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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-35561
IDEANOMICS, INC.
(Exact name of registrant as specified in its charter)
Nevada 20-1778374
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1441 Broadway, Suite 5116
New York, NY 10018
(Address of principal executive offices)
212-206-1216
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Trading Symbol(s) Name of each exchange on which registered:
Common stock, $0.001 par value per share IDEX Nasdaq Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒       No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒      No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “larger accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company
☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐      No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 497,680,745 shares as of November 18, 2021.


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QUARTERLY REPORT ON FORM 10-Q
OF IDEANOMICS, INC.
FOR THE PERIOD ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
-FINANCIAL INFORMATION
5
49
67
68
-OTHER INFORMATION
70
70
75
75
75
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2
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Use of Terms
Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company,” “the Company,” “IDEX,” or “Ideanomics,” are to the business of Ideanomics, Inc. (formerly known as “Seven Star Cloud Group, Inc.,” “SSC” and “Wecast Network, Inc.,”) a Nevada corporation, and its consolidated subsidiaries and variable interest entities.
In addition, unless the context otherwise requires and for the purposes of this report only:

•“DBOT” refers to the Delaware Board of Trade Holdings, Inc. which is holding company for the Company’s FINRA Registered Broker Dealer. The Company owns 98% of the share capital Delaware Board of Trade Holdings, Inc. On September 20, 2021 the name was changed to Justly Holdings Inc.;
•“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
•“EV” refers to electric vehicles, particularly battery operated electric vehicles;
•“FINRA” refers to the Financial Industry Regulatory Authority;
•“Legacy YOD” business refers to the premium content and integrated value-added service solutions for the delivery of VOD (defined below) and paid video programing to digital cable providers, Internet Protocol Television (“IPTV”) providers, Over-the-Top (“OTT”) streaming providers, mobile manufacturers and operators, as well as direct customers;
•“MEG” refers to Mobile Energy Global, the subsidiary that holds the Company’s EV businesses in the PRC;
•“PRC,” “China,” and “Chinese,” refer to the People’s Republic of China;
•“Renminbi” and “RMB” refer to the legal currency of the PRC;
•“SEC” refers to the United States Securities and Exchange Commission;
•“Securities Act” refers to the Securities Act of 1933, as amended;
•"Solectrac" refers to Solectrac, Inc., which was acquired on June 11, 2021;
•“SSSIG” refers to Sun Seven Stars Investment Group Limited, a British Virgin Islands corporation, an affiliate of Bruno Wu (“Dr. Wu,”) the former Chairman of the Company;
•“Timios” refers to Timios Holdings Corp. and its affiliates which was acquired on January 8, 2021;
•“U.S. dollars,” “dollars,” “USD,” “US$,” and “$” refer to the legal currency of the United States;
•"US Hybrid" refers to US Hybrid Corporation, which was acquired on June 20, 2021;
•“VOD” refers to video on demand, which includes near video on demand (“NVOD,”) subscription video on demand (“SVOD,”) and transactional video on demand (“TVOD;”) and
•“Wecast SH” refers to Shanghai Wecast Supply Chain Management Limited, a PRC company that is 51% owned by the Company;
•“WAVE” refers to Wireless Advanced Vehicle Electrification, Inc. which was acquired on January 15, 2021.

Explanatory Note

On November 16, 2021, Ideanomics, Inc. (the “Company”, “we”, “our” or “us”) filed a Current Report on Form 8-K disclosing that the Company determined that our previously issued financial statements contained in our Quarterly Report on Form 10-Q for the period ended March 31, 2021 and Quarterly Report on Form 10-Q for the period ending June 30, 2021 should no longer be relied upon due to errors in such condensed consolidated financial statements related to revenue reported by our affiliate Timios Holding Corp. (“Timios”), that provides title and agency services.

The errors were uncovered as part of the preparation of the Company’s condensed consolidated financial statements as of and for the period ended September 30, 2021. The preparation of the Company’s condensed consolidated financial statements as of and for the period ended September 30, 2021 also identified additional transactions and accounting practices not in accordance with U.S. generally accepted accounting principles (“US GAAP”).

The amendments to our Quarterly Reports on Form 10-Q for the periods ended March 31, 2021 and June 30, 2021 reflect the correction of the following errors identified subsequent to the filing of our Quarterly Report on Form 10-Q for the period ended
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March 31, 2021 and June 30, 2021, which were initially filed with the Securities and Exchange Commission (the “SEC”) on May 17, 2021 and August 16, 2021, respectively:

A.The Company determined that it did not present Timios title and agency services revenue and the related cost of revenue in accordance with US GAAP on the condensed consolidated statement of operations, as premiums from title insurance policies written by independent agencies were presented on a gross basis and did not properly present revenue and cost of revenue net of commission costs.
B.The Company discovered that it did not properly account for its investment in Technology Metals Market Limited (“TM2”) in accordance with the equity method of accounting. In addition, the Company determined that it incorrectly presented equity income (loss) on its equity method investments as a component of interest and other income (expense) on the condensed consolidated statements of operations rather than as a separate financial statement caption below income taxes.
C.The Company discovered certain errors in determining the estimated fair value of acquired intangible assets in its purchase price allocation for its acquisitions.
D.The Company determined that the errors in determining the estimated fair value of net assets acquired in its acquisitions resulted in an additional reduction to the Company’s deferred tax liabilities.
E.The Company determined that it did not properly recognize income tax expense (benefit) for certain acquired entities subsequent to their respective acquisitions during the periods ended March 31, 2021 and six months ended June 30, 2021.

See “Item 4 — Controls and Procedures” that discloses a material weakness in the Company’s internal controls associated with the restatements, as well as management’s restated conclusion that the Company’s internal controls over financial reporting were not effective as of March 31, 2021 and June 30, 2021.

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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
IDEANOMICS, INC.
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page
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7
8
9
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IDEANOMICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD in thousands)
September 30, 2021 December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents $ 256,930  $ 165,764 
Accounts receivable, net 4,494  7,400 
Available-for-sale securities 58,441  — 
Inventory 3,819  — 
Prepaid expenses 23,384  2,629 
Amount due from related parties 554  240 
Other current assets 1,617  3,726 
Held for sale assets (Fintech Village) 7,068  — 
Total current assets 356,307  179,759 
Property and equipment, net 1,627  330 
Fintech Village —  7,250 
Intangible assets, net 74,246  29,705 
Goodwill 111,458  1,165 
Long-term investments 35,549  8,570 
Operating lease right of use assets 8,759  155 
Other non-current assets 7,933  7,478 
Total assets $ 595,879  $ 234,412 
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY
Current liabilities
Accounts payable $ 6,943  $ 5,057 
Deferred revenue (including customer deposits of $3,527 and $31 as of September 30, 2021 and December 31, 2020, respectively)
4,464  1,129 
Accrued salaries 5,487  1,750 
Amount due to related parties 1,112  882 
Other current liabilities 8,670  2,235 
Current portion of operating lease liabilities 2,308  115 
Current contingent consideration 2,775  1,325 
Promissory note-short term 417  568 
Asset retirement obligations 4,653  — 
Redeemable non-controlling interest 7,832  — 
Total current liabilities 44,661  13,061 
Asset retirement obligations —  4,653 
Deferred tax liabilities 826  — 
Operating lease liability-long term 6,479  19 
Non-current contingent consideration 2,337  7,635 
Other long-term liabilities 7,710  7,275 
Total liabilities 62,013  32,643 
Commitments and contingencies (Note 18)
Convertible redeemable preferred stock and Redeemable non-controlling interest:
Series A - 7,000,000 shares issued and outstanding, liquidation and deemed liquidation preference of $3,500,000 as of September 30, 2021 and December 31, 2020
1,262  1,262 
Redeemable non-controlling interest —  7,485 
Equity:
Common stock - $0.001 par value; 1,500,000,000 shares authorized, 481,901,523 shares and 344,861,295 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
483  345 
Additional paid-in capital 938,006  531,866 
Accumulated deficit (411,409) (346,883)
Accumulated other comprehensive income 546  1,256 
Total Ideanomics, Inc. shareholders' equity 527,626  186,584 
Non-controlling interest 4,978  6,438 
Total equity 532,604  193,022 
Total liabilities, convertible redeemable preferred stock, redeemable non-controlling interest and equity $ 595,879  $ 234,412 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6


IDEANOMICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD in thousands)
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Revenue from sales of products (including from a related party of $0, $2, $1 and $9 for the three and nine months ended September 30, 2021 and 2020, respectively)
$ 9,977  $ 10,140  $ 21,934  $ 14,728 
Revenue from sales of services 17,070  480  65,898  962 
Total revenue 27,047  10,620  87,832  15,690 
Cost of revenue from sales of products (including from a related party of $9 ,$0, $20 and $2 for the three and nine months ended September 30, 2021 and 2020, respectively)
9,893  9,455  20,838  13,779 
Cost of revenue from sales of services 12,626  451  42,323  897 
Total cost of revenue 22,519  9,906  63,161  14,676 
Gross profit 4,528  714  24,671  1,014 
Operating expenses:
Selling, general and administrative expenses 28,876  7,636  53,650  20,188 
Research and development expense 184  1,318  429  1,318 
Professional fees 9,387  3,968  21,994  8,096 
Impairment losses 21,033  3,275  21,033  10,363 
Change in fair value of contingent consideration, net (5,099) (4,179) (7,006) (2,900)
Litigation settlement —  —  5,000  — 
Depreciation and amortization 1,682  695  4,445  1,651 
Total operating expenses 56,063  12,713  99,545  38,716 
Loss from operations (51,535) (11,999) (74,874) (37,702)
Interest and other income (expense):
Interest income (expense), net 109  (2,014) (871) (14,061)
Loss on disposal of subsidiaries, net —  —  (1,446) — 
Conversion expense —  —  —  (2,266)
Gain on remeasurement of investment —  —  2,915  — 
Gain on extinguishment of debt 300  —  300  — 
Other income, net 8  5,283  689  6,272 
Loss before income taxes and non-controlling interest (51,118) (8,730) (73,287) (47,757)
Income tax benefit 842  —  9,667  — 
Equity in gain (loss) of equity method investees (819) 7  (1,517) (8)
Net loss (51,095) (8,723) (65,137) (47,765)
Deemed dividend related to warrant repricing —  —  —  (184)
Net loss attributable to common shareholders (51,095) (8,723) (65,137) (47,949)
Net loss attributable to non-controlling interest 244  437  611  737 
Net loss attributable to Ideanomics, Inc. common shareholders $ (50,851) $ (8,286) $ (64,526) $ (47,212)
Earnings (loss) per share
Basic $ (0.11) $ (0.03) $ (0.15) $ (0.25)
Diluted $ (0.11) $ (0.03) $ (0.15) $ (0.25)
Weighted average shares outstanding:
Basic 473,829,962  237,535,999  432,989,602  191,976,856 
Diluted 473,829,962  237,535,999  432,989,602  191,976,856 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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IDEANOMICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (USD in thousands)
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Net loss $ (51,095) $ (8,723) $ (65,137) $ (47,765)
Other comprehensive income (loss), net of nil tax:
Changes in fair value of available-for-sale securities 4  —  (16) — 
Foreign currency translation adjustments (295) 1,356  (1,196) 1,639 
Comprehensive loss (51,386) (7,367) (66,349) (46,126)
Deemed dividend related to warrant repricing —  —  —  (184)
Comprehensive loss (gain) attributable to non-controlling interest 350  122  1,113  (51)
Comprehensive loss attributable to Ideanomics, Inc. common shareholders $ (51,036) $ (7,245) $ (65,236) $ (46,361)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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IDEANOMICS, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (Unaudited) (USD in thousands)
Nine Months Ended September 30, 2020
Common
Stock 		Par
Value
Additional
Paid-in 
Capital
Accumulated Deficit Accumulated
Other
Comprehensive
Loss 		Ideanomics
Shareholders’
equity 		Non-
controlling
Interest* 		Total
Equity
Balance, January 1, 2020 149,692,953  $ 150  $ 282,554  $ (248,481) $ (664) $ 33,559  $ 25,178  $ 58,737 
Share-based compensation —  —  2,202  —  —  2,202  —  2,202 
Common stock issuance for professional fee 429,000  —  240  —  —  240  —  240 
Common stock issuance for convertible note 1,454,424  1  613  —  —  614  —  614 
Common stock issuance for acquisition 10,883,668  11  6,737  —  —  6,748  —  6,748 
Common stock issuance for warrant exercise 1,000,000  1  999  —  —  1,000  —  1,000 
Measurement period adjustment —  —  —  —  —  —  (11,454) (11,454)
Non-controlling shareholder contribution —  —  —  —  —  —  100  100 
Net income (loss) —  —  —  (12,348) —  (12,348) (378) (12,726)
Foreign currency translation adjustments, net of nil tax
—  —  —  —  (16) (16) 23  7 
Balance, March 31, 2020 163,460,045  163  293,345  (260,829) (680) 31,999  13,469  45,468 
Share-based compensation —  —  3,394  —  —  3,394  —  3,394 
Common stock issuance for acquisition 459,180  —  293  —  —  293  —  293 
Common stock issuance for convertible note 26,231,634  26  19,983  —  —  20,009  —  20,009 
Common stock issued to settle debt 4,577,876  5  2,309  —  —  2,314  —  2,314 
Common stock issued under employee stock incentive plan 293,857  —  —  —  —  —  —  — 
Common stock issuance for professional fee 515,942  1  308  —  —  309  —  309 
Common stock issuance for warrant exercise 6,995,906  7  5,621  —  —  5,628  —  5,628 
Common stock issuance 34,473,719  35  32,467  —  —  32,502  —  32,502 
Measurement period adjustment —  —  —  —  —  —  (131) (131)
Net income (loss)** —  —  —  (26,578) —  (26,578) (133) (26,711)
Foreign currency translation adjustments, net of nil tax
—  —  —  —  172  172  104  276 
Balance, June 30, 2020 237,008,159  237  357,720  (287,407) (508) 70,042  13,309  83,351 
Share-based compensation —  —  3,252  —  —  3,252  —  3,252 
Common stock issuance for acquisition 1,613,207  2  1,031  —  —  1,033  —  1,033 
Common stock issuance for professional fee 250,000  —  343  —  —  343  —  343 
Net income (loss)* —  —  —  (8,286) —  (8,286) (547) (8,833)
Foreign currency translation adjustments, net of nil tax —  —  —  —  798  798  558  1,356 
Balance, September 30, 2020 238,871,366  $ 239  $ 362,346  $ (295,693) $ 290  $ 67,182  $ 13,320  $ 80,502 
__________________________
*    Excludes accretion of dividend for redeemable non-controlling interest.
** Excludes deemed dividend related to warrant repricing
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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IDEANOMICS, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (Unaudited) (USD in thousands) Continued
Nine months ended September 30, 2021
Common
Stock 		Par
Value 		Additional
Paid-in 
Capital 		Accumulated Deficit Accumulated
Other
Comprehensive
Loss 		Ideanomics
Shareholders’
equity 		Non-
controlling
Interest* 		Total
Equity
Balance, January 1, 2021 344,861,295  $ 345  $ 531,866  $ (346,883) $ 1,256  $ 186,584  $ 6,438  $ 193,022 
Share-based compensation —  —  2,040  —  —  2,040  —  2,040 
Common stock issuance for acquisition 10,181,299  10  32,367  —  —  32,377  —  32,377 
Common stock issuance for professional fee 440,909  —  1,162  —  —  1,162  —  1,162 
Common stock issued under employee stock incentive plan 475,000  —  251  —  —  251  —  251 
Common stock issuance for at the market offering 17,615,534  18  53,389  —  —  53,407  —  53,407 
Common stock issuance for convertible note 45,895,763  46  140,080  —  —  140,126  —  140,126 
Net income (loss)* —  —  —  (6,412) —  (6,412) (280) (6,692)
Foreign currency translation adjustments, net of nil tax
—  —  —  —  (472) (472) (388) (860)
Balance, March 31, 2021 419,469,800  419  761,155  (353,295) 784  409,063  5,770  414,833 
Share-based compensation —  —  2,007  —  —  2,007  —  2,007 
Common stock issuance for at the market offering 25,301,190  25  74,322  —  —  74,347  —  74,347 
Common stock issued under employee stock incentive plan 4,590,000  5  7,735  —  —  7,740  —  7,740 
Common stock issuance for acquisition 6,733,497  7  21,120  —  —  21,127  —  21,127 
Common stock issued pursuant to SEDA 10,000,000  10  27,290  —  —  27,300  —  27,300 
Common stock issuance for professional fee 260,000  —  656  —  —  656  —  656 
Changes in available-for-sale securities fair value —  —  —  —  (20) (20) —  (20)
Net income (loss)* —  —  —  (7,263) —  (7,263) (319) (7,582)
Foreign currency translation adjustments, net of nil tax
—  —  —  —  (34) (34) (7) (41)
Balance, June 30, 2021 466,354,487  466  894,285  (360,558) 730  534,923  5,444  540,367 
Share-based compensation —  —  15,187  —  —  15,187  —  15,187 
Common stock issuance for at the market offering 7,495,997  7  17,737  —  —  17,744  —  17,744 
Common stock issued under employee Stock Incentive Plan 4,051,021  6  293  —  —  299  —  299 
Common stock issuance for Controlled Equity Offering Sales 1,988,401  2  4,201  —  —  4,203  —  4,203 
Changes in available-for-sale securities fair value —  —  —  —  4  4  —  4 
Common stock issuance for acquisition 2,011,617  2  6,303  —  —  6,305  —  6,305 
Net income (loss)* —  —  —  (50,851) —  (50,851) (359) (51,210)
Foreign currency translation adjustments, net of nil tax —  —  —  —  (188) (188) (107) (295)
Balance, September 30, 2021 481,901,523  $ 483  $ 938,006  $ (411,409) $ 546  $ 527,626  $ 4,978  $ 532,604 
________________________
*    Excludes accretion of dividend for redeemable non-controlling interest.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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IDEANOMICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD in thousands)
Nine Months Ended
September 30, 2021 September 30, 2020
Cash flows from operating activities:
Net loss $ (65,137) $ (47,765)
Adjustments to reconcile net loss to net cash used in operating activities
Share-based compensation expense 19,234  8,848 
Depreciation and amortization 4,445  1,651 
Non-cash interest expense (income) (616) 14,143 
Allowance for doubtful accounts (141) 585 
Income tax benefit (10,160) — 
Conversion expense —  2,266 
Loss on disposal of subsidiaries, net 1,446  — 
Equity in losses of equity method investees 1,517  8 
Other income (forgiveness of liabilities) (777) — 
Issuance of common stock for professional fees 1,819  — 
Gain on extinguishment of debt (300) — 
Gain on remeasurement of investment (2,915) — 
Impairment losses 21,033  4,143 
Impairment of operating lease assets —  6,220 
Settlement of ROU operating lease liabilities —  (5,706)
Change in fair value of contingent consideration (7,006) (2,900)
Change in assets and liabilities (net of amounts acquired):
Accounts receivable 5,042  (2,496)
Inventory (410) — 
Prepaid expenses and other assets (16,358) (689)
Accounts payable (1,572) 1,358 
Deferred revenue 1,260  701 
Amount due to related parties 387  1,542 
Accrued expenses, salary and other current liabilities 6,971  (3,827)
Net cash used in operating activities (42,238) (21,918)
Cash flows from investing activities:
Acquisition of property and equipment (1,352) (45)
Acquisition of intangible asset (263) — 
Proceeds from note receivable repayment 464  1,469 
Disposal of subsidiaries, net of cash disposed (44) — 
Acquisition of subsidiaries, net of cash acquired (100,579) — 
Long term investment (31,785) — 
Notes receivable —  (1,910)
Investment in debt securities (58,228) — 
Net cash used in investing activities (191,787) (486)
Cash flows from financing activities
Proceeds from issuance of convertible notes 220,000  2,000 
Proceeds from exercise of options and warrants and issuance of common stock 185,291  39,128 
Proceeds from noncontrolling interest shareholder —  7,148 
Borrowings from Small Business Association Paycheck Protection Program —  460 
Repayment of amounts due to related parties —  (2,999)
Repayment of convertible note (80,000) — 
Net cash provided by financing activities 325,291  45,737 
Effect of exchange rate changes on cash (100) 1,639 
Net increase in cash and cash equivalents 91,166  24,972 
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Cash and cash equivalents at the beginning of the period 165,764  2,633 
Cash and cash equivalents at the end of the period $ 256,930  $ 27,605 
Supplemental disclosure of cash flow information:
Cash paid for income tax $ 928  $ — 
Cash paid for interest $ 1,516  $ 311 
Issuance of shares for acquisition of DBOT $ —  $ 8,074 
Tree Technologies measurement period adjustment $ —  $ 12,848 
Issuance of shares for acquisition $ 59,808  $ — 
Issuance of shares for convertible notes conversion $ 140,126  $ 20,069 
Issuance of shares for WAVE contingent liabilities $ 6,305  $ — 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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IDEANOMICS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1.    Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Ideanomics, Inc. (Nasdaq: IDEX) is a Nevada corporation that primarily operates in Asia and the United States through its subsidiaries and variable interest entities (“VIEs.”) Unless the context otherwise requires, the use of the terms “we,” “us,” “our” and the “Company” in these notes to condensed consolidated financial statements refers to Ideanomics, Inc., its consolidated subsidiaries and VIEs.

The Company’s chief operating decision maker has been identified as the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. Through September 30, 2021, the Company operates in one segment with two business units, Ideanomics Mobility and Ideanomics Capital. For the nine months ended September 30, 2021, the Company completed four acquisitions. We are in the in the process of obtaining required shareholder approval to acquire 100% of VIA Motors International, Inc., ("VIA Motors.") The total aggregate consideration payable in connection with this transaction is equal to $630.0 million, consisting of an upfront payment at the closing of the transaction of $450.0 million and an earnout payment of up to $180.0 million. On September 15, 2021the Company announced it has entered into an agreement to launch a voluntary conditional tender offer in concert with the Founders of Energica for shares of Energica Motor Company S.p.A. (Energica), pursuant to which Ideanomics plans to increase its investment from 20.0% in Energica to approximately 70.0%. The Energica Founders shall continue to own 29% of Energica. The Company anticipates that its internal management structure and the information reviewed by the chief operating decision maker will change such that it may have multiple reportable segments in the future. These will be Ideanomics Mobility, which will encompass the entities with businesses centered in the electric vehicle (“EV”) market, and Ideanomics Capital, which will encompass business centered in the finance/real estate market, Other, and a corporate entity, with the combination/consolidation of all comprising the consolidated operations of the Company. The chief operating decision maker will review financial results at the segment level, and the Company has appointed one segment manager and is in the process of identifying and appointing an additional segment manager and revising its internal reporting, budgeting and forecasting process so as to be aligned with the anticipated corporate structure.
Ideanomics Mobility will drive EV adoption by assembling a synergistic ecosystem of subsidiaries and investments across the three key pillars of EV: Vehicles, Charging, and Energy. These three pillars provide the foundation for Ideanomics Mobility’s planned offering of unique business solutions such as Charging as a Service (“CaaS”) and Vehicle as a Service (“VaaS.”)
Ideanomics Capital will be the Company’s fintech business unit, which focuses on leveraging technology and innovation to improve efficiency, transparency, and profitability for the financial services industry.
Basis of Presentation
In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. All significant intercompany transactions and balances are eliminated in consolidation. However, the results of operations included in such financial statements may not necessary be indicative of annual results.
The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on March 31, 2021 (“2020 Form 10-K.”)
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
On an ongoing basis, management evaluates the Company’s estimates, including those related to the bad debt allowance, variable consideration, fair values of financial instruments, intangible assets and goodwill, useful lives of intangible assets and
13
property and equipment, asset retirement obligations, income taxes, and contingent consideration and other contingent liabilities, among others. The Company bases its estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Significant Accounting Policies
For a detailed discussion of Ideanomics’ significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in Ideanomics’ consolidated financial statements included in the Company’s 2020 Form 10-K. During the nine months ended September 30, 2021, the Company acquired four businesses, Timios Holdings Corp. (“Timios,”) Wireless Advanced Vehicle Electrification, LLC. (“WAVE,”) US Hybrid ("U S Hybrid,") and Solectrac, Inc. ("Solectrac,") which resulted in the adoption of the following accounting policies with respect to those businesses.
Timios
Title Revenue

Premiums from title insurance policies written by independent agencies are recognized net of commission costs when the policies are reported to Timios and not before the effective date of the policy. Regulation of title insurance rates varies by state. Premiums are charged to customers based on rates predetermined in coordination with each states’ respective Department of Insurance.
Closing Revenue
A closing or escrow is a transaction pursuant to an agreement of a buyer, seller, borrower, or lender wherein an impartial third-party, such as Timios, acts in a fiduciary capacity on behalf of the parties in accordance with the terms of such agreement in order to accomplish the directions stated therein. Services provided include, among others, acting as escrow or other fiduciary agent, obtaining releases, and conducting the actual closing or settlement. Closing and escrow fees are recognized upon closing of the escrow, which is generally at the same time of the closing of the related real estate transaction.
Appraisal Revenue
Revenue from appraisal services are primarily related to establishing the ownership, legal status and valuation of the property in a real estate transaction. In these cases, Timios does not issue a title insurance policy or perform duties of an escrow agent. Revenues from these services are recognized upon delivery of the service to the customer.
Title Plant
Title plant consists of costs incurred to construct the title plant and to obtain, organize and summarize historical information for Glenn County title searches. These costs were capitalized until such time as the plant was deemed operational to conduct title searches and issue title insurance policies. Management has determined that the title plant has been properly maintained, has an indeterminable life, and in accordance with Accounting Standards Codification (“ASC”) Topic 950, Financial Services – Title Plant, has not been amortized. The costs to maintain the current status of the title plant are recorded as a current period expense.
Software Development Costs
Software developed or obtained for internal use in accordance with ASC 350-40, Internal-Use Software, is capitalized during the application development stage. In accordance with authoritative guidance, the Company begins to capitalize costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed, and the software will be used as intended. Once the project has been completed, these costs are amortized to expense on a straight-line basis over the estimated useful life of the related asset, generally estimated to be three years. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred. The Company classifies software development costs associated with the development of the Company’s products and services as intangible assets. For the nine months ended September 30, 2021, the Company capitalized software development costs of $0.5 million.

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Escrow and Trust Deposits
In providing escrow services, Timios holds funds for others in a fiduciary capacity, pending completion of real estate transactions. A separate, self-balancing set of accounting records is maintained by Timios to record escrow transactions. Escrow trust funds held for others are not Timios’s and, therefore, are excluded from the accompanying condensed consolidated balance sheet, however, Timios remains contingently liable for the disposition of these deposits. Escrow trust balances at September 30, 2021 were $32.3 million. It is a common industry practice for financial institutions where escrow funds are deposited to either reimburse or to directly provide for certain costs related to the delivery of escrow services. Timios follows the practice of non-recognition of costs borne by the financial institution where escrow funds are deposited.
WAVE, U S Hybrid, and Solectrac (collectively, the acquired EV entities)
Inventory
Inventories, which include the costs of material, labor and overhead, are stated at the lower of cost or net realizable value, with cost generally computed on a first-in, first-out (“FIFO”) basis. Estimated losses from obsolete and slow-moving inventories are recorded to reduce inventory values to their estimated net realizable value and are charged to costs of revenue. At the point of loss recognition, a new cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in a recovery in carrying value.
The composition of inventory is as follows (in thousands):
September 30, 2021
Raw materials $ 750
Work in progress 459
Finished goods 2,610
Total $ 3,819
The majority of the inventory is held in US Hybrid and Solectrac entities and represents finished assemblies and sub assemblies to be used in delivering electric powertrain components and electric tractors to customers, respectively.
Revenue
For product sales, the acquired EV entities consider practical and contractual limitations in determining whether there is an alternative use for the product. For example, long-term design and build contracts are typically highly customized to a customer’s specifications. For contracts with no alternative use and an enforceable right to payment for work performed to date, including a reasonable profit if the contract were terminated at the customer’s convenience for reason other than nonperformance, the acquired EV entities recognize revenue over time. All other product sales are recognized at a point in time.
For contracts recognized over time, the acquired EV entities have historically used the cost-to-total cost method to recognize the revenue over the life of the contract.
For contracts recognized at a point in time, the acquired EV entities recognize revenue when control passes to the customer, which is generally based on shipping terms that address when title and risk and rewards pass to the customer. However, the acquired EV entities also consider certain customer acceptance provisions as certain contracts with customers include installation, testing, certification or other acceptance provisions. In instances where contractual terms include a provision for customer acceptance, the acquired EV entities consider whether they have previously demonstrated that the product meets objective criteria specified by either the seller or customer in assessing whether control has passed to the customer.
For service contracts, the acquired EV entities recognize revenue as the services are rendered if the customer is benefiting from the service as it is performed, or otherwise upon completion of the service. Separately priced extended warranties are recognized as a separate performance obligation over the warranty period.
The transaction price in the acquired EV entities' contracts consists of fixed consideration and the impact of variable consideration including returns, rebates and allowances, and penalties. Variable consideration is generally estimated using a probability-weighted approach based on historical experience, known trends, and current factors including market conditions and status of negotiations.
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For design and build contracts, the acquired entities may at times collect progress payments from the customer throughout the term of the contract, resulting in contract assets or liabilities depending on the timing of the payments. Contract assets consist of unbilled amounts when revenue recognized exceeds customer billings. Contract liabilities consist of advance payments and billings in excess of revenue recognized.
Design and engineering costs for highly complex products to be sold under a long-term production-type contract are deferred and amortized in a manner consistent with revenue recognition of the related contract or anticipated contract. Other design and development costs are deferred only if there is a contractual guarantee for reimbursement. Costs to obtain a contract (e.g., commissions) for contracts greater than one year are deferred and amortized in a manner consistent with revenue recognition of the related contract.
Product Warranties
The acquired EV entities' standard product warranty terms generally include post-sales support and repairs or replacement of a product at no additional charge for a specified period of time. Accruals for estimated expenses related to product warranties are made at the time revenue is recognized and are recorded as a component of costs of revenue. The acquired EV entities estimate the liability for warranty claims based on standard warranties, the historical frequency of claims and the cost to replace or repair products under warranty. Factors that influence the warranty liability include the number of units sold, the length of warranty term, historical and anticipated rates of warranty claims and the cost per claim. The warranty liability as of September 30, 2021 is $0.6 million and is included in “Other long-term liabilities” within the condensed consolidated balance sheet. The warranty liability has not changed substantially subsequent to WAVE's acquisition.
Effects of COVID 19
Novel Coronavirus 2019 (“COVID-19”) is an infectious disease cause by severe acute respiratory syndrome coronavirus. The disease was first identified in December 2019 in Wuhan, the capital of China’s Hubei province, and has since spread globally, resulting in the ongoing COVID-19 pandemic. As of October 31, 2021, over 246.7 million cases had been reported across the globe, resulting in 5.0 million deaths.
The spread of COVID-19 has caused significant disruption to society as a whole, including the workplace. The resulting impact to the global supply chain has disrupted most aspects of national and international commerce, with government-mandated social distancing measures imposing stay-at-home and work-from-home orders in almost every country. The effects of social distancing have shut down significant parts of the local, regional, national, and international economies, for limited or extended periods of time, with the exception of government designated essential services.
In many parts of the world, stay-at-home and work-from-home orders were relaxed during the summer of 2020 as the effects of the Coronavirus appeared to lessen, and economic activity began to recover. However, commencing in the autumn and fall of 2020 and continuing, the U.S. as well as countries in Europe, South America and Asia began to experience an increase in new COVID-19 cases, and in some cases local, state, and national governments began to reinstate restrictive measures to stem the spread of the virus. The U.S. and other countries also experienced an increase in new COVID-19 cases after the fall and winter holiday season, with new, more infectious variants of COVID-19 identified. Various vaccines have been developed, with vaccinations programs in effect worldwide, though reaching acceptable levels of immunization against COVID-19 remains challenging at the local, regional and global level.
The future effects of the virus are difficult to predict, due to uncertainty about the course of the virus, different variants that may evolve, and the supply of the vaccine on a local, regional, and global basis, as well as the ability to implement vaccination programs in a short time frame.
The Company does not anticipate significant adverse effects on its operations’ revenue as compared to its business plan in the near- or mid-term, although the future effects of COVID-19 may result in regional restrictive measures which may constrain the Company’s operations, and supply chain shortages of various materials may have a negative effect on our EV sales or production capacity in the longer-term. The Company's Treeletrik business, which focuses on the sale of motorbikes in the ASEAN region, is experiencing disruption in its operations as a result the continued lockdowns in the region, which have adversely impacted its ability to fulfill committed orders.
The Company continues to monitor the overall situation with COVID-19 and its effects on both local, regional and global economies.

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Restatement of Previously Reported Condensed Consolidated Financial Statements

As previously disclosed on Form 8-K filed on November 16, 2021 and 8-K/A filed on November 22, 2021, the Company determi1ned that the Company’s previously issued financial statements for the periods ended March 31, 2021 and June 30, 2021 should no longer be relied upon due to errors in such condensed consolidated financial statements related to revenue reported by Timios that provides title and agency services. The preparation of the Company’s condensed consolidated financial statements identified additional transactions and accounting practices not in accordance with U.S. GAAP.

The following errors were identified as part of the restatement:

A.The Company determined that it did not present Timios title and agency services revenue and the related cost of revenue in accordance with US GAAP on the condensed consolidated statement of operations, as premiums from title insurance policies written by independent agencies were presented on a gross basis and did not properly present revenue and cost of revenue net of commission costs.
B.The Company discovered that it did not properly account for its investment in Technology Metals Market Limited (“TM2”) in accordance with the equity method of accounting. In addition, the Company determined that it incorrectly presented equity income (loss) on its equity method investments as a component of interest and other income (expense) on the condensed consolidated statements of operations rather than as a separate financial statement caption below income taxes.
C.The Company discovered certain errors in determining the estimated fair value of acquired intangible assets in its purchase price allocation for its acquisitions.
D.The Company determined that the errors in determining the estimated fair value of net assets acquired in its acquisitions resulted in an additional reduction to the Company’s deferred tax liabilities.
E.The Company determined that it did not properly recognize income tax expense (benefit) for certain acquired entities subsequent to their respective acquisitions during the periods ended March 31, 2021 and six June 30, 2021.

