Delaware
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6770
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86-1243837
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(State or other jurisdiction of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification No.) |
Debbie P. Yee, P.C.
Julia Danforth
Kirkland & Ellis LLP 609 Main Street Houston, Texas 77002 Tel: (713)
836-3600
Fax: (713)
836-3601
|
Nicolas H.R. Dumont, Esq.
Daniel Peale, Esq.
David I. Silverman, Esq.
Cooley LLP
55 Hudson Yards New York, New York 10001 Tel: (212)
479-6000
Fax: (212) 479 6275 |
Large accelerated filer
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☐
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Accelerated Filer
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☐
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Non-accelerated filer
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☒
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Smaller reporting company
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☒
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Emerging growth company
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☒
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Title of Each Class of
Securities to be Registered |
|
Amount
to be Registered |
|
Proposed
Maximum Offering Price Per Share |
|
Proposed
Maximum Aggregate Offering Price
(2)
|
|
Amount of
Registration Fee |
Class A common stock, par value $0.0001 per share
(1)
|
|
405,062,379
|
|
$9.97
|
|
$4,038,471,918.63
|
|
$440,597.29
(3)
|
|
||||||||
|
(1)
|
Represents the estimated maximum number of shares of the registrant’s Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), to be issued by the registrant to securityholders of Core Scientific Holding Co., a Delaware corporation (“Core Scientific”), in connection with the transactions described herein (the “merger”), estimated solely for the purpose of calculating the registration fee, and is based on the sum of (a) up to 297,426,315 shares of Class A Common Stock issuable as consideration to the holders of common stock, par value $0.00001 per share, of Core Scientific (the “Core Scientific common stock”) (including up to 11,333,364 shares of Class A Common Stock issuable as consideration upon the conversion of Core Scientific preferred stock into shares of Core Scientific common stock immediately prior to the Effective Time (as defined in the accompanying proxy statement/prospectus)); (b) up to 6,587,459 shares of Class A Common Stock issuable as consideration (i) upon the exercise of certain warrants to purchase shares of Class A Common Stock, which warrants will be issued upon the assumption by the registrant of Core Scientific warrants on the same terms and conditions as were applicable to such warrants prior to the Effective Time, and (ii) in connection with certain warrants that will be deemed to have been exercised, on a net exercise basis with respect to the applicable exercise price and any required withholding or employment taxes thereon and settled in the applicable number of shares of Core Scientific common stock; (c) up to 90,350,332 shares of Class A Common Stock underlying restricted stock units (“RSUs”) of the registrant, which RSUs will be issued upon the assumption by the registrant of Core Scientific RSUs on the same terms and conditions as were applicable to such RSUs prior to the Effective Time or settled as Core Scientific common stock prior to the Effective Time; and (d) up to 10,698,273 shares of Class A Common Stock issuable as consideration (i) upon the exercise of certain options to purchase shares of Class A Common Stock, which options will be issued upon the assumption by the registrant of Core Scientific options on the same terms and conditions as were applicable to such options prior to the Effective Time, and (ii) in connection with certain options that will be deemed to have been exercised, on a net exercise basis with respect to the applicable exercise price and any required withholding or employment taxes thereon and settled in the applicable number of shares of Core Scientific common stock.
|
(2)
|
Estimated solely for the purpose of calculating the registration fee, based on $9.97, the average of the high and low sales prices of the registrant’s Class A Common Stock on August 6, 2021 ($10.01 and $9.89, respectively). This calculation is in accordance with Rule 457(c) and
Rule 457(f)(1) of the Securities Act of 1933, as amended. |
(3)
|
Previously paid.
|
• |
(i) each warrant to purchase Core Scientific common stock held by a former employee or service provider of Core Scientific that is issued, outstanding and unexercised immediately prior to the Effective Time, (ii) except as set forth in the merger agreement, each option to purchase Core Scientific common stock held by a former employee or service provider of Core Scientific that is vested and outstanding immediately prior to the Effective Time and (iii) except as set forth in the merger agreement, each option to purchase Core Scientific common stock issued and outstanding immediately prior to the Effective Time held by certain specified Core Scientific optionholders that is vested and outstanding immediately prior to the Effective Time, will be deemed to have been exercised, on a net exercise basis with respect to the applicable exercise price and any required withholding or employment taxes thereon, immediately prior to the closing of the transactions contemplated by the merger agreement (the “Closing”) and settled in the applicable number of shares of Core Scientific common stock, rounded down to the nearest whole share, and such shares will be converted into the right to receive the merger consideration as described above;
|
• |
each option to purchase Core Scientific common stock held by a former employee or service provider of Core Scientific that is unvested and outstanding immediately prior to the Effective Time, except as set forth in the merger agreement, will be automatically canceled at the Closing without the payment of consideration;
|
• |
each warrant to purchase Core Scientific common stock that is issued, outstanding and unexercised immediately prior to the Effective Time (except as described above) will be assumed by XPDI and converted into a warrant to purchase shares of Class A Common Stock on the same terms and conditions as were applicable to the warrants to purchase Core Scientific common stock immediately prior to the Effective Time, equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Core Scientific common stock subject to such warrant immediately prior to the Effective Time and (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to the quotient of (x) the exercise price per share applicable to such warrant immediately prior to the Effective Time divided by (y) the Exchange Ratio;
|
• |
each restricted stock unit of Core Scientific issued and outstanding immediately prior to the Effective Time will be assumed by XPDI and converted into a restricted stock unit to be settled in shares of Class A Common Stock on the same terms and conditions as were applicable to such Core Scientific restricted stock unit immediately prior to the Effective Time, including applicable vesting conditions, equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Core Scientific common stock underlying such Core Scientific restricted stock unit immediately prior to the Effective Time and (ii) the Exchange Ratio;
|
• |
each option to purchase Core Scientific common stock issued and outstanding immediately prior to the Effective Time (except as set forth in the merger agreement and as described above) will be assumed by XPDI and converted into an option to purchase shares of Class A Common Stock on the same terms and conditions as were applicable to such Core Scientific option immediately prior to the Effective Time, including applicable vesting conditions, equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Core Scientific common stock subject to such Core Scientific option immediately prior to the Effective Time and (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to the quotient of (x) the exercise price per share of such Core Scientific option immediately prior to the Effective Time divided by (y) the Exchange Ratio; and
|
• |
each secured convertible promissory note issued by Core Scientific that is outstanding immediately prior to the Effective Time will be assumed by XPDI and remain outstanding (and Core Scientific or its successor by merger will remain an obligor with respect to such notes) and will be convertible into shares of Class A Common Stock (rather than equity securities of Core Scientific) in accordance with the terms of such secured convertible promissory note; provided, however, that with respect to any such outstanding secured convertible promissory note that Core Scientific receives a duly executed exercise of conversion in accordance with such secured convertible promissory note, exercising the right of such holder to convert such secured convertible promissory note subject to and conditioned upon the occurrence of the Effective Time, the outstanding principal amount and accrued interest as of the Effective Time with respect to such secured convertible promissory note will be converted into shares of Class A Common Stock, equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Core Scientific common stock issuable upon the conversion of such secured convertible promissory note in accordance with such secured convertible promissory note immediately prior to the Effective Time and (ii) the Exchange Ratio.
|
Sincerely, |
/s/ Patrick C. Eilers
|
Patrick C. Eilers |
Chief Executive Officer and Director |
1. |
The Business Combination Proposal
Annex
A
and
Annex B
, respectively (Proposal No. 1);
|
2. |
The Charter Proposal
Annex C
and the proposed second amended and restated bylaws (the “Proposed Bylaws”) in the form attached to the accompanying proxy statement/prospectus as
Annex D
, of XPDI after the merger (referred to herein as “New Core”) (Proposal No. 2);
|
3. |
The Governance Proposals
non-binding
advisory basis, certain governance provisions in the Proposed Charter, presented separately in accordance with the requirements of the Securities and Exchange Commission (“SEC”):
|
A. |
To increase the total number of shares of all classes of authorized capital stock from (i) 551,000,000, consisting of (a) 550,000,000 shares of common stock, including (1) 500,000,000 shares of Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), and (2) 50,000,000 shares of Class B common stock, par value $0.0001 per share (the “Class B Common Stock” and, together with the Class A Common Stock, the “XPDI common stock”), and (b) 1,000,000 shares of preferred stock, par value $0.0001 per share, to (ii) 12,000,000,000, consisting of (A) 10,000,000,000 shares of common stock, par value $0.0001 per share, and (B) 2,000,000,000 shares of preferred stock, par value $0.0001 per share (Proposal No. 3A);
|
B. |
To provide that any amendment to the Proposed Bylaws will require the approval of either New Core’s board of directors or the holders of at least 66 2/3% of the voting power of New Core’s then-outstanding shares of capital stock entitled to vote generally in an election of directors, voting together as a single class (Proposal No. 3B);
|
C. |
To provide that any amendment to certain provisions of the Proposed Charter will require the approval of the holders of at least 66 2/3% of the voting power of New Core’s then-outstanding shares of capital stock entitled to vote generally in an election of directors, voting together as a single class (Proposal No. 3C);
|
4. |
The Nasdaq Proposal
|
5. |
The Incentive Plan
Proposal
Annex I
(Proposal No. 5);
|
6. |
The ESPP Proposal
Annex J
(Proposal No. 6); and
|
7. |
The Adjournment Proposal
|
BY ORDER OF THE BOARD OF DIRECTORS |
/s/ Theodore J. Brombach
|
Theodore J. Brombach |
Chairman of the Board |
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• |
execute its business strategy, including monetization of services provided and expansions in and into existing and new lines of business;
|
• |
realize the benefits expected from the acquisition of Blockcap, including any related synergies;
|
• |
anticipate the uncertainties inherent in the development of new business lines and business strategies;
|
• |
retain and hire necessary employees;
|
• |
anticipate the impact of the COVID-19 pandemic, including variant strains of COVID-19, and its effect on business and financial conditions;
|
• |
manage risks associated with operational changes in response to the COVID-19 pandemic, including the emergence of variant strains of COVID-19;
|
• |
meet the closing conditions to the merger, including approval by stockholders of XPDI and Core Scientific on the expected terms and schedule;
|
• |
realize the benefits expected from the merger;
|
• |
increase brand awareness;
|
• |
attract, train and retain effective officers, key employees or directors;
|
• |
upgrade and maintain information technology systems;
|
• |
acquire and protect intellectual property;
|
• |
meet future liquidity requirements and comply with restrictive covenants related to long-term indebtedness;
|
• |
effectively respond to general economic and business conditions, including the price of bitcoin;
|
• |
maintain the listing on, or to prevent the delisting of XPDI’s securities from, the Nasdaq or an inability to have New Core’s securities listed on, or to maintain such listing on or to prevent the delisting of such securities from, the Nasdaq or another national securities exchange following the merger;
|
• |
obtain additional capital, including use of the debt market;
|
• |
enhance future operating and financial results;
|
• |
successfully execute expansion plans;
|
• |
anticipate rapid technological changes;
|
• |
comply with laws and regulations applicable to its business, including tax laws and laws and regulations related to data privacy and the protection of the environment;
|
• |
stay abreast of modified or new laws and regulations applicable to its business;
|
• |
anticipate the impact of, and response to, new accounting standards;
|
• |
anticipate the significance and timing of contractual obligations;
|
• |
maintain key strategic relationships with partners and distributors;
|
• |
respond to uncertainties associated with product and service development and market acceptance;
|
• |
anticipate the impact of changes in U.S. federal income tax laws, including the impact on deferred tax assets;
|
• |
successfully defend litigation; and
|
• |
successfully deploy the proceeds from the merger.
|
• |
any delay in the Closing of the merger;
|
• |
risks related to disruption of management’s time from ongoing business operations due to the proposed Transactions;
|
• |
litigation, complaints and/or adverse publicity;
|
• |
the impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability;
|
• |
increases and/or decreases in utility and other energy costs, increased costs related to utility or governmental requirements;
|
• |
privacy and data protection laws, privacy or data breaches or the loss of data; and
|
• |
the impact of the COVID-19 pandemic, including the emergence of new variant strains of COVID-19, and its effect on business and financial conditions of Core Scientific.
|
• |
“2021 Plan” are to the Core Scientific, Inc. 2021 Equity Incentive Plan, the approval of which is the subject of the Incentive Plan Proposal;
|
• |
“anchor investors” are to the following funds and accounts managed by subsidiaries of BlackRock, Inc.: The Obsidian Master Fund, HC NCBR Fund and Blackrock Credit Alpha Master Fund L.P.;
|
• |
“Blockcap” are to Blockcap, Inc., a Nevada corporation, prior to the Core/Blockcap merger;
|
• |
“Class A Common Stock” are to the Class A common stock, par value $0.0001 per share, of XPDI;
|
• |
“Class B Common Stock” are to the Class B common stock, par value $0.0001 per share, of XPDI;
|
• |
“Closing” are to the closing of the Transactions;
|
• |
“Core/Blockcap merger” are to the merger and the other transactions contemplated by the Core/Blockcap merger agreement;
|
• |
“Core/Blockcap merger agreement” are to that certain Agreement and Plan of Merger, dated July 15, 2021, by and among Core Scientific, Blockcap and the other parties thereto, pursuant to which, among other things, upon the terms and subject to the conditions set forth in therein, Block Merger Sub, Inc., a Delaware corporation and direct, wholly owned subsidiary of Core Scientific, merged with and into Blockcap, with Blockcap surviving as a wholly owned subsidiary of Core Scientific;
|
• |
“Core Scientific” are to Core Scientific Holding Co., a Delaware corporation, and its consolidated subsidiaries, including Core Scientific, Inc. and Blockcap, prior to the Effective Time;
|
• |
“Core Scientific common stock” are to the common stock, $0.00001 per share, of Core Scientific;
|
• |
“DGCL” are to the Delaware General Corporation Law;
|
• |
“Effective Time” are to the time at which the merger becomes effective;
|
• |
“ESPP” are to the Core Scientific, Inc. 2021 Employee Stock Purchase Plan, the approval of which is the subject of the ESPP Proposal;
|
• |
“Exchange Ratio” are to the quotient obtained by dividing (a) an amount equal to (x) $4.0 billion, divided by (y) the number of shares of Core Scientific common stock outstanding immediately prior to the Effective Time on a fully-diluted basis, by (b) $10.00;
|
• |
“First Merger” are to the proposed merger of First Merger Sub with and into Core Scientific, with Core Scientific surviving the First Merger as a wholly owned subsidiary of XPDI;
|
• |
“First Merger Sub” are to XPDI Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of XPDI;
|
• |
“Founder Shares” are to the shares of Class B Common Stock, initially purchased by the Sponsor in a private placement prior to XPDI’s Initial Public Offering and the shares of Class A Common Stock issuable upon the conversion thereof at the time of XPDI’s initial business combination;
|
• |
“GAAP” are to generally accepted accounting principles in the United States;
|
• |
“IPO” or “Initial Public Offering” are to the initial public offering of XPDI completed on February 12, 2021;
|
• |
“merger” are to the First Merger and the Second Merger;
|
• |
“merger agreement” are to that certain Agreement and Plan of Merger and Reorganization, dated as of July 20, 2021 (as amended on October 1, 2021, and as it may be further amended and/or restated from time to time), by and among XPDI, the Merger Subs and Core Scientific;
|
• |
“Merger Subs” are to First Merger Sub and Second Merger Sub;
|
• |
“Nasdaq” are to The Nasdaq Capital Market;
|
• |
“New Core” are to Core Scientific, Inc. (formerly Power & Digital Infrastructure Acquisition Corp.), after giving effect to the merger and the effectiveness of the Proposed Charter;
|
• |
“New Core common stock” are to, at and following the Effective Time, the common stock, par value $0.0001, of New Core;
|
• |
“Private Placement Warrants” are to the warrants of XPDI to purchase one share of Class A Common Stock, which warrants were purchased by the Sponsor and the anchor investors in a private placement that closed simultaneously with the IPO;
|
• |
“public shares” are to the shares of Class A Common Stock (whether purchased in the IPO or thereafter in the open market) sold as part of the units issued in the IPO;
|
• |
“public stockholders” are to the holders of the public shares;
|
• |
“public warrants” are to the warrants of XPDI (whether purchased in the IPO or thereafter in the open market) to purchase one share of Class A Common Stock, which warrants were sold as part of the units issued in the IPO;
|
• |
“SEC” are to the U.S. Securities and Exchange Commission;
|
• |
“Second Merger” are to the proposed merger of Core Scientific, as the surviving company in the First Merger, with and into Second Merger Sub, with Second Merger Sub surviving the Second Merger as a wholly owned subsidiary of XPDI, to occur promptly after the First Merger;
|
• |
“Second Merger Sub” are to XPDI Merger Sub 2, LLC, a Delaware limited liability company and wholly owned subsidiary of XPDI;
|
• |
“Special Meeting” are to the special meeting of the stockholders of XPDI that is the subject of this proxy statement/prospectus;
|
• |
“Sponsor” are to XPDI Sponsor LLC, a Delaware limited liability company;
|
• |
“Transactions” are to the transactions contemplated by the merger agreement, including the merger;
|
• |
“Trust Account” are to the trust account into which $345.0 million of the net proceeds of the IPO and certain proceeds from the concurrent sale of the Private Placement Warrants were deposited for the benefit of the public stockholders of XPDI;
|
• |
“units” are to the units of XPDI (whether purchased in the IPO or thereafter in the open market), consisting of one share of Class A Common Stock and one-fourth of one public warrant, with each whole public warrant exercisable for one share of Class A Common Stock;
|
• |
“we,” “us,” “our” and the “Company” refer to (i) XPDI prior to the consummation of the merger and (ii) New Core and its subsidiaries at and after the consummation of the merger;
|
• |
“XPDI” are to Power & Digital Infrastructure Acquisition Corp. before giving effect to the merger; and
|
• |
“XPDI common stock” are to, prior to the Effective Time, the Class A Common Stock and the Class B Common Stock, collectively.
|
i. |
no exercise of the 8,625,000 public warrants and 6,266,667 Private Placement Warrants that will remain outstanding following the merger, which will become exercisable at the holder’s option upon the later of (x) 30 days after Closing of the merger and (y) February 12, 2022, at an exercise
|
price of $11.50 per share, provided that XPDI has an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering the shares of New Core common stock issuable upon the exercise of such warrants and a current prospectus relating to them is available; |
ii. |
up to 297,426,315 shares of Class A Common Stock issuable as merger consideration to holders of Core Scientific common stock (including up to 11,333,364 shares of Class A Common Stock issuable as a result of the conversion of Core Scientific preferred stock into shares of Class A Common Stock immediately prior to the Effective Time);
|
iii. |
no exercise of any secured convertible or promissory notes of Core Scientific prior to the Effective Time;
|
iv. |
up to 6,587,459 shares of Class A Common Stock issuable upon the exercise of warrants to purchase shares of Class A Common Stock, which warrants will be issued upon the conversion of warrants to purchase shares of Core Scientific common stock in connection with the merger;
|
v. |
up to 3,327,324 shares of Class A Common Stock underlying restricted stock units (“RSUs”), which RSUs will be issued upon the conversion of Core Scientific RSUs in connection with the merger (and excluding 87,023,008 shares of Class A Common Stock underlying RSUs that may be issued following the merger if and upon the vesting of such RSUs);
|
vi. |
up to 6,141,916 shares of Class A Common Stock issuable upon the exercise of options, which options will be issued upon the conversion of Core Scientific options in connection with the merger (and excluding 4,556,356 shares of Class A Common Stock underlying options that may be issued following the merger if and upon the exercise of such options); and
|
vii. |
no public shares are redeemed, and the balance of the Trust Account as of the Effective Time is the same as its balance on September 30, 2021 of $345.0 million.
|
Q:
|
WHAT IS THE MERGER?
|
A: |
XPDI, the Merger Subs and Core Scientific have entered into the merger agreement. The merger agreement provides, among other things, for the merger of First Merger Sub with and into Core Scientific, with Core Scientific surviving the First Merger as a wholly owned subsidiary of XPDI. Promptly following the First Merger and in any event on the same day as the First Merger, Core Scientific will merge with and into Second Merger Sub, with Second Merger Sub surviving the Second Merger as a wholly owned subsidiary of XPDI.
|
Q:
|
WHY AM I RECEIVING THIS DOCUMENT?
|
A: |
XPDI is sending this proxy statement/prospectus to its stockholders to help them decide how to vote their shares of XPDI common stock with respect to the matters to be considered at the Special Meeting.
|
Q:
|
WHAT WILL HAPPEN TO XPDI’S SECURITIES UPON THE CONSUMMATION OF THE MERGER?
|
A: |
XPDI’s units, Class A Common Stock and public warrants are currently listed on Nasdaq under the symbols “XPDIU,” “XPDI” and “XPDIW,” respectively. At the Effective Time, the outstanding shares of Class B Common Stock will automatically convert into shares of Class A Common Stock on a one-for-one basis (which shares of Class A Common Stock will be reclassified as New Core common stock upon the consummation of the merger). Upon consummation of the merger, XPDI will change its name
|
to “Core Scientific, Inc.” and the New Core common stock will be listed on the Nasdaq Stock Market under the symbol “CORZ.” The New Core common stock will be the only outstanding class of common stock upon and following the consummation of the merger. Furthermore, upon consummation of the merger, XPDI’s public warrants will be listed on Nasdaq Stock Market under the symbol “CORZW.” The XPDI units (“XPDIU”) will not be traded on the Nasdaq following consummation of the merger and such units will automatically be separated into their component securities (“CORZ” and “CORZW”) without any action needed to be taken on the part of the holders of such units. XPDI warrantholders and those stockholders who do not elect to have their XPDI shares redeemed need not deliver their shares of Class A Common Stock or warrant certificates to XPDI or to XPDI’s transfer agent and such securities will remain outstanding. |
Q:
|
WILL I STILL OWN SECURITIES OF NEW CORE IF I REDEEM ALL OF MY PUBLIC SHARES?
|
A: |
Public stockholders who exercise redemption rights with respect to their shares of Class A Common Stock may still retain their public warrants, including any public warrants underlying their units. Under the terms of the merger agreement, these warrants will become warrants to purchase New Core common stock upon the completion of the merger and may be exercised by such redeeming public stockholders for shares of New Core common stock. Accordingly, such public stockholders would continue to be securityholders of New Core until they sell such warrants or such warrants are redeemed by New Core in accordance with their terms.
|
Q:
|
WHAT WILL CORE SCIENTIFIC STOCKHOLDERS RECEIVE IN THE MERGER?
|
A: |
At the Effective Time, each share of Core Scientific common stock (including common stock to be issued as a result of the conversion of Core Scientific preferred stock
|
convertible notes in connection with the merger) that is issued and outstanding immediately prior to the Effective Time (other than dissenting shares) will be cancelled and converted into the right to receive the applicable portion of the merger consideration, in accordance with an allocation schedule to be provided by Core Scientific (the “Allocation Schedule”), consisting of an aggregate number of shares of New Core common stock equal to $4.0 billion. See “
The Merger Agreement
—Merger Consideration
Conversion of Shares; Exchange Procedures
|
Q:
|
HOW WILL OUTSTANDING CORE SCIENTIFIC CONVERTIBLE NOTES BE TREATED IN THE MERGER?
|
A: |
At the Effective Time, each secured convertible promissory note issued by Core Scientific that is outstanding immediately prior to the Effective Time shall be assumed by XPDI and remain outstanding (and Core Scientific or its successor by merger shall remain an obligor with respect to such notes) and shall be convertible into shares of Class A Common Stock (rather than equity securities of Core Scientific) in accordance with the terms of such convertible promissory note; provided, however, that with respect to any outstanding convertible promissory notes for which Core Scientific receives a duly executed exercise of conversion in accordance with such convertible promissory note, exercising the right of such holder to convert such convertible promissory note subject to and conditioned upon the occurrence of the Effective Time, the outstanding principal amount and accrued interest as of the Effective Time with respect to such convertible promissory note shall be converted into shares of Class A Common Stock, equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Core Scientific common stock issuable upon the conversion of such convertible promissory note in accordance with such convertible promissory note immediately prior to the Effective Time and (ii) the Exchange Ratio.
|
Q:
|
HOW WILL OUTSTANDING CORE SCIENTIFIC EQUITY AWARDS BE TREATED IN THE MERGER?
|
A: |
At the Effective Time, each warrant to purchase Core Scientific common stock held by a former employee or service provider that is issued, outstanding and unexercised immediately prior to the Effective Time, except as set forth in the merger agreement, shall be deemed to have been exercised, on a net exercise basis with respect to the applicable exercise price and any required withholding or employment taxes thereon, immediately prior to the Closing and settled in the applicable number of shares of Core Scientific common stock, rounded down to the nearest whole share.
|
Q:
|
HOW WILL OUTSTANDING CORE SCIENTIFIC WARRANTS BE TREATED IN THE MERGER?
|
A: |
At the Effective Time, each warrant to purchase Core Scientific common stock that is issued, outstanding and unexercised immediately prior to the Effective Time (except as described below) shall be assumed by XPDI and converted into a warrant to purchase shares of Class A Common Stock on the same terms and conditions as were applicable to the warrants to purchase Core Scientific common stock immediately prior to the Effective Time, except as set forth in the merger agreement, equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Core Scientific common stock subject to such warrant immediately prior to the Effective Time and (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to the quotient of (x) the exercise price per share applicable to such warrant immediately prior to the Effective Time divided by (y) the Exchange Ratio. At the Effective Time, each warrant to purchase Core Scientific common stock held by a former employee or service provider that is issued, outstanding and unexercised immediately prior to the Effective Time, except as set forth in the merger agreement, shall be deemed to have been exercised, on a net exercise basis with respect to the applicable exercise price and any required withholding or employment taxes thereon, immediately prior to the Closing and settled in the applicable number of shares of Core Scientific common stock, rounded down to the nearest whole share.
|
Q:
|
WHEN WILL THE MERGER BE COMPLETED?
|
A: |
The parties currently expect that the merger will be completed during the fourth quarter of 2021. However, neither XPDI nor Core Scientific can assure you of when or if the merger will be completed and it is possible that factors outside of the control of both companies could result in the merger being completed at a different time or not at all. XPDI must first obtain the approval of XPDI stockholders with respect to each of the proposals set forth in this proxy statement/prospectus for their approval (other than the Governance Proposals and the Adjournment Proposal) and XPDI and Core Scientific must also first obtain certain necessary regulatory approvals and satisfy other closing conditions. See
“The
Merger Agreement
—Conditions to Closing of the Transactions”
|
Q:
|
HOW MANY SHARES OF CLASS A COMMON STOCK WILL BE ISSUED TO CORE SCIENTIFIC SECURITYHOLDERS IN CONNECTION WITH THE CONSUMMATION OF THE MERGER?
|
A: |
Up to 405,062,379 shares of Class A Common Stock are estimated to be issued to Core Scientific securityholders in connection with the consummation of the merger. Assuming conversion of the estimated outstanding principal amount of convertible promissory notes of Core Scientific at
|
December 31, 2021, approximately 66.4 million shares of Class A Common Stock would be issuable to the holders of such notes. |
Q:
|
WHAT HAPPENS TO CORE SCIENTIFIC STOCKHOLDERS IF THE MERGER IS NOT COMPLETED?
|
A: |
If the merger is not completed, Core Scientific stockholders will not receive any consideration for their shares of Core Scientific common stock, Core Scientific preferred stock will not be converted into Core Scientific common stock and there will not be any changes to the rights of those holding warrants or options to purchase Core Scientific common stock, RSUs of Core Scientific or secured convertible promissory notes issued by Core Scientific due to the merger. Instead, Core Scientific will remain an independent company. See
“The Merger Agreement
—Termination
Risk
Factors
|
Q:
|
WHAT AM I BEING ASKED TO VOTE ON AND WHY IS THIS APPROVAL NECESSARY?
|
A: |
XPDI stockholders are being asked to vote on the following proposals:
|
1. |
the Business Combination Proposal;
|
2. |
the Charter Proposal;
|
3. |
the Governance Proposals;
|
4. |
the Nasdaq Proposal;
|
5. |
the Incentive Plan Proposal;
|
6. |
the ESPP Proposal; and
|
7. |
the Adjournment Proposal.
|
Q:
|
WHY IS XPDI PROPOSING THE GOVERNANCE PROPOSALS?
|
A: |
As required by applicable SEC guidance, XPDI is requesting that its stockholders vote upon, on a
non-binding
advisory basis, a proposal to approve certain governance provisions contained in the Proposed Charter that may reasonably be considered to materially affect stockholder rights and therefore require a
non-binding
advisory basis vote pursuant to SEC guidance. This
non-binding
advisory vote is not otherwise required by Delaware law and is separate and apart from the Charter Proposal, but consistent with SEC guidance. XPDI is submitting these provisions to its stockholders separately for approval. However, the stockholder vote regarding this proposal is an advisory vote, and is not binding on XPDI or its board of directors (separate and apart from the approval of the Charter Proposal). Furthermore, the merger is not conditioned on the separate approval of the Governance Proposals (separate and apart from approval of the Charter Proposal). See the section titled “
Proposal
No.
3 — The Governance Proposals
|
Q:
|
WHY IS XPDI PROPOSING THE MERGER?
|
A: |
XPDI was organized to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses or entities.
|
Q:
|
DID THE XPDI BOARD OF DIRECTORS OBTAIN A THIRD-PARTY VALUATION OR FAIRNESS OPINION IN DETERMINING WHETHER OR NOT TO PROCEED WITH THE MERGER?
|
A: |
XPDI’s board of directors did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the merger. XPDI’s officers, directors and advisors have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and backgrounds enabled them to make the necessary analyses and determinations regarding the merger. In addition, XPDI’s officers, directors and advisors have substantial experience with mergers and acquisitions. Accordingly, investors will be relying solely on the judgment of XPDI’s board of directors and advisors in valuing Core Scientific’s business.
|
Q:
|
DO I HAVE REDEMPTION RIGHTS?
|
A: |
If you are a holder of shares of Class A Common Stock, you have the right to demand that XPDI redeem such shares for a pro rata portion of the cash held in the Trust Account, which holds the proceeds of the IPO (including aggregate fees of approximately $12.1 million payable to the underwriters of the IPO as deferred underwriting commissions) and certain of the proceeds from the private sale of the Private Placement Warrants consummated concurrently with the closing of the IPO, as of two (2) business days prior to the Special Meeting (including interest earned on the funds held in the Trust Account and not previously released to XPDI to pay taxes) upon the Closing (such rights, “redemption rights”).
|
Q:
|
WILL HOW I VOTE AFFECT MY ABILITY TO EXERCISE REDEMPTION RIGHTS?
|
A: |
No. You may exercise your redemption rights whether you vote your shares of Class A Common Stock for or against, or whether you abstain from voting on, the Business Combination Proposal or any other proposal described in this proxy statement/prospectus. As a result, the Business Combination Proposal can be approved by stockholders who will redeem their Class A Common Stock and no longer remain stockholders of XPDI and the merger may be consummated even though the funds available from the Trust Account and the number of public stockholders are substantially reduced as a result of redemptions by public stockholders. With fewer shares of Class A Common Stock outstanding and fewer public stockholders, the trading market for Class A Common Stock or New Core common stock, as applicable, may be less liquid than the market for such stock prior to the merger and XPDI or New Core, as applicable, may not be able to meet the listing standards of a national securities exchange. In addition, with fewer funds available from the Trust Account due to redemptions by public stockholders, the capital infusion from the Trust Account into New Core’s business will be reduced and the amount of working capital available to New Core following the merger may be reduced. Your decision to exercise your redemption rights with respect to shares of Class A Common Stock will have no effect on warrants of XPDI you may also hold.
|
Q:
|
HOW DO I EXERCISE MY REDEMPTION RIGHTS?
|
A: |
If you are a holder of Class A Common Stock and wish to exercise your redemption rights, you must demand that XPDI redeem your shares for cash no later than the second business day preceding the vote on the Business Combination Proposal by delivering your stock to XPDI’s transfer agent physically or electronically using Depository Trust Company’s (Deposit/Withdrawal At Custodian) (“DWAC”) system prior to the vote at the Special Meeting. The redemption rights include the requirement that a beneficial holder must identify itself in writing as a beneficial holder and provide its legal name, phone number and address to our transfer agent in order to validly redeem its shares. Any holder of Class A Common Stock will be entitled to demand that such holder’s shares be redeemed for a pro rata portion of the amount then in the Trust Account (which, for illustrative purposes, was approximately $345.0 million, or $10 per share, as of September 30, 2021). Such amount, including interest earned on the funds held in the Trust Account and not previously released to XPDI to pay its taxes, will be paid promptly upon consummation of the merger. However, under Delaware law, the proceeds held in the Trust Account could be subject to claims that could take priority over those of XPDI’s public stockholders exercising redemption rights, regardless of whether such holders vote for or against the Business Combination Proposal. Therefore, the
per-share
distribution from the Trust Account in such a situation may be less than originally anticipated due to such claims. Your vote on any proposal other than the Business Combination Proposal will have no impact on the amount you will receive upon exercise of your redemption rights.
|
Q:
|
WHAT HAPPENS TO THE FUNDS DEPOSITED IN THE TRUST ACCOUNT AFTER CONSUMMATION OF THE MERGER?
|
A: |
The net proceeds of the IPO, together with certain of the funds raised from the private sale of the Private Placement Warrants that occurred simultaneously with the consummation of the IPO, were placed in the Trust Account immediately following the IPO. After consummation of the merger, the funds in the Trust Account will be used to pay holders of the Class A Common Stock who exercise redemption rights, to pay fees and expenses incurred in connection with the merger (including aggregate fees of approximately $12.1 million as deferred underwriting commissions related to the IPO) and for New Core’s working capital and general corporate purposes.
|
Q:
|
WHAT HAPPENS IF THE MERGER IS NOT CONSUMMATED?
|
A: |
If XPDI does not complete the merger with Core Scientific for any reason, XPDI would search for another target business with which to complete its initial business combination. If XPDI does not complete the merger with Core Scientific or another target business by February 12, 2023, XPDI must redeem 100% of the outstanding shares of Class A Common Stock, at a
per-share
price, payable in cash, equal to the amount then held in the Trust Account (including interest earned on the funds held in the Trust Account and not previously released to XPDI to pay taxes) divided by the number of outstanding shares of Class A Common Stock. The Sponsor has no redemption rights in the event a business combination is not effected in the required time period and, accordingly, the Sponsor’s Founder Shares and Private Placement Warrants will be worthless. Additionally, in the event of such liquidation, there will be no distribution with respect to XPDI’s outstanding warrants. Accordingly, such warrants will expire worthless.
|
Q:
|
HOW DOES THE SPONSOR INTEND TO VOTE ON THE PROPOSALS?
|
A: |
The Sponsor owns of record and is entitled to vote an aggregate of approximately 19.7% of the outstanding shares of XPDI common stock. The Sponsor has agreed to vote any Founder Shares and any shares of Class A Common Stock held by it as of , 2021 (the “Record Date”), in favor of the proposals. See “
Other Agreements
—XPDI Letter Agreement
|
Q:
|
WHAT CONSTITUTES A QUORUM AT THE SPECIAL MEETING?
|
A: |
The presence, in person (including virtual presence) or by proxy, at the Special Meeting of holders of shares of outstanding XPDI common stock representing a majority of the voting power of all outstanding shares of XPDI common stock entitled to vote at the Special Meeting shall constitute a quorum for the transaction of business at the Special Meeting. Abstentions will be counted as present for the purpose of determining a quorum. Broker non-votes will not be counted as present for the purpose of determining the existence of a quorum at the Special Meeting. The holders of the Founder Shares, who currently own approximately 20% of the issued and outstanding shares of XPDI common stock, will count towards this quorum. In the absence of a quorum, the chairman of the Special Meeting has power to adjourn the Special Meeting. As of the Record Date for the Special Meeting, shares of XPDI common stock would be required to achieve a quorum.
|
Q:
|
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL AT THE XPDI SPECIAL MEETING?
|
A: |
The Business Combination Proposal:
Other Agreements
—XPDI Letter Agreement
|
Q:
|
DO ANY OF XPDI’S DIRECTORS OR OFFICERS HAVE INTERESTS IN THE MERGER THAT MAY DIFFER FROM OR BE IN ADDITION TO THE INTERESTS OF XPDI STOCKHOLDERS?
|
A: |
XPDI’s executive officers and directors may have interests in the merger that may be different from, or in addition to, the interests of XPDI stockholders generally. The XPDI board of directors was aware of and considered these interests to the extent such interests existed at the time, among other matters, in approving the merger agreement and in recommending that the merger agreement and the transactions contemplated thereby be approved by the stockholders of XPDI. See “
The Merger
—Interests of XPDI’s Directors and Officers in the Merger
|
Q:
|
WHAT DO I NEED TO DO NOW?
|
A: |
After carefully reading and considering the information contained in this proxy statement/prospectus, please submit your proxies as soon as possible so that your shares will be represented at the Special Meeting. Please follow the instructions set forth on the proxy card or on the voting instruction form provided by your broker, bank or other nominee if your shares are held in the name of your broker, bank or other nominee.
|
Q:
|
HOW DO I VOTE?
|
A: |
If you are a stockholder of record of XPDI as of , 2021, the Record Date for the Special Meeting, you may submit your proxy before the Special Meeting in any of the following ways, if available:
|
• |
use the toll-free number shown on your proxy card;
|
• |
visit the website shown on your proxy card to vote via the Internet; or
|
• |
complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.
|
Q:
|
WHEN AND WHERE IS THE SPECIAL MEETING?
|
A: |
The Special Meeting will be held on , 2021, unless postponed or adjourned to a later date. In light of the
COVID-19
pandemic, and the emergence of new variant strains of
COVID-19,
and to support the well-being of XPDI’s stockholders and partners, the Special Meeting will be held virtually. All XPDI stockholders as of the Record Date, or their duly appointed proxies, may attend the Special Meeting. Registration will begin at Central Time.
|
Q:
|
HOW CAN XPDI’S STOCKHOLDERS ATTEND THE SPECIAL MEETING?
|
A: |
As a registered stockholder of XPDI, you received a Notice and Access instruction form or proxy card from Continental Stock Transfer & Trust Company (“CST”). Both the form and the proxy card contain instructions on how to attend the virtual Special Meeting, including the URL address, along with your control number. You will need your control number for access. If you do not have your control number, contact CST at the phone number or
e-mail
address below. You can contact CST by phone at (917) 262-2373 or by
e-mail
at proxy@continentalstock.com.
|
Q:
|
WHY IS THE SPECIAL MEETING A VIRTUAL MEETING?
|
A: |
XPDI has decided to hold the Special Meeting virtually due to the
COVID-19
pandemic and the emergence of new variant strains of
COVID-19.
XPDI is sensitive to the public health and travel concerns of XPDI’s stockholders and employees and the protocols that federal, state and local governments may impose. XPDI believes that hosting a virtual meeting will enable greater stockholder attendance and participation from any location around the world.
|
Q:
|
WHAT IF DURING THE
CHECK-IN
TIME OR DURING THE SPECIAL MEETING I HAVE TECHNICAL DIFFICULTIES OR TROUBLE ACCESSING THE VIRTUAL MEETING WEBSITE?
|
A: |
If you encounter any difficulties accessing the virtual Special Meeting during the
check-in
or at the meeting time, please call the technical support number at (917) 262-2373. Technical support will be available starting at 7:00 a.m. Central Time on , 2021.
|
Q:
|
IF MY SHARES ARE HELD IN “STREET NAME” BY A BROKER, BANK OR OTHER NOMINEE, WILL MY BROKER, BANK OR OTHER NOMINEE VOTE MY SHARES FOR ME?
|
A: |
If your shares are held in “street name” in a stock brokerage account or by a broker, bank or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to XPDI or by voting online at the Special Meeting unless you provide a “legal proxy,” which you must obtain from your broker, bank or other nominee.
|
Q:
|
WHAT HAPPENS IF I SELL MY SHARES OF CLASS A COMMON STOCK BEFORE THE SPECIAL MEETING?
|
A: |
The Record Date for the Special Meeting will be earlier than the date of the Special Meeting. If you transfer your shares of Class A Common Stock after the Record Date, but before the Special Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Special Meeting. However, you will not be able to seek redemption of your shares of Class A Common Stock because you will no longer be able to deliver them for cancellation upon the consummation of the merger in accordance with the provisions described herein. If you transfer your shares of Class A Common Stock prior to the Record Date, you will have no right to vote those shares at the Special Meeting or redeem those shares for a pro rata portion of the proceeds held in the Trust Account.
|
Q:
|
WHAT IF I ATTEND THE SPECIAL MEETING AND ABSTAIN OR DO NOT VOTE?
|
A: |
For purposes of the Special Meeting, an abstention occurs when a stockholder virtually attends the Special Meeting online and does not vote or returns a proxy with an “abstain” vote.
|
Q:
|
WHAT WILL HAPPEN IF I RETURN MY PROXY CARD WITHOUT INDICATING HOW TO VOTE?
|
A: |
If you sign and return your proxy card without indicating how to vote on any particular proposal the XPDI common stock represented by your proxy will be voted as recommended by the XPDI board of directors with respect to that proposal.
|
Q:
|
MAY I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY OR VOTING INSTRUCTION CARD?
|
A: |
Yes. You may change your vote at any time before your proxy is voted at the Special Meeting. You may do this in one of three ways:
|
• |
submitting a notice to XPDI;
|
• |
mailing a new, subsequently dated proxy card; or
|
• |
by attending the Special Meeting virtually and electing to vote your shares online.
|
Q:
|
WHAT HAPPENS IF I FAIL TO TAKE ANY ACTION WITH RESPECT TO THE SPECIAL MEETING?
|
A: |
If you fail to take any action with respect to the Special Meeting and the merger is approved by stockholders and consummated, you will continue to be a stockholder of New Core. Failure to take any action with respect to the Special Meeting will not affect your ability to exercise your redemption rights. If you fail to take any action with respect to the Special Meeting and the merger is not approved, you will continue to be a stockholder of XPDI while XPDI searches for another target business with which to complete a business combination.
|
Q:
|
WHAT SHOULD I DO IF I RECEIVE MORE THAN ONE SET OF VOTING MATERIALS?
|
A: |
Stockholders may receive more than one (1) set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one (1) brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered under more than one (1) name, you will receive more than one (1) proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your shares.
|
Q:
|
WHOM SHOULD I CONTACT IF I HAVE ANY QUESTIONS ABOUT THE PROXY MATERIALS OR VOTING?
|
A: |
If you have any questions about the proxy materials, need assistance submitting your proxy or voting your shares or need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact Morrow Sodali LLC, the proxy solicitation agent for XPDI, toll-free at
(800) 662-5200
(banks and brokers call (203) 658-9400), or email Morrow Sodali LLC at XPDI.info@investor.morrowsodali.com.
|
• |
the early termination or expiration of the waiting period under the HSR Act;
|
• |
no order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any governmental authority, and no statute, rule or regulation that is in effect and enjoins, prohibits or makes illegal the consummation of the Transactions;
|
• |
XPDI having at least $5,000,001 of net tangible assets immediately after the Effective Time;
|
• |
the Class A Common Stock being approved for listing on the Nasdaq, subject only to official notice of issuance, and immediately following the Effective Time, XPDI shall satisfy any applicable initial and continuing listing requirements of Nasdaq and XPDI shall not have received any notice of
non-compliance
therewith that has not been cured prior to, or would not be cured at or immediately following the Effective Time; and
|
• |
the closing of the Core/Blockcap merger has occurred in accordance with the terms of the Core/Blockcap merger agreement.
|
• |
the accuracy of the representations and warranties of Core Scientific (subject to customary bring-down standards);
|
• |
the covenants of Core Scientific having been performed in all material respects;
|
• |
the occurrence of no Material Adverse Effect (as defined in the merger agreement); and
|
• |
the delivery by Core Scientific to XPDI of a certificate with respect to the truth and accuracy of Core Scientific’s representations and warranties as of the Closing, as well as the performance by Core Scientific of the covenants and agreements contained in the merger agreement required to be complied with by such party prior to the Closing.
|
• |
the accuracy of the representations and warranties of XPDI, First Merger Sub and Second Merger Sub (subject to customary bring-down standards);
|
• |
the covenants of XPDI, First Merger Sub and Second Merger Sub having been performed in all material respects;
|
• |
the delivery by XPDI to Core Scientific of a certificate with respect to the truth and accuracy of XPDI’s, First Merger Sub’s and Second Merger Sub’s representations and warranties as of the Closing, as well as the performance by each such party of the covenants and agreements contained in the merger agreement required to be complied with by such party prior to the Closing;
|
• |
the covenants of the Sponsor required under the Sponsor Agreement (as defined below) having been performed in all material respects;
|
• |
the directors and officers of XPDI listed on Schedule 9.03(g) to the merger agreement having been removed; and
|
• |
XPDI having terminated the existing registration agreement and replaced it with the Amended and Restated Registration Rights Agreement (as defined below).
|
• |
by mutual written consent of XPDI and Core Scientific;
|
• |
by either XPDI or Core Scientific, if a final,
non-appealable
governmental order or a statute, rule or regulation permanently restrains, enjoins, makes illegal or otherwise prohibits consummation of the Transactions;
|
• |
by either XPDI or Core Scientific, if the Transactions are not consummated on or before March 21, 2022 (the “Termination Date”), provided that the right to terminate the merger agreement on the Termination Date will not be available to any party whose breach of any provision of the merger agreement is the primary cause of, or primarily resulted in, the failure of the closing of the Transactions to occur on or before the Termination Date;
|
• |
by either XPDI or Core Scientific, if the Stockholder Approval is not obtained at the Special Meeting (or at a meeting following any adjournment or postponement thereof), provided that XPDI is not entitled to terminate on these grounds if, at the time of such termination, XPDI, First Merger Sub or Second Merger Sub is in breach of certain obligations with respect to this proxy statement/prospectus and the Special Meeting and such breach is the primary cause of the failure to obtain the required Stockholder Approval;
|
• |
by XPDI, if Core Scientific has breached or failed to perform any of its covenants, representations, warranties or other agreements contained in the merger agreement which breach or failure to perform (i) would result in the failure of a condition to Closing to be satisfied and (ii) is not capable of being cured by the Termination Date, or, if curable, is not cured by Core Scientific, as applicable, before the earlier of (a) the fifth business day immediately prior to the Termination Date and (b) the 13th day following receipt of written notice from XPDI of such breach or failure to perform; provided, that XPDI shall not have the right to terminate the merger agreement if it is then in material breach of any representations, warranties, covenants or other agreements contained in the merger agreement that would result in the failure of a condition to Closing to be satisfied if the Closing was scheduled to occur;
|
• |
by Core Scientific, if XPDI or either of the Merger Subs has breached or failed to perform any of their respective covenants, representations, warranties or other agreements contained in the merger agreement which breach or failure to perform (i) would result in the failure of a condition to Closing to be satisfied and (ii) is not capable of being cured by the Termination Date, or, if curable, is not cured by XPDI, First Merger Sub or Second Merger Sub, as applicable, before the earlier of (a) the fifth business day immediately prior to the Termination Date and (b) the 13th day following receipt of written notice from Core Scientific of such breach or failure to perform; provided, that Core Scientific shall not have the right to terminate the merger agreement if it is then in material breach of any representations, warranties, covenants or other agreements contained in the merger agreement that would result in the failure of a condition to Closing to be satisfied if the Closing were scheduled to occur;
|
• |
by XPDI, if Core Scientific has not delivered written consents of certain Core Scientific stockholders approving the merger as required by the merger agreement;
|
• |
by Core Scientific, at any time within five business days following a Change in Recommendation (as defined in the merger agreement).
|
Share Ownership in
New Core
(1)
No Redemptions
(2)
|
Maximum Redemption
(3)
|
|||||||||||||||
Number of
Shares |
Percentage of
Outstanding Shares |
Number of
Shares |
Percentage of
Outstanding Shares |
|||||||||||||
(in thousands)
|
(in thousands)
|
|||||||||||||||
Former equityholders of Core Scientific
|
299,012 | 87.4% | 299,012 | 97.2% | ||||||||||||
XPDI’s public stockholders
|
34,500 | 10.1 | % | 0 | 0 | % | ||||||||||
Holders of XPDI’s Founder Shares
|
8,625 | 2.5 | % | 8,625 | 2.8 | % |
(1) |
Percentages may not sum to 100% due to rounding. Figures and percentages do not give effect to the shares reserved for issuance under the 2021 Plan. See “
Proposal No.
5
—The Incentive Plan Proposal”
Basis of Presentation and Glossary
|
(2) |
This scenario assumes that no shares of Class A Common Stock are redeemed.
|
(3) |
This scenario assumes that 34,500,000 shares of Class A Common Stock are redeemed.
|
• |
Scenario 1—Assuming No Redemptions:
|
• |
Scenario 2—Assuming 100% Redemptions:
|
December 31, 2020
|
||||||||||||||||||||||||||||||||
Blockcap
Historical
|
Core
Scientific Historical |
Core
Scientific Pro Forma Combined |
XPDI
Historical |
Pro Forma
Combined New Core No Redemption |
Pro Forma
Equivalent New Core No Redemption |
Pro Forma
Combined New Core
100%
Redemption |
Pro Forma
Equivalent New Core
100%
Redemption |
|||||||||||||||||||||||||
Earnings (loss) per share for
the twelve months
ended December 31, 2020:
|
||||||||||||||||||||||||||||||||
Net income (loss) per share (Basic and Diluted)
(1)
|
$ | (0.56 | ) | $ | (0.23 | ) | $ | (0.57 | ) | $ | 0.00 | $ | (0.40 | ) | $ | (0.27 | ) | $ | (0.61 | ) | $ | (0.39 | ) |
(1) |
Potentially dilutive securities are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive.
|
Blockcap
(Historical) for the period January 1, 2021 through July 30, 2021 |
Core
Scientific Historical |
Core
Scientific Pro Forma Combined |
XPDI
Historical |
Pro Forma
Combined New Core No Redemption |
Pro Forma
Equivalent New Core No Redemption |
Pro Forma
Combined New Core
100%
Redemption |
Pro Forma
Equivalent New Core
100%
Redemption |
|||||||||||||||||||||||||
Earnings per share for
the nine months
ended September 30, 2021:
|
||||||||||||||||||||||||||||||||
Net income (loss) per share (Basic and Diluted)
(1)
|
$ | (0.13 | ) | $ | (0.15 | ) | $ | (0.32 | ) | $ | (0.51 | ) | $ | (0.33 | ) | $ | (0.22 | ) | $ | (0.39 | ) | $ | (0.25 | ) |
(1) |
Potentially dilutive securities are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive.
|
• |
Core Scientific’s business is, and New Core’s business after the consummation of the merger will be, highly dependent on a small number of digital asset mining equipment suppliers.
|
• |
The potential inability of Core Scientific or New Core to obtain new hosting and transaction processing hardware or purchase such hardware at competitive prices during times of high demand.
|
• |
The future price of bitcoin.
|
• |
Increases in power costs or Core Scientific’s or New Core’s inability to mine digital assets efficiently and to sell digital assets at favorable prices.
|
• |
A slowdown in the demand for blockchain technology or blockchain hosting resources.
|
• |
Social, political, economic and other events and circumstances in countries outside of the United States, most particularly China and other
non-Western
countries.
|
• |
Core Scientific’s historical revenue comes from a small number of customers.
|
• |
The need for significant electric power and the limited availability of power resources.
|
• |
The successful integration of Blockcap and its subsidiary RADAR.
|
• |
Failure in the critical systems of Core Scientific’s or New Core’s hosting facilities or services provided by Core Scientific or New Core.
|
• |
Operating in a rapidly developing industry and have an evolving business model with a limited history of generating revenue from services.
|
• |
Regulatory changes or actions may restrict the use of digital assets or the operation of digital asset networks in a manner that may require Core Scientific or New Core to cease certain or all operations.
|
• |
Digital asset transactions are irrevocable and, if stolen or incorrectly transferred, digital assets may be irretrievable.
|
• |
If the award of new digital assets and/or transaction fees for solving blocks is not sufficiently high to incentivize transaction processors, such processors may reduce or cease expending processing power on a particular network, which could negatively impact the utility of the network and reduce the value of its digital assets.
|
• |
Malicious actors or botnet may obtain control of more than 50% of the processing power on the Bitcoin or other network.
|
• |
The “halving” of rewards available on the Bitcoin network, or the reduction of rewards on other networks, has had and in the future could have a negative impact on Core Scientific’s or New Core’s, as applicable, ability to generate revenue as customers may not have an adequate incentive to continue transaction processing and customers may cease transaction processing operations altogether.
|
• |
The volatility of digital assets.
|
• |
A “soft fork” or “hard fork” (as described below) on a network.
|
• |
XPDI and Core Scientific have identified material weaknesses in their respective internal controls over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control, which may result in material misstatements of the New Core’s financial statements or cause it to fail to meet its periodic reporting obligations.
|
• |
The consummation of the merger is subject to a number of conditions and if those conditions are not satisfied or waived, the merger agreement may be terminated in accordance with its terms and the merger may not be completed.
|
• |
there is a reduction in the demand for our services due to macroeconomic factors in the markets in which we operate;
|
• |
we fail to provide competitive pricing terms or effectively market them to potential customers;
|
• |
we provide hosting services that are deemed by existing and potential customers or suppliers to be inferior to those of our competitors, or that fail to meet customers’ or suppliers’ ongoing and evolving program qualification standards, based on a range of factors, including available power, preferred design features, security considerations and connectivity;
|
• |
businesses decide to host internally as an alternative to the use of our services;
|
• |
we fail to successfully communicate the benefits of our services to potential customers;
|
• |
we are unable to strengthen awareness of our brand;
|
• |
we are unable to provide services that our existing and potential customers desire; or
|
• |
our customers are unable to secure an adequate supply of new generation digital asset mining equipment to host with us.
|
• |
a decline in the adoption and use of bitcoin and other similar digital assets within the technology industry or a decline in value of digital assets;
|
• |
increased costs of complying with existing or new government regulations applicable to digital assets and other factors;
|
• |
a downturn in the market for blockchain hosting space generally, which could be caused by an oversupply of or reduced demand for blockchain space;
|
• |
any transition by our customers of blockchain hosting from third-party providers like us to customer-owned and operated facilities;
|
• |
the rapid development of new technologies or the adoption of new industry standards that render our or our customers’ current products and services obsolete or unmarketable and, in the case of our customers, that contribute to a downturn in their businesses, increasing the likelihood of a default under their service agreements or their becoming insolvent;
|
• |
a slowdown in the growth of the Internet generally as a medium for commerce and communication;
|
• |
availability of an adequate supply of new generation digital asset mining equipment to enable us to mine digital assets at scale and for customers who want to host with us to be able to do so; and
|
• |
the degree of difficulty in mining digital assets and the trading price of such assets.
|
• |
inability or difficulty integrating and benefiting from acquired technologies or solutions in a profitable manner, including as a result of reductions in operating income, increases in expenses, failure to achieve synergies or otherwise;
|
• |
unanticipated costs or liabilities associated with Blockcap and RADAR or another acquisition or strategic partnership;
|
• |
difficulty integrating the accounting systems, operations and personnel of Blockcap and RADAR;
|
• |
adverse effects to our existing business relationships and clients or to Blockcap’s business relationships and clients as a result of the acquisition;
|
• |
loss of key employees, particularly those of Blockcap and RADAR;
|
• |
assumption of potential liabilities of Blockcap and RADAR, including regulatory noncompliance or acquired litigation, and expenses relating to contractual disputes of the acquired business for, infringement of intellectual property rights, data privacy violations or other claims;
|
• |
difficulty in acquiring suitable businesses, including challenges in predicting the value an acquisition will ultimately contribute to our business; and
|
• |
use of substantial portions of our available cash or assumption of additional indebtedness to consummate an acquisition.
|
• |
power loss;
|
• |
equipment failure;
|
• |
human error or accidents;
|
• |
theft, sabotage and vandalism;
|
• |
failure by us or our suppliers to provide adequate service or maintain our equipment;
|
• |
network connectivity downtime and fiber cuts;
|
• |
service interruptions resulting from server relocation;
|
• |
security breaches of our infrastructure;
|
• |
improper building maintenance by us;
|
• |
physical, electronic and cybersecurity breaches;
|
• |
animal incursions;
|
• |
fire, earthquake, hurricane, tornado, flood and other natural disasters;
|
• |
extreme temperatures;
|
• |
water damage;
|
• |
public health emergencies; and
|
• |
terrorism.
|
• |
continued worldwide growth in the adoption and use of digital assets and blockchain technologies;
|
• |
government and quasi-government regulation of digital assets and their use, or restrictions on or regulation of access to and operations of digital asset transaction processing;
|
• |
changes in consumer demographics and public tastes and preferences;
|
• |
the maintenance and development of the open-source software protocols or similar digital asset systems;
|
• |
the availability and popularity of other forms or methods of buying and selling goods and services, or trading assets including new means of using fiat currencies;
|
• |
general economic conditions and the regulatory environment relating to digital assets; and
|
• |
negative consumer perception of digital assets, including digital assets specifically and digital assets generally.
|
• |
identify and acquire desirable properties that we are interested in from developers;
|
• |
offer hosting services at prices below current market rates or below the prices we currently charge our customers;
|
• |
bundle colocation services with other services or equipment they provide at reduced prices;
|
• |
develop superior products or services, gain greater market acceptance and expand their service offerings more efficiently or rapidly;
|
• |
adapt to new or emerging technologies and changes in customer requirements more quickly;
|
• |
take advantage of acquisition and other opportunities more readily; and
|
• |
adopt more aggressive pricing policies and devote greater resources to the promotion, marketing and sales of their services.
|
• |
it is an “orthodox” investment company because it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or
|
• |
it is an inadvertent investment company because, absent an applicable exemption, it owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
|
• |
global digital asset supply;
|
• |
global digital asset demand, which can be influenced by the growth of retail merchants’ and commercial businesses’ acceptance of digital assets as payment for goods and services, the security of online digital asset exchanges and digital wallets that hold digital assets, the perception that the use and holding of digital assets is safe and secure, and the regulatory restrictions on their use;
|
• |
investors’ expectations with respect to the rate of inflation of fiat currencies;
|
• |
investors’ expectations with respect to the rate of deflation of digital assets;
|
• |
cyber theft of digital assets from online wallet providers, or news of such theft from such providers or from individuals’ online wallets;
|
• |
the availability and popularity of businesses that provide digital asset-related services;
|
• |
fees associated with processing a digital asset transaction;
|
• |
changes in the software, software requirements or hardware requirements underlying digital assets;
|
• |
changes in the rights, obligations, incentives, or rewards for the various participants in digital asset mining;
|
• |
interest rates;
|
• |
currency exchange rates, including the rates at which digital assets may be exchanged for fiat currencies;
|
• |
fiat currency withdrawal and deposit policies on digital asset exchanges and liquidity on such exchanges;
|
• |
interruptions in service or failures of major digital asset exchanges;
|
• |
investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in digital assets;
|
• |
momentum pricing;
|
• |
monetary policies of governments, trade restrictions, currency devaluations and revaluations;
|
• |
regulatory measures, if any, that affect the use of digital assets, restrict digital assets as a form of payment, or limit the purchase of digital assets;
|
• |
global or regional political, economic or financial events and conditions;
|
• |
expectations that the value of digital assets will change in the near or long term. A decrease in the price of a single digital asset may cause volatility in the entire digital asset industry and may affect other digital assets. For example, a security breach that affects investor or user confidence in bitcoin, ethereum, litecoin or another digital asset may affect the industry as a whole and may also cause the price of other digital assets to fluctuate; or
|
• |
with respect to bitcoin, increased competition from other forms of digital assets or payments services.
|
• |
price and volume fluctuations in the overall stock market from time to time;
|
• |
volatility in the trading prices and trading volumes of technology stocks;
|
• |
volatility in the price of bitcoin and other digital assets;
|
• |
changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;
|
• |
sales of shares of our common stock by us or our stockholders;
|
• |
failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
|
• |
the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections;
|
• |
announcements by us or our competitors of new products, features, or services;
|
• |
the public’s reaction to our press releases, other public announcements and filings with the SEC;
|
• |
rumors and market speculation involving us or other companies in our industry;
|
• |
actual or anticipated changes in our results of operations or fluctuations in our results of operations;
|
• |
actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;
|
• |
litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors;
|
• |
developments or disputes concerning our intellectual property or other proprietary rights;
|
• |
announced or completed acquisitions of businesses, products, services or technologies by us or our competitors;
|
• |
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
|
• |
changes in accounting standards, policies, guidelines, interpretations or principles;
|
• |
any significant change in our management; and
|
• |
general economic conditions and slow or negative growth of our markets.
|
• |
the ability of New Core’s board of directors to issue one or more series of preferred stock;
|
• |
advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at New Core’s annual meetings;
|
• |
certain limitations on convening special stockholder meetings;
|
• |
limiting the persons who may call special meetings of stockholders;
|
• |
limiting the ability of stockholders to act by written consent; and
|
• |
New Core’s board of directors have the express authority to make, alter or repeal the Proposed Bylaws.
|
• |
Core Scientific or XPDI may experience negative reactions from the financial markets, including negative impacts on XPDI’s stock price (including to the extent that the current market price reflects a market assumption that the merger will be completed);
|
• |
Core Scientific may experience negative reactions from its customers and employees;
|
• |
Core Scientific and XPDI will have incurred substantial expenses and will be required to pay certain costs relating to the merger, whether or not the merger is completed; and
|
• |
Since the merger agreement restricts the conduct of Core Scientific’s and XPDI’s businesses prior to completion of the merger, each of Core Scientific and XPDI may not have been able to take certain actions during the pendency of the merger that would have benefitted it as an independent company, and the opportunity to take such actions may no longer be available (see the section entitled “
The Merger Agreement
—Covenants
|
• |
The merger, which includes the merger of XPDI and the Merger Subs with Core Scientific;
|
• |
Core Scientific’s acquisition of Blockcap (described below), including any elimination of the effect of transactions between Core Scientific and Blockcap, as required, is included in the Core Scientific historical financial statements as of and for the nine months ended September 30, 2021. The pro forma impact to the Statement of Operations had the acquisition taken place on January 1, 2020 is included as an adjustment for the nine months ended September 30, 2021 and the twelve months ended December 31, 2020.
|
• |
The issuance by Core Scientific of secured convertible notes in April, 2021, net of the repayment of the existing Core Scientific loan (the “Silverpeak loan”) and the issuance in August and September, 2021 of unsecured convertible notes is included in the Core Scientific historical financial statements as of and for the nine months ended September 30, 2021. The pro forma impact to interest expense for the nine months ended September 30, 2021 and the twelve months ended December 31, 2020 is included as an adjustment. Also included as pro forma adjustments is the impact of additional issuance of unsecured convertible notes during October and November of 2021.
|
• |
the historical unaudited financial statements of XPDI as of and for the nine months ended September 30, 2021 and the related notes, which are included elsewhere in this proxy statement/prospectus;
|
• |
the historical audited financial statements of XPDI as of and for the period from December 29, 2020 (inception) through December 31, 2020 and the related notes, which are included elsewhere in this proxy statement/prospectus;
|
• |
the historical unaudited financial statements of Core Scientific as of and for the nine months ended September 30, 2021 and the related notes, which are included elsewhere in this proxy statement/prospectus;
|
• |
the historical audited financial statements of Core Scientific as of and for the year ended December 31, 2020 and the related notes, which are included elsewhere in this proxy statement/prospectus;
|
• |
the historical unaudited financial statements of Blockcap for the period from January 1, 2021 through the acquisition date of July 30, 2021;
|
• |
the historical audited financial statements of Blockcap as of and for the year ended December 31, 2020 and the related notes, which are included elsewhere in this proxy statement/prospectus;
|
• |
the historical audited financial statements of RME Black 88, LLC (“RME 88”), RME Black 100 LLC (“RME 100”), RME Black 200 (“RME 200”) and BEP 888 LLC (“BEP 888”) as of and for the periods from inception through December 31, 2020 and the related notes, which are included elsewhere in this proxy statement/prospectus; and
|
• |
other information relating to XPDI and Core Scientific contained in this proxy statement/prospectus, including the merger agreement and the description of certain terms thereof set forth in the section entitled “
The Merger Agreement.
|
• |
Scenario 1—Assuming No Redemptions:
|
• |
Scenario 2—Assuming Maximum Redemptions:
|
Share Ownership in New Core
|
||||||||||||||||
Scenario 1 – Assuming
No Redemptions |
Scenario 2 – Assuming
Maximum Redemptions |
|||||||||||||||
amounts in thousands
|
Shares
|
% of
Total |
Shares
|
% of
Total |
||||||||||||
Core Scientific shareholders (1)
|
|
299,012
|
|
|
87.4
|
%
|
|
299,012
|
|
|
97.2
|
%
|
||||
|
|
|
|
|
|
|
|
|||||||||
XPDI:
|
||||||||||||||||
XPDI Class A shares
|
34,500 | 10.1 | % | — | 0.0 | % | ||||||||||
XPDI Class B shares converted to Class A (2)
|
8,625 | 2.5 | % | 8,625 | 2.8 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
XPDI shareholders
|
|
43,125
|
|
|
12.6
|
%
|
|
8,625
|
|
|
2.8
|
%
|
||||
|
|
|
|
|
|
|
|
|||||||||
Closing Shares (3)
|
|
342,137
|
|
|
100.0
|
%
|
|
307,637
|
|
|
100.0
|
%
|
||||
|
|
|
|
|
|
|
|
(1) |
Includes equivalent Core Scientific common shares exchanged for New Core shares using the exchange rate of 1.5948274216 consisting of:
|
a. |
Core Scientific common shares of 157,685
|
b. |
Core Scientific common shares from settled warrants and options of 5,865
|
c. |
Core Scientific common shares from vested RSU settled of 1,133
|
d. |
Core Scientific common shares from convertible Series A and B preferred stock of 10,790
|
e. |
Core Scientific vested RSUs, warrants and options of 2,891
|
f. |
Blockcap equivalent Core Scientific common shares of 115,124
|
g. |
Blockcap equivalent Core Scientific common shares from settled options of 1,048
|
h. |
Blockcap equivalent Core Scientific common shares from vested RSUs of 1,949
|
i. |
Blockcap equivalent Core Scientific vested options of 2,527
|
(2) |
Includes 1,725 Class B common shares that will be converted to Class A unvested shares and will vest upon the date on which the volume-weighted average price of the Class A Common Stock is greater than $12.50 per share for any 20 trading days within any 30 consecutive trading day period within five years of the Closing date. The unvested shares will be excluded from pro forma earnings per share calculations because the stock price threshold contingency has not yet been met.
|
(3) |
Excludes Core Scientific and Blockcap equivalent Core Scientific common shares from unvested RSUs of 97,485 and 4,839, respectively, and 21,032 and 1,290 from unvested options, respectively, using the exchange rate of 1.5948274216 and all other potentially dilutive securities including Core Scientific options, warrants, restricted stock units and convertible notes as well as XPDI warrants. See Note 5
—
|
September 30, 2021
|
September 30, 2021
|
September 30, 2021
|
||||||||||||||||||||||||||||||
in thousands
|
Core Scientific
Pro Forma
(Note 2)
|
XPDI
(Historical)
|
Merger
Adjustments: No Redemption |
Pro Forma
Combined: No Redemption |
Merger
Adjustments: 100% Redemption |
Pro Forma
Combined:
100%
Redemption
|
||||||||||||||||||||||||||
Hosting revenue from customers
|
$ | 39,914 | $ | — | $ | — | $ | 39,914 | $ | — | $ | 39,914 | ||||||||||||||||||||
Equipment sales to customers
|
95,741 | — | — | 95,741 | — | 95,741 | ||||||||||||||||||||||||||
Digital asset mining income
|
149,541 | — | — | 149,541 | — | 149,541 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total revenue
|
285,196 | — | — | 285,196 | — | 285,196 | ||||||||||||||||||||||||||
Costs of revenue
|
136,002 | — | — | 136,002 | — | 136,002 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Gross profit
|
149,194 | — | — | 149,194 | — | 149,194 | ||||||||||||||||||||||||||
(Loss) gain on legal settlements
|
(2,603 | ) | — | — | (2,603 | ) | — | (2,603 | ) | |||||||||||||||||||||||
Gain (loss) from sales of digital currency assets
|
550 | — | — | 550 | — | 550 | ||||||||||||||||||||||||||
Impairment of digital currency assets
|
(30,024 | ) | — | — | (30,024 | ) | — | (30,024 | ) | |||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
Research and development
|
4,231 | — | — | 4,231 | — | 4,231 | ||||||||||||||||||||||||||
Sales and marketing
|
2,186 | — | — | 2,186 | — | 2,186 | ||||||||||||||||||||||||||
General and administrative
|
75,749 | 4,078 | — | 79,827 | — | 79,827 | ||||||||||||||||||||||||||
General and administrative-related party
|
— | 160 | — | 160 | — | 160 | ||||||||||||||||||||||||||
Franchise tax expenses
|
— | 148 | — | 148 | — | 148 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total operating expenses
|
82,166 | 4,386 | — | 86,552 | — | 86,552 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Operating income
|
34,951 | (4,386 | ) | — | 30,565 | — | 30,565 | |||||||||||||||||||||||||
Other (expense) income:
|
||||||||||||||||||||||||||||||||
(Loss) gain from sales of digital currency assets
|
(1,472 | ) | — | — | (1,472 | ) | — | (1,472 | ) | |||||||||||||||||||||||
(Loss) on debt from extinguishment
|
(8,016 | ) | — | — | (8,016 | ) | — | (8,016 | ) | |||||||||||||||||||||||
Change in fair value of derivative warrant liabilities
|
— | (13,904 | ) | — | (13,904 | ) | — | (13,904 | ) | |||||||||||||||||||||||
Offering costs associated with derivative warrant
liabilities
|
— | (1,055 | ) | — | (1,055 | ) | — | (1,055 | ) | |||||||||||||||||||||||
Income from investments held in Trust Account
|
— | 27 | (27 | ) |
|
e
|
|
— | (27 | ) |
|
e
|
|
— | ||||||||||||||||||
Other income (expense)
|
(12,945 | ) | — | — | (12,945 | ) | — | (12,945 | ) | |||||||||||||||||||||||
Interest expense, net
|
(66,023 | ) | — | — | (66,023 | ) | — | (66,023 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total other (expense) income
|
(88,456 | ) | (14,932 | ) | (27 | ) | (103,415 | ) | (27 | ) | (103,415 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Income (loss) before income taxes
|
(53,505 | ) | (19,318 | ) | (27 | ) | (72,850 | ) | (27 | ) | (72,850 | ) | ||||||||||||||||||||
Income tax provision (benefit)
|
1,946 | — | — | 1,946 | — | 1,946 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net income (loss) and other comprehensive income (loss)
|
$ | (55,451 | ) | $ | (19,318 | ) | $ | (27 | ) | $ | (74,796 | ) | $ | (27 | ) | $ | (74,796 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net income (loss) attributable to common stockholders
|
$ | (55,451 | ) | $ | (19,318 | ) | $ | (27 | ) | $ | (74,796 | ) | $ | (27 | ) | $ | (74,796 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net income (loss) per share
|
||||||||||||||||||||||||||||||||
Common stock – Basic and Diluted
|
$ | (0.32 | ) | $ | (0.51 | ) |
|
a
|
|
$ | (0.22 | ) | $ |
|
a
|
|
$ | (0.25 | ) | |||||||||||||
Weighted average shares outstanding:
|
||||||||||||||||||||||||||||||||
Basic and Diluted common stock
|
171,716 | 37,644 |
|
b
|
|
333,045 |
|
b
|
|
298,545 |
December 31, 2020
|
December 31,
2020 |
December 31,
2020 |
||||||||||||||||||||||||||||||
in thousands
|
Core Scientific
Pro Forma
(Note 2)
|
XPDI
(Historical)
|
Merger
Adjustments: No Redemption |
Pro Forma
Combined: No Redemption |
Merger
Adjustments: 100% Redemption |
Pro Forma
Combined: 100%
Redemption
|
||||||||||||||||||||||||||
Hosting revenue from customers
|
$ | 39,470 | $ | — | $ | — | $ | 39,470 | $ | — | $ | 39,470 | ||||||||||||||||||||
Equipment sales to customers
|
11,842 | — | — | 11,842 | — | 11,842 | ||||||||||||||||||||||||||
Digital asset mining income
|
19,636 | — | — | 19,636 | — | 19,636 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total revenue
|
70,948 | — | — | 70,948 | — | 70,948 | ||||||||||||||||||||||||||
Costs of revenue
|
54,237 | — | — | 54,237 | — | 54,237 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Gross profit
|
16,711 | — | — | 16,711 | — | 16,711 | ||||||||||||||||||||||||||
Gain on legal settlements
|
5,814 | — | — | 5,814 |
—
|
5,814 | ||||||||||||||||||||||||||
Gain on sale of digital assets
|
353 | — | — | 353 | — | 353 | ||||||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
Research and development
|
5,271 | — | — | 5,271 |
—
|
5,271 | ||||||||||||||||||||||||||
Sales and marketing
|
1,771 | — | — | 1,771 | — | 1,771 | ||||||||||||||||||||||||||
General and administrative
|
39,190 | 10 | 1,000 |
|
c
|
|
40,200 | 26,925 |
|
c
|
|
66,125 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total operating expenses
|
46,232 | 10 | 1,000 | 47,242 | 26,925 | 73,167 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Operating income
|
(23,354 | ) | (10 | ) | (1,000 | ) | (24,364 | ) |
|
(26,925
|
)
|
(50,289 | ) | |||||||||||||||||||
Other (expense) income:
|
||||||||||||||||||||||||||||||||
(Loss) on debt from extinguishment
|
(1,333 | ) | — | — | (1,333 | ) | — | (1,333 | ) | |||||||||||||||||||||||
Other income (expense)
|
(10,113 | ) | — | — | (10,113 | ) | — | (10,113 | ) | |||||||||||||||||||||||
Interest expense, net
|
(56,988 | ) | — | — | (56,988 | ) | — | (56,988 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total other (expense) income
|
(68,434 | ) | — | — | (68,434 | ) | — | (68,434 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Income (loss) before income taxes
|
(91,788 | ) | (10 | ) | (1,000 | ) | (92,798 | ) | (26,925 | ) | (118,723 | ) | ||||||||||||||||||||
Income tax provision (benefit)
|
(3,609 | ) | — | — | (3,609 | ) | — | (3,609 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net income (loss) and other comprehensive income (loss)
|
$ | (88,178 | ) | $ | (10 | ) | $ | (1,000 | ) | $ | (89,188 | ) | $ | (26,925 | ) | $ | (115,113 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Deemed divided from common to preferred exchange
|
(10,478 | ) | — | 10,478 |
|
d
|
|
— | 10,478 |
|
d
|
|
— | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net income (loss) attributable to common stockholders
|
$ | (98,656 | ) | $ | (10 | ) | $ | 9,478 | $ | (89,188 | ) | $ | (16,447 | ) | $ | (115,113 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net income (loss) per share
|
||||||||||||||||||||||||||||||||
Common stock – Basic and Diluted
|
$ | (0.57 | ) | $ | — |
|
a
|
|
$ | (0.27 | ) |
|
a
|
|
$ | (0.39 | ) | |||||||||||||||
Weighted average shares outstanding:
|
||||||||||||||||||||||||||||||||
Common stock – Basic and Diluted
|
171,716 | 7,500 |
|
b
|
|
333,045 |
|
b
|
|
298,545 |
• |
any anticipated synergies, operating efficiencies, tax savings, cost savings or increased costs of a public company that may be associated with the Transactions, or
|
• |
the potential purchases of mining and hosting equipment.
|
• |
The pro forma interest expense impact of the April 2021 Core Scientific issuance of $215 million of convertible notes, net of $5.6 million origination fees and the subsequent repayment of the $30 million Silverpeak loan net of prepayment penalties, the interest expense impact of the August and September Convertible Notes issuance of $205 million and the pro forma impact of the subsequent issuance in October and November 2021 of $95 million of additional Convertible Notes. It is not anticipated that the holders of the convertible notes will exercise their conversion rights as a result of the merger; and
|
• |
The acquisition of Blockcap by Core Scientific on July 30, 2021, including any elimination of the effect of transactions between Core Scientific and Blockcap, as required, is included in the Core Scientific historical financial statements as of and for the nine months ended September 30, 2021. The pro forma impact to the Statement of Operations had the acquisition taken place on January 1, 2020 is included as an adjustment for the period from January 1, 2021 through July 30, 2021 and the twelve months ended December 31, 2020. Consideration paid consisted of 72,186 Core Scientific common shares, 657 common shares from vested options settlement, 4,256 Core Scientific Restricted Stock Units and 2,393 Core Scientific Options. The portion of the fair value of the replaced Blockcap share based payments attributable to pre-combination service as well as the impact of the effective settlement of preexisting hosting and equipment contracts between Core Scientific and Blockcap has been included in the aggregate purchase price of $1,129.4 million.
|
Consideration
(in thousands)
|
||||
72,186 common shares valued at $16.18 per share (1) (2)
|
1,167,965 | |||
Fair value of replaced Blockcap share-based payments attributable to pre-combination service (3)
|
21,941 | |||
Settlement of pre-existing contracts (4)
|
(60,522 | ) | ||
|
|
|||
Total Consideration:
|
$ | 1,129,384 | ||
Fair value of assets acquired, and liabilities assumed:
|
||||
Cash and cash equivalents
|
$ | 704 | ||
Digital assets-Bitcoin
|
73,304 | |||
Digital assets-Ethereum
|
365 | |||
Digital assets-Bitcoin cash
|
8 | |||
Digital assets-Siacoin
|
554 | |||
Digital asset-Other
|
3,329 | |||
Other current assets
|
633 | |||
Intangible assets, net
|
2,925 | |||
Property, plant and equipment, net
|
27,089 | |||
Other noncurrent assets
|
1,293 | |||
|
|
|||
Total assets acquired
|
$
|
110,204
|
|
|
Accounts payable
|
492 | |||
Accrued expenses and other
|
21,497 | |||
Other current liabilities
|
6,605 | |||
|
|
|||
Total liabilities assumed
|
$
|
28,594
|
|
|
Total identifiable net assets
|
$
|
81,610
|
|
|
Goodwill on acquisition
|
$
|
1,047,774
|
|
|
|
|
(1) |
72,186 common shares represent the equivalent Core Scientific common shares issued to Blockcap shareholders as consideration for the purchase.
