Item 1.01 Entry Into A Material Definitive Agreement.
As disclosed in the Previous Current Report, on February 3, 2021, 10X Capital
Venture Acquisition Corp, a Delaware corporation (the "Company"), entered into
an Agreement and Plan of Merger (the "Merger Agreement") among REE Automotive
Ltd, a corporation organized under the laws of Israel ("REE"), Spark Merger Sub
Inc., a Delaware corporation and a direct, wholly-owned subsidiary of the
Company ("Merger Sub"), and the Company, which provides for, among other things,
the merger of Merger Sub with and into the Company, with the Company surviving
as a wholly owned subsidiary of REE (the "Business Combination"). In connection
with the Business Combination, REE will list as a publicly-traded company on
Nasdaq and will continue to conduct the automotive technology business conducted
by REE prior to the Business Combination.
The Merger Agreement
The Business Combination is based upon an enterprise valuation of REE of $3.0
billion on a cash-free and debt-free basis, and an assumed level of net working
capital, all at the time of the signing of the Merger Agreement. No purchase
price adjustments will be made in connection with the closing of the
transactions contemplated by the Merger Agreement. Assuming none of the Class A
common stock, par value $0.0001 per share, of the Company (the "Company Common
Stock") is redeemed by the Company's public stockholders as described below
under "Redemption Offer," immediately following the Effective Time, the
Company's public stockholders will own 5.6% of REE's ordinary shares, par value
NIS 0.01 each (the "REE Class A Ordinary Shares"); the Company's sponsor-10X
Capital SPAC Sponsor I LLC (the "Sponsor")-will own 2.2% of the REE Class A
Ordinary Shares; the shareholders of REE as of immediately prior to the Business
Combination (the "Legacy REE Shareholders") will own 83.8% of the REE Class A
Ordinary Shares, including Class B Ordinary Shares, par value NIS 0.01 each, of
REE ("REE Class B Ordinary Shares") owned by the founders of REE (the
"Founders") and REE Class A Ordinary Shares issued pursuant to the conversion of
REE Preferred Shares, as described below; and the PIPE Investors (as defined
below) will own 8.4% of the REE Class A Ordinary Shares.
Immediately prior to the Effective Time, (i) each preferred share, par value NIS
0.01 each, of REE (each, a "REE Preferred Share") will be converted into REE
Class A Ordinary Shares in accordance with REE's organizational documents and
(ii) immediately following such conversion but prior to the Effective Time, REE
will effect a stock split of each REE Class A Ordinary Share into such number of
REE Class A Ordinary Shares calculated in accordance with the terms of the
Merger Agreement such that each REE Class A Ordinary Share will have a value of
$10.00 per share after giving effect to such stock split (the "Stock Split" and,
together with the conversion of REE Preferred Shares, the "Capital
Restructuring").
As a result of the Business Combination, immediately prior to the Effective
Time, each outstanding share of Class B common stock, par value $0.0001 per
share, of the Company ("Company Class B Common Stock") shall convert into
1.5763975 (the "Class B Share Conversion Ratio") shares of Company Common Stock
and, immediately thereafter, each outstanding share of Company Common Stock will
be converted into the right to receive one newly issued REE Class A Ordinary
Share. The Company's amended and restated certificate of incorporation provides
that, upon conversion of the Company Class B Common Stock into Company Common
Stock, the holders of Company Class B Common Stock shall be entitled to receive
a number of additional shares (the "Anti-Dilution Shares") of Company Common
Stock equal to 25% of the number of shares of Company Common Stock issued to the
PIPE Investors. Pursuant to the Letter Agreement (as defined under "Letter
Agreement" below), the holders of the shares of the Company Class B Common Stock
have agreed to waive their right to receive any Anti-Dilution Shares in excess
of 2,900,000 (the "Conversion Ratio Adjustment"), with such waiver resulting in
the Class B Share Conversion Ratio. In addition, up to 1,500,000 of the
2,900,000 Anti-Dilution Shares to be received upon the conversion of the Company
Class B Common Stock will be subject to subsequent forfeiture without
consideration if trading prices of REE Class A Ordinary Shares specified below
are not achieved following the Business Combination. The Company's outstanding
warrants to purchase one share of Company Common Stock shall be converted into
the right to receive an equal number of warrants to purchase one REE Class A
Ordinary Share (the "REE Warrants").
