Arrival(ARVL) - 2022 Q4 - Annual Report

Share Purchase Agreement This agreement enables the Company to sell up to $300,000,000 in ordinary shares to the Investor under specific terms and conditions Agreement Overview This Share Purchase Agreement, entered into on March 10, 2023, allows the Company to sell and obligates the Investor to purchase up to $300,000,000 of newly issued ordinary shares over time, subject to specified terms and conditions Key Agreement Terms | Term | Details | | :--- | :--- | | Agreement Date | March 10, 2023 | | Parties | Arrival (Company) and Westwood Capital Group LLC (Investor) | | Total Commitment | Up to $300,000,000 in Ordinary Shares | - The sales of Ordinary Shares will be conducted in reliance upon Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D[10] - Concurrently, the parties are entering into a Registration Rights Agreement to register the resale of the purchased shares[10] - As consideration for the agreement, the Company will issue Commitment Shares to the Investor[10] ARTICLE I: DEFINITIONS This article defines key capitalized terms used throughout the agreement to ensure consistent interpretation Definitions This article states that capitalized terms used throughout the agreement are defined in Annex I, which is incorporated by reference - Capitalized terms used in the Agreement have the meanings defined in Annex I or as otherwise defined within the Agreement itself[12] ARTICLE II: PURCHASE AND SALE OF ORDINARY SHARES This article details the terms for the purchase and sale of ordinary shares, including closing procedures and public disclosure requirements Purchase and Sale of Shares This section establishes the Company's right, but not obligation, to sell up to $300,000,000 of its Ordinary Shares to the Investor during the Investment Period, with the Investor obligated to purchase these shares when the Company delivers a VWAP Purchase Notice Commitment Details | Item | Value | | :--- | :--- | | Total Commitment | $300,000,000 | | Mechanism | Company's discretion via VWAP Purchase Notices | Closing; Closing Date The agreement becomes effective and binding at the Closing, which occurs upon the execution and delivery of the Agreement and the Registration Rights Agreement, receipt of the Promissory Note by the Investor, and delivery of all other required documents - The Closing Date is March 10, 2023, the date of the agreement[14] - Closing is contingent on the delivery of signed counterpart pages for the Share Purchase Agreement and Registration Rights Agreement, and the Investor's receipt of the Promissory Note[14] Initial Public Announcements and Required Filings The Company is required to publicly disclose the transaction by filing a Form 6-K with the SEC within four trading days and a Form D within 15 calendar days, while the Investor must maintain confidentiality until public disclosure - The Company must file a Form 6-K describing the transaction within four Trading Days of the agreement date[15] - A Form D must be filed within fifteen calendar days following the Closing Date[15] - The Company must file an Initial Registration Statement to cover the resale of Registrable Securities by the Investor as soon as practicable[17] ARTICLE III: PURCHASE TERMS This article outlines the specific terms for share purchases, including VWAP mechanics, settlement procedures, and beneficial ownership limitations VWAP Purchases This section details the process for VWAP Purchases, where the Company can initiate a purchase by sending a VWAP Purchase Notice, subject to conditions like a minimum share price, a 'Quiet Period' between purchases, and a prohibition on capital raising until settlement, with the Investor obligated to accept valid notices - The Company may not deliver a VWAP Purchase Notice if the prior day's Closing Sale Price is below the Minimum Price[18] - A 'Quiet Period' prevents the Company from issuing a new VWAP Purchase Notice until the previous one has settled[18][20] - The Company is prohibited from raising additional capital from the delivery of a VWAP Purchase Notice until the day after its settlement[20] Settlement Settlement for each VWAP Purchase occurs on the third trading day following the notice, involving the Investor's initial par value payment, the Company's share delivery via DWAC, and the Investor's subsequent contribution of the remaining purchase price to a special equity reserve account (Account 115) - Settlement is a three-step process on the third Trading Day (VWAP Purchase Settlement Date) after the purchase notice[21] - The purchase price is split into two payments: a Par Value Settlement Payment and a subsequent contribution to the Company's special equity reserve account (Account 115)[21][23] - If the Company fails to deliver shares on time, it may be required to pay the Investor's 'Cover Price' for replacement shares purchased in the open market[23] Compliance with Rules of Trading Market This section mandates that the Company shall not issue or sell any shares under this agreement if such an action would be expected to violate the Securities Act or the rules of the Trading Market - The Company is prohibited from issuing shares if it would result in a violation of the Securities Act or a breach of Trading Market rules[23] Beneficial Ownership Limitation The agreement imposes a beneficial ownership