Fisker
Email: legal@fiskerinc.com if to the Trustee: Wilmington Savings Fund Society,
FSB 500 Delaware Avenue Wilmington, DE 19801 Attention: Corporate Trust -
Fisker Inc. The Company or the Trustee by written notice to the other may
designate additional or different addresses for subsequent notices or
communications. Any notice or communication delivered to the Trustee shall be
deemed effective upon actual receipt thereof. Any notice or communication
shall be sufficiently given to Holders of the Securities by mailing to such
Holders at their addresses as they shall appear on the Security Register.
Notice mailed shall be sufficiently given if so mailed within the time
prescribed. Copies of any such communication or notice to a Holder shall also
be mailed to the Trustee and each Agent at the same time.
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Notwithstanding any other provision of this Indenture or any Security, where
this Indenture or any Security provides for notice of any event to a Holder of
a Registered Global Security (whether by mail or otherwise), such notice shall
be sufficiently given if given to the Depositary for such Security (or its
designee) pursuant to the applicable procedures of such Depositary, if any,
prescribed for the giving of such notice. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders. Except as otherwise provided in this Indenture,
if a notice or communication is mailed in the manner provided in this Section
10.02, it is duly given, whether or not the addressee receives it. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not
be a condition precedent to the validity of any action taken in reliance upon
such waiver. In case it shall be impracticable to give notice as herein
contemplated, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose
hereunder. Section 10.03. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee: (a) an
Officer's Certificate stating that, in the opinion of the signer, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and (b) an Opinion of Counsel stating
that, in the opinion of such counsel, all such conditions precedent have been
complied with. Section 10.04. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than the certificate required
by Section 4.04) shall include: (a) a statement that the person signing such
certificate or opinion has read such covenant or condition and the definitions
herein relating thereto; (b) a brief statement as to the nature and scope of
the examination or investigation upon which the statement or opinion contained
in such certificate or opinion is based; (c) a statement that, in the opinion
of such person, he has made such examination or investigation as is necessary
to enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and (d) a statement as to
whether or not, in the opinion of such person, such condition or covenant has
been complied with; provided, however, that, with respect to matters of fact,
an Opinion of Counsel may rely on an Officer's Certificate or certificates of
public officials. Section 10.05. Evidence of Ownership. The Company, the
Trustee and any agent of the Company or the Trustee may deem and treat the
Holder of any Unregistered Security and the Holder of any coupon as the
absolute owner of such Unregistered Security or coupon (whether or not such
Unregistered Security or coupon shall be overdue) for the purpose of receiving
payment thereof or on account thereof and for all other purposes, and neither
the Company, the Trustee, nor any agent of the Company or the Trustee shall be
affected by any notice to the contrary. The fact of the holding by any Holder
of an Unregistered Security, and the identifying number of such Security and
the date of his holding the same, may be proved by the production of such
Security or by a certificate executed by any trust company, bank, banker or
recognized securities dealer wherever situated satisfactory to the Trustee, if
such certificate shall be deemed by the Trustee to be satisfactory. Each such
certificate shall be dated and shall state that on the date thereof a Security
bearing a specified identifying number was deposited with or exhibited to such
trust company, bank, banker or recognized securities dealer by the person
named in such certificate. Any such certificate
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may be issued in respect of one or more Unregistered Securities specified
therein. The holding by the person named in any such certificate of any
Unregistered Securities specified therein shall be presumed to continue for a
period of one year from the date of such certificate unless at the time of any
determination of such holding (1) another certificate bearing a later date
issued in respect of the same Securities shall be produced or (2) the Security
specified in such certificate shall be produced by some other Person, or (3)
the Security specified in such certificate shall have ceased to be
outstanding. Subject to Article 7, the fact and date of the execution of any
such instrument and the amount and numbers of Securities held by the Person so
executing such instrument may also be proven in accordance with such
reasonable rules and regulations as may be prescribed by the Trustee or in any
other manner which the Trustee may deem sufficient. The Company, the Trustee
and any agent of the Company or the Trustee may deem and treat the person in
whose name any Registered Security shall be registered upon the Security
Register for such series as the absolute owner of such Registered Security
(whether or not such Registered Security shall be overdue and notwithstanding
any notation of ownership or other writing thereon) for the purpose of
receiving payment of or on account of the Principal of and, subject to the
provisions of this Indenture, interest on such Registered Security and for all
other purposes; and neither the Company nor the Trustee nor any agent of the
Company or the Trustee shall be affected by any notice to the contrary.
Section 10.06. Rules by Trustee, Paying Agent or Registrar. The Trustee may
make reasonable rules for action by or at a meeting of Holders. The Paying
Agent or Registrar may make reasonable rules for its functions. Section 10.07.
Payment Date Other Than a Business Day. Except as otherwise provided with
respect to a series of Securities, if any date for payment of Principal or
interest on any Security shall not be a Business Day at any place of payment,
then payment of Principal of or interest on such Security, as the case may be,
need not be made on such date, but may be made on the next succeeding Business
Day at any place of payment with the same force and effect as if made on such
date and no interest shall accrue in respect of such payment for the period
from and after such date. Section 10.08. Governing Law. The laws of the State
of New York shall govern this Indenture and the Securities. Section 10.09. No
Adverse Interpretation of Other Agreements. This Indenture may not be used to
interpret another indenture or loan or debt agreement of the Company or any
Subsidiary of the Company. Any such indenture or agreement may not be used to
interpret this Indenture. Section 10.10. Successors. All agreements of the
Company in this Indenture and the Securities shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors. Section
10.11. Duplicate Originals. The parties may sign any number of copies of this
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement. Delivery of an executed counterpart of this
Indenture by facsimile or electronic transmission shall be equally as
effective as delivery of an original executed counterpart of this Indenture.
Any party delivering an executed counterpart of this Indenture by facsimile or
electronic transmission also shall deliver an original executed counterpart of
this Indenture, but failure to deliver an original executed counterpart shall
not affect the validity, enforceability and binding effect of this Indenture.
Section 10.12. Separability. In case any provision in this Indenture or in the
Securities shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby. Section 10.13. Table of Contents, Headings, Etc.
The Table of Contents and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the
terms and provisions hereof. Section 10.14. Incorporators, Stockholders,
Officers and Directors of Company Exempt From Individual Liability. No
recourse under or upon any obligation, covenant or agreement contained in this
Indenture or any indenture supplemental hereto, or in any Security or any
coupons appertaining thereto, or because of any indebtedness evidenced
thereby, shall be had against any incorporator, as such or against any past,
present or future stockholder,
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officer, director or employee, as such, of the Company or of any successor,
either directly or through the Company or any successor, under any rule of
law, statute or constitutional provision or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of the
Securities and the coupons appertaining thereto by the holders thereof and as
part of the consideration for the issue of the Securities and the coupons
appertaining thereto. Section 10.15. Judgment Currency. The Company agrees, to
the fullest extent that it may effectively do so under applicable law, that
(a) if for the purpose of obtaining judgment in any court it is necessary to
convert the sum due in respect of the Principal of or interest on the
Securities of any series (the "Required Currency") into a currency in which a
judgment will be rendered (the "Judgment Currency"), the rate of exchange used
shall be the rate at which in accordance with normal banking procedures the
Trustee could purchase in The City of New York the Required Currency with the
Judgment Currency on the day on which final unappealable judgment is entered,
unless such day is not a Business Day, then, to the extent permitted by
applicable law, the rate of exchange used shall be the rate at which in
accordance with normal banking procedures the Trustee could purchase in The
City of New York the Required Currency with the Judgment Currency on the
Business Day preceding the day on which final unappealable judgment is entered
and (b) its obligations under this Indenture to make payments in the Required
Currency (i) shall not be discharged or satisfied by any tender, or any
recovery pursuant to any judgment (whether or not entered in accordance with
subsection (a)), in any currency other than the Required Currency, except to
the extent that such tender or recovery shall result in the actual receipt, by
the payee, of the full amount of the Required Currency expressed to be payable
in respect of such payments, (ii) shall be enforceable as an alternative or
additional cause of action for the purpose of recovering in the Required
Currency the amount, if any, by which such actual receipt shall fall short of
the full amount of the Required Currency so expressed to be payable and (iii)
shall not be affected by judgment being obtained for any other sum due under
this Indenture. Section 10.16. Governing Law. THIS INDENTURE AND THE
SECURITIES WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SECURITIES.
Section 10.17 Waiver of Jury Trial. EACH OF THE COMPANY AND THE TRUSTEE HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS INDENTURE, THE NOTES, THE NOTE GUARANTEES OR THE TRANSACTIONS
CONTEMPLATED HEREBY. Section 10.18 Force Majeure. In no event shall the
Trustee be responsible or liable for any failure or delay in the performance
of its obligations under this Indenture arising out of or caused by, directly
or indirectly, forces beyond its control, including, without limitation, (i)
any act or provision of any present or future law or regulation or
governmental authority, (ii) any act of God, (iii) natural disaster, (iv) war,
(v) terrorism, (vi) civil unrest, (vii) accidents, (viii) labor dispute, (ix)
disease, (x) epidemic or pandemic, (xi) quarantine, (xii) national emergency,
(xiii) loss or malfunction of utility or computer software or hardware, (xiv)
communications system failure, (xv) malware or ransomware or (xvi)
unavailability of the Federal Reserve Bank wire or telex system or other wire
or other funds transfer systems, or (xvii) unavailability of securities
clearing system; it being understood that the Trustee shall use reasonable
efforts which are consistent with accepted practices in the banking industry
to resume performance as soon as practicable under the circumstances. Section
10.19 USA PATRIOT ACT. The parties hereto acknowledge that in accordance with
Section 326 of the USA PATRIOT Act, the Trustee, like all financial
institutions and in order to help fight the funding of terrorism and money
laundering, is required to obtain, verify, and record information that
identifies each person or legal entity that establishes a relationship or
opens an account. The Issuer agrees that it will provide the Trustee with
information about the Issuer as the Trustee may reasonably request in order
for the Trustee to satisfy the requirements of the USA PATRIOT Act.
[Signatures on following page]
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SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, all as of the date first written above. FISKER INC. as
the Company By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title:
Chief Financial Officer and Chief Operating Officer WILMINGTON SAVINGS FUND
SOCIETY, FSB, as the Trustee By: /s/ Patrick J. Healy Name: Patrick J. Healy
Title: Senior Vice President
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FISKER INC. TO FIRST SUPPLEMENTAL INDENTURE TO INDENTURE DATED JULY 11, 2023
Dated as of July 11, 2023 WILMINGTON SAVINGS FUND SOCIETY, FSB, as Trustee
Series A-1 Senior Convertible Note Due 2025
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FISKER INC. FIRST SUPPLEMENTAL INDENTURE TO INDENTURE DATED JULY 11, 2023
Series A-1 Senior Convertible Note Due 2025 FIRST SUPPLEMENTAL INDENTURE,
dated as of July 11, 2023 (this "First Supplemental Indenture"), between
FISKER INC., a Delaware corporation (the "Company"), and WILMINGTON SAVINGS
FUND SOCIETY, FSB, as Trustee (the "Trustee"). RECITALS A. The Company filed a
registration statement on Form S-3 on December 23, 2021 (File Number
333-261875) (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") pursuant to Rule 415 under the Securities Act of 1933,
as amended (the "Securities Act") and the Registration Statement has been
declared effective by the SEC on January 4, 2022. B. The Company has
heretofore executed and delivered to the Trustee an Indenture, dated as of
July 11, 2023, substantially in the form filed as an exhibit to the
Registration Statement (the "Indenture"), providing for the issuance from time
to time of Securities (as defined in the Indenture) by the Company. C. The
Indenture has been qualified under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). D. Section 2 of the Indenture provides for
various matters with respect to any series of Securities issued under the
Indenture to be established in an indenture supplemental to the Indenture. E.
Section 9.01 of the Indenture provides that, without the consent of the
Holders, for the Company and the Trustee may enter into an indenture
supplemental to the Indenture to establish the form or terms of Securities of
any series as provided by Section 2 of the Indenture. F. In accordance with
that certain Securities Purchase Agreement, dated July 10, 2023 (the
"Securities Purchase Agreement"), by and among the Company and the investors
party thereto (the "Investors"), at the applicable Closing (as defined in the
Securities Purchase Agreement) related to this First Supplemental Indenture,
the Company has agreed to sell to the Investors, and the Investors have agreed
to purchase from the Company, up to $680,000,000 in aggregate principal amount
of Notes (in one or more tranches, in accordance with the terms of the
Securities Purchase Agreement), subject to the satisfaction of certain terms
and conditions set forth in the Securities Purchase Agreement, in each case,
pursuant to (i) the Indenture, (ii) this First Supplemental Indenture, (iii)
the Securities Purchase Agreement and (iv) the Registration Statement.
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G. The Company hereby desires to supplement the Indenture pursuant to this
First Supplemental Indenture to set forth the terms and conditions of the
Notes to be issued in accordance herewith. NOW, THEREFORE, THIS FIRST
SUPPLEMENTAL INDENTURE WITNESSETH, for and in consideration of the premises
and the issuance of the series of Securities provided for herein, it is
mutually agreed, for the equal and proportionate benefit of all Holders of the
Securities of such series, as follows: ARTICLE I RELATION TO INDENTURE;
DEFINITIONS Section 1.1. RELATION TO INDENTURE. This First Supplemental
Indenture constitutes an integral part of the Indenture. Section 1.2.
DEFINITIONS. For all purposes of this First Supplemental Indenture: (a)
Capitalized terms used herein without definition shall have the meanings
specified in the Indenture or in the Notes, as applicable; (b) All references
herein to Articles and Sections, unless otherwise specified, refer to the
corresponding Articles and Sections of this First Supplemental Indenture; and
(c) The terms "herein," "hereof," "hereunder" and other words of similar
import refer to this First Supplemental Indenture. ARTICLE II THE SERIES OF
SECURITIES Section 2.1. TITLE. There shall be a series of Securities
designated the "Series A-1 Senior Convertible Notes Due 2025" (the "Notes").
Section 2.2. LIMITATION ON AGGREGATE PRINCIPAL AMOUNT. The aggregate principal
amount of the Notes to be sold pursuant to the Securities Purchase Agreement
and to be issued pursuant to this First Supplemental Indenture on the date
hereof shall be $340,000,000. Section 2.3. PRINCIPAL PAYMENT DATE. The
principal amount of the Notes outstanding (together with any accrued and
unpaid interest and other amounts) shall be payable in accordance with the
terms and conditions set forth in the Notes on each Conversion Date, Alternate
Conversion Date, redemption date and on the Maturity Date, in each case as
defined in the Notes.
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Section 2.4. INTEREST AND INTEREST RATES. Interest shall accrue and shall be
payable at such times and in the manner set forth in the Notes. Section 2.5.
PLACE OF PAYMENT. Except as otherwise provided by the Notes, the place of
payment where the Notes may be presented or surrendered for payment, where the
Notes may be surrendered for registration of transfer or exchange (to the
extent required or permitted, as applicable, by the terms of the Notes) and
where notices and demand to or upon the Trustee in respect of the Notes and
the Indenture may be served shall be: 500 Delaware Avenue, Wilmington, DE
19801, Attn.: Corporate Trust - Fisker Inc.; Telephone: (302) 573-3269;
Facsimile: (302) 421-9137; Email: JMcNichol@wsfsbank.com. Section 2.6.
REDEMPTION. The Company may redeem the Notes, in whole or in part, at such
times and in the manner set forth in the Notes. Section 2.7. DENOMINATION. The
Notes shall be issuable only in registered form without coupons and in minimum
denominations of $1,000 and integral multiples thereof. Section 2.8. CURRENCY.
Principal and interest and any other amounts payable, from time to time, on
the Notes shall be payable in such coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts in accordance with Section 23(b) of the Notes. Section 2.9. FORM
OF SECURITIES. The Notes shall be issued in the form attached hereto as
Exhibit A. Exhibit A also includes the form of Trustee's certificate of
authentication for the Notes. The Company has elected to issue only definitive
Securities and shall not issue any global Securities hereunder. Section 2.10.
CONVERTIBLE SECURITIES. The Notes are convertible into shares of Common Stock
(as defined in the Notes) of the Company upon the terms and conditions set
forth in the Notes and all references to "Common Stock" in the Indenture shall
be deemed to be references to Common Stock for all purposes thereunder. In
connection with any conversion of any given Note into Common Stock, the
Trustee may rely conclusively, without any independent investigation, on any
Conversion Notice (as defined in the Notes) executed by the applicable Holder
of such Note and an Acknowledgement (as defined in the Notes) signed by the
Company (in each case, in the forms attached as Exhibits I and II to the
Note), in lieu of the Company's obligations to deliver an Officer's
Certificate, Board Resolutions or an Opinion of Counsel pursuant to Article
Two, Article Three or Section 7.02 of the Indenture in connection with any
conversion of any Note. The applicable Conversion Notice and/or Acknowledgement
(unless subsequently revoked or withdrawn) shall be deemed to be a joint
instruction by the Company and such Holder to the Trustee to record on the
register of the Notes such conversion and decrease in the principal amount of
such Note by such aggregate principal amount of the Note converted, in each
case, as set forth in such applicable Conversion Notice and/or Acknowledgement.
Section 2.11. REGISTRAR. The Trustee shall only serve initially as the
Security Registrar and not as a paying agent and, in such capacity, shall
maintain a register (the "Security Register") in which the Trustee shall
register the Notes and transfers of the Notes. The entries in the Security
Register shall be conclusive and binding for all purposes absent manifest
error. The
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initial Security Register shall be created by the Trustee in connection with
the authentication of the initial Notes in the names and amounts detailed in
the related Company Order. No Note may be transferred or exchanged except in
compliance with the authentication procedures of the Trustee in accordance
with this First Supplemental Indenture. The Trustee shall not register a
transfer, exchange, redemption, conversion, cancellation or any other action
with respect to a Note unless instructed to do so in an Officer's Certificate,
Conversion Notice and/or Acknowledgement, as applicable. Each Officer's
Certificate, Conversion Notice and/or Acknowledgement, as applicable, given to
the Trustee in accordance with this Section 2.11 shall constitute a
representation and warranty to the Trustee that the Trustee shall be fully
indemnified in connection with any liability arising out of or related to any
action taken by the Trustee in good faith reliance on such Officer's
Certificate, Conversion Notice and/or Acknowledgement, as applicable. Section
2.12. SINKING FUND OBLIGATIONS. The Company has no obligation to redeem or
purchase any Notes pursuant to any sinking fund or analogous requirement or
upon the happening of a specified event or at the option of a Holder thereof.
Section 2.13. NO PAYING AGENT. Notwithstanding anything in Section 2.06 of the
Indenture to the contrary, the Company shall not be required to appoint and
has not appointed any Paying Agent in respect of the Notes pursuant to the
Indenture or any Supplemental Indenture and all amounts payable, from time to
time, pursuant to the Notes shall, for so long as so long as no Paying Agent
has been appointed, be paid directly by the Company to the applicable Holder.
Section 2.14. EVENTS OF DEFAULT. The Company has elected that the provisions
of Section 4 of the Notes shall govern all Events of Default in lieu of
Section 6 of the Indenture. Section 2.15. EXCLUDED DEFINITIONS. The Company
has elected that none of the following definitions in the Indenture shall be
applicable to the Notes and any analogous definitions set forth in the Notes
shall govern in lieu thereof: . Definition of "Affiliate" in Section 1.01; .
Definition of "Business Day" in Section 1.01; . Definition of "Event of
Default" in Section 6.01; . Definition of "Person" in Section 1.01; and .
Definition of "Subsidiary" in Section 1.01. Section 2.16. EXCLUDED PROVISIONS.
The Company has elected that none of the following provisions of the Indenture
shall be applicable to the Notes and any analogous provisions (including
definitions related thereto) of this First Supplemental Indenture and/or the
Notes shall govern in lieu thereof: . Section 2.03 (Form of Certificate of
Authentication)
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. Section 2.07 (Paying Agent to Hold Money in Trust) . Section 2.08 (Transfer
and Exchange) . Section 2.09 (Replacement Securities) . Section 2.10
(Outstanding Securities) . Section 2.14 (Defaulted Interest) . Article 3
(Redemption) . Section 4.1 (Payment of Securities) . Section 4.06 (Additional
Amounts) . Article 5 (Successor Corporation) . Article 6 (Default and
Remedies) . Article 8 (Satisfaction, and Discharge of Indenture; Unclaimed
Funds) . Section 9.01 (Without Consent of Holders) . Section 10.14
(Incorporators, Stockholders, Officers and Directors of Company Exempt From
Individual Liability) . Section 10.15 (Judgement Currency) Section 2.17.
COVENANTS. In addition to any covenants set forth in Article 4 of the
Indenture, the Company shall comply with the additional covenants set forth in
Section 13 of the Notes. Section 2.18. IMMEDIATELY AVAILABLE FUNDS. All cash
payments of principal and interest shall be made in U.S. dollars and
immediately available funds. Section 2.19. TRUSTEE MATTERS. (a) Duties of
Trustee. Notwithstanding anything in the Indenture to the contrary: (i) the
sole duty of the Trustee is to act as the Registrar unless otherwise agreed to
by the Required Holders (as defined in the Notes), the Trustee and the Company
in an additional supplemental Indenture (other than this First Supplemental
Indenture) or as separately agreed to in a writing by the Trustee and the
Required Holders; (ii) the rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and
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shall be enforceable by, the Trustee in each of its capacities hereunder
(including as Registrar), and to each agent, custodian, and any other such
Persons employed to act hereunder; (iii) the Trustee has no duty to make any
calculations called for under the Notes, and shall be protected in
conclusively relying without liability upon an Officer's Certificate with
respect thereto without independent verification; (iv) for the protection and
enforcement of the provisions of the Indenture, this First Supplemental
Indenture and the Notes, the Trustee shall be entitled to such relief as can
be given at either law or equity; (v) in the event that the Holders of the
Notes have waived any Event of Default with respect to this First Supplemental
Indenture or the Notes, the default covered thereby shall be deemed to be
cured for all purposes hereunder and the Company, the Trustee and the Holders
of the Notes shall be restored to their former positions and rights hereunder,
respectively, but no such waiver shall extend to any subsequent or other
default to impair any right consequent thereon; (vi) the Trustee makes no
representation as to the validity or value of any securities or assets issued
upon conversion of the Notes, and the Trustee shall not be responsible for the
failure by the Company to comply with any provisions of the Notes; (vii) the
Trustee will not at any time be under any duty or responsibility to any Holder
to determine the Conversion Price (or any adjustment thereto) or whether any
facts exist that may require any adjustment to the Conversion Price, or with
respect to the nature or extent or calculation of any such adjustment when
made, or with respect to the method employed in the Indenture, this First
Supplemental Indenture, in any supplemental indenture or the Notes provided to
be employed, in making the same; (viii) the Trustee will not be accountable
with respect to the validity or value (or the kind or amount) of any shares of
Common Stock, or of any securities, cash or other property that may at any
time be issued or delivered upon the conversion of any Note; and the Trustee
makes any representations with respect thereto; and (ix) the Trustee will not
be responsible for any failure of the Company to issue, transfer or deliver
any shares of Common Stock or stock certificates or other securities, cash or
other property upon the surrender of any Note for the purpose of conversion or
to comply with any of the duties, responsibilities or covenants of the Company
with respect thereto. (b) Additional Indemnification. In addition to any
indemnification rights set forth in the Indenture, the Company agrees the
Trustee may retain one separate counsel on behalf of itself and the Holders
(and in the case of an actual or perceived conflict of interest, one
additional separate counsel on behalf of the Holders) and, if deemed advisable
by such counsel, local counsel, and the Company shall pay the reasonable fees
and expenses of such separate counsel and local counsel.
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(c) Successor Trustee Petition Right. If an instrument of acceptance by a
successor Trustee required by Section 7.08 or 7.09 of the Indenture has not
been delivered to the Trustee within 30 days after the giving of a notice of
removal, the Trustee being removed, at the expense of the Company, may
petition any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such series. (d) Trustee
as Creditor. If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection
of claims against the Company (or any such other obligor). (e) Reports by the
Company. The parties hereto acknowledge and agree that delivery of such
reports, information, and documents to the Trustee pursuant to the provisions
of Section 4.05 of the Indenture is for informational purposes only and the
Trustee's receipt of such shall not constitute actual or constructive
knowledge or notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officer's Certificates). The Trustee shall have no duty to
monitor or confirm, on a continuing basis or otherwise, the Company's or any
other Person's compliance with any of the covenants under the Indenture and
this First Supplemental Indenture, to determine whether such reports,
information or documents are available on the SEC's website (including the
EDGAR system or any successor system,) the Company's website or otherwise, to
examine such reports, information, documents and other reports to ensure
compliance with the provisions of this Indenture, or to ascertain the
correctness or otherwise of the information or the statements contained
therein. (f) Statements by Officers as to Default. In addition to the
Company's obligations pursuant to the Indenture, the Company agrees as
follows: (i) Annually, within 120 days after the close of each fiscal year
beginning with the first fiscal year during which the Notes remain
outstanding, the Company will deliver to the Trustee an Officer's Certificate
(one of which Officers signatory thereto shall be the Chief Executive Officer,
Chief Financial Officer or Chief Corporate and Strategy Officer of the
Company) as to the knowledge of such Officers of the Company's compliance
(without regard to any period of grace or requirement of notice provided
herein) with all conditions and covenants under the Indenture, this First
Supplemental Indenture and the Notes and, if any Event of Default has occurred
and is continuing, specifying all such Events of Defaults and the nature and
status thereof of which such Officers have knowledge. (ii) The Company shall,
so long as any of the Notes remain outstanding, deliver to the Trustee, as
soon as practicable and in any event within 30 days after the Company becomes
aware of any Event of Default, an Officer's Certificate specifying such Events
of Default, its status and the actions that the Company is taking or proposes
to take in respect thereof.
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(g) Further Instruments and Acts. Upon request of the Trustee, the Company
will execute and deliver such further instruments and perform such further
acts as may be reasonably necessary or proper to carry out more effectively
the purposes of the Indenture and this First Supplemental Indenture. (h)
Expense. Notwithstanding anything in the Indenture to the contrary, any
actions taken by the Trustee in any capacity shall be at the Company's
reasonable expense. Section 2.20. SATISFACTION; DISCHARGE. The Indenture and
this First Supplemental Indenture will be discharged and will cease to be of
further effect with respect to the Notes (except as to any surviving rights
expressly provided for herein and in the Transaction Documents (as defined in
the Securities Purchase Agreement)), and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of the Indenture and this First Supplemental Indenture with respect
to the Notes, when all outstanding amounts under the Notes shall have been
paid in full (and/or converted into shares of Common Stock or other securities
in accordance therewith) and no other obligations remain outstanding pursuant
to the terms of the Notes, this First Supplemental Indenture, the Indenture
and/or the other Transaction Documents, as applicable, which have not been
paid in full by the Company, and when the Company has delivered to the Trustee
an Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of the Indenture and this First Supplemental Indenture with respect
to the Notes have been complied with. Notwithstanding the satisfaction and
discharge of the Indenture and this First Supplemental Indenture, the
obligations of the Company to the Trustee under Section 7.07 of the Indenture
shall survive. Section 2.21. CONTROL BY SECURITYHOLDERS. The Required Holders
(as defined in the Securities Purchase Agreement) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee with respect to the Notes; provided, however, that such direction
shall not be in conflict with any rule of law. Subject to the provisions of
Section 7.01 of the Indenture and this First Supplemental Indenture, the
Trustee shall have the right to decline to follow any such direction if the
Trustee in good faith shall determine that the proceeding so directed would
involve the Trustee in personal liability. The Notes may be amended, modified
or waived, as applicable, in accordance with Section 15 of the Notes. Upon any
waiver of any term of the Notes, the default covered thereby shall be deemed
to be cured for all purposes of the Indenture, this First Supplemental
Indenture, the Notes and the Company, the Trustee and the Holders of the Notes
shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon. ARTICLE III EXPENSES Section
3.1. PAYMENT OF EXPENSES. In connection with the offering, sale and issuance
of the Notes, the Company, in its capacity as issuer of the Notes, shall pay
all
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reasonable, documented out-of-pocket costs and expenses relating to the
offering, sale and issuance of the Notes and compensation and expenses of the
Trustee under the Indenture in accordance with the provisions of Section 7.07
of the Indenture. Section 3.2. PAYMENT UPON RESIGNATION OR REMOVAL. Upon
termination of this First Supplemental Indenture or the Indenture or the
removal or resignation of the Trustee, unless otherwise stated, the Company
shall pay to the Trustee all reasonable, documented out-of-pocket amounts,
fees and expenses (including reasonable attorney's fees and expenses) accrued
to the date of such termination, removal or resignation. ARTICLE IV
MISCELLANEOUS PROVISIONS Section 4.1. TRUSTEE NOT RESPONSIBLE FOR RECITALS.
The recitals herein contained are made by the Company and not by the Trustee,
and the Trustee assumes no responsibility for the correctness thereof. The
Trustee makes no representation as to the validity or sufficiency of this
First Supplemental Indenture. Section 4.2. ADOPTION, RATIFICATION AND
CONFIRMATION. The Indenture, as supplemented and amended by this First
Supplemental Indenture, is in all respects hereby adopted, ratified and
confirmed. Section 4.3. CONFLICT WITH INDENTURE; TRUST INDENTURE ACT.
Notwithstanding anything to the contrary in the Indenture, if any conflict
arises between the terms and conditions of this First Supplemental Indenture
(including, without limitation, the terms and conditions of the Notes) and the
Indenture, the terms and conditions of this First Supplemental Indenture
(including the Notes) shall control; provided, however, that if any provision
of this First Supplemental Indenture or the Notes limits, qualifies or
conflicts with a provision of the Trust Indenture Act that is required
thereunder to be a part of and govern this First Supplemental Indenture, the
latter provisions shall control. If any provision of this First Supplemental
Indenture modifies or excludes any provision of the Trust Indenture Act that
may be so modified or excluded, the latter provisions shall be deemed to apply
to the Indenture as so modified or excluded, as the case may be. Section 4.4.
AMENDMENTS; WAIVER. This First Supplemental Indenture may be amended by the
written consent of the Company and the Required Holders (as defined in the
Notes); provided however, no amendment shall adversely impact the rights,
duties, immunities or liabilities of the Trustee without its prior written
consent. Notwithstanding anything in any other Transaction Document to the
contrary, no amendment to any Transaction Document that adversely impact the
rights, duties, immunities or liabilities of the Trustee hereunder, pursuant
to the Indenture and/or the Notes, as applicable, shall be effective without
the Trustee's prior written consent. No provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement
is sought.
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Section 4.5. SUCCESSORS. This First Supplemental Indenture shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns, including any purchasers of the Notes. Section 4.6. SEVERABILITY;
ENTIRE AGREEMENT. If any provision of this First Supplemental Indenture shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this First Supplemental Indenture in that jurisdiction or the
validity or enforceability of any provision of this First Supplemental
Indenture in any other jurisdiction. Section 4.7. The Indenture, this First
Supplemental Indenture, the Transaction Documents and the exhibits hereto and
thereto set forth the entire agreement and understanding of the parties
related to this transaction and supersedes all prior agreements and
understandings, oral or written. Section 4.8. COUNTERPARTS. This First
Supplemental Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute
but one and the same instrument. Section 4.9. GOVERNING LAW. This First
Supplemental Indenture and the Indenture shall each be construed and enforced
in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Except as otherwise required
by Section 22 of the Notes, the Company hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in The Borough
of Manhattan, New York, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. Nothing
contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Nothing contained herein (i) shall be
deemed or operate to preclude any Holder from bringing suit or taking other
legal action against the Company in any other jurisdiction to collect on the
Company's obligations to such Holder, to realize on any collateral or any
other security for such obligations, or to enforce a judgment or other court
ruling in favor of such Holder or (ii) shall limit, or shall be deemed or
construed to limit, any provision of Section 22 of the Notes. THE COMPANY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST,
A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH OR ARISING OUT OF THIS FIRST SUPPLEMENTAL INDENTURE OR ANY TRANSACTION
CONTEMPLATED HEREBY.
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Section 4.10. U.S.A. PATRIOT ACT. The parties hereto acknowledge that in
accordance with Section 326 of the U.S.A. PATRIOT Act, the Trustee is required
to obtain, verify, and record information that identifies each person or legal
entity that establishes a relationship or opens an account with the Trustee.
The parties to this Supplemental Indenture agree that they shall provide the
Trustee with such information as it may reasonably request in order for the
Trustee to satisfy the requirements of the U.S.A. PATRIOT Act. [The remainder
of the page is intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed on the date or dates indicated in the
acknowledgments and as of the day and year first above written. FISKER INC.
By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title: Chief
Financial Officer and Chief Operating Officer
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WILMINGTON SAVINGS FUND SOCIETY, FSB, as Trustee By: /s/ Patrick J. Healy
Name: Patrick J. Healy Title: Senior Vice President
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EXHIBIT A (FORM OF NOTE)
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THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE
FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE. THIS NOTE HAS BEEN
ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID"). PURSUANT TO TREASURY REGULATION
(s)1.1275-3(b)(1), COREY MACGILLIVRAY, A REPRESENTATIVE OF THE COMPANY HEREOF
WILL, BEGINNING TEN DAYS AFTER THE ISSUANCE DATE OF THIS NOTE, PROMPTLY MAKE
AVAILABLE TO THE HOLDER UPON REQUEST THE INFORMATION DESCRIBED IN TREASURY
REGULATION (s)1.1275-3(b)(1)(i). THE COMPANY'S CHIEF FINANCIAL OFFICER MAY BE
REACHED AT TELEPHONE NUMBER (833) 434-7537. FISKER INC. Series B-1 SENIOR
UNSECURED CONVERTIBLE NOTE Issuance Date: September 29, 2023 Original
Principal Amount: U.S. $170,000,000 FOR VALUE RECEIVED, Fisker Inc., a
Delaware corporation (the "Company"), hereby promises to pay to the order of
CVI Investments, Inc. or its registered assigns ("Holder") the amount set
forth above as the Original Principal Amount (as reduced pursuant to the terms
hereof pursuant to redemption, conversion or otherwise, the "Principal") when
due, whether upon the Maturity Date, on any Installment Date with respect to
the Installment Amount due on such Installment Date (each as defined below),
or upon acceleration, redemption or otherwise (in each case in accordance with
the terms hereof) and upon the occurrence and continuance of an Event of
Default (as defined below) to pay interest ("Interest") on any outstanding
Principal at the applicable Default Rate (as defined below) from the date set
forth above as the Issuance Date (the "Issuance Date") until the same becomes
due and payable, whether upon the Maturity Date, on any Installment Date with
respect to the Installment Amount due on such Installment Date, or upon
acceleration, conversion, redemption or otherwise (in each case in accordance
with the terms hereof). This Series B-1 Senior Unsecured Convertible Note
(including all Senior Unsecured Convertible Notes issued in exchange, transfer
or replacement hereof, this "Note") is one of an issue of Senior Unsecured
Convertible Notes (collectively, the "Notes", and such other Senior Unsecured
Convertible Notes, the "Other Notes") issued pursuant to (i) Section 1 of that
certain Securities Purchase Agreement, dated as of July 10, 2023 (the
"Subscription Date"), by and among the Company and the investors (the
"Buyers") referred to therein, as amended from time to time (the "Securities
Purchase Agreement"), (ii) the Indenture, (iii) a Supplemental Indenture, and
(iv) the Company's Registration Statement on Form S-3 (File number 333-261875)
(the "Registration Statement"). Certain capitalized terms used herein are
defined in Section 30.
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1. PAYMENTS OF PRINCIPAL. On each Installment Date, the Company shall pay to
the Holder an amount equal to the Installment Amount due on such Installment
Date in accordance with Section 8. On the Maturity Date, the Company shall pay
to the Holder an amount in cash (excluding any amounts paid in shares of
Common Stock on the Maturity Date in accordance with Section 8) representing
all outstanding Principal, accrued and unpaid Interest and accrued and unpaid
Late Charges (as defined in Section 23(c)) on such Principal and Interest.
Other than as specifically permitted or required by this Note, the Company may
not prepay any portion of the outstanding Principal, accrued and unpaid
Interest or accrued and unpaid Late Charges on Principal and Interest, if any.
Notwithstanding anything herein to the contrary, with respect to any
conversion or redemption hereunder, as applicable, the Company shall convert
or redeem, as applicable, First, all accrued and unpaid Late Charges on any
Principal and Interest hereunder and under any other Notes held by the Holder
and all other amounts owed to the Holder under any other Transaction Document,
Second, all accrued and unpaid Interest, if any, hereunder and under any Other
Notes held by such Holder, Third, all other amounts (other than Principal)
outstanding under any Other Notes held by such Holder and, Fourth, all
Principal outstanding hereunder and under any Other Notes held by such Holder,
in each case, allocated pro rata among this Note and such Other Notes held by
such Holder. 2. INTEREST; DEFAULT RATE. No Interest shall accrue hereunder
unless and until an Event of Default (as defined below) has occurred. From and
after the occurrence and during the continuance of any Event of Default,
Interest shall accrue hereunder at eighteen percent (18.0%) per annum (the
"Default Rate") and shall be computed on the basis of a 360-day year and
twelve 30-day months, shall compound each calendar month and shall be payable
in arrears on the first Trading Day of each such calendar month in which
Interest accrues hereunder (each, an "Interest Date"). Accrued and unpaid
Interest, if any, shall also be payable by way of inclusion of such Interest
in the Conversion Amount (as defined below) on each Conversion Date (as
defined below) in accordance with in accordance with Section 3(b)(i) or upon
any redemption in accordance with Section 11 or any required payment upon any
Bankruptcy Event of Default (as defined in Section 4(a) below). In the event
that such Event of Default is subsequently cured (and no other Event of
Default then exists (including, without limitation, for the Company's failure
to pay such Interest at the Default Rate on the applicable Interest Date,
unless waived in writing by the Holder)), the adjustment referred to in the
preceding sentence shall cease to be effective as of the calendar day
immediately following the date of such cure or waiver; provided that the
Interest as calculated and unpaid at such increased rate during the
continuance of such Event of Default shall continue to apply to the extent
relating to the days after the occurrence of such Event of Default through and
including the date of such cure or waiver of such Event of Default, unless
waived in writing by the Holder. 3. CONVERSION OF NOTES. At any time after the
Issuance Date, this Note shall be convertible into validly issued, fully paid
and non-assessable shares of Common Stock (as defined below), on the terms and
conditions set forth in this Section 3. (a) Conversion Right. Subject to the
provisions of Section 3(d), at any time or times on or after the Issuance
Date, the Holder shall be entitled to convert any portion of the outstanding
and unpaid Conversion Amount (as defined below) into validly issued, fully
paid and non-assessable shares of Common Stock in accordance with Section
3(c), at the Conversion Rate (as defined below). The Company shall not issue
any fraction of a share of Common Stock upon any conversion. If the issuance
would result in the issuance of a fraction of a share of Common Stock, the
Company shall round such fraction of a share of Common Stock up to the nearest
whole share. The Company shall pay any and all transfer, stamp, issuance and
similar taxes, costs and expenses (including, without limitation, fees and
expenses of the Transfer Agent (as defined below)) that may be payable with
respect to the issuance and delivery of Common Stock upon conversion of any
Conversion Amount.
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(b) Conversion Rate. The number of shares of Common Stock issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) shall be
determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(the "Conversion Rate"). (i) "Conversion Amount" means the sum of (x) portion
of the Principal to be converted, redeemed or otherwise with respect to which
this determination is being made and (y) all accrued and unpaid Interest with
respect to such portion of the Principal amount and accrued and unpaid Late
Charges with respect to such portion of such Principal and such Interest, if
any. (ii) "Conversion Price" means, as of any Conversion Date or other date of
determination, $7.5986, subject to adjustment as provided herein. (c)
Mechanics of Conversion. (i) Optional Conversion. To convert any Conversion
Amount into shares of Common Stock on any date (a "Conversion Date"), the
Holder shall deliver (whether via electronic mail or as otherwise provided in
Section 23(a)), for receipt on or prior to 11:59 p.m., New York time, on such
date, a copy of an executed notice of conversion in the form attached hereto
as Exhibit I (each, a "Conversion Notice") to the Company and the Trustee. If
required by Section 3(c)(iii), within two (2) Trading Days following a
conversion of this Note as aforesaid, the Holder shall surrender this Note to
a nationally recognized overnight delivery service for delivery to the Company
(or an indemnification undertaking with respect to this Note in the case of
its loss, theft or destruction as contemplated by Section 17(b)). On or before
the first (1st) Trading Day following the date of receipt of a Conversion
Notice, the Company shall transmit by electronic mail an acknowledgment, in
the form attached hereto as Exhibit II, of confirmation of receipt of such
Conversion Notice and representation that such shares of Common Stock may then
be freely resold by the Holder without restriction (each, an "Acknowledgement")
to the Holder, the Trustee and the Company's transfer agent (the "Transfer
Agent") which confirmation shall constitute an instruction to the Transfer
Agent to process such Conversion Notice in accordance with the terms herein.
On or before the second (2nd) Trading Day following the date on which the
Company
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has received a Conversion Notice (or such earlier date as required pursuant to
the 1934 Act or other applicable law, rule or regulation for the settlement of
a trade initiated on the applicable Conversion Date of such shares of Common
Stock issuable pursuant to such Conversion Notice) (the "Share Delivery
Deadline"), the Company shall (1) provided that the Transfer Agent is
participating in The Depository Trust Company's ("DTC") Fast Automated
Securities Transfer Program ("FAST"), credit such aggregate number of shares
of Common Stock to which the Holder shall be entitled pursuant to such
conversion to the Holder's or its designee's balance account with DTC through
its Deposit/Withdrawal at Custodian system or (2) if the Transfer Agent is not
participating in FAST, upon the request of the Holder, issue and deliver (via
reputable overnight courier) to the address as specified in the Conversion
Notice, a certificate, registered in the name of the Holder or its designee,
for the number of shares of Common Stock to which the Holder shall be entitled
pursuant to such conversion. If this Note is physically surrendered for
conversion pursuant to Section 3(c)(iii) and the outstanding Principal of this
Note is greater than the Principal portion of the Conversion Amount being
converted, then the Company shall as soon as practicable and in no event later
than two (2) Business Days after receipt of this Note and at its own expense,
issue and deliver to the Holder (or its designee) a new Note (in accordance
with Section 17(d)) representing the outstanding Principal (and accrued and
unpaid Interest thereon) not converted. The Person or Persons entitled to
receive the shares of Common Stock issuable upon a conversion of this Note
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on the Conversion Date. In the event of a partial
conversion of this Note pursuant hereto, the Principal amount converted shall
be deducted from the Principal outstanding hereunder, including for purposes
of determining Installment Amount(s) relating to the Installment Date(s) as
set forth in the applicable Conversion Notice. (ii) Company's Failure to
Timely Convert. If the Company shall fail, for any reason or for no reason, on
or prior to the applicable Share Delivery Deadline, if the Transfer Agent is
not participating in FAST, to issue and deliver to the Holder (or its
designee) a certificate for the number of shares of Common Stock to which the
Holder is entitled and register such shares of Common Stock on the Company's
share register or, if the Transfer Agent is participating in FAST, to credit
the balance account of the Holder or the Holder's designee with DTC for such
number of shares of Common Stock to which the Holder is entitled upon the
Holder's conversion of this Note (as the case may be) (a "Conversion
Failure"), then, in addition to all other remedies available to the Holder,
(1) the Company shall pay in cash to the Holder on each day after such Share
Delivery Deadline that the issuance of such shares of Common Stock is not
timely effected an amount equal to one percent (1%) of the product of (A) the
sum of the number of shares of Common Stock not issued to the Holder on or
prior to the Share Delivery Deadline and to which the Holder is entitled,
multiplied by (B) any trading price of the Common Stock selected by the Holder
in writing as in effect at any time during the period beginning on the
applicable Conversion Date and ending on the applicable Share Delivery
Deadline and (2) the Holder, upon written notice to the Company, may void its
Conversion Notice with respect to, and retain or have returned (as the case
may be) any portion of this Note that has not been converted pursuant to such
Conversion Notice, provided that the voiding of a Conversion Notice shall not
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affect the Company's obligations to make any payments which have accrued prior
to the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In
addition to the foregoing, if on or prior to the Share Delivery Deadline if
the Transfer Agent is not participating in FAST, the Company shall fail to
issue and deliver to the Holder (or its designee) a certificate and register
such shares of Common Stock on the Company's share register or, if the
Transfer Agent is participating in FAST, the Transfer Agent shall fail to
credit the balance account of the Holder or the Holder's designee with DTC for
the number of shares of Common Stock to which the Holder is entitled upon the
Holder's conversion hereunder or pursuant to the Company's obligation pursuant
to clause (II) below, and if on or after such Share Delivery Deadline the
Holder acquires (in an open market transaction, stock loan or otherwise)
shares of Common Stock corresponding to all or any portion of the number of
shares of Common Stock issuable upon such conversion that the Holder is
entitled to receive from the Company and has not received from the Company in
connection with such Conversion Failure (a "Buy-In"), then, in addition to all
other remedies available to the Holder, the Company shall, within two (2)
Business Days after receipt of the Holder's request and in the Holder's
discretion, either: (I) pay cash to the Holder in an amount equal to the
Holder's total purchase price (including brokerage commissions, stock loan
costs and other out-of-pocket expenses, if any) for the shares of Common Stock
so acquired (including, without limitation, by any other Person in respect, or
on behalf, of the Holder) (the "Buy-In Price"), at which point the Company's
obligation to so issue and deliver such certificate (and to issue such shares
of Common Stock) or credit the balance account of such Holder or such Holder's
designee, as applicable, with DTC for the number of shares of Common Stock to
which the Holder is entitled upon the Holder's conversion hereunder (as the
case may be) (and to issue such shares of Common Stock) shall terminate, or
(II) promptly honor its obligation to so issue and deliver to the Holder a
certificate or certificates representing such shares of Common Stock or credit
the balance account of such Holder or such Holder's designee, as applicable,
with DTC for the number of shares of Common Stock to which the Holder is
entitled upon the Holder's conversion hereunder (as the case may be) and pay
cash to the Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (x) such number of shares of Common Stock multiplied
by (y) the lowest Closing Sale Price of the Common Stock on any Trading Day
during the period commencing on the date of the applicable Conversion Notice
and ending on the date of such issuance and payment under this clause (II)
(the "Buy-In Payment Amount"). Nothing shall limit the Holder's right to
pursue any other remedies available to it hereunder, at law or in equity,
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock (or to electronically deliver
such shares of Common Stock) upon the conversion of this Note as required
pursuant to the terms hereof. (iii) Registration; Book-Entry. The Trustee
shall maintain a register (the "Register") for the recordation of the names
and addresses of the holders of each Note and the principal amount of the
Notes held by such holders (the "Registered Notes") as provided in Section
2.06 of the Indenture. The entries in the Register shall be conclusive and
binding for all purposes absent manifest error. The Company and the holders of
the Notes shall treat each Person whose name is recorded in the Register as
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the owner of a Note for all purposes (including, without limitation, the right
to receive payments of Principal and Interest hereunder) notwithstanding
notice to the contrary. A Registered Note may be assigned, transferred or sold
in whole or in part only by registration of such assignment or sale on the
Register. Upon its receipt of a written request to assign, transfer or sell
all or part of any Registered Note by the holder thereof, the Trustee shall
record the information contained therein in the Register and issue one or more
new Registered Notes (to be executed by the Company and authenticated and
delivered by the Trustee) in the same aggregate principal amount as the
principal amount of the surrendered Registered Note in the name of the
designated assignee or transferee pursuant to Section 16, provided that if the
Company or the Trustee does not so record an assignment, transfer or sale (as
the case may be) of all or part of any Registered Note within two (2) Business
Days of such a request, then the Register shall be automatically deemed
updated to reflect such assignment, transfer or sale (as the case may be).
Every Registered Note presented or surrendered for registration of transfer,
or for exchange or redemption shall (if so required by the Company or the
Registrar for such Notes presented) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Registrar duly executed, by the holder thereof or his attorney duly authorized
in writing. Notwithstanding anything to the contrary set forth in this Section
3 or in the Indenture or in any applicable Supplemental Indenture, following
conversion of any portion of this Note in accordance with the terms hereof,
the Holder shall not be required to physically surrender this Note to the
Company unless (A) the full Conversion Amount represented by this Note is
being converted (in which event this Note shall be delivered to the Company
following conversion thereof as contemplated by Section 3(c)(i)) or (B) the
Holder has provided the Company with prior written notice (which notice may be
included in a Conversion Notice) requesting reissuance of this Note upon
physical surrender of this Note. The Holder, the Trustee and the Company shall
maintain records showing the Principal, Interest and Late Charges converted
and/or paid (as the case may be) and the dates of such conversions, and/or
payments (as the case may be) or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require physical
surrender of this Note upon conversion. If the Company does not update the
Register to record such Principal, Interest and Late Charges converted and/or
paid (as the case may be) and the dates of such conversions, and/or payments
(as the case may be) within two (2) Business Days of such occurrence, then the
Register shall be automatically deemed updated to reflect such occurrence.
(iv) Pro Rata Conversion; Disputes. In the event that the Company receives a
Conversion Notice from more than one holder of Notes for the same Conversion
Date and the Company can convert some, but not all, of such portions of the
Notes submitted for conversion, the Company, subject to Section 3(d), shall
convert from each holder of Notes electing to have Notes converted on such
date a pro rata amount of such holder's portion of its Notes submitted for
conversion based on the principal amount of Notes submitted for conversion on
such date by such holder relative to the aggregate principal amount of all
Notes submitted for conversion on such date. In the event of a dispute as to
the number of shares of Common Stock issuable to the Holder in connection with
a conversion of this Note, the Company shall issue to the Holder the number of
shares of Common Stock not in dispute and resolve such dispute
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in accordance with Section 22. If a Conversion Notice delivered to the Company
would result in a breach of Section 3(d) below, and the Holder does not elect
in writing to withdraw, in whole, such Conversion Notice, the Company shall
hold such Conversion Notice in abeyance until such time as such Conversion
Notice may be satisfied without violating Section 3(d) below (with such
calculations thereunder made as of the date such Conversion Notice was
initially delivered to the Company). (d) Limitations on Conversions. (i)
Beneficial Ownership. The Company shall not effect the conversion of any
portion of this Note, and the Holder shall not have the right to convert any
portion of this Note pursuant to the terms and conditions of this Note and any
such conversion shall be null and void and treated as if never made, to the
extent that after giving effect to such conversion, the Holder together with
the other Attribution Parties collectively would beneficially own in excess of
4.99% (the "Maximum Percentage") of the shares of Common Stock outstanding
immediately after giving effect to such conversion. For purposes of the
foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by the Holder and the other Attribution Parties shall
include the number of shares of Common Stock held by the Holder and all other
Attribution Parties plus the number of shares of Common Stock issuable upon
conversion of this Note with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would
be issuable upon (A) conversion of the remaining, nonconverted portion of this
Note beneficially owned by the Holder or any of the other Attribution Parties
and (B) exercise or conversion of the unexercised or nonconverted portion of
any other securities of the Company (including, without limitation, any
convertible notes or convertible preferred stock or warrants) beneficially
owned by the Holder or any other Attribution Party subject to a limitation on
conversion or exercise analogous to the limitation contained in this Section
3(d)(i). For purposes of this Section 3(d)(i), beneficial ownership shall be
calculated in accordance with Section 13(d) of the 1934 Act. For purposes of
determining the number of outstanding shares of Common Stock the Holder may
acquire upon the conversion of this Note without exceeding the Maximum
Percentage, the Holder may rely on the number of outstanding shares of Common
Stock as reflected in (x) the Company's most recent Annual Report on Form
10-K, Quarterly Report on Form 10-Q, Current Report on Form 8- K or other
public filing with the SEC, as the case may be, (y) a more recent public
announcement by the Company or (z) any other written notice by the Company or
the Transfer Agent, if any, setting forth the number of shares of Common Stock
outstanding (the "Reported Outstanding Share Number"). If the Company receives
a Conversion Notice from the Holder at a time when the actual number of
outstanding shares of Common Stock is less than the Reported Outstanding Share
Number, the Company shall notify the Holder in writing of the number of shares
of Common Stock then outstanding and, to the extent that such Conversion
Notice would otherwise cause the Holder's beneficial ownership, as determined
pursuant to this Section 3(d)(i), to exceed the Maximum Percentage, the Holder
must notify the Company of a reduced number of shares of Common Stock to be
purchased pursuant to such Conversion Notice. For any reason
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at any time, upon the written (which may be an e-mail) or oral request of the
Holder, the Company shall within one (1) Business Day confirm orally and in
writing or by electronic mail to the Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Note, by the Holder and
any other Attribution Party since the date as of which the Reported
Outstanding Share Number was reported. In the event that the issuance of
shares of Common Stock to the Holder upon conversion of this Note results in
the Holder and the other Attribution Parties being deemed to beneficially own,
in the aggregate, more than the Maximum Percentage of the number of
outstanding shares of Common Stock (as determined under Section 13(d) of the
1934 Act), the number of shares so issued by which the Holder's and the other
Attribution Parties' aggregate beneficial ownership exceeds the Maximum
Percentage (the "Excess Shares") shall be deemed null and void and shall be
cancelled ab initio, and the Holder shall not have the power to vote or to
transfer the Excess Shares. Upon delivery of a written notice to the Company,
the Holder may from time to time increase (with such increase not effective
until the sixty-first (61st) day after delivery of such notice) or decrease
the Maximum Percentage to any other percentage not in excess of 9.99% as
specified in such notice; provided that (i) any such increase in the Maximum
Percentage will not be effective until the sixty-first (61st) day after such
notice is delivered to the Company and (ii) any such increase or decrease will
apply only to the Holder and the other Attribution Parties and not to any
other holder of Notes (each, an "Other Holder", and collectively, the "Other
Holders") that is not an Attribution Party of the Holder. For purposes of
clarity, the shares of Common Stock issuable pursuant to the terms of this
Note in excess of the Maximum Percentage shall not be deemed to be
beneficially owned by the Holder for any purpose including for purposes of
Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to
convert this Note pursuant to this paragraph shall have any effect on the
applicability of the provisions of this paragraph with respect to any
subsequent determination of convertibility. The provisions of this paragraph
shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 3(d)(i) to the extent necessary to
correct this paragraph (or any portion of this paragraph) which may be
defective or inconsistent with the intended beneficial ownership limitation
contained in this Section 3(d)(i) or to make changes or supplements necessary
or desirable to properly give effect to such limitation. The limitation
contained in this paragraph may not be waived and shall apply to a successor
holder of this Note. (ii) Principal Market Regulation The Company shall not
issue any shares of Common Stock upon conversion of this Note or otherwise
pursuant to the terms of this Note if the issuance of such shares of Common
Stock would exceed the aggregate number of shares of Common Stock which the
Company may issue upon conversion of the Notes or otherwise pursuant to the
terms of the Notes without breaching the Company's obligations under the rules
or regulations of the Principal Market (the number of shares which may be
issued without violating such rules and regulations, including rules related
to the aggregate of offerings under Section 312.03(c) of the NYSE Listed
Company Manual, the "Exchange Cap"), except that such limitation shall not
apply in the event that the Company (A) obtains the approval
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of its stockholders as required by the applicable rules of the Principal
Market for issuances of shares of Common Stock in excess of such amount or (B)
obtains a written opinion from counsel to the Company that such approval is
not required, which opinion shall be reasonably satisfactory to the Holder.
Until such approval or such written opinion is obtained, no Buyer shall be
issued in the aggregate, upon conversion of any Notes or otherwise pursuant to
the terms of the Notes, shares of Common Stock in an amount greater than the
product of (i) the Exchange Cap as of the Issuance Date multiplied by (ii) the
quotient of (1) the original principal amount of Notes issued to such Buyer
pursuant to the Securities Purchase Agreement on the Closing Date (as defined
in the Securities Purchase Agreement) divided by (2) the aggregate original
principal amount of all Notes issued to the Buyers pursuant to the Securities
Purchase Agreement on the Closing Date (with respect to each Buyer, the
"Exchange Cap Allocation"). In the event that any Buyer shall sell or
otherwise transfer any of such Buyer's Notes, the transferee shall be
allocated a pro rata portion of such Buyer's Exchange Cap Allocation with
respect to such portion of such Notes so transferred, and the restrictions of
the prior sentence shall apply to such transferee with respect to the portion
of the Exchange Cap Allocation so allocated to such transferee. Upon
conversion in full of a holder's Notes, the difference (if any) between such
holder's Exchange Cap Allocation and the number of shares of Common Stock
actually issued to such holder upon such holder's conversion in full of such
Notes shall be allocated, to the respective Exchange Cap Allocations of the
remaining holders of Notes on a pro rata basis in proportion to the shares of
Common Stock underlying the Notes then held by each such holder of Notes. At
any time after the three month anniversary of the Initial Closing Date (as
defined in the Securities Purchase Agreement), in the event that the Company
is prohibited from issuing shares of Common Stock pursuant to this Section
3(d)(i) (the "Exchange Cap Shares"), the Company shall pay cash in exchange
for the cancellation of such portion of this Note convertible into such
Exchange Cap Shares at a price equal to the sum of (i) the product of (x) such
number of Exchange Cap Shares and (y) the greatest Closing Sale Price of the
Common Stock on any Trading Day during the period commencing on the date the
Holder delivers the applicable Conversion Notice with respect to such Exchange
Cap Shares to the Company and ending on the date of such issuance and payment
under this Section 3(d)(i) and (ii) to the extent of any Buy-In related
thereto, any Buy-In Payment Amount, any brokerage commissions and other
out-of-pocket expenses, if any, of the Holder incurred in connection therewith
(collectively, the "Exchange Cap Share Cancellation Amount"). (e) Right of
Alternate Conversion Upon a Triggering Event. (i) General. Upon the occurrence
of a Triggering Event with respect to this Note or any Other Note, the Company
shall within two (2) Business Days deliver written notice thereof via
electronic mail and overnight courier (with next day delivery specified) (an
"Triggering Event Notice") to the Holder and the Trustee. At any time after
the earlier of the Holder's receipt of an Triggering Event Notice and the
Holder becoming aware of an Triggering Event (such earlier date, the
"Triggering Event Right Commencement Date") and ending (such ending date, the
"Triggering Event Right Expiration Date", and each such period, an "Triggering
Event Redemption Right
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Period") on the twentieth (20th) Trading Day after the later of (x) the date
such Triggering Event is cured and (y) the Holder's receipt of an Triggering
Event Notice that includes (I) a reasonable description of the applicable
Triggering Event, (II) a certification as to whether, in the opinion of the
Company, such Triggering Event is capable of being cured and, if applicable, a
reasonable description of any existing plans of the Company to cure such
Triggering Event and (III) a certification as to the date the Triggering Event
occurred and, if cured on or prior to the date of such Triggering Event
Notice, the applicable Triggering Event Right Expiration Date, but subject to
Section 3(d), (regardless of whether such Triggering Event has been cured, or
if the Company has delivered a Triggering Notice to the Holder or otherwise
notified the Company that a Triggering Event has occurred), the Holder may, at
the Holder's option, convert (each, an "Alternate Conversion", and the date of
each such Alternate Conversion, an "Alternate Conversion Date") all, or any
part of, the Conversion Amount (such portion of the Conversion Amount subject
to such Alternate Conversion, each, an "Alternate Conversion Amount") into
shares of Common Stock at the Alternate Conversion Price. (ii) Mechanics of
Alternate Conversion. On any Alternate Conversion Date, the Holder may
voluntarily convert any Alternate Conversion Amount pursuant to Section 3(c)
(with "Alternate Conversion Price" replacing "Conversion Price" for all
purposes hereunder with respect to such Alternate Conversion and with
"Redemption Premium of the Conversion Amount" replacing "Conversion Amount" in
clause (x) of the definition of Conversion Rate above with respect to such
Alternate Conversion) by designating in the Conversion Notice delivered
pursuant to this Section 3(e) of this Note that the Holder is electing to use
the Alternate Conversion Price for such conversion. Notwithstanding anything
to the contrary in this Section 3(e), but subject to Section 3(d), until the
Company delivers shares of Common Stock representing the applicable Alternate
Conversion Amount to the Holder, such Alternate Conversion Amount may be
converted by the Holder into shares of Common Stock pursuant to Section 3(c)
without regard to this Section 3(e). 4. RIGHTS UPON EVENT OF DEFAULT. (a)
Event of Default. Each of the following events shall constitute an "Event of
Default" and each of the events in clauses (vii), (viii) and (ix) shall
constitute a "Bankruptcy Event of Default": (i) the suspension from trading or
the failure of the Common Stock to be trading or listed (as applicable) on an
Eligible Market for a period of five (5) consecutive Trading Days; (ii) the
Company's (A) failure to cure a Conversion Failure by delivery of the required
number of shares of Common Stock within five (5) Trading Days after the
applicable Conversion Date or exercise date (as the case may be) or (B)
notice, written or oral, to any holder of the Notes, including, without
limitation, by way of public announcement or through any of its agents, at any
time, of its intention not to comply, as required, with a request for
conversion of any Notes into shares of Common Stock that is requested in
accordance with the provisions of the Notes, other than pursuant to Section
3(d);
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(iii) except to the extent the Company is in compliance with Section 10(b)
below, at any time following the tenth (10th) consecutive day that the
Holder's Authorized Share Allocation (as defined in Section 10(a) below) is
less than the Required Reserve Amount (without regard to any limitations on
conversion set forth in Section 3(d) or otherwise); (iv) the Company's failure
to pay to the Holder any amount of Principal, Interest, Late Charges or other
amounts when and as due under this Note (including, without limitation, the
Company's failure to pay any redemption payments or amounts hereunder) or any
other Transaction Document (as defined in the Securities Purchase Agreement)
or any other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby, except, in
the case of a failure to pay Interest and Late Charges when and as due, in
which case only if such failure remains uncured for a period of at least three
(3) Trading Days; (v) the Company fails to remove any restrictive legend on
any certificate or any shares of Common Stock issued to the Holder upon
conversion or exercise (as the case may be) of any Securities (as defined in
the Securities Purchase Agreement) acquired by the Holder under the Securities
Purchase Agreement (including this Note) as and when required by such
Securities or the Securities Purchase Agreement, unless otherwise then
prohibited by applicable federal securities laws, and any such failure remains
uncured for at least five (5) Trading Days; (vi) the occurrence of any default
under, redemption of or acceleration prior to maturity of at least an
aggregate of $25,000,000 of Indebtedness (as defined in the Securities
Purchase Agreement) of the Company or any of its Subsidiaries, other than with
respect to any Other Notes; (vii) bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for the relief of debtors shall
be instituted by or against the Company or any Significant Subsidiary and, if
instituted against the Company or any Subsidiary by a third party, shall not
be dismissed within forty-five (45) days of their initiation; (viii) the
commencement by the Company or any Significant Subsidiary of a voluntary case
or proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree, order, judgment or other similar document in respect of
the Company or any Significant Subsidiary in an involuntary case or proceeding
under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy
or insolvency case or proceeding against it, or the filing by it of a petition
or answer or consent seeking reorganization or relief under any applicable
federal, state or foreign law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver,
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liquidator, assignee, trustee, sequestrator or other similar official of the
Company or any Significant Subsidiary or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors,
or the execution of a composition of debts, or the occurrence of any other
similar federal, state or foreign proceeding, or the admission by it in
writing of its inability to pay its debts generally as they become due, the
taking of corporate action by the Company or any Significant Subsidiary in
furtherance of any such action or the taking of any action by any Person to
commence a Uniform Commercial Code foreclosure sale or any other similar
action under federal, state or foreign law against the assets of the Company
or any Significant Subsidiary; (ix) the entry by a court of (i) a decree,
order, judgment or other similar document in respect of the Company or any
Significant Subsidiary of a voluntary or involuntary case or proceeding under
any applicable federal, state or foreign bankruptcy, insolvency, reorganization
or other similar law or (ii) a decree, order, judgment or other similar
document adjudging the Company or any Significant Subsidiary as bankrupt or
insolvent, or approving as properly filed a petition seeking liquidation,
reorganization, arrangement, adjustment or composition of or in respect of the
Company or any Significant Subsidiary under any applicable federal, state or
foreign law, or (iii) a decree, order, judgment or other similar document
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or any Significant Subsidiary or of
any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree, order,
judgment or other similar document or any such other decree, order, judgment
or other similar document unstayed and in effect for a period of forty-five
(45) consecutive days; (x) a final judgment or judgments for the payment of
money aggregating in excess of $25,000,000 are rendered against the Company
and/or any of its Subsidiaries and which judgments are not, within forty-five
(45) days after the entry thereof, bonded, discharged, settled or stayed
pending appeal, or are not discharged within forty- five (45) after the
expiration of such stay; provided, however, any judgment which is covered by
insurance or an indemnity from a credit worthy party shall not be included in
calculating the $25,000,000 amount set forth above so long as the Company
provides the Holder a written statement from such insurer or indemnity
provider (which written statement shall be reasonably satisfactory to the
Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company or such Subsidiary (as the case may be) will receive
the proceeds of such insurance or indemnity within forty-five (45) days of the
issuance of such judgment; (xi) the Company and/or any Subsidiary,
individually or in the aggregate, either (i) fails to pay, when due, or within
any applicable grace period, any payment with respect to any Indebtedness in
excess of $25,000,000 due to any third party (other than, with respect to
unsecured Indebtedness only, payments contested by the Company and/or such
Subsidiary (as the case may be) in good faith by proper proceedings and with
respect to which adequate reserves have been set aside for the payment thereof
in accordance with GAAP) or is otherwise in breach or violation of any
agreement for monies owed or owing in an amount in excess of $25,000,000, which
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breach or violation (i) results in such indebtedness becoming or being
declared due and payable prior to its stated maturity or (ii) constitutes a
failure to pay the principal or interest of any such debt when due and payable
(after giving effect to any applicable grace periods) at its stated maturity,
upon required repurchase, upon declaration of acceleration or otherwise; (xii)
other than as specifically set forth in another clause of this Section 4(a),
the Company or any Subsidiary breaches any representation or warranty, in any
material respect (other than representations or warranties subject to material
adverse effect or materiality, which may not be breached in any respect) or
any covenant or other term or condition of any Transaction Document, except,
in the case of a breach of a covenant or other term or condition that is
curable, only if such breach remains uncured for a period of five (5)
consecutive Trading Days; (xiii) a false or inaccurate certification
(including a false or inaccurate deemed certification) by the Company that
either (A) the Equity Conditions are satisfied, (B) there has been no Equity
Conditions Failure, or (C) as to whether any Event of Default has occurred;
(xiv) any breach or failure in any respect by the Company or any Subsidiary to
comply with any provision of Section 13(a)-(d), (f), (g) or (h) of this Note;
(xv) any Event of Default (as defined in the Other Notes) occurs and is
continuing with respect to any Other Notes. (b) Notice of an Event of Default;
Redemption Right. Upon the occurrence of an Event of Default with respect to
this Note or any Other Note, the Company shall within two (2) Business Days
deliver written notice thereof via electronic mail and overnight courier (with
next day delivery specified) (an "Event of Default Notice") to the Holder and
the Trustee. The obligation of the Company to deliver an Event of Default
Notice is in addition to, and may not be substituted by, the Trustee's
delivery of notice of the same Event of Default to the Holder in accordance
with Section 10.02 of the Indenture. At any time after the earlier of the
Holder's receipt of an Event of Default Notice and the Holder becoming aware
of an Event of Default (such earlier date, the "Event of Default Right
Commencement Date") and ending (such ending date, the "Event of Default Right
Expiration Date", and each such period, an "Event of Default Redemption Right
Period") on the twentieth (20th) Trading Day after the later of (x) the date
such Event of Default is cured and (y) the Holder's receipt of an Event of
Default Notice that includes (I) a reasonable description of the applicable
Event of Default, (II) a certification as to whether, in the opinion of the
Company, such Event of Default is capable of being cured and, if applicable, a
reasonable description of any existing plans of the Company to cure such Event
of Default and (III) a certification as to the date the Event of Default
occurred and, if cured on or prior to the date of such Event of Default
Notice, the applicable Event of Default Right Expiration Date, the Holder may
require the Company to redeem (regardless of whether such Event of Default has
been cured on or prior to the Event of Default Right Expiration Date) all or
any portion of this Note by delivering written notice
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thereof (the "Event of Default Redemption Notice") to the Company and the
Trustee, which Event of Default Redemption Notice shall indicate the portion
of this Note the Holder is electing to redeem. Each portion of this Note
subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the Company at a price equal to the greater of (i) the product of
(A) the Conversion Amount to be redeemed multiplied by (B) the Redemption
Premium and (ii) the product of (X) the Conversion Rate (calculated assuming
an Alternate Conversion as of the date of the Event of Default Redemption
Notice) with respect to the Conversion Amount in effect at such time as the
Holder delivers an Event of Default Redemption Notice multiplied by (Y) the
greatest Closing Sale Price of the Common Stock on any Trading Day during the
period commencing on the date immediately preceding such Event of Default and
ending on the date the Company makes the entire payment required to be made
under this Section 4(b) (the "Event of Default Redemption Price"). Redemptions
required by this Section 4(b) shall be made in accordance with the provisions
of Section 11. To the extent redemptions required by this Section 4(b) are
deemed or determined by a court of competent jurisdiction to be prepayments of
this Note by the Company, such redemptions shall be deemed to be voluntary
prepayments. Notwithstanding anything to the contrary in this Section 3(e),
but subject to Section 3(d), until the Event of Default Redemption Price
(together with any Late Charges thereon) is paid in full, the Conversion
Amount submitted for redemption under this Section 4(b) (together with any
Late Charges thereon) may be converted, in whole or in part, by the Holder
into Common Stock pursuant to the terms of this Note. In the event of a
partial redemption of this Note pursuant hereto, the Principal amount redeemed
shall be deducted from the Principal outstanding hereunder, including for
purposes of determining the Installment Amount(s) relating to the applicable
Installment Date(s) as set forth in the Event of Default Redemption Notice. In
the event of the Company's redemption of any portion of this Note under this
Section 4(b), the Holder's damages would be uncertain and difficult to
estimate because of the parties' inability to predict future interest rates
and the uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any redemption premium due under this
Section 4(b) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder's actual loss of its investment opportunity
and not as a penalty. Any redemption upon an Event of Default shall not
constitute an election of remedies by the Holder, and all other rights and
remedies of the Holder shall be preserved. (c) Mandatory Redemption upon
Bankruptcy Event of Default. Notwithstanding anything to the contrary herein,
and notwithstanding any conversion that is then required or in process, upon
any Bankruptcy Event of Default, whether occurring prior to or following the
Maturity Date, the Company shall immediately pay to the Holder an amount in
cash representing (i) all outstanding Principal, accrued and unpaid Interest
and accrued and unpaid Late Charges on such Principal and Interest, multiplied
by (ii) the Redemption Premium, in addition to any and all other amounts due
hereunder, without the requirement for any notice or demand or other action by
the Holder or any other person or entity, provided that the Holder may, in its
sole discretion, waive such right to receive payment upon a Bankruptcy Event
of Default, in whole or in part, and any such waiver shall not affect any
other rights of the Holder hereunder, including any other rights in respect of
such Bankruptcy Event of Default, any right to conversion, and any right to
payment of the Event of Default Redemption Price or any other Redemption
Price, as applicable.