|
(2) |
The price per share of our common shares was estimated to be $16.18. As the Core Scientific common shares were not listed on a public marketplace, the calculation of the fair value of the common shares was subject to a greater degree of estimation. Given the absence of a public market, an estimate of the fair value of the common shares was required at the time of the Blockcap Acquisition. Objective and subjective factors were considered in determining the estimated fair value and because there is no active trading of the Core Scientific equity shares on an established securities market, an independent valuation specialist was engaged. The valuation was determined by weighting the outcomes of scenarios estimating share value based on both public company valuations and private company valuations. Both a market approach and common stock equivalency model were used to determine a range of outcomes, which were weighted based on probability to determine the result.
|
(3) |
Reflects the estimated fair value of replaced Blockcap share-based payments allocated to purchase price based on the proportion of service related to the
pre-combination
period. The fair value of the stock-based awards was determined utilizing the Black-Scholes pricing model.
|
(4) |
Blockcap had preexisting hosting and equipment with Core Scientific that were effectively settled by Core Scientific’s acquisition of Blockcap. As a result, the consideration transferred to Blockcap has been adjusted by the deferred revenue balances that were settled at the time of acquisition.
|
As of
September 30, 2021
|
||||||||||||||||
in thousands
|
Core
Scientific
(Historical)
(A) |
Convertible
Note adjustments |
Core
Scientific Pro Forma Combined |
|||||||||||||
Assets
|
||||||||||||||||
Current Assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 147,906 | $ | 92,521 |
|
B
|
|
$ | 240,427 | |||||||
Restricted cash
|
12,101 | — | 12,101 | |||||||||||||
Accounts receivable, net of allowance of $620
|
602 | — | 602 | |||||||||||||
Accounts receivable from related parties
|
261 | — | 261 | |||||||||||||
Deposits for equipment
|
469,890 | — | 469,890 | |||||||||||||
Digital currency assets
|
115,856 | — | 115,856 | |||||||||||||
Other current assets
|
9,978 | — | 9,978 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total current assets
|
756,594 | 92,521 | 849,115 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Property, plant and equipment, net
|
219,795 | — | 219,795 | |||||||||||||
Goodwill
|
1,106,015 | — | 1,106,015 | |||||||||||||
Intangible assets, net
|
8,709 | — | 8,709 | |||||||||||||
Other noncurrent assets
|
14,110 | — | 14,110 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total assets
|
$ | 2,105,223 | $ | 92,521 | $ | 2,197,744 | ||||||||||
|
|
|
|
|
|
|||||||||||
Current Liabilities:
|
||||||||||||||||
Accounts payable
|
$ | 28,689 | — | $ | 28,689 | |||||||||||
Accrued expenses and other
|
33,849 | — | 33,849 | |||||||||||||
Deferred revenue
|
206,139 | — | 206,139 | |||||||||||||
Capital lease obligations, current portion
|
2,525 | — | 2,525 | |||||||||||||
Notes payable, current portion
|
25,202 | — | 25,202 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total current liabilities
|
296,404 | — | 296,404 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Capital lease obligations, net of current portion
|
1,524 | 1,524 | ||||||||||||||
Notes payable, net of current portion
|
467,662 | 95,000 |
|
B
|
|
562,662 | ||||||||||
Other noncurrent liabilities
|
1,994 | — | 1,994 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total liabilities
|
767,584 | 95,000 | 862,584 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Contingently redeemable preferred stock
|
44,476 | — | 44,476 | |||||||||||||
Stockholders’ Equity:
|
||||||||||||||||
Common stock; $0.00001 par value
|
2 | — | 2 | |||||||||||||
Additional Paid in Capital
|
1,385,381 | — | 1,385,381 | |||||||||||||
Accumulated (deficit) / Earnings
|
(92,220 | ) | (2,479 | ) |
|
B
|
|
(94,699 | ) | |||||||
|
|
|
|
|
|
|||||||||||
Total Stockholders’ Equity
|
1,293,163 | (2,479 | ) | 1,290,684 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total Liabilities, Redeemable Preferred
Stock, and Stockholders’ Equity
|
$ | 2,105,223 | $ | 92,521 | $ | 2,197,744 | ||||||||||
|
|
|
|
|
|
Transaction Accounting
Adjustments
|
||||||||||||||||||||||||||||||||||||
in thousands
|
Core
Scientific
(Historical)
September 30, 2021 |
Blockcap
(Historical) for
the period January 1, 2021 through July 30, 2021 |
Elimination
Adjustments |
Blockcap
Acquisition |
Convertible
Note |
Core
Scientific Pro Forma Combined |
||||||||||||||||||||||||||||||
Hosting revenue from customers
|
$ | 51,742 | $ | — | $ | (11,828 | ) |
|
e2
|
|
$ | — | — | $ | 39,914 | |||||||||||||||||||||
Equipment sales to customers
|
113,435 | — | (17,694 | ) |
|
e3
|
|
— | — | 95,741 | ||||||||||||||||||||||||||
Digital asset mining income
|
77,511 | 72,030 | — | — | — | 149,541 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total revenue
|
242,688 | 72,030 | (29,522 | ) | — | — | 285,196 | |||||||||||||||||||||||||||||
Costs of revenue
|
145,193 | 17,903 | (11,828 | ) |
|
e2
|
|
(868 | ) |
|
a
|
|
— | 136,002 | ||||||||||||||||||||||
— | — | (14,398 | ) |
|
e3
|
|
— | — | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Gross profit
|
97,495 | 54,127 | (3,296 | ) | 868 | — | 149,194 | |||||||||||||||||||||||||||||
(Loss) / gain on legal settlements
|
(2,603 | ) | — | — | — | — | (2,603 | ) | ||||||||||||||||||||||||||||
Gain on sale of digital assets
|
405 | 145 | — | — | — | 550 | ||||||||||||||||||||||||||||||
Impairment of digital currency asset
|
(12,552 | ) | (17,472 | ) | — | — | — | (30,024 | ) | |||||||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||||||
Research and development
|
4,231 | — | — | — | — | 4,231 | ||||||||||||||||||||||||||||||
Sales and marketing
|
2,186 | — | — | — | — | 2,186 | ||||||||||||||||||||||||||||||
General and administrative
|
46,992 | 47,997 | — | (19,240 | ) |
|
c
|
|
— | 75,749 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total operating expenses
|
53,409 | 47,997 | — | (19,240 | ) | — | 82,166 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Operating income (loss)
|
29,336 | (11,197 | ) | (3,296 | ) | 20,108 | 34,951 | |||||||||||||||||||||||||||||
Other (expense) income:
|
||||||||||||||||||||||||||||||||||||
(Loss) on sale of assets
|
— | (1,472 | ) | — | — | — | (1,472 | ) | ||||||||||||||||||||||||||||
(Loss) on debt from extinguishment
|
(8,016 | ) | — | — | — | — | (8,016 | ) | ||||||||||||||||||||||||||||
Other income (expense)
|
(12,945 | ) | — | — | — | — | (12,945 | ) | ||||||||||||||||||||||||||||
Interest (expense), net
|
(26,806 | ) | (1,717 | ) | — | — | (37,500 | ) |
|
d
|
|
(66,023 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total other (expense) income
|
(47,767 | ) | (3,189 | ) | — | — | (37,500 | ) | (88,456 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Income (loss) before income taxes
|
(18,431 | ) | (14,386 | ) | (3,296 | ) | 20,108 | (37,500 | ) | (53,505 | ) | |||||||||||||||||||||||||
Income tax provision (benefit)
|
(955 | ) | 2,901 | — | — | — | 1,946 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Net income (loss) and other comprehensive income (loss)
|
$ | (17,476 | ) | $ | (17,287 | ) | $ | (3,296 | ) | $ | 20,108 | $ | (37,500 | ) | $ | (55,451 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Net income (loss) attributable to common stockholders
|
$ | (17,476 | ) | $ | (17,287 | ) | $ | (3,296 | ) | $ | 20,108 | $ | (37,500 | ) | $ | (55,451 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Transaction Accounting
Adjustments |
|||||||||||||||||||||||||||||||||||
in thousands
|
Core
Scientific
(Historical)
|
Blockcap
Pro Forma
(Adjustment f)
|
Elimination
Adjustments |
Blockcap
Acquisition |
Convertible
Note |
Core
Scientific Pro Forma Combined |
||||||||||||||||||||||||||||||
Hosting revenue from customers
|
$ | 41,598 | $ | — | $ | (2,128 | ) |
e2
|
$ | — | — | $ | 39,470 | |||||||||||||||||||||||
Equipment sales to customers
|
12,595 | — | (753 | ) | e3 | — | — | 11,842 | ||||||||||||||||||||||||||||
Digital asset mining income
|
6,127 | 13,509 | — | — | — | 19,636 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total revenue
|
60,320 | 13,509 | (2,881 | ) | — | — | 70,948 | |||||||||||||||||||||||||||||
Costs of revenue
|
50,928 | 7,655 | (2,128 | ) |
|
e2
|
|
(1,488 | ) |
|
a
|
|
— | 54,237 | ||||||||||||||||||||||
— | — | (730 | ) |
|
e3
|
|
— | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Gross profit
|
9,392 | 5,854 | (23 | ) | 1,488 | — | 16,711 | |||||||||||||||||||||||||||||
Gain on legal settlements
|
5,814 | — | — |
|
—
|
|
— | 5,814 | ||||||||||||||||||||||||||||
Gain on sale of digital assets
|
65 | 288 | — | — | — | 353 | ||||||||||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||||||
Research and development
|
5,271 | — | — | — | — | 5,271 | ||||||||||||||||||||||||||||||
Sales and marketing
|
1,771 | — | — | — | — | 1,771 | ||||||||||||||||||||||||||||||
General and administrative
|
14,556 | 7,073 | — | 17,561 |
b
|
— | 39,190 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total operating expenses
|
21,598 | 7,073 | — | 17,561 | — | 46,232 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Operating income
|
(6,327 | ) | (931 | ) | (23 | ) | (16,073 | ) | — | (23,354 | ) | |||||||||||||||||||||||||
Other (expense) income:
|
||||||||||||||||||||||||||||||||||||
(Loss) on debt from extinguishment
|
(1,333 | ) | — | — | — | — | (1,333 | ) | ||||||||||||||||||||||||||||
Other income (expense)
|
(110 | ) | (10,003 | ) | — | — | — | (10,113 | ) | |||||||||||||||||||||||||||
Interest (expense), net
|
(4,436 | ) | (1,198 | ) | — | — | (2,479 | ) |
(e
|
)
|
(56,988 | ) | ||||||||||||||||||||||||
— | — | — | — | (48,875 | ) |
|
d
|
|
— | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total other (expense) income
|
(5,879 | ) | (11,201 | ) | — | — | (51,354 | ) | (68,434 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Income (loss) before income taxes
|
(12,206 | ) | (12,132 | ) | (23 | ) | (16,073 | ) | (51,354 | ) | (91,788 | ) | ||||||||||||||||||||||||
Income tax provision (benefit)
|
— | (134 | ) | — | (3,475 | ) |
|
e
|
|
— | (3,609 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Net income (loss) and other comprehensive income (loss)
|
$ | (12,206 | ) | $ | (11,998 | ) | $ | (23 | ) | $ | (12,598 | ) | $ | (51,354 | ) | $ | (88,178 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Deemed divided from common to preferred exchange
|
(10,478 | ) | — | — | — | — | (10,478 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Net income (loss) attributable to common stockholders
|
$ | (22,684 | ) | $ | (11,998 | ) | $ | (23 | ) | $ | (12,598 | ) | $ | (51,354 | ) | $ | (98,656 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
The following purchase price adjustments related to the acquisition of Blockcap by Core Scientific have been included in the Core Scientific historical balance sheet as of September 30, 2021:
|
1.
|
Changes to the Blockcap historical financials to represent the fair value changes associated with the acquisition. The resulting goodwill adjustment represents the excess of the purchase price over the aggregate fair value of the net identifiable assets acquired and liabilities assumed, including identifiable intangible assets. The goodwill is not deductible for U.S. federal income tax purposes.
|
As of July 30, 2021
|
||||||||||||||||
dollars excluding Price in thousands
|
Quantity
|
Price
|
Fair
value |
Carrying value
|
||||||||||||
Bitcoin (BTC)
|
1,747 | $ | 42,235.55 | $ | 73,805 | $ | 55,568 | |||||||||
Ethereum (ETH)
|
575 | $ | 2,466.96 | $ | 1,420 | $ | 1,263 | |||||||||
Bitcoin Cash (BCH)
|
15 | $ | 491 | $ | 7 | $ | 7 | |||||||||
Siacoin (SIA)
|
39,487,794 | $ | 0.01 | $ | 554 | $ | 384 | |||||||||
Other
|
Various | Various | $ | 2,714 | $ | 1,777 | ||||||||||
|
|
|
|
|||||||||||||
TOTAL
|
$
|
78,500
|
|
$
|
58,999
|
|
||||||||||
|
|
|
|
2.
|
The elimination of Blockcap’s deferred tax liability which is expected to result in a
non-recurring
income tax benefit of the same amount as a result of the partial reversal of the Company’s valuation allowance against the combined group’s accumulated earnings. As a result of the business combination, the combined entity expects to file a consolidated return, which will allow for the utilization of current tax losses or previous loss carryforwards to be utilized against taxable income. In addition, Blockcap’s deferred tax liability position will be netted against Core Scientific’s deferred tax asset position.
|
3.
|
The elimination of Blockcap additional paid in capital and accumulated earnings.
|
4.
|
The total consideration added to APIC as a result of the acquisition.
|
5.
|
The transaction costs associated with the Blockcap acquisition that were expensed as an adjustment to cash and retained earnings.
|
6.
|
The one-time expense Core Scientific has recorded as compensation expense in its financial statements for the period ending September 30, 2021 for the acceleration of certain equity awards of Blockcap’s CEO and others.
|
(B) |
During April, August and September 2021, Core Scientific entered into a Convertible Note Purchase Agreement with various Purchasers (Investors) and is continuing to enter into these agreements. As of the date of this filing, Core Scientific has issued notes in the aggregate amount of $515 million with origination fees estimated at $13,332. Core Scientific elected to measure the April, August and September issuance of convertible notes at fair value and accordingly recognized $10,853 of debt issuance costs as incurred as interest expense. The pro forma adjustments reflect the same election for the additional $95,000 issuance and recognize an additional $2,479 of debt issuance cost as interest expense. The related adjustments for this transaction resulted in an increase to cash of $92,521, an increase to notes payable of $95,000 and an increase to accumulated deficit of $2,479.
|
(e2) |
Reflects the elimination of Core Scientific hosting revenue from Blockcap and the corresponding Blockcap cost of revenue.
|
(e3) |
Reflects the elimination of Core Scientific equipment sales revenue and cost of revenue sold from Blockcap.
|
(a) |
Reflects the change in the cost of revenue attributable to incremental depreciation as a result of the fair value decrease to the basis of the Blockcap mining equipment assets as a result of the acquisition. The fair value adjustment decreases the historical cost of these assets by $4.5 million on assets with an assumed useful life of three years resulting in a decrease in depreciation expense of $0.9 million and $1.5 million for the period January 1, 2021 through July 30, 2021 and for the twelve months ended December 31, 2020, respectively.
|
(b) |
Reflects incremental stock compensation expense related to the replacement of unvested Blockcap share-based payments with awards issued by Core Scientific that will be recognized over the remaining service period using the acquisition date fair value, in excess of amounts recognized historically by Blockcap for the twelve months ended December 31, 2020. The associated incremental stock compensation expense for the nine months ended September 30, 2021 is included in the Core Scientific historical statement of operations.
|
(c) |
Reflects the elimination of $19,239 of expense recognized by Blockcap in July 2021 for the acceleration of certain equity awards of its CEO and others. Because this acceleration was deemed to be in contemplation of the Merger, Core Scientific has recorded $23,294 of compensation expense for the acceleration in its financial statements for the period ending September 30, 2021, which was determined based on the fair value of the awards at the time of the Merger. This adjustment is necessary to avoid duplication of the expense attributable to the combined company related to the acceleration of the same awards.
|
(d) |
Reflects the impact to interest expense derived from removing 15% per annum interest on the $30,000 Silverpeak loan, originated in May 2020, and replacing it with 10% per annum interest on the $515,000 million convertible notes ($215,000 issued in April 2021 and the remaining $300,000 issued in August through November 2021). This adjustment resulted in:
|
a. |
a reduction of $2,625 in interest expense due to the elimination of the Silverpeak loan, an increase in interest expense of $51,500 due to the issuance of the convertible notes for a net increase in interest expense of $48,875 for the twelve months ending December 31, 2020.
|
b. |
a reduction of $1,125 in interest expense due to the elimination of the Silverpeak loan, an increase in interest expense of $38,625 due to the issuance of the convertible note for a net increase in interest expense of $37,500 for the nine months ending September 30, 2021.
|
(e) |
Reflects the non-recurring interest expense related to the assumption that Core Scientific will elect to measure the October through November issuance of convertible notes at fair value similarly to the April, August and September issuance of convertible notes and accordingly included $2,479 of debt issuance costs as incurred as interest expense in the pro forma adjustments.
|
(f) |
Reflects the pro forma results for Blockcap for the year ending December 31, 2020 assuming the three significant LLCs acquired by Blockcap on December 1, 2020 had been in place for the full year as follows:
|
For the year
ended December 31, 2020 |
For the periods from inception
through November 30, 2020 |
December 31, 2020
|
||||||||||||||||||||||||||
in thousands
|
Blockcap
Historical
|
RME
Black 100 |
RME
Black 200 |
BEP 888
|
Acquisition
Adjustments |
Blockcap
Pro forma |
||||||||||||||||||||||
Hosting revenue from customers
|
$ | — | $ | — | $ | — | $ | — | — | $ | — | |||||||||||||||||
Equipment sales to customers
|
— | — | — | — | — | — | ||||||||||||||||||||||
Digital asset mining income
|
5,972 | 4,010 | 3,374 | 153 | — | 13,509 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenue
|
5,972 | 4,010 | 3,374 | 153 | — | 13,509 | ||||||||||||||||||||||
Costs of revenue
|
2,781 | 2,623 | 2,034 | 48 | 169 | i | 7,655 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Gross profit
|
3,191 | 1,387 | 1,340 | 105 | (169 | ) | 5,854 | |||||||||||||||||||||
Gain on legal settlements
|
— | — | — |
|
—
|
|
— | — | ||||||||||||||||||||
Gain on sale of digital assets
|
53 | 152 | 80 | 3 | — | 288 | ||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||
Research and development
|
— | — | — | — | — | — | ||||||||||||||||||||||
Sales and marketing
|
— | — | — | — | — | — | ||||||||||||||||||||||
General and administrative
|
2,221 | 1,559 | 1,343 | 1,950 | — | 7,073 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total operating expenses
|
2,221 | 1,559 | 1,343 | 1,950 | — | 7,073 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating income (loss)
|
1,023 | (20 | ) | 77 | (1,842 | ) | (169 | ) | (931 | ) | ||||||||||||||||||
Other (expense) income:
|
||||||||||||||||||||||||||||
(Loss) on debt from extinguishment
|
— | — | — | — | — | — | ||||||||||||||||||||||
Other income (expense)
|
(10,003 | ) | — | — | — | — | (10,003 | ) | ||||||||||||||||||||
Interest expense, net
|
(419 | ) | (414 | ) | (365 | ) | — | — | (1,198 | ) | ||||||||||||||||||
— | — | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other (expense) income
|
(10,422 | ) | (414 | ) | (365 | ) | — | — | (11,201 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) before income taxes
|
(9,399 | ) | (434 | ) | (288 | ) | (1,842 | ) | (169 | ) | (12,132 | ) | ||||||||||||||||
Income tax expense/(benefit)
|
538 | (107 | ) | (71 | ) | (453 | ) | (42 | ) | ii | (134 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net income (loss)
|
$ | (9,937 | ) | $ | (327 | ) | $ | (217 | ) | $ | (1,389 | ) | $ | (127 | ) | $ | (11,998 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
i. |
Reflects additional depreciation expense related to the acquisitions of the LLCs
|
ii. |
The combined net income before tax of the Company includes net income before tax of $ 406.5 attributable to multiple limited liability companies (of which $409.3 is included in Blockcap Historical) that are classified as partnerships for Federal income tax purposes, and as such, any partnership income or loss, specifically allocated or otherwise are subjected to tax at the individual partner level.
|
3.
|
Transaction Accounting Adjustments – Merger
|
(A) |
Reflects the estimated $39,000 reduction in cash for estimated transaction related expenses, including $12,075 that was previously recorded as deferred underwriting commissions and was therefore reversed; $1,000 related to
non-recurring
expenses from third-party consulting and other fees related to the merger that were not considered direct and incremental to the offering and therefore reflected as an adjustment to the accumulated deficit; and the remaining $25,925 is adjusted against additional paid in capital as direct and incremental costs of the offering. In the maximum redemptions scenario, the remaining $25,925 is adjusted against accumulated deficit because there are no offering proceeds to offset the direct and incremental costs and therefore such costs would be expensed.
|
(B) |
Reflects the increase in cash from the release of funds from the Trust Account into cash. In the no redemption scenario, the entire amount of $345,027 is released to cash. In the maximum redemption scenario, all funds are used to redeem shares and there is no increase to cash.
|
(C) |
Reflects the impact related to the maximum redemption scenario whereby the entire balance of the investments held in Trust Account is paid to holders that redeem 34,500 Class A redeemable shares at $10 per share for a total of $345,027 and therefore reduced.
|
(D) |
Reflects the conversion of 6,452 shares of Series A Preferred Stock and 314 shares of Series B Preferred Stock redeemable preferred stock to 6,766 shares of Core Scientific common stock just prior to the merger, eliminating the preferred stock balance. Subsequent to this conversion, these shares will be exchanged for New Core common shares using the exchange rate calculated per the merger agreement.
|
(E) |
Reflects the elimination of 34,500 shares of Class A Common Stock subject to redemption. The $345,000 subject to redemption is eliminated and added to additional paid in capital.
|
(F) |
Represents the elimination of XPDI equity and accumulated earnings and the exchange of existing Core Scientific and XPDI outstanding equity instruments for New Core common stock as follows:
|
a. |
171,059 existing Class A Core Scientific shares, 6,766 shares of Core Scientific Series A and Series B convertible preferred stock, 710 common shares from the settlement of vested restricted stock units, 1,440 common shares from the settlement of vested options and 2,894 common shares from the settlement of warrants to be exchanged for New Core shares using an exchange rate of 1.5948274216 per the merger agreement resulting in a total of 291,645 New Core common shares outstanding with a par value of $0.0001.
|
b. |
34,500 existing Class A XPDI shares and 8,625 existing XPDI Class B shares into 43,125 common shares of New Core in the scenario where none of the redeemable stock is redeemed. If the maximum amount of the redeemable stock is redeemed, only 8,625 XPDI Class B shares will be converted into shares of New Core common stock for a total of 8,625 New Core common shares. Immediately prior to the Closing, 1,725 Class B common shares will be unvested and will vest upon the date on which the volume-weighted average price of the Class A Common Stock is greater than $12.50 per share for any 20 trading days within any 30 consecutive trading day period within five years of the Closing date. These unvested shares are excluded from earnings per share calculations until such time as conditions are met for vesting.
|
c. |
Removes XPDI accumulated earnings with the offsetting adjustment to paid in capital.
|
(a) |
Reflects the calculation of earnings per share, basic and diluted, of the combined companies after the conversion of equity shares into New Core shares using the adjusted net income of the combined companies. See Note 5
—
|
(b) |
Reflects the total New Core common shares outstanding at the completion of the transaction. See Note 5
—
|
(c) |
Reflects 1,000 related to
non-recurring
expenses from third-party consulting and other fees related to the merger that were not considered direct and incremental to the offering and therefore reflected as an operating expense. In the maximum redemption scenario, the additional 25,925
non-recurring
expenses is reflected as an offering expense because there are no offering proceeds to offset the direct and incremental costs and therefore such costs would be expensed for a total of 26,925.
|
(d) |
Reflects the elimination of the dividend from common to preferred exchange. In February 2020, the Company completed an exchange of 1,096 shares of common stock that were originally issued in the private placement offering from October 2018 to December 2019 for 1,802 newly issued shares of Series A Preferred Stock. The shares of common stock were retired upon reacquisition by the Company. The Company received no net proceeds from the exchange and recognized a deemed dividend of $10,478 based on the incremental fair value of the preferred stock received by the stockholders compared to the fair value of the common stock exchanged. Under the pro forma scenario, all preferred stock is exchange for common stock under the terms of the merger agreement, eliminating the dividend.
|
(e) |
Reflects the elimination of income earned on investments in trust due to the release of trust funds to cash or the reduction in trust funds due to the redemption of redeemable stock.
|
4.
|
Accounting Policies
|
5.
|
Earnings per Share
|
• |
171,059 existing Class A Core Scientific shares, 6,766 Core Scientific Series A and Series B convertible preferred stock, 710 common shares from the settlement of vested restricted stock units,
|
1,440 common shares from the settlement of vested options and 2,894 common shares from the settlement of warrants to be exchanged for New Core shares using an exchange rate of 1.5948274216 per the merger agreement resulting in a total of 291,645 New Core common shares outstanding with a par value of $0.0001.
|
• |
34,500 existing Class A XPDI shares and 8,625 existing XPDI Class B shares into 43,125 common shares of New Core in the scenario where none of the redeemable stock is redeemed. If the maximum amount of the redeemable stock is redeemed, only 8,625 XPDI Class B shares will be converted into shares of New Core common stock for a total of 8,625 New Core common shares. Immediately prior to the Closing, 1,725 Class B common shares will be unvested and will vest upon the date on which the volume-weighted average price of the Class A Common Stock is greater than $12.50 per share for any 20 trading days within any 30 consecutive trading day period within five years of the Closing date. These unvested shares are excluded from earnings per share calculations until such time as conditions are met for vesting.
|
in thousands
|
Existing Shares
|
Shares just
prior to exchange |
After
exchange Assuming no redemption |
After
exchange Assuming maximum redemption |
||||||||||||
Core Scientific common stock
|
171,716 | 182,869 | 291,645 | 291,645 | ||||||||||||
XPDI Class A redeemable shares
|
34,500 | 34,500 | 34,500 | — | ||||||||||||
XPDI Class B sponsor shares net of unvested shares
|
8,625 | 6,900 | 6,900 | 6,900 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total weighted average common shares - Basic and Diluted (1) and (2)
|
|
214,841
|
|
|
224,269
|
|
|
333,045
|
|
|
298,545
|
|
||||
|
|
|
|
|
|
|
|
|||||||||
For the nine months ended September 30, 2021
|
|
|||||||||||||||
Pro forma net income (loss)
|
$ | (74,796 | ) | $ | (74,796 | ) | ||||||||||
Pro forma EPS – Basic and diluted (1)
|
$ | (0.22 | ) | $ | (0.25 | ) | ||||||||||
For the twelve months ended December, 2020
|
|
|||||||||||||||
Pro forma net income (loss)
|
$ | (89,188 | ) | $ | (115,113 | ) | ||||||||||
Pro forma net income (loss) – Basic and Diluted (1)
|
$ | (0.27 | ) | $ | (0.39 | ) |
(1) |
Potentially dilutive securities are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive. Shares potentially dilutive with the conversion of the convertible debt were not included due to the add back of interest avoided upon conversion causing the conversion to be anti-dilutive.
|
Conversion Event
|
Discount
|
|||
On or prior to April 19, 2022
|
20 | % | ||
On or after April 19, 2022 but prior to April 19, 2023
|
25 | % | ||
On or after April 19, 2023 but prior to April 19, 2024
|
30 | % | ||
On or after April 19, 2024 but prior to April 19, 2025
|
35 | % |
(2) |
Total Core Scientific outstanding options and warrants after exchanged is 26,144 and 1,595, respectively and are anti-dilutive so not included in the calculation of diluted EPS. 14,892 XPDI warrants are anti-dilutive so not included the calculation of diluted EPS.
|
(3) |
Core Scientific outstanding RSUs are not included as these are contingently issuable shares for which the transaction condition has not yet been met. These RSUs are subject to a time-based vesting condition and a transaction vesting condition. The transaction vesting condition is satisfied upon the earlier of a change in control or an initial public offering. The transaction vesting condition can be met in future years only with respect to a change in control or waiver of the condition by the Company’s board of directors and is not expected to occur, if at all, prior to expiration of the applicable lock-up period. In the event the transaction-based condition were to be met, including by future action of the board of directors, the unrecognized compensation expense for which the requisite service had been provided that would have been recognized was $526,064 as of September 30, 2021. Included in the total of Core Scientific’s unvested RSUs are 9,038 RSUs held by a former employee. These units have met the timebased vesting condition but similarly have not met the transaction-based vesting condition. The transaction-based vesting condition must be satisfied within three years of the former employee’s separation date or they will be forfeited. Had the transaction based vesting condition been met, unrecognized compensation expense would have been $82,674 as of June 30, 2021. This does not account for 6,912 Blockcap RSUs granted to legacy Blockcap shareholders and subject only to time-vesting conditions because the inclusion of such RSUs would be anti-dilutive.
|
Unvested Core Scientific RSUs as of September 30, 2021 | 45,793 | |||
RSUs to be granted in October 2021
|
9,777 | |||
RSUs to be reserved for future issuances
|
5,556 | |||
Unvested RSUs of Core Scientific (excluding Blockcap)
|
61,126 | |||
Exchange Rate
|
1.5948274216 | |||
Unvested pro forma RSUs of Core Scientific (excluding Blockcap) after applying exchange rate
|
97,485 |
1. |
the Business Combination Proposal;
|
2. |
the Charter Proposal;
|
3. |
the Governance Proposals;
|
4. |
the Nasdaq Proposal;
|
5. |
the Incentive Plan Proposal;
|
6. |
the ESPP Proposal; and
|
7. |
the Adjournment Proposal (if necessary).
|
• |
If the merger or another business combination is not consummated by February 12, 2023, XPDI will cease all operations except for the purpose of winding up, redeem 100% of the outstanding Class A Common Stock for cash and, subject to the approval of its remaining stockholders and its board of directors, dissolve and liquidate. In such event, the Founder Shares, which were initially acquired by the Sponsor for an aggregate purchase price of $25,000 prior to the IPO, some of which were subsequently transferred by the Sponsor to each of XPDI’s independent directors prior to the IPO and all 8,625,000 of which are currently held by the Sponsor and such directors, would be worthless because such holders are not entitled to participate in any redemption or distribution with respect to such shares. Such shares had an estimated aggregate market value of $ based upon the closing price of $ per public share on the Nasdaq on , 2021, the Record Date for the Special Meeting.
|
• |
In particular, because the Founder Shares were purchased at approximately $0.003 per share, the holders of the Founder Shares (including members of our management team that directly or indirectly own Founder Shares) could make a substantial profit after the merger even if our public stockholders lose money on their investment as a result of a decrease in the post-merger value of their shares of Class A Common Stock (after accounting for any adjustments in connection with an exchange or other transaction contemplated by the merger).
|
• |
The Sponsor, in which certain of XPDI’s officers and directors hold a direct or indirect interest, and the anchor investors purchased an aggregate of 6,266,667 Private Placement Warrants from XPDI for an aggregate purchase price of $9.4 million (or $1.50 per warrant) in a private placement. These purchases took place on a private placement basis that occurred simultaneously with the consummation of the IPO. A portion of the proceeds XPDI received from these purchases were placed in the Trust Account. Such warrants had an estimated aggregate value of $ based on the closing price of $ per warrant on the Nasdaq on , 2021, the Record Date for the Special Meeting. The Private Placement Warrants are not subject to redemption and will become worthless if XPDI does not consummate a business combination by February 12, 2023.
|
• |
If XPDI is unable to complete a business combination within the required time period, its executive officers will be personally liable under certain circumstances described herein to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by XPDI for services rendered or contracted for or products sold to XPDI. If XPDI consummates a business combination, on the other hand, XPDI will be liable for all such claims.
|
• |
The Sponsor, XPDI’s officers and directors, and their respective affiliates, are entitled to reimbursement of
out-of-pocket
|
• |
The continued indemnification of current directors and officers and the continuation of directors’ and officers’ liability insurance.
|
• |
XPDI has agreed to pay XMS Capital certain advisory fees in connection with the merger.
|
• |
You can submit a proxy to vote your shares by calling the toll-free number shown on your proxy card and voting over the phone.
|
• |
You can submit a proxy to vote your shares by visiting the website shown on your proxy card and voting via the internet.
|
• |
You can submit a proxy to vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Special Meeting. If you submit a proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares of XPDI common stock will be voted as recommended by XPDI’s board of directors. XPDI’s board of directors unanimously recommends that XPDI’s stockholders vote “
FOR
FOR
FOR
FOR
FOR
FOR
FOR
|
• |
You can attend the Special Meeting and vote virtually even if you have previously voted by submitting a proxy pursuant to any of the methods noted above. However, if your shares of XPDI common stock are held in the name of your broker, bank or other nominee, you must get a proxy from the broker, bank or other nominee. That is the only way XPDI can be sure that the broker, bank or nominee has not already voted your shares of XPDI common stock.
|
• |
you may send another proxy card with a later date;
|
• |
you may notify XPDI in writing before the Special Meeting that you have revoked your proxy; or
|
• |
you may attend the Special Meeting virtually, revoke your proxy and vote online as described above.
|
• |
EPTP is a private equity fund focused on renewable energy, energy technology (i.e., battery storage), equipment and services and transition energy infrastructure. Its leadership has over 20 years of investment experience and has invested approximately $1.1 billion, including approximately $900 million directly, in the renewable and transition energy space.
|
• |
XMS is an entity owned by professionals of XMS Capital Partners, LLC (“XMS Capital”). XMS Capital, founded in 2006, is a global independent financial services firm providing investment banking, asset management and merchant banking services to a wide range of clients. It has offices in Chicago, London and Boston. The XMS Capital value proposition is characterized by Involvement Banking
™
, a service approach which goes beyond transaction-oriented investment banking and focuses on delivering objective, value-added advice and custom-tailored solutions to help clients achieve their strategic goals. Its track record of consistent value creation for its clients is attributable to its ability to provide turnkey access to comprehensive, independent M&A, strategic advisory, financial restructuring, capital structure advisory and private capital advisory expertise.
|
• |
AP is an entity controlled by Benjamin W. Atkins and Jesse Peltan, each of whom serves as a member of our management team, who collectively have over 10 years of Bitcoin mining, high voltage electrical infrastructure and data center experience.
|
• |
subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination; and
|
• |
cause us to depend on the marketing and sale of a single product or limited number of products or services.
|
• |
appointing, compensating and overseeing our independent registered public accounting firm;
|
• |
reviewing and approving the annual audit plan for the Company;
|
• |
overseeing the integrity of our financial statements and our compliance with legal and regulatory requirements;
|
• |
discussing the annual audited financial statements and unaudited quarterly financial statements with management and our independent registered public accounting firm;
|
• |
pre-approving all
audit services and permitted
non-audit services
to be performed by our independent registered public accounting firm, including the fees and terms of the services to be performed;
|
• |
appointing or replacing our independent registered public accounting firm;
|
• |
monitoring our environmental sustainability and governance practices;
|
• |
establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies;
|
• |
discussing earnings press releases and financial information provided to analysts and rating agencies;
|
• |
discussing with management our policies and practices with respect to risk assessment and risk management;
|
• |
reviewing any material transaction between our Chief Financial Officer that has been approved in accordance with our Code of Ethics for our officers, and providing prior written approval of any material transaction between us and our Chief Executive Officer; and
|
• |
producing an annual report for inclusion in our proxy statement, in accordance with applicable rules and regulations.
|
• |
identifying individuals qualified to become members of our board of directors and making recommendations to the board of directors regarding nominees for election;
|
• |
reviewing the independence of each director and making a recommendation to the board of directors with respect to each director’s independence;
|
• |
developing and recommending to the board of directors the corporate governance principles applicable to us and reviewing our corporate governance guidelines at least annually;
|
• |
making recommendations to the board of directors with respect to the membership of the audit, compensation and corporate governance and nominating committees;
|
• |
overseeing the evaluation of the performance of the board of directors and its committees on a continuing basis, including an annual self-evaluation of the performance of the corporate governance and nominating committee;
|
• |
considering the adequacy of our governance structures and policies, including as they relate to our environmental sustainability and governance practices;
|
• |
considering director nominees recommended by stockholders; and
|
• |
reviewing our overall corporate governance and reporting to the board of directors on its findings and any recommendations.
|
• |
should possess personal qualities and characteristics, accomplishments and reputation in the business community;
|
• |
should have current knowledge and contacts in the communities in which we do business and in our industry or other industries relevant to our business;
|
• |
should have the ability and willingness to commit adequate time to the board of directors and committee matters;
|
• |
should demonstrate ability and willingness to commit adequate time to the board of directors and committee matters;
|
• |
should possess the fit of the individual’s skills and personality with those of other directors and potential directors in building a board of directors that is effective, collegial and responsive to our needs; and
|
• |
should demonstrate diversity of viewpoints, background, experience and other demographics, and all aspects of diversity in order to enable the board of directors to perform its duties and responsibilities effectively, including candidates with a diversity of age, gender, nationality, race, ethnicity and sexual orientation.
|
• |
reviewing and approving corporate goals and objectives relevant to our Chief Executive Officer’s compensation (if any), evaluating our Chief Executive Officer’s performance in light of those goals and
|
objectives and setting our Chief Executive Officer’s compensation level (if any) based on this evaluation;
|
• |
setting salaries and approving incentive compensation and equity awards, as well as compensation policies, for all other officers who file reports of their ownership, and changes in ownership, of the Company’s common stock under Section 16(a) of the Exchange Act (the “Section 16 Officers”), as designated by our board of directors;
|
• |
making recommendations to the board of directors with respect to incentive compensation programs and equity-based plans that are subject to board approval;
|
• |
approving any employment or severance agreements with our Section 16 Officers
|
• |
granting any awards under equity compensation plans and annual bonus plans to our Chief Executive Officer and the Section 16 Officers;
|
• |
approving the compensation of our directors; and
|
• |
producing an annual report on executive compensation for inclusion in our proxy statement, in accordance with applicable rules and regulations.
|
• |
the corporation could financially undertake the opportunity;
|
• |
the opportunity is within the corporation’s line of business; and
|
• |
it would not be fair to our company and its stockholders for the opportunity not to be brought to the attention of the corporation.
|
• |
Our executive officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our executive officers and directors is engaged in several other business endeavors for which he or she may be entitled to substantial compensation, and our executive officers and directors are not obligated to contribute any specific number of hours per week to our affairs.
|
• |
Our Sponsor, directors and each member of our management team have entered into agreements with us, pursuant to which they have agreed to waive their redemption rights with respect to any Founder Shares and public shares held by them in connection with (i) the completion of our initial business combination and (ii) a stockholder vote to approve an amendment to our Existing Charter that would affect the substance or timing of our obligation to provide holders of shares of our Class A Common Stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination February 12, 2023.
|
• |
Our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officer and director was included by a target business as a condition to any agreement with respect to our initial business combination.
|
• |
XPDI has agreed to pay XMS Capital certain advisory fees in connection with the merger.
|
Name
|
Age
|
Position
|
||
Theodore J. Brombach | 58 | Chairman of the Board | ||
Patrick C. Eilers | 55 | Chief Executive Officer and Director | ||
James P. Nygaard, Jr. | 47 | Chief Financial Officer | ||
Paul Dabbar | 54 | Director | ||
Paul Gaynor | 56 | Director | ||
Colleen Sullivan | 48 | Director | ||
Scott Widham | 63 | Director | ||
Benjamin W. Atkins | 35 | Vice President | ||
Jesse Peltan | 25 | Vice President |
• |
Acting as a fraud deterrent, as digital assets recorded on a blockchain are virtually impossible to counterfeit, reverse, or modify;
|
• |
Immediate settlement;
|
• |
Elimination of counterparty risk;
|
• |
No requirement for a trusted intermediary;
|
• |
Lower transaction fees;
|
• |
Identity theft prevention;
|
• |
Universal accessibility;
|
• |
Transaction verification and confirmation processes that prevent double spending;
|
• |
Decentralized transaction processing at any time of day without any central authority (governments or financial institutions); and
|
• |
Universal value free from currency exchange rates.
|
• |
Argo Blockchain PLC;
|
• |
Bit Digital, Inc.;
|
• |
Bitcoin Investment Trust;
|
• |
Bitfarms Technologies Ltd. (formerly Blockchain Mining Ltd);
|
• |
Blockchain Industries, Inc. (formerly Omni Global Technologies, Inc.);
|
• |
Cipher Mining Inc.;
|
• |
Coinbase, Inc.;
|
• |
Digihost International, Inc.;
|
• |
DMG Blockchain Solutions Inc.;
|
• |
DPW Holdings, Inc. (through its ownership of Digital Farms Inc.);
|
• |
Greenidge Generation Holdings Inc.;
|
• |
HashChain Technology, Inc.;
|
• |
Hive Blockchain Technologies Inc.;
|
• |
Hut 8 Mining Corp.;
|
• |
Layer1 Technologies, Inc.;
|
• |
Marathon Digital Holdings, Inc.;
|
• |
MGT Capital Investments, Inc.;
|
• |
Northern Data AG;
|
• |
Overstock.com Inc.; and
|
• |
Riot Blockchain, Inc.
|
• |
Kevin Turner, former President and Chief Executive Officer;
|
• |
Michael Trzupek, Chief Financial Officer; and
|
• |
Todd M. DuChene, Secretary and General Counsel.
|
Name and Principal Position
|
Year
|
Salary
(1)
|
Stock
Awards
(2)
|
All Other
Compensation ($)
(3)
|
Total
|
|||||||||||||||
B. Kevin Turner
(4)
Former President and Chief Executive Officer
|
2020 | $ | 300,000 | $ | 9,716,229 | $ | 33,217 | $ | 10,049,446 | |||||||||||
Michael Trzupek
(5)
Chief Financial Officer
|
2020 | 75,000 |
(5)
|
13,803,152 | — | 13,878,152 | ||||||||||||||
Todd M. DuChene
General Counsel and Secretary
|
2020 | 300,000 | 795,049 | — | 1,095,049 |
(1) |
Salary amounts represent actual amounts earned during 2020.
|
(2) |
Amounts reported represent the aggregate grant date fair value of restricted stock units granted to the named executive officer during 2020. The aggregate grant date fair value is based upon an estimate of Core Scientific common stock at the grant date. In accordance with the Financial Accounting Standard Board Accounting Standards Codification, Topic 718, or ASC Topic 718, recognition of compensation cost is deferred until consummation of the merger. See Note 2 of the audited consolidated financial statements included elsewhere in this proxy statement/prospectus for a discussion of the relevant assumptions used in calculating this amount. This amount does not reflect the actual economic value that may be realized by the named executive officer.
|
(3) |
Amounts reported include actual cash expenses incurred by Core Scientific. For more information regarding other compensation paid to our named executive officers for the fiscal year ended December 31, 2020, see “—
2020 All Other Compensation Table
|
(4) |
Mr. Turner resigned as Core Scientific’s President and Chief Executive Officer in May 2021.
|
(5) |
Mr. Trzupek joined Core Scientific as Chief Financial Officer on September 21, 2020. His annualized base salary as of December 31, 2020 was $300,000.
|
Name
|
Medical
benefits ($) |
Group Life
Insurance Premiums ($) |
Other Personal
Benefits ($) |
Total ($)
|
||||||||||||
B. Kevin Turner
|
$ | 32,325 | $ | 64 | $ | 828 |
(1)
|
$ | 33,217 |
(1) |
Amount shown represents
out-of-pocket
|
Name
|
Fiscal Year
2020 Base Salary |
|||
B. Kevin Turner
|
$ | 300,000 | ||
Michael Trzupek
|
$ | 300,000 | ||
Todd M. DuChene
|
$ | 300,000 |
Stock Awards
(1)
|
||||||||||||||||
Name
|
Grant
Date |
Vesting
Commencement Date |
Number of
Shares or Units of Stock that Have Not Vested (#) |
Market Value
of Shares or Units of Stock that Have Not Vested
(2)
|
||||||||||||
B. Kevin Turner
(3)
|
September 21, 2018 | July 1, 2018 | 5,000,000 | 51,150,000 | ||||||||||||
October 1, 2018 | July 1, 2018 | 3,000,000 | 30,690,000 | |||||||||||||
October 9, 2018 | July 1, 2018 | 1,000,000 | 10,230,000 | |||||||||||||
July 31, 2019 | July 1, 2019 | 1,000,000 | 10,230,000 | |||||||||||||
April 29, 2020 | April 30, 2020 | 1,725,000 | 17,646,750 | |||||||||||||
August 24, 2020 | August 25, 2020 | 1,000,000 | 10,230,000 | |||||||||||||
Michael Trzupek
(6)
|
October 1, 2020 | September 21, 2020 | 2,000,000 |
(5)
|
20,460,000 | |||||||||||
Todd M. DuChene
|
April 1, 2019 | April 1, 2019 | 1,000,000 |
(4)
|
10,230,000 | |||||||||||
June 12, 2020 | June 12, 2020 | 250,000 |
(5)
|
2,557,500 |
(1) |
All stock awards listed in this table represent restricted stock units granted pursuant to the 2018 Plan, the terms of which are described below under “
—Equity Plan
|
(2) |
This column represents the fair market value of a share of Core Scientific’s common stock of $10.23 as of December 31, 2020 as determined by its board of directors, multiplied by the amount shown in the column “Stock Awards—Number of Shares or Units of Stock that Have Not Vested.”
|
(3) |
Mr. Turner resigned as Core Scientific’s President and Chief Executive Officer in May 2021. Mr. Turner’s separation agreement provides that, as of Mr. Turner’s separation date, 9,037,500 restricted stock units had satisfied the time-based vesting condition, but these restricted stock units remain subject to the transaction-based vesting condition described in Note 11 to Core Scientific’s consolidated financial statements as of and for the years ended December 31, 2020 and 2019, which are included elsewhere in this proxy statement/prospectus. The transaction-based vesting condition must be satisfied within three years of Mr. Turner’s separation date.
|
(4) |
One fourth of these restricted stock units vest on the one year anniversary of the vesting commencement date and 1/36 of the remaining restricted stock units vest monthly thereafter, provided that the recipient remains in continuous service with us through each vesting date, and subject to the earlier to occur of (i) a change of control event, and (ii) an initial public offering of Core Scientific’s equity securities.
|
(5) |
One fourth of these restricted stock units vest on each of the first four anniversaries of the vesting commencement date, provided that the recipient remains in continuous service with us through each vesting date, and subject to the earlier to occur of (i) a change of control event, and (ii) an initial public offering of Core Scientific’s equity securities.
|
(6) |
Mr. Trzupek joined Core Scientific as Chief Financial Officer on September 21, 2020.
|
• |
select the eligible individual to whom awards may be granted;
|
• |
determine whether and to what extent awards are to be granted to eligible individuals;
|
• |
determine the number of shares of common stock to be covered by each award;
|
• |
determine the terms and conditions of awards (including exercise price, purchase price, vesting schedule or acceleration thereof, and forfeiture restrictions or waiver thereof);
|
• |
determine the amount of cash to be covered by each award;
|
• |
determine whether, to what extent and under what circumstances grants of awards under the 2018 Plan are to operate on a tandem basis and/or in conjunction with or apart from other awards made by the Company outside of the 2018 Plan;
|
• |
determine whether and under what circumstances, options may be settled in cash, common stock, and/or restricted stock;
|
• |
determine whether an option is an ISO or NSO;
|
• |
determine whether to require a participant not to sell or otherwise dispose of shares acquired pursuant to the exercise of an award for a period of time as determined by the plan administrator, in its sole discretion, following the date of the acquisition of such award;
|
• |
modify, extend or renew an award; and
|
• |
determine whether, to what extent and under what circumstances to provide loans to participants in order to exercise options under the 2018 Plan.
|
• |
awards may be continued, assumed, or have new rights substituted therefore;
|
• |
the plan administrator may provide for the purchase of any awards by the Company or an Affiliate for cash;
|
• |
the plan administrator may, in its sole discretion, terminate all outstanding and unexercised options, stock appreciation rights, or any other stock-based award that provides for a Participant elected exercise; and/or
|
• |
the plan administrator may, in its sole discretion, provide for accelerated vesting or lapse of restrictions.
|
Name
|
Stock awards
(1)
|
Total
|
||||||
Matthew Bishop
|
$ | 95,000 | $ | 95,000 |
(1) |
The amount reported represents the aggregate grant date fair value of the restricted stock units granted during the fiscal year ended December 31, 2020 under the 2018 Plan, computed in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the restricted stock units reported in this column are set forth in Note 11 to the notes to Core Scientific’s consolidated financial statements included elsewhere in this proxy statement/prospectus. These amounts do not reflect the actual economic value that may be realized by the
non-employee
director. As of December 31, 2020, Mr. Bishop held 625,000 restricted stock units all of which are subject to forfeiture if the transaction vesting condition of the award is not met on or before March 31, 2024.
|
Bitcoin Miners in deployed
|
||||||||
Mining Equipment
|
Hash rate (EH/s)
|
Number of Miners
|
||||||
Self-miners1
|
2.64 | 28,004 | ||||||
Hosted miners
|
4.48 | 50,994 | ||||||
|
|
|
|
|||||
Total mining equipment
|
7.12 | 78,998 | ||||||
Bitcoin Miners On Order
|
||||||||
Mining Equipment
|
Hash rate (EH/s)
|
Number of Miners
|
||||||
Self-miners1
|
12.57 | 125,661 | ||||||
Hosted miners
|
3.80 | 38,007 | ||||||
|
|
|
|
|||||
Total mining equipment
|
16.37 | 163,668 | ||||||
|
|
|
|
|||||
Total in operation and on order
|
23.49 | 242,666 | ||||||
|
|
|
|
1 |
Blockcap’s hash rate and number of miners is included in self-miners in the table above.
|
Nine Months Ended
September 30, |
Year Ended
December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Total Revenue
|
$ | 242,688 | $ | 36,633 | $ | 60,320 | $ | 59,523 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Cost of revenue
|
145,193 | 31,906 | 50,928 | 48,996 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
97,495 | 4,727 | 9,392 | 10,527 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gain on legal settlements
|
(2,603 | ) | 5,814 | 5,814 | — | |||||||||||
Gain from sales of digital currency assets
|
405 | 52 | 69 | 387 | ||||||||||||
Impairment of digital currency assets
|
(12,552 | ) | (4 | ) | (4 | ) | 419 | |||||||||
Total operating expenses
|
53,409 | 16,382 | 21,598 | 23,020 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income (Loss)
|
29,336 | (5,793 | ) | (6,327 | ) | (11,687 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total non-operating income (expense), net
|
(47,767 | ) | (4,104 | ) | (5,879 | ) | (235 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes
|
(18,431 | ) | (9,897 | ) | (12,206 | ) | (11,922 | ) | ||||||||
Income tax benefit
|
(955 | ) | — | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Income (Loss)
|
$ | (17,476 | ) | $ | (9,897 | ) | $ | (12,206 | ) | $ | (11,922 | ) | ||||
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
Year Ended
December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
Self-Mining Hash rate (Exahash), EoP
|
2.64 | 0.12 | 0.35 | 0.08 | ||||||||||||
Adjusted EBITDA ($ Millions)
|
$ | 88.0 | $ | 3.1 | $ | 6.1 | $ | (1.9 | ) |
Nine Months Ended
September 30, |
Year Ended
December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
Adjusted EBITDA
|
(in thousands) | (in thousands) | ||||||||||||||
Net income (loss)
|
$ | (17,476 | ) | $ | (9,897 | ) | $ | (12,206 | ) | $ | (11,922 | ) | ||||
Adjustments:
|
||||||||||||||||
Interest expense, net
|
34,822 | 4,104 | 5,879 | 235 | ||||||||||||
Income tax expense (benefit)
|
(955 | ) | — | — | — | |||||||||||
Depreciation and amortization
|
12,886 | 6,613 | 9,403 | 6,118 | ||||||||||||
Stock-based compensation expense
|
31,012 | 2,446 | 3,037 | 2,880 | ||||||||||||
Impairment of digital curreny assets
|
12,552 | 5 | 4 | (419 | ) | |||||||||||
Legal settlement
|
2,603 | — | — | — | ||||||||||||
Fair value adjustment on convertible note payable
|
12,945 | — | — | — | ||||||||||||
Other items
|
(388 | ) | (144 | ) | (66 | ) | 1,166 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA
|
$ | 88,000 | $ | 3,128 | $ | 6,051 | $ | (1,942 | ) | |||||||
|
|
|
|
|
|
|
|
• |
Hosting revenue from customers and related parties.
Certain Relationships and Related Party Transactions—Core Scientific
|
• |
Equipment sales to customers and related parties.
|
• |
Digital asset mining income.
|
to solve blocks on the Bitcoin blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks. The diagram below provides a simple illustration of the calculation of our annual digital asset mining income.
|
1 |
Amount represents the average number of blocks mined per year, e.g., blocks are mined on average every 10 minutes, or 144 per day, 52,560 per year
|
• |
Research and development.
|
• |
Sales and marketing.
|
• |
General and administrative.
|
Nine Months Ended
September 30, |
Year Ended
December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
Total Revenue:
|
(in thousands) | (in thousands) | ||||||||||||||
Hosting revenue from customers
|
$ | 37,836 | $ | 28,667 | $ | 34,615 | $ | 53,492 | ||||||||
Hosting revenue from related parties
|
13,906 | 3,382 | 6,983 | 384 | ||||||||||||
Equipment sales to customers
|
84,378 | 1,987 | 11,193 | — | ||||||||||||
Equipment sales to related parties
|
29,057 | 285 | 1,402 | — | ||||||||||||
Digital asset mining income
|
77,511 | 2,312 | 6,127 | 5,647 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue
|
242,688 | 36,633 | 60,320 | 59,523 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cost of revenue
|
145,193 | 31,906 | 50,928 | 48,996 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
97,495 | 4,727 | 9,392 | 10,527 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) gain on legal settlements
|
(2,603 | ) | 5,814 | 5,814 | — | |||||||||||
Gain from sales of digital currency assets
|
405 | 52 | 69 | 387 | ||||||||||||
Impairment of digital currency assets
|
(12,552 | ) | (4 | ) | (4 | ) | 419 | |||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
4,231 | 4,184 | 5,271 | 5,480 | ||||||||||||
Sales and Marketing
|
2,186 | 1,401 | 1,771 | 2,833 | ||||||||||||
General and administrative
|
46,992 | 10,797 | 14,556 | 14,707 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses
|
53,409 | 16,382 | 21,598 | 23,020 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income (Loss)
|
29,336 | (5,793 | ) | (6,327 | ) | (11,687 | ) | |||||||||
Non-operating
income (expense), net:
|
||||||||||||||||
Loss on debt extinguishment
|
(8,016 | ) | (1,333 | ) | (1,333 | ) | — | |||||||||
Interest expense, net
|
(26,806 | ) | (2,683 | ) | (4,436 | ) | (235 | ) | ||||||||
Other
non-operating
expenses, net
|
(12,945 | ) | (88 | ) | (110 | ) | — | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total
non-operating
income (expense), net .
|
(47,767 | ) | (4,104 | ) | (5,879 | ) | (235 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes
|
(18,431 | ) | (9,897 | ) | (12,206 | ) | (11,922 | ) | ||||||||
Income tax expense
|
(955 | ) | — | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Income (Loss)
|
$ | (17,476 | ) | $ | (9,897 | ) | $ | (12,206 | ) | $ | (11,922 | ) | ||||
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
Year Ended
December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
Total Revenue:
|
||||||||||||||||
Hosting revenue from customers
|
16 | % | 78 | % | 57 | % | 90 | % | ||||||||
Hosting revenue from related parties
|
6 | 9 | 12 | 1 | ||||||||||||
Equipment sales to customers
|
35 | 5 | 19 | — | ||||||||||||
Equipment sales to related parties
|
12 | 1 | 2 | — | ||||||||||||
Digital asset mining income
|
32 | 6 | 10 | 9 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue
|
100 | 100 | 100 | 100 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cost of revenue
|
60 | 87 | 84 | 82 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
40 | 13 | 16 | 18 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) gain on legal settlements
|
(1 | ) | 16 | 10 | — | |||||||||||
Gain from sales of digital currency assets
|
0 | 0 | 0 | 1 | ||||||||||||
Impairment of digital currency assets
|
(5 | ) | (0 | ) | 0 | 1 | ||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
2 | 11 | 9 | 9 | ||||||||||||
Sales and Marketing
|
1 | 4 | 3 | 5 | ||||||||||||
General and administrative
|
19 | 29 | 24 | 25 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses
|
22 | 45 | 36 | 39 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income (Loss)
|
17 | (16 | ) | (10 | ) | (20 | ) | |||||||||
Non-operating
income (expense), net:
|
||||||||||||||||
Loss on debt extinguishment and other
|
(3 | ) | (4 | ) | (2 | ) | — | |||||||||
Interest expense, net
|
(11 | ) | (7 | ) | (7 | ) | (0 | ) | ||||||||
Other
non-operating
expenses, net
|
(5 | ) | (0 | ) | (0 | ) | — | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total
non-operating
income (expense), net
|
(20 | ) | (11 | ) | (10 | ) | (0 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes
|
(8 | ) | (27 | ) | (20 | ) | (21 | ) | ||||||||
Income tax expense
|
(0 | ) | — | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Income (Loss)
|
(7 | )% | (27 | )% | (20 | )% | (21 | )% | ||||||||
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
Period to Period Change
|
|||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
|||||||||||||
Total Revenue:
|
(in thousands) | (in thousands) | ||||||||||||||
Hosting revenue from customers
|
$ | 37,836 | $ | 28,667 | $ | 9,169 | 32 | % | ||||||||
Hosting revenue from related parties
|
13,906 | 3,382 | 10,524 | 311 | % | |||||||||||
Equipment sales to customers
|
84,378 | 1,987 | 82,391 | 4147 | % | |||||||||||
Equipment sales to related parties
|
29,057 | 285 | 28,772 | n.m. | ||||||||||||
Digital asset mining income
|
77,511 | 2,312 | 75,199 | 3253 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue
|
$ | 242,688 | $ | 36,633 | $ | 206,055 | 562 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Percentage of total revenue:
|
||||||||||||||||
Hosting revenue from customers
|
16 | % | 78 | % | ||||||||||||
Hosting revenue from related parties
|
6 | 9 | ||||||||||||||
Equipment sales to customers
|
35 | 5 | ||||||||||||||
Equipment sales to related parties
|
12 | 1 | ||||||||||||||
Digital asset mining income
|
32 | 6 | ||||||||||||||
|
|
|
|
|||||||||||||
Total Revenue
|
100 | 100 | ||||||||||||||
|
|
|
|
Nine Months Ended
September 30, |
Period to Period
Change
|
|||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Cost of revenue
|
$ | 145,193 | $ | 31,906 | $ | 113,287 | 355 | % | ||||||||
Gross profit
|
97,495 | 4,727 | 92,768 | 1963 | % | |||||||||||
Gross margin
|
40 | % | 13 | % | — | 27 | % |
Nine Months Ended
September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Gain (loss) from sales of digital currency assets
|
$ | 405 | $ | 52 | $ | 353 | 679 | % | ||||||||
Percentage of total revenue
|
0 | % | 0 | % |
Nine Months Ended
September 30, |
Period to Period Change
|
|||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Impairment of digital currency assets
|
$ | (12,552 | ) | $ | (4 | ) | $ | (12,548 | ) | n.m. | ||||||
Percentage of total revenue
|
(5 | )% | 0 | % |
Nine Months Ended
September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Research and development
|
$ | 4,231 | $ | 4,184 | $ | 47 | 1 | % | ||||||||
Percentage of total revenue
|
2 | % | 11 | % |
Nine Months Ended
September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Sales and marketing
|
$ | 2,186 | $ | 1,401 | $ | 785 | 56 | % | ||||||||
Percentage of total revenue
|
1 | % | 4 | % |
Nine Months Ended
September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
General and administrative
|
$ | 46,992 | $ | 10,797 | $ | 36,195 | 335 | % | ||||||||
Percentage of total revenue
|
19 | % | 29 | % |
Nine Months Ended
September 30, |
Period to Period
Change
|
|||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
|||||||||||||
Non-operating income (expense), net:
|
(in thousands) | (in thousands) | ||||||||||||||
Loss on debt extinguishment
|
$ | (8,016 | ) | $ | (1,333 | ) | $ | (6,683 | ) | 501 | % | |||||
Interest expense, net
|
(26,806 | ) | (2,683 | ) | (24,123 | ) | 899 | % | ||||||||
Other non-operating expenses, net
|
(12,945 | ) | (88 | ) | (12,858 | ) | n.m. | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total non-operating income (expense), net
|
$ | (47,767 | ) | $ | (4,104 | ) | $ | (43,663 | ) | 1064 | % | |||||
|
|
|
|
|
|
|
|
For the Nine Months
Ended September 30, |
Period to Period
Change
|
|||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
|||||||||||||
Hosting and Equipment Sales Segment
|
(in thousands) | (in thousands) | ||||||||||||||
Hosting revenue from customers
|
$ | 51,742 | $ | 32,049 | $ | 19,693 | 61 | % | ||||||||
Equipment sales to customers
|
113,435 | 2,272 | 111,163 | n.m. | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue
|
165,177 | 34,321 | 130,856 | 381 | % | |||||||||||
Cost of revenue
|
131,284 | 30,308 | 100,976 | 333 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
$ | 33,893 | $ | 4,013 | $ | 29,880 | 745 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Mining Segment
|
||||||||||||||||
Digital asset mining income
|
$ | 77,511 | $ | 2,312 | $ | 75,199 | n.m. | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue
|
$ | 77,511 | 2,312 | 75,199 | n.m. | |||||||||||
Cost of revenue
|
13,909 | 1,598 | 12,311 | 770 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
$ | 63,602 | $ | 714 | $ | 62,888 | n.m. | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Consolidated total revenue
|
$ | 242,688 | $ | 36,633 | $ | 206,055 | 562 | % | ||||||||
Consolidated cost of revenue
|
$ | 145,193 | $ | 31,906 | $ | 113,287 | 355 | % | ||||||||
Consolidated gross profit
|
$ | 97,495 | $ | 4,727 | $ | 92,768 | 1963 | % |
For the Nine Months
Ended September 30, |
||||||||
Customer
|
2021
|
2020
|
||||||
A
|
34 | % | n/a | |||||
B
|
21 | % | n/a | |||||
C (related party)
|
18 | % | n/a | |||||
D
|
n/a | 42 | % | |||||
E
|
n/a | 16 | % |
For the Nine Months
Ended September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Reportable segment gross profit
|
$ | 97,495 | $ | 4,727 | $ | 92,768 | 1963 | % | ||||||||
(Loss) gain on legal settlements
|
(2,603 | ) | 5,814 | (8,417 | ) | (145 | %) | |||||||||
Gain (loss) from sales of digital currency assets
|
405 | 52 | 353 | 679 | % | |||||||||||
Impairment of digital currency assets
|
(12,552 | ) | (4 | ) | (12,548 | ) | n.m. | |||||||||
Operating expense (income):
|
||||||||||||||||
Research and development
|
4,231 | 4,184 | 47 | 1 | % | |||||||||||
Sales and marketing
|
2,186 | 1,401 | 785 | 56 | % | |||||||||||
General and administrative
|
46,992 | 10,797 | 36,195 | 335 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expense (income)
|
53,409 | 16,382 | 37,027 | 226 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income (Loss)
|
29,336 | (5,794 | ) | 35,130 | (606 | %) | ||||||||||
Other income (expense):
|
||||||||||||||||
Loss on debt extinguishment
|
(8,016 | ) | (1,333 | ) | (6,683 | ) | 501 | % | ||||||||
Interest expense, net
|
(26,806 | ) | (2,683 | ) | (24,123 | ) | 899 | % | ||||||||
Other
non-operating
expenses, net
|
(12,945 | ) | (88 | ) | (12,858 | ) | n.m. | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other income (expense)
|
(47,767 | ) | (4,104 | ) | (43,633 | ) | 1064 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes
|
$ | (18,431 | ) | $ | (9,897 | ) | $ | (8,533 | ) | 86 | % | |||||
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
Period to Period
Change
|
|||||||||||||||
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||
Total Revenue:
|
(in thousands) | (in thousands) | ||||||||||||||
Hosting revenue from customers
|
$ | 34,615 | $ | 53,492 | $ | (18,877 | ) | (35 | %) | |||||||
Hosting revenue from related parties
|
6,983 | 384 | 6,599 | n.m. | ||||||||||||
Equipment sales to customers
|
11,193 | — | 11,193 | — | ||||||||||||
Equipment sales to related parties
|
1,402 | — | 1,402 | — | ||||||||||||
Digital asset mining income
|
6,127 | 5,647 | 480 | 8 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue
|
$ | 60,320 | $ | 59,523 | $ | 797 | 1 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Percentage of total revenue:
|
||||||||||||||||
Hosting revenue from customers
|
57 | % | 90 | % | ||||||||||||
Hosting revenue from related parties
|
12 | 1 | ||||||||||||||
Equipment sales to customers
|
19 | — | ||||||||||||||
Equipment sales to related parties
|
2 | — | ||||||||||||||
Digital asset mining income
|
10 | 9 | ||||||||||||||
|
|
|
|
|||||||||||||
Total Revenue
|
100 | 100 | ||||||||||||||
|
|
|
|
Year Ended
December 31,
|
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Cost of revenue
|
$ | 50,928 | $ | 48,996 | $ | 1,932 | 4 | % | ||||||||
Gross profit
|
9,392 | 10,527 | (1,135 | ) | (11 | %) | ||||||||||
Gross margin
|
16 | % | 18 | % | — | (2 | %) |
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Impairment of digital currency assets
|
$ | (4 | ) | $ | 419 | $ | (423 | ) | (101 | %) | ||||||
Percentage of total revenue
|
0 | % | 1 | % |
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Research and development
|
$ | 5,271 | $ | 5,480 | $ | (209 | ) | (4 | %) | |||||||
Percentage of total revenue
|
9 | % | 9 | % |
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Sales and marketing
|
$ | 1,771 | $ | 2,833 | $ | (1,062) | (37 | %) | ||||||||
Percentage of total revenue
|
3 | % | 5 | % |
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
General and administrative
|
$ | 14,556 | $ | 14,707 | $ | (151) | (1 | %) | ||||||||
Percentage of total revenue
|
24 | % | 25 | % |
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||
Non-operating income (expense), net:
|
(in thousands) | (in thousands) | ||||||||||||||
Loss on debt extinguishment
|
$ | (1,333 | ) | — | $ | (1,333 | ) | — | % | |||||||
Interest expense, net
|
(4,436 | ) | (235 | ) | (4,201 | ) | 1788 | % | ||||||||
Other non-operating expenses, net
|
(110 | ) | — | (110 | ) | — | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total non-operating income (expense), net
|
$ | (5,879 | ) | $ | (235 | ) | $ | (5,644 | ) | 2402 | % | |||||
|
|
|
|
|
|
|
|
For the Years Ended
December 31, |
Period to Period
Change
|
|||||||||||||||
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||
Equipment Sales and Hosting Segment
|
(in thousands) | (in thousands) | ||||||||||||||
Hosting revenue from customers
|
$ | 41,598 | $ | 53,876 | $ | (12,278 | ) | (23 | %) | |||||||
Equipment sales to customers
|
12,595 | — | 12,595 | n.m. | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue
|
54,193 | 53,876 | 317 | 1 | % | |||||||||||
Cost of revenue
|
47,951 | 43,005 | 4,946 | 12 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
$ | 6,242 | $ | 10,871 | $ | (4,629 | ) | (43 | %) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Mining Segment
|
||||||||||||||||
Digital asset mining income
|
$ | 6,127 | $ | 5,647 | $ | 480 | 8 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue
|
6,127 | 5,647 | 480 | 8 | % | |||||||||||
Cost of revenue
|
2,977 | 5,991 | (3,014 | ) | (50 | %) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
$ | 3,150 | $ | (344 | ) | $ | 3,494 | n.m | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Consolidated total revenue
|
$ | 60,320 | $ | 59,523 | $ | 797 | 1 | % | ||||||||
Consolidated cost of revenue
|
$ | 50,928 | $ | 48,996 | $ | 1,932 | 4 | % | ||||||||
Consolidated gross profit
|
$ | 9,392 | $ | 10,527 | $ | (1,135 | ) | (11 | %) |
For the Years Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Reportable segment gross profit
|
$ | 9,392 | $ | 10,527 | $ | (1,135 | ) | (11 | %) | |||||||
Gain on legal settlements
|
5,814 | — | 5,814 | n.m. | ||||||||||||
Gain (loss) from sales of digital currency assets
|
69 | 387 | (318 | ) | (82 | %) | ||||||||||
Impairment of digital currency assets
|
(4 | ) | 419 | (423 | ) | (101 | %) | |||||||||
Operating expense (income):
|
||||||||||||||||
Research and development
|
$ | 5,271 | $ | 5,480 | $ | (209) | (4 | %) | ||||||||
Sales and marketing
|
1,771 | 2,833 | (1,062 | ) | (37 | %) | ||||||||||
General and administrative
|
14,556 | 14,707 | (151 | ) | (1 | %) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expense (income)
|
21,598 | 23,020 | (1,422 | ) | (6 | %) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income (loss)
|
(6,327 | ) | (11,687 | ) | 5,360 | (46 | %) | |||||||||
Other income (expense):
|
||||||||||||||||
Loss on debt extinguishment
|
(1,333 | ) | — | (1,333 | ) | n.m. | ||||||||||
Interest expense, net
|
(4,436 | ) | (235 | ) | (4,201 | ) | 1788 | % | ||||||||
Other non-operating expenses, net
|
(110 | ) | — | (110 | ) | n.m. | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other income (expense)
|
(5,879 | ) | (235 | ) | (5,644 | ) | 2402 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes
|
$ | (12,206 | ) | $ | (11,922 | ) | $ | (284 | ) | 2 | % | |||||
|
|
|
|
|
|
|
|
As of the
Nine Months Ended
September 30, |
Period to Period Change
|
As of the Year
Ended December 31, |
Period to Period Change
|
|||||||||||||||||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
Cash and cash equivalents
|
$ | 147,906 | $ | 6,573 | $ | 141,333 | n.m. | $ | 8,671 | $ | 6,657 | $ | 2,014 | 30 | % | |||||||||||||||||
Restricted cash
|
12,101 | 125 | 11,976 | n.m. | 50 | 250 | (200 | ) | (80 | %) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Cash, cash equiv. and restricted cash
|
$ | 160,007 | $ | 6,698 | $ | 8,721 | $ | 6,907 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
As of and for the Nine
Months Ended September 30, |
As of and for the Year
Ended December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Cash, cash equivalents and restricted cash
|
$ | 160,007 | $ | 6,698 | $ | 8,721 | $ | 6,907 | ||||||||
Cash provided by (used in)
|
||||||||||||||||
Operating activities
|
(166,474 | ) | (18,462 | ) | (23,765 | ) | (832 | ) | ||||||||
Investing activities
|
(115,524 | ) | (9,228 | ) | (15,144 | ) | (37,360 | ) | ||||||||
Financing activities
|
433,284 | 27,481 | 40,723 | 28,694 | ||||||||||||
Cash, cash equivalents and restricted cash – beg. of period
|
8,721 | 6,907 | 6,907 | 16,405 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash, cash equivalents and restricted cash – end of period
|
$ | 160,007 | $ | 6,698 | $ | 8,721 | $ | 6,907 | ||||||||
|
|
|
|
|
|
|
|
Year ending December 31,
|
||||
2021
|
$ | 111 | ||
2022-2025
|
— | |||
|
|
|||
Total minimum lease payments
|
$ | 111 | ||
|
|
Year ending December 31,
|
||||
2021
|
$ | 2,467 | ||
2022
|
1,990 | |||
2023
|
271 | |||
2024
|
102 | |||
2025
|
46 | |||
|
|
|||
Total minimum lease payments
|
4,876 | |||
Less: interest
|
(467 | ) | ||
|
|
|||
Present value of net minimum lease payments
|
$ | 4,409 | ||
|
|
Year Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Expected term (years)
|
10.0 |
5.43-5.57
|
||||||
Expected volatility
|
36.26 | % | 30.59 | % | ||||
Risk-free interest rate
|
0.70 | % | 1.65 | % | ||||
Expected dividend yield
|
0.0 | % | 0.0 | % |
• |
each person who is, or is expected to be, the beneficial owner of more than 5% of issued and outstanding shares of XPDI common stock or of New Core common stock;
|
• |
each of our current named executive officers and directors;
|
• |
each person who will (or is expected to) become an executive officer or director of New Core following the consummation of the merger; and
|
• |
all executive officers and directors of XPDI as a group
pre-merger
and all executive officers and directors of New Core post-merger.
|
After the Merger
|
||||||||||||||||||||||||||||||||
Before the Merger
|
No Redemptions
|
Maximum
Redemption |
||||||||||||||||||||||||||||||
Name and Address of
Beneficial Owner
(1)
|
Number of
shares of XPDI Class A Common Stock |
%
|
Number of
shares of XPDI Class B Common Stock
(2)
|
%
|
Number of
shares of New Core Common Stock |
%
|
Number of
shares of New Core Common Stock |
%
|
||||||||||||||||||||||||
Directors and Executive Officers of XPDI:
|
||||||||||||||||||||||||||||||||
Patrick C. Eilers
(3)
|
— | — | 8,505,000 | 19.7% | 8,505,000 | 2.5% | 8,505,000 | 2.8% | ||||||||||||||||||||||||
James P. Nygaard, Jr.
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Theodore J. Brombach
(3)
|
— | — | 8,505,000 | 19.7% | 8,505,000 | 2.5% | 8,505,000 | 2.8% | ||||||||||||||||||||||||
Paul Dabbar
|
— | — | 30,000 | * | 30,000 | * | 30,000 | * | ||||||||||||||||||||||||
Paul Gaynor
|
— | — | 30,000 | * | 30,000 | * | 30,000 | * | ||||||||||||||||||||||||
Colleen Sullivan
|
— | — | 30,000 | * | 30,000 | * | 30,000 | * | ||||||||||||||||||||||||
Scott Widham
|
— | — | 30,000 | * | 30,000 | * | 30,000 | * | ||||||||||||||||||||||||
Five Percent Holders of XPDI:
|
||||||||||||||||||||||||||||||||
XPDI Sponsor LLC
(3)
|
— | — | 8,505,000 | 19.7% | 8,505,000 | 2.5% | 8,505,000 | 2.8% | ||||||||||||||||||||||||
Adage Capital Partners, L.P.