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REE's ordinary shares will be divided into two classes. The REE Class A Ordinary
Shares will each have one vote per share. The REE Class B Ordinary Shares will
each have 10 votes per share. As a result of the conversion of the REE Preferred
Shares, coupled with their ownership of the REE Class B Ordinary Shares, each
Founder will have approximately 39% of the total voting power of the REE Class A
Ordinary Shares. The REE Class B Ordinary Shares will be cancelled and have no
further voting rights with respect to any Founder who (i) holds less than 33% of
the Class A shares (including those underlying vested and unvested options);
(ii) whose employment as an executive officer is terminated other than for cause
or resigns and also ceases to serve as a director, or (iii) whose employment as
an executive officer is terminated for cause. A termination for cause requires a
unanimous decision of the Board other than the affected Founder. In addition,
all of the REE Class B Ordinary Shares shall automatically convert into REE
Class A Ordinary Shares upon the tenth anniversary of the Closing.
Redemption Offer
Pursuant to the Company's amended and restated certificate of incorporation and
in accordance with the terms of the Merger Agreement, the Company will be
providing its public stockholders with the opportunity to redeem, upon the
Effective Time, their respective shares of Company Common Stock for cash equal
to the applicable pro rata share of the aggregate amount on deposit as of two
business days prior to the consummation of the Business Combination in the
Company's trust account (which holds the proceeds of the Company's initial
public offering, less taxes payable).
Representations, Warranties and Covenants
Each of REE, the Company and Merger Sub have made representations, warranties
and covenants in the Merger Agreement that are customary for transactions of
this nature. The representations and warranties of the Company, Merger Sub and
REE will not survive the closing of the Business Combination (the "Closing").
Conditions to Consummation of the Business Combination
Consummation of the transactions contemplated by the Merger Agreement is subject
to customary conditions of the respective parties, including, among others, that
(i) the Business Combination be approved by the Company's stockholders and REE's
shareholders; (ii) there has been no material adverse effect (as defined in the
Merger Agreement) that is continuing with respect to REE or the Company since
the date of the Merger Agreement; (iii) the representations and warranties of
the Company and REE shall be true and correct in all material respects on and as
of the date of the Merger Agreement and as of the date of the Closing (the
"Closing Date"); (iv) the Company and REE shall have performed all agreements
and covenants required by the Merger Agreement at or prior to the Closing Date
in all material respects; (v) the Company will have at least $5,000,001 of net
tangible assets immediately following the Closing (after giving effect to the
redemption of public shares by the Company's public stockholders pursuant to the
redemption offer described above and the PIPE Investment (as defined below));
(vi) the Capital Restructuring shall have been completed; (vii) the REE Class A
Ordinary Shares and REE Warrants shall be approved for listing on Nasdaq upon
Closing; (viii) the PIPE Investment and the funding of the PIPE Investment
amount shall have been consummated or will be consummated substantially
concurrently with the Closing; and (ix) the Company shall have at least
$225,000,000 in cash and cash equivalents at the time of the Closing (after
giving effect to, among other things, the redemption of public shares by the
Company's public stockholders pursuant to the redemption offer described above).