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5. RIGHTS UPON FUNDAMENTAL TRANSACTION. (a) Assumption. The Company shall not
enter into or be party to a Fundamental Transaction unless (i) the Successor
Entity assumes in writing all of the obligations of the Company under this
Note and the other Transaction Documents in accordance with the provisions of
this Section 5(a) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders (as defined in the Securities
Purchase Agreement) and approved by the Required Holders prior to such
Fundamental Transaction, including agreements to deliver to each holder of
Notes in exchange for such Notes a security of the Successor Entity evidenced
by a written instrument substantially similar in form and substance to the
Notes reasonably satisfactory to the Required Holders, including, without
limitation, having a principal amount and interest rate equal to the principal
amounts then outstanding and the interest rates of the Notes held by such
holder, having similar conversion rights as the Notes and having similar
ranking to the Notes and (ii) the Successor Entity (including its Parent
Entity) is a publicly traded corporation whose common stock is quoted on or
listed for trading on an Eligible Market. Upon the occurrence of any
Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Note and the other Transaction Documents
referring to the "Company" shall refer instead to the Successor Entity), and
may exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Note and the other Transaction Documents
with the same effect as if such Successor Entity had been named as the Company
herein. Upon consummation of a Fundamental Transaction, the Successor Entity
shall deliver to the Holder confirmation that there shall be issued upon
conversion or redemption of this Note at any time after the consummation of
such Fundamental Transaction, in lieu of the shares of Common Stock (or other
securities, cash, assets or other property (except such items still issuable
under Sections 6 and 14, which shall continue to be receivable thereafter))
issuable upon the conversion or redemption of the Notes prior to such
Fundamental Transaction, such shares of the publicly traded common stock (or
their equivalent) of the Successor Entity (including its Parent Entity) which
the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Note been converted immediately prior to such
Fundamental Transaction (without regard to any limitations on the conversion
of this Note), as adjusted in accordance with the provisions of this Note.
Notwithstanding the foregoing, the Holder may elect, at its sole option, by
delivery of written notice to the Company to waive this Section 5(a) to permit
the Fundamental Transaction without the assumption of this Note. The
provisions of this Section 5 shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any
limitations on the conversion of this Note. (b) Notice of a Change of Control;
Redemption Right. No sooner than twenty (20) Trading Days nor later than ten
(10) Trading Days prior to the consummation of a Change of Control (the
"Change of Control Date"), but not prior to the public announcement of such
Change of Control, the Company shall deliver written notice thereof via
electronic mail and overnight courier to the Holder and the Trustee (a "Change
of
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Control Notice"). At any time during the period beginning after the Holder's
receipt of a Change of Control Notice or the Holder becoming aware of a Change
of Control if a Change of Control Notice is not delivered to the Holder in
accordance with the immediately preceding sentence (as applicable) and ending
on twenty (20) Trading Days after the later of (A) the date of consummation of
such Change of Control or (B) the date of receipt of such Change of Control
Notice or (C) the date of the announcement of such Change of Control, the
Holder may require the Company to redeem all or any portion of this Note by
delivering written notice thereof ("Change of Control Redemption Notice") to
the Company and the Trustee, which Change of Control Redemption Notice shall
indicate the Conversion Amount the Holder is electing to redeem. The portion
of this Note subject to redemption pursuant to this Section 5 shall be
redeemed by the Company in cash at a price equal to the greatest of (i) the
product of (w) the Change of Control Redemption Premium multiplied by (y) the
Conversion Amount being redeemed, (ii) the product of (A) the Conversion
Amount being redeemed multiplied by (B) the quotient determined by dividing
(I) the greatest Closing Sale Price of the shares of Common Stock during the
period beginning on the date immediately preceding the earlier to occur of (1)
the consummation of the applicable Change of Control and (2) the public
announcement of such Change of Control and ending on the date the Holder
delivers the Change of Control Redemption Notice by (II) the Conversion Price
then in effect and (iii) the product of (A) the Conversion Amount being
redeemed multiplied by (B) the quotient of (I) the aggregate cash
consideration and the aggregate cash value of any non-cash consideration per
share of Common Stock to be paid to the holders of the shares of Common Stock
upon consummation of such Change of Control (any such non-cash consideration
constituting publicly-traded securities shall be valued at the highest of the
Closing Sale Price of such securities as of the Trading Day immediately prior
to the consummation of such Change of Control, the Closing Sale Price of such
securities on the Trading Day immediately following the public announcement of
such proposed Change of Control and the Closing Sale Price of such securities
on the Trading Day immediately prior to the public announcement of such
proposed Change of Control) divided by (II) the Conversion Price then in
effect (the "Change of Control Redemption Price"). Redemptions required by
this Section 5 shall be made in accordance with the provisions of Section 11
and shall have priority to payments to stockholders in connection with such
Change of Control. To the extent redemptions required by this Section 5(b) are
deemed or determined by a court of competent jurisdiction to be prepayments of
this Note by the Company, such redemptions shall be deemed to be voluntary
prepayments. Notwithstanding anything to the contrary in this Section 5, but
subject to Section 3(d), until the Change of Control Redemption Price
(together with any Late Charges thereon) is paid in full, the Conversion
Amount submitted for redemption under this Section 5(b) (together with any
Late Charges thereon) may be converted, in whole or in part, by the Holder
into Common Stock pursuant to Section 3. In the event of a partial redemption
of this Note pursuant hereto, the Principal amount redeemed shall be deducted
from the Principal outstanding hereunder, including for purposes of
determining the Installment Amount(s) relating to the applicable Installment
Date(s) as set forth in the Change of Control Redemption Notice. In the event
of the Company's redemption of any portion of this Note under this Section
5(b), the Holder's damages would be uncertain and difficult to estimate
because of the parties' inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any Redemption Premium due under this
Section 5(b) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder's actual loss of its investment opportunity
and not as a penalty.
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6. RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS. (a)
Purchase Rights. In addition to any adjustments pursuant to Sections 7 or 14
below, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to all or substantially all of the record holders of
any class of Common Stock (the "Purchase Rights"), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon complete
conversion of this Note (without taking into account any limitations or
restrictions on the convertibility of this Note and assuming for such purpose
that the Note was converted at the Installment Conversion Price assuming an
Installment Date as of the applicable record date) immediately prior to the
date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the
record holders of shares of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights; provided, however, that to the extent
that the Holder's right to participate in any such Purchase Right would result
in the Holder and the other Attribution Parties exceeding the Maximum
Percentage, then such Purchase Right shall be granted, issued or sold to the
Holder, as applicable, with a limitation on conversion and/or exercise, as
applicable, in the form of 3(d)(i) herein, mutatis mutandis; provided, that,
if such Purchase Right (and/or on any subsequent Purchase Right held
similarly) has an expiration date, maturity date or other similar provision,
such term also shall be extended, on a day-by-day basis, by such aggregate
number of days that the exercise or conversion (as applicable) of such
Purchase Right (and/or any subsequent Purchase Right held similarly) (in each
case, without regard to the limitation on conversion or exercise thereto, as
applicable) would result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage. (b) Other Corporate Events. In addition to
and not in substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which holders of
shares of Common Stock are entitled to receive securities or other assets with
respect to or in exchange for shares of Common Stock (a "Corporate Event"),
the Company shall make appropriate provision to ensure that the Holder will
thereafter have the right to receive upon a conversion of this Note, at the
Holder's option (i) in addition to the shares of Common Stock receivable upon
such conversion, such securities or other assets to which the Holder would
have been entitled with respect to such shares of Common Stock had such shares
of Common Stock been held by the Holder upon the consummation of such
Corporate Event (without taking into account any limitations or restrictions
on the convertibility of this Note) or (ii) in lieu of the shares of Common
Stock otherwise receivable upon such conversion, such securities or other
assets received by the holders of shares of Common Stock in connection with
the consummation of such Corporate Event in such amounts as the Holder would
have been entitled to receive had this Note initially been issued with
conversion rights for the form of such consideration (as opposed to shares
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of Common Stock) at a conversion rate for such consideration commensurate with
the Conversion Rate. Provision made pursuant to the preceding sentence shall
be in a form and substance satisfactory to the Holder. The provisions of this
Section 6 shall apply similarly and equally to successive Corporate Events and
shall be applied without regard to any limitations on the conversion or
redemption of this Note. 7. RIGHTS UPON ISSUANCE OF OTHER SECURITIES. (a)
Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever
on or after the Subscription Date the Company grants, issues or sells (or
enters into any agreement to grant, issue or sell), or in accordance with this
Section 7(a) is deemed to have granted, issued or sold, any shares of Common
Stock (including the granting, issuance or sale of shares of Common Stock
owned or held by or for the account of the Company, but excluding any Excluded
Securities granted, issued or sold or deemed to have been granted, issued or
sold) for a consideration per share (the "New Issuance Price") less than a
price equal to the Conversion Price in effect immediately prior to such
granting, issuance or sale or deemed granting, issuance or sale (such
Conversion Price then in effect is referred to herein as the "Applicable
Price") (the foregoing a "Dilutive Issuance"), then, immediately after such
Dilutive Issuance, the Conversion Price then in effect shall be reduced to an
amount equal to the New Issuance Price. For all purposes of the foregoing
(including, without limitation, determining the adjusted Conversion Price and
the New Issuance Price under this Section 7(a)), the following shall be
applicable: (i) Issuance of Options. If the Company in any manner grants,
issues or sells (or enters into any agreement to grant, issue or sell) any
Options and the lowest price per share for which one share of Common Stock is
at any time issuable upon the exercise of any such Option or upon conversion,
exercise or exchange of any Convertible Securities issuable upon exercise of
any such Option or otherwise pursuant to the terms thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting, issuance or sale of such Option for such price per share. For
purposes of this Section 7(a)(i), the "lowest price per share for which one
share of Common Stock is at any time issuable upon the exercise of any such
Option or upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option or otherwise pursuant to the terms
thereof" shall be equal to (1) the lower of (x) the sum of the lowest amounts
of consideration (if any) received or receivable by the Company with respect
to any one share of Common Stock upon the granting, issuance or sale of such
Option, upon exercise of such Option and upon conversion, exercise or exchange
of any Convertible Security issuable upon exercise of such Option or otherwise
pursuant to the terms thereof and (y) the lowest exercise price set forth in
such Option for which one share of Common Stock is issuable (or may become
issuable assuming all possible market conditions) upon the exercise of any
such Options or upon conversion, exercise or exchange of any Convertible
Securities issuable upon exercise of any such Option or otherwise pursuant to
the terms thereof, minus (2) the sum of all amounts paid or payable to the
holder of such Option (or any other Person) with respect to any one share of
Common Stock upon the granting, issuance or sale of such Option, upon exercise
of such Option and upon
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conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option or otherwise pursuant to the terms thereof plus the
value of any other consideration (including, without limitation, consideration
consisting of cash, debt forgiveness, assets or any other property) received
or receivable by, or benefit conferred on, the holder of such Option (or any
other Person). Except as contemplated below, no further adjustment of the
Conversion Price shall be made upon the actual issuance of such share of
Common Stock or of such Convertible Securities upon the exercise of such
Options or otherwise pursuant to the terms thereof or upon the actual issuance
of such shares of Common Stock upon conversion, exercise or exchange of such
Convertible Securities. (ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells (or enters into any agreement to issue
or sell) any Convertible Securities and the lowest price per share for which
one share of Common Stock is at any time issuable upon the conversion,
exercise or exchange thereof or otherwise pursuant to the terms thereof is
less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale (or the time of execution of such agreement
to issue or sell, as applicable) of such Convertible Securities for such price
per share. For the purposes of this Section 7(a)(ii), the "lowest price per
share for which one share of Common Stock is at any time issuable upon the
conversion, exercise or exchange thereof or otherwise pursuant to the terms
thereof" shall be equal to (1) the lower of (x) the sum of the lowest amounts
of consideration (if any) received or receivable by the Company with respect
to one share of Common Stock upon the issuance or sale (or pursuant to the
agreement to issue or sell, as applicable) of the Convertible Security and
upon conversion, exercise or exchange of such Convertible Security or
otherwise pursuant to the terms thereof and (y) the lowest conversion price
set forth in such Convertible Security for which one share of Common Stock is
issuable (or may become issuable assuming all possible market conditions) upon
conversion, exercise or exchange thereof or otherwise pursuant to the terms
thereof minus (2) the sum of all amounts paid or payable to the holder of such
Convertible Security (or any other Person) with respect to any one share of
Common Stock upon the issuance or sale (or the agreement to issue or sell, as
applicable) of such Convertible Security plus the value of any other
consideration received or receivable (including, without limitation, any
consideration consisting of cash, debt forgiveness, assets or other property)
by, or benefit conferred on, the holder of such Convertible Security (or any
other Person). Except as contemplated below, no further adjustment of the
Conversion Price shall be made upon the actual issuance of such shares of
Common Stock upon conversion, exercise or exchange of such Convertible
Securities or otherwise pursuant to the terms thereof, and if any such
issuance or sale of such Convertible Securities is made upon exercise of any
Options for which adjustment of the Conversion Price has been or is to be made
pursuant to other provisions of this Section 7(a), except as contemplated
below, no further adjustment of the Conversion Price shall be made by reason
of such issuance or sale.
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(iii) Change in Option Price or Rate of Conversion. If the purchase or
exercise price provided for in any Options, the additional consideration, if
any, payable (whether payable by the Company to such Person or from such
Person to the Company, as applicable) upon the issue, conversion, exercise or
exchange of any Options or Convertible Securities, or the rate at which any
Convertible Securities or Options are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time
(other than proportional changes in conversion or exercise prices, as
applicable, in connection with an event referred to in Section 7(b) below),
the Conversion Price in effect at the time of such increase or decrease shall
be adjusted to the Conversion Price which would have been in effect at such
time had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration (whether payable by the
Company to such Person or from such Person to the Company, as applicable) or
increased or decreased conversion rate (as the case may be) at the time
initially granted, issued or sold. For purposes of this Section 7(a)(i), if
the terms of any Option or Convertible Security (including, without
limitation, any Option or Convertible Security that was outstanding as of the
Subscription Date) are increased or decreased in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and
the shares of Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
increase or decrease. No adjustment pursuant to this Section 7(a) shall be
made if such adjustment would result in an increase of the Conversion Price
then in effect. (iv) Calculation of Consideration Received. If any Common
Stock, Option and/or Convertible Security and/or Adjustment Right and/or any
other security (as applicable) is issued in connection with the issuance or
sale or deemed issuance or sale of any other securities of the Company (as
determined by the Holder, the "Primary Security", and such Common Stock,
Option and/or Convertible Security and/or Adjustment Right or any other
security or instrument of the Company intended to convey value to any
participant in such transaction, in any form whatsoever, the "Secondary
Securities"), together comprising one integrated transaction (or one or more
transactions if such issuances or sales or deemed issuances or sales of
securities of the Company either (A) have at least one investor or purchaser
in common, (B) are consummated in reasonable proximity to each other and/or
(C) are consummated under the same plan of financing), the aggregate
consideration per share of Common Stock with respect to such Primary Security
shall be deemed to be equal to the difference of (x) the lowest price per
share for which one share of Common Stock was issued (or was deemed to be
issued pursuant to Section 7(a)(i) or 7(a)(ii) above, as applicable) in such
integrated transaction solely with respect to such Primary Security, minus (y)
with respect to such Secondary Securities, the sum of (I) the Black Scholes
Consideration Value of each such Option, if any, (II) the fair market value
(as determined by the Holder in good faith) or the Black Scholes Consideration
Value, as applicable, of such Adjustment Right, if any, and (III) the fair
market value (as determined by the Holder) of such Convertible Security and/or
any other security or instrument (as applicable), if any, in each case, as
determined on a per share basis in accordance with this Section 7(a)(iv). If
any shares of Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the consideration
received therefor (for the purpose of determining the consideration paid for
such Common Stock, Option or Convertible Security, but not for the purpose of
the calculation of the
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Black Scholes Consideration Value) will be deemed to be the net amount of
consideration received by the Company therefor. If any shares of Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by the Company (for the
purpose of determining the consideration paid for such Common Stock, Option or
Convertible Security, but not for the purpose of the calculation of the Black
Scholes Consideration Value) will be the fair value of such consideration,
except where such consideration consists of publicly traded securities, in
which case the amount of consideration received by the Company for such
securities will be the arithmetic average of the VWAPs of such security for
each of the five (5) Trading Days immediately preceding the date of receipt.
If any shares of Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor (for
the purpose of determining the consideration paid for such Common Stock,
Option or Convertible Security, but not for the purpose of the calculation of
the Black Scholes Consideration Value) will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible Securities
(as the case may be). The fair value of any consideration other than cash or
publicly traded securities will be determined jointly by the Company and the
Holder. If such parties are unable to reach agreement within ten (10) days
after the occurrence of an event requiring valuation (the "Valuation Event"),
the fair value of such consideration will be determined within five (5)
Trading Days after the tenth (10th) day following such Valuation Event, the
Holder may, at its sole option, select an independent, reputable investment
bank to resolve such dispute. The determination of such appraiser shall be
final and binding upon all parties absent manifest error and the fees and
expenses of such appraiser shall be borne by the Company. (v) Record Date. If
the Company takes a record of the holders of shares of Common Stock for the
purpose of entitling them (A) to receive a dividend or other distribution
payable in shares of Common Stock, Options or in Convertible Securities or (B)
to subscribe for or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the
issuance or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase (as the case may be). (b) Adjustment of Conversion Price upon
Subdivision or Combination of Common Stock. Without limiting any provision of
Section 6, Section 14 or Section 7(a), if the Company at any time on or after
the Subscription Date subdivides (by any stock split, stock dividend, stock
combination, recapitalization or other similar transaction) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
will be proportionately reduced. Without limiting any provision of Section 6,
Section 14 or Section 7(a), if the Company at any time on or after the
Subscription Date combines (by any stock split, stock dividend, stock
combination, recapitalization or other similar transaction) one or more
classes of its outstanding shares of Common Stock into a smaller
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number of shares, the Conversion Price in effect immediately prior to such
combination will be proportionately increased. Any adjustment pursuant to this
Section 7(b) shall become effective immediately after the effective date of
such subdivision or combination. If any event requiring an adjustment under
this Section 7(b) occurs during the period that a Conversion Price is
calculated hereunder, then the calculation of such Conversion Price shall be
adjusted appropriately to reflect such event. (c) Holder's Right of Adjusted
Conversion Price. In addition to and not in limitation of the other provisions
of this Section 7 or in the Securities Purchase Agreement, if the Company in
any manner issues or sells or enters into any agreement to issue or sell, any
Common Stock, Options or Convertible Securities (any such securities,
"Variable Price Securities") regardless of whether securities have been sold
pursuant to such agreement and whether such agreement has subsequently been
terminated, prior to or after the Subscription Date that are issuable pursuant
to such agreement or convertible into or exchangeable or exercisable for
shares of Common Stock, in each case, at a price which varies or may vary with
the market price of the shares of Common Stock, including by way of one or
more reset(s) to a fixed price, but exclusive of such formulations reflecting
customary anti-dilution provisions (such as share splits, share combinations,
share dividends and similar transactions) (each of the formulations for such
variable price being herein referred to as, the "Variable Price"), the Company
shall provide written notice thereof via electronic mail and overnight courier
to the Holder on the date of such agreement and the issuance of such Common
Stock, Convertible Securities or Options. From and after the date the Company
enters into such agreement or issues any such Variable Price Securities, the
Holder shall have the right, but not the obligation, in its sole discretion to
substitute the Variable Price for the Conversion Price upon conversion of this
Note by designating in the Conversion Notice delivered upon any conversion of
this Note that solely for purposes of such conversion the Holder is relying on
the Variable Price rather than the Conversion Price then in effect. The
Holder's election to rely on a Variable Price for a particular conversion of
this Note shall not obligate the Holder to rely on a Variable Price for any
future conversion of this Note. In addition, from and after the date the
Company enters into such agreement or issues any such Variable Price
Securities, for purposes of calculating the Installment Conversion Price,
Acceleration Conversion Price and/or Alternate Conversion Price, as
applicable, as of any time of determination, the "Conversion Price" as used
therein shall mean the lower of (x) the Installment Conversion Price,
Acceleration Conversion Price and/or Alternate Conversion Price, as
applicable, as of such time of determination and (y) the Variable Price as of
such time of determination. (d) Other Events. In the event that the Company
(or any Subsidiary) shall take any action to which the provisions hereof are
not strictly applicable, or, if applicable, would not operate to protect the
Holder from dilution or if any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
board of directors shall in good faith determine and implement an appropriate
adjustment in the Conversion Price so as to protect the rights of the Holder,
provided that no such adjustment pursuant to this Section 7(e) will increase
the Conversion Price as otherwise determined pursuant to this Section 7,
provided further that if the Holder does not accept such
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adjustments as appropriately protecting its interests hereunder against such
dilution, then the Company's board of directors and the Holder shall agree, in
good faith, upon an independent investment bank of nationally recognized
standing to make such appropriate adjustments, whose determination shall be
final and binding absent manifest error and whose fees and expenses shall be
borne by the Company. (e) Calculations. All calculations under this Section 7
shall be made by rounding to the nearest cent or the nearest 1/100th of a
share, as applicable. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Company, and the disposition of any such shares shall be considered an issue
or sale of Common Stock. (f) Voluntary Adjustment by Company. Subject to the
rules and regulations of the Principal Market, the Company may at any time
during the term of this Note, with the prior written consent of the Required
Holders (as defined in the Securities Purchase Agreement), reduce the then
current Conversion Price of each of the Notes to any amount and for any period
of time deemed appropriate by the board of directors of the Company. 8.
INSTALLMENT CONVERSION OR REDEMPTION. (a) General. On each applicable
Installment Date, provided there has been no Equity Conditions Failure, the
Company shall pay to the Holder of this Note the applicable Installment Amount
due on such date by converting such Installment Amount in accordance with this
Section 8 (a "Installment Conversion"); provided, however, that the Company
may, at its option following notice to the Holder (with a copy to the Trustee)
as set forth below, pay the Installment Amount by redeeming such Installment
Amount in cash (a "Installment Redemption") or by any combination of an
Installment Conversion and an Installment Redemption so long as all of the
outstanding applicable Installment Amount due on any Installment Date shall be
converted and/or redeemed by the Company on the applicable Installment Date,
subject to the provisions of this Section 8. On the date which is the sixth
(6th) Trading Day prior to each Installment Date (each, an "Installment Notice
Due Date"), the Company shall deliver written notice (each, a "Installment
Notice" and the date all of the holders receive such notice is referred to as
to the "Installment Notice Date"), to each holder of Notes (with a copy to the
Trustee) and such Installment Notice shall (i) either (A) confirm that the
applicable Installment Amount of such holder's Note shall be converted in
whole pursuant to an Installment Conversion or (B) (1) state that the Company
elects to redeem for cash, or is required to redeem for cash in accordance
with the provisions of the Notes, in whole or in part, the applicable
Installment Amount pursuant to an Installment Redemption and (2) specify the
portion of such Installment Amount which the Company elects or is required to
redeem pursuant to an Installment Redemption (such amount to be redeemed in
cash, the "Installment Redemption Amount") and the portion of the applicable
Installment Amount, if any, with respect to which the Company will, and is
permitted to, effect an Installment Conversion (such amount of the applicable
Installment Amount so specified to be so converted pursuant to this Section 8
is referred to herein as the "Installment Conversion Amount"), which amounts
when added together, must at least equal the entire applicable Installment
Amount and (ii) if the applicable Installment Amount is to be paid, in whole
or in part,
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pursuant to an Installment Conversion, certify that there is not then an
Equity Conditions Failure as of the applicable Installment Notice Date. Each
Installment Notice shall be irrevocable. If the Company does not timely
deliver an Installment Notice in accordance with this Section 8 with respect
to a particular Installment Date, then the Company shall be deemed to have
delivered an irrevocable Installment Notice confirming an Installment
Conversion of the entire Installment Amount payable on such Installment Date
and shall be deemed to have certified that there is not then an Equity
Conditions Failure in connection with such Installment Conversion. Except as
expressly provided in this Section 8(a), the Company shall convert and/or
redeem the applicable Installment Amount of this Note pursuant to this Section
8 and the corresponding Installment Amounts of the Other Notes pursuant to the
corresponding provisions of the Other Notes in the same ratio of the
applicable Installment Amount being converted and/or redeemed hereunder. The
applicable Installment Conversion Amount (whether set forth in the applicable
Installment Notice or by operation of this Section 8) shall be converted in
accordance with Section 8(b) and the applicable Installment Redemption Amount
shall be redeemed in accordance with Section 8(c). (b) Mechanics of
Installment Conversion. Subject to Section 3(d), if the Company delivers an
Installment Notice or is deemed to have delivered an Installment Notice
certifying that such Installment Amount is being paid, in whole or in part, in
an Installment Conversion in accordance with Section 8(a), then the remainder
of this Section 8(b) shall apply. The applicable Installment Conversion
Amount, if any, shall be converted on the applicable Installment Date at the
applicable Installment Conversion Price and the Company shall, on such
Installment Date, (A) deliver to the Holder's account with DTC such shares of
Common Stock issued upon such conversion (subject to the reduction
contemplated by the immediately following sentence and, if applicable, the
penultimate sentence of this Section 8(b)), and (B) in the event of the
Conversion Floor Price Condition, the Company shall deliver to the Holder the
applicable Conversion Installment Floor Amount, provided that the Equity
Conditions are then satisfied (or waived in writing by the Holder) on such
Installment Date and an Installment Conversion is not otherwise prohibited
under any other provision of this Note. If the Company confirmed (or is deemed
to have confirmed by operation of Section 8(a)) the conversion of the
applicable Installment Conversion Amount, in whole or in part, and there was
no Equity Conditions Failure as of the applicable Installment Notice Date (or
is deemed to have certified that the Equity Conditions in connection with any
such conversion have been satisfied by operation of Section 8(a)) but an
Equity Conditions Failure occurred between the applicable Installment Notice
Date and any time through the applicable Installment Date (the "Interim
Installment Period"), the Company shall provide the Holder a subsequent notice
to that effect. If there is an Equity Conditions Failure (which is not waived
in writing by the Holder) during such Interim Installment Period or an
Installment Conversion is not otherwise permitted under any other provision of
this Note, then, at the option of the Holder designated in writing to the
Company, the Holder may require the Company to do any one or more of the
following: (i) the Company shall redeem all or any part designated by the
Holder of the unconverted Installment Conversion Amount (such designated
amount is referred to as the "Designated Redemption Amount") and the Company
shall pay to the Holder within five (5) Trading Days of such Installment Date,
by wire transfer of immediately available funds, an amount in cash equal to
125% of such Designated
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Redemption Amount, and/or (ii) the Installment Conversion shall be null and
void with respect to all or any part designated by the Holder of the
unconverted Installment Conversion Amount and the Holder shall be entitled to
all the rights of a holder of this Note with respect to such designated part
of the Installment Conversion Amount; provided, however, the Conversion Price
for such designated part of such unconverted Installment Conversion Amount
shall thereafter be adjusted to equal the lesser of (A) the Installment
Conversion Price as in effect on the date on which the Holder voided the
Installment Conversion and (B) the Installment Conversion Price that would be
in effect on the date on which the Holder delivers a Conversion Notice
relating thereto as if such date was an Installment Date. If the Company fails
to redeem any Designated Redemption Amount by the second (2nd) day following
the applicable Installment Date by payment of such amount by such date, then
the Holder shall have the rights set forth in Section 11(a) as if the Company
failed to pay the applicable Installment Redemption Price (as defined below)
and all other rights under this Note (including, without limitation, such
failure constituting an Event of Default described in Section 4(a)(iv)).
Notwithstanding anything to the contrary in this Section 8(b), but subject to
3(d), until the Company delivers Common Stock representing the Installment
Conversion Amount to the Holder, the Installment Conversion Amount may be
converted by the Holder into Common Stock pursuant to Section 3. In the event
that the Holder elects to convert the Installment Conversion Amount prior to
the applicable Installment Date as set forth in the immediately preceding
sentence, the Installment Conversion Amount so converted shall be deducted
from the Principal outstanding hereunder, including for purposes of
determining the Installment Amount(s) relating to the applicable Installment
Date(s) as set forth in the applicable Conversion Notice. The Company shall
pay any and all taxes that may be payable with respect to the issuance and
delivery of any shares of Common Stock in any Installment Conversion
hereunder. (c) Mechanics of Installment Redemption. If the Company elects or
is required to effect an Installment Redemption, in whole or in part, in
accordance with Section 8(a), then the Installment Redemption Amount, if any,
shall be redeemed by the Company in cash on the applicable Installment Date by
wire transfer to the Holder of immediately available funds in an amount equal
to 103% of the applicable Installment Redemption Amount (the "Installment
Redemption Price"). If the Company fails to redeem such Installment Redemption
Amount on such Installment Date by payment of the Installment Redemption
Price, then, at the option of the Holder designated in writing to the Company
(any such designation shall be a "Conversion Notice" for purposes of this
Note), the Holder may require the Company to convert all or any part of the
Installment Redemption Amount at the Installment Conversion Price (determined
as of the date of such designation as if such date were an Installment Date).
Conversions required by this Section 8(c) shall be made in accordance with the
provisions of Section 3(c). Notwithstanding anything to the contrary in this
Section 8(c), but subject to Section 3(d), until the Installment Redemption
Price (together with any Late Charges thereon) is paid in full, the
Installment Redemption Amount (together with any Late Charges thereon) may be
converted, in whole or in part, by the Holder into Common Stock pursuant to
Section 3. In the event the Holder elects to convert all or any portion of the
Installment Redemption Amount prior to the applicable Installment Date as set
forth in the immediately preceding sentence, the Installment Redemption Amount
so converted shall be deducted from the
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Principal amount outstanding hereunder, including for purposes of determining
the Installment Amounts relating to the applicable Installment Date(s) as set
forth in the applicable Conversion Notice. Redemptions required by this
Section 8(c) shall be made in accordance with the provisions of Section 11.
(d) Deferred Installment Amount. Notwithstanding any provision of this Section
8(d) to the contrary, the Holder may, at its option and in its sole
discretion, deliver a written notice to the Company no later than the Trading
Day immediately prior to the applicable Installment Date electing to have the
payment of all or any portion of an Installment Amount payable on such
Installment Date deferred (such amount deferred, the "Deferral Amount", and
such deferral, each a "Deferral") until any subsequent Installment Date
selected by the Holder, in its sole discretion, in which case, the Deferral
Amount shall be added to, and become part of, such subsequent Installment
Amount and such Deferral Amount shall continue to accrue Interest hereunder.
Any notice delivered by the Holder pursuant to this Section 8(d) shall set
forth (i) the Deferral Amount and (ii) the date that such Deferral Amount
shall now be payable. (e) Acceleration of Installment Amounts. Notwithstanding
any provision of this Section 8 to the contrary, but subject to Section 3(d),
during the period commencing on an Installment Date (a "Current Installment
Date") and ending on the Trading Day immediately prior to the next Installment
Date (each, an "Installment Period"), at the option of the Holder, at one or
more times, the Holder may convert other Installment Amounts (each, an
"Acceleration", and each such amount, an "Acceleration Amount", and the
Conversion Date of any such Acceleration, each an "Acceleration Date"), in
whole or in part, at the Acceleration Conversion Price of such Current
Installment Date in accordance with the conversion procedures set forth in
Section 3 hereunder (with "Acceleration Conversion Price" replacing
"Conversion Price" for all purposes therein), mutatis mutandis; provided, that
if a Conversion Floor Price Condition exists with respect to such Acceleration
Date, with each Acceleration the Company shall also deliver to the Holder the
Acceleration Floor Amount on the applicable Share Delivery Deadline.
Notwithstanding anything to the contrary in this Section 8(e), with respect to
each period commencing on an Installment Date and ending on the Trading Day
immediately prior to the next Installment Date (each, an "Acceleration
Measuring Period"), the Holder may not elect to effect an Acceleration (the
"Current Acceleration", and such date of determination, the "Current
Acceleration Determination Date") during such Acceleration Measuring Period if
the Holder shall have converted pursuant to this Section 8 either on such
Current Installment Date and/or on any Acceleration Date during such
Acceleration Measuring Period, as applicable, such portion of the Conversion
Amount of this Note equal to the sum of (x) the Installment Amount for such
Installment Date (whether on the Current Installment Date or, if subject to a
Deferral, in whole or in part, on any one or more Acceleration Dates during
such Acceleration Measuring Period and prior to such applicable Current
Acceleration Determination Date) and (y) an additional 200% of the Installment
Amount for such Current Installment Date, in whole or in part, on any one or
more Acceleration Dates during such Acceleration Measuring Period and prior to
such applicable Current Acceleration Determination Date (or such greater
amount as the Company and the Holder shall mutually agree).
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9. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its Certificate of Incorporation (as defined in the
Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase
Agreement) or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Note, and will at all times in good
faith carry out all of the provisions of this Note and take all action as may
be required to protect the rights of the Holder of this Note. Without limiting
the generality of the foregoing or any other provision of this Note or the
other Transaction Documents, the Company (a) shall not increase the par value
of any shares of Common Stock receivable upon conversion of this Note above
the Conversion Price then in effect, and (b) shall take all such actions as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
conversion of this Note. Notwithstanding anything herein to the contrary, if
after the sixty (60) calendar day anniversary of the Issuance Date, the Holder
is not permitted to convert this Note in full for any reason (other than
pursuant to restrictions set forth in Section 3(d) hereof), the Company shall
use its best efforts to promptly remedy such failure, including, without
limitation, obtaining such consents or approvals as necessary to permit such
conversion into shares of Common Stock. 10. RESERVATION OF AUTHORIZED SHARES.
(a) Reservation. So long as any Notes remain outstanding, the Company shall at
all times reserve (I) if prior to Reserve Increase Deadline (as defined in the
Securities Purchase Agreement), 275,000,000 shares of Common Stock for
conversion (including without limitation, Installment Conversions, Alternate
Conversions and Accelerations) of all of the Notes then outstanding (without
regard to any limitations on conversions) or (ii) if on or after the Reserve
Increase Deadline, at least 100% of the aggregate number of shares of Common
Stock as shall from time to time be necessary to effect the conversion,
including without limitation, Installment Conversions, Alternate Conversions
and Accelerations, of all of the Notes then outstanding (without regard to any
limitations on conversions and assuming such Notes remain outstanding until
the Maturity Date) at the Floor Price then in effect (the "Required Reserve
Amount"). The Required Reserve Amount (including, without limitation, each
increase in the number of shares so reserved) shall be allocated pro rata
among the holders of the Notes based on the original principal amount of the
Notes held by each holder on the Initial Closing Date or increase in the
number of reserved shares, as the case may be (the "Authorized Share
Allocation"). In the event that a holder shall sell or otherwise transfer any
of such holder's Notes, each transferee shall be allocated a pro rata portion
of such holder's Authorized Share Allocation. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any Notes shall be
allocated to the remaining holders of Notes, pro rata based on the principal
amount of the Notes then held by such holders. (b) Insufficient Authorized
Shares. If, notwithstanding Section 10(a), and not in limitation thereof, at
any time while any of the Notes remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to
satisfy its obligation to reserve for issuance upon conversion of the Notes at
least a number of shares of Common Stock equal to the Required Reserve Amount
(an
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"Authorized Share Failure"), then the Company shall immediately take all
action necessary to increase the Company's authorized shares of Common Stock
to an amount sufficient to allow the Company to reserve the Required Reserve
Amount for the Notes then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than sixty (60) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the
Company shall provide each stockholder with a proxy statement and shall use
its best efforts to solicit its stockholders' approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal. Notwithstanding
the foregoing, if at any such time of an Authorized Share Failure, the Company
is able to obtain the written consent of a majority of the shares of its
issued and outstanding shares of Common Stock to approve the increase in the
number of authorized shares of Common Stock, the Company may satisfy this
obligation by obtaining such consent and submitting for filing with the SEC an
Information Statement on Schedule 14C. In the event that the Company is
prohibited from issuing shares of Common Stock pursuant to the terms of this
Note due to the failure by the Company to have sufficient shares of Common
Stock available out of the authorized but unissued shares of Common Stock
(such unavailable number of shares of Common Stock, the "Authorized Failure
Shares"), in lieu of delivering such Authorized Failure Shares to the Holder,
the Company shall pay cash in exchange for the redemption of such portion of
the Conversion Amount convertible into such Authorized Failure Shares at a
price equal to the sum of (i) the product of (x) such number of Authorized
Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on
any Trading Day during the period commencing on the date the Holder delivers
the applicable Conversion Notice with respect to such Authorized Failure
Shares to the Company and ending on the date of such issuance and payment
under this Section 10(a); and (ii) to the extent the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of Authorized Failure Shares, any
brokerage commissions and other out-of-pocket expenses, if any, of the Holder
incurred in connection therewith. Nothing contained in Section 10(a) or this
Section 10(b) shall limit any obligations of the Company under any provision
of the Securities Purchase Agreement. 11. REDEMPTIONS. (a) Mechanics. The
Company, or at the Company's written direction and at the Company's expense,
the Trustee, shall deliver the applicable Event of Default Redemption Price to
the Holder in cash within five (5) Business Days after the Company's receipt
of the Holder's Event of Default Redemption Notice. If the Holder has
submitted a Change of Control Redemption Notice in accordance with Section
5(b), the Company, or at the Company's direction, the Trustee, shall deliver
the applicable Change of Control Redemption Price to the Holder in cash
concurrently with the consummation of such Change of Control if such notice is
received prior to the consummation of such Change of Control and within five
(5) Business Days after the Company's receipt of such notice otherwise. The
Company shall deliver the applicable Installment Redemption Price to the
Holder in cash on the applicable Installment Date. Notwithstanding anything
herein to the
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contrary, in connection with any redemption hereunder at a time the Holder is
entitled to receive a cash payment under any of the other Transaction
Documents, at the option of the Holder delivered in writing to the Company,
the applicable Redemption Price hereunder shall be increased by the amount of
such cash payment owed to the Holder under such other Transaction Document
and, upon payment in full or conversion in accordance herewith, shall satisfy
the Company's payment obligation under such other Transaction Document. In the
event of a redemption of less than all of the Conversion Amount of this Note,
the Company shall promptly cause to be issued and delivered to the Holder a
new Note (in accordance with Section 17(d)) representing the outstanding
Principal which has not been redeemed. In the event that the Company does not
pay the applicable Redemption Price to the Holder within the time period
required, at any time thereafter and until the Company pays such unpaid
Redemption Price in full, the Holder shall have the option, in lieu of
redemption, to require the Company to promptly return to the Holder all or any
portion of this Note representing the Conversion Amount that was submitted for
redemption and for which the applicable Redemption Price (together with any
Late Charges thereon) has not been paid. Upon the Company's receipt of such
notice, (x) the applicable Redemption Notice shall be null and void with
respect to such Conversion Amount, (y) the Company shall immediately return
this Note, or issue a new Note (in accordance with Section 17(d)), to the
Holder, and in each case the principal amount of this Note or such new Note
(as the case may be) shall be increased by an amount equal to the difference
between (1) the applicable Redemption Price (as the case may be, and as
adjusted pursuant to this Section 11, if applicable) minus (2) the Principal
portion of the Conversion Amount submitted for redemption and (z) the
Conversion Price of this Note or such new Notes (as the case may be) shall be
automatically adjusted with respect to each conversion effected thereafter by
the Holder to the lowest of (A) the Conversion Price as in effect on the date
on which the applicable Redemption Notice is voided, (B) 75% of the Market
Price of the Common Stock for the period ending on and including the date on
which the applicable Redemption Notice is voided and (C) 75% of the Market
Price of the Common Stock for the period ending as of the applicable
Conversion Date (it being understood and agreed that all such determinations
shall be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during such period). The Holder's
delivery of a notice voiding a Redemption Notice and exercise of its rights
following such notice shall not affect the Company's obligations to make any
payments of Late Charges which have accrued prior to the date of such notice
with respect to the Conversion Amount subject to such notice. (b) Redemption
by Other Holders. Upon the Company's receipt of notice from any of the holders
of the Other Notes for redemption or repayment as a result of an event or
occurrence substantially similar to the events or occurrences described in
Section 4(b) or Section 5(b) (each, an "Other Redemption Notice"), the Company
shall immediately, but no later than one (1) Business Day of its receipt
thereof, forward to the Holder by electronic mail a copy of such notice (with
a copy to the Trustee). If the Company receives a Redemption Notice and one or
more Other Redemption Notices, during the seven (7) Business Day period
beginning on and including the date which is two (2) Business Days prior to
the Company's receipt of the Holder's applicable Redemption Notice and ending
on and including the date which is two (2) Business Days after the Company's
receipt of the Holder's applicable Redemption Notice and the Company is unable
to redeem all
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principal, interest and other amounts designated in such Redemption Notice and
such Other Redemption Notices received during such seven (7) Business Day
period, then the Company shall redeem a pro rata amount from each holder of
the Notes (including the Holder) based on the principal amount of the Notes
submitted for redemption pursuant to such Redemption Notice and such Other
Redemption Notices received by the Company during such seven (7) Business Day
period. 12. VOTING RIGHTS. The Holder shall have no voting rights as the
holder of this Note, except as required by law (including, without limitation,
the Delaware General Corporation Law) and as expressly provided in this Note.
13. COVENANTS. Until all of the Notes have been converted, redeemed or
otherwise satisfied in accordance with their terms: (a) Rank. The Company
shall designate all payments due under this Note as senior unsecured
Indebtedness, and (a) the Notes shall rank pari passu with all Other Notes and
(b) shall be at least pari passu in right of payment with all other
Indebtedness of the Company and its Subsidiaries (other than Permitted
Indebtedness secured by Permitted Liens). (b) Incurrence of Indebtedness. The
Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, incur or guarantee, assume or suffer to exist any
Indebtedness (other than (i) the Indebtedness evidenced by this Note and the
Other Notes and (ii) other Permitted Indebtedness). (c) Existence of Liens.
The Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, allow or suffer to exist any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property
or assets (including accounts and contract rights) owned by the Company or any
of its Subsidiaries (collectively, "Liens") other than Permitted Liens;
provided, however, that the Company shall be deemed to be in breach of this
Section 13(c) only if such breach remains uncured for a period of five (5)
Trading Days. (d) Restricted Payments and Investments. The Company shall not,
and the Company shall cause each of its Subsidiaries to not, directly or
indirectly, redeem, defease, repurchase, repay or make any payments in respect
of, by the payment of cash or cash equivalents (in whole or in part, whether
by way of open market purchases, tender offers, private transactions or
otherwise), all or any portion of any Indebtedness (other than the Notes)
whether by way of payment in respect of principal of (or premium, if any) or
interest on, such Indebtedness or make any Investment, as applicable, if at
the time such payment with respect to such Indebtedness and/or Investment, as
applicable, is due or is otherwise made or, after giving effect to such
payment, (i) an event constituting an Event of Default has occurred and is
continuing or (ii) an event that with the passage of time and without being
cured would constitute an Event of Default has occurred and is continuing.
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(e) Restriction on Redemption and Cash Dividends. The Company shall not, and
the Company shall cause each of its Subsidiaries to not, directly or
indirectly, redeem, repurchase or declare or pay any cash dividend or
distribution on any of its capital stock. (f) Restriction on Transfer of
Assets. The Company shall not, and the Company shall cause each of its
Subsidiaries to not, directly or indirectly, sell, lease, license, assign,
transfer, spin-off, split-off, close, convey or otherwise dispose of any
assets or rights of the Company or any Subsidiary owned or hereafter acquired
whether in a single transaction or a series of related transactions, other
than (i) sales, leases, licenses, assignments, transfers, conveyances and
other dispositions of such assets or rights by the Company and its
Subsidiaries (including, without limitation, in connection with joint
ventures) in the ordinary course of business consistent with its past practice
and (ii) sales of inventory and product in the ordinary course of business;
provided, however, that the Company shall be deemed to be in breach of this
Section 13(f) if such breach was an involuntary sale, lease, license,
assignment, transfer, spin-off, split-off, close, conveyance or otherwise
disposal that remains uncured for a period of five (5) Trading Days. (g)
Maturity of Indebtedness. The Company shall not, and the Company shall cause
each of its Subsidiaries to not, directly or indirectly, permit any
Indebtedness of the Company or any of its Subsidiaries to mature or accelerate
prior to the Maturity Date (except, solely from and after the Stockholder
Approval Date (as defined in the Securities Purchase Agreement), up to $100
million of Permitted Indebtedness in any three month period). (h) Change in
Nature of Business. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, engage in any material line
of business substantially different from those lines of business conducted by
or publicly contemplated to be conducted by the Company and each of its
Subsidiaries on the Subscription Date or any business substantially related or
incidental thereto. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, modify its or their corporate
structure or purpose other than for tax or other general corporate purposes
that are not meant to (and do not) change the nature of the business of the
Company currently conducted as of the Issuance Date. (i) Preservation of
Existence, Etc. The Company shall maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, its existence, rights and privileges,
and become or remain, and cause each of its Subsidiaries to become or remain,
duly qualified and in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the transaction
of its business makes such qualification necessary. (j) Maintenance of
Properties, Etc. The Company shall maintain and preserve, and cause each of
its Subsidiaries to maintain and preserve, all of its properties which are
necessary or useful in the proper conduct of its business in good working
order and condition, ordinary wear and tear excepted, and comply, and cause
each of its Subsidiaries to comply, at all times with the provisions of all
leases to which it is a party as lessee or under which it occupies property,
so as to prevent any loss or forfeiture thereof or thereunder.
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(k) Maintenance of Intellectual Property. The Company will, and will cause
each of its Subsidiaries to, take all action necessary or advisable to
maintain all of the Intellectual Property Rights (as defined in the Securities
Purchase Agreement) of the Company and/or any of its Subsidiaries that are
necessary or material to the conduct of its business in full force and effect.
(l) Maintenance of Insurance. The Company shall maintain, and cause each of
its Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations (including, without limitation,
comprehensive general liability, hazard, rent and business interruption
insurance) with respect to its properties (including all real properties
leased or owned by it) and business, in such amounts and covering such risks
as is required by any governmental authority having jurisdiction with respect
thereto or as is carried generally in accordance with sound business practice
by companies in similar businesses similarly situated (including, without
limitation, and for the avoidance of doubt, at least $5,000,000 in director's
and officer's insurance). (m) Transactions with Affiliates. The Company shall
not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend
or be a party to, any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease, transfer or
exchange of property or assets of any kind or the rendering of services of any
kind) with any affiliate, except transactions in the ordinary course of
business in a manner and to an extent consistent with past practice and
necessary or desirable for the prudent operation of its business, for fair
consideration and on terms no less favorable to it or its Subsidiaries than
would be obtainable in a comparable arm's length transaction with a Person
that is not an affiliate thereof. (n) Restricted Issuances. The Company shall
not, directly or indirectly, without the prior written consent of the holders
of a majority in aggregate principal amount of the Notes then outstanding, (i)
issue any Notes (other than as contemplated by the Securities Purchase
Agreement and the Notes) or (ii) issue any other securities that would cause a
breach or default under the Notes. (o) Financial Covenants; Announcement of
Operating Results. (i) The Company shall maintain, as of the end of each
Fiscal Quarter (and/or Fiscal Year, as applicable) a balance of Available Cash
in an aggregate amount equal to or greater than $340,000,000 (the "Financial
Test"). (ii) Operating Results Announcement. Commencing on the Fiscal Quarter
ending September 30, 2023, the Company shall publicly disclose and disseminate
(such date, the "Announcement Date"), if the Financial Test has not been
satisfied for such Fiscal Quarter or Fiscal Year, as applicable, a statement
to that effect no later than (x) if prior to March 31, 2024, the fifteenth
(15th) Trading Day or (y) if on or after March 31, 2024, the tenth (10th)
Trading Day, in either case, after the end of such Fiscal Quarter or Fiscal
Year, as applicable, and such announcement shall include a statement to the
effect that the Company is (or is not, as applicable) in breach of the
Financial Test for such Fiscal Quarter or Fiscal Year, as applicable.
Notwithstanding the foregoing, in the event no
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Financial Covenant Failure (as defined below) has occurred and the Company
reasonably determines, with the advice of legal counsel, that the disclosure
referred to in the immediately preceding sentence does not constitute material
non-public information, the Company shall make a statement to that effect in
the applicable certification required below and no disclosure with the SEC
shall be required to be made by the Company. On the Announcement Date, the
Company shall also provide to the Holder a certification, executed on behalf
of the Company by the Chief Financial Officer of the Company, certifying that
the Company satisfied the Financial Test for such Fiscal Quarter or Fiscal
Year, as applicable, if that is the case. If the Company has failed to meet
the Financial Test for a Fiscal Quarter or Fiscal Year, as applicable, (each a
"Financial Covenant Failure"), the Company shall provide to the Holder a
written certification, executed on behalf of the Company by the Chief
Financial Officer of the Company, certifying that the Financial Test has not
been met for such Fiscal Quarter or Fiscal Year, as applicable (a "Financial
Covenant Failure Notice"). Concurrently with the delivery of each Financial
Covenant Failure Notice to the Holder, the Company shall also make publicly
available (as part of a Quarterly Report on Form 10-Q, Annual Report on Form
10-K or on a Current Report on Form 8-K, or otherwise) the Financial Covenant
Failure Notice and the fact that an Event of Default has occurred under the
Notes. (p) PCAOB Registered Auditor. At all times any Notes remain
outstanding, the Company shall have engaged an independent auditor to audit
its financial statements that is registered with (and in compliance with the
rules and regulations of) the Public Company Accounting Oversight Board. (q)
Stay, Extension and Usury Laws. To the extent that it may lawfully do so, the
Company (A) agrees that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law (wherever or whenever enacted or in force) that may
affect the covenants or the performance of this Note; and (B) expressly waives
all benefits or advantages of any such law and agrees that it will not, by
resort to any such law, hinder, delay or impede the execution of any power
granted to the Holder by this Note, but will suffer and permit the execution
of every such power as though no such law has been enacted. (r) Taxes. The
Company and its Subsidiaries shall pay when due all taxes, fees or other
charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against the Company and its
Subsidiaries or their respective assets or upon their ownership, possession,
use, operation or disposition thereof or upon their rents, receipts or
earnings arising therefrom (except where the failure to pay would not,
individually or in the aggregate, have a material effect on the Company or any
of its Subsidiaries). The Company and its Subsidiaries shall file on or before
the due date therefor all personal property tax returns (except where the
failure to file would not, individually or in the aggregate, have a material
effect on the Company or any of its Subsidiaries). Notwithstanding the
foregoing, the Company and its Subsidiaries may contest, in good faith and by
appropriate proceedings, taxes for which they maintain adequate reserves
therefor in accordance with GAAP.
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(s) Independent Investigation. At the request of the Holder either (x) at any
time when an Event of Default has occurred and is continuing, (y) upon the
occurrence of an event that with the passage of time or giving of notice would
constitute an Event of Default or (z) at any time the Holder reasonably
believes an Event of Default may have occurred or be continuing, the Company
shall hire an independent, reputable investment bank selected by the Company
and approved by the Holder to investigate as to whether any breach of this
Note has occurred (the "Independent Investigator"). If the Independent
Investigator determines that such breach of this Note has occurred, the
Independent Investigator shall notify the Company of such breach and the
Company shall deliver written notice to each holder of a Note of such breach.
In connection with such investigation, the Independent Investigator may,
during normal business hours, inspect all contracts, books, records,
personnel, offices and other facilities and properties of the Company and its
Subsidiaries and, to the extent available to the Company after the Company
uses reasonable efforts to obtain them, the records of its legal advisors and
accountants (including the accountants' work papers) and any books of account,
records, reports and other papers not contractually required of the Company to
be confidential or secret, or subject to attorney-client or other evidentiary
privilege, and the Independent Investigator may make such copies and
inspections thereof as the Independent Investigator may reasonably request.
The Company shall furnish the Independent Investigator with such financial and
operating data and other information with respect to the business and
properties of the Company as the Independent Investigator may reasonably
request. The Company shall permit the Independent Investigator to discuss the
affairs, finances and accounts of the Company with, and to make proposals and
furnish advice with respect thereto to, the Company's officers, directors, key
employees and independent public accountants or any of them (and by this
provision the Company authorizes said accountants to discuss with such
Independent Investigator the finances and affairs of the Company and any
Subsidiaries), all at such reasonable times, upon reasonable notice, and as
often as may be reasonably requested. 14. DISTRIBUTION OF ASSETS. In addition
to any adjustments pursuant to Sections 6 or 7, if the Company shall declare
or make any dividend or other distributions of its assets (or rights to
acquire its assets) to any or all holders of shares of Common Stock, by way of
return of capital or otherwise (including without limitation, any distribution
of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (the "Distributions"), then the Holder will be
entitled to such Distributions as if the Holder had held the number of shares
of Common Stock acquirable upon complete conversion of this Note (without
taking into account any limitations or restrictions on the convertibility of
this Note and assuming for such purpose that the Note was converted at the
Installment Conversion Price assuming an Installment Date as of the applicable
record date) immediately prior to the date on which a record is taken for such
Distribution or, if no such record is taken, the date as of which the record
holders of Common Stock are to be determined for such Distributions (provided,
however, that to the extent that the Holder's right to participate in any such
Distribution would result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage, then the Holder shall not be entitled to
participate in such Distribution to the extent of the Maximum Percentage (and
shall not be entitled to beneficial ownership of such shares of Common Stock
as a result of such Distribution (and beneficial ownership) to the extent of
any such excess)) and in lieu of delivering to the Holder such portion of such
Distribution in excess of the Maximum Percentage, the Holder shall receive a
right to receive such portion of such Distribution, exercisable into such
Distribution at any time, in whole or in part, at the option of the Holder (or
any successor thereto), without the payment of any additional consideration,
but subject to a limitation on exercise in the form of 3(d)(i) herein, mutatis
mutandis.
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15. AMENDING THE TERMS OF THIS NOTE. Except for Section 3(d), which may not be
amended, modified or waived by the parties hereto, the prior written consent
of the Company and the Holder shall be required for any change, waiver or
amendment to this Note; provided, however, no change, waiver or amendment
shall adversely impact the rights, duties, immunities or liabilities of the
Trustee without its prior written consent. 16. TRANSFER. This Note and any
shares of Common Stock issued upon conversion of this Note may be offered,
sold, assigned or transferred by the Holder without the consent of the
Company; provided, that the Holder shall not transfer this Note to any
competitor of the Company without the prior written consent of the Company
(not to be unreasonably withheld). 17. REISSUANCE OF THIS NOTE. (a) Transfer.
If this Note is to be transferred, the Holder shall surrender this Note to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Note (in accordance with Section 16(d)), registered as the
Holder may request, representing the outstanding Principal being transferred
by the Holder and, if less than the entire outstanding Principal is being
transferred, a new Note (in accordance with Section 16(d)) to the Holder
representing the outstanding Principal not being transferred. The Holder and
any assignee, by acceptance of this Note, acknowledge and agree that, by
reason of the provisions of Section 3(c)(iii) following conversion or
redemption of any portion of this Note, the outstanding Principal represented
by this Note may be less than the Principal stated on the face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence), and, in
the case of loss, theft or destruction, of any indemnification undertaking by
the Holder to the Company in customary and reasonable form and, in the case of
mutilation, upon surrender and cancellation of this Note. Upon compliance with
Section 2.02 of the Indenture, the Company shall execute and, following
authentication of such new Note, deliver to the Holder a new Note (in
accordance with Section 17(d)) representing the outstanding Principal. (c)
Note Exchangeable for Different Denominations. This Note is exchangeable, upon
the surrender hereof by the Holder at the principal office of the Company, for
a new Note or Notes (in accordance with Section 16(d) and in principal amounts
of at least $1,000) representing in the aggregate the outstanding Principal of
this Note, and each such new Note will represent such portion of such
outstanding Principal as is designated by the Holder at the time of such
surrender.
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(d) Issuance of New Notes. Whenever the Company is required to issue a new
Note pursuant to the terms of this Note, such new Note (i) shall be of like
tenor with this Note, (ii) shall represent, as indicated on the face of such
new Note, the Principal remaining outstanding (or in the case of a new Note
being issued pursuant to Section 16(a) or Section 16(c), the Principal
designated by the Holder which, when added to the principal represented by the
other new Notes issued in connection with such issuance, does not exceed the
Principal remaining outstanding under this Note immediately prior to such
issuance of new Notes), (iii) shall have an issuance date, as indicated on the
face of such new Note, which is the same as the Issuance Date of this Note,
(iv) shall have the same rights and conditions as this Note, (v) shall be duly
authenticated in accordance with the Indenture and (vi) shall represent
accrued and unpaid Interest and Late Charges on the Principal and Interest of
this Note, from the Issuance Date. 18. REMEDIES, CHARACTERIZATIONS, OTHER
OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this
Note shall be cumulative and in addition to all other remedies available under
this Note and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief),
and nothing herein shall limit the Holder's right to pursue actual and
consequential damages for any failure by the Company to comply with the terms
of this Note. No failure on the part of the Holder to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Holder of any right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. In addition, the exercise of any right or
remedy of the Holder at law or equity or under this Note or any of the
documents shall not be deemed to be an election of Holder's rights or remedies
under such documents or at law or equity. The Company covenants to the Holder
that there shall be no characterization concerning this instrument other than
as expressly provided herein. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the Holder and shall not, except as
expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that
the remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to specific
performance and/or temporary, preliminary and permanent injunctive or other
equitable relief from any court of competent jurisdiction in any such case
without the necessity of proving actual damages and without posting a bond or
other security. The Company shall provide all information and documentation to
the Holder that is requested by the Holder to enable the Holder to confirm the
Company's compliance with the terms and conditions of this Note (including,
without limitation, compliance with Section 7). 19. PAYMENT OF COLLECTION,
ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an
attorney for collection or enforcement or is collected or enforced through any
legal proceeding or the Holder otherwise takes action to collect amounts due
under this Note and/or any other Transaction Document or to enforce the
provisions of this Note and/or any other Transaction Document or (b) there
occurs any bankruptcy, reorganization, receivership of the Company or other
proceedings affecting Company creditors' rights and involving a claim under
this Note, then the Company shall pay the reasonable out-of-pocket costs
incurred by the Holder for such collection, enforcement or action or in
connection with such bankruptcy, reorganization, receivership or other
proceeding, including, without limitation, reasonable attorneys' fees and
disbursements. The Company expressly acknowledges and agrees that no amounts
due under this Note and/or any other Transaction Document, as applicable,
shall be affected, or limited, by the fact that the purchase price paid for
this Note was less than the original Principal amount hereof.
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20. CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by
the Company and the initial Holder and shall not be construed against any such
Person as the drafter hereof. The headings of this Note are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Note. Unless the context clearly indicates otherwise, each pronoun herein
shall be deemed to include the masculine, feminine, neuter, singular and
plural forms thereof. The terms "including," "includes," "include" and words
of like import shall be construed broadly as if followed by the words "without
limitation." The terms "herein," "hereunder," "hereof" and words of like
import refer to this entire Note instead of just the provision in which they
are found. Unless expressly indicated otherwise, all section references are to
sections of this Note. Terms used in this Note and not otherwise defined
herein, but defined in the other Transaction Documents, shall have the
meanings ascribed to such terms on the Initial Closing Date in such other
Transaction Documents unless otherwise consented to in writing by the Holder.
21. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the
Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. No waiver shall be effective unless it
is in writing and signed by an authorized representative of the waiving party.
Notwithstanding the foregoing, nothing contained in this Section 21 shall
permit any waiver of any provision of Section 3(d). 22. DISPUTE RESOLUTION.
(a) Submission to Dispute Resolution. (i) In the case of a dispute relating to
a Closing Bid Price, a Closing Sale Price, a Conversion Price, an Installment
Conversion Price, an Acceleration Conversion Price, an Alternate Conversion
Price, a Black Scholes Consideration Value, a VWAP or a fair market value or
the arithmetic calculation of a Conversion Rate or the applicable Redemption
Price (as the case may be) (including, without limitation, a dispute relating
to the determination of any of the foregoing), the Company or the Holder (as
the case may be) shall submit the dispute to the other party via electronic
mail (A) if by the Company, within two (2) Business Days after learning of the
occurrence of the circumstances giving rise to such dispute or (B) if by the
Holder at any time after the Holder learned of the circumstances giving rise
to such dispute. If the Holder and the Company are unable to promptly resolve
such dispute relating to such Closing Bid Price, such Closing Sale Price, such
Conversion Price, such Installment Conversion Price, such Acceleration
Conversion Price, such Alternate Conversion Price, such Black Scholes
Consideration Value, such VWAP or such fair market value, or the arithmetic
calculation of such Conversion Rate or such applicable Redemption Price (as
the case may be), at any time after the fifth (5th) Business Day following
such initial notice by the Company or the Holder (as the case may be) of such
dispute to the Company or the Holder (as the case may be), then the Holder
may, at its sole option, select an independent, reputable investment bank to
resolve such dispute.
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(ii) The Holder and the Company shall each deliver to such investment bank (A)
a copy of the initial dispute submission so delivered in accordance with the
first sentence of this Section 22 and (B) written documentation supporting its
position with respect to such dispute, in each case, no later than 5:00 p.m.
(New York time) by the fifth (5th) Business Day immediately following the date
on which the Holder selected such investment bank (the "Dispute Submission
Deadline") (the documents referred to in the immediately preceding clauses (A)
and (B) are collectively referred to herein as the "Required Dispute
Documentation") (it being understood and agreed that if either the Holder or
the Company fails to so deliver all of the Required Dispute Documentation by
the Dispute Submission Deadline, then the party who fails to so submit all of
the Required Dispute Documentation shall no longer be entitled to (and hereby
waives its right to) deliver or submit any written documentation or other
support to such investment bank with respect to such dispute and such
investment bank shall resolve such dispute based solely on the Required
Dispute Documentation that was delivered to such investment bank prior to the
Dispute Submission Deadline). Unless otherwise agreed to in writing by both
the Company and the Holder or otherwise requested by such investment bank,
neither the Company nor the Holder shall be entitled to deliver or submit any
written documentation or other support to such investment bank in connection
with such dispute (other than the Required Dispute Documentation). (iii) The
Company and the Holder shall use reasonable best efforts to cause such
investment bank to determine the resolution of such dispute and notify the
Company and the Holder of such resolution no later than ten (10) Business Days
immediately following the Dispute Submission Deadline. The fees and expenses
of such investment bank shall be borne solely by the Company, and such
investment bank's resolution of such dispute shall be final and binding upon
all parties absent manifest error. (b) Miscellaneous. The Company expressly
acknowledges and agrees that (i) this Section 22 constitutes an agreement to
arbitrate between the Company and the Holder (and constitutes an arbitration
agreement) under (s) 7501, et seq. of the New York Civil Practice Law and
Rules ("CPLR") and that the Holder is authorized to apply for an order to
compel arbitration pursuant to CPLR (s) 7503(a) in order to compel compliance
with this Section 22, (ii) a dispute relating to a Conversion Price includes,
without limitation, disputes as to (A) whether an issuance or sale or deemed
issuance or sale of Common Stock occurred under Section 7(a), (B) the
consideration per share at which an issuance or deemed issuance of Common
Stock occurred, (C) whether any issuance or sale or deemed issuance or sale of
Common Stock was an issuance or sale or deemed issuance or sale of Excluded
Securities, (D) whether an agreement, instrument, security or the like
constitutes and Option or Convertible Security and (E) whether a Dilutive
Issuance occurred, (iii) the
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terms of this Note and each other applicable Transaction Document shall serve
as the basis for the selected investment bank's resolution of the applicable
dispute, such investment bank shall be entitled (and is hereby expressly
authorized) to make all findings, determinations and the like that such
investment bank determines are required to be made by such investment bank in
connection with its resolution of such dispute and in resolving such dispute
such investment bank shall apply such findings, determinations and the like to
the terms of this Note and any other applicable Transaction Documents, (iv)
the Holder (and only the Holder), in its sole discretion, shall have the right
to submit any dispute described in this Section 22 to any state or federal
court sitting in The City of New York, Borough of Manhattan in lieu of
utilizing the procedures set forth in this Section 22 and (v) nothing in this
Section 22 shall limit the Holder from obtaining any injunctive relief or
other equitable remedies (including, without limitation, with respect to any
matters described in this Section 22). 23. NOTICES; CURRENCY; PAYMENTS. (a)
Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement, or, with respect to the
Trustee, in accordance with Section 10.02 of the Indenture. The Company shall
provide the Holder and the Trustee with prompt written notice of all actions
taken pursuant to this Note, including in reasonable detail a description of
such action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder and the Trustee
(i) immediately upon any adjustment of the Conversion Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii)
at least fifteen (15) days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution upon
the Common Stock, (B) with respect to any grant, issuances, or sales of any
Common Stock, Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of shares of Common Stock
(including, without limitation, whether a Dilutive Issuance has occurred
hereunder) or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case
that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder. (b) Currency. All
dollar amounts referred to in this Note are in United States Dollars ("U.S.
Dollars"), and all amounts owing under this Note shall be paid in U.S.