Note 2.    New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-12 (“ASU 2019-12”) “Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes.” ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions currently provided for in ASC 740, “Income Taxes” (“ASC 740,”) and by amending certain other requirements of ASC 740. The changes resulting from ASU 2019-12 will be made on a retrospective or modified retrospective basis, depending on the specific exception or amendment. For public business entities, the amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted ASU 2019-12 effective January 1, 2021. The effect of the adoption of ASU 2019-12 was not material.
In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current U.S. GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting, and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as additional paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. For public business entities, the amendments in ASU 2020-06 are effective for public entities which meet the definition of a smaller reporting company are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company adopted ASU 2020-06 effective January 1, 2021. As the Company had no outstanding convertible instruments as of that date, the adoption of ASU 2020-06 had no effect.
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Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13 (“ASU 2016-13”) “Financial Instruments - Credit Losses” (“ASC 326:”) Measurement of Credit Losses on Financial Instruments” which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. In November 2019, the FASB issued ASU 2019-10 “Financial Instruments – Credit Losses (Topic 326,) Derivatives and Hedging (Topic 815,) and Leases (Topic 842)” (“ASC 2019-10,”) which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for public entities which meet the definition of a smaller reporting company. The Company will adopt ASU 2016-13 effective January 1, 2023. Management is currently evaluating the effect of the adoption of ASU 2016-13 on the consolidated financial statements. The effect will largely depend on the composition and credit quality of our investment portfolio and the economic conditions at the time of adoption.
In May 2021, the FASB issued ASU No. 2021-04 (“ASU 2021-04”) “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40)” which provides guidance on modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another Topic. An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, and provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. ASU 2021-04 also provides guidance on the recognition of the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. The Company will adopt ASU 2021-04 on January 1, 2022. Management is currently evaluating the effect of the adoption of ASU 2021-04 on the consolidated financial statements. The effect will largely depend on the terms of written call options or financings issued or modified in the future.

In October 2021, the FASB issued ASU No. 2021-08 ("ASU No. 2021-08") "Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". ASU No. 2021-08 will require companies to apply the definition of a performance obligation under ASC Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination. Under current U.S. GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. ASU No. 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its financial statements and the effects will be based upon the contract assets and liabilities acquired in the future.

Note 3.    Fuzhou Note Receivable

In May 2020, Energy Sales provided a note receivable to Fuzhou Zhengtong Hongxin Investment Management Company Limited (“Zhengtong”) in the amount of 3.0 million RMB ($0.4 million). The note receivable was not collateralized. Zhengtong agreed to repay 3.3 million RMB ($0.5 million) within three months of the disbursement date. The Company had recorded a reserve of $0.5 million against this note receivable in the three months ended December 31, 2020, and subsequently commenced legal action in order to recover the amounts due. In September 2021, Zhengtong, Beijing Seven Stars Global Culture Development Inc.(“BSSGCD”), an affiliate of Bruno Wu, and the Company reached an assignment agreement pursuant to which BSSGCD accepted from Zhengtong all the rights and claims arising from this note receivable. The Company received the payment in full of 3.3 million RMB ($0.5 million) from BSSGCD subsequently and recorded this recovery in Selling, general and administrative expenses.
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Note 4.    Revenue
The following table summarizes the Company’s revenues disaggregated by revenue source, geography (based on the Company’s business locations,) and timing of revenue recognition (in thousands):
Three Months Ended Nine Months Ended
September 30,
2021 		September 30,
2020 		September 30,
2021 		September 30,
2020
Geographic Markets
Malaysia $ 18  $ 33  $ 65  $ 42 
USA 17,984  480  69,873  908 
PRC 9,045  10,107  17,894  14,740 
Total $ 27,047  $ 10,620  $ 87,832  $ 15,690 
Product or Service
Electric vehicles $ 9,236  $ 8,872  $ 18,322  $ 9,622 
Charging, batteries and powertrains 2,292  —  6,850  — 
Title and escrow services 15,519  —  62,429  — 
Combustion engine vehicles —  1,268  —  5,160 
Digital advertising services and other —  480  231  908 
Total $ 27,047  $ 10,620  $ 87,832  $ 15,690 
Timing of Revenue Recognition
Products and services transferred at a point in time $ 25,526  $ 10,620  $ 84,546  $ 15,690 
Services provided over time 1,521  —  3,286  — 
Total $ 27,047  $ 10,620  $ 87,832  $ 15,690 
In the three and nine months ended September 30, 2021, the Company recognized revenue of $0.6 million and $0.6 million recorded in deferred revenue as of the beginning of the period.
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Note 5.    Available-for-Sale Securities

The Company accounts for its available-for-sale securities at their fair value, with changes in fair value, if any, recorded in other comprehensive income.

The following table provides certain information related to available-for-sale debt securities (in thousands):

As of September 30, 2021
Cost Interest Unrealized Gains Unrealized Losses Estimated Fair Value
Available-for-sale securities:
SILK EV Note (a) $ 15,000 $ 607 $ 4 $ (20) $ 15,591
CyVolve Note (b) 200 1 —  —  201
Via Motor Note (c) 42,500 149 —  —  42,649
Total available-for-sale securities $ 57,700 $ 757 $ 4 $ (20) $ 58,441
(a)On January 28, 2021, the Company invested $15.0 million in Silk EV via a convertible promissory note. Silk is an Italian engineering and design services company that has recently partnered with FAW to form a new company (“Silk-FAW”) to produce fully electric, luxury vehicles for the Chinese and global auto markets.
The terms of the convertible promissory note are as follows:
•The principal amount is $15.0 million;
•The interest rate is 6%;
•The maturity date is January 28, 2022;
•Upon a qualified equity financing, as defined, the outstanding principal and accrued interest shall convert into equity securities sold in the qualified equity financing at a conversion price equal to the cash price for the equity securities times 0.80;
•The events of default are as follows:
◦SILK EV fails to pay timely the principal and accrued interest due under this note;
◦SILK EV files any petition for relief under bankruptcy, reorganization, insolvency or similar other law; or
◦An involuntary petition is filed against SIK EV under bankruptcy or similar statute.
The Company accounts for the Silk EV note as an available-for-sale security at its fair value, with changes in fair value, if any, recorded in other comprehensive income. The Company recorded in other comprehensive income an increase of the note's fair value of $4,000 in the three months ended September 30, 2021. The Company recorded in other comprehensive income a reduction of the note's fair value of $16,275 in the nine months ended September 30, 2021.
(b)On July 30, 2021 the Company invested $0.1 million in CyVolve, Inc. (“CyVolve,”) via a secured promissory note and on September 24, 2021, the Company invested another $0.1 million in CyVolve, via a secured promissory note. Cyvolve is a next-generation provider of data security, to ensure constant encryption and Artificial Intelligence-driven pervasive control of an organization’s data across platforms.
The terms of the secured promissory notes are as follows:
•The principal amount is $0.1 million each;
•The interest rate is 8%;
•The maturity dates are January 30, 2022;
•The events of default are as follows:
◦CyVolve fails to pay timely the principal and accrued interest due under this note;
◦CyVolve files any petition for relief under bankruptcy, reorganization, insolvency or similar other law; or
◦An involuntary petition is filed against CyVolve under bankruptcy or similar statute.
The Company accounts for the CyVolve notes as an available-for-sale security at its fair value, with changes in fair value, if any, recorded in other comprehensive income.


(c)On August 30, 2021, the Company invested $42.5 million in VIA Motors, via a convertible promissory note. VIA Motors is a leading electric commercial vehicle company with proven advanced electric drive technology, delivering sustainable mobility solutions for a more livable world. VIA Motors designs, manufactures and markets electric commercial vehicles, with superior life-cycle economics, for use across a broad cross-section of the global fleet customer base.
The terms of the convertible promissory note are as follows:
•The principal amount is $42.5 million;
•The interest rate is 4%;
•The maturity date is the earlier of the closing date of the acquisition or August 30, 2022;
•The events of default are as follows:
◦VIA Motors fails to pay timely the principal and accrued interest due under this note;
◦VIA Motors files any petition for relief under bankruptcy, reorganization, insolvency or similar other law; or
◦An involuntary petition is filed against VIA Motors under bankruptcy or similar statute.

Note 6.    Acquisitions and Divestitures
The Company may divest certain businesses from time to time based upon review of the Company’s portfolio considering, among other items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in addition to considering if selling the businesses results in the greatest value creation for the Company and for shareholders.
The Company had not acquired any companies nor disposed of any subsidiaries in the year ended December 31, 2020, with the exception of the disposition of its remaining 10.0% interest in Amer Global Technology Limited (“Amer.”) In the three months ended September 30, 2020, the Company sold its remaining 10.0% interest in Amer to Fintalk Media Inc., a related party, for a nominal amount. As the Company had no basis in its remaining interest in Amer, the gain recognized on the sale was de minimis.
2021 Acquisitions
The Company has completed the below acquisitions in the nine months ended September 30, 2021. The accompanying condensed consolidated financial statements include the operations of the acquired entities from their respective acquisition dates. All of the acquisitions have been accounted for as business combinations. Accordingly, consideration paid by the Company to complete the acquisitions is initially allocated to the acquired assets and liabilities assumed based upon their estimated acquisition date fair values. The recorded amounts for assets acquired and liabilities assumed are provisional and subject to change during the measurement period, which is up to 12 months from the acquisition date. Management considers the valuations final for Timios and WAVE. The open areas for Solectrac relate to the finalization of net working capital adjustments with the sellers; and the open areas for US hybrid relate to the finalization of net working capital adjustments with the sellers and the impact of final income tax returns that may impact the deferred tax assets and liabilities, respectively.
The acquisitions below are collectively defined as the 2021 Acquisitions.
Timios Holdings Corp.
On January 8, 2021 the Company completed the acquisition of privately held Timios and its affiliates pursuant to the stock purchase agreement (the “Timios Agreement”) entered into on November 11, 2020. Pursuant to the Timios Agreement, the Company acquired 100% of the outstanding capital stock of Timios for a purchase price of $40.0 million, net of cash acquired of $6.5 million. The full purchase price was paid in cash. Pursuant to the Timios Agreement, $5.1 million of the cash consideration was paid into escrow pending a one year indemnification review. Timios provides title and escrow services for real estate transactions. Revenue of $15.5 million and $62.4 million and net loss of $(16.4) million and $(10.6) million for the three and nine months ended September 30, 2021, respectively, have been included in the condensed consolidated financial statements.
On July 26, 2021, Timios experienced a systems outage that was caused by a cybersecurity incident, which caused disruption to parts of Timios’ business, including its ability to perform its mortgage title, closing and escrow services offerings. This resulted in an adverse impact on Timios’ revenues in that one significant customer was lost and other customers have reduced their volume. The Company determined that an indicator of potential impairment existed and decided to perform an interim quantitative tangible and intangible asset and goodwill impairment tests for its Timios reporting unit.
Based on the results of this interim quantitative impairment test, the fair value of the Timios reporting unit was below the carrying value of its net assets. Refer to Note 9 for further information related to the impairment and the amounts recorded as of September 30, 2021. The tables below that relate to Timios have not been adjusted to reflect any impairments and continue to represent the fair value of the assets acquired and liabilities assumed as of the acquisition date.
Wireless Advanced Vehicle Electrification, Inc.
On January 15, 2021 the Company completed the acquisition of privately held WAVE pursuant to an agreement and plan of merger (the “WAVE Agreement”) entered into on January 4, 2021. WAVE is a provider of wireless charging solutions for medium and heavy-duty electric vehicles.
Pursuant to the WAVE Agreement, the Company acquired 100% of the outstanding capital stock of WAVE for an aggregate purchase price of $55.0 million in a combination of $15.0 million of cash plus a total of 12.6 million unregistered shares of the Company’s common stock, valued at $40.0 million at the date of closing. Pursuant to the Wave Agreement, $5.0 million of the cash consideration was paid into escrow pending a one year indemnification review. The WAVE Agreement provided that 3.6 million shares of the Company’s common stock be held back at closing, to be released upon the receipt of certain customer
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consents not obtained prior to closing. As of September 30, 2021, 0.5 million of the Company’s common stock remains unissued pending receipt of a final consent. Since receipt of this consent is probable, the Company has included the total common shares to be issued as contingent consideration as of the acquisition date of $7.7 million. Pursuant to the original agreement, if any such consent is not obtained within six months following the closing date, the portion of the common stock allocated to such consent in the WAVE Agreement would not be issued to the sellers. The Company intends to extend the time frame for this contractual provision as the receipt of the consents is outside the control of the former WAVE shareholders.
In addition to the purchase price to be paid at closing, the WAVE Agreement contains three earnouts that could result in additional payments of up to $30.0 million to the sellers based upon: (1) revenue and gross profit margin metrics in calendar year 2021; (2) revenue and gross profit margin metrics in calendar year 2022; and (3) revenue and gross profit margin metrics for 2021 and 2022 collectively. The Company considers this earnout to be contingent consideration that as of the acquisition date is unlikely to occur and has therefore attributed zero value for purposes of the preliminary purchase price allocation. The Company will continue to monitor the fair value of this contingent considerations with any changes being recorded in the consolidated statement of operations if and when a change occurs.
Ideanomics has also agreed to a performance and retention plan for the benefit of certain WAVE’s employees which could result in up to $10.0 million paid to such employees if certain gross revenue targets and certain gross profit margins are achieved for calendar years 2021 and 2022. The Company has concluded that this performance and retention plan does not constitute purchase consideration and will be recorded as compensation expense when the criteria are probable of being met. The Company has not accrued any of this retention plan as the revenue and gross profit margin criteria are not probable of being met.
Revenue of $1.0 million and $5.2 million and net loss of $(1.2) million and $(3.2) million, for the three and nine months ended September 30, 2021, respectively, have been included in the condensed consolidated financial statements.

US Hybrid

On June 10, 2021, the Company completed the acquisition of privately held US Hybrid Corporation ("US Hybrid") pursuant to an agreement and plan of merger (the “USH Agreement”) entered into on May 12, 2021. US Hybrid specializes in the design and manufacturing of zero-emission electric powertrain components including traction motors, controllers, auxiliary drives, energy storage and fuel cell engines for electric, hybrid, and fuel cell medium and heavy-duty municipality vehicles, commercial trucks, buses, and specialty vehicles throughout the world.

Pursuant to the USH Agreement, the Company acquired 100% of the outstanding capital stock of US Hybrid Corporation for an aggregate purchase price of $50.0 million in a combination of $30.0 million in cash and 6.6 million in unregistered shares of the Company's common stock, valued at $20.9 million at the date of closing. Pursuant to the USH Agreement, $1.0 million of cash consideration was paid into escrow pending a true up of net working capital within 90 days of the closing date. Additionally, the 6.6 million shares were paid into an indemnity escrow to satisfy future indemnification obligations of the selling shareholders, if any.

The Company has also agreed to a performance and retention plan for the benefit of certain US Hybrid employees which could result in up to $16.7 million paid to such employees if certain gross revenue targets, gross profit margins and certain operational targets are achieved for calendar years 2021, 2022 and 2023. The Company has concluded that this performance and retention plan does not constitute purchase consideration and will be recorded as compensation expense when the criteria are probable of being met. As of September 30, 2021 the Company has not accrued any of this retention plan as the various criteria are not probable of being met.

Revenue of $1.3 million and $1.6 million and net loss of $(0.7) million and $(1.0) million, for the three and nine months ended September 30, 2021, respectively, have been included in the condensed consolidated financial statements.

Solectrac

On June 11, 2021, the Company completed the acquisition of privately held Solectrac, Inc ("Solectrac") pursuant to an agreement and plan of merger (the “Solectrac Agreement”) entered into on June 11, 2021. Solectrac developed 100% battery-powered, all-electric tractors for agriculture and utility operations. Solectrac tractors provide an opportunity for farmers around the world to power their tractors by using the sun, wind, and other clean renewable sources of energy. Solectrac’s mission is to offer farmers independence from the pollution, infrastructure, and price volatility associated with fossil fuels.

Pursuant to the Solectrac Agreement, the Company acquired the remaining 78.6% of the outstanding capital stock of Solectrac for an aggregate purchase price of $17.7 million in net cash. The Company had previously acquired 21.4% of Solectrac in 2020. The Company now owns 100% of Solectrac. Pursuant to the Solectrac Agreement, $2.0 million of cash consideration was paid
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into an indemnity escrow to satisfy future indemnification obligations of the selling shareholders, if any. In conjunction with the acquisition of Solectrac, the Company remeasured the 21.4% previously accounted for as an equity method investment. This remeasurement resulted in a gain of $2.9 million recorded in the prior quarter condensed consolidated statement of operations.
In addition to the purchase price to be paid at closing, the Solectrac Agreement contains three earnouts that could result in additional payments of up to $6.0 million to the sellers based upon: (1) revenue and gross profit margin metrics in calendar year 2021; (2) revenue and gross profit margin metrics in calendar year 2022; and (3) revenue and gross profit margin metrics in calendar year 2023. The Company considers this earnout to be contingent consideration that as of the acquisition date is probable to occur in certain years and has attributed $1.6 million as additional consideration for purposes of the preliminary purchase price allocation. The Company will continue to monitor the fair value of this contingent consideration with any changes being recorded in the consolidated statement of operations if and when a change occurs.

The Company has also agreed to a performance and retention plan for the benefit of certain Solectrac employees which could result in up to $3.0 million paid to such employees if certain gross revenue targets, gross profit margins and certain operational targets are achieved for calendar years 2021, 2022 and 2023. The Company has concluded that this performance and retention plan does not constitute purchase consideration and will be recorded as compensation expense when the criteria are probable of being met. As of September 30, 2021 the Company has not accrued any of this retention plan as the various criteria are not yet probable of occurring.

Revenue of $0.2 million and $0.4 million and net loss of $(0.7) million and $(0.7) million, for the three and nine months ended September 30, 2021, respectively, have been included in the condensed consolidated financial statements.
Acquisition Method Accounting Estimates
The Company initially recognizes the assets and liabilities acquired from the aforementioned acquisitions based on its preliminary estimates of their acquisition date fair values. As additional information becomes known concerning the acquired assets and assumed liabilities, management may make adjustments to the opening balance sheet of the acquired company up to the end of the measurement period, which is no longer than a one year period following the acquisition date. The determination of the fair values of the acquired assets and liabilities assumed (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment.
The table below reflects the Company’s provisional estimates of the acquisition date fair values of the assets acquired and liabilities assumed for the 2021 Acquisitions (in thousands):
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Solectrac US Hybrid Timios WAVE
Purchase Price
Cash paid at closing, including working capital estimates $ 17,745  $ 30,139  $ 46,576  $ 15,000 
Fair value of previously held interest 5,287  — 
Fair value of common stock —  20,877  —  32,377 
Fair value of contingent consideration 1,639  —  —  7,657 
Total purchase consideration $ 24,671  $ 51,016  $ 46,576  $ 55,034 
Purchase Price Allocation
Assets acquired
Current assets 3,011  4,547  7,292  2,130 
Property, plant and equipment 30  5  429  — 
Other assets 45  51  48  — 
Intangible assets – tradename 4,570  1,740  7,780  12,630 
Intangible assets – lender relationships —  —  14,790  — 
Intangible assets - technology 2,450  5,110 
Intangible assets – patents —  —  —  13,000 
Intangible assets - non-compete —  520  —  — 
Intangible assets – licenses —  —  1,000  — 
Indefinite lived title plant —  —  500  — 
Goodwill 16,787  41,446  24,252  34,142 
Total assets acquired 26,893  53,419  56,091  61,902 
Liabilities assumed:
Current liabilities (509) (1,601) (4,306) (3,778)
Deferred tax liability (1,713) (802) (5,209) (3,090)
Total liabilities assumed (2,222) (2,403) (9,515) (6,868)
Net assets acquired $ 24,671  $ 51,016  $ 46,576  $ 55,034 
The useful lives of the intangible assets acquired is as follows:

Solectrac US Hybrid Timios WAVE
Intangible assets – tradename 6 7 15 15
Intangible assets – lender relationships —  —  7 — 
Intangible assets – technology 10 13 —  — 
Intangible assets – patents —  —  —  14
Intangible assets - non-compete —  5 —  — 
Intangible assets – licenses —  —  15 — 
Weighted average useful life 7.4 11.0 10 14.5
Amortization expense related to intangible assets created as a result of the 2021 Acquisitions of $1.7 million and $4.0 million has been recorded for the three and nine months ended September 30, 2021. Estimated amortization expense related to these intangible assets for each of the years subsequent to September 30, 2021 is as follows (amounts in thousands):
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2021 remaining $ 1,518 
2022 6,222 
2023 6,222 
2024 6,222 
2025 6,222 
2026 and beyond 33,400 
Total $ 59,806 
Cumulative Goodwill, excluding any impairments, in the amount of $116.6 million was recorded as a result of the 2021 Acquisitions. The goodwill from the 2021 Acquisitions represent future economic benefits that we expect to achieve as a result of the acquisitions, Goodwill is calculated as the excess of the consideration transferred over the net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill is not expected to be deductible for tax purposes for any of the 2021 Acquisitions. Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequent if certain indicators of impairment are present.
Transaction Costs
Transaction costs describe the broad category of costs the Company incurs in connection with signed and/or closed acquisitions. Transaction costs include expenses associated with legal, accounting, regulatory, and other transition services rendered in connection with acquisition, travel expense, and other non-recurring direct expenses associated with acquisitions. The Company incurred transaction costs of $0.6 million and $2.2 million during the three and nine months ended September 30, 2021 related to the 2021 Acquisitions. In addition, the Company incurred transaction costs of $3.3 million during the three and nine months ended September 30, 2021, associated with the proposed VIA Motors acquisition. Transaction costs have been included in selling, general and administrative expenses in the condensed consolidated statements of operations and in cash flows from operating activities in the condensed consolidated statements of cash flows.
Pro forma Financial Information
The unaudited pro forma results presented below include the effects of the Company’s acquisitions as if the acquisitions had occurred on January 1, 2020. The pro forma adjustments are based on historically reported transactions by the acquired companies. The pro forma results do not include any anticipated synergies or other expected benefits of the acquisitions. The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions occurred on January 1, 2020.
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
(Amounts in thousands, except per share and share data)
Total revenue $ 27,047  $ 32,418  $ 91,369  $ 75,747 
Net loss attributable to IDEX common shareholders (50,854) (6,132) (66,325) (42,398)
Earnings (loss) per share
Basic and Diluted $ (0.11) $ (0.02) $ (0.15) $ (0.20)
Weighted average shares outstanding
Basic and Diluted 477,214,431  256,752,912  440,151,607  211,193,769 

Dispositions

On April 20, 2021, Ideanomics entered into a stock purchase agreement with FNL Technologies, Inc., (“FNL”) the owner and operator of the social media platform Hoo.be, pursuant to which Ideanomics made an investment into FNL, including cash,
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Ideanomics common stock, and 100% of the common stock outstanding of Grapevine Logic, Inc. (“Grapevine,”) a wholly-owned subsidiary of the Company focused on influencer marketing. Subsequent to this transaction, the Company owned 29.0% of the outstanding common stock of FNL.

The Company recognized a disposal loss of $1.2 million as a result of the deconsolidation of Grapevine, and such loss was recorded in “Loss on disposal of subsidiaries, net” in the condensed consolidated statements of operations. Through its ownership in FNL, the Company has retained a 29.0% interest in Grapevine. The disposal loss of $1.2 million includes the adjustment recorded to adjust the retained interest of 29.0% in Grapevine to its fair value on the date of disposal.

Refer to Note 10 for additional information concerning the investment in FNL.
Note 7.    Accounts Receivable
The following table summarizes the Company’s accounts receivable (in thousands):
September 30,
2021 		December 31,
2020
Accounts receivable $ 6,053  $ 8,619 
Less: allowance for doubtful accounts (1,559) (1,219)
Accounts receivable, net $ 4,494  $ 7,400 
The gross balance includes the taxi commission revenue receivables of $1.2 million and $1.2 million from the related party Guizhou Qianxi Green Environmentally Friendly Taxi Service Co, as of September 30, 2021 and December 31, 2020, respectively.
The following table summarizes the movement of the allowance for doubtful accounts (in thousands):
September 30,
2021 		December 31,
2020
Balance at the beginning of the period $ (1,219) $ — 
Increase in the allowance for doubtful accounts (340) (1,219)
Balance at the end of the period $ (1,559) $ (1,219)
The Company reserved its accounts receivable of $0.3 million from a third-party in the nine months ended September 30, 2021. In the year ended December 31, 2020, the Company fully reserved its accounts receivable of $1.2 million from the related party Guizhou Qianxi Green Environmentally Friendly Taxi Service Co.
Note 8.    Property and Equipment, net
The following table summarizes the Company’s property and equipment (in thousands):
September 30,
2021 		December 31,
2020
Furniture and office equipment $ 1,163  $ 315 
Vehicle 393  229 
Leasehold improvements 547  246 
Machinery and equipment 277  — 
Total property and equipment 2,380  790 
Less: accumulated depreciation (753) (460)
Property and equipment, net $ 1,627  $ 330 
Fintech Village
Land $ —  $ 2,750 
Assets retirement obligations - environmental remediation —  4,500 
Fintech Village $ —  $ 7,250 

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The Company recorded depreciation expense of $126,323 and $25,170, which is included in its operating expense, for the three months ended September 30, 2021 and 2020, respectively and $335,785 and $90,962 for the nine months ended September 30, 2021 and 2020, respectively.

In the three months ended June 30, 2020 the Company ceased to use the premises for its New York City headquarters at 55 Broadway, and vacated the premises. As a result, the Company recorded an impairment loss of $0.2 million related to leasehold improvements and other fixed assets at that location.
Global Headquarters for Technology and Innovation in Connecticut (“Fintech Village”)
On January 28, 2021, the Company’s Board of Directors accepted an offer of $2.75 million for Fintech Village, and subsequently signed a sale contract on March 15, 2021. The Company believes that Fintech Village met the criteria for held for sale classification on January 28, 2021. As the sale is expected to be completed within one year, the land with a carrying amount of $2.6 million and the asset retirement cost of $4.5 million are recorded as “Held for sale assets (Fintech Village”) in the current asset section of the condensed consolidated balance sheet. The Company has estimated the costs to sell Fintech Village to be $0.2 million and has recorded these costs in “Loss on disposal of subsidiaries, net.”
The Company recorded asset retirement obligations for environmental remediation matters in connection with the acquisition of Fintech Village. The asset retirement obligations are classified as held for sale as they will be derecognized upon the sale.
The following table summarizes the activity in the asset retirement obligation for the nine months ended September 30, 2021 (in thousands):
January 1,
2021 		Liabilities
Incurred 		Remediation
Performed 		Accretion
Expense 		Revisions September 30,
2021
Asset retirement obligation $ 4,653  $ —  $ —  $ —  $ —  $ 4,653 
Note 9.    

A reporting unit is the level at which goodwill is tested for impairment, and is defined as an operating segment or one level below an operating segment, if certain criteria are met. Under its current corporate structure, the Company has one operating segment and seven reporting units.
Goodwill
The following table summarizes changes in the carrying amount of goodwill (in thousands):
Balance as of January 1, 2020 $ 23,344 
Measurement period adjustments (12,848)
Effect of change in foreign currency exchange rates (8)
Impairment loss (9,323)
Balance as of December 31, 2020 1,165 
Impairment* (5,610)
Restatement adjustments** 16,171 
Acquisitions 100,455 
Effect of change in foreign currency exchange rates (19)
Disposal of Grapevine*** (704)
Balance as of September 30, 2021 $ 111,458 

*On July 26, 2021, Timios experienced a systems outage that was caused by a cybersecurity incident, which caused disruption to parts of Timios’ business, including its ability to perform its mortgage title, closing and escrow services offerings. This resulted in an adverse impact on Timios’ revenues in that one significant customer was lost and other customers have reduced their volume. The Company determined that an indicator of potential impairment existed and decided to perform an interim quantitative tangible and intangible asset and goodwill impairment tests for its Timios reporting unit.

Based on the results of this interim quantitative impairment test, the fair value of the Timios reporting unit was below the carrying value of its net assets. The decline in the fair value of the Timios reporting unit resulted from the cybersecurity event described above, which lowered the projected revenue and profitability levels of the reporting unit. The fair value of the Timios
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reporting unit was based on the income approach. Under the income approach, the Company estimated the fair value of the reporting unit based on the present value of estimated future cash flows which are level 3 unobservable inputs in the fair value hierarchy. The Company prepared cash flow projections based on management's estimates of revenue growth rates and operating margins, taking into consideration the historical performance and the current macroeconomic industry and market conditions. The Company based the discount rate on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the Timios’ ability to execute on the projected cash flows. The fair value of Timios’ reporting unit is based on management’s best estimates, and should actual results differ from those estimates, future impairment charges may be required in future periods.

The quantitative analysis indicated that the carrying amount of the Timios reporting unit exceeded its fair value by $19.5 million. As a result, the Company recorded a goodwill impairment charge of $5.6 million, and impairment charges related to the Timios tradename and lender relationships of $0.7 million and $13.2 million, respectively, in the three months ended September 30, 2021.
**As reported in Note 1 the Company restated its condensed consolidated financial statements, including errors in determining the estimated fair value of acquired intangible assets in its purchase price allocation for its 2021 acquisitions. The cumulative impact of these errors resulted in less fair value being attributed to identifiable intangible assets and additional value attributed to goodwill. Refer to the Amended Form 10-Q's as of and for the three months ended March 31, 2021 and as of and for the three and six months ended June 30, 2021 that have been filed with the SEC on November 22, 2021.
***During the three months ended June 30, 2021, the Company completed the sale of Grapevine. Refer to Note 6 for additional information.



















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Intangible Assets
The following table summarizes information regarding amortizing and indefinite lived intangible assets (in thousands):
September 30, 2021 December 31, 2020
Weighted
Average
Remaining
Useful Life
(in years) 		Gross
Carrying
Amount 		Accumulated
Amortization 		Net
Balance 		Gross
Carrying
Amount 		Accumulated
Amortization 		Net 
Balance
Amortizing Intangible Assets
Influencer network (a,g) — $ —  $ —  $ —  $ 1,137  $ (462) $ 675 
Customer contract (a,g) — —  —  —  500  (389) 111 
Continuing membership agreement (b) 17.8 1,179  (642) 537  1,179  (619) 560 
Trade name (a,g) — —  —  —  110  (17) 93 
Technology platform (a,g) — —  —  —  290  (97) 193 
Land use rights (c) 97.3 27,024  (341) 26,683  28,162  (142) 28,020 
Timios licenses (d) 14.3 1,000  (49) 951  —  —  — 
Timios tradename (d) 14.3 7,108  (378) 6,730  —  —  — 
Timios lender relationships (d) 6.3 1,539  (1,539) —  —  —  — 
Timios software (e) 2.8 452  (38) 414  —  —  — 
WAVE patents (f) 13.3 13,000  (656) 12,344  —  —  — 
WAVE tradename (f) 14.3 12,630  (595) 12,035  —  —  — 
Software - Solectrac (h) 1.8 38  (5) 33  —  —  — 
Solectrac - Brand (h) 9.7 4,570  (138) 4,432  —  —  — 
Solectrac - Technology (h) 9.7 2,450  (74) 2,376  —  —  — 
US Hybrid - Brand (i) 6.7 1,740  (75) 1,665  —  —  — 
US Hybrid - Non-compete (i) 4.7 520  —  520  —  —  — 
US Hybrid - Technology (i) 12.7 5,110  (119) 4,991  —  —  — 
Software (j) 4.8 11  (1) 10  —  —  — 
Total 78,371  (4,650) 73,721  31,378  (1,726) 29,652 
Indefinite lived intangible assets
Timios Title plant (d) 500  —  500  —  —  — 
Website name 25  —  25  25  —  25 
Patent —  —  —  28  —  28 
Total $ 78,896  $ (4,650) $ 74,246  $ 31,431  $ (1,726) $ 29,705 

(a)During the third quarter of 2018, the Company completed the acquisition of 65.7% share of Grapevine. In connection with the business analysis of Grapevine, the Company determined that the attrition rate of the influencer network had accelerated, and performed an impairment analysis, and recorded an impairment loss of $0.8 million during the year ended December 31, 2020. As a result of this analysis of the influencer network, the Company determined that the remaining useful life of the influencer network should be reduced to two years, effective January 1, 2021 and also determined that remaining useful life of the technology should be reduced to one year, effective January 1, 2021.
(b)During the three months ended September 30, 2019 the Company completed the acquisition of additional shares in DBOT, which increased its ownership to 99.0%. Intangible assets of $8.3 million were recognized on the date of acquisition. As part of the determination of the fair value of DBOT’s intangible assets during the year ended December 31, 2020, the Company utilized the cost method to determine the fair value of the continuing membership agreement, and determined the fair value was $0.6 million, and recorded an impairment loss of $7.1 million during the year ended December 31 2020.
(c)During the three months ended December 31, 2019, the Company completed the acquisition of a 51.0% interest in Tree Technologies, a Malaysian company engaged in the EV market. Tree Technologies holds the land use rights for 250 acres of vacant land zoned for industrial development in the Begeng Industrial Area adjacent to Kuantan Port. Kuantan is the capital city of the state of Pahang on the east coast of Peninsular Malaysia.
(d)During the three months ended March 31. 2021, the Company completed the acquisition of 100.0% interest in Timios. Refer to Note 6 for additional information related to the acquisition.
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(e)Relates to software development costs capitalized during the nine months ended September 30, 2021 at Timios. The asset was placed into service in July 2021.
(f)During three months ended March 31. 2021, the Company completed the acquisition of 100.0% interest in WAVE. Refer to Note 6 for additional information related to the acquisition.
(g)During the three months ended June 30, 2021, the Company completed a stock purchase agreement with FNL Technologies, Inc., the owner and operator of the social media platform Hoo.be, pursuant to which Ideanomics made an investment into FNL, including cash, Ideanomics common stock, and 100% of the common stock outstanding of Grapevine, a wholly-owned subsidiary of the Company focused on influencer marketing.
(h)During three months ended June 30, 2021, the Company completed the acquisition of privately held Solectrac. Solectrac develops 100% battery-powered, all-electric tractors for agriculture and utility operations. Refer to Note 6 for additional information related to the acquisition.
(i)During three months ended June 30, 2021, the Company completed the acquisition of privately held US Hybrid Corporation. US Hybrid specializes in the design and manufacturing of zero-emission electric powertrain components. Refer to Note 6 for additional information related to the acquisition.
(j)Relates to software costs capitalized during the nine months ended September 30, 2021.