limit on the Investor, capping ownership at 4.99% of the Company's outstanding Ordinary Shares, with the Investor having sole discretion to increase this limit to 9.99% - The Investor's beneficial ownership is capped at 4.99% of the Company's outstanding Ordinary Shares[24] - The Investor may, at its discretion, increase the ownership limitation to 9.99%[24][26] ARTICLE IV: REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR This article details the Investor's representations, warranties, and covenants regarding its legal status, investment intent, and compliance Investor Representations (Sections 4.1-4.13) The Investor provides several representations and warranties, confirming its legal status, authority, and investment intent, including being an 'accredited investor,' acquiring securities for investment purposes and not for public distribution, not being an affiliate of the Company, and acknowledging its status as a statutory underwriter for resales - The Investor is a duly organized limited liability company in Delaware with the authority to enter into the agreement (Sec 4.1, 4.2)[27][28] - The Investor confirms it is an 'accredited investor' as defined in Rule 501(a) of Regulation D and is acquiring the securities for its own account for investment purposes (Sec 4.4, 4.5)[31][32] - The Investor is not an affiliate of the Company and has not engaged in short sales or hedging activities related to the Company's securities prior to the agreement (Sec 4.10, 4.11)[36][37] - The Investor acknowledges it will be disclosed as an 'underwriter' in the Registration Statement for the resale of the securities (Sec 4.12)[38] ARTICLE V: REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY This article outlines the Company's extensive representations and warranties concerning its corporate status, financial health, operational compliance, and securities matters Corporate and Financial Representations (Sections 5.1-5.12) The Company makes extensive representations regarding its corporate standing, capitalization, and financial health, including confirming its valid existence, authorization to enter the agreement, accuracy of its SEC filings and financial statements (prepared under IFRS), effectiveness of internal controls, and absence of material adverse effects, undisclosed liabilities, or insolvency proceedings - The Company and its subsidiaries are duly organized and in good standing (Sec 5.1)[40] - All SEC documents filed since March 24, 2021, comply with regulations and do not contain material misstatements, with financial statements prepared in accordance with IFRS (Sec 5.7)[49][52] - The Company maintains effective internal controls over financial reporting and disclosure controls and procedures (Sec 5.7)[54][55] - Since the last audited financial statements, there has been no Material Adverse Effect on the Company (Sec 5.9)[58] Operational and Compliance Representations (Sections 5.13-5.30) The Company represents that it has title to its assets, is in compliance with all applicable laws, and possesses necessary permits and intellectual property rights to operate its business, confirming no undisclosed legal proceedings, compliance with environmental and labor laws, proper handling of affiliate transactions, and that the offering is exempt from registration and does not involve general solicitation - The Company and its subsidiaries have good title to their material assets (Sec 5.13)[62] - The business is being conducted in compliance with all applicable laws, and the Company possesses all material permits and authorizations (Sec 5.15, 5.18)[65][69] - The Company is not a party to any contract with a labor union and is in material compliance with employment laws (Sec 5.22)[78] - The offer and sale of securities to the Investor are exempt from registration requirements under Section 4(a)(2) and Rule 506(b) of Regulation D (Sec 5.28)[85] Securities and Anti-Fraud Representations (Sections 5.31-5.43) The Company acknowledges the potential dilutive effect of the share issuance, represents that it has not manipulated its stock price, and confirms its shares are listed on the Trading Market and are DTC eligible, while also affirming compliance with anti-corruption (FCPA), anti-money laundering, and OFAC regulations, and stating it is not subject to 'Bad Actor' disqualifications under Rule 506(d) - The Company acknowledges the issuance of securities could cause dilution to existing shareholders (Sec 5.31)[88] - The Company's Ordinary Shares are registered under Section 12(b) of the Exchange Act, listed on the Trading Market, and eligible for DTC's DWAC system (Sec 5.34)[91] - The Company represents compliance with anti-corruption laws like the FCPA, anti-money laundering laws, and OFAC sanctions (Sec 5.36, 5.37, 5.38)[94][95][96] - No 'Issuer Covered Person' is subject to 'Bad Actor' disqualifications under Rule 506(d)(1) of the Securities Act (Sec 5.40)[99] ARTICLE VI: ADDITIONAL COVENANTS This article establishes ongoing covenants for both the Company and the Investor, including share reservation, listing maintenance, and trading restrictions Company and Investor Covenants (Sections 6.1-6.15) This article outlines ongoing obligations for both parties, with the Company covenanting to reserve sufficient shares, maintain its stock exchange listing, and keep the registration