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Termination
The Merger Agreement may be terminated at any time prior to the consummation of
the Business Combination (i) by mutual written consent of the Company and REE;
(ii) by either the Company or REE if the closing of the transactions
contemplated in the Merger Agreement has not occurred by August 15, 2021 (the
"Outside Date"), except that the right to so terminate the Merger Agreement will
not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Transactions (as defined in
the Merger Agreement) to occur on or before such date and such action or failure
to act constitutes a material breach of the Merger Agreement; (iii) by either
the Company or REE if a governmental entity has issued an order or decree or has
taken any other action, in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Transactions, including the
Business Combination, which order, decree or other action is final and
nonappealable; (iv) by REE if the Company has breached any of its covenants or
representations and warranties in any material respect and has not cured such
breach within the time periods provided for in the Merger Agreement (subject to
a 30-day cure period); (v) by the Company if REE has breached any of its
covenants or representations and warranties in any material respect and has not
cured such breach within the time periods provided for in the Merger Agreement
(subject to a 30-day cure period); (vi) by either the Company or REE, if, at the
meeting of the Company's stockholders held to approve the Business Combination
(including any adjournments thereof), the Merger Agreement, the Business
Combination, and the other transaction proposals contemplated by the Merger
Agreement are not duly adopted by the Company's stockholders by the requisite
vote under applicable legal requirements and the Company's organizational
documents; (vii) by either the Company or REE, if, at the meeting of REE's
shareholders held to approve the Business Combination (including any
adjournments thereof), the Merger Agreement, the Business Combination, and the
other transaction proposals contemplated by the Merger Agreement are not duly
adopted by REE's shareholders by the requisite vote under applicable legal
requirements and REE's organizational documents; (viii) by REE, if, prior to
receipt of approval of the stockholders of the Company, the board of directors
of the Company changes its recommendation with respect to the Business
Combination, as permitted by the Merger Agreement; (ix) by the Company, if the
REE shareholders necessary to approve the Business Combination, the Merger
Agreement, and the transactions contemplated thereby do not deliver voting
agreements in support of the transaction within 45 days following the signing of
the Merger Agreement; or (xi) by either the Company or REE, if, at the Closing,
the condition regarding the aggregate amount of available funds described above
is incapable of being satisfied at the Closing.
If the Merger Agreement is validly terminated, no party thereto will have any
liability or any further obligation to any other party under the Merger
Agreement, with certain limited exceptions, including liability for any
intentional fraud or willful breach of the Merger Agreement.
The Merger Agreement has been approved by the Company's board of directors, and
the board has recommended that the Company's stockholders adopt the Merger
Agreement and approve the Business Combination.
The Merger Agreement contains representations, warranties and covenants that the
respective parties made to each other as of the date of such agreement or other
specific dates. The assertions embodied in those representations, warranties and
covenants were made for purposes of the contract among the respective parties
and are subject to important qualifications and limitations agreed to by the
parties in connection with negotiating such agreement. The representations,
warranties and covenants in the Merger Agreement are also modified in part by
the underlying disclosure schedules which are not filed publicly and which are
subject to a contractual standard of materiality different from that generally
applicable to stockholders and were used for the purpose of allocating risk
among the parties rather than establishing matters as facts. The Company does
not believe that these schedules contain information that is material to an
investment decision. Investors are not third-party beneficiaries under the
Merger Agreement and should not rely on the representations, warranties and
covenants or any descriptions thereof as characterizations of the actual state
of facts or condition of the parties thereto or any of their respective
subsidiaries or affiliates.
The foregoing description of the Merger Agreement does not purport to be
complete and is qualified in its entirety by the terms and conditions of the
Merger Agreement, a copy of which is attached hereto as Exhibit 2.1 and is
incorporated herein by reference.
Support Agreement
As disclosed in the Previous Current Report, concurrently with the execution and
delivery of the Merger Agreement, the Company, its executive officers and
directors (the "Insiders"), the Sponsor, REE and the REE shareholders party
thereto (together with the Insiders and the Sponsor, the "Voting Parties")
entered into a Support Agreement (the "Support Agreement"), pursuant to which
each of the Voting Parties agreed to, among other things, in their respective
capacities as a Company stockholder or REE shareholders, as applicable, vote
their shares of Class A Common Stock in favor of the Business Combination at
every meeting of the Company stockholders' to be held to approve the Business
Combination, and vote their REE Class A Ordinary Shares in favor of the Business
Combination at every meeting of REE shareholders to be held to approve the
. . .
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as of February 3, 2021, by and
among 10X Capital Venture Acquisition Corp, REE Automotive Ltd and Spark
Merger Sub Inc.
10.1 Form of Support Agreement (contained in Exhibit C to Exhibit 2.1)
10.2 Form of Letter Agreement (contained in Exhibit E to Exhibit 2.1)
10.3 Form of Investors' Rights Agreement (contained in Exhibit B to Exhibit
2.1)
10.4 Form of the Subscription Agreement
*Schedules to this Exhibit have been omitted in accordance with Regulation S-K
Item 601(b)(2). The Registrant agrees to furnish supplementally a copy of all
omitted schedules to the Securities and Exchange Commission upon its request.
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