Amortization expense relating to intangible assets was $1.6 million and $0.7 million for the three months ended September 30, 2021 and 2020, respectively, and $4.1 million and $1.6 million for the nine months ended September 30, 2021 and 2020, respectively.
The following table summarizes the expected amortization expense for the following years (in thousands):
Years ending December 31, Amortization to be
recognized
2021 (excluding the nine months ended September 30, 2021) $ 1,625 
2022 6,396 
2023 6,396 
2024 6,305 
2025 6,230 
2026 and thereafter 46,769 
Total $ 73,721 
Note 10.    Long-term Investments
The following table summarizes the Company’s long-term investments (in thousands):
September 30,
2021 		December 31,
2020
Non-marketable equity investments $ 10,522  $ 4,787 
Equity method investments 25,027  3,783 
Total $ 35,549  $ 8,570 
Non-marketable equity investment
Non-marketable equity investments are investments in privately held companies without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

The Company reviews its equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee’s cash position, earnings and revenue outlook, liquidity and management ownership, among other factors, in its review. If management’s assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount. Based on
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management’s analysis of certain investment’s performance, the Company determined that there was a $1.5 million impairment loss recorded in the three and nine months ended September 30, 2021. Based on management's analysis of certain investment's performance, no impairment losses were recorded in the three and nine months ended September 30, 2020.
On August 2, 2021, the Company announced a strategic investment in Prettl Electronics Automotive ("PEA"), a business unit within the Prettl Group, a large German industrial company that manufactures and distributes components and systems for the automotive, energy, and electronics industries. The terms include a strategic investment of €7.5 million for 11,175 preferred shares. Ideanomics will receive exclusive sales and distribution rights for PEA charging infrastructure products and solutions in North America and CEO Alf Poor will join PEA's Board of Directors. The Company received legal ownership as of October 19, 2021, after payment of €7.5 million ($8.5 million).
Equity method investments
The following table summarizes the Company’s investment in companies accounted for using the equity method of accounting (in thousands):
September 30, 2021
January 1, 2021 Addition Income (loss)
on investment 		Reclassification to equity method investee Reclassification to subsidiaries Dilution loss due to investee share issuance September 30, 2021
Solectrac (a) $ 2,556  $ —  $ (153) $ —  $ (2,372) $ (31) $ — 
Energica (b) —  13,555  (735) —  —  —  12,820 
FNL Technologies (c) —  3,505  (236) 250  —  —  3,519 
MDI Fund (d) —  628  —  —  —  —  628 
TM2 (e) 1,227  7,226  (393) —  —  —  8,060 
Total $ 3,783  $ 24,914  $ (1,517) $ 250  $ (2,372) $ (31) $ 25,027 
The Company has received no dividends from equity method investees in the three and nine months ended September 30, 2021 and 2020.
(a)    Solectrac, Inc. (“Solectrac”)
On October 22, 2020, the Company acquired 1.4 million common shares, representing 15.0% of the total common shares outstanding, of Solectrac for a purchase price of $0.91 per share, for total consideration of $1.3 million. On November 19, 2020, Ideanomics acquired an additional 1.3 million shares of common stock for $1.00 per share, for a subsequent investment of $1.3 million. The Company’ ownership in Solectrac was diluted to 24.3% as of March 31, 2021 due to the new share issuance by Solectrac during the three months ended March 31, 2021.

On June 11, 2021, Ideanomics entered into a stock purchase agreement and plan of merger with Solectrac and its shareholders, and acquired the remaining common shares outstanding of Solectrac for total consideration of $17.7 million. Ideanomics now owns 100% of Soletrac, and commenced consolidation of Solectrac on that date.

Refer to Note 6 for additional information on the acquisition of Solectrac.
Solectrac develops, assembles and distributes 100% battery-powered electric tractors-an alternative to diesel tractors-for agriculture and utility operations. Solectrac tractors provide an opportunity for farmers around the world to power their tractors by using the sun, wind, and other clean renewable sources of energy.
(b)    Energica Motor Company S.P.A. (“Energica”)
On March 3, 2021, the Company entered into an investment agreement with Energica Motor Company S.P.A (“Energica.”) The Company invested €10.1 million ($13.6 million) for 6.1 million ordinary shares of Energica at a subscription price of €1.78 ($2.21) for each ordinary share. Pursuant to the purchase of the shares the Company will hold 20.0% of Energica’s share capital. From March 3, 2021 through September 30, 2021 the Company has the right to participate in any equity financing by Energica. Ideanomics was restricted from selling any of the shares for a period of 90 days.
Energica is the world’s leading manufacturer of high performance electric motorcycles and the sole manufacturer of the FIM Enel MotoE™ World Cup. Energica motorcycles are currently on sale through the official network of dealers and importers.
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The Company has decided to account for Energica on a one quarter lag as Energica, which is publicly traded on the Milan stock exchange, is only required to prepare and file semi-annual and annual financial statements, and the time frame in which the filings must be complete is much more lenient than in the U.S. Energica prepares its financial statements in accordance with Article 2423 et seq of the Italian Civil Code, rather than U.S. GAAP. Energica’s financial statements will either be prepared in or reconciled to U. S. GAAP prior to the Company recording its share of Energica’s earnings or losses, and the one quarter lag will be utilized to accomplish this, as well as related disclosure matters.

As of September 30, 2021, the excess of the Company’s investment over its proportionate share of Energica’s net assets was $10.9 million. The difference represents goodwill.

Certain shareholders of Energica have rights such that they may convert their ordinary shares into ordinary shares with supervoting rights under certain conditions. If some or all of these ordinary shares were converted into ordinary shares with supervoting rights, the Company’s ownership in Energica would be diluted, perhaps significantly.
The aggregate market value of the Energica common shares owned by the Company was $22.5 million as of September 30, 2021.

(c) FNL

On April 20, 2021, Ideanomics entered into a stock purchase agreement with FNL, pursuant to which Ideanomics made an investment into FNL, which included the investment of $2.9 million cash into FNL, the issuance of 0.1 million shares of Ideanomics common stock, and 100.0% of the common stock outstanding of Grapevine. Ideanomics received 0.6 million shares of common stock of FNL at a subscription price of $8.09 per share of common stock, and Ideanomics also converted a $250,000 Simple Agreement for Future Equity ("SAFE") into 30,902 shares of common stock. The Company determined that the basis in the FNL investment is the aggregate of the cash invested, including the SAFE, the fair value of the Ideanomics common stock issued, and the fair value of Grapevine. As a result of this transaction, Ideanomics owns 29.0% of the common stock outstanding of FNL, and FNL appointed Alfred Poor, Ideanomics’ Chief Executive Officer, to be a member of its board of directors.

The Company has decided to account for FNL on a one quarter lag, as FNL is in the development stage and will require the additional time to prepare financial statements in accordance with U.S. GAAP.

(d) Minority Depository Institution Keepers Fund

On July 26, 2021, the Company entered into a subscription agreement to invest $25.0 million in the MDI Fund. The MDI Fund sponsored by the National Bankers’ Association, an organization of minority-owned banks that aim to increase inclusivity in the financial services industry. The MDI Fund will provide capital resources primarily in low and moderate income areas to grow a more skilled workforce, increase employment opportunities, and support businesses’ growth among minority and underserved communities. The initial investment of $0.6 million was made on July 26, 2021.

The Company has decided to account for MDI on a one quarter lag, the MDI Fund reporting requirements differ from the Company's quarterly reporting schedule.

(e) Technology Metals Market Limited

On January 28, 2021, the Company entered into a simple agreement for future equity (the “SAFE”) with Technology Metals Market Limited (“TM2”). As of August 13, 2021, the SAFE was amended to which Ideanomics would invested €5.0 million ($5.9 million), an increase in the investment of €3.5 million ($4.1 million), from the original contracted investment of €1.5 million ($1.8 million.) If there is an equity financing (of above five million pounds (€5,000,000) during the twelve months immediately following execution of the SAFE, on the initial closing of such equity financing the SAFE will automatically convert into the number of ordinary shares equal to the purchase amount divided by the lowest price per share of the ordinary shares paid during such equity financing. If no equity financing has taken place during the twelve-month period immediately following the date of the SAFE, the parties shall in good faith attempt for one month to agree a fair value per ordinary share represented by the SAFE, following which the SAFE shall convert into the number of ordinary shares equal to the purchase amount divided by such fair value. If the parties are unable to establish a fair value per ordinary share within such one-month period, the Company shall be entitled to convert the purchase amount into ordinary shares based on the pre-investment valuation of the Company of €10.0 million ($11.1 million) on December 20, 2019, plus the value of any investment into the SAFE since the original investment resulting in a current valuation of the Company of €11.0 million, but subject to increase by the amount of any further debt, equity, convertible investment prior to January 28 2022. In the event of a non-qualifying financing, TM2 shall provide the Company with sufficient information to verify such funding and increase in valuation.


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Note 11.    Leases
As of September 30, 2021, the Company’s operating lease right of use assets and operating lease liabilities are $8.8 million and $8.8 million, respectively. The weighted-average remaining lease term is 4.1 years and the weighted-average discount rate is 3.6%.
The following table summarizes the components of lease expense (in thousands):
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Operating lease cost $ 610  $ 519  $ 1,058  $ 1,488 
Short-term lease cost 241  82  523  279 
Sublease income —  (11) —  (74)
Total $ 851  $ 590  $ 1,581  $ 1,693 
The following table summarizes supplemental information related to leases (in thousands):
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 723  $ 115  $ 1,506  $ 961 
Right of use assets obtained in exchange for new operating lease liabilities 3,515  —  8,141  322 
The additional right of use assets were acquired in the Timios, WAVE, US Hybrid and Solectrac acquisitions. The facilities acquired are primarily office buildings and warehouses in U.S. locations where they conduct business.
The following table summarizes the maturity of operating lease liabilities (in thousands):
Years ending December 31 Leased Property
Costs
2021 (excluding the nine months ended September 30, 2021) $ 696 
2022 2,544 
2023 2,457 
2024 1,541 
2025 1,153 
2026 and thereafter 1,029 
Total lease payments 9,420 
Less: interest (633)
Total $ 8,787 

In the three months ended March 31, 2020 the Company ceased to use the premises underlying one lease and vacated the real estate. As a result, the Company recorded an impairment loss related to the right of use asset of $0.9 million. In the three months ended June 30, 2020, the Company completed negotiations with the landlord to settle the remaining operating lease liability of $0.9 million by issuing a promissory note for $0.1 million, bearing an annual interest rate of 4.0%, and which is due and payable on December 31, 2021. The Company recorded a gain of $0.8 million in "Other income, net" for the settlement of the operating lease liability in the three months ending June 30, 2020.

In the three months ended June 30, 2020 the Company ceased to use the premises for its New York City headquarters at 55 Broadway, which are subject to two leases, and vacated the real estate. As a result, the Company recorded an impairment loss related to the right of use asset of $5.3 million. The Company had an operating use liability of $5.8 million with respect to these leases, excluding $0.6 million in accounts payable. In the three months ended September 30, 2020, the Company completed negotiations with the landlord to settle the remaining amounts of $6.4 million for a cash payment of $1.5 million. The Company recorded a gain of $4.9 million in "Other income, net" for the settlement of the operating lease liability in the three months ended September 30, 2020.
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Note 12.    Promissory Notes
The following table summarizes the outstanding promissory notes as of September 30, 2021 and December 31, 2020 (dollars in thousands):
September 30,
2021 		December 31,
2020
Interest Rate Principal Amount Carrying Amount* Principal Amount Carrying Amount*
Vendor Note Payable
0.25%-4%
$ 75  $ 75  $ 105  $ 105 
Small Business Association Paycheck Protection Program 1.0% 342  342  460  463 
Promissory Note —  —  —  — 
Total $ 417  417  $ 565  568 
Less: Current portion (417) (568)
Long-term Note, less current portion $ —  $ — 
______________________________________________
*Carrying amount includes the accrued interest.

As of September 30, 2021 and December 31, 2020, all debts are classified as current.
The Company had various debt instruments outstanding as of September 30, 2020. As of September 30, 2020, the total principal amount outstanding was $15.6 million, and the carrying amount, net of debt discounts arising from beneficial conversion features and including accrued interest, was $12.8 million. These debt instruments were either converted into common stock of the Company or repaid on or prior to their scheduled maturity dates in the year ended December 31, 2020.
In the nine months ended September 30, 2020, the Company received aggregate gross proceeds of $2.0 million from the issuance of convertible notes to YA II PN, Ltd. (“YA PN II,”) pursuant to a previous securities purchase agreement.
In the three months ended September 30, 2020, the Company recorded interest expense related to these debt instruments of $2.0 million, including amortization of the beneficial conversion features of $1.7 million. In the nine months ended September 30, 2020, the Company recorded interest expense related to these debt instruments of $14.2 million, including amortization of the beneficial conversion features of $13.2 million.
$37.5 million Convertible Debenture due July 4 2021 – YA II PN
On January 4, 2021, the Company executed a security purchase agreement with YA II PN, whereby the Company issued a convertible note of $37.5 million, and received aggregate gross proceeds of $37.5 million. The note was scheduled to mature on July 4, 2021 and bore interest at an annual rate of 4.0%, which would increase to 18.0% in the event of default. The note had a fixed conversion price of $2.00. The conversion price was not subject to adjustment except for subdivisions or combinations of common stock. The Company had the right, but not the obligation, to redeem a portion or all amounts outstanding under this note prior to the maturity date at a cash redemption price equal to the principal to be redeemed, plus accrued and unpaid interest. The note contained customary events of default, indemnification obligations of the Company and other obligations and rights of the parties.
During the nine months ended September 30, 2021, the note, plus accrued and unpaid interest, was converted into 18.8 million shares of common stock of the Company. Total interest expense recognized was $0 and $25,479 for the three and nine months ended September 30, 2021, respectively.
$37.5 million Convertible Debenture due July 15 2021 – YA II PN
On January 15, 2021, the Company executed a security purchase agreement with YA II PN, whereby the Company issued a convertible note of $37.5 million, and received aggregate proceeds of $37.5 million. The note was scheduled to mature on July 15, 2021 and bore interest at an annual rate of 4.0%, which would increase to 18.0% in the event of default. The note had a fixed conversion price of $3.31. The conversion price was not subject to adjustment except for subdivisions or combinations of common stock. The Company had the right, but not the obligation, to redeem a portion or all amounts outstanding under this note prior to the maturity date at a cash redemption price equal to the principal to be redeemed, plus accrued and unpaid interest. The note contained customary events of default, indemnification obligations of the Company and other obligations and rights of the parties.

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During the nine months ended September 30, 2021, the note, plus accrued and unpaid interest, were converted into 11.3 million shares of common stock of the Company. Total interest expense recognized was $0 and $46,301 for the three and nine months ended September 30, 2021, respectively.
$65.0 million Convertible Debenture due July 28 2021 – YA II PN
On January 28, 2021, the Company executed a security purchase agreement with YA II PN, whereby the Company issued a convertible note of $65.0 million, and received aggregate proceeds of $65.0 million. The note was scheduled to mature on July 28, 2021 and bore interest at an annual rate of 4.0%, which would increase to 18.0% in the event of default. The note had a fixed conversion price of $4.12. The conversion price was not subject to adjustment except for subdivisions or combinations of common stock. The Company had the right, but not the obligation, to redeem a portion or all amounts outstanding under this note prior to the maturity date at a cash redemption price equal to the principal to be redeemed, plus accrued and unpaid interest. The note contained customary events of default, indemnification obligations of the Company and other obligations and rights of the parties.
During the nine months ended September 30, 2021, the note, plus accrued and unpaid interest, were converted into 15.8 million shares of common stock of the Company. Total interest expense recognized was $0 and $53,699 for the three and nine months ended September 30, 2021.
$80.0 million Convertible Debenture due August 8, 2021 – YA II PN
On February 8, 2021, the Company executed a security purchase agreement with YA II PN, whereby the Company issued a convertible note of $80.0 million, and received aggregate proceeds of $80.0 million. The note is scheduled to mature on August 8, 2021 and bears interest at an annual rate of 4.0%, which increases to 18.0% in the event of default. The note has a fixed conversion price of $4.95. The conversion price is not subject to adjustment except for subdivisions or combinations of common stock. The Company has the right, but not the obligation, to redeem a portion or all amounts outstanding under this note prior to the maturity date at a cash redemption price equal to the principal to be redeemed, plus accrued and unpaid interest. The note contains customary events of default, indemnification obligations of the Company and other obligations and rights of the parties.
During the nine months ended September 30, 2021, the Company repaid the note and accrued interest $81.6 million. Total interest expense recognized was $0.3 million and $1.5 million for the three and nine months ended September 30, 2021.
Vendor Notes Payable
On May 13, 2020, DBOT entered into a settlement agreement with a vendor whereby the existing agreement with the vendor was terminated, the vendor ceased to provide services, and all outstanding amounts were settled. In connection with this agreement, DBOT paid an initial $30,000 and executed an unsecured promissory note in the amount of $60,000, bearing interest at 0.25% per annum, and payable in two installments of $30,000. The first installment was due on December 31, 2020 and was repaid. The remaining payment is due on August 31, 2021and was repaid.
In the three months ended March 31, 2020, the Company ceased to use the premises underlying one lease and vacated the real estate. In the three months ended June 30, 2020, the Company completed negotiations with the landlord to settle the remaining operating lease liability of $0.9 million by issuing a promissory note for $0.1 million, bearing an annual interest rate of 4.0%, and which is due and payable on December 31, 2021.
Small Business Association Paycheck Protection Program

On Apr 10, 2020, the Company borrowed $0.3 million at an annual rate of 1.0% from a commercial bank through the Small Business Association Paycheck Protection Program. The loan was originally payable in 18 installments of $18,993 commencing on November 10, 2020, with a final payment due on April 10, 2022. With several amendments, the loan is currently payable monthly commencing on September 10, 2021, with a final payment due on April 10, 2025. The forgiveness application of the loan was submitted in August 2021 and the first payment was made on October 10, 2021 for the payment due on September 10 2021 while the forgiveness application is under review.
On May 1, 2020 Grapevine borrowed $0.1 million at an annual rate of 1.0% from a commercial bank through the Small Business Association Paycheck Protection Program. The loan was originally payable in 18 installments of approximately $7,000 commencing on December 1, 2020, with a final payment due on May 1, 2022. With several amendments, the loan was payable commencing on October 1, 2021, with a final payment due on April 10, 2025. On April 20, 2021, the Company completed the disposal of Grapevine and the loan balance was deconsolidated from consolidated balance sheet.
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On May 3, 2020 WAVE borrowed $0.3 million at an annual rate of 1.0% from a commercial bank through the Small Business Association Paycheck Protection Program. The loan was originally payable in 18 installments of $12,630 commencing on November 1, 2020, with a final payment due on May 3, 2022. After the issuance of an additional grace period, payments will commence on September 21, 2021 until the original maturity date of May 3, 2022. The loan and the accrued interest were forgiven and paid by the U.S. Small Business Administration according to the notice received from the bank on September 16, 2021. The Company recorded it as the "Gain on extinguishment of debt" on the condensed consolidated statement of operations.
On February 24, 2021 US Hybrid borrowed $0.5 million at an annual rate of 1.0% from a commercial bank through the Small Business Association Paycheck Protection Program. The loan has a maturity date of February 24, 2026. After the issuance a 10 months grace period was initiated, and payments will commence on March 10, 2022 and will continue until the maturity date. US Hybrid used the loan for qualifying expenses. The loan was forgiven in June 2021 and was accounted for in conjunction with the acquisition accounting in Note 6.

Total interest expense recognized was $851 and $2,899 in the three and nine months ended September 30, 2021, respectively for the Small Business Association Paycheck Protection Program.
Note 13.    Stockholders’ Equity, Convertible Preferred Stock and Redeemable Non-controlling Interest
Convertible Preferred Stock
The Board of Directors has authorized 50.0 million shares of convertible preferred stock, $0.001 par value, issuable in series. As of September 30, 2021 and December 31, 2020, 7.0 million shares of Series A preferred stock were issued and outstanding. The Series A preferred stock shall be entitled to one vote per common stock on an as-converted basis and is only entitled to receive dividends when and if declared by the Board.
Redeemable Non-controlling Interest

The Company and Qingdao Chengyang Xinyang Development and Investment Company Limited (“Qingdao”) formed an entity named Qingdao Chengyang Mobo New Energy Automobile Sales Service Company Limited (“New Energy.”). With several name changes, the entity current name is Qingdao Chengyang Medici Zhixing New Energy Automobile Company Limited. Qingdao entered into a capital subscription agreement for a total of RMB 200.0 million ($28.0 million), and made the first capital contribution of RMB 50.0 million in the three months ended March 31, 2020. The remaining RMB 150.0 million ($21.0 million) are payable in three installments of RMB 50.0 million ($7.0 million) upon New Energy attaining certain revenue or market value benchmarks.

The investment agreement stipulates that New Energy must pay Qingdao dividends at the rate of 6.0%. After one year, Qingdao may sell its investment to an institutional investor, or redeem its investment if Qingdao does not meet certain revenue and market value benchmarks and after three years may redeem its investment. the redeemable amount equals the face amount plus 6.0% interest less dividends paid. At Qingdao's request, the Company had entered discussions concerning the redemption of the investment, and in the three months ended September 30, 2021 Qingdao officially requested redemption of the invested funds. Due to the redemption feature, the Company had classified the investment outside of permanent equity, and subsequent to the requested redemption classified the investment in current liabilities.
The following table summarizes activity for the redeemable non-controlling interest (in thousands):
Nine months ended
September 30, 2021 September 30, 2020
Beginning balance $ 7,485  $ — 
Initial investment —  7,047 
Accretion of dividend 347  323 
Loss attributable to non-controlling interest (195) (79)
Adjustment to redemption value 195  79 
Ending balance $ 7,832  $ 7,370 

Common Stock
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The Board of Directors has authorized 1,500 million shares of common stock, $0.001 par value.
2021 Equity Transactions
On February 26, 2021, the Company entered into a sales agreement with Roth Capital Partners, LLC (“Roth Capital.”) in accordance with the terms of the sales agreement, the Company may offer and sell from time to time through Roth Capital the Company’s common stock having an aggregate offering price of up to $150.0 million (the “Placement Shares.”). The Company shall pay to Roth Capital in cash, upon each sale of Placement Shares pursuant to the Agreement, an amount equal to 3.0% of the gross proceeds from each sale of Placement Shares. During the three months ended September 30, 2021, the Company issued 7.5 million shares of common stock and received net proceeds of $17.7 million after deducting $0.5 million commission and transaction fees. During the nine months ended September 30, 2021, the Company issued 50.4 million shares of common stock and received net proceeds of $145.5 million after deducting $4.5 million commission and transaction fees.
On June 30, 2021, the Company entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN, Ltd., (“YA”). The Company will be able to sell up to 80.4 million shares of its common stock at the Company’s request any time during the 36 months following the date of the SEDA’s entrance into force. The shares would be purchased at (i) 95% of the Market Price if the applicable pricing period is two consecutive trading days or (ii) 96% of the Market Price if the applicable pricing period is five consecutive trading days, and, in each case, would be subject to certain limitations, including that YA could not purchase any shares that would result in it owning more than 4.99% of the Company’s common stock. “Market Price” shall mean the lowest daily volume weighted average price of the Company’s common stock during the two or five consecutive trading days, as applicable, commencing on the trading day following the date the Company submits an advance notice to YA. Pursuant to the SEDA, the Company is required to register all shares which YA may acquire. The SEDA contains customary representations, warranties and agreements of the Company and YA II PN, indemnification rights and other obligations of the parties. YA II PN has covenanted not to cause or engage in any direct or indirect short selling or hedging of the Company’s shares of common stock. During the nine months ended September 30, 2021, the Company issued 10.0 million shares of common stock for a total of $27.3 million.
On August 12, 2021, the Company entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co ("Cantor"). In accordance with the terms of the Agreement, the Company may offer and sell from time to time through or to Cantor, as sales agent or principal, the Company’s common stock having an aggregate offering price of up to $350,000,000 (the “Placement Shares”). The Placement Shares will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (Registration No. 333- 252230). The Company shall pay to Cantor in cash, upon each sale of Placement Shares pursuant to this Agreement, an amount equal to up to 3.0% of the aggregate gross proceeds from each sale of Placement Shares. During the three months ended September 30, 2021, the Company issued 2.0 million shares of common stock and received net proceeds of $4.2 million after deducting $0.1 million commission and transaction fees.
Refer to Note 6 for information related to the issuance to common stock for acquisitions, Note 12 for information related to issuance of common stock with convertible notes, Note 15 for information related to the issuance to common stock for option exercise.

2020 Equity Transactions

During the three months ended September 30, 2020, the Company issued 1.6 million shares of common stock related to the DBOT acquisition, issued 0.3 million shares of common stock related to the professional service provide by a third party.

During the nine months ended September 30, 2020, the Company issued 13.0 million shares of common stock related to the DBOT acquisition, issued 27.9 million shares of common stock related to the issuance, conversion and warrant exercise of convertible notes to third party, 10.3 million shares of common stock related to the related party debt conversion, 34.5 million shares related to SEDA, 2.0 million shares related to the settlement of a third party debt and 1.2 million shares of common stock related to the professional service provided by the third parties.

Note 14.    Related Party Transactions
(a) Convertible Notes
$3.0 million Convertible Note with Mr. Shane McMahon (“Mr. McMahon”)

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On May 10, 2012, Mr. McMahon, the Company’s Vice Chairman, made a loan to the Company in the amount of $3.0 million. In consideration for the loan, the Company issued a convertible note to Mr. McMahon in the aggregate principal amount of $3.0 million at a 4.0% interest rate computed on the basis of a 365-day year. The Company had previously entered several amendments with respect to the effective conversion price (changed from $1.75 to $1.50), convertible stocks (changed from of Series E Preferred Stock to Common Stock). The last amendment was made on May 9, 2020, and extended the maturity date to December 31, 2022. For the three and nine months ended September 30, 2020, the Company recorded interest expense of $0 and $50,959 related to the note, respectively.
On June 5, 2020, the Audit Committee and the Board of Directors approved the reduction of conversion price to $0.59, contingent upon the immediate conversion of the Note. On June 5, 2020, the note was converted into 5.1 million shares of common stock. The Company paid the accumulated interest $0.3 million in cash prior to the conversion.
$2.5 million Convertible Promissory Note with SSSIG

On February 8, 2019, the Company entered into a convertible promissory note agreement with SSSIG, an affiliate of Dr. Wu, in the aggregate principal amount of $2.5 million. The convertible promissory note bore interest at a rate of 4.0%, was scheduled to mature on February 8, 2020, and was convertible into shares of the Company’s common stock at a conversion price of $1.83 per share anytime at the option of SSSIG. For the three and nine months ended September 30, 2020, the Company recorded interest expense of $0 and $21,546 related to the convertible promissory note, respectively. The Company did not pay the interest in cash on this note.
The Company received $1.3 million from SSSIG, and did not receive the remaining $1.2 million. On June 5, 2020, the Audit Committee and the Board of Directors approved the reduction of the conversion price to $0.59, contingent upon the immediate conversion of the convertible promissory note. On June 5, 2020, the convertible promissory note, including accumulated interest, was converted into 2.2 million shares of common stock.
$1.0 million Convertible Promissory Note with SSSIG

On November 25, 2019, the Company entered into a convertible promissory note agreement with SSSIG, an affiliate of Dr. Wu, in the aggregate principal amount of $1.0 million. The convertible promissory note bore interest at a rate of 4.0%, was initially scheduled to mature on November 25, 2021, and was convertible into the shares of the Company’s common stock at a conversion price of $1.25 per share anytime at the option of SSSIG. For the three and nine months ended September 30, 2020, the Company recorded interest expense of $0 and $4,301, respectively. The Company did not paid the interest in cash on this note.
The Company received $0.25 million from SSSIG and did not receive the remaining $0.8 million. On June 5, 2020, the Audit Committee and the Board of Directors approved the reduction of the conversion price to $0.59, contingent upon the immediate conversion of the convertible promissory note. On June 5, 2020, the convertible promissory note, including accumulated interest, was converted into 0.4 million shares of common stock.
(b) Severance payments

Pursuant to previous severance agreements with certain executives, the Company paid $0.1 million in the nine months ended Sep 30, 2020, and recorded the remaining $0.1 million in “Accrued salaries” on its condensed consolidated balance sheet as of September 30, 2021 and December 31, 2020.
(c) Transaction with Dr. Wu. and his affiliates
On June 5, 2020, the Audit Committee and the Board of Directors approved the conversion of some borrowings at a conversion price of $0.59 per common share, contingent upon the immediate conversion of these amounts. On June 5, 2020, the borrowings of $1.5 million, including the $0.4 million transferred from Beijing Financial Holding Limited, were converted into 2.6 million shares of common stock.

As of September 30, 2021 and December 31, 2020, the Company has receivables of $0.2 million and $0.2 million, respectively, due from Dr. Wu and his affiliates and recorded in “Amounts due from related parties” in the condensed consolidated balance sheets.
As of September 30, 2021 and December 31, 2020, the Company has payables of $0.7 million and $0.6 million, respectively, due to Dr. Wu and his affiliates and recorded in “Amounts due to related parties” in the condensed consolidated balance sheets.
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The increase is mainly due to $0.4 million accrued service charges payable to SSSIG for the period from April 1, 2021 through September 30, 2021 described more fully below.
Service agreement with SSSIG
The Company entered a service agreement with SSSIG for the period from July 1, 2020 through June 30, 2021 for $1.4 million in exchange for consulting services from SSSIG. The services include but are not limited to human resources, finance and legal advice. The Company recorded the service charges of $0.4 million in “Professional fees” for the three and nine months ended September 30, 2021. The agreement was terminated in May 2021 and both parties agree that the service agreement has been completely performed and no payment is outstanding, and the termination shall not be regarded as a breach by either party. As a result, the Company recorded unpaid $0.6 million in "Other income (expense, net)" in the condensed consolidated statement of operation.
The Company entered a new consulting service agreement with SSSIG on April, 20, 2021 for the period from April 1, 2021 through June 30, 2021 for $0.4 million. The service agreement includes employment transfer, financial transition, corporate documents handover, legal representative and board member change for the Company's subsidiaries and affiliates. The Company recorded $0.4 million in the “Amount due to related parties.”
(d) Amounts due from and due to Glory

Glory has made partial payment of $0.5 million on behalf of the Company to acquire the land use rights and the Company has made payments of $0.2 million on behalf of Glory for some of its operational expenses during the year ended December 31, 2020. The net balance of $0.2 million and $0.3 million due to Glory as result of these payments is recorded in “Amount due to related parties” as of September 30, 2021 and December 31, 2020, respectively.
(e) Fuzhou Note Receivable
Refer to Note 3 for the details.
(f) Receivable due from Ocasia

In the three months ended September 30, 2021, Seven Stars Energy PTD LTD (`"SSE"), one of Ideanomics' subsidiary, sent $0.2 million to Ocasia Group Holding LTD for the purpose of a business cooperation project. Ocasia returned $0.2 million in October 2021 because the project was put on hold.

(g) Receivable due from Mr. McMahon

In the three months ended September 30 2021, the Company paid his personal expense $0.1 million on behalf of Mr. McMahon and recorded as the "amount due from related parties" on the consolidated balance sheet.
(h) Long Term Investment to Guizhou Qianxi Green Environmentally Friendly Taxi Service Co. (“Qianxi”)
In November 2019, the Company entered into a share transfer agreement with Sichuan Shenma Zhixing Technology Co. (“Shenma”) to acquire its 1.72% ownership in Qianxi for consideration of $4.9 million, which was to be paid in six installments. Shenma was required to complete the share transfer registration prior to May 31, 2020, otherwise it will be required to return the consideration to the Company. The Company has paid $0.5 million as of September 30, 2021 and December 31, 2020 and recorded it on the “Other Non-Current Assets” since the share transfer registration is not completed yet. The Company is currently taking actions to resolve these matter.
(i) Stock purchase consideration payable due to FNL
On April 20, 2021, Ideanomics entered into a stock purchase agreement with FNL, pursuant to which Ideanomics made an investment into FNL, the unpaid consideration $0.1 million is recorded in the “Amount due to related parties.” Refer to Note 6 for additional information.
(j) Borrowing from Beijing Financial Holdings Limited

In the three months ended June 30 2020, the borrowing of $0.4 million from Beijing Financial Holding Limited was transferred to Dr. Wu, and was subsequently converted to shares at a conversion price of $0.59 per common share on June 5, 2020.
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Effective January 1, 2020, Beijing Financials Holding limited is considered a related party because MHTL is intended to act as a trustee over 10,000 common shares of MEG to effect a share-based compensation plan and has the same owner of Beijing Financial Holdings Limited.

(k) Zhu Note Receivable

In May 2020, a subsidiary of the Company, Qingdao Chenyang Ainengju New Energy Sales and Service Company Limited ("Energy Sales") provided a note receivable to Mr. Jianya Zhu ("Mr. Zhu") in the amount of 10.0 million RMB ($1.4 million). Mr. Zhu, through his wholly-owned entity Prime Capital Enterprise Pte. Ltd., provided collateral in the form of its 50.0% ownership of Seven Stars Founder Space Industrial Pte. Ltd ("Founder Space.") Founder Space is also 50.0% owned by a related party, Seven Stars Innovative Industries Group Limited, an affiliate of Dr. Bruno Wu (“Dr. Wu”), the Chairman of the Company. Mr. Zhu agreed to repay 10.5 million RMB ($1.5 million) one month from the disbursement date. In September 2020, a third-party satisfied the note receivable and accrued interest in the amount of 10.5 million RMB ($1.5 million) on behalf of Mr. Zhu, and the Company terminated the note and collateral agreement.