(4)
|
1,750,000 | 5.07% | — | — | 1,750,000 | * | 1,750,000 | * | ||||||||||||||||||||||||
Beryl Capital Management LLC
(5)
|
2,178,428 | 6.3% | — | — | 2,178,428 | * | 2,178,428 | * | ||||||||||||||||||||||||
Directors and Executive Officers of New Core After Consummation of the Merger:
|
||||||||||||||||||||||||||||||||
Michael Levitt
|
— | — | — | — | 21,981,476 |
(6)
|
6.4 | % | 21,981,476 |
(6)
|
7.1 | % | ||||||||||||||||||||
B. Kevin Turner
(7)
|
— | — | — | — | 8,254,110 |
(8)
|
2.4 | % | 8,254,110 |
(8)
|
2.7 | % | ||||||||||||||||||||
Michael Trzupek
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Todd M. DuChene
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Darin Feinstein
|
— | — | — | — | 38,658,285 |
(9)
|
11.3 | % | 38,658,285 |
(9)
|
12.6 | % | ||||||||||||||||||||
Jarvis Hollingsworth
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Matt Minnis
|
— | — | — | — | 30,609,150 |
(10)
|
8.9 | % | 30,609,150 |
(10)
|
9.9 | % | ||||||||||||||||||||
Stacie Olivares
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Kneeland Youngblood
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
All Directors and Executive Officers of New Core as a Group (10 Individuals)
|
— | — | — | — |
|
99,503,022
|
|
|
29.1%
|
|
|
99,503,022
|
|
|
32.3%
|
|
||||||||||||||||
Five Percent Holders of New Core After Consummation of the Merger:
|
||||||||||||||||||||||||||||||||
BCV Entities
|
— | — | — | — | 141,144,538 |
(11)
|
41.3 | % | 141,144,538 |
(11)
|
45.9 | % |
* |
Less than one percent.
|
(1) |
Unless otherwise noted, the business address of each of the following entities or individuals is 321 North Clark Street, Suite 2440, Chicago, Illinois 60654. Unless otherwise indicated, the business address of each of the directors, executive officers and five percent holders of New Core is 106 East 6th Street,
Suite 900-145,
Austin, Texas 78701.
|
(2) |
Interests shown reflect ownership of the Founder Shares. Such shares will automatically convert into Class A Common Stock at the time of XPDI’s initial business combination as described in this proxy statement/prospectus.
|
(3) |
XPDI Sponsor LLC is controlled by its managing members, Messrs. Brombach and Eilers. Accordingly, all of the shares held by the Sponsor may be deemed to be beneficially held by Messrs. Brombach and Eilers. Each such person disclaims beneficial ownership of these securities, except to the extent, if any, of his pecuniary interest therein.
|
(4) |
Based solely upon the Schedule 13G filed by Adage Capital Partners, L.P., Adage Capital Partners GP, L.L.C., Adage Capital Advisors, L.L.C., Robert Atchinson and Phillip Gross (collectively, the “Reporting Persons”) on February 22, 2021. Adage Capital Partners, L.P., a Delaware limited partnership (“ACP”), has the power to dispose of and the power to vote the shares of Class A Common Stock beneficially owned by it, which power may be exercised by its general partner, Adage Capital Partners GP, L.L.C., a limited liability company organized under the laws of the State of Delaware (“ACPGP”). Adage Capital Advisors, L.L.C., a limited liability company organized under the laws of the State of Delaware (“ACA”), as managing member of ACPGP, directs ACPGP’s operations. Neither ACPGP nor ACA directly owns any shares of Class A Common Stock. By reason of the provisions of Rule
13d-3
of the Exchange Act, ACPGP and ACA may be deemed to beneficially own the shares owned by ACP. Messrs. Atchinson and Gross, as managing members of ACA, have shared power to vote the shares of Class A Common Stock beneficially owned by ACP. Neither Mr. Atchinson nor Mr. Gross directly owns any shares of Class A Common Stock. By reason of the provisions of Rule
13d-3
of the Exchange Act, each of Messrs. Atchinson and Gross may be deemed to beneficially own the shares beneficially owned by ACP. The business address of each of the Reporting Persons is 200 Clarendon Street, 52nd Floor, Boston, Massachusetts 02116.
|
(5) |
Based solely upon the Schedule 13G filed by Beryl Capital Management LLC (“Beryl”), Beryl Capital Management LP (“Beryl GP”), Beryl Capital Partners II LP (the “Partnership”) and David A. Witkin (collectively, the “Reporting Persons”) on August 6, 2021. Beryl is the investment adviser to the Partnership and other private investment funds (collectively, the “Funds”) and other accounts. Beryl is the general partner of Beryl GP, which is also the general partner of one or more of the Funds. Mr. Witkin is the control person of Beryl and Beryl GP. The Funds hold the shares of Class A Common Stock reported hereby (the “Stock”) for the benefit of their investors, and the Funds’ and Beryl’s other clients have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Stock. Other than the Partnership, no individual client’s holdings of the Stock are more than five percent of the outstanding Stock. Each Reporting Person disclaims beneficial ownership of the Stock except to the extent of that person’s pecuniary interest therein.
|
(6) |
Consists of (i) 19,973,324 shares of New Core common stock to be issued to BCV 55 LLC, BCV 66 LLC and BCV 77 LLC (collectively, the “BCV Entities”) in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (ii) 17,982 shares of New Core common stock to be issued to HKM Investment LLC (“HKM”) in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (iii) 35,965 shares of New Core common stock to be issued to The MJL 2012 Younger Children Trust, modified as of March 21, 2021, in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (iv) 35,965 shares of New Core common stock to be issued to The MJL 2012 Older Children Trust, modified as of March 21, 2021, in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (v) 89,912 shares of New Core common stock to be issued to The CS 1219 Trust, dated April 13, 2017, in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (vi) 210,152 shares of New Core common stock to be issued to Mr. Levitt in exchange for outstanding pre-Closing Core Scientific Series A preferred stock, which will be converted into shares of Core Scientific common stock immediately prior to the Effective Time, at the Closing, (vii) 23,350 shares of
|
New Core common stock to be issued to HKM in exchange for outstanding pre-Closing Core Scientific Series A preferred stock, which will be converted into shares of Core Scientific common stock immediately prior to the Effective Time, at the Closing and (viii) 1,594,827 shares of New Core common stock issuable upon exercise of warrants within 60 days of the Ownership Date held by Mr. Levitt. Mr. Levitt is the managing member of each of HKM and MJL Blockchain LLC (“MJL Blockchain”) a trustee of each of (i) The MJL 2012 Younger Children Trust, modified as of March 21, 2021, (ii) The MJL 2012 Older Children Trust, modified as of March 21, 2021, (iii) The CS 1219 Trust, dated April 13, 2017, (iv) The MJL Revoacable Trust, modified as of June 18, 2021, and (v) The NBL Revocable Trust, modified as of June 18, 2021 (collectively, the “Levitt Trusts”). MJL Blockchain and the Levitt Trusts in turn are each a member of the BCV Entities and collectively are estimated to hold voting and dispositive power over 19,973,324 shares of New Core common stock to be issued to the BCV entities pursuant to Mr. Levitt’s ownership stake in the BCV Entities. However, this estimate is subject to a variable contractual arrangement between Mr. Levitt and the BCV Entities and, as a result of which, the actual number of shares to be held by the BCV Entities attributable to Mr. Levitt’s beneficial ownership at the time of the Closing may vary from the number disclosed herein. The principal business address of each of the BCV Entities is 3753 S. Howard Hughes Pkwy, Suite 200-295, Las Vegas, NV 89169. |
(7) |
Mr. Turner is a named executive officer of Core Scientific during the year ended December 31, 2020. He resigned as Core Scientific’s President and Chief Executive Officer in May 2021.
|
(8) |
Consists of (i) 3,212,523 shares of New Core common stock to be issued to the BCV Entities in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (ii) 1,618,431 shares of New Core common stock to be issued to Mr. Turner in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (iii) 233,502 shares of New Core common stock to be issued to Mr. Turner in exchange for outstanding pre-Closing Core Scientific Series A preferred stock, which will be converted into shares of Core Scientific common stock immediately prior to the Effective Time, at the Closing and (iv) 3,189,655 shares of New Core common stock issuable upon exercise of warrants within 60 days of the Ownership Date held by Mr. Turner. Mr. Turner is a member of the BCV Entities and is estimated to hold voting and dispositive power over 3,212,523 shares of New Core common stock to be issued to the BCV entities pursuant to Mr. Turner’s ownership stake in the BCV Entities. However, this estimate is subject to a variable contractual arrangement between Mr. Turner and the BCV Entities and, as a result of which, the actual number of shares to be held by the BCV Entities attributable to Mr. Turner’s beneficial ownership at the time of the Closing may vary from the number disclosed herein. The principal business address of each of the BCV Entities is 3753 S. Howard Hughes Pkwy, Suite 200-295, Las Vegas, NV 89169.
|
(9) |
Consists of (i) 28,761,646 shares of New Core common stock to be issued to the BCV Entities in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (ii) 809,215 shares of New Core common stock to be issued to Red Moon 88, LLC (“Red Moon”) in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (iii) 6,379,876 shares of New Core common stock to be issued to Mr. Feinstein in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (iv) 197,899 shares of New Core common stock to be issued to Mr. Feinstein in exchange for outstanding pre-Closing Core Scientific Series A preferred stock, which will be converted into shares of Core Scientific common stock immediately prior to the Effective Time, at the Closing and (v) 2,509,649 shares of New Core common stock issuable upon exercise of options within 60 days of the Ownership Date held by Mr. Feinstein. Mr. Feinstein is the managing member of each of Red Whisky Foxtrot, LLC (“RWF”) and Red Moon. RWF in turn is a member of the BCV Entities. RWF and Mr. Feinstein in his individual capacity each is estimated to hold voting and dispositive power over 5,717,973 and 23,043,674 shares, respectively, of New Core common stock to be issued to the BCV entities pursuant to Mr. Feinstein’s ownership stake in the BCV Entities. However, this estimate is subject to a variable contractual arrangement between Mr. Feinstein and the BCV Entities and, as a result of which, the actual number of shares to be held by the BCV Entities attributable to Mr. Feinstein’s beneficial ownership at the time of the Closing may vary from the number disclosed herein. The principal business address of each of RWF and Red Moon is 3753 Howard Hughes Pkwy, Suite 200, Las Vegas, NV 89169. The principal business address of each of the BCV Entities is 3753 S. Howard Hughes Pkwy, Suite 200-295, Las Vegas, NV 89169.
|
(10) |
Consists of (i) 20,846,221 shares of New Core common stock to be issued to the BCV Entities in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (ii) 7,970,203 shares of New Core common stock to be issued to MPM Life, LLC (“MPM”) in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (iii) 197,899 shares of New Core common stock to be issued to MPM in exchange for outstanding pre-Closing Core Scientific Series A preferred stock, which will be converted into shares of Core Scientific common stock immediately prior to the Effective Time, at the Closing and (iv) 1,594,827 shares of New Core common stock issuable upon exercise of warrants within 60 days of the Ownership Date held by Mr. Minnis through MPM. Mr. Minnis is the managing member of MPM, which in turn is a member of the BCV Entities and is estimated to hold voting and dispositive power over 20,846,221 shares of New Core common stock to be issued to the BCV entities pursuant to Mr. Minnis’ ownership stake in the BCV Entities. However, this estimate is subject to a variable contractual arrangement between Mr. Minnis and the BCV Entities and, as a result of which, the actual number of shares to be held by the BCV Entities attributable to Mr. Minnis’ beneficial ownership at the time of the Closing may vary from the number disclosed herein. The principal business address of each of the BCV Entities is 3753 S. Howard Hughes Pkwy, Suite 200-295, Las Vegas, NV 89169.
|
(11) |
Consists of (i) 57,727,826 shares of New Core common stock to be issued to BCV 55 LLC in exchange for outstanding pre-Closing Core Scientific common stock at the Closing, (ii) 17,318,347 shares of New Core common stock to be issued to BCV 66 LLC in exchange for outstanding pre-Closing Core Scientific common stock at the Closing and (iii) 66,098,364 shares of New Core common stock to be issued to BCV 77 LLC in exchange for outstanding pre-Closing Core Scientific common stock at the Closing. Darin Feinstein, Michael Levitt and Matt Minnis are the managing members and predominant owners, directly or through affiliated entities, of voting membership interests of each of the BCV Entities. The principal business address of each of the BCV Entities is 3753 S. Howard Hughes Pkwy, Suite 200-295, Las Vegas, NV 89169.
|
Name
|
Age
|
Position
|
||||
Executive Officers
|
||||||
Michael Levitt
|
62 |
Chief Executive Officer and
Co-Chair
of the Board of Directors
|
||||
Darin Feinstein
|
49 | Chief Vision Officer and Co-Chair of the Board of Directors | ||||
Michael Trzupek
|
50 | Chief Financial Officer | ||||
Todd M. DuChene
|
57 | General Counsel and Secretary | ||||
Non-Employee
Directors
|
||||||
Jarvis Hollingsworth
|
58 | Director | ||||
Matt Minnis
|
57 | Director | ||||
Stacie Olivares
|
47 | Director | ||||
Kneeland Youngblood
|
65 | Director |
• |
Helping the board of directors of New Core oversee corporate accounting and financial reporting processes;
|
• |
Managing the selection, engagement, qualifications, independence and performance of a qualified firm to serve as the independent registered public accounting firm to audit the financial statements;
|
• |
Discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, the interim and
year-end
operating results;
|
• |
Developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
|
• |
Reviewing related person transactions;
|
• |
Obtaining and reviewing a report by the independent registered public accounting firm at least annually that describes internal quality control procedures, any material issues with such procedures and any steps taken to deal with such issues when required by applicable law; and
|
• |
Approving or, as permitted,
pre-approving,
audit and permissible
non-audit
services to be performed by the independent registered public accounting firm.
|
• |
Reviewing and approving the compensation of the chief executive officer, other executive officers and senior management;
|
• |
Administering the equity incentive plans and other benefit programs;
|
• |
Reviewing, adopting, amending and terminating incentive compensation and equity plans, severance agreements, profit sharing plans, bonus plans,
change-of-control
|
• |
Reviewing and establishing general policies relating to compensation and benefits of the employees.
|
• |
Specific responsibilities of the nominating and corporate governance committee will include:
|
• |
Identifying and evaluating candidates, including the nomination of incumbent directors for reelection and nominees recommended by stockholders, to serve on the board of directors of New Core;
|
• |
Considering and making recommendations to the board of directors regarding the composition and chairmanship of the committees of the board of directors of New Core;
|
• |
Developing and making recommendations to the board of directors regarding corporate governance guidelines and matters, including in relation to corporate social responsibility; and
|
• |
Overseeing periodic evaluations of the performance of the board of directors of New Core, including its individual directors and committees.
|
• |
for any transaction from which the director derives an improper personal benefit;
|
• |
for any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
|
• |
for any unlawful payment of dividends or redemption of shares; or
|
• |
for any breach of a director’s duty of loyalty to the corporation or its stockholders.
|
1
|
Source: Coindesk.
|
2
|
Source: Capital IQ.
|
• |
extensive meetings and calls with management of Core Scientific, Blockcap and RADAR to understand and analyze their respective businesses;
|
• |
review by XPDI management of the results of diligence materials prepared by K&E, DLx, Marcum and XPDI’s other advisors;
|
• |
review of the financial statements of Core Scientific and Blockcap;
|
• |
review of industry trends;
|
• |
review of comparable companies, including Riot Blockchain, Inc. (Nasdaq: RIOT) (“Riot”), Marathon Digital Holdings, Inc. (Nasdaq: MARA) (“Marathon”), Hut 8 Mining (OTCMKTS: HUTWF), Greenidge Generation Holdings Inc., HIVE Blockchain Technologies Ltd. (TSX.V: HIVE), Cipher Mining, TeraWulf and Argo Blockchain (OTCMKTS: ARBKF); and
|
• |
reviews of certain projections provided by Core Scientific, which projections were prepared on a pro forma basis after giving effect to the Blockcap merger.
|
• |
Strong Fit with Stated Objectives of XPDI.
|
• |
Market Leader with Significant First-Mover Advantage in the Rapidly Growing Digital Assets Economy.
|
• |
Diversified Business Model.
|
• |
Compelling Long-Term Growth Opportunities in Blockchain and Blockchain Technology.
|
• |
Expected Significant Growth for KPIs
.
|
• |
100% Carbon-Neutral.
Green-E
Energy Certificates, offsetting environmental concerns associated with bitcoin mining.
|
• |
Industry-Leading Network of Strategic Relationships.
|
• |
Strong Proprietary Technology and Software.
|
• |
Seasoned Management Team.
|
• |
The risk that the potential benefits of the merger may not be fully achieved, or may not be achieved within the expected time frame and the significant fees, expenses and time and effort of management associated with completing the merger.
|
• |
The risk that the Transactions might not be consummated or completed in a timely manner or that the closing might not occur despite XPDI’s best efforts, including by reason of a failure to obtain the approval of XPDI’s stockholders, litigation challenging the merger or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin the consummation of the merger.
|
• |
Core Scientific is highly dependent on a small number of digital asset mining equipment suppliers. These suppliers may not be able to meet increasing demand from their customers, including Core Scientific. This could have a material adverse effect on Core Scientific’s business, financial conditions and results of operations.
|
• |
Insufficient bitcoin prices, increases in power costs and the resulting effects on Core Scientific’s ability to mine digital assets efficiently and to sell digital assets at favorable prices will reduce Core Scientific’s operating margins, impact its ability to attract customers and could have a material adverse effect on its business, financial condition and results of operations.
|
• |
A slowdown in the demand for blockchain technology or blockchain hosting resources and other market and economic conditions could have a material adverse effect on Core Scientific’s business, financial condition and results of operations.
|
• |
The rapid development of the blockchain and digital asset industries increases the complexity of Core Scientific’s business, which makes it difficult to evaluate future business prospects and could have a material adverse effect on its business, financial condition and results of operations.
|
• |
Continuing coronavirus outbreaks may have a material adverse effect on Core Scientific’s business, liquidity, financial condition and results of operations.
|
• |
Regulatory changes or actions may restrict the use of digital assets or the operation of digital asset networks in a manner that may require Core Scientific to cease certain or all operations, which could have a material adverse effect on its business, financial condition, results of operations and growth prospects.
|
• |
Concerns about greenhouse gas emissions and global climate change may result in environmental taxes, charges, assessments or penalties and could have a material adverse effect on Core Scientific’s business, financial condition and results of operations.
|
• |
Core Scientific’s management has limited experience in operating a public company. The requirements of being a public company may strain Core Scientific’s resources and divert management’s attention, and the increases in legal, accounting and compliance expenses that will result from the merger may be greater than Core Scientific anticipates.
|
Year Ended
December 31, |
||||||||
2021 | 2022 | |||||||
Capacity (megawatts)
|
512 | 1,031 | ||||||
Mining machines
|
133,000 | 329,000 | ||||||
Hash rate (EH/S)
|
11 | 31 |
(1)
|
Year Ended
December 31, |
||||||||
(in millions)
|
2021 | 2022 | ||||||
Revenues
|
$ | 493 | $ | 1,140 | ||||
Adjusted EBITDA
(3)
|
203 | 572 |
(1) |
The basis for the increase in hash rate from 11 EH/s for the year ended December 31, 2021 to 31 EH/s for the year ended December 31, 2022 is outlined in the table below.
|
Hash Rate | ||||
Total Hash Rate from Self-Mining and Hosting - June 30, 2021
|
5.3 | |||
2021 Additions - On Order
|
5.4 | |||
|
|
|||
Total Hash Rate from Self-Mining and Hosting - December 31, 2021
|
10.7 | |||
2022 Units - On Order
|
8.7 | |||
2022 Units - To Be Ordered
|
5.4 | |||
2022 Hosted Units - Transferred In
|
6.5 | |||
|
|
|||
Total 2022
|
31.3 | |||
|
|
(2) |
The growth in Total Revenue and Adjusted EBITDA for the year ended December 31, 2022 attributable to the acquisition of Blockcap and RADAR was 26%, or $169.7 million, and 38%, or $138.9 million, respectively. The growth in 2022 attributable to the opening of Core Scientific’s Georgia and North Dakota facilities is projected to be 17%. It is expected the facilities located in Georgia will be fully operational in 2021, with no additional expansion in 2022 currently projected. The remainder of the growth is expected to come from new facilities currently under letters of intent as well as the acquisition and development of additional facilities to support Core Scientific’s anticipated future growth.
|
(3) |
Core Scientific supplements its GAAP results by evaluating Adjusted EBITDA, a
non-GAAP
measure. Adjusted EBITDA is a
non-GAAP
financial measure defined as Core Scientific’s net income or (loss), adjusted to eliminate the effect of (i) interest income, interest expense, and other income (expense), net; (ii) provision for income taxes; (iii) depreciation and amortization; (iv) stock-based compensation expense; and (v) certain additional
non-cash
and
non-recurring
items, that do not reflect our ongoing business operations. A reconciliation of net loss, the most comparable GAAP measure, to Adjusted EBITDA is set forth in the section entitled
Core Scientific’s Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measure
non-recurring
expenses that would be necessary to present GAAP-based net income/(loss) or EPS, including impairments of long-lived and other assets, and other
non-recurring
fair value
re-measurements
based on uncertainties related to both timing and magnitude.
|
Core
Scientific
(1)
|
Riot
(2)
|
Marathon
(3)
|
||||||||||
Year-to-date
)
|
|
1,683
|
|
|
1,167
|
|
|
846
|
|
|||
December 2022 Estimated Self-Mining Hash Rate (EH/s)
|
14.8 | 7.7 | 10.4 | |||||||||
December 2022 Estimated Hosting Hash Rate (EH/s)
|
16.3 | NA | 0 | |||||||||
|
|
|
|
|||||||||
December 2022 Estimated Total Hash Rate (EH/s)
|
|
31
|
|
|
NA
|
|
|
10.4
|
|
|||
December 2022 Annualized Self-Mining Bitcoin Mined (#)
(4)
|
21,807 | 11,381 | 15,327 | |||||||||
December 2022 Annualized Hosting Bitcoin Mined (#)
(4)
|
24,060 | NA | 0 | |||||||||
|
|
|
|
|||||||||
December 2022 Annualized Total Bitcoin Mined (
)
|
|
45,867
|
|
|
NA
|
|
|
15,327
|
|
|||
December 2022 Annualized Adjusted Revenue ($ in millions)
|
||||||||||||
Self-Mining at Current Bitcoin Price
(5)
|
685 | 358 | 481 | |||||||||
Hosting
|
241 | 105 | 0 | |||||||||
DeFi Platform
|
99 | 0 | 0 | |||||||||
Hardware (Net)
(6)
|
48 | 0 | 0 | |||||||||
|
|
|
|
|||||||||
December 2022 Annualized Adjusted Revenue
|
|
1,072
|
|
|
462
|
|
|
481
|
|
|||
Enterprise Value (Last 20 Trading Days VWAP as of July 16, 2021)
|
4,341 | 3,037 | 2,342 | |||||||||
Enterprise Value / December 2022 Annualized Adjusted Revenue
|
4.0x | 6.6x | 4.9x | |||||||||
Implied Core Scientific Discount (%)
|
|
(38
|
%)
|
|
(17
|
%)
|
||||||
Implied Core Scientific Pro Forma Share Price ($)
(7)
|
|
15.60
|
|
|
11.85
|
|
(1) |
Enterprise Value assumes $10 share price.
|
(2) |
Estimated hash rate, number of Bitcoin mined, and expected developed capacity at Whinstone US, Inc. (“Whinstone”) as disclosed in Riot’s press release dated July 8, 2021. Enterprise Value is pro forma for Riot’s Whinstone acquisition and based on the latest balance sheet information and last 20 trading day VWAP of $33.48 as of July 16, 2021. December 2022 annualized hosting revenue is based on available capacity at Whinstone of 544 MW and Core Scientific management’s estimated assumptions including hosting MW usage of 300, a hosting rate of $0.04 / kWh, uptime of 95% and a power usage effectiveness (PUE) of 1.05.
|
(3) |
Estimated hash rate and number of Bitcoin mined as disclosed in Marathon’s press release dated July 2, 2021. Enterprise Value is based on the latest balance sheet information and last 20 trading day VWAP of $28.52 as of July 16, 2021.
|
(4) |
Calculated as (December 2022 Estimated Hash Rate / Estimated Network Hash Rate as of December 2022 of 240 EH/s) * (6.25 BTC Block Reward + 0.5 BTC Transaction Fee) * (52,560 blocks per year).
|
(5) |
Bitcoin price of approximately $31,414 as of July 16, 2021 at 7:59 p.m. Eastern time
|
(6) |
Net revenue on hardware equipment sales. Amount represents average over a
2-year
period.
|
(7) |
Implied Core Scientific Pro Forma Share Price as derived by the respective Enterprise Value / December 2022 Annualized Adjusted Revenue multiples using treasury stock method accounting.
|
• |
If the merger or another business combination is not consummated by February 12, 2023, XPDI will cease all operations except for the purpose of winding up, redeem 100% of the outstanding Class A Common Stock for cash and, subject to the approval of its remaining stockholders and its board of directors, dissolve and liquidate. In such event, the Founder Shares, which were initially acquired by the Sponsor for an aggregate purchase price of $25,000 prior to the IPO, some of which were subsequently transferred by the Sponsor to each of XPDI’s independent directors prior to the IPO and all 8,625,000 of which are currently held by the Sponsor and such directors, would be worthless because such holders are not entitled to participate in any redemption or distribution with respect to such shares. Such shares had an estimated aggregate market value of $ based upon the closing price of $ per public share on the Nasdaq on , 2021, the Record Date for the Special Meeting.
|
• |
In particular, because the Founder Shares were purchased at approximately $0.003 per share, the holders of the Founder Shares (including members of our management team that directly or indirectly own Founder Shares) could make a substantial profit after the merger even if our public stockholders lose money on their investment as a result of a decrease in the post-merger value of their shares of
|
Class A Common Stock (after accounting for any adjustments in connection with an exchange or other transaction contemplated by the merger).
|
• |
The Sponsor, in which certain of XPDI’s officers and directors hold a direct or indirect interest, and the anchor investors purchased an aggregate of 6,266,667 Private Placement Warrants from XPDI for an aggregate purchase price of $9.4 million (or $1.50 per warrant) in a private placement. These purchases took place on a private placement basis that occurred simultaneously with the consummation of the IPO. A portion of the proceeds XPDI received from these purchases were placed in the Trust Account. Such warrants had an estimated aggregate value of $ based on the closing price of $ per warrant on the Nasdaq on , 2021, the Record Date for the Special Meeting. The Private Placement Warrants are not subject to redemption and will become worthless if XPDI does not consummate a business combination by February 12, 2023.
|
• |
If XPDI is unable to complete a business combination within the required time period, its executive officers will be personally liable under certain circumstances described herein to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by XPDI for services rendered or contracted for or products sold to XPDI. If XPDI consummates a business combination, on the other hand, XPDI will be liable for all such claims.
|
• |
XPDI’s officers and directors, and their affiliates, are entitled to reimbursement of
out-of-pocket
|
• |
The continued indemnification of current directors and officers and the continuation of directors’ and officers’ liability insurance.
|
• |
Core Scientific’s existing stockholders will have the greatest voting interest in the combined entity under both the no redemption and maximum redemption scenarios;
|
• |
The largest individual minority stockholder of New Core will be an existing stockholder of Core Scientific;
|
• |
Core Scientific’s existing directors and individuals designated by existing Core Scientific stockholders will represent the majority of New Core’s board of directors;
|
• |
Core Scientific’s senior management will be the senior management of New Core; and
|
• |
Core Scientific is the larger entity based on historical revenue and has the larger employee base.
|
• |
change or amend its certificate of formation, limited liability company agreement, certificate of incorporation, bylaws or other organizational documents;
|
• |
make, declare, set aside, establish a record date for or pay any dividend or distribution, other than any dividends or distributions from any wholly owned subsidiary of Core Scientific to Core Scientific or any other wholly owned subsidiaries of Core Scientific;
|
• |
except for entries, modifications, amendments, waivers, terminations or nonrenewals in the ordinary course of business, enter into, materially modify, materially amend, waive any material right under, terminate or fail to renew, certain specified material contracts;
|
• |
except in accordance with the transaction documents relating to the Core/Blockcap merger, (i) issue, deliver, sell, transfer, pledge, dispose of or place any lien (other than permitted liens on equity securities of subsidiaries of Core Scientific) on any shares of capital stock or any other equity or voting securities of Core Scientific or any of its subsidiaries or (ii) issue or grant any options, warrants or other rights to purchase or obtain any shares of capital stock or any other equity or voting securities of Core Scientific or any of its subsidiaries or any other rights to purchase or obtain;
|
• |
sell, assign, transfer, convey, lease, license, abandon, allow to lapse or expire, subject to or grant any lien (other than permitted liens) on, or otherwise dispose of, any material assets, rights or properties (including intellectual property), other than the sale of goods and services to customers, or the sale or other disposition of assets or equipment deemed by Core Scientific in its reasonable business judgment to be obsolete, in each such case, in the ordinary course of business
|
• |
(i) cancel or compromise any claim or indebtedness owed to Core Scientific or any of its subsidiaries or (ii) settle any pending or threatened action or proceeding if such settlement would require (x) payment by Core Scientific in an amount greater than $2,000,000 or (y) to the extent such settlement involves a governmental authority or alleged criminal wrongdoing;
|
• |
except as otherwise required by law or the terms of any existing company benefit plan, policy or contract of Core Scientific or its subsidiaries as in effect on the date of the merger agreement, (i) increase or decrease the compensation or benefits of any employee, officer, director or other service provider of Core Scientific or its subsidiaries, (ii) pay or promise to pay, fund any new, enter into or make any grant of any severance, change in control, transaction bonus, equity or equity-based, retention or termination payment or arrangement to any employee of Core Scientific or any of its subsidiaries, (iii) make any change in the key management structure of Core Scientific or any of its subsidiaries, including the hiring of additional officers or the termination of existing officers (other than for cause), (iv) hire, engage, terminate (without cause), furlough, or temporarily layoff any employee, independent contractor or service provider of Core Scientific or any of its subsidiaries with an annual compensation of less than $170,000, (v) take any action to accelerate any payments or benefits, or the funding of any payments or benefits, payable or to become payable to any employees of Core Scientific or any of its subsidiaries or (vi) establish, adopt, enter into, amend or terminate any company benefit plan or any plan, agreement, program, policy, trust, fund, contract or other arrangement that would be a company benefit plan if it were in existence as of the date of the merger agreement;
|
• |
waive or release any noncompetition, nonsolicitaiton, nondisclosure, noninterference, nondisparagement, or other restrictive covenant obligation of any director, officer or certain specified key employee of the Company or any of its Subsidiaries, except as required by applicable law;
|
• |
implement or announce any employee layoffs, plant closings, furloughs, reductions in force, reductions in compensation, salaries, wages, hours or benefits, work schedule changes or similar actions that could implicate the Worker Adjustment and Retraining Notification Act of 1988 or any similar laws;
|
• |
(i) negotiate, modify, extend, or enter into any collective bargaining agreement or (ii) recognize or certify any labor union, labor organization, works council, or group of employees as the bargaining representative for any employee, officer, director or other service provider of Core Scientific or its subsidiaries;
|
• |
directly or indirectly acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by purchasing all of or a substantial equity interest in, or by any other manner, any business or any corporation, partnership, limited liability company, joint venture, association or other entity or person or division thereof;
|
• |
make any loans or advance any money or other property to any third party, except for (a) advances in the ordinary course of business to employees or officers of Core Scientific or any of its subsidiaries for expenses not to exceed $50,000 individually or $250,000 in the aggregate (b) prepayments and deposits paid in the ordinary course of business to suppliers of Core Scientific, (c) trade credit extended to customers of Core Scientific or any of its subsidiaries in the ordinary course of business and (d) advances to wholly-owned subsidiaries of Core Scientific;
|
• |
redeem, purchase, repurchase or otherwise acquire, or offer to redeem, purchase, repurchase or acquire, any equity interests (convertible or otherwise) of Core Scientific or any of its subsidiaries, other than (i) redemptions of any equity securities from former employees, directors or other service providers
|
upon the terms set forth in the underlying contracts governing such equity securities or (ii) as required pursuant to the Company Convertible Note Purchase Agreement;
|
• |
adjust, split, combine, subdivide, recapitalize, reclassify or otherwise effect any change in respect of any equity interests or securities of Core Scientific or any of its subsidiaries;
|
• |
make any material change in accounting principles or methods of accounting, other than as may be required by GAAP;
|
• |
adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Core Scientific or any of its subsidiaries (other than the Transactions);
|
• |
make, change or revoke any material tax election, adopt, change or revoke any material accounting method with respect to taxes, file any amended material tax return, settle or compromise any material tax liability, enter into any material closing agreement with respect to any tax, surrender any right to claim a material refund of taxes, or enter into any tax sharing, tax indemnification or similar agreements (except, in each case, for any such agreements that are commercial contracts not primarily relating to taxes), in each case, if such action would be reasonably expected to materially increase the present or future tax liability of XPDI, Core Scientific or any of Core Scientific’s subsidiaries;
|
• |
(i) incur, create or assume any indebtedness for borrowed money in excess of $200,000,000 in the aggregate, (ii) modify, in any material respect, the terms of any indebtedness or (iii) assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person for indebtedness;
|
• |
fail to maintain in full force and effect material insurance policies covering Core Scientific and its properties, assets and businesses in a form and amount consistent with past practices;
|
• |
enter into any contract or amend in any material respect any existing contract with any person that is, to the knowledge of Core Scientific, an affiliate of any equityholder of Core Scientific, or an affiliate of its subsidiaries;
|
• |
other than in the ordinary course of business, (i) enter into any agreement that materially restricts the ability of Core Scientific or its subsidiaries to engage or compete in any line of business, (ii) enter into any agreement that materially restricts the ability of Core Scientific or its subsidiaries to enter into a new line of business or (iii) enter into any new line of business;
|
• |
make any capital expenditures other than (i) the capitalized portion of labor with respect to any expenditure and (ii) any capital expenditure (or series of related capital expenditures) as consistent in all material respects with Core Scientific’s annual capital expenditures budget for 2021 and 2022 made available to XPDI (which capital expenditures may be made in 2021 and 2022);
|
• |
other than as expressly contemplated by the Blockcap Transaction Documents (as defined in the Core/Blockcap merger agreement), accelerate any annual or other bonuses ahead of the date on which such bonuses would have been paid in the ordinary course of business for fiscal year 2021;
|
• |
enter into any contract with any broker, finder, investment banker or other person under which such person is or will be entitled to any brokerage fee, finders’ fee or other commission in connection with the Transactions;
|
• |
modify, extend or amend any lease, except in the ordinary course of business, or terminate any lease, or enter into any new lease, sublease, license or other agreement for the use or occupancy of any real property; or
|
• |
enter into any contract, or otherwise become obligated, or resolve to take any action prohibited by any of the foregoing.
|
• |
change, modify or amend XPDI’s trust agreement or organizational documents or the organizational documents of the XPDI, First Merger Sub or Second Merger Sub;
|
• |
withdraw any funds from XPDI’s Trust Account, other than as permitted by the XPDI trust agreement or organizational documents;
|
• |
(i) declare, set aside or pay any dividends on, or make any other distribution in respect of any outstanding capital stock of, or other equity interests in, any of XPDI, First Merger Sub and Second Merger Sub; (ii) split, combine or reclassify any capital stock of or other equity interests in any of XPDI, First Merger Sub and Second Merger Sub; or (iii) other than in connection with the XPDI stockholder redemption or as otherwise required by XPDI’s organizational documents in order to consummate the transactions contemplated by the merger agreement, repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any capital stock of or other equity interests in any of XPDI, First Merger Sub and Second Merger Sub;
|
• |
make, change or revoke any material tax election, adopt, change or revoke any material accounting method with respect to taxes, file any material amended tax return, settle or compromise any material tax liability, enter into any material closing agreement with respect to any tax, surrender any right to claim a material refund of taxes, or enter into any tax sharing, tax indemnification or similar agreements (except, in each case, for any such agreements that are commercial contracts not primarily relating to taxes) in each case, if such action would be reasonably expected to materially increase the present or future tax liability of XPDI, Core Scientific or any of Core Scientific’s subsidiaries;
|
• |
enter into, renew or amend in any material respect, any transaction or contract with any director, officer, employee, stockholder, warrantholder or affiliate of any of XPDI, First Merger Sub and Second Merger Sub (unless entered into in the ordinary course of business);
|
• |
waive, release, compromise, settle or satisfy any pending or threatened material claim (which shall include, but not be limited to, any pending or threatened action) or compromise or settle any liability, in each case, other than compromises or settlements in an aggregate amount not greater than $500,000;
|
• |
incur, guarantee or otherwise become liable for (whether directly, contingently or otherwise) any indebtedness;
|
• |
(A) offer, issue, deliver, grant or sell, or authorize or propose to offer, issue, deliver, grant or sell, any capital stock of, other equity interests, equity equivalents, stock appreciation rights, phantom stock ownership interests or similar rights in, XPDI or any of its subsidiaries or any securities convertible into, or any rights, warrants or options to acquire, any such capital stock or equity interests, other than the (i) issuance of Class A Common Stock in exchange for Class B Common Stock, (ii) issuance of Class A Common Stock in connection with the exercise of any XPDI warrants outstanding on the date of the merger agreement, or (iii) issuance of Class A Common Stock in connection with any purchase of Class A Common Stock at or prior to the Closing by certain permitted investors or (B) amend, modify or waive any of the terms or rights set forth in, any warrant of XPDI entitling the holder to purchase one share of Class A Common Stock per warrant or the applicable warrant agreement, including any amendment, modification or reduction of the warrant price set forth therein;
|
• |
form any subsidiary of XPDI other than the First Merger Sub and the Second Merger Sub or as contemplated by the merger agreement or the Transactions;
|
• |
liquidate, dissolve, reorganize or otherwise wind up the business and operations of XPDI or Party;
|
• |
materially amend, or modify or consent to the termination (excluding any expiration in accordance with its terms) of any contracts (including engagement letters) with any of the financial advisors
|
identified on Schedule 5.07 of the merger agreement in a manner adverse to XPDI or that would increase, add or supplement any Acquiror Transaction Expenses or enter into a contract that if entered into prior to the date of the merger agreement would require the payment of amounts that would constitute Acquiror Transaction Expenses; or
|
• |
enter into any contract, or otherwise become obligated, to resolve to take any action prohibited by any of the foregoing.
|
• |
XPDI to take all actions and do all things reasonably necessary or advisable to consummate and make effective as promptly as reasonably practicable the Transactions, including the satisfaction of the closing conditions, as described in the section below entitled “—
Conditions to Closing of the Transactions
|
• |
compliance with the notification and reporting requirements under the HSR Act;
|
• |
the parties to prepare and file this proxy statement/prospectus and to solicit proxies from XPDI stockholders to vote on the proposals that will be presented for consideration at the special meeting;
|
• |
mutual exclusivity during the interim period between signing of the merger agreement and closing of the Transactions;
|
• |
each party to take certain actions to effect the intended tax treatment of the Transactions;
|
• |
the protection of confidential information of the parties and, subject to the confidentiality requirements, the provision of reasonable access to information;
|
• |
each party to cooperate following the Closing, including executing additional documents and taking additional actions, as may be reasonably necessary or appropriate to give full effect to the allocation of rights, benefits, obligations and liabilities contemplated by the Transactions; and
|
• |
customary indemnification of, and provision of insurance with respect to, former and current officers and directors of XPDI and Core Scientific and each of their respective subsidiaries.
|
• |
the early termination or expiration of the waiting period under the HSR Act;
|
• |
no order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any governmental authority, and no statute, rule or regulation that is in effect and enjoins, prohibits or makes illegal the consummation of the Transactions;
|
• |
XPDI having at least $5,000,001 of net tangible assets immediately after the Effective Time; and
|
• |
the XPDI common stock being approved for listing on the Nasdaq, subject only to official notice of issuance, and immediately following the Effective Time, XPDI shall satisfy any applicable initial and continuing listing requirements of Nasdaq and XPDI shall not have received any notice of
non-compliance
therewith that has not been cured prior to, or would not be cured at or immediately following the Effective Time.
|
• |
the accuracy of the representations and warranties of Core Scientific (subject to customary bring-down standards);
|
• |
the covenants of Core Scientific having been performed in all material respects;
|
• |
the occurrence of no Material Adverse Effect (as defined in the merger agreement);
|
• |
the delivery by Core Scientific to XPDI of a certificate with respect to the truth and accuracy of such party’s representations and warranties as of the Closing, as well as the performance by such party of the covenants and agreements contained in the merger agreement required to be complied with by such party prior to the Closing; and
|
• |
the closing of Core Scientific’s acquisition of Blockcap has occurred in accordance with the terms of the Core/Blockcap merger agreement.
|
• |
the accuracy of the representations and warranties of XPDI, First Merger Sub and Second Merger Sub (subject to customary bring-down standards);
|
• |
the covenants of XPDI, First Merger Sub and Second Merger Sub having been performed in all material respects;
|
• |
the delivery by XPDI to Core Scientific of a certificate with respect to the truth and accuracy of XPDI’s, First Merger Sub’s and Second Merger Sub’s representations and warranties as of the Closing, as well as the performance by such party of the covenants and agreements contained in the merger agreement required to be complied with by such party prior to the Closing;
|
• |
the covenants of the Sponsor required under the Sponsor Agreement having been performed in all material respects;
|
• |
the directors and officers of XPDI listed on Schedule 9.03(g) to the merger agreement having been removed; and
|
• |
XPDI having terminated the existing registration agreement and replaced it with the Amended and Restated Registration Rights Agreement.
|
• |
by mutual written consent of XPDI and Core Scientific;
|
• |
by either XPDI or Core Scientific, if a final,
non-appealable
governmental order or a statute, rule or regulation permanently restrains, enjoins, makes illegal or otherwise prohibits consummation of the merger;
|
• |
by either XPDI or Core Scientific, if the Transactions are not consummated on or before 11:59 PM, Eastern Time, on March 21, 2022 (the “Termination Date”), provided that the right to terminate the merger agreement on the Termination Date will not be available to any party whose breach of any provision of the merger agreement is the primary cause of, or primarily resulted in, the failure of the closing of the Transactions to occur on or before the Termination Date;
|
• |
by either XPDI or Core Scientific, if XPDI Stockholder Approval is not obtained at the Special Meeting (or at a meeting following any adjournment or postponement thereof), provided that XPDI is not entitled to terminate on these grounds if, at the time of such termination, XPDI, First Merger Sub or Second Merger Sub is in breach of certain obligations with respect to this proxy statement/prospectus and the stockholders’ meeting and such breach is the primary cause of the failure to obtain the required XPDI Stockholder Approval;
|
• |
by XPDI, if Core Scientific has breached or failed to perform any of its respective covenants, representations, warranties or other agreements contained in the merger agreement which breach or failure to perform (i) would result in the failure of a condition to closing of the Transactions to be satisfied and (ii) is not capable of being cured by the Termination Date, or, if curable, is not cured by Core Scientific, as applicable, before the earlier of (a) the fifth business day immediately prior to the Termination Date and (b) the thirtieth day following receipt of written notice from XPDI of such breach or failure to perform; provided, that XPDI shall not have the right to terminate the merger agreement if it is then in material breach of any representations, warranties, covenants or other agreements contained in the merger agreement that would result in the failure of a condition to closing of the Transactions to be satisfied if the closing of the Transactions was scheduled to occur;
|
• |
by Core Scientific, if XPDI or either Merger Sub has breached or failed to perform any of its respective covenants, representations, warranties or other agreements contained in the merger agreement which
|
breach or failure to perform (i) would result in the failure of a condition to closing of the Transactions to be satisfied and (ii) is not capable of being cured by the Termination Date, or, if curable, is not cured by XPDI, First Merger Sub or Second Merger Sub, as applicable, before the earlier of (a) the fifth business day immediately prior to the Termination Date and (b) the thirtieth day following receipt of written notice from Core Scientific of such breach or failure to perform; provided, that Core Scientific shall not have the right to terminate the merger agreement if it is then in material breach of any representations, warranties, covenants or other agreements contained in the merger agreement that would result in the failure of a condition to closing of the Transactions to be satisfied if the closing of the Transactions were scheduled to occur;
|
• |
by XPDI, if Core Scientific has not provided the written consent; and
|
• |
by Core Scientific, at any time within five business days following a Change in Recommendation (as defined in the merger agreement).
|
• |
Name Change Charter Amendment.
|
• |
Corporate Purpose
|
• |
Authorized Share Capital.
|
• |
Bylaws Amendment
2
/
3
% of the voting power of New Core’s then-outstanding shares of capital stock entitled to vote generally in an election of directors, voting together as a single class;
|
• |
Charter Amendment.
2
/
3
% of the voting power of New Core’s then-outstanding shares of capital stock entitled to vote generally in an election of directors, voting together as a single class;
|
• |
Blank Check Company
|
• |
Corporate Opportunity Charter Amendment.
Corporate Opportunity
|
• |
Action by Written Consent
|
• |
Name Change.
|
• |
Corporate Purpose.
|
• |
Authorized Share Capital.
|
• |
Bylaws Amendment
2
/
3
% of the voting power of New Core’s then-outstanding shares of capital stock entitled to vote generally at an election of directors to make any amendment to New Core’s second amended and restated bylaws not approved by New Core’s board of directors is intended to protect key provisions of New Core’s second amended and restated bylaws from arbitrary amendment and to prevent a simple majority of stockholders from taking actions that may be harmful to other stockholders or making changes to provisions that are intended to protect all stockholders.
|
• |
Charter Amendment
2
⁄
3
% of the voting power of New Core’s then-outstanding shares of capital stock entitled to vote generally at an election of directors to make any amendment to certain provisions of the Proposed Charter is intended to protect key provisions of the Proposed Charter from arbitrary amendment and to make it more difficult for a simple majority of stockholders to take actions that may be harmful to other stockholders or making changes to provisions that are intended to protect all stockholders. However, such provision may make it very difficult to approve any proposal by (i) allowing one or more stockholders the ability to block a proposal and (ii) by extending the powers of management who own a majority position, thus making it impossible to pass a proposal without management’s support.
|
• |
Blank Check Company
|
• |
Corporate Opportunity
|
• |
Action by Written Consent.
|
Existing Charter
|
Proposed Charter
|
|||
Authorized Share Capital
|
XPDI’s Existing Charter authorizes (a) 550,000,000 shares of common stock, consisting of 500,000,000 shares of Class A Common Stock and 50,000,000 shares of Class B Common Stock and (b) 1,000,000 shares of preferred stock. | The Proposed Charter will authorize the issuance of up to (a) 10,000,000,000 shares of common stock, par value $0.0001 per share and (b) 2,000,000,000 shares of preferred stock, par value $0.0001 per share. | ||
Bylaws Amendment
|
XPDI’s Existing Charter provides that any amendment to XPDI’s bylaws requires the affirmative vote of either (i) a majority of the board of directors or (ii) a majority of the voting power of all then-outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class, provided that no bylaws adopted by XPDI’s stockholders shall invalidate any prior act of XPDI’s board of directors that would have been valid if such bylaws had not been adopted. | The Proposed Charter will provide that any amendment to New Core’s second amended and restated bylaws will require the approval of either New Core’s board of directors or the holders of at least 66 2/3% of the voting power of New Core’s then-outstanding shares of capital stock entitled to vote generally in an election of directors, voting together as a single class. | ||
Charter Amendment
|
XPDI’s Existing Charter is silent on the requirements for a minimum vote to amend the Existing Charter, other than with respect to Paragraph TWENTY-FOURTH (
Business Combination Requirements
|
The Proposed Charter will provide that any amendment to certain provisions of the Proposed Charter will require the approval of the holders of at least 66 2/3% of the voting power of New Core’s then-outstanding shares of capital stock entitled to vote generally in an election of directors, voting together as a single class. |
• |
a bank or other financial institution;
|
• |
a
tax-exempt
organization;
|
• |
a government, or agency or instrumentality thereof;
|
• |
a real estate investment trust;
|
• |
an S corporation or other pass-through entity (or an investor in an S corporation or other pass-through entity);
|
• |
an insurance company;
|
• |
a regulated investment company or a mutual fund;
|
• |
a pension plan;
|
• |
a “controlled foreign corporation” or a “passive foreign investment company”;
|
• |
a corporation that accumulates earnings to avoid U.S. federal income tax;;
|
• |
a dealer or broker in stocks, securities, commodities or currencies;
|
• |
a trader in securities that elects
mark-to-market
|
• |
a holder of Class A Common Stock that received Class A Common Stock through the exercise of an employee stock option, through a
tax-qualified
retirement plan or otherwise as compensation;
|
• |
a U.S. Holder of Class A Common Stock that has a functional currency other than the U.S. dollar;
|
• |
a Holder that holds Class A Common Stock as part of a hedge, straddle, constructive sale, conversion or integrated transaction, or other similar transaction;
|
• |
a former citizen or long-term resident of the United States;
|
• |
a person who actually or constructively owns five (5) percent or more of the XPDI common stock by vote or value;
|
• |
an anchor investor;
|
• |
an officer or director of XPDI; or
|
• |
the Sponsor, its affiliates, or other holder of Founder Shares or Private Placement Warrants.
|
• |
such gain is effectively connected with the conduct by you of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that you maintain in the United States), in which case you generally will be subject to U.S. federal income tax on such gain at the regular U.S. federal income tax rates applicable to a comparable U.S. Holder and, if you are a corporation for U.S. federal income tax purposes, also may be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate;
|
• |
you are an individual who is present in the United States for 183 days or more in the taxable year of the redemption and certain other conditions are met, in which case you generally will be subject to a 30% tax on your net capital gain for the year; or
|
• |
XPDI is or has been a “U.S. real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five (5) year period ending on the date of the redemption or the period during which you held the redeemed Class A Common Stock, and, in the case where the Class A Common Stock is considered regularly traded on an established securities market for this purpose, you have owned, directly or constructively, more than 5% of the Class A Common Stock at any time within the shorter of the five (5) year period ending on the date of the redemption or the period during which you held the redeemed Class A Common Stock. XPDI does not believe that it is or has been a U.S. real property holding corporation.
|
• |
10,000,000,000 shares of common stock, par value $0.0001 per share, and
|
• |
2,000,000,000 shares of preferred stock, par value $0.0001 per share.
|
• |
in whole and not in part;
|
• |
at a price of $0.01 per warrant;
|
• |
upon not less than 30 days’ prior written notice of redemption to each warrantholder; and
|
• |
if, and only if, the last reported sale price of the New Core common stock for any 20 trading days within a
30-trading day
period ending three (3) business days before New Core sends the notice of redemption to the warrantholders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “
—Public Warrants—Anti-dilution
Adjustments
|
• |
in whole and not in part;
|
• |
at $0.10 per warrant;
|
• |
upon a minimum of 30 days’ prior written notice of redemption, provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table below, based on the redemption date and the “fair market value” of New Core common stock except as otherwise described below;
|
• |
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “—
Public Warrants
Anti-dilution
Adjustments
|
• |
if the Reference Value is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “
—
Public Warrants
—Anti-dilution
Adjustments
|
Redemption Date
(period to expiration of warrants) |
Fair Market Value of New Core Common Stock
|
|||||||||||||||||||||||||||||||||||
£
$10.00
|
$11.00
|
$12.00
|
$13.00
|
$14.00
|
$15.00
|
$16.00
|
$17.00
|
³
$18.00
|
||||||||||||||||||||||||||||
60 months
|
0.261 | 0.281 | 0.297 | 0.311 | 0.324 | 0.337 | 0.348 | 0.358 | 0.361 | |||||||||||||||||||||||||||
57 months
|
0.257 | 0.277 | 0.294 | 0.310 | 0.324 | 0.337 | 0.348 | 0.358 | 0.361 | |||||||||||||||||||||||||||
54 months
|
0.252 | 0.272 | 0.291 | 0.307 | 0.322 | 0.335 | 0.347 | 0.357 | 0.361 | |||||||||||||||||||||||||||
51 months
|
0.246 | 0.268 | 0.287 | 0.304 | 0.320 | 0.333 | 0.346 | 0.357 | 0.361 | |||||||||||||||||||||||||||
48 months
|
0.241 | 0.263 | 0.283 | 0.301 | 0.317 | 0.332 | 0.344 | 0.356 | 0.361 | |||||||||||||||||||||||||||
45 months
|
0.235 | 0.258 | 0.279 | 0.298 | 0.315 | 0.330 | 0.343 | 0.356 | 0.361 | |||||||||||||||||||||||||||
42 months
|
0.228 | 0.252 | 0.274 | 0.294 | 0.312 | 0.328 | 0.342 | 0.355 | 0.361 | |||||||||||||||||||||||||||
39 months
|
0.221 | 0.246 | 0.269 | 0.290 | 0.309 | 0.325 | 0.340 | 0.354 | 0.361 | |||||||||||||||||||||||||||
36 months
|
0.213 | 0.239 | 0.263 | 0.285 | 0.305 | 0.323 | 0.339 | 0.353 | 0.361 | |||||||||||||||||||||||||||
33 months
|
0.205 | 0.232 | 0.257 | 0.280 | 0.301 | 0.320 | 0.337 | 0.352 | 0.361 | |||||||||||||||||||||||||||
30 months
|
0.196 | 0.224 | 0.250 | 0.274 | 0.297 | 0.316 | 0.335 | 0.351 | 0.361 | |||||||||||||||||||||||||||
27 months
|
0.185 | 0.214 | 0.242 | 0.268 | 0.291 | 0.313 | 0.332 | 0.350 | 0.361 | |||||||||||||||||||||||||||
24 months
|
0.173 | 0.204 | 0.233 | 0.260 | 0.285 | 0.308 | 0.329 | 0.348 | 0.361 | |||||||||||||||||||||||||||
21 months
|
0.161 | 0.193 | 0.223 | 0.252 | 0.279 | 0.304 | 0.326 | 0.347 | 0.361 | |||||||||||||||||||||||||||
18 months
|
0.146 | 0.179 | 0.211 | 0.242 | 0.271 | 0.298 | 0.322 | 0.345 | 0.361 | |||||||||||||||||||||||||||
15 months
|
0.130 | 0.164 | 0.197 | 0.230 | 0.262 | 0.291 | 0.317 | 0.342 | 0.361 | |||||||||||||||||||||||||||
12 months
|
0.111 | 0.146 | 0.181 | 0.216 | 0.250 | 0.282 | 0.312 | 0.339 | 0.361 | |||||||||||||||||||||||||||
9 months
|
0.090 | 0.125 | 0.162 | 0.199 | 0.237 | 0.272 | 0.305 | 0.336 | 0.361 | |||||||||||||||||||||||||||
6 months
|
0.065 | 0.099 | 0.137 | 0.178 | 0.219 | 0.259 | 0.296 | 0.331 | 0.361 | |||||||||||||||||||||||||||
3 months
|
0.034 | 0.065 | 0.104 | 0.150 | 0.197 | 0.243 | 0.286 | 0.326 | 0.361 | |||||||||||||||||||||||||||
0 months
|
— | — | 0.042 | 0.115 | 0.179 | 0.233 | 0.281 | 0.323 | 0.361 |
• |
before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
|
• |
upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
|
• |
on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66
2
/
3
% of the outstanding voting stock that is not owned by the interested stockholder.
|
• |
any merger or consolidation involving the corporation and the interested stockholder;
|
• |
any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
|
• |
subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
|
• |
any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; and
|
• |
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits by or through the corporation.
|
• |
any breach of the director’s duty of loyalty to the corporation or its stockholders;
|
• |
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
|
• |
unlawful payments of dividends or unlawful stock repurchases or redemptions; and
|
• |
any transaction from which the director derived an improper personal benefit.
|
• |
the amounts involved exceeded or will exceed $120,000 or 1% of the average of the total assets of Core Scientific at
year-end
for the last two completed fiscal years; and
|
• |
any of Core Scientific’s directors, executive officers or holders of more than 5% of Core Scientific’s capital stock, or any member of the immediate family of, or person sharing the household with, the foregoing persons, had or will have a direct or indirect material interest.
|
Stockholder
|
Series A Preferred Stock
|
Total
Purchase Price |
||||||
Kevin Turner (1)
|
146,412 | $ | 999,994 | |||||
Michael Levitt (2)
|
146,412 | $ | 999,994 | |||||
MPM Life, LLC (3)
|
124,088 | $ | 847,521 | |||||
The Aber Whitcomb Trust (4)
|
124,088 | $ | 847,521 | |||||
William & Marilyn Humes Charitable Lead Annuity Trust 2017 (5)
|
29,283 | $ | 200,003 | |||||
Darin Feinstein (6)
|
124,088 | $ | 847,421 |
(1) |
Kevin Turner is Core Scientific’s former President and Chief Executive Officer, and a former member of Core Scientific’s board of directors.
|
(2) |
Michael Levitt is Core Scientific’s Chief Executive Officer and is the
Co-Chair
and a member of Core Scientific’s board of directors. 14,641 shares of Mr. Levitt’s Series A Preferred Stock holdings are held indirectly through HKM Investment LLC.
|
(3) |
Matthew Minnis, a member of Core Scientific’s board of directors, is the managing member of MPM Life, LLC.
|
(4) |
Aber Whitcomb, a former member of Core Scientific’s board of directors, is a trustee for The Aber Whitcomb Trust.
|
(5) |
William Humes, Core Scientific’s former Chief Financial Officer, is a trustee for the William & Marilyn Charitable Lead Annuity Trust 2017.
|
(6) |
Darin Feinstein is an owner of greater than 5% of Core Scientific’s capital stock through the BCV Entities (as defined below) and is the
Co-Chair
of Core Scientific’s board of directors.
|
• |
If the shares are registered in the name of the stockholder, the stockholder should contact us at our offices at 321 North Clark Street, Suite 2440, Chicago, Illinois 60654, to inform us of his or her request; or
|
• |
If a bank, broker or other nominee holds the shares, the stockholder should contact the bank, broker or other nominee directly.
|
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
|
||||
Audited Financial Statements of Power & Digital Infrastructure Acquisition Corp. as of December 31, 2020, for the Year Ended December 31, 2020 and the Period from December 29, 2020 (inception) Through December 31, 2020
|
||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-9–F-20
|
||||
Unaudited Consolidated Financial Statements of Power & Digital Infrastructure Acquisition Corp. as of and for the Nine Months Ended September 30, 2021
|
||||
F-21 | ||||
F-22 | ||||
F-23 | ||||
F-24 | ||||
F-25–F-45
|
||||
CORE SCIENTIFIC HOLDING CO. AND SUBSIDIARIES
|
||||
Audited Consolidated Financial Statements of Core Scientific Holding Co. and Subsidiaries as of and for the Years Ended December 31, 2020 and 2019
|
||||
F-46 | ||||
F-47 | ||||
F-48 | ||||
F-49 | ||||
F-50 | ||||
F-51–F-81 | ||||
Consolidated Financial Statements of Core Scientific Holding Co. and Subsidiaries as of September 30, 2021 (Unaudited) and December 31, 2020 and for the Nine Months Ended September 30, 2021 and 2020 (Unaudited)
|
||||
F-82 | ||||
F-83 | ||||
F-84 | ||||
F-85 | ||||
F-86 | ||||
BLOCKCAP, INC.
|
||||
Audited Financial Statements of Blockcap, Inc. as of December 31, 2020, for the Year Ended December 31, 2020 and the Period from February 19, 2019 (inception) Through December 31, 2020
|
||||
F-105 | ||||
F-106 |
Assets:
|
||||
Deferred offering costs associated with proposed public offering
|
$ | 15,000 | ||
|
|
|||
Total Assets
|
$
|
15,000
|
|
|
|
|
|||
Liabilities and Stockholder’s Equity:
|
|
|
|
|
Current liabilities:
|
||||
Accrued expenses
|
$ | 400 | ||
|
|
|||
Total current liabilities
|
400 | |||
|
|
|||
Commitments and Contingencies
|
||||
Stockholder’s Equity:
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
|
— | |||
Class A common stock, $0.0001 par value; 500,000,000 shares authorized; none issued and outstanding
|
— | |||
Class B common stock, $0.0001 par value; 50,000,000 shares authorized; 8,625,000 shares issued and outstanding
(1)(2)
|
863 | |||
Additional
paid-in
capital
|
24,137 | |||
Accumulated deficit
|
(10,400 | ) | ||
|
|
|||
Total stockholder’s equity
|
14,600 | |||
|
|
|||
Total Liabilities and Stockholder’s Equity
|
$
|
15,000
|
|
|
|
|
(1)
|
This number includes up to 1,125,000 shares of Class B common stock subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters. (see Note 4)
|
(2)
|
On February 9, 2021, the Company effected a share capitalization of 1,437,500 shares of Class B common stock, resulting in an aggregate of 8,625,000 shares Class B common stock outstanding. All shares and associated amounts have been retroactively restated to reflect the share capitalization. (see Note 4, 6 and 7)
|
General and administrative expenses
|
$ | 10,400 | ||
|
|
|||
Net loss
|
$ | (10,400 | ) | |
|
|
|||
Weighted average shares outstanding, basic and diluted
(1)(2)
|
7,500,000 | |||
|
|
|||
Basic and diluted net loss per share
|
$ | (0.00 | ) | |
|
|
(1)
|
This number excludes an aggregate of up to 1,125,000 Class B common stock subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters. (see Note 4)
|
(2)
|
On February 9, 2021, the Company effected a share capitalization of 1,437,500 shares of Class B common stock, resulting in an aggregate of 8,625,000 shares Class B common stock outstanding. All shares and associated amounts have been retroactively restated to reflect the share capitalization. (see Note 4, 6 and 7)
|
Common Stock
|
Additional
Paid-In
Capital |
Accumulated
Deficit |
Total
Stockholder’s Equity |
|||||||||||||||||||||||||
Class A
|
Class B
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||
Balance — December 29, 2020 (inception)
|
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|||||||
Issuance of Class B common stock to Sponsors
(1)(2)
|
— | — | 8,625,000 | 863 | 24,137 | — | 25,000 | |||||||||||||||||||||
Net loss
|
— | — | — | — | — | (10,400 | ) | (10,400 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance — December 31, 2020
|
|
—
|
|
$
|
—
|
|
|
8,625,000
|
|
$
|
863
|
|
$
|
24,137
|
|
$
|
(10,400
|
)
|
$
|
14,600
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
This number includes up to 1,125,000 shares of Class B common stock subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters. (see Note 4)
|
(2)
|
On February 9, 2021, the Company effected a share capitalization of 1,437,500 shares of Class B common stock, resulting in an aggregate of 8,625,000 shares Class B common stock outstanding. All shares and associated amounts have been retroactively restated to reflect the share capitalization. (see Note 4, 6 and 7)
|
Cash Flows from Operating Activities:
|
||||
Net loss
|
$ | (10,400 | ) | |
General and administrative expenses paid by related party
|
10,000 | |||
Changes in operating assets and liabilities:
|
||||
Accrued expenses
|
$ | 400 | ||
|
|
|||
Net cash used in operating activities
|
— | |||
|
|
|||
Net change in cash
|
— | |||
Cash — beginning of the period
|
— | |||
|
|
|||
Cash — end of the period
|
$
|
—
|
|
|
|
|
|||
Supplemental disclosure of noncash activities:
|
||||
Deferred offering costs paid by Sponsor in exchange for issuance of Class B common stock
|
$ | 15,000 |
|
•
|
|
in whole and not in part;
|
|
•
|
|
at a price of $0.01 per warrant;
|
|
•
|
|
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
|
|
•
|
|
if, and only if, the last reported sale price of Class A common stock for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted).
|
|
•
|
|
in whole and not in part;
|
|
•
|
|
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” (as defined below) of Class A common stock;
|
|
•
|
|
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments” ); and
|
|
•
|
|
if the Reference Value is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
|
|
September 30,
2021 |
|
|
December 31,
2020 |
|
||
|
|
(Unaudited)
|
|
|
|
|
||
Assets:
|
|
|
||||||
Current assets:
|
|
|
||||||
Cash
|
$ | 1,598,506 | $ | — | ||||
Prepaid expenses
|
446,855 | — | ||||||
|
|
|
|
|||||
Total current assets
|
2,045,361 | — | ||||||
Investments held in Trust Account
|
345,027,247 | — | ||||||
Deferred offering costs
|
— | 15,000 | ||||||
|
|
|
|
|||||
Total Assets
|
$
|
347,072,608
|
|
$
|
15,000
|
|
||
|
|
|
|
|||||
Liabilities
, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit:
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 721,484 | $ | — | ||||
Accrued expenses
|
3,225,538 | 400 | ||||||
Franchise tax payable
|
148,395 | — | ||||||
|
|
|
|
|||||
Total current liabilities
|
4,095,417 | 400 | ||||||
Derivative warrant liabilities
|
36,931,330 | — | ||||||
Deferred underwriting commissions
|
12,075,000 | — | ||||||
|
|
|
|
|||||
Total liabilities
|
53,101,747 | 400 | ||||||
Commitments and Contingencies
|
||||||||
Class A common stock
subject to possible redemption
$0.0001 par value; 34,500,000 shares at $10.00 per share
,
|
345,000,000 | — | ||||||
Stockholders’ Equity (Deficit):
|
||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
|
— | — | ||||||
Class A common stock, $0.0001 par value; 500,000,000 shares authorized
|
— | — | ||||||
Class B common stock, $0.0001 par value; 50,000,000 shares authorized; 8,625,000 shares issued and
outstanding as of
September 30, 2021 and December 31, 2020
|
863 | 863 | ||||||
Additional
paid-in
capital
|
— | 24,137 | ||||||
Accumulated deficit
|
(51,030,002 |
)
|
(10,400 | ) | ||||
|
|
|
|
|||||
Total stockholders’ equity (deficit)
|
(51,029,139 | ) | 14,600 | |||||
|
|
|
|
|||||
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity
(Deficit) |
$
|
347,072,608
|
|
$
|
15,000
|
|
||
|
|
|
|
|
|
For the
Three Months Ended September 30, 2021 |
|
|
For the
Nine Months Ended September 30, 2021 |
|
||
General and administrative expenses
|
$ | 2,387,202 |
|
$
|
4,077,585
|
|
||
General and administrative expenses — related party
|
60,000 |
|
|
160,000
|
|
|||
Franchise tax expenses
|
49,863 |
|
|
147,995
|
|
|||
|
|
|
|
|
|
|
|
|
Loss from operations
|
(2,497,065 | ) |
|
|
(4,385,580
|
)
|
||
Change in fair value of derivative warrant liabilities
|
(16,231,910 | ) |
|
|
(13,903,830
|
|
||
Offering costs associated with derivative warrant liabilities
|
— |
|
|
(1,055,577
|
)
|
|||
Income from investments held in Trust Account
|
4,440 |
|
|
27,247
|
|
|||
|
|
|
|
|
|
|||
Net
loss
|
$ | (18,724,535 | ) |
|
$
|
(19,317,740
|
)
|
|
Weighted average shares outstanding of Class A common stock
,
basic and diluted
|
|
34,500,000 |
|
|
29,192,308
|
|
||
Basic and diluted net
loss
per share, Class A common stock
|
$ | (0.43 | ) |
|
$
|
(0.51
|
|
|
Weighted average shares
outstanding of
Class B
common stock, basic and diluted
|
8,625,000 |
|
|
8,451,923
|
|
|||
Basic and diluted
net loss per share,
Class B
common stock
|
$ | (0.43 | ) |
|
$
|
(0.51
|
)
|
|
|
Common Stock
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Equity
(Deficit)
|
|
||||||||||||||||
|
|
Class A
|
|
|
Class B
|
|
||||||||||||||||||||||
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
||||||||||||||||
Balance — December 31, 2020
|
|
—
|
|
$
|
—
|
|
|
8,625,000
|
|
$
|
863
|
|
$
|
24,137
|
|
$
|
(10,400
|
)
|
$
|
14,600
|
|
|||||||
Accretion of Class A common stock subject to possible redemption amount
|
— | — | — | — | (24,137 | ) |
(31,701,862
|
)
|
(31,725,999 | ) | ||||||||||||||||||
Net income
|
— |
—
|
— | — | — | 4,962,873 | 4,962,873 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance —
March 31, 2021 (restated)
|
|
—
|
|
$
|
—
|
|
|
8,625,000
|
|
$
|
863
|
|
$
|
—
|
|
$
|
(26,749,389
|
) |
$
|
(26,748,526
|
) | |||||||
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,556,078
|
)
|
|
|
(5,556,078
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance —
June 30, 2021 (restated)
|
|
|
—
|
|
|
$
|
—
|
|
|
|
8,625,000
|
|
|
$
|
863
|
|
|
$
|
—
|
|
|
$
|
(32,305,467
|
)
|
|
$
|
(32,304,604
|
) |
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(18,724,535
|
)
|
|
|
(18,724,535
|
)
|
Balance — September 30, 2021
|
|
|
—
|
|
|
$
|
—
|
|
|
|
8,625,000
|
|
|
$
|
863
|
|
|
$
|
—
|
|
|
$
|
(51,030,002
|
)
|
|
$
|
(51,029,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities:
|
||||
Net
loss
|
$ | (19,317,740 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||
Change in fair value of derivative warrant liabilities
|
|
|
13,903,830
|
|
Offering costs associated with derivative warrant liabilities
|
1,055,577 | |||
Income from investments held in Trust Account
|
(27,247 | ) | ||
General and administrative expenses paid by related party under promissory note
|
144 | |||
Changes in operating assets and liabilities:
|
||||
Prepaid expenses
|
(446,855 | ) | ||
Accrued expenses
|
2,718,988 | |||
Accounts payable
|
721,484 | |||
Franchise tax payable
|
147,995 | |||
|
|
|||
Net cash used in operating activities
|
(1,243,824 | ) | ||
|
|
|||
Cash Flows from Investing Activities
|
||||
Cash deposited in Trust Account
|
(345,000,000 | ) | ||
|
|
|||
Net cash used in investing activities
|
(345,000,000 | ) | ||
|
|
|||
Cash Flows from Financing Activities:
|
||||
Proceeds received from initial public offering, gross
|
345,000,000 | |||
Proceeds received from private placement
|
9,400,000 | |||
Repayment of note payable to related party
|
(90,035 | ) | ||
Offering costs paid
|
(6,467,635 | ) | ||
|
|
|||
Net cash provided by financing activities
|
347,842,330 | |||
|
|
|||
Net change in cash
|
1,598,506 | |||
Cash — beginning of the period
|
— | |||
|
|
|||
Cash — end of the period
|
$
|
1,598,506
|
|
|
|
|
|||
Supplemental disclosure of noncash activities:
|
||||
Offering costs included in accrued expenses
|
$ | 506,550 | ||
Offering costs paid by related party under promissory note
|
$ | 89,891 | ||
Deferred underwriting commissions in connection with the initial public
|
$ | 12,075,000 |
As of February 12, 2021
|
|
As
Reported,
As Restated |
|
|
Adjustment
|
|
|
As Restated
|
|
|||
Total assets
|
|
$
|
348,644,865
|
|
|
|
$
|
348,644,865
|
|
|||
Total liabilities
|
|
$
|
36,448,520
|
|
|
|
$
|
36,448,520
|
|
|||
Class A common stock subject to possible redemption
|
|
|
307,196,340
|
|
|
|
37,803,660
|
|
|
|
345,000,000
|
|
Preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Class A common stock
|
|
|
378
|
|
|
|
(378
|
)
|
|
|
—
|
|
Class B common stock
|
|
|
863
|
|
|
|
—
|
|
|
|
863
|
|
Additional
paid-in
capital
|
|
|
5,809,812
|
|
|
|
(5,809,812
|
)
|
|
|
—
|
|
Retained earnings (accumulated deficit)
|
|
|
(811,048
|
)
|
|
|
(31,993,470
|
)
|
|
|
(32,804,518
|
)
|
Total stockholders’ equity (deficit)
|
|
$
|
5,000,005
|
|
|
$
|
(37,803,660
|
)
|
|
$
|
(32,803,655
|
)
|
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit)
|
|
$
|
348,644,865
|
|
|
$
|
—
|
|
|
$
|
348,644,865
|
|
As of March 31, 2021
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|||
Total assets
|
|
$
|
347,742,624
|
|
|
|
$
|
347,742,624
|
|
|||
Total liabilities
|
|
$
|
29,769,286
|
|
|
|
$
|
29,769,286
|
|
|||
Class A common stock subject to possible redemption
|
|
|
312,973,330
|
|
|
|
32,026,670
|
|
|
|
345,000,000
|
|
Preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Class A common stock
|
|
|
320
|
|
|
|
(320
|
)
|
|
|
—
|
|
Class B common stock
|
|
|
863
|
|
|
|
—
|
|
|
|
863
|
|
Additional
paid-in
capital
|
|
|
46,352
|
|
|
|
(46,352
|
)
|
|
|
—
|
|
Retained earnings (accumulated deficit)
|
|
|
4,952,473
|
|
|
|
(31,979,998
|
)
|
|
|
(27,027,525
|
)
|
Total stockholders’ equity (deficit)
|
|
$
|
5,000,008
|
|
|
$
|
(32,026,670
|
)
|
|
$
|
(27,026,662
|
)
|
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit)
|
|
$
|
347,742,624
|
|
|
$
|
—
|
|
|
$
|
347,742,624
|
|
|
||||||||||||
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|||
Cash Flow used in Operating Activities
|
|
$
|
(798,200
|
)
|
|
$
|
—
|
|
|
$
|
(798,200
|
)
|
Cash Flows used in Investing Activities
|
|
$
|
(345,000,000
|
)
|
|
$
|
—
|
|
|
$
|
(345,000,000
|
)
|
Cash Flows provided by Financing Activities
|
|
$
|
347,842,331
|
|
|
$
|
—
|
|
|
$
|
347,842,331
|
|
Supplemental Disclosure of Noncash Financing Activities:
|
|
|
|
|||||||||
Offering costs included in accrued expenses
|
|
$
|
506,550
|
|
|
$
|
—
|
|
|
$
|
506,550
|
|
Offering costs paid by related party under promissory note
|
|
$
|
89,891
|
|
|
$
|
—
|
|
|
$
|
89,891
|
|
Deferred underwriting commissions in connection with the initial public offering
|
|
$
|
12,075,000
|
|
|
$
|
—
|
|
|
$
|
12,075,000
|
|
Initial value of Class A common stock subject to possible redemption
|
|
$
|
307,196,340
|
|
|
$
|
(307,196,340
|
)
|
|
$
|
—
|
|
Change in value of Class A common stock subject to possible redemption
|
|
$
|
499,050
|
|
|
$
|
(499,050
|
)
|
|
$
|
—
|
|
As of June 30, 2021
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|||
Total assets
|
|
$
|
347,606,096
|
|
|
|
$
|
347,606,096
|
|
|||
Total liabilities
|
|
$
|
34,910,699
|
|
|
|
$
|
34,910,699
|
|
|||
Class A common stock subject to possible redemption
|
|
|
307,695,390
|
|
|
|
37,304,610
|
|
|
|
345,000,000
|
|
Preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Class A common stock
|
|
|
373
|
|
|
|
(373
|
)
|
|
|
—
|
|
Class B common stock
|
|
|
863
|
|
|
|
—
|
|
|
|
863
|
|
Additional
paid-in
capital
|
|
|
5,602,376
|
|
|
|
(5,602,376
|
)
|
|
|
—
|
|
Retained earnings (accumulated deficit)
|
|
|
(603,605
|
)
|
|
|
(31,701,861
|
)
|
|
|
(32,305,466
|
)
|
Total stockholders’ equity (deficit)
|
|
$
|
5,000,007
|
|
|
$
|
(37,304,610
|
)
|
|
$
|
(32,304,603
|
)
|
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit)
|
|
$
|
347,606,096
|
|
|
$
|
—
|
|
|
$
|
347,606,096
|
|
Form
10-Q:
Six Months Ended June 30, 2021
|
|
|||||||||||
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|||
Cash Flow used in Operating Activities
|
|
$
|
(730,082
|
)
|
|
$
|
—
|
|
|
$
|
(730,082
|
)
|
Cash Flows used in Investing Activities
|
|
$
|
(345,000,000
|
)
|
|
$
|
—
|
|
|
$
|
(345,000,000
|
)
|
Cash Flows provided by Financing Activities
|
|
$
|
347,784,164
|
|
|
$
|
—
|
|
|
$
|
347,784,164
|
|
Supplemental Disclosure of Noncash Financing Activities:
|
|
|
|
|||||||||
Offering costs included in accrued expenses
|
|
$
|
448,383
|
|
|
$
|
—
|
|
|
$
|
448,383
|
|
Offering costs paid by related party under promissory note
|
|
$
|
89,891
|
|
|
$
|
—
|
|
|
$
|
89,891
|
|
Deferred underwriting commissions in connection with the initial public offering
|
|
$
|
12,075,000
|
|
|
$
|
—
|
|
|
$
|
12,075,000
|
|
Initial value of Class A common stock subject to possible redemption
|
|
$
|
307,196,340
|
|
|
$
|
(307,196,340
|
)
|
|
$
|
—
|
|
Change in value of Class A common stock subject to possible redemption
|
|
$
|
5,776,990
|
|
|
$
|
(5,776,990
|
)
|
|
$
|
—
|
|
|
|
EPS for Class A common stock (redeemable)
|
|
|||||||||
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Adjusted
|
|
|||
Form
10-Q
(March 31, 2021) — three months ended March 31, 2021
|
|
|
|
|||||||||
Net income
|
|
$
|
4,962,873
|
|
|
$
|
—
|
|
|
$
|
4,962,873
|
|
Weighted average shares outstanding
|
|
|
30,731,669
|
|
|
|
3,768,331
|
|
|
|
34,500,000
|
|
Basic and diluted earnings per share
|
|
$
|
—
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
Form
10-Q
(June 30, 2021) — three months ended June 30, 2021
|
|
|
|
|||||||||
Net loss
|
|
$
|
(5,556,078
|
)
|
|
$
|
—
|
|
|
$
|
(5,556,078
|
)
|
Weighted average shares outstanding
|
|
|
31,291,533
|
|
|
|
3,208,467
|
|
|
|
34,500,000
|
|
Basic and diluted earnings per share
|
|
$
|
—
|
|
|
$
|
(0.13
|
)
|
|
$
|
(0.13
|
)
|
Form
10-Q
(June 30, 2021) — six months ended June 30, 2021
|
|
|
|
|||||||||
Net loss
|
|
$
|
(593,205
|
)
|
|
$
|
—
|
|
|
$
|
(593,205
|
)
|
Weighted average shares outstanding
|
|
|
31,098,199
|
|
|
|
3,401,801
|
|
|
|
34,500,000
|
|
Basic and diluted earnings per share
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
EPS for Class B common stock
(non-redeemable)
|
|
|||||||||
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Adjusted
|
|
|||
Form
10-Q
(March 31, 2021) — three months ended March 31, 2021
|
|
|
|
|||||||||
Net income
|
|
$
|
4,962,873
|
|
|
$
|
—
|
|
|
$
|
4,962,873
|
|
Weighted average shares outstanding
|
|
|
10,109,776
|
|
|
|
(2,009,776
|
)
|
|
|
8,100,000
|
|
Basic and diluted earnings per share
|
|
$
|
0.49
|
|
|
$
|
(0.37
|
)
|
|
$
|
0.12
|
|
Form
10-Q
(June 30, 2021) — three months ended June 30, 2021
|
|
|
|
|||||||||
Net loss
|
|
$
|
(5,556,078
|
)
|
|
$
|
—
|
|
|
$
|
(5,556,078
|
)
|
Weighted average shares outstanding
|
|
|
11,833,467
|
|
|
|
(3,208,467
|
)
|
|
|
8,625,000
|
|
Basic and diluted earnings per share
|
|
$
|
(0.47
|
)
|
|
$
|
0.34
|
|
|
$
|
(0.13
|
)
|
Form
10-Q
(June 30, 2021) — six months ended June 30, 2021
|
|
|
|
|||||||||
Net loss
|
|
$
|
(593,205
|
)
|
|
$
|
—
|
|
|
$
|
(593,205
|
)
|
Weighted average shares outstanding
|
|
|
10,976,383
|
|
|
|
(2,612,433
|
)
|
|
|
8,363,950
|
|
Basic and diluted earnings per share
|
|
$
|
(0.05
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.01
|
)
|
• |
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
|
• |
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
|
• |
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
|
|
For the Three Months Ended
September 30, 2021 |
|
|
For the Nine Months Ended
September 30, 2021 |
|
||||||||||
|
|
Class A
|
|
|
Class B
|
|
|
Class A
|
|
|
Class B
|
|
||||
Basic and diluted net loss per common stock:
|
|
|
|
|
||||||||||||
Numerator:
|
|
|
|
|
||||||||||||
Allocation of net loss
|
|
$
|
(14,979,628
|
)
|
|
$
|
(3,744,907
|
)
|
|
$
|
(14,980,500
|
)
|
|
$
|
(4,337,240
|
)
|
Denominator:
|
|
|
|
|
||||||||||||
Basic and diluted weighted average common stock outstanding
|
|
|
34,500,000
|
|
|
|
8,625,000
|
|
|
|
29,192,308
|
|
|
|
8,451,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common stock
|
|
$
|
(0.43
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
345,000,000
|
|
Less:
|
|
|||
Fair value of Public Warrants at issuance
|
|
|
(13,627,500
|
)
|
Offering costs allocated to Class A common stock subject to possible redemption
|
|
|
(18,098,499
|
)
|
Plus:
|
|
|||
Accretion on Class A common stock subject to possible redemption amount
|
|
|
31,725,999
|
|
|
|
|
|
|
Class A common stock subject to possible redemption
|
|
$
|
345,000,000
|
|
|
|
|
|
|
•
|
|
in whole and not in part;
|
|
•
|
|
at a price of $0.01 per warrant;
|
|
•
|
|
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
|
|
•
|
|
if, and only if, the last reported sale price of Class A common stock for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted).