Dollars. All amounts denominated in other currencies (if any) shall be
converted into the U.S. Dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation. "Exchange Rate" means, in relation
to any amount of currency to be converted into U.S. Dollars pursuant to this
Note, the U.S. Dollar exchange rate as published in the Wall Street Journal on
the relevant date of calculation (it being understood and agreed that where an
amount is calculated with reference to, or over, a period of time, the date of
calculation shall be the final date of such period of time).
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(c) Payments. Whenever any payment of cash is to be made by the Company to any
Person pursuant to this Note, unless otherwise expressly set forth herein,
such payment shall be made in lawful money of the United States of America by
a certified check drawn on the account of the Company and sent via overnight
courier service to such Person at such address as previously provided to the
Company in writing (which address, in the case of each of the Buyers, shall
initially be as set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement), provided that the Holder may elect to receive a payment
of cash via wire transfer of immediately available funds by providing the
Company with prior written notice setting out such request and the Holder's
wire transfer instructions. Whenever any amount expressed to be due by the
terms of this Note is due on any day which is not a Business Day, the same
shall instead be due on the next succeeding day which is a Business Day. Any
amount of Principal or other amounts due under the Transaction Documents which
is not paid when due (except to the extent such amount is simultaneously
accruing Interest at the Default Rate hereunder) shall result in a late charge
being incurred and payable by the Company in an amount equal to interest on
such amount at the rate of eighteen percent (18%) per annum from the date such
amount was due until the same is paid in full ("Late Charge"). 24.
CANCELLATION. After all Principal, accrued Interest, Late Charges and other
amounts at any time owed on this Note or any other Transaction Documents have
been paid in full, this Note shall automatically be deemed canceled, shall be
surrendered to the Company for cancellation and shall not be reissued. 25.
WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
irrevocably waives demand, notice, presentment, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default
or enforcement of this Note and the Securities Purchase Agreement. 26.
GOVERNING LAW. This Note shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than
the State of New York. Except as otherwise required by Section 22 above, the
Company hereby irrevocably submits to the exclusive jurisdiction of the state
and federal courts sitting in The City of New York, Borough of Manhattan, for
the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. Nothing contained herein (i) shall be deemed or
operate to preclude the Holder from bringing suit or taking other legal action
against the Company in any other jurisdiction to collect on the Company's
obligations to the Holder, or to enforce a judgment or other court ruling in
favor of the Holder or (ii) shall limit, or shall be deemed or construed to
limit, any provision of Section 22. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
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27. JUDGMENT CURRENCY. (a) If for the purpose of obtaining or enforcing
judgment against the Company in any court in any jurisdiction it becomes
necessary to convert into any other currency (such other currency being
hereinafter in this Section 27 referred to as the "Judgment Currency") an
amount due in U.S. dollars under this Note, the conversion shall be made at
the Exchange Rate prevailing on the Trading Day immediately preceding: (i) the
date actual payment of the amount due, in the case of any proceeding in the
courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or (ii) the date on which
the foreign court determines, in the case of any proceeding in the courts of
any other jurisdiction (the date as of which such conversion is made pursuant
to this Section 27(a)(ii) being hereinafter referred to as the "Judgment
Conversion Date"). (b) If in the case of any proceeding in the court of any
jurisdiction referred to in Section 27(a)(ii) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and the date of
actual payment of the amount due, the applicable party shall pay such adjusted
amount as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the Exchange Rate prevailing on the date of
payment, will produce the amount of US dollars which could have been purchased
with the amount of Judgment Currency stipulated in the judgment or judicial
order at the Exchange Rate prevailing on the Judgment Conversion Date. (c) Any
amount due from the Company under this provision shall be due as a separate
debt and shall not be affected by judgment being obtained for any other
amounts due under or in respect of this Note. 28. SEVERABILITY. If any
provision of this Note is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and
enforceable, and the invalidity or unenforceability of such provision shall
not affect the validity of the remaining provisions of this Note so long as
this Note as so modified continues to express, without material change, the
original intentions of the parties as to the subject matter hereof and the
prohibited nature, invalidity or unenforceability of the provision(s) in
question does not substantially impair the respective expectations or
reciprocal obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or
unenforceable provision(s) with a valid provision(s), the effect of which
comes as close as possible to that of the prohibited, invalid or unenforceable
provision(s).
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29. MAXIMUM PAYMENTS. Without limiting Section 9(d) of the Securities Purchase
Agreement, nothing contained herein shall be deemed to establish or require
the payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest required
to be paid or other charges hereunder exceed the maximum permitted by such
law, any payments in excess of such maximum shall be credited against amounts
owed by the Company to the Holder and thus refunded to the Company. 30.
CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have
the following meanings: (a) "1933 Act" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder. (b) "1934 Act" means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. (c) "Acceleration Conversion Price" means, with respect to any
given Acceleration Date, the lower of (i) the Installment Conversion Price for
such Current Installment Date related to such Acceleration Date and (ii) the
greater of (x) the Floor Price and (y) 93% of the Acceleration Market Price.
(d) "Acceleration Market Price" means, with respect to any given Acceleration
Date, the lesser of (i) the VWAP of the Common Stock on the Trading Day
immediately prior to such Acceleration Date and (ii) the quotient of (x) the
sum of the VWAP of the Common Stock for each Trading Day during the five (5)
consecutive Trading Day period ending, and including, the Trading Day
immediately prior to such Acceleration Date, divided by (y) five (5). All such
determinations to be appropriately adjusted for any share split, share
dividend, share combination or other similar transaction during any such
measuring period. (e) "Acceleration Floor Amount" means an amount in cash, to
be delivered by wire transfer of immediately available funds pursuant to wire
instructions delivered to the Company by the Holder in writing, equal to the
product obtained by multiplying (A) the higher of (I) the highest price that
the shares of Common Stock trades at on the Trading Day immediately preceding
the relevant Acceleration Date with respect to such Acceleration and (II) the
applicable Acceleration Conversion Price of such Acceleration Date and (B) the
difference obtained by subtracting (I) the number of shares of Common Stock
delivered (or to be delivered) to the Holder on the applicable Share Delivery
Deadline with respect to such Acceleration from (II) the quotient obtained by
dividing (x) the applicable Acceleration Amount that the Holder has elected to
be the subject of the applicable Acceleration, by (y) the applicable
Acceleration Conversion Price of such Acceleration Date without giving effect
to clause (x) of such definition or clause (x) of the definition of the
Installment Conversion Price, as applicable. (f) "Adjustment Right" means any
right granted with respect to any securities issued in connection with, or
with respect to, any issuance or sale (or deemed issuance or sale in
accordance with Section 7) of shares of Common Stock (other than rights of the
type described in Section 6(a) hereof) that could result in a decrease in the
net consideration received by the Company in connection with, or with respect
to, such securities (including, without limitation, any cash settlement
rights, cash adjustment or other similar rights).
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(g) "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such Person, it being understood for purposes of this definition that
"control" of a Person means the power directly or indirectly either to vote
10% or more of the stock having ordinary voting power for the election of
directors of such Person or direct or cause the direction of the management
and policies of such Person whether by contract or otherwise. (h) "Alternate
Conversion Price" means, with respect to any Alternate Conversion that price
which shall be the lower of (i) the applicable Conversion Price as in effect
on the applicable Conversion Date of the applicable Alternate Conversion, and
(ii) 80% of the Market Price as of the Trading Day of the delivery or deemed
delivery of the applicable Conversion Notice (such period, the "Alternate
Conversion Measuring Period"). All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination, reclassificatio
n or similar transaction that proportionately decreases or increases the
Common Stock during such Alternate Conversion Measuring Period. (i) "Approved
Stock Plan" means any employee benefit plan which has been approved by the
board of directors of the Company prior to or subsequent to the Subscription
Date pursuant to which shares of Common Stock and standard options to purchase
Common Stock may be issued to any employee, officer or director for services
provided to the Company in their capacity as such. (j) "Attribution Parties"
means, collectively, the following Persons and entities: (i) any investment
vehicle, including, any funds, feeder funds or managed accounts, currently, or
from time to time after the Issuance Date, directly or indirectly managed or
advised by the Holder's investment manager or any of its Affiliates or
principals, (ii) any direct or indirect Affiliates of the Holder or any of the
foregoing, (iii) any Person acting or who could be deemed to be acting as a
Group together with the Holder or any of the foregoing and (iv) any other
Persons whose beneficial ownership of the Company's Common Stock would or
could be aggregated with the Holder's and the other Attribution Parties for
purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the
foregoing is to subject collectively the Holder and all other Attribution
Parties to the Maximum Percentage. (k) "Available Cash" means, with respect to
any date of determination, an amount equal to the aggregate amount of the Cash
of the Company and its Subsidiaries (excluding for this purpose cash held in
restricted accounts or otherwise unavailable for unrestricted use by the
Company or any of its Subsidiaries for any reason) and Reclaimable Cash as of
such date of determination held in bank accounts of financial banking
institutions in the United States of America or in bank accounts of reputable
financial banking institutions in such other country or countries as the
Company has a bona fide business purpose to hold such Cash (other than with a
purpose to circumvent or otherwise misrepresent the aggregate amount of
Available Cash required pursuant to the terms and conditions of this Note).
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(l) "Black Scholes Consideration Value" means the value of the applicable
Option, Convertible Security or Adjustment Right (as the case may be) as of
the date of issuance thereof calculated using the Black Scholes Option Pricing
Model obtained from the "OV" function on Bloomberg utilizing (i) an underlying
price per share equal to the Closing Sale Price of the Common Stock on the
Trading Day immediately preceding the public announcement of the execution of
definitive documents with respect to the issuance of such Option, Convertible
Security or Adjustment Right (as the case may be), (ii) a risk-free interest
rate corresponding to the U.S. Treasury rate for a period equal to the
remaining term of such Option, Convertible Security or Adjustment Right (as
the case may be) as of the date of issuance of such Option, Convertible
Security or Adjustment Right (as the case may be), (iii) a zero cost of borrow
and (iv) an expected volatility equal to the greater of 100% and the 30 day
volatility obtained from the "HVT" function on Bloomberg (determined utilizing
a 365 day annualization factor) as of the Trading Day immediately following
the date of issuance of such Option, Convertible Security or Adjustment Right
(as the case may be). (m) "Bloomberg" means Bloomberg, L.P. (n) "Business Day"
means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain
closed; provided, however, for clarification, commercial banks shall not be
deemed to be authorized or required by law to remain closed due to "stay at
home", "shelter-in-place", "non-essential employee" or any other similar
orders or restrictions or the closure of any physical branch locations at the
direction of any governmental authority so long as the electronic funds
transfer systems (including for wire transfers) of commercial banks in The
City of New York generally are open for use by customers on such day. (o)
"Cash" of the Company and its Subsidiaries on any date shall be determined
from such Persons' books maintained in accordance with GAAP, and means,
without duplication, the cash, cash equivalents and Eligible Marketable
Securities accrued by the Company and its wholly owned Subsidiaries on a
consolidated basis on such date. (p) "Change of Control" means any Fundamental
Transaction other than (i) any merger of the Company or any of its, direct or
indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons,
(ii) any reorganization, recapitalization or reclassification of the shares of
Common Stock in which holders of the Company's voting power immediately prior
to such reorganization, recapitalization or reclassification continue after
such reorganization, recapitalization or reclassification to hold publicly
traded securities and, directly or indirectly, are, in all material respects,
the holders of the voting power of the surviving entity (or entities with the
authority or voting power to elect the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities)
after such reorganization, recapitalization or reclassification, or (iii)
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company or any of its Subsidiaries. (q)
"Change of Control Redemption Premium" means 125%.
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(r) "Closing Bid Price" and "Closing Sale Price" means, for any security as of
any date, the last closing bid price and last closing trade price,
respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price
(as the case may be) then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing bid
price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded
as reported by Bloomberg, or if the foregoing do not apply, the last closing
bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the average of the
bid prices, or the ask prices, respectively, of any market makers for such
security as reported in The Pink Open Market (or a similar organization or
agency succeeding to its functions of reporting prices). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price (as the case may be) of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in accordance with the
procedures in Section 22. All such determinations shall be appropriately
adjusted for any stock splits, stock dividends, stock combinations,
recapitalizations or other similar transactions during such period. (s)
"Common Stock" means (i) the Company's shares of Class A common stock,
$0.00001 par value per share, and (ii) any capital stock into which such
common stock shall have been changed or any share capital resulting from a
reclassification of such common stock. (t) "Conversion Floor Price Condition"
means that the relevant Acceleration Conversion Price (including any
Installment Conversion Price referred to therein) or Installment Conversion
Price, as applicable, is being determined based on sub-clause (x) of such
definitions. (u) "Conversion Installment Floor Amount" means an amount in
cash, to be delivered by wire transfer of immediately available funds pursuant
to wire instructions delivered to the Company by the Holder in writing, equal
to the product obtained by multiplying (A) the higher of (I) the highest price
that the shares of Common Stock trades at on the Trading Day immediately
preceding the relevant Installment Date and (II) the applicable Installment
Conversion Price and (B) the difference obtained by subtracting (I) the number
of shares of Common Stock delivered (or to be delivered) to the Holder on the
applicable Installment Date with respect to such Installment Conversion from
(II) the quotient obtained by dividing (x) the applicable Installment Amount
subject to such Installment Conversion, by (y) the applicable Installment
Conversion Price without giving effect to clause (x) of such definition.
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(v) "Convertible Securities" means any stock or other security (other than
Options) that is at any time and under any circumstances, directly or
indirectly, convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any shares of Common Stock.
(w) "Current Public Information Failure" means the Company's failure for any
reason to satisfy the requirements of Rule 144(c)(1), including, without
limitation, the failure to satisfy the current public information requirement
under Rule 144(c) or the Company has ever been an issuer described in Rule
144(i)(1)(i) or becomes such an issuer in the future, and the Company shall
fail to satisfy any condition set forth in Rule 144(i)(2). (x) "Eligible
Market" means the NYSE American, the Nasdaq Global Select Market, the Nasdaq
Global Market, the Nasdaq Capital Market or the Principal Market. (y)
"Eligible Marketable Securities" as of any date means marketable securities
which would be reflected on a consolidated balance sheet of the Company and
its Subsidiaries prepared as of such date in accordance with GAAP, and which
are permitted under the Company's investment policies as in effect on the
Issuance Date or approved thereafter by the Company's Board of Directors. (z)
"Equity Conditions" means, with respect to any given date of determination:
(i) on each day during the period beginning thirty calendar days prior to the
applicable date of determination and ending on and including the applicable
date of determination (the "Equity Conditions Measuring Period"), the Common
Stock (including all Underlying Securities (as defined in the Securities
Purchase Agreement)) is listed or designated for quotation (as applicable) on
an Eligible Market and shall not have been suspended from trading on an
Eligible Market (other than suspensions of not more than two (2) days and
occurring prior to the applicable date of determination due to business
announcements by the Company) nor shall delisting or suspension by an Eligible
Market have been threatened (with a reasonable prospect of delisting occurring
after giving effect to all applicable notice, appeal, compliance and hearing
periods) or reasonably likely to occur or pending as evidenced by (A) a
writing by such Eligible Market or (B) the Company falling below the minimum
listing maintenance requirements of the Eligible Market on which the Common
Stock is then listed or designated for quotation (as applicable); (ii) during
the Equity Conditions Measuring Period, the Company shall have delivered all
shares of Common Stock issuable upon conversion of this Note on a timely basis
as set forth in Section 3 hereof and all other shares of capital stock
required to be delivered by the Company on a timely basis as set forth in the
other Transaction Documents; (iii) any shares of Common Stock to be issued in
connection with the event requiring determination (or issuable upon conversion
of the Conversion Amount being redeemed in the event requiring this
determination) may be issued in full without violating Section 3(d) hereof;
(iv) any shares of Common Stock to be issued in connection with the event
requiring determination (or issuable upon conversion of the Conversion Amount
being redeemed in the event requiring this determination (without regards to
any limitations on conversion set forth herein)) may be issued in full without
violating the rules or regulations of the Eligible Market on which the Common
Stock is then listed or designated for quotation (as applicable); (v) on each
day during the Equity Conditions
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Measuring Period, no public announcement of a pending, proposed or intended
Fundamental Transaction shall have occurred which has not been abandoned,
terminated or consummated; (vi) no Current Public Information Failure then
exists or is continuing; (vii) the Holder shall not be in (and no Other Holder
shall be in) possession of any material, non-public information provided to
any of them by the Company, any of its Subsidiaries or any of their respective
affiliates, employees, officers, representatives, agents or the like; (viii)
on each day during the Equity Conditions Measuring Period, the Company
otherwise shall have been in compliance with each, and shall not have breached
any representation or warranty in any material respect (other than
representations or warranties subject to material adverse effect or
materiality, which may not be breached in any respect) or any covenant or
other term or condition of any Transaction Document, including, without
limitation, the Company shall not have failed to timely make any payment
pursuant to any Transaction Document, in each case, which has not been waived;
(ix) on each Trading Day during the Equity Conditions Measuring Period, there
shall not have occurred any Volume Failure or Price Failure as of such
applicable date of determination; (x) on the applicable date of determination
(A) no Authorized Share Failure shall exist or be continuing and all shares of
Common Stock to be issued in connection with the event requiring this
determination (or issuable upon conversion of the Conversion Amount being
redeemed in the event requiring this determination at the Alternate Conversion
Price then in effect (without regard to any limitations on conversion set
forth herein)) (each, a "Required Minimum Securities Amount") are available
under the certificate of incorporation of the Company and reserved by the
Company to be issued pursuant to the Notes and (B) all shares of Common Stock
to be issued in connection with the event requiring this determination (or
issuable upon conversion of the Conversion Amount being redeemed in the event
requiring this determination (without regards to any limitations on conversion
set forth herein)) may be issued in full without resulting in an Authorized
Share Failure; (xi) on each day during the Equity Conditions Measuring Period,
there shall not have occurred and there shall not exist an Event of Default
(as defined in the Notes) or an event that with the passage of time or giving
of notice would constitute an Event of Default (regardless of whether the
Holder has submitted an Event of Default Redemption Notice), in each case,
which has not been waived; (xii) no bona fide dispute shall exist, by and
between any of holder of Notes, the Company, the Principal Market (or such
applicable Eligible Market in which the Common Stock of the Company is then
principally trading) and/or FINRA with respect to any term or provision of any
Note or any other Transaction Document and (xiii) the shares of Common Stock
issuable pursuant to the event requiring the satisfaction of the Equity
Conditions are duly authorized and listed and eligible for trading without
restriction on an Eligible Market. (aa) "Equity Conditions Failure" means that
on any day during the period commencing twenty (20) Trading Days prior to the
applicable Installment Notice Date through the later of the applicable
Installment Date and the date on which the applicable shares of Common Stock
are actually delivered to the Holder, the Equity Conditions have not been
satisfied (or waived in writing by the Holder).
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(bb) "Excluded Securities" means (i) shares of Common Stock or standard
options to purchase Common Stock issued to directors, officers or employees of
the Company for services rendered to the Company in their capacity as such
pursuant to an Approved Stock Plan (as defined above), provided that (A) all
such issuances (taking into account the shares of Common Stock issuable upon
exercise of such options) after the Subscription Date pursuant to this clause
(i) do not, in the aggregate, exceed more than 5% of the Common Stock issued
and outstanding immediately prior to the Subscription Date and (B) the
exercise price of any such options is not lowered, none of such options are
amended to increase the number of shares issuable thereunder and none of the
terms or conditions of any such options are otherwise materially changed in
any manner that adversely affects any of the holders of Notes; (ii) shares of
Common Stock issued upon the conversion or exercise of Convertible Securities
or Options (other than standard options to purchase Common Stock issued
pursuant to an Approved Stock Plan that are covered by clause (i) above)
issued prior to the Subscription Date, provided that the conversion price of
any such Convertible Securities (other than standard options to purchase
Common Stock issued pursuant to an Approved Stock Plan that are covered by
clause (i) above) is not lowered, none of such Convertible Securities or
Options (other than standard options to purchase Common Stock issued pursuant
to an Approved Stock Plan that are covered by clause (i) above) are amended to
increase the number of shares issuable thereunder and none of the terms or
conditions of any such Convertible Securities or Options (other than standard
options to purchase Common Stock issued pursuant to an Approved Stock Plan
that are covered by clause (i) above) are otherwise materially changed in any
manner that adversely affects any of the holders of Notes; (iii) the shares of
Common Stock issuable upon conversion of the Notes or otherwise pursuant to
the terms of the Notes; provided, that the terms of the Notes are not amended,
modified or changed on or after the Subscription Date (other than antidilution
adjustments pursuant to the terms thereof in effect as of the Subscription
Date); and (iv) shares of Common Stock issued and sold, in one or more
transactions, pursuant to a Permitted ATM (as defined in the Securities
Purchase Agreement), provided that the aggregate purchase price for such
shares of Common Stock in such transaction or transactions shall not exceed
$10,000,000. For the avoidance of doubt, any sales of shares of Common Stock
pursuant to a Permitted ATM in excess of $10,000,000 shall not be included in
this definition of "Excluded Securities". (cc) "Floor Price" means $1.16,
subject to adjustment for stock splits, stock dividends, stock combinations,
recapitalizations or other similar events; provided, that the Company may
reduce the Floor Price to any amount set forth in a written notice to the
Holder with at least five (5) Trading Day prior written notice (or such other
time as the Company and the Holder shall mutually agree); provided, further,
that any such reduction shall be irrevocable and shall not be subject to
increase thereafter. (dd) "Fiscal Quarter" means each of the fiscal quarters
adopted by the Company for financial reporting purposes that correspond to the
Company's fiscal year as of the date hereof that ends on December 31. (ee)
"Fiscal Year" means the fiscal year adopted by the Company for financial
reporting purposes as of the date hereof that ends on December 31.
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(ff) "Fundamental Transaction" means (A) that the Company shall, directly or
indirectly, including through subsidiaries, Affiliates or otherwise, in one or
more related transactions, (i) consolidate or merge with or into (whether or
not the Company is the surviving corporation) another Subject Entity, or (ii)
sell, assign, transfer, convey or otherwise dispose of all or substantially
all of the properties or assets of the Company or any of its Significant
Subsidiaries to one or more Subject Entities, or (iii) make, or allow one or
more Subject Entities to make, or allow the Company to be subject to or have
its Common Stock be subject to or party to one or more Subject Entities
making, a purchase, tender or exchange offer that is accepted by the holders
of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50%
of the outstanding shares of Common Stock calculated as if any shares of
Common Stock held by all Subject Entities making or party to, or Affiliated
with any Subject Entities making or party to, such purchase, tender or
exchange offer were not outstanding; or (z) such number of shares of Common
Stock such that all Subject Entities making or party to, or Affiliated with
any Subject Entity making or party to, such purchase, tender or exchange
offer, become collectively the beneficial owners (as defined in Rule 13d-3
under the 1934 Act) of at least 50% of the outstanding shares of Common Stock,
or (iv) consummate a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with one or more Subject Entities whereby
all such Subject Entities, individually or in the aggregate, acquire, either
(x) at least 50% of the outstanding shares of Common Stock, (y) at least 50%
of the outstanding shares of Common Stock calculated as if any shares of
Common Stock held by all the Subject Entities making or party to, or
Affiliated with any Subject Entity making or party to, such stock purchase
agreement or other business combination were not outstanding; or (z) such
number of shares of Common Stock such that the Subject Entities become
collectively the beneficial owners (as defined in Rule 13d-3 under the 1934
Act) of at least 50% of the outstanding shares of Common Stock, or (v)
reorganize, recapitalize or reclassify its Common Stock, (B) that the Company
shall, directly or indirectly, including through subsidiaries, Affiliates or
otherwise, in one or more related transactions, allow any Subject Entity
individually or the Subject Entities in the aggregate to be or become the
"beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, whether through acquisition, purchase, assignment, conveyance,
tender, tender offer, exchange, reduction in outstanding shares of Common
Stock, merger, consolidation, business combination, reorganization,
recapitalization, spin-off, scheme of arrangement, reorganization,
recapitalization or reclassification or otherwise in any manner whatsoever, of
either (x) at least 50% of the aggregate ordinary voting power represented by
issued and outstanding Common Stock, (y) at least 50% of the aggregate
ordinary voting power represented by issued and outstanding Common Stock not
held by all such Subject Entities as of the date of this Note calculated as if
any shares of Common Stock held by all such Subject Entities were not
outstanding, or (z) a percentage of the aggregate ordinary voting power
represented by issued and outstanding shares of Common Stock or other equity
securities of the Company sufficient to allow such Subject Entities to effect
a statutory short form merger or other transaction requiring other
stockholders of the Company to surrender their shares of Common Stock without
approval of the stockholders of the Company or (C) directly or indirectly,
including through subsidiaries, Affiliates or otherwise, in one or more
related transactions, the issuance of or the entering into any other
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instrument or transaction structured in a manner to circumvent, or that
circumvents, the intent of this definition in which case this definition shall
be construed and implemented in a manner otherwise than in strict conformity
with the terms of this definition to the extent necessary to correct this
definition or any portion of this definition which may be defective or
inconsistent with the intended treatment of such instrument or transaction.
(gg) "GAAP" means United States generally accepted accounting principles,
consistently applied. (hh) "Group" means a "group" as that term is used in
Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder. (ii)
"Holder Pro Rata Amount" means a fraction (i) the numerator of which is the
original Principal amount of this Note issued to the Holder on the Initial
Closing Date and (ii) the denominator of which is the aggregate original
principal amount of all Notes issued to the initial purchasers pursuant to the
Securities Purchase Agreement on the Initial Closing Date. (jj) "Indebtedness"
shall have the meaning ascribed to such term in the Securities Purchase
Agreement. (kk) "Initial Closing Date" shall have the meaning set forth in the
Securities Purchase Agreement, which date is the date the Company initially
issued Initial Notes (as defined in the Securities Purchase Agreement)
pursuant to the terms of the Securities Purchase Agreement. (ll) "Installment
Amount" means the sum of (A) (i) with respect to any Installment Date other
than the Maturity Date, the lesser of (x) the Holder Pro Rata Amount of
$18,888,888.89 and (y) the Principal amount then outstanding under this Note
as of such Installment Date, and (ii) with respect to the Installment Date
that is the Maturity Date, the Principal amount then outstanding under this
Note as of such Installment Date (in each case, as any such Installment Amount
may be reduced pursuant to the terms of this Note, whether upon conversion,
redemption or Deferral), (B) any Deferral Amount deferred pursuant to Section
8(d) and included in such Installment Amount in accordance therewith, (C) any
Acceleration Amount accelerated pursuant to Section 8(e) and included in such
Installment Amount in accordance therewith and (D) in each case of clauses (A)
through (C) above, the sum of any accrued and unpaid Interest as of such
Installment Date under this Note, if any, and accrued and unpaid Late Charges,
if any, under this Note as of such Installment Date. In the event the Holder
shall sell or otherwise transfer any portion of this Note, the transferee
shall be allocated a pro rata portion of each unpaid Installment Amount
hereunder. (mm) "Installment Conversion Price" means, with respect to a
particular date of determination, the lower of (i) the Conversion Price then
in effect, and (ii) the greater of (x) the Floor Price and (y) 93% of the
Market Price of the applicable Installment Date. All such determinations to be
appropriately adjusted for any stock split, stock dividend, stock combination
or other similar transaction during any such measuring period.
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(nn) "Installment Date" means (i) September 29, 2023, (ii) then, each three
month anniversary thereafter until the Maturity Date, and (iii) the Maturity
Date; provided that if any such date is not a Business Day, the next Business
Day. (oo) "Indenture" means that certain Indenture for Debt Securities dated
as of the Initial Closing Date, by and between the Company and the Trustee, as
may be amended, modified or supplemented from time to time, including, without
limitation, by any Supplemental Indenture (as defined below). (pp)
"Investment" means any beneficial ownership (including stock, partnership or
limited liability company interests) of or in any Person, or any loan, advance
or capital contribution to any Person or the acquisition of all, or
substantially all, of the assets of another Person or the purchase of any
assets of another Person for greater than the fair market value of such
assets. (qq) "Market Price" shall mean, as of any given date, the lower of (i)
the VWAP of the Common Stock on the Trading Day immediately prior to such date
and (ii) the quotient of (x) the sum of the VWAP of the Common Stock on each
Trading Day during the five (5) consecutive Trading Day period ending, and
including, the Trading Day immediately prior to such date, divided by (II)
five (5) (it being understood and agreed that all such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during such period). (rr) "Maturity Date" shall
mean September 29, 2025; provided, however, the Maturity Date may be extended
at the option of the Holder (i) in the event that, and for so long as, an
Event of Default shall have occurred and be continuing or any event shall have
occurred and be continuing that with the passage of time and the failure to
cure would result in an Event of Default or (ii) through the date that is
twenty (20) Business Days after the consummation of a Fundamental Transaction
in the event that a Fundamental Transaction is publicly announced or a Change
of Control Notice is delivered prior to the Maturity Date, provided further
that if a Holder elects to convert some or all of this Note pursuant to
Section 3 hereof, and the Conversion Amount would be limited pursuant to
Section 3(d) hereunder, the Maturity Date shall automatically be extended
until such time as such provision shall not limit the conversion of this Note.
(ss) "Options" means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities. (tt) "Parent
Entity" of a Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is
quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest public
market capitalization as of the date of consummation of the Fundamental
Transaction.
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(uu) "Permitted Convertible Securities" means (a) any Convertible Securities
of the Company issued after July 11, 2023 in exchange for Indebtedness of the
Company outstanding as of the Subscription Date; provided, that (i) such
Convertible Securities are pari passu or subordinate to the terms of the
Notes, (ii) the terms of such Convertible Securities are not more favorable to
such holders of Convertible Securities than the terms of the Notes, (iii) the
amounts outstanding under such Convertible Securities do not increase as a
result of such exchange and (iv) such Convertible Securities shall not
prohibit or limit in any manner any term or condition under the Transaction
Documents and/or any amendment, or modification or waiver hereunder or
thereunder, as applicable, including, but not limited to (x) any prohibition
on any payment of cash by the Company in respect of any obligation under the
Notes and (y) any limitation on conversion or the payment of any amounts by
the Company in shares of Common Stock, in accordance with the terms of the
Notes; and (b) any Convertible Securities issued after the 12-month
anniversary of the Initial Closing Date; provided, that (i) such Convertible
Securities are pari passu or subordinate to the terms of the Notes, and (ii)
such Convertible Securities shall not prohibit or limit in any manner any term
or condition under the Transaction Documents and/or any amendment, or
modification or waiver hereunder or thereunder, as applicable, including, but
not limited to (x) any prohibition on any payment of cash by the Company in
respect of any obligation under the Notes and (y) any limitation on conversion
or the payment of any amounts by the Company in shares of Common Stock, in
accordance with the terms of the Notes. (vv) "Permitted Indebtedness" means
(i) Indebtedness evidenced by this Note and the Other Notes, (ii) Indebtedness
set forth on Schedule 3(s) to the Securities Purchase Agreement, as in effect
as of the Subscription Date, (iv) Permitted Convertible Securities, (v)
Indebtedness secured by Permitted Liens or unsecured but as described in
clauses (iv) and (v) of the definition of Permitted Liens, (vi) non-convertible
Indebtedness to trade creditors incurred in the ordinary course of business
(not otherwise excluded from the definition of Indebtedness), including
non-convertible Indebtedness incurred in the ordinary course of business with
corporate credit cards, (vii) non-convertible Indebtedness arising from
letters of credit (or similar instruments) in the ordinary course of business,
(viii) non-convertible Indebtedness arising from operating and financing
leases in the ordinary course of business, (ix) non-convertible Indebtedness
incurred under working capital facilities entered into in the ordinary course
of business, provided such facilities do not exceed $200,000,000 in the
aggregate (the "Permitted WC Facility"), (x) non-convertible intercompany
Indebtedness owed between the Company and/or any Subsidiary (or between any
Subsidiaries), as applicable, (xi) non-convertible Indebtedness consisting of
subsidized loans made, or guaranteed, by a governmental entity, (xii) to the
extent constituting non-convertible Indebtedness, obligations owed to an
insurance company incurred in the ordinary course of business with respect to
premiums payable for property, casualty, or other insurance, so long as such
indebtedness shall not be in excess of the
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amount of the unpaid cost of, and shall be incurred only to defer the cost of,
such insurance for the year in which such indebtedness is incurred and such
indebtedness shall be outstanding only during such year, (xiii) non-
convertible Indebtedness in respect of surety and appeal bonds, performance
bonds, bid bonds, appeal bonds, completion guarantees and similar obligations
incurred in the ordinary course of business, and (xiv) other non- convertible
Indebtedness not to exceed $25,000,000; provided, that (A) all Permitted
Indebtedness must be pari passu or subordinate to the terms of the Notes
(other than Permitted Indebtedness secured by Permitted Liens), and (B) no
Permitted Indebtedness shall prohibit or limit in any manner any term or
condition under the Transaction Documents and/or any amendment, or
modification or waiver hereunder or thereunder, as applicable, including, but
not limited to (x) any prohibition on any payment of cash by the Company in
respect of any obligation under the Notes and (y) any limitation on conversion
or the payment of any amounts by the Company in shares of Common Stock, in
accordance with the terms of the Notes. (ww) "Permitted Liens" means (i) any
Lien for taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, (ii) any statutory Lien arising in the ordinary course
of business by operation of law with respect to a liability that is not yet
due or delinquent, (iii) any Lien created by operation of law, such as
materialmen's liens, mechanics' liens and other similar liens, arising in the
ordinary course of business with respect to a liability that is not yet due or
delinquent or that are being contested in good faith by appropriate
proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the
Company or any of its Subsidiaries to secure the purchase price of such
equipment or Indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment at
the time of its acquisition, provided that the Lien is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
equipment, in either case, with respect to Indebtedness in an aggregate amount
not to exceed $200,000,000, (v) Liens incurred in connection with the
extension, renewal or refinancing of the Indebtedness secured by Liens of the
type described in clause (iv) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the Indebtedness being extended, renewed or
refinanced does not increase, (vi) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payments of custom duties in
connection with the importation of goods, (vii) Liens arising from judgments,
decrees or attachments in circumstances not constituting an Event of Default
under Section 4(a)(x) and (viii) Liens with respect to any accounts
receivables or inventory of the Company and its Subsidiaries securing the
Permitted WC Facility. (xx) "Person" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity or a government or any
department or agency thereof.
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(yy) "Price Failure" means, with respect to a particular date of determination,
the VWAP of the Common Stock on any Trading Day during the twenty (20) Trading
Day period ending on the Trading Day immediately preceding such date of
determination fails to exceed $1.16 (as adjusted for stock splits, stock
dividends, stock combinations, recapitalizations or other similar transactions
occurring after the Subscription Date). All such determinations to be
appropriately adjusted for any stock splits, stock dividends, stock
combinations, recapitalizations or other similar transactions during any such
measuring period. (zz) "Principal Market" means the New York Stock Exchange.
(aaa) "Reclaimable Cash" means, as of any given date of determination, (i)
unavailable Cash as of such date of determination that is eligible to be
returned to the Company or any of its Subsidiaries, as applicable, at the
conclusion of any agreement where such Cash would otherwise not be considered
cash and cash equivalents for purposes of GAAP, but which is reasonably
expected to be released as unrestricted Cash of the Company or any of its
Subsidiaries within 90 days of such date of determination (including, for the
avoidance of doubt, any Cash amounts so restricted due to a letter of credit
supporting supplier contractual obligations) and (ii) order deposits made
through credit card transactions whereby Cash payments are held by financial
institutions until the vehicle being purchased by any such applicable customer
is delivered to such applicable customer (but solely with respect to such Cash
payments that are reasonably expected to be released to the Company or any of
its Subsidiaries, as applicable, within 90 days of such date of determination
upon delivery of such applicable vehicle(s) to such applicable customer(s)
and/or non-refundable payments that with the passage of time will become an
asset of the Company (or such applicable Subsidiary) under GAAP)(regardless of
whether the vehicle(s) is delivered)) at which time the Cash is deposited into
the Company's (or such applicable Subsidiary's) bank account and available for
the Company's (or such applicable Subsidiary's) unrestricted use. (bbb)
"Redemption Notices" means, collectively, the Event of Default Redemption
Notices, the Installment Notices with respect to any Installment Redemption,
and the Change of Control Redemption Notices, and each of the foregoing,
individually, a "Redemption Notice." (ccc) "Redemption Premium" means 125%.
(ddd) "Redemption Prices" means, collectively, Event of Default Redemption
Prices, the Change of Control Redemption Prices, and the Installment
Redemption Prices, and each of the foregoing, individually, a "Redemption
Price." (eee) "SEC" means the United States Securities and Exchange Commission
or the successor thereto. (fff) "Securities Purchase Agreement" means that
certain securities purchase agreement, dated as of the Subscription Date, by
and among the Company and the initial holders of the Notes pursuant to which
the Company issued the Notes, as may be amended from time to time.
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(ggg) "Significant Subsidiaries" or "Significant Subsidiary" means, as of any
time of determination, any of the "significant subsidiaries" (as defined in
Rule 1-02 of Regulation S-X) of the Company as of such time of determination.
(hhh) "Subscription Date" means July 10, 2023. (iii) "Subsidiaries" shall have
the meaning as set forth in the Securities Purchase Agreement. (jjj) "Subject
Entity" means any Person, Persons or Group or any Affiliate or associate of
any such Person, Persons or Group. (kkk) "Successor Entity" means the Person
(or, if so elected by the Holder, the Parent Entity) formed by, resulting from
or surviving any Fundamental Transaction or the Person (or, if so elected by
the Holder, the Parent Entity) with which such Fundamental Transaction shall
have been entered into. (lll) "Supplemental Indenture" shall have the meaning
ascribed to such term in the Securities Purchase Agreement, as each such
supplemental indenture may be amended, modified or supplemented from time to
time. (mmm) "Trading Day" means, as applicable, (x) with respect to all price
or trading volume determinations relating to the Common Stock, any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock
is then traded, provided that "Trading Day" shall not include any day on which
the Common Stock is scheduled to trade on such exchange or market for less
than 4.5 hours or any day that the Common Stock is suspended from trading
during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading
on such exchange or market, then during the hour ending at 4:00:00 p.m., New
York time) unless such day is otherwise designated as a Trading Day in writing
by the Holder or (y) with respect to all determinations other than price
determinations relating to the Common Stock, any day on which The New York
Stock Exchange (or any successor thereto) is open for trading of securities.
(nnn) "Triggering Event" means the occurrence of any Event of Default
(assuming for such purpose that "$10,000,000" replaces "$25,000,000", where
applicable, in each clause of the definition of Event of Default). (ooo)
"Trustee" means Wilmington Savings Fund Society, FSB, in its capacity as
trustee under the Indenture, or any successor or any additional trustee
appointed with respect to the Notes pursuant to the Indenture.
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(ppp) "Volume Failure" means, with respect to a particular date of
determination, if either (x) the aggregate daily dollar trading volume (as
reported on Bloomberg) of the Common Stock on the Principal Market on more
than five (5) Trading Days during the twenty (20) Trading Day period ending on
the Trading Day immediately preceding such date of determination, or (y) the
aggregate daily dollar trading volume (as reported on Bloomberg) of the Common
Stock on the Principal Market on any Trading Day during the five (5) Trading
Day period ending on the Trading Day immediately preceding such date of
determination, as applicable, is less than $25,000,000. (qqq) "VWAP" means,
for any security as of any date, the dollar volume-weighted average price for
such security on the Principal Market (or, if the Principal Market is not the
principal trading market for such security, then on the principal securities
exchange or securities market on which such security is then traded), during
the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New
York time, as reported by Bloomberg through its "VAP" function (set to 09:30
start time and 16:00 end time) or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market
on the electronic bulletin board for such security during the period beginning
at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in The Pink Open Market (or a
similar organization or agency succeeding to its functions of reporting
prices). If the VWAP cannot be calculated for such security on such date on
any of the foregoing bases, the VWAP of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in accordance with the
procedures in Section 22. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination, recapitalizatio
n or other similar transaction during such period. 31. DISCLOSURE. Upon
delivery by the Company to the Holder (or receipt by the Company from the
Holder) of any notice in accordance with the terms of this Note, unless the
Company has in good faith determined that the matters relating to such notice
do not constitute material, non-public information relating to the Company or
any of its Subsidiaries (it being understood that a Dilutive Issuance, which
results in an adjustment of the Conversion Price, shall always be deemed
material for the purpose of this Section 31), the Company shall on or prior to
9:00 am, New York City time on the Business Day immediately following such
notice delivery date, publicly disclose such material, non-public information
on a Current Report on Form 8-K or otherwise. In the event that the Company
believes that a notice contains material, non-public information relating to
the Company or any of its Subsidiaries, the Company so shall indicate to the
Holder explicitly in writing in such notice (or immediately upon receipt of
notice from the Holder, as applicable), and in the absence of any such written
indication in such notice (or notification from the Company immediately upon
receipt of notice from the Holder), the Holder shall be entitled to presume
that information contained in the notice does not constitute material,
non-public information relating to the Company or any of its Subsidiaries.
Nothing contained in this Section 31 shall limit any obligations of the
Company, or any rights of the Holder, under Section 4(l) of the Securities
Purchase Agreement.
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32. ABSENCE OF TRADING AND DISCLOSURE RESTRICTIONS. The Company acknowledges
and agrees that the Holder is not a fiduciary or agent of the Company and that
the Holder shall have no obligation to (a) maintain the confidentiality of any
information provided by the Company or (b) refrain from trading any securities
while in possession of such information in the absence of a written
non-disclosure agreement signed by an officer of the Holder that explicitly
provides for such confidentiality and trading restrictions. In the absence of
such an executed, written non-disclosure agreement, the Company acknowledges
that the Holder may freely trade in any securities issued by the Company, may
possess and use any information provided by the Company in connection with
such trading activity, and may disclose any such information to any third
party. [signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
the Issuance Date set out above. FISKER INC. By: /s/ Dr. Geeta Gupta-Fisker
Name: Dr. Geeta Gupta-Fisker Title: Chief Financial Officer and Chief
Operating Officer CERTIFICATE OF AUTHENTICATION This is one of the Securities
of the series designated herein referred to in the within-mentioned Indenture
and the applicable Supplemental Indenture. Dated: September 29, 2023
WILMINGTON SAVINGS FUND SOCIETY, FSB By: /s/ Patrick J. Healy Name: Patrick J.
Healy Title: Senior Vice President Senior Convertible Note - Signature Page
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EXHIBIT I FISKER INC. CONVERSION NOTICE Reference is made to the Series
[A][B][C][-][1][2][3][4] Senior Convertible Note (the "Note") issued to the
undersigned by Fisker Inc., a Delaware corporation (the "Company"). In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the Note indicated
below into shares of Class A Common Stock, $0.00001 par value per share (the
"Common Stock"), of the Company, as of the date specified below. Capitalized
terms not defined herein shall have the meaning as set forth in the Note. Date
of Conversion: Aggregate Principal to be converted: Aggregate accrued and
unpaid Interest and accrued and unpaid Late Charges with respect to such
portion of the Aggregate Principal and such Aggregate Interest to be
converted: AGGREGATE CONVERSION AMOUNT TO BE CONVERTED: Please confirm the
following information: Conversion Price: Number of shares of Common Stock to
be issued: Installment Amount(s) to be reduced (and corresponding Installment
Date(s)) and amount of reduction: If this Conversion Notice is being
delivered with respect to an Alternate Conversion, check here if Holder is
electing to use the following Alternate Conversion Price:____________ If this
Conversion Notice is being delivered with respect to an Acceleration, check
here if Holder is electing to use _________ as the Installment Conversion
Price (as applicable) related to the following Installment Date:____________
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Please issue the Common Stock into which the Note is being converted to
Holder, or for its benefit, as follows: Check here if requesting delivery as
a certificate to the following name and to the following address: Issue to:
Check here if requesting delivery by Deposit/Withdrawal at Custodian as
follows: DTC Participant: DTC Number: DTC Participant Phone Number: Account
Number: The source for these shares of Common Stock is reserve account [.],
with an effective date of [.], 20[.]. Date: _____________ __, Name of
Registered Holder By: Name: Title: Tax ID:_____________________ E-mail
Address: Mailing Address:
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Exhibit II ACKNOWLEDGMENT The Company hereby (a) acknowledges this Conversion
Notice, (b) certifies that the above indicated number of shares of Common
Stock are eligible to be resold by the Holder without restriction and hereby
directs _________________ to issue the above indicated number of shares of
Common Stock in accordance with the Transfer Agent Instructions dated
_____________, 20__ from the Company and acknowledged and agreed to by
________________________. FISKER INC. By: Name: Title:
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FISKER INC. SECOND SUPPLEMENTAL INDENTURE TO INDENTURE DATED JULY 11, 2023
Dated as of September 29, 2023 WILMINGTON SAVINGS FUND SOCIETY, FSB, as
Trustee Series B-1 Senior Convertible Note Due 2025
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FISKER INC. SECOND SUPPLEMENTAL INDENTURE TO INDENTURE DATED JULY 11, 2023
Series B-1 Senior Convertible Note Due 2025 SECOND SUPPLEMENTAL INDENTURE,
dated as of September 29, 2023 (this "Second Supplemental Indenture"), between
FISKER INC., a Delaware corporation (the "Company"), and WILMINGTON SAVINGS
FUND SOCIETY, FSB, as Trustee (the "Trustee"). RECITALS A. The Company filed a
registration statement on Form S-3 on December 23, 2021 (File Number 333-
261875) (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") pursuant to Rule 415 under the Securities Act of 1933,
as amended (the "Securities Act") and the Registration Statement has been
declared effective by the SEC on January 4, 2022. B. The Company has
heretofore executed and delivered to the Trustee an Indenture, dated as of
July 11, 2023, substantially in the form filed as an exhibit to the
Registration Statement (the "Indenture"), providing for the issuance from time
to time of Securities (as defined in the Indenture) by the Company. On July
11, 2023, the Company issued $340,000,000 in aggregate principal amount of
series A-1 senior unsecured convertible notes due 2025 (the "Series A-1
Notes") pursuant to the First Supplemental Indenture, dated as of July 11,
2023. As of the date hereof $337,000,000 in aggregate principal amount of
Series A-1 Notes remain outstanding. C. The Indenture has been qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). D.
Section 2 of the Indenture provides for various matters with respect to any
series of Securities issued under the Indenture to be established in an
indenture supplemental to the Indenture. E. Section 9.01 of the Indenture
provides that, without the consent of the Holders, for the Company and the
Trustee may enter into an indenture supplemental to the Indenture to establish
the form or terms of Securities of any series as provided by Section 2 of the
Indenture. F. In accordance with that certain Securities Purchase Agreement,
dated July 10, 2023, as amended by that certain Amendment No. 1 to Securities
Purchase Agreement dated as of September 29, 2023 (as so amended, the
"Securities Purchase Agreement"), by and among the Company and the investors
party thereto (the "Investors"), at the applicable Closing (as defined in the
Securities Purchase Agreement) related to this Second Supplemental Indenture,
the Company has agreed to sell to the Investors, and the Investors have agreed
to purchase from the Company, up to $170,000,000 in aggregate principal amount
of Notes (as defined below) (in one or more tranches, in accordance with the
terms of the Securities Purchase Agreement), subject to the satisfaction of
certain terms and conditions set forth in the Securities Purchase Agreement,
in each case, pursuant to (i) the Indenture, (ii) this Second Supplemental
Indenture, (iii) the Securities Purchase Agreement and (iv) the Registration
Statement.
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G. The Company hereby desires to supplement the Indenture pursuant to this
Second Supplemental Indenture to set forth the terms and conditions of the
Notes to be issued in accordance herewith. NOW, THEREFORE, THIS SECOND
SUPPLEMENTAL INDENTURE WITNESSETH, for and in consideration of the premises
and the issuance of the series of Securities provided for herein, it is
mutually agreed, for the equal and proportionate benefit of all Holders of the
Securities of such series, as follows: ARTICLE I RELATION TO INDENTURE;
DEFINITIONS Section 1.1. RELATION TO INDENTURE. This Second Supplemental
Indenture constitutes an integral part of the Indenture. Section 1.2.
DEFINITIONS. For all purposes of this Second Supplemental Indenture: (a)
Capitalized terms used herein without definition shall have the meanings
specified in the Indenture or in the Notes, as applicable; (b) All references
herein to Articles and Sections, unless otherwise specified, refer to the
corresponding Articles and Sections of this Second Supplemental Indenture; and
(c) The terms "herein," "hereof," "hereunder" and other words of similar
import refer to this Second Supplemental Indenture. ARTICLE II THE SERIES OF
SECURITIES Section 2.1. TITLE. There shall be a series of Securities
designated the "Series B-1 Senior Convertible Notes Due 2025" (the "Notes").
Section 2.2. LIMITATION ON AGGREGATE PRINCIPAL AMOUNT. The aggregate principal
amount of the Notes to be sold pursuant to the Securities Purchase Agreement
and to be issued pursuant to this Second Supplemental Indenture on the date
hereof shall be $170,000,000. Section 2.3. PRINCIPAL PAYMENT DATE. The
principal amount of the Notes outstanding (together with any accrued and
unpaid interest and other amounts) shall be payable in accordance with the
terms and conditions set forth in the Notes on each Conversion Date, Alternate
Conversion Date, redemption date and on the Maturity Date, in each case as
defined in the Notes.
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Section 2.4. INTEREST AND INTEREST RATES. Interest shall accrue and shall be
payable at such times and in the manner set forth in the Notes. Section 2.5.
PLACE OF PAYMENT. Except as otherwise provided by the Notes, the place of
payment where the Notes may be presented or surrendered for payment, where the
Notes may be surrendered for registration of transfer or exchange (to the
extent required or permitted, as applicable, by the terms of the Notes) and
where notices and demand to or upon the Trustee in respect of the Notes and
the Indenture may be served shall be: 500 Delaware Avenue, Wilmington, DE
19801, Attn.: Corporate Trust-Fisker Inc.; Telephone: (302) 573-3269;
Facsimile: (302) 421-9137; Email: PHealy@wsfsbank.com. Section 2.6.
REDEMPTION. The Company may redeem the Notes, in whole or in part, at such
times and in the manner set forth in the Notes. Section 2.7. DENOMINATION. The
Notes shall be issuable only in registered form without coupons and in minimum
denominations of $1,000 and integral multiples thereof. Section 2.8. CURRENCY.
Principal and interest and any other amounts payable, from time to time, on
the Notes shall be payable in such coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts in accordance with Section 23(b) of the Notes. Section 2.9. FORM
OF SECURITIES. The Notes shall be issued in the form attached hereto as
Exhibit A. Exhibit A also includes the form of Trustee's certificate of
authentication for the Notes. The Company has elected to issue only definitive
Securities and shall not issue any global Securities hereunder. Section 2.10.
CONVERTIBLE SECURITIES. The Notes are convertible into shares of Common Stock
(as defined in the Notes) of the Company upon the terms and conditions set
forth in the Notes and all references to "Common Stock" in the Indenture shall
be deemed to be references to Common Stock for all purposes thereunder. In
connection with any conversion of any given Note into Common Stock, the
Trustee may rely conclusively, without any independent investigation, on any
Conversion Notice (as defined in the Notes) executed by the applicable Holder
of such Note and an Acknowledgement (as defined in the Notes) signed by the
Company (in each case, in the forms attached as Exhibits I and II to the
Note), in lieu of the Company's obligations to deliver an Officer's
Certificate, Board Resolutions or an Opinion of Counsel pursuant to Article
Two, Article Three or Section 7.02 of the Indenture in connection with any
conversion of any Note. The applicable Conversion Notice and/or Acknowledgement
(unless subsequently revoked or withdrawn) shall be deemed to be a joint
instruction by the Company and such Holder to the Trustee to record on the
register of the Notes such conversion and decrease in the principal amount of
such Note by such aggregate principal amount of the Note converted, in each
case, as set forth in such applicable Conversion Notice and/or Acknowledgement.
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Section 2.11. REGISTRAR. The Trustee shall only serve initially as the
Security Registrar and not as a paying agent and, in such capacity, shall
maintain a register (the "Security Register") in which the Trustee shall
register the Notes and transfers of the Notes. The entries in the Security
Register shall be conclusive and binding for all purposes absent manifest
error. The initial Security Register shall be created by the Trustee in
connection with the authentication of the initial Notes in the names and
amounts detailed in the related Company Order. No Note may be transferred or
exchanged except in compliance with the authentication procedures of the
Trustee in accordance with this Second Supplemental Indenture. The Trustee
shall not register a transfer, exchange, redemption, conversion, cancellation
or any other action with respect to a Note unless instructed to do so in an
Officer's Certificate, Conversion Notice and/or Acknowledgement, as
applicable. Each Officer's Certificate, Conversion Notice and/or Acknowledgement
, as applicable, given to the Trustee in accordance with this Section 2.11
shall constitute a representation and warranty to the Trustee that the Trustee
shall be fully indemnified in connection with any liability arising out of or
related to any action taken by the Trustee in good faith reliance on such
Officer's Certificate, Conversion Notice and/or Acknowledgement, as
applicable. Section 2.12. SINKING FUND OBLIGATIONS. The Company has no
obligation to redeem or purchase any Notes pursuant to any sinking fund or
analogous requirement or upon the happening of a specified event or at the
option of a Holder thereof. Section 2.13. NO PAYING AGENT. Notwithstanding
anything in Section 2.06 of the Indenture to the contrary, the Company shall
not be required to appoint and has not appointed any Paying Agent in respect
of the Notes pursuant to the Indenture or any Supplemental Indenture and all
amounts payable, from time to time, pursuant to the Notes shall, for so long
as so long as no Paying Agent has been appointed, be paid directly by the
Company to the applicable Holder. Section 2.14. EVENTS OF DEFAULT. The Company
has elected that the provisions of Section 4 of the Notes shall govern all
Events of Default in lieu of Section 6 of the Indenture. Section 2.15.
EXCLUDED DEFINITIONS. The Company has elected that none of the following
definitions in the Indenture shall be applicable to the Notes and any
analogous definitions set forth in the Notes shall govern in lieu thereof: .
Definition of "Affiliate" in Section 1.01; . Definition of "Business Day" in
Section 1.01; . Definition of "Event of Default" in Section 6.01; . Definition
of "Person" in Section 1.01; and . Definition of "Subsidiary" in Section 1.01.
Section 2.16. EXCLUDED PROVISIONS. The Company has elected that none of the
following provisions of the Indenture shall be applicable to the Notes and any
analogous provisions (including definitions related thereto) of this Second
Supplemental Indenture and/or the Notes shall govern in lieu thereof: .
Section 2.03 (Form of Certificate of Authentication)
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. Section 2.07 (Paying Agent to Hold Money in Trust) . Section 2.08 (Transfer
and Exchange) . Section 2.09 (Replacement Securities) . Section 2.10
(Outstanding Securities) . Section 2.14 (Defaulted Interest) . Article 3
(Redemption) . Section 4.1 (Payment of Securities) . Section 4.06 (Additional
Amounts) . Article 5 (Successor Corporation) . Article 6 (Default and
Remedies) . Article 8 (Satisfaction, and Discharge of Indenture; Unclaimed
Funds) . Section 9.01 (Without Consent of Holders) . Section 10.14
(Incorporators, Stockholders, Officers and Directors of Company Exempt From
Individual Liability) . Section 10.15 (Judgement Currency) Section 2.17.
COVENANTS. In addition to any covenants set forth in Article 4 of the
Indenture, the Company shall comply with the additional covenants set forth in
Section 13 of the Notes. Section 2.18. IMMEDIATELY AVAILABLE FUNDS. All cash
payments of principal and interest shall be made in U.S. dollars and
immediately available funds. Section 2.19. TRUSTEE MATTERS. (a) Duties of
Trustee. Notwithstanding anything in the Indenture to the contrary: (i) the
sole duty of the Trustee is to act as the Registrar unless otherwise agreed to
by the Required Holders (as defined in the Notes), the Trustee and the Company
in an additional supplemental Indenture (other than this Second Supplemental
Indenture) or as separately agreed to in a writing by the Trustee and the
Required Holders; (ii) the rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder (including as Registrar), and to each agent,
custodian, and any other such Persons employed to act hereunder;
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(iii) the Trustee has no duty to make any calculations called for under the
Notes, and shall be protected in conclusively relying without liability upon
an Officer's Certificate with respect thereto without independent
verification; (iv) for the protection and enforcement of the provisions of the
Indenture, this Second Supplemental Indenture and the Notes, the Trustee shall
be entitled to such relief as can be given at either law or equity; (v) in the
event that the Holders of the Notes have waived any Event of Default with
respect to this Second Supplemental Indenture or the Notes, the default
covered thereby shall be deemed to be cured for all purposes hereunder and the
Company, the Trustee and the Holders of the Notes shall be restored to their
former positions and rights hereunder, respectively, but no such waiver shall
extend to any subsequent or other default to impair any right consequent
thereon; (vi) the Trustee makes no representation as to the validity or value
of any securities or assets issued upon conversion of the Notes, and the
Trustee shall not be responsible for the failure by the Company to comply with
any provisions of the Notes; (vii) the Trustee will not at any time be under
any duty or responsibility to any Holder to determine the Conversion Price (or
any adjustment thereto) or whether any facts exist that may require any
adjustment to the Conversion Price, or with respect to the nature or extent or
calculation of any such adjustment when made, or with respect to the method
employed in the Indenture, this Second Supplemental Indenture, in any
supplemental indenture or the Notes provided to be employed, in making the
same; (viii) the Trustee will not be accountable with respect to the validity
or value (or the kind or amount) of any shares of Common Stock, or of any
securities, cash or other property that may at any time be issued or delivered
upon the conversion of any Note; and the Trustee makes any representations
with respect thereto; and (ix) the Trustee will not be responsible for any
failure of the Company to issue, transfer or deliver any shares of Common
Stock or stock certificates or other securities, cash or other property upon
the surrender of any Note for the purpose of conversion or to comply with any
of the duties, responsibilities or covenants of the Company with respect
thereto. (b) Additional Indemnification. In addition to any indemnification
rights set forth in the Indenture, the Company agrees the Trustee may retain
one separate counsel on behalf of itself and the Holders (and in the case of
an actual or perceived conflict of interest, one additional separate counsel
on behalf of the Holders) and, if deemed advisable by such counsel, local
counsel, and the Company shall pay the reasonable fees and expenses of such
separate counsel and local counsel.
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(c) Successor Trustee Petition Right. If an instrument of acceptance by a
successor Trustee required by Section 7.08 or 7.09 of the Indenture has not
been delivered to the Trustee within 30 days after the giving of a notice of
removal, the Trustee being removed, at the expense of the Company, may
petition any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such series. (d) Trustee
as Creditor. If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection
of claims against the Company (or any such other obligor). (e) Reports by the
Company. The parties hereto acknowledge and agree that delivery of such
reports, information, and documents to the Trustee pursuant to the provisions
of Section 4.05 of the Indenture is for informational purposes only and the
Trustee's receipt of such shall not constitute actual or constructive
knowledge or notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officer's Certificates). The Trustee shall have no duty to
monitor or confirm, on a continuing basis or otherwise, the Company's or any
other Person's compliance with any of the covenants under the Indenture and
this Second Supplemental Indenture, to determine whether such reports,
information or documents are available on the SEC's website (including the
EDGAR system or any successor system,) the Company's website or otherwise, to
examine such reports, information, documents and other reports to ensure
compliance with the provisions of this Indenture, or to ascertain the
correctness or otherwise of the information or the statements contained
therein. (f) Statements by Officers as to Default. In addition to the
Company's obligations pursuant to the Indenture, the Company agrees as
follows: (i) Annually, within 120 days after the close of each fiscal year
beginning with the first fiscal year during which the Notes remain
outstanding, the Company will deliver to the Trustee an Officer's Certificate
(one of which Officers signatory thereto shall be the Chief Executive Officer,
Chief Financial Officer or Chief Corporate and Strategy Officer of the
Company) as to the knowledge of such Officers of the Company's compliance
(without regard to any period of grace or requirement of notice provided
herein) with all conditions and covenants under the Indenture, this First
Supplemental Indenture and the Notes and, if any Event of Default has occurred
and is continuing, specifying all such Events of Defaults and the nature and
status thereof of which such Officers have knowledge. (ii) The Company shall,
so long as any of the Notes remain outstanding, deliver to the Trustee, as
soon as practicable and in any event within 30 days after the Company becomes
aware of any Event of Default, an Officer's Certificate specifying such Events
of Default, its status and the actions that the Company is taking or proposes
to take in respect thereof. (g) Further Instruments and Acts. Upon request of
the Trustee, the Company will execute and deliver such further instruments and
perform such further acts as may be reasonably necessary or proper to carry
out more effectively the purposes of the Indenture and this Second
Supplemental Indenture.
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(h) Expense. Notwithstanding anything in the Indenture to the contrary, any
actions taken by the Trustee in any capacity shall be at the Company's
reasonable expense. Section 2.20. SATISFACTION; DISCHARGE. The Indenture and
this Second Supplemental Indenture will be discharged and will cease to be of
further effect with respect to the Notes (except as to any surviving rights
expressly provided for herein and in the Transaction Documents (as defined in
the Securities Purchase Agreement)), and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of the Indenture and this Second Supplemental Indenture with respect
to the Notes, when all outstanding amounts under the Notes shall have been
paid in full (and/or converted into shares of Common Stock or other securities
in accordance therewith) and no other obligations remain outstanding pursuant
to the terms of the Notes, this Second Supplemental Indenture, the Indenture
and/or the other Transaction Documents, as applicable, which have not been
paid in full by the Company, and when the Company has delivered to the Trustee
an Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of the Indenture and this Second Supplemental Indenture with respect
to the Notes have been complied with. Notwithstanding the satisfaction and
discharge of the Indenture and this Second Supplemental Indenture, the
obligations of the Company to the Trustee under Section 7.07 of the Indenture
shall survive. Section 2.21. CONTROL BY SECURITYHOLDERS. The Required Holders
(as defined in the Securities Purchase Agreement) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee with respect to the Notes; provided, however, that such direction
shall not be in conflict with any rule of law. Subject to the provisions of
Section 7.01 of the Indenture and this Second Supplemental Indenture, the
Trustee shall have the right to decline to follow any such direction if the
Trustee in good faith shall determine that the proceeding so directed would
involve the Trustee in personal liability. The Notes may be amended, modified
or waived, as applicable, in accordance with Section 15 of the Notes. Upon any
waiver of any term of the Notes, the default covered thereby shall be deemed
to be cured for all purposes of the Indenture, this Second Supplemental
Indenture, the Notes and the Company, the Trustee and the Holders of the Notes
shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon. ARTICLE III EXPENSES Section
3.1. PAYMENT OF EXPENSES. In connection with the offering, sale and issuance
of the Notes, the Company, in its capacity as issuer of the Notes, shall pay
all reasonable, documented out-of-pocket costs and expenses relating to the
offering, sale and issuance of the Notes and compensation and expenses of the
Trustee under the Indenture in accordance with the provisions of Section 7.07
of the Indenture.
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Section 3.2. PAYMENT UPON RESIGNATION OR REMOVAL. Upon termination of this
Second Supplemental Indenture or the Indenture or the removal or resignation
of the Trustee, unless otherwise stated, the Company shall pay to the Trustee
all reasonable, documented out-of-pocket amounts, fees and expenses (including
reasonable attorney's fees and expenses) accrued to the date of such
termination, removal or resignation. ARTICLE IV MISCELLANEOUS PROVISIONS
Section 4.1. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals herein
contained are made by the Company and not by the Trustee, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee makes no
representation as to the validity or sufficiency of this Second Supplemental
Indenture. Section 4.2. ADOPTION, RATIFICATION AND CONFIRMATION. The
Indenture, as supplemented and amended by this Second Supplemental Indenture,
is in all respects hereby adopted, ratified and confirmed. Section 4.3.
CONFLICT WITH INDENTURE; TRUST INDENTURE ACT. Notwithstanding anything to the
contrary in the Indenture, if any conflict arises between the terms and
conditions of this Second Supplemental Indenture (including, without
limitation, the terms and conditions of the Notes) and the Indenture, the
terms and conditions of this Second Supplemental Indenture (including the
Notes) shall control; provided, however, that if any provision of this Second
Supplemental Indenture or the Notes limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required thereunder to be a part
of and govern this Second Supplemental Indenture, the latter provisions shall
control. If any provision of this Second Supplemental Indenture modifies or
excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the latter provisions shall be deemed to apply to the Indenture as
so modified or excluded, as the case may be. Section 4.4. AMENDMENTS; WAIVER.
This Second Supplemental Indenture may be amended by the written consent of
the Company and the Required Holders (as defined in the Notes); provided
however, no amendment shall adversely impact the rights, duties, immunities or
liabilities of the Trustee without its prior written consent. Notwithstanding
anything in any other Transaction Document to the contrary, no amendment to
any Transaction Document that adversely impact the rights, duties, immunities
or liabilities of the Trustee hereunder, pursuant to the Indenture and/or the
Notes, as applicable, shall be effective without the Trustee's prior written
consent. No provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. Section 4.5.
SUCCESSORS. This Second Supplemental Indenture shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes. Section 4.6. SEVERABILITY; ENTIRE
AGREEMENT. If any provision of this Second Supplemental Indenture shall be
invalid or unenforceable in any jurisdiction, such invalidity or unenforceabilit
y shall not affect the validity or enforceability of the remainder of this
Second Supplemental Indenture in that jurisdiction or the validity or
enforceability of any provision of this Second Supplemental Indenture in any
other jurisdiction.
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Section 4.7. The Indenture, this Second Supplemental Indenture, the
Transaction Documents and the exhibits hereto and thereto set forth the entire
agreement and understanding of the parties related to this transaction and
supersedes all prior agreements and understandings, oral or written. Section
4.8. COUNTERPARTS. This Second Supplemental Indenture may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 4.9. GOVERNING LAW. This Second Supplemental Indenture and the
Indenture shall each be construed and enforced in accordance with, and all
questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than
the State of New York. Except as otherwise required by Section 22 of the
Notes, the Company hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The Borough of Manhattan, New York,
for the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. Nothing contained herein (i) shall be deemed or
operate to preclude any Holder from bringing suit or taking other legal action
against the Company in any other jurisdiction to collect on the Company's
obligations to such Holder, to realize on any collateral or any other security
for such obligations, or to enforce a judgment or other court ruling in favor
of such Holder or (ii) shall limit, or shall be deemed or construed to limit,
any provision of Section 22 of the Notes. THE COMPANY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR
THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT
OF THIS SECOND SUPPLEMENTAL INDENTURE OR ANY TRANSACTION CONTEMPLATED HEREBY.
Section 4.10. U.S.A. PATRIOT ACT. The parties hereto acknowledge that in
accordance with Section 326 of the U.S.A. PATRIOT Act, the Trustee is required
to obtain, verify, and record information that identifies each person or legal
entity that establishes a relationship or opens an account with the Trustee.
The parties to this Supplemental Indenture agree that they shall provide the
Trustee with such information as it may reasonably request in order for the
Trustee to satisfy the requirements of the U.S.A. PATRIOT Act. [The remainder
of the page is intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental
Indenture to be duly executed on the date or dates indicated in the
acknowledgments and as of the day and year first above written. FISKER INC.