(l) Research and development contract with a related party

The Company has entered a research and development contract with an entity with the total amount of $2.8 million for EV design and technology development in the three months ended September 30 2020. The Company has paid $1.3 million in the three months ended September 30, 2020 and recorded this amount in "Research and development expense." One of the shareholders of this entity holds a senior position in several of Dr. Wu’s affiliated entities.
Note 15.    Share-Based Compensation
As of September 30, 2021, the Company had 22.9 million options and 1.1 million warrants outstanding.
The Company awards common stock and stock options to employees, consultants, and directors as compensation for their services, and accounts for its stock option awards to employees, consultants, and directors pursuant to the provisions of ASC 718, Stock Compensation. For the options with market conditions, the fair value of each award is estimated on the date of grant using Monte-Carlo valuation model and recognizes the fair value of each option as compensation expense over the derived service period. For the options with performance conditions, the fair value of each award is estimated on the date of grant using Black-Scholes Merton valuation model and recognizes the fair value of each option as compensation expense over the implicit service period. For Restricted stock and option awards only with service conditions, the fair value of each option award is estimated on the date of grant using the Black-Scholes Merton valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the straight-line attribution method over the service period, which is generally the vesting period.
Effective as of December 3, 2010 and amended on August 3, 2018, the Company’s Board of Directors approved the 2010 Stock Incentive Plan (“the 2010 Plan”) pursuant to which options or other similar securities may be granted. On October 22, 2020, the Company’s shareholders approved the amendment and restatement of the 2010 Plan. The maximum aggregate number of shares of common stock that may be issued under the 2010 Plan increased from 31.5 million shares to 56.8 million shares. As of September 30, 2021, options available for issuance are 16.3 million shares.
For the three months ended September 30, 2021 and 2020, total share-based payments expense was $15.2 million and $3.3 million, respectively, and $19.2 million and $8.8 million for the nine months ended September 30, 2021 and 2020, respectively.
(a)Stock Options
The following table summarizes stock option activity for the nine months ended September 30, 2021:
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Options
Outstanding 		Weighted
Average
Exercise
Price 		Weighted
Average
Remaining
Contractual
Life (Years) 		Aggregate
Intrinsic
Value
Outstanding at January 1, 2021 25,087,416  $ 1.29  —  $ — 
Granted 9,377,000  2.50  —  — 
Exercised (5,589,084) 1.50  —  5,588,929 
Expired (2,891,509) 1.73  —  — 
Forfeited (3,067,750) 0.63  —  — 
Outstanding at September 30, 2021 22,916,073  1.77  8.48 10,518,390 
Vested as of September 30, 2021 12,369,305  1.47  7.94 8,010,123 
Expected to vest as of September 30, 2021 10,546,768  2.13  9.11 2,508,267 
As of September 30, 2021, $19.1 million of total unrecognized compensation expense related to non-vested share options is expected to be recognized over a weighted average period of 1.6 years. The total intrinsic value of shares exercised in the nine months ended September 30, 2021 and 2020 was $5.6 million and $59,965, respectively. The total fair value of shares vested in the nine months ended September 30, 2021 and 2020 was $5.4 million and $8.8 million, respectively. Cash received from options exercised in the nine months ended September 30, 2021 and 2020 were $8.4 million and $0, respectively.
For the options with performance conditions and only with service conditions, the assumptions used to estimate the fair values of the stock options granted in the nine months ended September 30, 2021 and 2020 as follows:
Nine Months Ended
September 30, 2021 September 30, 2020
Expected term (in years)
4.79-7.17
5.37-5.46
Expected volatility
112.02%-129.63%
100.98%-101.55%
Expected dividend yield —  % —  %
Risk free interest rate
0.51%-1.1%
0.40  %
For the options with market conditions, the assumptions used to estimate the fair values of the stock options granted in the nine months ended September 30, 2021 as follows:
Nine Months Ended September 30, 2021
Expected term (in years) 1.88
Expected volatility 106.92  %
Expected dividend yield —  %
Risk free interest rate 1.31  %
(b)Warrants
In connection with certain of the Company’s service agreements, the Company issued warrants to service providers to purchase common stock of the Company. The weighted average exercise price was $4.00 and the weighted average remaining life was 0.9 years.
September 30, 2021 December 31, 2020
Warrants Outstanding Number of
Warrants
Outstanding and
Exercisable 		Number of
Warrants
Outstanding and
Exercisable 		Exercise
Price 		Expiration
Date
Service providers 200,000  200,000  $ 5.00  July 1, 2022
Service providers 700,000  700,000  2.50 
February 28, 2022 - October 1, 2022
Service provider 100,000  —  7.50  January 1, 2023
Service provider 100,000  —  9.00  January 1, 2023
Total 1,100,000  900,000 
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(c)Restricted Shares
In July 2021, the Company granted 5.0 million restricted shares to seven employees and directors under the “2010 Plan” which was approved by the Board of Directors. The restricted shares were all vested immediately on the grant date. The aggregated grant date fair value of all those restricted shares was $12.4 million.





A summary of the unvested restricted shares is as follows:
Shares Weighted-average fair value
Non-vested restricted shares outstanding at January 1, 2021 —  $ — 
Granted 5,025,000 2.46 
Forfeited —  — 
Vested (5,025,000) 2.46 
Non-vested restricted shares outstanding at September 30, 2021 —  — 
As of September 30, 2021, there was $0 of unrecognized compensation cost related to unvested restricted shares.
Note 16.    Earnings (Loss) Per Common Share
The following table summarizes the Company’s earnings (loss) per share for the three and nine months ended September 30, 2021 and 2020 (USD in thousands, except per share amounts):
Three Months Ended Nine Months Ended
September 30,
2021 		September 30,
2020 		September 30,
2021 		September 30,
2020
Net earnings (loss) attributable to common stockholders $ (50,851) $ (8,286) $ (64,526) $ (47,212)
Basic weighted average common shares outstanding 473,829,962  237,535,999  432,989,602  191,976,856 
Effect of dilutive securities
Convertible preferred shares- Series A —  —  —  — 
Convertible promissory notes —  —  —  — 
Diluted potential common shares 473,829,962  237,535,999  432,989,602  191,976,856 
Earnings (loss) per share:
Basic $ (0.11) $ (0.03) $ (0.15) $ (0.25)
Diluted $ (0.11) $ (0.03) $ (0.15) $ (0.25)
Basic earnings (loss) per common share attributable to the Company’s shareholders is calculated by dividing the net loss attributable to the Company’s shareholders by the weighted average number of outstanding common shares during the period.
Diluted earnings (loss) per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. Diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares is anti-dilutive.
The following table includes the number of shares that may be dilutive potential common shares in the future. The holders of these shares do not have a contractual obligation to share in the Company’s losses and thus these shares were not included in the computation of diluted loss per share because the effect was antidilutive (in thousands):
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September 30,
2021 		December 31,
2020
Warrants 1,100  900 
Options and RSUs 22,931  25,172 
Series A Preferred Stock 933  933 
Contingent shares 1,491  1,013 
Total 26,455  28,018 

Note 17.    Income Taxes

During the three months ended September 30, 2021 there was an income tax benefit of $0.8 million, During the nine months ended September 30, 2021 there was an income tax benefit of $9.7 million. This benefit for the nine months ended September 30, 2021 principally consisted of a reduction in the Company’s valuation allowance that resulted from the acquisitions, US Hybrid and Solectrac in the second quarter, and,Timios and WAVE, in the first quarter. In the case of each acquisition, intangible assets were recognized for financial reporting purposes that were not recognized for income tax purposes. This, in combination with some smaller temporary differences of four acquired businesses, resulted in the recognition of $11.0 million deferred tax liabilities, none of which was in the three months ended September 30,2021. The federal tax returns of all four acquired businesses will be included in the Ideanomics and subsidiaries consolidated U.S. federal tax return. WAVE will be included in the state tax returns of Ideanomics. The federal deferred tax liabilities, and the WAVE state deferred tax liabilities created, resulted in the valuation allowance on Ideanomics’ deferred tax assets being reduced by a similar amount. Ideanomics’ net deferred tax assets that had previously been judged to be more likely that not to be unable to reduce the Company’s income tax liability and consequently were completely offset by a valuation allowance. Once the acquisitions of four acquired businesses occurred, a portion of Ideanomics’ deferred tax assets could be utilized in offsetting the newly acquired deferred tax liabilities, this resulted in a one-time income tax benefit of $9.1 million during the nine months ended September 30, 2021.

Timios, US Hybrid and Soletrac have taxable income or loss reported on certain separate state tax returns and consequently have related state income tax expense or benefit. In the case of US Hybrid and Soletrac, which have losses, there are state income tax benefits consisting of those losses being used to reduce the state deferred tax liabilities recognized in the acquisitions. In the case of Timios, state income tax expense results from income. The net state income benefit for Timios, US Hybrid and Solectrac was $0.8 million and $0.6 million for the three and nine months ended September 30, 2021, respectively. The income tax benefit for both the three and nine months ended September 30, 2021 included a $0.6 million state deferred tax benefit related to the Timios impairment. There are no other material income tax expenses or benefits for the three and nine months ended September 30, 2021 because of net operating loss and deferred tax assets related to the net operating loss carryovers utilized had been offset by a valuation allowance. The Company had established a 100% valuation allowance against its net deferred tax assets, excluding Timios, US Hybrid and Solectrac's’ net state deferred tax liabilities, due to its history of pre-tax losses and the likelihood that the deferred tax assets will not be realized.

During the three and nine months ended September 30, 2020 income tax expense is nil because of net operating loss and deferred tax assets related to the net operating loss carryovers utilized had been offset by a valuation allowance. Company had established a 100% valuation allowance against its net deferred tax assets due to its history of pre-tax losses and the likelihood that the deferred tax assets will not be realized.

There were no uncertain tax positions that would prevent the Company from recording the related benefit as of September 30, 2021 and December 31, 2020.
Note 18.    Commitments and Contingencies
Lawsuits and Legal Proceedings
From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the business.
Shareholder Class Actions and Derivative Litigation

On July 19, 2019, a purported class action, now captioned Rudani v. Ideanomics, et al. Inc., was filed in the United States District Court for the Southern District of New York against the Company and certain of its current and former officers and

directors. The Amended Complaint alleges violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934. Among other things, the Amended Complaint alleges purported misstatements made by the Company in 2017 and 2018. As part of a mediation, the parties reached a settlement in principle for $5.0 million. The settlement agreement has been preliminarily approved by the Court and is subject to final court approval.

On June 28, 2020, a purported securities class action, captioned Lundy v. Ideanomics et al. Inc., was filed in the United State District Court for the Southern District of New York against the Company and certain current officers and directors of the Company. Additionally, on July 7, 2020, a purported securities class action captioned Kim v. Ideanomics, et al, was filed in the Southern District of New York against the Company and certain current officers and directors of the Company. Both cases alleged violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 arising from certain purported misstatements by the Company beginning in September 2020 regarding its MEG division. On November 4, 2020, the Lundy and Kim actions were consolidated and is now titled “In re Ideanomics, Inc. Securities Litigation.” In December 2020, the Court appointed Rene Aghajanian as lead plaintiff and an amended complaint was filed in February 2021, alleging violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 arising from certain purported misstatements by the Company beginning in March 2020 regarding its MEG division. The defendants filed a motion to dismiss on May 6, 2021. While the Company believes that this action is without merit, there can be no assurance that the Company will prevail. The Company cannot currently estimate the possible loss or range of losses, if any, that it may experience in connection with this litigation.

On July 10, 2020, the Company was named as a nominal defendant, and certain of its former officers and directors were named as defendants, in a shareholder derivative action filed in the United States District Court for the Southern District of New York, captioned Toorani v. Ideanomics, et al. The Complaint alleges violations of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and corporate waste and seeks monetary damages and other relief on behalf of the Company. Additionally, on September 11, 2020, the Company was named as a nominal defendant, and certain of its former officers and directors were named as defendants, in a shareholder derivative action filed in the United States District Court for the Southern District of New York, captioned Elleisy, Jr. v. Ideanomics, et al, alleging violations and allegations similar to the Toorani litigation. On October 10, 2020, the Court in the Elleisy and Toorani, consolidated these two actions. Additionally, on October 27, 2020, the Company was named as a nominal defendant, and certain of its former officers and directors were named as defendants, in a shareholder derivative action filed in the United States District Court for the District of Nevada, captioned Zare v. Ideanomics, et al, alleging violations and allegations similar to the Toorani and Elleisy litigation. The Company and certain of the defendants, including the Company, have reached a settlement in principle in which the Company has agreed to certain corporate governance and internal procedure reforms and is not expected to have a material financial impact on the Company. The settlement in principle is subject to finalization and approval of the Court.
SEC Investigation
As previously reported, the Company is subject to an investigation by the SEC and continues to respond to various information and requests from the SEC. The Company is fully cooperating with the SEC’s requests and cannot predict the outcome of this investigation.
Note 19.    Concentration of Credit and Foreign Currency Risks
(a)Concentration of Credit Risks
Financial instruments that potentially subject the Company to significant concentration of credit risk primarily consist of cash, cash equivalents, and accounts receivable. As of September 30, 2021, the Company’s cash was held by financial institutions (located in the PRC, Hong Kong, Malaysia, the U.S. and Singapore) that management believes have acceptable credit. Accounts receivable are typically unsecured. The risk with respect to accounts receivable is mitigated by regular credit evaluations that the Company performs on its distribution partners and its ongoing monitoring of outstanding balances.
(b)Foreign Currency Risks
A portion of the Company’s operating transactions are denominated in RMB. RMB is not freely convertible into foreign currencies. The value of the RMB is subject to changes in the central government policies and to international economic and political developments. In the PRC, certain foreign exchange transactions are required by laws to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC.”) Remittances in currencies other than RMB by the Company in China must be processed through PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to complete the remittance.
(c)Cybersecurity Incident

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The Company’s real estate services subsidiary, Timios, experienced a systems outage that was caused by a cybersecurity incident. Timios has engaged leading forensic information technology firms and legal counsel to assist its investigation into the incident. Although Timios is actively managing the impact of the cybersecurity incident, it has caused a delay or disruption to parts of Timios’ business, including its ability to perform its mortgage title, closing and escrow services offerings during the reporting period. Timios has since recovered their operation capabilities. The cybersecurity incident has had a material adverse impact on Timios’ revenues. Daily orders are increasing and the company anticipates that a significant amount of the business lost immediately after the cybersecurity incident will be recovered in 2022, although there can be no assurances in this regard. Timios promptly notified third-parties who may have been affected by this incident, and its insurer has offered a one year credit monitoring service to those who may have been affected.
Note 20.    Contingent Consideration
The following table summarizes information about the Company’s financial instruments measured at fair value on a recurring basis, grouped into Level 1 to 3 based on the degree to which the input to fair value is observable (in thousands):
September 30, 2021
Level I Level II Level III Total
DBOT - Contingent consideration1
$ —  $ —  $ 649  $ 649 
Tree Technology - Contingent consideration2
—  —  1,305  1,305 
Wave - Contingent consideration3
—  —  1,519  1,519 
Solectrac - Contingent consideration4
—  —  1,639  1,639 
Total $ —  $ —  $ 5,112  $ 5,112 

December 31, 2020
Level I Level II Level III Total
DBOT - Contingent consideration1
$ —  $ —  $ 649  $ 649 
Tree Technology - Contingent consideration2
—  —  8,311  8,311 
Total $ —  $ —  $ 8,960  $ 8,960 

1This represents the liability incurred in connection with the acquisition of DBOT shares during the three months ended September 30, 2019 and as remeasured as of April 17, 2020. The contractual period which required periodic remeasurement has expired, and therefore the Company will not remeasure this liability in the future. The fair value of DBOT contingent consideration as of September 30, 2021 was valued using the Black-Scholes Merton method. The Company issued 11.3 million shares during the nine months ended September 30, 2020 and partially satisfied this liability. No shares have been issued in the nine months ended September 30, 2021.
2This represents the liability incurred in connection with the acquisition of Tree Technology shares during the three months ended December 31, 2019 and as subsequently remeasured as of September 30, 2021. The fair value of the Tree Technology contingent consideration was valued using a scenario-based method which incorporates various estimates, including projected gross revenue for the periods, probability estimates, discount rates and other factors.
3This represents the liability incurred in connection with the acquisition of WAVE. The liability represents the combination of the contingent shares and the earnout. The contingent shares are the remaining shares to be issued contingent on the receipt of certain customer consents as disclosed in Note 6. The fair value of this contingent consideration was valued using a scenario-based method that indicated based on the probabilities that 100% of the consents will be received. the Company received some consents in the three months ended September 30, 2021 and issued 2.0 million shares accordingly. The earnout liability is dependent on WAVE achieving certain revenue and gross profit margin criteria in 2021, 2022 and cumulatively 2021 and 2022. The fair value of zero has been determined using a scenario-based method which indicated that none of the criteria are likely to be achieved.
4This represents the liability incurred in connection with the acquisition of Solectrac. The liability represents the fair value of the three earnouts that were entered into at closing. The fair value of $1.6 million has been determined using a scenario-based method which indicated partial achievement of the criteria over the three years.
The following table summarizes the reconciliation of Level 3 fair value measurements (in thousands):

Contingent
Consideration
January 1, 2021 $ 8,960 
Addition 9,297 
Settlement (6,138)
Measurement period adjustment
Remeasurement loss/(gain) recognized in the statement of operations (7,006)
September 30, 2021 $ 5,113 

Note 21.    Subsequent Events

Convertible Debenture

On October 25, 2021 Ideanomics entered into a convertible debenture with the YA II PN, Ltd (“YA,”) with a principal amount of $75.0 million. The note has a fixed conversion price of $1.88. The conversion price is not subject to adjustment except for subdivisions or combinations of common stock. The principal and the interest payable under the note will mature on October 24, 2022, unless earlier converted or redeemed by the Company. At any time before the maturity date, YA may convert the note at its option into up to 39.9 million shares (excluding additional shares issuable upon accrued interest) of the Company’s common stock at a fixed conversion price of $1.88. The note contains customary events of default, indemnification obligations of the Company and other obligations and rights of the parties.

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Cautionary Note Regarding Forward Looking Statements
This Form 10-Q contains “forward-looking” statements that involve risks and uncertainties. You can identify these statements by the use of forward-looking words such as “may”, “will”, “expect”, “anticipate”, “estimate”, “believe”, “continue”, or other similar words. You should read statements that contain these words carefully because they discuss the Company’s future expectations, contain projections of the Company’s future results of operations or financial condition or state other “forward-looking” information. The Company believes that it is important to communicate its future expectations to its investors. However, these forward-looking statements are not guarantees of future performance and actual results may differ materially from the expectations that are expressed, implied or forecasted in any such forward-looking statements. There may be events in the future that we are unable to accurately predict or control, including weather conditions and other natural disasters which may affect demand for the Company’s products, and the product-development and marketing efforts of its competitors. Examples of these events are more fully described in the Company’s 2020 Form 10-K under Part I. Item 1A. Risk Factors.
Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the reports and documents the Company files from time to time with the SEC, particularly its Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, Current Reports on Form 8-K and all amendments to those reports.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following management’s discussion and analysis is presented in four sections as below and should be read in conjunction with the condensed consolidated financial statements and the notes thereto and the other financial information appearing elsewhere in this report on Form 10-Q. In addition to historical information, the following discussion contains certain forward-looking information. See “Cautionary Note Regarding Forward Looking Statements” above for certain information concerning those forward-looking statements.
•Overview
•Results of Operations
•Liquidity and Capital Resources
•Outlook
OVERVIEW
Ideanomics, Inc. (Nasdaq: IDEX) was incorporated in the State of Nevada on October 19, 2004.
Through September 30, 2021, the Company operates in one segment with two business units, Ideanomics Mobility and Ideanomics Capital. Ideanomics Mobility is driving EV adoption by assembling a synergistic ecosystem of subsidiaries and investments across the three key pillars of electric vehicles ("EV"): Vehicles, Charging, and Energy. These three pillars provide the foundation for Ideanomics Mobility’s planned offering of unique business solutions such as Charging as a Service (“CaaS”) and Vehicle as a Service (“VaaS.”)
Ideanomics Capital is the Company’s fintech business unit, which focuses on leveraging technology and innovation to improve efficiency, transparency, and profitability for the financial services industry.

Restatement of Previously Issued Consolidated Financial Statements

The accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations gives effect to the restatement adjustments made to the previously reported Condensed Consolidated Financial Statements as of and for the periods ended March 31, 2021 and June 30, 2021. For additional information and a detailed discussion of the Restatement, see Note 2, “Restatement of Previously Issued Condensed Consolidated Financial Statements.”
Significant Transactions in the Nine Months Ended September 30, 2021
Since December 31, 2020 the Company has completed a number of transactions that have expanded the scope of the Company’s EV and fintech activities, and has entered into a contract regarding the sale of Fintech Village and has completed the disposal of Grapevine Logic, Inc.
WAVE
On January 15, 2021 acquired 100% of privately held Wireless Advanced Vehicle Electrification, LLC. (“WAVE.”)
Founded in 2011, and headquartered in Salt Lake City, Utah, WAVE is a leading provider of inductive (wireless) charging solutions for medium and heavy-duty EVs. Embedded in roadways and depot facilities, the WAVE system automatically charges vehicles during scheduled stops. The hands-free WAVE system eliminates battery range limitations and enables fleets to achieve driving ranges that match that of internal combustion engines.
Deployed since 2012, WAVE has demonstrated the capability to develop and integrate high-power charging systems into heavy-duty EVs from leading commercial EV manufacturers. With commercially available wireless charging systems up to 250kW and higher power systems in development, WAVE provides custom fleet solutions for mass transit, logistics, airport and campus shuttles, drayage fleets, and off-road vehicles at ports and industrial sites.
Wireless charging systems offer several compelling benefits over plug-in-based charging systems, including reduced maintenance, improved health and safety, and expedited energy connection and are important to the deployment of autonomous
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driving vehicles. Furthermore, wireless in-route charging enables greater route lengths or smaller batteries while also maintaining battery life, thereby reducing costs for fleet operators. WAVE customers include what is currently the largest EV bus system in the U.S., the Antelope Valley Transit Authority, and its partnerships include Kenworth, Gillig, BYD, Complete Coach Works and the Department of Energy.
Energica Motor Company, S.P.A. (“Energica”)

On March 3, 2021 the Company purchased 20% of Energica, the world’s leading manufacturer of high-performance electric motorcycles and the sole manufacturer of the FIM Enel MotoE™ World Cup. Energica has combined zero emission EV technology with the pedigree of high-performance mobility synonymous with Italy’s Motor Valley to create a range of exceptional products for the high-performance motorcycle market. To support its products, it has developed proprietary EV battery and DC fast-charging in-house that has applications and synergies with Ideanomics’ broader interests in the global EV sector. On September 15, 2021 the Company announced it has entered into an agreement to launch a voluntary conditional tender offer in concert with the Founders of Energica for shares of Energica Motor Company S.p.A. (Energica), pursuant to which Ideanomics plans to increase its investment in Energica to approximately 70%. The Energica Founders shall continue to own 29% of Energica.
Silk EV Cayman LP (“Silk”)
On January 28, 2021, the Company invested $15.0 million in Silk EV via a promissory note. Silk is an Italian engineering and design services company that has recently partnered with FAW to form a new company (“Silk-FAW”) to produce fully electric, luxury vehicles for the Chinese and Global auto markets. Silk-FAW has exclusive rights to develop Hongqi-S brand high-end electric sports cars. The Hongqi brand is the most well known luxury auto brand in China. Silk-FAW vehicles are being designed in Italy’s Motor Valley and is attracting talent from the luxury and high performance auto market. Partnering with Silk provides access to Silk-FAW’s Innovation Centers providing us insight into technological advancements and all best-in-breed technology evaluated at those centers to support the development of high-performance sportscars (battery tech, power management systems, high performance motors.)
Timios Holdings Corp.
On January 8, 2021 the Company acquired 100% of privately-held Timios Holdings Corp. (“Timios.”) Timios, a U.S. nationwide title and escrow services provider, which has been expanding in recent years through offering innovative and freedom-of-choice-friendly solutions for real estate transactions. The products include residential and commercial title insurance, closing and settlement services, as well as specialized offerings for the mortgage process industry.
Ideanomics expects that Timios will become one of the cornerstones of Ideanomics Capital. Timios combines difficult to obtain local and state licenses, a knowledgeable and experienced team, and a scalable platform to deliver best-in-class services through both centralized processing and localized branch networks. Ideanomics will assist Timios in scaling its business in various ways, including referring client acquisitions and product innovation.
Founded in 2008 by real estate industry veteran Trevor Stoffer, Timios’ vision is to bring transparency to real estate transactions. The company offers title and settlement, appraisal management, and real-estate-owned (“REO”) title and closing services in 44 states and currently serves more than 280 national and regional clients.
Technology Metals Market Limited (“TM2”)
TM2 is a London based digital commodities issuance and trading platform for technology metals. It connects institutional investors, proprietary traders and retail investors with metals suppliers – miners, refiners, recyclers and mints. The platform focuses specifically on new metals that currently don’t have an active trading marketplace, such as rhodium, lithium, cobalt, rhenium, etc. The Company’s ownership interest in TM2 provides valuable data and insight into the global technology metals market, which is critical to the future of the Cleantech and EV industries. TM2 connects both pillars of Cleantech and Fintech. The types of metals and materials traded on the TM2 platform are critical to Cleantech (for EV battery production, energy storage systems, solar cells, etc.,) while the Fintech platform is innovative in representing these commodities which do not exist on traditional exchanges.
On January 28, 2021, the Company entered into a simple agreement for future equity with TM2 pursuant to which Ideanomics invested $2.1 million. This investment is a follow-on investment further the Company’s prior investment of $1.2 million in stock-based consideration in December 2019.
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Fintech Village
On January 28, 2021, the Company’s Board of Directors accepted an offer of $2.75 million for Fintech Village, and subsequently signed a sale contract on March 15, 2021. The Company believes that Fintech Village met the criteria for held for sale classification on January 28, 2021. As the sale is expected to be completed within one year, the land with a carrying amount of $2.6 million and the asset retirement cost of $4.5 million are recorded as “Held for sale assets (Fintech Village”) in the current asset section of the condensed consolidated balance sheet. The Company has estimated the costs to sell Fintech Village to be $0.2 million and has recorded these costs in “Loss on disposal of subsidiaries, net.”
US Hybrid
On June 10, 2021, the Company completed the acquisition of US Hybrid Corporation (“US Hybrid.”) Founded in 1999, and headquartered in Torrance, California, US Hybrid has been providing innovative solutions including components, drive trains, and fuel cells to medium and heavy-duty commercial fleet operators. US Hybrid designs, manufactures, and markets integrated power conversion systems for battery electric, fuel cell, and hybrid vehicles, as well as systems for renewable energy generation and storage. The company has been leading the clean-tech revolution by offering integrated power conversion components and integrated motor drives, motors and controllers, distributed energy management systems, and DC-DC boost converters - equipment that is vital to the growth of the broader EV industry. In addition to its relationships with leading original equipment manufacturers, US Hybrid has delivered projects for the private and public sectors, including the defense industry and governmental customers.
US Hybrid has reliably demonstrated proven powertrain technology, along with DC-DC converters which possess high efficiency ratings and fast dynamic response capabilities. US Hybrid enjoys long-term commercial relationships in various industries including Commercial, Defense and Aerospace, and Transit/Municipal for its battery electric vehicle, fuel cell energy, and hybrid platforms.
The acquisition of US Hybrid brings to Ideanomics the application of U.S.-built technology, for use in its own vehicles, and significantly extends the company's capabilities in zero-emission transportation. US Hybrid will continue to service its existing customer base, and Ideanomics will assist them in scaling their business operations within the Ideanomics Mobility business division. US Hybrid operates from locations in California, Connecticut, and Massachusetts.
Solectrac, Inc.

On June 11, 2021, the Company completed the acquisition of privately held Solectrac, Inc ("Solectrac") pursuant to an agreement and plan of merger (the “Solectrac Agreement”) entered into on June 11, 2021. Solectrac developed 100 percent battery-powered, all-electric tractors for agriculture and utility operations. Solectrac tractors provide an opportunity for farmers around the world to power their tractors by using the sun, wind, and other clean renewable sources of energy. Solectrac’s mission is to offer farmers independence from the pollution, infrastructure, and price volatility associated with fossil fuels.

Grapevine Logic, Inc.

On April 20, 2021, Ideanomics entered into a stock purchase agreement with FNL Technologies, Inc., (“FNL”) the owner and operator of the social media platform Hoo.be, pursuant to which Ideanomics made an investment into FNL, including cash, Ideanomics common stock, and 100% of the common stock outstanding of Grapevine Logic, Inc. (“Grapevine,”) a wholly-owned subsidiary of the Company focused on influencer marketing. Subsequent to this transaction, the Company owned 29.0% of the outstanding common stock of FNL.

The Company recognized a disposal loss of $1.2 million as a result of the deconsolidation of Grapevine, and such loss was recorded in “Loss on disposal of subsidiaries, net” in the condensed consolidated statements of operations. Through its ownership in FNL, the Company has retained a 29.0% interest in Grapevine. The disposal loss of $1.2 million includes the adjustment recorded to adjust the retained interest of 29.0% in Grapevine to its fair value on the date of disposal.

Refer to Note 10 for additional information concerning the investment in FNL.
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Recent Developments

Convertible Debenture

On October 25, 2021, the Company entered into a convertible debenture with the YA II PN, Ltd. (the “Investor”) with a principal amount of $75.0 million maturing on October 24, 2022.

Minority Depository Institution Keepers Fund

On July 26, 2021, the Company entered into a subscription agreement to invest $25.0 million in MDI Fund. The MDI Fund sponsored by the National Bankers’ Association, an organization of minority-owned banks that aim to increase inclusivity in the financial services industry. The MDI Fund will provide capital resources primarily in low and moderate income areas to grow a more skilled workforce, increase employment opportunities, and support businesses’ growth among minority and underserved communities. The initial investment of $0.6 million was made on July 26, 2021.

Prettl Electronics Automotive

On August 2, 2021, the Company announced a strategic investment in Prettl Electronics Automotive ("PEA"), a business unit within the Prettl Group, a large German industrial company that manufactures and distributes components and systems for the automotive, energy, and electronics industries. The terms include a strategic investment of €7.5 million ($8.9 million) for 11,175 preferred shares. Ideanomics will receive exclusive sales and distribution rights for PEA charging infrastructure products and solutions in North America and CEO Alf Poor will join PEA's Board of Directors.

Cybersecurity Incident

The Company’s real estate services subsidiary, Timios, experienced a systems outage that was caused by a cybersecurity incident. Timios has engaged leading forensic information technology firms and legal counsel to assist its investigation into the incident. Although Timios is actively managing the impact of the cybersecurity incident, it has caused a delay or disruption to parts of Timios’ business, including its ability to perform its mortgage title, closing and escrow services offerings during the reporting period. Timios has since recovered their operation capabilities. The cybersecurity incident has had a material adverse impact on Timios’ revenues. Daily orders are increasing and the company anticipates that a significant amount of the business lost immediately after the cybersecurity incident will be recovered in 2022, although there can be no assurances in this regard. Timios promptly notified third-parties who may have been affected by this incident, and its insurer has offered a one year credit monitoring service to those who may have been affected.

Equity Offering

On August 12, 2021, the Company entered into a Controlled Equity Offering Sales Agreement (the “Agreement”) with Cantor Fitzgerald & Co. (the “Agent”). In accordance with the terms of the Agreement, the Company may offer and sell from time to time through or to the Agent, as sales agent or principal, the Company’s common stock having an aggregate offering price of up to $350.0 million (the “Placement Shares.”)