|
|
•
|
|
in whole and not in part;
|
|
•
|
|
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” (as defined below) of Class A common stock;
|
|
•
|
|
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”); and
|
|
•
|
|
if the Reference Value is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
Description
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2) |
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
|||
Assets:
|
||||||||||||
Investments held in Trust Account — Money market fund
|
$ | 345,027,247 | $ | — | $ | — | ||||||
Liabilities:
|
||||||||||||
Derivative warrant liabilities — Public warrants
|
$ | 21,390,000 | $ | — | $ |
—
|
||||||
Derivative warrant liabilities — Private placement warrants
|
$ | — | $ | — | $ | 15,541,330 |
|
|
February 12,
2021 |
|
|
September 30,
2021 |
|
||
Exercise price
|
$ | 11.50 | $ | 11.50 | ||||
Stock price
|
$ | 10.87 | $ | 10.11 | ||||
Volatility
|
20.0 | % | 31.3 |
%
|
||||
Term
|
5.0 | 5.0 | ||||||
Risk-free rate
|
0.50 | % | 0.98 | % |
Derivative warrant liabilities at December 31, 2020
|
$ | — | ||
Issuance of Public and Private Warrants
|
23,027,500 | |||
Change in fair value of derivative warrant liabilities
|
(6,160,830 | ) | ||
Derivative warrant liabilities at March 31, 2021
|
$ | 16,866,670 | ||
Transfer of Public Warrants to Level 1
|
|
|
(9,660,000
|
)
|
Change in fair value of derivative warrant liabilities
|
|
|
1,504,000
|
|
|
|
|
|
|
Derivative warrant liabilities at June 30, 2021
|
|
$
|
8,710,670
|
|
Change in fair value of derivative warrant liabilities
|
|
|
6,830,660
|
|
Derivative warrant liabilities at September 30, 2021
|
|
$
|
15,541,330
|
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Assets
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 8,671 | $ | 6,657 | ||||
Restricted cash
|
50 | 250 | ||||||
Accounts receivable, net of allowance of $620 and $76, respectively
|
792 | 105 | ||||||
Accounts receivable from related parties
|
315 | 72 | ||||||
Deposits for equipment
|
54,818 | — | ||||||
Other current assets
|
6,273 | 3,969 | ||||||
|
|
|
|
|||||
Total Current Assets
|
70,919 | 11,053 | ||||||
|
|
|
|
|||||
Property, plant and equipment, net
|
85,244 | 81,296 | ||||||
Goodwill
|
58,241 | 58,241 | ||||||
Intangible assets, net
|
6,674 | 3,977 | ||||||
Other noncurrent assets
|
4,499 | 7,447 | ||||||
|
|
|
|
|||||
Total Assets
|
$ | 225,577 | $ | 162,014 | ||||
|
|
|
|
|||||
Liabilities, Redeemable Preferred Stock and Stockholders’ Equity
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$ | 3,057 | $ | 7,503 | ||||
Accrued expenses and other
|
3,585 | 1,916 | ||||||
Deferred revenue
|
44,843 | 7,834 | ||||||
Capital lease obligations, current portion
|
2,146 | 1,571 | ||||||
Notes payable, current portion
|
16,016 | 648 | ||||||
|
|
|
|
|||||
Total Current Liabilities
|
69,647 | 19,472 | ||||||
|
|
|
|
|||||
Capital lease obligations, net of current portion
|
2,263 | 3,183 | ||||||
Notes payable, net of current portion
|
19,864 | 2,092 | ||||||
Other noncurrent liabilities
|
103 | 1,412 | ||||||
|
|
|
|
|||||
Total Liabilities
|
91,877 | 26,159 | ||||||
|
|
|
|
|||||
Contingently redeemable convertible preferred stock; $0.00001 par value; 50,000 shares authorized; 6,766 and 4,421 shares issued and outstanding at December 31, 2020 and 2019; $45,164 and $30,195 total liquidation preference at December 31, 2020 and 2019
|
44,476 | 29,526 | ||||||
Commitments and contingencies
|
||||||||
Stockholders’ Equity:
|
||||||||
Common stock; $0.00001 par value; 200,000 shares authorized; 98,607 and 99,141 shares issued and outstanding at December 31, 2020 and 2019
|
1 | 1 | ||||||
Additional
paid-in
capital
|
163,967 | 168,866 | ||||||
Accumulated deficit
|
(74,744 | ) | (62,538 | ) | ||||
|
|
|
|
|||||
Total Stockholders’ Equity
|
89,224 | 106,329 | ||||||
|
|
|
|
|||||
Total Liabilities, Contingently Redeemable Convertible Preferred Stock and Stockholders’ Equity
|
$ | 225,577 | $ | 162,014 | ||||
|
|
|
|
For the Years Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Hosting revenue from customers
|
$ | 34,615 | $ | 53,492 | ||||
Hosting revenue from related parties
|
6,983 | 384 | ||||||
Equipment sales to customers
|
11,193 | — | ||||||
Equipment sales to related parties
|
1,402 | — | ||||||
Digital asset mining income
|
6,127 | 5,647 | ||||||
|
|
|
|
|||||
Total revenue
|
60,320 | 59,523 | ||||||
Costs of revenue
|
50,928 | 48,996 | ||||||
|
|
|
|
|||||
Gross profit
|
9,392 | 10,527 | ||||||
Gain on legal settlements
|
5,814 | — | ||||||
Gain from sales of digital currency assets
|
65 | 806 | ||||||
Operating expense:
|
||||||||
Research and development
|
5,271 | 5,480 | ||||||
Sales and marketing
|
1,771 | 2,833 | ||||||
General and administrative
|
14,556 | 14,707 | ||||||
|
|
|
|
|||||
Total operating expense
|
21,598 | 23,020 | ||||||
|
|
|
|
|||||
Operating loss
|
(6,327 | ) | (11,687 | ) | ||||
|
|
|
|
|||||
Non-operating
income (expense), net:
|
||||||||
Loss on debt extinguishment
|
(1,333 | ) | — | |||||
Interest expense, net
|
(4,436 | ) | (235 | ) | ||||
Other
non-operating
expenses, net
|
(110 | ) | — | |||||
|
|
|
|
|||||
Total
non-operating
income (expense), net
|
(5,879 | ) | (235 | ) | ||||
|
|
|
|
|||||
Loss before income taxes
|
(12,206 | ) | (11,922 | ) | ||||
Income tax expense
|
— | — | ||||||
|
|
|
|
|||||
Net loss and comprehensive loss
|
$ | (12,206 | ) | $ | (11,922 | ) | ||
|
|
|
|
|||||
Deemed dividend from common to preferred exchange
|
(10,478 | ) | — | |||||
|
|
|
|
|||||
Net loss attributable to common stockholders
|
$ | (22,684 | ) | $ | (11,922 | ) | ||
|
|
|
|
|||||
Net loss attributable to common stockholders per share (Note 13):
|
||||||||
Basic and diluted
|
$ | (0.23 | ) | $ | (0.12 | ) | ||
|
|
|
|
|||||
Weighted average shares outstanding:
|
||||||||
Basic and diluted
|
98,492 | 98,684 | ||||||
|
|
|
|
Contingently Redeemable
Convertible Preferred Stock |
Common Stock
|
Additional
Paid-In Capital
|
Accumulated
Deficit |
Total
Stockholders’ Equity |
||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Amount
|
Amount
|
Amount
|
||||||||||||||||||||||||
Balance at December 31, 2018
|
— | $ | — |
|
98,531 | $ | 1 | $ | 161,365 | $ | (50,616 | ) | $ | 110,750 | ||||||||||||||||
Net loss
|
|
(11,922 | ) | (11,922 | ) | |||||||||||||||||||||||||
Stock-based compensation
|
|
50 | — | 3,100 | 3,100 | |||||||||||||||||||||||||
Issuances of Series A contingently redeemable convertible preferred stock
|
4,421 | 29,526 |
|
|||||||||||||||||||||||||||
Issuances of common stock
|
|
560 | — | 4,401 | 4,401 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at December 31, 2019
|
4,421 | $ | 29,526 | 99,141 | $ | 1 | $ | 168,866 | $ | (62,538 | ) | $ | 106,329 | |||||||||||||||||
Net loss
|
(12,206 | ) | (12,206 | ) | ||||||||||||||||||||||||||
Stock-based compensation
|
3,037 | 3,037 | ||||||||||||||||||||||||||||
Exchange of common stock for Series A contingently redeemable convertible preferred stock
|
1,802 | 12,308 | (1,096 | ) | — | (12,308 | ) | (12,308 | ) | |||||||||||||||||||||
Issuances of common stock- asset acquisition
|
562 | — | 1,967 | 1,967 | ||||||||||||||||||||||||||
Issuances of Series A contingently redeemable convertible preferred stock
|
229 | 1,545 | ||||||||||||||||||||||||||||
Issuances of Series B contingently redeemable convertible preferred stock
|
314 | 1,097 | ||||||||||||||||||||||||||||
Issuances of common stock warrants and options
|
2,405 | 2,405 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at December 31, 2020
|
6,766 | $ | 44,476 | 98,607 | $ | 1 | $ | 163,967 | $ | (74,744 | ) | $ | 89,224 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Cash flows from Operating Activities:
|
||||||||
Net loss
|
$ | (12,206 | ) | $ | (11,922 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
9,403 | 6,118 | ||||||
Stock-based compensation
|
3,037 | 2,880 | ||||||
Digital asset mining income
|
(6,127 | ) | (5,647 | ) | ||||
Amortization of debt discount and debt issuance costs
|
1,300 | — | ||||||
Impairments of long-lived assets
|
— | 932 | ||||||
Losses on disposals of property, plant and equipment
|
2 | 621 | ||||||
Loss on debt extinguishment
|
1,333 | — | ||||||
Provision for doubtful accounts
|
616 | 14 | ||||||
Changes in working capital:
|
||||||||
Accounts receivable, net
|
(1,303 | ) | (11 | ) | ||||
Accounts receivable from related parties
|
(243 | ) | (72 | ) | ||||
Digital currency assets
|
6,094 | 6,497 | ||||||
Deposits for equipment
|
(54,736 | ) | — | |||||
Other current assets
|
(2,353 | ) | (1,603 | ) | ||||
Accounts payable
|
(1,770 | ) | 1,398 | |||||
Accrued expenses and other
|
1,625 | 266 | ||||||
Deferred revenue
|
30,009 | (911 | ) | |||||
Other noncurrent assets and liabilities, net
|
1,554 | 608 | ||||||
|
|
|
|
|||||
Net cash used in operating activities
|
(23,765 | ) | (832 | ) | ||||
|
|
|
|
|||||
Cash flows from Investing Activities:
|
||||||||
Purchases of property, plant and equipment
|
(13,668 | ) | (37,412 | ) | ||||
Proceeds from sales of property, plant and equipment
|
92 | 160 | ||||||
Acquisition of intangible assets and other
|
(1,568 | ) | (108 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities
|
(15,144 | ) | (37,360 | ) | ||||
|
|
|
|
|||||
Cash flows from Financing Activities:
|
||||||||
Proceeds from issuances of preferred stock
|
2,642 | 29,526 | ||||||
Issuances of debt
|
45,178 | — | ||||||
Principal payments on debt
|
(7,097 | ) | (832 | ) | ||||
|
|
|
|
|||||
Net cash provided by financing activities
|
40,723 | 28,694 | ||||||
|
|
|
|
|||||
Increase (decrease) in cash, cash equivalents, and restricted cash
|
1,814 | (9,498 | ) | |||||
Cash, cash equivalents and restricted cash - beginning of year
|
6,907 | 16,405 | ||||||
|
|
|
|
|||||
Cash, cash equivalents and restricted cash - end of year
|
$ | 8,721 | $ | 6,907 | ||||
|
|
|
|
|||||
Supplemental disclosure of other cash flow information:
|
||||||||
Cash paid for interest
|
$ | 2,903 | $ | 336 | ||||
Supplemental disclosure of noncash investing and financing activities:
|
||||||||
Acquisition:
|
||||||||
Fair value of assets acquired
|
$ | 3,359 | $ | — | ||||
Fair value of common stock issued as consideration
|
1,966 | — | ||||||
Accrued capital expenditures
|
$ | 2,544 | $ | 3,341 | ||||
Increase in notes payable for acquisition of property, plant and equipment
|
$ | 19,882 | $ | — | ||||
Decrease in notes payable in exchange for equipment
|
$ | 7,000 | $ | — | ||||
Property, plant and equipment acquired under capital leases
|
$ | 1,486 | $ | 4,957 | ||||
Common stock issuances for acquisition of long-lived assets
|
$ | — | $ | 3,825 |
1.
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
• |
Owning and operating datacenter facilities in the U.S. to provide colocation and hosting services for artificial intelligence (“AI”) and distributed ledger technology, also commonly known as blockchain;
|
• |
Owning and operating computer equipment used to process transactions conducted on one or more blockchain networks in exchange for transaction processing fees rewarded in digital currency assets, commonly referred to as mining;
|
• |
Developing AI and blockchain-based platforms and applications, including infrastructure management, security technologies, mining optimization, and record keeping;
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Cash and cash equivalents
|
$ | 8,671 | $ | 6,657 | ||||
Restricted Cash
|
50 | 250 | ||||||
|
|
|
|
|||||
Total cash, cash equivalents and restricted cash
|
$ | 8,721 | $ | 6,907 | ||||
|
|
|
|
For the Years Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
Customer
|
||||||||
A
|
26 | % | N/A | |||||
B
|
N/A | 92 | % |
For the Years Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
Customer
|
||||||||
B
|
24 | % | 74 | % | ||||
C
|
13 | % | N/A |
3.
|
ASSET ACQUISITIONS
|
4.
|
OTHER ASSETS
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Prepaid expenses
|
$ | 1,212 | $ | 2,702 | ||||
Security deposits
|
2,230 | 972 | ||||||
Customer contract asset
|
— | 110 | ||||||
Other
|
2,831 | 185 | ||||||
|
|
|
|
|||||
Total other current assets
|
$ | 6,273 | $ | 3,969 | ||||
|
|
|
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Security deposits
|
$ | 1,150 | $ | 1,246 | ||||
Utility construction contributions
|
3,000 | 5,348 | ||||||
Deferred income taxes
|
— | 535 | ||||||
Customer contract asset and other
|
349 | 318 | ||||||
|
|
|
|
|||||
Total other noncurrent assets
|
$ | 4,499 | $ | 7,447 | ||||
|
|
|
|
5.
|
PROPERTY, PLANT AND EQUIPMENT, NET
|
December 31,
|
||||||||||||
2020
|
2019
|
Estimated Useful Lives
|
||||||||||
Land and improvements
|
$ | 5,458 | $ | 5,258 |
20 years
(1)
|
|||||||
Building and improvements
|
46,811 | 43,407 | 12 to 39 years | |||||||||
Computer, mining and network equipment
(2)
|
20,270 | 19,247 | 1 to 5 years | |||||||||
Electrical equipment
(3)
|
24,681 | 24,259 | 10 years | |||||||||
Other property, plant and equipment
(4)
|
1,243 | 1,499 | 5 to 7 years | |||||||||
|
|
|
|
|||||||||
Total
|
98,463 | 93,670 | ||||||||||
Less accumulated depreciation and amortization
(5)
|
(13,219 | ) | (12,374 | ) | ||||||||
|
|
|
|
|||||||||
Property, plant and equipment, net
|
$ | 85,244 | $ | 81,296 | ||||||||
|
|
|
|
(1)
|
Estimated useful life of improvements. Land is not depreciated.
|
(2)
|
Includes capital lease assets of $3,277 and $2,951 at December 31, 2020 and 2019, respectively.
|
(3)
|
Includes capital lease assets of $2,588 and $2,588 at December 31, 2020 and 2019, respectively.
|
(4)
|
Includes capital lease assets of $432 and $0 at December 31, 2020 and 2019, respectively.
|
(5)
|
Includes accumulated amortization for assets under capital leases of $1,762 and $290 at December 31, 2020 and 2019, respectively.
|
6.
|
INTANGIBLE ASSETS, NET
|
December 31, 2020
|
||||||||||||||||
Gross
|
Accumulated
Amortization |
Net
Carrying Amount |
Estimated
Useful
Lives |
|||||||||||||
Acquired software
|
$ | 7,318 | $ | (954 | ) | $ | 6,364 |
5-8 years
|
||||||||
Patents
|
260 | (4 | ) | 256 | 20 years | |||||||||||
Trademarks
|
59 | (5 | ) | 54 | 8 years | |||||||||||
|
|
|
|
|
|
|||||||||||
Total intangible assets, net
|
$ | 7,637 | $ | (963 | ) | $ | 6,674 | |||||||||
|
|
|
|
|
|
December 31, 2019
|
||||||||||||||||
Gross
|
Accumulated
Amortization |
Net
Carrying Amount |
Estimated
Useful
Lives |
|||||||||||||
Acquired software
|
$ | 3,959 | $ | (124 | ) | $ | 3,835 | 8 years | ||||||||
Patents
|
111 | (2 | ) | 109 | 20 years | |||||||||||
Trademarks
|
34 | (1 | ) | 33 | 8 years | |||||||||||
|
|
|
|
|
|
|||||||||||
Total intangible assets, net
|
$ | 4,104 | $ | (127 | ) | $ | 3,977 | |||||||||
|
|
|
|
|
|
7.
|
ACCRUED EXPENSES AND OTHER
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Accrued expenses and other
|
$ | 936 | $ | 1,058 | ||||
Accrued taxes
|
1,645 | 847 | ||||||
Other current liabilities
|
1,004 | 11 | ||||||
|
|
|
|
|||||
Total accrued expenses and other
|
$ | 3,585 | $ | 1,916 | ||||
|
|
|
|
8.
|
NOTES PAYABLE
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Georgia note
|
$ | 581 | $ | 773 | ||||
Kentucky note
|
1,511 | 1,967 | ||||||
PPP note
|
2,154 | — | ||||||
Silverpeak note
|
22,260 | — | ||||||
Genesis note
|
4,648 | — | ||||||
NYDIG note
|
718 | — | ||||||
Celsius note
|
6,842 | — | ||||||
|
|
|
|
|||||
Total
|
38,714 | 2,740 | ||||||
|
|
|
|
|||||
Unamortized discount and debt issuance costs
|
(2,834 | ) | — | |||||
|
|
|
|
|||||
Total notes payable, net
|
$ | 35,880 | $ | 2,740 | ||||
|
|
|
|
Year ending December 31,
|
||||
2021
|
$ | 16,016 | ||
2022
|
6,743 | |||
2023
|
15,955 | |||
|
|
|||
Total notes payable
|
$ | 38,714 | ||
|
|
9.
|
CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED STOCK
|
December 31, 2020
|
||||||||||||||||||||
Shares
Authorized |
Shares
Issued and Outstanding |
Issuance
Price per Share |
Net Proceeds
|
Liquidation
preference |
||||||||||||||||
Contingently Redeemable Convertible Preferred Stock:
|
||||||||||||||||||||
Series A
|
14,641 | 6,452 | $ | 6.83 | $ | 31,070 | $ | 44,064 | ||||||||||||
Series B
|
14,327 | 314 | 3.50 | 1,097 | 1,100 | |||||||||||||||
Undesignated
|
21,032 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total contingently redeemable convertible preferred stock
|
50,000 | 6,766 | $ | 32,167 | $ | 45,164 | ||||||||||||||
|
|
|
|
|
|
|
|
December 31, 2019
|
||||||||||||||||||||
Shares
Authorized |
Shares
Issued and Outstanding |
Issuance Price
per Share |
Net Proceeds
|
Liquidation
preference |
||||||||||||||||
Contingently Redeemable Convertible Preferred Stock:
|
||||||||||||||||||||
Series A
|
14,641 | 4,421 | $ | 6.83 | $ | 29,526 | $ | 30,195 | ||||||||||||
Undesignated
|
35,359 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total contingently redeemable convertible preferred stock
|
50,000 | 4,421 | $ | 29,526 | $ | 30,195 | ||||||||||||||
|
|
|
|
|
|
|
|
10.
|
COMMITMENTS AND CONTINGENCIES
|
Year ending December 31,
|
||||
2021
|
$ | 111 | ||
2022 - 2025
|
— | |||
|
|
|||
Total minimum lease payments
|
$ | 111 | ||
|
|
Year ending December 31,
|
||||
2021
|
$ | 2,467 | ||
2022
|
1,990 | |||
2023
|
271 | |||
2024
|
102 | |||
2025
|
46 | |||
|
|
|||
Total minimum lease payments
|
4,876 | |||
Less: interest
|
(467 | ) | ||
|
|
|||
Present value of net minimum lease payments
|
$ | 4,409 | ||
|
|
11.
|
STOCKHOLDERS’ EQUITY
|
Options outstanding
|
2,530 | |||
Restricted stock units and awards outstanding
|
37,946 | |||
Available for future stock option and restricted stock units and grants
|
12,024 | |||
|
|
|||
Total outstanding and reserved for future issuance
|
52,500 | |||
|
|
For the Years Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Dividend yield
|
0.00 | % | 0.00 | % | ||||
Expected volatility
|
36.26 | % | 30.59 | % | ||||
Risk-free interest rate
|
0.70 | % | 1.65 | % | ||||
Expected life (years)
|
10.00 | 5.51 |
Number of
Shares |
Weighted-
Average Exercise Price |
Weighted-Average
Remaining Contractual Term (in years) |
Aggregate
Intrinsic Value |
|||||||||||||
Options outstanding - December 31, 2018
|
1,880 | $ | 11.23 | |||||||||||||
Granted
|
350 | 6.83 | ||||||||||||||
Exercised
|
— | — | ||||||||||||||
Forfeited
|
— | — | ||||||||||||||
|
|
|
|
|||||||||||||
Options outstanding - December 31, 2019
|
2,230 | 10.54 | ||||||||||||||
Granted
|
300 | 1 | ||||||||||||||
Exercised
|
— | — | ||||||||||||||
Forfeited
|
— | — | ||||||||||||||
|
|
|
|
|||||||||||||
Options outstanding - December 31, 2020
|
2,530 | $ | 9.41 | 8.08 | $ | 3,959 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options vested and expected to vest as of December 31, 2020
|
2,530 | $ | 9.41 | 8.08 | $ | 3,959 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options vested and exercisable as of December 31, 2020
|
1,159 | $ | 7.54 | 8.43 | $ | 3,704 | ||||||||||
|
|
|
|
|
|
|
|
• |
Over a
4-year
service period, or
|
• |
Over a
4-year
service period and upon either i) completion of an initial public offering of the Company’s common stock, or ii) upon consummation of a transaction resulting in a change in control of the Company.
|
Number of
Shares |
Weighted-Average
Grant Date Fair Value |
|||||||
Unvested - December 31, 2018
|
28,412 | $ | 11.23 | |||||
Granted
|
13,065 | 6.83 | ||||||
Vested
|
— | — | ||||||
Forfeited
|
(6,430 | ) | 10.42 | |||||
|
|
|
|
|||||
Unvested - December 31, 2019
|
35,047 | $ | 9.39 | |||||
Granted
|
8,056 | 4.46 | ||||||
Vested
|
(802 | ) | 11.23 | |||||
Forfeited
|
(5,157 | ) | 6.83 | |||||
|
|
|
|
|||||
Unvested - December 31, 2020
|
37,144 | $ | 8.55 | |||||
|
|
|
|
12.
|
INCOME TAXES
|
For the Years Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
U.S. federal statutory income tax benefit applied to loss before income taxes
|
$ | (2,563 | ) | $ | (2,525 | ) | ||
State income taxes, net of federal benefit
|
(410 | ) | (429 | ) | ||||
Valuation allowance
|
1,106 | 2,835 | ||||||
Deferred tax adjustments
|
1,827 | — | ||||||
Other permanent items
|
40 | 119 | ||||||
|
|
|
|
|||||
Total income tax expense
|
$ | — | $ | — | ||||
|
|
|
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss
|
$ | 10,674 | $ | 8,438 | ||||
Interest expense limitation
|
137 | 177 | ||||||
Allowance for doubtful accounts
|
151 | 19 | ||||||
Vacation pay accrual
|
8 | 104 | ||||||
Stock-based compensation
|
3,579 | 2,943 | ||||||
Unrealized capital loss
|
548 | 499 | ||||||
Impairment loss
|
61 | 141 | ||||||
Debt extinguishment loss
|
406 | — | ||||||
Intangibles (other than goodwill)
|
3,015 | 3,069 | ||||||
|
|
|
|
|||||
Gross deferred tax assets
|
18,579 | 15,390 | ||||||
Valuation allowance
|
(15,961 | ) | (14,855 | ) | ||||
|
|
|
|
|||||
Deferred tax assets, net of valuation allowance
|
2,618 | 535 | ||||||
|
|
|
|
|||||
Deferred tax liabilities:
|
||||||||
Property, plant and equipment, net
|
(2,618 | ) | (535 | ) | ||||
|
|
|
|
|||||
Deferred tax liabilities, net
|
(2,618 | ) | (535 | ) | ||||
|
|
|
|
|||||
Total net deferred tax assets
|
$ | — | $ | — | ||||
|
|
|
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Beginning Balance
|
$ | 14,855 | $ | 11,689 | ||||
Change related to current net operating losses
|
2,238 | 2,835 | ||||||
Net change related to generation of tax attributes
|
695 | 331 | ||||||
Change related to deferred tax adjustments
|
(1,827 | ) | — | |||||
|
|
|
|
|||||
Ending Balance
|
$ | 15,961 | $ | 14,855 | ||||
|
|
|
|
13.
|
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
For the Years Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Net loss
|
$ | (12,206 | ) | $ | (11,922 | ) | ||
Deemed dividend
|
(10,478 | ) | — | |||||
|
|
|
|
|||||
Net loss attributable to common stockholders (numerator)
|
$ | (22,684 | ) | $ | (11,922 | ) | ||
Weighted average common shares outstanding – basic and diluted (denominator)
|
98,492 | 98,684 | ||||||
Net loss per share – basic and diluted
|
$ | (0.23 | ) | $ | (0.12 | ) |
December 31,
|
||||||||
2020
|
2019
|
|||||||
Stock options
|
2,530 | 2,230 | ||||||
Preferred stock
|
6,766 | 4,421 | ||||||
Warrants
|
4,135 | 150 | ||||||
Restricted stock
|
37,946 | 35,047 | ||||||
|
|
|
|
|||||
Total potentially anti-dilutive shares
|
51,377 | 41,848 | ||||||
|
|
|
|
14.
|
SEGMENT REPORTING
|
For the Years Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
Equipment Sales and Hosting Segment
|
||||||||
Hosting revenue
|
$ | 41,598 | $ | 53,876 | ||||
Equipment sales
|
12,595 | — | ||||||
|
|
|
|
|||||
Total revenue
|
54,193 | 53,876 | ||||||
Cost of revenue
|
47,951 | 43,005 | ||||||
|
|
|
|
|||||
Gross profit
|
$ | 6,242 | $ | 10,871 | ||||
Mining Segment
|
||||||||
Digital asset mining income
|
$ | 6,127 | $ | 5,647 | ||||
|
|
|
|
|||||
Total revenue
|
6,127 | 5,647 | ||||||
Cost of revenue
|
2,977 | 5,991 | ||||||
|
|
|
|
|||||
Gross profit
|
$ | 3,150 | $ | (344 | ) | |||
Consolidated total revenue
|
$ | 60,320 | $ | 59,523 | ||||
Consolidated cost of revenue
|
$ | 50,928 | $ | 48,996 | ||||
Consolidated gross profit
|
$ | 9,392 | $ | 10,527 |
For the Years Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Reportable segment gross profit
|
9,392 | 10,527 | ||||||
Gain on legal settlement
|
5,814 | — | ||||||
Gain from sales of digital currency assets
|
65 | 806 | ||||||
Operating expense (income):
|
||||||||
Research and development
|
5,271 | 5,480 | ||||||
Sales and marketing
|
1,771 | 2,833 | ||||||
General and administrative
|
14,556 | 14,707 | ||||||
|
|
|
|
|||||
Total operating expense (income)
|
21,598 | 23,020 | ||||||
|
|
|
|
|||||
Operating loss
|
(6,327 | ) | (11,687 | ) | ||||
Non-operating
income (expense), net:
|
||||||||
Loss on debt extinguishment and other
|
(1,333 | ) | — | |||||
Interest expense, net
|
(4,436 | ) | (235 | ) | ||||
Other
non-operating
expenses, net
|
(110 | ) | — | |||||
|
|
|
|
|||||
Total
non-operating
income (expense), net
|
(5,879 | ) | (235 | ) | ||||
|
|
|
|
|||||
Loss before income taxes
|
(12,206 | ) | (11,922 | ) | ||||
|
|
|
|
15.
|
RELATED-PARTY TRANSACTIONS
|
16.
|
SUBSEQUENT EVENTS
|
September 30,
2021 |
December 31,
2020 |
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 147,906 | $ | 8,671 | ||||
Restricted cash
|
12,101 | 50 | ||||||
Accounts receivable
|
602 | 792 | ||||||
Accounts receivable from related parties
|
261 | 315 | ||||||
Deposits for equipment
|
469,890 | 54,818 | ||||||
Digital currency assets
|
115,856 | 63 | ||||||
Other current assets
|
9,978 | 6,210 | ||||||
|
|
|
|
|||||
Total Current Assets
|
756,594 | 70,919 | ||||||
|
|
|
|
|||||
Property, plant and equipment, net
|
219,795 | 85,244 | ||||||
Goodwill
|
1,106,015 | 58,241 | ||||||
Intangible assets, net
|
8,709 | 6,674 | ||||||
Other noncurrent assets
|
14,110 | 4,499 | ||||||
|
|
|
|
|||||
Total Assets
|
$ | 2,105,223 | $ | 225,577 | ||||
|
|
|
|
|||||
Liabilities, Redeemable Preferred Stock and Stockholders’ Equity
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$ | 28,689 | $ | 3,057 | ||||
Accrued expenses and other
|
33,849 | 3,585 | ||||||
Deferred revenue
|
74,855 | 38,113 | ||||||
Deferred revenue from related parties
|
131,284 | 6,730 | ||||||
Capital lease obligations, current portion
|
2,525 | 2,146 | ||||||
Notes payable, current portion
|
25,202 | 16,016 | ||||||
|
|
|
|
|||||
Total Current Liabilities
|
296,404 | 69,647 | ||||||
|
|
|
|
|||||
Capital lease obligations, net of current portion
|
1,524 | 2,263 | ||||||
Notes payable, net of current portion (includes $438,566 and $- at fair value)
|
467,662 | 19,864 | ||||||
Other noncurrent liabilities
|
1,994 | 103 | ||||||
|
|
|
|
|||||
Total Liabilities
|
767,584 | 91,877 | ||||||
|
|
|
|
|||||
Contingently redeemable preferred stock; $0.00001 par value; 50,000 shares authorized; 6,766 shares issued and outstanding at September 30, 2021 and December 31, 2020
|
44,476 | 44,476 | ||||||
Commitments and contingencies (Note 6)
|
||||||||
Stockholders’ Equity:
|
||||||||
Common stock; $0.00001 par value; 200,000 shares authorized; 170,818 and 98,607 shares issued and outstanding at September 30, 2021 and December 31, 2020
|
2 | 1 | ||||||
Additional paid-in capital
|
1,385,381 | 163,967 | ||||||
Accumulated deficit
|
(92,220 | ) | (74,744 | ) | ||||
|
|
|
|
|||||
Total Stockholders’ Equity
|
1,293,163 | 89,224 | ||||||
|
|
|
|
|||||
Total Liabilities, Redeemable Preferred Stock and Stockholders’ Equity
|
$ | 2,105,223 | $ | 225,577 | ||||
|
|
|
|
Nine Months Ended September 30,
|
||||||||
2021
|
2020
|
|||||||
Total evenue:
|
||||||||
Hosting revenue from customers
|
$ | 37,836 | $ | 28,667 | ||||
Hosting revenue from related parties
|
13,906 | 3,382 | ||||||
Equipment sales to customers
|
84,378 | 1,987 | ||||||
Equipment sales to related parties
|
29,057 | 285 | ||||||
Digital asset mining income
|
77,511 | 2,312 | ||||||
|
|
|
|
|||||
Total revenue
|
242,688 | 36,633 | ||||||
Costs of revenue
|
145,193 | 31,906 | ||||||
|
|
|
|
|||||
Gross profit
|
97,495 | 4,727 | ||||||
(Loss) gain on legal settlements
|
(2,603 | ) | 5,814 | |||||
Gain from sales of digital currency assets
|
405 | 52 | ||||||
Impairment of digital currency assets
|
(12,552 | ) | (5 | ) | ||||
Operating expenses:
|
||||||||
Research and development
|
4,231 | 4,183 | ||||||
Sales and marketing
|
2,186 | 1,401 | ||||||
General and administrative
|
46,992 | 10,797 | ||||||
|
|
|
|
|||||
Total operating expenses
|
53,409 | 16,381 | ||||||
|
|
|
|
|||||
Operating income (loss)
|
29,336 | (5,793 | ) | |||||
Non-operating expenses,
net:
|
||||||||
Loss on debt from extinguishment
|
8,016 | 1,333 | ||||||
Interest expense, net
|
26,806 | 2,683 | ||||||
Other non-operating expense,
net
|
12,945 | 88 | ||||||
|
|
|
|
|||||
Total non-operating expense,
net
|
47,767 | 4,104 | ||||||
|
|
|
|
|||||
Loss before income taxes
|
(18,431 | ) | (9,897 | ) | ||||
Income tax expense
|
(955 | ) | — | |||||
|
|
|
|
|||||
Net loss and other comprehensive income loss)
|
(17,476 | ) | (9,897 | ) | ||||
|
|
|
|
|||||
Deemed dividend from common to preferred exchange
|
— | (10,478 | ) | |||||
|
|
|
|
|||||
Net loss attributable to common stockholders
|
$ | (17,476 | ) | $ | (20,375 | ) | ||
|
|
|
|
|||||
Net loss per share (Note 8):
|
||||||||
Basic
|
$ | (0.15 | ) | $ | (0.21 | ) | ||
|
|
|
|
|||||
Diluted
|
$ | (0.15 | ) | $ | (0.21 | ) | ||
|
|
|
|
|||||
Weighted average shares outstanding:
|
||||||||
Basic
|
115,482 | 98,453 | ||||||
|
|
|
|
|||||
Diluted
|
115,482 | 98,453 | ||||||
|
|
|
|
Contingently Redeemable
Convertible Preferred Stock
|
Common Stock
|
Additional
Paid-In
Capital
|
Accumulated
Deficit
|
Total
Stockholders’
Equity
|
||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||||||||||
Balance at December 31, 2020
|
6,766 | $ | 44,476 |
|
98,607 | $ | 1 | $ | 163,967 | $ | (74,744 | ) | $ | 89,224 | ||||||||||||||||||||||
Net loss
|
— | — |
|
— | — | — | (17,476 | ) | (17,476 | ) | ||||||||||||||||||||||||||
Stock-based compensation
|
— | — |
|
— | — | 31,012 | — | 31,012 | ||||||||||||||||||||||||||||
Issuances of common stock- business combination
|
— | — |
|
72,186 | 1 | 1,189,906 | — | 1,189,907 | ||||||||||||||||||||||||||||
Issuances of common stock warrants and options
|
— | — |
|
25 | — | 496 | — | 496 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Balance at September 30, 2021
|
6,766 | $ | 44,476 | 170,818 | $ | 2 | $ | 1,385,381 | $ | (92,220 | ) | $ | 1,293,163 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Balance at December 31, 2019
|
4,421 | $ | 29,526 | 99,141 | $ | 1 | $ | 168,866 | $ | (62,538 | ) | $ | 106,329 | |||||||||||||||||||||||
Net loss
|
— | — | — | — | — | (9,897 | ) | (9,897 | ) | |||||||||||||||||||||||||||
Stock-based compensation
|
— | — | — | — | 2,446 | — | 2,446 | |||||||||||||||||||||||||||||
Exchange of common stock for Series A contingently redeemable convertible preferred stock
|
1,802 | 12,308 | (1,096 | ) | — | (12,308 | ) | — | (12,308 | ) | ||||||||||||||||||||||||||
Issuances of Series A contingently redeemable convertible preferred stock
|
229 | 1,545 | — | — | — | — | — | |||||||||||||||||||||||||||||
Issuances of Series B contingently redeemable convertible preferred stock
|
314 | 1,097 | — | — | — | — | — | |||||||||||||||||||||||||||||
Issuances of common stock- asset acquisition
|
— | — | 562 | — | 2,405 | — | 2,405 | |||||||||||||||||||||||||||||
Issuances of common stock warrants and options
|
— | — | — | — | 1,967 | — | 1,967 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Balance at September 30, 2020
|
6,766 | $ | 44,476 | 98,607 | $ | 1 | $ | 163,376 | $ | (72,435 | ) | $ | 90,942 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
||||||||
2021
|
2020
|
|||||||
Cash flows from Operating Activities:
|
||||||||
Net loss
|
$ | (17,476 | ) | $ | (9,897 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
12,886 | 6,613 | ||||||
Stock-based compensation
|
31,012 | 2,446 | ||||||
Digital asset mining income
|
(77,511 | ) | (2,312 | ) | ||||
Deferred income taxes
|
3,604 | — | ||||||
Loss on legal settlements
|
2,603 | — | ||||||
Loss on debt extinguishment
|
8,016 | 1,333 | ||||||
Fair value adjustment on convertible notes
|
20,221 | — | ||||||
Amortization of debt discount and debt issuance costs
|
1,024 | 858 | ||||||
Losses on disposals of property, plant and equipment
|
17 | (92 | ) | |||||
Impairments of digital currency assets
|
12,552 | 5 | ||||||
Provision for doubtful accounts
|
— | (4 | ) | |||||
Changes in working capital components:
|
||||||||
Accounts receivable, net
|
(6,641 | ) | (3,415 | ) | ||||
Accounts receivable from related parties
|
55 | (1,903 | ) | |||||
Digital currency assets
|
27,316 | 2,314 | ||||||
Deposits for equipment
|
(414,771 | ) | (19,846 | ) | ||||
Other current assets
|
970 | (360 | ) | |||||
Accounts payable
|
(35,132 | ) | (790 | ) | ||||
Accrued expenses and other
|
17,943 | 1,330 | ||||||
Deferred revenue
|
254,530 | 5,878 | ||||||
Other noncurrent assets and liabilities, net
|
(7,692 | ) | (620 | ) | ||||
|
|
|
|
|||||
Net cash used in operating activities
|
(166,474 | ) | (18,462 | ) | ||||
|
|
|
|
|||||
Cash flows from Investing Activities:
|
||||||||
Purchases of property, plant and equipment
|
(116,074 | ) | (7,970 | ) | ||||
Cash acquired in business combination
|
704 | — | ||||||
Proceeds from sales of property, plant and equipment
|
— | 92 | ||||||
Other
|
(154 | ) | (1,350 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities
|
(115,524 | ) | (9,228 | ) | ||||
|
|
|
|
|||||
Cash flows from Financing Activities:
|
||||||||
Proceeds from issuances of common stock options and warrants
|
496 | 2,642 | ||||||
Issuances of debt
|
475,301 | 30,658 | ||||||
Principal payments on debt
|
(42,513 | ) | (5,819 | ) | ||||
|
|
|
|
|||||
Net cash provided by financing activities
|
433,284 | 27,481 | ||||||
|
|
|
|
|||||
Increase (decrease) in cash, cash equivalents, and restricted cash
|
151,286 | (209 | ) | |||||
Cash, cash equivalents and restricted cash—beginning of period
|
8,721 | 6,907 | ||||||
|
|
|
|
|||||
Cash, cash equivalents and restricted cash—end of period
|
$ | 160,007 | $ | 6,698 | ||||
|
|
|
|
1.
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
• |
Owning and operating datacenter facilities in the U.S. to provide colocation and hosting services for distributed ledger technology, also commonly known as blockchain;
|
• |
Owning and operating computer equipment used to process transactions conducted on one or more blockchain networks in exchange for transaction processing fees rewarded in digital currency assets, commonly referred to as mining;
|
• |
Developing blockchain-based platforms and applications, including infrastructure management, security technologies, mining optimization, and recordkeeping;
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Balance at December 31, 2020
|
$ | — | $ | — | $ | — | $ | — | ||||||||
Convertible notes issued
|
— | 418,345 | — | 418,345 | ||||||||||||
PIK interest capitalized
|
— | 2,580 | — | 2,580 | ||||||||||||
Transfers to level 3
|
— | (283,830 | ) | 283,830 | — | |||||||||||
Change in fair value from inception
|
— | 4,694 | 12,947 | 17,641 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at September 30, 2021
|
$ | — | $ | 141,789 | $ | 296,777 | $ | 438,566 | ||||||||
|
|
|
|
|
|
|
|
Fair value
|
Probability of
conversion event |
Expected term
(years) |
Volatility
|
|||||||||||||
Convertible notes (Level 3)
|
$ | 296,777 | 95.0 | % |
0.43 -1.20
|
38.4% -40.2%
|
(in thousands)
|
Financial statement line item
|
Nine months ended
September 30, 2021
|
||||
Cash interest payments
|
Interest expense, net | $ | 4,850 | |||
Payment-in-kind (PIK) interest
|
Interest expense, net | 7,274 | ||||
Other fair value adjustments
|
Other non-operating expense, net | 12,947 | ||||
|
|
|||||
Total fair value adjustments
|
25,071 | |||||
Debt issuance costs
|
Interest expense, net | $ | 10,664 |
(in thousands)
|
September 30
2021 |
December 31
2020 |
||||||
Bitcoin (BTC)
|
$ | 109,871 | $ | 51 | ||||
Ethereum (ETH)
|
1,834 | — | ||||||
Siacoin (SC)
|
945 | — | ||||||
Other
|
3,206 | 12 | ||||||
|
|
|
|
|||||
Total digital currencies
|
$ | 115,856 | $ | 63 | ||||
|
|
|
|
3.
|
ACQUISITIONS
|
Consideration
(in thousands)
|
||||
72.2 million common shares valued at $16.18 per share
1,2
|
$ | 1,167,965 | ||
Fair value of replaced Blockcap share-based payments attributable to
pre-combination
service
3
|
21,941 | |||
Settlement of preexisting services contracts
4
|
(60,522 | ) | ||
|
|
|||
Total Consideration:
|
$ | 1,129,384 | ||
Fair value of assets acquired, and liabilities assumed:
|
||||
Cash and cash equivalents
|
$ | 704 | ||
Digital assets-Bitcoin
|
73,304 | |||
Digital assets-Ethereum
|
365 | |||
Digital assets-Bitcoin cash
|
8 | |||
Digital assets-Siacoin
|
554 | |||
Digital assets-Other
|
3,329 | |||
Other current assets
|
633 | |||
Intangible assets, net
|
2,925 | |||
Property, plant and equipment, net
|
27,089 | |||
Other noncurrent assets
|
1,293 | |||
|
|
|||
Total assets acquired
|
|
110,204
|
|
|
Accounts payable
|
492 | |||
Accrued expenses and other
|
21,497 | |||
Other current liabilities
|
6,605 | |||
|
|
|||
Total liabilities assumed
|
$
|
28,594
|
|
|
Total identifiable net assets
|
$
|
81,610
|
|
|
Goodwill on acquisition
|
$
|
1,047,774
|
|
1 |
72.2 million common shares represent the equivalent Core Scientific common shares issued to Blockcap shareholders as consideration for the purchase.
|
2 |
The price per share of our common shares was estimated to be $16.18. As the Core Scientific common shares were not listed on a public marketplace, the calculation of the fair value of the common shares was subject to a greater degree of estimation. Given the absence of a public market, an estimate of the fair value of the common shares was required at the time of the Blockcap Acquisition. the Company’s and subjective factors were considered in determining the estimated fair value and because there is no active trading of the Core Scientific equity shares on an established securities market, an independent valuation specialist was engaged. The valuation was determined by weighting the outcomes of scenarios estimating share value based on both public company valuations and private company valuations. Both a market approach and common stock equivalency model were used to determine a range of outcomes, which were weighted based on probability to determine the result.
|
3 |
Reflects the estimated fair value of replaced Blockcap share-based payments allocated to purchase price based on the proportion of service related to the
pre-combination
services.
|
4 |
Blockcap had preexisting hosting and equipment contracts with the Company that were effectively settled by the Company’s acquisition of Blockcap. As a result, the consideration transferred to Blockcap has been adjusted by the deferred revenue balances that were settled at the time of acquisition.
|
(in thousands)
|
Goodwill
|
|||
Balance as of December 31, 2020
|
$ | 58,241 | ||
Acquisitions
|
1,047,774 | |||
|
|
|||
Balance as of September 30, 2021
|
$ | 1,106,015 | ||
|
|
Nine Months Ended
September 30, |
||||||||
(in thousands)
|
2021
|
2020
|
||||||
Total revenues
|
$ | 285,196 | $ | 38,645 | ||||
Operating income (loss)
|
$ | 34,951 | $ | (4,024 | ) |
• |
Transaction costs of $1.9 million are assumed to have occurred on the pro forma close date of January 1, 2020, and are recognized as if incurred in the first quarter of 2020;
|
• |
Tangible and intangible assets are assumed to be recorded at their estimated fair values as of January 1, 2020 and are depreciated or amortized over their estimated useful lives; and
|
• |
Accounting policies of Blockcap are conformed to those of Core Scientific including depreciation for mining equipment.
|
• |
Share-based compensation awards of Blockcap for which the performance condition of the award is assumed to be probable of being met as of January 1, 2020 and expensed as they are earned based on the service condition.
|
• |
The elimination of $19,239 of expense recognized by Blockcap in July 2021 for the acceleration of certain equity awards of its CEO and others. Because this acceleration was deemed to be in contemplation of the Merger, Core Scientific has recorded $23,294 of compensation expense for the acceleration in its financial statements for the period ending September 30, 2021, which was determined based on the fair value of the awards at the time of the Merger. This adjustment is necessary to avoid duplication of the expense attributable to the combined company related to the acceleration of the same awards.
|
4.
|
NOTES PAYABLE
|
(in thousands)
|
September 30
2021 |
December 31
2020 |
||||||
Georgia note
|
$ | 430 | $ | 581 | ||||
Kentucky note
|
1,154 | 1,511 | ||||||
PPP loan
|
— | 2,154 | ||||||
Silverpeak loan
|
— | 22,260 | ||||||
Stockholder loan
|
10,000 | — | ||||||
Genesis loan
|
2,015 | 4,648 | ||||||
Celsius loan
|
— | 6,842 | ||||||
NYDIG loan
|
40,510 | 718 | ||||||
Trinity loan
|
1,000 | — | ||||||
Convertible notes
|
420,925 | — | ||||||
Other
|
304 | — | ||||||
|
|
|
|
|||||
Total
|
476,338 | 38,714 | ||||||
Unamortized discount and debt issuance costs
|
(1,115 | ) | (2,834 | ) | ||||
Fair value adjustments to convertible notes
|
17,641 | — | ||||||
|
|
|
|
|||||
Total notes payable, net
|
$ | 492,864 | $ | 35,880 | ||||
|
|
|
|
5.
|
CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED STOCK
|
6.
|
COMMITMENTS AND CONTINGENCIES
|
7.
|
INCOME TAXES
|
8.
|
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
Nine Months Ended
September 30, |
||||||||
2021
|
2020
|
|||||||
Net loss and other comprehensive loss
|
$ | (17,476 | ) | $ | (9,897 | ) | ||
Deemed dividend from common to preferred exchange
|
— | (10,478 | ) | |||||
|
|
|
|
|||||
Net loss attributable to common stockholders
|
$ | (17,476 | ) | $ | (20,375 | ) | ||
Weighted average shares outstanding - basic
|
115,482 | 98,453 | ||||||
Add: Dilutive share-based compensation awards
|
— | — | ||||||
|
|
|
|
|||||
Weighted average shares outstanding - diluted
|
115,482 | 98,453 | ||||||
Net income (loss) per share - basic
|
$ | (0.15 | ) | $ | (0.21 | ) | ||
Net income (loss) per share - diluted
|
$ | (0.15 | ) | $ | (0.21 | ) |
Nine Months Ended
September 30, |
||||||||
2021
|
2020
|
|||||||
Stock options
|
7,320 | 7,320 | ||||||
Preferred stock
|
6,766 | 6,766 | ||||||
Warrants
|
4,255 | 4,255 | ||||||
Restricted stock
|
45,793 | 37,512 | ||||||
|
|
|
|
|||||
Total potentially anti-dilutive shares
|
64,134 | 55,853 | ||||||
|
|
|
|
9.
|
SEGMENT REPORTING
|
Nine Months Ended
September 30, |
||||||||
2021
|
2020
|
|||||||
Equipment Sales and Hosting Segment
|
||||||||
Hosting revenue from customers
|
$ | 51,742 | $ | 32,049 | ||||
Equipment sales to customers
|
113,435 | 2,272 | ||||||
|
|
|
|
|||||
Total revenue
|
165,177 | 34,321 | ||||||
Cost of revenue
|
131,284 | 30,308 | ||||||
|
|
|
|
|||||
Gross profit
|
$ | 33,893 | $ | 4,013 | ||||
Mining Segment
|
||||||||
Digital asset mining income
|
$ | 77,511 | $ | 2,312 | ||||
|
|
|
|
|||||
Total revenue
|
77,511 | 2,312 | ||||||
Cost of revenue
|
13,909 | 1,598 | ||||||
|
|
|
|
|||||
Gross profit
|
$ | 63,602 | $ | 714 | ||||
Consolidated total revenue
|
$ | 242,688 | $ | 36,633 | ||||
Consolidated cost of revenue
|
$ | 145,193 | $ | 31,906 | ||||
Consolidated gross profit
|
$ | 97,495 | $ | 4,727 |
Nine Months
Ended September 30, |
||||||||
2021
|
2020
|
|||||||
Customer
|
||||||||
A
|
34 | % | N/A | |||||
B
|
21 | % | N/A | |||||
Blockcap
|
18 | % | N/A | |||||
C
|
N/A | 42 | % | |||||
D
|
N/A | 16 | % |
Nine Months Ended
September 30, |
||||||||
2021
|
2020
|
|||||||
Gross profit
|
97,495 | 4,727 | ||||||
(Loss) gain on legal settlements
|
(2,603 | ) | 5,814 | |||||
Gain from sales of digital currency assets
|
405 | 52 | ||||||
Impairment of digital currency assets
|
(12,552 | ) | (5 | ) | ||||
Operating expenses:
|
||||||||
Research and development
|
4,231 | 4,183 | ||||||
Sales and marketing
|
2,186 | 1,401 | ||||||
General and administrative
|
46,992 | 10,797 | ||||||
|
|
|
|
|||||
Total operating expenses
|
53,409 | 16,381 | ||||||
|
|
|
|
|||||
Operating income (loss)
|
29,336 | (5,793 | ) | |||||
Non-operating expenses,
net:
|
||||||||
Loss on debt from extinguishment
|
8,016 | 1,333 | ||||||
Interest expense, net
|
26,806 | 2,683 | ||||||
Other non-operating (income)
expense, net
|
12,945 | 88 | ||||||
|
|
|
|
|||||
Total non-operating expense,
net
|
47,767 | 4,104 | ||||||
|
|
|
|
|||||
Income (loss) before income taxes
|
(18,431 | ) | (9,897 | ) |
10.
|
RELATED-PARTY TRANSACTIONS
|
11.
|
SUBSEQUENT EVENTS
|
2020
|
2019
|
|||||||
Assets
|
||||||||
Current assets
|
||||||||
Cash
|
$ | 8,756,697 | — | |||||
Digital assets
|
2,404,047 | — | ||||||
Digital assets receivable
|
50,979 | — | ||||||
Prepaid expenses
|
1,664,186 | — | ||||||
|
|
|
|
|||||
Total current assets
|
12,875,909 | — | ||||||
Deposits on mining equipment assets
|
5,087,685 | — | ||||||
Mining equipment assets, net
|
16,715,171 | — | ||||||
Goodwill
|
21,171,370 | — | ||||||
|
|
|
|
|||||
Total assets
|
$ | 55,850,135 | — | |||||
|
|
|
|
|||||
Liabilities and stockholders’ equity
|
||||||||
Current liabilities
|
||||||||
Accounts payable and accrued liabilities
|
$ | 60,556 | $ | 609 | ||||
Loans payable
|
7,992,455 | — | ||||||
Due to related parties
|
41,884 | — | ||||||
Common shares issuable
|
6,204,202 | — | ||||||
Taxes payable
|
115,564 | — | ||||||
|
|
|
|
|||||
Total current liabilities
|
14,414,661 | 609 | ||||||
Long term liabilities
|
||||||||
Deferred tax liability
|
1,125,495 | — | ||||||
|
|
|
|
|||||
Total liabilities
|
15,540,156 | 609 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 15) | ||||||||
Stockholders’ equity (deficit)
|
||||||||
Common stock, $0.00001 par value; 400,000,000 shares authorized; 121,909,000 and nil shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
1,219 | — | ||||||
Additional
paid-in
capital
|
50,246,144 | — | ||||||
Accumulated deficit
|
(9,937,384 | ) | (609 | ) | ||||
|
|
|
|
|||||
Total stockholders’ equity (deficit)
|
40,309,979 | (609 | ) | |||||
|
|
|
|
|||||
Total liabilities and stockholders’ equity
|
$ | 55,850,135 | — | |||||
|
|
|
|
2020
|
2019
|
|||||||
Revenue
|
||||||||
Digital assets mined
|
$ | 5,972,142 | — | |||||
Cost of Revenue
|
||||||||
Hosting costs
|
2,128,211 | — | ||||||
Depreciation
|
652,765 | — | ||||||
|
|
|
|
|||||
Total cost of revenue
|
2,780,976 | — | ||||||
Gross profit
|
3,191,166 | — | ||||||
Operating expenses
|
||||||||
Share-based compensation
|
1,992,000 | — | ||||||
Management and professional fees
|
104,162 | — | ||||||
Office and administration
|
125,028 | 609 | ||||||
|
|
|
|
|||||
Total operating expenses
|
2,221,190 | 609 | ||||||
Operating income (loss)
|
969,976 | (609 | ) | |||||
Other expenses
|
||||||||
Share-based merger expense
|
10,002,974 | — | ||||||
Interest expense
|
419,121 | — | ||||||
Gain on sale of digital assets
|
(53,518 | ) | ||||||
|
|
|
|
|||||
Total other expenses, net
|
10,368,577 | — | ||||||
Net loss before tax
|
(9,398,601 | ) | (609 | ) | ||||
Income tax expense
|
$ | 538,174 | — | |||||
|
|
|
|
|||||
Net loss
|
$ | (9,936,775 | ) | $ | (609 | ) | ||
|
|
|
|
|||||
Basic and diluted net loss per share
|
($0.46 | ) | $ | nil | ||||
Weighted average number of shares outstanding:
|
||||||||
Basic and diluted
|
21,587,741 | — |
Number of
shares |
Common
stock |
Additional paid
in capital |
Accumulated
deficit |
Total
|
||||||||||||||||
February 19, 2019
|
— | — | — | — | — | |||||||||||||||
Net loss
|
— | — | — | $ | (609 | ) | $ | (609 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2019
|
— | — | — | $ | (609 | ) | $ | (609 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares issued in connection with reverse merger (note 3)
|
43,688,944 | $ | 437 | $ | 12,718,245 | — | 12,718,682 | |||||||||||||
Common shares issued in connection with Business Combinations (note 4)
|
71,037,695 | 710 | 34,097,596 | — | 34,098,306 | |||||||||||||||
Common shares issued in connection with asset acquisition (note 5)
|
7,182,361 | 72 | 3,430,303 | — | 3,430,375 | |||||||||||||||
Net loss
|
— | — | (9,936,775 | ) | (9,936,775 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2020
|
121,909,000 | $ | 1,219 | $ | 50,246,144 | $ | (9,937,384 | ) | $ | 40,309,979 | ||||||||||
|
|
|
|
|
|
|
|
|
|
2020
|
2019
|
|||||||
Operating activities
|
|
|||||||
Net loss
|
$ | (9,936,775 | ) | $ | (609 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities Digital assets mined
|
(5,972,142 | ) | — | |||||
Gain on sale of digital assets
|
(53,518 | ) | — | |||||
Depreciation
|
652,765 | — | ||||||
Income taxes
|
538,174 | — | ||||||
Share-based compensation
|
1,992,000 | |||||||
Share-based merger expense
|
10,002,974 | — | ||||||
Digital assets receivable
|
(28,579 | ) | — | |||||
Changes in operating assets and liabilities
|
||||||||
Prepaid expenses
|
(246,332 | ) | — | |||||
Accounts payable and accrued liabilities
|
(217,325 | ) | 609 | |||||
|
|
|
|
|||||
Net cash used in operating activities
|
(3,268,758 | ) | — | |||||
Investing activities
|
||||||||
Purchase of mining equipment assets
|
(3,064,216 | ) | — | |||||
Deposits made on mining equipment assets
|
(2,364,135 | ) | ||||||
Sales of digital assets
|
4,615,466 | |||||||
Advances from related parties
|
436,823 | |||||||
Advances to related parties
|
(498,613 | ) | — | |||||
Cash received on acquisition of RME Black 100 (Note 4(a))
|
266,490 | — | ||||||
Cash received on acquisition of RME Black 200 (Note 4(b))
|
152,264 | — | ||||||
Cash received on acquisition of BEP 888 (Note 4(c))
|
794,445 | — | ||||||
Cash received on acquisition of BEP 999 (Note 5)
|
1,150,000 | — | ||||||
Proceeds from BEP 999 subscriptions receivable
|
2,450,000 | — | ||||||
|
|
|
|
|||||
Net cash provided by investing activities
|
3,938,524 | — | ||||||
Financing activities
|
||||||||
Founders’ initial contributions
|
723,921 | — | ||||||
Cash received for common shares issuable
|
6,204,202 | |||||||
Repayments of loan payable
|
(1,338,721 | ) | — | |||||
Proceeds from loan payable
|
2,497,529 | — | ||||||
|
|
|
|
|||||
Net cash provided by financing activities
|
8,086,931 | — | ||||||
|
|
|
|
|||||
Net increase in cash
|
8,756,697 | — | ||||||
Cash, beginning of year
|
— | — | ||||||
|
|
|
|
|||||
Cash, end of year
|
$ | 8,756,697 | $ | — | ||||
|
|
|
|
|||||
Supplemental disclosure of cash flow information
|
||||||||
Cash paid for interest
|
$ | 415,686 | ||||||
|
|
|||||||
Cash paid for taxes
|
$ | — | ||||||
|
|
1.
|
Organization and description of business
|
2.
|
Summary of significant accounting policies
|
a) |
Basis of presentation
|
b) |
COVID-19
|
c) |
Use of estimates
|
d) |
Fair Value Measurements
|
• |
Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
|
• |
Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
• |
Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
|
e) |
Cash
|
f) |
Digital assets
|
g) |
Digital assets receivable
|
h) |
Mining equipment assets
|
i) |
Business combinations and asset acquisitions
|
j) |
Revenue from contracts with customers
|
• |
Identification of the contract with a customer
|
• |
Identification of the performance obligations in the contract
|
• |
Determination of the transaction price
|
• |
Allocation of the transaction price to the performance obligations in the contract
|
• |
Recognition of revenue when, or as, the performance obligations are satisfied
|
k) |
Cost of Revenue
|
l) |
Depreciation
|
m) |
Deferred taxes
|
n) |
Stock compensation
|
o) |
Income Taxes
|
p) |
Loss per common share
|
q) |
Segment reporting
|
r) |
Recently issued and adopted accounting pronouncements
|
3.
|
Reverse merger
|
4.
|
Business combinations
|
a) |
RME Black 100
|
Consideration:
|
||||
30,708,776 common shares valued at $0.48 per share
|
$ | 14,740,213 | ||
|
|
|||
Fair value of assets acquired and liabilities assumed:
|
||||
Cash
|
$ | 266,490 | ||
Digital assets
|
450,412 | |||
Digital assets receivable
|
10,557 | |||
Prepaid expenses
|
675,323 | |||
Due from related parties
|
26,628 | |||
Mining equipment assets
|
6,852,352 | |||
Accrued liabilities
|
(7,655 | ) | ||
Loan payable
|
(3,292,973 | ) | ||
Deferred tax liability
|
($ | 336,725 | ) | |
|
|
|||
Total identifiable net assets
|
$ | 4,644,409 | ||
|
|
|||
Goodwill on acquisition, not deductible for income tax purposes
|
$ | 10,095,804 | ||
|
|
b) |
RME Black 200
|
Consideration:
|
||||
26,827,730 common shares valued at $0.48 per share
|
$ | 12,877,310 | ||
|
|
|||
Fair value of assets acquired and liabilities assumed:
|
||||
Cash
|
$ | 152,264 | ||
Digital assets
|
461,788 | |||
Digital assets receivable
|
10,789 | |||
Prepaid expenses
|
674,256 | |||
Due from related parties
|
16,958 | |||
Mining equipment assets
|
6,841,524 | |||
Accrued liabilities
|
(5,770 | ) | ||
Investor draws payable
|
(18,519 | ) | ||
Due to related parties
|
(27,626 | ) | ||
Loan payable
|
(3,540,673 | ) | ||
Deferred tax liability
|
($ | 336,193 | ) | |
|
|
|||
Total identifiable net assets
|
$ | 4,228,798 | ||
|
|
|||
Goodwill on acquisition, not deductible for income tax purposes
|
$ | 8,648,512 | ||
|
|
c) |
BEP 888
|
Consideration:
|
||||
13,501,189 common shares valued at $0.48 per share
|
$ | 6,480,571 | ||
|
|
|||
Fair value of assets acquired and liabilities assumed:
|
||||
Cash
|
$ | 794,445 | ||
Digital assets
|
81,653 | |||
Digital assets receivable
|
1,052 | |||
Prepaid expenses
|
68,277 | |||
Deposits on mining equipment assets
|
2,723,550 | |||
Mining equipment assets
|
609,842 | |||
Due to related parties
|
(195,336 | ) | ||
Deferred tax liability
|
($ | 29,967 | ) | |
|
|
|||
Total identifiable net assets
|
$ | 4,053,516 | ||
|
|
|||
Goodwill on acquisition, not deductible for income tax purposes
|
$ | 2,427,055 | ||
|
|
5.
|
Asset acquisition
|
Purchase price:
|
||||
7,182,361 common shares
|
$ | 3,430,375 | ||
|
|
|||
Fair value of assets acquired and liabilities assumed:
|
||||
Cash
|
$ | 1,150,000 | ||
Subscription receivable from shareholders
|
2,450,000 | |||
Due to related parties
|
(169,625 | ) | ||
|
|
|||
Total identifiable net assets
|
$ | 3,430,375 | ||
|
|
6.
|
Digital assets
|
Bitcoin
|
||||
Opening balance as of January 1, 2020
|
— | |||
Revenue from Bitcoin mined
|
$ | 5,972,142 | ||
Bitcoin acquired through the business combinations
|
993,853 | |||
Bitcoin sold
|
(4,561,948 | ) | ||
|
|
|||
End balance as of December 31, 2020
|
$ | 2,404,047 | ||
|
|
7.
|
Digital assets receivable
|
8.
|
Prepaid expenses
|
December 31,
2020 |
December 31,
2019 |
|||||||
Prepaid hosting fees (see note 13)
|
$ | 1,622,349 | — | |||||
Other prepaid expenses
|
41,837 | — | ||||||
|
|
|
|
|||||
Total
|
$ | 1,664,186 | — | |||||
|
|
|
|
9.
|
Mining equipment assets
|
Cost
|
||||
Balance, January 1, 2019
|
|
—
|
|
|
Additions
|
|
—
|
|
|
|
|
|||
Balance December 1, 2019
|
|
—
|
|
|
|
|
|||
Additions
|
$ | 3,064,216 | ||
Mining equipment assets acquired through the business combinations
|
14,303,720 | |||
|
|
|||
Balance December 31, 2020
|
$
|
17,367,936
|
|
|
|
|
|||
Accumulated depreciation
|
||||
Balance, January 1, 2019
|
|
—
|
|
|
Additions
|
|
—
|
|
|
|
|
|||
Balance December 31, 2019
|
|
—
|
|
|
|
|
|||
Additions
|
$ | 652,765 | ||
Balance December 31, 2020
|
$
|
652,765
|
|
|
|
|
|||
Net Book value
|
||||
Cost
|
$ | 17,367,936 | ||
Accumulated depreciation
|
(652,765 | ) | ||
|
|
|||
Mining equipment assets, net December 31, 2020
|
$ | 16,715,171 | ||
|
|
10.
|
Accounts payable and accrued liabilities
|
December 31, 2020
|
||||
Accounts payable
|
$ | 10,167 | ||
Accrued liabilities
|
50,389 | |||
|
|
|||
Total
|
$ | 60,556 | ||
|
|
11.
|
Loans payable
|
12.
|
Stockholders’ equity
|
a) |
Authorized
|
b) |
Issued and outstanding
|
i. |
The Company received $723,458 in connection with its initial formation. As a result of the Transaction, the issuance of the 43,688,944 shares of common stock has been presented on the statement of stockholders’ equity to show the retroactive effect of that issuance. The Company also incurred charges of $11,995,224 in connection with a portion of the share issuance being made to individuals with no prior ownership in the entities. (see note 3)
|
ii. |
The Company issued 71,037,695 shares through the business combinations (see note 4).
|
iii. |
The Company entered into subscription agreements for the issuance of 7,182,361 shares through the asset acquisition (see note 5).
|
13.
|
Related party transactions
|
14.
|
Income taxes
|
Current
|
2020
|
2019
|
||||||
Federal
|
$ | 98,626 | — | |||||
State
|
16,938 | — | ||||||
|
|
|
|
|||||
Total current
|
$ | 115,564 | — | |||||
|
|
|
|
Deferred
|
2020
|
2019
|
||||||
Federal
|
$ | 360,668 | — | |||||
State
|
61,942 | — | ||||||
|
|
|
|
|||||
Total deferred
|
422,610 | — | ||||||
|
|
|
|
|||||
Total income tax expense from continuing operations
|
$ | 538,174 | — | |||||
|
|
|
|
2020
|
2019
|
|||||||
(609 | ||||||||
|
|
|||||||
US federal statutory income tax benefit applied to loss before income taxes
|
$ | (1,973,706 | ) | — | ||||
State income taxes, net of federal benefit
|
(338,552 | ) | — | |||||
RME 88
pre-merger
income
|
(100,793 | ) | — | |||||
Transaction expense
|
2,951,225 | — | ||||||
|
|
|
|
|||||
Income tax provision
|
$ | 538,174 | — | |||||
|
|
|
|
2020
|
2019
|
|||||||
Computer servers
|
($ | 742,391 | ) | — | ||||
Prepaid expenses
|
(383,104 | ) | — | |||||
|
|
|
|
|||||
Total deferred tax liabilities
|
($ | 1,125,495 | ) | — | ||||
|
|
|
|
15.
|
Commitments
|
Year ended
|
Year ended
|
|||||||
December 31, 2020
|
December 31, 2019
|
|||||||
Within one year
|
$ | 20,251,566 | — | |||||
Later than one year but not later than five years
|
$ | 66,727,201 | — | |||||
|
|
|
|
|||||
Total
|
$ | 86,978,767 | — | |||||
|
|
|
|
16.
|
Subsequent events
|
Options granted
|
Exercise Price
|
Vesting period
|
Expiration Date
|
Quantity
|
||||||||||||
January 2021
|
$ | 2.25 | Immediate |
Jan-28
|
15,000 | |||||||||||
January 2021
|
$ | 2.25 | 4 years |
Jan-28
|
4,295,000 | |||||||||||
February 2021
|
$ | 2.25 | Immediate |
Feb-28
|
20,000 | |||||||||||
January 2021
|
$ | 3.15 | 4 years |
Jan-28
|
1,360,000 | |||||||||||
March 2021
|
$ | 6.00 | 4 years |
Mar-28
|
565,000 | |||||||||||
March 2021
|
$ | 10.95 | 4 years |
Mar-28
|
1,940,000 | |||||||||||
April 2021
|
$ | 10.95 | 4 years |
Apr-28
|
250,000 | |||||||||||
May 2021
|
$ | 10.95 | 4 years |
May-28
|
170,000 | |||||||||||
June 2021
|
$ | 10.95 | 4 years |
Jun-28
|
250,000 | |||||||||||
July 2021
|
$ | 10.95 | Immediate |
Jul-28
|
196,466 | |||||||||||
|
|
|||||||||||||||
9,061,466 | ||||||||||||||||
|
|
|||||||||||||||
Forfeited | (650,000 | ) | ||||||||||||||
|
|
|||||||||||||||
Total | 8,411,466 | |||||||||||||||
|
|
Shares granted
|
Vesting period
|
Quantity
|
||||||
May 2021
|
4 years | 100,000 | ||||||
June 2021
|
4 years | 1,200,000 | ||||||
June 2021
|
4 years | 1,775,000 | ||||||
June 2021
|
4 years | 25,000 | ||||||
June 2021
|
4 years | 20,000 | ||||||
July 2021
|
4 years | 4,985,000 | ||||||
July 2021
|
Immediate | 30,000 | ||||||
July 2021
|
Immediate | 253,534 | ||||||
|
|
|||||||
8,388,534 | ||||||||
|
|
a) |
On February 11, 2021, the Company entered into an office lease in Dallas, TX effective as of April 1, 2021 for a term of 37 months. Expected rent and operating costs were expected to be approximately $268,000 per year.
|
b) |
On March 16, 2021, the Company entered into an office lease in Austin, TX effective as of May 1, 2021 for a term of 6 months at a cost of $38,000 per month.
|
As of
|
||||||||
June 30,
2021
|
December 31,
2020
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Current Assets:
|
||||||||
Cash
|
$ | 552 | $ | 8,757 | ||||
Digital assets
|
43,884 | 2,404 | ||||||
Digital assets receivable
|
74 | 51 | ||||||
Taxes receivable
|
115 | — | ||||||
Prepaid expenses
|
4,039 | 1,664 | ||||||
|
|
|
|
|||||
Total Current Assets
|
48,664 | 12,876 | ||||||
|
|
|
|
|||||
Deposits on mining equipment assets
|
78,071 | 5,087 | ||||||
Property, plant, and equipment, net
|
55,318 | 16,715 | ||||||
Goodwill
|
21,172 | 21,172 | ||||||
|
|
|
|
|||||
Total Assets
|
$ | 203,225 | $ | 55,850 | ||||
|
|
|
|
|||||
Liabilities and Stockholders’ Equity
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable and accrued expenses
|
$ | 220 | $ | 61 | ||||
Equipment purchase payable
|
21,313 | — | ||||||
Lease termination payable
|
102 | — | ||||||
Accrued interest
|
190 | — | ||||||
Accrued interest, related party
|
83 | — | ||||||
Notes payable
|
24,455 | — | ||||||
Notes payable, related party
|
16,146 | 7,992 | ||||||
Due to related parties
|
97 | 42 | ||||||
Common shares issuable
|
— | 6,204 | ||||||
Taxes payable
|
— | 116 | ||||||
|
|
|
|
|||||
Total Current Liabilities
|
62,606 | 14,415 | ||||||
|
|
|
|
|||||
Deferred tax liability
|
9,903 | 1,125 | ||||||
|
|
|
|
|||||
Total Liabilities
|
72,509 | 15,540 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 6)
|
||||||||
Stockholders’ Equity:
|
||||||||
Common stock; $0.00001 par value; 400,000 shares authorized; 138,078 and 121,909 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively
|
1 | 1 | ||||||
Additional paid-in capital
|
131,681 | 50,246 | ||||||
Accumulated deficit
|
(966 | ) | (9,937 | ) | ||||
|
|
|
|
|||||
Total Stockholders’ Equity
|
130,716 | 40,310 | ||||||
|
|
|
|
|||||
Total Liabilities and Stockholders’ Equity
|
$ | 203,225 | $ | 55,850 | ||||
|
|
|
|
For the Six Months Ended
June 30,
|
||||||||
2021
|
2020
|
|||||||
Digital asset mining
|
$
|
59,390
|
|
|
208
|
|
||
|
|
|
|
|||||
Total revenue
|
|
59,390
|
|
|
208
|
|
||
Costs of revenue
|
||||||||
Hosting costs
|
|
9,468
|
|
|
117
|
|
||
Depreciation
|
|
4,340
|
|
|
22
|
|
||
|
|
|
|
|||||
Total costs of revenue
|
|
13,808
|
|
|
139
|
|
||
|
|
|
|
|||||
Gross profit
|
|
45,582
|
|
|
69
|
|
||
Operating expenses:
|
||||||||
Wage, benefits, and contractor costs
|
|
7,218
|
|
|
2
|
|
||
Amortization
|
|
60
|
|
|
—
|
|
||
General and administrative
|
|
1,006
|
|
|
—
|
|
||
Loss on impairment of assets
|
|
17,607
|
|
|
—
|
|
||
|
|
|
|
|||||
Total operating expenses
|
|
25,891
|
|
|
2
|
|
||
|
|
|
|
|||||
Operating profit
|
|
19,691
|
|
|
67
|
|
||
|
|
|
|
|||||
Non-operating income (expense), net:
|
||||||||
Gain on sale of digital assets
|
|
145
|
|
|
10
|
|
||
Interest expense
|
|
(2,204
|
)
|
|
—
|
|
||
Loss on termination of lease
|
|
(81
|
)
|
|
—
|
|
||
Miscellaneous income
|
|
135
|
|
|
—
|
|
||
|
|
|
|
|||||
Total non-operating income (expense), net
|
|
(2,005
|
)
|
|
10
|
|
||
|
|
|
|
|||||
Income before income taxes
|
|
17,686
|
|
|
77
|
|
||
Income tax expense
|
|
8,715
|
|
|
-
|
|
||
|
|
|
|
|||||
Net income
|
|
8,971
|
|
|
77
|
|
||
|
|
|
|
|||||
Net income per share:
|
||||||||
Basic
|
$
|
0.07
|
|
$
|
—
|
|
||
|
|
|
|
|||||
Diluted
|
$
|
0.07
|
|
$
|
—
|
|
||
|
|
|
|
|||||
Weighted average shares outstanding:
|
||||||||
Basic
|
|
133,826
|
|
|
—
|
|
||
|
|
|
|
|||||
Diluted
|
|
133,855
|
|
|
—
|
|
||
|
|
|
|
Common Stock
|
Additional Paid-In
Capital |
Accumulated
Deficit |
Total
Stockholders’ Equity |
|||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||
Balance at January 1, 2021
|
121,909 | $ | 1 | $ | 50,246 | $ | (9,937 | ) | $ | 40,310 | ||||||||||
Net income
|
— | — | — | 8,971 | 8,971 | |||||||||||||||
Issuance of common stock for cash and digital assets
|
15,840 | — | 73,719 | — | 73,719 | |||||||||||||||
Repurchase of shares
|
(3,426 | ) | — | — | — | — | ||||||||||||||
Conversion of note payable into common shares
|
635 | — | 2,000 | — | 2,000 | |||||||||||||||
Stock-based compensation from issuance of restricted shares
|
3,120 | — | 1,153 | 1,153 | ||||||||||||||||
Stock-based compensation from issuance of stock options
|
— | — | 4,563 | — | 4,563 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at June 30, 2021
|
138,078 | $ | 1 | $ | 131,681 | ($ | 966 | ) | $ | 130,716 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Common Stock
|
Additional
Paid-In Capital
|
Retained
Earnings (Accumulated Deficit) |
Total
Stockholders’ Equity |
|||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||
Balance at January 1, 2020
|
— | — | $ | — | $ | (1 | ) | $ | (1 | ) | ||||||||||
Net income
|
— | — | — | 77 | 77 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at June 30, 2020
|
— | — | — | 76 | $ | 76 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
||||||||
2021
|
2020
|
|||||||
Cash flows from Operating Activities:
|
||||||||
Net income
|
$ | 8,971 | 77 | |||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
4,400 | 22 | ||||||
Stock-based compensation
|
5,716 | — | ||||||
Digital asset mining
|
(59,390 | ) | (208 | ) | ||||
Deferred income taxes
|
8,778 | — | ||||||
Gain on sale of digital assets
|
(145 | ) | (10 | ) | ||||
Loss on impairment of digital assets
|
17,607 | — | ||||||
Loss on termination of lease
|
81 | — | ||||||
Changes in working capital components:
|
||||||||
Prepaid expenses
|
(2,398 | ) | — | |||||
Lease liability
|
9 | — | ||||||
Income taxes payable
|
(231 | ) | — | |||||
Net charges paid through related parties
|
55 | 2 | ||||||
Accrued interest
|
190 | — | ||||||
Accrued interest, related party
|
83 | — | ||||||
Accounts payable and accrued expenses
|
159 | 19 | ||||||
|
|
|
|
|||||
Net cash used in operating activities
|
(16,115 | ) | (98 | ) | ||||
|
|
|
|
|||||
Cash flows from Investing Activities:
|
||||||||
Deposits on mining equipment assets
|
(88,303 | ) | — | |||||
Purchase of property, plant, and equipment
|
(6,335 | ) | (3,064 | ) | ||||
Proceeds from sale of digital assets
|
871 | 213 | ||||||
|
|
|
|
|||||
Net cash used in investing activities
|
(93,767 | ) | (2,851 | ) | ||||
|
|
|
|
|||||
Cash flows from Financing Activities:
|
||||||||
Proceeds from issuances of common stock, net
|
67,068 | — | ||||||
Advances from related parties
|
— | 723 | ||||||
Proceeds from notes payable
|
24,455 | 2,498 | ||||||
Proceeds from notes payable, related party
|
16,146 | — | ||||||
Amounts due from related parties
|
— | (63 | ) | |||||
Repayment of notes payable
|
(5,992 | ) | — | |||||
|
|
|
|
|||||
Net cash provided by financing activities
|
101,677 | 3,158 | ||||||
|
|
|
|
|||||
(Decrease) increase in cash
|
(8,205 | ) | 209 | |||||
Cash - beginning of period
|
8,757 | — | ||||||
|
|
|
|
|||||
Cash - end of period
|
$ | 552 | 209 | |||||
|
|
|
|
|||||
Cash paid for interest
|
$ | 1,931 | — | |||||
Cash paid for taxes
|
$ | 168 | — | |||||
Supplemental disclosure of noncash investing and financing activities:
|
||||||||
Digital assets received for common shares issued
|
$ | 445 | — | |||||
Conversion of notes payable to common shares
|
$ | 2,000 | — | |||||
Issuance of common shares to settle shares issuable
|
$ | 6,204 | — | |||||
Reclassification of miner deposits to fixed assets
|
$ | 15,319 | — | |||||
Equipment purchase payable
|
$ | 21,313 | — | |||||
Recognition of right of use asset and liability
|
$ | 439 | — |
1.