By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title: Chief
Financial Officer and Chief Operating Officer
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WILMINGTON SAVINGS FUND SOCIETY, FSB, as Trustee By: /s/ Patrick J. Healy
Name: Patrick J. Healy Title: Senior Vice President
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EXHIBIT A (FORM OF NOTE)
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Execution Version THIRD SUPPLEMENTAL INDENTURE TO INDENTURE Dated as of
November 22, 2023 WILMINGTON SAVINGS FUND SOCIETY, FSB, as Trustee, CVI
INVESTMENTS, INC., as Collateral Agent, and The Guarantors (as defined herein)
signatory hereto Series A-1 Senior Convertible Note Due 2025 Series B-1 Senior
Convertible Note Due 2025
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FISKER INC. THIRD SUPPLEMENTAL INDENTURE TO INDENTURE DATED JULY 11, 2023
Series A-1 Senior Convertible Note Due 2025 Series B-1 Senior Convertible Note
Due 2025 THIRD SUPPLEMENTAL INDENTURE, dated as of November 22, 2023 (this
"Third Supplemental Indenture"), by and among FISKER INC., a Delaware
corporation (the "Company"), CVI INVESTMENTS, INC. ("Collateral Agent"), the
Guarantors (as defined below), and WILMINGTON SAVINGS FUND SOCIETY, FSB, as
Trustee (the "Trustee"). RECITALS A. The Company filed a registration
statement on Form S-3 on December 23, 2021 (File Number 333-261875) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") pursuant to Rule 415 under the Securities Act of 1933, as amended (the
"Securities Act") and the Registration Statement has been declared effective
by the SEC on January 4, 2022. B. The Company has heretofore executed and
delivered to the Trustee an Indenture, dated as of July 11, 2023 (the "Base
Indenture"), the First Supplemental Indenture dated July 11, 2023 (the "First
Supplemental Indenture") and the Second Supplemental Indenture dated September
29, 2023 (the "Second Supplemental Indenture" and, collectively with the Base
Indenture and the First Supplemental Indenture, the "Indenture"), providing
for the issuance from time to time of Securities (as defined in the Indenture)
by the Company. C. The Indenture has been qualified under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). D. Section 2 of the
Indenture provides for various matters with respect to any series of
Securities issued under the Indenture to be established in an indenture
supplemental to the Indenture. E. Section 9.01 of the Indenture provides that,
without the consent of the Holders, for the Company and the Trustee may enter
into an indenture supplemental to the Indenture to establish the form or terms
of Securities of any series as provided by Section 2 of the Indenture. F. In
accordance with that certain Securities Purchase Agreement, dated July 10,
2023, as amended by that certain Amendment No. 1 to Securities Purchase
Agreement dated as of September 29, 2023 (as so amended, the "Securities
Purchase Agreement"), by and among the Company and the investors party
thereto, at the applicable Closing (as defined in the Securities
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Purchase Agreement) the Company sold $510,000,000 in original aggregate
principal amount of Notes. G. The parties hereby desire to supplement the
Indenture pursuant to this Third Supplemental Indenture to set forth the terms
and conditions of the Security Documents (defined below). NOW, THEREFORE, THIS
THIRD SUPPLEMENTAL INDENTURE WITNESSETH, for and in consideration of the
premises and the issuance of the series of Securities provided for herein, it
is mutually agreed, for the equal and proportionate benefit of all Holders of
the Securities of such series, as follows: ARTICLE I RELATION TO INDENTURE;
DEFINITIONS Section 1.1. RELATION TO INDENTURE. This Third Supplemental
Indenture constitutes an integral part of the Indenture. Section 1.2.
DEFINITIONS. For all purposes of this Third Supplemental Indenture: (a)
Capitalized terms used herein without definition shall have the meanings
specified in the Indenture or in the Notes, as applicable; (b) All references
herein to Articles and Sections, unless otherwise specified, refer to the
corresponding Articles and Sections of this Third Supplemental Indenture; and
(c) The terms "herein," "hereof," "hereunder" and other words of similar
import refer to this Third Supplemental Indenture. ARTICLE II GUARANTY; PLEDGE
AND GRANT OF SECURITY INTERESTS Section 2.1. GUARANTY. The obligations under
the Transaction Documents will be guaranteed by the direct and indirect
subsidiaries of the Company set forth on Schedule 2.1 hereto (collectively,
the "Guarantors"), as evidenced by a guaranty to be entered into by the
Guarantors in favor of the Collateral Agent (the "Guaranty"). Section 2.2.
SECURITY. The Notes shall be secured by a first priority perfected security
interest in substantially all of the existing and future assets of the Company
and the Guarantors, including a pledge of all of the share capital in each of
the Guarantors, as evidenced by a pledge agreement in the form attached hereto
as Exhibit A (the "Pledge Agreement" and together with a security agreement by
and among the Company, the Collateral Agent and the Guarantors, this Third
Supplemental Indenture and such other security documents and agreements from
time to time entered into by the Company or its Subsidiaries in favor of the
Collateral Agent
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to secure the obligations under the Transaction Documents, as each may be
amended, restated, supplemented or otherwise modified from time to time,
collectively, the "Security Documents"). Section 2.3. COLLATERAL AGENT. CVI
Investments, Inc. shall initially be the collateral agent hereunder and under
the other Security Documents (in such capacity, the "Collateral Agent"), and
(ii) each holder of Notes (each, an "Investor"), by accepting such Notes,
shall be deemed to have authorized the Collateral Agent (and its officers,
directors, employees and agents) to take such action on such Investor's behalf
in accordance with the terms of the Transaction Documents. The Collateral
Agent shall not have, by reason hereof or any of the other Security Documents,
a fiduciary relationship in respect of any Investor. Neither the Collateral
Agent nor any of its officers, directors, employees or agents shall have any
liability to any Investor for any action taken or omitted to be taken in
connection hereof or any other Security Document except to the extent caused
by its own gross negligence or willful misconduct, and the Investor agrees to
defend, protect, indemnify and hold harmless the Collateral Agent and all of
its officers, directors, employees and agents (collectively, the "Collateral
Agent Indemnitees") from and against any losses, damages, liabilities,
obligations, penalties, actions, judgments, suits, fees, costs and expenses
(including, without limitation, reasonable attorneys' fees, costs and
expenses) incurred by such Collateral Agent Indemnitee, whether direct,
indirect or consequential, arising from or in connection with the performance
by such Collateral Agent Indemnitee of the duties and obligations of
Collateral Agent pursuant hereto or any of the Security Documents. The
Collateral Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions
of the Required Holders, and such instructions shall be binding upon all
holders of Notes; provided, however, that the Collateral Agent shall not be
required to take any action which, in the reasonable opinion of the Collateral
Agent, exposes the Collateral Agent to liability or which is contrary to this
Agreement or any other Transaction Document or applicable law. The Collateral
Agent shall be entitled to rely upon any written notices, statements,
certificates, orders or other documents or any telephone message believed by
it in good faith to be genuine and correct and to have been signed, sent or
made by the proper Person, and with respect to all matters pertaining to this
Agreement or any of the other Transaction Documents and its duties hereunder
or thereunder, upon advice of counsel selected by it. Section 2.4. SUCCESSOR
COLLATERAL AGENT. (a) The Collateral Agent may resign from the performance of
all its functions and duties hereunder and under the other Transaction
Documents at any time by giving at least ten (10) Business Days' prior written
notice to the Company and each holder of Notes. Such resignation shall take
effect upon the acceptance by a successor Collateral Agent of appointment
pursuant to clauses (ii) and (iii) below or as otherwise provided below. If at
any time the Collateral Agent (together with its affiliates) beneficially owns
less than $100,000 in aggregate principal amount of Notes, the holders of a
majority in aggregate principal amount of the Notes then outstanding may, by
written consent, remove the Collateral Agent from all its functions and duties
hereunder and under the other Transaction Documents. (b) Upon any such notice
of resignation or removal, the Required Holders shall appoint a successor
collateral agent. Upon the acceptance of any appointment as Collateral Agent
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hereunder by a successor collateral agent, such successor collateral agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the collateral agent, and the Collateral Agent shall
be discharged from its duties and obligations under this Agreement and the
other Transaction Documents. After the Collateral Agent's resignation or
removal hereunder as the collateral agent, the provisions of Section 2.3 shall
inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Collateral Agent under this Agreement and the other
Transaction Documents. (c) If a successor collateral agent shall not have been
so appointed within ten (10) Business Days of receipt of a written notice of
resignation or removal, the Collateral Agent shall then appoint a successor
collateral agent who shall serve as the Collateral Agent until such time, if
any, as the Required Holders appoint a successor collateral agent as provided
above. (d) In the event that a successor Collateral Agent is appointed
pursuant to the provisions of this Section 2.4 that is not an Investor or an
affiliate of any Investor (or the Required Holders or the Collateral Agent (or
its successor), as applicable, notify the Company that they or it wants to
appoint such a successor Collateral Agent pursuant to the terms of this
Section 2.4), the Company and each Subsidiary thereof covenants and agrees to
promptly take all actions reasonably requested by the Required Holders or the
Collateral Agent (or its successor), as applicable, from time to time, to
secure a successor Collateral Agent satisfactory to the requesting
part(y)(ies), in their sole discretion, including, without limitation, by
paying all reasonable and customary fees and expenses of such successor
Collateral Agent, by having the Company and each Subsidiary thereof agree to
indemnify any successor Collateral Agent pursuant to reasonable and customary
terms and by each of the Company and each Subsidiary thereof executing a
collateral agency agreement or similar agreement and/or any amendment to the
Security Documents reasonably requested or required by the successor
Collateral Agent. Section 2.5. PERFECTION. To the extent required by the
Security Documents, the Company shall deliver to the Collateral Agent (A)
original certificates (if any) (I) representing the Subsidiaries' shares of
share capital to the extent such subsidiary is a corporation or otherwise has
certificated equity and (II) representing all other equity interests and all
promissory notes required to be pledged thereunder, in each case, accompanied
by undated share powers and allonges executed in blank and other proper
instruments of transfer and (B) appropriate financing statements on Form UCC-1
to be duly filed in such office or offices as may be necessary or, in the
opinion of the Collateral Agent, desirable to perfect the security interests
purported to be created by each Security Document. Section 2.6. COVENANTS. In
addition to any covenants set forth in Article 4 of the Indenture, the Company
shall comply with the additional covenants set forth in Security Agreement and
the Guaranty.
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Section 2.7. TRUSTEE MATTERS. (a) Duties. The Trustee has no obligation to
undertake any of the duties of the Collateral Agent as set forth is this Third
Supplemental Indenture. (b) Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and
perform such further acts as may be reasonably necessary or proper to carry
out more effectively the purposes of the Indenture and this Third Supplemental
Indenture. (c) Expense. Notwithstanding anything in the Indenture to the
contrary, any actions taken by the Trustee in any capacity shall be at the
Company's reasonable expense. ARTICLE III MISCELLANEOUS PROVISIONS Section
3.1. PAYMENT OF EXPENSES. The Company shall pay all reasonable, documented
out-of-pocket costs and expenses of the Trustee relating to the execution and
delivery of this Third Supplemental Indenture, the Security Documents and the
Guaranty, as applicable, and all compensation and expenses of the Trustee
under the Indenture in accordance with the provisions of Section 7.07 of the
Indenture. Section 3.2. TRUSTEE AND COLLATERAL AGENT NOT RESPONSIBLE FOR
RECITALS. The recitals herein contained are made by the Company and not by the
Trustee or the Collateral Agent, and the Trustee and the Collateral Agent
assume no responsibility for the correctness thereof. The Trustee and the
Collateral Agent make no representation as to the validity or sufficiency of
this Third Supplemental Indenture. Section 3.3. ADOPTION, RATIFICATION AND
CONFIRMATION. Except as expressly amended, supplemented and modified by this
Third Supplemental Indenture, the Base Indenture, the First Supplemental
Indenture and the Second Supplemental Indenture are in all respects ratified
and confirmed and the Base Indenture, the First Supplemental Indenture and the
Second Supplemental Indenture as so amended hereby shall be read, taken and
construed as one and the same instrument. Section 3.4. CONFLICT WITH
INDENTURE; TRUST INDENTURE ACT. Notwithstanding anything to the contrary in
the Indenture, if any conflict arises between the terms and conditions of this
Third Supplemental Indenture (including, without limitation, the terms and
conditions of the Notes) and the Indenture, the terms and conditions of this
Third Supplemental Indenture (including the Notes) shall control; provided,
however, that if any provision of this Third Supplemental Indenture or the
Notes limits, qualifies or conflicts with a provision of the Trust Indenture
Act that is required thereunder to be a part of and govern this Third
Supplemental Indenture, the latter provisions shall control. If any provision
of this Third Supplemental Indenture modifies or excludes any provision of the
Trust Indenture Act that may be so modified or excluded,
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the latter provisions shall be deemed to apply to the Indenture as so modified
or excluded, as the case may be. Section 3.5. AMENDMENTS; WAIVER. This Third
Supplemental Indenture may be amended by the written consent of the Company
and the Required Holders (as defined in the Notes); provided however, no
amendment shall adversely impact the rights, duties, immunities or liabilities
of the Trustee without its prior written consent. Notwithstanding anything in
any other Transaction Document to the contrary, no amendment to any
Transaction Document that adversely impact the rights, duties, immunities or
liabilities of the Trustee hereunder, pursuant to the Indenture and/or the
Notes, as applicable, shall be effective without the Trustee's prior written
consent. No provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. Section 3.6.
SUCCESSORS. This Third Supplemental Indenture shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes. Section 3.7. SEVERABILITY; ENTIRE
AGREEMENT. If any provision of this Third Supplemental Indenture shall be
invalid or unenforceable in any jurisdiction, such invalidity or unenforceabilit
y shall not affect the validity or enforceability of the remainder of this
Third Supplemental Indenture in that jurisdiction or the validity or
enforceability of any provision of this Third Supplemental Indenture in any
other jurisdiction. Section 3.8. The Indenture, this Third Supplemental
Indenture, the Transaction Documents and the exhibits hereto and thereto set
forth the entire agreement and understanding of the parties related to this
transaction and supersedes all prior agreements and understandings, oral or
written. Section 3.9. COUNTERPARTS. This Third Supplemental Indenture may be
executed in any number of counterparts, each of which shall be an original,
but such counterparts shall together constitute but one and the same
instrument. Section 3.10. GOVERNING LAW. This Third Supplemental Indenture and
the Indenture shall each be construed and enforced in accordance with, and all
questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than
the State of New York. Except as otherwise required by Section 22 of the
Notes, the Company hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The Borough of Manhattan, New York,
for the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.
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Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law. Nothing contained herein (i)
shall be deemed or operate to preclude any Holder from bringing suit or taking
other legal action against the Company in any other jurisdiction to collect on
the Company's obligations to such Holder, to realize on any collateral or any
other security for such obligations, or to enforce a judgment or other court
ruling in favor of such Holder or (ii) shall limit, or shall be deemed or
construed to limit, any provision of Section 22 of the Notes. THE COMPANY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST,
A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH OR ARISING OUT OF THIS THIRD SUPPLEMENTAL INDENTURE OR ANY TRANSACTION
CONTEMPLATED HEREBY. Section 3.11. U.S.A. PATRIOT ACT. The parties hereto
acknowledge that in accordance with Section 326 of the U.S.A. PATRIOT Act, the
Trustee is required to obtain, verify, and record information that identifies
each person or legal entity that establishes a relationship or opens an
account with the Trustee. The parties to this Supplemental Indenture agree
that they shall provide the Trustee with such information as it may reasonably
request in order for the Trustee to satisfy the requirements of the U.S.A.
PATRIOT Act. [The remainder of the page is intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental
Indenture to be duly executed on the date or dates indicated in the
acknowledgments and as of the day and year first above written. FISKER INC.
By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title: Chief
Financial Officer and Chief Operating Officer FISKER GROUP INC. By: /s/ Dr.
Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title: Chief Financial Officer
and Chief Operating Officer FISKER GMBH By: /s/ Dr. Geeta Gupta-Fisker Name:
Dr. Geeta Gupta-Fisker Title: Director
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CVI INVESTMENTS, INC., as Collateral Agent C/O Heights Capital Management,
Inc., its authorized agent By: /s/ Martin Kobinger Name: Martin Kobinger
Title: President
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WILMINGTON SAVINGS FUND SOCIETY, FSB, as Trustee By: /s/ Patrick J. Healy
Name: Patrick J. Healy Title: Senior Vice President
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Schedule 2.1 Fisker Group Inc. Fisker GmbH [Austrian Subsidiary]
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Exhibit A Form of Pledge Agreement
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SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (the
"Agreement"), dated as of July 10, 2023, is by and among Fisker Inc., a
Delaware corporation with offices located at 1888 Rosecrans Avenue, Manhattan
Beach, California 90266 (the "Company"), and each of the investors listed on
the Schedule of Buyers attached hereto (individually, a "Buyer" and
collectively, the "Buyers"). RECITALS A. The Company and each Buyer desire to
enter into this transaction to purchase Notes (as defined below) pursuant to a
currently effective shelf registration statement on Form S-3, which has
sufficient availability for the issuance of the Securities (as defined below)
on each Closing Date (as defined below) (Registration Number 333- 261875) (the
"Registration Statement") and has been declared effective in accordance with
the 1933 Act, by the SEC. B. The Company has authorized one or more new series
of senior unsecured convertible notes of the Company (with a new series of
senior unsecured convertible notes to be established for each Closing (as
defined below) hereunder), in the aggregate original principal amount of up to
$680,000,000, substantially in the form attached hereto as Exhibit A-1 (the
"Notes"), which Notes shall be convertible into shares of Common Stock (as
defined below) (the shares of Common Stock issuable pursuant to the terms of
the Notes, including, without limitation, upon conversion or otherwise,
collectively, the "Conversion Shares"), in accordance with, and issued
pursuant to and by, the provisions of (x) an Indenture dated as of the Initial
Closing Date (as defined below), by and between the Company and Wilmington
Savings Fund Society, FSB, as trustee (the "Trustee"), in substantially the
form attached hereto as Exhibit A-2 (as amended and/or supplemented from time
to time, including, without limitation, by any Supplemental Indenture (as
defined below), the "Indenture"), and (y) one or more supplemental indentures
with respect to the Notes in the form attached hereto as Exhibit A-3 (each, a
"Supplemental Indenture", and collectively, the "Supplemental Indentures"). C.
Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms
and conditions stated in this Agreement, at the Initial Closing (as defined
below) a Note (established under the Series A of the Notes) in the aggregate
original principal amount set forth opposite such Buyer's name in column (3)
on the Schedule of Buyers (which aggregate principal amount for all Buyers
shall not exceed $340,000,000) (each an "Initial Note", and collectively, the
"Initial Notes"). D. Subject to the terms and conditions set forth in this
Agreement, each Buyer may require the Company to participate in one or more
Additional Optional Closings (as defined below) for the purchase by such
Buyer, and the sale by the Company, of one or more additional Notes (with each
established under the Series B of the Notes) with an aggregate original
principal amount for all Additional Optional Closings not to exceed the
maximum aggregate principal amount set forth opposite such Buyer's name in
column (4) on the Schedule of Buyers (which aggregate principal amount for all
Buyers for all Additional Optional Closings shall not exceed $226,666,667)
(each an "Additional Optional Notes", and collectively, the "Additional
Optional Notes").
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E. Subject to the terms and conditions set forth in this Agreement, the
Company may require each Buyer to participate in an Additional Mandatory
Closing (as defined below) for the purchase by such Buyer, and the sale by the
Company, of additional Notes (established under the Series C of the Notes)
(each an "Additional Mandatory Note", and collectively, the "Additional
Mandatory Notes", and together with the Additional Optional Notes, each an
"Additional Note", and collectively, the "Additional Notes") each with an
aggregate original principal amount as set forth opposite such Buyer's name in
column (5) on the Schedule of Buyers (which aggregate principal amount for all
Buyers for the Additional Mandatory Closing shall not exceed $113,333,333). F.
The Notes and the Conversion Shares are collectively referred to herein as the
"Securities." AGREEMENT NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and each Buyer hereby agree as follows: 1. PURCHASE AND SALE OF
NOTES. (a) Purchase of Notes. (i) Purchase of Initial Notes. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6(a) and 7(a)
below, the Company shall issue and sell to each Buyer, and each Buyer
severally, but not jointly, agrees to purchase from the Company on the Initial
Closing Date (as defined below) an Initial Note in the original principal
amount as is set forth opposite such Buyer's name in column (3) on the
Schedule of Buyers (the "Initial Closing"). (ii) Purchase of Additional Notes.
Subject to the satisfaction (or waiver) of the conditions set forth in
Sections 1(b)(ii), 6(b) and 7(b) below, the Company shall issue and sell to
each Buyer, and each Buyer severally, but not jointly, shall purchase from the
Company on such Additional Closing Date (as defined below), an Additional Note
in such aggregate principal amount as specified in such Additional Mandatory
Closing Notice (as defined below) or Additional Closing Notice (as defined
below), as applicable (each, an "Additional Closing Notice", and such closing
of the purchase of such Additional Notes, each, an "Additional Closing"). (b)
Closing. Each of the Initial Closing and any Additional Closings (collectively,
the "Closings") of the purchase of Notes by the Buyers shall occur at the
offices of Kelley Drye & Warren LLP, 3 World Trade Center, 175 Greenwich
Street, New York, NY 10007. (i) Initial Closing. The date and time of the
Initial Closing (the "Initial Closing Date") shall be 10:00 a.m., New York
time, on the first (1st) Business Day on which the conditions to the Closing
set forth in Sections 6(a) and 7(a) below are satisfied or waived (or such
other date as is mutually agreed to by the Company and each Buyer). As used
herein "Business Day" means any day other than Saturday, Sunday or other day
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on which commercial banks in the City of New York are authorized or required
by law to remain closed; provided, however, for clarification, commercial
banks shall not be deemed to be authorized or required by law to remain closed
due to "stay at home", "shelter-in-place", "non-essential employee" or any
other similar orders or restrictions or the closure of any physical branch
locations at the direction of any governmental authority so long as the
electronic funds transfer systems (including for wire transfers) of commercial
banks in the City of New York generally are open for use by customers on such
day. (ii) Additional Closings. (1) Additional Closing Date. If the Company has
delivered an Additional Mandatory Closing Notice to each of the Buyers or a
Buyer has delivered an Additional Closing Notice to the Company, the date and
time of the applicable Additional Closing (each, an "Additional Closing Date,"
and the Initial Closing Date and each Additional Closing Date, each, a
"Closing Date") shall be 10:00 a.m., New York time, on the first (1st)
Business Day on which the conditions to such Additional Closing set forth in
this Section 1(b)(ii), 6(b) and 7(b) below are satisfied or waived (or such
other date as is mutually agreed to by the Company and each Buyer). (2)
Additional Optional Closings at Buyer's Election. Subject to the satisfaction
(or waiver) of the conditions set forth in Sections 6(b) and 7(b) below, at
any time on or after the first anniversary of the Initial Closing Date (unless
amended or waived to an earlier date by the Company, which amendment or waiver
shall not require the consent of the Buyers hereunder), each Buyer, severally,
shall have the right, exercisable by delivery by e-mail of a written notice to
the Company (each, an "Additional Optional Closing Notice", and the date
hereof, each an "Additional Optional Closing Notice Date") to purchase, and to
require the Company to sell to such Buyer, at one or more Additional Closings,
up to such aggregate principal amount of such Additional Notes as set forth
opposite its name in column (4) on the Schedule of Buyers (each, an
"Additional Optional Notes Amount"). Each Additional Optional Closing Notice
shall specify (A) the proposed date and time of the Additional Closing (which,
if unspecified in such Additional Optional Closing Notice, shall be the second
(2nd) Trading Day after such Additional Optional Closing Notice or such other
date as is mutually agreed to by the Company and each Buyer, each, an
"Additional Optional Closing Date", and each such Additional Closing, an
"Additional Optional Closing") and (B) the applicable Additional Optional
Notes Amount of the Additional Notes to be issued to such applicable Buyer at
such Additional Closing, but in no event less than the lesser of (x)
$50,000,000 and (y) the remaining Additional Optional Notes Amount of
Additional Notes of such Buyer that has not been purchased by such Buyer at
one or more Additional Optional Closings on or prior to such time of
determination. If a Buyer has not elected to effect an Additional Closing with
respect to all of the Additional Optional Notes Amount of such Buyer on or
prior to the eighteen-month anniversary of the Initial Closing Date (the
"Additional Optional Closing Expiration Date"), such Buyer shall have no
further right to effect an Additional Closing hereunder.
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(3) Additional Mandatory Closing at Company's Election. Subject to the
satisfaction of the conditions to closing set forth in this Section 1(b)(ii)
and Sections 6(b) and 7(b) below, at any time after the tenth (10th) calendar
day after the Additional Optional Closing Date pursuant to which the Buyers
shall have purchased the entire Additional Optional Notes Amount (the
"Additional Mandatory Closing Eligibility Date") of each Buyer hereunder, the
Company shall have the right to require each Buyer to purchase (such
Additional Closing, the "Additional Mandatory Closing", and such Additional
Closing Date, the "Additional Mandatory Closing Date") an Additional Note in
the original principal amount set forth opposite such Buyer's name in column
(5) on the Schedule of Buyers (the "Additional Mandatory Note Amount").
Subject to the satisfaction of the conditions to closing set forth in this
Section 1(b)(ii) and Sections 6(b) and 7(b) below, the Company may exercise
its right to require the Additional Mandatory Closing by delivering, at any
time on or after the applicable Additional Mandatory Closing Eligibility Date
and prior to the Additional Closing Expiration Date, a written notice thereof
by e-mail and overnight courier to each Buyer (the "Additional Mandatory
Closing Notice", and together with each Additional Optional Closing Notice,
each an "Additional Closing Notice", and the date of the applicable Additional
Mandatory Closing Notice, the "Additional Mandatory Closing Notice Date", and
together with each Additional Optional Closing Notice Date, each an
"Additional Closing Notice Date"). The Company shall only be permitted to
submit one (1) Additional Mandatory Closing Notice to the Buyers hereunder and
the Additional Mandatory Closing Notice shall be irrevocable. The Additional
Mandatory Closing Notice shall (A) certify that the Additional Mandatory
Closing Eligibility Date with respect to the proposed Additional Mandatory
Closing has occurred and, other than with respect to deliverables to be
delivered to each Buyer at the Additional Mandatory Closing, all the
conditions to closing set forth in this Section 1(b)(ii) and Sections 6(b) and
7(b) below have been satisfied in full as of the Additional Mandatory Closing
Notice Date, (B) specify the proposed date of the Additional Mandatory Closing
(which shall be sixty (60) calendar days after the Additional Mandatory
Closing Notice Date, subject to the right of each Buyer, by written notice to
the Company, to accelerate the Additional Mandatory Closing Date to an earlier
date, not less than two (2) Trading Days after the Additional Mandatory
Closing Notice Date (or such other date as such Buyer and the Company shall
mutually agree)) and (C) specify the aggregate principal amount of Additional
Notes to be purchased by each Buyer at the Additional Mandatory Closing, which
shall equal the Additional Mandatory Note Amount of such applicable Buyer (or
such other amount as the Company and such Buyer shall mutually agree) (such
aggregate principal amount of Additional Notes set forth in such Additional
Mandatory Closing Notice to be purchased by such Buyer, each, an "Additional
Note Amount"). For the avoidance of doubt, the Company shall not be entitled
to effect the Additional Mandatory Closing if on the Additional Mandatory
Closing Date there is an Equity Conditions Failure (as defined in the Initial
Notes) on the Additional Mandatory Closing Date or if the Company fails to
satisfy any of the other conditions to closing herein (unless waived in
writing by the applicable Buyer participating in such Additional Closing). The
Company's right to affect the Additional Mandatory Closing hereunder shall
automatically terminate at 9:00 AM, New York City time on the tenth (10th)
calendar day after the Additional Mandatory Closing Eligibility Date (as
applicable, the "Additional Closing Expiration Date").
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(c) Purchase Price. The aggregate purchase price for the Notes to be purchased
by each Buyer (the "Initial Purchase Price") shall be the amount set forth
opposite such Buyer's name in column (5) on the Schedule of Buyers. The
aggregate purchase price for the Additional Notes to be purchased by each
Buyer at any given Additional Closing (each, an "Additional Purchase Price",
and together with the Initial Purchase Price, each, a "Purchase Price") shall
be approximately $882.35294 for each $1,000 of aggregate principal amount of
Additional Notes to be issued in such Additional Closing (which, together with
the Additional Purchase Price of each prior Additional Closings, shall not
exceed the aggregate amount set forth opposite such Buyer's name in column (6)
on the Schedule of Buyers). (d) Form of Payment. (i) Initial Closing. On the
Initial Closing Date, (i) each Buyer shall pay its respective Initial Purchase
Price (less, in the case of any Buyer, the amounts withheld pursuant to
Section 4(j)) to the Company for the Initial Notes to be issued and sold to
such Buyer at the Initial Closing, by wire transfer of immediately available
funds in accordance with the Initial Flow of Funds Letter (as defined below)
and (ii) the Company shall deliver to each Buyer an Initial Note in the
aggregate original principal amount as is set forth opposite such Buyer's name
in column (3) of the Schedule of Buyers, duly executed on behalf of the
Company and registered in the name of such Buyer or its designee. (ii)
Additional Closing. On each Additional Closing Date, (i) each Buyer shall pay
its respective applicable Additional Purchase Price for such Additional
Closing (less, in the case of any Buyer, the amounts withheld pursuant to
Section 4(j)) to the Company for the Additional Notes to be issued and sold to
such Buyer at such Additional Closing, by wire transfer of immediately
available funds in accordance with the applicable Additional Flow of Funds
Letter (as defined below) and (ii) the Company shall deliver to each Buyer an
Additional Note in the aggregate original principal amount as is set forth in
the applicable Additional Closing Notice to be issued to such Buyer, duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee. 2. BUYER'S REPRESENTATIONS AND WARRANTIES. Each Buyer, severally
and not jointly, represents and warrants to the Company with respect to only
itself that, as of the date hereof and as of each Closing Date: (a)
Organization; Authority. Such Buyer is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents (as
defined below) to which it is a party and otherwise to carry out its
obligations hereunder and thereunder.
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(b) Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and shall
constitute the legal, valid and binding obligations of such Buyer enforceable
against such Buyer in accordance with its terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies. (c) No Conflicts. The execution, delivery and performance
by such Buyer of this Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a
violation of the organizational documents of such Buyer, or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which such Buyer is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to such Buyer, except in the
case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or
violations which could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of such Buyer to
perform its obligations hereunder. (d) No Group. Other than affiliates of such
Buyer who are also Buyers under this Agreement, such Buyer is not under common
control with or acting in concert with any other Buyer and is not part of a
"group" for purposes of the 1934 Act. 3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY. The Company represents and warrants to each of the Buyers that, as of
the date hereof and as of each Closing Date: (a) Organization and
Qualification. Each of the Company and each of its Subsidiaries are entities
duly organized and validly existing and in good standing under the laws of the
jurisdiction in which they are formed, and have the requisite power and
authority to own their properties and to carry on their business as now being
conducted and as presently proposed to be conducted. Each of the Company and
each of its Subsidiaries is duly qualified as a foreign entity to do business
and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not reasonably be expected to have a
Material Adverse Effect (as defined below). As used in this Agreement,
"Material Adverse Effect" means any material adverse effect on (i) the
business, properties, assets, liabilities, operations (including results
thereof), condition (financial or otherwise) or prospects of the Company or
any Subsidiary, taken as a whole, (ii) the transactions contemplated hereby or
in any of the other Transaction Documents or any other agreements or
instruments to be entered into in connection herewith or therewith or (iii)
the authority or ability of the Company or any of its Subsidiaries to perform
any of their respective obligations under any of the Transaction Documents (as
defined below). Other than the Persons (as defined below) set forth on
Schedule 3(a), the Company has no Subsidiaries. "Subsidiaries" means any
Person in which the Company, directly or indirectly, (I) owns at least 10% of
the outstanding capital stock or holds at least 10% of the equity or similar
interest of such Person or (II) controls or operates all or any part of the
business, operations or administration of such Person, and each of the
foregoing, is individually referred to herein as a "Subsidiary."
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(b) Authorization; Enforcement; Validity. The Company has the requisite power
and authority to enter into and perform its obligations under this Agreement
and the other Transaction Documents and to issue the Securities in accordance
with the terms hereof and thereof. The execution and delivery of this
Agreement and the other Transaction Documents by the Company, and the
consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Notes and the
reservation for issuance and issuance of the Conversion Shares issuable upon
conversion of the Notes) have been duly authorized by the Company's board of
directors (other than (i) the filing with the SEC of (A) the applicable 8-K
Filing (as defined below), (B) a prospectus supplement in connection with the
applicable Closing as required by the Registration Statement pursuant to Rule
424(b) under the 1933 Act (the "Prospectus Supplement") supplementing the base
prospectus forming part of the Registration Statement (the "Prospectus")), (C)
with respect to the Additional Closings, the Indenture (and/or any amendment
or supplement thereto) and a Form T-1, (D) the filing of an Additional Listing
Application with the Principal Market and (E) any other filings as may be
required by any state securities agencies (collectively, the "Required
Approvals") and no further filing, consent or authorization is required by the
Company, its board of directors or its stockholders or other governing body.
This Agreement has been, and the other Transaction Documents to which it is a
party will be prior to such Closing, duly executed and delivered by the
Company, and each constitutes the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with its respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies and except as rights
to indemnification and to contribution may be limited by federal or state
securities law. "Transaction Documents" means, collectively, this Agreement,
the Notes, the Custodian Agreements, the Indenture, the Supplemental
Indentures, the Irrevocable Transfer Agent Instructions, the Voting Agreement
(as defined below) and each of the other agreements and instruments entered
into or delivered by any of the parties hereto in connection with the
transactions contemplated hereby and thereby, as may be amended from time to
time. (c) Issuance of Securities; Registration Statement. The issuance of the
Notes are duly authorized and upon issuance in accordance with the terms of
the Transaction Documents shall be validly issued, fully paid and non-
assessable and free from all preemptive or similar rights, mortgages, defects,
claims, liens, pledges, charges, taxes, rights of first refusal, encumbrances,
security interests and other encumbrances (collectively "Liens") with respect
to the issuance thereof. As of the applicable Closing, the Company shall have
reserved from its duly authorized capital stock not less than (I) if prior to
the second (2nd) Trading Day after the Stockholder Meeting Deadline (the
"Reserve Increase Deadline"), 275 million shares of Common Stock for
conversion of the Notes or (II) if on or after the Reserve Increase Deadline,
the maximum number of Conversion Shares issuable upon conversion of the Notes
(assuming for purposes hereof that (x) the Notes are convertible at the Floor
Price (as defined in the Notes), and (y) any such conversion shall not take
into account any limitations on the conversion of the Notes set forth in the
Notes). Upon issuance or conversion in accordance with the Notes, the
Conversion Shares, when issued, will be validly issued, fully paid and
nonassessable and free from all preemptive or
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similar rights or Liens with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock. The
issuance by the Company of the Securities has been registered under the 1933
Act, the Securities are being issued pursuant to the Registration Statement
and all of the Securities are freely transferable and freely tradable by each
of the Buyers without restriction, whether by way of registration or some
exemption therefrom. The Registration Statement is effective and available for
the issuance of the Securities thereunder and the Company has not received any
notice that the SEC has issued or intends to issue a stop-order with respect
to the Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either temporarily
or permanently, or intends or has threatened in writing to do so. The "Plan of
Distribution" section under the Registration Statement permits the issuance
and sale of the Securities hereunder and as contemplated by the other
Transaction Documents. Upon receipt of the Securities, each of the Buyers will
have good and marketable title to the Securities. The Registration Statement
and any prospectus included therein, including the Prospectus and the
Prospectus Supplement, complied in all material respects with the requirements
of the 1933 Act and the Securities Exchange Act of 1934, as amended (the "1934
Act") and the rules and regulations of the SEC promulgated thereunder and all
other applicable laws and regulations. At the time the Registration Statement
and any amendments thereto became effective, at the date of this Agreement and
at each deemed effective date thereof pursuant to Rule 430B(f)(2) of the 1933
Act, the Registration Statement and any amendments thereto complied and will
comply in all material respects with the requirements of the 1933 Act and did
not and will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments or
supplements thereto (including, without limitation the Prospectus Supplement),
at the time the Prospectus or any amendment or supplement thereto was issued
and at the applicable Closing Date, complied, and will comply, in all material
respects with the requirements of the 1933 Act and did not, and will not,
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company meets
all of the requirements for the use of Form S-3 under the 1933 Act for the
offering and sale of the Securities contemplated by this Agreement and the
other Transaction Documents, and the SEC has not notified the Company of any
objection to the use of the form of the Registration Statement pursuant to
Rule 401(g)(1) under the 1933 Act. The Registration Statement meets the
requirements set forth in Rule 415(a)(1)(x) under the 1933 Act. At the
earliest time after the filing of the Registration Statement that the Company
or another offering participant made a bona fide offer (within the meaning of
Rule 164(h)(2) under the 1933 Act) relating to any of the Securities, the
Company was not and is not an "Ineligible Issuer" (as defined in Rule 405
under the 1933 Act). The Registration Statement has been filed with the SEC
not earlier than three years prior to the date hereof; and no notice of
objection of the SEC to the use of such registration statement or any
post-effective amendment thereto pursuant to Rule 401(g)(2) under the 1933 Act
has been received by the Company. No order suspending the effectiveness of the
Registration Statement has been issued by the SEC and no proceeding for that
purpose or pursuant to Section 8A of the 1933 Act against the Company or
related to the offering has been initiated or threatened by the SEC; as of the
effective time of the Registration Statement, the Registration Statement
complied and will comply in all material respects with the 1933 Act and the
TIA (as defined below) and did not contain and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and as of the date of the Prospectus and any
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amendment or supplement thereto and as of such applicable Closing Date, the
Prospectus did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the
Company makes no representation and warranty with respect to (i) that part of
the Registration Statement that constitutes the Statement of Eligibility and
Qualification (Form T-1) of the Trustee under the TIA or (ii) any statements
or omissions in the Registration Statement and the Prospectus and any
amendment or supplement thereto made in reliance upon and in conformity with
information relating to any underwriter or placement agent furnished to the
Company in writing by such underwriter or placement agent expressly for use
therein. The Company (i) has not distributed any offering material in
connection with the offer or sale of any of the Securities and (ii) until no
Buyer holds any of the Securities, shall not distribute any offering material
in connection with the offer or sale of any of the Securities to, or by, any
of the Buyers (if required), in each case, other than the Registration
Statement, the Prospectus or the Prospectus Supplement. In accordance with
Rule 5110(b)(7)(C)(i) of the Financial Industry Regulatory Authority Manual,
the offering of the Securities has been registered with the SEC on Form S-3
under the 1933 Act pursuant to the standards for Form S-3 in effect prior to
October 21, 1992, and the Securities are being offered pursuant to Rule 415
promulgated under the 1933 Act. (d) No Conflicts. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Notes, the Conversion Shares and the
reservation for issuance of the Conversion Shares) will not (i) result in a
violation of the Certificate of Incorporation (as defined below) (including,
without limitation, any certificate of designation contained therein), Bylaws
(as defined below), certificate of formation, memorandum of association,
articles of association, bylaws or other organizational documents of the
Company or any of its Subsidiaries, or any capital stock or other securities
of the Company or any of its Subsidiaries, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including, without limitation, foreign, federal and state securities
laws and regulations and the rules and regulations of the New York Stock
Exchange (the "Principal Market") and including all applicable foreign,
federal and state laws, rules and regulations) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected. (e) Consents. Neither the
Company nor any Subsidiary is required to obtain any consent from,
authorization or order of, or make any filing or registration with (other than
the Required Approvals), any Governmental Entity (as defined below) or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its respective obligations under or
contemplated by the Transaction Documents, in each case, in accordance with
the terms hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company or any Subsidiary is required to obtain
pursuant to the preceding sentence have been or will be obtained or effected
on or prior to such Closing Date, and neither the Company nor any of its
Subsidiaries are aware of any facts or circumstances which might prevent the
Company or any of its Subsidiaries from obtaining or effecting any of the
registration,
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application or filings contemplated by the Transaction Documents. The Company
is not in violation of the requirements of the Principal Market and has no
knowledge of any facts or circumstances which could reasonably lead to
delisting or suspension of the Common Stock in the foreseeable future.
"Governmental Entity" means any nation, state, county, city, town, village,
district, or other political jurisdiction of any nature, federal, state,
local, municipal, foreign, or other government, governmental or quasi-government
al authority of any nature (including any governmental agency, branch,
department, official, or entity and any court or other tribunal),
multi-national organization or body; or body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature or instrumentality of
any of the foregoing, including any entity or enterprise owned or controlled
by a government or a public international organization or any of the
foregoing. (f) Acknowledgment Regarding Buyer's Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the
capacity of an arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby and that no
Buyer is (i) an officer or director of the Company or any of its Subsidiaries,
(ii) an "affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or
a successor rule thereto) (collectively, "Rule 144")) of the Company or any of
its Subsidiaries or (iii) to its knowledge, a "beneficial owner" of more than
10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended (the "1934 Act")). The Company
further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company or any of its Subsidiaries (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by a Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each
Buyer that the Company's decision to enter into the Transaction Documents to
which it is a party has been based solely on the independent evaluation by the
Company and its representatives. (g) Financial Advisory Fees. The Company
shall be responsible for the payment of any placement agent's fees, financial
advisory fees, or brokers' commissions (other than for Persons engaged by any
Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby, including, without limitation, financial
advisory fees payable to Cowen and Co., as financial advisor (the "Financial
Advisor") in connection with the sale of the Securities. The fees and expenses
of the Financial Advisor be paid by the Company or any of its Subsidiaries are
as set forth on Schedule 3(g) attached hereto. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including,
without limitation, attorney's fees and out-of-pocket expenses) arising in
connection with any such claim. The Company acknowledges that it has engaged
the Financial Advisor in connection with the sale of the Securities. Other
than the Financial Advisor, neither the Company nor any of its Subsidiaries
has engaged any placement agent or other agent in connection with the offer or
sale of the Securities.
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(h) No Integrated Offering. None of the Company, its Subsidiaries or any of
their affiliates, nor any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would cause this offering of the
Securities to require approval of stockholders of the Company under any
applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system
on which any of the securities of the Company are listed or designated for
quotation. None of the Company, its Subsidiaries, their affiliates nor any
Person acting on their behalf will take any action or steps that would cause
the offering of any of the Securities to be integrated with other offerings of
securities of the Company. (i) Dilutive Effect. The Company understands and
acknowledges that the number of Conversion Shares will increase in certain
circumstances. The Company further acknowledges that its obligation to issue
the Conversion Shares pursuant to the terms of the Notes in accordance with
this Agreement and the Notes is, in each case, absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company. (j) Application of Takeover
Protections; Rights Agreement. The Company and its board of directors have
taken all necessary action, if any, in order to render inapplicable any
control share acquisition, interested stockholder, business combination,
poison pill (including, without limitation, any distribution under a rights
agreement), stockholder rights plan or other similar anti-takeover provision
under the Certificate of Incorporation, Bylaws or other organizational
documents or the laws of the jurisdiction of its incorporation or otherwise
which is or could become applicable to any Buyer as a result of the
transactions contemplated by this Agreement, including, without limitation,
the Company's issuance of the Securities and any Buyer's ownership of the
Securities. The Company and its board of directors have taken all necessary
action, if any, in order to render inapplicable any stockholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of
shares of Common Stock or a change in control of the Company or any of its
Subsidiaries. (k) SEC Documents; Financial Statements. During the two (2)
years prior to the date hereof, the Company has timely filed all reports,
schedules, forms, proxy statements, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act (all of the foregoing filed prior to the date hereof and all exhibits and
appendices included therein and financial statements, notes and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC Documents"). The Company has delivered or has made
available to the Buyers or their respective representatives true, correct and
complete copies of each of the SEC Documents not available on the EDGAR
system. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements
of the Company included in the SEC Documents complied in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto as in effect as of the time of
filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP"), consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material respects
the financial
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position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments which will not be
material, either individually or in the aggregate). The reserves, if any,
established by the Company or the lack of reserves, if applicable, are
reasonable based upon facts and circumstances known by the Company on the date
hereof and there are no loss contingencies that are required to be accrued by
the Statement of Financial Accounting Standard No. 5 of the Financial
Accounting Standards Board which are not provided for by the Company in its
financial statements or otherwise. No other information provided by or on
behalf of the Company to any of the Buyers which is not included in the SEC
Documents (including, without limitation, information in the disclosure
schedules to this Agreement) contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein not misleading, in the light of the circumstance under which they are
or were made. The Company is not currently contemplating to amend or restate
any of the financial statements (including, without limitation, any notes or
any letter of the independent accountants of the Company with respect thereto)
included in the SEC Documents (the "Financial Statements"), nor is the Company
currently aware of facts or circumstances which would require the Company to
amend or restate any of the Financial Statements, in each case, in order for
any of the Financial Statements to be in compliance with GAAP and the rules
and regulations of the SEC. The Company has not been informed by its
independent accountants that they recommend that the Company amend or restate
any of the Financial Statements or that there is any need for the Company to
amend or restate any of the Financial Statements. (l) Absence of Certain
Changes. Since the date of the Company's most recent audited financial
statements contained in a Form 10-K, there has been no material adverse change
and no material adverse development in the business, assets, liabilities,
properties, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company or any of its Subsidiaries. Since the
date of the Company's most recent audited financial statements contained in a
Form 10-K, neither the Company nor any of its Subsidiaries has (i) declared or
paid any dividends, (ii) sold any assets, individually or in the aggregate,
outside of the ordinary course of business or (iii) made any capital
expenditures, individually or in the aggregate, outside of the ordinary course
of business. Neither the Company nor any of its Subsidiaries has taken any
steps to seek protection pursuant to any law or statute relating to
bankruptcy, insolvency, reorganization, receivership, liquidation or winding
up, nor does the Company or any Subsidiary have any knowledge or reason to
believe that any of their respective creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company and its Subsidiaries,
individually and on a consolidated basis, are not as of the date hereof, and
after giving effect to the transactions contemplated hereby to occur at such
Closing, will not be Insolvent (as defined below). For purposes of this
Section 3(l), "Insolvent" means, (i) with respect to the Company and its
Subsidiaries, on a consolidated basis, (A) the present fair saleable value of
the Company's and its Subsidiaries' assets is less than the amount required to
pay the Company's and its Subsidiaries' total Indebtedness (as defined below),
(B) the Company and its Subsidiaries are unable to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (C) the Company and its
Subsidiaries intend to incur or believe that they will incur debts that would
be beyond their ability to pay as such debts mature; and (ii) with respect to
the Company and each Subsidiary, individually, (A) the present fair saleable
value of the Company's or such Subsidiary's (as the case may be) assets is
less than the amount required to pay its respective total Indebtedness,
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(B) the Company or such Subsidiary (as the case may be) is unable to pay its
respective debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured or (C) the Company or
such Subsidiary (as the case may be) intends to incur or believes that it will
incur debts that would be beyond its respective ability to pay as such debts
mature. Neither the Company nor any of its Subsidiaries has engaged in any
business or in any transaction, and is not about to engage in any business or
in any transaction, for which the Company's or such Subsidiary's remaining
assets constitute unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted. (m) No Undisclosed Events, Liabilities, Developments
or Circumstances. No event, liability, development or circumstance has
occurred or exists, or is reasonably expected to exist or occur with respect
to the Company, any of its Subsidiaries or any of their respective businesses,
properties, liabilities, prospects, operations (including results thereof) or
condition (financial or otherwise), that (i) would be required to be disclosed
by the Company under applicable securities laws on a registration statement on
Form S-1 filed with the SEC relating to an issuance and sale by the Company of
its Common Stock and which has not been publicly announced, (ii) could have a
material adverse effect on any Buyer's investment hereunder or (iii) could
have a Material Adverse Effect. (n) Conduct of Business; Regulatory Permits.
Neither the Company nor any of its Subsidiaries is in violation of any term of
or in default under its Certificate of Incorporation, any certificate of
designation, preferences or rights of any other outstanding series of
preferred stock of the Company or any of its Subsidiaries or Bylaws or their
organizational charter, certificate of formation, memorandum of association,
articles of association, Certificate of Incorporation or certificate of
incorporation or bylaws, respectively. Neither the Company nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except in all cases for
possible violations which could not, individually or in the aggregate, have a
Material Adverse Effect. Without limiting the generality of the foregoing, the
Company is not in violation of any of the rules, regulations or requirements
of the Principal Market and has no knowledge of any facts or circumstances
that could reasonably lead to delisting or suspension of the Common Stock by
the Principal Market in the foreseeable future. During the two years prior to
the date hereof, (i) the Common Stock has been listed or designated for
quotation on the Principal Market, (ii) trading in the Common Stock has not
been suspended by the SEC or the Principal Market and (iii) the Company has
received no communication, written or oral, from the SEC or the Principal
Market regarding the suspension or delisting of the Common Stock from the
Principal Market. The Company and each of its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not
have, individually or in the aggregate, a Material Adverse Effect, and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit. There is no agreement, commitment, judgment,
injunction, order or decree binding upon the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries is a party
which has or would reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any of its
Subsidiaries, any acquisition of property by the Company or any of its
Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries as currently conducted other than such effects, individually or
in the aggregate, which have not had and would not reasonably be expected to
have a Material Adverse Effect on the Company or any of its Subsidiaries.
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(o) Foreign Corrupt Practices. Neither the Company, the Company's subsidiary
or any director, officer, agent, employee, nor any other person acting for or
on behalf of the foregoing (individually and collectively, a "Company
Affiliate") have violated the U.S. Foreign Corrupt Practices Act of 1977, as
amended (the "FCPA"), or any other applicable anti-bribery or anti-corruption
laws, nor has any Company Affiliate offered, paid, promised to pay, or
authorized the payment of any money, or offered, given, promised to give, or
authorized the giving of anything of value, to any officer, employee or any
other person acting in an official capacity for any Governmental Entity to any
political party or official thereof or to any candidate for political office
(individually and collectively, a "Government Official") or to any person
under circumstances where such Company Affiliate knew or was aware of a high
probability that all or a portion of such money or thing of value would be
offered, given or promised, directly or indirectly, to any Government
Official, for the purpose of: (i) (A) influencing any act or decision of such
Government Official in his/her official capacity, (B) inducing such Government
Official to do or omit to do any act in violation of his/her lawful duty, (C)
securing any improper advantage, or (D) inducing such Government Official to
influence or affect any act or decision of any Governmental Entity, or (ii)
assisting the Company or its Subsidiaries in obtaining or retaining business
for or with, or directing business to, the Company or its Subsidiaries. (p)
Sarbanes-Oxley Act. The Company and each Subsidiary is in compliance with any
and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended,
and any and all applicable rules and regulations promulgated by the SEC
thereunder. (q) Transactions With Affiliates. No current or former employee,
partner, director, officer or stockholder (direct or indirect) of the Company
or its Subsidiaries, or any associate, or, to the knowledge of the Company,
any affiliate of any thereof, or any relative with a relationship no more
remote than first cousin of any of the foregoing, is presently, or has ever
been, (i) a party to any transaction with the Company or its Subsidiaries
(including any contract, agreement or other arrangement providing for the
furnishing of services by, or rental of real or personal property from, or
otherwise requiring payments to, any such director, officer or stockholder or
such associate or affiliate or relative Subsidiaries (other than for ordinary
course services as employees, officers or directors of the Company or any of
its Subsidiaries)) or (ii) the direct or indirect owner of an interest in any
corporation, firm, association or business organization which is a competitor,
supplier or customer of the Company or its Subsidiaries (except for a passive
investment (direct or indirect) in less than 5% of the common stock of a
company whose securities are traded on or quoted through an Eligible Market
(as defined in the Notes)), nor does any such Person receive income from any
source other than the Company or its Subsidiaries which relates to the
business of the Company or its Subsidiaries or should properly accrue to the
Company or its Subsidiaries. No employee, officer, stockholder or director of
the Company or any of its Subsidiaries or member of his or her immediate
family is indebted to the Company or its Subsidiaries, as the case may be,
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nor is the Company or any of its Subsidiaries indebted (or committed to make
loans or extend or guarantee credit) to any of them, other than (i) for
payment of salary for services rendered, (ii) reimbursement for reasonable
expenses incurred on behalf of the Company, and (iii) for other standard
employee benefits made generally available to all employees or executives
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company). (r) Equity Capitalization.
(i) Definitions: (A) "Common Stock" means (x) the Company's shares of class A
common stock, $0.00001 par value per share, and (y) any capital stock into
which such common stock shall have been changed or any share capital resulting
from a reclassification of such common stock. (B) "Class B Common Stock" means
(x) the Company's shares of class B common stock, $0.00001 par value per
share, and (y) any capital stock into which such common stock shall have been
changed or any share capital resulting from a reclassification of such common
stock. (C) "Preferred Stock" means (x) the Company's blank check preferred
stock, $0.00001 par value per share, the terms of which may be designated by
the board of directors of the Company in a certificate of designations and (y)
any capital stock into which such preferred stock shall have been changed or
any share capital resulting from a reclassification of such preferred stock
(other than a conversion of such preferred stock into Common Stock in
accordance with the terms of such certificate of designations). (ii)
Authorized and Outstanding Capital Stock. As of the date hereof, the
authorized capital stock of the Company consists of (A) 750,000,000 shares of
Class A Common Stock, of which, 210,179,237 are issued and outstanding and
253,812,911 shares are reserved for issuance pursuant to Convertible
Securities (as defined below) (other than the Notes) exercisable or
exchangeable for, or convertible into, shares of Common Stock, (B) 150,000,000
shares of Class B Common Stock, of which, 132,354,128 are issued and
outstanding and no shares are reserved for issuance pursuant to Convertible
Securities exercisable or exchangeable for, or convertible into, shares of
Common Stock and (C) 15,000,000 shares of Preferred Stock, none of which are
issued and outstanding. No shares of Common Stock are held in the treasury of
the Company. "Convertible Securities" means any capital stock or other
security of the Company or any of its Subsidiaries that is at any time and
under any circumstances directly or indirectly convertible into, exercisable
or exchangeable for, or which otherwise entitles the holder thereof to
acquire, any capital stock or other security of the Company (including,
without limitation, Common Stock) or any of its Subsidiaries.
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(iii) Valid Issuance; Available Shares; Affiliates. All of such outstanding
shares are duly authorized and have been, or upon issuance will be, validly
issued and are fully paid and nonassessable. Schedule 3(r)(iii) sets forth the
number of shares of Common Stock that are (A) reserved for issuance pursuant
to Convertible Securities (as defined below) (other than the Notes) and (B)
that are, as of the date hereof, owned by Persons who are "affiliates" (as
defined in Rule 405 of the 1933 Act and calculated based on the assumption
that only officers, directors and holders of at least 10% of the Company's
issued and outstanding Common Stock are "affiliates" without conceding that
any such Persons are "affiliates" for purposes of federal securities laws) of
the Company or any of its Subsidiaries. Except as disclosed in the SEC
Documents, to the Company's knowledge, no Person owns 10% or more of the
Company's issued and outstanding shares of Common Stock (calculated based on
the assumption that all Convertible Securities (as defined below), whether or
not presently exercisable or convertible, have been fully exercised or
converted (as the case may be) taking account of any limitations on exercise
or conversion (including "blockers") contained therein without conceding that
such identified Person is a 10% stockholder for purposes of federal securities
laws). (iv) Existing Securities; Obligations. Except as disclosed in the SEC
Documents: (A) none of the Company's or any Subsidiary's shares, interests or
capital stock is subject to preemptive rights or any other similar rights or
Liens suffered or permitted by the Company or any Subsidiary; (B) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares, interests or
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares, interests or
capital stock of the Company or any of its Subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any shares, interests or capital stock of the
Company or any of its Subsidiaries; (C) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated
to register the sale of any of their securities under the 1933 Act (except
pursuant to this Agreement); (D) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (E) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; and (F) neither the Company nor any Subsidiary has any stock
appreciation rights or "phantom stock" plans or agreements or any similar plan
or agreement.
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(v) Organizational Documents. The Company has furnished to the Buyers true,
correct and complete copies of the Company's Certificate of Incorporation, as
amended and as in effect on the date hereof (the "Certificate of Incorporation")
, and the Company's bylaws, as amended and as in effect on the date hereof
(the "Bylaws"), and the terms of all Convertible Securities and the material
rights of the holders thereof in respect thereto. (s) Indebtedness and Other
Contracts. Neither the Company nor any of its Subsidiaries, (i) except as
disclosed on Schedule 3(s), has any outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness of the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries is or may become bound, (ii) is a party
to any contract, agreement or instrument, the violation of which, or default
under which, by the other party(ies) to such contract, agreement or instrument
could reasonably be expected to result in a Material Adverse Effect, (iii) has
any financing statements securing obligations in any amounts filed in
connection with the Company or any of its Subsidiaries; (iv) is in violation
of any term of, or in default under, any contract, agreement or instrument
relating to any Indebtedness, except where such violations and defaults would
not result, individually or in the aggregate, in a Material Adverse Effect, or
(v) is a party to any contract, agreement or instrument relating to any
Indebtedness, the performance of which, in the judgment of the Company's
officers, has or is expected to have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries have any liabilities or obligations
required to be disclosed in the SEC Documents which are not so disclosed in
the SEC Documents, other than those incurred in the ordinary course of the
Company's or its Subsidiaries' respective businesses and which, individually
or in the aggregate, do not or could not have a Material Adverse Effect. For
purposes of this Agreement: (x) "Indebtedness" of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations
issued, undertaken or assumed as the deferred purchase price of property or
services (including, without limitation, "capital leases" in accordance with
GAAP) (other than trade payables entered into in the ordinary course of
business consistent with past practice), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses and any guarantees of
any such obligations, (E) all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred as financing,
in either case with respect to any property or assets acquired with the
proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with GAAP, consistently
applied for the periods covered thereby, is classified as a capital lease, (G)
all indebtedness referred to in clauses (A) through (F) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in
respect of indebtedness or obligations of others of the kinds referred to in
clauses (A) through (G) above; (y) "Contingent Obligation" means, as to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to any Indebtedness, lease, dividend or other obligation
of another Person if the primary purpose or intent of the Person incurring
such liability, or the primary effect thereof,
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is to provide assurance to the obligee of such liability that such liability
will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in
whole or in part) against loss with respect thereto; and (z) "Person" means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and any
Governmental Entity or any department or agency thereof. (t) Litigation. There
is no action, suit, arbitration, proceeding, inquiry or investigation before
or by the Principal Market, any court, public board, other Governmental
Entity, self-regulatory organization or body pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries, the Common Stock or any of the Company's or its Subsidiaries'
officers or directors, whether of a civil or criminal nature or otherwise, in
their capacities as such, which is outside of the ordinary course of business
or individually or in the aggregate material to the Company or any of its
Subsidiaries, except as set forth in Schedule 3(t). No director, officer or
employee of the Company or any of its subsidiaries has willfully violated 18
U.S.C. (s)1519 or engaged in spoliation in reasonable anticipation of
litigation. Without limitation of the foregoing, there has not been, and to
the knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company, any of its Subsidiaries or any
current or former director or officer of the Company or any of its
Subsidiaries. The SEC has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company under the
1933 Act or the 1934 Act, including, without limitation, the Registration
Statement. After reasonable inquiry of its employees, the Company is not aware
of any fact which might result in or form the basis for any such action, suit,
arbitration, investigation, inquiry or other proceeding. Neither the Company
nor any of its Subsidiaries is subject to any order, writ, judgment,
injunction, decree, determination or award of any Governmental Entity. (u)
Insurance. The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in
the businesses in which the Company and its Subsidiaries are engaged. Neither
the Company nor any such Subsidiary has been refused any insurance coverage
sought or applied for, and neither the Company nor any such Subsidiary has any
reason to believe that it will be unable to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect. (v) Employee Relations. Neither the
Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and its Subsidiaries
believe that their relations with their employees are good. No current (or
former) executive officer (as defined in Rule 501(f) promulgated under the
1933 Act) or other key employee of the Company or any of its Subsidiaries has
notified the Company or any such Subsidiary that such officer intends to leave
the Company or any such Subsidiary or otherwise terminate such officer's
employment with the Company or any such Subsidiary. No current (or, to the
knowledge of the Company, former) executive officer or other key employee of
the Company or any of its Subsidiaries is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and
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the continued employment of each such executive officer or other key employee
(as the case may be) does not subject the Company or any of its Subsidiaries
to any liability with respect to any of the foregoing matters. The Company and
its Subsidiaries are in compliance with all federal, state, local and foreign
laws and regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect. (w)
Title. (i) Real Property. Each of the Company and its Subsidiaries holds good
title to all real property, leases in real property, facilities or other
interests in real property owned or held by the Company or any of its
Subsidiaries (the "Real Property") owned by the Company or any of its
Subsidiaries (as applicable). The Real Property is free and clear of all Liens
and is not subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except for
(a) Liens for current taxes not yet due and (b) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto. Any Real Property held under lease by the Company or any of
its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
or any of its Subsidiaries. (ii) Fixtures and Equipment. Each of the Company
and its Subsidiaries (as applicable) has good title to, or a valid leasehold
interest in, the tangible personal property, equipment, improvements,
fixtures, and other personal property and appurtenances that are used by the
Company or its Subsidiary in connection with the conduct of its business (the
"Fixtures and Equipment"). The Fixtures and Equipment are structurally sound,
are in good operating condition and repair, are adequate for the uses to which
they are being put, are not in need of maintenance or repairs except for
ordinary, routine maintenance and repairs and are sufficient for the conduct
of the Company's and/or its Subsidiaries' businesses (as applicable) in the
manner as conducted prior to such Closing. Each of the Company and its
Subsidiaries owns all of its Fixtures and Equipment free and clear of all
Liens except for (a) liens for current taxes not yet due and (b) zoning laws
and other land use restrictions that do not impair the present or anticipated
use of the property subject thereto. (x) Intellectual Property Rights. The
Company and its Subsidiaries own or possess adequate rights or licenses to use
all trademarks, trade names, service marks, service mark registrations,
service names, original works of authorship, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations,
trade secrets and other intellectual property rights and all applications and
registrations therefor ("Intellectual Property Rights") necessary to conduct
their respective businesses as now conducted and presently proposed to be
conducted. Each of the patents owned by the Company or any of its Subsidiaries
is listed on Schedule 3(x)(i). Except as set forth in Schedule 3(x)(ii), none
of the Company's Intellectual
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Property Rights have expired or terminated or have been abandoned or are
expected to expire or terminate or are expected to be abandoned, within three
years from the date of this Agreement. The Company does not have any knowledge
of any infringement by the Company or its Subsidiaries of Intellectual
Property Rights of others. There is no claim, action or proceeding being made
or brought, or to the knowledge of the Company or any of its Subsidiaries,
being threatened, against the Company or any of its Subsidiaries regarding its
Intellectual Property Rights. Neither the Company nor any of its Subsidiaries
is aware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights. (y)
Environmental Laws. (i) The Company and its Subsidiaries (A) are in compliance
with any and all Environmental Laws (as defined below), (B) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (C) are in
compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (A), (B) and (C), the failure
to so comply could be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect. The term "Environmental Laws" means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder. (ii) No Hazardous Materials: (A) have been disposed of or
otherwise released from any Real Property of the Company or any of its
Subsidiaries in violation of any Environmental Laws; or (B) are present on,
over, beneath, in or upon any Real Property or any portion thereof in
quantities that would constitute a violation of any Environmental Laws. No
prior use by the Company or any of its Subsidiaries of any Real Property has
occurred that violates any Environmental Laws, which violation would have a
material adverse effect on the business of the Company or any of its
Subsidiaries. (iii) Neither the Company nor any of its Subsidiaries knows of
any other person who or entity which has stored, treated, recycled, disposed
of or otherwise located on any Real Property any Hazardous Materials,
including, without limitation, such substances as asbestos and polychlorinated
biphenyls.
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(iv) None of the Real Properties are on any federal or state "Superfund" list
or Liability Information System ("CERCLIS") list or any state environmental
agency list of sites under consideration for CERCLIS, nor subject to any
environmental related Liens. (z) Subsidiary Rights. The Company or one of its
Subsidiaries has the unrestricted right to vote, and (subject to limitations
imposed by applicable law) to receive dividends and distributions on, all
capital securities of its Subsidiaries as owned by the Company or such
Subsidiary. (aa) Tax Status. The Company and each of its Subsidiaries (i) has
timely made or filed all foreign, federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has timely paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction.
The Company is not operated in such a manner as to qualify as a passive
foreign investment company, as defined in Section 1297 of the Code. (bb)
Internal Accounting and Disclosure Controls. Except as set forth in the
Company's periodic and current reports filed with the U.S. Securities and
Exchange Commission (the "SEC"), the Company and each of its Subsidiaries
maintains internal control over financial reporting (as such term is defined
in Rule 13a-15(f) under the 1934 Act) that is effective to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles, including that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is
permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets and liabilities
is compared with the existing assets and liabilities at reasonable intervals
and appropriate action is taken with respect to any difference. Except as set
forth in the Company's periodic and current reports filed with the SEC, the
Company maintains disclosure controls and procedures (as such term is defined
in Rule 13a-15(e) under the 1934 Act) that are effective in ensuring that
information required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is recorded, processed, summarized and
reported, within the time periods specified in the rules and forms of the SEC,
including, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is accumulated and communicated to the
Company's management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to allow
timely decisions regarding required disclosure. Neither the Company nor any of
its Subsidiaries has received any notice or correspondence from any
accountant, Governmental Entity or other Person relating to any potential
material weakness or significant deficiency in any part of the internal
controls over financial reporting of the Company or any of its Subsidiaries.
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(cc) Off Balance Sheet Arrangements. There is no transaction, arrangement, or
other relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or
that otherwise could be reasonably likely to have a Material Adverse Effect.
(dd) Investment Company Status. The Company is not, and upon consummation of
the sale of the Securities will not be, an "investment company," an affiliate
of an "investment company," a company controlled by an "investment company" or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act
of 1940, as amended. (ee) Acknowledgement Regarding Buyers' Trading Activity.
It is understood and acknowledged by the Company that (i) following the public
disclosure of the transactions contemplated by the Transaction Documents, in
accordance with the terms thereof, none of the Buyers have been asked by the
Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the
Company or any of its Subsidiaries, to desist from effecting any transactions
in or with respect to (including, without limitation, purchasing or selling,
long and/or short) any securities of the Company, or "derivative" securities
based on securities issued by the Company or to hold any of the Securities for
any specified term; (ii) any Buyer, and counterparties in "derivative"
transactions to which any such Buyer is a party, directly or indirectly,
presently may have a "short" position in the Common Stock which was
established prior to such Buyer's knowledge of the transactions contemplated
by the Transaction Documents; (iii) each Buyer shall not be deemed to have any
affiliation with or control over any arm's length counterparty in any
"derivative" transaction; and (iv) each Buyer may rely on the Company's
obligation to timely deliver shares of Common Stock upon conversion or
exchange, as applicable, of the Securities as and when required pursuant to
the Transaction Documents for purposes of effecting trading in the Common
Stock of the Company. The Company further understands and acknowledges that
following the public disclosure of the transactions contemplated by the
Transaction Documents pursuant to the Press Release (as defined below) one or
more Buyers may engage in hedging and/or trading activities (including,
without limitation, the location and/or reservation of borrowable shares of
Common Stock) at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value
and/or number of the Conversion Shares deliverable with respect to the
Securities are being determined and such hedging and/or trading activities
(including, without limitation, the location and/or reservation of borrowable
shares of Common Stock), if any, can reduce the value of the existing
stockholders' equity interest in the Company both at and after the time the
hedging and/or trading activities are being conducted. The Company
acknowledges that such aforementioned hedging and/or trading activities do not
constitute a breach of this Agreement, the Notes or any other Transaction
Document or any of the documents executed in connection herewith or therewith.
(ff) Manipulation of Price. Neither the Company nor any of its Subsidiaries
has, and, to the knowledge of the Company, no Person acting on their behalf
has, directly or indirectly, (i) taken any action designed to cause or to
result in the stabilization or manipulation of the price of any security of
the Company or any of its Subsidiaries to facilitate the sale or resale of any
of the Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, (iii) paid or agreed to pay to
any Person any compensation for soliciting another to purchase any other
securities of the Company or any of its Subsidiaries or (iv) paid or agreed to
pay any Person for research services with respect to any securities of the
Company or any of its Subsidiaries.
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(gg) U.S. Real Property Holding Corporation. Neither the Company nor any of
its Subsidiaries is, or has ever been, and so long as any of the Securities
are held by any of the Buyers, shall become, a U.S. real property holding
corporation within the meaning of Section 897 of the Code, and the Company and
each Subsidiary shall so certify upon any Buyer's request. (hh) [Intentionally
Omitted]. (ii) Transfer Taxes. On such Closing Date, all stock transfer or
other similar transfer taxes (not including any income or similar taxes) which
are required to be paid in connection with the issuance, sale and transfer of
the Securities to be sold to each Buyer hereunder will be, or will have been,
fully paid or provided for by the Company, and all laws imposing such taxes
will be or will have been complied with. (jj) Bank Holding Company Act.