Principal Factors Affecting the Company’s Financial Performance
The business is expected to be impacted by both macroeconomic and Ideanomics-specific factors. The following factors have been part of the transformation of the Company which affected the results of its operations in 2021 and 2020:
•The Company’s ability to transform the business and to meet internal or external expectations of future performance. In connection with this transformation, the Company is in the process of considerable changes, which include assembling a new management team in the United States and overseas, reconfiguring its business structure, continuing to further enhance the controls, procedures, and oversight during this transformation, and expanding the Company’s mission and business lines for continued growth. It is uncertain whether these efforts will prove beneficial or whether the Company will be able to develop the necessary business models, infrastructure and systems to support the businesses. To succeed, among other things, the Company will need to have or hire the right talent to execute the business strategy. Market acceptance of new product and service offerings will be dependent in part on management’s ability to include functionality and usability that address customer requirements, and optimally price the products and services to meet customer demand and cover costs.
•The Company’s ability to remain competitive. The Company will continue to face intense competition: these new technologies are constantly evolving, and the Company’s competitors may introduce new platforms and solutions that
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are superior. In addition, the Company’s competitors may be able to adapt more quickly to new technologies or may be able to devote greater resources to the development, marketing and sale of their products than the Company can. The Company may never establish and maintain a competitive position in the hybrid financing and logistics management businesses.
•The fluctuation in earnings from the deployment of the Company’s services through acquisitions, strategic equity investments, the formation of joint ventures, and through licenses of technology. The Company’s results of operations may fluctuate from period to period based on the entry into new transactions to expand the business. In addition, while management intends to contribute cash and other assets to the Company’s various investments, the Company does not intend for its holding company to conduct significant research and development activities. The Company intends research and development activities to be conducted by its technology partners and licensors. These fluctuations in growth or costs and in the Company’s various investments may contribute to significant fluctuations in the results of the Company’s operations.
Effects of COVID 19
Novel Coronavirus 2019 (“COVID-19”) is an infectious disease cause by severe acute respiratory syndrome coronavirus. The disease was first identified in December 2019 in Wuhan, the capital of China’s Hubei province, and has since spread globally, resulting in the ongoing COVID-19 pandemic. As of October 31, 2021, over 246.7 million cases had been reported across the globe, resulting in 5.0 million deaths.
The spread of COVID-19 has caused significant disruption to society as a whole, including the workplace. The resulting impact to the global supply chain has disrupted most aspects of national and international commerce, with government-mandated social distancing measures imposing stay-at-home and work-from-home orders in almost every country. The effects of social distancing have shut down significant parts of the local, regional, national, and international economies, for limited or extended periods of time, with the exception of government designated essential services.
In many parts of the world, stay-at-home and work-from-home orders were relaxed during the summer of 2020 as the effects of the Coronavirus appeared to lessen, and economic activity began to recover. However, commencing in the autumn and fall of 2020 and continuing, the U.S. as well as countries in Europe, South America and Asia began to experience an increase in new COVID-19 cases, and in some cases local, state, and national governments began to reinstate restrictive measures to stem the spread of the virus. The U.S. and other countries also experienced an increase in new COVID-19 cases after the fall and winter holiday season, with new, more infectious variants of COVID-19 identified. Various vaccines have been developed, with vaccinations programs in effect worldwide, though reaching acceptable levels of immunization against COVID-19 remains challenging at the local, regional and global level.
The future effects of the virus are difficult to predict, due to uncertainty about the course of the virus, different variants that may evolve, and the supply of the vaccine on a local, regional, and global basis, as well as the ability to implement vaccination programs in a short time frame.
The Company does not anticipate significant adverse effects on its operations’ revenue as compared to its business plan in the near- or mid-term, although the future effects of COVID-19 may result in regional restrictive measures which may constrain the Company’s operations, and supply chain shortages of various materials may have a negative effect on our EV sales or production capacity in the longer-term. The Company's Treeletrik business, which focuses on the sale of motorbikes in the ASEAN region, is experiencing disruption in its operations as a result the continued lockdowns in the region, which have adversely impacted its ability to fulfill committed orders.
The Company continues to monitor the overall situation with COVID-19 and its effects on both local, regional and global economies.
Information about Segment Presentation

The Company’s chief operating decision maker has been identified as the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. Through September 30, 2021, the Company operates in one segment with two business units, Ideanomics Mobility and Ideanomics Capital. For the nine months ended September 30, 2021, the Company completed four acquisitions. We are in the in the process of obtaining required shareholder approval to acquire 100% of VIA Motors International, Inc., ("VIA Motors,") and we are also in discussion with Energica Motor Company S.P.A. ("Energica,") to increase our ownership from 20.0% to 70.0%. The Company anticipates that its internal management structure and the information reviewed by the chief operating decision maker will
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change such that it may have multiple reportable segments in the future. These will be Ideanomics Mobility, which will encompass the entities with businesses centered in the electric vehicle (“EV”) market, and Ideanomics Capital, which will encompass business centered in the finance/real estate market, Other, and a corporate entity, with the combination/consolidation of all three comprising the consolidated operations of the Company. The chief operating decision maker will review financial results at the segment level, and the Company has appointed one segment manager and is in the process of identifying and appointing an additional segment manager and revising its internal reporting, budgeting and forecasting process so as to be aligned with the anticipated corporate structure.
Ideanomics Mobility will drive EV adoption by assembling a synergistic ecosystem of subsidiaries and investments across the three key pillars of EV: Vehicles, Charging, and Energy. These three pillars provide the foundation for Ideanomics Mobility’s planned offering of unique business solutions such as Charging as a Service (“CaaS”) and Vehicle as a Service (“VaaS.”)
Ideanomics Capital will be the Company’s fintech business unit, which focuses on leveraging technology and innovation to improve efficiency, transparency, and profitability for the financial services industry.
Our Unconsolidated Equity Investments
The investments where the Company exercises significant influence, but not control, are classified as long-term equity investments and accounted for using the equity method. Under the equity method, the investment is initially recorded at cost and adjusted for its share of undistributed earnings or losses of the investee. Investment losses are recognized until the investment is written down to nil, provided that the Company does not guarantee the investee’s obligations or is committed to provide additional funding. Refer to Note 10 of the notes to unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.
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Consolidated Results of Operations
Comparison of Three Months Ended September 30, 2021 and 2020 (USD in thousands):
Three Months Ended
September 30, 2021 September 30, 2020
Amount
Change
%
Change
Revenue $ 27,047  $ 10,620  $ 16,427  n/m
Cost of revenue 22,519  9,906  12,613  n/m
Gross profit 4,528  714  3,814  n/m
Operating expenses:
Selling, general and administrative expenses 28,876  7,636  21,240  n/m
Research and development expense 184  1,318  (1,134) (86.0)
Professional fees 9,387  3,968  5,419  n/m
Impairment losses 21,033  3,275  17,758  n/m
Change in fair value of contingent consideration, net (5,099) (4,179) (920) 22.0 
Depreciation and amortization 1,682  695  987  n/m
Total operating expenses 56,063  12,713  43,350  n/m
Loss from operations (51,535) (11,999) (39,536) n/m
Interest and other income (expense):
Interest income (expense), net 109  (2,014) 2,123  n/m
Gain on extinguishment of debt 300  —  300  n/m
Other income, net 8  5,283  (5,275) (99.8)
Loss before income taxes and non-controlling interest (51,118) (8,730) (42,388) n/m
Income tax benefit 842  —  842  n/m
Equity in gain (loss) of equity method investees (819) 7  (826) n/m
Net loss (51,095) (8,723) (42,372) n/m
Net loss attributable to common shareholders (51,095) (8,723) (42,372) n/m
Net loss attributable to non-controlling interest 244  437  (193) (44.2)
Net loss attributable to Ideanomics, Inc. common shareholders $ (50,851) $ (8,286) $ (42,565) n/m

n/m = Not Meaningful - represents percentage changes, in terms of absolute value over 100%.


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Consolidated Results of Operations
Comparison of Nine months ended September 30, 2021 and 2020 (USD in thousands):
Nine Months Ended
September 30, 2021 September 30, 2020
Amount
Change
%
Change
Revenue $ 87,832  $ 15,690  $ 72,142  n/m
Cost of revenue 63,161  14,676  48,485  n/m
Gross profit 24,671  1,014  23,657  n/m
Operating expenses:
Selling, general and administrative expenses 53,650  20,188  33,462  n/m
Research and development expense 429  1,318  (889) (67.5)
Professional fees 21,994  8,096  13,898  n/m
Impairment losses 21,033  10,363  10,670  n/m
Change in fair value of contingent consideration, net (7,006) (2,900) (4,106) n/m
Litigation settlement 5,000  —  5,000  n/m
Depreciation and amortization 4,445  1,651  2,794  n/m
Total operating expenses 99,545  38,716  60,829  n/m
Loss from operations (74,874) (37,702) (37,172) 98.6 
Interest and other income (expense):
Interest expense, net (871) (14,061) 13,190  (93.8)
Loss on disposal of subsidiaries, net (1,446) —  (1,446) n/m
Conversion expense —  (2,266) 2,266  n/m
Gain on extinguishment of debt 300  —  300  n/m
Gain on remeasurement of investment 2,915  —  2,915  n/m
Other income, net 689  6,272  (5,583) (89.0)
Loss before income taxes and non-controlling interest (73,287) (47,757) (25,530) 53.5 
Income tax benefit 9,667  —  9,667  n/m
Equity in loss of equity method investees (1,517) (8) (1,509) n/m
Net loss (65,137) (47,765) (17,372) 36.4 
Deemed dividend related to warrant repricing —  (184) 184  n/m
Net loss attributable to common shareholders (65,137) (47,949) (17,188) 35.8 
Net loss attributable to non-controlling interest 611  737  (126) (17.1)
Net loss attributable to Ideanomics, Inc. common shareholders $ (64,526) $ (47,212) $ (17,314) 36.7 
Revenues (USD in thousands)
Three Months Ended
September 30, 2021 September 30, 2020 Amount
Change 		%
Change
Electric vehicles* $ 9,236  $ 8,872  $ 364  4.1 
Charging, batteries and powertrains 2,292  —  2,292  n/m
Title and escrow services 15,519  —  15,519  n/m
Combustion engine vehicles* —  1,268  (1,268) n/m
Digital advertising services and others —  480  (480) n/m
Total $ 27,047  $ 10,620  $ 16,427  n/m
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n/m = Not Meaningful - represents percentage changes, in terms of absolute value over 100%.
Nine Months Ended
September 30, 2021 September 30, 2020 Amount
Change 		%
Change
Electric vehicles* $ 18,322  $ 9,622  $ 8,700  90.4 
Charging, batteries and powertrains 6,850  —  6,850  n/m
Title and escrow services 62,429  —  62,429  n/m
Combustion engine vehicles* —  5,160  (5,160) n/m
Digital advertising services and others 231  908  (677) (74.6)
Total $ 87,832  $ 15,690  $ 72,142  n/m

n/m = Not Meaningful - represents percentage changes, in terms of absolute value over 100%.
* The revenues were recorded on either a Principal or Agent basis, depending on the terms of the underlying transaction, including the ability to control the product and the level of inventory risk taken. In the nine months ended September 30, 2021, the revenue from the sale of electric vehicles were recorded on a Principal basis. In the nine months ended September 30, 2020, the EV revenues were recorded on either a Principal or Agency basis.

Three months ended September 30, 2021 as compared to the three months ended September 30, 2020
Revenue for the three months ended September 30, 2021 was $27.0 million as compared to $10.6 million for the same period in 2020, an increase of $16.4 million. The increase was mainly due to the Company’s acquisition of Timios, which generated revenue of $15.5 million for the three months ended September 30, 2021. No revenue was generated related to title and escrow services for the three months ended September 30, 2020.
In the three months ended September 30, 2021, the Company recognized $15.5 million revenue from the sales of title and escrow services, $9.2 million revenue from the sales of EVs, and $2.3 million revenue from sales of charging, batteries and powertrains. In the three months ended September 30, 2021, the Company acted in a Principal capacity in relation to vehicle sales.

In the three months ended September 30, 2020, the Company recognized $10.1 million revenue from the sales of vehicles, which included revenue of $1.3 million from the sale of traditional combustion vehicles. In the three months ended September 30, 2020, the Company acted in both a Principal and Agent capacity in relation to vehicle sales. For those contracts in which it acted in a Principal capacity, revenues were recorded on a Gross basis and for those contracts where it acted in an Agent capacity the revenues were recorded on a Net basis.

Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020
Revenue for the nine months ended September 30, 2021 was $87.8 million as compared to $15.7 million for the same period in 2020, an increase of $72.1 million. The increase was mainly due to the Company’s acquisition of Timios, which generated revenue of $62.4 million from the acquisition closing date through September 30, 2021. No revenue was generated related to title and escrow services for the nine months ended September 30, 2020.
In the nine months ended September 30, 2021, the Company recognized $62.4 million revenue from the sales of title and escrow service, $18.3 million revenue from the sales of EVs, and $6.9 revenue from sales of charging, batteries and powertrains. In the nine months ended September 30, 2021, the Company acted in a Principal capacity in relation to vehicle sales.
In the nine months ended September 30, 2020, the Company recognized $14.8 million revenue from the sales of vehicles, which included revenue of $5.2 million from the sale of traditional combustion vehicles. In the nine months ended September 30, 2020, the Company acted in both a Principal and Agent capacity in relation to vehicle sales. For those contracts in which it acted in a Principal capacity revenues were recorded on a Gross basis and for those contracts where it acted in an Agent capacity the revenues were recorded on a Net basis.
Cost of revenues (USD in thousands)
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Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 Amount
Change 		%
Change 		September 30, 2021 September 30, 2020 Amount
Change 		%
Change
Electric vehicles $ 9,160  $ 8,226  $ 934  11.4  $ 17,709  $ 8,658  $ 9,051  104.5 
Charging, batteries and powertrains 2,212  —  2,212  n/m 5,861  —  5,861  n/m
Title and escrow services 11,147  —  11,147  n/m 39,399  —  39,399  n/m
Combustion engine vehicles —  1,229  (1,229) n/m —  5,121  (5,121) nm
Digital advertising services and others —  451  (451) n/m 192  897  (705) (78.6)
Total $ 22,519  $ 9,906  $ 12,613  n/m $ 63,161  $ 14,676  $ 48,485  n/m
Three months ended September 30, 2021 as compared to the three months ended September 30, 2020
Cost of revenues was $22.5 million for the three months ended September 30, 2021, as compared to $9.9 million for the three months ended September 30, 2020. The increase was mainly due to the Company’s acquisition of Timios, which had recorded cost of $11.1 million related to title and escrow service for the three months ended September 30, 2021. No cost related to title and escrow services were incurred for the three months ended September 30, 2020.

Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020

Cost of revenues was $63.2 million for the nine months ended September 30, 2021, as compared to $14.7 million for the nine months ended September 30, 2020. The increase was mainly due to the Company’s acquisition of Timios, which had recorded cost of $39.4 million related to title and escrow service from the acquisition closing date through September 30, 2021. No cost related to title and were incurred escrow services for the nine months ended September 30, 2020.

Gross profit (USD in thousands)
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 Amount
Change 		%
Change 		September 30, 2021 September 30, 2020 Amount
Change 		%
Change
Electric vehicles $ 76  $ 646  $ (570) (88.2) $ 613  $ 964  $ (351) (36.4)
Charging, batteries and powertrains 80  —  80  n/m 989  —  989  n/m
Title and escrow services 4,372  —  4,372  n/m 23,030  —  23,030  n/m
Combustion engine vehicles —  39  (39) n/m —  39  (39) n/m
Digital advertising services and others —  29  (29) n/m 39  11  28  n/m
Total $ 4,528  $ 714  $ 3,814  n/m $ 24,671  $ 1,014  $ 23,657  n/m
Gross profit ratio
Three Months Ended Nine Months Ended
September 30,
2021 		September 30,
2020 		September 30,
2021 		September 30,
2020
Electric vehicles 0.8  % 7.3  % 3.3  % 10.0  %
Charging, batteries and powertrains 3.5  % —  % 14.4  % —  %
Title and escrow services 28.2  % —  % 36.9  % —  %
Combustion engine vehicles —  % 3.1  % —  % 0.8  %
Digital advertising services and others —  % 6.0  % 16.9  % 1.2  %
Total 16.7  % 6.7  % 28.1  % 6.5  %

Three months ended September 30, 2021 as compared to the three months ended September 30, 2020

Gross profit for the three months ended September 30, 2021 was $4.5 million, as compared to gross profit in the amount of $0.7 million during the same period in 2020. The increase was mainly due to the Company’s acquisition of Timios, which generated gross profit of $4.4 million related to title and escrow service for the three months ended September 30, 2021. There was no gross profit related to title and escrow services for the three months ended September 30, 2020.

The gross profit ratio for the three months ended September 30, 2021 was 16.7%, while in 2020, it was 6.7%. The increase was mainly due to the high gross margin from the sales of title and escrow services for the three months ended September 30, 2021.
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Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020

Gross profit for the nine months ended September 30, 2021 was $24.7 million, as compared to gross profit in the amount of $1.0 million during the same period in 2020. The gross profit ratio for the nine months ended September 30, 2021 was 28.1%, while in 2020, it was 6.5%. The increase was mainly due to the high gross margin from sales of title and escrow services for the nine months ended September 30, 2021.
Selling, general and administrative expenses
Three months ended September 30, 2021 as compared to the three months ended September 30, 2020

Selling, general and administrative expenses for the three months ended September 30, 2021 were $28.9 million as compared to $7.6 million for the same period in 2020, an increase of $21.2 million. The increase was principally due to Stock Based Compensation expense related to RSU grants made in the current quarter, costs related to the operations of Timios, WAVE, Solectrac & US Hybrid acquisitions which were completed in the current year and increased compensation, payroll tax & benefit expense related to increased headcount to build out the company’s operations and recruiting costs.

Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020

Selling, general and administrative expenses for the nine months ended September 30, 2021 were $53.7 million as compared to $20.2 million for the same period in 2020, an increase of $33.5 million, or almost 166%. The increase was principally due to costs related to the operations of Timios, WAVE, Solectrac & US Hybrid acquisitions completed in the current year, Stock Based Compensation expense related to RSU grants made in the third quarter 2021, and compensation, payroll tax & benefit expense due to increased headcount related to building out the company’s operations and related recruiting costs.
Research and development expense

Three months ended September 30, 2021 as compared to the three months ended September 30, 2020

Research and development expense was $0.2 million in the three months ended September 30, 2021 as compared to $1.3 million million for the three months ended September 30, 2020 a decrease of $1.1 million. The expense for the prior period included costs related to research into EV trucks, there was no expense research related to EV trucks in the current quarter. Expense in the current quarter was primarily incurred in connection with EV motorbikes in Malaysia and research and development activities in Wave and Solectrac.
Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020

Research and development expense was $0.4 million in the nine months ended September 30, 2021, as compared to $1.3 million for the nine months ended September 30, 2020 a decrease of $0.9 million. The expense for the prior year included costs related to research into EV trucks, there was no expense research related to EV trucks in the current year. Expense in the current period was primarily incurred in connection with EV motorbikes in Malaysia. and research and development activities in Wave and Solectrac.
Professional fees
Three months ended September 30, 2021 as compared to the three months ended September 30, 2020

Professional fees for the three months ended September 30, 2021 were $9.4 million as compared to $4.0 million for the same period in 2020, an increase of $5.4 million. The increase was related to a transaction fee incurred for advice on the contemplated acquisition of Via Motors, advice related to acquisition related activity and patents, fees for general corporate related activity and advice related to Intellectual Property.
Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020

Professional fees for the nine months ended September 30, 2021 were $22.0 million as compared to $8.1 million for the same period in 2020, an increase of $13.9 million. The increase in legal fees was related to advice on mergers and acquisitions, general corporate advice and responding to regulatory inquiries due primarily to costs associated with mergers and acquisitions activity including a transaction fee incurred for advice on the contemplated acquisition of Via Motors, due diligence reviews and work related to the integration of acquired businesses and advice related to Intellectual Property.


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Impairment losses
Three months ended September 30, 2021 as compared to the three months ended September 30, 2020

In the three months ended September 30, 2021, the Company recorded impairment losses of $21.0 million as the Company decided to fully impair a cost method investment, which is decided to take step to wind up the business by voluntarily liquidation.
In the three months ended September 30, 2020, the Company recorded an impairment loss of $3.2 million related to Fintech Village assets after performing an impairment analysis..
Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020

For the nine months ended September 30, 2021, the Company recorded an impairment loss of $21.0 million as the Company decided to fully impair a cost method investment.

For the nine months ended September 30, 2020, the Company recorded an impairment loss of $3.2 million related to Fintech Village assets because the Company decided not to continue the development of Fintech Village, an impairment loss of $1.0 million related to the DBOT right of use assets and $5.9 million related to the New York headquarters’ right of use assets, leasehold improvement and fixed assets because the Company decided to cease use the office and vacated the space subsequently. The Company also recorded an impairment loss of $0.3 million related to another current asset.
Change in fair value of contingent consideration, net
Three months ended September 30, 2021 as compared to the three months ended September 30, 2020
The change in fair value of contingent consideration, net was $5.1 million for the three months ended September 30, 2021 represents the remeasurement of the contingent consideration payable to Tree Technology shareholders.
The change in fair value of contingent consideration, net was $4.2 million for the three months ended September 30, 2020 represents the remeasurement of the contingent consideration payable to Tree Technology shareholders.
Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020

The change in fair value of contingent consideration, net was $7.0 million for the nine months ended September 30, 2021 represents the remeasurement of the contingent consideration payable to the Tree Technology shareholders.

The change in fair value of contingent consideration, net was $2.9 million for the nine months ended September 30, 2020 represents the remeasurement loss of $1.5 million of the contingent consideration payable to the former DBOT shareholder and remeasurement gain of $4.4 million of the contingent consideration payable to the Tree Technology shareholders.
Litigation settlement
Three months ended September 30, 2021 as compared to the three months ended September 30, 2020
There were no litigation settlement expenses recorded for the three months ended September 30, 2021, and 2020, respectively.
Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020
The Company recorded a $5.0 million litigation settlement as a result of the agreement reached by both parties on the mediation in April, 2021. There were no such litigation settlements in the nine months ended September 30, 2020.
Depreciation and amortization
Three months ended September 30, 2021 as compared to the three months ended September 30, 2020
Depreciation and amortization for the three months ended September 30, 2021 was $1.7 million as compared to $0.7 million for the same period in 2020, an increase of $1.0 million. The increase was mainly due to the increase in amortization expense recorded by Timios, WAVE, Solectrac and US Hybrid, which were acquired in the first half year of 2021.
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Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020
Depreciation and amortization for the nine months ended September 30, 2021 was $4.4 million as compared to $1.7 million for the same period in 2020, an increase of $2.8 million. The increase was mainly due to the increase in amortization expense recorded by Timios and WAVE, which were acquired in the first half year of 2021.
Interest expense, net

The following table summarizes the breakdown of the interest income (expense) (in thousands):
Three Months Ended Nine months ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Interest, net $ 109  $ (289) $ (871) $ (887)
Amortization of discount —  (1,725) —  (13,174)
Total $ 109  $ (2,014) $ (871) $ (14,061)

Three months ended September 30, 2021 as compared to the three months ended September 30, 2020

Interest expense decreased $2.1 million to a $0.1 million gain for the three months ended September 30, 2021, from $2.0 million during the same period of 2020. The interest income during 2021 mainly represents the income earned from the notes receivable, The interest expense during 2020 was primarily related to the beneficial conversion feature of convertible debt that were either converted or repaid in 2020 with a resulting decrease in interest expense.

Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020

Interest expense decreased $13.2 million to $0.9 million for the nine months ended September 30, 2021, from $14.1 million during the same period of 2020. The interest expense during 2020 was primarily related to the beneficial conversion feature of convertible debt that were either converted or repaid in 2020 with a resulting decrease in interest expense.
Loss on disposal of subsidiaries, net
Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020
Loss on disposal of subsidiaries, net represents the loss incurred on the sale of Grapevine and the estimated costs to sell Fintech Village.
Conversion expense
Conversion expense of $2.3 million for the nine months ended September 30, 2020 represents the expense recognized as a result of the reduction of conversion price to induce the conversion of the convertible notes from related parties.There were no such conversions in the three months ended September 30, 2020.
There were no such conversions in the three and nine months ended September 30, 2021.
Gain on remeasurement of investment
Gain on remeasurement of investment of $— million and $2.9 million in the three and nine months ended September 30, 2021 resulted from remeasuring the Company's investment in Solectrac to its fair value of the date the Company obtained the remainder of the Solectrac shares outstanding and commenced consolidating Solectrac.
There were no such remeasurements in the three and nine months ended September 30, 2020.
Other income, net
Three months ended September 30, 2021 as compared to the three months ended September 30, 2020
Other income (expense), net has decreased $5.3 million to $— million for the three months ended September 30, 2021 from $5.3 million million during the same period of 2020 mainly due to that the Company reached agreement with landlord to
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terminate its New York City headquarters lease at 55 Broadway and recorded a one-time gain of $4.9 million in the three months ended September 30 2020.

Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020

Other income (expense), net has decreased $5.6 million to $0.7 million for the nine months ended September 30, 2021 from 6.3 million during the same period of 2020 mainly due to that the Company reached agreement with landlord to terminate its New York City headquarters lease at 55 Broadway and recorded a one-time gain of $4.9 million in the three months ended September 30 2020.
Income tax (expense) benefit
Three months ended September 30, 2021 as compared to the three months ended September 30, 2020

During the three months ended September 30, 2021, the income tax expense of $0.8 million is mainly due to deferred state income tax benefits $0.6 million of one time from Timios impairment.
During the three months ended September 30, 2020, the income tax expense is nil because of net operating loss and deferred tax assets related to the net operating loss carryovers utilized had been offset by a valuation allowance. Company had established a 100% valuation allowance against its net deferred tax assets due to its history of pre-tax losses and the likelihood that the deferred tax assets will not be realized.
Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020

During the nine months ended September 30, 2021, the income tax benefit of $9.7 million is mainly due to $9.1 million of one-time benefits relating to acquisitions and net state income expense $0.6 million for recently acquired entities.

During the nine months ended September 30, 2020, income tax expense is nil because of net operating loss and deferred tax assets related to the net operating loss carryovers utilized had been offset by a valuation allowance. The Company had established a 100.0% valuation allowance against its net deferred tax assets due to its history of pre-tax losses and the likelihood that the deferred tax assets will not be realized.
Equity in loss of equity method investees
Three months ended September 30, 2021 as compared to the three months ended September 30, 2020
Equity in loss of equity method investees increased $0.8 million to $0.8 million for the three months ended September 30, 2021 from $7,000 during the same period of 2020. The increase is due to the equity in the losses of Solectrac, Energica and FNL.
Nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020
Equity in loss of equity method investees increased $1.5 million to $1.5 million for the nine months ended September 30, 2021 from $8,000 during the same period of 2020. The increase is due to the equity in the losses of Solectrac, Energica and FNL.

Deemed dividend related to warrant repricing

Deemed dividend related to warrant repricing of $0.2 million for nine months ended September 30, 2020 resulted from the reduction of the exercise prices of warrants issued in connection with convertible promissory notes. There is no repricings in the three months ended September 30, 2020.
There were no such repricings in the three and nine months ended September 30, 2021.
Net loss attributable to non-controlling interest
Three months ended September 30, 2021 as compared to the three months ended September 30, 2020
Net loss attributable to non-controlling interests was $0.2 million for the three months ended September 30, 2021 compared to a net loss of $0.4 million in the same period in 2020. The increase is primarily due to the increase in loss of our investment with Tree Technologies, partially offset by the decrease in loss of iUnicorn.
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Net loss attributable to non-controlling interests was $0.6 million for the nine months ended September 30, 2021 compared to a net loss of $0.7 million in the same period in 2020. The increase is primarily due to the increase in loss of our investment with Tree Technologies, partially offset by the decrease in loss of iUnicorn.
Liquidity and Capital Resources
As of September 30, 2021, the Company had cash of $256.9 million. Approximately $30.5 million was held in accounts outside of the United States, primarily in Hong Kong and the PRC.
Due to the strict regulations governing the transfer of funds held in the PRC to other jurisdictions, the Company does not consider funds held in its PRC entities to be available to fund operations and investment outside of the PRC and consequently does not include them when evaluating the liquidity needs of its businesses operating outside of the PRC.
Timios holds various regulatory licenses related to its business as a title insurance agency and is required to hold a minimum cash balance of $2.0 million. As a broker-dealer, DBOT has minimum capital requirements. DBOT had cash of $0.2 million as of September 30, 2021, which was necessary for DBOT to meet its minimum capital requirements. The Company consolidates a 51.0% owned investment in an entity which is based in Singapore. This entity had cash of $0.2 million as of September 30, 2021. The agreement of the Company’s partner in this entity is required prior to disbursement of this entity’s funds for certain defined expenditures.
The following table provides a summary of net cash flows from operating, investing and financing activities (in thousands):
Nine Months Ended
September 30, 2021 September 30, 2020
Net cash used in operating activities $ (42,238) $ (21,918)
Net cash used in investing activities (191,787) (486)
Net cash provided by financing activities 325,291  45,737 
Effect of exchange rate changes on cash (100) 1,639 
Net increase in cash and cash equivalents 91,166  24,972 
Cash and cash equivalents at beginning of period 165,764  2,633 
Cash and cash equivalents at end of period $ 256,930  $ 27,605 
Operating Activities
Cash used in operating activities was $(42.2) million for the nine months ended September 30, 2021 as compared to cash used in operating activities of $(21.9) million in the same period in 2020. This was primarily due to: (1) a reduction in net loss to $(65.1) million in the current period as compared to a net loss of $(47.8) million in the same period of 2020, (2) total non-cash adjustments resulted in a decrease to net loss of $27.6 million and $29.3 million for the nine months ended September 30, 2021 and 2020, respectively; and (3) total changes in operating assets and liabilities resulted in $(4.7) million and $(3.4) million in cash used in operating activities for the nine months ended September 30, 2021 and 2020, respectively.
Investing Activities
Cash used in investing activities was $(191.8) million for the nine months ended September 30, 2021, which was primarily due to expenditures incurred for the acquisitions of Timios, WAVE, Solectrac and US Hybrid, the investments in Energica, TM2, Via Motor, MDI fund and FNL and the acquisition of the convertible notes with Silk EV and Via Motor. Cash used in investing activities was $(0.5) million for the nine months ended September 30, 2020, which was primarily due to the Company entering into two notes receivable of $1.9 million and receipt one of the note repayments of $1.5 million.
Financing Activities
In the nine months ended September 30, 2021, the Company received $325.3 million from financing activities versus $45.7 million in the same period in the prior year. The issuance of convertible notes generated $220.0 million in the current period as compared to $2.0 million in the same period of 2020. The exercise of warrants and stock options and issuance of common stock generated $185.3 million as compared to $39.1 million in the same period of 2020. In the period ended September 30, 2021, the Company made a repayment of $(80.0) million to settle a convertible note. In the period ended September 30, 2020 the Company received $7.1 million from a non-controlling shareholders contribution and made a repayment of $(3.0) million to a related party and received a loan of $0.5 million from the Small Business Paycheck Protection Program.
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The Company expects to continue to raise both equity and debt finance to support the Company’s investment plans and operations.
Off-Balance Sheet Arrangements
Off-balance sheet arrangements are obligations the Company has with nonconsolidated entities related to transactions, agreements or other contractual arrangements. The Company holds interests in investments accounted for under the equity method of accounting. The Company does not control these investments and therefore does not consolidate them.
The Company does not have other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in its securities.
Seasonality
The Company expects that orders and sales in its Ideanomics Mobility business unit will be influenced by the amount and timing of budgeted expenditure by its customers. Typically, the Company would expect to see higher sales at the start of the year when companies start executing on their capital programs and at the end of the year when companies are spending any surplus or uncommitted budget before the new budget cycle commences. The Company’s operating businesses are in the early stage of their development and consequently do not have sufficient trading histories to project seasonal buying patterns with any degree of confidence.
Orders and sales in our Ideanomics Capital business unit will principally be influenced by changes in interest rates and the resulting impact on in the U.S. housing market particularly as it relates to purchases of homes and the refinancing of existing mortgages which are central to our Timios business.
OUTLOOK

The Company has two distinct business units, Ideanomics Mobility and Ideanomics Capital. Each is focused on the growth opportunity, fueled by technological and legislative disruption, taking place in the automotive, energy, and financial services industries. The Company believes these two business units provide an opportunity for the Company to benefit from the value creation that can be achieved in the short, medium, and long term through establishing competitive products and services which can enable the capture of market share sufficient to sustain profitable operations.

The Company anticipates making continued investments in both the Ideanomics Mobility and Ideanomics Capital business units.

IDEANOMICS MOBILITY

The transition to BEV & FCEV, driven by global air quality goals and supported through government incentives and subsidies, is underpinned by favorable Total Cost of Ownership (TCO) for EV vehicles when compared to existing internal combustion engine (ICE) vehicles and continues to provide favorable market conditions for Ideanomics Mobility.

The Company’s electric vehicle (EV) and technology acquisitions during 2021 have created the foundation for the development of a vertically integrated commercial EV company. The Company is currently reviewing the intellectual property (IP) across the organization with a view to consolidating its patent portfolio. This targeted approach will enable Ideanomics to both identify gaps in its product and service offerings, as well as develop relationships with third parties to leverage commercial opportunities across the Company’s IP portfolio.

By combining leading EV technologies, products, knowledge, and capabilities across the Company’s product verticals, Ideanomics can rapidly develop unique sustainable mobility solutions in both the off-highway and on-highway commercial vehicle markets. These include the provision of vehicles, energy systems, charging infrastructure, data management platforms, and associated financing programs. This provides the Company with the capability to assist commercial fleet operators of internal combustion engine (ICE) vehicles to transition with confidence to Battery Electric Vehicles (BEV) and Fuel Cell Electric Vehicles (FCEV) and meet their zero emission objectives.

By choosing the integrated platform approach from Ideanomics Mobility, the commercial fleet operator benefits from a single source solution that supports all aspects of the transition to EV, from early-stage requirements analysis, charging infrastructure specification and installation, vehicle procurement and deployment, training, operationalization management services, and financing.
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To support the cost of transition from fossil fuels to BEV and FCEV, Ideanomics Vehicle-as-a-Service (VaaS) and Charging-as-a-Service (CaaS) financing programs offer fleet operators the necessary financial and management support to confidently migrate from traditional CapEx models to an OpEx model, releasing capital to support traditional business growth and have the simplicity, predictability, and certainty of a monthly subscription which covers all aspects of EV fleet operations. These programs also have the added advantage of providing Ideanomics with predictable recurring revenues.

To support the Company’s operations, it has recently executed a lease on an approximately 48,000 square foot facility in New Jersey, which will serve as a center of excellence for Ideanomics Mobility and zero emission vehicles, promoting education and advocacy of electric and hydrogen powered vehicles to commercial fleet operators. Anticipated to come online in 2022, the facility will showcase the Company’s Mobility products and services and serve as a regional support center on the East Coast of the United States for Ideanomics Mobility’s operating businesses’ activities in North America.

To support further geographical expansion, the Company is exploring a strategic relationship with a Europe-based industrialization partner to accelerate new product introduction and enable Ideanomics Mobility to expedite its expansion into important European markets.

At the operating business level, further investment is planned to support continuous technology and product development and the associated manufacturing and assembly expansion to support increasing demand and revenue achievement.
The global supply chain slowdowns and shipping container shortages continue to present challenges at each of the operating companies within the Ideanomics Mobility business unit.

VIA Motors (“VIA”)

The Company anticipates that its agreement to purchase VIA will close in the first quarter of 2022 and is subject to a shareholder vote for approval thereof.

With the acquisition of VIA, Ideanomics will acquire a business which has developed a unique commercial battery electric skateboard architecture in the high-growth Class 2 to 5 local and last mile delivery market segment. The skateboard architecture provides opportunity to customize the vehicle configuration in van or cab/chassis to meet specific customer needs. VIA is well advanced in the development and validation of the product and with the support of Ideanomics will transition to volume manufacturing by 2023.