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
• |
Identification of the contract with a customer
|
• |
Identification of the performance obligations in the contract
|
• |
Determination of the transaction price
|
• |
Allocation of the transaction price to the performance obligations in the contract
|
• |
Recognition of revenue when, or as, the performance obligations are satisfied
|
3.
|
DIGITAL ASSETS
|
As of
|
||||||||
June 30
|
December 31
|
|||||||
2021
|
2020
|
|||||||
Opening balance
|
$ | 2,404 | $ | — | ||||
Revenue from digital asset mining
|
59,390 | 5,972 | ||||||
Digital assets acquired through business combinations
|
— | 994 | ||||||
Digital assets acquired through issuance of shares
|
445 | — | ||||||
Net digital asset receivable change in revenue
|
(23 | ) | — | |||||
Digital assets sold
|
(726 | ) | (4,562 | ) | ||||
Impairment of digital assets
|
(17,606 | ) | — | |||||
|
|
|
|
|||||
Ending balance
|
$ | 43,884 | $ | 2,404 | ||||
|
|
|
|
4.
|
PROPERTY, PLANT AND EQUIPMENT
|
Cost
|
||||
Balance January 1, 2021
|
$ | 17,368 | ||
Additions: mining equipment assets
|
42,889 | |||
Additions: Office equipment
|
79 | |||
Disposal of furniture
|
(25 | ) | ||
|
|
|||
Balance June 30, 2021
|
$ | 60,311 | ||
|
|
|||
Accumulated depreciation
|
||||
Balance January 1, 2021
|
$ | 653 | ||
Additions: mining equipment assets
|
4,340 | |||
|
|
|||
Balance June 30, 2021
|
$ | 4,993 | ||
|
|
|||
Net Book Value
|
||||
Cost
|
$ | 60,311 | ||
Accumulated depreciation
|
(4,993 | ) | ||
|
|
|||
Balance June 30, 2021
|
$ | 55,318 | ||
|
|
5.
|
NOTES PAYABLE
|
As of
|
||||||||
June 30
|
December 31
|
|||||||
2021
|
2020
|
|||||||
Foundry
|
$ | — | $ | 7,992 | ||||
|
|
|
|
|||||
NYDIG repurchase agreement
|
24,455 | — | ||||||
|
|
|
|
|||||
Core Scientific promissory note
|
16,146 | — | ||||||
|
|
|
|
|||||
Total notes payable, net
|
$ | 40,601 | $ | 7,992 | ||||
|
|
|
|
6.
|
COMMITMENTS AND CONTINGENCIES
|
As of,
|
||||||||
June 30
|
June 30
|
|||||||
2021
|
2020
|
|||||||
Within one year
|
$ | 39,377 | $ | 2,646 | ||||
|
|
|
|
|||||
Later than one year but not later than five years
|
163,076 | 7,095 | ||||||
|
|
|
|
|||||
Total
|
$ | 202,453 | $ | 9,741 | ||||
|
|
|
|
7.
|
STOCKHOLDERS’ EQUITY
|
Number of options
|
Weighted average
exercise price
|
|||||||
Unvested at January 1, 2021
|
— | — | ||||||
Granted
|
10,615,000 | 4.73 | ||||||
Vested
|
(35,000 | ) | 2.25 | |||||
Forfeited
|
(1,900,000 | ) | 2.25 | |||||
Cancelled
|
(250,000 | ) | 3.15 | |||||
|
|
|
|
|||||
Unvested at June 30, 2021
|
8,430,000 | 5.33 | ||||||
|
|
|
|
For the six months
ended June 30, |
||||||||
2021
|
2020
|
|||||||
Net income attributable to common stockholders
|
$ | 8,971 | $ | 77 | ||||
Weighted average common shares outstanding - basic
|
133,826 | — | ||||||
Net income per share – basic
|
$ | 0.07 | $ | — | ||||
Weighted average common shares outstanding – diluted
|
133,855 | — | ||||||
Net income per share – diluted
|
$ | 0.07 | $ | — |
8.
|
INCOME TAXES
|
9.
|
RELATED-PARTY TRANSACTIONS
|
10.
|
SUBSEQUENT EVENTS
|
Options Granted
|
Exercise Price
|
Vesting Period
|
Expiration Date
|
Quantity
|
||||||||||||
July 2021
|
$0.74 | Immediate |
|
December
2028 |
|
287,637 | ||||||||||
July 2021
|
$0.74 | Immediate |
|
September
2029 |
|
6,403 | ||||||||||
July 2021
|
$1.16 | Immediate | July 2030 | 341,111 | ||||||||||||
|
|
|||||||||||||||
Total
|
|
635,151
|
|
|||||||||||||
|
|
Restricted Stock
Units Granted
|
Vesting Period
|
Vesting Notes
|
Expiration Date
|
Quantity
|
||||||||||||
July 2021
|
4 | N/A | 4,985,000 | |||||||||||||
July 2021
|
Immediate | N/A | 283,534 | |||||||||||||
|
|
|||||||||||||||
Total
|
|
5,268,534
|
|
|||||||||||||
|
|
Options Granted
|
Exercise Price
|
Vesting Period
|
Expiration Date
|
Quantity
|
||||||||||||
July 2021
|
$10.95 | Immediate |
|
July
2028 |
|
196,466 | ||||||||||
|
|
|||||||||||||||
Total
|
|
196,466
|
|
|||||||||||||
|
|
Options Granted
|
Exercise Price
|
Vesting Period
|
Forfeiture Date
|
Quantity
|
||||||||||||
April 2021
|
$10.95 | 4 | July 2021 | 250,000 | ||||||||||||
Total
|
|
250,000
|
|
|||||||||||||
|
|
2020
|
||||
Assets
|
||||
Current assets
|
||||
Cash
|
$ | 794,445 | ||
Digital assets
|
74,790 | |||
Digital assets receivable
|
1,052 | |||
Prepaid expenses
|
68,277 | |||
|
|
|||
Total current assets
|
938,564 | |||
Deposits on mining equipment assets
|
2,723,550 | |||
Mining equipment assets
|
538,701 | |||
|
|
|||
Total assets
|
$ | 4,200,815 | ||
|
|
|||
Liabilities and members’ equity
|
||||
Current liabilities
|
||||
Due to related parties
|
$ | 195,336 | ||
|
|
|||
Total liabilities
|
195,336 | |||
Commitments and Contingencies (Note 9)
|
||||
Members’ equity
|
||||
Ownership interests
|
5,847,143 | |||
Accumulated deficit
|
(1,841,664 | ) | ||
|
|
|||
Total members’ equity
|
4,005,479 | |||
|
|
|||
Total liabilities and members’ equity
|
$ | 4,200,815 | ||
|
|
Revenue
|
||||
Digital assets mined
|
$ | 152,672 | ||
Cost of revenue
|
||||
Hosting costs
|
40,023 | |||
Depreciation
|
7,653 | |||
|
|
|||
Total cost of revenue
|
47,676 | |||
Gross profit
|
104,996 | |||
Operating expenses
|
||||
Management and
start-up
fees
|
193,960 | |||
Compensation expense from ownership interests
|
1,754,143 | |||
Administrative expenses
|
1,630 | |||
|
|
|||
Total operating expenses
|
1,949,733 | |||
Operating loss
|
$ | (1,844,737 | ) | |
Other income
|
||||
Gain on sale of digital assets
|
3,073 | |||
|
|
|||
Net loss
|
$ | (1,841,664 | ) | |
|
|
Ownership
units
|
Ownership
interests
|
Accumulated
deficit
|
Total
|
|||||||||||||
June 1, 2020
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
||||
Issuance of ownership units to managing member
|
30 | 1,754,143 | — | 1,754,143 | ||||||||||||
Issuance of ownership units for cash
|
70 | 4,093,000 | — | 4,093,000 | ||||||||||||
Net loss
|
— | — | (1,841,664 | ) | (1,841,664 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
November 30, 2020
|
100 | $ | 5,847,143 | $ | (1,841,664 | ) | $ | 4,005,479 | ||||||||
|
|
|
|
|
|
|
|
2020
|
||||
Operating activities
|
||||
Net loss
|
$ | (1,841,664 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities
|
||||
Digital assets mined
|
(152,672 | ) | ||
Compensation expense from ownership interests
|
1,754,143 | |||
Gain on sale of digital assets
|
(3,073 | ) | ||
Digital assets receivable
|
(1,052 | ) | ||
Depreciation
|
7,653 | |||
Net changes in working capital
|
||||
Prepaid expenses
|
(68,276 | ) | ||
Due to related parties
|
193,960 | |||
|
|
|||
Net cash used in operating activities
|
(110,981 | ) | ||
Investing activities
|
||||
Sales of digital assets
|
80,955 | |||
Deposits on mining equipment assets
|
(2,723,550 | ) | ||
Purchase of mining equipment assets
|
(546,354 | ) | ||
|
|
|||
Net cash used in investing activities
|
(3,188,949 | ) | ||
Financing activities
|
||||
Proceeds from private placements
|
4,093,000 | |||
Advances from related parties
|
1,375 | |||
|
|
|||
Net cash provided by financing activities
|
4,094,375 | |||
|
|
|||
Net increase in cash
|
794,445 | |||
Cash, beginning of period
|
— | |||
|
|
|||
Cash, end of period
|
$ | 794,445 | ||
|
|
Supplemental disclosure of cash flow information | ||||
Cash paid for interest
|
$ | — | ||
|
|
|||
Cash paid for taxes
|
$ | — | ||
|
|
1.
|
Nature of operations
|
2.
|
Summary of significant accounting policies
|
a) |
Basis of presentation
|
b) |
COVID-19
|
c) |
Recently issued and adopted accounting pronouncements
|
d) |
Use of estimates
|
e) |
Fair value measurements
|
• |
Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
|
• |
Level 2 — Valuations based on observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
• |
Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
|
f) |
Cash
|
g) |
Digital assets
|
h) |
Digital assets receivable
|
i) |
Mining equipment assets
|
j) |
Revenue from contracts with customers
|
• |
Identification of the contract with a customer
|
• |
Identification of the performance obligations in the contract
|
• |
Determination of the transaction price
|
• |
Allocation of the transaction price to the performance obligations in the contract
|
• |
Recognition of revenue when, or as, the performance obligations are satisfied
|
k) |
Cost of Revenue
|
l) |
Depreciation
|
m) |
Segment reporting
|
n) |
Stock Compensation
|
o) |
Income Taxes
|
3.
|
Digital assets
|
Bitcoin
|
2020
|
|||
Opening balance at June 1, 2020
|
$ | — | ||
Revenue from Bitcoin mined
|
152,672 | |||
Bitcoin sold
|
(77,882 | ) | ||
|
|
|||
Ending balance as of November 30, 2020
|
$ | 74,790 | ||
|
|
4.
|
Digital assets receivable
|
5.
|
Prepaid expenses
|
November 30,
2020 |
||||
Prepaid hosting fees (see note 7)
|
$ | 68,277 | ||
|
|
|||
Total
|
$ | 68,277 | ||
|
|
6.
|
Mining equipment assets
|
Cost
|
||||
Additions
|
$ | 546,354 | ||
|
|
|||
Balance November 30, 2020
|
$ | 546,354 | ||
|
|
|||
Accumulated depreciation
|
||||
Additions
|
$ | 7,653 | ||
|
|
|||
Balance November 30, 2020
|
$ | 7,653 | ||
|
|
|||
Net Book value
|
||||
Cost
|
$ | 546,354 | ||
Accumulated depreciation
|
($ | 7,653 | ) | |
|
|
|||
Mining equipment assets, net November 30, 2020
|
$ | 538,701 | ||
|
|
7.
|
Due to related parties
|
8.
|
Members’ equity
|
i. |
On June 1, 2020, the Company issued 30 membership units to the managing member to which a charge of $1,754,143 was recorded against compensation expense.
|
ii. |
Between August 26, 2020 and November 9, 2020, the Company raised a total of $4,093,000 in exchange for a total of 70 ownership units.
|
9.
|
Commitments
|
As of
November 30, 2020 |
||||
Within one year
|
$ | 3,233,516 | ||
Later than one year but not later than five years
|
$ | 9,548,122 | ||
|
|
|||
Total
|
$ | 12,781,638 | ||
|
|
10.
|
Subsequent events
|
Opinion
|
on the Financial Statements
|
Basis
|
for Opinion
|
2020
|
||||
Assets
|
||||
Current assets
|
||||
Cash
|
$ | 1,150,000 | ||
|
|
|||
Total assets
|
$ | 1,150,000 | ||
|
|
|||
Liabilities and members’ equity
|
||||
Current liabilities
|
||||
Due to related parties
|
$ | 169,625 | ||
|
|
|||
Total liabilities
|
169,625 | |||
Members’ equity
|
||||
Ownership interests
|
3,600,000 | |||
Investors’ equity receivable
|
(2,450,000 | ) | ||
Accumulated deficit
|
(169,625 | ) | ||
|
|
|||
Total members’ equity
|
980,375 | |||
|
|
|||
Total liabilities and members’ equity
|
$ | 1,150,000 | ||
|
|
Ownership
units
|
Ownership
interests
|
Accumulated
deficit
|
Total
|
|||||||||||||
November 5, 2020
|
|
—
|
|
$ | — | $ | — | $ | — | |||||||
Issuance of ownership units to managing member
|
30 | — | — | — | ||||||||||||
Issuance of ownership units for cash
|
70 | 3,600,000 | — | 3,600,000 | ||||||||||||
Investors equity receivable
|
— | (2,450,000 | ) | — | (2,450,000 | ) | ||||||||||
Net loss
|
— | — | (169,625 | ) | (169,625 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
November 30, 2020
|
100 | $ | 2,692,857 | $ | (169,625 | ) | $ | 980,375 | ||||||||
|
|
|
|
|
|
|
|
2020
|
||||
Operating activities
|
||||
Net loss
|
$ | (169,625 | ) | |
Due to related parties
|
169,200 | |||
|
|
|||
Net cash used in operating activities
|
(425 | ) | ||
Financing activities
|
||||
Proceeds from private placements
|
1,150,000 | |||
Advances from related parties
|
425 | |||
|
|
|||
Net cash provided by financing activities
|
1,150,425 | |||
Net increase in cash
|
1,150,000 | |||
Cash, beginning of period
|
— | |||
|
|
|||
Cash, end of period
|
$ | 1,150,000 | ||
|
|
|||
Supplemental disclosure of cash flow information | ||||
Cash paid for interest
|
$ | — | ||
|
|
|||
Cash paid for taxes
|
$ | — | ||
|
|
1.
|
Nature of operations
|
2.
|
Summary of significant accounting policies
|
a) |
Basis of presentation
|
b) |
COVID-19
|
c) |
Recently issued and adopted accounting pronouncements
|
d) |
Use of estimates
|
e) |
Cash
|
f) |
Income Tax
|
3.
|
Due to related parties
|
4.
|
Members’ equity
|
i. |
In connection with the initial formation and capital raising efforts, the Company issued 30 ownership units to the managing member for no consideration. On December 1, 2020, in connection with the amendment and exchange agreement with Blockcap, Inc., the managing member forfeited these units.
|
ii. |
Between November 22, 2020 and November 30, 2020, the Company issued 70 ownership units for $3,600,000 of which $2,450,000 was outstanding as of November 30, 2020. The outstanding amount was assigned to, and collected by, Blockcap, Inc. in December 2020 (note 5).
|
5.
|
Subsequent events
|
2020
|
||||
Assets
|
||||
Current assets
|
||||
Cash
|
$ | 266,490 | ||
Digital assets
|
436,370 | |||
Digital assets receivable
|
10,557 | |||
Due from related parties
|
26,628 | |||
Prepaid expenses
|
675,323 | |||
|
|
|||
Total current assets
|
1,415,368 | |||
Mining equipment assets
|
5,708,446 | |||
|
|
|||
Total assets
|
$ | 7,123,814 | ||
|
|
|||
Liabilities and members’ equity
|
||||
Current liabilities
|
||||
Accrued interest
|
$ | 7,655 | ||
Loan payable
|
3,292,973 | |||
|
|
|||
Total liabilities
|
3,300,628 | |||
Commitments and contingencies (Note 10)
|
||||
Members’ equity
|
||||
Ownership interests
|
4,257,140 | |||
Accumulated deficit
|
(433,954 | ) | ||
|
|
|||
Total members’ equity
|
3,823,186 | |||
|
|
|||
Total liabilities and members’ equity
|
$ | 7,123,814 | ||
|
|
2020
|
||||
Revenue
|
||||
Digital assets mined
|
$ | 4,010,167 | ||
Cost of Revenue
|
||||
Hosting costs
|
1,959,327 | |||
Depreciation
|
663,773 | |||
|
|
|||
Total cost of revenue
|
2,623,100 | |||
Gross profit
|
1,387,067 | |||
Operating Expenses
|
||||
Management and professional fees
|
64,389 | |||
Compensation expense from ownership interests
|
1,307,143 | |||
Management and
start-up
fees
|
143,350 | |||
Office and administration fees
|
44,263 | |||
|
|
|||
Total operating expenses
|
1,559,145 | |||
Operating loss
|
($ | 172,078 | ) | |
Other expenses
|
||||
Interest expense
|
414,070 | |||
Gain on sale of digital assets
|
(152,194 | ) | ||
|
|
|||
Total other expenses, net
|
$ | 261,876 | ||
Net loss
|
($ | 433,954 | ) | |
|
|
Ownership
units
|
Ownership
interests
|
Accumulated
deficit |
Total
|
|||||||||||||
April 16, 2020
|
— | $ | — | $ | — | $ | — | |||||||||
Issuance of ownership units to managing member
|
30 | 1,307,143 | — | 1,307,143 | ||||||||||||
Issuance of ownership units for cash
|
70 | 3,050,000 | — | 3,050,000 | ||||||||||||
Members draws
|
— | (100,003 | ) | — | (100,003 | ) | ||||||||||
Net loss
|
— | — | (433,954 | ) | (433,954 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
November 30, 2020
|
100 | $ | 4,257,140 | ($ | 433,954 | ) | $ | 3,823,186 | ||||||||
|
|
|
|
|
|
|
|
2020
|
||||
Operating activities
|
||||
Net loss
|
$ | (433,954 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities
|
||||
Digital asset mined
|
(4,010,167 | ) | ||
Compensation expense from ownership interests
|
1,307,143 | |||
Gain on sale of digital assets
|
(152,194 | ) | ||
Digital assets receivable
|
(10,557 | ) | ||
Depreciation
|
663,773 | |||
Net changes in working capital
|
||||
Prepaid expenses
|
(675,323 | ) | ||
Accrued liabilities
|
7,655 | |||
|
|
|||
Net cash used in operating activities
|
(3,303,624 | ) | ||
Investing activities
|
||||
Sales of digital assets
|
3,725,991 | |||
Advances to related parties
|
(313,967 | ) | ||
Purchase of mining equipment assets
|
(6,372,219 | ) | ||
|
|
|||
Net cash used in investing activities
|
(2,960,195 | ) | ||
Financing activities
|
|
|||
Proceeds from private placements
|
3,050,000 | |||
Members draws
|
(100,003 | ) | ||
Payments received from related parties
|
287,339 | |||
Repayments of loan payable
|
(1,266,528 | ) | ||
Finance draw on loan payable
|
4,559,501 | |||
|
|
|||
Net cash provided by financing activities
|
6,530,309 | |||
|
|
|||
Net increase in cash
|
266,490 | |||
Cash, beginning of period
|
— | |||
|
|
|||
Cash, end of period
|
$ | 266,490 | ||
|
|
|||
Supplemental disclosure of cash flow information
|
||||
Cash paid for interest
|
$ | 406,414 | ||
|
|
|||
Cash paid for taxes
|
$ | — | ||
|
|
1.
|
Nature of operations
|
2.
|
Summary of significant accounting policies
|
a) |
Basis of presentation
|
b) |
COVID-19
|
c) |
Recently issued and adopted accounting pronouncements
|
d) |
Use of estimates
|
e) |
Fair value measurements
|
• |
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
|
• |
Level 2—Valuations based on observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
• |
Level 3—Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
|
f) |
Cash
|
g) |
Digital assets
|
h) |
Digital assets receivable
|
i) |
Mining equipment assets
|
j) |
Revenue from contracts with customers
|
• |
Identification of the contract with a customer
|
• |
Identification of the performance obligations in the contract
|
• |
Determination of the transaction price
|
• |
Allocation of the transaction price to the performance obligations in the contract
|
• |
Recognition of revenue when, or as, the performance obligations are satisfied
|
k) |
Cost of Revenue
|
l) |
Depreciation
|
m) |
Segment reporting
|
n) |
Stock compensation
|
o) |
Income taxes
|
3.
|
Digital assets
|
Bitcoin
|
2020
|
|||
Opening balance at April 16, 2020
|
$ | — | ||
Revenue from Bitcoin mined
|
4,010,167 | |||
Bitcoin sold
|
(3,573,797 | ) | ||
|
|
|||
Ending balance as of November 30, 2020
|
$ | 436,370 |
4.
|
Digital assets receivable
|
5.
|
Prepaid expenses
|
November 30, 2020
|
||||
Prepaid hosting fees (see note 9)
|
$ | 675,323 | ||
|
|
|||
Total
|
$ | 675,323 |
6.
|
Mining equipment assets
|
Cost
|
||||
Additions
|
$ | 6,372,219 | ||
|
|
|||
Balance November 30, 2020
|
$ | 6,372,219 | ||
|
|
|||
Accumulated depreciation
|
||||
Additions
|
$ | 663,773 | ||
|
|
|||
Balance November 30, 2020
|
$ | 663,773 | ||
|
|
|||
Net Book value
|
||||
Cost
|
$ | 6,372,219 | ||
Accumulated depreciation
|
(663,773 | ) | ||
|
|
|||
Net mining equipment assets, November 30, 2020
|
$ | 5,708,446 | ||
|
|
7.
|
Loan payable
|
8.
|
Members’ equity
|
i. |
On April 16, 2020, the Company issued 30 ownership units to the managing to which a charge of $1,307,143 was recorded against compensation expense.
|
ii. |
Between April 20, 2020 and May 8, 2020, the Company raised a total of $3,050,000 in exchange for a total of 70 ownership units.
|
iii. |
During the period ended November 30, 2020, members withdrew total funds amounting to $100,003 of their initial investment.
|
9.
|
Related party transactions
|
10.
|
Commitments
|
As of November 30,
2020
|
||||
Within one year
|
$ | 5,361,399 | ||
Later than one year but not later than five years
|
$ | 13,850,281 | ||
|
|
|||
Total
|
$ | 19,211,680 | ||
|
|
11.
|
Subsequent events
|
2020
|
||||
Assets
|
||||
Current assets
|
||||
Cash
|
$ | 152,264 | ||
Digital assets
|
447,397 | |||
Digital assets receivable
|
10,789 | |||
Prepaid expenses
|
674,256 | |||
Due from related parties
|
16,958 | |||
|
|
|||
Total current assets
|
1,301,664 | |||
Mining equipment assets
|
5,760,051 | |||
|
|
|||
Total assets
|
$ | 7,061,715 |
|
|
|
|
|||
Liabilities and equity
|
||||
Current liabilities
|
||||
Accrued liabilities
|
$ | 5,770 | ||
Members’ draws payable
|
18,519 | |||
Due to related parties
|
27,626 | |||
Loan payable
|
3,540,673 | |||
|
|
|||
Total liabilities
|
3,592,588 | |||
Commitments and contingencies (note 10)
|
||||
Members’ equity
|
||||
Ownership interests
|
3,757,140 | |||
Accumulated deficit
|
(288,013 | ) | ||
|
|
|||
Total members’ equity
|
3,469,127 | |||
|
|
|||
Total liabilities and members’ equity
|
$ | 7,061,715 | ||
|
|
2020
|
||||
Revenue
|
||||
Digital assets mined
|
$ | 3,373,890 | ||
Cost of Revenue
|
||||
Hosting costs
|
1,510,439 | |||
Depreciation
|
523,641 | |||
|
|
|||
Total cost of revenue
|
2,034,080 | |||
Gross Profit
|
1,339,810 | |||
Operating expenses
|
||||
Professional fees
|
5,000 | |||
Compensation expense from ownership interests
|
1,157,143 | |||
Management and
start-up
fees
|
165,908 | |||
Office and administration fees
|
14,914 | |||
|
|
|||
Total operating expenses
|
1,342,965 | |||
Operating loss
|
(3,155 | ) | ||
Other expenses
|
||||
Interest expense
|
365,457 | |||
Gain on sale of digital assets
|
(80,599 | ) | ||
|
|
|||
Total other expenses, net
|
284,858 | |||
Net loss
|
$
|
(288,013
|
)
|
Ownership
units |
Ownership
interests |
Accumulated
deficit |
Total
|
|||||||||||||
April 27, 2020
|
— | $ | — | $ | — | $ | — | |||||||||
Issuance of ownership units to managing member
|
30 | 1,157,143 | — | 1,157,143 | ||||||||||||
Issuance of ownership units for cash
|
70 | 2,700,000 | — | 2,700,000 | ||||||||||||
Members draws
|
— | (100,003 | ) | — | (100,003 | ) | ||||||||||
Net loss
|
— | — | (288,013 | ) | (288,013 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
November 30, 2020
|
100 | $ | 3,757,140 | $ | (288,013 | ) | $ | 3,469,127 | ||||||||
|
|
|
|
|
|
|
|
2020
|
||||
Operating activities
|
||||
Net loss
|
$ | (288,013 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities
|
||||
Digital asset mined
|
(3,373,890 | ) | ||
Compensation expense from ownership interests
|
1,157,143 | |||
Gain on sale of digital assets
|
(80,599 | ) | ||
Digital assets receivable
|
(10,789 | ) | ||
Depreciation
|
523,641 | |||
Net changes in working capital
|
||||
Prepaid expenses
|
(674,256 | ) | ||
Members draws payable
|
18,519 | |||
Accrued liabilities
|
5,770 | |||
|
|
|||
Net cash used in operating activities
|
(2,722,474 | ) | ||
Investing activities
|
||||
Advances to related parties
|
(463,911 | ) | ||
Purchase of mining equipment assets
|
(6,283,692 | ) | ||
Sale of digital assets
|
3,007,092 | |||
|
|
|||
Net cash used in investing activities
|
(3,740,511 | ) | ||
Financing activities
|
||||
Proceeds from private placements
|
2,700,000 | |||
Members draws
|
(100,003 | ) | ||
Advances from related parties
|
474,579 | |||
Repayments of loan payable
|
(1,011,621 | ) | ||
Finance draw on loan payable
|
4,552,294 | |||
|
|
|||
Net cash provided by financing activities
|
6,615,249 | |||
|
|
|||
Net increase in cash
|
152,264 | |||
Cash, beginning of period
|
— | |||
|
|
|||
Cash, end of period
|
$ | 152,264 | ||
|
|
|||
Supplemental disclosure of cash flow information
|
||||
Cash paid for interest
|
$ | 359,687 | ||
|
|
|||
Cash paid for taxes
|
$ | — | ||
|
|
|||
Supplemental disclosure of noncash investing activities
|
||||
Digital assets used to pay finance and management fees
|
$ | 233,487 |
1.
|
Nature of operations
|
2.
|
Summary of significant accounting policies
|
a) |
Basis of presentation
|
b) |
COVID-19
|
c) |
Recently issued and adopted accounting pronouncements
|
d) |
Use of estimates
|
e) |
Fair value measurements
|
• |
Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
|
• |
Level 2 — Valuations based on observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
• |
Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
|
f) |
Cash
|
g) |
Digital assets
|
h) |
Digital assets receivable
|
i) |
Mining equipment assets
|
j) |
Revenue from contracts with customers
|
• |
Identification of the contract with a customer
|
• |
Identification of the performance obligations in the contract
|
• |
Determination of the transaction price
|
• |
Allocation of the transaction price to the performance obligations in the contract
|
• |
Recognition of revenue when, or as, the performance obligations are satisfied
|
k) |
Cost of Revenue
|
l) |
Depreciation
|
m) |
Segment reporting
|
n) |
Stock compensation
|
o) |
Income Tax
|
3.
|
Digital assets
|
Bitcoin
|
2020
|
|||
Opening balance at April 27, 2020
|
$ | — | ||
Revenue from Bitcoin mined
|
3,373,890 | |||
Bitcoin sold
|
(2,926,493 | ) | ||
|
|
|||
Ending balance as of November 30, 2020
|
$ | 447,397 | ||
|
|
4.
|
Digital assets receivable
|
5.
|
Prepaid expenses
|
November 30,
2020 |
||||
Prepaid hosting fees (see note 9)
|
$ | 674,256 | ||
|
|
|||
Total
|
$ | 674,256 | ||
|
|
6.
|
Mining equipment assets
|
Cost
|
||||
Additions
|
$ | 6,283,692 | ||
|
|
|||
Balance November 30, 2020
|
$ | 6,283,692 | ||
|
|
Accumulated depreciation
|
||||
Additions
|
$ | 523,641 | ||
|
|
|||
Balance November 30, 2020
|
$ | 523,641 | ||
|
|
Net Book value
|
||||
Cost
|
$ | 6,283,692 | ||
Accumulated depreciation
|
($ | 523,641 | ) | |
|
|
|||
Net mining equipment assets, November 30, 2020
|
$ | 5,760,051 | ||
|
|
7.
|
Loan payable
|
8.
|
Members’ equity
|
i. |
On April 27, 2020, the Company issued 30 ownership units to the managing member to which a charge of $1,157,143 was recorded against compensation expense.
|
ii. |
Between April 27, 2020 and May 15, 2020, the Company raised a total of $2,700,000 in exchange for a total of 70 ownership units.
|
iii. |
On November 25, 2020 members withdrew $100,003 of their initial investment of which $18,519 remained payable as of November 30, 2020.
|
9.
|
Related party transactions
|
10.
|
Commitments
|
As of
November 30, 2020 |
||||
Within one year
|
$ | 4,898,297 | ||
Later than one year but not later than five years
|
$ | 12,653,934 | ||
|
|
|||
Total
|
$ | 17,552,231 | ||
|
|
11.
|
Subsequent events
|
Page
|
||||||
ARTICLE I CERTAIN DEFINITIONS
|
|
A-2
|
|
|||
Section 1.01
|
Definitions
|
A-2 | ||||
Section 1.02
|
Construction
|
A-17 | ||||
Section 1.03
|
Knowledge
|
A-17 | ||||
Section 1.04
|
Equitable Adjustments
|
A-17 | ||||
ARTICLE II THE MERGERS
|
|
A-18
|
|
|||
Section 2.01
|
Closing Transactions
|
A-18 | ||||
Section 2.02
|
Effective Time
|
A-18 | ||||
Section 2.03
|
Effect of the Mergers
|
A-19 | ||||
Section 2.04
|
Governing Documents
|
A-19 | ||||
Section 2.05
|
Directors and Officers of the Surviving Corporation and Surviving Entity
|
A-19 | ||||
Section 2.06
|
Further Assurances
|
A-20 | ||||
ARTICLE III MERGER CONSIDERATION; CLOSING
|
|
A-20
|
|
|||
Section 3.01
|
Effects of Mergers
|
A-20 | ||||
Section 3.02
|
Closing
|
A-22 | ||||
Section 3.03
|
Withholding Rights
|
A-22 | ||||
Section 3.04
|
Company Closing Statement
|
A-23 | ||||
Section 3.05
|
Disbursement of Share Consideration
|
A-23 | ||||
Section 3.06
|
Appraisal Rights
|
A-24 | ||||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
|
A-24
|
|
|||
Section 4.01
|
Corporate Organization of the Company
|
A-25 | ||||
Section 4.02
|
Subsidiaries
|
A-25 | ||||
Section 4.03
|
Due Authorization
|
A-25 | ||||
Section 4.04
|
No Conflict
|
A-25 | ||||
Section 4.05
|
Governmental Authorities; Consents
|
A-26 | ||||
Section 4.06
|
Current Capitalization
|
A-26 | ||||
Section 4.07
|
Capitalization of Subsidiaries
|
A-26 | ||||
Section 4.08
|
Financial Statements
|
A-27 | ||||
Section 4.09
|
Undisclosed Liabilities
|
A-28 | ||||
Section 4.10
|
Litigation and Proceedings
|
A-28 | ||||
Section 4.11
|
Compliance with Laws
|
A-28 | ||||
Section 4.12
|
Contracts; No Defaults
|
A-29 | ||||
Section 4.13
|
Company Benefit Plans
|
A-31 | ||||
Section 4.14
|
Labor Matters
|
A-33 | ||||
Section 4.15
|
Taxes
|
A-34 | ||||
Section 4.16
|
Insurance
|
A-35 | ||||
Section 4.17
|
Permits
|
A-36 | ||||
Section 4.18
|
Machinery, Equipment and Other Tangible Property
|
A-36 | ||||
Section 4.19
|
Real Property
|
A-36 | ||||
Section 4.20
|
Intellectual Property and IT Security
|
A-37 | ||||
Section 4.21
|
Environmental Matters
|
A-39 | ||||
Section 4.22
|
Absence of Changes
|
A-39 | ||||
Section 4.23
|
Brokers’ Fees
|
A-39 | ||||
Section 4.24
|
Related Party Transactions
|
A-39 | ||||
Section 4.25
|
Proxy Statement / Prospectus
|
A-40 | ||||
Section 4.26
|
International Trade; Anti-Corruption
|
A-40 | ||||
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR PARTIES
|
|
A-41
|
|
|||
Section 5.01
|
Corporate Organization
|
A-41 | ||||
Section 5.02
|
Due Authorization
|
A-41 |
Page
|
||||||
Section 5.03
|
No Conflict
|
A-42 | ||||
Section 5.04
|
Litigation and Proceedings
|
A-42 | ||||
Section 5.05
|
Governmental Authorities; Consents
|
A-42 | ||||
Section 5.06
|
Trust Account
|
A-43 | ||||
Section 5.07
|
Brokers’ Fees
|
A-43 | ||||
Section 5.08
|
SEC Reports; Financial Statements; Sarbanes-Oxley Act; Undisclosed Liabilities
|
A-43 | ||||
Section 5.09
|
Business Activities
|
A-44 | ||||
Section 5.10
|
Tax
|
A-45 | ||||
Section 5.11
|
Capitalization
|
A-47 | ||||
Section 5.12
|
NASDAQ Stock Market Listing
|
A-47 | ||||
Section 5.13
|
Related Party Transactions
|
A-48 | ||||
Section 5.14
|
Proxy Statement / Prospectus
|
A-48 | ||||
Section 5.15
|
Sponsor Agreement
|
A-48 | ||||
Section 5.16
|
Investment Company Act
|
A-48 | ||||
Section 5.17
|
Employees
|
A-48 | ||||
ARTICLE VI COVENANTS OF THE COMPANY
|
|
A-49
|
|
|||
Section 6.01
|
Conduct of Business
|
A-49 | ||||
Section 6.02
|
Inspection
|
A-51 | ||||
Section 6.03
|
No Claim Against the Trust Account
|
A-52 | ||||
Section 6.04
|
Proxy Statement / Prospectus
|
A-52 | ||||
Section 6.05
|
Code Section 280G
|
A-53 | ||||
Section 6.06
|
FIRPTA
|
A-53 | ||||
Section 6.07
|
Termination of Related-Party Arrangements
|
A-53 | ||||
Section 6.08
|
Company Approval
|
A-54 | ||||
Section 6.09
|
Blockcap Transaction
|
A-54 | ||||
ARTICLE VII COVENANTS OF ACQUIROR
|
|
A-55
|
|
|||
Section 7.01
|
Indemnification and Directors’ and Officers’ Insurance
|
A-55 | ||||
Section 7.02
|
Conduct of Acquiror During the Interim Period
|
A-55 | ||||
Section 7.03
|
Permitted Equity Financing
|
A-57 | ||||
Section 7.04
|
Inspection
|
A-59 | ||||
Section 7.05
|
Section 16 Matters
|
A-59 | ||||
Section 7.06
|
Post-Closing Directors and Officers
|
A-59 | ||||
Section 7.07
|
Incentive Equity Plan
|
A-59 | ||||
Section 7.08
|
Acquiror Bylaws and Charter
|
A-59 | ||||
Section 7.09
|
Acquiror NASDAQ Listing
|
A-59 | ||||
Section 7.10
|
Acquiror Public Filings
|
A-60 | ||||
Section 7.11
|
Qualification as an Emerging Growth Company
|
A-60 | ||||
Section 7.12
|
Terminated Agreements
|
A-60 | ||||
ARTICLE VIII JOINT COVENANTS
|
|
A-60
|
|
|||
Section 8.01
|
Efforts to Consummate
|
A-60 | ||||
Section 8.02
|
Registration Statement; Proxy Statement / Prospectus; Special Meeting
|
A-61 | ||||
Section 8.03
|
Exclusivity
|
A-64 | ||||
Section 8.04
|
Tax Matters
|
A-64 | ||||
Section 8.05
|
Confidentiality; Publicity
|
A-65 | ||||
Section 8.06
|
Post-Closing Cooperation; Further Assurances
|
A-65 | ||||
Section 8.07
|
Company Options; Company RSUs
|
A-65 | ||||
Section 8.08
|
Third Merger
|
A-66 | ||||
Section 8.09
|
Registration Rights Agreement
|
A-66 |
Page
|
||||||
ARTICLE IX CONDITIONS TO OBLIGATIONS
|
|
A-66
|
|
|||
Section 9.01
|
Conditions to Obligations of All Parties
|
A-66 | ||||
Section 9.02
|
Additional Conditions to Obligations of Acquiror Parties
|
A-67 | ||||
Section 9.03
|
Additional Conditions to the Obligations of the Company
|
A-68 | ||||
Section 9.04
|
Frustration of Conditions
|
A-68 | ||||
ARTICLE X TERMINATION/EFFECTIVENESS
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|
A-68
|
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|||
Section 10.01
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Termination
|
A-68 | ||||
Section 10.02
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Effect of Termination
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A-69 | ||||
ARTICLE XI MISCELLANEOUS
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A-70
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Section 11.01
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Waiver
|
A-70 | ||||
Section 11.02
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Notices
|
A-70 | ||||
Section 11.03
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Assignment
|
A-71 | ||||
Section 11.04
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Rights of Third Parties
|
A-71 | ||||
Section 11.05
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Expenses
|
A-71 | ||||
Section 11.06
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Governing Law
|
A-71 | ||||
Section 11.07
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Captions; Counterparts
|
A-72 | ||||
Section 11.08
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Schedules and Exhibits
|
A-72 | ||||
Section 11.09
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Entire Agreement
|
A-72 | ||||
Section 11.10
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Amendments
|
A-72 | ||||
Section 11.11
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Severability
|
A-72 | ||||
Section 11.12
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Jurisdiction; WAIVER OF TRIAL BY JURY
|
A-72 | ||||
Section 11.13
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Enforcement
|
A-73 | ||||
Section 11.14
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Non-Recourse
|
A-73 | ||||
Section 11.15
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Nonsurvival of Representations, Warranties and Covenants
|
A-73 | ||||
Section 11.16
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Acknowledgements
|
A-73 | ||||
Section 11.17
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Waiver; Privilege
|
A-74 |
EXHIBITS
|
||||
Exhibit A | – | Form of Acquiror Charter | ||
Exhibit B | – | Form of Acquiror Bylaws | ||
Exhibit C | – | Form of Surviving Entity Operating Agreement | ||
Exhibit D | – | Form of Company Stockholder Approval |
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
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||
By: | /s/ Patrick C. Eilers | |
Name: | Patrick C. Eilers | |
Title: | Chief Executive Officer | |
XPDI MERGER SUB INC.
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||
By: | /s/ Patrick C. Eilers | |
Name: | Patrick C. Eilers | |
Title: |
Director and
Co-President
|
|
XPDI MERGER SUB 2, LLC
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||
By: | /s/ Patrick C. Eilers | |
Name: | Patrick C. Eilers | |
Title: |
Director and
Co-President
|
CORE SCIENTIFIC HOLDING CO.
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||
By: | /s/ Todd DuChene | |
Name: | Todd DuChene | |
Title: | General Counsel and Secretary |
POWER & DIGITAL
INFRASTRUCTURE ACQUISITION
CORP.
|
||
By: |
/s/ Patrick C. Eilers
|
|
Name: Patrick C. Eilers | ||
Title: Chief Executive Officer |
XPDI MERGER SUB INC.
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||
By: |
/s/ Patrick C. Eilers
|
|
Name: Patrick C. Eilers
|
||
Title: Director and Co-President |
XPDI MERGER SUB 2, LLC
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||
By: |
/s/ Patrick C. Eilers
|
|
Name: Patrick C. Eilers
|
||
Title: Director and Co-President
|
CORE SCIENTIFIC HOLDING CO.
|
||
By: |
/s/ Todd DuChene
|
|
Name: Todd DuChene
|
||
Title: General Counsel and Secretary
|
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
|
||
By: |
|
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Title: |
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XPDI SPONSOR LLC
|
||||
By: | /s/ Patrick C. Eilers | |||
Name: | Patrick C. Eilers | |||
Title: |
Co-Chief
Executive Officer
|
|||
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
|
||||
By: | /s/ Patrick C. Eilers | |||
Name: | Patrick C. Eilers | |||
Title: | Chief Executive Officer | |||
CORE SCIENTIFIC HOLDING CO.
|
||||
By: | /s/ Todd DuChene | |||
Name: | Todd DuChene | |||
Title: | General Counsel and Secretary |
/s/ Paul Dabbar
|
Paul Dabbar
|
/s/ Paul Gaynor
|
Paul Gaynor
|
/s/ Colleen Sullivan
|
Colleen Sullivan
|
/s/ Scott Widham
|
Scott Widham
|
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
|
||||
By: |
|
|||
Name: | ||||
Title: |
CORE SCIENTIFIC HOLDING CO.
|
||||
By: |
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|||
Name: | ||||
Title: |
[SUPPORTING HOLDER]
|
||||
By: |
|
|||
Name: | ||||
Title: |
Name of Supporting Holder
|
Subject Common
Shares
|
Subject Series A
Preferred Shares
|
Subject Series B
Preferred Shares
|
COMPANY
|
||
P
OWER
& D
IGITAL
I
NFRASTRUCTURE
A
CQUISITION
C
ORP
.
|
||
By: |
|
|
Name: | Patrick C. Eilers | |
Title: | Chief Executive Officer |
C
ORE
S
CIENTIFIC
H
OLDING
C
O
.
|
||
By: |
|
|
Name: | ||
Title: | ||
HOLDER:
|
||
XPDI S
PONSOR
LLC
|
||
By: |
|
|
Name: | Patrick C. Eilers | |
Title: | Managing Member | |
P
AUL
D
ABBAR
|
||
|
||
P
AUL
G
AYNOR
|
||
|
||
C
OLLEEN
S
ULLIVAN
|
||
|
||
S
COTT
W
IDHAM
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||
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1
|
Note to Draft
|
(i) |
in the case of an entity, Transfers to or distributions to any direct or indirect stockholder, partner, member or affiliate of such entity (or to any executive officer or director of such entity or of such entity’s affiliates) or to any investment fund or other entity controlling, controlled by, managing or managed by or under common control or management with such entity or affiliates of such entity (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by or under common management as such partnership);
|
(ii) |
in the case of an individual, Transfers by gift to members of the individual’s immediate family (as defined below) or to a trust, the beneficiary of which is a member of one of the individual’s immediate family, to an affiliate of such person or to a charitable organization;
|
(iii) |
in the case of an individual, Transfers by virtue of laws of descent and distribution upon death of the individual;
|
(iv) |
in the case of an individual, Transfers pursuant to a qualified domestic relations order or divorce settlement;
|
(v) |
in the case of an entity, Transfers by virtue of the laws of the state or jurisdiction of the entity’s organization and the entity’s organizational documents upon dissolution of the entity;
|
(vi) |
transactions relating to Common Stock or other securities convertible into or exercisable or exchangeable for Common Stock acquired in open market transactions after the Closing,
provided
Lock-Up
Period;
|
(vii) |
the exercise of any options or warrants to purchase Common Stock (which exercises may be effected on a cashless basis to the extent the instruments representing such options or warrants permit exercises on a cashless basis);
|
(viii) |
Transfers (including forfeitures) (x) to the Company to satisfy tax withholding obligations pursuant to equity incentive plans or arrangements of the Company or (y) pursuant to escrow arrangement with the Company with respect to tax withholding obligations pursuant to the U.S. Internal Revenue Code of 1986, as amended (the “
Code
|
2
|
Note to Draft
|
(ix) |
the establishment of a trading plan that meets the requirements of Rule
10b5-1(c)
under the Exchange Act (a “
Trading Plan
provided
however
Lock-Up
Period, and (b)(x) no public announcement or filing shall be made voluntarily regarding such plan during the
Lock-Up
Period or (y) if any public announcement is required of or voluntarily made by or on behalf of the Securityholder or the Company regarding such plan, then such announcement or filing shall include a statement to the effect that no Transfer may be made under such plan during the
Lock-Up
Period;
|
(x) |
transactions in the event of completion of a liquidation, merger, consolidation, stock exchange, reorganization, tender offer or other similar transaction which results in all of the Company’s securityholders having the right to exchange their shares of Common Stock for cash, securities or other property;
|
(xi) |
transactions to satisfy any U.S. federal, state, or local income tax obligations of the Securityholder (or its direct or indirect owners) arising from a change in the Code, or the U.S. Treasury Regulations promulgated thereunder (the “
Regulations
tax-free
treatment pursuant to any successor or other provision of the Code or Regulations taking into account such changes), in each case, solely to the extent necessary to cover any tax liability as a result of the transaction; and
|
(xii) |
in connection with the creation of any charge, lien, mortgage, pledge or other security interest or posting as collateral of any of the Securityholder’s Securities in connection with a bona fide loan transaction;
provided
lock-up
agreement in substantially the form of this Letter Agreement to take effect in the event that the pledgee takes possession of the Securityholder’s Securities as a result of a foreclosure, margin call or similar disposition;
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Very truly yours, |
|
(Name of Securityholder – Please Print) |
|
(Signature) |
|
(Name of Signatory if Securityholder is an entity – Please Print) |
|
(Title of Signatory if Securityholder is an entity – Please Print) |
Address: |
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||
|
1.
|
G
ENERAL
.
|
2.
|
S
HARES
S
UBJECT
TO
THE
P
LAN
.
|
3.
|
E
LIGIBILITY
AND
L
IMITATIONS
.
|
4.
|
O
PTIONS
AND
S
TOCK
A
PPRECIATION
R
IGHTS
.
|
5.
|
A
WARDS
O
THER
T
HAN
O
PTIONS
AND
S
TOCK
A
PPRECIATION
R
IGHTS
.
|
6.
|
A
DJUSTMENTS
UPON
C
HANGES
IN
C
OMMON
S
TOCK
; O
THER
C
ORPORATE
E
VENTS
.
|
7.
|
A
DMINISTRATION
.
|
8.
|
T
AX
W
ITHHOLDING
|
9.
|
M
ISCELLANEOUS
.
|
10.
|
C
OVENANTS
OF
THE
C
OMPANY
.
|
11.
|
A
DDITIONAL
R
ULES
FOR
A
WARDS
S
UBJECT
TO
S
ECTION
409A.
|
12.
|
S
EVERABILITY
.
|
13.
|
T
ERMINATION
OF
THE
P
LAN
.
|
14.
|
D
EFINITIONS
.
|
1.
|
G
ENERAL
; P
URPOSE
.
|
2.
|
A
DMINISTRATION
.
|
3.
|
S
HARES
OF
C
OMMON
S
TOCK
S
UBJECT
TO
THE
P
LAN
.
|
4.
|
G
RANT
OF
P
URCHASE
R
IGHTS
; O
FFERING
.
|
5.
|
E
LIGIBILITY
.
|
6.
|
P
URCHASE
R
IGHTS
; P
URCHASE
P
RICE
.
|
7.
|
P
ARTICIPATION
; W
ITHDRAWAL
; T
ERMINATION
.
|
8.
|
E
XERCISE
OF
P
URCHASE
R
IGHTS
.
|
9.
|
C
OVENANTS
OF
THE
C
OMPANY
.
|
10.
|
D
ESIGNATION
OF
B
ENEFICIARY
.
|
11.
|
A
DJUSTMENTS
UPON
C
HANGES
IN
C
OMMON
S
TOCK
; C
ORPORATE
T
RANSACTIONS
.
|
12.
|
A
MENDMENT
, T
ERMINATION
OR
S
USPENSION
OF
THE
P
LAN
.
|
13.
|
T
AX
Q
UALIFICATION
; T
AX
W
ITHHOLDING
.
|
14.
|
E
FFECTIVE
D
ATE
OF
P
LAN
.
|
15.
|
M
ISCELLANEOUS
P
ROVISIONS
.
|
16.
|
D
EFINITIONS
.
|
(a) |
A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.
|
(b) |
A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
|
(c) |
To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.
|
(d) |
Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is a director
|
or officer at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders. |
(e) |
Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys’ fees) incurred by former officers and directors or other employees and agents may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.
|
(f) |
The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to such provision after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.
|
(g) |
A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section.
|
(h) |
For purposes of this section, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
|
(i) |
For purposes of this section, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this section.
|
(j) |
The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to
|
be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. |
(k) |
The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any by law, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation’s obligation to advance expenses (including attorneys’ fees).
|
* |
Filed herewith.
|
** |
Previously filed.
|
† |
Indicates management contract or compensatory plan.
|
†† |
Certain of the exhibits and schedules to these exhibits have been omitted in accordance with Regulation
S-K
Item 601(a)(5). The registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
|
++ |
Portions of this Exhibit (indicated with [***]) have been omitted as the Registrant has determined that (i) the omitted information is not material and (ii) the omitted information would likely cause competitive harm to the Registrant if publicly disclosed.
|
A. |
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
(i) |
To include any prospectus required by Section 10(a)(3) of the Securities Act.
|
(ii) |
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
|
(iii) |
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
|
B. |
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
C. |
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
|
D. |
That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
|
E. |
That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
(i) |
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
|
(ii) |
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
|
(iii) |
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
|
(iv) |
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
F. |
That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
|
G. |
That every prospectus (i) that is filed pursuant to paragraph (F) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Securities Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
H. |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
|
I. |
To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
|
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
|
||
By: | /s/ Patrick C. Eilers | |
Name: | Patrick C. Eilers | |
Title: | Chief Executive Officer |
Signature
|
Position
|
Date
|
||
/s/ Patrick C. Eilers
Patrick C. Eilers
|
Chief Executive Officer and Director
(
Principal Executive Officer
|
November 18, 2021 | ||
/s/ James P. Nygaard, Jr.
James P. Nygaard, Jr.
|
Chief Financial Officer
(
Principal Accounting and Financial Officer
|
November 18, 2021 | ||
*
Theodore J. Brombach
|
Director (Chairman) | November 18, 2021 | ||
*
Paul Dabbar
|
Director | November 18, 2021 | ||
*
Paul Gaynor
|
Director | November 18, 2021 | ||
*
Colleen Sullivan
|
Director | November 18, 2021 | ||
*
Scott Widham
|
Director | November 18, 2021 |
*By: | /s/ Patrick C. Eilers | |
Patrick C. Eilers
Attorney-in-Fact
|
EXHIBIT 4.7
CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS CONVERTIBLE NOTE PURCHASE AGREEMENT (this Agreement) is made as of August 20, 2021, by and among Core Scientific Holding Co., a Delaware corporation (the Company), the Guarantors from time to time party hereto, the persons and entities named on the Schedule of Purchasers under the header Initial Purchasers attached hereto as Schedule 2 (individually, an Initial Purchaser and collectively, the Initial Purchasers), each Additional Purchaser from time to time party hereto and U.S. Bank National Association, as note agent (in such capacity, the Note Agent) and, upon the execution and delivery of the Collateral Documents pursuant to Section 6.13, as collateral agent for the Secured Parties (in such capacity, the Collateral Agent and, together with the Note Agent, the Agents).
RECITALS
WHEREAS, the Company desires (i) to issue and to sell to the Initial Purchasers, and the Initial Purchasers have agreed to purchase from the Company, on the Initial Closing Date, convertible promissory notes substantially in the form attached hereto as Exhibit A (each, an Initial Note and collectively, the Initial Notes) and (ii) to issue and to sell to Additional Purchasers on Additional Closing Dates convertible promissory notes substantially in the form attached hereto as Exhibit A (each, an Additional Note and collectively, the Additional Notes and, together with the Initial Notes, individually, a Note and collectively, the Notes), in an aggregate principal amount for all such Notes of up to $300,000,000.00 on the terms, and subject to the conditions, specified herein; and
WHEREAS, to induce the Purchasers to purchase the Notes, the Note Parties have agreed to execute and deliver, contemporaneously with the issuance, sale and purchase of the Initial Notes on the Initial Closing Date, the Guaranty, pursuant to which each Guarantor will guarantee the Obligations of the Company under the Notes and, as and when required pursuant to Section 6.13, the Security Agreement, pursuant to which the Note Parties will grant to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in the Note Parties assets to secure the Obligations or their respective Guaranteed Obligations (as applicable).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and the representations, warranties, covenants and conditions set forth below, which represent integral components of the transactions contemplated hereby and shall be fully enforceable by the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Note Parties, the Agents and each Purchaser, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
As used herein, the following terms shall have the meanings set forth below.
(a) Act means the Securities Exchange Act of 1934, as amended.
(b) Additional Closing Date has the meaning ascribed thereto in Section 2.2.
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(c) Additional Note or Additional Notes has the meaning ascribed thereto in Section 2.2.
(d) Additional Purchaser or Additional Purchasers has the meaning ascribed thereto in Section 2.2.
(e) Administrative Questionnaire means an Administrative Questionnaire substantially in the form attached hereto as Exhibit G.
(f) Agent-Related Person means the Note Agent and the Collateral Agent, together with their affiliates, officers, directors, employees, agents and attorneys-in-fact of the Agents and their affiliates.
(g) Agents has the meaning ascribed to such term in the preamble to this Agreement.
(h) Asset Disposition means any sale, lease, license, transfer, assignment or other disposition (whether by a single transaction or through series of transactions, and including by means of a merger, consolidation, amalgamation or similar transaction) by the Company or any of its Subsidiaries of any asset or property.
(i) Business Day means a day other than a Saturday, Sunday or other day on which commercial banks in the City of New York or the Principal Office are authorized or required to close.
(j) Capital Lease means any lease of any property by such Person as lessee which would, in accordance with GAAP, be required to be accounted for as a capital lease on the balance sheet of such Person.
(k) Capital Lease Obligations means, with respect to any Person, all obligations of such Person under Capital Leases.
(l) Capital Stock means (a) any capital stock, partnership, membership, limited liability company, joint venture or other ownership or equity interest or other equivalent, participation or securities (whether voting or non-voting, whether preferred, common or otherwise, whether certificated or uncertificated, and however designated), and (b) any option, warrant, security, appreciation right, profits interests or other right directly or indirectly convertible into or exercisable or exchangeable for, or otherwise to acquire directly or indirectly, any capital stock, partnership, membership, limited liability company, joint venture or other ownership or equity interest, participation or security described in clause (a) above (excluding the Notes and any other Indebtedness convertible or exchangeable into any such capital stock, partnership, membership, limited liability company, joint venture or other ownership or equity interest, participation or security described in clause (a) above unless and to the extent converted or exchanged).
(m) Charter Documents means (i) the articles or certificate of incorporation or formation (as applicable), (ii) the by-laws, operating agreement or limited liability company agreement (as applicable) and (iii) other similar organizational and governing documents of any Person, as amended, restated, supplemented or otherwise modified from time to time.
(n) Closing Date means the Initial Closing Date or each Additional Closing Date, as the context may require.
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(o) Collateral means the Collateral as defined in the Security Agreement.
(p) Collateral Agent has the meaning ascribed to such term in the preamble to this Agreement.
(q) Collateral Documents means, collectively, the Security Agreement, the Intellectual Property Security Agreement and each other agreement or writing pursuant to which the Note Parties purport to pledge or grant a security interest in any property or assets securing the Obligations or the Guaranteed Obligations, as applicable, in each case, as amended, restated, supplemented and/or otherwise modified from time to time.
(r) Company Covered Persons means those Persons specified in Rule 506(d)(1) promulgated under the Act; provided, however, that Company Covered Persons do not include (a) any Holder or (b) any person or entity that is deemed to be an affiliated issuer of the Company solely as a result of the relationship between the Company and any Holder.
(s) Contractual Obligations means as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument or arrangement (whether in writing or otherwise) to which such Person is a party or by which it or any of such Persons property is bound.
(t) Conversion Event has the meaning ascribed to such term in the Notes.
(u) Conversion Securities has the meaning ascribed to such term in Section 5.3.
(v) Default means any condition or event which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
(w) Disqualified Capital Stock means any Capital Stock issued by any Person that (a) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b) is or may become redeemable or repurchaseable by such Person at the option of the holder thereof, in whole or in part (other than in connection with an asset sale, change of control or similar event) or (c) is convertible or exchangeable at the option of the holder thereof for Indebtedness or Capital Stock described in this definition, on or prior to, in the case of clause (a), (b) or (c), ninety (90) days after the Maturity Date (as defined in the Notes).
(x) Environmental Laws means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, Licenses, concessions, grants, franchises, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water, air or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof, including, without limitation, the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq. (CWA), the Solid Waste Disposal Act (as amended by the Resource Conservation and Recovery Act), 42 U.S.C. § 6901 et seq. (RCRA) and the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq. (CERCLA).
(y) ERISA means the Employee Retirement Income Security Act of 1974.
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(z) ERISA Affiliate means, any person that for purposes of Title I or Title IV of ERISA or Section 412 of the Internal Revenue Code would be deemed at any relevant time to be a single employer or otherwise aggregated with the Company or any of its Subsidiaries under Section 414(b), 414(c), 414(m) or 414(o) of the Internal Revenue Code or Section 4001 of ERISA.
(aa) Event of Default has the meaning ascribed thereto in the Notes.
(bb) Excluded Subsidiary means (i) any Subsidiary that is not a wholly-owned Subsidiary, (ii) any Subsidiary that is not a Material Subsidiary and (iii) any Subsidiary that is (a) a Foreign Subsidiary (as defined in the Security Agreement), (b) a CFC Holdco (as defined in the Security Agreement) or (c) a Subsidiary of a CFC or a CFC Holdco (as defined in the Security Agreement); provided that notwithstanding the foregoing clauses (i) through (iii), the Company may in its sole discretion designate any Excluded Subsidiary as a Guarantor.
(cc) Existing Note Purchase Agreement means that certain Senior Secured Convertible Note Purchase Agreement, dated as of April 19, 2021, by and among the Company, the Guarantors from time to time party thereto, the Purchasers (as defined therein) party thereto and U.S. Bank National Association, as note agent and as collateral agent for the Secured Parties (as defined therein), as amended, restated, supplemented and/or otherwise modified from time to time.
(dd) Existing Notes means the senior secured convertible promissory notes issued pursuant to the Existing Note Purchase Agreement.
(ee) Existing Secured Note Obligations means all Obligations under and as defined in the Existing Note Purchase Agreement and any refinancing, refunding, renewal or extension thereof.
(ff) GAAP means the United States generally accepted accounting principles in effect as of the date of determination thereof. GAAP will be deemed to treat operating leases and Capital Leases in a manner consistent with the treatment under GAAP as in effect prior to the issuance by the Financial Accounting Standards Board on February 25, 2016 of Accounting Standards Update No. 2016-02.
(gg) Governmental Authority means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
(hh) Guarantee of or by any Person (the guarantor) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the primary obligor) in any manner, whether directly or indirectly and including any obligation, direct or indirect, of the guarantor (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued in support of such Indebtedness or obligation; provided that the term
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Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.
(ii) Guaranteed Obligations has the meaning ascribed thereto in the Guaranty.
(jj) Guarantor means each Subsidiary of the Company party to the Guaranty and each other Subsidiary of a Note Party that becomes a Guarantor under the Note Documents pursuant to Section 6.10..
(kk) Guaranty means the Guaranty, dated as the date hereof, made by the Guarantors in favor of the Note Agent, substantially in the form attached hereto as Exhibit C, (as amended, restated, supplemented and/or otherwise modified from time to time).
(ll) Hazardous Materials means (i) any hazardous substance, as defined by CERCLA, (ii) any hazardous waste, as defined by RCRA, (iii) any petroleum product, (iv) any pollutant, as defined by the CWA, or (v) contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other Environmental Law.
(mm) Holder or Holders means, individually and collectively, the holders of the Notes, including the Purchasers.
(nn) Indebtedness as applied to any Person, means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables and accounts payable incurred in the ordinary course of business and any deferred compensation, earn-out, purchase price adjustment or other deferred purchase price obligation which is contingently payable based on the achievement of future financial performance); (d) all obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (e) all obligations in respect of Capital Leases of such Person, (f) all obligations, contingent or otherwise, of such Person in respect of letters of credit, bankers acceptances or similar extensions of credit, (g) all Guarantees of such Person of Indebtedness of other Persons that would count as a liability on the balance sheet of such Person in accordance with the GAAP, (h) all Indebtedness of a third party secured by any Lien on any property or asset owned or held by such Person, whether or not such Indebtedness has been assumed by such Person, (i) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Disqualified Capital Stock of such Person and (j) all monetary obligations under any receivables factoring, receivables sales, receivable securitization or similar transactions or other off-balance sheet liabilities. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor.
(oo) Initial Closing Date means August 20, 2021.
(pp) Initial Note or Initial Notes has the meaning ascribed thereto in the recitals to this Agreement.
(qq) Initial Purchaser or Initial Purchasers has the meaning ascribed thereto in the preamble to this Agreement.
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(rr) Intellectual Property means all intellectual and similar property of a Person, including inventions, designs, patents, copyrights, trademarks, service marks, trade names, trade secrets, confidential or proprietary information, customer lists, know-how, software and databases.
(ss) Intellectual Property Security Agreement means the Intellectual Property Security Agreement, to be made by the applicable Note Parties in favor of the Collateral Agent, substantially in the form attached hereto as Exhibit E (as amended, restated, supplemented and/or otherwise modified from time to time).
(tt) Intercreditor Agreement has the meaning ascribed thereto in Section 7.1(a).
(uu) Ledger shall have the meaning ascribed thereto in the Notes.
(vv) Licenses means all licenses, permits, authorizations, determinations, and registrations issued by any Governmental Authority to the Company or any Subsidiary in connection with the conduct of its business.
(ww) Lien means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.
(xx) Material Adverse Effect means, individually or in the aggregate, (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties or financial condition of the Company and its Subsidiaries taken as a whole; (b) a material impairment of the ability of the Note Parties to perform their obligations under the Note Documents or, from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, the rights and remedies of the Secured Parties under the Note Documents; (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Note Parties of any Note Document; or (d) from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, a material adverse effect on the Liens in favor of the Collateral Agent (for the benefit of the Secured Parties) on the Collateral or the priority of such Liens.
(yy) Material Subsidiary mean each Subsidiary which, as of the most recent fiscal quarter of the Company, for the period of four consecutive fiscal quarters of the Company then last ended (taken as one accounting period) in respect of which financial statements were (or were required to be) delivered pursuant to Sections 6.1(a) or (b), as applicable (a Test Period), had Total Assets as of the last day of such Test Period that were in excess of 10% of the Total Assets of the Company and its Subsidiaries as of such date.
(zz) Multiemployer Plan means any multiemployer plan as defined in Section 4001(a)(3) of ERISA, which is contributed to by (or to which there is or may be an obligation to contribute of) the Company, any of its Subsidiaries or an ERISA Affiliate, and each such plan for the five-year period immediately following the latest date on which the Company, any of its Subsidiaries or an ERISA Affiliate contributed to or had an obligation to contribute to such plan.
(aaa) Note or Notes has the meaning ascribed thereto in the recitals to this Agreement.
(bbb) Note Documents means, collectively, this Agreement, each Note, the Guaranty, each Collateral Document (if applicable), the fee schedule delivered from the Agents to the Company in connection with this Agreement, the Intercreditor Agreement (if applicable), and any other document, agreement or instrument which has or will be executed by or for the benefit of the Holders in connection with such agreements and the transactions described therein, each as may be amended, restated, supplemented/and or otherwise modified from time to time.
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(ccc) Note Party or Note Parties means, individually and collectively, the Company and the Guarantors. From and after a Parent Entity assumes or otherwise becomes a co-obligor with respect to the Companys Obligations in connection with a SPAC pursuant to Section 6.13, each reference to Note Party shall be deemed to include a reference to a Parent Entity.
(ddd) Obligations means all advances to, and debts, liabilities (including without limitation (x) prepayment premiums (if any) and other premiums payable under the Notes (if any), including all or any portion of the Repayment Amount (as defined in the Notes), if applicable, (y) accrued and unpaid interest and (z) capitalized interest), obligations, fees, expenses, indemnities, covenants and duties of, the Note Parties arising under any Note Document or otherwise with respect to any Note, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Note Parties of any proceeding under any debtor relief laws naming any Note Party as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims or allowable in such proceeding.
(eee) OFAC means the U.S. Department of the Treasurys Office of Foreign Assets Control.
(fff) Parent Entity has the meaning ascribed thereto in the definition of SPAC.
(ggg) PBGC mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor thereto).
(hhh) Permitted Lien means:
(i) from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, Liens in favor of Collateral Agent for the benefit of Secured Parties granted pursuant to the Note Documents;
(ii) Liens set forth on Schedule 5.17 existing as of the Initial Closing Date;
(iii) Liens for taxes if obligations with respect to such taxes either (i) are not due and payable, (ii) are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and adequate reserves have been made in accordance with GAAP or (iii) could not reasonably be excepted to have a Material Adverse Effect;
(iv) statutory Liens of landlords, banks (and rights of set-off), of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law (other than any such Lien imposed pursuant to Section 401 (a)(29) or 412(n) of the Internal Revenue Code or by the Employee Retirement Income Security Act of 1974), in each case incurred in the ordinary course of business (i) for amounts not yet overdue, or (ii) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of five (5) days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts;
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(v) Liens incurred in the ordinary course of business in connection with workers compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money or other indebtedness), so long as (x) no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof and (y) adequate reserves required by GAAP shall have been set aside therefor;
(vi) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not have a Material Adverse Effect;
(vii) any interest or title of a lessor or sublessor under any lease of real estate permitted hereunder;
(viii) Liens solely on any cash earnest money deposits made by the Company in connection with any letter of intent or purchase agreement permitted hereunder;
(ix) purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal property entered into in the ordinary course of business;
(x) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods used in the ordinary course of business;
(xi) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property;
(xii) licenses of patents, trademarks and other Intellectual Property rights granted by the Company in the ordinary course of business;
(xiii) Liens securing obligations of the Company incurred under leases (but not securing indebtedness for borrowed money) in the form of cash deposits made in the ordinary course of business;
(xiv) Liens arising in favor of depository institutions as a result of set-off rights or otherwise securing obligations owed to such depository institution in connection with bank services provided to the Company or its Subsidiaries;
(xv) Liens on cash deposits securing obligations owed to an issuer of a letter of credit at the request of the Company of any of its Subsidiaries;
(xvi) Liens on any assets of the Note Parties securing any Indebtedness, including Capital Lease Obligations, incurred to finance the acquisition of any fixed or capital assets (including any real property assets) so long as such Liens encumber only the assets acquired or financed with the proceeds of such Indebtedness and do not attach to any other assets of any Note Party;
(xvii) Liens on cash deposit accounts and cash and cash equivalents delivered or pledged to secure letters of credit;
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(xviii) Liens on Indebtedness permitted to be incurred in reliance on Section 7.01(a);
(xix) Liens arising from judgments for the payment of money in circumstances not constituting an Event of Default; and
(xx) Liens on the Collateral securing the Existing Secured Note Obligations.
(iii) Permitted Transferees means, (x) as to any Purchaser that is a limited or general partnership or a trust, to its partners (whether general or limited, including retired partners) or beneficiaries and to affiliated partnerships managed by the same management company or managing (general) partner or by an entity which directly or indirectly controls, is controlled by, or is under common control with, such management company or managing or general partner, or member (or retired member) of such Purchaser in accordance with limited liability company interests and (y) as to any other Purchaser, an entity which directly or indirectly controls, is controlled by, or is under common control with such Purchaser.
(jjj) Person (regardless of whether capitalized) means any natural person, entity, or association, including without limitation any corporation, partnership, limited partnership, limited liability company, government (or agency or subdivision thereof), trust, joint venture, or proprietorship.
(kkk) Plan means any employee benefit plan as defined in Section 3 of ERISA (other than a Multiemployer Plan) maintained or contributed to by any Note Party or any ERISA Affiliate or to which a Note Party or any ERISA Affiliate has or may have an obligation to contribute, and each such plan that is subject to Title IV of ERISA for the five-year period immediately following the latest date on which a Note Party or any ERISA Affiliate maintained, contributed to or had an obligation to contribute to (or is deemed under Section 4069 of ERISA to have maintained or contributed to or to have had an obligation to contribute to, or otherwise to have liability with respect to) such plan.
(lll) Principal Office means the Note Agents office, address or bank account as from time to time designated in writing by the Note Agent to the Company and each Holder, which shall initially be the office designated on the Note Agents signature page to this Agreement.
(mmm) Pro Rata Share means, as to any Holder at any time, the ratio at such time of (x) the aggregate principal amount of the Notes held by such Holder to (y) the aggregate outstanding principal amount of all Notes issued hereunder.
(nnn) Purchaser or Purchasers means, individually and collectively, the Initial Purchasers and the Additional Purchasers, as the context may require.
(ooo) Reportable Event means any of the events set forth in Section 4043(c) of ERISA with respect to a Plan, other than those events as to which the thirty-day notice period is waived under subsection .22, .23, .25, .27, .28, .29, .30, .31, .32, .34, or .35 of PBGC Regulation Section 4043.
(ppp) Required Holders means Holders representing more than fifty percent (50%) of the aggregate outstanding principal amount of the Notes (including all accrued PIK Interest) issued pursuant to this Agreement at the relevant time of reference.
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(qqq) Requirements of Law means as to any Person, provisions of the Charter Documents of such Person, or any law, treaty, code, rule, regulation, right, privilege, qualification, License or franchise, or any determination of an arbitrator or a court or other Governmental Authority, in each case applicable to such Person or any of such Persons property or to which such Person or any of such Persons property is subject or pertaining to any or all of the transactions contemplated or referred to in the Note Documents, including, but not limited to the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Federal Trade Commission Act and comparable state laws, the Telephone Consumer Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, the CAN-SPAM Act, the Electronic Fund Transfer Act, the U.S. Card Act, and any similar laws and regulations in Canada, including federal and provincial laws.
(rrr) Responsible Officer means the chief financial officer, general counsel, secretary, controller or other authorized officer of the Note Parties set forth on an incumbency certificate delivered to the Note Agent from time to time.
(sss) Restricted Payment means as to any Person (i) any dividend or other distribution (whether in cash, Capital Stock or other property) with respect to or on account of any shares of any Capital Stock of such Person or (ii) any payment by such Person on account of the purchase, redemption, retirement, defeasance, surrender, cancellation, termination or acquisition of any Capital Stock of such Person or any claim respecting the purchase or sale of any Capital Stock of such Person.
(ttt) Sanctioned Entity means (a) an agency of the government of, (b) an organization directly or indirectly controlled by, or (c) a person resident in a country that is subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/programs, or as otherwise published from time to time as such program may be applicable to such agency, organization or person.
(uuu) Sanctioned Person means a person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise published from time to time.
(vvv) Secured Debt Cap has the meaning ascribed thereto in Section 7.1(a).
(www) Secured Party or Secured Parties means, individually and collectively, upon the execution and delivery of the Collateral Documents pursuant to Section 6.13, the Purchasers, Holders, the Agents, and their respective successors and permitted assigns.
(xxx) Securities has the meaning ascribed thereto in Section 8.1.
(yyy) Security Agreement means the Security Agreement, to be made by the Note Parties in favor of the Collateral Agent, for the benefit of the Secured Parties, substantially in the form attached hereto as Exhibit D (as amended, restated, supplemented and/or otherwise modified from time to time).
(zzz) Single Employer Plan shall mean any Plan that is covered by Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, other than a Multiemployer Plan, that is maintained or contributed to by the Company or any Commonly Controlled Entity or to which the Company or a Commonly Controlled Entity has or may have an obligation to contribute, and such plan for the six-year period immediately following the latest date on which the Company or a Commonly Controlled Entity maintained, contributed to or had an obligation to contribute to (or is deemed under Section 4069 of ERISA to have maintained or contributed to or to have had an obligation to contribute to, or otherwise to have liability with respect to) such plan. For the purposes of this definition, Commonly Controlled Entity means a person or an entity, whether or not incorporated, that is under common control with the Company within the meaning of Section 4001 of ERISA or is part of a group that includes the Company and that is treated as a single employer under Section 414 of the Code.
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(aaaa) Solvent means, with respect to any Person, that such Person (i) owns and will own assets the fair saleable value of which are greater than the amount that will be required to pay the probable liabilities of its then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to it, (ii) has capital that is not unreasonably small in relation to its business as presently conducted or after giving effect to any contemplated transaction and (iii) does not intend to incur and does not believe that it will incur debts beyond its ability to pay such debts as they become due. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
(bbbb) SPAC means a transaction, including, without limitation, the XPDI Transaction, involving a publicly listed special purpose acquisition company that, upon the consummation thereof, shall be the direct or indirect parent company of Core Scientific Holding Co. (or of the successor by merger to Core Scientific Holding Co.) (such parent company, a Parent Entity). The Company shall promptly notify the Agents in writing upon the occurrence of a SPAC or the XPDI Transaction.
(cccc) Subsidiary means, with respect to any Person, any other Person of which an aggregate of more than fifty percent (50%) of the outstanding Capital Stock having ordinary voting power to elect a majority of the board of directors of such other Person is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, or a combination thereof, or with respect to which any such Person has the right to vote or designate the vote of more than fifty percent (50%) of such Capital Stock whether by proxy, agreement, operation of law or otherwise. Unless the context otherwise requires, each reference to a Subsidiary shall mean a Subsidiary of the Company.
(dddd) Taxes means any present or future United States federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp occupation, premium, windfall profits, environmental (including taxes under former Code §59A), customs duties, capital stock, franchise profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on-minimum, estimated, or other taxes, levies, assessments, fees or other charges imposed by any Governmental Authority, including any interest, penalty, or addition thereto, whether disputed or not.
(eeee) Total Assets shall mean the total assets of the Company and its Subsidiaries on a consolidated basis, as shown on the applicable consolidated balance sheet of the Company and its Subsidiaries and computed in accordance with GAAP. Total Assets shall be calculated after giving effect to the transaction giving rise to the need to calculate Total Assets.
(ffff) UCC means Uniform Commercial Code.
(gggg) Unfunded Pension Liability of any Plan means the amount, if any, by which the value of the accumulated plan benefits under the Plan, determined on a plan termination basis in accordance with actuarial assumptions at such time consistent with those prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions).
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(hhhh) XPDI Transaction means the transactions contemplated by the Agreement and Plan of Merger and Reorganization, dated as of July 20, 2021, by and among Power & Digital Infrastructure Acquisition Corp., a Delaware corporation (XPDI), XPDI Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of XPDI, XPDI Merger Sub 2, LLC, a Delaware limited liability company and wholly owned subsidiary of XPDI, and the Company, as amended, restated, supplemented and/or otherwise modified from time to time.