Neither the Company nor any of its Subsidiaries is subject to the Bank Holding
Company Act of 1956, as amended (the "BHCA") and to regulation by the Board of
Governors of the Federal Reserve System (the "Federal Reserve"). Neither the
Company nor any of its Subsidiaries or affiliates owns or controls, directly
or indirectly, five percent (5%) or more of the outstanding shares of any
class of voting securities or twenty-five percent (25%) or more of the total
equity of a bank or any entity that is subject to the BHCA and to regulation
by the Federal Reserve. Neither the Company nor any of its Subsidiaries or
affiliates exercises a controlling influence over the management or policies
of a bank or any entity that is subject to the BHCA and to regulation by the
Federal Reserve. (kk) [Intentionally Omitted]. (ll) Illegal or Unauthorized
Payments; Political Contributions. Neither the Company nor any of its
Subsidiaries nor, to the best of the Company's knowledge (after reasonable
inquiry of its officers and directors), any of the officers, directors,
employees, agents or other representatives of the Company or any of its
Subsidiaries or any other business entity or enterprise with which the Company
or any Subsidiary is or has been affiliated or associated, has, directly or
indirectly, made or authorized any payment, contribution or gift of money,
property, or services, whether or not in contravention of applicable law, (i)
as a kickback or bribe to any Person or (ii) to any political organization, or
the holder of or any aspirant to any elective or appointive public office
except for personal political contributions not involving the direct or
indirect use of funds of the Company or any of its Subsidiaries. (mm) Money
Laundering. The Company and its Subsidiaries are in compliance with, and have
not previously violated, the USA Patriot Act of 2001 and all other applicable
U.S. and non-U.S. anti-money laundering laws and regulations, including,
without limitation, the laws, regulations and Executive Orders and sanctions
programs administered by the U.S. Office of Foreign Assets Control, including,
but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled,
"Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism" (66 Fed. Reg. 49079 (2001)); and
(ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.
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(nn) Management. Except as set forth in Schedule 3(nn) hereto, during the past
five year period, no current or former officer or director or, to the
knowledge of the Company, no current ten percent (10%) or greater stockholder
of the Company or any of its Subsidiaries has been the subject of: (i) a
petition under bankruptcy laws or any other insolvency or moratorium law or
the appointment by a court of a receiver, fiscal agent or similar officer for
such Person, or any partnership in which such person was a general partner at
or within two years before the filing of such petition or such appointment, or
any corporation or business association of which such person was an executive
officer at or within two years before the time of the filing of such petition
or such appointment; (ii) a conviction in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic violations that do
not relate to driving while intoxicated or driving under the influence); (iii)
any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining any such person from, or otherwise limiting, the following
activities: (1) Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the United States
Commodity Futures Trading Commission or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, or engaging
in or continuing any conduct or practice in connection with such activity; (2)
Engaging in any particular type of business practice; or (3) Engaging in any
activity in connection with the purchase or sale of any security or commodity
or in connection with any violation of securities laws or commodities laws;
(iv) any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any authority barring, suspending or otherwise limiting for more
than sixty (60) days the right of any such person to engage in any activity
described in the preceding sub paragraph, or to be associated with persons
engaged in any such activity; (v) a finding by a court of competent
jurisdiction in a civil action or by the SEC or other authority to have
violated any securities law, regulation or decree and the judgment in such
civil action or finding by the SEC or any other authority has not been
subsequently reversed, suspended or vacated; or
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(vi) a finding by a court of competent jurisdiction in a civil action or by
the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding has not been
subsequently reversed, suspended or vacated. (oo) Stock Option Plans. Each
stock option granted by the Company was granted (i) in accordance with the
terms of the applicable stock option plan of the Company and (ii) with an
exercise price at least equal to the fair market value of the Common Stock on
the date such stock option would be considered granted under GAAP and
applicable law. No stock option granted under the Company's stock option plan
has been backdated. The Company has not knowingly granted, and there is no and
has been no policy or practice of the Company to knowingly grant, stock
options prior to, or otherwise knowingly coordinate the grant of stock options
with, the release or other public announcement of material information
regarding the Company or its Subsidiaries or their financial results or
prospects. (pp) No Disagreements with Accountants and Lawyers. There are no
material disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the accountants
and lawyers formerly or presently employed by the Company and the Company is
current with respect to any fees owed to its accountants and lawyers which
could affect the Company's ability to perform any of its obligations under any
of the Transaction Documents. In addition, on or prior to the date hereof, the
Company had discussions with its accountants about its financial statements
previously filed with the SEC. Based on those discussions, the Company has no
reason to believe that it will need to restate any such financial statements
or any part thereof. (qq) No Additional Agreements. The Company does not have
any agreement or understanding with any Buyer with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents. (rr) Public Utility Holding Company Act. None of the
Company nor any of its Subsidiaries is a "holding company," or an "affiliate"
of a "holding company," as such terms are defined in the Public Utility
Holding Company Act of 2005. (ss) Federal Power Act. None of the Company nor
any of its Subsidiaries is subject to regulation as a "public utility" under
the Federal Power Act, as amended. (tt) Ranking of Notes. No Indebtedness of
the Company, at such Closing, will be senior to, or pari passu with, the Notes
in right of payment, whether with respect to payment or redemptions, interest,
damages, upon liquidation or dissolution or otherwise (other than Indebtedness
secured by Permitted Liens (as defined in the Notes)). (uu) Cybersecurity. The
Company and its Subsidiaries' information technology assets and equipment,
computers, systems, networks, hardware, software, websites, applications, and
databases (collectively, "IT Systems") are adequate for, and operate and
perform in all material respects as required in connection with the operation
of the business of the Company and its subsidiaries as currently conducted,
free and clear of all material bugs, errors, defects, Trojan horses, time
bombs, malware and other corruptants that would reasonably be expected to have
a
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Material Adverse Effect on the Company's business. The Company and its
Subsidiaries have implemented and maintained commercially reasonable physical,
technical and administrative controls, policies, procedures, and safeguards to
maintain and protect their material confidential information and the
integrity, continuous operation, redundancy and security of all IT Systems and
data, including "Personal Data," used in connection with their businesses.
"Personal Data" means (i) a natural person's name, street address, telephone
number, e-mail address, photograph, social security number or tax
identification number, driver's license number, passport number, credit card
number, bank information, or customer or account number; (ii) any information
which would qualify as "personally identifying information" under the Federal
Trade Commission Act, as amended; (iii) "personal data" as defined by the
European Union General Data Protection Regulation ("GDPR") (EU 2016/679); (iv)
any information which would qualify as "protected health information" under
the Health Insurance Portability and Accountability Act of 1996, as amended by
the Health Information Technology for Economic and Clinical Health Act
(collectively, "HIPAA"); and (v) any other piece of information that allows
the identification of such natural person, or his or her family, or permits
the collection or analysis of any data related to an identified person's
health or sexual orientation. There have been no breaches, violations, outages
or unauthorized uses of or accesses to same, except for those that have been
remedied without material cost or liability or the duty to notify any other
person or such, nor any incidents under internal review or investigations
relating to the same except in each case, where such would not, either
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect. The Company and its Subsidiaries are presently in
compliance with all applicable laws or statutes and all judgments, orders,
rules and regulations of any court or arbitrator or governmental or regulatory
authority, internal policies and contractual obligations relating to the
privacy and security of IT Systems and Personal Data and to the protection of
such IT Systems and Personal Data from unauthorized use, access, misappropriatio
n or modification except in each case, where such would not, either
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect. (vv) Compliance with Data Privacy Laws. The Company
and its Subsidiaries are, and at all prior times were, in compliance with all
applicable state and federal data privacy and security laws and regulations,
including without limitation HIPAA, and the Company and its Subsidiaries have
taken commercially reasonable actions to prepare to comply with, and since May
25, 2018, have been and currently are in compliance with, the General Data
Protection Regulation of the European Union (GDPR) (Regulation EU 2016/679)
(collectively, the "Privacy Laws") except in each case, where such would not,
either individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect. To ensure compliance with the Privacy Laws, the
Company and its Subsidiaries have in place, comply with, and take appropriate
steps reasonably designed to ensure compliance in all material respects with
their policies and procedures relating to data privacy and security and the
collection, storage, use, disclosure, handling, and analysis of Personal Data
(the "Policies"). The Company and its Subsidiaries have at all times made all
disclosures to users or customers required by applicable laws and regulatory
rules or requirements, and none of such disclosures made or contained in any
Policy have, to the knowledge of the Company, been inaccurate or in violation
of any applicable laws and regulatory rules or requirements in any material
respect. The Company further certifies that neither it nor any Subsidiary: (i)
has received notice of any actual or potential liability under or relating to,
or actual or potential violation of, any of the Privacy Laws, and has no
knowledge of any event or condition that would reasonably be expected to
result in any such notice; (ii) is currently conducting or paying for, in
whole or in part, any investigation, remediation, or other corrective action
pursuant to any Privacy Law; or (iii) is a party to any order, decree, or
agreement that imposes any obligation or liability under any Privacy Law.
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(ww) Registration Rights. No holder of securities of the Company has rights to
the registration of any securities of the Company because of the filing of the
Registration Statement or the issuance of the Securities hereunder that could
expose the Company to material liability or any Buyer to any liability or that
could impair the Company's ability to consummate the issuance and sale of the
Securities in the manner, and at the times, contemplated hereby, which rights
have not been waived by the holder thereof as of the date hereof. (xx)
Compliance With FINRA Rule 5110. At the time the Registration Statement was
declared effective by the SEC, and as of the date hereof and as of such
Closing Date, the Company has (i) a 1934 Act reporting history in excess of 36
months and (ii) a non-affiliate, public common float of at least $100 million
and annual trading volume of at least three million shares. (yy) Qualification
Under Trust Indenture Act. Prior to any issuance of Notes hereunder, the
Company shall qualify or cause or arrange for the Trustee to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "TIA") and
enter into any necessary supplemental indentures in connection therewith and,
so long as the Notes remain outstanding, the Indenture shall be maintained in
compliance with the TIA. (zz) Disclosure. The Company confirms that neither it
nor any other Person acting on its behalf has provided any of the Buyers or
their agents or counsel with any information that constitutes or could
reasonably be expected to constitute material, non-public information
concerning the Company or any of its Subsidiaries, other than the existence of
the transactions contemplated by this Agreement and the other Transaction
Documents. The Company understands and confirms that each of the Buyers will
rely on the foregoing representations in effecting transactions in securities
of the Company. All disclosure provided to the Buyers regarding the Company
and its Subsidiaries, their businesses and the transactions contemplated
hereby, including the schedules to this Agreement, furnished by or on behalf
of the Company or any of its Subsidiaries is true and correct and does not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. All of the
written information furnished after the date hereof by or on behalf of the
Company or any of its Subsidiaries to each Buyer pursuant to or in connection
with this Agreement and the other Transaction Documents, taken as a whole,
will be true and correct in all material respects as of the date on which such
information is so provided and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which
they were made, not misleading. Each press release issued by the Company or
any of its Subsidiaries during the twelve (12) months preceding the date of
this Agreement did not at the time of release contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, liabilities,
prospects, operations (including results thereof) or conditions (financial or
otherwise), which, under applicable law, rule or regulation,
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requires public disclosure at or before the date hereof or announcement by the
Company but which has not been so publicly disclosed. All financial
projections and forecasts that have been prepared by or on behalf of the
Company or any of its Subsidiaries and made available to you have been
prepared in good faith based upon reasonable assumptions and represented, at
the time each such financial projection or forecast was delivered to each
Buyer, the Company's best estimate of future financial performance (it being
recognized that such financial projections or forecasts are not to be viewed
as facts and that the actual results during the period or periods covered by
any such financial projections or forecasts may differ from the projected or
forecasted results). The Company acknowledges and agrees that no Buyer makes
or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 2. 4.
COVENANTS. (a) Best Efforts. Each Buyer shall use its best efforts to timely
satisfy each of the covenants hereunder and conditions to be satisfied by it
as provided in Section 6 of this Agreement. The Company shall use its best
efforts to timely satisfy each of the covenants hereunder and conditions to be
satisfied by it as provided in Section 7 of this Agreement. (b) Amendments to
the Registration Statement; Prospectus Supplements; Free Writing Prospectuses.
(i) Amendments to the Registration Statement; Prospectus Supplements; Free
Writing Prospectuses. Except as provided in this Agreement and other than
periodic reports required to be filed pursuant to the 1934 Act, the Company
shall not file with the SEC any amendment to the Registration Statement that
relates to the Buyer, this Agreement or any other Transaction Document or the
transactions contemplated hereby or thereby or file with the SEC any
Prospectus Supplement that relates to the Buyer, this Agreement or any other
Transaction Document or the transactions contemplated hereby or thereby with
respect to which (a) the Buyer shall not previously have been advised, (b) the
Company shall not have given due consideration to any comments thereon
received from the Buyer or its counsel, or (c) the Buyer shall reasonably
object after being so advised, unless the Company reasonably has determined
that it is necessary to amend the Registration Statement or make any
supplement to the Prospectus to comply with the 1933 Act or any other
applicable law or regulation, in which case the Company shall promptly (but in
no event later than 24 hours) so inform the Buyer, the Buyer shall be provided
with a reasonable opportunity to review and comment upon any disclosure
relating to the Buyer and the Company shall expeditiously furnish to the Buyer
an electronic copy thereof. In addition, for so long as, in the reasonable
opinion of counsel for the Buyer, the Prospectus (or in lieu thereof, the
notice referred to in Rule 173(a) under the 1933 Act) is required to be
delivered in connection with any acquisition or sale of Securities by the
Buyer, the Company shall not file any Prospectus Supplement with respect to
the Securities without delivering or making available a copy of such
Prospectus Supplement, together with the Prospectus, to the Buyer promptly.
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(ii) The Company has not made, and agrees that unless it obtains the prior
written consent of the Buyer it will not make, an offer relating to the
Securities that would constitute an "issuer free writing prospectus" as
defined in Rule 433 promulgated under the 1933 Act (an "Issuer Free Writing
Prospectus") or that would otherwise constitute a "free writing prospectus" as
defined in Rule 405 promulgated under the 1933 Act (a "Free Writing
Prospectus") required to be filed by the Company or the Buyer with the SEC or
retained by the Company or the Buyer under Rule 433 under the 1933 Act. The
Buyer has not made, and agrees that unless it obtains the prior written
consent of the Company it will not make, an offer relating to the Securities
that would constitute a Free Writing Prospectus required to be filed by the
Company with the SEC or retained by the Company under Rule 433 under the 1933
Act. Any such Issuer Free Writing Prospectus or other Free Writing Prospectus
consented to by the Buyer or the Company is referred to in this Agreement as a
"Permitted Free Writing Prospectus." The Company agrees that (x) it has
treated and will treat, as the case may be, each Permitted Free Writing
Prospectus as an Issuer Free Writing Prospectus and (y) it has complied and
will comply, as the case may be, with the requirements of Rules 164 and 433
under the 1933 Act applicable to any Permitted Free Writing Prospectus,
including in respect of timely filing with the SEC, legending and record
keeping. (c) Prospectus Delivery. Immediately prior to execution of this
Agreement, the Company shall have delivered to the Buyer, and as soon as
practicable after execution of this Agreement the Company shall file,
Prospectus Supplements with respect to the Securities to be issued on the
applicable Closing Date, as required under, and in conformity with, the 1933
Act, including Rule 424(b) thereunder. The Company shall provide the Buyer a
reasonable opportunity to comment on a draft of each Prospectus Supplement and
any Issuer Free Writing Prospectus, shall give due consideration to all such
comments and, subject to the provisions of Section 4(b) hereof, shall deliver
or make available to the Buyer, without charge, an electronic copy of each
form of Prospectus Supplement, together with the Prospectus, and any Permitted
Free Writing Prospectus on such Closing Date. The Company consents to the use
of the Prospectus (and of any Prospectus Supplements thereto) in accordance
with the provisions of the 1933 Act and with the securities or "blue sky" laws
of the jurisdictions in which the Securities may be sold by the Buyer, in
connection with the offering and sale of the Securities and for such period of
time thereafter as the Prospectus (or in lieu thereof, the notice referred to
in Rule 173(a) under the 1933 Act) is required by the 1933 Act to be delivered
in connection with sales of the Securities. If during such period of time any
event shall occur that in the judgment of the Company and its counsel is
required to be set forth in the Registration Statement or the Prospectus or
any Permitted Free Writing Prospectus or should be set forth therein in order
to make the statements made therein (in the case of the Prospectus, in light
of the circumstances under which they were made) not misleading, or if it is
necessary to amend the Registration Statement or supplement or amend the
Prospectus or any Permitted Free Writing Prospectus to comply with the 1933
Act or any other applicable law or regulation, the Company shall forthwith
prepare and, subject to Section 4(b) above, file with the SEC an appropriate
amendment to the Registration Statement or Prospectus Supplement to the
Prospectus (or supplement to the Permitted Free Writing Prospectus) and shall
expeditiously furnish or make available to the Buyer an electronic copy
thereof.
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(d) Stop Orders. The Company shall advise the Buyer promptly (but in no event
later than 24 hours) and shall confirm such advice in writing: (i) of the
Company's receipt of notice of any request by the SEC for amendment of or a
supplement to the Registration Statement, the Prospectus, any Permitted Free
Writing Prospectus or for any additional information; (ii) of the Company's
receipt of notice of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or prohibiting or suspending the
use of the Prospectus or any Prospectus Supplement, or of the suspension of
qualification of the Securities for offering or sale in any jurisdiction, or
the initiation or contemplated initiation of any proceeding for such purpose;
(iii) of the Company becoming aware of the happening of any event, which makes
any statement of a material fact made in the Registration Statement, the
Prospectus or any Permitted Free Writing Prospectus untrue or which requires
the making of any additions to or changes to the statements then made in the
Registration Statement, the Prospectus or any Permitted Free Writing
Prospectus in order to state a material fact required by the 1933 Act to be
stated therein or necessary in order to make the statements then made therein
(in the case of the Prospectus, in light of the circumstances under which they
were made) not misleading, or of the necessity to amend the Registration
Statement or supplement the Prospectus or any Permitted Free Writing
Prospectus to comply with the 1933 Act or any other law or (iv) if at any time
following the date hereof the Registration Statement is not effective or is
not otherwise available for the issuance of the Securities or any Prospectus
contained therein is not available for use for any other reason. Thereafter,
the Company shall promptly notify such holders when the Registration
Statement, the Prospectus, any Permitted Free Writing Prospectus and/or any
amendment or supplement thereto, as applicable, is effective and available for
the issuance of the Securities. If at any time the SEC shall issue any stop
order suspending the effectiveness of the Registration Statement or
prohibiting or suspending the use of the Prospectus or any Prospectus
Supplement, the Company shall use best efforts to obtain the withdrawal of
such order at the earliest possible time. (e) Blue Sky. The Company shall, on
or before the applicable Closing Date, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to,
qualify the Securities for sale to the Buyers at such Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Buyers on or prior to such
Closing Date. Without limiting any other obligation of the Company under this
Agreement, the Company shall timely make all filings and reports relating to
the offer and sale of the Securities required under all applicable securities
laws (including, without limitation, all applicable federal securities laws
and all applicable "Blue Sky" laws), and the Company shall comply with all
applicable foreign, federal, state and local laws, statutes, rules,
regulations and the like relating to the offering and sale of the Securities
to the Buyers. (f) Reporting Status. Until the date on which the Buyers shall
have sold all of the Securities (the "Reporting Period"), the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would no longer require or otherwise permit such
termination. (g) Use of Proceeds. The Company will use the proceeds from the
sale of the Securities as described in the Prospectus Supplement, but not,
directly or indirectly, for (i) except as set forth on Schedule 4(g), the
satisfaction of any indebtedness of the Company or any of its Subsidiaries,
(ii) the redemption or repurchase of any securities of the Company or any of
its Subsidiaries, or (iii) the settlement of any outstanding litigation.
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(h) Financial Information. The Company agrees to send the following to each
holder of Notes (each, an "Investor") during the Reporting Period (i) unless
the following are filed with the SEC through EDGAR and are available to the
public through the EDGAR system, within one (1) Business Day after the filing
thereof with the SEC, a copy of its Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q, any interim reports or any consolidated balance sheets,
income statements, stockholders' equity statements and/or cash flow statements
for any period other than annual, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant
to the 1933 Act, (ii) unless the following are either filed with the SEC
through EDGAR or are otherwise widely disseminated via a recognized news
release service (such as PR Newswire), on the same day as the release thereof,
e-mail copies of all press releases issued by the Company or any of its
Subsidiaries and (iii) unless the following are filed with the SEC through
EDGAR, copies of any notices and other information made available or given to
the stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders. (i) Listing. The Company
shall promptly secure the listing or designation for quotation (as the case
may be) of all of the Underlying Securities (as defined below) upon each
national securities exchange and automated quotation system, if any, upon
which the Common Stock is then listed or designated for quotation (as the case
may be) (subject to official notice of issuance) and shall maintain such
listing or designation for quotation (as the case may be) of all Underlying
Securities from time to time issuable under the terms of the Transaction
Documents on such national securities exchange or automated quotation system.
The Company shall maintain the Common Stock's listing or authorization for
quotation (as the case may be) on the Principal Market, The New York Stock
Exchange, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global
Market or the Nasdaq Global Select Market (each, an "Eligible Market").
Neither the Company nor any of its Subsidiaries shall take any action which
could be reasonably expected to result in the delisting or suspension of the
Common Stock on an Eligible Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section
4(i). "Underlying Securities" means (i) the Conversion Shares, and (ii) any
capital stock of the Company issued or issuable with respect to the Conversion
Shares, the Indenture or the Notes respectively, including, without
limitation, (1) as a result of any stock split, stock dividend, recapitalization
, exchange or similar event or otherwise and (2) shares of capital stock of
the Company into which the shares of Common Stock are converted or exchanged
and shares of capital stock of a Successor Entity (as defined in the Notes)
into which the shares of Common Stock are converted or exchanged, in each
case, without regard to any limitations on conversion of the Notes. (j) Fees.
The Company shall reimburse the lead Buyer for all reasonable costs and
expenses incurred by it or its affiliates in connection with the structuring,
documentation, negotiation and closing of the transactions contemplated by the
Transaction Documents (including, without limitation, as applicable, (x) a
non-accountable amount of $150,000 for the legal fees and disbursements of
Kelley Drye & Warren LLP, counsel to the lead Buyer with respect to the
Initial Closing, (y) a non-accountable amount of $15,000 with respect to each
Additional Closing and (z) any other reasonable fees and expenses in
connection with the structuring, documentation, negotiation and closing of the
transactions contemplated by the Transaction Documents and due
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diligence and regulatory filings in connection therewith) (the "Transaction
Expenses") and shall be withheld by the lead Buyer from its applicable
Purchase Price at the applicable Closing, less any amounts previously paid by
the Company to the lead Buyer or Kelley Drye & Warren LLP; provided, that the
Company shall promptly reimburse Kelley Drye & Warren LLP on demand for all
Transaction Expenses not so reimbursed through such withholding at such
Closing. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, any fees and expenses of the Trustee
(including, without limitation, the fees and expenses of any legal counsel to
the Trustee), transfer agent fees, DTC (as defined below) fees or broker's
commissions (other than for Persons engaged by any Buyer) relating to or
arising out of the transactions contemplated hereby (including, without
limitation, any fees or commissions payable to the Financial Advisor, who is
the Company's sole financial advisor in connection with the transactions
contemplated by this Agreement). The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of- pocket expenses) arising in
connection with any claim relating to any such payment. Except as otherwise
set forth in the Transaction Documents, each party to this Agreement shall
bear its own expenses in connection with the sale of the Securities to the
Buyers. (k) Pledge of Securities. Notwithstanding anything to the contrary
contained in this Agreement, the Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Buyer. (l)
Disclosure of Transactions and Other Material Information. (i) Disclosure of
Transaction. (1) Initial Closing. The Company shall, on or before 9:30 a.m.,
New York time, on the date of this Agreement, issue a press release (the
"Initial Press Release") reasonably acceptable to the Buyers disclosing all
the material terms of the transactions contemplated by the Transaction
Documents. On or before 9:30 a.m., New York time, on the date of this
Agreement, the Company shall file a Current Report on Form 8-K describing all
the material terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act and attaching all the material
Transaction Documents (including, without limitation, this Agreement (and all
schedules to this Agreement), the form of Indenture, the form of Supplemental
Indentures, and the form of Notes (including all attachments), the "Initial
8-K Filing"). From and after the filing of the Initial 8-K Filing, the Company
shall have disclosed all material, non-public information (if any) provided to
any of the Buyers by the Company or any of its Subsidiaries or any of their
respective officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction Documents. In addition, effective
upon the filing of the Initial 8-K Filing, the Company acknowledges and agrees
that any and all confidentiality or similar obligations under any agreement,
whether written or oral, between the Company, any of its Subsidiaries or any
of their respective officers, directors, affiliates, employees or agents, on
the one hand, and any of the Buyers or any of their affiliates, on the other
hand, shall terminate.
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(2) Additional Closings. The Company shall, on or before 9:30 a.m., New York
time, on the first (1st) Business Day after the Company receives an Additional
Closing Notice, either issue a press release (each, an "Additional Press
Release") or file a Current Report on Form 8-K (each, an "Additional 8-K
Filing", and together with the Initial 8-K Filing, the "8-K Filings"), in each
case reasonably acceptable to such Buyer participating in such Additional
Closing, disclosing that "an institutional investor" has elected to deliver an
Additional Closing Notice to the Company or the Company has elected to effect
an Additional Closing, as applicable. From and after the filing of the
Additional Press Release or Additional 8-K Filing, solely to the extent such
Additional Closing Notice constitutes material non-public information (as
specified by the Company in such applicable Additional Mandatory Closing
Notice or in its acknowledgement to such applicable Additional Optional
Closing Notice), the Company shall have disclosed all material, non-public
information (if any) provided to any of the Buyers by the Company or any of
its Subsidiaries or any of their respective officers, directors, employees or
agents in connection with the transactions contemplated by the Transaction
Documents. In addition, effective upon the filing of the Additional 8-K
Filing, the Company acknowledges and agrees that any and all confidentiality
or similar obligations under any agreement, whether written or oral, between
the Company, any of its Subsidiaries or any of their respective officers,
directors, affiliates, employees or agents, on the one hand, and any of the
Buyers or any of their affiliates, on the other hand, shall terminate. (ii)
Limitations on Disclosure. Except with respect to the delivery of an
Additional Mandatory Closing Notice, the Company shall not, and the Company
shall cause each of its Subsidiaries and each of its and their respective
officers, directors, employees and agents not to, provide any Buyer with any
material, non-public information regarding the Company or any of its
Subsidiaries from and after the date hereof without the express prior written
consent of such Buyer (which may be granted or withheld in such Buyer's sole
discretion). In the event of a breach of any of the foregoing covenants,
including, without limitation, Section 4(q) of this Agreement, or any of the
covenants or agreements contained in any other Transaction Document, by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents (as determined in the reasonable good faith
judgment of such Buyer), in addition to any other remedy provided herein or in
the Transaction Documents, such Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such breach or such material, non-public information, as applicable,
without the prior approval by the Company, any of its Subsidiaries, or any of
its or their respective officers, directors, employees or agents. No Buyer
shall have any liability to the Company, any of its Subsidiaries, or any of
its or their respective officers, directors, employees, affiliates,
stockholders or agents, for any such disclosure. To the extent that the
Company delivers any material, non-public
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information to a Buyer without such Buyer's consent, the Company hereby
covenants and agrees that such Buyer shall not have any duty of confidentiality
with respect to, or a duty not to trade on the basis of, such material, non-
public information. Subject to the foregoing, neither the Company, its
Subsidiaries nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, the Company shall be entitled, without the prior approval of any
Buyer, to make the Press Release and any press release or other public
disclosure with respect to such transactions (i) in substantial conformity
with the 8-K Filings and contemporaneously therewith and (ii) as is required
by applicable law and regulations (provided that in the case of clause (i)
each Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release). Without the prior
written consent of the applicable Buyer (which may be granted or withheld in
such Buyer's sole discretion), the Company shall not (and shall cause each of
its Subsidiaries and affiliates to not) disclose the name of such Buyer in any
filing, announcement, release or otherwise. Notwithstanding anything contained
in this Agreement to the contrary and without implication that the contrary
would otherwise be true, the Company expressly acknowledges and agrees that no
Buyer shall have (unless expressly agreed to by a particular Buyer after the
date hereof in a written definitive and binding agreement executed by the
Company and such particular Buyer (it being understood and agreed that no
Buyer may bind any other Buyer with respect thereto)), any duty of
confidentiality with respect to, or a duty not to trade on the basis of, any
material, non-public information regarding the Company or any of its
Subsidiaries. (m) Additional Issuance of Securities. So long as any Buyer
beneficially owns any Securities, the Company will not, without the prior
written consent of the Required Holders issue any Notes (other than to the
Buyers as contemplated hereby) and the Company shall not issue any other
securities that would cause a breach or default under the Notes. The Company
agrees that for the period commencing on the date hereof and ending on the
date immediately following the two month anniversary of the Initial Closing
Date (or, upon each occurrence of an Additional Closing Date after which the
Buyers shall have purchased, in one or more Additional Closings, Additional
Notes with an aggregate principal amount of at least $100,000,000 (each, a
"Restricted Period Trigger Date") (but excluding any Additional Optional Notes
purchased in connection with any prior Restricted Period Trigger Date),
commencing on such applicable Additional Closing and ending on the date
immediately following the one month anniversary of such Additional Closing
Date) (the "Restricted Period"), neither the Company nor any of its
Subsidiaries shall directly or indirectly: (i) file a registration statement
under the 1933 Act relating to securities that are not the Underlying
Securities (other than a registration statement on Form S-4, Form S-8 or such
supplements or amendments to registration statements that are outstanding and
have been declared effective by the SEC as of the date hereof (including the
Registration Statement) (solely to the extent necessary to keep such
registration statements effective and available and not with respect to any
Subsequent Placement));
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(ii) amend or modify (whether by an amendment, waiver, exchange of securities,
or otherwise) any of the Company's warrants to purchase Common Stock that are
outstanding as of the date hereof; or (iii) issue, offer, sell, grant any
option or right to purchase, or otherwise dispose of (or announce any
issuance, offer, sale, grant of any option or right to purchase or other
disposition of) any equity security or any equity-linked or related security
(including, without limitation, any "equity security" (as that term is defined
under Rule 405 promulgated under the 1933 Act)), any Convertible Securities
(as defined below), any debt, any preferred stock or any purchase rights (any
such issuance, offer, sale, grant, disposition or announcement (whether
occurring during the Restricted Period or at any time thereafter) is referred
to as a "Subsequent Placement"). Notwithstanding the foregoing, this Section
4(m) shall not apply in respect of the issuance of (A) shares of Common Stock
or standard options to purchase Common Stock to directors, officers or
employees of the Company in their capacity as such pursuant to an Approved
Stock Plan (as defined below), provided that (x) all such issuances (taking
into account the shares of Common Stock issuable upon exercise of such
options) after the date hereof pursuant to this clause (A) do not, in the
aggregate, exceed more than 5% of the Common Stock issued and outstanding
immediately prior to the date hereof and (y) the exercise price of any such
options is not lowered, none of such options are amended to increase the
number of shares issuable thereunder and none of the terms or conditions of
any such options are otherwise materially changed in any manner that adversely
affects any of the Buyers; (B) shares of Common Stock issued upon the
conversion or exercise of Convertible Securities (other than standard options
to purchase Common Stock issued pursuant to an Approved Stock Plan that are
covered by clause (A) above) issued prior to the date hereof, provided that
the conversion, exercise or other method of issuance (as the case may be) of
any such Convertible Security is made solely pursuant to the conversion,
exercise or other method of issuance (as the case may be) provisions of such
Convertible Security that were in effect on the date immediately prior to the
date of this Agreement, the conversion, exercise or issuance price of any such
Convertible Securities (other than standard options to purchase Common Stock
issued pursuant to an Approved Stock Plan that are covered by clause (A)
above) is not lowered, none of such Convertible Securities (other than
standard options to purchase Common Stock issued pursuant to an Approved Stock
Plan that are covered by clause (A) above) are amended to increase the number
of shares issuable thereunder and none of the terms or conditions of any such
Convertible Securities (other than standard options to purchase Common Stock
issued pursuant to an Approved Stock Plan that are covered by clause (A)
above) are otherwise materially changed in any manner that adversely affects
any of the Buyers; (C) the Conversion Shares, (D) any shares of Common Stock,
warrants or options issued or issuable in connection with any bona fide
strategic or commercial alliances, acquisitions, mergers, licensing
arrangements, and strategic partnerships, provided, that (x) the primary
purpose of such issuance is not to raise capital as reasonably determined, and
(y) the purchaser or acquirer
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or recipient of the securities in such issuance solely consists of either (I)
the actual participants in such strategic or commercial alliance, strategic or
commercial licensing arrangement or strategic or commercial partnership, (II)
the actual owners of such assets or securities acquired in such acquisition or
merger or (III) the stockholders, partners, employees, consultants, officers,
directors or members of the foregoing Persons, in each case, which is, itself
or through its subsidiaries, an operating company or an owner of an asset, in
a business synergistic with the business of the Company and shall provide to
the Company additional benefits in addition to the investment of funds, and
(z) the number or amount of securities issued to such Persons by the Company
shall not be disproportionate to each such Person's actual participation in
(or fair market value of the contribution to) such strategic or commercial
alliance or strategic or commercial partnership or ownership of such assets or
securities to be acquired by the Company, as applicable (each of the foregoing
in clauses (A) through (D), collectively the "Excluded Securities"). "Approved
Stock Plan" means any employee benefit plan, including stock incentive plans,
which has been approved by the board of directors of the Company prior to or
subsequent to the date hereof pursuant to which shares of Common Stock and
standard options to purchase Common Stock may be issued to any employee,
officer or director for services provided to the Company in their capacity as
such. (n) Reservation of Shares. So long as any of the Notes remain
outstanding, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than (I) if
prior to the Reserve Increase Deadline, 275 million shares of Common Stock for
conversion of the Notes or (II) if on or after the Reserve Increase Deadline
the maximum number of shares of Common Stock issuable upon conversion of all
the Notes then outstanding (assuming for purposes hereof that (x) the Notes
are convertible at the Floor Price then in effect, and (y) any such conversion
shall not take into account any limitations on the conversion of the Notes set
forth in the Notes), (collectively, the "Required Reserve Amount"); provided
that at no time shall the number of shares of Common Stock reserved pursuant
to this Section 4(n) be reduced other than proportionally in connection with
any conversion, exercise and/or redemption, as applicable of Notes. If at any
time the number of shares of Common Stock authorized and reserved for issuance
is not sufficient to meet the Required Reserve Amount, the Company will
promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of stockholders to authorize additional shares to meet the Company's
obligations pursuant to the Transaction Documents, in the case of an
insufficient number of authorized shares, obtain stockholder approval of an
increase in such authorized number of shares, and voting the management shares
of the Company in favor of an increase in the authorized shares of the Company
to ensure that the number of authorized shares is sufficient to meet the
Required Reserve Amount. (o) Conduct of Business. The business of the Company
and its Subsidiaries shall not be conducted in violation of any law, ordinance
or regulation of any Governmental Entity, except where such violations would
not reasonably be expected to result, either individually or in the aggregate,
in a Material Adverse Effect.
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(p) Other Notes; Variable Securities. So long as any Notes remain outstanding,
the Company and each Subsidiary shall be prohibited from effecting or entering
into an agreement to effect any Subsequent Placement involving a Variable Rate
Transaction (other than an at-the-market offering with a bone fide broker
dealer) (the "Permitted ATM"). "Variable Rate Transaction" means a transaction
in which the Company or any Subsidiary (i) issues or sells any Convertible
Securities either (A) at a conversion, exercise or exchange rate or other
price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial
issuance of such Convertible Securities, or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such Convertible Securities or upon the occurrence of
specified or contingent events directly or indirectly related to the business
of the Company or the market for the Common Stock, other than pursuant to a
customary "weighted average" anti-dilution provision or (ii) enters into any
agreement (including, without limitation, an equity line of credit or an
"at-the-market" offering) whereby the Company or any Subsidiary may sell
securities at a future determined price (other than standard and customary
"preemptive" or "participation" rights). Each Buyer shall be entitled to
obtain injunctive relief against the Company and its Subsidiaries to preclude
any such issuance, which remedy shall be in addition to any right to collect
damages. (q) Participation Right. At any time on or prior to the first
anniversary of the Initial Closing Date, neither the Company nor any of its
Subsidiaries shall, directly or indirectly, effect any Subsequent Placement
unless the Company shall have first complied with this Section 4(q). The
Company acknowledges and agrees that the right set forth in this Section 4(q)
is a right granted by the Company, separately, to each Buyer. (i) At least
five (5) Trading Days prior to any proposed or intended Subsequent Placement,
the Company shall deliver to each Buyer a written notice (each such notice, a
"Pre-Notice"), which Pre-Notice shall not contain any information (including,
without limitation, material, non-public information) other than: (A) if the
proposed Offer Notice (as defined below) constitutes or contains material,
non-public information, a statement asking whether the Investor is willing to
accept material non-public information or (B) if the proposed Offer Notice
does not constitute or contain material, non-public information, (x) a
statement that the Company proposes or intends to effect a Subsequent
Placement, (y) a statement that the statement in clause (x) above does not
constitute material, non-public information and (z) a statement informing such
Buyer that it is entitled to receive an Offer Notice (as defined below) with
respect to such Subsequent Placement upon its written request. Upon the
written request of a Buyer within three (3) Trading Days after the Company's
delivery to such Buyer of such Pre-Notice, and only upon a written request by
such Buyer, the Company shall promptly, but no later than one (1) Trading Day
after such request, deliver to such Buyer an irrevocable written notice (the
"Offer Notice") of any proposed or intended issuance or sale or exchange (the
"Offer") of the securities being offered (the "Offered Securities") in a
Subsequent Placement, which Offer Notice shall (A) identify and describe the
Offered Securities, (B) describe the price and other terms upon which they are
to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (C) identify the Persons
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(if known) to which or with which the Offered Securities are to be offered,
issued, sold or exchanged and (D) offer to issue and sell to or exchange with
such Buyer in accordance with the terms of the Offer such Buyer's pro rata
portion of 25% of the Offered Securities, provided that the number of Offered
Securities which such Buyer shall have the right to subscribe for under this
Section 4(q) shall be (x) based on such Buyer's pro rata portion of the
aggregate original principal amount of the Notes purchased hereunder by all
Buyers (the "Basic Amount"), and (y) with respect to each Buyer that elects to
purchase its Basic Amount, any additional portion of the Offered Securities
attributable to the Basic Amounts of other Buyers as such Buyer shall indicate
it will purchase or acquire should the other Buyers subscribe for less than
their Basic Amounts (the "Undersubscription Amount"), which process shall be
repeated until each Buyer shall have an opportunity to subscribe for any
remaining Undersubscription Amount. (ii) To accept an Offer, in whole or in
part, such Buyer must deliver a written notice to the Company prior to the end
of the fifth (5th) Business Day after such Buyer's receipt of the Offer Notice
(the "Offer Period"), setting forth the portion of such Buyer's Basic Amount
that such Buyer elects to purchase and, if such Buyer shall elect to purchase
all of its Basic Amount, the Undersubscription Amount, if any, that such Buyer
elects to purchase (in either case, the "Notice of Acceptance"). If the Basic
Amounts subscribed for by all Buyers are less than the total of all of the
Basic Amounts, then each Buyer who has set forth an Undersubscription Amount
in its Notice of Acceptance shall be entitled to purchase, in addition to the
Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; provided, however, if the Undersubscription Amounts subscribed for exceed
the difference between the total of all the Basic Amounts and the Basic
Amounts subscribed for (the "Available Undersubscription Amount"), each Buyer
who has subscribed for any Undersubscription Amount shall be entitled to
purchase only that portion of the Available Undersubscription Amount as the
Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that
have subscribed for Undersubscription Amounts, subject to rounding by the
Company to the extent it deems reasonably necessary. Notwithstanding the
foregoing, if the Company desires to modify or amend the terms and conditions
of the Offer prior to the expiration of the Offer Period, the Company may
deliver to each Buyer a new Offer Notice and the Offer Period shall expire on
the fifth (5th) Business Day after such Buyer's receipt of such new Offer
Notice. (iii) The Company shall have five (5) Business Days from the
expiration of the Offer Period above (A) to offer, issue, sell or exchange all
or any part of such Offered Securities as to which a Notice of Acceptance has
not been given by a Buyer (the "Refused Securities") pursuant to a definitive
agreement(s) (the "Subsequent Placement Agreement"), but only to the offerees
described in the Offer Notice (if so described therein) and only upon terms
and conditions (including, without limitation, unit prices and interest rates)
that are not more favorable to the acquiring Person or Persons or less
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favorable to the Company than those set forth in the Offer Notice and (B) to
publicly announce (x) the execution of such Subsequent Placement Agreement,
and (y) either (I) the consummation of the transactions contemplated by such
Subsequent Placement Agreement or (II) the termination of such Subsequent
Placement Agreement, which shall be filed with the SEC on a Current Report on
Form 8-K with such Subsequent Placement Agreement and any documents
contemplated therein filed as exhibits thereto. (iv) In the event the Company
shall propose to sell less than all the Refused Securities (any such sale to
be in the manner and on the terms specified in Section 4(q)(iii) above), then
each Buyer may, at its sole option and in its sole discretion, withdraw its
Notice of Acceptance or reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that such Buyer elected to
purchase pursuant to Section 4(q)(ii) above multiplied by a fraction, (i) the
numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Buyers pursuant to this Section 4(q) prior
to such reduction) and (ii) the denominator of which shall be the original
amount of the Offered Securities. In the event that any Buyer so elects to
reduce the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities
have again been offered to the Buyers in accordance with Section 4(q)(i)
above. (v) Upon the closing of the issuance, sale or exchange of all or less
than all of the Refused Securities, such Buyer shall acquire from the Company,
and the Company shall issue to such Buyer, the number or amount of Offered
Securities specified in its Notice of Acceptance, as reduced pursuant to
Section 4(q)(iv) above if such Buyer has so elected, upon the terms and
conditions specified in the Offer. The purchase by such Buyer of any Offered
Securities is subject in all cases to the preparation, execution and delivery
by the Company and such Buyer of a separate purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to such
Buyer and its counsel. (vi) Any Offered Securities not acquired by a Buyer or
other Persons in accordance with this Section 4(q) may not be issued, sold or
exchanged until they are again offered to such Buyer under the procedures
specified in this Agreement. (vii) The Company and each Buyer agree that if
any Buyer elects to participate in the Offer, neither the Subsequent Placement
Agreement with respect to such Offer nor any other transaction documents
related thereto (collectively, the "Subsequent Placement Documents") shall
include any term or provision whereby such Buyer shall be required to agree to
any restrictions
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on trading as to any securities of the Company or be required to consent to
any amendment to or termination of, or grant any waiver, release or the like
under or in connection with, any agreement previously entered into with the
Company or any instrument received from the Company. (viii) Notwithstanding
anything to the contrary in this Section 4(q) and unless otherwise agreed to
by such Buyer, the Company shall either confirm in writing to such Buyer that
the transaction with respect to the Subsequent Placement has been abandoned or
shall publicly disclose its intention to issue the Offered Securities, in
either case, in such a manner such that such Buyer will not be in possession
of any material, non-public information, by the fifth (5th) Business Day
following delivery of the Offer Notice. If by such fifth (5th) Business Day,
no public disclosure regarding a transaction with respect to the Offered
Securities has been made, and no notice regarding the abandonment of such
transaction has been received by such Buyer, such transaction shall be deemed
to have been abandoned and such Buyer shall not be in possession of any
material, non-public information with respect to the Company or any of its
Subsidiaries. Should the Company decide to pursue such transaction with
respect to the Offered Securities, the Company shall provide such Buyer with
another Offer Notice and such Buyer will again have the right of participation
set forth in this Section 4(q). The Company shall not be permitted to deliver
more than one such Offer Notice to such Buyer in any sixty (60) day period,
except as expressly contemplated by the last sentence of Section 4(q)(ii).
(ix) The restrictions contained in this Section 4(q) shall not apply in
connection with the issuance of any Excluded Securities or the Permitted ATM.
The Company shall not circumvent the provisions of this Section 4(q) by
providing terms or conditions to one Buyer that are not provided to all. (r)
Dilutive Issuances. For so long as any Notes remain outstanding, the Company
shall not, in any manner, enter into or affect any Dilutive Issuance (as
defined in the Notes) if the effect of such Dilutive Issuance is to cause the
Company to be required to issue upon conversion of any Notes any shares of
Common Stock in excess of that number of shares of Common Stock which the
Company may issue upon conversion of the Notes without breaching the Company's
obligations under the rules or regulations of the Principal Market. (s)
Passive Foreign Investment Company. The Company shall conduct its business,
and shall cause its Subsidiaries to conduct their respective businesses, in
such a manner as will ensure that the Company will not be deemed to constitute
a passive foreign investment company within the meaning of Section 1297 of the
Code. (t) Restriction on Redemption and Cash Dividends. So long as any Notes
are outstanding, the Company shall not, directly or indirectly, redeem, or
declare or pay any cash dividend or distribution on, any securities of the
Company without the prior express written consent of the Buyers.
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(u) Corporate Existence. So long as any Buyer beneficially owns any Notes, the
Company shall not be party to any Fundamental Transaction (as defined in the
Notes) unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Notes. (v) Stock Splits.
Until the Notes and all notes issued pursuant to the terms thereof are no
longer outstanding, the Company shall not effect any stock combination,
reverse stock split or other similar transaction (or make any public
announcement or disclosure with respect to any of the foregoing) without the
prior written consent of the Required Holders (as defined below). (w)
Conversion Procedures. Each of the form of Conversion Notice (as defined in
the Notes) included in the Notes set forth the totality of the procedures
required of the Buyers in order to convert the Notes. No additional legal
opinion, other information or instructions shall be required of the Buyers to
convert their Notes. The Company shall honor conversions of the Notes and
shall deliver the Conversion Shares in accordance with the terms, conditions
and time periods set forth in the Notes. Without limiting the preceding
sentences, no ink-original Conversion Notice shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of any
Conversion Notice form be required in order to convert the Notes. (x)
Regulation M. The Company will not take any action prohibited by Regulation M
under the 1934 Act, in connection with the distribution of the Securities
contemplated hereby. (z) Stockholder Approval. The Company provide each
stockholder entitled to vote at a special meeting of stockholders of the
Company (the "Stockholder Meeting"), which shall be promptly called and held
not later than August 31, 2023 (the "Stockholder Meeting Deadline"), a proxy
statement, in each case, in a form reasonably acceptable to the Buyers and
Kelley Drye & Warren LLP, at the expense of the Company. The proxy statement,
if any, shall solicit each of the Company's stockholder's affirmative vote at
the Stockholder Meeting for approval of resolutions ("Stockholder
Resolutions") providing for (x) the approval of the issuance of all of the
Securities in compliance with the rules and regulations of the Principal
Market (without regard to any limitations on conversion set forth in the
Notes) and (y) the increase of the authorized shares of Class A Common Stock
of the Company from 750,000,000 to 1,250,000,000 (such affirmative approval
being referred to herein as the "Stockholder Approval", and the date such
Stockholder Approval is obtained, the "Stockholder Approval Date"), and the
Company shall use its reasonable best efforts to solicit its stockholders'
approval of such resolutions and to cause the Board of Directors of the
Company to recommend to the stockholders that they approve such resolutions.
The Company shall be obligated to seek to obtain the Stockholder Approval by
the Stockholder Meeting Deadline. If, despite the Company's reasonable best
efforts the Stockholder Approval is not obtained on or prior to the
Stockholder Meeting Deadline, the Company shall cause an additional
Stockholder Meeting to be held on or prior to November 30, 2023. If, despite
the Company's reasonable best efforts the Stockholder Approval is not obtained
after such subsequent stockholder meetings, the Company shall cause an
additional Stockholder Meeting to be held semi-annually thereafter until such
Stockholder Approval is obtained. (bb) Closing Documents. On or prior to
fourteen (14) calendar days after each Closing Date, the Company agrees to
deliver, or cause to be delivered, to each Buyer and Kelley Drye & Warren LLP
a complete closing set of the executed Transaction Documents, Securities and
any other document required to be delivered to any party pursuant to Section 7
hereof or otherwise.
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5. REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND. (a) Register. The Company
shall maintain at its principal executive offices (or such other office or
agency of the Company as it may designate by notice to each holder of
Securities), a register for the Notes in which the Company shall record the
name and address of the Person in whose name the Notes have been issued
(including the name and address of each transferee), the principal amount of
the Notes held by such Person and the number of Conversion Shares issuable
pursuant to the terms of the Notes. The Company shall keep the register open
and available at all times during business hours for inspection of any Buyer
or its legal representatives. (b) Transfer Agent Instructions. The Company
shall issue irrevocable instructions to its transfer agent and any subsequent
transfer agent (as applicable, the "Transfer Agent") in a form acceptable to
each of the Buyers (the "Irrevocable Transfer Agent Instructions") to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company ("DTC"), registered in the name of each Buyer or its
respective nominee(s), for the Conversion Shares in such amounts as specified
from time to time by each Buyer to the Company upon conversion of the Notes.
The Company represents and warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5(b), will
be given by the Company to its transfer agent with respect to the Securities,
and that the Securities shall otherwise be freely transferable on the books
and records of the Company, as applicable, to the extent provided in this
Agreement and the other Transaction Documents. If a Buyer effects a sale,
assignment or transfer of any Securities, the Company shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in
such name and in such denominations as specified by such Buyer to effect such
sale, transfer or assignment. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to a Buyer. Accordingly,
the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5(b) will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of
this Section 5(b), that a Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required. The
Company shall cause its counsel to issue the legal opinion referred to in the
Irrevocable Transfer Agent Instructions to the Transfer Agent as follows: (i)
upon each conversion of the Notes (unless such issuance is covered by a prior
legal opinion previously delivered to the Transfer Agent) and (ii) on each
date a registration statement with respect to the issuance or resale of any of
the Securities is declared effective by the SEC. Any fees (with respect to the
transfer agent, counsel to the Company or otherwise) associated with the
issuance of such opinion or the removal of any legends on any of the
Securities shall be borne by the Company. (c) Legends. Certificates and any
other instruments evidencing the Securities shall not bear any restrictive or
other legend. (d) FAST Compliance. While any Notes remain outstanding, the
Company shall maintain a transfer agent that participates in the DTC Fast
Automated Securities Transfer Program.
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6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. (a) The obligation of the
Company hereunder to issue and sell the Initial Notes to each Buyer at the
Initial Closing is subject to the satisfaction, at or before the Initial
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof: (i) Such Buyer shall have executed each of the other
Transaction Documents to which it is a party and delivered the same to the
Company. (ii) Such Buyer and each other Buyer shall have delivered to the
Company the Purchase Price (less, in the case of any Buyer, the amounts
withheld pursuant to Section 4(j)) for the Initial Note being purchased by
such Buyer at the Initial Closing by wire transfer of immediately available
funds in accordance with the Flow of Funds Letter. (iii) The representations
and warranties of such Buyer shall be true and correct in all material
respects as of the date when made and as of the Initial Closing Date as though
originally made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such
specific date), and such Buyer shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by such Buyer at
or prior to the Initial Closing Date. (b) The obligation of the Company
hereunder to issue and sell Additional Notes to each Buyer at the applicable
Additional Closing is subject to the satisfaction, at or before such
Additional Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof: (i) Such Buyer shall have executed each of the other
Transaction Documents to which it is a party and delivered the same to the
Company. (ii) Such Buyer and each other Buyer shall have delivered to the
Company the applicable Additional Purchase Price (less, in the case of any
Buyer, the amounts withheld pursuant to Section 4(j)) for the Additional Note
being purchased by such Buyer at such Additional Closing by wire transfer of
immediately available funds in accordance with the Additional Flow of Funds
Letter. (iii) The representations and warranties of such Buyer shall be true
and correct in all material respects as of the date when made and as of such
Additional Closing Date as though originally made at that time (except for
representations and warranties that speak as of a specific date, which shall
be true and correct as of such specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Buyer at or prior to such Additional
Closing Date.
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7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. (a) The obligation of
each Buyer hereunder to purchase its Initial Note at the Initial Closing is
subject to the satisfaction, at or before the Initial Closing Date, of each of
the following conditions, provided that these conditions are for each Buyer's
sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice thereof: (i) The
Company shall have duly executed and delivered to such Buyer each of the
Transaction Documents and the Company shall have duly executed and delivered
to such Buyer the Initial Note (in such original principal amount as is set
forth across from such Buyer's name in column (3) of the Schedule of Buyers)
being purchased by such Buyer at the Initial Closing pursuant to this
Agreement. (ii) Such Buyer shall have received the opinion of Orrick
Herrington & Sutcliffe LLP, the Company's counsel, dated as of the Initial
Closing Date, in the form acceptable to such Buyer. (iii) The Company shall
have delivered to such Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form acceptable to such Buyer, which instructions shall
have been delivered to and acknowledged in writing by the Company's transfer
agent and shall remain in full force and effect as of such Initial Closing
Date. (iv) The Company shall have delivered to such Buyer a certificate
evidencing the formation and good standing of the Company in such entity's
jurisdiction of formation issued by the Secretary of State (or comparable
office) of such jurisdiction of formation as of a date within ten (10) days of
the Initial Closing Date. (v) The Company shall have delivered to such Buyer a
certificate evidencing the Company's qualification as a foreign corporation
and good standing issued by the Secretary of State (or comparable office) of
each jurisdiction in which the Company conducts business and is required to so
qualify, as of a date within ten (10) days of the Initial Closing Date. (vi)
The Company shall have delivered to such Buyer a certified copy of the
Certificate of Incorporation as certified by the Delaware Secretary of State
within ten (10) days of the Initial Closing Date. (vii) The Company shall have
delivered to such Buyer a certificate, in the form acceptable to such Buyer,
executed by the Secretary of the Company and dated as of the Initial Closing
Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the
Company's board of directors in a form reasonably acceptable to such Buyer,
(ii) the Certificate of Incorporation of the Company and (iii) the Bylaws of
the Company, each as in effect at the Initial Closing.
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(viii) Each and every representation and warranty of the Company shall be true
and correct as of the date when made and as of the Initial Closing Date as
though originally made at that time (except for representations and warranties
that speak as of a specific date, which shall be true and correct as of such
specific date) and the Company shall have performed, satisfied and complied in
all respects with the covenants, agreements and conditions required to be
performed, satisfied or complied with by the Company at or prior to the
Initial Closing Date. Such Buyer shall have received a certificate, duly
executed by the Chief Executive Officer of the Company, dated as of the
Initial Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Buyer in the form acceptable to such
Buyer. (ix) The Company shall have delivered to such Buyer a letter from the
Company's transfer agent certifying the number of shares of Common Stock
outstanding on the Initial Closing Date immediately prior to the Initial
Closing. (x) The Common Stock (A) shall be designated for quotation or listed
(as applicable) on the Principal Market and (B) shall not have been suspended,
as of the Initial Closing Date, by the SEC or the Principal Market from
trading on the Principal Market nor shall suspension by the SEC or the
Principal Market have been threatened, as of the Initial Closing Date, either
(I) in writing by the SEC or the Principal Market or (II) by falling below the
minimum maintenance requirements of the Principal Market. (xi) The Company
shall have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the sale of the Securities, including without
limitation, those required by the Principal Market, if any. (xii) No statute,
rule, regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by any court or Governmental
Entity of competent jurisdiction that prohibits the consummation of any of the
transactions contemplated by the Transaction Documents. (xiii) Since the date
of execution of this Agreement, no event or series of events shall have
occurred that reasonably would have or result in a Material Adverse Effect.
(xiv) The Company shall have obtained approval of the Principal Market to list
or designate for quotation (as the case may be) the Conversion Shares issuable
upon conversion of the Initial Notes.
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(xv) Such Buyer shall have received a letter on the letterhead of the Company,
duly executed by the Chief Executive Officer of the Company, setting forth the
wire amounts of each Buyer and the wire transfer instructions of the Company
(the "Initial Flow of Funds Letter"). (xvi) From the date hereof to the
Initial Closing Date, (i) trading in the Common Stock shall not have been
suspended by the SEC or the Principal Market (except for any suspension of
trading of limited duration, which suspension shall be terminated prior to the
Initial Closing), and, (ii) at any time prior to the Initial Closing Date,
trading in securities generally as reported by Bloomberg L.P. shall not have
been suspended or limited, or minimum prices shall not have been established
on securities whose trades are reported by such service, or on the Principal
Market, nor shall a banking moratorium have been declared either by the United
States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the reasonable
judgment of each Buyer, makes it impracticable or inadvisable to purchase the
Securities at the Initial Closing (xvii) The Registration Statement shall be
effective and available for the issuance and sale of the Initial Notes to be
issued in the Initial Closing and the Conversion Shares issuable upon
conversion thereof pursuant to the terms of the Indenture and the Supplemental
Indenture for the Initial Notes and the Company shall have delivered to such
Buyer the Prospectus and the Prospectus Supplement with respect thereto as
required hereunder and thereunder. (xviii) The Company shall have filed a Form
T-1, in form and substance satisfactory to the Trustee, with respect to the
transaction contemplated hereby in accordance with TIA 305(b)(2). (xix) The
Trustee shall have duly executed and delivered to the Company and such Buyer
the Indenture, the Supplemental Indenture for such Additional Notes to be
issued in such Additional Closing and the custodian agreements in the form
attached hereto as Exhibit B (each, a "Custodian Agreement"). The Indenture
and the Supplemental Indenture for such Additional Notes shall be qualified
under the TIA. (xx) The Trustee shall have duly executed and delivered to the
Company and such Buyer the Indenture, the Supplemental Indenture for the
Initial Notes to be issued in the Initial Closing and the Custodian
Agreements. The Indenture and the Supplemental Indenture for the Initial Notes
shall be qualified under the TIA. (xxi) The Company shall have duly executed
and delivered to such Buyer the voting agreement in the form of Exhibit C
hereof (the "Voting Agreement"), by and between the Company and the
stockholders listed on Schedule 7(a)(xxi) attached hereto (the "Stockholders")
and the Stockholders shall have duly executed and delivered to such Buyer the
Voting Agreement.
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(xxii) The Company and its Subsidiaries shall have delivered to such Buyer
such other documents, instruments or certificates relating to the transactions
contemplated by this Agreement as such Buyer or its counsel may reasonably
request. (b) The obligation of each Buyer hereunder to purchase the applicable
Additional Note at the applicable Additional Closing is subject to the
satisfaction, at or before such Additional Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof: (i) The Company shall
have duly executed and delivered to such Buyer each of the Transaction
Documents and the Company shall have duly executed and delivered to such Buyer
such Additional Note being purchased by such Buyer at such Additional Closing
pursuant to this Agreement. (ii) Such Buyer shall have received the opinion of
Orrick Herrington & Sutcliffe LLP, the Company's counsel, dated as of such
Additional Closing Date, in the form acceptable to such Buyer. (iii) The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form acceptable to such Buyer, which instructions
shall have been delivered to and acknowledged in writing by the Company's
transfer agent and shall remain in full force and effect as of such Additional
Closing Date. (iv) The Company shall have delivered to such Buyer a
certificate evidencing the formation and good standing of the Company in such
entity's jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction of formation as of a date within ten
(10) days of such Additional Closing Date. (v) The Company shall have
delivered to such Buyer a certificate evidencing the Company's qualification
as a foreign corporation and good standing issued by the Secretary of State
(or comparable office) of each jurisdiction in which the Company conducts
business and is required to so qualify, as of a date within ten (10) days of
such Additional Closing Date. (vi) The Company shall have delivered to such
Buyer a certified copy of the Certificate of Incorporation as certified by the
Delaware Secretary of State within ten (10) days of such Additional Closing
Date.
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(vii) The Company shall have delivered to such Buyer a certificate, in the
form acceptable to such Buyer, executed by the Secretary of the Company and
dated as of such Additional Closing Date, as to (i) the resolutions consistent
with Section 3(b) as adopted by the Company's board of directors in a form
reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation of
the Company and (iii) the Bylaws of the Company, each as in effect at such
Additional Closing. (viii) Each and every representation and warranty of the
Company shall be true and correct as of the date when made and as of such
Additional Closing Date as though originally made at that time (except for
representations and warranties that speak as of a specific date, which shall
be true and correct as of such specific date) and the Company shall have
performed, satisfied and complied in all respects with the covenants,
agreements and conditions required to be performed, satisfied or complied with
by the Company at or prior to such Additional Closing Date. Such Buyer shall
have received a certificate, duly executed by the Chief Executive Officer of
the Company, dated as of such Additional Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer in
the form acceptable to such Buyer. (ix) The Company shall have delivered to
such Buyer a letter from the Company's transfer agent certifying the number of
shares of Common Stock outstanding on such Additional Closing Date immediately
prior to such Additional Closing. (x) The Common Stock (A) shall be designated
for quotation or listed (as applicable) on the Principal Market and (B) shall
not have been suspended, as of such Additional Closing Date, by the SEC or the
Principal Market from trading on the Principal Market nor shall suspension by
the SEC or the Principal Market have been threatened, as of such Additional
Closing Date, either (I) in writing by the SEC or the Principal Market or (II)
by falling below the minimum maintenance requirements of the Principal Market.
(xi) The Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the sale of the
Securities, including without limitation, those required by the Principal
Market, if any. (xii) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or Governmental Entity of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents. (xiii) Since the date of execution of this Agreement, no event or
series of events shall have occurred that reasonably would have or result in a
Material Adverse Effect.
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(xiv) The Company shall have obtained approval of the Principal Market to list
or designate for quotation (as the case may be) the Conversion Shares issuable
upon conversion of such Additional Notes to be sold in such Additional
Closing. (xv) Such Buyer shall have received a letter on the letterhead of the
Company, duly executed by the Chief Executive Officer of the Company, setting
forth the wire amounts of each Buyer and the wire transfer instructions of the
Company with respect to such Additional Closing (each, an "Additional Flow of
Funds Letter"). (xvi) From the date hereof to such Additional Closing Date,
(i) trading in the Common Stock shall not have been suspended by the SEC or
the Principal Market (except for any suspension of trading of limited
duration, which suspension shall be terminated prior to such Additional
Closing), and, (ii) at any time prior to such Additional Closing Date, trading
in securities generally as reported by Bloomberg L.P. shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on the Principal
Market, nor shall a banking moratorium have been declared either by the United
States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the reasonable
judgment of each Buyer, makes it impracticable or inadvisable to purchase the
Securities at such Additional Closing (xvii) The Registration Statement shall
be effective and available for the issuance and sale of the Additional Notes
to be issued in such Additional Closing and the Conversion Shares issuable
upon conversion thereof pursuant to the terms of the Indenture and the
Supplemental Indenture for such Additional Note and the Company shall have
delivered to such Buyer the Prospectus and the Prospectus Supplement with
respect thereto as required hereunder and thereunder. (xviii) The Company
shall have filed a Form T-1, in form and substance satisfactory to the
Trustee, with respect to the transaction contemplated hereby in accordance
with TIA 305(b)(2). (xix) The Trustee shall have duly executed and delivered
to the Company and such Buyer the Indenture, the Supplemental Indenture for
such Additional Notes to be issued in such Additional Closing and the
custodian agreements in the form attached hereto as Exhibit B (each, a
"Custodian Agreement"). The Indenture and the Supplemental Indenture for such
Additional Notes shall be qualified under the TIA. (xx) The Trustee shall have
duly executed and delivered to the Company and such Buyer the Indenture, the
Supplemental Indenture for the Initial Notes to be issued in the Initial
Closing and the Custodian Agreements. The Indenture and the Supplemental
Indenture for the Initial Notes shall be qualified under the TIA.
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(xxi) The Stockholder Approval shall have been obtained. (xxii) No Equity
Conditions Failure (as defined in the Initial Notes) exists as of such
applicable Additional Closing Date. (xxiii) No bona fide dispute shall exist,
by and between (or among) any of the Buyers, any holder of Notes, the Trustee
and/or the Company, which dispute is reasonably related to this Agreement, any
of the Securities and/or the transactions contemplated hereby or thereby, as
applicable. (xxiv) The Company and its Subsidiaries shall have delivered to
such Buyer such other documents, instruments or certificates relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request. 8. TERMINATION. In the event that the Closing shall not
have occurred with respect to a Buyer within five (5) days of the date hereof,
then such Buyer shall have the right to terminate its obligations under this
Agreement with respect to itself at any time on or after the close of business
on such date without liability of such Buyer to any other party; provided,
however, (i) the right to terminate this Agreement under this Section 8 shall
not be available to such Buyer if the failure of the transactions contemplated
by this Agreement to have been consummated by such date is the result of such
Buyer's breach of this Agreement and (ii) the abandonment of the sale and
purchase of the Notes shall be applicable only to such Buyer providing such
written notice, provided further that no such termination shall affect any
obligation of the Company under this Agreement to reimburse such Buyer for the
expenses described in Section 4(j) above. Nothing contained in this Section 8
shall be deemed to release any party from any liability for any breach by such
party of the terms and provisions of this Agreement or the other Transaction
Documents or to impair the right of any party to compel specific performance
by any other party of its obligations under this Agreement or the other
Transaction Documents. 9. MISCELLANEOUS. (a) Governing Law; Jurisdiction; Jury
Trial. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. The Company hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in The City of New York, Borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or under any of the other
Transaction Documents or with any transaction contemplated hereby or thereby,
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such
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court, that such suit, action or proceeding is brought in an inconvenient
forum or that the venue of such suit, action or proceeding is improper. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted
by law. Nothing contained herein shall be deemed or operate to preclude any
Buyer from bringing suit or taking other legal action against the Company in
any other jurisdiction to collect on the Company's obligations to such Buyer
or to enforce a judgment or other court ruling in favor of such Buyer. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER
ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY OR THEREBY. (b) Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party. In the event that any signature
is delivered by facsimile transmission or by an e-mail which contains a
portable document format (.pdf) file of an executed signature page, such
signature page shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such signature page were an original thereof. (c) Headings;
Gender. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
Unless the context clearly indicates otherwise, each pronoun herein shall be
deemed to include the masculine, feminine, neuter, singular and plural forms
thereof. The terms "including," "includes," "include" and words of like import
shall be construed broadly as if followed by the words "without limitation."
The terms "herein," "hereunder," "hereof" and words of like import refer to
this entire Agreement instead of just the provision in which they are found.
(d) Severability; Maximum Payment Amounts. If any provision of this Agreement
is prohibited by law or otherwise determined to be invalid or unenforceable by
a court of competent jurisdiction, the provision that would otherwise be
prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the
remaining provisions of this Agreement so long as this Agreement as so
modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does
not substantially impair the respective expectations or reciprocal obligations
of the parties or the practical realization of the benefits that would
otherwise be conferred upon the parties. The parties will endeavor in good
faith negotiations to replace the prohibited, invalid or unenforceable
provision(s) with a valid provision(s), the effect of which comes as close as
possible to that of the prohibited, invalid or unenforceable provision(s).