Energica Motor Company (“Energica”)

During the first half of 2021 the Company took a minority ownership position in Energica Motor Company, a leading manufacturer of high-performance electric motorbikes with a global distributor network in development. The Company has since launched a tender offer to acquire the outstanding publicly traded shares of Energica that it does not already own, as well as a portion of the shares of management and affiliates. The acquisition of Energica will greatly strengthen the Company’s competitive position in the motorcycle market globally and bring the Company expertise in battery technology, powertrain, and telematics, which are core competitive advantages. The Company’s intent is to support Energica with its continued global expansion, the introduction of new models, and the expansion of its manufacturing and assembly facilities, as well as developing the application of its core technology to other noncompeting market sectors within the Ideanomics Mobility business unit and externally to other industrial applications.

Ideanomics China

The Company's operations in China continue to develop the business, selling ride hailing vehicles and EV batteries, and has recently executed on orders which have expanded its activities to include electric vans, trucks, and buses. A market has developed for used commercial EVs in China, which the Company has established operations to take advantage of. The China business is in discussions with major customers and OEMs to integrate and deploy WAVE technology in China and is working to develop ancillary financial products to make purchasing of commercial EVs simpler for fleet operators. The Company’s supply chain operations in China have helped alleviate some of the difficult current market conditions for electronic components to the benefit of its other operating companies.

Tree Technologies (“Treeletrik”)

Treeletrik has collaborated with Energica on the development of a new range of low power electric motorcycles which are anticipated for introduction to market in 2022. The development of the next generation of Treeletrik branded motorbikes will enable Treeletrik to remain competitive and leverages Energica’s technology and know-how; translated to the lower power
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commuter and delivery bike market segment which Treeletrik markets its products to. This technical collaboration demonstrates the synergistic nature of the Ideanomics Mobility operations, and the ability to leverage and apply IP, technology, and expertise to improve the Company’s products.

The contract with PSE for the purchase of 200,000 motorcycles is not progressing on the originally anticipated time scale, due to pandemic restrictions and the progress and performance of PSE in areas including local homologation. The Company is evaluating alternatives to fulfilling the order, including but not limited to establishing dealerships in Indonesia, Philippines, and Thailand starting in 2022 to directly enter these markets and take advantage of the opportunity surrounding the dependence on two and three-wheeled low-cost transportation in the region.

Treeletrik has been subjected to continuous rolling lockdowns in 2021 due to the COVID-19 pandemic. This has restricted the supply chain and ability to export products within the ASEAN region. The Company anticipates this situation to continue until such time as vaccination rates increase in Malaysia and surrounding countries.

Solectrac

The Company completed the acquisition of Solectrac, a California-based maker and distributor of electric powered tractors, in Q2 of 2021. Since acquisition the Company has invested in assimilating the business and has made investments in engineering, supply chain management, and operational leadership to scale the business.
The next stage of product development has been initiated, focused on ergonomic and application improvements, system upgrades the introduction of a range of Solectrac-compatible farming implements, and a re-styling exercise to strengthen Solectrac’s physical branding. To that end, Solectrac recently launched its E70N tractor, which is focused on vineyards and hobby farms.

A lease on a new facility, in proximity to the current facility, has been agreed to expand its manufacturing and assembly capacity to meet anticipated market demand. Solectrac has engaged the services a leading, global, automotive consultancy to design and implement a scalable and compliant manufacturing operation.

To support its growth objectives, Solectrac has commenced the development of a North American dealer and distribution network, which will help it in the marketing, distribution, sales, and servicing of its products and services.

US Hybrid

In Q2 of 2021, the Company completed the acquisition of US Hybrid, a California-based low and zero emission engineering and vehicle integration business which also manufactures Hydrogen fuel cells and power electronics for electric and hydrogen powered vehicles. Since the acquisition, the Company has invested in assimilating the business and has made investments in people and operations to help scale the business, which includes a lease on a new facility in Torrance, CA to expand its manufacturing and assembly capacity to meet the anticipated market demand.

Additionally, the Company is working with US Hybrid to further develop the resources required to expand its hydrogen fuel cell manufacturing subsidiary to meet the anticipated demand for hydrogen powered vehicles.

US Hybrid will continue to provide engineering services, fuel cells, power electronics, systems, and components, and associated vehicle integration services to both external customers and to internal companies within Ideanomics Mobility. US Hybrid will serve as a research and development resource across Ideanomics Mobility for BEV and FCEV.

WAVE

Since the acquisition of WAVE in January 2021, the Company has continued investment in facilities and resources to meet the anticipated demand for WAVE’s high power inductive wireless charging products. WAVE has continued to develop its high-powered induction capabilities beyond 250kW, successfully delivering systems at 125kW and 500kW, and is working with the U.S. Department of Energy and Paccar’s Kenworth division on a 1-Megawatt system for heavy trucking applications that is due for delivery in 2022. To support widespread adoption, WAVE is developing relationships with additional OEM partners to facilitate the integration of its vehicle-side hardware.

Over the next 12 months the Company will support WAVE with supply chain development and quality initiatives, cost reductions, and increased manufacturing and assembly capacity to improve production capabilities in response to market
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demand. To support its expansion plans, WAVE is adapting its products to meet the varying power requirements and standards for Europe and Asia.

Medici Motor Works (“Medici”)

Medici has taken a project approach, working with established OEMs in the bus and specialty vehicle markets to meet the zero emission needs of commercial fleet operators. The evaluation and application of Ideanomics IP and technologies to select OEM products is intended to provide differentiated product and service offerings for both off and on highway mobility.

Prettl Electronics Automotive (“PEA”)

In July of 2021, Ideanomics made a strategic minority investment in PEA to include exclusive sales and distribution rights of PEA charging and infrastructure products in North America. PEA is currently conducting in-field testing of its European products with partners in that region, and is planning to launch its North American products, to be assembled and certified in the U.S., during 2022.

IDEANOMICS CAPITAL

Financial technology (Fintech) continues to provide opportunities which could generate high rates of return through the deployment of technology to disrupt existing business models.

Timios Holdings, Inc. (“Timios”)

The Company’s acquisition of Timios in the first quarter of 2021 marks the first entrance into the real estate title agency and closing market. Management believes that through deployment of advanced technology and complimentary acquisitions it can increase Timios’ value. Timios experienced a Cybersecurity incident on July 27, 2021, and, as a consequence of the incident, there was a material reduction in the number of daily orders and revenue. The number of daily orders is recovering, however it is too early to predict when, and if, orders and revenue will return to pre-incident levels.

Delaware Board of Trade (“DBOT”) now known as JUSTLY

In recent months, the Company has restructured and relaunched its DBOT business as JUSTLY, a FINRA-registered broker dealer destination for ESG and thematic investments. The Company has hired an entirely new management team of experienced capital markets and regulatory professionals, implementing new systems for JUSTLY to leverage its new business model as a destination for crowdfunding as well as other associated offerings.

Other Ideanomics Capital Initiatives

The Company’s Ideanomics Capital business unit is providing the resources and expertise for the development of the financing programs which will underpin sales and revenues of Ideanomics Mobility. We call these financing programs Charging-as-a-Service (CaaS) and Vehicle-as-a-Service (VaaS), as part of our Ideanomics Mobility offering to commercial fleet operators.
Environmental Matters
The Company is subject to various federal, state and local laws and regulations governing, among other things, hazardous materials, environmental contamination and the protection of the environment. We have made, and expect to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures. We may also incur fines and penalties from time to time associated with noncompliance with such laws and regulations.
New Accounting Pronouncements
Information regarding new accounting pronouncements is included in Note 2 to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of September 30, 2021 that our disclosure controls and procedures were not effective.

We identified material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. The matters involving internal controls and procedures that our management considered to be material weaknesses were:

•The design and implementation of internal controls over the review of management’s inputs into valuation models and associated valuation outputs from third party valuation specialists.

•The design and implementation of internal controls over the revenue recognition process, specifically the failure to properly evaluate whether the Company was to be considered the principal or the agent in contracts with customers.

•There is a lack of sufficient personnel in accounting and financial reporting functions with sufficient experience and expertise with respect to the application of U.S. GAAP and SEC disclosure requirements.

•Operating effectiveness of internal controls to identify and evaluate the accounting implications of non-routine transactions.

These material weaknesses, individually or in the aggregate, could result in misstatements of accounts or disclosures that would each result in a material misstatement of the interim or annual Consolidated Financial Statements that would not be prevented or detected.

Notwithstanding the conclusion by our management that our disclosure controls and procedures as of June 30, 2021 were not effective, and notwithstanding the material weaknesses in our internal control over financial reporting, management believes that the condensed consolidated financial statements and related financial information included in this Quarterly Report on Form 10‑Q/A fairly present in all material respects our financial position, results of operations and cash flows as of and for the dates presented, and for the periods ended on such dates, in conformity with US GAAP.

Our evaluation excluded Timios, WAVE, Solectrac and US Hybrid which were acquired in the nine months ended September 30, 2021. As of and for the nine months ended September 30, 2021, Timios represented 7.5% of total assets and 71.1% of revenue, WAVE represented 11.5% of total assets and 6.0% of revenue, Solectrac represented 4.8% of total assets and 0.5% of revenue, and US Hybrid represented 9.8% of total assets and 1.8% of revenue. In accordance with guidance issued by the SEC, we expect to exclude the acquisitions from our assessment of internal controls over financial reporting during the first year following the acquisition.




Changes in Internal Control Over Financial Reporting

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There were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2021, which have materially affected or would likely materially affect our internal control over financial reporting. The Company continues to invest resources in order to upgrade internal controls.

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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For a description of the Company’s legal proceedings, see Note 18, Commitments and Contingencies, to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the 2020 Form 10-K which could materially affect the Company’s business, financial condition or future results. The risks described in the 2020 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to management or that management currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition or future results.

Risks Related to the Restatement of our Prior Period Condensed Consolidated Financial Statements and Material Weaknesses in our Internal Control

We have restated our condensed consolidated financial statements for several prior periods, which has affected and may continue to affect investor confidence, our stock price, our ability to raise capital in the future, and our reputation with our customers, which may result in stockholder litigation and may reduce customer confidence in our ability to complete new opportunities.

We have restated our Quarterly Report on Form 10-Q as of and for the periods ended March 31, 2021 and June 30, 2021. The restatement of our prior condensed consolidated financial statements primarily reflects the correction of certain errors, which resulted from an incorrect application of US GAAP, as described in more detail elsewhere in the Quarterly Report on Form 10-Q/A for the periods ended March 31, 2021 and June 30, 2021. Such restatement may have the effect of eroding investor confidence in the Company and our financial reporting and accounting practices and processes, and may negatively impact the trading price of our common stock, may result in stockholder litigation, may make it more difficult for us to raise capital on acceptable terms, if at all, and may negatively impact our reputation with our customers and cause customers to place new orders with other companies.

We have identified material weaknesses in our internal control over financial reporting, which, did and could continue to, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.

We have concluded that our internal control over financial reporting was not effective as of September 30, 2021 due to the existence of material weaknesses in such controls, and we have also concluded that our disclosure controls and procedures were not effective as of September 30, 2021 due to material weaknesses in our internal control over financial reporting, all as described in Part I, Item 4, “Controls and Procedures” of this Quarterly Report on Form 10-Q. Although we have initiated remediation measures to address the identified weaknesses, we cannot provide assurance that our remediation efforts will be adequate to allow us to conclude that such controls will be effective in the future. We also cannot assure you that additional material weaknesses in our internal control over financial reporting will not arise or be identified in the future.

We intend to continue our remediation activities and to continue to improve our overall control environment and our operational and financial systems and infrastructure, as well as to continue to train, retain and manage our personnel who are essential to effective internal control. In doing so, we will continue to incur expenses and expend management’s time on compliance-related issues. However, we cannot ensure that the steps that we have taken or will take will successfully remediate the errors. If we are unable to successfully complete our remediation efforts or favorably assess the effectiveness of our internal control over financial reporting, our operating results, financial position, ability to accurately report our financial results and timely file our SEC reports, and our stock price could be adversely affected.

Moreover, because of the inherent limitations of any control system, material misstatements due to error or fraud may not be prevented or detected and corrected on a timely basis, or at all. If we are unable to provide reliable and timely financial reports in the future, our business and reputation may be further harmed. Restated financial statements and failures in internal control may also cause us to fail to meet reporting obligations, negatively affect investor and customer confidence in our management and the accuracy of our financial statements and disclosures, result in events of default under our banking agreements, or result in adverse publicity and concerns from investors and customers, any of which could have a negative effect on the price of our common stock, subject us to regulatory investigations and penalties or additional stockholder litigation, and have a material adverse impact on our business and financial condition.
Risks Related to Our Information Technology Systems and Cyber-Security

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Defects or disruptions in our technology or services could diminish demand for our products and services and subject us to liability.
Because our technology, products and services are complex and use or incorporate a variety of computer hardware, software and databases, both developed in-house and acquired from third-party vendors, our technology, products and services may have errors or defects. Errors and defects could result in unanticipated downtime or failure and could cause financial loss and harm to our reputation and our business. We have from time to time found defects and errors in our technology, products and service and defects and errors in our technology, products or services may be detected in the future. In addition, our customers may use our technology, products and services in unanticipated ways that may cause a disruption for other customers. As we acquire companies, we may encounter difficulty in incorporating the acquired technologies, products and services, and maintaining the quality standards that are consistent with our technology, products and services. Since our customers use our technology, products and services for important aspects of their businesses and for financial transactions, any errors, defects, or disruptions in such technology, products and services or other performance problems with our technology, products and services could subject our customers to financial loss and hurt our reputation.
Our platform functions on software that is highly technical and complex and may now or in the future contain undetected errors, bugs, or vulnerabilities. Some errors in our software code may only be discovered after the code has been deployed. Any errors, bugs or vulnerabilities discovered in our code after deployment, inability to identify the cause or causes of performance problems within an acceptable period of time or difficultly maintaining and improving the performance of our platform, particularly during peak usage times, could result in damage to our reputation or brand, loss of revenues, or liability for damages, any of which could adversely affect our business and financial results.
We expect to continue to make significant investments to maintain and improve the availability of our platform and to enable rapid releases of new features and products. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be harmed.
We have previously experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, third-party service providers, human or software errors and capacity constraints. If our application is unavailable when customers attempt to access it or it does not load as quickly as they expect, customers may seek other services.
Malicious cyber-attacks and other adverse events affecting our operational systems or infrastructure, or those of third parties, could disrupt our businesses, result in the disclosure of confidential information, damage our reputation and cause losses or regulatory penalties.
Developing and maintaining our operational systems and infrastructure are challenging, particularly as a result of us and our clients entering into new businesses, jurisdictions and regulatory regimes, rapidly evolving legal and regulatory requirements and technological shifts. Our financial, accounting, data processing or other operating and compliance systems and facilities may fail to operate properly or become disabled as a result of events that are wholly or partially beyond our control, including malicious cyber-attack or other adverse events, which may adversely affect our ability to process these transactions or provide services or products.
In addition, our operations rely on the secure processing, storage and transmission of confidential and other information on our computer systems and networks. Although we take protective measures, such as software programs, firewalls and similar technology, to maintain the confidentiality, integrity and availability of our and our customers’ information, and endeavor to modify these protective measures as circumstances warrant, the nature of cyber threats continues to evolve. As a result, our computer systems, software and networks may be vulnerable to unauthorized access, loss or destruction of data (including confidential customer information), account takeovers, unavailability or disruption of service, computer viruses, acts of vandalism, or other malicious code, ransomware, hacking, phishing and other cyber-attacks and other adverse events that could have an adverse security impact. Despite the defensive measures we have taken, these threats may come from external forces, such as governments, nation-state actors, organized crime, hackers, and other third parties, including outsource or infrastructure-support providers and application developers, or may originate internally from within us. Given the high volume of transactions, certain errors may be repeated or compounded before they are discovered and rectified.
We also face the risk of operational disruption, failure, termination or capacity constraints of any of the third parties that facilitate our business activities, including vendors, customers, counterparties, exchanges, clearing agents, clearinghouses or other financial intermediaries. Such parties could also be the source of a cyber-attack on or breach of our operational systems, network, data or infrastructure.
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There have been an increasing number of ransomware, hacking, phishing and other cyber-attacks in recent years in various industries, including ours, and cyber-security risk management has been the subject of increasing focus by our regulators. Like other companies, we have on occasion experienced, and may continue to experience, threats to our systems, including viruses, phishing and other cyber-attacks. The number and complexity of these threats continue to increase over time. The techniques used in these attacks are increasingly sophisticated, change frequently and are often not recognized until launched. If one or more cyber-attacks occur, it could potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our, as well as our customers’ or other third parties’ operations, which could result in reputational damage, financial losses, customer dissatisfaction and/or regulatory penalties, which may not in all cases by covered by insurance. If an actual, threatened or perceived cyber-attack or breach of our security occurs, our clients could lose confidence in our platforms and solutions, security measures and reliability, which would materially harm our ability to retain existing clients and gain new clients. As a result of any such attack or breach, we may be required to expend significant resources to repair system, network or infrastructure damage and to protect against the threat of future cyber-attacks or security breaches. We could also face litigation or other claims from impacted individuals as well as substantial regulatory sanctions or fines.
The extent of a particular cyber- attack and the steps that we may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed and full and reliable information about the attack is known. While such an investigation is ongoing, we may not necessarily know the full extent of the harm caused by the cyber-attack, and any resulting damage may continue to spread. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber-attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber-attack.
Our regulators in recent years have increased their examination and enforcement focus on all matters of our businesses, especially matters relating to cyber-security threats, including the assessment of firms’ vulnerability to cyber-attacks. In particular, regulatory concerns have been raised about firms establishing effective cyber-security governance and risk management policies, practices and procedures that enable the identification of risks, testing and monitoring of the effectiveness of such procedures and adaptation to address any weaknesses; protecting firm networks and information; data loss prevention, identifying and addressing risk associated with remote access to client information and fund transfer requests; identifying and addressing risks associated with customers business partners, counterparties, vendors, and other third parties, including exchanges and clearing organizations; preventing and detecting unauthorized access or activities; adopting effective mitigation and business continuity plans to timely and effectively address the impact of cyber-security breaches; and establishing protocols for reporting cyber-security incidents. As we enter new jurisdictions or different product area verticals, we may be subject to new areas of risk or to cyber-attacks in areas in which we have less familiarity and tools. A technological breakdown could also interfere with our ability to comply with financial reporting requirements. The SEC has issued guidance stating that, as a public company, we are expected to have controls and procedures that relate to cybersecurity disclosure, and are required to disclose information relating to certain cyber-attacks or other information security breaches in disclosures required to be made under the federal securities laws. While any insurance that we may have that covers a specific cyber-security incident may help to prevent our realizing a significant loss from the incident, it would not protect us from the effects of adverse regulatory actions that may result from the incident or a finding that we had inadequate cyber-security controls, including the reputational harm that could result from such regulatory actions.
Additionally, data privacy is subject to frequently changing rules and regulations in countries where we do business. For example, the European Union adopted a new regulation that became effective in May 2018, the General Data Protection Regulation (“GDPR,”) which requires entities both in the European Economic Area and outside to comply with new regulations regarding the handling of personal data. We are also subject to certain U.S. federal and state laws governing the protection of personal data. These laws and regulations are increasing in complexity and number. In addition to the increased cost of compliance, our failure to successfully implement or comply with appropriate processes to adhere to the GDPR and other laws and regulations relating to personal data could result in substantial financial penalties for non-compliance, expose us to litigation risk and harm our reputation.
Risks Related to the Real Estates Services Industry
If adverse changes in the levels of real estate activity occur, the revenues of our Timios subsidiaries may decline.
Title insurance, settlement services, and appraisal revenue is closely related to the level of real estate activity, which includes, among other things, sales, mortgage financing and mortgage refinancing. The levels of real estate activity are primarily affected by the average price of real estate sales, the availability of funds to finance purchases and mortgage interest rates. Both the volume and the average price of residential real estate transactions have increased substantially in many parts of the country
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over the past year. Due to the unprecedented nature of activity, these trends are unlikely to continue at the same level in the long term.
We have found that residential real estate activity generally decreases in the following situations:
•Mortgage interest rates are high or increasing;
•Mortgage funding supply is limited; and
•The United States economy is weak, including high unemployment levels.
If there is a decline in the level of real estate activity or the average price of real estate sales may adversely affect our title insurance, settlement services, and appraisal management revenues. In 2020, the mortgage interest rate reached record lows increasing mortgage refinancing to the highest levels in history. In 2021, the mortgage interest rate has increased, which may negatively impact the amount of mortgage refinancing activity in comparison to 2020. Sales and mortgage financing remain elevated and the interest rate remains low in respect to historical averages. This activity may be adversely impacted if the economy does not continue to perform well, mortgage rates increase greatly, or lending institutions experience losses that prohibit their ability to lend. Our revenues in future periods will continue to be subject to these and other factors which are beyond our control and, as a result, are likely to fluctuate.
If financial institutions at which we hold escrow funds fail, it could have a material adverse impact on our company.
We hold customers’ assets in escrow at various financial institutions, pending completion of real estate transactions. These assets are maintained in segregated bank accounts. Failure of one or more of these financial institutions may lead us to become liable for the funds owed to third parties and there is no guarantee that we would recover all of the funds deposited, whether through Federal Deposit Insurance Corporation coverage or otherwise.
If we experience changes in the rate or severity of title insurance claims, it may adversely impact our ability to conduct business.
By their nature, claims are often complex, vary greatly in dollar amounts and are affected by economic and market conditions and the legal environment existing at the time of settlement of the claims. We are an underwritten title company, and if our claims exceed the threshold established by the title companies that underwrite the insurance we offer, it may be cause to have our appointments revoked and negatively impact our ability to conduct business.
Because our Timios subsidiary is dependent upon California for a substantial portion of our title insurance premiums, our business may be adversely affected by regulatory conditions in California.
California is the largest source of revenue for the title insurance industry and, in 2020, California-based premiums accounted for a substantial portion of the premiums earned by our Timios subsidiary. A significant part of our revenues and profitability are therefore subject to our operations in California and to the prevailing regulatory conditions in California. Adverse regulatory developments in California, which could include reductions in the maximum rates permitted to be charged, cost of employment regulations, inadequate rate increases or more fundamental changes in the design or implementation of the California title insurance regulatory framework, could have a material adverse effect on our results of operations and financial condition.
The title insurance business is highly competitive.
Competition in the title insurance and appraisal management industry is intense, particularly with respect to price, service and expertise. Business comes primarily by referral from real estate agents, lenders, developers and other settlement providers. The sources of business lead to a great deal of competition among title agents and appraisal management companies. There are numerous national companies and smaller companies at the regional and local levels. The smaller companies are an ever-present competitive risk in the regional and local markets where their business connections can give them a competitive edge. Although we are not aware of any current initiatives to reduce regulatory barriers to entering our industry, any such reduction could result in new competitors, including financial institutions, entering the title insurance business. From time to time, new entrants enter the marketplace with alternative products to traditional title insurance, although many of these alternative products have been disallowed by title insurance regulators. These alternative products, if permitted by regulators, could adversely affect our revenues and earnings. Competition among the major title insurance companies and any new entrants could lower our premium and fee revenues.
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Industry regulatory changes and scrutiny could adversely affect our ability to compete for or retain business or increase our cost of doing business.
The title insurance industry has recently been, and continues to be, under regulatory scrutiny in a number of states with respect to pricing practices, and alleged Real Estate Settlement Procedures Act violations and unlawful rebating practices. The regulatory environment could lead to industry-wide reductions in premium rates and escrow fees, the inability to get rate increases when necessary, as well as to changes that could adversely affect the Company’s ability to compete for or retain business or raise the costs of additional regulatory compliance. Further, if regulatory decrees delaying foreclosures are extended, it will continue to impact our ability to recognize revenue and profitability from our default title and settlement services department.
We may pursue opportunities that involve business, regulatory, legal or other complexities.
We may pursue unusually complex opportunities. This can often take the form of substantial business, regulatory or legal complexity. Our tolerance for complexity presents risks, as such contracts can be more difficult, expensive and time-consuming to execute; it can be more difficult to manage or realize value from the assets managed in such activity; and such activity sometimes entail a higher level of regulatory scrutiny or a greater risk of contingent liabilities. Any of these risks could harm the results of our operations.
Our business depends upon our ability to keep pace with the latest technological changes, and our failure to do so could make us less competitive in our industry.
The market for our products and services is characterized by rapid change and technological change, frequent new product innovations, changes in customer requirements and expectations and evolving industry standards. Products using new technologies or emerging industry standards could make our products and services less attractive. Failure to respond in a timely and cost-effective way to these technological developments may result in serious harm to our business and operating results. As a result, our success will depend, in part, on our ability to develop and market product and service offerings that respond in a timely manner to the technological advances available to our customers, evolving industry standards and changing preferences.
Rapid technological changes in our industry require timely and cost-effective responses. Our earnings may be adversely affected if we are unable to effectively use technology to increase productivity.
Technological advances occur rapidly in the title insurance industry as industry standards evolve and title insurers introduce new products and services. We believe that our future success depends on our ability to anticipate technological changes and to offer products and services that meet evolving standards on a timely and cost-effective basis. Successful implementation and customer acceptance of our technology-based services will be crucial to our future profitability. There is a risk that the introduction of new products and services, or advances in technology, could reduce the usefulness of our products and render them obsolete.
Risks Related to the Wireless Charging System Industry
The success of our business depends in large part on our ability to protect our proprietary information and technology and enforce our intellectual property rights against third parties.
We rely on a combination of patent, copyright, service mark, trademark and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights, all of which provide only limited protection. We cannot assure you that any patents will issue with respect to our currently pending patent applications, in a manner that gives us the protection that we seek, if at all, or that any future patents issued to us will not be challenged, invalidated or circumvented. Our currently issued patents and any patents that may issue in the future with respect to pending or future patent applications may not provide sufficiently broad protection or they may not prove to be enforceable in actions against alleged infringers. Also, we cannot assure you that any future service mark registrations will be issued with respect to pending or future applications or that any registered service marks will be enforceable or provide adequate protection of our proprietary rights.
We endeavor to enter into agreements with our employees and contractors and agreements with parties with whom we do business to limit access to and disclosure of our proprietary information. We cannot be certain that the steps we have taken will prevent unauthorized use of our technology or the reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property. The enforcement of our intellectual
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property rights also depends on our legal actions against these infringers being successful, but we cannot be sure these actions will be successful, even when our rights have been infringed.
Further, effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country in which our services are available over the Internet. In addition, the legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in EV-related industries are uncertain and still evolving.
Changes to existing federal, state or international laws or regulations applicable to us could cause an erosion of our current competitive strengths.
Our business is subject to a variety of federal, state and international laws and regulations, including those with respect government incentives promoting fuel efficiency and alternate forms of energy, electric vehicles and others. These laws and regulations, and the interpretation or application of these laws and regulations, could change. Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, fiscal tightening or other reasons may result in diminished revenues from government sources and diminished demand for our products. In addition, new laws or regulations affecting our business could be enacted. These laws and regulations are frequently costly to comply with and may divert a significant portion of management’s attention. If we fail to comply with these applicable laws or regulations, we could be subject to significant liabilities which could adversely affect our business.
There are many federal, state and international laws that may affect our business, including measures to regulate EVs and charging systems. If we fail to comply with these applicable laws or regulations, we could be subject to significant liabilities which could adversely affect our business.
There are a number of significant matters under review and discussion with respect to government regulations which may affect business and/or harm our customers, and thereby adversely affect our business, financial condition and results of operations.
Item 2. Unregistered Sales of Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of equity securities during the fiscal quarter ended September 30, 2021, other than those that were previously reported in the Company’s Current Reports on Form 8-K.
Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities during the fiscal quarter ended September 30, 2021.
Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
Not applicable.
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Item 6. Exhibits
Exhibit No.
Description 
2.1
3.1*
10.1
10.2
10.3*
10.4*
10.5*
10.6
10.7*
10.8*
10.9*
31.1*
31.2*
32.1**
32.2**
101.INS XBRL Instance Document
101.SCH Taxonomy Extension Schema Document
101.CAL Taxonomy Extension Calculation Linkbase Document
101.DEF Taxonomy Extension Definition Linkbase Document
101.LAB Taxonomy Extension Label Linkbase Document
101.PRE Taxonomy Extension Presentation Linkbase Document
_____________________________________________
*Filed herewith
**Furnished herewith
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on November 22, 2021.
IDEANOMICS, INC.
By:  /s/ Conor McCarthy
 
  Conor McCarthy
  Chief Financial Officer
  (Principal Financial and Accounting Officer)
77

AMENDMENT NO. 3 TO
THE SECOND AMENDED AND RESTATED BYLAWS
(the “Bylaws”)
OF
IDEANOMICS, INC.
(the “Corporation”)
Effective November 10, 2021
1.The Bylaws of the Corporation are hereby amended by deleting therefrom Section 2.6 of Article II in its entirety and inserting in lieu thereof a new Section 2.6 of Article II as follows:
“Section 2.6    Quorum. At all meetings of the stockholders, the presence in person or by proxy of the holders of thirty-three and one-third percent (33 1/3%) of the shares issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business except as otherwise provided by law, by the Articles of Incorporation or by these Bylaws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the chair of the meeting or the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.”
2.The Bylaws of the Corporation are hereby amended by deleting therefrom Section 2.7 of Article II in its entirety and inserting in lieu thereof a new Section 2.7 of Article II as follows:
“Section 2.7    Voting. When a quorum is present at any meeting of the Corporation’s stockholders, action by the stockholders on a matter other than the election of directors is approved if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, unless the question is one upon which, by express provision of law, the Articles of Incorporation, these Bylaws or applicable stock exchange rules, a different vote is required, in which case such express provision shall govern and control the decision of such question. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.”
3.Except as set forth herein, the Bylaws shall remain in full force and effect.
* * * * *
Adopted by resolution of the Board of Directors, the 10th day of November, 2021.
/s/Tony Sklar
Secretary


Modena, September 15, 2021
To:
Ideanomics Inc.
1441 Broadway, Suite #5116
New York, NY, 10018
To the attention of
Alf Poor – Chief Executive Officer
by email
RE: ENERGICA MOTOR COMPANY S.P.A. – FRAMEWORK AGREEMENT
Dear Sirs,
following our recent discussions, we agree with Your proposal and we transcribe in full the text of the proposal letter sent to us, initialed on each page and fully signed at the end by our duly authorized representatives for full acceptance
FRAMEWORK AGREEMENT
BETWEEN
(1)Ideanomics, Inc., a company incorporated under the laws of Nevada having its registered office in New York, 1441 Broadway, Suite 5116, IRS Employer Identification no. 20-1778374I, (the “Bidder”), represented herein by its Chief Executive Officer Alf Poor;
– of the one side –
AND
(2)Energica Motor Company S.p.A., a joint stock company incorporated under the laws of the Republic of Italy, having its registered office in Modena, via Cesare Della Chiesa, no. 150, registered in the ordinary section of the Companies’ Register of Modena under Tax Code, VAT and registration no. 03592550366 (“Energica”), represented herein by its chief executive officer, Livia Cevolini;
AND
(3)CRP Meccanica S.r.l., a limited liability company incorporated under the laws of the Republic of Italy, having its registered office in Modena, via Cesare Della Chiesa, no. 21, registered in the ordinary section of the Companies’ Register of Modena under Tax Code, VAT and registration no. 00782680367 (“CRP Meccanica”), represented herein by its chief executive officer, Franco Cevolini;
AND
(4)Maison ER & Cie S.a., a limited liability company incorporated under the laws of Luxembourg, having its registered office in Luxembourg, 412F Route d’Esch, registered in the ordinary section of the Companies’ Register of Luxembourg under Tax Code, Italian VAT no. 94071610367 (“Maison”), represented herein by its Chairman, Jean-Hugues Doubet;
AND
(5)CRP Technology S.r.l., a limited liability company incorporated under the laws of the Republic of Italy, having its registered office in Modena, via Cesare Della Chiesa, no. 150/C, registered in the ordinary section of the Companies’ Register of Modena under Tax Code, VAT and registration no. 03344960368 (“CRP Technology”), represented herein by its chief executive officer, Franco Cevolini;
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AND
(6)Mr. Andrea Vezzani, Italian citizen, born in Modena, on February 28, 1966, resident in Modena, Via Legnano, no. 106, Tax Code VZZNDR66B28F257N (“Vezzani”)
AND
(7)Mr. Giampiero Testoni, Italian citizen, born in Milano, on July 2, 1978, resident in Milan, Via Monte Bianco, no. 40, Tax Code TSTGPR78H02F205M (“Testoni” and, together with CRP Meccanica, Maison, CRP Technology and Vezzani, the “Founders” and each a “Founder”)
– on the other side –
(Ideanomics, Energica and the Founders, collectively, the “Parties” and each a “Party”)
WHEREAS
(A)Energica is a joint stock company whose details are as indicated in paragraph (2) of the Preamble of this agreement and active within the field of the manufacturing and commercialization (both as wholesaler and as retailer) of super-sporty electrical motor-vehicles and related equipment (the “Relevant Business”).
(B)As of the date hereof, the authorized and resolved upon share capital of Energica is equal to euro 306,409,82, subscribed and paid-up for euro 306,409,82, and is divided into no. 30,640,982 ordinary shares without nominal value (the “Shares”), which are admitted to be traded on the AIM Italia, a multilateral trading facility organized and managed by Borsa Italiana (“AIM Italia”).
(C)As of the date hereof the Founders are the full and exclusive owners of no. 13,404,774 common shares of Energica, representing in the aggregate 43,75% of the relevant share capital. In particular:
(i)CRP Meccanica is the full and exclusive owner of no. 10,232,384 shares of Energica, representing 33.4% of the share capital, provided that CRP Meccanica will demerge its shares in Energica to EMCH S.r.l., a newly incorporated company, within 15 October 2021;
(ii)Maison is the full and exclusive owner of no. 880,000 shares of Energica, representing 2.87% of the share capital;
(iii)CRP Technology is the full and exclusive owner of no. 2,091,940 shares of Energica, representing 6.83% of the share capital;
(iv)Vezzani is the full and exclusive owner of no. 100,000 shares of Energica, representing 0.33% of the share capital;
(v)Testoni is the full and exclusive owner of no. 100,000 shares of Energica, representing 0.33% of the share capital;
(collectively, the “Founders Shares”).
(D)Energica issued n. 1.037.400 warrants “Energica 2016-2021“, admitted to trading on the AIM Italia, due to expire on 15 October 2021 (the “Energica Warrants 2016-2021”) which could be exercised between 1st October, 2021 and 15 October, 2021 at a strike price of euro 9.00 and n. 96.153,00 Warrant Negma Tranche #1 at a strike price of euro 2,60, n. 104.166,00 Warrant Negma Tranche #2 at a strike price of euro 2,40, n. 43.478,00 Warrant Negma Tranche #3 at a strike price of euro 2,30 n. 40.000,00 Warrant Negma Tranche #4 at a strike price of euro of 2,50 n. 43.478, Warrant Negma Tranche #5 at a strike price of euro of 2,30 (“Warrants Negma)”. The Warrants Negma are not traded on a regulated or unregulated market.
(E)On 30 March 2021 the shareholders’ meeting of Energica resolved, inter alia, upon the amendment of the by-laws of Energica, providing for the right of the shareholders in possession of the requirements indicated therein to convert their Shares into multiple voting right shares with a voting ratio 1:3 and the features indicated in
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Energica by-laws (the “Conversion Right” and the “Class A Shares”), provided that the sale of Shares entitled to the conversion by the Founders within the Offer will extinguish the conversion rights in Class A Shares and that for the remaining Founders Shares the Founders will waive their conversion rights after the Delisting.
(F)All of the Founders Shares are convertible into Class A Shares, whereas no other shareholder of Energica is entitled to convert common shares into Class A Shares.
(G)As of today, Energica has in place a management incentive plan structured as follows (“Founders Stock Option Plan”):
Beneficiary No. of Shares Price per Share
Assignment date
Cevolini Franco 50.000
2,00
Sep 2018
Cevolini Livia 50.000
2,00
Sep 2018
Testoni Giampiero 50.000
2,00
Sep 2018
Vezzani Andrea 50.000
2,00
Sep 2018