statement effective, while agreeing not to enter into conflicting agreements or certain 'Variable Rate Transactions,' and the Investor covenanting to comply with selling restrictions, including a prohibition on short sales during the Restricted Period, and to use a broker-dealer for resales - The Company will reserve and keep available sufficient authorized but unissued Ordinary Shares to fulfill its obligations under the agreement (Sec 6.2)[107] - The Company will use commercially reasonable efforts to maintain its listing on the Trading Market (Sec 6.3)[108] - The Company is prohibited from entering into any 'Variable Rate Transactions' (e.g., certain convertible debt with floating conversion prices), with specified exceptions (Sec 6.6)[115] - The Investor agrees not to engage in any Short Sales of Ordinary Shares during the Restricted Period (from execution until termination) (Sec 6.9)[118] ARTICLE VII: CONDITIONS TO CLOSING, COMMENCEMENT AND VWAP PURCHASES This article specifies the conditions precedent that must be satisfied for the agreement to become effective, for share purchases to commence, and for subsequent VWAP purchases to proceed Conditions Precedent to Closing This section lists the conditions that must be met for the agreement to become legally binding, including the accuracy of representations and warranties from both parties, the Company's payment of the Investor's expense reimbursement, and the delivery of all required legal documents and opinions - The representations and warranties of both the Investor and the Company must be true and correct in all material respects[131][132] - The Company must pay the Investor Expense Reimbursement as defined in Section 10.1(i)[134] - Counterpart signature pages of the Agreement, Registration Rights Agreement, and Promissory Note must be delivered, along with legal opinions and closing certificates[135] Conditions Precedent to Commencement This section outlines a comprehensive set of conditions that must be satisfied before the Company can begin issuing VWAP Purchase Notices, including the SEC declaring the Initial Registration Statement effective, the issuance of the Commitment Shares to the Investor, the absence of any trading suspension, and the completion of a reverse stock split and par value reduction - The Initial Registration Statement covering the resale of securities must be declared effective by the SEC[139] - The Company must issue the Commitment Shares to the Investor, valued at $3,000,000, against the set-off of the Promissory Note[150] - The Company must effect a reverse stock split to ensure the post-split share price is not less than $4.00[155] - The par value of the Ordinary Shares must be reduced to an amount less than or equal to $0.01[155] Conditions Precedent to VWAP Purchases after Commencement Date For each VWAP Purchase after the initial Commencement, a set of conditions must be met at the time of the purchase notice, largely mirroring the commencement conditions, ensuring the Company's representations remain accurate, the registration statement remains effective, shares remain listed and tradable without suspension, and all prior share deliveries have been completed - The Company's representations and warranties must remain true and correct[157] - The applicable Registration Statement must be effective, and the Prospectus must be usable for resales by the Investor[158][159] - Trading in the Ordinary Shares must not be suspended, and the shares must remain listed on an eligible market[167] - All shares from prior VWAP Purchases must have been successfully delivered to the Investor as DWAC Shares[168] ARTICLE VIII: TERMINATION This article defines the conditions under which the agreement will terminate, including automatic triggers and specific termination rights for both parties, and outlines the effects of such termination Automatic Termination The agreement will terminate automatically upon the earliest occurrence of several events: the 36-month anniversary of the Closing Date, the Investor purchasing the full $300,000,000 commitment, the delisting of the Company's shares, or the commencement of bankruptcy proceedings - The agreement terminates automatically on the 36-month anniversary of the Closing Date[171] - Termination occurs if the Investor purchases the full Total Commitment of $300,000,000[171] - Delisting from the Trading Market or an Eligible Market, or the initiation of bankruptcy proceedings, will also trigger automatic termination[171] Other Termination This section provides termination rights to both parties, allowing the Company to terminate with one trading day's notice after Commencement, and the Investor to terminate for specific causes such as a material adverse effect, a fundamental transaction, failure by the Company to file or maintain an effective registration statement, or a material breach of the agreement by the Company - The Company may terminate the agreement with one Trading Day's written notice[172] - The Investor has the right to terminate if a Material Adverse Effect occurs, a Fundamental Transaction occurs, or the Company breaches its obligations under the Registration Rights Agreement[172] Effect of Termination Upon termination, the agreement becomes void, but certain provisions survive, including indemnification, miscellaneous clauses, and specific covenants