Notwithstanding anything to the contrary contained in this Agreement or any
other Transaction Document (and without implication that the following is
required or applicable), it is the intention of the parties that in no event
shall amounts
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and value paid by the Company and/or any of its Subsidiaries (as the case may
be), or payable to or received by any of the Buyers, under the Transaction
Documents (including without limitation, any amounts that would be
characterized as "interest" under applicable law) exceed amounts permitted
under any applicable law. Accordingly, if any obligation to pay, payment made
to any Buyer, or collection by any Buyer pursuant to the Transaction Documents
is finally judicially determined to be contrary to any such applicable law,
such obligation to pay, payment or collection shall be deemed to have been
made by mutual mistake of such Buyer, the Company and its Subsidiaries and
such amount shall be deemed to have been adjusted with retroactive effect to
the maximum amount or rate of interest, as the case may be, as would not be so
prohibited by the applicable law. Such adjustment shall be effected, to the
extent necessary, by reducing or refunding, at the option of such Buyer, the
amount of interest or any other amounts which would constitute unlawful
amounts required to be paid or actually paid to such Buyer under the
Transaction Documents. For greater certainty, to the extent that any interest,
charges, fees, expenses or other amounts required to be paid to or received by
such Buyer under any of the Transaction Documents or related thereto are held
to be within the meaning of "interest" or another applicable term to otherwise
be violative of applicable law, such amounts shall be pro-rated over the
period of time to which they relate. (e) Entire Agreement; Amendments. This
Agreement, the other Transaction Documents and the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein
supersede all other prior oral or written agreements between the Buyers, the
Company, its Subsidiaries, their affiliates and Persons acting on their
behalf, including, without limitation, any transactions by any Buyer with
respect to Common Stock or the Securities, and the other matters contained
herein and therein, and this Agreement, the other Transaction Documents, the
schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein contain the entire understanding of the parties
solely with respect to the matters covered herein and therein; provided,
however, nothing contained in this Agreement or any other Transaction Document
shall (or shall be deemed to) (i) have any effect on any agreements any Buyer
has entered into with, or any instruments any Buyer has received from, the
Company or any of its Subsidiaries prior to the date hereof with respect to
any prior investment made by such Buyer in the Company or (ii) waive, alter,
modify or amend in any respect any obligations of the Company or any of its
Subsidiaries, or any rights of or benefits to any Buyer or any other Person,
in any agreement entered into prior to the date hereof between or among the
Company and/or any of its Subsidiaries and any Buyer, or any instruments any
Buyer received from the Company and/or any of its Subsidiaries prior to the
date hereof, and all such agreements and instruments shall continue in full
force and effect. Except as specifically set forth herein or therein, neither
the Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. For clarification purposes, the
Recitals are part of this Agreement. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the
Required Holders (as defined below), and any amendment to any provision of
this Agreement made in conformity with the provisions of this Section 9(e)
shall be binding on all Buyers and holders of Securities, as applicable;
provided that no such amendment shall be effective to the extent that it (A)
applies to less than all of the holders of the Securities then outstanding or
(B) imposes any obligation or liability on any Buyer without such Buyer's
prior written consent (which may be granted or withheld in such Buyer's sole
discretion). No waiver shall be effective unless it is in writing and signed
by an authorized representative of the waiving party, provided that the
Required Holders may waive any provision of this Agreement, and any waiver of
any
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provision of this Agreement made in conformity with the provisions of this
Section 9(e) shall be binding on all Buyers and holders of Securities, as
applicable, provided that no such waiver shall be effective to the extent that
it (1) applies to less than all of the holders of the Securities then
outstanding (unless a party gives a waiver as to itself only) or (2) imposes
any obligation or liability on any Buyer without such Buyer's prior written
consent (which may be granted or withheld in such Buyer's sole discretion). No
consideration (other than reimbursement of legal fees) shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration
also is offered to all of the parties to the Transaction Documents and all
holders of the Notes. From the date hereof and while any Notes are
outstanding, the Company shall not be permitted to receive any consideration
from a Buyer or a holder of Notes that is not otherwise contemplated by the
Transaction Documents in order to, directly or indirectly, induce the Company
or any Subsidiary (i) to treat such Buyer or holder of Notes in a manner that
is more favorable than other similarly situated Buyers or holders of Notes, or
(ii) to treat any Buyer(s) or holder(s) of Notes in a manner that is less
favorable than the Buyer or holder of Notes that is paying such consideration;
provided, however, that the determination of whether a Buyer has been treated
more or less favorably than another Buyer shall disregard any securities of
the Company purchased or sold by any Buyer. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents
except as set forth in the Transaction Documents. Without limiting the
foregoing, the Company confirms that, except as set forth in this Agreement,
no Buyer has made any commitment or promise or has any other obligation to
provide any financing to the Company, any Subsidiary or otherwise. As a
material inducement for each Buyer to enter into this Agreement, the Company
expressly acknowledges and agrees that (x) no due diligence or other
investigation or inquiry conducted by a Buyer, any of its advisors or any of
its representatives shall affect such Buyer's right to rely on, or shall
modify or qualify in any manner or be an exception to any of, the Company's
representations and warranties contained in this Agreement or any other
Transaction Document and (y) unless a provision of this Agreement or any other
Transaction Document is expressly preceded by the phrase "except as disclosed
in the SEC Documents," nothing contained in any of the SEC Documents shall
affect such Buyer's right to rely on, or shall modify or qualify in any manner
or be an exception to any of, the Company's representations and warranties
contained in this Agreement or any other Transaction Document. "Required
Holders" means (I) prior to the Initial Closing Date, each Buyer entitled to
purchase Notes at the Closing and (II) on or after the Initial Closing Date,
holders of a majority of the Underlying Securities as of such time (excluding
any Underlying Securities held by the Company or any of its Subsidiaries as of
such time and excluding any purchasers of Underlying Securities, unless
pursuant to a written assignment by such Buyer) issued or issuable hereunder
or pursuant to the Notes (or the Buyers, with respect to any waiver or
amendment of Section 4(o)). (f) Notices. Any notices, consents, waivers or
other communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i)
upon receipt, when delivered personally; (ii) upon receipt, when sent by
electronic mail (provided that such sent email is kept on file (whether
electronically or otherwise) by the sending party and the sending party does
not receive an automatically generated message from the recipient's email
server that such e-mail could not be delivered to such recipient); or (iii)
one (1) Business Day after deposit with an overnight courier service with next
day delivery specified, in each case, properly addressed to the party to
receive the same. The mailing addresses and e-mail addresses for such
communications shall be:
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If to the Company: Fisker Inc. 1888 Rosecrans Avenue Manhattan Beach, CA 90266
Telephone: (833) 434-7537 Attention: Geeta Gupta-Fisker, Chief Financial
Officer and Chief Operating Officer E-Mail: legal@fiskerinc.com With a copy
(for informational purposes only) to: Orrick, Herrington & Sutcliffe LLP 222
Berkeley Street, Suite 2000 Boston, MA 02116 Telephone: (617) 880-1800
Attention: Albert Vanderlaan E-Mail: avanderlaan@orrick.com If to the Transfer
Agent: Computershare Investor Services 150 Royall Street Canton, MA 02021
Telephone: (415) 335-1968 Attention: Earon Crosby E-Mail: Earon.Crosby@computers
hare.com If to a Buyer, to its mailing address and e-mail address set forth on
the Schedule of Buyers, with copies to such Buyer's representatives as set
forth on the Schedule of Buyers, with a copy (for informational purposes only)
to: Kelley Drye & Warren LLP 3 World Trade Center 175 Greenwich Street New
York, NY 10007 Telephone: (212) 808-7540 Attention: Michael A. Adelstein, Esq.
E-mail: madelstein@kelleydrye.com or to such other mailing address and/or
e-mail address and/or to the attention of such other Person as the recipient
party has specified by written notice given to each other party five (5) days
prior to the effectiveness of such change, provided that Kelley Drye & Warren
LLP shall only be provided copies of notices sent to the lead Buyer. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender's e-mail containing the time, date and recipient's e-mail or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by e-mail or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
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(g) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns,
including any purchasers of any of the Notes (but excluding any purchasers of
Underlying Securities, unless pursuant to a written assignment by such Buyer).
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Required Holders,
including, without limitation, by way of a Fundamental Transaction (as defined
in the Notes) (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes). A Buyer
may assign some or all of its rights hereunder in connection with any transfer
of any of its Securities without the consent of the Company, in which event
such assignee shall be deemed to be a Buyer hereunder with respect to such
assigned rights; provided that (i)a Buyer shall not transfer its rights
hereunder to any competitor of the Company without the prior written consent
of the Company (not to be unreasonably withheld) and (ii) if a Buyer assigns
its obligations pursuant to Section 1(b)(ii)(3) to any Person and such Person
breaches its purchase obligations pursuant to Section 1(b)(ii)(3), such Buyer
shall remain bound by such purchase obligations under Section 1(b)(ii)(3)
hereof. (h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person, other than the Indemnitees referred to in
Section 9(k). (i) Survival. The representations, warranties, agreements and
covenants shall survive the Closing. Each Buyer shall be responsible only for
its own representations, warranties, agreements and covenants hereunder. (j)
Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as any other
party may reasonably request in order to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby. (k) Indemnification. (i) In consideration of each Buyer's
execution and delivery of the Transaction Documents and acquiring the
Securities thereunder and in addition to all of the Company's other
obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each holder of any
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether
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any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and
disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as a
result of, or arising out of, or relating to (i) any misrepresentation or
breach of any representation or warranty made by the Company or any Subsidiary
in any of the Transaction Documents, (ii) any breach of any covenant,
agreement or obligation of the Company or any Subsidiary contained in any of
the Transaction Documents or (iii) any cause of action, suit, proceeding or
claim brought or made against such Indemnitee by a third party (including for
these purposes a derivative action brought on behalf of the Company or any
Subsidiary) or which otherwise involves such Indemnitee that arises out of or
results from (A) the execution, delivery, performance or enforcement of any of
the Transaction Documents, (B) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of
the Securities, (C) any disclosure properly made by such Buyer pursuant to
Section 4(l), or (D) the status of such Buyer or holder of the Securities
either as an investor in the Company pursuant to the transactions contemplated
by the Transaction Documents or as a party to this Agreement (including,
without limitation, as a party in interest or otherwise in any action or
proceeding for injunctive or other equitable relief). To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
(ii) Promptly after receipt by an Indemnitee under this Section 9(k) of notice
of the commencement of any action or proceeding (including any governmental
action or proceeding) involving an Indemnified Liability, such Indemnitee
shall, if a claim in respect thereof is to be made against the Company under
this Section 9(k), deliver to the Company a written notice of the commencement
thereof, and the Company shall have the right to participate in, and, to the
extent the Company so desires, to assume control of the defense thereof with
counsel mutually satisfactory to the Company and the Indemnitee; provided,
however, that an Indemnitee shall have the right to retain its own counsel
with the fees and expenses of such counsel to be paid by the Company if: (A)
the Company has agreed in writing to pay such fees and expenses; (B) the
Company shall have failed promptly to assume the defense of such Indemnified
Liability and to employ counsel reasonably satisfactory to such Indemnitee in
any such Indemnified Liability; or (C) the named parties to any such
Indemnified Liability (including any impleaded parties) include both such
Indemnitee and the Company, and such Indemnitee shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnitee and the Company (in which case, if such
Indemnitee notifies the Company in writing that it elects to employ separate
counsel at the expense of the Company, then the Company shall not have the
right to assume the defense thereof and such counsel shall be at the expense
of the Company), provided further, that in the case of clause (C) above the
Company shall not be
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responsible for the reasonable fees and expenses of more than one (1) separate
legal counsel for the Indemnitees. The Indemnitee shall reasonably cooperate
with the Company in connection with any negotiation or defense of any such
action or Indemnified Liability by the Company and shall furnish to the
Company all information reasonably available to the Indemnitee which relates
to such action or Indemnified Liability. The Company shall keep the Indemnitee
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Company shall not be liable
for any settlement of any action, claim or proceeding effected without its
prior written consent, provided, however, that the Company shall not
unreasonably withhold, delay or condition its consent. The Company shall not,
without the prior written consent of the Indemnitee, consent to entry of any
judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnitee of a release from all liability in respect to
such Indemnified Liability or litigation, and such settlement shall not
include any admission as to fault on the part of the Indemnitee. Following
indemnification as provided for hereunder, the Company shall be subrogated to
all rights of the Indemnitee with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the Company within a reasonable time
of the commencement of any such action shall not relieve the Company of any
liability to the Indemnitee under this Section 9(k), except to the extent that
the Company is materially and adversely prejudiced in its ability to defend
such action. (iii) The indemnification required by this Section 9(k) shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, within ten (10) days after bills are received or
Indemnified Liabilities are incurred. (iv) The indemnity agreement contained
herein shall be in addition to (A) any cause of action or similar right of the
Indemnitee against the Company or others, and (B) any liabilities the Company
may be subject to pursuant to the law. (l) 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 rules of strict construction will be
applied against any party. No specific representation or warranty shall limit
the generality or applicability of a more general representation or warranty.
Each and every reference to share prices, shares of Common Stock and any other
numbers in this Agreement that relate to the Common Stock shall be
automatically adjusted for any stock splits, stock dividends, stock
combinations, recapitalizations or other similar transactions that occur with
respect to the Common Stock after the date of this Agreement. Notwithstanding
anything in this Agreement to the contrary, for the avoidance of doubt,
nothing contained herein shall constitute a representation or warranty
against, or a prohibition of, any actions with respect to the borrowing of,
arrangement to borrow, identification of the availability of, and/or securing
of, securities of the Company in order for such Buyer (or its broker or other
financial representative) to effect short sales or similar transactions in the
future.
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(m) Remedies. Each Buyer and in the event of assignment by Buyer of its rights
and obligations hereunder, each holder of Securities, shall have all rights
and remedies set forth in the Transaction Documents and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision
of this Agreement and to exercise all other rights granted by law.
Furthermore, the Company recognizes that in the event that it or any
Subsidiary fails to perform, observe, or discharge any or all of its or such
Subsidiary's (as the case may be) obligations under the Transaction Documents,
any remedy at law would be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to specific performance
and/or temporary, preliminary and permanent injunctive or other equitable
relief from any court of competent jurisdiction in any such case without the
necessity of proving actual damages and without posting a bond or other
security. The remedies provided in this Agreement and the other Transaction
Documents shall be cumulative and in addition to all other remedies available
under this Agreement and the other Transaction Documents, at law or in equity
(including a decree of specific performance and/or other injunctive relief).
(n) Withdrawal Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Buyer exercises a right, election, demand or option under a
Transaction Document and the Company or any Subsidiary does not timely perform
its related obligations within the periods therein provided, then such Buyer
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company or such Subsidiary (as the case may be), any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights. (o) Payment Set Aside; Currency. To the extent that the
Company makes a payment or payments to any Buyer hereunder or pursuant to any
of the other Transaction Documents or any of the Buyers enforce or exercise
their rights hereunder or thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred. Unless otherwise
expressly indicated, all dollar amounts referred to in this Agreement and the
other Transaction Documents are in United States Dollars ("U.S. Dollars"), and
all amounts owing under this Agreement and all other Transaction Documents
shall be paid in U.S. Dollars. All amounts denominated in other currencies (if
any) shall be converted into the U.S. Dollar equivalent amount in accordance
with the Exchange Rate on the date of calculation. "Exchange Rate" means, in
relation to any amount of currency to be converted into U.S. Dollars pursuant
to this Agreement, the U.S. Dollar exchange rate as published in the Wall
Street Journal on the relevant date of calculation.
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(p) Judgment Currency. (i) If for the purpose of obtaining or enforcing
judgment against the Company in connection with this Agreement or any other
Transaction Document in any court in any jurisdiction it becomes necessary to
convert into any other currency (such other currency being hereinafter in this
Section 9(p) referred to as the "Judgment Currency") an amount due in U.S.
Dollars under this Agreement, the conversion shall be made at the Exchange
Rate prevailing on the Trading Day immediately preceding: (1) the date actual
payment of the amount due, in the case of any proceeding in the courts of New
York or in the courts of any other jurisdiction that will give effect to such
conversion being made on such date: or (2) the date on which the foreign court
determines, in the case of any proceeding in the courts of any other
jurisdiction (the date as of which such conversion is made pursuant to this
Section 9(p)(i)(2) being hereinafter referred to as the "Judgment Conversion
Date"). (ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 9(p)(i)(2) above, there is a change in the Exchange
Rate prevailing between the Judgment Conversion Date and the date of actual
payment of the amount due, the applicable party shall pay such adjusted amount
as may be necessary to ensure that the amount paid in the Judgment Currency,
when converted at the Exchange Rate prevailing on the date of payment, will
produce the amount of US Dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial order at
the Exchange Rate prevailing on the Judgment Conversion Date. (iii) Any amount
due from the Company under this provision shall be due as a separate debt and
shall not be affected by judgment being obtained for any other amounts due
under or in respect of this Agreement or any other Transaction Document. (q)
Independent Nature of Buyers' Obligations and Rights. The obligations of each
Buyer under the Transaction Documents are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way
for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall
be deemed to constitute the Buyers as, and the Company acknowledges that the
Buyers do not so constitute, a partnership, an association, a joint venture or
any other kind of group or entity, or create a presumption that the Buyers are
in any way acting in concert or as a group or entity, and the Company shall
not assert any such claim with respect to such obligations or the transactions
contemplated by the Transaction Documents or any matters, and the Company
acknowledges that the Buyers are not acting in concert or as a group, and the
Company shall not assert any such claim, with respect to such obligations or
the transactions contemplated by the Transaction Documents. The decision of
each Buyer to purchase Securities pursuant to the Transaction Documents has
been
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made by such Buyer independently of any other Buyer. Each Buyer acknowledges
that no other Buyer has acted as agent for such Buyer in connection with such
Buyer making its investment hereunder and that no other Buyer will be acting
as agent of such Buyer in connection with monitoring such Buyer's investment
in the Securities or enforcing its rights under the Transaction Documents. The
Company and each Buyer confirms that each Buyer has independently participated
with the Company and its Subsidiaries in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each
Buyer shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out
of any other Transaction Documents, and it shall not be necessary for any
other Buyer to be joined as an additional party in any proceeding for such
purpose. The use of a single agreement to effectuate the purchase and sale of
the Securities contemplated hereby was solely in the control of the Company,
not the action or decision of any Buyer, and was done solely for the
convenience of the Company and its Subsidiaries and not because it was
required or requested to do so by any Buyer. It is expressly understood and
agreed that each provision contained in this Agreement and in each other
Transaction Document is between the Company, each Subsidiary and a Buyer,
solely, and not between the Company, its Subsidiaries and the Buyers
collectively and not between and among the Buyers. [signature pages follow]
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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above. COMPANY: FISKER INC. By: /s/ Dr. Geeta Gupta-Fisker Name: Dr.
Geeta Gupta-Fisker Title: Chief Financial Officer and Chief Operating Officer
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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above. BUYER: CVI INVESTMENTS, INC. By: /s/ Martin Kobinger Name:
Martin Kobinger Title: President
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SCHEDULE OF BUYERS (1) (2) (3) (4) (5) (6) (7) Buyer Mailing Address and
E-mail Address Original Principal Amount of Initial Notes Aggregate Maximum
Original Principal Amount of Additional Notes for Additional Optional Closings
Aggregate Original Principal Amount of Additional Notes for Additional
Mandatory Closing Initial Purchase Price Legal Representative's Mailing
Address and E-mail Address
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AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT This AMENDMENT NO. 1, dated
as of September 29, 2023 (this "Amendment"), to the SECURITIES PURCHASE
AGREEMENT (the "Securities Purchase Agreement"), dated as of July 10, 2023, is
by and among Fisker Inc., a Delaware corporation with offices located at 1888
Rosecrans Avenue, Manhattan Beach, California 90266 (the "Company"), and the
investors signatory thereto (including, the undersigned investor (the
"Investor"). Unless otherwise defined herein or the context otherwise
requires, capitalized terms used herein and defined in the Securities Purchase
Agreement shall be used herein as therein defined. RECITALS A. The Company and
the Investor entered into the Securities Purchase Agreement pursuant to which
the Investor agreed to purchase certain Notes of the Company, upon the terms
and subject to the conditions set forth therein. B. The Company and the
Investor desire to amend the Securities Purchase Agreement as provided herein.
NOW, THEREFORE, in consideration of the promises and the mutual representations,
warranties, covenants and agreements set forth in this Amendment and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows: 1.
AMENDMENTS. Effective as of the time the Company and the Investor shall have
executed and delivered this Amendment (the "Amendment Time"), the Securities
Purchase Agreement is hereby amended as follows: (a) RECITAL B of the
Securities Purchase Agreement is hereby amended by replacing "680,000,000"
with "1,133,333,334". (b) RECITAL D of the Securities Purchase Agreement is
hereby amended by replacing "226,666,667" with "566,666,667". (c) RECITAL E of
the Securities Purchase Agreement is hereby amended by replacing "113,333,333"
with "226,666,667". (d) The first sentence of Section 1(b)(ii)(2) of the
Securities Purchase Agreement is hereby amended by replacing "at any time on
or after the first anniversary of the Initial Closing Date" with "at any time
after (A) with respect to the initial $170,000,000 of Additional Optional
Notes Amount, September 27, 2023, (B) with respect to the next $226,666,667 of
Additional Optional Notes Amount, December 29, 2023 or (C) with respect to the
remaining $170,000,000 of Additional Optional Notes Amount, March 29, 2024".
(e) The last sentence of Section 1(b)(ii)(2) of the Securities Purchase
Agreement is hereby amended by replacing "eighteen month anniversary of the
Initial Closing Date" with "March 29, 2026".
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(f) Section 1 is hereby amended to add the following as Section 1(e): (e)
Requested Additional Notes; Acceleration Temporary Ceiling. If a Buyer
consummates an Additional Closing to purchase at least $170 million in
aggregate principal amount of Additional Notes during the period commencing on
the date hereof and ending on October 2, 2023, with respect to any Notes
(including, without limitation, the Initial Notes and any Additional Notes)
outstanding during such period, if such holder of a Note requests an
Acceleration (as defined in such Note) prior to January 11, 2024 at a time
when the Acceleration Conversion Price (as defined in the Notes) is greater
than the Installment Conversion Price (as defined in the Notes) for the July
11, 2023 Installment Date (as defined in the Notes) of the Initial Notes (as
adjusted for stock splits, stock dividends, stock combinations, recapitalization
s and similar events) (the "Acceleration Temporary Ceiling"), in accordance
with Section 7(f) of such Note, the Company hereby agrees that the Conversion
Price (as defined in such Note) of such portion of such Note that would
otherwise have been converted in such Acceleration shall be automatically
reduced to the Acceleration Temporary Ceiling and, in lieu of such
Acceleration, such conversion shall be settled as a voluntary optional
conversion in accordance with Section 3 of such Note. (g) Section 3(c) is
hereby amended by replacing "Stockholder Meeting Deadline" with "Additional
Stockholder Approval Deadline" and "275 million shares of Common Stock" with
"782 million shares of Common Stock". (h) Section 4(n) is hereby amended by
replacing "275 million shares of Common Stock" with "782 million shares of
Common Stock". (i) Section 4(q) is hereby amended to replace "the first
anniversary of the Initial Closing Date" with "September 29, 2024". (j)
Section 4 is hereby amended to add the following as Section 4(cc): Additional
Stockholder Approval. Either (x) if the Company shall have obtained the prior
written consent of the requisite stockholders (the "Stockholder Consent") to
obtain the Additional Stockholder Approval (as defined below), inform the
stockholders of the Company of the receipt of the Stockholder Consent by
preparing and filing with the SEC an information statement with respect
thereto, which shall be effective no later than January 31, 2024 (the
"Additional Stockholder Approval Deadline") or (y) provide each
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stockholder entitled to vote at a special meeting of stockholders of the
Company (the "Additional Stockholder Meeting"), which shall be promptly called
and held not later than the Additional Stockholder Approval Deadline, a proxy
statement in a form reasonably acceptable to the Investor and Kelley Drye &
Warren LLP, at the expense of the Company, with the Company obligated to
reimburse the expenses of Kelley Drye & Warren LLP incurred in connection
therewith in an amount not exceed $5,000. The proxy statement shall solicit
each of the Company's stockholder's affirmative vote at the Additional
Stockholder Meeting for approval of resolutions ("Additional Stockholder
Resolutions") providing for (x) the approval of the issuance of such portion
of the Securities issued or issuable solely with respect to an Additional
Closing in compliance with the rules and regulations of the Principal Market
(without regard to any limitations on conversion set forth in the applicable
Notes) and (y) the increase of the authorized shares of the Company from
1,250,000,000 to 2,000,000,000 (such affirmative approval (either by an
effective Written Consent or affirmative vote at an Additional Stockholder
Meeting, being referred to herein as the "Additional Stockholder Approval",
and the date such Additional Stockholder Approval is obtained, the "Additional
Stockholder Approval Date"), and the Company shall use its reasonable best
efforts to solicit its stockholders' approval of such resolutions and to cause
the Board of Directors of the Company to recommend to the stockholders that
they approve such resolutions. The Company shall be obligated to seek to
obtain the Additional Stockholder Approval by the Additional Stockholder
Approval Deadline. If, despite the Company's reasonable best efforts the
Additional Stockholder Approval is not obtained on or prior to the Additional
Stockholder Approval Deadline, the Company shall cause an additional
Additional Stockholder Meeting to be held on or prior to March 31, 2024. If,
despite the Company's reasonable best efforts the Additional Stockholder
Approval is not obtained after such subsequent stockholder meetings, the
Company shall cause an additional Additional Stockholder Meeting to be held
semi-annually thereafter until such Additional Stockholder Approval is
obtained. (k) Section 7(b)(xxi) shall be amended by replacing "Stockholder
Approval" with "Additional Stockholder Approval".
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(l) Column (4) of the Schedule of Buyers attached to the Securities Purchase
Agreement is hereby amended by replacing "226,666,667" with "566,666,667". (m)
Column (5) of the Schedule of Buyers attached to the Securities Purchase
Agreement is hereby amended by replacing "113,333,334" with "226,666,667". 2.
MISCELLANEOUS (a) Disclosure of Transactions and Other Material Information.
The Company shall, on or before 9:30 a.m., New York time, on the first Trading
Day after the date of this Amendment, file a Current Report on Form 8-K,
describing all the material terms of the transactions contemplated by this
Amendment in the form required by the 1934 Act, and attaching this Amendment
(including all attachments, the "8-K Filing"). From and after the 8-K Filing,
the Company shall have disclosed all material, non-public information (if any)
delivered to the Investor by the Company or any of its Subsidiaries, or any of
their respective officers, directors, employees or agents in connection with
the transactions contemplated by the Amendments and the Transaction Documents
(including, without limitation, attaching the form of this Amendment and the
Waiver Documents). In addition, effective upon the filing of the 8-K Filing,
the Company acknowledges and agrees that any and all confidentiality or
similar obligations under any agreement, whether written or oral, between the
Company, any of its Subsidiaries or any of their respective officers,
directors, affiliates, employees or agents, on the one hand, and the Investor
or any of its affiliates, on the other hand, shall terminate. (b)
Acknowledgement; Reaffirmation of Obligations; Consent. The Company hereby
confirms and agrees that following the Amendment Time, except as set forth in
Section 1 above, the Securities Purchase Agreement and each of the other
Transaction Documents are, and shall continue to be, in full force and effect
and are hereby ratified and confirmed in all respects. (c) Fees. The Company
shall reimburse Kelley Drye & Warren LLP, on demand, a non- accountable amount
of $25,000 (the "Legal Fee Amount") for all costs and expenses incurred by it
in connection with preparing and delivering this Agreement (including, without
limitation, all legal fees and disbursements in connection therewith, and due
diligence in connection with the transactions contemplated thereby), which the
Company directs the Investor to pay by holding back such Legal Fee Amount from
the Purchase Price of the Requested Notes. (d) General. The provisions of
Section 9 of the Securities Purchase Agreement are hereby incorporated by
reference herein, mutatis mutandis. [The remainder of the page is
intentionally left blank]
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IN WITNESS WHEREOF, the Investor and the Company have caused their respective
signature page to this Amendment to the Securities Purchase Agreement to be
duly executed as of the date first written above. COMPANY: FISKER INC. By: /s/
Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title: Chief Financial
Officer and Chief Operating Officer
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IN WITNESS WHEREOF, the Investor and the Company have caused their respective
signature page to this Amendment to the Securities Purchase Agreement to be
duly executed as of the date first written above. INVESTOR: CVI INVESTMENTS,
INC. B By: Heights Capital Management, Inc., its authorized agent By: /s/
Martin Kobinger Name: Martin Kobinger Title: President
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Execution Version AMENDMENT AND WAIVER AGREEMENT This Amendment and Waiver
Agreement (this "Agreement") is entered into as of the 22nd day of November,
2023, by and between Fisker Inc., a Delaware corporation (the "Company") and
the investor signatory hereto (the "Investor"), with reference to the
following facts: A. Prior to the date hereof, pursuant to that Securities
Purchase Agreement, dated as of July 10, 2023, by and between the Company and
the investor party thereto (as amended, modified or waived from time to time,
the "Securities Purchase Agreement"), the Company, among other things, issued
$340,000,000 in aggregate original principal amount of Series A-1 senior
convertible notes due 2025 (the "Series A-1 Notes") and $170,000,000 in
aggregate original principal amount of Series B-1 senior convertible notes due
2025 (the "Series B-1 Notes," and together with the Series A-1 Notes, the
"Existing Notes"). Capitalized terms not defined herein shall have the meaning
set forth in the Securities Purchase Agreement. B. As of the date hereof, the
Company has failed to timely file its quarterly report on Form 10-Q for the
quarter ended September 30, 2023 (the "Existing Default"). C. The Company
desires to obtain a waiver, in part, of the Existing Default such that the
Existing Default shall cease to be an Event of Default (as defined in the
Note) (other than with respect to Section 30(nnn) of the Notes) (the "Limited
Waiver"), and, in connection therewith, has agreed to grant (the "Security
Grant") each holder of Notes (including the Existing Notes) a security
interest in certain assets of the Company and its Subsidiaries, as described
in (i) that certain supplemental indenture, in the form attached hereto as
Exhibit A (the "Security Grant Supplemental Indenture"), (ii) that certain
Pledge Agreement, in the form attached hereto as Exhibit B (the "Pledge
Agreement") and (iii) that certain security agreement, by and among the
Company, the Investor and certain subsidiaries of the Company and such other
security documents and certificates as specified in the Pledge Agreement,
together with the Pledge Agreement and the Security Grant Supplemental
Indenture, collectively, the "Security Documents". D. The Company and the
Investor desire to amend certain terms and conditions of the Transaction
Documents and waive, in part, certain terms and conditions of the Transaction
Documents to effectuate the Security Grant, as provided herein and in the
Security Documents. NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants hereinafter contained, the parties hereto agree as
follows: 1. Amendments. Effective as of the date hereof, the Securities
Purchase Agreement, the Notes (including the Existing Notes) and each of the
other Transaction Documents are hereby amended as follows (and any such
agreements, covenants and related provisions therein shall be deemed
incorporated by reference herein, mutatis mutandis, as amended as such): (a)
The defined term "Transaction Documents" is hereby amended to include this
Agreement, the Guaranty (as defined in the Pledge Agreement), the Security
Grant Supplemental Indenture and the Security Documents.
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2 (b) The defined term "Security Documents", "Pledge Agreement", and "Security
Grant Supplemental Indenture" shall have the meaning as set forth in this
Agreement and "Collateral" shall have the meaning as set forth in the Pledge
Agreement. (c) The Notes (including any Existing Notes) shall be senior
secured convertible notes, with such security interest as provided in the
Security Documents. 2. Limited Waiver. Effective upon (a) the due execution
and delivery by the Company, the Investor and, where applicable, each direct
and indirect U.S. subsidiary of the Company and/or the Trustee, as applicable,
of the Pledge Agreement, and the Security Grant Supplemental Indenture and (b)
the satisfaction in full of any covenant or agreement therein required to be
completed as of the date of execution thereof as required therein (other than,
for the avoidance of doubt, terms or agreements to be entered into following
the execution thereof), (i) in exchange for the Security Grant, the Investor
hereby grants the Limited Waiver and (ii) the Investor hereby waives Section
13(o) of the Notes, in part, and amends each of the Notes and the form of Note
attached to the Securities Purchase Agreement, as applicable, such that
"$340,000,000" shall be reduced to $250,000,000. 3. Ratifications. Except as
otherwise expressly provided herein, the Securities Purchase Agreement, and
each other Transaction Document, is, and shall continue to be, in full force
and effect and is hereby ratified and confirmed in all respects, except that
on and after the date hereof: (i) all references in the Securities Purchase
Agreement to "this Agreement", "hereto", "hereof", "hereunder" or words of
like import referring to the Securities Purchase Agreement shall mean the
Securities Purchase Agreement as amended by this Agreement, and (ii) all
references in the other Transaction Documents to the "Securities Purchase
Agreement", "thereto", "thereof", "thereunder" or words of like import
referring to the Securities Purchase Agreement shall mean the Securities
Purchase Agreement as amended by this Agreement. 4. Replacement Registration
Statement. On or prior to January 31, 2024, the Company shall file a
Registration Statement on Form S-1 (or such other available form) to register
the issuance of the Additional Notes to permit one or more Additional
Closings, when and as required, in accordance with the terms of the Securities
Purchase Agreement (each, a "Replacement Registration Statement"). The Company
shall use its reasonable best efforts to cause each Replacement Registration
Statement (a) to clear all comments with the SEC as soon as reasonably
practicable after the date of filing of such Replacement Registration
Statement, but in no event later than the 90th (ninetieth) calendar day after
such applicable filing date and (b) to be accelerated and become effective to
permit each applicable Additional Closing, when and as required, in accordance
with the terms of the Securities Purchase Agreement. 5. Fees. The Company
shall promptly reimburse Kelley Drye & Warren, LLP (counsel to the Investor),
on demand, a non-accountable amount of $75,000 for the costs and expenses
incurred by it in connection with preparing and delivering this Agreement and
the Security Documents and shall reimburse the Investor for any additional
costs and expenses incurred in connection with the satisfaction of the terms
and conditions thereof. 6. Disclosure of Transaction. On or before 9:00 a.m.,
New York time, on the first (1st) Business Day after the date of this
Agreement, the Company shall file a Quarterly Report on Form 10-Q describing
all the material terms of the transactions contemplated by this Agreement and
the Pledge Agreement in the form required by the Exchange Act and attaching
this Agreement
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3 (including all attachments, the "10-Q Filing"). From and after the filing of
the 10-Q Filing, the Company shall have disclosed all material, non-public
information (if any) provided to the Investor by the Company or any of its
Subsidiaries or any of their respective officers, directors, employees or
agents in connection with the transactions contemplated hereby and pursuant to
and the Pledge Agreement. In addition, effective upon the filing of the 10-Q
Filing, the Company acknowledges and agrees that any and all confidentiality
or similar obligations under any agreement, whether written or oral, between
the Company, any of its Subsidiaries or any of their respective officers,
directors, affiliates, employees or agents, on the one hand, and the Investor
or any of its affiliates, on the other hand, relating to the transactions
contemplated hereby and pursuant to the Transaction Documents, shall
terminate. Notwithstanding anything contained in this Agreement to the
contrary and without implication that the contrary would otherwise be true,
the Company expressly acknowledges and agrees that the Investor shall not have
(unless expressly agreed to by the Investor after the date hereof in a written
definitive and binding agreement executed by the Company and the Investor),
any duty of confidentiality with respect to any material, non-public
information regarding the Company or any of its Subsidiaries. 7. Reliance by
Trustee. The Company and the Investor acknowledge and agree that Wilmington
Savings Fund Society, FSB, as trustee, is an intended third-party beneficiary
of this Agreement and is entitled to rely upon its terms for all purposes of
the Indenture (as defined in the Indenture) and the Security Grant
Supplemental Indenture. 8. Miscellaneous Provisions. Section 9 of the
Securities Purchase Agreement (as amended hereby) is hereby incorporated by
reference herein, mutatis mutandis. [The remainder of the page is
intentionally left blank]
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IN WITNESS WHEREOF, the Investor and the Company have executed this Agreement
as of the date set forth on the first page of this Agreement. COMPANY: FISKER
INC. By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title: Chief
Financial Officer and Chief Operating Officer
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IN WITNESS WHEREOF, the Investor and the Company have executed this Agreement
as of the date set forth on the first page of this Agreement. INVESTOR: CVI
INVESTMENTS, INC. C/O Heights Capital Management, Inc.; its authorized agent
By: /s/ Martin Kobinger Name: Martin Kobinger Title: President
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Execution Version THIS DOCUMENT WAS EXECUTED OUTSIDE OF AUSTRIA. THE TAKING OF
THIS DOCUMENT OR ANY CERTIFIED COPY OF IT OR ANY DOCUMENT WHICH CONSTITUTES
SUBSTITUTE DOCUMENTATION FOR IT, OR ANY DOCUMENT WHICH INCLUDES WRITTEN
CONFIRMATIONS OR REFERENCES TO IT, INTO AUSTRIA AS WELL AS PRINTING OUT ANY E-
MAIL COMMUNICATION WHICH REFERS TO THIS DOCUMENT IN AUSTRIA OR SENDING ANY
E-MAIL COMMUNICATION TO WHICH A PDF SCAN OF THIS DOCUMENT IS ATTACHED TO AN
AUSTRIAN ADDRESSEE OR SENDING ANY E-MAIL COMMUNICATION CARRYING AN ELECTRONIC
OR DIGITAL SIGNATURE WHICH REFERS TO ANY TRANSACTION DOCUMENT TO AN AUSTRIAN
ADDRESSEE MAY CAUSE THE IMPOSITION OF AUSTRIAN STAMP DUTY. ACCORDINGLY, KEEP
THE ORIGINAL DOCUMENT AS WELL AS ALL CERTIFIED COPIES THEREOF AND WRITTEN AND
SIGNED REFERENCES TO IT OUTSIDE OF AUSTRIA AND AVOID PRINTING OUT ANY E-MAIL
COMMUNICATION WHICH REFERS TO ANY TRANSACTION DOCUMENT IN AUSTRIA OR SENDING
ANY E-MAIL COMMUNICATION TO WHICH A PDF SCAN OF THIS DOCUMENT IS ATTACHED TO
AN AUSTRIAN ADDRESSEE OR SENDING ANY E-MAIL COMMUNICATION CARRYING AN
ELECTRONIC OR DIGITAL SIGNATURE WHICH REFERS TO THIS DOCUMENT TO AN AUSTRIAN
ADDRESSEE. GUARANTY This GUARANTY, dated as of December 28, 2023 (this
"Guaranty"), is made by each of the undersigned (each a "Guarantor", and
collectively, the "Guarantors"), in favor of CVI Investments, Inc.,, in its
capacity as collateral agent (in such capacity, the "Collateral Agent") for
the Noteholders (as defined below). W I T N E S S E T H: WHEREAS, Fisker Inc.,
a company organized under the laws of Delaware, with offices located at 1888
Rosecrans Avenue, Manhattan Beach, California 90266 (the "Company") and each
party listed as a "Investor" on the Schedule of Investors attached thereto
(collectively, the "Investors") are parties to the Securities Purchase
Agreement, dated as of July 10, 2023 (as amended, restated, extended, replaced
or otherwise modified from time to time, the "Securities Purchase Agreement"),
pursuant to which the Company has sold, and may in the future be required to
sell, to the Investors, and the Investors have purchased, and may in the
future exercise their right to purchase, the "Notes" issued pursuant thereto
(as such Notes may be amended, restated, extended, replaced or otherwise
modified from time to time in accordance with the terms thereof, collectively,
the "Notes"); WHEREAS, the Company is party to that certain Indenture, dated
as of July 11, 2023, by and between the Company and Wilmington Savings Fund
Society, FSB, as trustee (as amended, modified, supplemented, extended,
renewed, restated or replaced from time to time in accordance with the terms
thereof, the "Indenture") providing for the issuance from time to time of
Securities (as defined in the Indenture) by the Company; WHEREAS, the
Indenture requires that the Guarantors execute and deliver to the Collateral
Agent, (i) a guaranty guaranteeing all of the obligations of the Company under
the Securities Purchase Agreement, the Notes and the other Transaction
Documents (as defined below); and (ii) an Amended and Restated Security and
Pledge Agreement, dated as of the date hereof, granting the Collateral Agent a
lien on and security interest in all of their assets and properties (the
"Security Agreement"); and
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WHEREAS, each Guarantor has determined that the execution, delivery and
performance of this Guaranty directly benefits, and is in the best interest
of, such Guarantor. NOW, THEREFORE, in consideration of the premises and the
agreements herein, each Guarantor hereby agrees with each Noteholder as
follows: SECTION 1. Definitions. Reference is hereby made to the Securities
Purchase Agreement, the Indenture and the Notes for a statement of the terms
thereof. All terms used in this Guaranty and the recitals hereto which are
defined in the Securities Purchase Agreement or the Notes, and which are not
otherwise defined herein shall have the same meanings herein as set forth
therein. In addition, the following terms when used in the Guaranty shall have
the meanings set forth below: "Bankruptcy Code" means Chapter 11 of Title 11
of the United States Code, 11 U.S.C (s)(s) 101 et seq. (or other applicable
bankruptcy, insolvency or similar laws). "Business Day" means any day other
than Saturday, Sunday or other day on which commercial banks in New York City
are authorized or required by law to remain closed; provided, however, for
clarification, commercial banks shall not be deemed to be authorized or
required by law to remain closed due to "stay at home", "shelter-in- place",
"non-essential employee" or any other similar orders or restrictions or the
closure of any physical branch locations at the direction of any governmental
authority so long as the electronic funds transfer systems (including for wire
transfers) of commercial banks in The City of New York generally are open for
use by customers on such day. "Investor" or "Investors" shall have the meaning
set forth in the recitals hereto. "Capital Stock" means (i) with respect to
any Person that is a corporation, any and all shares, interests, participations
or other equivalents (however designated and whether or not voting) of
corporate stock (including, without limitation, any warrants, options, rights
or other securities exercisable or convertible into equity interests or
securities of such Person), and (ii) with respect to any Person that is not a
corporation, any and all partnership, membership or other equity interests of
such Person. "Collateral" shall have the meaning set forth in Section 3(a) of
the Security Agreement. "Collateral Agent" shall have the meaning set forth in
the recitals hereto. "Company" shall have the meaning set forth in the
recitals hereto. "Governmental Authority" means any nation, state, county,
city, town, village, district, or other political jurisdiction of any nature,
federal, state, local, municipal, foreign, or other government, governmental
or quasi- governmental authority of any nature (including any governmental
agency, branch, department, official, or entity and any court or other
tribunal), multi-national organization or body; or body exercising, or
entitled to exercise, any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any nature or
instrumentality of any of the foregoing, including any entity or enterprise
owned or controlled by a government or a public international organization or
any of the foregoing.
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"Guaranteed Obligations" shall have the meaning set forth in Section 2 of this
Guaranty. "Guarantor" or "Guarantors" shall have the meaning set forth in the
recitals hereto. "Indemnified Party" shall have the meaning set forth in
Section 14(a) of this Guaranty. "Insolvency Proceeding" means any proceeding
commenced by or against any Person under any provision of the Bankruptcy Code
or under any other bankruptcy or insolvency law, assignments for the benefit
of creditors, formal or informal moratoria, compositions, or extensions
generally with creditors, or proceedings seeking reorganization, arrangement,
or other similar relief. "Joinder Agreement" means an agreement substantially
in the form attached hereto as Exhibit A. "Notes" shall have the meaning set
forth in the recitals hereto. "Obligations" shall have the meaning set forth
in Section 4 of the Security Agreement. "Other Taxes" shall have the meaning
set forth in Section 13(a)(iv) of this Guaranty. "Paid in Full" or "Payment in
Full" means the indefeasible payment in full in cash of all of the Guaranteed
Obligations (other than inchoate indemnity obligations). "Person" means an
individual, corporation, limited liability company, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture or
other enterprise or entity or Governmental Authority. "Securities Purchase
Agreement" shall have the meaning set forth in the recitals hereto. "Security
Agreement" shall have the meaning set forth in the recitals hereto.
"Subsidiary" means any Person in which a Guarantor directly or indirectly, (i)
owns a majority of the outstanding Capital Stock of such Person or (ii)
controls or operates all or any part of the business, operations or
administration of such Person, and all of the foregoing, collectively,
"Subsidiaries". "Taxes" shall have the meaning set forth in Section 13(a) of
this Guaranty. "Transaction Documents" shall have the meaning set forth in the
Securities Purchase Agreement, as supplemented by the Second Supplemental
Indenture. "Transaction Party" means the Company and each Guarantor,
collectively, "Transaction Parties".
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SECTION 2. Guaranty. (a) The Guarantors, jointly and severally, hereby
unconditionally and irrevocably, guaranty to the Collateral Agent, for the
benefit of the Collateral Agent and the Noteholders, the punctual payment, as
and when due and payable, by stated maturity or otherwise, of all Obligations,
including, without limitation, all interest, make- whole and other amounts
that accrue after the commencement of any Insolvency Proceeding of the Company
or any Guarantor, whether or not the payment of such interest, make-whole
and/or other amounts are enforceable or are allowable in such Insolvency
Proceeding, and all fees, interest, premiums, penalties, causes of actions,
costs, commissions, expense reimbursements, indemnifications and all other
amounts due or to become due under any of the Transaction Documents (all of
the foregoing collectively being the "Guaranteed Obligations"), and agrees to
pay any and all costs and expenses (including counsel fees and expenses)
incurred by the Collateral Agent in enforcing any rights under this Guaranty.
Without limiting the generality of the foregoing, each Guarantor's liability
hereunder shall extend to all amounts that constitute part of the Guaranteed
Obligations and would be owed by the Company to the Collateral Agent or any
Noteholder under the Securities Purchase Agreement and the Notes but for the
fact that they are unenforceable or not allowable due to the existence of an
Insolvency Proceeding involving any Transaction Party. (b) Each Guarantor, and
by its acceptance of this Guaranty, the Collateral Agent and each Noteholder,
hereby confirms that it is the intention of all such Persons that this
Guaranty and the Guaranteed Obligations of each Guarantor hereunder not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer
Act or any similar foreign, federal, provincial, state, or other applicable
law to the extent applicable to this Guaranty and the Guaranteed Obligations
of each Guarantor hereunder. To effectuate the foregoing intention, by
acceptance of the benefits of this Guaranty, the Collateral Agent, the
Noteholders and the Guarantors hereby irrevocably agree that the Guaranteed
Obligations of each Guarantor under this Guaranty at any time shall be limited
to the maximum amount as will result in the Guaranteed Obligations of such
Guarantor under this Guaranty not constituting a fraudulent transfer or
conveyance. SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.
(a) The Guarantors, jointly and severally, guaranty that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the
Transaction Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Collateral Agent or any Noteholder with respect thereto. The
obligations of each Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against any Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of
any Guarantor under this Guaranty shall be as a primary obligor (and not
merely as a surety) and shall be irrevocable, absolute and unconditional
irrespective of, and each
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Guarantor hereby irrevocably waives, to the extent permitted by law, any
defenses (other than a defense of Payment in Full of the Guaranteed
Obligations) it may now or hereafter have in any way relating to, any or all
of the following: (i) any lack of validity or enforceability of any
Transaction Document; (ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Guaranteed Obligations, or any
other amendment or waiver of or any consent to departure from any Transaction
Document, including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to any
Transaction Party or extension of the maturity of any Guaranteed Obligations
or otherwise; (iii) any taking, exchange, release or non-perfection of any
Collateral; (iv) any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations; (v) any change, restructuring or termination of the corporate,
limited liability company or partnership structure or existence of any
Transaction Party; (vi) any manner of application of Collateral or any other
collateral, or proceeds thereof, to all or any of the Guaranteed Obligations,
or any manner of sale or other disposition of any Collateral or any other
collateral for all or any of the Guaranteed Obligations or any other
Obligations of any Transaction Party under the Transaction Documents or any
other assets of any Transaction Party or any of its Subsidiaries; (vii) any
failure of the Collateral Agent or any Noteholder to disclose to any
Transaction Party any information relating to the business, condition
(financial or otherwise), operations, performance, properties or prospects of
any other Transaction Party now or hereafter known to the Collateral Agent or
any Noteholder (each Guarantor waiving any duty on the part of the Collateral
Agent or any Noteholder to disclose such information); (viii) the taking of
any action in furtherance of the release of any Guarantor or any other Person
that is liable for the Guaranteed Obligations from all or any part of any
liability arising under or in connection with any Transaction Document without
the prior written consent of the Collateral Agent; or (ix) any other
circumstance (including, without limitation, any statute of limitations) or
any existence of or reliance on any representation by the Collateral Agent or
any Noteholder that might otherwise constitute a defense available to, or a
discharge of, any Transaction Party or any other guarantor or surety. (b) This
Guaranty shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Collateral Agent, any Noteholder, or any
other Person upon the insolvency, bankruptcy or reorganization of any
Transaction Party or otherwise, all as though such payment had not been made.
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(c) This Guaranty is a continuing guaranty and shall (i) remain in full force
and effect until Payment in Full of the Guaranteed Obligations and shall not
terminate for any reason prior to the respective Maturity Date of each Note
(other than Payment in Full of the Guaranteed Obligations) and (ii) be binding
upon each Guarantor and its respective successors and assigns. This Guaranty
shall inure to the benefit of and be enforceable by the Collateral Agent, the
Noteholders, and their respective successors, and permitted pledgees,
transferees and assigns. Without limiting the generality of the foregoing
sentence, the Collateral Agent or any Noteholder may pledge, assign or
otherwise transfer all or any portion of its rights and obligations under and
subject to the terms of any Transaction Document to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to the Collateral Agent or such Noteholder (as applicable)
herein or otherwise, in each case as provided in the Securities Purchase
Agreement or such Transaction Document. None of the rights or obligations of
any Guarantor hereunder may be assigned or otherwise transferred without the
prior written consent of each Noteholder. SECTION 4. Waivers. To the extent
permitted by applicable law, each Guarantor hereby waives promptness,
diligence, protest, notice of acceptance and any other notice or formality of
any kind with respect to any of the Guaranteed Obligations and this Guaranty
and any requirement that the Collateral Agent exhaust any right or take any
action against any Transaction Party or any other Person or any Collateral.
Each Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated herein and that the waiver set
forth in this Section 4 is knowingly made in contemplation of such benefits.
The Guarantors hereby waive any right to revoke this Guaranty, and acknowledge
that this Guaranty is continuing in nature and applies to all Guaranteed
Obligations, whether existing now or in the future. Without limiting the
foregoing, to the extent permitted by applicable law, each Guarantor hereby
unconditionally and irrevocably waives (a) any defense arising by reason of
any claim or defense based upon an election of remedies by the Collateral
Agent or any Noteholder that in any manner impairs, reduces, releases or
otherwise adversely affects the subrogation, reimbursement, exoneration,
contribution or indemnification rights of such Guarantor or other rights of
such Guarantor to proceed against any of the other Transaction Parties, any
other guarantor or any other Person or any Collateral, and (b) any defense
based on any right of set-off or counterclaim against or in respect of the
Guaranteed Obligations of such Guarantor hereunder. Each Guarantor hereby
unconditionally and irrevocably waives any duty on the part of the Collateral
Agent or any Noteholder to disclose to such Guarantor any matter, fact or
thing relating to the business, condition (financial or otherwise),
operations, performance, properties or prospects of any other Transaction
Party or any of its Subsidiaries now or hereafter known by the Collateral
Agent or an Noteholder. SECTION 5. Subrogation. No Guarantor may exercise any
rights that it may now or hereafter acquire against any Transaction Party or
any other guarantor that arise from the existence, payment, performance or
enforcement of any Guarantor's obligations under this Guaranty, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy of the Collateral Agent or any Noteholder against any Transaction Party
or any other guarantor or any Collateral, 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 any Transaction
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Party or any other guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security solely on
account of such claim, remedy or right, unless and until there has been
Payment in Full of the Guaranteed Obligations. If any amount shall be paid to
a Guarantor in violation of the immediately preceding sentence at any time
prior to Payment in Full of the Guaranteed Obligations and all other amounts
payable under this Guaranty, such amount shall be held in trust for the
benefit of the Collateral Agent and shall forthwith be paid to the Collateral
Agent to be credited and applied to the Guaranteed Obligations and all other
amounts payable under this Guaranty, whether matured or unmatured, in
accordance with the terms of the Transaction Document, or to be held as
Collateral for any Guaranteed Obligations or other amounts payable under this
Guaranty thereafter arising. If (a) any Guarantor shall make payment to the
Collateral Agent of all or any part of the Guaranteed Obligations, and (b)
there has been Payment in Full of the Guaranteed Obligations, the Collateral
Agent will, at such Guarantor's request and expense, execute and deliver to
such Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation
to such Guarantor of an interest in the Guaranteed Obligations resulting from
such payment by such Guarantor. SECTION 6. Representations, Warranties and
Covenants. (a) Each Guarantor hereby represents and warrants as of the date
first written above as follows: (i) such Guarantor (A) is a corporation,
limited liability company, limited partnership or other legal entity duly
organized, validly existing and in good standing (to the extent that the
concept of good standing exists) under the laws of the jurisdiction of its
organization as set forth on the signature pages hereto, (B) has all requisite
corporate, limited liability company, limited partnership or other legal
entity power and authority to conduct its business as now conducted and as
presently contemplated and to execute, deliver and perform its obligations
under this Guaranty and each other Transaction Document to which such
Guarantor is a party, and to consummate the transactions contemplated hereby
and thereby and (C) is duly qualified to do business and is in good standing
to the extent that the concept of good standing exists) in each jurisdiction
in which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary except where
the failure to be so qualified (individually or in the aggregate) would not
result in a Material Adverse Effect. (ii) The execution, delivery and
performance by such Guarantor of this Guaranty and each other Transaction
Document to which such Guarantor is a party (A) have been duly authorized by
all necessary corporate, limited liability company, limited partnership or
other legal entity action, (B) do not and will not contravene its charter,
articles, certificate of formation or by-laws, its limited liability company
or operating agreement or its certificate of partnership or partnership
agreement, or similar formation and organizational documents, as applicable,
or any applicable law or any contractual restriction binding on such Guarantor
or its properties do not and will not result in or require the creation of any
lien, security interest or encumbrance (other than pursuant to any Transaction
Document) upon or with respect to any of its properties, and (C) do not and
will not result in any default, noncompliance, suspension,
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revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to it or its operations or any of its
properties, except any default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal that would not result in a Material
Adverse Effect. (iii) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or other Person is
required in connection with the due execution, delivery and performance by
such Guarantor of this Guaranty or any of the other Transaction Documents to
which such Guarantor is a party (other than as expressly provided for in any
of the Transaction Documents). (iv) This Guaranty has been duly executed and
delivered by each Guarantor and is a legal, valid and binding obligation of
such Guarantor, enforceable against such Guarantor in accordance with its
terms, except as may be limited by the Bankruptcy Code or other applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
suretyship or similar laws and equitable principles (regardless of whether
enforcement is sought in equity or at law). (v) There is no pending or, to the
best knowledge of such Guarantor, threatened action, suit or proceeding
against such Guarantor or to which any of the properties of such Guarantor is
subject, before any court or other Governmental Authority or any arbitrator
that (A) if adversely determined, could reasonably be expected to have a
Material Adverse Effect or (B) relates to this Guaranty or any of the other
Transaction Documents to which such Guarantor is a party or any transaction
contemplated hereby or thereby. (vi) Such Guarantor (A) has read and
understands the terms and conditions of the Securities Purchase Agreement and
the other Transaction Documents, and (B) now has and will continue to have
independent means of obtaining information concerning the affairs, financial
condition and business of the Company and the other Transaction Parties, and
has no need of, or right to obtain from the Collateral Agent or any
Noteholder, any credit or other information concerning the affairs, financial
condition or business of the Company or the other Transaction Parties. (b)
Each Guarantor covenants and agrees that, until Payment in Full of the
Guaranteed Obligations, it will comply with each of the covenants (except to
the extent applicable only to a public company) which are set forth in Section
4 of the Securities Purchase Agreement as if such Guarantor were a party
thereto. SECTION 7. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, the Collateral Agent and any Noteholder
may, and is hereby authorized to, at any time and from time to time, without
prior notice to the Guarantors (any such notice being expressly waived by each
Guarantor) and to the fullest extent permitted by law, set-off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by the Collateral Agent
or any Noteholder to or for the credit or the account of any Guarantor against
any and all obligations of the Guarantors now or hereafter existing under this
Guaranty or any other Transaction Document, irrespective of whether or not the
Collateral Agent or any Noteholder shall have made any demand under this
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Guaranty or any other Transaction Document and although such obligations may
be contingent or unmatured. The Collateral Agent and each Noteholder agrees to
notify the relevant Guarantor promptly after any such set-off and application
made by the Collateral Agent or such Noteholder, provided that the failure to
give such notice shall not affect the validity of such set-off and
application. The rights of the Collateral Agent or any Noteholder under this
Section 7 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Collateral Agent or such
Noteholder may have under this Guaranty or any other Transaction Document in
law or otherwise. SECTION 8. Limitation on Guaranteed Obligations. (a)
Notwithstanding any provision herein contained to the contrary, each
Guarantor's liability hereunder shall be limited to an amount not to exceed as
of any date of determination the greater of: (i) the amount of all Guaranteed
Obligations, plus interest thereon at the applicable Interest Rate as
specified in the Note; and (ii) the amount which could be claimed by the
Collateral Agent from any Guarantor under this Guaranty without rendering such
claim voidable or avoidable under the Bankruptcy Code or under any applicable
state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or
similar statute or common law after taking into account, among other things,
Guarantor's right of contribution and indemnification. (b) Each Guarantor
agrees that the Guaranteed Obligations may at any time and from time to time
exceed the amount of the liability of such Guarantor hereunder without
impairing the guaranty hereunder or affecting the rights and remedies of the
Collateral Agent or any Noteholder hereunder or under applicable law. (c) No
payment made by the Company, any Guarantor, any other guarantor or any other
Person or received or collected by the Collateral Agent or any other
Noteholder from the Company, any of the Guarantors, any other guarantor or any
other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of
or in payment of the Guaranteed Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment (other than any payment made by such
Guarantor in respect of the Guaranteed Obligations or any payment received or
collected from such Guarantor in respect of the Guaranteed Obligations),
remain liable for the Guaranteed Obligations up to the maximum liability of
such Guarantor hereunder until after all of the Guaranteed Obligations and all
other amounts payable under this Guaranty shall have been Paid in Full.
SECTION 9. Austrian Capital Maintenance Restrictions. (a) The liabilities and
obligations of each Guarantor incorporated in Austria under any of the
Transaction Documents shall be limited so that at no time the assumption or
enforcement of a liability or obligation under any of the Transaction
Documents would be required if this would violate mandatory Austrian capital
maintenance rules
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(Kapitalerhaltungsvorschriften) pursuant to Austrian company law, in
particular sections 82 et seq. of the Austrian Act on Limited Liability
Companies (GmbH-Gesetz) and/or sections 52 et seq. (including, for the
avoidance of doubt and without limitation, section 66a to the extent being
directly or analogously applied) of the Austrian Stock Corporation Act
(Aktiengesetz) (the "Austrian Capital Maintenance Rules"). (b) Should any
liability and/or obligation of a Guarantor incorporated in Austria under the
Transaction Documents violate or contradict Austrian Capital Maintenance Rules
and should therefore be held invalid or unenforceable or should the
assumption, creation or enforcement of such liability and/or obligation expose
any managing director or member of the supervisory board of the Guarantor
incorporated in Austria, if applicable, to personal liability or criminal
responsibility, then such liability and/or obligation shall be limited in
accordance with the Austrian Capital Maintenance Rules and shall be deemed to
be replaced by a liability and/or obligation of a similar nature which is in
compliance with the Austrian Capital Maintenance Rules and which provides the
best possible security interest in favour of the Collateral Agent, on behalf
of the Noteholders. By way of example, should it be held that the security
created under any Transaction Document contradicts the Austrian Capital
Maintenance Rules in relation to any amount of the Guaranteed Obligations, the
security created by the respective Transaction Document shall be reduced to
such an amount of the Guaranteed Obligations which is permitted pursuant to
the Austrian Capital Maintenance Rules. (c) No reduction of the amount
enforceable under any Transaction Document in accordance with the limitations
set out in this Section 9 will prejudice the rights of the Collateral Agent or
the Noteholders under any Transaction Document (subject always to the
operation of the limitations set out in this Section 9 at the time of such
enforcement) until full satisfaction of any guaranteed claims. SECTION 10.
Notices, Etc. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Guaranty must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by email or other electronic
transmission (provided that such sent email is kept on file (whether
electronically or otherwise) by the sending party and the sending party does
not receive an automatically generated message from the recipient's email
server that such email could not be delivered to such recipient); or (iii) one
(1) Business Day after deposit with an nationally recognized overnight courier
service with next day delivery specified, in each case, properly addressed to
the party to receive the same. All notices and other communications provided
for hereunder shall be sent, if to any Guarantor, to the Company's address
and/or email address, or if to the Collateral Agent or any Noteholder, to it
at its respective address and/or email address, each as set forth in Section
9(f) of the Securities Purchase Agreement, but shall at any rate not be sent
to an address, e-mail address or fax number with an Austrian nexus. SECTION
11. Governing Law; Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Guaranty shall be governed by
the internal laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdiction other than the State of New York. Each
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Guarantor hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or under any of the other Transaction Documents or with any
transaction contemplated hereby or thereby, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim, obligation
or defense that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient
forum or that the venue of such suit, action or proceeding is improper. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for such notices to it under Section 9(f)
of the Securities Purchase Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Nothing contained herein shall be
deemed or operate to preclude the Collateral Agent or the Noteholders from
bringing suit or taking other legal action against any Guarantor in any other
jurisdiction to collect on a Guarantor's obligations or to enforce a judgment
or other court ruling in favor of the Collateral Agent or an Noteholder.
SECTION 12. WAIVER OF JURY TRIAL, ETC. EACH GUARANTOR HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR
THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION
DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS GUARANTY, ANY OTHER
TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.
SECTION 13. Taxes. (a) All payments made by any Guarantor hereunder or under
any other Transaction Document shall be made in accordance with the terms of
the respective Transaction Document and shall be made without set-off,
counterclaim, withholding, deduction or other defense. Without limiting the
foregoing, all such payments shall be made free and clear of and without
deduction or withholding for any present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on the net income of the Collateral Agent or any
Noteholder by the jurisdiction in which the Collateral Agent or such
Noteholder is organized or where it has its principal lending office (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities, collectively or individually, "Taxes"). If any Guarantor shall be
required to deduct or to withhold any Taxes from or in respect of any amount
payable hereunder or under any other Transaction Document: (i) the amount so
payable shall be increased to the extent necessary so that after making all
required deductions and withholdings (including Taxes on amounts payable to
the Collateral Agent or any Noteholder pursuant to this sentence) the
Collateral Agent or each Noteholder receives an amount equal to the sum it
would have received had no such deduction or withholding been made, (ii) such
Guarantor shall make such deduction or withholding,
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(iii) such Guarantor shall pay the full amount deducted or withheld to the
relevant Governmental Authority in accordance with applicable law, and (iv) as
promptly as possible thereafter, such Guarantor shall send the Collateral
Agent or each Noteholder an official receipt (or, if an official receipt is
not available, such other documentation as shall be satisfactory to the
Collateral Agent, as the case may be) showing payment. In addition, each
Guarantor agrees to pay any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies that arise from
any payment made hereunder or from the execution, delivery, registration or
enforcement of, or otherwise with respect to, this Guaranty or any other
Transaction Document (collectively, "Other Taxes"). (b) Each Guarantor hereby
indemnifies and agrees to hold each Indemnified Party harmless from and
against Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
13) paid by any Indemnified Party as a result of any payment made hereunder or
from the execution, delivery, registration or enforcement of, or otherwise
with respect to, this Guaranty or any other Transaction Document, and any
liability (including penalties, interest and expenses for nonpayment, late
payment or otherwise) arising therefrom or with respect thereto, whether or
not such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be paid within thirty (30) days from the date on which
the Collateral Agent or such Noteholder makes written demand therefor, which
demand shall identify the nature and amount of such Taxes or Other Taxes. (c)
If any Guarantor fails to perform any of its obligations under this Section
13, such Guarantor shall indemnify the Collateral Agent and each Noteholder
for any taxes, interest or penalties that may become payable as a result of
any such failure. The obligations of the Guarantors under this Section 13
shall survive the termination of this Guaranty and the payment of the
Guaranteed Obligations and all other amounts payable hereunder. SECTION 14.
Right of Contribution. (a) Each Guarantor agrees that to the extent that any
Guarantor shall have paid more than its proportionate share of any payment
made hereunder in respect of any Guaranteed Obligations of any other
Guarantor, such Guarantor shall be entitled to seek and receive contribution
from and against any other Guarantor which has not paid its proportionate
share of such payment. (b) Each Guarantor's right of contribution under this
Section 14 shall be subject to the terms and conditions of Section 5. The
provisions of this Section 14 shall in no respect limit the obligations and
liabilities of the Company or any other Guarantor to the Collateral Agent and
the Noteholders, and each Guarantor shall remain jointly and severally liable
to the Collateral Agent and the Noteholders for the full amount of the
Guaranteed Obligations. Each Guarantor agrees to contribute, to the maximum
extent permitted by law, such amounts to each other Guarantor so as to
maximize the aggregate amount paid to the Noteholders under or in respect of
the Transaction Documents.
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SECTION 15. Indemnification. (a) Without limitation of any other obligations
of any Guarantor or remedies of the Collateral Agent or the Noteholders under
this Guaranty or applicable law, each Guarantor shall, to the fullest extent
permitted by law, indemnify, defend and save and hold harmless the Collateral
Agent and each other Indemnitee (as defined in the Securities Purchase
Agreement) to the same extent and subject to the same terms that the Company
has agreed to indemnify the Indemnities under Section 9(k) of the Securities
Purchase Agreement, which Section 9(k) is hereby incorporated by reference,
mutatis mutandis. (b) Each Guarantor hereby also agrees that none of the
Indemnified Parties shall have any liability (whether direct or indirect, in
contract, tort or otherwise) or any fiduciary duty or obligation to any of the
Guarantors or any of their respective affiliates or any of their respective
officers, directors, employees, agents and advisors, and each Guarantor hereby
agrees not to assert any claim against any Indemnified Party on any theory of
liability, for special, indirect, consequential, incidental or punitive
damages arising out of or otherwise relating to the this Guaranty, the other
Transaction Documents or any of the transactions contemplated hereby and
thereby. SECTION 16. Miscellaneous. (a) Each Guarantor will make each payment
hereunder in lawful money of the United States of America and in immediately
available funds to the Collateral Agent or each Noteholder, at such address
specified by the Collateral Agent or such Noteholder from time to time by
notice to the Guarantors. (b) No amendment or waiver of any provision of this
Guaranty and no consent to any departure by any Guarantor therefrom shall in
any event be effective unless the same shall be in writing and signed by each
Guarantor, the Collateral Agent and each Noteholder, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. (c) No failure on the part of the Collateral Agent or
any Noteholder to exercise, and no delay in exercising, any right or remedy
hereunder or under any other Transaction Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right hereunder or
under any Transaction Document preclude any other or further exercise thereof
or the exercise of any other right or remedy. The rights and remedies of the
Collateral Agent and the Noteholders provided herein and in the other
Transaction Documents are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law. The rights and remedies of the
Collateral Agent and the Noteholders under any Transaction Document against
any party thereto are not conditional or contingent on any attempt by the
Collateral Agent or any Noteholder to exercise any of their respective rights
or remedies under any other Transaction Document against such party or against
any other Person. (d) Any provision of this Guaranty that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
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(e) For so long as any Notes remain outstanding, upon any entity becoming a
direct, or indirect, Subsidiary of the Company, the Company shall cause each
such Subsidiary to become party to the Guaranty by executing a joinder to the
Guaranty reasonably satisfactory in form and substance to the Required
Holders. (f) This Guaranty and the other Transaction Documents reflect the
entire understanding of the transaction contemplated hereby and shall not be
contradicted or qualified by any other agreement, oral or written, entered
into before the date hereof. (g) Section headings herein are included for
convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose. SECTION 17. Currency Indemnity. If, for the purpose of
obtaining or enforcing judgment against Guarantor in any court in any
jurisdiction, it becomes necessary to convert into any other currency (such
other currency being hereinafter in this Section 17 referred to as the
"Judgment Currency") an amount due under this Guaranty in any currency (the
"Obligation Currency") other than the Judgment Currency, the conversion shall
be made at the rate of exchange prevailing on the Business Day immediately
preceding the date on which the judgment is given (such date being hereinafter
in this Section 17 referred to as the "Judgment Conversion Date"). If, in the
case of any proceeding in the court of any jurisdiction referred to in the
preceding paragraph, there is a change in the rate of exchange prevailing
between the Judgment Conversion Date and the date of actual payment of the
amount due in immediately available funds, the Guarantors shall pay such
additional amount (if any, but in any event not a lesser amount) as may be
necessary to ensure that the amount actually received in the Judgment
Currency, when converted at the rate of exchange prevailing on the date of
payment, will produce the amount of the Obligation Currency which could have
been purchased with the amount of the Judgment Currency stipulated in the
judgment or judicial order at the rate of exchange prevailing on the Judgment
Conversion Date. If the amount of the Judgment Currency actually paid is
greater than the sum originally due to the Collateral Agent or any Noteholder
in the Obligation Currency, the Collateral Agent or such Noteholder agrees to
return the amount of any excess to the Company (or to any other Person who may
be entitled thereto under applicable law). Any amount due from the Guarantors
under this Section 17 shall be due as a separate debt and shall not be
affected by judgment being obtained for any other amounts due under or in
respect of this Guaranty. SECTION 18. Joinder of Additional Guarantors. Any
Subsidiary of the Company may become a Guarantor under this Guaranty by
executing and delivering to the Collateral Agent a joinder agreement in
substantially the form attached hereto as Exhibit A. [REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed by
its respective duly authorized officer, as of the date first above written.