Cevolini Franco 168.539
1,78
Mar 2021
Cevolini Livia 168.539
1,78
Mar 2021
Testoni Giampiero 168.539
1,78
Mar 2021
Vezzani Andrea 168.539
1,78
Mar 2021
(H)The Bidder is a global company that is driving the sustainability transformation and, following the negotiations occurred with Energica and the Founders, is interested in launching, by acting in concert with the Founders, a voluntary and conditional public tender offer the (“Tender Offer”) over (i) all the Shares traded on AIM Italia and (ii) on no. 2,529,731 of Shares held by CRP Meccanica and no. 2,091,940 shares held by CRP Technology (the “Tender Shares”) (therefore for a whole amount of no. 4,621,671 shares or 15 million euros aggregate purchase price) aimed at obtaining the delisting from AIM Italia (the “Delisting”), with a view to increase and maximize the value of Energica in line with the growth and development goals thereof, including by way of a possible subsequent initial public offering and/or or a business combination with a special purpose acquisition vehicle aimed to the admission to trading, directly or indirectly, of Energica on a Recognised Market (the “IPO”) or, also in light of market condition at that time, other kind of transactions that could reach the above mentioned purposes as shared by the Parties.
(I)On the basis of the foregoing, the Parties intend to regulate the terms and conditions of: (i) the launch of the Tender Offer on the Tender Shares by the Bidder; and (ii) the Delisting, it being understood that the governance of Energica in the event of successful completion of the Tender Offer will be governed by a separate Shareholders Agreement.
Now, therefore, the Parties hereby agree as follows:
TITLE I
– PRELIMINARY PROVISIONS –
1.DEFINITIONS
For the purposes of this agreement, the terms and expressions listed below, when starting with a capital letter, shall have the meaning set out or referred to in this Article 1:
“102 Notice” means the notice to the market by which the Bidder will disclose its intention to launch the Tender Offer having the content set out by the applicable law provisions.
“Affiliate” with respect to a Person, any Person which directly or indirectly controls, or is controlled by, or is under common control with, such Person.
“Annexes”
as defined in Paragraph 3.1 of this agreement.
“Article” any article of this agreement.
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“Authorisation” any act, order, activity and behaviour of whatever Authority having the nature, content or effect of an authorisation, licence or permit in general, howsoever named or described, including, but not limited to, any approval, authorisation, grant, certificate (including energy certificates and fire prevention certificates), licence, permit, resolution, certification, declaration or statement of conformity, enrolment, registration, communication, filing and consent.
“Authority” any Italian, foreign, in the EU or international, private or public, state, regional, provincial, municipal or local body carrying out legislative, judicial or administrative functions (including independent authorities such as Consob, Italian Competition Authority - AGCM and social security institutions), or executive or arbitral functions, as well as any officer, member, apparatus, office or organ of the same.
“Bidder”
as defined in paragraph (1) of the Preamble of this agreement.
“Bidder Representations and Warranties”
as defined in Article 11 of this agreement.
“Borsa Italiana” means Borsa Italiana S.p.A. with registered office at Piazza degli Affari 1, Milan.
“Business Day” any calendar day, excluding (a) Saturdays and Sundays; (b) the days comprised between 1 and 31 August (included) and (c) the other days in which banking institutions are not open to the public in Milan and New York.
“Business Representations and Warranties”
the representations contained in Paragraphs from 1.3 to 1.22 of Annex 7.
“Cash Confirmation Letter”
means the performance guarantee set out by article 37-bis of the Consob Issuers Regulations by which the Confirming Bank irrevocably undertakes, for the Bidder’s interest, to guarantee the payment of the Offer Price for each Shares tendered to the Tender Offer up to a maximum amount equal to the Overall Consideration in case of Bidder’s breach.
“Class A Shares”
as defined in Recital (E) of this agreement.
“Closing” the payment of the Offer Price to Energica shareholders who have tendered the Tender Shares and the other activities to be carried out on the Closing Date.
“Closing Date” the date of payment to Energica shareholders who have tendered the Tender Shares, taking into account any reopening of the Tender Offer, also in the context of possible procedures of sell-out and squeeze-out.
“Comfort Letter” as defined in Paragraph 5.12(d)(iv) of this agreement
“Competing Offer”
as defined in Paragraph 4.2 of this agreement.
“Conditions”
as defined in Paragraph 5.6 of this agreement.
“Consob”
means the Commissione Nazionale per le Società e la Borsa.
“Consob Issuers’ Regulations” means the regulation implementing the TUF adopted by CONSOB by means of resolution no.11971 of 14 May 1999.
“Control”, “Controlling” and “Controlled” as defined in accordance with the meaning set forth in article 2359, paragraph 1, no. 1, of the Italian Civil Code.
“Conversion Right”
as defined in Recital (E) of this agreement.
“CRP Meccanica”
as defined in paragraph (3) of the Preamble of this agreement.
“CRP Technology”
as defined in paragraph (5) of the Preamble of this agreement.
“Deductible”
as defined in Paragraph 9.4 of this agreement.
“De Minimis”
as defined in Paragraph 9.4 of this agreement.
“Delisting”
as defined in Recital (H) of this agreement.
“Directorship Agreement”
means the directorship and consultancy agreement to be drafted consistently with the term-sheets attached hereto as Annex 5.12(f)(ii) to be entered into by and between Energica and Livia Cevolini and Andrea Vezzani.
“Employment Agreement”
means each employment agreement to be drafted consistently with the term-sheets attached hereto as Annex 5.12(f)(iii) to be entered into by and between Energica and Livia Cevolini and between Energica and Gianpiero Testoni.
“Energica”
as defined in paragraph (2) of the Preamble of this agreement.
“Energica Shareholders” means, following completion of the Tender Offer and the Delisting regulated by this agreement, the Bidder and the Founders.
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“Energica Warrants 2016-2021”
as defined in Recital (D) of this agreement.
“Confirming Bank” means an international bank of primary standing to be indicated by the Bidder.
“Founders”
as defined in paragraph (7) of the Preamble of this agreement.
“Founders Representations and Warranties”
means the Representations and Warranties of the Founders of Annex 7.
“Fundamental Representations and Warranties”
the representations contained in Paragraphs 1.1 and 1.2 of Annex 7.
“Indemnifiable Liability”
any Liability that would have not arisen if the Founders Representations and Warranties made under Annex 7 had been true, complete and correct and incurred or arising from any breach of any covenant or agreement made by the Founders in this agreement.
“Indemnity Claim”
as defined in Paragraph 10.1 of this agreement.
“Insured Representations and Warranties”
means the Representations and Warranties from paragraph 1.3 to paragraph 1.22 of Annex 7 of this agreement.
“IPO”
as defined in Recital (F) of this agreement.
“Law” any law, regulation, decree, directive, convention, order, decision, custom or other source of law or Order, be it at a State, regional, provincial, municipal, local, foreign, international or EU level.
“Liabilities”
means damages (danno emergente), whether or not deriving from a Third Parties’ Claim, within the meaning of Article 1223 of the Italian Civil Code, costs (including reasonable legal costs) and expenses.
“Lock-up Period” as defined in Paragraph 5.11 of this agreement.
“Maison”
as defined in paragraph (4) of the Preamble of this agreement.
“Maximum Amount”
as defined in Paragraph 9.4 of this agreement.
“Minimum Acceptance Level Condition”
as defined in Paragraph 5.6 of this agreement.
“Order” any sentence, order, ordinance, decree, decision, judgement, opinion, directive, award, injunction, assessment, payment order or other order from any Authority whatsoever.
“New By-Laws”
means the new by-laws of Energica to be adopted by 5 (five) Business Days from the Delisting pursuant to Paragraph 5.12(d)(ii) and reflecting, to the maximum extent permitted by the applicable Law, the provisions of the Shareholders Agreement.
“Offer Period” means the period of duration of the Tender Offer to be agreed between the Bidder and Consob, as possibly extended.
“Offer Price” means the price of euro 3,20 for share, to be offered by the Bidder in the context of the Tender Offer.
“Overall Consideration” means the total amount to be paid by the Bidder in the event that all the Tender Shares are tendered to the Tender Offer, equal to euro 50,544,016.
“Paragraph” any paragraph of any Article.
“Parties” collectively, the Bidder, Energica and the Founders.
“Payment Date” means each date on which the Offer Price will be paid to Energica shareholders that have tendered their shares to the Tender Offer, including, if applicable, in the context of the squeeze out procedures.
“Person” any natural or legal person, even if not recognised, and Authority.
“Proceeding” means any lawsuit, trial, in-court, out-of-court, administrative or arbitration proceeding pending before any Authority or any inspection, preliminary investigation, inquiry and/or assessment by any Authority whatsoever (including civil, criminal, administrative, tax, social-security and labour-law ones).
“Recognised Stock Exchange”
means a regulated or unregulated market managed by Borsa Italiana, Deutsche Börse, Euronext, the London Stock Exchange, the National Association of Securities Dealers Automated Quotations Exchange, or the New York Stock Exchange.
“Relevant Business”
as defined in Recital (A) of this agreement.
“Resigning Directors”
means all the directors of Energica.
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“Restriction” any real or pre-emption right, assignment obligation, option, co-sale right or obligation, or any other limitation (of a legal, judicial or contractual nature) on the transfer, use, enjoyment, fruition or the exercise of any other right on a property (including, with reference to the Shares, voting and profit-sharing rights as well as all the other administrative and property rights attached thereto).
“Shares”
as defined in Recital (B) of this agreement.
“Shareholders Agreement”
means the shareholders agreement attached to this agreement as Annex 5.12(f)(i).
“Tax” with reference to a Person, any liability, payment obligation or any other tax and administrative obligation of said Person, including any charge, tax, levy (whether direct or indirect), excise tax, duty, burden, withholding tax or contribution (including social security contribution) imposed by any Authority whatsoever (including those due as withholding agent) as well as any interest or penalty in connection thereto.
“Tax Return” all returns, reports, forms, elections, designations, estimates, filings, information statements or other information required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax
“Tender Offer or Offer”
as defined in Recital (H) of this agreement.
“Tender Shares”
as defined in Recital (H) of this agreement.
“Testoni”
as defined in paragraph (7) of the Preamble of this agreement.
“Third Parties’ Claims”
as defined in Paragraph 10.1 of this agreement.
“Transfer”
any transfer by a deed inter vivos, howsoever made, of equity holdings in the share capital of a company, including, but not limited to, by way of gift, performance of a natural obligation, compulsory sale, datio in solutum, exchange and contribution in kind to companies and, more generally, any agreement the result of which is, either directly or indirectly, the transfer of ownership or in rem rights (pledge or usufruct) or the creation of rights (including pledge and usufruct rights) over equity participations in the share capital of a company or over option rights arising from equity holdings in the share capital of a company. The terms “Transfer (to)”, “Transferor”, “Transferable” shall have a meaning in accordance with the term “Transfer”.
“TUF” means the Italian consolidated financial act (D.Lgs. no. 58/1998).
“Vezzani”
as defined in paragraph (6) of the Preamble of this agreement.
“Warrants Negma”
as defined in Recital (D) of this agreement.
“W&I Insurance”
means the warranty and indemnity insurance policy entered into between the W&I Insurer and the Bidder, and at the cost of Energica in relation to the Insured Representations and Warranties.
“W&I Insurer” means Vale the insurer of the W&I Insurance.
2.INTERPRETATION RULES
2.1In this agreement, unless a different intention of the Parties clearly appears from the context:
(a)the definition of any name shall also include all its declensions and the definition of any verb shall also include all its conjugations;
(b)reference to any contract or document shall also be construed as a reference to the recitals and annexes as well as to the amendments, if any, thereof (in particular, any reference to this agreement shall also be construed as a reference to the Recitals and Annexes thereof, which are an integral and essential part thereof and constitute as well a covenant between the Parties);
(c)reference to a Law or a provision thereof shall also be construed as a reference to that Law or provision thereof, as may be subsequently amended or interpreted as well as to any order implementing such Law or provision thereof;
(d)reference to any Person shall include also its successors, transferees or authorised assignees;
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(e)the terms provided for in this agreement must be calculated in accordance with Article 155 of the Italian Code of Civil Procedure, unless they are expressed in Business Days, in which case the relevant definition under Article 1 shall apply;
(f)the terms provided for in this agreement for the performance of any of the Parties must be deemed of the essence in the interest of the other Party, pursuant to and for the purposes of Article 1457 of the Italian Civil Code;
(g)the words “including”, “inclusive”, “included” or equivalent words shall be interpreted just by way of an example, and not by limitation;
(h)whenever a provision in this agreement provides for a Party to “cause” (or equivalent words) a Person to perform (or not to perform) a certain act, such provision shall be interpreted as a promise of the fact of the third party (“promessa del fatto del terzo”) pursuant to and for the purposes of Article 1381 of the Italian Civil Code.
(i)the Founders Representations and Warranties granted by the Founders under Article 7, as well as the correspondent indemnity obligation undertaken pursuant to Article 8, constitute, as a whole, an additional deed of covenant for warranty purposes, aimed at contractually allocating certain risks among the Parties, and that – as such – is not subject to the statute of limitations under Article 1495 of the Italian Civil Code; it is also agreed that the provisions concerning insurance under Articles 1892 and 1893 of the Italian Civil Code shall not apply, either directly or by analogy, to such deed of covenant.
3.ANNEXES
3.1The following documents, duly initialled for identification, are enclosed to this agreement (the “Annexes”):
–Annex 5.12(d)(iv): Comfort Letter;
–Annex 5.12(f)(i): Shareholders Agreement;
–Annex 5.12(f)(ii): term sheet Directorship Agreement;
–Annex 5.12(f)(iii): term sheet Employment Agreement;
–Annex 7: Founders Representations and Warranties;
–Annex 15.1: communication addresses;
TITLE II
–TENDER OFFER AND DELISTING –
4.PURPOSE OF THIS AGREEMENT; GOAL OF THE PARTIES
4.1The Parties expressly acknowledge and declare their interest in the launch of the Tender Offer by the Bidder, it being agreed and understood that the Bidder shall act in concert with the Founders for the purpose thereof, pursuant to article 109 of the TUF. As a consequence, the Parties acknowledge that they intend to (i) reasonably cooperate towards the implementation of the steps in order to launch of the Tender Offer aimed at acquiring all the Tender Shares and (ii) achieve the Delisting. Furthermore, the Parties also acknowledge that the Founders, to the extent permissible and practicable, undertake to take all actions in order to implement all the required steps and the launch of the Tender Offer on the terms and conditions set forth in this agreement.
4.2The Founders undertake not to: (i) purchase (or agree to purchase or cause to purchase or cause to agree to purchase) any Shares (or financial instruments giving the right to purchase or subscribe the same Shares), nor to take any long position with reference to the same Shares in the period between the date of this agreement and the Closing Date, provided that, in case of violation of this undertaking, they shall be under the obligation to
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tender to the Tender Offer the Shares so purchased; and (ii) solicit, directly or indirectly, any competing offer to the Tender Offer pursuant to article 44 of the Consob Issuers’ Regulation (the “Competing Offer”).
4.3The Parties acknowledge and agree that, in case of launch by a third-party, pursuant to article 44 of the Consob Issuers’ Regulation, of a Competing Offer to the Tender Offer, as well as of a raise of the price of such competing offer, the Parties will discuss in good faith for a period of 5 Business Days if, and for what amount, the Bidder will raise the Offer Price of the Tender Offer to top-up the Competing Offer. Failing to reach such agreement, this agreement shall be automatically terminated according to Article 1372 of the Italian Civil Code. It remains understood that, in case a Competing Offer prevails to the Tender Offer upon the last raise required by Consob pursuant to article 44, paragraph 7, of the Consob Issuers’ Regulation, the Parties will still be entitled to terminate this agreement. Energica and the Founders will have no liability whatsoever or other surviving obligation vis-à-vis the Bidder and vice versa, or any of their Affiliates as a result of the above termination or otherwise arising from this agreement and its execution, and the Founders will be entitled to adhere to any Competing Offer or otherwise freely dispose of the Founders Shares at their respective discretion.
5.LAUNCH OF THE TENDER OFFER
102 Notice
5.1The Bidder undertakes, as soon as technically practicable upon execution of this agreement, to publish the 102 Notice in accordance with the terms set forth by the applicable Law. If required by the Bidders, the Founders shall cooperate in good faith to execute the activities needed for the publication of the 102 Notice.
5.2In this respect, as soon as the Tender Offer has been rendered known to the public via the publication of the 102 Notice, Energica shall carry out – and the Founders shall procure that Energica carries out – the activities set forth by article 102, paragraph 2, TUF in connection with the information of Energica employees’ representatives (or, absent the latter, Energica employees).
Filing of the Offering Document
5.3The Bidder undertakes to launch the Tender Offer, filing the Offering Document with Consob, as soon as technically practicable following the publication of the 102 Notice and in any case within 20 days as set out in article 102, paragraph 3, TUF.
5.4Each Party undertakes, to the extent the same is concerned, to cooperate with the Bidder in good faith for the purpose of collecting all the information to be included in the Offering Document pursuant to the applicable Law and for complying with any of Consob and/or Borsa Italiana request to clarify or supplement any information included in the Offering Document or to amend it according to Consob instruction.
5.5The Bidder shall promptly provide in compliance under applicable Law, to Energica and the Founders all drafts of the Offering Document and ancillary documentation (including set of comments and formal responses and requests from Consob), in advance of the relevant filing with Consob or publication, as well as of any other contract, release, or document to be executed and/or issued by the Bidder in the context of the Tender Offer, and shall reasonably take into account any comments that Energica and/or the Founders may have in such regard upon their consistency to applicable law and Consob’s instructions. The Bidder also undertakes to keep the Founders updated in relation to the developments of the Tender Offer process, also during the Offer Period and with respect to the amount of tenders of the investors and the results of the Tender Offer.
Terms and conditions of the Tender Offer
5.6The Parties acknowledge and agree that the Tender Offer shall be launched at – and shall be subject to – the following terms and conditions as set out in the 102 Notice:
(a)it shall be a voluntary offer on all the Shares traded on AIM Italia including and on no. 2,529,731 of Shares held by CRP Meccanica and no. 2,091,940 shares held by CRP Technology; and on all Energica Warrants 2016-2021 (to the extent the same are not expired) at a price: (i) per each Tender Share equal to Offer Price; and (ii) per Energica Warrants 2016-2021 equal to euro 0,10;
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(b)the Offer Price will be paid on the Payment Date by the Bidder for each Tender Share tendered to the Tender Offer;
(c)acceptances of the Tender Offer by shareholders of Energica of a minimum aggregate number of Tender Shares such as to allow the Bidder in concert with the Founders, to hold at the end of the Offer Period at least 90% of the overall Energica voting rights (“Minimum Acceptance Level Condition”);
(d)between the date of this agreement and the Payment Date, the corporate bodies of Energica do not carry out or undertake to carry out (including through conditional agreements and/or partnerships with third parties) any acts or transactions that might cause a significant deterioration, even prospectively, in the capital, company assets, business (inclusive of the Relevant Business), operating results and financial position of the Issuer as represented in the annual report of Energica at 31 December 2020 and/or the activity of Energica (“Material Acts Condition”);
(e)between the date of this agreement and the Payment Date, Energica and the Founders respectively not resolve or cause to resolve and otherwise not execute (or undertake to execute) acts or transactions that might conflict with the pursue of the objectives of the Offer, even if they have been authorized by the ordinary or extraordinary shareholders’ meetings of Energica (“Defensive Measures Condition”);
(f)between the date of this agreement and the Payment Date, (i) no extraordinary circumstances or events have occurred at the domestic and/or international level, involving or that may involve material adverse changes in the political, financial, economic, currency, regulatory (including accounting and supervisory regulations) or market situation having prejudicial effects on the Offer and/or the capital, financial position, operating results or profits of Energica, as represented in the annual reports of Energica, at 31 December 2020; and (ii) no facts or situations have occurred involving Energica unknown to the market at the date of this agreement and having a prejudicial effect on the activity of Energica and/or its capital, financial position, operating results or profits as represented in the annual report of Energica at 31 December 2020 (“MAC Condition”);
provided that the Bidder will be entitled, at its sole discretion, to waive the Minimum Acceptance Level Condition, the Material Acts Condition, the Defensive Measures Condition and the MAC Condition.
5.7The Bidder undertakes to carry out the Tender Offer on the basis of the key terms and conditions set out in the 102 Notice and, more in general, in consultation and agreement (which cannot be unreasonably withheld), on any material term and action, with the Founders.
5.8The Parties acknowledge and agree that the Offer Price, the duration of the Offer Period, the waiver of the Conditions, any public announcement in connection with the Tender Offer, any declaration or resolution concerning the delisting of the Company, and any other material term relating to the Tender Offer, as set out in the 102 Notice, or otherwise subsequently included in the Offering Document and the ancillary documentation, may be amended by the Bidder only with the written consent of the Founders (which will not be unreasonably withheld). It is understood that any possible transactions aimed at the Delisting of Energica following the completion of the Tender Offer or thereafter may be resolved upon and carried out only with the prior agreement of all the Parties, to the extent that it is not provided under this agreement.
Offering Document; Cash Confirmation Letter
5.9The Bidder undertakes to publish the Offering Document as soon as technically possible following the Consob approval pursuant to article 102, paragraph 4, TUF and to complete – or to cause the completion – all the activities/formalities required by the applicable Law, including the issuance by the Confirming Bank of the Cash Confirmation Letter, for starting the Offer Period. If required by the Bidders, the Founders shall cooperate in good faith to execute the activities needed for the publication of the Offering Document.
5.10Following the publication of the Offering Document, the Founders, each to the extent the same is concerned, shall undertake the activities set forth by the applicable law, there including:
(a)procure that, immediately after the publication of the Offering Document, the board of directors of Energica carries out the activities set forth by article 102, paragraph 5, TUF in connection with the
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transmission of the Offering Document to Energica employees’ representatives (or, absent the latter, Energica employees);
(b)drafting and collecting, within 1 (one) day before the starting of the Offer Period, the opinion provided for by article 39-bis of Consob Regulations by Energica’s independent directors’;
(c)procure that, within 1 (one) day before the starting of the Offer Period, Energica board of directors resolves upon the statement regarding the Tender Offer (together with the opinion of the independent directors) and publishes the relevant press release, pursuant to article 103 of the TUF and article 39 of Consob Energicas Regulations
Undertakings of the Parties during the Offer Period
5.11During the Offer Period:
(a)each Party undertakes, during the period between the date of this agreement and the expiry of the 12th month from the execution of the same (the “Lock-up Period”), not to: (i) engage, directly or indirectly, in any sale, transfer, disposal or other transaction which has as its object or effect, directly or indirectly, the assignment or transfer to third parties, for any reason and in any form (including, without limitations, the granting of option rights, the creation of Restrictions) of the Shares (or other financial instruments, which grant the right to purchase, subscribe for, convert into, or exchange for, Shares or other financial instruments that grant rights inherent in or similar to such shares or financial instruments); and (ii) not to approve and/or carry out transactions on derivative instruments, which have the same effects, even if only economic, as the transactions referred to above. For the sake of clarity, it is understood that the provisions of this letter (a) shall not apply: (i) with regard to the Bidder, for the activities carried out to pursue the Tender Offer; and (ii) with regard to the Founders, for the sale of Shares object of the Tender Offer as provided by lett. (d), Article 5.11;
(b)each Party undertakes not to make (or agree to make) directly or indirectly, also by means of its respective Affiliates, any purchase of Shares (or other financial instruments giving the right to purchase or subscribe for them) during the period between the date of this Agreement and the 6 (six) months following the completion of the Tender Offer for a price higher of the Offer Price;
(c)each Party undertakes, in relation to the Tender Offer, to strictly comply with the provisions set out in articles 41 and 42 of the CONSOB Issuers’ Regulations regulating transparency and proper conduct rules (including those related to the disclosure by the Bidder (i) of the number of subscriptions collected, at least weekly, and (ii) the sale and purchase of the financial products subject matter of the Tender Offer, daily);
(d)CRP Meccanica and CRP Technology undertake to tender only and no less than n. 2,529,731 of Shares held by CRP Meccanica and n. 2,091,940 shares held by CRP Technology to the Tender Offer, provided that Maison, Testoni and Vezzani undertake to not tender any of their Founders Shares in the Tender Offer;
(e)the Founders undertake to exercise their right as Energica shareholders so that - in the period between the date of this agreement and the last Payment Date, Energica and its business (including the Relevant Business) are managed in a correct and prudent way, in the ordinary course consistent with past practice, with a view to preserving its value and its goodwill and consistent with its previous operating and commercial general rules within the limits of ordinary management;
(f)in case of non-fulfilment of the Minimum Acceptance Level Condition, the Bidder undertakes to carry out the relevant procedure as set forth activities in connection with the re-opening of the Offer Period, to the extent practicable and reasonable under the applicable Law.
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Activities upon termination of the Offer Period
5.12Subject to the fulfilment (or the waiver) of the Minimum Acceptance Level Condition, the Parties, to the extent each of them is concerned, shall carry out the following activities:
(a)by the first Payment Date:
(i)the Bidder shall communicate the Tender Offer results pursuant to the applicable article 41, paragraph 6, of Consob Issuers Regulations;
(b)on the first and each subsequent Payment Date, if any, the Bidder:
(i)shall pay the Offer Price to the Tender Shares tendered to the Tender Offer;
(ii)shall carry out and complete all the formalities relating to the completion of the Tender Offer, including the communications to the market required by the applicable Law;
(c)within 5 days from the occurrence of the Minimum Acceptance Level Condition, the Bidder undertake to carry out:
(i)the relevant procedure as set forth under article 13 of Energica’s by-laws and 108 and 111 of the TUF, as applicable based on the circumstances, and duly comply with all requirements and obligations set out therein for a sell-out and squeeze-out process and subsequent Delisting;
(ii)other actions or activities that may be necessary and/or useful for the purposes of the Delisting;
(d)by 5 (five) Business Days from the Delisting, the Founders shall:
(i)deliver to the Bidder the resignation letters signed by each Resigning Director;
(ii)cause the shareholders’ meetings of Energica to be validly held, to resolve upon: (i) the acknowledgment of the resignation of the Resigning Directors and the waiver of any actions against the Resigning Directors; (ii) the appointment for a three-year term of the new directors replacing the Resigning Directors as follows 3 (three) directors to be appointed by the Bidder and 2 (two) directors to be appointed by CRP Meccanica and CRP Technology as better detailed in the Shareholders Agreement; (iii) the adoption of the New By-Laws of Energica, provided that the Bidder, as well as the Founders, shall express their voting rights pertaining to the Shares accordingly;
(iii)waive and terminate – via a written notice sent to the Bidder – their right to convert the Founders Shares not tendered in the Tender Offer in Class A Shares as provided in the current by-laws of Energica;
(iv)cause the release to the Bidder by Livia Cevolini, in her quality of Target’s director, of a comfort letter about the truthfulness, completeness, accuracy, and correctness as of the date of execution of this agreement and on the Closing Date of the Founders Representations and Warranties (as below defined) (the “Comfort Letter”)
(e)by 15 (fifteen) Business Days from the Delisting, the Bidder shall:
(i)pay to the Founders an overall amount equal to euro 1,599,997,98 (“SOP Price”), in the proportion provided in Recital (G) so to allow the Founders to subscribe n. 874.156 Shares where the newly issued n. 874.156 Shares will be sold at the Offer Price less the SOP Price already paid by the Founders and delivered to the Bidder within 5 (five) Business Days from the payment of the SOP Price to Energica;
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(f)by 5 (five) Business Days from the Delisting the Parties shall:
(i)enter into the Shareholders Agreement substantially in the form attached under Annex 5.12(f)(i);
(ii)cause and procure Energica to enter into the Directorship Agreement by and between Energica and Livia Cevolini and Andrea Vezzani;
(iii)cause and procure Energica to enter into the Employment Agreement by and between Energica and Gianpiero Testoni.
6.CONDITIONS PRECEDENT
6.1Pursuant to and for the purposes of article 1353 of the Italian Civil Code, the obligation of the Parties to execute this agreement and to perform the other actions required to be taken pursuant this Agreement is subject to the occurrence within October 30, 2021 (“Long Stop Date”) of the following conditions precedent (“Conditions Precedent”):
(a)the execution by the Bidder of a standard W&I Policy, at terms and conditions in line with market practice for transactions similar to the Transaction;
(b)the arrangement and approval by Energica board of directos of 2022-2024 Business Plan and Budget.
6.2The Conditions Precedent are unilateral conditions, provided in the sole and exclusive interest of the Bidder. Therefore, the Bidder shall be entitled to unilaterally waive the aforesaid Conditions Precedent within the Long Stop Date, in which event the Condition Precedent waived shall be considered as not provided.
It is understood that even if only one of the Conditions Precedent is not met or waived within the Long Stop Date, this Agreement shall automatically terminate and shall cease to be in effect between the Parties, which shall be released from all the obligations provided for herein, except for the possible rights or obligations arising out of the breach of provisions of this Agreement and without prejudice to the provisions of Title I and Title V.
Should one or more Conditions Precedent not be satisfied within the Long Stop Date, the Bidder shall be entitled to indicate, at its discretion, as time of occurrence a different date, which shall fall no later than 60 calendar days after the Long Stop Date.
The Parties shall use their best effort to cause the satisfaction of the above Conditions Precedent.
Obligation to provide information
6.3Until the Conditions Precedent are met, the Founders undertake to promptly inform the Bidder in writing of any fact, act or circumstance (either occurred after the date of execution of this agreement, or which became known to the Founders after the date of execution of this agreement, even if occurred before such date) that may make any one of the Founder’s Representations and Warranties incomplete, non-compliant with the truth, incorrect or inaccurate.
TITLE III
– COLLATERAL WARRANTY AGREEMENT –
7.REPRESENTATIONS AND WARRANTIES OF THE FOUNDERS
CRP Meccanica and CRP Technology severally and jointly and the other Founders severally and not jointly among themselves (in express derogation of article 1294 of the Italian Civil Code) each in proportion to the percentage of interest held by each of them in the share capital of Energica on the date of execution of this agreement, represent and warrant to the Bidder that the statements contained in Annex 7 (the “Founders Representations and Warranties”) are true, complete, accurate, and correct as of the date of execution of this agreement and
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shall be true, complete, accurate and correct as of, and as made on the Closing Date on which they shall be intended as repeated by each of them.
In respect of the Founders Representations and Warranties, the Bidder acknowledges that:
(a)the Founders Representations and Warranties are in lieu of any other representations and warranties however provided under applicable law or otherwise and constitute all of the representations and warranties made by the Founders in connection with the transactions contemplated by this agreement, inclusive of Tender Shares and Delisting;
(b)(i) it has such knowledge and experience in financial and business matters that it is capable of evaluating Energica, the Tender Shares, the Relevant Business and the merits and risks of an investment therein; (ii) it has completed its own independent investigation, analysis and evaluation of Energica and the Relevant Business; (iii) it has made all such reviews and inspections of Energica, and the Relevant Business (including the results of operations and condition (financial or otherwise) of the assets) as it has deemed necessary or appropriate; and (iv) in making its decision to enter into this agreement and to consummate the transactions contemplated hereby it has relied on its own independent investigation, analysis and evaluation of Energica and the Relevant Business;
(c)when entering into this agreement it did not rely on any warranty or statement made by, or on behalf of, the Founders or Energica, as the case may be, other than the Founders Representations and Warranties and the Comfort Letter;
(d)except as provided under the Founders Representations and Warranties and the Comfort Letter, no other statement, promise or forecast made by, or on behalf of, the Founders or Energica, as the case may be, may form the basis of any Indemnity Claim by the Bidder in connection with this agreement or any document connected therewith. In particular, the Founders do not make any representation or warranty as to the accuracy of any forecasts, estimates, projections, statements of intent or opinion provided to the Bidders, its Affiliates or to its or their advisors on or before the date of this agreement;
(e)except in case of and as against any individual or entity who has acted fraudulently, the Bidder agrees and undertakes with the Founders and Energica that neither it nor any of its Affiliates has any rights against, and waives and shall not make any claim against, any employee, director, officer, or agent of Energica on whom the Bidder may have relied before agreeing to any term of this agreement or any other document related to the transaction contemplated herein.
8.INDEMNITY OBLIGATIONS OF THE FOUNDERS