2. TERMS OF THE CONVERTIBLE PROMISSORY NOTES.
2.1 The Initial Notes.
Subject to the satisfaction (or waiver in accordance with Section 10.9) of the conditions precedent set forth in Section 4.1, the Company shall issue and sell to each Initial Purchaser, and each Initial Purchaser shall purchase from the Company, an Initial Note on the Initial Closing Date in a principal amount equal to the amount opposite such Initial Purchasers name set forth in the Schedule of Purchasers under the header Initial Purchasers attached hereto as Schedule 2. By no later than 11:00 a.m. (New York time) on the Initial Closing Date (i) each Initial Purchaser shall wire transfer same day funds in U.S. dollars, at the Note Agents Principal Office, in the amount of such Initial Purchasers Initial Note and (ii) the Company shall issue and deliver to each such Initial Purchaser an Initial Note in favor of such Initial Purchaser payable in the principal amount of such Initial Purchasers Initial Note.
2.2 The Additional Notes.
(a) Subject to the satisfaction (or waiver in accordance with Section 10.9) of the conditions precedent set forth in Section 4.2, at any time and from time to time after the Initial Closing Date, the Company shall issue and sell to each Person that executes a counterpart signature page to this Agreement in the form attached hereto as Exhibit B (individually, an Additional Purchaser and collectively, the Additional Purchasers), and each such Additional Purchaser shall purchase from the Company, an Additional Note in a principal amount to be mutually agreed between such Additional Purchaser and the Company. Each additional issuance, sale and purchase of Additional Notes as provided in this Section 2.2 shall take place on a date to be mutually agreed by the Company and such Additional Purchaser (each, an Additional Closing Date); provided that (i) each Additional Closing Date shall have occurred on or prior to December 31, 2021, (ii) all issuances, sales and purchases of Additional Notes on an Additional Closing Date shall be made on substantially identical terms and conditions as the Initial Notes, shall, to the extent permitted by law, be fungible for tax purposes with the Initial Notes and may only be amended pursuant to Section 10.9; (iii) the purchase price of each Additional Note shall be increased by the PIK Interest (as defined in the Note) and Cash Interest (as defined in the Note) that has accrued since the Initial Closing Date on the Initial Notes (it being understood and agreed that interest on all the Notes shall accrue PIK Interest and be payable on the same dates) and (iv) in no event shall the initial aggregate principal amount of all Notes issued hereunder exceed $300,000,000.00.
(b) Any Additional Notes issued, sold and purchased pursuant to this Section 2.2 shall be deemed to be Notes for all purposes under this Agreement. By no later than 11:00 a.m. (New York time) on an Additional Closing Date (i) each Additional Purchaser shall wire transfer same day funds in U.S. dollars, at the Note Agents Principal Office, in the amount of such Additional Purchasers Additional Note and (ii) the Company shall issue and deliver to each such Additional Purchaser an Additional Note in favor of such Additional Purchaser payable in the principal amount of such Additional Purchasers Additional Note. The Schedule of Purchasers may be amended by the Company without the consent of the Purchasers to include any Additional Purchasers upon the execution by such Additional Purchasers of a counterpart signature page hereto in the form attached hereto as Exhibit B.
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3. SECURITY.
To secure the performance and payment in full of the Obligations and the Guaranteed Obligations, as applicable, each Note Party shall grant to the Collateral Agent, for the benefit of the Secured Parties, a first-priority Lien on the Collateral (subject to Permitted Liens) pursuant to the Security Agreement, as and when required pursuant to Section 6.13.
4. CONDITIONS PRECEDENT TO EACH CLOSING DATE.
4.1 Conditions Precedent to the Initial Closing Date.
The obligation of the Company to issue and to sell, and of each Initial Purchaser to purchase, Initial Notes on the Initial Closing Date are subject to the satisfaction (or waiver in accordance with Section 10.9) of the following conditions precedent on or prior to the Initial Closing Date:
(a) receipt by each Initial Purchaser of counterparts to this Agreement, the Guaranty and the Initial Notes;
(b) receipt by each Initial Purchaser of a certificate signed by a Responsible Officer of each Note Party attaching (i) true, correct and complete copies of the Charter Documents of each Note Party as in effect on the Initial Closing Date, certified, with respect to the Charter Documents set forth in clause (ii) of the definition thereof, as of a recent date by the Secretary of State of the state of incorporation or organization (as applicable) of such Note Party, (ii) a certificate of good standing of each Note Party, certified as of a recent date by the Secretary of State of the state of incorporation or organization (as applicable) of such Note Party, (iii) the names of the Responsible Officers of each Note Party authorized to sign the Note Documents and their true signatures and (iv) true, correct and complete copy of resolutions duly adopted by the board of directors or similar governing body of each Note Party authorizing the execution, delivery and performance of this Agreement and the other Note Documents;
(c) receipt by each Initial Purchaser of a certificate of solvency, executed by the chief financial officer (or equivalent) of the Company, substantially in the form attached hereto as Exhibit F;
(d) receipt by each Initial Purchaser of a certificate signed by a Responsible Officer of the Company certifying that the condition specified in clause (j) of this Section 4.1 has been satisfied;
(e) the Initial Purchasers and the Agents shall have received an opinion of Cooley LLP, counsel to the Company, in form and substance reasonably satisfactory to the Initial Purchasers;
(f) all authorizations, consents, approvals or permits, if any, of any governmental authority or regulatory body that are required in connection with the lawful issuance and sale of the Initial Notes pursuant to this Agreement shall have been duly obtained and shall be effective on and as of the Initial Closing Date;
(g) there shall be no claim, action, suit, investigation, litigation or proceeding, pending or, to the knowledge of the Company and its Subsidiaries, threatened, in any court or before any governmental authority with respect to the Note Documents or any transactions contemplated thereby or hereby;
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(h) the representations and warranties made pursuant to Section 5 hereof shall be true and correct in all material respects (or if a representation or warranties is qualified by materiality or material adverse effect, in all respects) on and as of the Initial Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects (or if a representation or warranties is qualified by materiality or material adverse effect, in all respects) on and as of such earlier date;
(i) immediately before and after giving effect to the issuance of the Initial Notes on the Initial Closing Date, no Event of Default shall exist;
(j) the Company shall have paid all outstanding fees and expenses of the Agents, Shipman & Goodwin LLP, counsel to the Agents, and as otherwise required pursuant to Section 10(a);
(k) receipt by the Company and the Note Agent of an Administrative Questionnaire and executed copies of IRS Form W-9 or appropriate IRS Form W-8, as applicable, as well as any reasonably necessary supporting information, certifying that payments to the Initial Purchasers under the Initial Notes are exempt from U.S. federal withholding Tax; and
(l) the Company shall have delivered to the Initial Purchasers such other documents and instruments relating to the transactions contemplated by this Agreement as the Initial Purchasers or their counsel may reasonably request (which request shall have been made no later than 3 days prior to the Initial Closing Date).
4.2 Conditions Precedent to each Additional Closing Date.
The obligation of the Company to issue and to sell, and of each Additional Purchaser to purchase, Additional Notes on an Additional Closing Date are subject to the satisfaction (or waiver in accordance with Section 10.8) of the following conditions precedent on or prior to each such Additional Closing Date:
(a) each Additional Purchaser shall have received copies of each of the documents set forth in clauses (a) through (e) and clause (l) of Section 4.1 delivered to the Initial Purchasers on the Initial Closing Date;
(b) the representations and warranties made pursuant to Section 5 hereof shall be true and correct in all material respects (or if a representation or warranties is qualified by materiality or material adverse effect, in all respects) on and as of the applicable Additional Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects (or if a representation or warranties is qualified by materiality or material adverse effect, in all respects) on and as of such earlier date;
(c) immediately before and after giving effect to the issuance of Additional Notes on the applicable Additional Closing Date, no Event of Default (as defined in the Notes) shall exist; and
(d) receipt by the Company and the Note Agent of an Administrative Questionnaire and of executed copies of IRS Form W-9 or appropriate IRS Form W-8, as applicable, as well as any reasonably necessary supporting information, certifying that payments to the Additional Purchasers under Additional Notes are exempt from U.S. federal withholding Tax.
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5. REPRESENTATIONS AND WARRANTIES OF THE NOTE PARTIES.
Each Note Party hereby represents and warrants to each Initial Purchaser and the Agents as of the Initial Closing Date and to each Additional Purchaser and the Agents as of the applicable Additional Closing Date as follows:
5.1 Organization, Good Standing and Qualification.
(a) Organization; Good Standing; Qualification. Each Note Party and each of its Subsidiaries: (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, (ii) has all requisite corporate or limited liability company power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently, or is currently proposed to be, engaged; (iii) is duly qualified as a foreign entity, licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect and (iv) has the corporate or limited liability company power and authority to execute, deliver and perform its obligations under each Note Document to which it is or will be a party and to borrow hereunder. Each Note Partys present name, former names within the last five (5) years (if any), owned and leased locations, place of formation, tax identification number and organizational identification number are correctly set forth in Schedule 5.1 hereto, as may be updated by the Company from time to time in a written notice provided to the Note Agent after the Initial Closing Date.
(b) Collateral. Except for the Liens granted under the Security Agreement, each Note Party shall be the sole legal and equitable owner of each item of Collateral in which it purports to grant a security interest under the Security Agreement upon the execution and delivery thereof pursuant to Section 6.13, having good and marketable title thereto, free and clear of any and all Liens except for Permitted Liens and, upon filing of UCC financing statements in the UCC filing office applicable to such Note Party, the Collateral Agent shall have a perfected security interest in the Collateral, which such security interest shall be senior to all other Liens (other than Permitted Liens) to the extent the same can be perfected by filing.
5.2 Corporate Power; No Contravention. The execution, delivery and performance by the Company and each Subsidiary of each Note Document to which it is or will be a party and the consummation of the transactions contemplated hereby: (a) have been duly authorized by all necessary corporate or limited liability company action; (b) do not and will not contravene or violate the terms of the Charter Documents of the Company or any of its Subsidiaries or any amendment thereto or any material Requirement of Law applicable to the Company or such Subsidiary or the Companys or such Subsidiarys assets, business or properties; (c) do not and will not (i) conflict with, contravene, result in any violation or breach of or default under any material Contractual Obligation of the Company or such Subsidiary (with or without the giving of notice or the lapse of time or both) other than any right to consent, which consents have been obtained, (ii) create in any other Person a right or claim of termination or amendment of any material Contractual Obligation of the Company or such Subsidiary, or (iii) require modification, acceleration or cancellation of any material Contractual Obligation of the Company or such Subsidiary; and (d) do not and will not result in the creation of any Lien (or obligation to create a Lien) against any property, asset or business of the Company or such Subsidiary (other than those securing the Notes from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13).
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5.3 Authorization. All corporate action on the part of the Company, its Subsidiaries and their respective directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement by the Company and its Subsidiaries and the performance of the Companys obligations hereunder, including the issuance and delivery of the Notes and the reservation of the equity securities issuable upon conversion of the Notes (collectively, the Conversion Securities) has been taken or will be taken prior to the issuance of such Conversion Securities. This Agreement and the Note Documents, when executed and delivered by the Note Parties, shall constitute valid and binding obligations of the Note Parties enforceable in accordance with their terms, subject to laws of general application relating to bankruptcy, insolvency, the relief of debtors and general principles of equity and, with respect to rights to indemnity, subject to federal and state securities laws. The Conversion Securities, when issued in compliance with the provisions of this Agreement or the Notes will be validly issued, fully paid and nonassessable and free of any Liens and issued in compliance with all applicable federal and state securities laws.
5.4 Governmental Consents. All consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with, any Governmental Authority, required on the part of the Note Parties in connection with the valid execution and delivery of this Agreement and the other Note Documents, the offer, sale or issuance of the Notes and the Conversion Securities issuable upon conversion of the Notes and the consummation of any other transaction contemplated hereby shall have been obtained and will be effective on the Initial Closing Date.
5.5 Compliance with Laws.
(a) No Note Party is in violation of any Requirements of Law, any applicable statute, rule, regulation, order or restriction of any domestic government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties, which violation of which would materially and adversely affect the business, assets, liabilities, financial condition or operations of the Note Parties (individually and in the aggregate).
(b) Neither the Company nor any of its Subsidiaries is registered or required to register as an investment company or a company controlled by an investment company under the Investment Company Act of 1940, as amended. Neither the Company nor any of its Subsidiaries is engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). The Company and each of its Subsidiaries has complied in all material respects with applicable provisions of the Federal Fair Labor Standards Act. Neither the Company nor any of its Subsidiaries is a holding company or an affiliate of a holding company or a subsidiary company of a holding company as each term is defined and used in the Public Utility Holding Company Act of 2005. Neither the Companys nor any of its Subsidiaries properties or assets has been used by the Company or such Subsidiary or, to Companys knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than in material compliance with applicable laws. The Company and each of its Subsidiaries has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted, except to the extent that the failure to obtain, make or give any of the foregoing would not reasonably be expected to have a Material Adverse Effect.
(c) Neither the Company nor any Subsidiary (i) is a Sanctioned Person, (ii) has any assets in Sanctioned Entities, or (iii) derives any operating income from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. The proceeds of the Notes will not be used and have not been used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.
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(d) The Company and its Subsidiaries are in compliance, in all material respects, with any United States Requirements of Law relating to terrorism, sanctions or money laundering (the Anti- Terrorism Laws), including the United States Executive Order No. 13224 on Terrorist Financing (the Anti-Terrorism Order) and the Patriot Act. No part of the proceeds of any Note will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended or any other Anti-Terrorism Law.
(e) No Note Party and no Subsidiary of any Note Party (i) is listed in the annex to, or is otherwise subject to the provisions of, the Anti-Terrorism Order, (ii) is owned or controlled by, or acting for or on behalf of, any person listed in the annex to, or is otherwise subject to the provisions of, the Anti-Terrorism Order or (iii) commits, threatens or conspires to commit or supports terrorism as defined in the Anti-Terrorism Order.
(f) None of the funds to be provided under this Agreement will be used, directly or indirectly, (i) for any activities in violation of any applicable anti-money laundering, economic sanctions and anti-bribery laws and regulations laws and regulations or (ii) for any payment to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
5.6 Compliance with Other Instruments. The Company is not in violation or default of any term of its articles of incorporation, or of any provision of any mortgage, indenture or contract to which it is a party and by which it is bound or of any judgment, decree, order or writ, other than such violation(s) that would not have a Material Adverse Effect on the Company. The execution, delivery and performance of this Agreement and the other Note Documents, and the consummation of the transactions contemplated hereby and thereby will not result in any material violation or be in conflict with, or constitute, with or without the passage of time and giving of notice, either a default under any such material provision, instrument, judgment, decree, order or writ or an event that results in the creation of any material Lien upon any assets of the Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its business or operations or any of its material assets or properties. Without limiting the foregoing, the Company has obtained all waivers reasonably necessary with respect to any preemptive rights, rights of first refusal or similar rights, including any notice or offering periods provided for as part of any such rights, in order for the Company to consummate the transactions contemplated hereunder without any third party obtaining any rights to cause the Company to offer or issue any securities of the Company as a result of the consummation of the transactions contemplated hereunder.
5.7 Solvency. As of the Initial Closing Date both immediately before and after giving effect to the transactions contemplated by the Note Documents, the Company is individually, and the Company and its Subsidiaries on a consolidated basis are, Solvent.
5.8 Offering. The offer, issue, and sale of the Notes and the Conversion Securities are and will be exempt from the registration and prospectus delivery requirements of the Act, and no qualification under the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder is required in connection with, the issuance of the Notes and the Conversion Securities.
5.9 No Bad Actor Disqualification. The Company has exercised reasonable care to determine whether any Company Covered Person (as defined below) is subject to any of the bad actor disqualifications described in Rule 506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the Act (Disqualification Events). To the Companys knowledge, no Company Covered Person is subject to a Disqualification Event. The Company has complied, to the extent required, with any disclosure obligations under Rule 506(e) under the Act.
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5.10 Litigation. There are no legal actions, suits, proceedings, claims or disputes pending or, to the knowledge of any Note Party, threatened in writing, at law, in equity, in arbitration or before any Governmental Authority against or affecting the Company or its Subsidiaries that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (b) there is no injunction, writ, temporary restraining order, decree or any order or determination of any nature by any arbitrator, court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of the Note Documents or which relates to the assets or the business of the Company or its Subsidiaries; and (c) there is no litigation, claim, audit, dispute, review, proceeding or investigation currently pending or threatened in writing against the Company or its Subsidiaries for any violation or alleged violation of any Requirements of Law, and neither the Company nor any Subsidiary has received written notice of any threat of any suit, action, claim, dispute, investigation, review or other proceeding pursuant to or involving any Requirements of Law.
5.11 Taxes.
(a) Except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect, the Company and each of its Subsidiaries has timely filed all United States federal and state income and other material tax returns that it was required to file, in each case with due regard for any extension of time within which to file such tax return. Except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect, all Taxes due and payable by the Company or its Subsidiaries have been paid, in each case with due regard for any extension of time within which to file such tax return, other than any Taxes the amount or validity of which is being actively contested by Company or its Subsidiaries in good faith and by appropriate proceedings and with respect to which adequate reserves or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. There are no Liens, other than Permitted Liens, on any of the assets of the Company or its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax. To the knowledge of the Company, no claim has been made by a Governmental Authority in a jurisdiction where the Company and its Subsidiaries do not file tax returns that the Company or any of its Subsidiaries is or may be subject to taxation by that jurisdiction that could reasonably be expected to have a Material Adverse Effect.
(b) There is no action, suit, proceeding, investigation, examination, audit, or claim now pending or, to the knowledge of the Company, threatened in writing by any Governmental Authority regarding any Taxes relating to the Company or its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.
5.12 Financial Condition. The Note Parties have furnished the Purchasers with true, correct and complete copies of (i) the audited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 2018, 2019 and 2020 and the related consolidated statements of income or operations, shareholders equity and cash flows for each such fiscal year and (ii) the unaudited consolidated balance sheets of the Company and its Subsidiaries as of March 31, 2021 and the related consolidated statements of income or operations and cash flows for such fiscal quarter (collectively, the Financial Statements). The Financial Statements fairly present, in all material respects, the financial position of the Company and its Subsidiaries on a consolidated basis, as of the respective dates thereof, and the results of operations and cash flows thereof, as of the respective dates or for the respective periods set forth therein, and are in conformity with the past historical practices of the Note Parties, with GAAP consistently applied during the periods involved. As of the dates of the Financial Statements, neither the Company nor any Subsidiary had any known obligation, Indebtedness or liability (whether accrued, absolute, contingent or otherwise, and whether due or to become due), which was not reflected or reserved against in the balance sheets which are part of the Financial Statements, except for those incurred in the ordinary course of business and which are fully reflected on the books of account of the Company or its Subsidiaries, as applicable.
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5.13 Subsidiaries. Except as set forth on Schedule 5.13, the Company does not have any Subsidiaries.
5.14 Capitalization. As of the Initial Closing Date, without giving effect to the transactions contemplated hereby and in the other Note Documents, the outstanding capitalization of the Company and its Subsidiaries is as set forth on Schedule 5.14. All of the issued and outstanding Capital Stock of the Company has been, and Capital Stock of the Company issuable upon the exercise of outstanding securities when issued will be, duly authorized and validly issued and are fully paid and nonassessable. All outstanding Capital Stock of the Companys Subsidiaries are 100% owned by the Company or one of its Subsidiaries free and clear of all Liens other than Permitted Liens. Except as set forth in the Charter Documents (as in effect on the Initial Closing Date), the issuance of the foregoing Capital Stock is not and has not been subject to preemptive rights in favor of any Person other than such rights that have been waived and will not result in the issuance of any additional Capital Stock of the Company or the triggering of any down-round or similar rights contained in any options warrants, debentures or other securities or agreements of the Company or any of its Subsidiaries. On the Initial Closing Date, except as set forth on Schedule 5.14, there are no outstanding securities convertible into or exchangeable for Capital Stock of the Company or any of its Subsidiaries or options, warrants or other rights to purchase or subscribe for Capital Stock of the Company or any of its Subsidiaries, or contracts, commitments, agreements, understandings or arrangements of any kind to which the Company or any of its Subsidiaries is a party relating to the issuance of any Capital Stock of the Company or any of its Subsidiaries, or any such convertible or exchangeable securities or any such options, warrants or rights. On the Initial Closing Date, except as set forth on Schedule 5.14, neither the Company nor any of its Subsidiaries has any obligation, whether mandatory or at the option of any other Person, at any time to redeem or repurchase any Capital Stock of the Company or any of its Subsidiaries, pursuant to the terms of their respective Charter Documents or otherwise. All securities of the Company and its Subsidiaries (including all shares of the Companys common stock, securities, options and warrants to purchase shares of the Companys common stock (both outstanding as well as those that are no longer outstanding)), have been and were issued and granted pursuant to an exception from the Act and otherwise in compliance, in all material respects, with all securities and other applicable laws.
5.15 Private Offering. No form of general solicitation or general advertising was used by the Company or its Subsidiaries or their respective representatives in connection with the offer or sale of the Notes to the Purchasers pursuant to this Agreement.
5.16 Brokers, Finders or Similar Fees. Except as set forth in that certain Engagement Letter, dated on or about of August 20, 2021, by and between the Company and GreensLedge Capital Markets LLC, there are no brokerage commissions, finders fees or similar fees or commissions payable by the Company or its Subsidiaries in connection with the transactions based on any agreement, arrangement or understanding with the Company or its Subsidiaries or any action taken by the Company or its Subsidiaries. Notwithstanding the foregoing or any other provision herein, no Purchaser shall be liable for any brokerage commission, finders fees or similar fees or commissions.
5.17 Indebtedness. Schedule 5.17 lists the amount of all Indebtedness of the Company and its Subsidiaries (other than Indebtedness under this Agreement) that is in existence immediately before the Initial Closing Date and will remain outstanding after the Initial Closing Date.
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6. AFFIRMATIVE COVENANTS OF THE NOTE PARTIES
Each Note Party shall, and shall cause each of its Subsidiaries to:
6.1 Reporting Obligations. Deliver to the Note Agent (for prompt distribution to the Purchasers as specified in the applicable Administrative Questionnaire (or as otherwise specified by a Purchaser to the Note Agent in writing from time to time)):
(a) as soon as available, but not later than 150 days after the end of each fiscal year of the Company, a copy of the audited consolidated balance sheets of the Company and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income or operations, shareholders equity and cash flows for such fiscal year, in each case, prepared in accordance with GAAP, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by a report of any Big Four or, upon Required Holders written consent (not to be unreasonably withheld), any other independent certified public accounting firm, which report shall contain an unqualified opinion (without any (A) going concern or like qualification or exception, (B) qualification or exception as to the scope of such audit, or (C) qualification which relates to the treatment or classification of any item and which, as a condition to the removal of such qualification, would require an adjustment to such item (except in the case of clauses (A) and (B) above as it relates to the Obligations during the last twelve months before the Maturity Date)), stating that such consolidated financial statements present fairly in all material respects the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years; and
(b) as soon as available, but not later than 45 after the end of each fiscal quarter of each fiscal year (other than the fourth fiscal quarter), the unaudited consolidated balance sheets of the Company and its Subsidiaries as at the end of such fiscal quarter and the related unaudited consolidated statements of income and cash flows of the Company and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, all certified on behalf of the Company by a Responsible Officer of the Company as being complete and correct and fairly presenting, in all material respects, the financial position and the results of operations of the Company and its Subsidiaries, subject to normal year-end adjustments and absence of footnote disclosures.
(c) promptly, and in any event within three (3) Business Days after the Company or any other Note Party becomes aware of or has knowledge of any event or condition that constitutes a Default or Event of Default, provide written notice of such event or condition and a statement of the curative action that the Company proposes to take with respect thereto.
Delivery of any reports, information and documents under this Section 6.2, as well as any other reports, information and documents pursuant to this Agreement, to the Note Agent is for informational purposes only and the Note Agents receipt of the same shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Companys compliance with any of its covenants hereunder (as to which the Note Agent is entitled to rely exclusively on certificates of a Responsible Officer of the Company). The Note Agent shall have no responsibility or liability for the filing, timeliness or content of any report required under this Section 6.2 or any other reports, information and documents required under this Agreement.
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6.2 Taxes and Claims.
(a) Timely file complete and correct United States federal and state income and applicable foreign, state and local tax returns required by law, in each case with due regard for any extension of time within which to file such tax returns, and pay when due all Taxes in each case, except to the extent that the failure to so file or pay could not reasonably be expected to have a Material Adverse Effect; provided that the Company and its Subsidiaries shall not be required to pay any such Taxes which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with GAAP, which deferment of payment is permissible so long as no Lien, other than a Permitted Lien, has been entered and the Companys and its Subsidiaries title to, and its and their right to use, its and their respective properties are not materially adversely affected thereby.
(b) Pay all stamp, court or documentary, intangible, recording, filing or similar Taxes, if any, that arise solely in connection with the issuance of the Notes except to the extent such Taxes arise as a result of a transfer of a Note to a person other than the initial Holder of the Notes. The obligations of the Company under this Section 6.2(b) shall survive the payment of the Obligations and the termination of the Note Documents.
6.3 Insurance.
(a) Maintain with reputable insurance companies insurance in such amounts and covering such risks as is consistent with sound business practice, including, without limitation, property and casualty insurance on all of its property, general liability insurance, workers compensation insurance and business interruption insurance. From and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, each Note Party will, and will cause each of its Subsidiaries to, furnish to the Collateral Agent, upon reasonable request, full information as to the insurance carried by it.
(b) From and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, (i) at all times keep its property which is subject to the Lien of the Collateral Agent insured in favor of the Collateral Agent, and all policies or certificates (or certified copies thereof) with respect to such insurance and (ii) notify (and cause each of its Subsidiaries to notify) the Collateral Agent and the Purchasers, promptly, upon receipt of a notice of termination, cancellation, or non-renewal from its insurance company of any such policy.
(c) If the Company shall fail to maintain all insurance in accordance with this Section 6.3 or to timely pay or cause to be paid the premium(s) on any such insurance, or if the Company shall fail to deliver all certificates with respect thereto, from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance or pay such premiums, and the Company agrees to reimburse the Purchasers, on demand, for all costs and expenses relating thereto.
6.4 Compliance with Laws. Comply with any and all Requirements of Law to which it may be subject including, without limitation, all Environmental Laws, and obtain any and all Licenses necessary to the ownership of its property or to the conduct of its businesses, except, in each case, where failure to do so could not reasonably be expected to have a Material Adverse Effect. Each Note Party will, and will cause each of its Subsidiaries to, timely satisfy all material assessments, fines, costs and penalties imposed by any Governmental Authority against such Person or any property of such Person except to the extent such assessments, fines, costs, or penalties are being contested in good faith by appropriate proceedings and for which the Company or such Subsidiary has set aside on its books adequate reserves in accordance with GAAP.
6.5 Maintenance of Properties. Do all things necessary to maintain, preserve, protect and keep its property (other than property that is obsolete, surplus, or no longer used or useful in the ordinary conduct of its business) in good repair, working order and condition (ordinary wear and tear and casualty and condemnation excepted), make all necessary and proper repairs, renewals and replacements such that its business can be carried on in connection therewith and be properly conducted at all times and pay and discharge when due the cost of repairs and maintenance to its property, and pay all rentals when due for all real estate leased by such Person.
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6.6 Employee Benefit Plans. (a) Keep in full force and effect any and all Plans which are presently in existence or may, from time to time, come into existence under ERISA and not withdraw from any such Plans, unless such withdrawal can be effected or such Plans can be terminated without material liability to the Company or its Subsidiaries, (b) make contributions to all such Plans in a timely manner and in a sufficient amount to comply in all material respects with the standards of ERISA, including, without limitation, the minimum funding standards of ERISA, (c) comply in all material respects with all requirements of ERISA, (d) notify the Purchasers promptly upon receipt by the Company or any Subsidiary of any notice concerning the imposition of any withdrawal liability or of the institution of any proceeding or other action which may result in the termination of any such Plans by the PBGC or the appointment of a trustee to administer such Plans, (c) promptly advise the Purchasers of the occurrence of any Reportable Event or non-exempt prohibited transaction (as defined in ERISA) with respect to any such Plans of which Company becomes aware, and (f) amend any Plan that is intended to be qualified within the meaning of Section 401 of the Code to the extent necessary to keep the Plan qualified and to cause the Plan to be administered and operated in a manner that does not cause the Plan to lose its qualified status.
6.7 Environmental. Use and operate all of its facilities and properties in material compliance with all Environmental Laws, keep all necessary Licenses in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws.
6.8 Intellectual Property.
(a) Each Note Party will take the steps described in this Section 6.8 with respect to all new or acquired Intellectual Property to which the Company or any Guarantor is now or later becomes entitled that is necessary in the conduct of such Persons business. The Company acknowledges and agrees that the Secured Parties shall have no duties with respect to any Intellectual Property or Licenses of the Company or its Subsidiaries.
(b) The Note Parties shall have the duty, with respect to Intellectual Property that is necessary in the conduct of such Persons business (i) to prosecute diligently any trademark application or service mark application that is part of the trademarks pending as of the date hereof or hereafter, (ii) to prosecute diligently any patent application that is part of the patents pending as of the date hereof or hereafter, and (iii) to take all reasonable and necessary action to preserve and maintain all of the Note Parties trademarks, patents, copyrights, Licenses, and its rights therein, including paying all maintenance fees and filing of applications for renewal, affidavits of use, and affidavits of non-contestability, except in the case of clauses (i) and (ii), where the Company, in its reasonable opinion, determines that the costs for engaging in such prosecution activities exceeds the likely benefit of continued prosecution and, except in the of case (iii), where the Company, in its reasonable opinion, determines that the costs of preserving and maintaining exceeds the value the Company obtains from such preservation and maintenance. Each Note Party will require all employees, consultants, and contractors of such Note Party who were involved in the creation or development of such Intellectual Property to sign agreements containing assignment to the Company or such Guarantor of Intellectual Property rights created or developed and obligations of confidentiality. No Note Party shall abandon any Intellectual Property or License that is necessary in the conduct of the Companys or such Guarantors business.
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(c) From and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, each Note Party will (i) promptly file, at such Note Partys sole cost and expense, any application to register any Intellectual Property with the United States Patent and Trademark Office or the United States Copyright Office if such registration is necessary in connection with the conduct of such Note Partys business, (ii) concurrently with the delivery of financial statements pursuant to Sections 6.1(a) or (b), deliver supplements to Schedule 4(c) to the Security Agreement and any other documents reasonably necessary for the Collateral Agent to record its security interest in such Intellectual Property with the United States Patent and Trademark Office or the United States Copyright Office and (iii) promptly after the delivery of the documents required by clause (ii) above, upon the reasonable request of the Collateral Agent, execute and deliver in favor of the Collateral Agent one or more Intellectual Property Security Agreements to further evidence the Purchasers Lien on such Note Partys Intellectual Property.
6.9 Use of Proceeds. Use the proceeds of the Notes (i) to pay any fees and expenses incurred by the Company in connection with the transactions contemplated hereby and (ii) for general corporate purposes not in violation of any applicable laws. The Company shall not use any proceeds of the sale of the Notes hereunder to, directly or indirectly, purchase or carry any margin stock (as defined in Regulation U) or to extend credit to others for the purpose of purchasing or carrying any margin stock, in either case, in violation of the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.
6.10 Subsidiaries. If any Note Party creates, forms or acquires any Subsidiary (other than an Excluded Subsidiary) on or after the date of this Agreement, such Note Party will, and will cause such Subsidiary to, (a) within 30 days (which 30 days may be extended by the Note Agent at the direction of the Required Holders) of the creation, formation or acquisition of such new Subsidiary, cause such Subsidiary to join the Guaranty as a Guarantor thereunder and (b) from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, within 30 days (which 30 days may be extended by the Collateral Agent at the direction of the Required Holders) of the creation, formation or acquisition of such new Subsidiary, cause such Subsidiary to join the Security Agreement as a Grantor and take all such other actions and execute and deliver, or cause to be executed and delivered, all such documents, instruments, agreements, and certificates as are similar to those described in Sections 4.1(c) and, if requested by the Required Holders, 4.1(g) or that are necessary or desirable to protect, evidence or perfect the security interest of the Collateral Agent in a manner similar to the Liens and assets granted by the existing Note parties under the existing Collateral Documents either by executing and delivering to the Collateral Agent a counterpart or supplement to the existing Collateral Documents or such new documents as are necessary or desirable to evidence, grant or perfect a first priority lien in such assets in favor of Collateral Agent, for the benefit of Secured Parties (including, without limitation, any pledges of Capital Stock (other than with respect to Excluded Property (as defined in the Security Agreement))). The Agents shall be authorized to execute and deliver such documents upon receipt of a certificate from a Responsible Officer of the Company stating that such documents are authorized or permitted under the Note Documents.
6.11 Piggyback Registration Rights. The Company shall provide the Holders of the Notes with customary piggyback registration rights (with respect to the shares of common stock issued upon conversion of the Notes) on all registration statements of the Company, subject to the right, however, of the Company and its underwriters to reduce the number of shares proposed to be registered at the underwriters discretion.
6.12 Further Assurances. Each Note Party will take any action reasonably requested by any Holder in order to effectuate the purposes and terms contained in this Agreement or any other Note Document.
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6.13 Conversion Event. Within 30 calendar days of the occurrence of the first Conversion Event, (i) each of the Note Parties and the Collateral Agent hereby agrees that it shall execute and deliver to each Holder a counterpart of the Security Agreement and the Intellectual Property Security Agreement and take such actions and deliver such other documents as are reasonably necessary, or reasonably required by the Required Holdings, to give effect to this Section 6.13, including, without limitation, delivering and filing (or causing to be delivered and filed) UCC-1 financing statements with respect to the security interests to be granted thereby (provided that any such actions shall not be a condition precedent to the effectiveness of the Security Agreement) and furnishing certificates of insurance issued on applicable ACORD Forms with respect to property and liability insurance for the Company and (ii) in the event that such a Conversion Event is a SPAC and the Parent Entity assumes or otherwise becomes a co-obligor with respect to the Companys Obligations pursuant to Section 10.1, Core Scientific Holding Co. (or its successor by merger) shall remain a co-obligor with such Parent Entity with respect to such Obligations (other than any such Obligation of the Company to deliver Conversion Securities pursuant to Section 2 of the Note, with respect to which delivery Obligation Core Scientific Holding Co. (or it successor by merger) hereby agrees that it shall execute and deliver to each Holder a supplement to the Guaranty, substantially in the form attached thereto as Exhibit C).
7. NEGATIVE COVENANTS OF THE NOTE PARTIES
Each Note Party shall not, and shall cause each of its Subsidiaries not to:
7.1 Liens, Restricted Payments and Dispositions. Prior to the occurrence of a Conversion Event, so long as the Obligations remain outstanding:
(a) Liens. Create, assume or suffer to exist any Liens on any assets of the Note Parties securing debt for borrowed money in excess of an amount at any time outstanding equal to the greater of (x) the sum of (I) the aggregate principal amount of the Existing Notes at any time outstanding (disregarding, for the purposes of this clause (I) any and all PIK Interest (as defined in the Existing Notes) that has been added to the aggregate principal amount of the Existing Notes) plus (II) $50,000,000 and (y) $265,000,000 (such clause (y), the Secured Debt Cap); provided that (x) in no event shall the aggregate principal amount of the Existing Notes at any time outstanding (disregarding, for the purposes of this proviso any and all PIK Interest (as defined in the Existing Notes) that has been added to the aggregate principal amount of the Existing Notes) exceed at any time $215,000,000, (y) the Collateral Agent and the authorized representative with respect to any Indebtedness that is secured on a pari passu basis with the Liens on the Collateral securing the Obligations that is permitted to be secured in reliance on this clause (a) shall have entered into an intercreditor agreement providing for equal and ratable lien priority and perfection for the holders and providers of such Indebtedness at the direction of the Required Holders and substantially in the form attached hereto as Exhibit H (it being understood that the form attached as Exhibit H is acceptable to the Holders) or such other form reasonably satisfactory to the Required Holders (the Intercreditor Agreement) and (z) notwithstanding the foregoing, the Note Parties shall be permitted to incur any letters of credit and any Indebtedness, including Capital Lease Obligations, incurred to finance the acquisition of any fixed or capital assets (including, for the avoidance of doubt, any real property assets) so long as such Liens shall encumber only the assets acquired or financed with the proceeds of such Indebtedness (or, in the case of any letters of credit, cash collateral) and do not attach to any other assets of any Note Party, which letters of credit and Indebtedness set forth in this clause (z) shall, for the avoidance of doubt, be excluded from the calculation of the Secured Debt Cap.
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(b) Restricted Payments.
(i) Pay or make any Restricted Payment to its direct or indirect equityholders; provided that, the foregoing shall not restrict or prohibit any Subsidiary from paying or making any Restricted Payments, directly or indirectly, to the Company, and shall not restrict or prohibit any Restricted Payments, directly or indirectly, from the Company to its direct or indirect equityholders at such times and in such amounts as are necessary to permit:
(1) such equityholder (A) to pay general administrative costs and expenses (including audit and tax fees payable to third party auditors and tax advisors, customary compensation and reasonable costs and expenses of the board of directors or similar managing body of such entity incurred in the ordinary course of business, and franchise taxes and other fees, taxes and expenses required to maintain such entitys existence), (B) to discharge its, its Subsidiaries and its direct and indirect owners income tax liabilities and (C) in the case that the Company is treated as a flow-through entity for U.S. income tax purposes, its direct and indirect owners to discharge their respective U.S. federal, state and local and non-U.S. income tax obligations associated with their ownership of the Company, in each case, so long the amount of any such Restricted Payment is applied for such purpose; and
(2) (x) purchases or cash payments in lieu of fractional shares of Capital Stock arising out of stock dividends, splits, combinations or conversions of Capital Stock in the ordinary course of business and (y) purchases or cash payments in lieu of fractional shares upon conversion of the Notes.
(ii) From and after the occurrence of a Conversion Event, any Restricted Payments made or paid to the direct or indirect equityholders of the Company (other than the Restricted Payments of the type referred to in the proviso to clause (i) above) shall also be made or paid to the Holders in accordance with their Pro Rata Share of the Notes on an as-converted basis as if such Notes had been converted pursuant to their terms at the time of the applicable Restricted Payment.
(c) Asset Dispositions. Consummate any Asset Dispositions; provided that the foregoing shall not restrict or prohibit (A) sales of inventory in the ordinary course of business; (B) the use of cash or cash equivalents in a manner not prohibited by the Note Documents; (C) licenses, sublicenses, leases or subleases granted to third parties in the ordinary course of business not interfering with the business of the Company and its Subsidiaries and which do not materially impair the value of the property so licensed, sublicensed, leased or subleased; (D) dispositions of obsolete, damaged, surplus or worn-out or no longer used or useful equipment; (E) the lapse, abandonment or other dispositions of Intellectual Property that is, in the reasonable business judgment of the Company, no longer economically practicable or commercially desirable to maintain; (F) dispositions by (1) any Subsidiary to the Company, (2) the Company to any Note Party, (3) any Subsidiary to any Note Party or (4) any Subsidiary that is not a Note Party to any other Subsidiary that is not a Note Party; (G) dispositions resulting from any casualty or property losses or condemnation or similar proceeding of, any property or asset of the Company or any of its Subsidiaries; (H) the sale or other disposition of any assets or property of the Company not constituting Collateral; (I) any Asset Disposition so long as such Asset Disposition is made for fair market value; (J) any individual Asset Disposition so long as the consideration therefor does not exceed $1,000,000; and (K) any other Asset Dispositions to a non-affiliated third party so long as the aggregate consideration therefor does not exceed $10,000,000 per fiscal year; provided, further, that notwithstanding the foregoing, any Asset Disposition described in the foregoing clause (K) shall be permissible notwithstanding the fact that the counterparty is an affiliate or a Subsidiary of the Company so long as such Asset Disposition is on fair and reasonable terms no less favorable to the Company or such affiliate or Subsidiary than would be obtainable on comparable arms length transaction with a non-affiliated third party.
7.2 Issuances of Equity. Except to the extent permitted by Section 7.1(c), no Subsidiary of the Company shall issue or sell Capital Stock in such Subsidiary.
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7.3 Modifications of Charter Documents. The Company will not permit, and will cause each of its Subsidiaries not to permit, such Persons Charter Documents to be amended or modified in any way that could reasonably be expected to materially or adversely affect the interests of the Holders in their capacity as Secured Parties (and not, for the avoidance of doubt, as holders of Capital Stock of the Company).
7.4 Compensation or Credit Support. Other than (x) to consenting or approving Holders in connection with a consent or amendment in accordance with Section 10.9 to the extent all Holders are afforded an opportunity to enter into such consent or amendment or (y) in connection with the issuance of warrants to non-consenting Holders pursuant to Section 1(b)(i)(1) of the Notes, the Company shall not enter into any arrangement with any Holder for the purposes of providing additional compensation (in the form of interest, fees or otherwise) or credit support (in the form of additional collateral or otherwise) to such Holder in connection with the Notes without providing such additional compensation or credit support for the ratable benefit of all Holders.
8. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Initial Purchaser hereby represents and warrants as of the Initial Closing Date, and each Additional Purchaser hereby represents and warrants as of the applicable Additional Closing Date as follows:
8.1 Purchase for Own Account. Each Purchaser represents that it is acquiring a Note and the Conversion Securities (collectively, the Securities) solely for its own account and beneficial interest for investment and not for sale or with a view to distribution of the Securities or any part thereof, has no present intention of selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the same, and does not presently have reason to anticipate a change in such intention.
8.2 Information and Sophistication. Without lessening or obviating the representations and warranties of the Note Parties set forth in Section 5 hereof or in any other Note Document or the right of such Purchaser to rely thereon, each Purchaser hereby: (i) acknowledges that it has received all the information it has requested from the Company and it considers necessary or appropriate for deciding whether to acquire the Securities, (ii) represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities and to obtain any additional information necessary to verify the accuracy of the information given the Purchaser, and (iii) further represents that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risk of this investment.
8.3 Ability to Bear Economic Risk. Each Purchaser acknowledges that investment in the Securities involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of its investment.
8.4 Further Limitations on Disposition. Without in any way limiting the representations set forth above, each Purchaser further agrees not to make any disposition of all or any portion of the Securities unless and until:
(c) there is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or
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(d) the Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, such Purchaser shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration under the Act or any applicable state securities laws, provided that no such opinion shall be required for dispositions in compliance with Rule 144, except in unusual circumstances.
Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by such Purchaser to Permitted Transferees, or transfers by gift, will or intestate succession to any spouse or lineal descendants or ancestors of any Purchaser who is an individual, if all transferees agree in writing to be subject to the terms hereof to the same extent as if they were Purchasers hereunder
8.5 Accredited Investor Status. Each Purchaser is an accredited investor as such term is defined in Rule 501 under the Act.
8.6 No Bad Actor Disqualification. Each Holder represents and warrants that neither (A) such Holder nor (B) any entity that controls such Holder or is under the control of, or under common control with, such Holder, is subject to any Disqualification Event, except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Act and disclosed in writing in reasonable detail to the Company. Each Holder represents that such Holder has exercised reasonable care to determine the accuracy of the representation made by such Holder in this paragraph, and agrees to notify the Company if such Holder becomes aware of any fact that makes the representation given by such Holder hereunder inaccurate.
8.7 Foreign Investors. If a Holder is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the Code)), such Holder hereby represents that he, she or it has satisfied itself as to the full observance of the laws of the Holders jurisdiction in connection with any invitation to subscribe for the Securities or any use of its Note, including (A) the legal requirements within the Holders jurisdiction for the purchase of the Securities, (B) any foreign exchange restrictions applicable to such purchase, (C) any governmental or other consents that may need to be obtained, and (D) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Securities. The Holders subscription, payment for and continued beneficial ownership of the Securities will not violate any applicable securities or other laws of the Holders jurisdiction.
8.8 Forward-Looking Statements. With respect to any forecasts, projections of results and other forward-looking statements and information provided to a Holder, such Holder acknowledges that such statements were prepared based upon assumptions deemed reasonable by the Company at the time of preparation. There is no assurance that such statements will prove accurate, and the Company has no obligation to update such statements.
8.9 GreensLedge as Placement Agent. Each Purchaser represents, acknowledges and agrees that: (A) GreensLedge Capital Markets LLC (GreensLedge) has acted as the Companys placement agent for the Securities, (B) such Purchaser is not relying on the advice or recommendations of GreensLedge (including any affiliate, agent, advisor or representative thereof) in connection with such Purchasers purchase of Securities, (C) GreensLedge is not acting as an underwriter or initial purchaser with respect to any Securities, (D) GreensLedge has no responsibility with respect to any marketing or other disclosure documents relating to the Securities (or the completeness of any thereof) furnished to such Purchaser, (E) GreensLedge has not made, and will not make, any representation or warranty with respect to the Company or any Securities (and such Purchaser will not rely on any statements made by GreensLedge, orally or in writing, to the contrary) and (F) GreensLedge and/or any affiliate or employee thereof may purchase or otherwise invest in the Securities.
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8.10 Further Assurances. Each Purchaser agrees and covenants that at any time and from time to time it will promptly execute and deliver to the Company such further instruments and documents and take such further action as the Company may reasonably require in order to carry out the full intent and purpose of this Agreement and to comply with state or federal securities laws or other regulatory approvals.
9. THE AGENTS
9.1 Appointment and Authorization of the Agents. Each Purchaser hereby irrevocably appoints, designates and authorizes the Note Agent to act as the note agent under the Note Documents and, from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, the Collateral Agent to act as the collateral agent under the Note Documents and to act as the agent of (and to hold any security interest created by any Note Document for and on behalf of or on trust for) such Purchaser for purposes of acquiring, holding and enforcing any and all Liens on Collateral to be granted by the Company to secure any of the Obligations, and to take such other action on its behalf in accordance with the provisions of this Agreement and each other Note Document and to exercise such powers and perform such duties, in each case as are expressly delegated to the Agents by the terms of this Agreement or any other Note Document, together with such powers and discretion as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Note Document, the Agents shall have no duties or responsibilities, except those expressly set forth herein, nor shall the Agents have or be deemed to have any fiduciary relationship with any Purchaser or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Note Document or otherwise exist against the Agents. Without limiting the generality of the foregoing sentence, the use of the term agent herein and in the other Note Documents with reference to the Agents is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. Without limiting the generality of the foregoing, from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, the Purchasers hereby expressly authorize the Collateral Agent to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Note Documents and acknowledge and agree that any such action by Collateral Agent shall bind the Purchasers. Whether or not expressly stated in any Note Document, the rights, privileges and immunities of the Agents shall be automatically incorporated by reference therein. Whether or not a party thereto, the Agents shall be express third party beneficiaries of the Notes, including without limitation the payment waterfall set forth therein.
9.2 Liability of Agents. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Note Document or the transactions contemplated hereby, or (b) be responsible in any manner to any Purchaser for any recital, statement, representation or warranty made by the Company or any officer thereof, contained herein or in any other Note Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, this Agreement or any other Note Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Note Document, or the creation, perfection, maintenance of perfection or priority of any Lien or security interest created or purported to be created under the Note Documents, the convertibility of the Notes and the validity or the sufficiency of the Equity Securities (as defined in the Note), or for any failure of the Company or any other party (other than Agents) to any Note Document to
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perform its obligations hereunder or thereunder, except to the extent such loss resulted from the gross negligence or willful misconduct of such Agent-Related Person, as determined by a final nonappealable order of a court of competent jurisdiction. The Note Agent shall have no obligation to monitor the Ledger in the absence of being providing such by the Company in accordance with the terms of the Notes, and may, in its sole discretion either: (i) conclusively rely on the Ledger most-recently delivered to it, (ii) conclusively rely on a statement by a Holder as to the outstanding principal amount of Notes held by it, or (iii) refrain from taking any action until the Note Agent receives a current Ledger from the Company. No Agent-Related Person shall be under any obligation to any Purchaser or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Note Document, or to inspect the properties, books or records of the Company or any affiliate thereof.
The Agents shall not have any duties or obligations except those expressly set forth in the Note Documents. Without limiting the generality of the foregoing, (i) the Agents shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing and (ii) the Agents shall not have any duty to take any discretionary action or exercise any discretionary powers, except, from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, discretionary rights and powers expressly contemplated hereby that the Collateral Agent is instructed in writing to exercise by the Required Holders (or such other requisite number or percentage of Holders as provided in Section 10.9).
In no event shall the Agents be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, epidemics, pandemics, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services or the unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility, it being understood that the Agents shall use reasonable best efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.
9.3 Reliance by the Agents. The Agents shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, facsimile or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper person or persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agents. The Agents shall be fully justified in failing or refusing to take any action under any Note Document unless it shall first receive such advice or concurrence of the Required Holders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Holders against any and all loss, liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Note Document in accordance with a request or consent of the Required Holders (or such greater number of Holders as may be expressly required hereby in any instance), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the of the same; provided that the Agents shall not be required to take any action that, in its opinion or in the opinion of its counsel, may expose the Agents to liability or that is contrary to any Note Document or applicable law.
9.4 Notice of Default. The Agents shall not be deemed to have knowledge or notice of the occurrence of any Event of Default, unless the Agents shall have received written notice from a Purchaser referring to this Agreement, describing such Event of Default and stating that such notice is a notice of event of default. The Agents shall take such action with respect to any Event of Default as may be directed by the Required Holders in accordance with the terms of the Notes; provided that unless and until the Agents has received any such direction, the Agents may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable or in the best interest of the Holders.
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9.5 Agents Reimbursement. Each of the Holders severally agrees to reimburse the Agents, in accordance with such Holders Pro Rata Share, for any reasonable and documented out-of-pocket expenses not reimbursed by the Company (without limiting the obligation of the Company to make such reimbursement pursuant to Section 10.10): (a) for which the Agents are entitled to reimbursement by the Company under this Agreement or any Note Document and (b) after the occurrence and during the continuance of an Event of Default, for any other reasonable and documented expenses incurred by the Agents on the Holders behalf in connection with the enforcement of the Holders rights under this Agreement or any Note Document; provided, however, that (x) the Agents shall not be reimbursed for any such expenses arising as a result of its gross negligence or willful misconduct, as determined by a final nonappealable order of a court of competent jurisdiction and (y) in the event that the Company reimburses the Agents for any such reasonable and documented out-of-pocket expenses, any corresponding amounts previously reimbursed by the Holders to the Agents will be promptly returned to such Holders in accordance with their Pro Rata Share.
9.6 Indemnification. Each of the Holders shall severally indemnify the Agents and their officers, directors, employees, agents, attorneys, accountants, consultants and controlling Persons (to the extent not reimbursed by or on behalf of the Company pursuant to Section 10.10 and without limiting the obligations of the Company to do so), in accordance with their respective Pro Rata Share, from and against any and all liabilities, obligations, damages, penalties, actions, judgments, suits, losses (including accrued and unpaid Agents fees), and reasonable and documented costs, expenses or disbursements of any kind whatsoever which may at any time be imposed on, incurred by or asserted against the Agents or such Persons relating to or arising out of this Agreement, any Note Document, the transactions contemplated hereby or thereby, or any action taken or omitted by the Agents in connection with any of the foregoing; provided, however, that the foregoing shall not extend to actions or omissions to the extent arising from gross negligence or willful misconduct of the Agents, as determined by a final nonappealable order of a court of competent jurisdiction. The Agents shall not be under any obligation to exercise any of the rights or powers vested in it by this Agreement at the request, order or direction of any of the Holders, pursuant to any provision of this Agreement, unless the Required Holders shall have offered (and, if requested, provided) to the Agents security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred by it therein or thereby. The undertaking in this Section 9.6 shall survive the payment of all other Obligations and the resignation of the Agents.
9.7 Collateral Matters. The Purchasers irrevocably agree that, from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, any Lien on any property granted to or held by the Collateral Agent under any Note Document for the benefit of the Secured Parties shall be automatically released (i) upon payment in full of all Obligations (it being understood and agreed that the conversion in full of a Note by the Holder thereof shall be deemed, for purposes of this Section 9.6, to be a repayment of the entire outstanding principal amount (including all capitalized interest) of such Note together with any unpaid accrued interest thereon on the date of such conversion), (ii) subject to Section 10.9, if the release of such Lien is approved, authorized or ratified in writing by the Purchasers or (iii) upon the sale, transfer or other disposition of any Collateral that is not prohibited by the Note Documents. Upon request by the Collateral Agent at any time from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, the Purchasers will confirm in writing the Collateral Agents authority to release particular types or items of property. In each case as specified in this Section 9.7, the Collateral Agent will, from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, promptly (and each Purchaser irrevocably authorizes the Collateral Agent to), at the Companys expense,
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execute and deliver to the Company such documents as the Company may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Note Documents. In connection with any such release, the Collateral Agent shall be entitled to a certificate of a Responsible Officer of the Company stating that such release is authorized and permitted by the Note Documents, upon which the Collateral Agent may conclusively rely. Each party to this Agreement acknowledges and agrees that the Agents shall not have an obligation to file financing statements, amendments to financing statements, or continuation statements, or to perfect or maintain the perfection of the Collateral Agents Lien on the Collateral.
9.8 Successor Agents. The Agents may resign as Agents upon fifteen (15) days notice to the Holders. If an Agent resigns under this Agreement, the Holders shall unanimously appoint a successor representative for the Holders. If no successor representative is appointed prior to the effective date of the resignation of the Agent, the resigning Agent may appoint, after consulting with the Holders and the Company, a successor agent. Upon the acceptance of its appointment as successor representative hereunder, such successor representative shall succeed to all the rights, powers and duties of the retiring Agent, the term Agents shall mean such successor representative and the retiring Agents appointment, powers and duties as Agents shall be terminated. After any retiring Agents resignation hereunder as Agent, the provisions of this Section 9 and Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor representative has accepted appointment as Agent by the date which is fifteen (15) days following a retiring Agents notice of resignation, the retiring Agents resignation shall nevertheless thereupon become effective and the Holders shall perform all of the duties of the Agents hereunder until such time, if any, as the Holders appoint a successor representative as provided for above.
9.9 Intercreditor Agreement. The Collateral Agent is hereby authorized to enter into the Intercreditor Agreement pursuant to Section 7.1(a) and the parties hereto acknowledge that such Intercreditor Agreement, upon execution of the same, shall be binding upon them. From and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, each Secured Party hereby (a) agrees that it will be bound by and will take no actions contrary to the provisions of the Intercreditor Agreement, (b) authorizes and instructs the Collateral Agent, without any further consent of such Secured Party, to enter into the Intercreditor Agreement provided by the Company and accompanied by the certificate specified in Section 7.1(a) and to subject the Liens on the Collateral securing the Obligations to the provisions thereof and (c) authorizes and instructs the Collateral Agent to execute and deliver on behalf of the Secured Parties any amendment (or amendment and restatement) or modification to the Intercreditor Agreement to provide for the incurrence of any Indebtedness permitted hereunder or such other amendments as the Required Holders may specify in writing to the Collateral Agent.
10. MISCELLANEOUS
10.1 Binding Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, expressed or implied, is intended to confer upon any third party any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Notwithstanding anything to the contrary contained herein or in any other Note Documents, in the event of a SPAC, the Obligations of the Company to deliver Conversion Securities pursuant to Section 2 of the Note may be assigned to a Parent Entity, so long as such Parent Entity expressly assumes such Obligation of the Company and becomes a co-Obligor of each other Obligation of the Company (or its successor by merger) under the Note Documents, in each case pursuant to an joinder and assignment and assumption agreement, substantially in the form attached hereto as Exhibit I, and delivers certificates substantially identical to those delivered by the Company on the Initial Closing Date pursuant to clauses (b), (c) and (d) of Section 4.1.
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10.2 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THEREOF.
10.3 JURISDICTION AND VENUE. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OTHER NOTE DOCUMENT AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF ANY PURCHASER, ANY HOLDER OR, FROM AND AFTER THE EXECUTION AND DELIVERY OF THE COLLATERAL DOCUMENTS PURSUANT TO SECTION 6.13, THE COLLATERAL AGENT, TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE COMPANY AGAINST ANY PURCHASER, ANY HOLDER OR ANY OF THEIR AFFILIATES AND, FROM AND AFTER THE EXECUTION AND DELIVERY OF THE COLLATERAL DOCUMENTS PURSUANT TO SECTION 6.13, THE COLLATERAL AGENT OR ANY OF ITS AFFILIATES, INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN THE BOROUGH OF NEW YORK, NEW YORK.
10.4 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE PURCHASERS, THE HOLDERS AND, FROM AND AFTER THE EXECUTION AND DELIVERY OF THE COLLATERAL DOCUMENTS PURSUANT TO SECTION 6.13, THE COLLATERAL AGENT HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
10.5 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of this Agreement shall be interpreted as if such provision were so excluded, and (c) the balance of this Agreement shall be enforceable in accordance with its terms.
10.6 Counterparts. This Agreement may be executed in one or more counterparts (and by different parties hereto in different counterparts), each of which shall be deemed an original, but all of which together shall constitute a single contract. Any counterpart of a signature page to this Agreement may be delivered by facsimile, electronic mail (including .pdf or .tif) or by means of an electronic signature complying with the U.S. federal ESIGN Act of 2000 or the New York Electronic Signature and Records Act or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes to the fullest extent permitted by applicable law. The Note Documents and all notices, approvals, consents, requests and any
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communications hereunder must be in writing (provided that any such communication sent to Agents hereunder must be in the form of a document that is signed manually or by way of a digital signature provided by DocuSign (or such other digital signature provider as specified in writing to the Agents by the authorized representative)), in English. The Company agrees to assume all risks arising out of the use of using digital signatures and electronic methods to submit communications to the Note Agent, including without limitation the risk of the Note Agent acting on unauthorized instructions, and the risk of interception and misuse by third parties.
10.7 Headings; Interpretation. Paragraph headings used in this Agreement are included for convenience of reference only and will not modify the provisions that they precede or affect the interpretation of this Agreement or any other Note Document. The term including shall be interpreted to mean including but not limited to. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.
10.8 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient (and if not, then on the next Business Day), (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. Notices to the Agents shall be effective upon actual receipt thereof. All communications shall be sent, if to the Note Parties, at the address set forth on the signature page of the Company, if to the Agents, at the address set forth on the signature page thereof, and, if to a Purchaser, at the address(es) set forth on the Schedule of Purchasers attached hereto as Schedule 2 or at such other address(es) as the Company or Purchaser may designate by ten (10) days advance written notice to the other parties hereto. Except where notice is specifically required by this Agreement, no notice to or demand on the Company or any of its Subsidiaries in any case shall entitle the Company or any of its Subsidiaries to any other or further notice or demand in similar or other circumstances.
10.9 Amendments; Waiver. Any term of the Notes and this Agreement may be amended or waived with the written consent of the Company and the Required Holders; provided, that without the consent of each Holder, no amendment, modification, termination, or consent shall be effective if the effect thereof would (a) extend the scheduled final maturity of any Note held by any non-consenting Holder, (b) waive, reduce or postpone any scheduled repayment (but not prepayment) with respect to the Note held by any non-consenting Holder; (c) reduce the rate of interest or amount of any fees payable under any Note held by any non-consenting Holder; (d) extend the time for payment of any interest or fees payable under any Note held by any non-consenting Holder; (e) reduce the principal amount of any Note held by any non-consenting Holder; (f) amend, modify, terminate or waive any provision of this Section 10.9; (g) amend the definition of Required Holders; (h) release all or substantially all of the Collateral securing any Note (if any) held by any non-consenting Holder except as expressly provided in the Note Documents, (i) from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13, subordinate the Collateral Agents Liens on Collateral except as expressly provided in the Note Documents; (j) release any Guarantor except as expressly provided in the Note Documents or (k) consent to the assignment or transfer by the Company of any of its rights and obligations under any Note Document held by any non-consenting Holder. No amendment affecting the rights, privileges and immunities of the Agents shall be effective without the consent of such Agent. Notwithstanding anything to the contrary contained herein or in any other Note Documents, no consent of any Holder shall be required pursuant to this Section 10.9 in connection with (i) an assignment and assumption by a Parent Entity of the Companys Obligations in connection with a SPAC, so long as the conditions set forth in Section 10.1 shall have been satisfied, and (ii) any Person (including, without limitation, a Parent Entity in connection with a SPAC) becoming a Guarantor or a co-issuer or co-obligor hereunder and under the Notes; provided, that the Company shall deliver a certificate of a Responsible Officer to the Agents stating that any documents to be executed in connection with a SPAC are authorized and permitted pursuant to the Note Documents.
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10.10 Expenses and Indemnification.
(a) The Company shall not be responsible for any out-of-pocket costs or expenses incurred by such Initial Purchasers in connection with the preparation, execution and delivery of this Agreement and the other Note Documents. The Company shall pay all reasonable and documented out-of-pocket costs and expenses of the Agents (including reasonable and documented fees, expenses and disbursements of its outside counsel) relating to the negotiation, preparation and execution of the Note Documents, review of other documents (including for purposes of due diligence review) in connection with the transactions contemplated hereby and any amendments and waivers hereto or thereto. In addition, the Company agrees to promptly pay in full after the occurrence of an Event of Default, all costs and expenses (including, without limitation, reasonable and documented fees and disbursements of counsel, agents and professional advisers) incurred by the Holders or the Agents in enforcing any obligations of or in collecting any payments due hereunder or under the Notes by reason of such Event of Default or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a workout, or any insolvency or bankruptcy proceedings.
(b) In addition to the payment of expenses pursuant to Section 10.10(a), the Company (as Indemnitor) agrees to indemnify, pay and hold the Purchasers, the Holders and the Agents, and the officers, directors, employees, agents, and affiliates of the Purchasers, the Holders and the Agents (collectively called the Indemnitees) harmless from and against any and all other liabilities, costs, expenses, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees) in connection with any investigative, administrative or judicial proceeding commenced or threatened (excluding claims among Indemnitees (other than claims against an Agent acting in its capacity as such) and, with the exception of claims arising out of otherwise indemnifiable matters (e.g., actions to enforce the indemnification rights provided hereunder), and excluding claims between the Company and an Indemnitee), whether or not such Indemnitee shall be designated a party thereto, which may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Agreement, the Notes, the Note Documents or the other documents related to the transactions contemplated hereby (including, without limitation, the existence or exercise of any security rights with respect to the Collateral in accordance with the Security Agreement), the Purchasers agreement to purchase the Notes or the use or intended use of the proceeds of any of the proceeds thereof to the Company (the Indemnified Liabilities); provided, that the Indemnitor shall not have any obligation to an Indemnitee hereunder with respect to an Indemnified Liability to the extent that such Indemnified Liability arises from the gross negligence or willful misconduct of that Indemnitee as determined by a final nonappealable order of a court of competent jurisdiction. Each Indemnitee shall give the Indemnitor prompt written notice of any claim that might give rise to Indemnified Liabilities setting forth a description of those elements of such claim of which such Indemnitee has knowledge; provided, that any failure to give such notice shall not affect the obligations of the Indemnitor unless (and then solely to the extent) such Indemnitor is not aware of such claim and is materially prejudiced. The Indemnitor shall have the right at any time during which such claim is pending to select counsel to defend and control the defense thereof and settle any claims for which it is responsible for indemnification hereunder (provided that the Indemnitor will not settle any such claim without (i) the appropriate Indemnitees prior written consent, which consent shall not be unreasonably withheld or (ii) obtaining an unconditional release of the appropriate Indemnitee from all claims arising out of or in any way relating to the circumstances involving such claim) so long as in any such event the Indemnitor shall have stated in a writing delivered to the Indemnitee that, as between the Indemnitor and the Indemnitee, the
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Indemnitor is responsible to the Indemnitee with respect to such claim to the extent and subject to the limitations set forth herein; provided, that the Indemnitor shall not be entitled to control the defense of any claim in the event that in the reasonable opinion of counsel for the Indemnitee, there are one or more material defenses available to the Indemnitee which are not available to the Indemnitor, in which case the Indemnitee may retain separate counsel and the Company will pay the reasonable fees and expenses of such counsel (including the reasonable fees and expenses of counsel to such Indemnitee incurred in evaluating whether such a conflict exists); provided further, that with respect to any claim as to which the Indemnitee is controlling the defense, the Indemnitor will not be liable to any Indemnitee for any settlement of any claim pursuant to this Section 10.10(b) that is effected without its prior written consent, which consent shall not be unreasonably withheld. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section 10.10(b) may be unenforceable because it is violative of any law or public policy, the Company shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. The obligations of each of the parties under this Section 10.10 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement, the resignation or removal of any Agent and the termination of this Agreement.
(c) To the extent permitted by applicable law, none of the parties hereto shall assert, and each of the parties hereto hereby waives, any claim against the other parties (including their respective affiliates, partners, stockholders, members, directors, officers, agents, employees and controlling persons), on any theory of liability for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated hereunder, any Note Document, the Notes or the use of the proceeds thereof; provided that nothing contained in this Section 10.10(c) shall limit the Notes Parties indemnification and reimbursement obligations to the extent set forth in this Agreement.
10.11 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to each Purchaser, upon any breach or default of the Company under this Agreement or any other Note Document shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by a Purchaser of any breach or default under this Agreement, or any waiver by such Purchaser of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to such Purchaser, shall be cumulative and not alternative.
10.12 Waiver of Conflicts. Each party to this Note acknowledges that Cooley LLP (Cooley), outside general counsel to the Company, has in the past performed and is or may now or in the future represent the Holders or the Holders affiliates in matters unrelated to the transactions contemplated by this Note (the Note Financing), including representation of the Holders or the Holders affiliates in matters of a similar nature to the Note Financing. The applicable rules of professional conduct require that Cooley inform the parties hereunder of this representation and obtain their consent. Cooley has served as outside general counsel to the Company and has negotiated the terms of the Note Financing solely on behalf of the Company. The Company and the Holders hereby (i) acknowledge that they have had an opportunity to ask for and have obtained information relevant to such representation, including disclosure of the reasonably foreseeable adverse consequences of such representation; (ii) acknowledge that with respect to the Note Financing, Cooley has represented solely the Company, and not any Holder or any stockholder, board member or employee of the Company or director, stockholder or employee of the Holder; and (iii) gives the Holders informed consent to Cooleys representation of the Company in the Note Financing.
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10.13 Obligations Several. The Purchasers obligations hereunder are several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance of any obligation by any other Purchaser hereunder.
10.14 Survival of Representations and Warranties. All of the representations and warranties made by the Note Parties and their Subsidiaries herein shall survive the execution and delivery of this Agreement, any investigation by or on behalf of any Purchaser, acceptance of the Notes and payment therefor, or termination of this Agreement.
10.15 Entire Agreement. This Agreement and the other Note Documents constitute the entire contract among the parties hereto regarding to the subject matters addressed herein and supersede any and all previous agreements, negotiations, and discussions, oral or written, by the parties regarding the subject matters addressed herein.
10.16 Withholding. The Company shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as it is required to deduct and withhold under the Code, or any Tax law, with respect to the making of such payment. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such deduction and withholding was made. If a payment is payable (in whole or in part) in consideration other than cash and if the cash portion of any such payment is insufficient to satisfy all required Tax withholding obligations, the Company shall retain an amount of the non-cash consideration otherwise payable equal in value to the amount required to satisfy any applicable withholding taxes (as reasonably determined by the Company).10.17 PATRIOT ACT. The Agents hereby notify the Company that pursuant to the requirements of the PATRIOT Act, the Company may be required to obtain, verify and record information that identifies the Company, its subsidiaries and the Guarantors, including their respective names, addresses and other information that will allow the Agent to identify, the Company, its subsidiaries and the Guarantors in accordance with the PATRIOT Act.
[Signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
COMPANY: | ||
CORE SCIENTIFIC HOLDING CO. | ||
By: |
/s/ Michael Trzupek |
|
Name: Michael Trzupek | ||
Title: Chief Financial Officer | ||
Address for notices: | ||
Attention: Michael Trzupek, Chief Executive Officer | ||
Email: | ||
Copy to: | ||
Todd DuChene, General Counsel | ||
Email: | ||
In each case, with a copy (which shall not constitute notice) to: | ||
Cooley LLP 1299 Pennsylvania AVE, NW |
||
Suite 700 | ||
Washington, DC 20004 | ||
Attention: Mike Tollini | ||
Email: mtollini@cooley.com |
GUARANTORS: | ||
CORE SCIENTIFIC, INC., a Delaware corporation | ||
By: |
/s/ Michael Trzupek |
|
Name: | Michael Trzupek | |
Title: | Chief Financial Officer | |
AMERICAN PROPERTY ACQUISITION, LLC, a Delaware limited liability company | ||
By: Core Scientific, Inc., its sole member |
||
By: |
/s/ Michael Trzupek |
|
Name: | Michael Trzupek | |
Title: | Chief Financial Officer | |
AMERICAN PROPERTY ACQUISITIONS I, LLC, a North Carolina limited liability company | ||
By: American Property Acquisition, LLC, its sole member |
||
By: Core Scientific, Inc., its sole member |
||
By: |
/s/ Michael Trzupek |
|
Name: | Michael Trzupek | |
Title: | Chief Financial Officer |
AMERICAN PROPERTY ACQUISITIONS VII, LLC, a Georgia limited liability company | ||
By: American Property Acquisition, LLC, its sole member |
||
By: Core Scientific, Inc., its sole member |
||
By: |
/s/ Michael Trzupek |
|
Name: | Michael Trzupek | |
Title: | Chief Financial Officer | |
BLOCKCAP, INC., a Nevada corporation |
||
By: |
/s/ Todd DuChene |
|
Name: | Todd DuChene | |
Title: | Secretary |
U.S. BANK NATIONAL ASSOCIATION, AS NOTE AGENT | ||
By: |
/s/ Joshua A. Hahn |
|
Name: Joshua A. Hahn | ||
Title: Vice President | ||
Address for notices: | ||
U.S. Bank National Association | ||
West Side Flats 60 Livingston Avenue |
||
EP-MN-WS3C | ||
St. Paul, MN 55107 | ||
Attention: Joshua Hahn (Core Sciences) | ||
In each case, with a copy (which shall not constitute notice) to: | ||
Shipman & Goodwin LLP | ||
One Constitution Plaza | ||
Hartford, CT 06103 | ||
Attn: Nathan Plotkin (Core Scientific) |
U.S. BANK NATIONAL ASSOCIATION, AS COLLATERAL AGENT | ||
By: |
/s/ Joshua A. Hahn |
|
Name: Joshua A. Hahn | ||
Title: Vice President | ||
Address for notices: | ||
U.S. Bank National Association | ||
West Side Flats 60 Livingston Avenue |
||
EP-MN-WS3C | ||
St. Paul, MN 55107 | ||
Attention: Joshua Hahn (Core Sciences) | ||
In each case, with a copy (which shall not constitute notice) to: | ||
Shipman & Goodwin LLP | ||
One Constitution Plaza | ||
Hartford, CT 06103 | ||
Attn: Nathan Plotkin (Core Scientific) |
PURCHASER: | ||
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY | ||
By: |
/s/ Eric Partlan |
|
Name: Eric Partlan |
||
Title: Head of Portfolio Management |
CRYPTONIC BLACK, LLC | ||
By: |
/s/ Jennifer LaFrance |
|
Name: Jennifer LaFrance |
||
Title: Manager |
PURCHASER: | ||
FIRST SUN INVESTMENTS, LLC | ||
By: |
/s/ Brent Berge |
|
Name: Brent Berge |
||
Title: Manager |
PURCHASER: |
/s/ Douglas Lipton |
DOUGLAS LIPTON |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO TACTICAL VALUE SPN INVESTMENTS, L.P. |
||
By: Apollo Tactical Value SPN Management, LLC, its investment manager | ||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt |
||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO CENTRE STREET PARTNERSHIP, L.P. By: Apollo Centre Street Management, LLC, its investment manager |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt |
||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO LINCOLN FIXED INCOME FUND, L.P. |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt |
||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO MOULTRIE CREDIT FUND, L.P. By: Apollo Moultrie Credit Fund Management, LLC, its investment manager |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
BLOCKFI LENDING LLC |
||
By: |
/s/ Rene van Kesteren |
|
Name: Rene van Kesteren | ||
Title: Head of Institutions |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
WOLFSWOOD PARTNERS LP |
||
By: |
/s/ Jason Comerchen |
|
Name: Jason Comerchen | ||
Title: Managing Member |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. |
ADDITIONAL PURCHASER: |
/s/ Robert Fedrock |
Robert Fedrock |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
TJC3 LLC |
||
By: |
/s/ Thomas J. Coleman |
|
Name: Thomas J. Coleman | ||
Title: Trustee of the Thomas J. Coleman Revocable Trust as the Sole Member of TJC3 LLC |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
KMR CS Holdings, LLC |
||
By: |
/s/ |
|
Name: | ||
Title: Manager |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
The Sear Family 1996 Trust |
||
By: |
/s/ Mark Sear |
|
Name: Mark Sear | ||
Title: Trustee |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
JSK Partnership LLC |
||
By: |
/s/ |
|
Name: | ||
Title: Co-managing member |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Wormser Family Partnership II, LP |
||
By: |
/s/ Ken Wormser |
|
Name: Ken Wormser | ||
Title: Partner |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
TBC 222 LLC |
||
By: |
/s/ |
|
Name: | ||
Title: Managing Partner |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder.
ADDITIONAL PURCHASER: |
/s/ Frank Polaro Frank Polaro |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder.
ADDITIONAL PURCHASER: |
/s/ David Sarner David Sarner |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder.
ADDITIONAL PURCHASER: |
/s/ James Pulaski James Pulaski |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
SunnySide Consulting and Holdings, Inc. | ||
By: |
/s/ Taras Kulyk |
|
Name: Taras Kulyk | ||
Title: Director / Principal |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
1994 Steinfeld Family Trust | ||
By: |
/s/ Jake Steinfeld |
|
Name: Jake Steinfeld | ||
Title: Trustee |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Better Downtown Miami, LLC | ||
By: |
/s/ Marc Roberts |
|
Name: Marc Roberts | ||
Title: Manager |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder.
ADDITIONAL PURCHASER: |
/s/ Jason Capello Jason Capello |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder.
ADDITIONAL PURCHASER: |
/s/ Vineet Agrawal Vineet Agrawal |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Milos Core LLC | ||
By: |
/s/ Scott Packman |
|
Name: Scott Packman | ||
Title: Partner |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Barkley Investments, LLC | ||
By: |
/s/ Jason Paul Godfrey |
|
Name: Jason Paul Godfrey | ||
Title: President, its managing member, Godfrey Capital |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Richard Katz 2016 GST TRUST | ||
By: |
/s/ Richard Katz |
|
Name: Richard Katz | ||
Title: Director |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder.