GUARANTORS: FISKER INC. By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta
Gupta-Fisker Title: Chief Financial Officer and Chief Operating Officer FISKER
GROUP INC. By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title:
Chief Financial Officer and Chief Operating Officer FISKER GMBH By: /s/ Dr.
Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title: Director PLATINUM IPR
LLC By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title:
Authorized Officer TERRA ENERGY INC. By: /s/ Dr. Geeta Gupta-Fisker Name: Dr.
Geeta Gupta-Fisker Title: Chief Financial Officer and Chief Operating Officer
FISKER TN LLC By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker
Title: President
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BLUE CURRENT HOLDING LLC By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta
Gupta-Fisker Title: President ACCEPTED BY: CVI INVESTMENTS, INC., as
Collateral Agent C/O Heights Capital Management, Inc., its authorized agent
Name: Martin Kobinger Title: President
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EXHIBIT A FORM OF JOINDER AGREEMENT
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Execution Version THIS DOCUMENT WAS EXECUTED OUTSIDE OF AUSTRIA. THE TAKING OF
THIS DOCUMENT OR ANY CERTIFIED COPY OF IT OR ANY DOCUMENT WHICH CONSTITUTES
SUBSTITUTE DOCUMENTATION FOR IT, OR ANY DOCUMENT WHICH INCLUDES WRITTEN
CONFIRMATIONS OR REFERENCES TO IT, INTO AUSTRIA AS WELL AS PRINTING OUT ANY E-
MAIL COMMUNICATION WHICH REFERS TO THIS DOCUMENT IN AUSTRIA OR SENDING ANY
E-MAIL COMMUNICATION TO WHICH A PDF SCAN OF THIS DOCUMENT IS ATTACHED TO AN
AUSTRIAN ADDRESSEE OR SENDING ANY E-MAIL COMMUNICATION CARRYING AN ELECTRONIC
OR DIGITAL SIGNATURE WHICH REFERS TO ANY TRANSACTION DOCUMENT TO AN AUSTRIAN
ADDRESSEE MAY CAUSE THE IMPOSITION OF AUSTRIAN STAMP DUTY. ACCORDINGLY, KEEP
THE ORIGINAL DOCUMENT AS WELL AS ALL CERTIFIED COPIES THEREOF AND WRITTEN AND
SIGNED REFERENCES TO IT OUTSIDE OF AUSTRIA AND AVOID PRINTING OUT ANY E-MAIL
COMMUNICATION WHICH REFERS TO ANY TRANSACTION DOCUMENT IN AUSTRIA OR SENDING
ANY E-MAIL COMMUNICATION TO WHICH A PDF SCAN OF THIS DOCUMENT IS ATTACHED TO
AN AUSTRIAN ADDRESSEE OR SENDING ANY E-MAIL COMMUNICATION CARRYING AN
ELECTRONIC OR DIGITAL SIGNATURE WHICH REFERS TO THIS DOCUMENT TO AN AUSTRIAN
ADDRESSEE. AMENDED AND RESTATED SECURITY AND PLEDGE AGREEMENT AMENDED AND
RESTATED SECURITY AND PLEDGE AGREEMENT, dated as of December 28, 2023 (this
"Agreement"), made by Fisker Inc., a company organized under the laws of
Delaware, with offices located at 1888 Rosecrans Avenue, Manhattan Beach,
California 90266 (the "Company"), and each of the undersigned Subsidiaries (as
defined below) of the Company from time to time, if any (each a "Grantor" and
together with the Company, collectively, the "Grantors"), in favor of CVI
Investment, Inc. with offices located at c/o Heights Capital Management, 101
California Street, Suite 3250, San Francisco, CA 94111, in its capacity as
collateral agent (together with its successors and assignees, in such
capacity, the "Collateral Agent") for the Noteholders (as defined below). W I
T N E S S E T H: WHEREAS, the Company is party to that certain Securities
Purchase Agreement, dated as of July 10, 2023 (as amended, modified,
supplemented, extended, renewed, restated or replaced from time to time in
accordance with the terms thereof, the "Securities Purchase Agreement"), by
and among the Company and each party listed as an "Investor" on the Schedule
of Investors attached thereto (each an "Investor" and collectively, the
"Investors"), pursuant to which the Company has sold, and may in the future be
required to sell, to the Investors, and the Investors have purchased, and may
in the future exercise their right to purchase, the "Notes" issued pursuant
thereto (as such Notes may be amended, modified, supplemented, extended,
renewed, restated or replaced from time to time in accordance with the terms
thereof, collectively, the "Notes"); WHEREAS, the Company is party to that
Indenture, dated as of July 11, 2023, by and between the Company and
Wilmington Savings Fund Society, FSB, as trustee (as amended, modified,
supplemented, extended, renewed, restated or replaced from time to time in
accordance with the terms thereof, the "Indenture"), providing for the
issuance from time to time of Securities (as defined in the Indenture) by the
Company; WHEREAS, the Grantors, other than the Company, (each a "Guarantor"
and collectively, the "Guarantors") have executed and delivered that certain
Guaranty, dated as of the date hereof (as amended, modified, supplemented,
extended, renewed, restated or replaced from time to time in accordance with
the terms thereof, the "Guaranty") with respect to the Company's Obligations
(as defined below);
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WHEREAS, under the terms of the Third Supplemental Indenture, the Grantors
have executed and delivered to the Collateral Agent that certain Pledge
Agreement, dated as of November 22, 2023 (as heretofore amended, the "Pledge
Agreement"), providing for the grant to the Collateral Agent, for the ratable
benefit of the Noteholders, of a security interest in substantially all
personal property of each Grantor (excluding certain Excluded Property) to
secure all of the Company's obligations under the Transaction Documents;
WHEREAS, the Grantors are Affiliates that are part of a common enterprise such
that each Grantor will derive substantial direct and indirect financial and
other benefits from the consummation of the transactions contemplated under
the Transaction Documents and, accordingly, the consummation of such
transactions are in the best interests of each Grantor; and WHEREAS, the
parties now desire to amend and restate in its entirety the Pledge Agreement
as set forth in this Agreement; NOW, THEREFORE, in consideration of the
premises and the agreements herein, each Grantor agrees with the Collateral
Agent, for the ratable benefit of the Collateral Agent and the Noteholders, as
follows: SECTION 1. Restatement; Foreign Currency Amounts; Definitions. (a)
This Agreement amends and restates in its entirety the Pledge Agreement, it
being understood that it is the intent of the parties hereto that this
Agreement does not constitute a novation of rights, obligations and
liabilities of the respective parties existing under the Pledge Agreement and
such rights, obligations and liabilities shall continue and remain
outstanding, and that this Agreement amends, restates and replaces in its
entirety the Pledge Agreement. (b) Amounts expressed herein in dollars or $
shall mean, with respect to any amounts denominated in a currency other than
United States dollars, the equivalent of such dollar amount in such other
currency, as reasonably determined by the Company using a widely available
foreign exchange rate. (c) All terms used in this Agreement and the recitals
hereto which are defined in the Securities Purchase Agreement, the Notes or in
the Code, and which are not otherwise defined herein, shall have the same
meanings herein as set forth therein; provided that terms used herein which
are defined in the Code on the date hereof shall continue to have the same
meaning notwithstanding any replacement or amendment of the Code except as the
Collateral Agent may otherwise determine in its sole and absolute discretion.
(d) Without limiting the generality of, and subject to the proviso at the end
of, Section 1(c), the following terms shall have the respective meanings
provided for in the Code: "Accounts", "Account Debtor", "Cash Proceeds",
"Certificate of Title", "Chattel Paper", "Commercial Tort Claim", "Commodity
Account", "Commodity Contracts", "Deposit Account", "Documents", "Electronic
Chattel Paper", "Equipment", "Financial Asset", "Fixtures", "General
Intangibles", "Goods", "Instruments", "Inventory", "Investment Property",
"Letter-of-Credit Rights", "Noncash Proceeds", "Payment Intangibles",
"Proceeds", "Promissory Notes", "Security Entitlement", "Security", "Record",
"Securities Account", "Software", "Supporting Obligations" and "Uncertificated
Securities".
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(e) As used in this Agreement, the following terms shall have the respective
meanings indicated below, such meanings to be applicable equally to both the
singular and plural forms of such terms: "Bankruptcy Code" means Chapter 11 of
Title 11 of the United States Code, 11 U.S.C (s)(s) 101 et seq. (or other
applicable bankruptcy, insolvency or similar laws). "Bankruptcy Event of
Default" shall have the meaning set forth in the Note. "Business Day" means
any day other than Saturday, Sunday or other day on which commercial banks in
The City of New York are authorized or required by law to remain closed;
provided, however, for clarification, commercial banks shall not be deemed to
be authorized or required by law to remain closed due to "stay at home",
"shelter-in-place", "non-essential employee" or any other similar orders or
restrictions or the closure of any physical branch locations at the direction
of any Governmental Authority so long as the electronic funds transfer systems
(including for wire transfers) of commercial banks in The City of New York
generally are open for use by customers on such day. "Capital Stock" means (i)
with respect to any Person that is a corporation, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock (including, without limitation, any
warrants, options, rights or other securities exercisable or convertible into
equity interests or securities of such Person), and (ii) with respect to any
Person that is not an individual or a corporation, any and all partnership,
membership, trust or other equity interests of such Person. "Code" means
Articles 8 or 9 of the Uniform Commercial Code as in effect from time to time
in the State of New York; provided that, if perfection or the effect of
perfection or non-perfection or the priority of any security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, "Code" means the Uniform
Commercial Code as in effect from time to time in such other jurisdiction for
purposes of the provisions hereof relating to such perfection, effect of
perfection or non-perfection or priority. "Collateral" shall have the meaning
set forth in Section 3(a) of this Agreement. "Collateral Agent" shall have the
meaning set forth in the preamble hereto. "Collateral Reporting Date" means
the last Business Day of each January, March, May, July, September and
November, commencing January 31, 2024. "Company" shall have the meaning set
forth in the preamble hereto. "Controlled Account" means any Pledged Account
that is subject to a Controlled Account Agreement.
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"Controlled Account Agreement" means (a) in the case of any Pledged Account
maintained at a financial institution in the United States, a deposit account
control agreement or securities account control agreement with respect to such
Pledged Account, pursuant to which the Collateral Agent is granted control
over such Pledged Account in a manner that perfects its security interest in
such Pledged Account under the Code or (b) in the case of any other Pledged
Account maintained at a financial institution outside of the United States, an
agreement with respect to such Pledged Account that is necessary under the
laws of the jurisdiction where such Pledged Account is maintained to perfect
the Collateral Agent's security interest in such Pledged Account and to permit
the Collateral Agent to control the disposition of funds or other assets
deposited in or credited to such Pledged Account at such time that an Event of
Default has occurred and is continuing, in each case in form and substance
reasonably satisfactory to the Collateral Agent, as the same may be amended,
modified, supplemented, extended, renewed, restated or replaced from time to
time. "Controlled Account Bank" shall have the meaning set forth in Section
6(i). "Copyright Licenses" means all licenses, contracts or other agreements,
whether written or oral, naming any Grantor as licensee or licensor and
providing for the grant of any right to use or sell any works covered by any
Copyright. "Copyrights" means all domestic and foreign copyrights, whether
registered or not, including, without limitation, all copyright rights
throughout the universe (whether now or hereafter arising) in any and all
media (whether now or hereafter developed), in and to all original works of
authorship fixed in any tangible medium of expression, acquired or used by any
Grantor, all applications, registrations and recordings thereof (including,
without limitation, the applications, registrations and recordings in the
United States Copyright Office or in any similar office or agency of any other
country described in Schedule II, as updated by the Grantors from time to
time), and all reissues, divisions, continuations, continuations in part and
extensions or renewals thereof. "Domestic Subsidiary" means any Subsidiary
other than a Foreign Subsidiary. "Enforcement Restrictions" shall have the
meaning set forth in Section 5(i). "Event of Default" shall have the meaning
set forth in Section 4(a) of the Notes. "Excluded Accounts" means (a) any
deposit accounts or securities accounts that are maintained by any Grantor
exclusively for one or more of the purposes described in the following
clauses: (i) disbursements and payments for payroll, healthcare and other
employee wage and benefit accounts in the ordinary course of business, (ii)
tax accounts related to Taxes required to be collected, remitted or withheld
(including, federal and state withholding taxes) (with respect to clauses
(a)(i) and (a)(ii), the aggregate balance in such accounts shall not exceed
the total amount estimated by the Grantors in good faith to be payable in the
following thirty (30) days from such accounts), (iii) fiduciary, trust or
escrow accounts held for another Person (other than a Grantor or Affiliate) in
the ordinary course of business; (iv) accounts holding deposits made by
customers to secure orders placed with any Grantor pursuant to a written
agreement; (v) accounts holding cash or cash equivalents required to be
restricted in favor of any of the Company's financing partners pending the
perfection of such financing partners' liens on vehicles financed for the
benefit of third party purchasers by such financing partners; and (vi)
accounts maintained to satisfy minimum capital requirements imposed by
Governmental Authorities in countries other than the United States only to the
extent and for so long as such requirement is in effect and (b) deposit
accounts
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or securities accounts holding Cash or cash equivalents pledged to secure or
that are otherwise restricted to support reimbursement obligations of a
Grantor with respect to letters of credit, bank guaranties, surety bonds and
similar instruments. "Excluded Property" means (a) any governmental licenses
or state or local franchises, charters and authorizations to the extent the
grant of a security interest is prohibited or restricted thereby (except to
the extent such prohibition or restriction is ineffective under the Code or
other applicable law) other than proceeds and receivables thereof the
assignment of which is expressly deemed effective under the Code or other
applicable law notwithstanding such prohibition; (b) any property or assets as
to which pledges thereof or security interests therein are prohibited or
restricted by applicable law (including any requirement to obtain the consent
of any (x) Governmental Authority or (y) similar regulatory third party, in
each case, except to the extent such consent has been obtained) after giving
effect to the applicable anti-assignment provisions of the Code and other
applicable law (provided that such property shall be Excluded Property only to
the extent and for so long as such prohibition is in effect); (c) any lease,
license or other contract or agreement or any property or assets subject to an
agreement binding on and relating to such property at the time of acquisition
thereof (and not entered into in contemplation of such acquisition), to the
extent that a grant of a Lien therein would violate or invalidate, such lease,
license or other contract or agreement or create a right of termination or
right of acceleration in favor of any party (other than the Company or any of
its Subsidiaries) thereto or otherwise require consent (other than the Company
or any of its Subsidiaries) thereunder (after giving effect to the applicable
anti-assignment provisions of the Code or other applicable law) other than
proceeds and receivables thereof; (d) any Excluded Accounts; (e) any
intent-to-use trademark application prior to the filing of a "Statement of
Use" or "Amendment to Allege Use" with respect thereto, solely during the
period, if any, in which the grant of a security interest therein may impair
the validity or enforceability of such intent-to-use trademark application
under applicable federal law; (f) any property subject to a purchase money
arrangement or finance lease that is permitted or not otherwise prohibited by
the terms of any Transaction Document to the extent that a grant of a security
interest therein would violate or invalidate such purchase money arrangement
or finance lease or create a right of termination in favor of any other party
thereto (other than the Company or any of its Subsidiaries) after giving
effect to the applicable anti-assignment provisions of the UCC and other
applicable law, other than proceeds and receivables thereof the assignment of
which is expressly deemed effective under the Code or other applicable law
notwithstanding such prohibition; (g) the portion of the voting Capital Stock
of any Foreign Subsidiary (other than a Grantor) in excess of 65% of the
issued and outstanding voting Capital Stock of such Foreign Subsidiary to the
extent that at any time the pledging of more than 65% of the total outstanding
voting Capital Stock of such Foreign Subsidiary would result in a material
adverse tax consequence to the Company and its Subsidiaries, taken as a whole;
and (h) any "margin stock", as such term is defined in Regulation U
promulgated by the Board of Governors of the Federal Reserve System of the
United States of America. Notwithstanding anything to the contrary, "Excluded
Property" shall not include any proceeds, products, substitutions or
replacements of any "Excluded Property" (unless such proceeds, substitutions
or replacements would constitute "Excluded Property"). Immediately upon the
ineffectiveness, lapse or termination of each restriction or condition set
forth in the definition of "Excluded Property" that prevented the grant of a
security interest in any right, interest or other asset that would have, but
for such restriction or condition, constituted Collateral, the Collateral
shall include, and the relevant Grantor shall be deemed to have automatically
granted a security interest in, such previously restricted or conditioned
right, interest or other asset, as the case may be, as if such restriction or
condition had never been in effect.
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"Excluded Subsidiary" means (a) as of the date of this Agreement, each Foreign
Subsidiary listed on Annex A for so long as such Subsidiary meets the
definition set forth in clause (b) of this definition and (b) subsequent to
the date of this Agreement, any Foreign Subsidiary that (i) has total assets
of less than 5.0% of the total assets of the Company and its Subsidiaries on a
consolidated basis as set forth in most recent balance sheet of the Company
filed with the SEC on form 10-K or 10-Q prior to such date or (ii) generated
less than 5.0% of the total revenue of the Company and its Subsidiaries on a
consolidated basis for the most recent fiscal quarter as set forth in the most
recent income statement of the Company filed with the SEC on form 10-K or 10-Q
prior to such date. "Foreign Collateral Actions" shall have the meaning set
forth in Section 6(m). "Foreign Subsidiary" means any Subsidiary of a Grantor
organized under the laws of a jurisdiction other than the United States, any
of the states thereof, Puerto Rico or the District of Columbia. "Free Cash
Amount" shall have the meaning set forth in Section 6(i)(ii). "Free Cash
Excess Period" shall have the meaning set forth in Section 6(i)(ii). "GAAP"
means U.S. generally accepted accounting principles consistently applied.
"Governmental Authority" means any nation or government, any Federal, state,
city, town, municipality, county, local, foreign or other political
subdivision thereof or thereto and any department, commission, board, bureau,
court, tribunal, instrumentality, agency or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government. "Guaranteed Obligations" shall have
the meaning set forth in Section 2 of the Guaranty. "Guarantor" or
"Guarantors" shall have the meaning set forth in the recitals hereto.
"Guaranty" shall have the meaning set forth in the recitals hereto.
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law or law for the relief of debtors, any proceeding
relating to assignments for the benefit of creditors, formal or informal
moratoria, compositions, or extensions generally with creditors, or any
proceeding seeking reorganization, arrangement, or other similar relief.
"Intellectual Property" means, collectively, all intellectual property rights
and assets, and all rights, interests and protections that are associated
with, similar to, or required for the exercise of, any of the foregoing,
however arising, under the applicable laws of any jurisdiction throughout the
world, whether registered or unregistered, including, without limitation, any
and all: (a) Trademarks; (b) internet domain names, whether or not trademarks,
registered in any top-level domain by any authorized private registrar or
Governmental Authority, web addresses, web pages, websites and related
content; (c) accounts with YouTube, LinkedIn, Twitter, Instagram, Facebook
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and other social media companies and the content found thereon (to the extent
that such accounts and content are transferable pursuant to the terms,
conditions, and policies of each applicable social media platform); (d)
Copyrights; (e) Patents; and (f) business and technical information,
databases, data collections and other confidential and proprietary information
and all rights therein. "Intellectual Property Security Agreement" means the
Intellectual Property Security Agreement required to be delivered pursuant to
Section 6(h)(i) of this Agreement, substantially in the form attached hereto
as Exhibit A. "Investor" or "Investors" shall have the meaning set forth in
the recitals hereto. "Joinder Agreement" means an agreement substantially in
the form attached hereto as Exhibit B. "Licenses" means, collectively, the
Copyright Licenses, the Trademark Licenses and the Patent Licenses. "Lien"
means any mortgage, lien, pledge, charge, security interest, adverse claim or
other encumbrance upon or in any property or assets. "Limited Waiver" means
the Amendment and Waiver Agreement, dated November 22, 2023, by and between
the Company and CVI Investments, Inc. "Non-Grantor Subsidiary" means any
Subsidiary of the Company that is not a Grantor. "Noteholders" means, at any
time, the holders of the Notes at such time. "Notes" shall have the meaning
set forth in the recitals hereto. "Obligations" shall have the meaning set
forth in Section 4 of this Agreement. "Paid in Full" or "Payment in Full"
means the indefeasible payment in full in cash of all of the Obligations.
"Patent Licenses" means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to manufacture, use or sell any invention covered by
any Patent. "Patents" means all domestic and foreign letters patent, design
patents, utility patents, industrial designs, inventions, trade secrets,
ideas, concepts, methods, techniques, processes, proprietary information,
technology, know-how, formulae, rights of publicity and other general
intangibles of like nature, now existing or hereafter acquired (including,
without limitation, all domestic and foreign letters patent, design patents,
utility patents, industrial designs, inventions, trade secrets, ideas,
concepts, methods, techniques, processes, proprietary information, technology,
know-how and formulae), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office, or in any similar office or
agency of the United States or any other country or any political subdivision
thereof described in Schedule II hereto, as updated by the Grantors from time
to time), and all reissues, reexaminations, divisions, continuations,
continuations in part and extensions or renewals thereof.
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"Perfection Requirements" means: (a) the filing under the Code in the
applicable jurisdiction of the financing statements described in Schedule V
hereto, (b) with respect to any Collateral constituting Registered
Intellectual Property, the recording in the United States Patent and Trademark
Office or the United States Copyright Office of the appropriate Intellectual
Property Security Agreement, (c) with respect to all Pledged Accounts (other
than Excluded Accounts), and all cash and other property from time to time
deposited or carried therein or credited thereto, the execution of a
Controlled Account Agreement with the depository, securities intermediary or
commodity intermediary with which the applicable Pledged Accounts are
maintained, as provided in Section 6(i), (d) with respect to any Collateral
constituting Letter-of-Credit Rights, the consent of the issuer of the
applicable letter of credit to the assignment of proceeds of such letter of
credit, (e) with respect to any Collateral constituting uncertificated
securities, the applicable Grantor causing the issuer thereof either (i) to
register the Collateral Agent as the registered owner of such securities or
(ii) to agree in an authenticated record with such Grantor and the Collateral
Agent that such issuer will comply with instructions with respect to such
securities originated by the Collateral Agent without further consent of such
Grantor, such authenticated record to be in form and substance reasonably
satisfactory to the Collateral Agent, (f) with respect to any Collateral
constituting certificated securities, the acquisition by the Collateral Agent,
or by another person on behalf of the Collateral Agent, of the security
certificates evidencing such certificated securities, indorsed to such Person
in blank or by an effective indorsement, (g) with respect to any Collateral
constituting Electronic Chattel Paper, the Collateral Agent obtaining
"control" of such Electronic Chattel Paper within the meaning of Section 9-105
of the Code; (h) with respect to any Collateral constituting Documents,
Chattel Paper (other than Electronic Chattel Paper), or Instruments, the
Collateral Agent obtaining possession of such Collateral and (i) with respect
to the assets or Capital Stock of any Foreign Subsidiary, the Foreign
Collateral Actions. "Permitted Liens" shall have the meaning set forth in the
Notes. "Person" means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or other enterprise or entity or Governmental
Authority. "Pledged Accounts" means (a) all of each Grantor's right, title and
interest in all of its Deposit Accounts, Commodity Accounts and Securities
Accounts and all Security Entitlements with respect thereto; and (b) all
right, title and interest of each Non-Grantor Subsidiary in any Deposit
Accounts and Securities Accounts and all Security Entitlements with respect
thereto that have been or will be pledged by such Non-Grantor Subsidiary to
the Collateral Agent to secure the Obligations (including those listed on
Schedule IV attached hereto), but in each case excluding any Excluded
Accounts. "Pledged Collateral" shall have the meaning set forth in Section
2(a). "Pledged Debt" shall have the meaning set forth in Section 2(a).
"Pledged Entity" means, each Person listed from time to time on Schedule IV
hereto as a "Pledged Entity," together with each other Person, any right in or
interest in or to all or a portion of whose Securities or Capital Stock is
acquired or otherwise owned by a Grantor after the date hereof.
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"Pledged Equity" means all of each Grantor's right, title and interest in and
to all of the Capital Stock now or hereafter owned by such Grantor (including,
without limitation, those interests listed opposite the name of such Grantor
on Schedule IV, but excluding Financial Assets credited to any Securities
Account and any Security Entitlements with respect thereto), regardless of
class or designation, including all substitutions therefor and replacements
thereof, all proceeds thereof and all rights relating thereto, all
certificates representing such Capital Stock, the right to receive any
certificates representing any of such Capital Stock, all warrants, options,
subscription, share appreciation rights and other rights, contractual or
otherwise, in respect thereof, and the right to receive dividends,
distributions of income, profits, surplus, or other compensation by way of
income or liquidating distributions, in cash or in kind, and cash,
instruments, and other property from time to time received, receivable, or
otherwise distributed in respect of or in addition to, in substitution of, on
account of, or in exchange for any or all of the foregoing; provided, that
"Pledged Equity" shall not include any Excluded Property. "Pledged Operating
Agreements" means all of each Grantor's rights, powers and remedies under the
limited liability company operating agreements of each of the Pledged Entities
that is a limited liability company, as may be amended, modified,
supplemented, extended, renewed, restated or replaced from time to time.
"Pledged Partnership Agreements" means all of each Grantor's rights, powers,
and remedies under the general or limited partnership agreements of each of
the Pledged Entities that is a general or limited partnership, as may be
amended, modified, supplemented, extended, renewed, restated or replaced from
time to time. "Pledged Securities" means any Promissory Notes, stock
certificates, limited liability membership interests or other Securities,
certificates or Instruments now or hereafter included in the Pledged
Collateral, including all Pledged Equity, Pledged Debt and all other
certificates, instruments or other documents representing or evidencing any
Pledged Collateral. "Registered Copyrights" means all Copyrights registered
with or recorded in the United States Copyright Office or in any similar
office or agency of any other country. "Registered Intellectual Property"
means, collectively, the Registered Copyrights, the Registered Patents and the
Registered Trademarks. "Registered Patents" means all Patents registered with
or recorded in the United States Copyright Office or in any similar office or
agency of any other country. "Registered Trademarks" means all Trademarks
registered with or recorded in the United States Copyright Office or in any
similar office or agency of any other country. "Securities Purchase Agreement"
shall have the meaning set forth in the recitals hereto. "Subsidiary" means
any Person in which a Grantor directly or indirectly, (i) owns a majority of
the outstanding Capital Stock of such Person or (ii) controls or operates all
or any part of the business, operations or administration of such Person, and
all of the foregoing, collectively, "Subsidiaries".
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"Taxes" means all present and future taxes, levies, deductions, withholdings,
assessments, fees and other charges imposed by any Governmental Authority,
including any interest applicable thereto. "Trademark Licenses" means all
licenses, contracts or other agreements, whether written or oral, naming any
Grantor as licensor or licensee and providing for the grant of any right
concerning any Trademark, together with any goodwill connected with and
symbolized by any such licenses, contracts or agreements and the right to
prepare for sale or lease and sell or lease any and all Inventory now or
hereafter owned by any Grantor and now or hereafter covered by such licenses,
contracts or agreements. "Trademarks" means all domestic and foreign
trademarks, service marks, collective marks, certification marks, trade names,
business names, d/b/a's, assumed names, Internet domain names, trade styles,
designs, logos and other source or business identifiers and all general
intangibles of like nature, now or hereafter owned, adopted, acquired or used
by any Grantor (including, without limitation, all domestic and foreign
trademarks, service marks, collective marks, certification marks, trade names,
business names, d/b/a's, assumed names, Internet domain names, trade styles,
designs, logos and other source or business identifiers), all applications,
registrations and recordings thereof (including, without limitation, the
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of any other country
described in Schedule II, as updated by the Grantors from time to time), and
all reissues, extensions or renewals thereof, together with all goodwill of
the business symbolized by such marks and all customer lists, formulae and
other Records of any Grantor relating to the distribution of products and
services in connection with which any of such marks are used. "Transaction
Documents" means, collectively, this Agreement, the Notes, the Custodian
Agreements, the Indenture, the Supplemental Indentures, the Irrevocable
Transfer Agent Instructions, the Voting Agreement, the Limited Waiver, the
Guaranty, the Security Documents and each of the other agreements and
instruments entered into or delivered by any of the parties hereto in
connection with the transactions contemplated hereby and thereby including in
connection with any Foreign Collateral Action, as may be amended from time to
time. "Transfer Cut-Off Time" means, on any Business Day, the latest time on
which a transfer of cash or Cash Equivalents may be made by wire, book-entry
transfer, automated clearing house or other electronic means from one
Controlled Account to another Controlled Account may be made in order for such
cash or Cash Equivalents to be shown by the applicable Controlled Account Bank
as available in or credited to the receiving Controlled Account on such
Business Day. SECTION 2. Pledge of Pledged Collateral. (a) As collateral
security for due and punctual payment and performance in full of the
Obligations, as and when due, each Grantor hereby assigns and pledges to the
Collateral Agent, and hereby grants to the Collateral Agent, for the ratable
benefit of the Collateral Agent and the Noteholders, a continuing Lien on and
security interest in all of such Grantor's right, title and interest in, to
and under all of the following, wherever located and whether now or hereafter
existing and whether now owned or hereafter acquired: (i) the Pledged Equity;
(ii) all Promissory Notes, and other Instruments evidencing debt now owned or
at any time hereafter acquired by it (including, without limitation, those
listed opposite the name of such Grantor on Schedule IV, but excluding any
Excluded Property) (the "Pledged Debt"); (iii) subject to Section 2(g) and
2(h), all
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payments of principal or interest, dividends, distributions, cash, Securities,
Instruments and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for or upon the conversion
of, and all other Proceeds received in respect of, the Pledged Equity and the
Pledged Debt; (iv) all rights and privileges of such Grantor with respect to
the Securities and other property referred to in clauses (i), (ii), and (iii)
above; and (v) all Proceeds of any of the foregoing (the items referred to in
clauses (i) through (v) above being collectively referred to as the "Pledged
Collateral"); provided that the Pledged Collateral shall not include any item
referred to in clauses (i) through (v) above if, for so long as and to the
extent such item constitutes Excluded Property. (b) No later than the fifth
(5th) Business Day following (x) the date of this Agreement (in the case of
any Grantor that party to this Agreement on the date hereof) or (y) the date
on which it becomes a party to this Agreement pursuant to Section 6(m) (in the
case of any other Grantor), each Grantor shall deliver or cause to be
delivered to the Collateral Agent any and all Pledged Securities (other than
any Uncertificated Securities, but only for so long as such Securities remain
uncertificated) to the extent such Pledged Securities, in the case of
Promissory Notes and other Instruments evidencing debt, are required to be
delivered pursuant to Section 2(c). Thereafter, whenever such Grantor acquires
any other Pledged Security (other than any Uncertificated Securities, but only
for so long as such Uncertificated Securities remain uncertificated), such
Grantor shall promptly, and in any event within 30 days (or such longer period
as the Collateral Agent may agree to in writing), deliver or cause to be
delivered to the Collateral Agent such Pledged Security as Collateral
hereunder to the extent such Pledged Securities, in the case of Promissory
Notes and Instruments evidencing debt, are required to be delivered pursuant
to Section 2(c). (c) Each Grantor will cause each Promissory Note or
Instrument constituting Collateral with a face amount in excess of $500,000 to
be pledged and delivered to the Collateral Agent (i) no later than the fifth
(5th) Business Day following (x) the date of this Agreement (in the case of
any Grantor that party to this Agreement on the date hereof) or (y) the date
on which it becomes a party to this Agreement pursuant to Section 6(m) (in the
case of any other Grantor), in the case of any such debt existing on such date
or (ii) on the next Collateral Reporting Date that is at least 30 days after
the acquisition thereof, in the case of any such Promissory Note or Instrument
acquired by a Grantor after the date hereof (or after the date such Grantor
becomes party to this Agreement), in each case pursuant to the terms hereof.
(d) Upon delivery to the Collateral Agent, any Pledged Securities required to
be delivered pursuant to Section 2(b) and/or 2(c) shall be accompanied by
undated stock or note powers duly executed by the applicable Grantor in blank
or other instruments of transfer reasonably satisfactory to the Collateral
Agent and by such other instruments and documents as the Collateral Agent may
reasonably request in order to effect the transfer of such Pledged Securities.
Each delivery of Pledged Securities or other Pledged Collateral shall be
accompanied by a schedule describing such Pledged Securities or Pledged
Collateral, as the case may be, which schedule shall be deemed to supplement
Schedule IV and be made a part hereof; provided that failure to attach any
such schedule hereto shall not affect the validity of such pledge of such
Pledged Securities. Each schedule so delivered shall supplement any prior
schedules so delivered. (e) The assignment, pledge, Lien and security interest
granted in Section 2(a) are granted as security only and shall not subject the
Collateral Agent or any Noteholder to, or in any way alter or modify, any
obligation or liability of any Grantor with respect to or arising out of the
Pledged Collateral.
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(f) If an Event of Default shall occur and be continuing and, other than in
the case of a Bankruptcy Event of Default, the Collateral Agent shall have
notified the Borrower in writing of its intent to exercise such rights, (a)
the Collateral Agent, shall have the right (in its sole and absolute
discretion) to cause each of the Pledged Securities to be transferred of
record into the name of the Collateral Agent or into the name of its nominee
(as pledgee or as sub-agent) or the name of the applicable Grantor, endorsed
or assigned in blank or in favor of the Collateral Agent and (b) to the extent
permitted by the documentation governing such Pledged Securities and
applicable law, the Collateral Agent shall have the right to exchange the
certificates representing Pledged Securities for certificates of smaller or
larger denominations for any purpose consistent with this Agreement. Each
Grantor will take any and all actions reasonably requested by the Collateral
Agent to facilitate compliance with this Section 2(f). (g) Unless and until an
Event of Default shall have occurred and be continuing and, other than in the
case of a Bankruptcy Event of Default, the Collateral Agent shall have
notified the Grantors in writing that the rights of the Grantors under this
Section 2(g) are being suspended: (i) Each Grantor shall be entitled to
exercise any and all voting and/or other consensual rights and powers inuring
to an owner of Pledged Collateral or any part thereof for any purpose
consistent with or not otherwise prohibited by the terms of this Agreement and
the other Transaction Documents. (ii) The Collateral Agent shall promptly
execute and deliver to each Grantor, or cause to be executed and delivered to
such Grantor, all such proxies, powers of attorney and other instruments as
such Grantor may reasonably request in writing for the purpose of enabling
such Grantor to exercise the voting and/or consensual rights and powers it is
entitled to exercise pursuant to Section 2(g)(i), in each case as shall be
specified in such request. (iii) Each Grantor shall be entitled to receive and
retain any and all dividends, interest, principal and other distributions paid
on or distributed in respect of the Pledged Collateral, to the extent (and
only to the extent) that such dividends, interest, principal and other
distributions are permitted by, the other Transaction Documents and applicable
laws; provided that any noncash dividends, interest, principal or other
distributions that would constitute Pledged Equity or Pledged Debt, whether
resulting from a subdivision, combination or reclassification of the
outstanding equity interests of the issuer of any Pledged Securities or
received in exchange for Pledged Securities or any part thereof, or in
redemption thereof, or as a result of any merger, consolidation, acquisition
or other exchange of assets to which such issuer may be a party or otherwise,
shall be and become part of the Pledged Collateral, and, if received by any
Grantor, shall be held in trust for the benefit of the Collateral Agent and
shall, to the extent required by Section 2(b) and/or 2(c) be forthwith
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement or documents set forth in Section 2(d) or as otherwise
reasonably requested by the Collateral Agent). So long as no Event of Default
has occurred and is continuing, the Collateral Agent shall promptly deliver to
each Grantor any Pledged Securities in its possession if requested to be
delivered to the issuer thereof in connection with any exchange or redemption
of such Pledged Securities.
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(h) Upon the occurrence and during the continuance of an Event of Default and,
other than in the case of a Bankruptcy Event of Default, after the Collateral
Agent shall have notified the Grantors in writing of the suspension of the
rights of the Grantors under Section 2(g)(iii), all rights of any Grantor to
dividends, interest, principal or other distributions that such Grantor is
authorized to receive pursuant to Section 2(g)(iii) shall cease, and all such
rights shall thereupon become vested in the Collateral Agent, which shall have
the sole and exclusive right and authority to receive and retain such
dividends, interest, principal or other distributions as part of the Pledged
Collateral, subject to Section 2(k) and the last sentence of this Section
2(h). All dividends, interest, principal or other distributions received by
any Grantor contrary to the provisions of Section 2(g) or this Section 2(h)
shall be held in trust for the benefit of the Collateral Agent and shall be
forthwith delivered to the Collateral Agent upon demand in the same form as so
received (with any necessary endorsement reasonably requested by the
Collateral Agent). Any and all money and other property paid over to or
received by the Collateral Agent pursuant to the provisions of Section 2(g)
and/or this Section 2(h) shall be retained by the Collateral Agent in an
account to be established by the Collateral Agent upon receipt of such money
or other property, shall be held as security for the payment and performance
of the Obligations and shall be applied in accordance with the provisions of
Section 8. After all Events of Default have been cured or waived, and the
Grantors have delivered to the Collateral Agent a certificate of an executive
officer to such effect, the Collateral Agent shall promptly repay to each
Grantor (without interest) all dividends, interest, principal or other
distributions that such Grantor would otherwise be permitted to retain
pursuant to the terms of Section 2(g)(iii) in the absence of an Event of
Default and that remain in such account. (i) Upon the occurrence and during
the continuance of an Event of Default and, other than in the case of a
Bankruptcy Event of Default, after the Collateral Agent shall have notified
the Grantors in writing of the suspension of the rights of the Grantors under
Section 2(g)(i), all rights of any Grantor to exercise the voting and
consensual rights and powers it is entitled to exercise pursuant to Section
2(g)(i), and the obligations of the Collateral Agent under Section 2(g)(ii),
shall cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and authority
to exercise such voting and consensual rights and powers subject to Section
2(k) and the last sentence of this Section 2(i); provided that, the Collateral
Agent shall have the right from time to time following and during the
continuance of an Event of Default to permit the Grantors to exercise such
rights. After all Events of Default have been cured or waived, and the
Grantors have delivered to the Collateral Agent a certificate of an executive
officer to such effect, each Grantor shall have the exclusive right to
exercise the voting and/or consensual rights and powers that such Grantor
would otherwise be entitled to exercise pursuant to the terms of Section
2(g)(i), and the obligations of the Collateral Agent under Section 2(g)(ii)
shall be reinstated. (j) Any notice given by the Collateral Agent to the
Grantors under Section 2(f) or Section 2(g) (i) may be given by telephone if
promptly confirmed in writing, (ii) may be given with respect to one or more
of the Grantors at the same or different times and (iii) may suspend the
rights of the Grantors under Section 2(g)(i) or 2(g)(iii) in part without
suspending all such rights (as specified by the Collateral Agent in its sole
and absolute discretion) and without waiving or otherwise affecting the
Collateral Agent's rights to give additional notices from time to time
suspending other rights so long as an Event of Default has occurred and is
continuing.
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(k) Nothing contained in this Agreement shall be construed to make the
Collateral Agent or any Noteholder liable as a member of any limited liability
company or as a partner of any partnership, and neither the Collateral Agent
nor any Noteholder by virtue of this Agreement or otherwise (except as
referred to in the following sentence) shall have any of the duties,
obligations or liabilities of a member of any limited liability company or as
a partner in any partnership. The parties hereto expressly agree that, unless
the Collateral Agent shall become the absolute owner of Pledged Equity
consisting of a limited liability company interest or a partnership interest
pursuant hereto, this Agreement shall not be construed as creating a
partnership or joint venture among the Collateral Agent, any Noteholder, any
Grantor and/or any other Person. SECTION 3. Grant of Security Interest (a) As
collateral security for the due and punctual payment and performance in full
of the Obligations, as and when due, each Grantor hereby pledges and assigns
to the Collateral Agent, and hereby grants to the Collateral Agent, for the
ratable benefit of the Collateral Agent and the Noteholders, a continuing Lien
on and security interest in, all of such Grantor's right, title and interest
in, to and under all personal property and assets of such Grantor, wherever
located and whether now or hereafter existing and whether now owned or
hereafter acquired, of every kind, nature and description, whether tangible or
intangible (together with the Pledged Collateral, the "Collateral"),
including, without limitation, the following: (i) all Accounts; (ii) all
Chattel Paper (whether tangible or Electronic Chattel Paper); (iii) all
Commercial Tort Claims, including, without limitation, those specified on
Schedule VI hereto; (iv) all Documents; (v) all Equipment; (vi) all Fixtures;
(vii) all General Intangibles (including, without limitation, all Payment
Intangibles); (viii) all Goods; (ix) all Instruments; (x) all Inventory; (xi)
all Investment Property (and, regardless of whether classified as Investment
Property under the Code, all Pledged Equity, Pledged Operating Agreements and
Pledged Partnership Agreements); (xii) all Intellectual Property and all
Licenses; (xiii) all Letter-of-Credit Rights;
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(xiv) all Pledged Accounts, all cash and other property from time to time
deposited therein, including without limitation all Financial Assets and all
Security Entitlements with respect thereto and all monies and property in the
possession or under the control of the Collateral Agent or any Noteholder or
any Affiliate, representative, agent or correspondent of the Collateral Agent
or any such Noteholder; (xv) all Supporting Obligations; (xvi) all other
tangible and intangible personal property of each Grantor (whether or not
subject to the Code), including, without limitation, all Deposit Accounts and
other accounts and all cash and all investments therein, all proceeds,
products, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of any Grantor described in the
preceding clauses of this Section 3(a) (including, without limitation, any
proceeds of insurance thereon and all causes of action, claims and warranties
now or hereafter held by each Grantor in respect of any of the items listed
above), and all books, correspondence, files and other Records, including,
without limitation, all tapes, desks, cards, Software, data and computer
programs in the possession or under the control of any Grantor or any other
Person from time to time acting for any Grantor, in each case, to the extent
of such Grantor's rights therein, that at any time evidence or contain
information relating to any of the property described in the preceding clauses
of this Section 3(a) or are otherwise necessary or helpful in the collection
or realization thereof; and (xvii) all Proceeds, including all Cash Proceeds
and Noncash Proceeds, and products of any and all of the foregoing Collateral;
in each case howsoever any Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise). (b)
Notwithstanding anything herein to the contrary, the term "Collateral" shall
not include any Excluded Property. SECTION 4. Security for Obligations. The
Lien and security interest created hereby in the Collateral constitutes
continuing collateral security for all of the following obligations, whether
direct or indirect, absolute or contingent, and whether now existing or
hereafter incurred (collectively, the "Obligations"): (a) (i) the payment by
the Company and each other Grantor, as and when due and payable (by scheduled
maturity, required prepayment, acceleration, demand or otherwise), of all
amounts from time to time owing by it in respect of the Securities Purchase
Agreement, this Agreement, the Notes and the other Transaction Documents, and
(ii) in the case of the Guarantors, the payment by such Guarantors, as and
when due and payable of all Guaranteed Obligations under the Guaranties,
including, without limitation, in both cases, (A) all principal of, interest,
make-whole and other amounts on the Notes (including, without limitation, all
interest, make-whole and other amounts that accrues after the commencement of
any Insolvency Proceeding of any Grantor, whether or not the payment of such
interest is enforceable or is allowable in such Insolvency Proceeding), and
(B) all fees, interest, premiums, penalties, contract causes of action, costs,
commissions, expense reimbursements, indemnifications and all other amounts
due or to become due under this Agreement or any of the Transaction Documents;
and
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(b) the due and punctual performance and observance by each Grantor of all of
its other obligations from time to time existing in respect of any of the
Transaction Documents, including without limitation, with respect to any
conversion or redemption rights of the Noteholders under the Notes. SECTION 5.
Representations and Warranties. Each Grantor represents and warrants as
follows: (a) Schedule I hereto sets forth (i) the exact legal name of each
Grantor, and (ii) the jurisdiction of incorporation, organization or formation
and the organizational identification number (if any) of each Grantor in such
jurisdiction. The information set forth in Schedule I hereto with respect to
such Grantor is true and accurate in all respects. Such Grantor has not
changed its name (or operated under any other name), jurisdiction of
organization or organizational identification number prior to the date of this
Agreement from those set forth in Schedule I hereto except as disclosed in
Schedule I hereto. (b) There is no pending or, to its knowledge, written
notice threatening any action, suit, proceeding or claim affecting any Grantor
before any Governmental Authority or any arbitrator, or any order, judgment or
award issued by any Governmental Authority or arbitrator, in each case, that
may adversely affect the grant by any Grantor, or the perfection, of the Lien
and security interest purported to be created hereby in the Collateral, or the
exercise by the Collateral Agent of any of its rights or remedies hereunder.
(c) All Federal, state and material local tax returns and other material
reports required by applicable law to be filed by any Grantor have been filed,
or extensions have been obtained, and all taxes, assessments and other
governmental charges or levies imposed upon any Grantor or any property of any
Grantor (including, without limitation, all federal income and social security
taxes on employees' wages) that are material in amount and which have become
due and payable on or prior to the date hereof have been paid, except to the
extent contested in good faith by proper proceedings which stay the imposition
of any penalty, fine or Lien resulting from the non-payment thereof and with
respect to which adequate reserves have been set aside for the payment thereof
in accordance with GAAP. (d) All Equipment, Fixtures, Inventory and other
Goods of each Grantor are located at the addresses specified therefor in
Schedule III hereto, excluding (i) Collateral with a book value of less than
$500,000 in the aggregate at any single location, (ii) Equipment that in the
ordinary course of business is in the possession or control of third-party
suppliers (other than the Company or any of its Subsidiaries) of parts or
components to the Company or any of its Subsidiaries, and (iii) assets that
are in transit to (x) any of the locations described on Schedule III, (y) any
location described in clause (ii), or (z) any customer of the Company or any
of its Subsidiaries; provided, that Schedule III shall reflect finished
Inventory located at any warehouses or distribution centers pending delivery
to customers. Each Grantor's principal place of business and chief executive
office, the place where each Grantor keeps its Records concerning the
Collateral and all originals of all Chattel Paper evidencing obligations
greater than $500,000 in the aggregate in which any Grantor has any right,
title or interest are located at the addresses specified therefor in Schedule
III hereto. (e) Set forth in Schedule IV hereto is a complete and accurate
list, as of the date of this Agreement, of (i) all Pledged Debt, specifying
the debtor thereof and the outstanding
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principal amount thereof as of the date of this Agreement, in which any
Grantor has any right, title or interest, (ii) each Deposit Account and
Securities Account of each Grantor and each Pledged Account of each applicable
Non- Grantor Subsidiary, together with the name and country of each
institution at which each such account is maintained, the account number for
each such account, a description of the purpose of each such account and, in
the case of each Deposit Account and Securities Account of a Grantor, whether
such account is an Excluded Account (and, in the case of any such account that
is an Excluded Account, the relevant clause(s) in the definition of "Excluded
Account" that are applicable to such account). Set forth in Schedule II hereto
is a complete and correct list of each trade name used by each Grantor. All of
the Pledged Debt, to the best of the Grantors' knowledge (provided that no
such knowledge qualification applies to Pledged Debt issued by a Grantor or a
Subsidiary), is the legal, valid and binding obligation of the issuer thereof,
enforceable against such issuer in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies. (f) [Reserved] (g) Each Grantor owns and
controls, or otherwise possesses adequate rights to use, all of its
Intellectual Property and Licenses necessary to conduct its business in
substantially the same manner as conducted as of the date hereof. Schedule II
hereto sets forth a true and complete list of all Registered Intellectual
Property owned or used by each Grantor as of the date hereof. To the knowledge
of each Grantor, except as would not have a Material Adverse Effect, all
Intellectual Property of such Grantor is subsisting and in full force and
effect, has not been adjudged invalid or unenforceable, is valid and
enforceable and has not been abandoned in whole or in part. Except as would
not have a Material Adverse Effect (i) to the knowledge of each Grantor, each
Grantor is not now infringing or in conflict with any Patent, Trademark,
Copyright, trade secret or similar rights of others, and (ii) to the knowledge
of each Grantor, no other Person is now infringing or in conflict in any
material respect with any such properties, assets and rights owned or used by
each Grantor. No Grantor has received any written, or the knowledge of the
Grantor, oral notice that it is violating or has violated the Trademarks,
Patents, Copyrights, inventions, trade secrets, proprietary information and
technology, know-how, formulae, rights of publicity or other intellectual
property rights of any third party. (h) Each Grantor is and will be at all
times the sole and exclusive owner of, or will otherwise have rights to, the
Collateral in which such Grantor has granted a Lien and security interest
hereunder free and clear of any Liens, except for (i) Permitted Liens thereon
and (ii) certain Intellectual Property rights of the Company which is jointly
owned by the Company with certain third parties. No effective financing
statement or other instrument similar in effect covering all or any part of
the Collateral is on file in any recording or filing office except such as (i)
may have been filed in favor of the Collateral Agent and/or the Noteholders
relating to this Agreement or the other Transaction Documents, or (ii) are
intended to perfect Permitted Liens disclosed on Schedule VII hereto. (i) The
exercise by the Collateral Agent of any of its rights and remedies hereunder
will not contravene any law or contractual restriction binding on or otherwise
affecting any Grantor or any of its properties other than restrictions arising
under (x) any governmental license or state or local franchise, charter or
authorizations, (y) any law or (y) any contract, in each case, to the extent
described in clauses (a) through (c) of the definition of "Excluded Property"
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(disregarding for purposes of this subsection (i) any anti-assignment or
override provision under the Code or other applicable law) (any such
restrictions, "Enforcement Restrictions") and will not result in or require
the creation of any Lien upon or with respect to any of its properties other
than as granted pursuant to this Agreement. (j) No authorization or approval
or other action by or with, and no notice to or filing with (except as
provided in Section 6(n)), any Governmental Authority or any other Person, is
required under the Code for (i) the grant by each Grantor, or the perfection,
of the Lien and security interest purported to be created hereby in the
Collateral, or (ii) the exercise by the Collateral Agent of any of its rights
and remedies hereunder, except for (x) the filing under the Code in the
applicable jurisdiction of the financing statements described in Schedule V
hereto, (y) the performance of the Perfection Requirements and (z) the waiver
of any applicable Enforcement Restrictions. (k) This Agreement creates in
favor of the Collateral Agent a legal, valid and enforceable Lien on and
security interest in the Collateral, as security for the Obligations. The
performance of the Perfection Requirements results in (and when performed in
accordance with Section 6(n) shall result in) the perfection of such Lien on
and security interest in the Collateral, to the extent that the Code governs
perfection of such Lien and security interest. Such Lien and security interest
is (or in the case of Collateral in which any Grantor obtains any right, title
or interest after the date hereof, will be), subject only to Permitted Liens
and the Perfection Requirements, a first priority, valid, enforceable and
perfected Lien on and security interest in the Collateral, to the extent that
the Code governs the creation and perfection of such Lien and security
interest. (l) As of the date of this Agreement, no Grantor holds any
Commercial Tort Claims with a value in excess of $500,000, or has knowledge of
any pending Commercial Tort Claims with a value in excess of $500,000, except
for the Commercial Tort Claims described in Schedule VI. (m) As of the date of
this Agreement (i) all of the Pledged Equity is presently owned by the
applicable Grantor as set forth in Schedule IV free and clear of all Liens
other than Permitted Liens and, in the case of certificated securities, is
presently represented by the certificates listed on Schedule IV hereto (if
applicable); (ii) there are no existing options, warrants, calls or
commitments of any character whatsoever relating to the Pledged Equity other
than as contemplated and permitted by the Transaction Documents; (iii) each
Grantor is the sole holder of record or the sole beneficial owner of the
Pledged Equity, as applicable; (iv) none of the Pledged Equity has been issued
or transferred in violation of the securities registration, securities
disclosure or similar laws of any jurisdiction to which such issuance or
transfer may be subject; (v) the Pledged Equity constitutes 100% or such other
percentage as set forth on Schedule IV of the issued and outstanding shares of
Capital Stock of the applicable Pledged Entity; (vi) all of the Pledged Equity
has been duly and validly authorized and issued by the issuer thereof and
(vii) in the case of Pledged Equity constituting Capital Stock (other than
Capital Stock consisting of limited liability company interests or partnership
interests which, pursuant to the relevant organizational or formation
documents, cannot be fully paid and non-assessable), is fully paid and
non-assessable. (n) Such Grantor (i) is a corporation, limited liability
company, limited partnership or other legal entity, as applicable, duly
organized, validly existing and in good standing (to the extent that the
concept of good standing exists) under the laws of the jurisdiction
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of its incorporation, organization or formation, (ii) has all requisite
corporate, limited liability company, limited partnership or other legal
entity power and authority to conduct its business as now conducted and as
presently contemplated and to execute and deliver this Agreement and each
other Transaction Document to which such Grantor is a party, and to consummate
the transactions contemplated hereby and thereby and (iii) is duly qualified
to do business and is in good standing (to the extent that the concept of good
standing exists) in each jurisdiction in which the character of the properties
owned or leased by it or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified would not
result in a Material Adverse Effect. (o) The execution, delivery and
performance by each Grantor of this Agreement and each other Transaction
Document to which such Grantor is a party (i) have been duly authorized by all
necessary corporate, limited liability company, limited partnership or other
legal entity action, (ii) do not and will not contravene its charter or
by-laws, limited liability company or operating agreement, certificate of
partnership or partnership agreement, or similar formation and organizational
documents, as applicable, or any applicable law or any contractual restriction
binding on such Grantor or its properties, (iii) do not and will not result in
or require the creation of any Lien (other than pursuant to any Transaction
Document) upon or with respect to any of its assets or properties, and (iv) do
not and will not result in any default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to it or its operations or any of its assets or
properties, except any default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal that would not result in a Material
Adverse Effect. (p) This Agreement has been duly executed and delivered by
each Grantor and is the legal, valid and binding obligation of such Grantor,
enforceable against such Grantor in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, suretyship or other similar laws and equitable
principles (regardless of whether enforcement is sought in equity or at law).
SECTION 6. Covenants as to the Collateral. Until all of the Obligations shall
have been Paid in Full, unless the Collateral Agent shall otherwise consent in
writing (in its sole and absolute discretion): (a) Further Assurances. Each
Grantor will, at its expense, at any time and from time to time, promptly
execute and deliver all further instruments and documents and take all further
action that the Collateral Agent may reasonably request in order to: (i)
perfect and protect the Lien and security interest of the Collateral Agent
created hereby; (ii) enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Collateral, including, without
limitation, the Pledged Accounts; or (iii) otherwise effect the purposes of
this Agreement; provided, however, that unless an Event of Default has
occurred and is continuing, no Grantor shall be required to take any action
under this Section 6(a) to (A) obtain the consent or acknowledgment of any
Person that is not a Subsidiary of the Company or a Controlled Account Bank,
(B) comply with the Federal Assignment of Claims Act, (C) perfect the
Collateral Agent's Lien on any Collateral consisting of Goods covered by a
Certificate of Title (except to the extent perfection can be attained by the
filing of a financing statement under the Code), (D) perfect by possession the
Collateral Agent's Lien on any Collateral consisting of Goods or (E) perfect
or register the pledge of shares of Capital Stock in any Excluded Subsidiary
in accordance with the laws of the applicable foreign jurisdiction.
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(b) Location of Collateral. Each Grantor will keep the Collateral constituting
Equipment, Fixtures, Inventory and other Goods of such Grantor at the
locations specified therefor on Schedule III hereto (as such Schedule III will
be updated in accordance with this Section 6(b)), excluding (i) Collateral
with an aggregate book value of less than $500,000 at any single location,
(ii) Equipment that in the ordinary course of business is in the possession or
control of third-party suppliers (other than the Company or any of its
Subsidiaries) of parts or components to the Company or any of its
Subsidiaries, (iii) assets that are in transit to (x) any of the locations
described on Schedule III (as such Schedule III will be updated in accordance
with this Section 6(b)), (y) any location described in clause (ii), or (z) any
customer of the Company or any of its Subsidiaries; provided that Schedule III
shall reflect the finished Inventory located at any warehouses or distribution
centers pending delivery to customers. On each Collateral Reporting Date, each
Grantor shall deliver to the Collateral Agent an updated Schedule III setting
forth where any Collateral constituting Equipment, Fixtures, Inventory and
other Goods of such Grantor (other than Collateral described in the exclusions
to the immediately preceding sentence) is located as of a date that is no
earlier than five (5) Business Days prior to such Collateral Reporting Date.
(c) Condition of Equipment. Each Grantor will maintain or cause to be
maintained and preserved in good condition, repair and working order, ordinary
wear and tear excepted, the Equipment necessary or useful to its business. (d)
Taxes, Etc. Each Grantor agrees to pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory, except to the extent the validity thereof is being
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non- payment thereof and with respect
to which adequate reserves in accordance with GAAP have been set aside for the
payment thereof. (e) Insurance. (i) Each Grantor will, at its own expense,
maintain insurance (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to
its properties (including all real properties leased or owned by it) and
business, in such amounts and covering such risks, in such form and with
responsible and reputable insurance companies or associations as is required
by any Governmental Authority having jurisdiction with respect thereto or as
is carried generally in accordance with sound business practice by companies
in similar businesses similarly situated and in any event, in amount, adequacy
and scope reasonably satisfactory to the Collateral Agent. (ii) To the extent
requested by the Collateral Agent at any time and from time to time, each such
policy for general liability insurance shall provide for all losses to be paid
on behalf of the Collateral Agent and any Grantor as their respective
interests may appear, and each policy for property damage insurance shall
provide for all losses to be adjusted with, and paid directly to, the
Collateral Agent. In addition to and without limiting the foregoing, to the
extent requested by the Collateral Agent at any time and from time to time,
each such policy shall in addition (A) name the Collateral Agent as an
additional insured party and/or loss payee, as applicable, thereunder (without
any representation or warranty by or obligation upon the Collateral Agent) as
its interests may appear, (B) contain an agreement by the insurer that any
loss thereunder shall be payable to the Collateral Agent on its own account
notwithstanding any action, inaction or breach of representation or warranty
by any Grantor, (C) provide that there shall be no recourse
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against the Collateral Agent for payment of premiums or other amounts with
respect thereto, and (D) provide that at least 30 days' (or 10 days' for
non-payment of premium) prior written notice of cancellation, lapse,
expiration or other adverse change shall be given to the Collateral Agent by
the insurer. Any Grantor will, if so requested by the Collateral Agent,
deliver to the Collateral Agent original or duplicate policies of such
insurance (including certificates demonstrating compliance with this Section
6(e)). Any Grantor will also, at the request of the Collateral Agent, execute
and deliver instruments of assignment of such insurance policies and cause the
respective insurers to acknowledge notice of such assignment. (iii)
Reimbursement under any liability insurance maintained by any Grantor pursuant
to this Section 6(e) may be paid directly to the Person who shall have
incurred liability covered by such insurance. In the case of any loss
exceeding $1,000,000 involving damage to Equipment or Inventory, to the extent
paragraph (iv) of this Section 6(e) is not applicable, any proceeds of
insurance involving such damage shall be paid to the Collateral Agent, and any
Grantor will make or cause to be made the necessary repairs to or replacements
of such Equipment or Inventory, and any proceeds of insurance maintained by
any Grantor pursuant to this Section 6(e) (except as otherwise provided in
paragraph (iv) in this Section 6(e)) shall be paid by the Collateral Agent to
any Grantor as reimbursement for the reasonable costs of such repairs or
replacements. (iv) Notwithstanding anything to the contrary in subsection
6(e)(iii) above, following written notification by the Collateral Agent to the
Grantors during the continuance of an Event of Default, all insurance payments
in respect of each Grantor's properties and business shall be paid to the
Collateral Agent and applied as specified in Section 8(b) hereof. (f)
Provisions Concerning Name, Organization, Location, Accounts and Licenses. (i)
Each Grantor will (A) notify the Collateral Agent no later than ten (10)
Business Days prior to the date of any change in such Grantor's name, identity
or organizational structure, (B) maintain its jurisdiction of incorporation,
organization or formation as set forth in Schedule I hereto, and (C) keep
adequate records concerning the Collateral and permit representatives of the
Collateral Agent during normal business hours on reasonable notice to such
Grantor, to inspect and make abstracts from such records; provided that unless
an Event of Default has occurred and is continuing, the Collateral Agent may
not conduct more than once in any calendar year inspections under this Section
6(f)(i) and under Section 7. (ii) The Collateral Agent shall have the right at
any time following the occurrence and during the continuance of an Event of
Default to notify the Account Debtors or obligors under any Accounts of the
assignment of such Accounts to the Collateral Agent and to direct such Account
Debtors or obligors to make payment of all amounts due or to become due to any
Grantor thereunder directly to the Collateral Agent or its designated agent
and, upon such notification and at the expense of any Grantor and to the
extent permitted by applicable law, to enforce collection of any such Accounts
and to adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as any Grantor might have done. After receipt by
any Grantor of a notice from the Collateral Agent that the Collateral Agent
has notified, intends to notify, or has enforced or intends to enforce any
Grantor's rights against the Account Debtors or obligors under any Accounts as
referred to in the immediately preceding sentence, (A) all amounts and
proceeds (including, without limitation, Instruments) received by any Grantor
in
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respect of the Accounts shall be received in trust for the benefit of the
Collateral Agent hereunder (for the ratable benefit of the Collateral Agent
and the Noteholders), shall be segregated from other funds of any Grantor and
shall be forthwith paid over to the Collateral Agent in the same form as so
received (with any necessary endorsement) to be applied as specified in
Section 8(b) hereof, and (B) no Grantor will adjust, settle or compromise the
amount or payment of any Account or release wholly or partly any Account
Debtor or obligor thereof or allow any credit or discount thereon. In
addition, upon the occurrence and during the continuance of an Event of
Default, the Collateral Agent may (in its sole and absolute discretion) direct
any or all of the banks and financial institutions with which any Grantor
either maintains a Pledged Account or a lockbox or deposits the proceeds of
any Accounts to send immediately to the Collateral Agent by wire transfer (to
such deposit account as the Collateral Agent shall specify, or in such other
manner as the Collateral Agent shall direct) all or a portion of the cash,
investments and other items held by such institution in such Pledged Account.
Any such cash, investments and other items so received by the Collateral Agent
shall be applied as specified in accordance with Section 8(b) hereof. (g)
Other Liens. No Grantor will create, suffer to exist or grant any Lien upon or
with respect to any Collateral other than a Permitted Lien. (h) Intellectual
Property. (i) If applicable, each Grantor shall duly execute and deliver the
applicable Intellectual Property Security Agreement. Subject to the qualifiers
below in this subsection (h)(i), each Grantor (either itself or through
licensees) will, and will cause each licensee thereof to, take all action
necessary to maintain all of the Intellectual Property in full force and
effect, including, without limitation, using the proper statutory notices,
numbers and markings (relating to patent, trademark and copyright rights) and
using the Trademarks on each applicable trademark class of goods in order to
so maintain the Trademarks in full force and free from any claim of
abandonment for non-use, and each Grantor will not (nor permit any licensee
thereof to) do any act or knowingly omit to do any act whereby any
Intellectual Property may become abandoned, cancelled or invalidated;
provided, however, that so long as no Event of Default has occurred and is
continuing, no Grantor shall have an obligation to use or to maintain any
Intellectual Property (A) that each Grantor in its reasonable business
judgment determines is no longer needed for the operation of the business of
each Grantor's business, so long as no Material Adverse Effect will occur (B)
that relates to any product or work, that is no longer necessary or material
and has been, or is in the process of being, discontinued, abandoned or
terminated in the ordinary course of business and consistent with the exercise
of reasonable business judgment, (C) that is being replaced with Intellectual
Property substantially similar to the Intellectual Property that may be
abandoned or otherwise become invalid, so long as the failure to use or
maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such
replacement Intellectual Property is subject to the Lien created by this
Agreement and does not have a material adverse effect on the business of any
Grantor or (D) that is substantially the same as other Intellectual Property
that is in full force, so long the failure to use or maintain such
Intellectual Property does not materially adversely affect the validity of
such replacement Intellectual Property and so long as such other Intellectual
Property is subject to the Lien and security interest created by this
Agreement and does not have a material adverse effect on the business of any
Grantor. Subject to each Grantor's reasonable business judgment, each Grantor
will cause to be taken all necessary steps in any proceeding before the United
States Patent and Trademark Office and the United States Copyright Office or
any similar office or agency in any other country or political subdivision
thereof to maintain each
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registration of the Intellectual Property and application for registration of
Intellectual Property (other than the Intellectual Property described in the
proviso to the immediately preceding sentence), including, without limitation,
filing of renewals, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings and payment of
maintenance fees, filing fees, taxes or other governmental charges or fees. If
any Intellectual Property (other than Intellectual Property described in the
proviso to the second sentence of subsection (i) of this clause (h)) is
infringed, misappropriated, diluted or otherwise violated in any material
respect by a third party that would result in a Material Adverse Effect, each
Grantor shall (x) upon learning of such infringement, misappropriation,
dilution or other violation, promptly notify the Collateral Agent and (y)
where deemed appropriate by each Grantor under the circumstances, promptly
consider whether to sue for infringement, misappropriation, dilution or other
violation, seek injunctive relief where appropriate and recover any and all
damages for such infringement, misappropriation, dilution or other violation,
or take such other actions as such Grantor shall deem appropriate under the
circumstances to protect such Intellectual Property. On each Collateral
Reporting Date, the Company shall furnish to the Collateral Agent an updated
Schedule II hereto that sets forth all Registered Intellectual Property of the
Grantors that has been registered or recorded with the applicable Governmental
Authority as of a date that is no earlier than ten (10) Business Days prior to
such Collateral Reporting Date and shall comply with such Perfection
Requirements required hereunder to subject such Registered Intellectual
Property (other than Excluded Property) to the Lien and security interest
created by this Agreement. Notwithstanding anything herein to the contrary,
upon the occurrence and during the continuance of an Event of Default, no
Grantor may abandon, surrender or cancel or otherwise permit any Intellectual
Property to become abandoned, surrendered, cancelled or invalid without the
prior written consent of the Collateral Agent (in its sole and absolute
discretion), and if any Intellectual Property is infringed, misappropriated,
diluted or otherwise violated in any material respect by a third party, each
Grantor will take such reasonable action, as the Collateral Agent shall deem
appropriate under the circumstances to protect such Intellectual Property.