which remain in effect for six months, with termination not affecting any pending VWAP purchases or the Investor's rights under the Registration Rights Agreement or its ownership of the Commitment Shares - Certain articles, including Indemnification (IX) and Miscellaneous (X), survive termination indefinitely[175] - Termination does not cancel any pending VWAP Purchase; both parties must fulfill their obligations for any outstanding purchase[175] - The Commitment Shares are considered fully earned as of the Closing Date and are unaffected by termination[175] ARTICLE IX: INDEMNIFICATION This article details the Company's obligation to indemnify the Investor for losses arising from breaches of the agreement and outlines the procedures for handling such claims Indemnification of Investor The Company agrees to indemnify and hold harmless the Investor and its affiliates from any losses, damages, or costs arising from any breach of representations, warranties, or covenants by the Company in the transaction documents, or from any legal action instituted against the Investor related to the agreement - The Company will indemnify the Investor Party for Damages resulting from the Company's breach of representations, warranties, or covenants[178] - Indemnification also covers Damages from legal proceedings against the Investor Party arising from the transaction documents, unless the Damages resulted from the Investor's fraud, bad faith, or gross negligence[178] Indemnification Procedures This section outlines the process for an indemnification claim, requiring the Investor to promptly notify the Company, which has the right to assume the defense of the claim with its own counsel, and cannot settle a claim without the Investor's consent unless the settlement includes an unconditional release of the Investor - The Investor must notify the Company in writing after receiving notice of a claim for which it seeks indemnification[182] - The Company may assume the defense of the claim, but if a conflict of interest exists, it must pay for the Investor's separate counsel[182] - The Company cannot settle a claim without an unconditional release of the Investor Party from all liability, unless the Investor Party consents[182] ARTICLE X: MISCELLANEOUS This article contains standard legal provisions, including expense reimbursement, commitment share issuance, governing law, and dispute resolution mechanisms Fees, Expenses, and Commitment Shares This section details financial considerations and share issuance mechanics, including the Company's responsibility for reimbursing the Investor's expenses up to $150,000, the issuance of Commitment Shares valued at $3,000,000 as consideration, and the process for providing irrevocable instructions to the transfer agent to issue all shares as unlegended DWAC shares after the registration statement is effective Financial Considerations | Item | Amount | Details | | :--- | :--- | :--- | | Investor Expense Reimbursement | Up to $150,000 | To cover the Investor's out-of-pocket expenses, including legal fees | | Commitment Shares | $3,000,000 | Issued to the Investor as consideration for entering the agreement | - The Commitment Shares are considered fully earned at Closing, regardless of whether any VWAP Purchases occur[186] - The Company must provide its transfer agent with irrevocable instructions to issue all securities post-Commencement as DWAC shares without restrictive legends[189][191] General Provisions (Sections 10.2-10.16) This part of the article contains standard legal clauses governing the agreement, including consent to jurisdiction in New York courts, a waiver of jury trial, confirmation that the transaction documents constitute the entire agreement, establishment of New York law as governing, and specification of which clauses survive termination - Both parties agree to specific performance and injunctions as remedies for breaches and waive the right to a jury trial (Sec 10.2)[192][196] - The agreement is governed by the laws of the State of New York (Sec 10.11)[207] - The Company must provide the Investor a reasonable opportunity to review and comment on any public disclosures related to the transaction (Sec 10.14)[211] - Representations, warranties, and covenants in Articles V, VIII, IX, and X survive the termination of the agreement indefinitely (Sec 10.12)[209] Annex I: Definitions This annex provides comprehensive definitions for key capitalized terms used throughout the Share Purchase Agreement to ensure clarity and consistent interpretation Defined Terms This annex provides detailed definitions for the capitalized terms used throughout the Share Purchase Agreement, clarifying the specific meaning of terms such as 'VWAP Purchase Price', 'Total Commitment', 'Material Adverse Effect', and 'Fundamental Transaction' to ensure precise interpretation of the contract - Defines 'Commitment Shares' as $3,000,000 worth of Ordinary Shares, with the share count determined by a formula based on the Closing Sale Price[221] - Defines 'VWAP Purchase Price' with two different calculation methods: a 'Forward VWAP Purchase' at 97% of the 3-day average VWAP, and an 'Alternative VWAP Purchase' at 95% of the lowest daily VWAP over 3 days[255][256] - Defines 'Minimum Price' as $0.10, which acts as a floor for the Company to be able to initiate a VWAP Purchase[237]