ADDITIONAL PURCHASER: |
/s/ John Quinn John Quinn |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Northdata Holdings Inc. | ||
By: |
/s/ Daniel Rafuse |
|
Name: Daniel Rafuse | ||
Title: Chairman |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Monbanc Inc. | ||
By: |
/s/ Daniel Rafuse |
|
Name: Daniel Rafuse | ||
Title: Chairman |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Sabby Volatility Warrant Master Fund, Ltd. | ||
By: |
/s/ |
|
Name: | ||
Title: Chief Operating Officer |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Leon J. Simkins Non-Exempt Trust | ||
FBO Michael Simkins | ||
By: |
/s/ Michael Simkins-Rubell |
|
Name: Michael Simkins-Rubell | ||
Title: Trustee |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
FTF Diversified Holdings, LP | ||
By: |
/s/ Anthony Fadell |
|
Name: Anthony Fadell | ||
Title: Principal |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
FGK Investments Ltd. | ||
By: |
/s/ Joaquin Palomo |
|
Name: Joaquin Palomo | ||
Title: Director |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Neso Investment Group Ltd. | ||
By: |
/s/ Ernesto Castillo Kriete |
|
Name: Ernesto Castillo Kriete | ||
Title: Director |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Ferro Investments Ltd. | ||
By: |
/s/ Marco Baldocchi Kriete |
|
Name: Marco Baldocchi Kriete | ||
Title: Director |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Galaxy Digital LP by its general partner, Galaxy Digital GP LLC |
||
By: |
/s/ Chris Ferraro |
|
Name: Chris Ferraro | ||
Title: Authorized Signatory |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Corbin ERISA Opportunity Fund, Ltd. | ||
By: |
/s/ Cesar Bello |
|
Name: Cesar Bello | ||
Title: Deal Counsel |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Corbin Opportunity Fund, L.P. | ||
By: |
/s/ Cesar Bello |
|
Name: Cesar Bello | ||
Title: Deal Counsel |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Levbern Management LLC | ||
By: |
/s/ Andrew Ward |
|
Name: Andrew Ward | ||
Title: Member |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
JPAS Crypto Infrastructure LLC | ||
By: |
/s/ George Lusch |
|
Name: George Lusch | ||
Title: Chief Financial Officer |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
JPAS Crypto Infrastructure-A S.P. | ||
By: |
/s/ George Lusch |
|
Name: George Lusch | ||
Title: Chief Financial Officer |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
JPAS Credit-A S.P. | ||
By: |
/s/ George Lusch |
|
Name: George Lusch | ||
Title: Chief Financial Officer |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
JPAS Credit LLC | ||
By: |
/s/ George Lusch |
|
Name: George Lusch | ||
Title: Chief Financial Officer |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Cannon Investments LLC | ||
By: |
/s/ Andrew Rosen |
|
Name: Andrew Rosen | ||
Title: Manager |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Andrew Rosen 2004 Successor Insurance Trust | ||
By: |
/s/ Dan Nir |
|
Name: Dan Nir | ||
Title: Manager |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
XMS Core Convert Holdings LLC | ||
By: |
/s/ John McGarrity |
|
Name: John McGarrity | ||
Title: Managing Director |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Amplify Transformational Data Sharing ETF | ||
By: |
/s/ Charles A. Ragauss |
|
Name: Charles A. Ragauss | ||
Title: Portfolio Manager |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Marsico AXS CS LLC | ||
By: |
/s/ |
|
Name: | ||
Title: Manager |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Gullane Digital Asset Partners, LLC | ||
By: |
/s/ Richard A. Miller, III |
|
Name: Richard A. Miller, III | ||
Title: Managing Partner |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Gullane Capital Partners, LLC | ||
By: |
/s/ Richard A. Miller, III |
|
Name: Richard A. Miller, III | ||
Title: Managing Partner |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Marsico AXS CS LLC | ||
By: |
/s/ |
|
Name: | ||
Title: Manager |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Transatlantic Mobility Holdings II LLC | ||
By: |
/s/ |
|
Name: | ||
Title: Chairman & CEO |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
OIP SPV Core Scientific, LLC | ||
By: |
/s/ |
|
Name: | ||
Title: Manager |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
OIP SPV CS, LLC | ||
By: |
/s/ |
|
Name: | ||
Title: Manager |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Pescadero Capital, LLC | ||
By: |
/s/ Mark Hickson |
|
Name: Mark Hickson | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Amplify Transformational Data Sharing ETF | ||
By: |
/s/ Charles A. Ragauss |
|
Name: Charles A. Ragauss | ||
Title: Portfolio Manager |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Blackrock Credit Alpha Master Fund L.P. | ||
By: |
/s/ Christopher Biasotti |
|
Name: Christopher Biasotti | ||
Title: Authorized Signatory |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
HC NCBR Fund | ||
By: BlackRock Financial Management Inc., in its capacity as investment advisor | ||
By: |
/s/ Christopher Biasotti |
|
Name: Christopher Biasotti | ||
Title: Authorized Signatory |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
The Obsidian Master Fund | ||
By: BlackRock Financial Management Inc., its Investment Advisor | ||
By: |
/s/ Christopher Biasotti |
|
Name: Christopher Biasotti | ||
Title: Authorized Signatory |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. |
ADDITIONAL PURCHASER: |
/s/ John P. Joliet |
John P. Joliet |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
Gullane Digital Asset Partners QP, LLC | ||
By: |
/s/ Richard Miller |
|
Name: Richard Miller | ||
Title: Managing Member |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser, a Purchaser and a Holder hereunder. | ||
ADDITIONAL PURCHASER: | ||
OMEGA INTERCEPTOR RESTRICTED LTD | ||
By: |
/s/ Bajmar Al Rosan |
|
Name: Bajmar Al Rosan | ||
Title: Authorized Signatory |
SCHEDULE 2
SCHEDULE OF PURCHASERS
SCHEDULE 5.1
NOTE PARTIES
SCHEDULE 5.13
SUBSIDIARIES
SCHEDULE 5.14
CAPITALIZATION
(see attached)
SCHEDULE 5.17
INDEBTEDNESS
EXHIBIT A
FORM OF CONVERTIBLE PROMISSORY NOTE
(see attached)
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR UNDER THE SECURITIES LAWS OF ANY STATES IN THE UNITED STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT PURSUANT TO SECTION 5(C) HEREOF AND AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (WITHIN THE MEANING OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE CODE)). UPON WRITTEN REQUEST, THE COMPANY WILL PROMPTLY MAKE AVAILABLE TO ANY HOLDER OF THIS NOTE THE FOLLOWING INFORMATION: (1) THE ISSUE PRICE AND ISSUE DATE OF THE NOTE, (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE NOTE AND (3) THE YIELD TO MATURITY OF THE NOTE. HOLDERS SHOULD CONTACT THE CHIEF FINANCIAL OFFICER OF THE COMPANY AT [***].
[FORM OF] CONVERTIBLE PROMISSORY NOTE
Note Series: |
2021 Convertible Promissory Notes |
|||||
Date of Note: | [__], 2021 | |||||
Initial Principal Amount of Note: | $[__], plus any PIK Interest that has accrued and been capitalized pursuant to the terms of this Note |
For value received CORE SCIENTIFIC HOLDING CO., a Delaware corporation (the Company), promises to pay to the undersigned holder or such partys successors or permitted assigns (the Holder) the principal amount set forth above with interest to accrue on such outstanding principal amount at a rate of 10% per annum, 4% of which shall be payable in cash (Cash Interest) and 6% of which shall be payable in kind by capitalizing such interest payment and increasing the outstanding principal amount of this Note by the amount thereof (PIK Interest). Interest shall accrue on the outstanding principal amount of this Note commencing on (and including) the date of original issuance thereof (or the most recent interest payment date) and continuing until the earlier to occur of (x) the date this Note is repaid or prepaid in full and (y) the date this Note is converted in full by the Holder pursuant to Section 2 hereof. Cash Interest shall be due and payable and PIK Interest shall be capitalized quarterly in arrears on the first day of each fiscal quarter, commencing on October 1, 2021. Interest shall be computed on the basis of a year of 365 days for the actual number of days elapsed. This Note shall be automatically deemed to include any accrued PIK Interest thereon and the Company shall not be obligated to issue any subsequent Notes reflecting PIK Interest. This Note is one of the Notes issued pursuant to the Purchase Agreement. All capitalized terms used but not otherwise defined in this Note will have the same meanings in this Note as in the Purchase Agreement referred to below.
The following is a statement of the rights of the Holder and the conditions to which this Note is subject, and to which the Holder, by the acceptance of this Note, agrees:
1. |
BASIC TERMS. |
(a) Series of Notes. This convertible promissory note (this Note) is issued as part of a series of notes designated by the Note Series above (collectively, the Notes), having an initial aggregate principal amount of up to $300,000,000.00 and issued pursuant to, and to those persons and entities (collectively, the Holders) party, as Purchasers, to, that certain Convertible Note Purchase Agreement, dated as of even date herewith (as amended, restated, supplemented and/or otherwise modified from time to time, the Purchase Agreement), by and among the Company, each Purchaser party thereto, U.S. Bank National Association, as Note Agent, and, upon the execution and delivery of the Collateral Documents pursuant to Section 6.13 of the Purchase Agreement, U.S. Bank National Association, as Collateral Agent for the Secured Parties. The Company shall maintain a ledger of all Holders (Ledger), which shall include all PIK Interest accrued and capitalized, and which shall be available (i) promptly upon request to the Agents and the Holder, (ii) promptly after any transfer or assignment of any Note, (iii) promptly upon conversion of any Note and (iv) on the tenth business day prior to any interest payment date.
(b) Payments.
(i) Voluntary Prepayments. Subject to and following the expiration of any applicable lockup period set forth under any lockup agreement to which the Holder, the Company and the Companys underwriters are a party, and unless otherwise converted in full or in part pursuant to Section 2 hereof (including following delivery of the Companys notice referred to in this subsection (b)(i)(2)), the Company may at any time, upon ten (10) Business Days prior written notice to the Holder and the Note Agent (which notice may be conditioned or rescinded upon such events as may be specified in such notice) prepay all or any portion of this Note in an amount equal to (x) the outstanding principal amount (including all accrued PIK Interest not already added to the principal amount of this Note) of this Note being prepaid at such time, together with all accrued unpaid Cash Interest on such outstanding principal amount at such time multiplied by (y) 200% (such amount, the Repayment Amount).
(ii) Repayment. Unless otherwise prepaid by the Company pursuant to Section 1(b)(i) or converted in full pursuant to Section 2 hereof, this Note shall be repaid in full on the earlier to occur of (x) April 19, 2025 (the Maturity Date) and (y) acceleration by the Holders representing at least twenty-five percent (25%) of the aggregate outstanding principal amount of the Notes issued pursuant to the Purchase Agreement at such time after the occurrence of an Event of Default in accordance with the terms hereof, in each case, in an amount equal to the outstanding principal (including all accrued PIK Interest not already added to the principal amount of this Note) of this Note, plus all unpaid accrued Cash Interest thereon.
(iii) Payments Generally.
(1) This Note and the other Notes issued pursuant to the Purchase Agreement are pari passu in right of payment and all payments (other than conversion) under this Note and such other Notes shall be made in accordance with each Holders Pro Rata Share. All payments shall be applied first, to the payment of expenses due under this Note and the other Note Documents to the Agents, second, to the payment of expenses due under this Note and the other Note Documents to the Holders, third, unpaid accrued interest of this Note and fourth, if the amount of payment exceeds the amount of all such expenses and accrued interest, to the payment of outstanding principal (including all accrued PIK Interest not already added to the principal amount of this Note) of this Note. The conversion of this Note by the Holder pursuant to the terms hereof shall be deemed to be a repayment of the full outstanding principal amount (including all accrued PIK Interest not already added to the principal amount of this Note) of such Note together with any unpaid accrued Cash Interest thereon on the date of such conversion.
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(2) All payments to be made by the Company shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff, except with respect to Taxes required to be deducted and/or withheld under applicable law. All payments (other than by means of conversion pursuant to the terms of the Notes), including any prepayments, of interest and principal to be made by the Company hereunder shall be made by the Company to the Note Agent, in cash, for the account of the respective Holders to which such payment is owed, at the applicable Notes Agents Principal Office for payment and in same day funds not later than 11:00 a.m. on the date specified herein. The Notes Agent will promptly distribute to each Holder its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to each Holder at the address specified in the Holders Administrative Questionnaire (or at such other address as the Holder may indicate in writing to the Note Agent from time to time). All payments received by the Notes Agent after 11:00 a.m. may (at the sole discretion of the Notes Agent) in each case be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.
(3) If any payment to be made by the Company shall come due on a day other than a Business Day, any interest shall be payable, and any PIK Interest shall be capitalized, on the next succeeding Business Day without additional interest accruing thereon.
(4) Whenever any payment received by the Notes Agent under this Agreement or any of the other Notes Documents is insufficient to pay in full all amounts due and payable to the Notes Agent and the Holders under or in respect of this Agreement and the other Notes Documents on any date, such payment shall be distributed by the Notes Agent and applied by the Notes Agent and the Holders in the order of priority set forth in Section 1(b)(iii)(1). If the Notes Agent receives funds for application to the Obligations of the Company under or in respect of the Notes Documents under circumstances for which the Notes Documents do not specify the manner in which such funds are to be applied, the Notes Agent may, but shall not be obligated to, elect to distribute such funds to the Holders in accordance with the Holders Pro Rata Share of such of the outstanding Notes or other Obligations then owing to the Holder.
(iv) Withholding. Notwithstanding anything to the contrary herein, the Company shall be entitled to deduct and withhold from the consideration otherwise payable under the Note such amounts as it is required to deduct and withhold under the Code, or any other tax law, with respect to the making of such payment. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Note as having been paid to the Person in respect of whom such deduction and withholding was made. If a payment is payable (in whole or in part) in consideration other than cash and if the cash portion of any such payment is insufficient to satisfy all required tax withholding obligations, the Company shall retain an amount of the non-cash consideration otherwise payable equal in value to the amount required to satisfy any applicable withholding taxes (as reasonably determined by the Company).
2. |
CONVERSION. |
(a) Conversion upon an Offering. In the event that the Company (i) issues and sells shares of its equity securities (Equity Securities) to investors (the Investors) in a private offering or placement with total gross proceeds to the Company of at least $50,000,000 (excluding the conversion of the Notes or other convertible securities issued for capital raising purposes (e.g., Simple Agreements for
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Future Equity)), (ii) issues and sells its common stock (Common Stock) to Investors in an underwritten public offering pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Act or under equivalent securities laws and regulations of any other jurisdiction (including, for the avoidance of doubt, a SPAC), (iii) lists its Common Stock (other than shares of Common Stock not eligible for resale under Rule 144 under the Securities Act) on a national securities exchange by means of an effective registration statement on Form S-1 filed by the Company with the SEC that registers shares of existing capital stock of the Company for resale, as approved by the Companys board of directors, or (iv) lists its Common Stock on any stock exchange (the occurrence of each event set forth in clauses (i) through (iv) above, an Offering and, together with the occurrence of a Change of Control as provided in Section 2(b) below, each, a Conversion Event), in each case, while this Note remains outstanding, the Holder shall have the right at any time and from time to time during the period commencing on the date of consummation of such Offering until the Maturity Date, to convert, in whole or in part, the outstanding principal amount (including all accrued PIK Interest not already added to the principal amount of this Note) of this Note, together with all unpaid accrued Cash Interest thereon, into Equity Securities or Common Stock of the Company (as applicable) at a conversion price equal to the Applicable Conversion Price (as defined below) (which shall be determined, for the avoidance of doubt, on the date of the consummation of such Offering). The issuance of Equity Securities or Common Stock by the Company (as applicable) pursuant to the conversion of this Note shall be upon and subject to the same terms and conditions (other than as otherwise set forth herein) applicable to Equity Securities or Common Stock of the Company (as applicable), sold in the applicable Offering.
(b) Conversion upon a Change of Control. In the event the Company consummates a Change of Control (as defined below) while this Note remains outstanding, the Company shall repay the outstanding principal amount of this Note in an amount equal to the Repayment Amount; provided, however, that upon the written election of the Holder made not less than five (5) days prior to the Change of Control, the Company shall convert the outstanding principal amount of this Note (including all accrued PIK Interest not already added to the principal amount of this Note) and any unpaid accrued Cash Interest into Common Stock at a conversion price equal to the Applicable Conversion Price (which shall be determined, for the avoidance of doubt, on the date of consummation of such Change of Control) (assuming conversion of all securities convertible into Common Stock and exercise of all outstanding options and warrants, but excluding the shares of equity securities of the Company issuable upon the conversion of Notes or other convertible securities issued for capital raising purposes (e.g., Simple Agreements for Future Equity)). The Company shall give the Holder and the Note Agent written notice of any Change of Control at least ten (10) Business Days prior to the consummation thereof, which notice will contain the material terms and conditions (including price and form of consideration) of the Change of Control, the identity of the parties to the Change of Control and the intended date of the Change of Control.
For purposes of this Note, (i) a Change of Control means, at any time, any Person or group other than the Permitted Holders (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors of the Company; (ii) Permitted Holders means each of BCV 55 LLC, BCV 66 LLC, BCV 77 LLC and each of their respective affiliates; (iii) Fair Market Value Per Common Share means the cash and/or the value of the property, rights or securities to be paid or distributed per share of Common Stock of the Company to the holders of Common Stock of the Company pursuant to a Change of Control or a SPAC (with the value of such property, rights or securities being determined in good faith by the board of directors of the Company); (iv) the Applicable Conversion Price means a conversion price equal to (a) 80% of either (x) the cash price paid per share for Equity Securities or Common Stock of the Company (as applicable) by the Investors in an Offering (other than a SPAC) or (y) the Fair Market Value Per Common Share in a Change of Control or a SPAC, as applicable, if the Conversion Event occurs on or prior to April 19, 2022, (b) 75% of either (x) the cash price paid per share for Equity Securities or
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Common Stock of the Company (as applicable) by the Investors in an Offering (other than a SPAC) or (y) the Fair Market Value Per Common Share in a Change of Control or a SPAC, as applicable, if the Conversion Event occurs on or after April 19, 2022 but prior to April 19, 2023, (c) 70% of either (x) the cash price paid per share for Equity Securities or Common Stock of the Company (as applicable) by the Investors in an Offering (other than a SPAC) or (y) the Fair Market Value Per Common Share in a Change of Control or a SPAC, as applicable, if the Conversion Event occurs on or after April 19, 2023 but prior to April 19, 2024 and (d) 65% of either (x) the cash price paid per share for Equity Securities or Common Stock of the Company (as applicable) by the Investors in an Offering (other than a SPAC) or (y) the Fair Market Value Per Common Share in a Change of Control or a SPAC, as applicable, if the Conversion Event occurs on or after April 19, 2024 but prior to April 19, 2025; (v) in connection with any SPAC, each reference to Company shall be deemed to also refer to a Parent Entity that has become a co-obligor with respect to the Companys Obligations hereunder (except that solely such Parent Entity, and not Core Scientific Holding Co. (or its successor by merger), shall be obligated to deliver Equity Securities or Common Stock pursuant to this Section 2); and (vi) in connection with any SPAC, each reference to Common Stock shall be deemed to refer to the kind and the amount of property that a holder of one share of Common Stock of the Company would be entitled to receive on account of the consummation of such SPAC.
(c) Procedure for Conversion. Upon the conversion in whole or in part of this Note into Equity Securities or Common Stock of the Company (as applicable), the Holder shall surrender this Note to the Company and deliver to the Company any documentation reasonably required by the Company (including, in the case of an Offering, all financing documents executed by the Investors in connection with such Offering). The Company shall not be required to issue or deliver the Equity Securities or Common Stock of the Company (as applicable) into which this Note may convert until the Holder has surrendered this Note to the Company and delivered to the Company any such documentation. The Company shall, as soon as practicable after the surrender of this Note and delivery to the Company of such documentation deliver to the Holder (i) a certificate or certificates for the number of shares of Equity Securities or Common Stock of the Company (as applicable) into which this Note is convertible in whole or in part, rounded downward to the nearest whole share and cash for the amounts not so converted as a result of the above-referenced downward rounding, registered in the name of such Investor or registered nominee or assignee and (ii) to the extent the Holder has converted only a portion of the outstanding principal amount of this Note, a replacement Note for the outstanding principal amount of this Note not converted. Upon the conversion in full or in part of this Note into Equity Securities or Common Stock of the Company (as applicable) pursuant to the terms hereof, in lieu of any fractional shares to which the Holder would otherwise be entitled, the Company shall pay the Holder cash equal to such fraction multiplied by the price at which this Note converts. Upon conversion of this Note in full or in part and payment of cash representing any fractional share pursuant to this Section 2(c), the Company shall be forever released from all its obligations and liabilities under this Note and this Note shall be deemed of no further force or effect, whether or not the original of this Note has been delivered to the Company for cancellation.
(d) Taxes. The Company shall pay any and all stamp, stock transfer, stock issuance and other similar taxes that may be payable in respect of any issuance or delivery of shares of Equity Securities or Common Stock of the Company (as applicable) upon conversion of this Note pursuant to this Section 2. The Company shall not, however, be required to pay any income, capital gains or similar tax of the recipient of Equity Securities or Common Stock of the Company (as applicable) or any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Equity Securities or Common Stock of the Company (as applicable) in a name other than that in which this Note so converted was registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid.
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3. |
SECURED NOTE. |
Upon the execution and delivery of the Collateral Documents pursuant to Section 6.13 of the Purchase Agreement, this Note shall be secured by a first-priority Lien on the Collateral (subject to Permitted Liens) pursuant to the Security Agreement.
4. |
EVENTS OF DEFAULT. |
If there shall be any Event of Default (as defined below) hereunder, at the option and upon the declaration of the Holders representing at least twenty-five percent (25%) of the aggregate outstanding principal amount of the Notes issued pursuant to the Purchase Agreement at such time and upon written notice to the Company (which election and notice shall not be required in the case of an Event of Default under subsection (v) or (vi) below), this Note shall accelerate and all principal (including all accrued PIK Interest not already added to the principal amount of this Note) and all unpaid accrued Cash Interest shall automatically become immediately due and payable. The occurrence of any one or more of the following shall constitute an Event of Default:
(i) the Company fails to pay to the Holder (i) the principal of this Note as and when due or (ii) within five (5) Business Days after the same becomes due any Cash Interest on this Note or any fees or any other Obligations;
(ii) any representation or warranty made or deemed made by or on behalf of the Company or any of its Subsidiaries to the Holder under or in connection with the Note Documents or any certificate or information delivered in connection therewith shall be materially false when made;
(iii) the Company and its Subsidiaries fail to observe or perform any term, covenant, or provision contained in Section 7 of the Purchase Agreement and such non-observance or non-performance shall not have been remedied or waived within thirty (30) days after the earlier of (i) the Company becoming aware of such non-observance or non-compliance or (ii) receipt by the Company of notice from a Holder of such non-observance or non-compliance;
(iv) the Company and its Subsidiaries fail to observe or perform any other term, covenant or provision contained in the Purchase Agreement (other than those specified elsewhere in this Section 4) or any other Note Document and such non-observance or non-performance shall not have been remedied or waived within thirty (30) days after the earlier of (i) the Company becoming aware of such non-observance or non-compliance or (ii) receipt by the Company of notice from a Holder of such non-observance or non-compliance;
(v) the Company or any Material Subsidiary shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) admit in writing its inability to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) take any action for the purpose of effecting any of the foregoing;
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(vi) proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or any of its Material Subsidiaries, or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or any of its Material Subsidiaries, if any, or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced, or an order for relief shall be entered in any such proceeding, or such proceeding shall not be dismissed or discharged within 60 days of commencement;
(vii) the Company fails to pay when due any principal of or interest on or any other amount payable in respect of, or breaches or defaults under any other term of, any mortgage, indenture, agreement or other instrument under which there may be outstanding any Indebtedness in an aggregate principal amount of in excess of $10,000,000, in each case, beyond the grace period, if any, if the effect of such non-payment, breach or default is to cause such Indebtedness to become or be declared due and payable (or subject to a compulsory repurchase or redemption) prior to its stated maturity;
(viii) any court, government, or Governmental Authority shall condemn, seize or otherwise appropriate, or take custody or control of, all or any material portion of the property of the Company and its Subsidiaries, taken as a whole;
(ix) one or more judgments or orders for the payment of money in excess of $10,000,000 (or the equivalent thereof in currencies other than U.S. dollars) in the aggregate shall be entered or filed against the Company or any of its Subsidiaries and shall remain undischarged, unvacated, unbonded or unstayed for a period of thirty (30) consecutive days;
(x) (i) the occurrence of a Reportable Event with respect to any Plan, (ii) the filing of a notice of intent to terminate a Plan by the Company, any ERISA Affiliate or any Subsidiary, the institution of proceedings to terminate a Plan by the PBGC or any other Person; (iii) the withdrawal in a complete withdrawal or a partial withdrawal as defined in Sections 4203 and 4205, respectively, of ERISA by the Company, any ERISA Affiliate or any Subsidiary of the Company from any Multiemployer Plan, (iv) the incurrence of any material increase in the contingent liability of the Company or any of its Subsidiaries with respect to any employee welfare benefit plan as defined in Section 3(1) of ERISA which covers retired employees and its beneficiaries or (v) the Unfunded Pension Liabilities of all Single Employer Plans shall exceed (in the aggregate) $10,000,000, in each such case which, either individually or in the aggregate, would be reasonably expected to result in liability to any Note Party in excess of $10,000,000;
(xi) the institution by the Company, any ERISA Affiliate or any Subsidiary of steps to terminate any Plan if, in order to effectuate such termination, the Company, such ERISA Affiliate or such Subsidiary, as the case may be, would be required to make a contribution to such Plan, or would incur a liability or obligation to such Plan, in excess of $10,000,000, or the institution by the PBGC of steps to terminate any Plan, which would reasonably be expected to result in material liability to any Note Party;
(xii) the Company or any Material Subsidiary shall (i) be the subject of any proceeding pertaining to the release by the Company, any such Material Subsidiary or any other Person of any Hazardous Material into the environment or (ii) violate any Environmental Law, which, in either case could reasonably be expected to have a Material Adverse Effect;
(xiii) from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13 of the Purchase Agreement, any Collateral Document shall for any reason fail to create a valid and perfected first priority (subject to any Permitted Liens) security interest in any collateral purported to be covered thereby, except as permitted by the terms of such Collateral Document, or any Collateral Document shall fail to remain in full force or effect (other than in accordance with the terms hereof or thereof) or any action taken by the Company or any Subsidiary shall be taken to discontinue or to assert the invalidity or unenforceability of such Collateral Document;
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(xiv) any intercreditor agreement or subordination agreement relating to any Indebtedness of any Note Party subordinated to the Obligations, or any subordination provisions of any note or other document running to the benefit of the Holders in respect of such Indebtedness, including, from and after the execution and delivery of the Collateral Documents pursuant to Section 6.13 of the Purchase Agreement, the Intercreditor Agreement, shall cease for any reason to be in full force and effect other than in accordance with the terms hereof or thereof or any Note Party or any of their Subsidiaries shall so assert in writing; or
(xv) the Note Parties shall be enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of the business of the Note Parties, taken as a whole.
5. |
MISCELLANEOUS PROVISIONS. |
(a) Waivers. The Company hereby waives demand, notice, presentment, protest and notice of dishonor.
(b) Further Assurances. The Holder agrees and covenants that at any time and from time to time the Holder will promptly execute and deliver to the Company such further instruments and documents and take such further action as the Company may reasonably require in order to carry out the full intent and purpose of this Note and to comply with state or federal securities laws or other regulatory approvals.
(c) Transfers of Notes. Subject to the Companys prior written consent (not to be unreasonably withheld or delayed) and to the extent permitted by applicable law, this Note may be transferred only upon its surrender to the Company for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, this Note shall be reissued to, and registered in the name of, the transferee, or a new Note for like principal amount and interest shall be issued to, and registered in the name of, the transferee. Interest and principal shall be paid solely to the registered holder of this Note. Such payment shall constitute full discharge of the Companys obligation to pay such interest and principal. Upon the effectiveness of any transfer pursuant to this Section 5(c) the Company shall provide an updated Ledger to the Note Agent. Any transfer of this Note in contravention of this Section 5(c) shall be void and the Company shall be entitled to continue to treat the Holder as the holder of this Note for all purposes under the Note Documents. The Company shall at all times maintain a book-entry system, which shall reflect ownership of this Note and interests therein. This Note is intended to be in registered form for United States federal tax purposes.
(d) Market Standoff. To the extent requested by the Company or an underwriter of securities of the Company, each Holder and any permitted transferee thereof shall not, without the prior written consent of the underwriters in an underwritten public offering pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Act or under equivalent securities laws and regulations of any other jurisdiction, offer, sell, make any short sale of, grant or sell any option for the purchase of, lend, pledge, otherwise transfer or dispose of (directly or indirectly), enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership (whether any such transaction is described above or is to be settled by delivery of Securities or other securities, in cash, or otherwise), any Securities or other shares of stock of the Company then owned by such Holder or any transferee thereof, or enter into an agreement to
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do any of the foregoing, for up to 180 days following the consummation of any such offering. For purposes of this paragraph, Company includes the Company or any other direct or indirect parent entity of the Company into which the Company merges or consolidates. The Company may place restrictive legends on the certificates representing the shares subject to this paragraph and may impose stop transfer instructions with respect to the Securities and such other shares of stock of each Holder and any transferee thereof (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. Each Holder and any transferee thereof shall enter into any agreement reasonably required by the underwriters for such an offering to implement the foregoing within any reasonable timeframe so requested. The underwriters for any such offering are intended third party beneficiaries of this paragraph and shall have the right, power and authority to enforce the provisions of this paragraph as though they were parties hereto. The provisions of this paragraph shall survive any conversion and/or repayment of this Note.
(e) Waiver of Statutory Information Rights. Prior to the conversion in full of this Note, the Holder, on behalf of the Holder and all beneficial owners of the Securities now or hereafter owned by the Holder (a Beneficial Owner), acknowledges and agrees that that neither the Holder nor any of the Beneficial Owners will have any right to receive any information from the Company by virtue of ownership of any of the Securities. Without limiting the foregoing, prior to the conversion in full of this Note, to the fullest extent permitted by law, the Holder hereby unconditionally and irrevocably waives all rights under Section 220 of the Delaware General Corporation Law and all such similar information and/or inspection rights that may be provided under the law of any jurisdiction, or any federal, state or foreign regulation, that are, or may become, applicable to the Company or the Companys capital stock (the Inspection Rights) on behalf of the Holder and all Beneficial Owners. The Holder, on behalf of the Holder and all Beneficial Owners, hereby covenants and agrees that neither the Holder nor any Beneficial Owner shall directly or indirectly commence, voluntarily aid in any way, prosecute, assign, transfer, or cause to be commenced any claim, action, cause of action, or other proceeding to pursue or exercise the Inspection Rights. The Holder hereby further warrants and represents that the Holder has reviewed this waiver with its legal counsel, and that the Holder knowingly and voluntarily waives its rights otherwise provided by Section 220 of the Delaware General Corporation Law (or under similar rights under other applicable law). Notwithstanding the foregoing, Beneficial Owners that were issued Equity Securities other than by way of a conversion in connection with an Offering will not be subject to this Section 5(e). The terms of this Section 5(e) shall survive any repayment of this Note.
(f) Amendment and Waiver. This Note and any term hereof may only be amended, waived or modified in accordance with Section 10.9 of the Purchase Agreement. Upon the effectuation of such amendment, waiver or modification with the consent of the Required Holders or each Holder, as applicable, in conformance with Section 10.9 of the Purchase Agreement, such amendment, waiver or modification shall be effective as to, and binding against the Holders of, all of the Notes, and the Company shall promptly give written notice thereof to the Holder if the Holder has not previously consented to such amendment, waiver or modification in writing; provided that the failure to give such notice shall not affect the validity of such amendment, waiver or modification.
(g) Binding Agreement. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Note, expressed or implied, is intended to confer upon any third party any rights, remedies, obligations, or liabilities under or by reason of this Note, except as expressly provided in this Note. Notwithstanding any assumption of the Companys Obligations under this Note by a Parent Entity in accordance with Section 10.1 of the Purchase Agreement, Core Scientific Holding Co. (or its successor by merger) shall remain a co-obligor with such Parent Entity with respect to such Obligations (other than any such Obligation of the Company to deliver Equity Securities or Common Stock pursuant to Section 2 of this Note, with respect to which delivery Obligation Core Scientific Holding Co. (or its successor by merger) shall be a Guarantor).
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(h) Counterparts. This Note may be executed in one or more counterparts (and by different parties hereto in different counterparts), each of which shall be deemed an original, but all of which together shall constitute a single contract. Any counterpart of a signature page to this Note may be delivered by facsimile, electronic mail (including .pdf or .tif) or by means of an electronic signature complying with the Electronic Signatures in Global and National Commerce Act, the New York Electronic Signature and Records Act or any other similar state laws based on the Uniform Electronic Transactions Act and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes to the fullest extent permitted by applicable law.
(i) Headings; Interpretation. Paragraph headings used in this Note are included for convenience of reference only and will not modify the provisions that they precede or affect the interpretation of this Note or any other Note Document. The term including shall be interpreted to mean including but not limited to.
(j) Notices. All communications and notices required or permitted to be given hereunder shall be delivered in accordance with Section 10.8 of the Purchase Agreement.
(k) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THEREOF.
(l) Expenses, Etc. This Note is subject to the provisions of Section 10.3 (Jurisdiction and Venue), Section 10.4 (Waiver of Jury Trial) and Section 10.10 (Expenses and Indemnification) of the Purchase Agreement, which are by this reference incorporated herein in full, mutatis mutandis.
(m) Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to each Holder, upon any breach or default of the Company under this Note or any Note shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by a Holder of any breach or default under this Note, or any waiver by such Holder of any provisions or conditions of this Note must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Note, or by law or otherwise afforded to such Holder, shall be cumulative and not alternative.
(n) Entire Agreement. This Note and the other Note Documents constitute the entire contract among the parties hereto regarding to the subject matters addressed herein and supersede any and all previous agreements, negotiations, and discussions, oral or written, by the parties regarding the subject matters addressed herein.
(o) Exculpation among Holders. The Holder acknowledges that the Holder is not relying on any person, firm or corporation, other than the Company and its officers and board members, in making its investment or decision to invest in the Company.
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(p) Brokers Fees. Each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any brokers or finders fee or any other commission directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this subsection being untrue.
(q) Repayment Amounts. The parties hereto hereby acknowledge and agree that payment of any Repayment Amount hereunder constitutes liquidated damages and not a penalty, the actual amount of damages to the Holder or profits lost by the Holder as a result of a prepayment or conversion of this Note would be impracticable and extremely difficult to ascertain and the Repayment Amount hereunder is part of an arms length transaction between sophisticated parties represented by counsel and is bargained for consideration provided for and agreed to by mutual agreement of the Company and the Holder. THE NOTE PARTIES EXPRESSLY WAIVE THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE REPAYMENT AMOUNT TO THE EXTENT SUCH REPAYMENT AMOUNT IS DUE AND PAYABLE IN ACCORDANCE WITH THIS NOTE. The Note Parties expressly agree that: (i) the Repayment Amount shall be payable notwithstanding the then prevailing market rates at the time payment is made; (ii) the Note Parties shall be estopped hereafter from claiming differently than as agreed to in this paragraph; and (iii) their agreement to pay the Repayment Amount is a material inducement to the Holder to purchase the Note.
(r) Tax Forms. Prior to the date hereof, the Holder (and, in the event any Person becomes an assignee or participant in respect of this Note, prior to the date such Person becomes such an assignee or participant) shall have delivered to the Company executed copies of Internal Revenue Service (IRS) Form W-9 or appropriate IRS Form W-8, as applicable, as well as any reasonably necessary supporting information, certifying that any payments to such Holder (or assignee or participant) under this Note are exempt from U.S. federal withholding tax. The Holder (and assignee or participant) further agrees that if any such form or certification expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Company in writing of its legal inability to do so.
(s) Calculations. The Company shall be responsible for making all calculations with respect to this Note, including, without limitation, accrued interest (including PIK Interest), the Fair Market Value Per Common Share and the Applicable Conversion Price and shall forward such calculations to the Agents and the Holder upon request.
[Signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Note as of the date first written above.
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[Signature Page to Core Scientific Holding Co. Convertible Promissory Note]
EXHIBIT B
FORM OF COUNTERPART SIGNATURE PAGE
EXHIBIT C
FORM OF GUARANTY
(see attached)
EXHIBIT D
FORM OF SECURITY AGREEMENT
(see attached)
SCHEDULE 4(b)
GRANTORS
SCHEDULE 4(c)
INTELLECTUAL PROPERTY
SCHEDULE 4(d)
INVESTMENT PROPERTY
EXHIBIT E
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
(see attached)
SCHEDULE 1
INTELLECTUAL PROPERTY SECURITY AGREEMENT
EXHIBIT F
FORM OF SOLVENCY CERTIFICATE
(see attached)
EXHIBIT G
FORM OF ADMINISTRATIVE QUESTIONNAIRE
EXHIBIT H
FORM OF FIRST LIEN INTERCREDITOR AGREEMENT
EXHIBIT I
FORM OF JOINDER AND ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 4.8
EXECUTION VERSION
FIRST AMENDMENT TO CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO CONVERTIBLE NOTE PURCHASE AGREEMENT (this First Amendment) is made as of September 23, 2021, by and among Core Scientific Holding Co., a Delaware corporation (the Company), the Guarantors party hereto, the Purchasers party hereto and U.S. Bank National Association, as note agent and as collateral agent for the Secured Parties (in such capacities, the Agents).
RECITALS
WHEREAS, the Company has entered into that certain Convertible Note Purchase Agreement, dated as of August 20, 2021 (as amended, restated, supplemented and/or otherwise modified from time to time, the Purchase Agreement; capitalized terms used but not otherwise defined herein having the meanings ascribed thereto therein), by and among the Company, the Guarantors from time to time party thereto, the Purchasers from time to time party thereto and the Agents; and
WHEREAS, the Company desires to amend, and the Purchasers party hereto constituting the Required Holders have agree to amend, the Purchase Agreement, on the terms set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing, the parties hereto, intending to be legally bound, hereby agree as follows:
1. AMENDMENT. Effective as of the First Amendment Effective Date (as defined below), the Purchase Agreement is hereby amended as follows:
1.1 Section 6.14. Section 6 of the Purchase Agreement is hereby amended by adding the following new Section 6.14 immediately following existing Section 6.13 therein:
6.14 Filing. The Company shall file, within forty-five (45) days of the closing of the XPDI Transaction (or any other SPAC transaction), a registration statement for a shelf registration on Form S-3 (the Form S-3 Shelf), or if the Company is ineligible to use a Form S-3 Shelf, a registration statement for a shelf registration on Form S-1 (the Form S-1 Shelf, and together with the Form S-3 Shelf (and any subsequent shelf registration), the Shelf), in each case, covering the resale of the equity securities issuable upon conversion of the Notes (determined as of five (5) Business Days prior to such filing) on a delayed or continuous basis. The Company shall use its commercially reasonable efforts to cause the Shelf to become effective under the Securities Act of 1933, as amended, as soon as practicable after the initial filing thereof.
1.2 Section 8.9. Section 8 of the Purchase Agreement is hereby amended by deleting existing Section 8.9 included therein in its entirety and inserting the following new Section 8.9 in lieu thereof:
8.9 GreensLedge as Placement Agent. Each Purchaser represents, acknowledges and agrees that: (A) GreensLedge Capital Markets LLC (GreensLedge) has acted as the Companys placement agent for the Securities issued to Purchasers that are institutional investors, (B) such Purchaser is not relying on the advice or recommendations of GreensLedge (including any affiliate, agent, advisor or representative thereof) in connection with such Purchasers purchase of Securities, (C) GreensLedge is not acting as (I) an underwriter or initial purchaser with respect to any Securities or (II) a placement agent with respect to any Securities acquired by Purchasers that are non-institutional investors, (D) GreensLedge has no responsibility with respect to any marketing or other disclosure documents relating to the Securities (or the completeness of any thereof) furnished to such Purchaser, (E) GreensLedge has not made, and will not make, any representation or warranty with respect to the Company or any Securities (and such Purchaser will not rely on any statements made by GreensLedge, orally or in writing, to the contrary), (F) GreensLedge and/or any affiliate or employee thereof may purchase or otherwise invest in the Securities and (G) GreensLedge is an express third-party beneficiary of the provisions of this Section 8.9.
2. CONDITIONS PRECEDENT. This First Amendment shall become effective on the date (the First Amendment Effective Date) on which the Company shall have received counterparts of this First Amendment duly executed by each party hereto.
3. MISCELLANEOUS.
3.1 Effect of Agreement. Except as set forth expressly herein, all terms of the Purchase Agreement, as amended hereby, and the other Note Documents shall be and remain in full force and effect and shall constitute the legal, valid, binding and enforceable obligations of the parties hereto. This Amendment shall constitute a Note Document for all purposes of the Purchase Agreement.
3.2 Entire Agreement. This Note and the other Note Documents constitute the entire contract among the parties hereto regarding to the subject matters addressed herein and supersede any and all previous agreements, negotiations, and discussions, oral or written, by the parties regarding the subject matters addressed herein.
3.3 Successors and Assigns. The terms and conditions of this First Amendment shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.
3.4 Expenses, Governing Law, Etc. This First Amendment is subject to the provisions of Section 10.2 (Governing Law), Section 10.3 (Jurisdiction and Venue), Section 10.4 (Waiver of Jury Trial) and Section 10.10(a) (Expenses and Indemnification) of the Purchase Agreement, which are by this reference incorporated herein in full, mutatis mutandis. U.S. Bank National Association is entering into this First Amendment solely in its capacity as Note Agent and Collateral Agent pursuant to the direction from the Required Holders. In acting hereunder, the Agents shall be entitled to all of the rights, privileges and immunities of the Agents in acting hereunder, including without limitation the obligations of the Holders pursuant to Section 9.3 and Section 9.6 of the Purchase Agreement.
3.5 Counterparts. This First Amendment may be executed in one or more counterparts (and by different parties hereto in different counterparts), each of which shall be deemed an original, but all of which together shall constitute a single contract. Any counterpart of a signature page to this First Amendment may be delivered by facsimile, electronic mail (including .pdf or .tif) or by means of an electronic signature complying with the Electronic Signatures in Global and National Commerce Act, the New York Electronic Signature and Records Act or any other similar state laws based on the Uniform Electronic Transactions Act and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes to the fullest extent permitted by applicable law. The Grantors agree to assume all risks arising out of the use of using digital signatures and electronic methods to submit communications to the Note Agent, including without limitation the risk of the Note Agent acting on unauthorized instructions, and the risk of interception and misuse by third parties.
[Signature pages follow]
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the date first written above.
CORE SCIENTIFIC HOLDING CO. |
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By: |
/s/ Michael Trzupek |
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Name: Michael Trzupek |
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Title: Chief Executive Officer |
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CORE SCIENTIFIC, INC. |
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By: |
/s/ Michael Trzupek |
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Name: Michael Trzupek |
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Title: Chief Executive Officer |
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AMERICAN PROPERTY ACQUISITION, LLC |
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By: |
/s/ Michael Trzupek |
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Name: Michael Trzupek |
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Title: Chief Executive Officer |
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AMERICAN PROPERTY ACQUISITIONS I, LLC |
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By: |
/s/ Michael Trzupek |
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Name: Michael Trzupek |
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Title: Chief Executive Officer |
AMERICAN PROPERTY ACQUISITIONS VII, LLC |
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By: |
/s/ Michael Trzupek |
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Name: Michael Trzupek |
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Title: Chief Executive Officer |
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BLOCKCAP, INC. |
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By: |
/s/ Michael Trzupek |
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Name: Michael Trzupek |
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Title: Chief Executive Officer |
U.S. BANK NATIONAL ASSOCIATION, AS NOTE AGENT AND AS COLLATERAL AGENT | ||
By: |
/s/ Joshua A. Hahn |
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Name: Joshua A. Hahn |
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Title: Vice President |
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY | ||
By: |
/s/ Eric Partlan |
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Name: Eric Partlan |
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Title: Head of Portfolio Management |
CRYPTONIC BLACK, LLC |
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By: |
/s/ Jennifer LaFrance |
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Name: Jennifer LaFrance |
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Title: Manager |
FIRST SUN INVESTMENTS, LLC |
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By: |
/s/ Brent Berge |
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Name: Brent Berge |
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Title: Manager |
/s/ Douglas Lipton |
Douglas Lipton |
APOLLO TACTICAL VALUE SPN INVESTMENTS, L.P. | ||
By: |
/s/ Joseph D. Glatt |
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Name: Joseph D. Glatt |
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Title: Vice President |
APOLLO CENTRE STREET PARTNERSHIP, L.P. | ||
By: |
/s/ Joseph D. Glatt |
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Name: Joseph D. Glatt |
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Title: Vice President |
APOLLO LINCOLN FIXED INCOME FUND, L.P. | ||
By: |
/s/ Joseph D. Glatt |
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Name: Joseph D. Glatt |
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Title: Vice President |
APOLLO MOULTRIE CREDIT FUND, L.P. | ||
By: |
/s/ Joseph D. Glatt |
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Name: Joseph D. Glatt |
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Title: Vice President |
BLOCKFI LENDING LLC | ||
By: |
/s/ Rene van Kesteren |
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Name: Rene van Kesteren |
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Title: Head of Institutions |
WOLFSWOOD PARTNERS LP | ||
By: |
/s/ Jason Comerchero |
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Name: Jason Comerchero |
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Title: Managing Member |
Exhibit 10.14
CORE SCIENTIFIC, INC.
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
EFFECTIVE AS OF JANUARY 1, 2021
Each member of the Board of Directors (the Board) who is not also serving as an employee of or consultant to Core Scientific, Inc. (the Company) or any of its subsidiaries (each such member, an Eligible Director) will receive the compensation described in this Non-Employee Director Compensation Policy for his or her Board service following the date first set forth above (the Effective Date). An Eligible Director may decline all or any portion of his or her compensation by giving notice to the Company prior to the date cash may be paid or equity awards are to be granted, as the case may be. This Policy is effective as of the Effective Date and may be amended at any time in the sole discretion of the Board.
Annual Cash Compensation
The annual cash compensation amount set forth below is payable to Eligible Directors in equal quarterly installments, payable in arrears on the last day of each fiscal quarter in which the service occurred. If an Eligible Director joins the Board or a committee of the Board at a time other than effective as of the first day of a fiscal quarter, each annual retainer set forth below will be pro-rated based on days served in the applicable fiscal quarter, with the pro-rated amount paid on the last day of the first fiscal quarter in which the Eligible Director provides the service and regular full quarterly payments thereafter. All annual cash fees are vested upon payment. If an Eligible Director terminates service on the Board or a committee during the course of a fiscal quarter, the annual retainer amount for the fiscal quarter in which such termination occurs will be prorated based on days served in such fiscal quarter.
1. |
Annual Board Service Retainer: |
a. |
All Eligible Directors: $150,000 |
b. |
Lead Director: $200,000 |
2. |
Annual Committee Chair Service Retainer: |
a. |
Chair of the Audit Committee: $20,000 |
b. |
Chair of the Compensation Committee: $20,000 |
c. |
Chair of the Corporate Governance and Nominating Committee: $20,000 |
3. |
Annual Committee Member Service Retainer (not applicable to Committee Chairs): |
a. |
Member of the Audit Committee: $10,000 |
b. |
Member of the Compensation Committee: $10,000 |
c. |
Member of the Nominating and Corporate Governance Committee: $10,000 |
Election to Receive Shares of Common Stock in Lieu of Cash
An Eligible Director may make a timely election to receive all or a portion of his or her annual cash retainer in the form of shares of common stock of the Company (Common Stock), subject to delivering an election form provided by the Company. An election to receive Common Stock in lieu of cash retainers for a fiscal year must be made before the start of the fiscal year to which the election relates by delivering the election form to the Company before the start of the fiscal year. Elections apply for one fiscal year. An election cannot be altered once the fiscal year begins. The number of shares of Common Stock to be issued in lieu of annual cash retainers shall be determined on a quarterly basis, on the last day of each fiscal quarter, by dividing the dollar amount of cash compensation to be paid for such quarter (determined as described above, including any prorated amounts for partial service during the quarter) by the closing price of the Common Stock on the last trading day of the fiscal quarter. Shares shall be issued as soon as practicable, but in no event more than 30 days, following each fiscal quarter end. All shares of Common Stock issued in lieu of annual cash retainers are vested upon issuance.
Expenses
The Company will reimburse Eligible Directors for ordinary, necessary and reasonable out-of-pocket travel expenses to cover in-person attendance at and participation in Board and committee meetings; provided, that the Eligible Director timely submit to the Company appropriate documentation substantiating such expenses in accordance with the Companys travel and expense policy, as in effect from time to time.
Equity Compensation
All grants of equity awards to Eligible Directors pursuant to this Policy will be automatic and nondiscretionary (without the need for any additional corporate action by the Board or the Compensation Committee) and will be made in accordance with the following provisions. The equity compensation set forth below will be granted under the Companys 2021 Equity Incentive Plan (the Plan).
1. Initial RSU Grants: For each Eligible Director who is first elected or appointed to the Board following the Effective Date, on the date of such Eligible Directors initial election or appointment to the Board (or, if such date is not a market trading day, the first market trading day thereafter), the Eligible Director will be automatically, and without further action by the Board or the Compensation Committee of the Board, granted restricted stock units (RSUs) with respect to shares of Common Stock with an aggregate Fair Market Value (as defined in the Plan) as of the grant date equal to $500,000 (the Initial RSU Grant). The Initial RSU Grant will vest over a four-year period, with one-fourth of the Initial RSU Grant vesting on each anniversary of the grant date, such that the Initial RSU Grant is fully vested on the fourth anniversary of the date of grant, subject to the Eligible Directors Continuous Service (a defined in the Plan) through each such vesting date.
2. Annual RSU Grants: On the date of each annual stockholder meeting of the Company (each, an Annual Meeting) held after the Effective Date, each Eligible Director who continues to serve as a non-employee member of the Board following such Annual Meeting (excluding any Eligible Director who is first appointed or elected by the Board at the Annual Meeting) will be automatically, and without further action by the Board or the Compensation Committee of the Board, granted RSUs with respect to shares of Common Stock with an aggregate Fair Market Value as of the grant date equal to $150,000 (the Annual RSU Grant). The Annual RSU Grant will vest in full on the earlier of the date of the following years Annual Meeting (or the date immediately prior to the next Annual Meeting if the Non-Employee Directors service as a director ends at such Annual Meeting due to the directors failure to be re-elected or the director not standing for re-election), subject in all cases to the Eligible Directors Continuous Service through such vesting date. Notwithstanding the above, an Eligible Director may not receive an Annual RSU Grant in the same fiscal year as the receipt of the Initial RSU Grant.
3. Settlement of RSUs: The Common Stock to be issued upon settlement of vested RSUs under Initial RSU Grants and Annual RSU Grants will be delivered on the applicable vesting date, or as soon as practicable thereafter, subject to the terms and conditions of the applicable form of RSU grant notice and agreement approved by the Board, provided, that such Common Stock shall be delivered no later than the date that is the 15th day of the third calendar month of the year following the year in which such shares are no longer subject to a substantial risk of forfeiture within the meaning of Treasury Regulations Section 1.409A-1(d).
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4. Acceleration of Initial RSU Grants and Annual RSU Grants: Notwithstanding the foregoing vesting schedules, all Initial RSU Grants and Annual RSU Grants granted pursuant to this Policy shall vest in full immediately prior to, but conditioned upon, the closing of a Change in Control as defined under the Plan, subject to such Eligible Director remaining in Continuous Service (as defined in the Plan) with the Company until immediately prior to the closing of such Change in Control.
5. Additional Provisions: All provisions of the Plan not inconsistent with this Policy will apply to awards granted to Eligible Directors. Eligible Directors will be required to execute an RSU award agreement in a form satisfactory to the Company upon receipt of an Initial RSU Grant or Annual RSU Grant. An Eligible Director may decline all or any portion of his or her compensation by giving notice to the Company prior to the date cash is to be paid or equity awards are to be granted, as the case may be.
Non-Employee Director Compensation Limit
Notwithstanding the foregoing, the aggregate value of all compensation granted or paid, as applicable, to any individual for service as a Non-Employee Director (as defined in the Plan) shall in no event exceed the limits set forth in Section 3(c) of the Plan.
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Exhibit 10.28
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this Agreement) is entered into as of October 10, 2021 and between Michael J. Levitt (Executive) and Core Scientific Holding Co. (the Company).
WHEREAS, the Company desires to employ Executive and Executive desires to be employed by the Company, on the terms set forth in this Agreement.
WHEREAS, the Company and Executive are parties to an Employment Agreement dated as of July 2, 2021;
WHEREAS, the parties desire to amend and restate the Agreement as of the date hereof;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Employment Term. The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed with the Company, upon the terms and conditions contained in this Agreement. Executives employment with the Company pursuant to this Agreement shall be deemed to have commenced on May 17, 2021 (the Effective Date) and shall continue until the fourth (4th) anniversary of the Effective Date (the Initial Term) unless earlier terminated pursuant to Section 8; provided, that the term of this Agreement shall automatically be extended for one (1) additional year commencing on the fourth anniversary of the Effective Date and on each anniversary thereafter (each, a Renewal Term) unless, not less than ninety (90) days prior to the commencement of any such Renewal Term, either party shall have given written notice to the other that it does not wish to extend this Agreement (a Non-Renewal Notice), in which case, Executives employment under this Agreement shall terminate upon the close of business on the last day of the Initial Term or the then-current Renewal Term, as applicable. The period during which Executive is employed by the Company pursuant to this Agreement is hereinafter referred to as the Term.
2. Employment Duties. Executive shall have the title of Chairman of the Board and Chief Executive Officer of the Company and shall have such duties, authorities and responsibilities as are consistent with such position and as the Board of Directors of the Company (the Board) may designate from time to time. Executive shall also serve as a member of the Board. Executive shall report to the Board. Executive shall devote Executives full working time and attention and Executives best efforts to Executives employment and service with the Company and shall perform Executives services in a capacity and in a manner consistent with Executives position for the Company; provided, that this Section 2 shall not be interpreted as prohibiting Executive from (i) managing Executives personal investments and other lawful business interests, including without limitation, serving on the board or as an executive of any investment banking or investment or asset management business, (ii) engaging in charitable or civic activities, (iii) participating on boards of directors or similar bodies of non-profit organizations, or (iv) subject to approval by the Board in its reasonable business judgment, participating on boards of directors or similar bodies of for-profit organizations, in each case of (i) (iv), so long as such activities do not, individually or in the aggregate, (a) materially
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interfere with the performance of Executives duties and responsibilities hereunder, (b) create a fiduciary conflict, or (c) result in a violation of Section 13 of this Agreement. If requested, Executive shall also serve as an executive officer of any entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company (an Affiliate) without any additional compensation.
3. Base Salary and Bonus. During the Term, the Company shall pay Executive a base salary at an annual rate of $60,000, payable in accordance with the Companys normal payroll practices for employees as in effect from time to time. The Board shall review Executives base salary annually. Executives annual base salary, as in effect from time to time, is hereinafter referred to as the Base Salary. If for any calendar year during the term of this Agreement (or partial year in the case of the year in which this Agreement terminates) the positive total shareholder return (TSR) of the Company exceeds the TSR for the S&P 500 Index during the same period (TSR Over Performance), Executive shall be entitled to a bonus (Bonus) equal to the product of .0375 multiplied by the amount of the increase in Company equity value attributable to TSR Over Performance. The Bonus amount is payable at the option and discretion of the Company in cash, bitcoin (BTC) or shares of Company common stock having a fair market value on the date of issue equal to the amount of the Bonus.
4. Equity Awards and Benefits. As soon as reasonably practicable following the Effective Date, subject to approval by the Board, Executive or his designees shall be granted 8,400,000 restricted stock units pursuant to the Companys 2018 Omnibus Incentive Plan or such other or successor plan then established by Company Executive shall also be entitled to an award of 3,150,000 restricted stock units following an initial public offering involving the common stock of the Company or the consummation of a transaction in which the common stock of the Company is converted into shares of an entity that is publicly traded on a national securities exchange. In addition, on an annual basis the Board shall conduct an annual performance review of Executive pursuant to which Executive shall have the opportunity to earn an additional annual grant of up to 1,000,000 additional restricted stock units subject to achievement of certain performance metrics established by the Board of Directors in the Boards discretion which metrics shall include the Companys performance with respect to environmental, social and governance practices, improvements with respect to sustainability in the Companys business operations as well as such other business operational performance as the Board of Directors may establish. Restricted stock units granted to Executive hereunder or during the term of Executives employment shall be issued pursuant to the Companys 2018 Omnibus Incentive Plan or such other successor plan established by Company (as amended from time to time, the Plan) or otherwise as the Board shall determine in its discretion. Equity awards granted to Executive or his designees shall have such terms, conditions and vesting set forth in the applicable award agreement issued pursuant to the Plan the form of which is attached as Exhibit A. Notwithstanding the foregoing, equity awards granted to Executive during the term of his employment shall fully vest if Executives employment is terminated as a result of Executives death or Disability (as defined in Section 8(b) hereof, or by Company without Cause (as defined in Section 10(a) hereof) or for Good Reason (as defined in Section 10(c) hereof).
5. Benefits. Executive shall be entitled to participate in any benefit plans, including medical, disability life insurance and disability offered by the Company as in effect from time to
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time (collectively, Benefit Plans), on the same basis as those generally made available to other executives of the Company, to the extent consistent with applicable law and the terms of the applicable Benefit Plan. The Company does not promise the adoption or continuance of any particular Benefit Plan and reserves the right to amend or cancel any Benefit Plan at any time in its sole discretion (subject to the terms of such Benefit Plan and applicable law).
6. Indemnity and Director and Officer Insurance. The Company agrees that in the event Executive is, or is threatened to be made, a party to any pending, contemplated or threatened action, suit, arbitration, or any other proceeding whether civil, criminal, administrative or investigative, and whether formal or informal (Proceeding), by reason of the fact that Executive is or was, or had agreed to become, an employee or director of the Company, is are or was serving at the request of the Company as an employee or director to another corporation, partnership, joint venture, business, person, trust, employee benefit plan or other entity, the Company shall indemnify and hold Executive harmless, to the fullest extent permitted by the Delaware General Corporation Law, as amended from time to time, and the Companys Certificate of Incorporation or By-Laws, against all claims, expenses, damages, liabilities and losses incurred by Executive, provided that Executive acted in good faith and in a manner Executive reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, had no reasonable cause to believe Executives conduct was unlawful; provided, further that Executive shall not be entitled to any such indemnification (A) in respect of any Proceeding based upon or attributable to Executives gaining in fact any personal profit or advantage to which Executive was or is not entitled or resulting from Executives fraudulent misconduct, (B) to the extent Executive has already received indemnification or payment pursuant to the Companys Certificate of Incorporation, By-laws or other governing documents or otherwise or (C) in respect of any Proceeding initiated by Executive, unless: (I) the Company has joined in or the Board has authorized such Proceeding or (II) Executive is obligated to bring a proceeding against the Company to enforce the Companys indemnity or expense advance obligations. Any such indemnification shall include advancement of costs and expenses. The indemnification obligations of the Company shall survive from the date hereof and continue until (i) ten years after the date that Executive shall have ceased to serve as an employee or director to the Company or (ii) the final termination of all Proceedings pending on the date set forth in clause (i) in respect of which Executive is granted rights of indemnification or advancement of expenses hereunder (the Survival Period), and shall survive after the Survival Period with respect to any indemnification claim as to which the Company has received notice on or prior to the end of the Survival Period. The Companys belief regarding a statute of limitations applicable to a claim, any position taken by the Company in response to a claim, or the determination of any judicial, quasi-judicial, or arbitral body in connection with a claim and any statute of limitations applicable to a claim(s) shall in no event relieve the Company from its obligation to indemnify Executive. In addition to Executive entering into a customary written Indemnification Agreement with the Company, for so long as Executive is a director on the Board, Executive will also be entitled to coverage under the Companys D&O (and other applicable) insurance policies as then in effect. The Company will also obtain on Executives behalf and pay for a personal directors liability insurance policy.
7. Expense Reimbursement. Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business expenses incurred by Executive in connection with the performance of Executives duties hereunder in accordance with the Companys expense reimbursement policies and procedures in effect time to time, subject to presentation by
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Executive of documentation reasonably satisfactory to the Company that the applicable expense has been incurred. Executive shall be permitted to fly private for business travel and shall be reimbursed for use of Executives own aircraft at a rate of $8,000 per flight hour or the reasonable actual cost of charter aircraft in the event Executives aircraft is unavailable.
8. Termination of Employment. The Term and Executives employment hereunder may be terminated as follows:
(a) Automatically in the event of the death of Executive;
(b) At the option of the Company, by written notice to Executive or Executives personal representative in the event of the Disability of Executive. As used herein, the term Disability shall mean Executives inability to perform the essential duties, responsibilities, and functions of his position with the Company as a result of any mental or physical disability or incapacity, with or without reasonable accommodation (including for example but not by way of limitation, by providing reasonable accommodation in the form of protected leave) and such inability continues for at least 120 consecutive calendar days or 150 nonconsecutive days during any consecutive 12-month period after its commencement. Notwithstanding the foregoing, Executive shall not be terminated for Disability under circumstances that would violate Executives rights to reasonable accommodation or protected leave under applicable law protecting individuals with disabilities or requiring leave. Family and medical leave or disability leave provided under federal, state or local law may be unpaid as per the requirements of such laws; provided, however, that Executive shall be entitled to such payments and benefits under the Companys sick leave or disability leave programs as per the terms of such programs. The Company may terminate Executives active employment because of a Disability by giving written notice to Executive at any time effective at or within twenty (20) days after the end period of leave as may be required under the family and medical leave laws or under federal, state or local disability laws, but the Company shall retain Executive as an inactive employee if necessary to maintain Executives eligibility for any disability leave benefits. A reduction or elimination of the duties defined in Section 2 during the period Executive is designated as an inactive employee shall not constitute Good Reason. In the event of a dispute over the occurrence of a Disability, Executive agrees to submit to an examination by a doctor selected by the Company who will determine fitness for duties as defined in Section 2 above. If Executives physician disagrees with the Companys physicians opinion, a third physician, mutually agreed upon by Executive and the Company, shall examine Executive and that physicians opinion shall be conclusive as to Executives fitness for duty.
(c) At the option of the Company for Cause, by delivering prior written notice to Executive specifying the facts and circumstances and the section of the Agreement on which the Company bases its determination of Cause;
(d) At the option of the Company at any time without Cause, by delivering written notice of its determination to terminate to Executive;
(e) At the option of Executive for Good Reason;
(f) At the option of Executive without Good Reason, upon sixty (60) days prior written notice to the Company (which the Company may, in its sole discretion, make effective earlier than the termination date provided in such notice), or
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(g) Upon the close of business on the last day of the Initial Term or the then-current Renewal Term, as applicable, as a result of a Non-Renewal Notice.
9. Payments by Virtue of Termination of Employment.
(a) Within thirty (30) days following Executives termination of employment, Executive shall receive: (a) payment of Executives accrued and unpaid Base Salary as of the date of termination, (b) any accrued amounts or accrued benefits due to Executive in accordance with the Benefit Plans, programs or policies (other than severance), and (c) reimbursement of expenses under Section 7 incurred as of the date of termination. Executive hereby acknowledges and agrees that, other than the payments described in this Section 9 and set forth in any applicable award agreement under the Plan, upon the effective date of the termination of Executives employment, Executive shall not be entitled to any other payments or benefits of any kind under any Company benefit plan or policy generally available to the Companys employees or otherwise and all other rights of Executive to compensation under this Agreement shall end as of such date.
(b) In the event the Executives employment is terminated by the Company without Cause, by the Executive for Good Reason, by either Party after a Change in Control, or as a result of a Company Non-Renewal, the Executive shall be entitled to (i) the payments set forth in Section 9(a) and (ii) subject to Section 9(c) of this Agreement, (1) Base Salary continuation for twelve (12) months, payable in substantially equal installments in accordance with the Companys regular payroll practices, (2) Bonus, if any, for the year in which the termination occurs in an amount equal to the target bonus amount approved by the Board with respect to Executive and payable within thirty (30) days following Executives termination of employment, and (3) if Executive timely elects coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), a cash payment equal to the full premium for actively employed executives of the Company with the same level of coverage, payable monthly in accordance with the Companys standard payroll practices for twelve (12) months following the date of termination; provided, that the first payment pursuant to this Section 9(b)(ii) shall be made on the next regularly scheduled payroll date following the sixtieth (60th) day after Executives termination and shall include payment of any amounts that would otherwise be due prior thereto. Executive hereby acknowledges and agrees that, other than the payments described in this Section 9 and set forth in any applicable award agreement under the Plan, upon the effective date of the termination of Executives employment, Executive shall not be entitled to any other payments or benefits of any kind under any Company benefit plan or policy generally available to the Companys employees or otherwise and all other rights of Executive to compensation under this Agreement shall end as of such date.
(c) All payments and benefits due to Executive under this Section 9(b)(ii) which are not otherwise required by applicable law shall be payable only if Executive executes a release of claims in a form mutually agreed by the Parties and such release becomes irrevocable, within sixty (60) days following termination of employment. The form of release executed by the Parties shall include a release of any and all claims that the Company might have or assert against Executive. Failure to timely execute and return such release or the revocation of such release during the revocation period shall be a waiver by Executive of Executives right to the payments in Section 9(b)(ii). In addition, the payments in Section 9(b)(ii) shall be conditioned on Executives compliance with Sections 11 of this Agreement and on Executives continued compliance with Section 13 of this Agreement.
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10. Definitions. For purposes of this Agreement,
(a) Cause shall mean, (i) Executives conviction of, or a plea of guilty or no contest to, any indictable criminal offense or any other criminal offense involving fraud, misappropriation or moral turpitude, (ii) Executives continued failure to materially perform Executives duties hereunder (for any reason other than illness or physical or mental incapacity) and failure to cure the same within thirty (30) days after the Company provides written notice consistent with Section 8(c) to Executive or a material breach of fiduciary duty, (iii) Executives theft, fraud, or dishonesty with regard to the Company or any of its Affiliates or in connection with Executives duties, (iv) Executives material violation of the Companys code of conduct or similar written policies, (v) Executives willful misconduct unrelated to the Company or any of its Affiliates having, or likely to have, a material negative impact on the Company or any of its Affiliates (economically or its reputation), (vi) an act of gross negligence or willful misconduct by Executive that relates to the affairs of the Company or any of its Affiliates, or (vii) material breach by Executive of any provisions of this Agreement. Notwithstanding the foregoing, Executive may only be terminated for Cause under (iv) or (vii) of this Section if he first receives written notice consistent with Section 8(c) from the Company and fails to cure the same within thirty (30) days after the Company provides such written notice. Notwithstanding anything else in this Agreement, a good faith error in judgment in the normal course of business shall not constitute Cause for termination.
(b) Good Reason shall mean, without Executives consent, (i) any material diminution in Executives responsibilities, authorities or duties, (ii) any material reduction in Base Salary, other than across the board reductions for all executives, and (iii) a relocation of Executives principal place of employment by more than fifty (50) miles from Executives residence in Austin, Texas; provided, that no event described in clause (i), (ii) or (iii) shall constitute Good Reason unless (A) Executive has given the Company written notice of the termination, setting forth the conduct of the Company that is alleged to constitute Good Reason, within sixty (60) days following the occurrence of such event, and (B) Executive has provided the Company at least sixty (60) days following the date on which such notice is provided to cure such conduct and the Company has failed to do so. Failing such cure, a termination of employment by Executive for Good Reason shall be effective on the day following the expiration of such cure period.
(c) For the purposes of any equity awards granted under the Plan, Change in Control shall mean (i) the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries (taken as a whole) to any person or group (as such terms are defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Initial Shareholders or (ii) any person or group, other than the Initial Shareholders Affiliated Sponsor Entities, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the voting equity of the Company, including by way of merger, consolidation or otherwise. In determining whether any person or group constitutes a person or group for purposes of subsections (i) or (ii) above, the Initial Shareholders shall be excluded from such person or group. For purposes of determining whether (i) or (ii) has occurred, an
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issuance of shares of the Company by the Company (or its successor), whether through an initial public offering, other primary issuance or otherwise, shall be excluded. Notwithstanding the foregoing, a Change in Control shall not occur unless such transaction constitutes a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the Companys assets under Section 409A. Initial Shareholders shall mean each of the shareholders of the Company and their respective affiliates as of the Effective Date.
11. Return of Company Property. Within ten (10) days following the effective date of Executives termination for any reason, Executive, or Executives personal representative shall return all property of the Company or any of its Affiliates in Executives possession, including, but not limited to, all Company-owned computer equipment (hardware and software), telephones, facsimile machines, tablet computers and other communication devices, credit cards, office keys, security access cards, badges, identification cards and all copies (including drafts) of any documentation or information (however stored) relating to the business of the Company or any of its Affiliates, the Companys or any of its Affiliates customers and clients or their respective prospective customers or clients.
12. Resignation as Officer or Director. Upon the effective date of Executives termination, Executive shall be deemed to have resigned from Executives position and, to the extent applicable, as an officer of the Company, as a member of the Board or similar governing body of the Company or any of its Affiliates, and as a fiduciary of any Company benefit plan. On or immediately following the effective date of any such termination of Executives employment, Executive shall confirm the foregoing by submitting to the Company in writing a confirmation of Executives resignation(s).
13. Confidentiality; Non-Solicitation; Non-Competition.
(a) Confidential and Proprietary Information. Executive agrees that all materials and items produced or developed by Executive for the Company or any of its Affiliates or obtained by Executive from the Company or any of its Affiliates either directly or indirectly pursuant to this Agreement shall be and remains the property of the Company and its Affiliates. Executive acknowledges that he will, during Executives association with the Company, acquire, or be exposed to, or have access to, materials, data and information that constitute valuable, confidential and proprietary information of the Company and its Affiliates, including, without limitation, any or all of the following: business plans, practices and procedures, pricing information, sales figures, profit or loss figures, this Agreement and its terms, information relating to customers, clients, intellectual property, suppliers, technology, sources of supply and customer lists, research, technical data, trade secrets, or know-how, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances, policies, training manuals and similar materials used by the Company in conducting its business operations, personnel information of any Person employed by the Company, potential business combinations, and such other information or material as the Company may designate as confidential and/or proprietary from time to time (collectively hereinafter, the Confidential and Proprietary Information). During Executives employment with the Company and at all times thereafter, Executive shall not, directly or indirectly, use, misuse, misappropriate, disclose or make known, without the prior written approval of the Board, to any party, firm, corporation, association or other entity, any such Confidential and Proprietary Information for any reason or purpose whatsoever, except as may
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be required in the course of Executives performance of Executives duties hereunder. In consideration of the unique nature of the Confidential and Proprietary Information, all obligations pertaining to the confidentiality and nondisclosure thereof shall remain in effect until the Company and its Affiliates have released such information; provided, that the provisions of this Section 13(a) shall not apply to the disclosure of Confidential and Proprietary Information to the Companys Affiliates together with each of their respective shareholders, directors, officers, accountants, lawyers and other representatives or agents, nor to a Permitted Disclosure as defined in Section 13(b) below. In addition, it shall not be a breach of the confidentiality obligations hereof if Executive is required by applicable law to disclose any Confidential and Proprietary Information; provided, that in such case, Executive shall (x) give the Company the earliest notice possible that such disclosure is or may be required and (y) cooperate with the Company, at the Companys expense, in protecting to the maximum extent legally permitted, the confidential or proprietary nature of the Confidential and Proprietary Information which must be so disclosed. Upon termination of Executives employment, Executive agrees that all Confidential and Proprietary Information, directly or indirectly, in Executives possession that is in writing or other tangible form (together with all duplicates thereof) will promptly (and in any event within 10 days following such termination) be returned to the Company and will not be retained by Executive or furnished to any person, either by sample, facsimile film, audio or video cassette, electronic data, verbal communication or any other means of communication. Notwithstanding the foregoing or anything else in this Agreement, Executive may disclose the terms of this Agreement and information regarding his compensation arrangements with his spouse, and his tax, legal and financial advisors.
(b) Permitted Disclosure. This Agreement does not limit or interfere with Executives right, without notice to or authorization of the Company, to communicate and cooperate in good faith with any self-regulatory organization or U.S. federal, state, or local governmental or law enforcement branch, agency, commission, or entity (collectively, a Government Entity) for the purpose of (i) reporting a possible violation of any U.S. federal, state, or local law or regulation, (ii) participating in any investigation or proceeding that may be conducted or managed by any Government Entity, including by providing documents or other information, or (iii) filing a charge or complaint with a Government Entity, provided that in each case, such communications, participation, and disclosures are consistent with applicable law. Additionally, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. If Executive files a lawsuit for retaliation by an employer for reporting a suspected violation of law, Executive may disclose the trade secret to Executives attorney and use the trade secret information in the court proceeding, if Executive files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order. All disclosures permitted under this Section 13(b) are herein referred to as Permitted Disclosures.
(c) Confidentiality of this Agreement and its Terms. Executive acknowledges that the terms of this Agreement are intended to be confidential between the Parties and except in response to a lawful subpoena, court order or governmental administrative request, Executive will not discuss the terms of this Agreement with any third party. The only exceptions will be that Executive may discuss the fact and terms of this Agreement with his spouse, attorneys, and financial advisor(s).
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(d) Non-Solicitation. Executive agrees that during the Restricted Period (defined below), Executive will not, without written consent of the Company, directly or indirectly, including causing, encouraging, directing or soliciting any other Person (defined below) to, contact, approach or solicit (except as so long as Executive continues to be employed by the Company and makes such contact, approach or solicitation on behalf of the Company and excluding offspring of Executive) for the purpose of offering employment to or hiring (whether as an employee, consultant, agent, independent contractor or otherwise) or actually hire any Person who is or has been employed or retained in the operation of the Companys Business (defined below) by the Company or its Affiliates during the period commencing one year prior to the date hereof and ending on the date of termination of the Restricted Period, or induce, interfere with or solicit, or attempt to induce, interfere with or solicit, any Person that is a current or former customer, vendor, supplier or other business relation of the Company or its Affiliates into any business relationship that might harm the Companys Business. The restrictions in this Section 13(d) shall not prohibit a general solicitation to the public through general advertising or similar methods of solicitation by search firms not specifically directed at employees of the Company. Restricted Period means the period beginning on the Effective Date and ending on the one (1) year anniversary of the date on which Executives employment is terminated. Person means an individual, a partnership, a corporation, an association, a limited liability company, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. Business means crypto mining and competing blockchain businesses; Business shall not include any non-competing blockchain business.
(e) Non-Competition. Executive agrees that during the Restricted Period, Executive will not, within or with respect to the geographical area of (i) the United State of America and (ii) all other areas of the world in which the Company is then engaged in Business. (the Restricted Area), except in the furtherance of the Companys Business directly or indirectly own, operate, lease, manage, control, participate in, consult with, advise, permit the Employees name to be used by, provide services for, or in any manner engage in (other than ownership for investment purposes of less than two percent (2%) of a publicly traded company) any company or other entity or organization that, directly or indirectly, engages in the Business of the Company in the Restricted Area (A) as conducted by the Company during the course of Executives employment with the Company or (B) planned to be conducted by the Company pursuant to a product or business plan developed prior to the termination of Executives employment with the Company, provided such plans were documented and the Executive was aware of these plans. Notwithstanding the foregoing, however, nothing herein shall prohibit Executive from engaging in any of the activities described above as a result of the activities of investment banking, investment or asset management businesses owned, operated, managed, controlled, or invested in by Executive or such entities with which Executive is affiliated or as to which Executive counsels, advises or is otherwise engaged by or with.
(f) Nondisparagement. Executive agrees not to disparage or make defamatory statements about the Company, its subsidiaries, affiliates or predecessors, or their past and present investors, officers, directors or employees, or any of their affiliates. Nothing in this Section 13(f) shall interfere with Executives ability to make the Permitted Disclosures as defined in Section 13(b) above. The Company agrees to instruct its executive officers not to disparage or make defamatory statements about Executive. Nothing in this Agreement shall be
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interpreted, however, to preclude: (1) either the Company or its subsidiaries, officers and/or directors from making any truthful statements about Employee to the extent required by applicable law or regulation, in connection with any proceeding (regardless of whether between Employee and the Company) or in the course of any regulatory or administrative inquiry, review or investigation or other proceeding that may be conducted by a government agency or (2) the Executive from making any truthful statements about the Company to the extent required by applicable law or regulation, in connection with any proceeding (regardless of whether between Employee and the Company) or in the course of any regulatory or administrative inquiry, review or investigation or other proceeding that may be conducted by a government agency. Notwithstanding the foregoing, competitive speech other than legally actionable defamation or, comparisons of products and/or services by Executive on behalf of future employers following the expiration of the Restricted Period shall not be a violation of this Section 13(f).
(g) Acknowledgement. Executive acknowledges, agrees and stipulates that: (i) the terms and provisions of this Agreement are reasonable and constitute an otherwise enforceable agreement; (ii) the consideration provided by the Company under this Agreement is not illusory; and (iii) the consideration given by the Company under this Agreement, including, without limitation, the provision by the Company of confidential information to Executive as contemplated by Section 13(a), gives rise to the Companys interest in restraining and prohibiting Executive from engaging in the activities described in Sections 13(c) and 13(d), and Executives covenant not to engage in these activities is designed to enforce Executives consideration (or return promises), including, without limitation, Executives promise to not disclose confidential information under this Agreement.
(h) Tolling. In the event of any violation of the provisions of this Section 13, Executive acknowledges and agrees that the post-termination restrictions contained in this Section 13 shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation.
14. Cooperation. From and after an Executives termination of employment, Executive shall provide Executives reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executives employment hereunder, provided, that the Company shall reimburse Executive for Executives reasonable costs and expenses (including legal counsel selected by Executive and reasonably acceptable to the Company) and such cooperation shall not unreasonably burden Executive or unreasonably interfere with any subsequent employment that Executive may undertake.
15. Injunctive Relief and Specific Performance. Executive understands and agrees that Executives covenants under Sections 11, 13 and 14 are special and unique and that the Company and its Affiliates may suffer irreparable harm if Executive breaches any of Sections 11, 13, or 14 because monetary damages would be inadequate to compensate the Company and its Affiliates for the breach of any of these sections. Accordingly, Executive acknowledges and agrees that the Company shall, in addition to any other remedies available to the Company at law or in equity, be entitled to obtain specific performance and injunctive or other equitable relief by a federal or state court in Delaware to enforce the provisions of Sections 11, 13 and/or 14 without the necessity of posting a bond or proving actual damages, without liability should such relief be denied, modified or vacated, and to obtain attorneys fees in respect of the foregoing if
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the Company prevails in any such action or proceeding. Executive also recognizes that the territorial, time and scope limitations set forth in Section 13 are reasonable and are properly required for the protection of the Company and its Affiliates and in the event that any such territorial, time or scope limitation is deemed to be unreasonable by a court of competent jurisdiction, the Company and Executive agree, and Executive submits, to the reduction of any or all of said territorial, time or scope limitations to such an area, period or scope as said court shall deem reasonable under the circumstances.
16. Section 280G. Notwithstanding anything to the contrary in this Agreement, if Executive is a disqualified individual (as defined in section 280G(c) of the Internal Revenue Code of 1986, as amended (the Code)), and the payments and benefits provided for in this Agreement, together with any other payments and benefits which Executive has the right to receive from the Company or any of its Affiliates, would constitute a parachute payment (as defined in section 280G(b)(2) of the Code), then the payments and benefits provided for in this Agreement shall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by Executive from the Company and its affiliates will be one dollar ($1.00) less than three times Executives base amount (as defined in section 280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by Executive shall be subject to the excise tax imposed by section 4999 of the Code or (b) paid in full, whichever produces the better net after-tax position to Executive (taking into account any applicable excise tax under section 4999 of the Code and any other applicable taxes). The reduction of payments and benefits hereunder, if applicable, shall be made by reducing, first, payments or benefits to be paid in cash hereunder in the order in which such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then, reducing any benefit to be provided in-kind hereunder in a similar order. The determination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by the Company in good faith. If a reduced payment or benefit is made or provided and through error or otherwise that payment or benefit, when aggregated with other payments and benefits from the Company (or its affiliates) used in determining if a parachute payment exists, exceeds one dollar ($1.00) less than three times Executives base amount, then Executive shall immediately repay such excess to the Company upon notification that an overpayment has been made. Nothing in this Section 16 shall require the Company to be responsible for, or have any liability or obligation with respect to, Executives excise tax liabilities under section 4999 of the Code.