(ii) Upon request of the Collateral Agent, any Grantor shall execute,
authenticate and deliver any and all assignments, agreements, instruments,
documents and papers as the Collateral Agent may reasonably request to
complete the Perfection Requirements with respect to any Registered
Intellectual Property (other than Excluded Property) of any Grantor, and each
Grantor hereby appoints the Collateral Agent its attorney-in-fact to execute
and/or authenticate and file all such writings for the foregoing purposes, all
acts of such attorney being hereby ratified and confirmed, and such power
(being coupled with an interest) shall be irrevocable until all Obligations
are fully performed and Paid in Full. (i) Pledged Accounts. (i) Each Grantor
shall cause each bank and other financial institution which maintains a
Pledged Account that is not an Excluded Account (each a "Controlled Account
Bank") to execute and deliver to the Collateral Agent a Controlled Account
Agreement with respect to all Pledged Accounts maintained with such Controlled
Account Bank pursuant to which such Controlled Account Bank shall agree, among
other things, with respect to such Pledged Account, that (i) at any time after
any Grantor, the Collateral Agent or any Buyer shall have notified such
Controlled Account Bank that an Event of Default has occurred or is
continuing, such Controlled Account Bank will comply with any and all
instructions originated by the Collateral Agent directing the disposition of
the funds in such Controlled Account without further consent by such Grantor
and (ii) at any time after the Collateral Agent shall have notified such
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Pledged Account Bank that an Event of Default has occurred or is continuing,
Bank shall not comply with any instructions, directions or orders of any form
with respect to such Controlled Accounts other than instructions, directions
or orders originated by the Collateral Agent. (ii) From and after January 19,
2024, if the amount of all unrestricted Cash and cash equivalents of the
Company and its Subsidiaries held in Deposit Accounts and Securities Accounts
that are not Controlled Accounts ("Free Cash Amount") exceeds $60,000,000 (the
"Maximum Free Cash Amount") as of the Transfer Cut-Off Time of each Business
Day in any three (3) consecutive Business Day period (any such period, a "Free
Cash Excess Period"), the Company shall, or shall cause one or more of its
Subsidiaries to, no later than the Transfer Cut-Off Time on the Business Day
immediately following the last Business Day of such Free Cash Excess Period,
(x) transfer to a Controlled Account an amount of Cash and cash equivalents
and/or (y) deliver to the Collateral Agent a Controlled Account Agreement with
respect to one or more Pledged Accounts, duly executed by such Grantor and (if
applicable) the depositary bank or other financial institution at which such
Pledged Account is maintained, so that the Free Cash Amount as of the Transfer
Cut-Off Time of the Business Day immediately following such Free Cash Excess
Period does not exceed the Maximum Free Cash Amount; provided, however, that
in no event shall the Company permit the Free Cash Amount to exceed the
Maximum Free Cash Amount as of the Transfer Cut-Off Time of more than eight
(8) Business Days in any single calendar month. (j) Reserved. (k) Control.
Each Grantor hereby agrees to take any or all action that may be necessary or
that the Collateral Agent may reasonably request in order for the Collateral
Agent to obtain "control" in accordance with Section 8-106 or Section 9-105
through Section 9-107 of the Code, as applicable, with respect Collateral
consisting of (i) Investment Property (ii) Electronic Chattel Paper (other
than any Electronic Chattel Paper evidencing an obligation that does not
exceed $500,000) or (iii) Letter-of-Credit Rights (other than Letter-of-Credit
Rights with respect to any letter of credit with a face amount that does not
exceed $500,000). (l) Inspection and Reporting. Each Grantor shall permit the
Collateral Agent, or any agent or representatives thereof or such attorneys,
accountant or other professionals or other Persons as the Collateral Agent may
designate (at Grantors' sole cost and expense) (x)(i) to examine and make
copies of and abstracts from any Grantor's Records and books of account, (ii)
to visit and inspect its properties, (iii) to verify materials, leases,
Instruments, Accounts, Inventory and other assets of any Grantor from time to
time, and (iv) to conduct audits, physical counts, appraisals, valuations
and/or examinations at the locations of any Grantor and (y) to discuss such
Grantor's affairs, finances and accounts with any of its directors, officers,
managerial employees, attorneys, independent accountants or any of its other
representatives provided that unless an Event of Default has occurred and is
continuing, the Collateral Agent may not conduct more than once in any
calendar year inspections under this Section 7 and under Section 6(f)(i).
Without limiting the foregoing, the Collateral Agent may, at any time that an
Event of Default has occurred and is continuing, in the Collateral Agent's own
name, in the name of a nominee of the Collateral Agent, or in the name of any
Grantor communicate (by mail, telephone, facsimile or otherwise) with the
Account Debtors of such Grantor, parties to contracts with such Grantor and/or
obligors in respect of Instruments or Pledged Debt of such Grantor to verify
with such Persons, to the Collateral Agent's satisfaction, the existence,
amount, terms of, and any other matter relating to, Accounts, Instruments,
Pledged Debt, Chattel Paper, payment intangibles and/or other receivables.
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(m) Future Subsidiaries; Foreign Collateral Actions. If any Grantor hereafter
creates or acquires any Subsidiary (other than an Excluded Subsidiary), or if
any Foreign Subsidiary ceases to satisfy the requirements for an Excluded
Subsidiary, then as soon as commercially practicable (but no later than thirty
(30) days following (1) the creation or acquisition of such Subsidiary or (2)
the date such Foreign Subsidiary ceases to satisfy the requirements for an
Excluded Subsidiary (or such longer period as may be agreed to by the
Collateral Agent)), such Grantor shall (i)(x) if such Subsidiary is a Domestic
Subsidiary, cause such Subsidiary to become a party to this Agreement as an
additional "Grantor" hereunder by execution of a Joinder Agreement or (y) if
such Subsidiary is a Foreign Subsidiary, cause such Subsidiary to execute and
deliver to the Collateral Agent such documents and to take such actions in
such foreign jurisdictions that the Collateral Agent shall reasonably request
to create and perfect in favor of the Collateral Agent a security interest in
the assets of such Subsidiary (other than Excluded Property), (ii) deliver to
the Collateral Agent updated Schedules to this Agreement, as appropriate
(including, without limitation, an updated Schedule IV to reflect the grant by
such Grantor of a Lien on and security interest in all Pledged Debt and
Pledged Equity now or hereafter owned by such Grantor), (iii) cause such
Subsidiary to duly execute and deliver a joinder to the Guaranty in accordance
with Section 18 of the Guaranty, (iv) deliver to the Collateral Agent the
stock certificates representing all of the Capital Stock of such Subsidiary
that is a certificated, along with undated stock powers for each such
certificates, executed in blank (or, if any such shares of Capital Stock are
uncertificated, confirmation and evidence reasonably satisfactory to the
Collateral Agent that the security interest in such uncertificated securities
has been perfected by the Collateral Agent, in accordance with Section
8-106(c) of the Code or any other similar or local or foreign law that may be
applicable), and (v) duly execute and deliver (or cause to be duly executed
and delivered) to the Collateral Agent, in form and substance acceptable to
the Collateral Agent, such opinions of counsel and other documents as the
Collateral Agent shall reasonably request with respect thereto; provided,
however, that no Grantor shall be required to pledge any Excluded Property.
Each Grantor hereby authorizes the Collateral Agent to attach such updated
Schedules to this Agreement and agrees that all Pledged Equity and Pledged
Debt listed on any updated Schedule delivered to the Collateral Agent shall
for all purposes hereunder be considered Collateral. The Grantors (i) agree
that the pledge of the shares of Capital Stock currently owned or acquired by
a Grantor of any Foreign Subsidiary (other than an Excluded Subsidiary) may be
supplemented by one or more separate pledge agreements, deeds of pledge, share
charges, or other similar agreements or instruments, executed and delivered by
the relevant Grantor in favor of the Collateral Agent, which pledge agreements
will provide for the pledge of such shares of Capital Stock in accordance with
the laws of the applicable foreign jurisdiction and (ii) shall cause each
applicable Non-Grantor Subsidiary to execute and deliver Controlled Account
Agreements with respect to the Pledged Accounts held by such Non-Grantor
Subsidiary (the actions that may be taken by the Collateral Agent under this
sentence or under subsection (i)(y) of this Section 6(m), collectively, the
"Foreign Collateral Actions"). (n) Post-Closing Perfection Requirements.
Without limiting any of the Grantors' obligations under this Agreement, the
Grantors shall perform the Perfection Requirements set forth on Annex B no
later than the dates set forth on Annex B. SECTION 7. Additional Provisions
Concerning the Collateral. (a) To the maximum extent permitted by applicable
law, and for the purpose of taking any action that the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Agreement, each
Grantor hereby (i) authorizes the Collateral Agent to execute
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any such agreements, instruments or other documents in such Grantor's name and
to file such agreements, instruments or other documents in such Grantor's name
and in any appropriate filing office to satisfy the Perfection Requirements,
(ii) authorizes the Collateral Agent at any time and from time to time to
file, one or more financing or continuation statements, and amendments
thereto, relating to the Collateral (including, without limitation, any such
financing statements that (A) describe the Collateral as "all assets" or "all
personal property" (or words of similar effect) or that describe or identify
the Collateral by type or in any other manner as the Collateral Agent may
determine regardless of whether any particular asset of such Grantor falls
within the scope of Article 9 of the Code or whether any particular asset of
such Grantor constitutes part of the Collateral, and (B) contain any other
information required by Part 5 of Article 9 of the Code for the sufficiency or
filing office acceptance of any financing statement, continuation statement or
amendment, including, without limitation, whether such Grantor is an
organization, the type of organization and any organizational identification
number issued to such Grantor) and (iii) ratifies such authorization to the
extent that the Collateral Agent has filed any such financing or continuation
statements, or amendments thereto, prior to the date hereof. (b) Each Grantor
hereby irrevocably appoints the Collateral Agent as its attorney-in-fact and
proxy, with full authority in the place and stead of such Grantor and in the
name of such Grantor or otherwise, from time to time in the Collateral Agent's
discretion, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation, (i) to ask, demand, collect,
sue for, recover, compound, receive and give acquittance and receipts for
moneys due and to become due under or in respect of any Collateral, (ii) to
receive, endorse, and collect any drafts or other Instruments, Documents and
Chattel Paper in connection with clause (i) above, (iii) to file any claims or
take any action or institute any action, suit or proceedings which the
Collateral Agent may deem necessary or desirable for the collection of any
Collateral or otherwise to enforce the rights of the Collateral Agent and the
Noteholders with respect to any Collateral, (iv) to execute assignments,
licenses and other documents to enforce the rights of the Collateral Agent and
the Noteholders with respect to any Collateral, and (v) to verify any and all
information with respect to any and all Accounts; provided, however, that the
Collateral Agent may only take the actions described in clauses (i) through
(v) if an Event of Default has occurred and is continuing. This power is
coupled with an interest and is irrevocable until all of the Obligations are
Paid in Full. (c) For the purpose of enabling the Collateral Agent to exercise
rights and remedies hereunder at such time that an Event of Default has
occurred and is continuing, at such time as the Collateral Agent shall be
lawfully entitled to exercise such rights and remedies, and for no other
purpose and at no other time, each Grantor hereby grants to the Collateral
Agent, to the extent assignable, an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to any Grantor)
to use, assign, license or sublicense any Intellectual Property in which such
Grantor now or hereafter has any right, title or interest, wherever the same
may be located, including, without limitation, in such license reasonable
access to all media in which any of the licensed items may be recorded or
stored and to all computer programs used for the compilation or printout
thereof. Notwithstanding anything contained herein to the contrary, but
subject to the provisions of the Securities Purchase Agreement that limit the
right of any Grantor to dispose of its property, and Section 6(g) and Section
6(h) hereof, unless an Event of Default shall have occurred and be continuing,
and, other than in the case of a Bankruptcy Event of Default, the Collateral
Agent shall have notified the Grantors in writing that the rights of the
Grantors under this Section 7(c) are being suspended, any Grantor may exploit,
use, enjoy, protect,
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license, sublicense, assign, sell, dispose of or take other actions with
respect to the Intellectual Property in the ordinary course of its business
and as otherwise expressly permitted by any of the other Transaction
Documents. In furtherance of the foregoing, unless an Event of Default shall
have occurred and be continuing, the Collateral Agent shall from time to time,
upon the request of any Grantor, execute and deliver any instruments,
certificates or other documents, in the form so requested, which such Grantor
shall have certified are appropriate (in such Grantor's judgment) to allow it
to take any action permitted above (including relinquishment of the license
provided pursuant to this clause (c) as to any Intellectual Property).
Further, upon the Payment in Full of all of the Obligations, the Collateral
Agent shall release and reassign to any Grantor all of the Collateral Agent's
right, title and interest in and to the Intellectual Property, and the
Licenses, all without recourse, representation or warranty whatsoever. The
exercise of rights and remedies hereunder by the Collateral Agent shall not
terminate the rights of the holders of any licenses or sublicenses theretofore
granted by each Grantor in accordance with the second sentence of this clause
(c). Each Grantor hereby releases the Collateral Agent from any claims, causes
of action and demands at any time arising out of or with respect to any
actions taken or omitted to be taken by the Collateral Agent under the powers
of attorney granted herein other than actions taken or omitted to be taken
through the Collateral Agent's gross negligence or willful misconduct, as
determined by a final judgment of a court of competent jurisdiction no longer
subject to appeal. (d) If any Grantor fails to perform any agreement or
obligation contained herein, the Collateral Agent may itself perform, or cause
performance of, such agreement or obligation, in the name of such Grantor or
the Collateral Agent, and the expenses of the Collateral Agent incurred in
connection therewith shall be payable by such Grantor pursuant to Section 9
hereof and such obligation shall be secured by the Collateral. (e) The powers
conferred on the Collateral Agent hereunder are solely to protect its interest
in the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Collateral
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. (f) Anything herein to the contrary
notwithstanding (i) each Grantor shall remain liable under the Licenses and
otherwise with respect to any of the Collateral to the extent set forth
therein to perform all of its obligations thereunder to the same extent as if
this Agreement had not been executed, (ii) the exercise by the Collateral
Agent of any of its rights or remedies hereunder shall not release any Grantor
from any of its obligations under the Licenses or otherwise in respect of the
Collateral, and (iii) the Collateral Agent shall not have any obligation or
liability by reason of this Agreement under the Licenses or with respect to
any of the other Collateral, nor shall the Collateral Agent be obligated to
perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
SECTION 8. Remedies Upon Event of Default; Application of Proceeds. If any
Event of Default shall have occurred and be continuing: (a) The Collateral
Agent may exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein, in any other Transaction Document or
otherwise available to it, all of the rights and remedies of a secured party
upon default under the Code (whether or not the Code applies to the affected
Collateral), and also may (i) take absolute
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control of the Collateral, including, without limitation, transfer into the
Collateral Agent's name or into the name of its nominee or nominees (to the
extent the Collateral Agent has not theretofore done so) and thereafter
receive, for the ratable benefit of itself and the Noteholders, all payments
made thereon, give all consents, waivers and ratifications in respect thereof
and otherwise act with respect thereto as though it were the outright owner
thereof, (ii) require each Grantor to, and each Grantor hereby agrees that it
will at its expense and upon request of the Collateral Agent forthwith,
assemble all or part of its respective Collateral as directed by the
Collateral Agent and make it available to the Collateral Agent at a place or
places to be designated by the Collateral Agent that is reasonably convenient
to both parties, and the Collateral Agent may enter into and occupy any
premises owned or leased by any Grantor where the Collateral or any part
thereof is located or assembled for a reasonable period in order to effectuate
the Collateral Agent's rights and remedies hereunder or under law, without
obligation to any Grantor in respect of such occupation, and (iii) without
notice except as specified below and without any obligation to prepare or
process the Collateral for sale, (A) sell the Collateral or any part thereof
in one or more parcels at public or private sale (including, without
limitation, by credit bid), at any of the Collateral Agent's offices or
elsewhere, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as the Collateral Agent may deem commercially
reasonable and/or (B) lease, license or dispose of the Collateral or any part
thereof upon such terms as the Collateral Agent may deem commercially
reasonable. Each Grantor agrees that, to the extent notice of sale or any
other disposition of its respective Collateral shall be required by law, at
least ten (10) days' notice to any Grantor of the time and place of any public
sale or the time after which any private sale or other disposition of its
respective Collateral is to be made shall constitute reasonable notification.
The Collateral Agent shall not be obligated to make any sale or other
disposition of any Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Grantor hereby waives any claims against the Collateral Agent
and the Noteholders arising by reason of the fact that the price at which its
respective Collateral may have been sold at a private sale was less than the
price which might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Collateral Agent accepts the
first offer received and does not offer such Collateral to more than one
offeree, and waives all rights that any Grantor may have to require that all
or any part of such Collateral be marshaled upon any sale (public or private)
thereof. Each Grantor hereby acknowledges that (i) any such sale of its
respective Collateral by the Collateral Agent shall be made without warranty,
(ii) the Collateral Agent may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth in
clauses (i) and (ii) above shall not adversely affect the commercial
reasonableness of any such sale of Collateral. In addition to the foregoing,
(1) upon written notice to any Grantor from the Collateral Agent after and
during the continuance of an Event of Default, such Grantor shall cease any
use of the Intellectual Property or any trademark, patent or copyright similar
thereto for any purpose described in such notice; (2) the Collateral Agent
may, at any time and from time to time after and during the continuance of an
Event of Default, upon 10 days' prior notice to such Grantor, license, whether
general, special or otherwise, and whether on an exclusive or non-exclusive
basis, any of the Intellectual Property, throughout the universe for such term
or terms, on such conditions, and in such manner, as the Collateral Agent
shall in its sole discretion determine; and (3) the Collateral Agent may, at
any time, pursuant to the authority granted in Section 7 hereof or otherwise
(such authority being effective upon the occurrence and during the continuance
of an Event of Default), execute and deliver on behalf of such Grantor, one or
more instruments of assignment of the Intellectual Property (or any
application or registration thereof), in form suitable for filing, recording
or registration in any country.
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(b) Any cash held by the Collateral Agent as Collateral and all Cash Proceeds
received by the Collateral Agent in respect of any sale or disposition of or
collection from, or other realization upon, all or any part of the Collateral
shall be applied as follows (subject to the provisions of the Securities
Purchase Agreement): first, to pay any fees, indemnities or expense
reimbursements then due to the Collateral Agent (including, without
limitation, those described in Section 9 hereof); second, to pay any fees,
indemnities or expense reimbursements then due to the Noteholders, on a pro
rata basis; third to pay interest due under the Notes owing to the
Noteholders, on a pro rata basis; fourth, to pay or prepay principal in
respect of the Notes, whether or not then due, owing to the Noteholders, on a
pro rata basis; fifth, to pay or prepay any other Obligations, whether or not
then due, in such order and manner as the Collateral Agent shall elect,
consistent with the provisions of the Securities Purchase Agreement. Any
surplus of such cash or Cash Proceeds held by the Collateral Agent and
remaining after the full performance and Payment in Full of all of the
Obligations shall be paid over to whomsoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct. (c) In
the event that the proceeds of any such sale, disposition, collection or
realization are insufficient to pay all amounts to which the Collateral Agent
and the Noteholders are legally entitled, each Grantor shall be, jointly and
severally, liable for the deficiency, together with interest thereon at the
highest rate specified in the Notes for interest on overdue principal thereof
or such other rate as shall be fixed by applicable law, together with the
costs of collection and the reasonable fees, costs, expenses and other charges
of any attorneys employed by the Collateral Agent to collect such deficiency.
(d) To the extent that applicable law imposes duties on the Collateral Agent
to exercise rights and remedies in a commercially reasonable manner, each
Grantor acknowledges and agrees that it is commercially reasonable for the
Collateral Agent (i) to fail to incur expenses deemed significant by the
Collateral Agent to prepare Collateral for disposition or otherwise to
transform raw material or work in process into finished goods or other
finished products for disposition, (ii) to fail to obtain third party consents
for access to Collateral to be disposed of, or to obtain or, if not required
by other law, to fail to obtain governmental or third party consents for the
collection or disposition of Collateral to be collected or disposed of, (iii)
to fail to exercise collection remedies against Account Debtors or other
Persons obligated on Collateral or to remove Liens on or any adverse claims
against Collateral, (iv) to exercise collection remedies against Account
Debtors and other Persons obligated on Collateral directly or through the use
of collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as any Grantor, for
expressions of interest in acquiring all or any portion of such Collateral,
(vii) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the Collateral is of a specialized
nature, (viii) to dispose of Collateral by utilizing internet sites that
provide for the auction of assets of the types included in the Collateral or
that have the reasonable capacity of doing so, or that match buyers and
sellers of assets, (ix) to dispose of assets in wholesale rather than retail
markets, (x) to disclaim disposition warranties, such as title, possession or
quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure
the Collateral Agent against risks of loss, collection or disposition of
Collateral or to provide to the Collateral Agent a guaranteed return from the
collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by the Collateral Agent, to obtain the services of brokers,
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investment bankers, consultants, attorneys and other professionals to assist
the Collateral Agent in the collection or disposition of any of the
Collateral. Each Grantor acknowledges that the purpose of this section is to
provide non- exhaustive indications of what actions or omissions by the
Collateral Agent would be commercially reasonable in the Collateral Agent's
exercise of rights and remedies against the Collateral and that other actions
or omissions by the Collateral Agent shall not be deemed commercially
unreasonable solely on account of not being indicated in this section. Without
limitation of the foregoing, nothing contained in this section shall be
construed to grant any rights to any Grantor or to impose any duties on the
Collateral Agent that would not have been granted or imposed by this Agreement
or by applicable law in the absence of this section. (e) The Collateral Agent
shall not be required to marshal any present or future collateral security
(including, but not limited to, this Agreement and the Collateral) for, or
other assurances of payment of, the Obligations or any of them or to resort to
such collateral security or other assurances of payment in any particular
order, and all of the Collateral Agent's rights and remedies hereunder and in
respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights and remedies, however existing
or arising. To the extent that any Grantor lawfully may, each Grantor hereby
agrees that it will not invoke any law relating to the marshaling of
collateral which might cause delay in or impede the enforcement of the
Collateral Agent's rights and remedies under this Agreement or under any other
instrument creating or evidencing any of the Obligations or under which any of
the Obligations is outstanding or by which any of the Obligations is secured
or payment thereof is otherwise assured, and, to the extent that it lawfully
may, each Grantor hereby irrevocably waives the benefits of all such laws. (f)
Notwithstanding anything to the contrary contained in this Agreement or any of
the other Transaction Documents, the Collateral Agent shall not give notice of
exclusive control or any similar notice to any Controlled Account Bank under a
Controlled Account Agreement unless an Event of Default has occurred and is
continuing. SECTION 9. Indemnity; Expenses. (a) Each Grantor, jointly and
severally, agrees to indemnify and hold harmless the Collateral Agent and each
other Indemnitee (as defined in the Securities Purchase Agreement) to the same
extent and subject to the same terms that the Company has agreed to indemnify
the Indemnitees under Section 9(k) of the Securities Purchase Agreement, which
Section 9(k) is hereby incorporated by reference, mutatis mutandis. (b) Each
Grantor agrees, jointly and severally, to pay to the Collateral Agent upon
demand the amount of any and all costs and expenses, including the reasonable
fees, costs, expenses and disbursements of counsel for the Collateral Agent
and of any experts and agents (including, without limitation, any collateral
trustee which may act as agent of the Collateral Agent), which the Collateral
Agent may incur in connection with (i) the preparation, negotiation,
execution, delivery, recordation, administration, amendment, waiver or other
modification or termination of this Agreement, the Guaranty and any other
Transaction Documents or the performance of any Foreign Collateral Action,
(ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any Collateral, (iii) the exercise
or enforcement of any of the rights or remedies of the Collateral Agent
hereunder, or (iv) the failure by any Grantor to perform or observe any of the
provisions hereof.
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SECTION 10. Austrian Capital Maintenance Restrictions. (a) The liabilities and
obligations of each Grantor incorporated in Austria under any of the
Transaction Documents shall be limited so that at no time the assumption or
enforcement of a liability or obligation under any of the Transaction
Documents would be required if this would violate mandatory Austrian capital
maintenance rules (Kapitalerhaltungsvorschriften) pursuant to Austrian company
law, in particular sections 82 et seq. of the Austrian Act on Limited
Liability Companies (GmbH-Gesetz) and/or sections 52 et seq. (including, for
the avoidance of doubt and without limitation, section 66a to the extent being
directly or analogously applied) of the Austrian Stock Corporation Act
(Aktiengesetz) (the "Austrian Capital Maintenance Rules"). (b) Should any
liability and/or obligation of a Grantor incorporated in Austria under the
Transaction Documents violate or contradict Austrian Capital Maintenance Rules
and should therefore be held invalid or unenforceable or should the
assumption, creation or enforcement of such liability and/or obligation expose
any managing director or member of the supervisory board of the Grantor
incorporated in Austria, if applicable, to personal liability or criminal
responsibility, then such liability and/or obligation shall be limited in
accordance with the Austrian Capital Maintenance Rules and shall be deemed to
be replaced by a liability and/or obligation of a similar nature which is in
compliance with the Austrian Capital Maintenance Rules and which provides the
best possible security interest in favour of the Collateral Agent on behalf of
the Noteholders. By way of example, should it be held that the security
created under any Transaction Document contradicts the Austrian Capital
Maintenance Rules in relation to any amount of the Obligations, the security
created by the respective Transaction Document shall be reduced to such an
amount of the Obligations which is permitted pursuant to the Austrian Capital
Maintenance Rules. (c) No reduction of the amount enforceable under any
Transaction Document in accordance with the limitations set out in this
Section 10 will prejudice the rights of the Collateral Agent or the
Noteholders under any Transaction Document (subject always to the operation of
the limitations set out in this Section 10 at the time of such enforcement)
until full satisfaction of any guaranteed claims. SECTION 11. Notices, Etc.
All notices and other communications provided for hereunder shall be in
writing and shall be mailed (by certified mail, first-class postage prepaid
and return receipt requested), telecopied, e- mailed or delivered, if to any
Grantor, to the Company's address, or if to the Collateral Agent or any
Noteholder, to it at its respective address, each as set forth in Section 9(f)
of the Securities Purchase Agreement; or as to any such Person, at such other
address as shall be designated by such Person in a written notice to all other
parties hereto complying as to delivery with the terms of this Section 11. All
such notices and other communications shall be effective (a) if sent by
certified mail, return receipt requested, when received or five Business Days
after deposited in the mails, whichever occurs first, (b) if telecopied or
e-mailed, when transmitted (during normal business hours) and confirmation is
received, and otherwise, the day after the notice or communication was
transmitted and confirmation is received, or (c) if delivered in person, upon
delivery. For the avoidance of doubt, all Foreign Subsidiaries, as Grantors,
hereby appoint the Company as its agent for receipt of service of process and
all notices and other communications in the United States at the address
specified below, but shall at any rate not be sent to an address, e-mail
address or fax number with an Austrian nexus.
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SECTION 12. Miscellaneous. (a) No amendment of any provision of this Agreement
shall be effective unless it is in writing and signed by each Grantor and the
Collateral Agent (and approved by the Required Holders), and no waiver of any
provision of this Agreement, and no consent to any departure by each Grantor
therefrom, shall be effective unless it is in writing and signed by each
Grantor and the Collateral Agent (and approved by the Required Holders), and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No amendment, modification or
waiver of this Agreement shall be effective to the extent that it (1) applies
to fewer than all of the holders of Notes or (2) imposes any obligation or
liability on any holder of Notes without such holder's prior written consent
(which may be granted or withheld in such holder's sole and absolute
discretion). (b) No failure on the part of the Collateral Agent to exercise,
and no delay in exercising, any right or remedy hereunder or under any of the
other Transaction Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right or remedy preclude any other or
further exercise thereof or the exercise of any other right or remedy. The
rights and remedies of the Collateral Agent or any Noteholder provided herein
and in the other Transaction Documents are cumulative and are in addition to,
and not exclusive of, any rights or remedies provided by law. The rights and
remedies of the Collateral Agent or any Noteholder under any of the other
Transaction Documents against any party thereto are not conditional or
contingent on any attempt by such Person to exercise any of its rights or
remedies under any of the other Transaction Documents against such party or
against any other Person, including but not limited to, any Grantor. (c) Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
portions hereof or thereof or affecting the validity or enforceability of such
provision in any other jurisdiction. (d) This Agreement shall create a
continuing Lien on and security interest in the Collateral and shall (i)
remain in full force and effect until the Payment in Full of the Obligations,
and (ii) be binding on each Grantor and all other Persons who become bound as
debtor to this Agreement in accordance with Section 9-203(d) of the Code and
shall inure, together with all rights and remedies of the Collateral Agent and
the Noteholders hereunder, to the ratable benefit of the Collateral Agent and
the Noteholders and their respective permitted successors, transferees and
assigns. Without limiting the generality of clause (ii) of the immediately
preceding sentence, without notice to any Grantor, the Collateral Agent and
the Noteholders may assign or otherwise transfer their rights and obligations
under this Agreement and any of the other Transaction Documents, to any other
Person and such other Person shall thereupon become vested with all of the
benefits in respect thereof granted to the Collateral Agent and the
Noteholders herein or otherwise. Upon any such assignment or transfer, all
references in this Agreement to the Collateral Agent or any such Noteholder
shall mean the assignee of the Collateral Agent or such Noteholder. None of
the rights or obligations of any Grantor hereunder may be assigned, delegated
or otherwise transferred without the prior written consent of the Collateral
Agent in its sole and absolute discretion, and any such assignment, delegation
or transfer without such consent of the Collateral Agent shall be null and
void. (e) Upon the Payment in Full of the Obligations, (i) this Agreement and
the security interests created hereby shall terminate and all rights to the
Collateral shall revert to the respective Grantor that granted such security
interests hereunder, and (ii) the Collateral Agent will,
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upon any Grantor's request and at such Grantor's expense, (A) return to such
Grantor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and (B) execute and
deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination, all without any representation, warranty
or recourse whatsoever. (f) Governing Law; Jurisdiction; Jury Trial. (i) All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any provision or rule of law (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdiction other than the State of New York. (ii) Each
Grantor hereby irrevocably submits to the exclusive jurisdiction of the state
and federal courts sitting in The City of New York, Borough of Manhattan, for
the adjudication of any dispute hereunder or in connection herewith or under
any of the other Transaction Documents or with any transaction contemplated
hereby or thereby, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim, defense or objection that it is not
personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under Section 9(f) of the Securities Purchase
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted
by law. Nothing contained herein shall be deemed or operate to preclude the
Collateral Agent or the Noteholders from bringing suit or taking other legal
action against any Grantor in any other jurisdiction to collect on a Grantor's
obligations or to enforce a judgment or other court ruling in favor of the
Collateral Agent or a Noteholder. (iii) WAIVER OF JURY TRIAL, ETC. EACH
GRANTOR IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER
ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY OR THEREBY. (iv) Each Grantor irrevocably and unconditionally waives
any right it may have to claim or recover in any legal action, suit or
proceeding referred to in this Section any special, exemplary, indirect,
incidental, punitive or consequential damages. (g) Section headings herein are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
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(h) This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together constitute one and
the same Agreement. Delivery of any executed counterpart of a signature page
of this Agreement by pdf, facsimile or other electronic transmission shall be
effective as delivery of a manually executed counterpart of this Agreement.
(i) This Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Obligations is rescinded
or must otherwise be returned by the Collateral Agent, any Noteholder or any
other Person (upon (i) the occurrence of any Insolvency Proceeding of any of
the Company or any Grantor or (ii) otherwise, in all cases as though such
payment had not been made). (j) Upon the execution and delivery to the
Collateral Agent by the Company of an Austrian law share pledge agreement
("Austrian Share Pledge") in favor of the Collateral Agent with respect to
100% of the Capital Stock of Fisker GmbH, an Austrian limited liability
company (the "Austrian Capital Stock"), the Austrian Capital Stock shall be
automatically released from the Lien created by this Agreement so that the
Austrian Share Pledge shall be the controlling document with respect to the
Collateral Agent's lien on the Austrian Capital Stock. (k) The parties hereto
agree that the Collateral Agent shall be the joint and several creditor
(Gesamtglaubiger) (together with the relevant other Noteholders) of each and
every obligation of the Grantors towards that other Noteholder under the
Transaction Documents and that accordingly the Collateral Agent will have its
own and independent right to demand performance by the Grantors of those
obligations in full. SECTION 13. Material Non-Public Information. (a) On or
before 9:30 a.m., New York time, on the date of this Agreement, the Company
shall file a Current Report on Form 8-K describing all the material terms of
the transactions contemplated by the Transaction Documents in the form
required by the 1934 Act and attaching all the material Transaction Documents
(including, without limitation, this Agreement (the "8-K Filing"). From and
after the filing of the 8-K Filing, the Company shall have disclosed all
material, non-public information (if any) provided to any of the Noteholders
by the Company or any of its Subsidiaries or any of their respective officers,
directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective upon the
filing of the 8-K Filing, the Company acknowledges and agrees that any and all
confidentiality or similar obligations under any agreement, whether written or
oral, between the Company, any of its Subsidiaries or any of their respective
officers, directors, affiliates, employees or agents, on the one hand, and any
of the Buyers or any of their affiliates, on the other hand, shall terminate.
(b) Upon receipt or delivery by any Grantor of any notice in accordance with
the terms of this Agreement, unless such Grantor has in good faith determined
that the matters relating to such notice do not constitute material,
non-public information relating to the Grantor or any of its Subsidiaries,
such Grantor shall by the next Business Day (if delivery is made after the
close of the Principal Market on a Business Day or a Saturday or Sunday) or
the same Business Day (if disclosure is made on a Business Day prior to the
opening of the Principal Market) after any such receipt or delivery publicly
disclose such material, non-public information on a Current Report on Form 8-K
or otherwise. In the event that such Grantor believes that a notice contains
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material, non-public information relating to such Grantor or any of its
Subsidiaries, such Grantor so shall indicate to the Collateral Agent and any
applicable Noteholder contemporaneously with delivery of such notice (which
shall before the opening or after the close of the Principal Market), and in
the absence of any such indication, the Collateral Agent and each Noteholder
shall be allowed to presume that all matters relating to such notice do not
constitute material, non-public information relating to such Grantor or its
Subsidiaries. Nothing contained in this Section 13 shall limit any obligations
of any Grantor, or any rights or remedies of the Collateral Agent or any
Noteholder, under Section 4(l) of the Securities Purchase Agreement. SECTION
14. Amendments. (a) Section 4(a) of the Notes (including the form of Note
attached to the Securities Purchase Agreement) is hereby amended to add the
following: "(xvi) any provision of any Transaction Document (including,
without limitation) the Security Documents or the Guaranty shall at any time
for any reason (other than pursuant to the express terms thereof) cease to be
valid and binding on or enforceable against the parties thereto, or the
validity or enforceability thereof shall be contested by the Company or any
Subsidiary, or a proceeding shall be commenced by the Company or any
Subsidiary or any governmental authority having jurisdiction over any of them,
seeking to establish the invalidity or unenforceability thereof, or the
Company or any Subsidiary shall deny in writing that it has any liability or
obligation purported to be created under any Transaction Document (including,
without limitation, the Security Documents and the Guaranty); (xvii) any
Security Document shall for any reason fail or cease to create a separate
valid and perfected and, except to the extent permitted by the terms hereof or
thereof, first priority Lien (as defined in the Securities Purchase Agreement)
on the Collateral (as defined in the Security Documents) in favor of the
Collateral Agent (as defined in the Securities Purchase Agreement) or any
material provision of any Security Document shall at any time for any reason
cease to be valid and binding on or enforceable against the Company or the
validity or enforceability thereof shall be contested by any party thereto, or
a proceeding shall be commenced by the Company or any governmental authority
having jurisdiction over the Company, seeking to establish the invalidity or
unenforceability thereof;" (b) Each of the Notes (including the form of Note
attached to the Securities Purchase Agreement) are hereby amended to add the
following as a new Section 33: "33. SECURITY. This Note and the Other Notes
are secured and guaranteed to the extent and in the manner set forth in the
Transaction Documents (including, without limitation, the Security Agreement,
the other Security Documents and the Guaranty)."
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(c) The last sentence of Section 20 of each of the Notes (including the form
of Note attached to the Securities Purchase Agreement) is hereby amend and
restated as follows: "Terms used in this Note and not otherwise defined
herein, but defined in the other Transaction Documents, shall have the
meanings ascribed to such terms in such other Transaction Documents unless
otherwise consented to in writing by the Holder." (d) The defined term
"Transaction Documents" when used in any other Transaction Document shall have
the meaning set forth in this Agreement. [REMAINDER OF THIS PAGE INTENTIONALLY
LEFT BLANK]
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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written. GRANTORS: FISKER INC. By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta
Gupta-Fisker Title: Chief Financial Officer and Chief Operating Officer FISKER
GROUP INC. By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title:
Chief Financial Officer and Chief Operating Officer FISKER GMBH By: /s/ Dr.
Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title: Director PLATINUM IPR
LLC By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title:
Authorized Officer TERRA ENERGY INC. By: /s/ Dr. Geeta Gupta-Fisker Name: Dr.
Geeta Gupta-Fisker Title: Chief Financial Officer and Chief Operating Officer
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FISKER TN LLC By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker
Title: President BLUE CURRENT HOLDING LLC By: /s/ Dr. Geeta Gupta-Fisker Name:
Dr. Geeta Gupta-Fisker Title: President
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ACCEPTED BY: CVI INVESTMENTS, INC., as Collateral Agent By: /s/ Martin
Kobinger Name: Martin Kobinger Title: President
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SCHEDULE I Grantors
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SCHEDULE II Intellectual Property
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SCHEDULE III Locations of Chief Executive Office, Principal Place of Business
and Books and Records Locations of Equipment, Fixtures, Inventory and Other
Goods Finished Vehicle Locations
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SCHEDULE IV Pledged Equity; Pledged Debt; Pledged Accounts
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SCHEDULE V Financing Statements
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SCHEDULE VI Commercial Tort Claims
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SCHEDULE VII Permitted Liens
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ANNEX A EXCLUDED SUBSIDIARIES
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ANNEX B POST-CLOSING PERFECTION REQUIREMENT
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EXHIBIT A FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
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EXHIBIT B FORM OF JOINDER AGREEMENT
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EXECUTION COPY SECOND AMENDMENT AND WAIVER AGREEMENT This Second Amendment and
Waiver Agreement (this "Agreement") is entered into as of the 21st day of
January, 2024, by and between Fisker Inc., a Delaware corporation (the
"Company"), and the investor signatory hereto (the "Investor"), with reference
to the following facts: A. Prior to the date hereof, pursuant to that
Securities Purchase Agreement, dated as of July 10, 2023, by and between the
Company and the Investor (as amended, modified or waived from time to time,
the "Securities Purchase Agreement"), the Company, among other things, issued
$340,000,000 in aggregate original principal amount of Series A-1 senior
convertible notes due 2025 (the "Series A-1 Notes") and $170,000,000 in
aggregate original principal amount of Series B-1 senior convertible notes due
2025 (the "Series B-1 Notes," and together with the Series A-1 Notes, the
"Existing Notes"). Capitalized terms not defined herein shall have the meaning
set forth in the Securities Purchase Agreement. B. Prior to the date hereof,
the Company failed to timely file its quarterly report on Form 10-Q for the
quarter ended September 30, 2023 (the "September Default"), which September
Default was waived by the Investor for all purposes under the Transaction
Documents (other than with respect to Section 30(nnn) of the Existing Notes)
pursuant to that certain Amendment and Waiver Agreement, dated as of November
22, 2023, between the Company and the Investor (the "Initial Waiver"). C. The
Company desires to obtain a waiver of certain terms and conditions of the
Transaction Documents to facilitate various commercial agreements between the
Company and/or certain of its Subsidiaries, on the one hand, and an automotive
original equipment manufacturer (or equipment or part manufacturer) and/or
certain of its affiliate(s) (collectively, the "OEM"), on the other hand,
relating to, among other things, (a) the development and manufacture of one or
more of the Company's vehicles, platforms and/or technologies, (b) the
licensing by the Company and/or its Subsidiaries to the OEM of one or more of
the Company's platforms and/or technologies and certain Intellectual Property
(as defined under the Security Agreement) and Intellectual Property Rights (as
defined under the Securities Purchase Agreement) relating thereto and (c)
certain other commercial arrangements between the Company and/or certain of
its Subsidiaries, on the one hand, and the OEM, on the other hand
(collectively, the "OEM Commercial Agreements"). NOW, THEREFORE, in
consideration of the foregoing premises and the mutual covenants hereinafter
contained, the parties hereto agree as follows: 1. Limited Waiver. Effective
as of the Effective Time (as defined below): (a) Waiver of Minimum Cash
Balance Requirement. The Investor hereby waives the requirement for the
Company to maintain a minimum cash balance as provided in Section 13(o) of the
Existing Notes. For the avoidance of doubt, as of the Effective Time, Section
13(o) of the Existing Notes shall have no further force or effect.
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(b) Economic Antidilution Waiver Solely with Respect to Strategic Offerings.
The Investor hereby waives, in part, Section 7(a) of the Existing Notes such
that "Excluded Securities" shall be deemed to include (as a new clause (v) in
such definition): "Any shares of Common Stock, warrants or options issued or
issuable in connection with any bona fide strategic or commercial alliances,
acquisitions, mergers, licensing arrangements, and strategic partnerships,
provided, that (x) the primary purpose of such issuance is not to raise
capital as reasonably determined, and (y) the purchaser or acquirer or
recipient of the securities in such issuance solely consists of either (I) the
actual participants in such strategic or commercial alliance, strategic or
commercial licensing arrangement or strategic or commercial partnership, (II)
the actual owners of such assets or securities acquired in such acquisition or
merger or (III) the stockholders, partners, employees, consultants, officers,
directors or members of the foregoing Persons, in each case, which is, itself
or through its subsidiaries, an operating company or an owner of an asset, in
a business synergistic with the business of the Company and shall provide to
the Company additional benefits in addition to the investment of funds, and
(z) the number or amount of securities issued to such Persons by the Company
shall not be disproportionate to each such Person's actual participation in
(or fair market value of the contribution to) such strategic or commercial
alliance or strategic or commercial partnership or ownership of such assets or
securities to be acquired by the Company, as applicable." (c) September
Default Remedies. Upon the timely filing by the Company of its Annual Report
on Form 10-K for the fiscal period ended on December 31, 2023 with the SEC,
(i) the Investor hereby agrees to waive and not exercise any of its remedies
under the Existing Notes due to the September Default and (ii) Section 4(f) of
the Securities Purchase Agreement is hereby amended by replacing "the Company
shall timely file all reports" with "the Company shall timely file all reports
(except, the failure to timely file will be deemed to have been cured on the
date of the timely filing with the SEC of the Company's next required
Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as applicable)".
(d) Waivers and Releases with Respect to OEM Commercial Agreements. Effective
immediately and automatically upon the execution by the applicable parties
thereto of any OEM Commercial Agreement, the Investor hereby irrevocably: (i)
waives and releases the Company and its Subsidiaries from any and all
restrictions and other limitations on, and compliance with any and all
applicable representations and warranties by, the Company and its Subsidiaries
solely with respect to Intellectual Property and Intellectual Property Rights
with respect to any license, transfer, assignment, or other disposition of, or
grant of any right, title or interest with respect to, any such Intellectual
Property and Intellectual Property Rights, solely as required by the
applicable OEM Commercial Agreement (including, solely to the extent required
to satisfy the Company's obligations pursuant to the applicable OEM Commercial
Agreement, as set forth in Sections 9, 13(c), 13(f) and 13(k) of the Existing
Notes, Sections 5(g), 5(h), 6(g) and 6(h) of the Security Agreement and
Section 3(x) of
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the Securities Purchase Agreement (collectively, the "IP Provisions")), it
being understood and agreed that any such waiver and release shall be solely
to the extent of any such license, transfer, assignment, or other disposition
of, or grant of any right, title or interest with respect to, any of the
Company's or any of its Subsidiaries' Intellectual Property or Intellectual
Property Rights to the OEM or to any joint venture entity formed by the
Company and the OEM, in each case, to carry out the objectives of such OEM
Commercial Agreement as necessary and required pursuant to the terms of such
OEM Commercial Agreement (collectively, the "OEM Transferable IP") (it being
understood that any such license, transfer, assignment, or other disposition
of, or grant of any right, title or interest, conducted in accordance with
this provision shall be permitted under, and shall not be construed as a
breach of, any of the terms or conditions (including, for the avoidance of
doubt, the IP Provisions) of any of the Transaction Documents); (ii) releases,
cancels and terminates (and shall cause the Collateral Agent (as defined in
the Security Agreement) to release, cancel and terminate) any and all of the
Liens created by the Existing Notes or any of the Security Documents on any
OEM Transferable IP, solely to the extent any such OEM Transferable IP are
jointly developed, or jointly owned, by the OEM, on the one hand, and the
Company and/or any of its Subsidiaries, on the other hand, or are otherwise
transferred or assigned to the OEM, pursuant to the terms and conditions of
such OEM Commercial Agreement; and (iii) agrees to provide such additional
reasonable consents, waivers and releases as may be reasonably requested by
the Company to carry out the objectives of such OEM Commercial Agreement. 2.
Other Amendments. Effective as of the Effective Time (as defined below): (a)
Section 4(cc) of the Securities Purchase Agreement is hereby amended to
replace (i) "January 31, 2024" with "March 8, 2024" and (ii) "March 31, 2024"
with "May 1, 2024" and to add the following to the end: "The Company agrees
that the proxy statement with respect to the Stockholder Meeting shall be
filed with the SEC by no later than January 30, 2024." (b) Effective as of
January 1, 2024, Section 3(c) of the Securities Purchase Agreement is hereby
amended by replacing "782 million shares of Common Stock" with "626 million
shares of Common Stock". (c) Effective as of January 1, 2024, Section 4(n) of
the Securities Purchase Agreement is hereby amended by replacing "782 million
shares of Common Stock" with "626 million shares of Common Stock". (d) Section
4 of the Initial Waiver is hereby amended by replacing "On or prior to January
31, 2024" with "Within 10 Business Days from the filing of the Company's Form
10-K for the fiscal year ended December 31, 2023".
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(e) Subclause (ix) of the defined term "Equity Conditions" (as defined in
Section 30(z) of the Existing Notes) is hereby amended to delete "on each
Trading Day during the Equity Conditions Measuring Period,". (f) The defined
term "Volume Failure", as defined in Section 30(ppp) of the Existing Notes is
hereby amended to read as follows: "means, with respect to a particular date
of determination, if either (x) the aggregate daily dollar trading volume (as
reported on Bloomberg) of the Common Stock on the Principal Market on more
than five (5) Trading Days during the twenty (20) Trading Day period ending on
the Trading Day immediately preceding such date of determination, or (y) the
aggregate daily dollar trading volume (as reported on Bloomberg) of the Common
Stock on the Principal Market on any Trading Day during such five (5) Trading
Day period (except, if a Holiday occurs during such five (5) Trading Day
Period and trading in the Common Stock of the Company is not suspended on the
last Trading Day of such applicable measuring period, the aggregate daily
dollar trading volume (as reported on Bloomberg) of the Common Stock on the
Principal Market on more than one (1) Trading Day during the five (5) Trading
Day period ending on the Trading Day immediately preceding such date of
determination), as applicable, is less than $20,000,000". 3. Release;
Non-Disparagement. (a) Release. The Company, on behalf of itself, each
Subsidiary and each of their past and/or present, officers, directors,
employees, predecessors, successors, assigns, affiliates, parents and
subsidiaries (together, the "Fisker Releasing Parties") fully, irrevocably and
generally releases the Investor and each of its past and present parents,
subsidiaries, affiliates, successors, assigns, owners, officers, directors,
trustees, shareholders, unitholders, members, partners, employees,
contractors, agents, insurers, attorneys, investment bankers, advisors,
auditors, accountants, partners, general partners, heirs, executors,
administrators, and representatives (collectively the "Released Parties"),
from any and all claims (whether direct, class, derivative, representative or
otherwise), actions, suits, liabilities, damages (whether compensatory,
punitive or otherwise), losses, costs, expenses, and rights and causes of
action, known or Unknown Claims (as defined below), that they now have or have
ever had or may ever have in the future, whether resulting from any action or
inaction with respect to, based upon, arising with respect to, or directly or
indirectly relating to, as applicable, the Existing Notes, the Transaction
Documents and/or any of the Securities (the "Released Claims"). Released
Claims shall not include claims to enforce this Agreement or for breach of
this Agreement. "Unknown Claims" means claims which the Fisker Releasing
Parties do not know or do or do not suspect to exist in their favor at the
time of the release of the Released Claims, which, if known by them might have
affected their release of the Released Claims, or might have affected their
decision(s) with respect to this Agreement. With respect to any and all
Released Claims, the Fisker Releasing Parties stipulate and agree that they
expressly waive, the provisions, rights, and benefits of California Civil Code
(s)1542, which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE
CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER
FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR
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HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR
RELEASED PARTY. The Fisker Releasing Parties hereby further waive any and all
provisions, rights and benefits conferred by any law of any state or territory
of the United States, or principle of common law, which is similar,
comparable, or equivalent to California Civil Code (s)1542. The Fisker
Releasing Parties acknowledge that they may hereafter discover facts in
addition to or different from those which they now know or believe to be true
with respect to the subject matter of the Released Claims, but expressly
fully, finally and forever waive, compromise, settle, discharge, extinguish
and release fully, finally and forever, any and all Released Claims, known or
unknown, suspected or unsuspected, contingent or non- contingent, whether or
not concealed or hidden, which now exist, or heretofore have existed, upon any
theory of law or equity now existing or coming into existence in the future,
including, but not limited to, conduct which is negligent, intentional, with
or without malice, or a breach of any duty, law or rule, without regard to the
subsequent discovery or existence of such different or additional facts, legal
theories or authorities. The Fisker Releasing Parties acknowledge that the
foregoing waiver was separately bargained for and is an essential element of
this Agreement. Notwithstanding the foregoing, nothing in this Section 3(a)
shall limit the rights of the Company pursuant to Section 22 of the Existing
Notes with respect to disputes as to any applicable calculations or fair
market value determinations. (b) Non-Disparagement. The Company, on behalf of
itself, its Subsidiaries, and each of the other Fisker Releasing Parties,
agrees that it will not at any time make, publish or communicate (whether made
or given orally, in writing, in any digital medium, in any filing with any
Governmental Entity or in any other manner) to any Person, any Disparaging
(defined below) remarks, comments or statements concerning any of the Released
Parties or any of the Transaction Documents. For purposes of this Agreement,
"Disparaging" remarks, comments or statements are those that impugn, or
threaten to impugn, the character, honesty, integrity, morality, legality,
business acumen or abilities of the individual or Person or Transaction
Document being disparaged, as applicable. Disparaging remarks shall expressly
include, but not be limited to, any suggestion that any of the Released
Parties violates or operates in contravention of federal or state securities
laws, that any term or condition of any of the Transaction Documents are void
or invalid, or any other remark, comment or statement that undermines any of
the Released Parties' reputation or the validity or enforceability of any of
the Transaction Documents (whether made or given orally, in writing, in any
digital medium, in any filing with any Governmental Entity or in any other
manner to any Person). The Company further agrees that it should be jointly
and severally liable under this Section 3(b) for any Disparaging remarks,
comments or statements of any of the Fisker Releasing Parties. The Fisker
Releasing Parties acknowledge that the foregoing non-disparagement agreement
was separately bargained for and is an essential element of this Agreement. 4.
Ratifications. Except as otherwise expressly provided herein, the Securities
Purchase Agreement, and each other Transaction Document, is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed
in all respects, except that on and after the date hereof: (i) all references
in the Securities Purchase Agreement to "this Agreement", "hereto", "hereof",
"hereunder" or words of like import referring to the Securities Purchase
Agreement shall mean the Securities Purchase Agreement as amended by this
Agreement, and (ii) all references in
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the other Transaction Documents to the "Securities Purchase Agreement",
"thereto", "thereof", "thereunder" or words of like import referring to the
Securities Purchase Agreement shall mean the Securities Purchase Agreement as
amended by this Agreement. 5. Fees. The Company shall promptly reimburse
Kelley Drye & Warren, LLP (counsel to the Investor) a non-accountable amount
of $76,442.85, with respect to its legal fees incurred in connection with
preparing and delivering this Agreement and legal fees and expenses of Kelley
Drye & Warren LLP with respect to the Security Documents through the date
hereof. 6. Effective Time. This Agreement shall be effective upon the time of
execution and delivery by the parties hereto of this Agreement (the "Effective
Time"). 7. Disclosure of Transaction. On or before 9:00 a.m., New York time,
on the first (1st) Business Day after the date of this Agreement, the Company
shall file a Current Report on Form 8-K describing all the material terms of
the transactions contemplated by this Agreement and the Pledge Agreement in
the form required by the Exchange Act and attaching this Agreement (including
all attachments, the "8-K Filing"). From and after the filing of the 8-K
Filing, the Company shall have disclosed all material, non-public information
(if any) provided to the Investor by the Company or any of its Subsidiaries or
any of their respective officers, directors, employees or agents in connection
with the transactions contemplated hereby and pursuant to and the Pledge
Agreement. In addition, effective upon the filing of the 8-K Filing, the
Company acknowledges and agrees that any and all confidentiality or similar
obligations under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers, directors,
affiliates, employees or agents, on the one hand, and the Investor or any of
its affiliates, on the other hand, relating to the transactions contemplated
hereby and pursuant to the Transaction Documents, shall terminate.
Notwithstanding anything contained in this Agreement to the contrary and
without implication that the contrary would otherwise be true, the Company
expressly acknowledges and agrees that the Investor shall not have (unless
expressly agreed to by the Investor after the date hereof in a written
definitive and binding agreement executed by the Company and the Investor),
any duty of confidentiality with respect to any material, non-public
information regarding the Company or any of its Subsidiaries. 8. Reliance by
Trustee. The Company and the Investor acknowledge and agree that Wilmington
Savings Fund Society, FSB, as trustee, is an intended third-party beneficiary
of this Agreement and is entitled to rely upon its terms for all purposes of
the Indenture (as defined in the Indenture) and the Security Grant
Supplemental Indenture. 9. Due Performance; Equitable Relief. The parties
hereto agree that irreparable damage, for which monetary damages (even if
available) would not be an adequate remedy, shall occur in the event that the
parties hereto do not perform the provisions of this Agreement or any of the
Transaction Documents (including the Notes) in accordance with its specified
terms or otherwise breach such provisions. Accordingly, the parties
acknowledge and agree that the parties shall be entitled to an injunction,
specific performance or other equitable relief to prevent breaches of the
Transaction Documents and to enforce specifically the terms and provisions
hereof, as applicable, in addition to any other remedy to which they are
entitled at law or in equity. Each of the parties hereto agrees that it shall
not oppose the granting of an injunction, specific performance and/or other
equitable relief on the basis that any other party has an adequate remedy at
law or that any award of an injunction, specific performance and/or other
equitable relief is not an appropriate remedy for any reason at law or in
equity. Any party seeking: (i) an injunction or injunctions to
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prevent breaches of the Transaction Documents; (ii) to enforce specifically
the terms and provisions of the Transaction Documents; and/or (iii) other
equitable relief, shall not be required to show proof of irreparable harm or
to provide any bond or other security in connection with any such remedy. 10.
Miscellaneous Provisions. Section 9 of the Securities Purchase Agreement (as
amended hereby) is hereby incorporated by reference herein, mutatis mutandis.
[The remainder of the page is intentionally left blank]
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IN WITNESS WHEREOF, the Investor and the Company have executed this Agreement
as of the date set forth on the first page of this Agreement. COMPANY: FISKER
INC. By: /s/ Dr. Geeta Gupta-Fisker Name: Dr. Geeta Gupta-Fisker Title: Chief
Financial Officer and Chief Operating Officer
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IN WITNESS WHEREOF, the Investor and the Company have executed this Agreement
as of the date set forth on the first page of this Agreement. INVESTOR: CVI
INVESTMENTS, INC. By: Heights Capital Management, Inc., its authorized agent
By: /s/ Martin Kobinger Name: Martin Kobinger Title: President
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Exhibit 21
SUBSIDIARIES OF FISKER INC.
Name of Subsidiary Jurisdiction
Fisker Group Inc. Delaware (USA)
Fisker TN LLC. Tennessee (USA)
Blue Current Holding LLC Delaware (USA)
Platinum IPR LLC Delaware (USA)
Terra Energy Inc. Delaware (USA)
Fisker GmbH Austria
Fisker Belgium SRL Belgium
Fisker Canada Ltd. Canada
Fisker (Shanghai) Motors Ltd. China
Fisker Denmark ApS Denmark
Fisker France SAS France
Fisker GmbH Germany
Fisker Vigyan India Private Limited India
Fisker Ireland Limited Ireland
Ocean E.V. Mexico
Fisker Netherlands B.V. Netherlands
Fisker Netherlands Sales B.V. Netherlands
Fisker Norway AS Norway
Fisker Spain Spain
Fisker Sweden AB Sweden
Fisker Switzerland GmbH Switzerland
Fisker Switzerland Sales GmbH Switzerland
Fisker (GB) Limited United Kingdom
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-251883) of Fisker Inc. of our report dated
April 22, 2024 relating to the financial statements
and the effectiveness of internal control over financial reporting, which
appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
April 22, 2024
1
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13A-14(A) AND 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Henrik Fisker, certify that:
1.
I have reviewed this Annual Report on Form 10-K for the period ended December
31, 2023 of Fisker Inc. (the "registrant");
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
-------------------------------------------------------------------------------
Date: April 22, 2024 /s/ Henrik Fisker
Henrik Fisker
Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13A-14(A) AND 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Dr. Geeta Gupta-Fisker, certify that:
1.
I have reviewed the Annual Report on Form 10-K for the period ended December
31, 2023 of Fisker Inc. (the "registrant");
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: April 22, 2024 /s/ Dr. Geeta Gupta-Fisker
Dr. Geeta Gupta-Fisker
Chief Financial Officer and Chief Operating Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Fisker Inc. (the "Company") on Form
10-K for the period ended December 31, 2023, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Henrik Fisker, Chief
Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. (s)
1350, as adopted pursuant to (s) 906 of the Sarbanes-Oxley Act of 2002, that,
to my knowledge:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: April 22, 2024 /s/ Henrik Fisker
Henrik Fisker
Chairman of the Board, President & Chief Executive Officer
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Fisker Inc. (the "Company") on Form
10-K for the period ended December 31, 2023, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Dr. Geeta
Gupta-Fisker, Chief Financial Officer of the Company, hereby certify pursuant
to 18 U.S.C. (s) 1350, as adopted pursuant to (s) 906 of the Sarbanes-Oxley
Act of 2002, that, to my knowledge:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: April 22, 2024 /s/ Dr. Geeta Gupta-Fisker
Dr. Geeta Gupta-Fisker
Chief Financial Officer and Chief Operating Officer
(Principal Financial Officer)
FISKER INC. COMPENSATION CLAWBACK POLICY (Adopted and approved on August 4,
2023 and effective as of August 4, 2023) 1. Purpose Fisker Inc. (collectively
with its subsidiaries, the "Company") is committed to promoting high standards
of ethical business conduct and compliance with applicable laws, rules and
regulations. As part of this commitment, the Company has adopted this
Compensation Clawback Policy (this "Policy"). This Policy is designed to
comply with Section 10D of the Exchange Act. Refer to Section 11 below for the
definitions of capitalized terms used throughout this Policy. 2. Recoupment If
the Company is required to undertake a Restatement, then the Company shall
recover, reasonably promptly, all Recoverable Compensation from any Covered
Person during the Applicable Period (including those Covered Persons who are
not Executive Officers at the time of the Restatement), unless the
Compensation Committee determines it Impracticable to do so, after exercising
a normal due process review of all the relevant facts and circumstances. Such
recovery shall be made without regard to any individual knowledge or
responsibility related to the Restatement or the Recoverable Compensation.
Further, if the achievement of one or more Financial Reporting Measures was
considered in determining the Incentive-Based Compensation Received by a
Covered Employee, but the Incentive-Based Compensation was not paid or awarded
on a formulaic basis, the Compensation Committee will in its good faith
discretion determine the amount of any Recoverable Compensation that must be
recouped with respect thereto. The Compensation Committee has sole discretion
to administer this Policy and, subject to applicable law, may seek to recoup
such Recoverable Compensation by requiring any Covered Person to repay such
amount to the Company; an adjustment to future cash or equity-based
compensation payments or awards; by set-off of a Covered Person's other
compensation; or by such other means or combination of means as the
Compensation Committee, in its sole discretion, determines to be appropriate.
3. Other Actions In addition, the Compensation Committee may, in its sole
discretion and in the reasonable exercise of its business judgment, determine
whether and to what extent additional action is appropriate to address the
circumstances surrounding a Restatement to minimize the likelihood of any
recurrence and to impose such other discipline as it deems appropriate. 4. No
Indemnification or Reimbursement Notwithstanding the terms of any other
policy, program, agreement or arrangement, in no event will the Company or any
of its affiliates indemnify or reimburse a Covered Person for any loss under
this Policy and in no event shall the Company or any of its affiliates pay
premiums on any insurance policy that would cover a Covered Person's potential
obligations with respect to Recoverable Compensation under this Policy. 5.
Administration of Policy The Compensation Committee shall have full authority
to administer this Policy. Actions of the Compensation Committee pursuant to
this Policy shall be taken by the vote of a majority of its members. The
Compensation Committee shall, subject to the provisions of this Policy, make
such determinations and interpretations and take such actions in connection
with this Policy as it deems necessary, appropriate or advisable. All
determinations and interpretations made by the Compensation Committee shall be
final, binding and conclusive.
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2 6. Acknowledgement by Covered Persons The Company shall provide notice and
seek written acknowledgement of this Policy from each Executive Officer,
provided that the failure to provide such notice or obtain such acknowledgement
shall have no impact on the applicability or enforceability of this Policy. 7.
Other Laws The remedies under this Policy are in addition to, and not in lieu
of, any legal and equitable claims the Company or any of its affiliates may
have or any actions that may be imposed by law enforcement agencies,
regulators, administrative bodies or other authorities. Further, the exercise
by the Compensation Committee of any rights pursuant to this Policy shall be
without prejudice to any other rights that the Company or the Compensation
Committee may have with respect to any Executive Officer or other Covered
Person subject to this Policy. To the extent applicable, this Policy will be
administered in a manner that complies with applicable law and listing
exchange requirements and shall be interpreted and construed accordingly. 8.
Amendment; Termination The Board or the Compensation Committee may amend or
terminate this Policy at any time. 9. Interpretation; Enforcement In the event
of a Restatement, this Policy will be interpreted and enforced, and
appropriate disclosures and other filings with respect to this Policy will be
made, in accordance with Rule 10D-1 of the Securities Exchange Act of 1934, as
amended, and the Company's applicable exchange listing standards. 10.
Effectiveness Except as otherwise determined in writing by the Compensation
Committee, this Policy shall apply to any Incentive-Based Compensation that is
Received by Covered Persons prior to or following the effectiveness of this
Policy. 11. Definitions As used in this Policy, the following definitions
apply: "Applicable Period" means the three completed fiscal years of the
Company immediately preceding the earlier of (i) the date the Board, a
committee of the Board, or the officer or officers of the Company authorized
to take such action if Board action is not required, concludes (or reasonably
should have concluded) that a Restatement is required or (ii) the date a
regulator, court or other legally authorized entity directs the Company to
undertake a Restatement. The "Applicable Period" also includes any transition
period (that results from a change in the Company's fiscal year) within or
immediately following the three completed fiscal years identified in the
preceding sentence. "Board" means the Board of Directors of the Company.
"Compensation Committee" means the Company's committee of independent
directors responsible for executive compensation decisions, or in the absence
of such a committee, a majority of the independent directors serving on the
Board. "Company" has the meaning set forth in Section 1. "Covered Person"
means any person who is, or was at any time, during the Applicable Period, an
Executive Officer of the Company. For the avoidance of doubt, Covered Person
may include a former Executive Officer
-------------------------------------------------------------------------------
3 that left the Company, retired, or transitioned to an employee role
(including after serving as an Executive Officer in an interim capacity)
during the Applicable Period. "Executive Officer" means the Company's
president, principal financial officer, principal accounting officer (or if
there is no such accounting officer, the controller), any vice-president in
charge of a principal business unit, division, or function (such as sales,
administration, or finance), any other officer who performs a policy-making
function, or any other person (including an officer of the Company's parent(s)
or subsidiaries) who performs similar policy-making functions for the Company.
"Financial Reporting Measure" means a measure that is determined and presented
in accordance with the accounting principles used in preparing the Company's
financial statements (including "non-GAAP" financial measures, such as those
appearing in the Company's earnings releases or Management Discussion and
Analysis), and any measure that is derived wholly or in part from such
measure. Examples of Financial Reporting Measures include measures based on:
revenues, net income, operating income, financial ratios, EBITDA, liquidity
measures, return measures (such as return on assets), profitability of one or
more segments, sales per square foot, same store sales, revenue per user, and
cost per employee. Stock price and total shareholder return are also Financial
Reporting Measures. "Impracticable." The Compensation Committee may determine
in good faith that recovery of Recoverable Compensation is "Impracticable" if:
(i) pursuing such recovery would violate applicable law and the Company
provides an opinion of counsel to that effect to the Company's listing
exchange; (ii) the direct expense paid to a third party to assist in enforcing
this Policy would exceed the Recoverable Compensation and the Company has (A)
made a reasonable attempt to recover such amounts and (B) provided
documentation of such attempts to recover to the Company's applicable listing
exchange; or (iii) recovery would likely cause an otherwise tax- qualified
retirement plan, under which benefits are broadly available to employees of
the Company, to fail to meet the requirements of the Internal Revenue Code of
1986, as amended. "Incentive-Based Compensation" means any compensation that
is granted, earned, or vested based wholly or in part upon the attainment of a
Financial Reporting Measure. Incentive-Based Compensation does not include any
base salaries (except with respect to any salary increases earned wholly or in
part based on the attainment of a Financial Reporting Measure performance
goal); bonuses paid solely at the discretion of the Compensation Committee or
Board that are not paid from a "bonus pool" that is determined by satisfying a
Financial Reporting Measure performance goal; bonuses paid solely upon
satisfying one or more subjective standards and/or completion of a specified
employment period; non-equity incentive plan awards earned solely upon
satisfying one or more strategic measures or operational measures; and equity
awards that vest solely based on the passage of time and/or attaining one or
more non-Financial Reporting Measures. "Policy" has the meaning set forth in
Section 1. "Received." Incentive-Based Compensation is deemed "Received" in
the Company's fiscal period during which the Financial Reporting Measure
specified in the Incentive-Based Compensation award is attained, even if the
payment or grant of the Incentive-Based Compensation occurs after the end of
that period. "Recoverable Compensation" means the amount of any Incentive-Based
Compensation (calculated on a pre- tax basis) Received by a Covered Person
during the Applicable Period that is in excess of the amount that otherwise
would have been Received if the calculation were based on the Restatement. For
the avoidance of doubt, Recoverable Compensation does not include any
Incentive-Based Compensation Received by a person (i) before such person began
service in a position or capacity meeting the definition of a "Covered
Person," (ii) if such person did not meet the definition of a "Covered Person"
at any time during the Applicable Period, or (iii) during any period the
Company did not have a class of its securities listed on a national securities
exchange or a national securities association. For the avoidance of doubt,
Recoverable Compensation may include Incentive-Based Compensation Received by
a person while serving as an employee if such person previously served as an
Executive Officer and then transitioned to an employee role. For the avoidance
of doubt, if the subject Incentive-Based Compensation (calculated on a pre-tax
basis) was based on stock price or total shareholder return, where the
Recoverable Compensation is not subject to mathematical recalculation directly
-------------------------------------------------------------------------------
4 from the information in a Restatement, the Recoverable Compensation must be
based on a reasonable estimate of the effect of the Restatement on the stock
price or total shareholder return upon which the Incentive-Based Compensation
was Received, and documentation of such reasonable estimate must be provided
to the Company's applicable listing exchange. "Restatement" means an
accounting restatement of any of the Company's financial statements filed with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, or the Securities Act of 1933, as amended, due to the
Company's material noncompliance with any financial reporting requirement
under U.S. securities laws, regardless of whether Company or Covered Person
misconduct was the cause for such restatement. "Restatement" includes any
required accounting restatement to correct an error in previously issued
financial statements that is material to the previously issued financial
statements (commonly referred to as "Big R" restatements), or that would
result in a material misstatement if the error were corrected in the current
period or left uncorrected in the current period (commonly referred to as
"little r" restatements).
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