17. Miscellaneous.
(a) All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand or mailed by (i) certified mail, postage and fees prepaid, or (ii) nationally recognized overnight express mail service, as follows:
If to the Company:
Core Scientific Holding Co.
Email: tduchene@corescientific.com
To: Todd M. DuChene
If to Executive:
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At Executives home address as then shown in the Companys personnel records, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
(b) This Agreement is personal to Executive and shall not be assigned by Executive. Any purported assignment by Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and its successors and assigns.
(c) This Agreement contains the entire agreement between the parties with respect to the subject matter hereof supersedes all other agreements, term sheets, offer letters, and drafts thereof, oral or written, between the parties hereto with respect to the subject matter hereof. No promises, statements, understandings, representations or warranties of any kind, whether oral or in writing, express or implied, have been made to Executive by any person or entity to induce Executive to enter into this Agreement other than the express terms set forth herein, and Executive is not relying upon any promises, statements, understandings, representations, or warranties other than those expressly set forth in this Agreement.
(d) No change or modification of this Agreement shall be valid unless the same shall be in writing and signed by all of the parties hereto. No waiver of any provisions of this Agreement shall be valid unless in writing and signed by the party charged with waiver. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver, unless so provided in the waiver.
(e) If any provisions of this Agreement (or portions thereof) shall, for any reason, be held invalid or unenforceable, such provisions (or portions thereof) shall be ineffective only to the extent of such invalidity or unenforceability, and the remaining provisions of this Agreement (or portions thereof) shall nevertheless be valid, enforceable and of full force and effect. If any court of competent jurisdiction finds that any restriction contained in this Agreement is invalid or unenforceable, then the parties hereto agree that such invalid or unenforceable restriction shall be deemed modified so that it shall be valid and enforceable to the greatest extent permissible under law, and if such restriction cannot be modified so as to make it enforceable or valid, such finding shall not affect the enforceability or validity of any of the other restrictions contained herein.
(f) 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.
(g) The section or paragraph headings or titles herein are for convenience of reference only and shall not be deemed a part of this Agreement. The parties have jointly
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participated in the drafting of this Agreement, and the rule of construction that a contract shall be construed against the drafter shall not be applied. 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.
(h) Notwithstanding anything to the contrary in this Agreement:
(i) The parties agree that this Agreement shall be interpreted to comply with or be exempt from Section 409A of the Code and the regulations and authoritative guidance promulgated thereunder to the extent applicable (collectively Section 409A), and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. In no event whatsoever will the Company, any of its affiliates, or any of their respective directors, officers, agents, attorneys, employees, executives, shareholders, investors, members, managers, trustees, fiduciaries, representatives, principals, accountants, insurers, successors or assigns be liable for any additional tax, interest or penalties that may be imposed on Executive under Section 409A or any damages for failing to comply with Section 409A.
(ii) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits considered nonqualified deferred compensation under Section 409A upon or following a termination of employment unless such termination is also a separation from service within the meaning of Section 409A, and for purposes of any such provision of this Agreement, references to a resignation, termination, terminate, termination of employment or like terms shall mean separation from service. If any payment, compensation or other benefit provided to Executive in connection with the termination of Executives employment is determined, in whole or in part, to constitute nonqualified deferred compensation within the meaning of Section 409A and Executive is a specified employee as defined in Section 409A(2)(B)(i) of the Code, no part of such payments shall be paid before the day that is six (6) months plus one (1) day after the date of termination or, if earlier, ten business days following Executives death (the New Payment Date). The aggregate of any payments that otherwise would have been paid to Executive during the period between the date of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, any payments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time period originally scheduled, in accordance with the terms of this Agreement.
(iii) All reimbursements for costs and expenses under this Agreement shall be paid in no event later than the end of the calendar year following the calendar year in which Executive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind, benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year.
(iv) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate
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payment. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., payment shall be made within thirty (30) days following the date of termination), the actual date of payment within the specified period shall be within the sole discretion of the Company.
(i) All questions concerning the construction, validity and interpretation of this Agreement and the exhibits to this Agreement will be governed by and construed in accordance with the domestic laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. The parties hereby irrevocably and unconditionally submit in any legal action or proceeding arising out of or relating to this Agreement to the exclusive jurisdiction of either a state court located in the State of Delaware, with subject matter jurisdiction over the action or the United States District Court or in the Federal Courts located in Delaware, and, in any such action or proceeding, consent to jurisdiction in such courts and waive any objection to the venue in any such court. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT (EACH PARTY HAVING HAD OPPORTUNITY TO CONSULT COUNSEL), EACH PARTY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.
(j) Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he/she is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive on and after the Effective Date, enforceable in accordance with its terms. Executive hereby acknowledges and represents that he has had the opportunity to consult with independent legal counsel or other advisor of Executives choice and has done so regarding Executives rights and obligations under this Agreement, that he is entering into this Agreement knowingly, voluntarily, and of Executives own free will, that he is relying on Executives own judgment in doing so, and that he fully understands the terms and conditions contained herein.
(k) The Company shall have the right to withhold from any amount payable hereunder any Federal, state and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
(l) The covenants and obligations of the Company under Sections 9, 13, 14, 15 and 17 hereof, and the covenants and obligations of Executive under Sections 11, 12, 13, 14, 15 and 17 hereof, shall continue and survive any expiration of the Term, termination of Executives employment or any termination of this Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
CORE SCIENTIFIC HOLDING CO. | ||
By: | /s/ Todd DuChene | |
By: Todd M. DuChene | ||
Title: General Counsel |
EXECUTIVE | ||
/s/ Michael Levitt | ||
Name: Michael J. Levitt |
Exhibit A
Form of Restricted Stock Unit Agreement
CORE SCIENTIFIC HOLDING CO.
RESTRICTED STOCK UNIT AWARD AGREEMENT
THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this Award Agreement) is made effective as of DATE (the Grant Date) by and between Core Scientific Holding Co., a Delaware corporation (the Company), and NAME (the Grantee). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Core Scientific Holding Co (f/k/a MineCo Holdings, Inc.) 2018 Omnibus Incentive Plan (the Plan).
R E C I T A L S:
WHEREAS, the Board of Directors of the Company (the Board) has determined that it would be in the best interests of the Company and its stockholders to grant the restricted stock units provided for herein to the Grantee pursuant to the terms set forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:
Number of Restricted Stock Units Subject to this Award: (RSUs)
Vesting Commencement Date:
Vesting: The RSUs shall be subject to both a time vesting condition and a transaction-based vesting condition as set forth in clauses (i) and (ii) below.
Time-Vesting Condition. Twenty five percent (25%) of the RSUs shall time vest on each of the first four (4) anniversaries of the Vesting Commencement Date, subject to the Grantees continued Service with the Company on each applicable time vesting date (Time Vesting Condition).
Transaction-based Vesting Condition. The RSUs shall transaction-based vest upon the earlier of a Change in Control or the initial Public Offering of equity securities of the Company (Transaction-based Vesting Condition).
Both the Time Vesting Condition and the Transaction-based Vesting Condition must be satisfied in order for the RSUs to vest (such RSUs, the Vested RSUs). The date in which both the Time Vesting Condition and the Transaction-based Vesting Condition has been satisfied with respect to any RSUs shall be referred to as a Vesting Date.
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Termination of Service
If the Grantees service is terminated for Cause or the Grantee breaches any restrictive covenants in favor of the Company to which the Grantee is a party, all Vested RSUs, unvested RSUs and any Shares received in connection with the settlement of RSUs shall be forfeited.
In the event the Grantees Service is terminated for any reason other than for Cause, any RSUs that have not satisfied the Time Vesting Condition as of the date of such termination shall be forfeited. The RSUs that have satisfied the Time Vesting Condition as of the date of such termination (the Time Vested RSUs) shall remain outstanding and eligible to vest for two (2) years following the date of such termination. If the Time Vested RSUs satisfy the Transaction-based Vesting Condition on or prior to the second (2nd) anniversary of the date of termination of the Grantees Service, such RSUs shall be settled in accordance with Section 5 or if the Time Vested RSUs do not satisfy the Transaction-based Vesting Condition on or prior to the second (2nd) anniversary of the date of termination of the Grantees Service, the Time Vested RSUs shall be immediately forfeited for no consideration on such second (2nd) anniversary.
For purposes of this Award Agreement, Service shall mean, the Grantees service as an employee, director, advisor, consultant or independent contractor with the Company or a Subsidiary.
Settlement of Restricted Stock Units
Settlement Schedule. Vested RSUs shall be settled as soon as reasonably practicable following the Vesting Date but in no event later than March 15th of the year following the calendar year in which the Vesting Date occurs (such date of settlement, the Settlement Date); provided that the Company shall have the sole and absolute discretion to determine the Settlement Date during such period.
Conversion of RSUs and Issuance of Shares. Upon settlement, one share of Common Stock shall be issuable for each Vested RSU (the Settlement Shares) subject to the terms and provisions of the Plan and this Award Agreement. Prior to the issuance of any Settlement Shares, Grantee shall enter into a joinder to the Companys shareholder agreement or other similar agreement in a form to be provided by the Company under which the Settlement Shares will be subject to transfer restrictions, voting agreements and other obligations to be provided therein. No fractional shares shall be issued under this Award Agreement.
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Right to Settlement Shares. Grantee shall not have any right in, to or with respect to any of the Settlement Shares (including any voting rights) issuable under the Award until the Award is settled by the issuance of such Settlement Shares to Grantee.
Award is Unfunded. By entering into this Award Agreement and accepting the Award, Grantee acknowledges that the Company has not formally funded the award of RSUs and that Grantee is considered a general unsecured creditor of the Company with respect to such award.
No Right to Continued Service. The granting of the RSUs evidenced hereby and this Award Agreement shall impose no obligation on the Company or any Affiliate to continue the Service of the Grantee and shall not lessen or affect any right that the Company or any Affiliate may have to terminate the Service of such Grantee.
Taxes. Grantee is ultimately liable and responsible for all taxes owed in connection with the Award, regardless of any action the Company or any of its Affiliates takes with respect to any tax withholding obligations that arise in connection with the Award. Neither the Company nor any of its Affiliates makes any representation or undertaking regarding the treatment of any tax withholding in connection with the grant or vesting of the Award or the subsequent sale of Shares issuable pursuant to the Award. The Company and its Affiliates do not commit to structure the Award to reduce or eliminate Grantees tax liability, and are under no obligation to do so. Prior to the issuance of any Settlement Shares, the Grantee shall be required to pay to the Company or its Affiliates, and the Company and its Affiliates shall have the right and are hereby authorized to withhold, any applicable withholding taxes in respect of the RSUs or any payment or transfer under or with respect to the RSUs and to take such other action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes. If the Grantee has not paid the required minimum applicable tax withholding amount to the Company, as determined by the Company, within thirty (30) days following the applicable Settlement Date, the RSUs and any Settlement Shares issuable thereunder shall be forfeited for no consideration. The minimum applicable tax withholding amount may be paid by the Grantee as follows: (i) in cash or by check, bank draft or money order payable to the order of the Company; (ii) solely to the extent permitted by applicable law, if the Common Stock is traded on a national securities exchange, through a procedure whereby the Grantee delivers irrevocable instructions to a broker reasonably acceptable to the Committee to deliver promptly to the Company an amount equal to the applicable tax withholding amount; or (iii) to the extent permitted by the Committee in its sole discretion, by having Common Stock otherwise deliverable to the Grantee in respect of the RSUs with a Fair Market Value equal to the minimum applicable tax withholding amount, withheld by the Company.
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Legends. Grantee acknowledges that, unless a registration statement shall then be in effect covering the resale of the Settlement Shares, any certificate representing the Settlement Shares shall bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF (EACH, A TRANSFER) UNLESS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS SUCH TRANSFER IS (A) EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS IN THE OPINION OF COUNSEL TO THE SHAREHOLDER, WHICH COUNSEL MUST BE, AND THE FORM AND SUBSTANCE OF WHICH OPINION ARE, REASONABLY SATISFACTORY TO THE ISSUER AND (B) IN COMPLIANCE WITH THE TERMS OF THE COMPANYS CERTIFICATE OF INCORPORATION AND ANY AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS THERETO.
Unless a Public Offering shall have been consummated, any certificate representing the Settlement Shares shall bear the following additional legend:
The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Core Scientific, Inc. (the Company) 2018 Omnibus Incentive Plan (the Plan) and an Agreement entered into between the registered owner and the Company dated [ ]. Copies of such Plan and Agreement are on file at the principal office of the Company.
Restriction on Sale upon Public Offering. Grantee agrees that, in the event the Company files a registration statement or other offering statement in connection with a Public Offering, Grantee will not, without the prior written consent of the Company, effect any public sale or distribution of any of the Settlement Shares (other than as part of such Public Offering), including but not limited to pursuant to Rule 144 or Rule 144A under the Securities Act, for the duration (not to exceed 20 days prior to and the 180 days after the effective date of such registration statement or offering statement) specified by and to the extent requested by the Company and an underwriter or sales agent of the Common Stock or other securities of the Company at any time during such period except Common Stock (or other securities) included in such registration or qualified offering; provided, however, that (i) all officers and directors of the Company and all persons with registration rights with respect to the Companys capital stock enter into similar agreements; and (ii) the restrictions applicable to Grantee are no more restrictive than those applicable to any other shareholder, director or officer of the Company. Grantee further understands and acknowledges that any sale, transfer or other disposition of the Settlement Shares by Grantee following a Public Offering will be subject to compliance with, and may be limited under, the federal securities laws and/or state blue sky laws.
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Registration. As soon as practicable following a Public Offering, the Company shall use its commercially reasonable efforts to effect the registration under the Securities Act of all of the Shares evidenced hereby, to the extent such Shares are eligible for registration on Form S-8 (or other applicable form for registration relating to the sale of securities to employees or other service providers in a Company equity incentive plan).
Section 409A. The intent of the parties is that payments or issuance of Settlement Shares under this Award Agreement comply with or be exempt from Section 409A of the Code and, accordingly, to the maximum extent permitted, this Award Agreement shall be interpreted to be in compliance therewith or exempt therefrom, as applicable. If any other payments due or issuance of Settlement Shares to the Grantee hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, the Company may (i) adopt such amendments to the Award Agreement, including amendments with retroactive effect, that the Company determines necessary or appropriate to preserve the intended tax treatment of the payments or issuance of Settlement Shares provided by the Award Agreement and/or (ii) take such other actions as the Company determines necessary or appropriate to comply with the requirements of Section 409A. A termination of Service shall not be deemed to have occurred for purposes of this Award Agreement providing for the payment of any amounts or issuance of Settlement Shares that are considered nonqualified deferred compensation under Section 409A upon or following a termination of employment, unless such termination is also a separation from service within the meaning of Section 409A and the payment or issuance thereof prior to a separation from service would violate Section 409A. For purposes of any such provision of this Award Agreement relating to any such payment or issuance, references to a termination, termination of employment or like terms shall mean separation from service. If the Grantee is deemed on the date of termination to be a specified employee within the meaning of that term under Section 409A(a)(2)(B), then, notwithstanding any other provision herein, with regard to any payment or issuance of Settlement Shares that is considered nonqualified deferred compensation under Section 409A payable on account of a separation from service, such payment or issuance shall not be made or provided prior to the date which is the earlier of (A) the expiration of the six-month period measured from the date of such separation from service of the Grantee, and (B) the date of the Grantees death (the Delay Period). Upon the expiration of the Delay Period, all payments or issuances of Settlement Shares delayed pursuant to this Section 11 (whether they would have otherwise been payable in a single lump
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sum or in installments in the absence of such delay) shall be paid to the Grantee in a lump sum or issued to the Grantee on the first business day following the Delay Period, and any remaining payments or issuances due under this Award Agreement shall be paid or issued in accordance with the normal payment dates specified for them herein. Nothing contained in this Award Agreement shall constitute any representation or warranty by the Company regarding compliance with Section 409A. The Company has no obligation to take any action to prevent the assessment of any additional income tax, interest or penalties under Section 409A on any person and the Company, its subsidiaries and affiliates, and each of their employees and representatives shall not have any liability to the Grantee with respect thereto.
Limitation on Rights; No Right to Future Grants; Extraordinary Item. By entering into this Award Agreement and accepting the Award, Grantee acknowledges that: (i) the Plan is discretionary and may be modified, suspended or terminated by the Company at any time as provided in the Plan; (ii) the grant of the Award is a one-time benefit and does not create any contractual or other right to receive future grants of awards or benefits in lieu of awards; (iii) all determinations with respect to any such future grants, including but not limited to the times when awards will be granted, the number of shares subject to each award, the award price, if any, and the time or times when each award will be settled, will be at the sole discretion of the Company; (iv) Grantees participation in the Plan is voluntary; (v) the Award is not part of normal or expected compensation for any purpose; (vi) the future value of the Common Stock subject to the Award is unknown and cannot be predicted with certainty; (vii) neither the Plan, the Award nor the issuance of the Shares confers upon Grantee any right to continue to provide services to the Company or an Affiliate; and (viii) the grant of the Award will not be interpreted to form an employment relationship with the Company or any Affiliate.
Miscellaneous
Entire Agreement. The Award Agreement (including the Plan and the Companys shareholders agreement) constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.
Waiver. No waiver of any breach or condition of this Award Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.
Successors and Assigns. The provisions of this Award Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Grantee, the Grantees assigns and the legal representatives, heirs and legatees of the Grantees estate, whether or not any such person shall have become a party to this Award Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.
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Choice of Law. THE VALIDITY, CONSTRUCTION, INTERPRETATION, ADMINISTRATION AND EFFECT OF THE PLAN, AND OF ITS RULES AND REGULATIONS, AND RIGHTS RELATING TO THE PLAN AND TO THIS AWARD AGREEMENT, SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS, BUT NOT THE CHOICE OF LAW RULES, OF THE STATE OF DELAWARE.
Mutual Waiver of Jury Trial. TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH PARTY TO THIS AWARD AGREEMENT HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE BETWEEN OR AMONG ANY OF THE PARTIES HERETO, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THIS AWARD AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY AND/OR THE RELATIONSHIP ESTABLISHED AMONG THE PARTIES HEREUNDER.
Amendment. The Committee may amend or alter this Award Agreement and the RSUs granted hereunder at any time; provided that, no such amendment or alteration shall be made without the consent of the Grantee if such action would materially diminish any of the rights of the Grantee under this Award Agreement or with respect to the RSUs. The Board may amend the Companys shareholder agreement without the consent of the Grantee, whether before or after the Grantee becomes a party thereto.
Severability. The provisions of this Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
Signature in Counterparts. This Award Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Restricted Stock Unit Award Agreement as of the date first written above.
CORE SCIENTIFIC HOLDING CO. |
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By: |
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Agreed and acknowledged as
of the date first above written:
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GRANTEE |
Exhibit 10.29
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this Agreement) is entered into as of October 10, 2021, and between Darin Feinstein (Executive) and Core Scientific Holding Co. (the Company).
WHEREAS, the Company desires to employ Executive and Executive desires to be employed by the Company, on the terms set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Employment Term. The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed with the Company, upon the terms and conditions contained in this Agreement. Executives employment with the Company pursuant to this Agreement shall be deemed to have commenced on September 17, 2021 (the Effective Date) and shall continue until the fourth (4th) anniversary of the Effective Date (the Initial Term) unless earlier terminated pursuant to Section 8; provided, that the term of this Agreement shall automatically be extended for one (1) additional year commencing on the fourth anniversary of the Effective Date and on each anniversary thereafter (each, a Renewal Term) unless, not less than ninety (90) days prior to the commencement of any such Renewal Term, either party shall have given written notice to the other that it does not wish to extend this Agreement (a Non-Renewal Notice), in which case, Executives employment under this Agreement shall terminate upon the close of business on the last day of the Initial Term or the then-current Renewal Term, as applicable. The period during which Executive is employed by the Company pursuant to this Agreement is hereinafter referred to as the Term.
2. Employment Duties. Executive shall have the title of Co-Chairman of the Board and Chief Vision Officer of the Company and shall have such duties, authorities and responsibilities as are consistent with such position and as the Board of Directors of the Company (the Board) may designate from time to time. Executive shall also serve as a member of the Board. Executive shall report to the Board. Executive shall devote Executives full working time and attention and Executives best efforts to Executives employment and service with the Company and shall perform Executives services in a capacity and in a manner consistent with Executives position for the Company; provided, that this Section 2 shall not be interpreted as prohibiting Executive from (i) managing Executives personal investments and other lawful business interests, including without limitation, serving on the board or as an executive of any investment banking or investment or asset management business, (ii) engaging in charitable or civic activities, (iii) participating on boards of directors or similar bodies of non-profit organizations, or (iv) subject to approval by the Board in its reasonable business judgment, participating on boards of directors or similar bodies of for-profit organizations, in each case of (i) (iv), so long as such activities do not, individually or in the aggregate, (a) materially interfere with the performance of Executives duties and responsibilities hereunder, (b) create a fiduciary conflict, or (c) result in a violation of Section 13 of this Agreement. If requested, Executive shall also serve as an executive officer of any entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company (an Affiliate) without any additional compensation.
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3. Base Salary and Bonus. During the Term, the Company shall pay Executive a base salary at an annual rate of $60,000, payable in accordance with the Companys normal payroll practices for employees as in effect from time to time. The Board shall review Executives base salary annually. Executives annual base salary, as in effect from time to time, is hereinafter referred to as the Base Salary. If for any calendar year during the term of this Agreement (or partial year in the case of the year in which this Agreement terminates) the positive total shareholder return (TSR) of the Company exceeds the TSR for the S&P 500 Index during the same period (TSR Over Performance), Executive shall be entitled to a bonus (Bonus) equal to the product of .0375 multiplied by the amount of the increase in Company equity value attributable to TSR Over Performance. The Bonus amount is payable at the option and discretion of the Company in cash, bitcoin (BTC) or shares of Company common stock having a fair market value on the date of issue equal to the amount of the Bonus.
4. Equity Awards and Benefits. Immediately prior to the effective date of the merger with and into XPDI pursuant to the Agreement and Plan of Merger dated July 20, 2021, subject to approval by the Board, Executive shall be granted options to purchase 5,000,000 shares of common stock of the Company pursuant to the Companys 2018 Omnibus Incentive Plan or such other or successor plan then established by Company Options granted to Executive hereunder or during the term of Executives employment shall be issued pursuant to the Companys 2018 Omnibus Incentive Plan or such other successor plan established by Company (as amended from time to time, the Plan) or otherwise as the Board shall determine in its discretion. Equity awards granted to Executive or his designees shall have such terms, conditions and vesting set forth in the applicable award agreement issued pursuant to the Plan. Notwithstanding the foregoing, equity awards granted to Executive hereunder shall fully vest if Executives employment is terminated as a result of Executives death or Disability (as defined in Section 8(b) hereof, or by Company without Cause (as defined in Section 10(a) hereof) or for Good Reason (as defined in Section 10(c) hereof).
5. Benefits. Executive shall be entitled to participate in any benefit plans, including medical, disability life insurance and disability offered by the Company as in effect from time to time (collectively, Benefit Plans), on the same basis as those generally made available to other executives of the Company, to the extent consistent with applicable law and the terms of the applicable Benefit Plan. The Company does not promise the adoption or continuance of any particular Benefit Plan and reserves the right to amend or cancel any Benefit Plan at any time in its sole discretion (subject to the terms of such Benefit Plan and applicable law).
6. Indemnity and Director and Officer Insurance. The Company agrees that in the event Executive is, or is threatened to be made, a party to any pending, contemplated or threatened action, suit, arbitration, or any other proceeding whether civil, criminal, administrative or investigative, and whether formal or informal (Proceeding), by reason of the fact that Executive is or was, or had agreed to become, an employee or director of the Company, is are or was serving at the request of the Company as an employee or director to another corporation, partnership, joint venture, business, person, trust, employee benefit plan or other entity, the Company shall indemnify and hold Executive harmless, to the fullest extent permitted by the Delaware General Corporation Law, as amended from time to time, and the Companys Certificate of Incorporation or By-Laws, against all claims, expenses, damages, liabilities and losses incurred by Executive, provided that Executive acted in good faith and in a manner Executive reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, had no reasonable cause to believe Executives conduct was unlawful; provided,
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further that Executive shall not be entitled to any such indemnification (A) in respect of any Proceeding based upon or attributable to Executives gaining in fact any personal profit or advantage to which Executive was or is not entitled or resulting from Executives fraudulent misconduct, (B) to the extent Executive has already received indemnification or payment pursuant to the Companys Certificate of Incorporation, By-laws or other governing documents or otherwise or (C) in respect of any Proceeding initiated by Executive, unless: (I) the Company has joined in or the Board has authorized such Proceeding or (II) Executive is obligated to bring a proceeding against the Company to enforce the Companys indemnity or expense advance obligations. Any such indemnification shall include advancement of costs and expenses. The indemnification obligations of the Company shall survive from the date hereof and continue until (i) ten years after the date that Executive shall have ceased to serve as an employee or director to the Company or (ii) the final termination of all Proceedings pending on the date set forth in clause (i) in respect of which Executive is granted rights of indemnification or advancement of expenses hereunder (the Survival Period), and shall survive after the Survival Period with respect to any indemnification claim as to which the Company has received notice on or prior to the end of the Survival Period. The Companys belief regarding a statute of limitations applicable to a claim, any position taken by the Company in response to a claim, or the determination of any judicial, quasi-judicial, or arbitral body in connection with a claim and any statute of limitations applicable to a claim(s) shall in no event relieve the Company from its obligation to indemnify Executive. In addition to Executive entering into a customary written Indemnification Agreement with the Company, for so long as Executive is a director on the Board, Executive will also be entitled to coverage under the Companys D&O (and other applicable) insurance policies as then in effect. The Company will also obtain on Executives behalf and pay for a personal directors liability insurance policy.
7. Expense Reimbursement. Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business expenses incurred by Executive in connection with the performance of Executives duties hereunder in accordance with the Companys expense reimbursement policies and procedures in effect time to time, subject to presentation by Executive of documentation reasonably satisfactory to the Company that the applicable expense has been incurred. Executive shall be permitted to fly private for business travel and shall be reimbursed for use of Executives own aircraft at a rate of $8,000 per flight hour or the reasonable actual cost of charter aircraft in the event Executives aircraft is unavailable.
8. Termination of Employment. The Term and Executives employment hereunder may be terminated as follows:
(a) Automatically in the event of the death of Executive;
(b) At the option of the Company, by written notice to Executive or Executives personal representative in the event of the Disability of Executive. As used herein, the term Disability shall mean Executives inability to perform the essential duties, responsibilities, and functions of his position with the Company as a result of any mental or physical disability or incapacity, with or without reasonable accommodation (including for example but not by way of limitation, by providing reasonable accommodation in the form of protected leave) and such inability continues for at least 120 consecutive calendar days or 150 nonconsecutive days during any consecutive 12-month period after its commencement. Notwithstanding the foregoing, Executive shall not be terminated for Disability under circumstances that would violate
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Executives rights to reasonable accommodation or protected leave under applicable law protecting individuals with disabilities or requiring leave. Family and medical leave or disability leave provided under federal, state or local law may be unpaid as per the requirements of such laws; provided, however, that Executive shall be entitled to such payments and benefits under the Companys sick leave or disability leave programs as per the terms of such programs. The Company may terminate Executives active employment because of a Disability by giving written notice to Executive at any time effective at or within twenty (20) days after the end period of leave as may be required under the family and medical leave laws or under federal, state or local disability laws, but the Company shall retain Executive as an inactive employee if necessary to maintain Executives eligibility for any disability leave benefits. A reduction or elimination of the duties defined in Section 2 during the period Executive is designated as an inactive employee shall not constitute Good Reason. In the event of a dispute over the occurrence of a Disability, Executive agrees to submit to an examination by a doctor selected by the Company who will determine fitness for duties as defined in Section 2 above. If Executives physician disagrees with the Companys physicians opinion, a third physician, mutually agreed upon by Executive and the Company, shall examine Executive and that physicians opinion shall be conclusive as to Executives fitness for duty.
(c) At the option of the Company for Cause, by delivering prior written notice to Executive specifying the facts and circumstances and the section of the Agreement on which the Company bases its determination of Cause;
(d) At the option of the Company at any time without Cause, by delivering written notice of its determination to terminate to Executive;
(e) At the option of Executive for Good Reason;
(f) At the option of Executive without Good Reason, upon sixty (60) days prior written notice to the Company (which the Company may, in its sole discretion, make effective earlier than the termination date provided in such notice), or
(g) Upon the close of business on the last day of the Initial Term or the then- current Renewal Term, as applicable, as a result of a Non-Renewal Notice.
9. Payments by Virtue of Termination of Employment.
(a) Within thirty (30) days following Executives termination of employment, Executive shall receive: (a) payment of Executives accrued and unpaid Base Salary as of the date of termination, (b) any accrued amounts or accrued benefits due to Executive in accordance with the Benefit Plans, programs or policies (other than severance), and (c) reimbursement of expenses under Section 7 incurred as of the date of termination. Executive hereby acknowledges and agrees that, other than the payments described in this Section 9 and set forth in any applicable award agreement under the Plan, upon the effective date of the termination of Executives employment, Executive shall not be entitled to any other payments or benefits of any kind under any Company benefit plan or policy generally available to the Companys employees or otherwise and all other rights of Executive to compensation under this Agreement shall end as of such date.
(b) In the event the Executives employment is terminated by the Company without Cause, by the Executive for Good Reason, by either Party after a Change in Control, or as
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a result of a Company Non-Renewal, the Executive shall be entitled to (i) the payments set forth in Section 9(a) and (ii) subject to Section 9(c) of this Agreement, (1) Base Salary continuation for twelve (12) months, payable in substantially equal installments in accordance with the Companys regular payroll practices, (2) Bonus, if any, for the year in which the termination occurs in an amount equal to the target bonus amount approved by the Board with respect to Executive and payable within thirty (30) days following Executives termination of employment, and (3) if Executive timely elects coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), a cash payment equal to the full premium for actively employed executives of the Company with the same level of coverage, payable monthly in accordance with the Companys standard payroll practices for twelve (12) months following the date of termination; provided, that the first payment pursuant to this Section 9(b)(ii) shall be made on the next regularly scheduled payroll date following the sixtieth (60th) day after Executives termination and shall include payment of any amounts that would otherwise be due prior thereto. Executive hereby acknowledges and agrees that, other than the payments described in this Section 9 and set forth in any applicable award agreement under the Plan, upon the effective date of the termination of Executives employment, Executive shall not be entitled to any other payments or benefits of any kind under any Company benefit plan or policy generally available to the Companys employees or otherwise and all other rights of Executive to compensation under this Agreement shall end as of such date.
(c) All payments and benefits due to Executive under this Section 9(b)(ii) which are not otherwise required by applicable law shall be payable only if Executive executes a release of claims in a form mutually agreed by the Parties and such release becomes irrevocable, within sixty (60) days following termination of employment. The form of release executed by the Parties shall include a release of any and all claims that the Company might have or assert against Executive. Failure to timely execute and return such release or the revocation of such release during the revocation period shall be a waiver by Executive of Executives right to the payments in Section 9(b)(ii). In addition, the payments in Section 9(b)(ii) shall be conditioned on Executives compliance with Sections 11 of this Agreement and on Executives continued compliance with Section 13 of this Agreement.
10. Definitions. For purposes of this Agreement,
(a) Cause shall mean, (i) Executives conviction of, or a plea of guilty or no contest to, any indictable criminal offense or any other criminal offense involving fraud, misappropriation or moral turpitude, (ii) Executives continued failure to materially perform Executives duties hereunder (for any reason other than illness or physical or mental incapacity) and failure to cure the same within thirty (30) days after the Company provides written notice consistent with Section 8(c) to Executive or a material breach of fiduciary duty, (iii) Executives theft, fraud, or dishonesty with regard to the Company or any of its Affiliates or in connection with Executives duties, (iv) Executives material violation of the Companys code of conduct or similar written policies, (v) Executives willful misconduct unrelated to the Company or any of its Affiliates having, or likely to have, a material negative impact on the Company or any of its Affiliates (economically or its reputation), (vi) an act of gross negligence or willful misconduct by Executive that relates to the affairs of the Company or any of its Affiliates, or (vii) material breach by Executive of any provisions of this Agreement. Notwithstanding the foregoing, Executive may only be terminated for Cause under (iv) or (vii) of this Section if he first receives written notice consistent with Section 8(c) from the Company and fails to cure the same within thirty (30) days after the Company provides such written notice. Notwithstanding anything else in this Agreement, a good faith error in judgment in the normal course of business shall not constitute Cause for termination.
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(b) Good Reason shall mean, without Executives consent, (i) any material diminution in Executives responsibilities, authorities or duties, (ii) any material reduction in Base Salary, other than across the board reductions for all executives, and (iii) a relocation of Executives principal place of employment by more than fifty (50) miles from Executives residence in Austin, Texas; provided, that no event described in clause (i), (ii) or (iii) shall constitute Good Reason unless (A) Executive has given the Company written notice of the termination, setting forth the conduct of the Company that is alleged to constitute Good Reason, within sixty (60) days following the occurrence of such event, and (B) Executive has provided the Company at least sixty (60) days following the date on which such notice is provided to cure such conduct and the Company has failed to do so. Failing such cure, a termination of employment by Executive for Good Reason shall be effective on the day following the expiration of such cure period.
(c) For the purposes of any equity awards granted under the Plan, Change in Control shall mean (i) the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries (taken as a whole) to any person or group (as such terms are defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Initial Shareholders or (ii) any person or group, other than the Initial Shareholders Affiliated Sponsor Entities, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the voting equity of the Company, including by way of merger, consolidation or otherwise. In determining whether any person or group constitutes a person or group for purposes of subsections (i) or (ii) above, the Initial Shareholders shall be excluded from such person or group. For purposes of determining whether (i) or (ii) has occurred, an issuance of shares of the Company by the Company (or its successor), whether through an initial public offering, other primary issuance or otherwise, shall be excluded. Notwithstanding the foregoing, a Change in Control shall not occur unless such transaction constitutes a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the Companys assets under Section 409A. Initial Shareholders shall mean each of the shareholders of the Company and their respective affiliates as of the Effective Date.
11. Return of Company Property. Within ten (10) days following the effective date of Executives termination for any reason, Executive, or Executives personal representative shall return all property of the Company or any of its Affiliates in Executives possession, including, but not limited to, all Company-owned computer equipment (hardware and software), telephones, facsimile machines, tablet computers and other communication devices, credit cards, office keys, security access cards, badges, identification cards and all copies (including drafts) of any documentation or information (however stored) relating to the business of the Company or any of its Affiliates, the Companys or any of its Affiliates customers and clients or their respective prospective customers or clients.
12. Resignation as Officer or Director. Upon the effective date of Executives termination, Executive shall be deemed to have resigned from Executives position and, to the extent applicable, as an officer of the Company, as a member of the Board or similar governing body of the Company or any of its Affiliates, and as a fiduciary of any Company benefit plan. On
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or immediately following the effective date of any such termination of Executives employment, Executive shall confirm the foregoing by submitting to the Company in writing a confirmation of Executives resignation(s).
13. Confidentiality; Non-Solicitation; Non-Competition.
(a) Confidential and Proprietary Information. Executive agrees that all materials and items produced or developed by Executive for the Company or any of its Affiliates or obtained by Executive from the Company or any of its Affiliates either directly or indirectly pursuant to this Agreement shall be and remains the property of the Company and its Affiliates. Executive acknowledges that he will, during Executives association with the Company, acquire, or be exposed to, or have access to, materials, data and information that constitute valuable, confidential and proprietary information of the Company and its Affiliates, including, without limitation, any or all of the following: business plans, practices and procedures, pricing information, sales figures, profit or loss figures, this Agreement and its terms, information relating to customers, clients, intellectual property, suppliers, technology, sources of supply and customer lists, research, technical data, trade secrets, or know-how, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances, policies, training manuals and similar materials used by the Company in conducting its business operations, personnel information of any Person employed by the Company, potential business combinations, and such other information or material as the Company may designate as confidential and/or proprietary from time to time (collectively hereinafter, the Confidential and Proprietary Information). During Executives employment with the Company and at all times thereafter, Executive shall not, directly or indirectly, use, misuse, misappropriate, disclose or make known, without the prior written approval of the Board, to any party, firm, corporation, association or other entity, any such Confidential and Proprietary Information for any reason or purpose whatsoever, except as may be required in the course of Executives performance of Executives duties hereunder. In consideration of the unique nature of the Confidential and Proprietary Information, all obligations pertaining to the confidentiality and nondisclosure thereof shall remain in effect until the Company and its Affiliates have released such information; provided, that the provisions of this Section 13(a) shall not apply to the disclosure of Confidential and Proprietary Information to the Companys Affiliates together with each of their respective shareholders, directors, officers, accountants, lawyers and other representatives or agents, nor to a Permitted Disclosure as defined in Section 13(b) below. In addition, it shall not be a breach of the confidentiality obligations hereof if Executive is required by applicable law to disclose any Confidential and Proprietary Information; provided, that in such case, Executive shall (x) give the Company the earliest notice possible that such disclosure is or may be required and (y) cooperate with the Company, at the Companys expense, in protecting to the maximum extent legally permitted, the confidential or proprietary nature of the Confidential and Proprietary Information which must be so disclosed. Upon termination of Executives employment, Executive agrees that all Confidential and Proprietary Information, directly or indirectly, in Executives possession that is in writing or other tangible form (together with all duplicates thereof) will promptly (and in any event within 10 days following such termination) be returned to the Company and will not be retained by Executive or furnished to any person, either by sample, facsimile film, audio or video cassette, electronic data, verbal communication or any other means of communication. Notwithstanding the foregoing or anything else in this Agreement, Executive may disclose the terms of this Agreement and information regarding his compensation arrangements with his spouse, and his tax, legal and financial advisors.
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(b) Permitted Disclosure. This Agreement does not limit or interfere with Executives right, without notice to or authorization of the Company, to communicate and cooperate in good faith with any self-regulatory organization or U.S. federal, state, or local governmental or law enforcement branch, agency, commission, or entity (collectively, a Government Entity) for the purpose of (i) reporting a possible violation of any U.S. federal, state, or local law or regulation, (ii) participating in any investigation or proceeding that may be conducted or managed by any Government Entity, including by providing documents or other information, or (iii) filing a charge or complaint with a Government Entity, provided that in each case, such communications, participation, and disclosures are consistent with applicable law. Additionally, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. If Executive files a lawsuit for retaliation by an employer for reporting a suspected violation of law, Executive may disclose the trade secret to Executives attorney and use the trade secret information in the court proceeding, if Executive files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order. All disclosures permitted under this Section 13(b) are herein referred to as Permitted Disclosures.
(c) Confidentiality of this Agreement and its Terms. Executive acknowledges that the terms of this Agreement are intended to be confidential between the Parties and except in response to a lawful subpoena, court order or governmental administrative request, Executive will not discuss the terms of this Agreement with any third party. The only exceptions will be that Executive may discuss the fact and terms of this Agreement with his spouse, attorneys, and financial advisor(s).
(d) Non-Solicitation. Executive agrees that during the Restricted Period (defined below), Executive will not, without written consent of the Company, directly or indirectly, including causing, encouraging, directing or soliciting any other Person (defined below) to, contact, approach or solicit (except as so long as Executive continues to be employed by the Company and makes such contact, approach or solicitation on behalf of the Company and excluding offspring of Executive) for the purpose of offering employment to or hiring (whether as an employee, consultant, agent, independent contractor or otherwise) or actually hire any Person who is or has been employed or retained in the operation of the Companys Business (defined below) by the Company or its Affiliates during the period commencing one year prior to the date hereof and ending on the date of termination of the Restricted Period, or induce, interfere with or solicit, or attempt to induce, interfere with or solicit, any Person that is a current or former customer, vendor, supplier or other business relation of the Company or its Affiliates into any business relationship that might harm the Companys Business. The restrictions in this Section 13(d) shall not prohibit a general solicitation to the public through general advertising or similar methods of solicitation by search firms not specifically directed at employees of the Company. Restricted Period means the period beginning on the Effective Date and ending on the one (1) year anniversary of the date on which Executives employment is terminated. Person means an individual, a partnership, a corporation, an association, a limited liability company, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. Business means crypto mining and competing blockchain businesses; Business shall not include any non-competing blockchain business.
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(e) Non-Competition. Executive agrees that during the Restricted Period, Executive will not, within or with respect to the geographical area of (i) the United State of America and (ii) all other areas of the world in which the Company is then engaged in Business. (the Restricted Area), except in the furtherance of the Companys Business directly or indirectly own, operate, lease, manage, control, participate in, consult with, advise, permit the Employees name to be used by, provide services for, or in any manner engage in (other than ownership for investment purposes of less than two percent (2%) of a publicly traded company) any company or other entity or organization that, directly or indirectly, engages in the Business of the Company in the Restricted Area (A) as conducted by the Company during the course of Executives employment with the Company or (B) planned to be conducted by the Company pursuant to a product or business plan developed prior to the termination of Executives employment with the Company, provided such plans were documented and the Executive was aware of these plans. Notwithstanding the foregoing, however, nothing herein shall prohibit Executive from engaging in any of the activities described above as a result of the activities of investment banking, investment or asset management businesses owned, operated, managed, controlled, or invested in by Executive or such entities with which Executive is affiliated or as to which Executive counsels, advises or is otherwise engaged by or with.
(f) Nondisparagement. Executive agrees not to disparage or make defamatory statements about the Company, its subsidiaries, affiliates or predecessors, or their past and present investors, officers, directors or employees, or any of their affiliates. Nothing in this Section 13(f) shall interfere with Executives ability to make the Permitted Disclosures as defined in Section 13(b) above. The Company agrees to instruct its executive officers not to disparage or make defamatory statements about Executive. Nothing in this Agreement shall be interpreted, however, to preclude: (1) either the Company or its subsidiaries, officers and/or directors from making any truthful statements about Employee to the extent required by applicable law or regulation, in connection with any proceeding (regardless of whether between Employee and the Company) or in the course of any regulatory or administrative inquiry, review or investigation or other proceeding that may be conducted by a government agency or (2) the Executive from making any truthful statements about the Company to the extent required by applicable law or regulation, in connection with any proceeding (regardless of whether between Employee and the Company) or in the course of any regulatory or administrative inquiry, review or investigation or other proceeding that may be conducted by a government agency. Notwithstanding the foregoing, competitive speech other than legally actionable defamation or, comparisons of products and/or services by Executive on behalf of future employers following the expiration of the Restricted Period shall not be a violation of this Section 13(f).
(g) Acknowledgement. Executive acknowledges, agrees and stipulates that: (i) the terms and provisions of this Agreement are reasonable and constitute an otherwise enforceable agreement; (ii) the consideration provided by the Company under this Agreement is not illusory; and (iii) the consideration given by the Company under this Agreement, including, without limitation, the provision by the Company of confidential information to Executive as contemplated by Section 13(a), gives rise to the Companys interest in restraining and prohibiting Executive from engaging in the activities described in Sections 13(c) and 13(d), and Executives covenant not to engage in these activities is designed to enforce Executives consideration (or return promises), including, without limitation, Executives promise to not disclose confidential information under this Agreement.
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(h) Tolling. In the event of any violation of the provisions of this Section 13, Executive acknowledges and agrees that the post-termination restrictions contained in this Section 13 shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation.
14. Cooperation. From and after an Executives termination of employment, Executive shall provide Executives reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executives employment hereunder, provided, that the Company shall reimburse Executive for Executives reasonable costs and expenses (including legal counsel selected by Executive and reasonably acceptable to the Company) and such cooperation shall not unreasonably burden Executive or unreasonably interfere with any subsequent employment that Executive may undertake.
15. Injunctive Relief and Specific Performance. Executive understands and agrees that Executives covenants under Sections 11, 13 and 14 are special and unique and that the Company and its Affiliates may suffer irreparable harm if Executive breaches any of Sections 11, 13, or 14 because monetary damages would be inadequate to compensate the Company and its Affiliates for the breach of any of these sections. Accordingly, Executive acknowledges and agrees that the Company shall, in addition to any other remedies available to the Company at law or in equity, be entitled to obtain specific performance and injunctive or other equitable relief by a federal or state court in Delaware to enforce the provisions of Sections 11, 13 and/or 14 without the necessity of posting a bond or proving actual damages, without liability should such relief be denied, modified or vacated, and to obtain attorneys fees in respect of the foregoing if the Company prevails in any such action or proceeding. Executive also recognizes that the territorial, time and scope limitations set forth in Section 13 are reasonable and are properly required for the protection of the Company and its Affiliates and in the event that any such territorial, time or scope limitation is deemed to be unreasonable by a court of competent jurisdiction, the Company and Executive agree, and Executive submits, to the reduction of any or all of said territorial, time or scope limitations to such an area, period or scope as said court shall deem reasonable under the circumstances.
16. Section 280G. Notwithstanding anything to the contrary in this Agreement, if Executive is a disqualified individual (as defined in section 280G(c) of the Internal Revenue Code of 1986, as amended (the Code)), and the payments and benefits provided for in this Agreement, together with any other payments and benefits which Executive has the right to receive from the Company or any of its Affiliates, would constitute a parachute payment (as defined in section 280G(b)(2) of the Code), then the payments and benefits provided for in this Agreement shall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by Executive from the Company and its affiliates will be one dollar ($1.00) less than three times Executives base amount (as defined in section 280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by Executive shall be subject to the excise tax imposed by section 4999 of the Code or (b) paid in full, whichever produces the better net after-tax position to Executive (taking into account any applicable excise tax under section 4999 of the Code and any other applicable taxes). The reduction of payments and benefits hereunder, if applicable, shall be made by reducing, first, payments or benefits to be paid in cash hereunder in the order in which such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then,
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reducing any benefit to be provided in-kind hereunder in a similar order. The determination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by the Company in good faith. If a reduced payment or benefit is made or provided and through error or otherwise that payment or benefit, when aggregated with other payments and benefits from the Company (or its affiliates) used in determining if a parachute payment exists, exceeds one dollar ($1.00) less than three times Executives base amount, then Executive shall immediately repay such excess to the Company upon notification that an overpayment has been made. Nothing in this Section 16 shall require the Company to be responsible for, or have any liability or obligation with respect to, Executives excise tax liabilities under section 4999 of the Code.
17. Miscellaneous.
(a) All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand or mailed by (i) certified mail, postage and fees prepaid, or (ii) nationally recognized overnight express mail service, as follows:
If to the Company:
Core Scientific Holding Co.
Email: tduchene@corescientific.com
To: Todd M. DuChene
If to Executive:
At Executives home address as then shown in the Companys personnel records, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
(b) This Agreement is personal to Executive and shall not be assigned by Executive. Any purported assignment by Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and its successors and assigns.
(c) This Agreement contains the entire agreement between the parties with respect to the subject matter hereof supersedes all other agreements, term sheets, offer letters, and drafts thereof, oral or written, between the parties hereto with respect to the subject matter hereof. No promises, statements, understandings, representations or warranties of any kind, whether oral or in writing, express or implied, have been made to Executive by any person or entity to induce Executive to enter into this Agreement other than the express terms set forth herein, and Executive is not relying upon any promises, statements, understandings, representations, or warranties other than those expressly set forth in this Agreement.
(d) No change or modification of this Agreement shall be valid unless the same shall be in writing and signed by all of the parties hereto. No waiver of any provisions of this Agreement shall be valid unless in writing and signed by the party charged with waiver. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver, unless so provided in the waiver.
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(e) If any provisions of this Agreement (or portions thereof) shall, for any reason, be held invalid or unenforceable, such provisions (or portions thereof) shall be ineffective only to the extent of such invalidity or unenforceability, and the remaining provisions of this Agreement (or portions thereof) shall nevertheless be valid, enforceable and of full force and effect. If any court of competent jurisdiction finds that any restriction contained in this Agreement is invalid or unenforceable, then the parties hereto agree that such invalid or unenforceable restriction shall be deemed modified so that it shall be valid and enforceable to the greatest extent permissible under law, and if such restriction cannot be modified so as to make it enforceable or valid, such finding shall not affect the enforceability or validity of any of the other restrictions contained herein.
(f) 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.
(g) The section or paragraph headings or titles herein are for convenience of reference only and shall not be deemed a part of this Agreement. The parties have jointly participated in the drafting of this Agreement, and the rule of construction that a contract shall be construed against the drafter shall not be applied. 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.
(h) Notwithstanding anything to the contrary in this Agreement:
(i) The parties agree that this Agreement shall be interpreted to comply with or be exempt from Section 409A of the Code and the regulations and authoritative guidance promulgated thereunder to the extent applicable (collectively Section 409A), and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. In no event whatsoever will the Company, any of its affiliates, or any of their respective directors, officers, agents, attorneys, employees, executives, shareholders, investors, members, managers, trustees, fiduciaries, representatives, principals, accountants, insurers, successors or assigns be liable for any additional tax, interest or penalties that may be imposed on Executive under Section 409A or any damages for failing to comply with Section 409A.
(ii) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits considered nonqualified deferred compensation under Section 409A upon or following a termination of employment unless such termination is also a separation from service within the meaning of Section 409A, and for purposes of any such provision of this Agreement, references to a resignation, termination, terminate, termination of employment or like terms shall mean separation from service. If any payment, compensation or other benefit provided to
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Executive in connection with the termination of Executives employment is determined, in whole or in part, to constitute nonqualified deferred compensation within the meaning of Section 409A and Executive is a specified employee as defined in Section 409A(2)(B)(i) of the Code, no part of such payments shall be paid before the day that is six (6) months plus one (1) day after the date of termination or, if earlier, ten business days following Executives death (the New Payment Date). The aggregate of any payments that otherwise would have been paid to Executive during the period between the date of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, any payments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time period originally scheduled, in accordance with the terms of this Agreement.
(iii) All reimbursements for costs and expenses under this Agreement shall be paid in no event later than the end of the calendar year following the calendar year in which Executive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind, benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year.
(iv) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., payment shall be made within thirty (30) days following the date of termination), the actual date of payment within the specified period shall be within the sole discretion of the Company.
(i) All questions concerning the construction, validity and interpretation of this Agreement and the exhibits to this Agreement will be governed by and construed in accordance with the domestic laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. The parties hereby irrevocably and unconditionally submit in any legal action or proceeding arising out of or relating to this Agreement to the exclusive jurisdiction of either a state court located in the State of Delaware, with subject matter jurisdiction over the action or the United States District Court or in the Federal Courts located in Delaware, and, in any such action or proceeding, consent to jurisdiction in such courts and waive any objection to the venue in any such court. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT (EACH PARTY HAVING HAD OPPORTUNITY TO CONSULT COUNSEL), EACH PARTY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.
(j) Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he/she is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the
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Company, this Agreement shall be the valid and binding obligation of Executive on and after the Effective Date, enforceable in accordance with its terms. Executive hereby acknowledges and represents that he has had the opportunity to consult with independent legal counsel or other advisor of Executives choice and has done so regarding Executives rights and obligations under this Agreement, that he is entering into this Agreement knowingly, voluntarily, and of Executives own free will, that he is relying on Executives own judgment in doing so, and that he fully understands the terms and conditions contained herein.
(k) The Company shall have the right to withhold from any amount payable hereunder any Federal, state and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
(l) The covenants and obligations of the Company under Sections 9, 13, 14, 15 and 17 hereof, and the covenants and obligations of Executive under Sections 11, 12, 13, 14, 15 and 17 hereof, shall continue and survive any expiration of the Term, termination of Executives employment or any termination of this Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
CORE SCIENTIFIC HOLDING CO. | ||
/s/ Todd DuChene |
||
By: |
Todd M. DuChene | |
Title: |
General Counsel |
EXECUTIVE | ||
/s/ Darin Feinstein |
||
Name: Darin Feinstein |
EXHIBIT 10.30
CORE SCIENTIFIC, INC.
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this Agreement) is dated as of _________________, 20__ and is between Core Scientific, Inc., a Delaware corporation (the Company), and ______________ (Indemnitee).
RECITALS
A. Indemnitees service to the Company substantially benefits the Company.
B. Individuals are reluctant to serve as directors or officers of corporations or in certain other capacities unless they are provided with adequate protection through insurance or indemnification against the risks of claims and actions against them arising out of such service.
C. Indemnitee does not regard the protection currently provided by applicable law, the Companys governing documents and any insurance as adequate under the present circumstances, and Indemnitee may not be willing to serve as a director or officer without additional protection.
D. In order to induce Indemnitee to continue to provide services to the Company, it is reasonable, prudent and necessary for the Company to contractually obligate itself to indemnify, and to advance expenses on behalf of, Indemnitee as permitted by applicable law.
E. This Agreement is a supplement to and in furtherance of the indemnification provided in the Companys certificate of incorporation and bylaws, and any resolutions adopted pursuant thereto, and this Agreement shall not be deemed a substitute therefor, nor shall this Agreement be deemed to limit, diminish or abrogate any rights of Indemnitee thereunder.
AGREEMENT
The parties agree as follows:
1. Definitions.
(a) Beneficial Owner shall have the meaning given to such term in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act); provided, however, that Beneficial Owner shall exclude any Person otherwise becoming a Beneficial Owner solely by reason of (i) the stockholders of the Company approving a merger of the Company with another Person, or entering into tender or support agreements relating thereto, provided such merger was approved by the Companys board of directors, or (ii) the Companys board of directors approving a sale of securities by the Company to such Person.
(b) A Change in Control shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:
(i) Acquisition of Stock by Third Party. Any Person (as defined below) becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Companys then outstanding securities;
(ii) Change in Board Composition. During any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constituted the Companys board of directors and any Approved Directors cease for any reason to constitute at least a majority of the members of the Companys board of directors. Approved Directors means new directors (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 1(b)(i), 1(b)(iii) or 1(b)(iv)) whose election or nomination by the board of directors (or, if applicable, by the Companys stockholders) was approved by a vote of at least two thirds of the directors then still in office who either were directors at the beginning of such two-year period or whose election or nomination for election was previously so approved;
(iii) Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect a majority of the board of directors or other governing body of such surviving entity; or
(iv) Liquidation. The approval by the Companys board of directors of a complete liquidation or the dissolution of the Company or an agreement for the sale, lease or disposition by the Company of all or substantially all of the Companys assets; or
(v) Other Events. Any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement, except the completion of the Companys initial public offering shall not be considered a Change in Control.
(c) Corporate Status describes the status of a person who is or was a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other Enterprise.
(d) DGCL means the General Corporation Law of the State of Delaware.
(e) Disinterested Director means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.
(f) Enterprise means the Company and any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary.
(g) Expenses include all reasonable and actually incurred attorneys fees, retainers, court costs, transcript costs, fees and costs of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersede as bond or other appeal bond or their equivalent, and (ii) for purposes of Section 10(d),
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Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitees rights under this Agreement or under any directors and officers liability insurance policies maintained by the Company. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
(h) Independent Counsel means a law firm, or a partner or member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (i) the Company, any Enterprise or Indemnitee in any matter material to any such party (other than as Independent Counsel with respect to matters concerning Indemnitee under this Agreement, or other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term Independent Counsel shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitees rights under this Agreement.
(i) Person shall have the meaning set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
(j) Proceeding means any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, whether formal or informal, including any appeal therefrom and including without limitation any such Proceeding pending as of the date of this Agreement, in which Indemnitee was, is or will be involved as a party, a potential party, a non-party witness or otherwise by reason of (i) the fact that Indemnitee is or was a director or officer of the Company, (ii) any action taken by Indemnitee or any action or inaction on Indemnitees part while acting as a director or officer of the Company, or (iii) the fact that he or she is or was serving at the request of the Company as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other Enterprise, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification or advancement of expenses can be provided under this Agreement.
(k) to the fullest extent permitted by applicable law means to the fullest extent permitted by all applicable laws, including without limitation: (i) the fullest extent permitted by DGCL as of the date of this Agreement and (ii) the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.
(l) In connection with any Proceeding relating to an employee benefit plan: references to fines shall include any excise taxes assessed on a person with respect to any employee benefit plan; references to serving at the request of the Company shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Company as referred to in this Agreement.
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2. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 2 if Indemnitee is, or is threatened to be made, a party to or witness or other participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 2, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful.
3. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a witness or other participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 3 in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged by a court of competent jurisdiction to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such expenses as the Delaware Court of Chancery or such other court shall deem proper.
4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, in circumstances where indemnification is not available under Section 2 or 3, as the case may be, to the fullest extent permitted by law and to the extent that Indemnitee is a party to, and is successful (on the merits or otherwise) in defense of, any Proceeding or any claim, issue or matter therein, the Company shall indemnify Indemnitee against all Expenses incurred by Indemnitee or on Indemnitees behalf in connection therewith. For purposes of this Section 4, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
5. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any Proceeding (or any part of any Proceeding):
(a) for which payment has actually been made to or on behalf of Indemnitee under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;
(b) for an accounting or disgorgement of profits pursuant to Section 16(b) of the Exchange Act, or similar provisions of federal, state or local statutory law or common law, if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);
(c) for any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act), if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);
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(d) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees, agents or other indemnitees, unless (i) the Companys board of directors authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (iii) otherwise authorized in Section 10(d) or (iv) otherwise required by applicable law; provided, for the avoidance of doubt, Indemnitee shall not be deemed for purposes of this paragraph, to have initiated any Proceeding (or any part of a Proceeding) by reason of (i) having asserted any affirmative defenses in connection with a claim not initiated by Indemnitee or (ii) having made any counterclaim (whether permissive or mandatory) in connection with any claim not initiated by Indemnitee; or
(e) if prohibited by the DGCL or other applicable law.
6. Advances of Expenses. The Company shall advance the Expenses incurred by Indemnitee in connection with any Proceeding prior to its final disposition, and such advancement shall be made as soon as reasonably practicable, but in any event no later than 30 days, after the receipt by the Company of a written statement or statements requesting such advances from time to time (which shall include invoices received by Indemnitee in connection with such Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditure made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice). Advances shall be unsecured and interest free and made without regard to Indemnitees ability to repay such advances. Indemnitee hereby undertakes to repay any advance to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company, except, with respect to advances of expenses made pursuant to Section 10(c), in which case Indemnitee makes the undertaking provided in Section 10(c). This Section 6 shall not apply to the extent advancement is prohibited by law and shall not apply to any Proceeding (or any part of any Proceeding) for which indemnity is not permitted under this Agreement, but shall apply to any Proceeding (or any part of any Proceeding) referenced in Section 5(b) or 5(c) prior to a determination that Indemnitee is not entitled to be indemnified by the Company.
7. Procedures for Notification and Defense of Claim.
(a) Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses as soon as reasonably practicable following the receipt by Indemnitee of notice thereof. The written notification to the Company shall include, in reasonable detail, a description of the nature of the Proceeding and the facts underlying the Proceeding. The failure by Indemnitee to notify the Company will not relieve the Company from any liability that it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights, except to the extent that such failure or delay materially prejudices the Company.
(b) If, at the time of the receipt of a notice of a Proceeding pursuant to the terms hereof, the Company has directors and officers liability insurance in effect that may be applicable to the Proceeding, the Company shall give prompt notice of the commencement of the Proceeding to the insurers in accordance with the procedures set forth in the applicable policies. The Company shall thereafter take all commercially reasonable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.
(c) In the event the Company may be obligated to make any indemnity in connection with a Proceeding, the Company shall be entitled to assume the defense of such Proceeding with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, conditioned or delayed, upon the delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval
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of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee for any fees or expenses of counsel subsequently incurred by Indemnitee with respect to the same Proceeding. Notwithstanding the Companys assumption of the defense of any such Proceeding, the Company shall be obligated to pay the fees and expenses of Indemnitees separate counsel to the extent (i) the employment of separate counsel by Indemnitee is authorized by the Company, (ii) counsel for the Company shall have reasonably concluded that there is a conflict of interest between the Company and Indemnitee in the conduct of any such defense such that Indemnitee needs to be separately represented, (iii) the Company is not financially or legally able to perform its indemnification obligations, or (iv) the Company shall not have retained, or shall not continue to retain, counsel to defend such Proceeding. Regardless of any provision in this Agreement, Indemnitee shall have the right to employ counsel in any Proceeding at Indemnitees personal expense. The Company shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Company.
(d) Indemnitee shall give the Company such information and cooperation in connection with the Proceeding as may be reasonably appropriate.
(e) The Company shall not be liable to indemnify Indemnitee for any settlement of any Proceeding (or any part thereof) effected without the Companys prior written consent, which shall not be unreasonably withheld, conditioned or delayed. The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in a settlement to which the Company has given its prior written consent, such settlement shall be treated as a success on the merits in the settled action, suit or proceeding.
(f) The Company shall not settle any Proceeding (or any part thereof) in a manner that imposes any penalty or liability on Indemnitee not paid by the Company without Indemnitees prior written consent, which shall not be unreasonably withheld, conditioned or delayed.
8. Procedures upon Application for Indemnification.
(a) To obtain indemnification, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and as is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Proceeding. Any delay in providing the request will not relieve the Company from its obligations under this Agreement, except to the extent such failure is prejudicial.
(b) Upon written request by Indemnitee for indemnification pursuant to Section 8(a), a determination with respect to Indemnitees entitlement thereto shall be made as follows, provided that a Change in Control shall not have occurred: (i) by a majority vote of the Disinterested Directors, even though less than a quorum of the Companys board of directors; (ii) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Companys board of directors; (iii) if there are no such Disinterested Directors or, if a majority of Disinterested Directors so direct, by Independent Counsel in a written opinion to the Companys board of directors, a copy of which shall be delivered to Indemnitee; or (iv) if so directed by the Companys board of directors, by the stockholders of the Company. If a Change in Control shall have occurred, then a determination with respect to Indemnitees entitlement to indemnification shall be made by Independent Counsel in a written opinion to the Companys board of directors, a copy of which shall be delivered to Indemnitee. If it is determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within 10 days after such determination. Indemnitee shall cooperate with the person, persons or entity making the determination with respect to Indemnitees entitlement to indemnification, including
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providing to such person, persons or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys fees and disbursements) actually and reasonably incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company, to the extent permitted by applicable law.
(c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8(b), the Independent Counsel shall be selected as provided in this Section 8(c). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Companys board of directors, and the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Companys board of directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of Independent Counsel as defined in Section 1, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after the later of (i) submission by Indemnitee of a written request for indemnification pursuant to Section 8(a) and (ii) the final disposition of the Proceeding, the parties have not agreed upon an Independent Counsel, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection that shall have been made by the Company or Indemnitee to the others selection of Independent Counsel and for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 8(b). Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 10(a), the Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
(d) The Company shall pay the reasonable fees and expenses of any Independent Counsel and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
9. Presumptions and Effect of Certain Proceedings.
(a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption by clear and convincing evidence.
(b) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.
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(c) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith to the extent Indemnitee relied in good faith on (i) the records or books of account of the Enterprise, including financial statements, (ii) information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, (iii) the advice of legal counsel for the Enterprise or its board of directors or counsel selected by any committee of the board of directors or (iv) information or records given or reports made to the Enterprise by an independent certified public accountant, an appraiser, investment banker or other expert selected with reasonable care by the Enterprise or its board of directors or any committee of the board of directors. The provisions of this Section 9(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.
(d) Neither the knowledge, actions nor failure to act of any other director, officer, agent or employee of the Enterprise shall be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
10. Remedies of Indemnitee.
(a) Subject to Section 10(e), in the event that (i) a determination is made pursuant to Section 9 that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 6 or 10(d), (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 8 within 30 days after the later of the receipt by the Company of the request for indemnification or the final disposition of the Proceeding, (iv) payment of indemnification pursuant to this Agreement is not made (A) within ten days after a determination has been made that Indemnitee is entitled to indemnification or (B) with respect to indemnification pursuant to Sections 4, 5 and 10(d), within 30 days after receipt by the Company of a written request therefor, or (v) the Company or any other person or entity takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his or her option, may seek an award in arbitration with respect to his or her entitlement to such indemnification or advancement of Expenses, to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 12 months following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 10(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his or her rights under Section 4. The Company shall not oppose Indemnitees right to seek any such adjudication or award in arbitration in accordance with this Agreement.
(b) Neither (i) the failure of the Company, its board of directors, any committee or subgroup of the board of directors, Independent Counsel or stockholders to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor (ii) an actual determination by the Company, its board of directors, any committee or subgroup of the board of directors, Independent Counsel or stockholders that Indemnitee has not met the applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct. In the event that a determination shall have been made pursuant to Section 8 that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 10 shall be conducted in all respects as a de novo trial, or arbitration, on the merits, and
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Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 10, the Company shall, to the fullest extent not prohibited by law, have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be, and the burden of proof shall be by clear and convincing evidence.
(c) To the fullest extent not prohibited by law, the Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 10 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. If a determination shall have been made pursuant to Section 10 that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitees statements not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(d) To the extent not prohibited by law, the Company shall indemnify Indemnitee against all Expenses incurred by Indemnitee in connection with any action for indemnification or advancement of Expenses from the Company under this Agreement, any other agreement, the Companys certificate of incorporation or bylaws or under any directors and officers liability insurance policies maintained by the Company to the extent Indemnitee is successful in such action, and, if requested by Indemnitee, shall (as soon as reasonably practicable, but in any event no later than 30 days, after receipt by the Company of a written request therefor) advance such Expenses to Indemnitee, subject to the provisions of Section 6. Indemnitee hereby undertakes to repay such advances to the extent the Indemnitee is ultimately unsuccessful in such action or arbitration.
(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification shall be required to be made prior to the final disposition of the Proceeding.
11. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amounts incurred by Indemnitee, whether for Expenses, judgments, fines or amounts paid or to be paid in settlement, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the events and transactions giving rise to such Proceeding; and (ii) the relative fault of Indemnitee and the Company (and its other directors, officers, employees and agents) in connection with such events and transactions.
12. Non-Exclusivity. The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Companys certificate of incorporation or bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Companys certificate of incorporation and bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change, subject to the restrictions expressly set forth herein or therein. Except as expressly set forth herein, no right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. Except as expressly set forth herein, the assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
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13. Primary Responsibility. The Company acknowledges that to the extent Indemnitee is serving as a director on the Companys board of directors at the request or direction of a private equity or venture capital fund or other entity and/or certain of its affiliates (collectively, the Secondary Indemnitors), Indemnitee may have certain rights to indemnification and advancement of expenses provided by such Secondary Indemnitors. The Company agrees that, as between the Company and the Secondary Indemnitors, the Company is primarily responsible for amounts required to be indemnified or advanced under the Companys certificate of incorporation or bylaws or this Agreement and any obligation of the Secondary Indemnitors to provide indemnification or advancement for the same amounts is secondary to those Company obligations. To the extent not in contravention of any insurance policy or policies providing liability or other insurance for the Company or any director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other Enterprise, the Company waives any right of contribution or subrogation against the Secondary Indemnitors with respect to the liabilities for which the Company is primarily responsible under this Section 13. In the event of any payment by the Secondary Indemnitors of amounts otherwise required to be indemnified or advanced by the Company under the Companys certificate of incorporation or bylaws or this Agreement, the Secondary Indemnitors shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee for indemnification or advancement of expenses under the Companys certificate of incorporation or bylaws or this Agreement or, to the extent such subrogation is unavailable and contribution is found to be the applicable remedy, shall have a right of contribution with respect to the amounts paid. The Secondary Indemnitors are express third-party beneficiaries of the terms of this Section 13.
14. No Duplication of Payments. Subject to Section 13, the Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually received payment for such amounts under any insurance policy, contract, agreement or otherwise.
15. Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, trustees, general partners, managing members, officers, employees, agents or fiduciaries of the Company or any other Enterprise, Indemnitee shall be covered by such policy or policies to the same extent as the most favorably-insured persons under such policy or policies in a comparable position.
16. Subrogation. Subject to Section 13, in the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
17. Services to the Company. Indemnitee agrees to serve as a director or officer of the Company or, at the request of the Company, as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of another Enterprise, for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his or her resignation or is removed from such position. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee. Indemnitee specifically acknowledges that any employment with the Company (or any of its subsidiaries or any Enterprise) is at will, and Indemnitee may be discharged at any time for any reason, with or without cause, with or without notice, except as may be otherwise expressly provided in any executed, written
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employment contract between Indemnitee and the Company (or any of its subsidiaries or any Enterprise), any existing formal severance policies adopted by the Companys board of directors or, with respect to service as a director or officer of the Company, the Companys certificate of incorporation or bylaws or the DGCL. No such document shall be subject to any oral modification thereof.
18. Duration. All agreements and obligations of the Company contained herein will continue during the period Indemnitee is an Agent of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and will continue thereafter so long as Indemnitee will be subject to any proceeding by reason of his or her corporate status as an Agent, whether or not he or she is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement will be binding on and inure to the benefit of and be enforceable by the parties of this Agreement and their respective successors (including any direct or indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors, and personal and legal representatives.
19. Successors. This Agreement shall be binding upon the Company and its successors and assigns, including any direct or indirect successor, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Company, and shall inure to the benefit of Indemnitee and Indemnitees heirs, executors and administrators. Further, the Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
20. Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Companys inability, pursuant to court order or other applicable law, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (ii) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (iii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
21. Enforcement. The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company.
22. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Companys certificate of incorporation and bylaws and applicable law.
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23. Modification and Waiver. No supplement, modification or amendment to this Agreement shall be binding unless executed in writing by the parties hereto. No amendment, alteration or repeal of this Agreement shall adversely affect any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. No waiver of any of the provisions of this Agreement shall constitute or be deemed a waiver of any other provision of this Agreement nor shall any waiver constitute a continuing waiver.
24. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand, messenger or courier service addressed:
(a) if to Indemnitee, to Indemnitees address, facsimile number or electronic mail address as shown on the signature page of this Agreement or in the Companys records, as may be updated in accordance with the provisions hereof; or
(b) if to the Company, to Core Scientific, Inc., 106 East 6th Street, Suite 900-145, Austin, Texas 78701, Attention: General Counsel, or at such other current address as the Company shall have furnished to Indemnitee, with a copy to Cooley LLP, 55 Hudson Yards, New York, NY 10001, Attention: Nicolas Dumont and Daniel Peale.
Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at the earlier of its receipt or five days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer or, if sent via electronic mail, upon confirmation of delivery when directed to the relevant electronic mail address, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipients next business day.
25. Applicable Law and Consent to Jurisdiction. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 10(a), the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court of Chancery, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court of Chancery for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, The Corporation Trust Company, Wilmington, Delaware as its agent in the State of Delaware as such partys agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court of Chancery, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court of Chancery has been brought in an improper or inconvenient forum.
26. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile signature and in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
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27. Captions. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
(signature page follows)
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The parties are signing this Indemnification Agreement as of the date stated in the introductory sentence.
CORE SCIENTIFIC, INC. |
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[INDEMNITEE NAME] | ||
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[Signature Page to Indemnification Agreement]
Exhibit 23.1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Power & Digital Infrastructure Acquisition Corp. on Amendment No. 3 to Form S-4 (File No. 333-258720) of our report dated January 8, 2021, except for Note 7, as to which the date is February 11, 2021, which includes an explanatory paragraph as to the Companys ability to continue as a going concern, with respect to our audit of the financial statements of Power & Digital Infrastructure Acquisition Corp. as of December 31, 2020 and for the period from December 29, 2020 (inception) through December 31, 2020, which report appears in the Proxy Statement / Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading Experts in such Proxy Statement / Prospectus.
/s/ Marcum LLP |
Marcum LLP |
New York, NY |
November 18, 2021 |
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Experts and to the use of our report dated August 11, 2021, with respect to the consolidated financial statements of Core Scientific Holding Co. included in the registration statement and preliminary proxy statement/prospectus of Power & Digital Infrastructure Acquisition Corp. that is made a part of Amendment No. 3 to the Registration Statement (Form S-4) and preliminary proxy statement/prospectus of Power & Digital Infrastructure Acquisition Corp for the registration of shares of its common stock.
/s/ Ernst & Young LLP
Seattle, Washington
November 18, 2021
Exhibit 23.3
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Power & Digital Infrastructure Acquisition Corp. on Amendment No. 3 to Form S-4 (File No. 333-258720) of our report dated July 30, 2021 with respect to our audits of the financial statements of Blockcap, Inc. as of December 31, 2020 and 2019, for the year ended December 31, 2020 and for the period from February 19, 2019 (inception) through December 31, 2019, which report appears in the Proxy Statement/Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading Experts in such Proxy Statement/Prospectus.
/s/ Marcum LLP
Marcum LLP
Los Angeles, CA
November 18, 2021
Exhibit 23.4
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Power & Digital Infrastructure Acquisition Corp. on Amendment No. 3 to Form S-4 (File No. 333-258720) of our report dated July 30, 2021 with respect to our audit of the financial statements of BEP 888, LLC as of November 30, 2020, and the related statements of operations, members equity and cash flows for the period from June 1, 2020 (inception) to November 30, 2020, which report appears in the Proxy Statement/Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading Experts in such Proxy Statement/Prospectus.
/s/ Marcum LLP
Marcum LLP
Los Angeles, CA
November 18, 2021
Exhibit 23.5
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Power & Digital Infrastructure Acquisition Corp. on Amendment No. 3 to Form S-4 (File No. 333-258720) of our report dated July 30, 2021 with respect to our audit of the financial statements of BEP 999, LLC as of November 30, 2020, and the related statements of operations, members equity and cash flows for the period from November 5, 2020 (inception) to November 30, 2020, which report appears in the Proxy Statement/Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading Experts in such Proxy Statement/Prospectus.
/s/ Marcum LLP
Marcum LLP
Los Angeles, CA
November 18, 2021
Exhibit 23.6
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Power & Digital Infrastructure Acquisition Corp. on Amendment No. 3 to Form S-4 (File No. 333-258720) of our report dated July 30, 2021 with respect to our audit of the financial statements of RME Black 100, LLC as of November 30, 2020, and the related statements of operations, members equity and cash flows for the period from April 16, 2020 (inception) to November 30, 2020, which report appears in the Proxy Statement/Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading Experts in such Proxy Statement/Prospectus.
/s/ Marcum LLP
Marcum LLP
Los Angeles, CA
November 18, 2021
Exhibit 23.7
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Power & Digital Infrastructure Acquisition Corp. on Amendment No. 3 to Form S-4 (File No. 333-258720) of our report dated July 30, 2021 with respect to our audit of the financial statements of RME Black 200, LLC as of November 30, 2020, and the related statements of operations, members equity and cash flows for the period from April 27, 2020 (inception) to November 30, 2020, which report appears in the Proxy Statement/Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading Experts in such Proxy Statement/Prospectus.
/s/ Marcum LLP
Marcum LLP
Los Angeles, CA
November 18, 2021
Exhibit 99.2
November 18, 2021
Power & Digital Infrastructure Acquisition Corp.
321 North Clark Street, Suite 2440
Chicago, IL 60654
Consent to Reference in Proxy Statement/Prospectus
Power & Digital Infrastructure Acquisition Corp. (the Company) has filed a Registration Statement on Form S-4 with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Securities Act). In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to the reference to me in the proxy statement/prospectus included in such registration statement as a future member of the board of directors of the Company.
Sincerely, |
/s/ Michael Levitt Name: Michael Levitt |
Exhibit 99.3
November 18, 2021
Power & Digital Infrastructure Acquisition Corp.
321 North Clark Street, Suite 2440
Chicago, IL 60654
Consent to Reference in Proxy Statement/Prospectus
Power & Digital Infrastructure Acquisition Corp. (the Company) has filed a Registration Statement on Form S-4 with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Securities Act). In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to the reference to me in the proxy statement/prospectus included in such registration statement as a future member of the board of directors of the Company.
Sincerely, |
/s/ Darin Feinstein |
Name: Darin Feinstein |
Exhibit 99.4
November 18, 2021
Power & Digital Infrastructure Acquisition Corp.
321 North Clark Street, Suite 2440
Chicago, IL 60654
Consent to Reference in Proxy Statement/Prospectus
Power & Digital Infrastructure Acquisition Corp. (the Company) has filed a Registration Statement on Form S-4 with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Securities Act). In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to the reference to me in the proxy statement/prospectus included in such registration statement as a future member of the board of directors of the Company.
Sincerely, |
/s/ Jarvis Hollingsworth |
Name: Jarvis Hollingsworth |
Exhibit 99.5
November 18, 2021
Power & Digital Infrastructure Acquisition Corp.
321 North Clark Street, Suite 2440
Chicago, IL 60654
Consent to Reference in Proxy Statement/Prospectus
Power & Digital Infrastructure Acquisition Corp. (the Company) has filed a Registration Statement on Form S-4 with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Securities Act). In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to the reference to me in the proxy statement/prospectus included in such registration statement as a future member of the board of directors of the Company.
Sincerely, |
/s/ Matt Minnis |
Name: Matt Minnis |
Exhibit 99.6
November 18, 2021
Power & Digital Infrastructure Acquisition Corp.
321 North Clark Street, Suite 2440
Chicago, IL 60654
Consent to Reference in Proxy Statement/Prospectus
Power & Digital Infrastructure Acquisition Corp. (the Company) has filed a Registration Statement on Form S-4 with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Securities Act). In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to the reference to me in the proxy statement/prospectus included in such registration statement as a future member of the board of directors of the Company.
Sincerely, |
/s/ Stacie Olivares |
Name: Stacie Olivares |
Exhibit 99.7
November 18, 2021
Power & Digital Infrastructure Acquisition Corp.
321 North Clark Street, Suite 2440
Chicago, IL 60654
Consent to Reference in Proxy Statement/Prospectus
Power & Digital Infrastructure Acquisition Corp. (the Company) has filed a Registration Statement on Form S-4 with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Securities Act). In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to the reference to me in the proxy statement/prospectus included in such registration statement as a future member of the board of directors of the Company.
Sincerely, |
/s/ Kneeland Youngblood Name: Kneeland Youngblood |