8.1Without prejudice to Paragraph 13, CRP Meccanica and CRP Technology severally and jointly and the other Founders severally and not jointly among themselves (in express derogation of article 1294 of the Italian Civil Code) each in proportion to the percentage of interest held by each of them in the share capital of Energica on the date of execution of this agreement, shall keep the Bidder or Energica harmless and indemnified from any and all Indemnifiable Liabilities incurred by any breach of any representation or warranty made by the Founders in Annex 7 as well as any breach of any covenant or agreement made by the Founders in this agreement, by corresponding to the Bidder or Energica, as the case may be, an amount equal to the 100% of any such Indemnifiable Liabilities directly incurred by the Bidder or Energica respectively.
8.2Without prejudice to Paragraph 13 following the Closing Date, the right to indemnification provided for by this Paragraph 8 shall be the only possible remedy available to the Bidder for being indemnified by any Indemnifiable Liabilities (and shall be in lieu of any other right, action, defence, claim or remedy of the Bidder, provided by law or otherwise). For the sake of clarity, Parties acknowledge and agree that (i) this Paragraph 8.2 shall be only applicable with reference to the Indemnifiable Liabilities and (ii) in case of untruthfulness or inaccuracy or incompleteness of any Founders Representations and Warranties, the Bidder shall have the right to rescind or terminate this agreement or to refuse to effect the Closing or to perform its obligations set forth in this agreement, prior to date of the publishing of the 102 Notice, including the right to trigger the remedy set forth under Article 1453 et seq. of the Italian Civil Code.
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9.LIMITATIONS TO THE INDEMNITY OBLIGATIONS OF THE FOUNDERS
The following is agreed in respect of the indemnity obligations of the Founders under Article 8 above.
No duplications
9.1Should the same event or circumstance represent a breach of more Representations and Warranties, said event or circumstance shall be indemnified with no duplications in compliance with the indemnity principle
Matters disclosed
9.2The Founders shall not be liable for any Indemnity Claim for breach of the Representations and Warranties if and to the extent that the fact, matter, event or circumstance giving rise to such Indemnity Claim is disclosed by this agreement. For the sake of clarity and for the purposes of this agreement “disclosed” means “fairly disclosed in such a manner that allows a reasonably diligent purchaser to, on the face of relevant documents, make an informed assessment of the nature and scope of the matter disclosed”.
Duration of the indemnity obligation undertaken by the Founders
9.3It remains agreed and understood that:
(a)the indemnity obligation under Article 8 shall remain incumbent on the Founders until the expiry of the following final terms:
(i)with regard to Indemnifiable Liabilities that would have not occurred if the Fundamental Representations and Warranties had been true and correct, until the 15th Business Day after the expiry of the applicable statute of limitations;
(ii)with reference to Indemnifiable Liabilities that would have not occurred if the Business Representations and Warranties had been true and correct and complete until the expiry of the 18th month from the Closing Date.
(b)the indemnity obligation under Article 8 shall remain valid also after the expiry of the final terms under point (a) of this Paragraph 9.3, provided that the Bidder has made the Indemnity Claim under Paragraph 10.1 below before the expiry of the aforesaid final terms.
Limitations to the amount payable by way of indemnity
9.4The liability of the Founders towards the Bidder pursuant to Article 8 will be subject to the following limitations:
(a)Euro 25,000 with reference to the Indemnifiable Liabilities suffered or incurred by Energica and which Energica would not have suffered or incurred if the Business Representations and Warranies, had been true, correct, exact and accurate (the “Bidder Business Representations Cap”); and
(b)Euro 5,000,000 with reference to the Indemnifiable Liabilities suffered or incurred by the Bidder or Energica and which the Bidder or Energica would not have suffered or incurred if the Fundamental Representations, had been true, correct, complete and accurate (the “Bidder Fundamental Representations Cap”);
(c)provided that:
(i)the Bidder will not be entitled to be kept harmless and indemnified from any Indemnifiable Liabilities that would have not occurred if the Business Representations and Warranies or the Fundamental Representations and Warranties had been true and correct whose value, considered separately, is lower than euro 25,000 (“De Minimis”). In such respect, it is anyway understood that Indemnifiable Liabilities resulting from the same event or from connected events or from evens having the same nature, should be added together and considered jointly as a single Indemnifiable Liability for the purposes of the achievement of the De Minimis;
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(ii)the Bidder shall not be entitled to be kept harmless or indemnified by the Founders pursuant to Article 8, until the whole of the Indemnifiable Liabilities that would have not occurred if the Business Representations and Warranties or Fundamental Representations and Warranties had been true, complete, accurate and correct having a value higher than the De Minimis has reached the aggregate value of euro 500,000 (the “Deductible”). In such respect it is understood that if the Deductible is exceeded the Founders shall be obliged to hold the Bidder harmless and indemnified for the whole amount;
(d)if the Delisting will not occur within the Closing Date, the Representations and Warranties other than the Insured Representations and Warranties and the Fundamental Representations will expire on the date on which the Bidder has announced to the market that the Minimum Acceptance Level Condition has not been fulfilled or the Minimum Acceptance Level Condition, the Material Acts Condition, the Defensive Measures Condition or the MAC Condition have been waived.
Recovery after payment by the Founders
9.5If the Founders have made a payment to the Bidder or Energica in relation to any Indemnity Claim and the Bidder or Energica is entitled to recover (whether by insurance, payment, discount, credit, deduction, relief or otherwise) from a third party a sum which indemnifies or compensates the Bidder (in whole or in part) in respect of the Liability which is the subject of an Indemnity Claim, the Bidder shall: (i) promptly notify the Founders of the fact and provide such information as the Founders may reasonably require; (ii) take all reasonable steps or proceedings as the Founders may require to enforce such right; and (iii) pay to the Founders as soon as practicable after receipt an amount equal to the amount recovered from the third party (net of Tax and less any reasonable costs of recovery).
Bidder’s duty to mitigate; no Indemnity Claims from acts or omissions of the Bidder
9.6The Founders shall not be liable for any Indemnity Claim to the extent that it would not have arisen but for, or has been increased or not reduced as a result of, any voluntary act, omission or transaction carried out: (a) after Closing, by the Bidder (or its directors, employees or agents or successors in title or any of its Affiliates); or (b) before Closing, by any of the Founders or Energica acting in accordance with this agreement or at the direction or written request or with the written approval of the Bidder.
No liability for changes in the legislation or in rates of Tax
9.7The Founders shall not be liable for any Indemnity Claim if and to the extent it is attributable to, or the amount of such Indemnity Claim is increased as a result of, any changes in accounting or Tax policy, basis or practice of the Bidder or Energica introduced or having effect after the date of this agreement. It being further understood that, in the event and to the extent that any amount to be indemnified under this agreement is deductible by the Company or the Bidder, as the case may be, for income tax purposes in any given fiscal year, then, in such event and to such extent, the amount of Indemnity Claim payable by the Founders will be reduced by an amount equal to the tax benefit obtained or obtainable (whether in the current or in any subsequent fiscal year) by the Company or the Bidder by virtue of such deduction
Consequential and indirect losses; contingent liabilities
9.8For the avoidance of doubt, the Bidder shall not be entitled to claim for any punitive, special, indirect or consequential loss or loss of profit or for any loss of goodwill or possible business after Closing, whether actual or prospective.
9.9It further being understood that if any Indemnity Claim is based upon a Liability which is contingent only, the Founders shall not be liable unless and until such contingent liability gives rise to an obligation to make a payment.
Absence of limitations
9.10None of the limits contained in this Article 9, or elsewhere in this agreement, shall apply to the indemnification obligations incumbent on the Founders in case of fraud (frode) or wilful misconduct (dolo).
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10.INDEMNIFICATION PROCEDURE
10.1Should Indemnifiable Liabilities arise, the Parties will observe the following provisions, provided that the provisions of this Paragraph 10.1 will apply only to the extent they do not conflict with the terms of the W&I Policy, whose indemnification procedure will prevail in any case of conflict:
(a)within and not later than 20 Business Days after the Bidder becoming actually aware of any such event, under penalty of forfeiture, the Bidder shall give notice thereof to the Founders according to Article 15 below. Such notice (the “Indemnity Claim”) shall contain an indication of (1) the nature of the claim and the facts grounding the same, (2) to the extent it is already known or available, the amount requested as a result of such facts, (3) the method of computation thereof, and (4) the relevant Representations and Warranties enforced, it being understood that in the event that the same circumstance constitutes a breach of different Representations and Warranties, such circumstance will only be deemed as a breach of the Representation and Warranty that is more relevant to it;
(b)the Founders, under penalty of forfeiture, may object in writing the Bidder’s Indemnity Claim within 25 Business Days from receipt of the same, by sending the Bidder a specific notice pursuant to Article 15, specifying and detailing the reasons of their objection;
(c)in absence of objection within the aforesaid term, the Indemnity Claim will be considered as finally accepted by the Founders. In such case, the Founders shall be obliged to pay the Bidder the amount under the Indemnity Claim by and no later than 20 Business Days from the expiry of the term provided for the transmission of the objection, by means of payment on the bank current account that the Bidder shall indicate;
(d)in case of timely objection within the aforesaid term, the Parties shall attempt to reach an amicable settlement within 45 Business Days following the expiry of the term provided for the transmission of the objection;
(e)should an agreement not be reached, the Indemnity Claim shall be addressed, by the most diligent party, pursuant to Article 23 below;
(f)the Founders shall indemnify the Bidder against the Indemnifiable Liabilities within 45 Business Days from the positive conclusion of the compulsory settlement attempt, or from the enforceable judgement, under Article 23 below;
(g)should an Indemnity Claim refer to Indemnifiable Liabilities originating from Orders, notifications, summons, and more in general from any action or claim brought by third parties or Authority against the Bidder or Energica (“Third Parties’ Claims”):
(i)the Bidder shall be entitled to require the Founders to take part in the defence in the possible litigation phase by appointing a defence lawyer who joins the defence lawyer appointed by the Bidder or Energica, giving notice thereof to the Bidder and Energica within 15 Business Days from receipt of the Indemnity Claim (or the subsequent date on which the Bidder gave notice of the starting of the judicial Proceeding), without prejudice to urgent protection measures. In case of disagreement within the defence panel appointed as above, the judgement of the defence lawyer appointed by the Bidder or Energica shall prevail. It is understood that in any event the Founders shall bear the costs, expenses and fees of the defence lawyer appointed by the same;
(ii)without prejudice to point (i) above, the Bidder shall properly and diligently defend, and shall cause Energica, to properly and diligently defend, any claim, suit, action or proceeding of the kind referred to under point (i) above and shall refrain, and shall cause Energica to refrain, from taking any action which could prejudice the defence of the Founders interest hereunder;
(iii)should Energica be proposed to settle the dispute, the same shall not enter into the settlement without the prior written consent of the Founders, under penalty of forfeiture of the right to indemnification in relation to the Third Parties’ Claim being settled, provided that, in any
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event, the Founders shall have to promptly announce their decision and that the consent to the settlement may not be withheld by the Founders without reasonable grounds;
(iv)without prejudice to the foregoing, should the Founders, but not the Bidder, be willing to enter into the settlement, Energica may refuse the settlement and start or continue the possible judicial or arbitral dispute at its own costs. However, in this case, the amount due, if any, by the Founders as indemnity shall be limited to the amount of the settlement proposal.
11.REPRESENTATIONS AND WARRANTIES OF THE BIDDER
11.1The Bidder represent and warrant to Energica and the Founders that the statements contained in Paragraphs 11.2 to 11.10 (the “Bidder Representations and Warranties”) are true and correct as of the date of execution of this agreement and shall be true and correct as of, and as made on the Closing Date.
11.2Due incorporation. The Bidder is a corporation duly incorporated, validly existing and in good standing under the Laws of Nevada.
11.3Authority; Due Authorization. The Bidder has the requisite power and authority to execute and deliver, and has taken all action necessary for the execution and delivery of, this agreement, and for the consummation of the transactions contemplated herein. Any consent of any third party required for the consummation of the transactions contemplated hereby has been obtained.
11.4Binding Nature. This agreement, when executed and delivered by the Bidder, shall constitute the Bidder's valid and binding obligations, in each case, enforceable in accordance with its terms.
11.5No Conflicts or Defaults. The execution and delivery of this agreement by the Bidder, and the consummation of the transactions contemplated hereby, do not and will not (a) contravene the certificate of incorporation (or other formation document) or by-laws (or other governance document) of the Bidder, or (b) with or without the giving of notice or the passage of time, violate or conflict with, or result in a breach of, or a default or loss of rights under, any material agreement, lease, mortgage, instrument, permit or license to which the Bidder is a party, or to which the Bidder is subject, or any judgment, order, decree, Law, rule or regulation to which the Bidder is subject.
11.6Authorizations. Any authorization and/or approval required by laws applicable to the Bidder in connection with the execution, delivery and performance of this agreement has been obtained.
11.7Corporate Approval. The entering into and the consummation of the transactions contemplated in this agreement have been and will have been duly resolved upon by the competent corporate bodies of the Bidder.
11.8Regulatory Approvals. Before the execution of this agreement, on the basis of the necessary data and information provided by the Founders and Energica to the Bidder, the Bidder has conducted in an autonomous and independent manner, with the support of its own advisors and consultants, an assessment as to whether the completion of the transaction contemplated by this agreement is subject or not to the previous obtainment of any clearance, approval, authorization and/or consent pursuant to any antitrust and golden power Laws.
11.9Brokers and Finders. No agent, broker, investment banker, financial advisor or other person or entity retained by the Bidder is or shall be entitled to any broker's or finder's fee or other commission or similar fee from the Founders or Energica in connection with the transactions contemplated by this agreement.
11.10Availability of Funds. The Bidder has sufficient funds to consummate the transactions contemplated by this agreement.
12.INDEMNITY OBLIGATIONS OF THE BIDDER
The Bidder shall keep Energica and the Founders harmless and indemnified from any and all Liabilities incurred by the same that would have not arisen if the Bidder Representations and Warranties had been true and correct. Limitations to the amount payable by the Bidder by way of indemnity provided by Article 10.4 shall be mutatis
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mutandis applicable provided, however, that in no event shall Bidder’s liabilities under this provision be in excess of euro 4,000,000. The indemnification procedure under Article 10 above shall apply mutatis mutandis.
13.W&I POLICY
13.1The Parties hereby agree that, in the context of the negotiations of this agreement and the relevant balance of their respective rights and obligations, the Business Representations and Warranties are given, and the indemnity obligations under Paragraph 7 are undertaken, by the Founders, exclusively and for the sole purpose of allowing the Bidder to enter into the W&I Policy and that it is under Bidder’s responsibility the issuance of such W&I Policy in order to be indemnified from a primary insurance company (“Insurer”) in connection with the untruthfulness, incompleteness or inaccurateness of the Business Representations and Warranties, without prejudice only to Bidder Business Representations Cap and the Bidder Fundamental Representations Cap.
13.2The W&I Policy, in particular, envisages and shall envisage and the Bidder undertakes that:
(a)the Bidder, as indemnified party and beneficiary of the W&I Policy, once the Bidder Business Representations Cap has been reached, shall submit any claim for the indemnification under the W&I Policy exclusively and directly to the Insurer, in accordance with the provisions of the W&I Policy, with no involvement of the Founders, expressly waiving any right to bring any action or claim against the same. Founders shall owe a duty of cooperation to the Bidders should the Bidders require it in order to be indemnified under the W&I Policy;
(b)it is excluded any right of recourse, substitution, subrogation, recovery, payback, “regresso”, “surrogazione” or similar right, action or claim against the Founders, save if the relevant Business Representation and Warranty has been given by the Founders with fraud (“frode”), wilful misconduct (“dolo”) or gross negligence (“colpa grave”), provided that this shall not cause any duplication of indemnification;
(c)without prejudice for letter b) above, once the Bidder Business Representations Cap has been reached, any and all liabilities arising out of the untruthfulness, incompleteness or inaccurateness of the Business Representations and Warranties (without prejudice to the Fundamental Representations and Warranties) shall cease to be enforceable against the Founders and the Founders shall be released from any and all liability deriving therefrom;
(d)as an exception to the provisions of this Article 13, and without prejudice to the Founders’ indemnity obligations in relation to Indemnifiable Liabilities arising out of the untruthfulness, incompleteness or inaccurateness of the Fundamental Representations, it is agreed and understood that the W&I Policy does not cover the Liabilities arising out of the untruthfulness, incompleteness or inaccurateness of the Fundamental Representations, which shall remain subject to indemnification by the Founders pursuant to this agreement.
TITLE IV
– FINAL PROVISIONS –
14.TERM
14.1This agreement shall be deemed automatically terminated and without effect ex nunc (i.e., prospectively only) on the prior date on which the Bidder has announced to the market that the Minimum Acceptance Level Condition has not been fulfilled.
15.NOTICES
15.1All notices between the Parties to be given under or howsoever relating to this agreement shall be given in writing and transmitted (i) by hand delivery, or (ii) registered letter with return receipt, or (iii) certified electronic mail, or (iv) telefax or electronic mail confirmed by registered letter with return receipt, to the addresses listed in Annex 15.1 (or to any other address that may be subsequently notified by the Parties in accordance with this Article 21.
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The notices given pursuant to Paragraph 15.1 shall be deemed duly served:
(a)if delivered by hand or sent by registered letter or certified email, on the date of delivery, as shown in the relevant receipt;
(b)if sent in advance via facsimile or non-certified email, when received in a readable format by the recipient but subject to confirmation of the receipt of the register letter, it being understood that any notice received on a day other than a Business Day or after 6 pm of a Business Day shall be deemed served on the following Business Day.
16.ENTIRE AGREEMENT
16.1The understandings contained in this agreement represent the full and complete expression of the Parties’ intention in connection with the transaction regulated hereunder and, as such, supersede and novate any other previous agreement of whatever form and kind, between them, with the exception of articles 5, 7 and 8 of the agreement entered into by and between Energica and the Bidder on 4 March 2021.
17.COSTS
17.1Each Party shall bear any and all expenses and costs incurred or to be incurred in relation to the negotiation and execution of this agreement, including, without limitation, any costs payable for legal and professional assistance as well any further costs that may be required to implement the understandings contained herein up to the Closing Date, provided all expenses and costs strictly related to the execution of the Offer and the Delisting (including without limitation the obligation of payment of the Offer Price as well as the obligation of payment of any documented costs and/or expenses required for the completion of the Offer process), will be borne exclusively by the Bidder; provided, however, that Bidder shall not be obligated to pay more than $600,000 in expenses related to execution of the agreement and excluded any payment to broker or financial advisor and that the Bidder shall keep the Founders fully indemnified and harmless from and against any damages, costs, expenses and/or sanction related to the Offer.
17.2Any registration tax due in connection with the registration of this agreement (if any) shall be borne by the Party who shall have caused such registration.
18.CONFIDENTIALITY
18.1The Parties undertake to keep strictly private and confidential any information concerning their commitments relating to this agreement, the transaction regulated hereunder and any other agreement or deed implementing and or relating to this agreement. The disclosure of any information to third parties shall be allowed only insofar as it is necessary to perform this agreement, or fulfil any obligation of the Law or any Order or any request by Consob.
19.AMENDMENTS
19.1Pursuant to and for the purposes of Article 1352 of the Italian Civil Code, any amendment or addition to this agreement shall be valid and effective only if contained in a specific amendment deed entered into in writing by the Parties.
20.ASSIGNMENT
20.1Unless otherwise agreed under specific provisions of this agreement, no Party shall be entitled to wholly or partly assign this agreement or any of the rights or obligations arising therefrom without the other Party’s prior written consent, except for the demerger of CRP Meccanica Shares to EMCH S.r.l. provided that EMCH S.r.l. on the effective date of the demerger will be entitled to all the rights and assume all the obligations provided in this agreement.
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21.TOLERANCE
21.1Any tolerance by a Party of any conduct of the other Party that may amount to a breach of the provisions of this agreement shall not be regarded as a waiver of the rights arising from the provisions breached or of the right to claim for due performance of all terms and conditions of this agreement.
22.APPLICABLE LAW
22.1This agreement shall be governed and construed according to the laws of the Republic of Italy.
23.EXCLUSIVE JURISDICTION
23.1Without prejudice to the above, any legal proceedings howsoever connected with this agreement shall be subject to the exclusive jurisdiction of the Courts of Milan.
* * *   * * *   * * *
For acceptance.
Yours sincerely,
Energica Motor Company S.p.A.
CRP Meccanica S.r.l.
Livia Cevolini
Chief Executive Officer
Franco Cevolini
Chief Executive Officer
Maison ER & Cie S.a.
CRP Technology S.r.l.
Jean-Hugues Doubet
Chairman
Franco Cevolini
Chief Executive Officer
Andrea Vezzani
Giampiero Testoni
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Energica Motor Company S.p.A.
via Cesare della Chiesa, no. 150
Modena – Italy
CRP Meccanica S.r.l.
via Cesare Della Chiesa, no. 21
Modena - Italy
[Note: if SHA will be signed after the effectiveness of the De-Merger, indicate Emch S.r.l. instead of CRP Meccanica]
Maison ER S.a r.l.
412F Route d’Esch
Luxembourg,
CRP Technology S.r.l.
via Cesare Della Chiesa, no. 150
Modena - Italy
Mr. Andrea Vezzani
Via Legnano, no. 106
Modena - Italy
and
Mr. Giampiero Testoni
Via Monte Bianco, no. 36
Milan - Italy
by email
RE: ENERGICA MOTOR COMPANY S.P.A. – Shareholders AGREEMENT
Dear Sirs,
Further to our understandings, we submit for your approval, to be given in a letter wholly incorporating the content hereof, the following proposal for a
SHAREHOLDERS AGREEMENT
BETWEEN
(1)Ideanomics, Inc., a company incorporated under the laws of Nevada having its registered office in New York, 1441 Broadway, Suite 5116, IRS Employer Identification no. 20-1778374I (“Ideanomics”), represented herein by its Chief Executive Officer Alf Poor;
– of the one side –
AND
(2)CRP Meccanica S.r.l. [or Emch S.r.l.], a limited liability company incorporated under the laws of the Republic of Italy, having its registered office in Modena, via Cesare Della Chiesa, no. 21, registered in the ordinary section of the Companies’ Register of Modena under Tax Code, VAT and registration no. 00782680367 (“CRP Meccanica”), represented herein by its chief executive officer, Franco Cevolini;
AND
(3)Maison ER S.a r.l., a limited liability company incorporated under the laws of Luxembourg, having its registered office in Luxembourg, 412F Route d’Esch, registered in the ordinary section of the Companies’ Register of
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Luxembourg under Tax Code, Italian VAT no. 94071610367 (“Maison”), represented herein by its Chairman, Jean-Hugues Doubet;
AND
(4)CRP Technology S.r.l., a limited liability company incorporated under the laws of the Republic of Italy, having its registered office in Modena, via Cesare Della Chiesa, no. 150/C, registered in the ordinary section of the Companies’ Register of Modena under Tax Code, VAT and registration no. 03344960368 (“CRP Technology”), represented herein by its chief executive officer, Franco Cevolini;
AND
(5)Mr. Andrea Vezzani, Italian citizen, born in Modena, on February 28, 1966, resident in Modena, Via Legnano, no.106, Tax Code VZZNDR66B28F257N (“Vezzani”)
AND
(6)Mr. Giampiero Testoni, Italian citizen, born in Milan, on July 2, 1978, resident in Milan, Via Monte Bianco, no. 36, Tax Code TSTGPR78H02F205M (“Testoni” and, together with CRP Meccanica, Maison, CRP Technology and Vezzani, the “Founders” and each a “Founder”)
– on the other side –
AND
(7)Energica Motor Company S.p.A., a joint stock company incorporated under the laws of the Republic of Italy, having its registered office in Modena, via Cesare della Chiesa, no. 150, registered in the ordinary section of the Companies’ Register of Modena under Tax Code, VAT and registration no. 03592550366 (“Energica” or the “Company”), represented herein by its chief executive officer, Livia Cevolini;
(Ideanomics, Energica and the Founders, collectively, the “Parties” and each a “Party”)
WHEREAS
(A)Energica is a joint stock company whose details are as indicated in paragraph 7 of the Preamble of this Agreement and active within the field of the manufacturing and commercialization (both as wholesaler and as retailer) of super-sporty electrical motor-vehicles and related equipment (the “Relevant Business”).
(B)On [•] 2021, Ideanomics, on one side, and the Founders, on the other side, entered into a framework agreement (the “Framework Agreement”) aimed to regulate, inter alia, the terms and conditions of: (i) a voluntary and conditional public tender offer, to be launched by Ideanomics by acting in concert with the Founders, over all the shares of Energica (formerly) traded on AIM Italia and approximatively 1/3 of the Founders Shares (the “Tender Shares” the “Tender Offer”), and (ii) the terms and conditions of the consequent delisting of Energica from AIM Italia (the “Delisting”). [On [•], Energica board of directors approved the First Annual Business Plan that is acknowledged by Ideanomics.] [TBC if First Annual Business Plan approved before the signature of the SHA]
(C)As of the date hereof - following the performance of the Framework Agreement and carrying out of the activities set forth therein and occurrence of the Delisting - the authorized and resolved upon share capital of Energica - equal to euro 306,409,82, subscribed and paid-up for euro 306,409,82, and is divided into no. 30,640,982 ordinary shares without nominal value (the “Shares”) - is held as follows:
(i)Ideanomics is the full and exclusive owner of no. [•] shares of Energica, representing [71.25]% of the share capital;
(ii)[CRP Meccanica][EMCH S.r.l.] is the full and exclusive owner of no. 10,232,384 shares of Energica, representing 18.4% of the share capital;
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(iii)Maison is the full and exclusive owner of no. 880,000 shares of Energica, representing [2.87]% of the share capital;
(iv)CRP Technology is the full and exclusive owner of no. 2,091,940 shares of Energica, representing [6.83]% of the share capital;
(v)Vezzani is the full and exclusive owner of no. 100,000 shares of Energica, representing [0.33]% of the share capital;
(vi)Testoni is the full and exclusive owner of no. 100,000 shares of Energica, representing [0.33]% of the share capital.
(D)In light of the above, consistently with the provisions of the Framework Agreement and their reciprocal understandings, the Parties intend to enter into this shareholders agreement (the “Shareholders’ Agreement” or the “Agreement”) to regulate the governance of Energica, upon the terms and conditions set out herein.
Now, therefore, the Parties hereby agree as follows:
TITLE I
– PRELIMINARY PROVISIONS –
1.DEFINITIONS
1.1For the purposes of this Shareholders’ Agreement, the terms and expressions starting with a capital letter shall have the same meaning set forth under the Framework Agreement, with the exception of those listed below that shall have the following meaning:
“Additional Financing” as defined in Article 6 of this Agreement.
“Agreement” or “Shareholders’ Agreement” as defined in Recital (D) of this Agreement.
“Annexes” as defined in Paragraph 3.1 of this Agreement
“Annual Business Plan” the business plan and budget of Energica that has been approved by the Board of Directors in accordance with this Agreement. [Note: annex to be finalized between signing and closing in order to be attached to the version of this agreement which will be executed pursuant to the FA]
“Article” any article of this Agreement.
“Board of Directors” as defined in Paragraph 7.1 of this Agreement
“Board of Statutory Auditors” as defined in Paragraph 10.1 of this Agreement
“Budget” the budget 2022 approved by the board of directors of Energica on [•] 2021 and acknowledged by Ideanomics that is attached hereto as Annex 1.1(b). [Note: annex to be finalized between signing and closing in order to be attached to the version of this agreement which will be executed pursuant to the FA]
“Business Day” any calendar day, excluding (a) Saturdays and Sundays; (b) the days comprised between 1 and 31 August (included) and (c) the other days in which banking institutions are not open to the public in Milan and New York.
“Business Plan Deadlock” as defined in Paragraph 9.8.
“Call Option” as defined in Paragraph 12.5 of this Agreement.
“Committee” as defined in Paragraph 12.2 of this Agreement.
“Consob”
means the Commissione Nazionale per le Società e la Borsa.
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“Control”, “Controlling” and “Controlled” as defined in accordance with the meaning set forth in article 2359, paragraph 1, no. 1, of the Italian Civil Code.
“CRP Meccanica Designees” as defined in Paragraph 7.1 of this Agreement.
“CRP Meccanica” as defined in paragraph (2) of the Preamble of this Agreement.
“CRP Technology” as defined in paragraph (4) of the Preamble of this Agreement.
“Deadlock” as defined in Paragraph 12.1 of this Agreement.
“Deadlock Agreement” as defined in Paragraph 12.3 of this Agreement.
“Deadlock Occurrence Notice” as defined in Paragraph 12.1 of this Agreement.
“Debt Financing” as defined in Paragraph 9.3.
“Delisting” as defined in Recital (B) of this Agreement.
“Energica” as defined in Paragraph (7) of the Preamble of this Agreement.
“Energica Shareholders” Means Ideanomics and the Founders.
“Expert” (a) [name of preferred auditing firm to be agreed]; or (b) if [name of preferred auditing firm to be agreed] [Note: to be agreed upon / inserted in the version of this agreement that will be executed on closing pursuant to the FA] does not accept the engagement, such other auditing firm as Ideanomics and the Founders may agree to in writing; or (c) if the Parties fail to reach an agreement as to the auditing firm to be appointed as Expert within 5 Business Days, any other leading firm of independent certified public accountants designated by the President of the Tribunal of Milan at the request of the most diligent Party.
“First Annual Business Plan” as defined in paragraph 9.2.
“Founders” as defined in paragraph (6) of the Preamble of this Agreement.
“Framework Agreement” as defined in Recital (B) of this Agreement.
“Ideanomics Designees” as defined in Paragraph 7.1 of this Agreement.
“IPO” an initial public offering and/or or a business combination with a special purpose acquisition vehicle aimed to the admission to trading, directly or indirectly, of Energica on a regulated or unregulated market either in the United States of America, the United Kingdom or the European Union.
“Law” any law, regulation, decree, directive, convention, order, decision, custom or other source of law or Order, be it at a State, regional, provincial, municipal, local, foreign, international or EU level.
“Liquidity Event” as defined in Paragraph 17.1 of this agreement
“Lock-up Period” as defined in Paragraph 13.1 of this Agreement
“Maison” as defined in Paragraph (3) of the Preamble of this Agreement.
“Management Team” shall mean the chief executive officer and chief financial officer of Energica.
“Objection Notice” as defined in Paragraph 12.5 of this Agreement.
“Order” any sentence, order, ordinance, decree, decision, judgement, opinion, directive, award, injunction, assessment, payment order or other order from any Authority whatsoever.
“Offered Shares” as defined in Paragraph 14.1 of this Agreement.
“Option Closing” as defined in Paragraph 12.5 of this Agreement.
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“Option Closing Date” as defined in Paragraph 12.5 of this Agreement.
“Option Notice” as defined in Paragraph 12.5 of this Agreement.
“Option Party” as defined in Paragraph 12.5 of this Agreement.
“Option Price” as defined in Paragraph 12.5 of this Agreement
“Optioned Shares” as defined in Paragraph 12.5 of this Agreement.
“Options” as defined in Paragraph 12.5 of this Agreement.
“Paragraph” any Paragraph of any Article or Preamble.
“Parties” collectively, Ideanomics, Energica and the Founders.
“Person” any natural or legal person, even if not recognised, and Authority.
“Permitted Transferee” as defined in Paragraph 13.3 of this Agreement.
“Permitted Transfers” as defined in Paragraph 13.3 of this Agreement.
“Pre-emption Exercise Notice” as defined in Paragraph 14.4 of this Agreement.
“Pre-emption Period” as defined in Paragraph 14.4 of this Agreement.
“Pre-emption Offer” as defined in Paragraph 14.3 of this Agreement.
“Pre-emption Party” as defined in Paragraph 14.1 of this Agreement.
“Pre-emption Right” as defined in Paragraph 14.1 of this Agreement.
“Put Option” as defined in Paragraph 12.5 of this Agreement.
“Qualifying IPO” as defined in Paragraph 17.1 of this Agreement.
“Receiving Party” as defined in Paragraph 12.5 of this Agreement.
“Recognised Stock Exchange” means a regulated or unregulated market managed by Borsa Italiana, Deutsche Börse, Euronext, the London Stock Exchange, the National Association of Securities Dealers Automated Quotations Exchange, or the New York Stock Exchange.
“Relevant Business” as defined in Recital (A) of this Agreement.
“Restriction” any real or pre-emption right, assignment obligation, option, co-sale right or obligation, or any other limitation (of a legal, judicial or contractual nature) on the transfer, use, enjoyment, fruition or the exercise of any other right on a property (including, with reference to the Shares, voting and profit-sharing rights as well as all the other administrative and property rights attached thereto).
“Sale Execution Period” as defined in Paragraph 14.6 of this Agreement.
“Second Deadlock Notice” as defined in Paragraph 12.4 of this Agreement.
“Shareholders Meeting Reserved matters” as defined in Paragraph 11.2 of this Agreement.
“Shares” as defined in Recital (C) of this Agreement.
“Shares on Sale” as defined in Paragraph 15.1 of this Agreement
“Signing Date” means the date of execution of this Agreement.
“Tag-Along Shareholders” as defined in Paragraph 15.1 of this Agreement
“Tag-Along Notice” as defined in Paragraph 15.2 of this Agreemen
“Tag-Along Right” as defined in Paragraph 15.1 of this Agreement
“Tagged Shares” as defined in Paragraph 15.3 of this Agreement
“Tagged Shareholders” as defined in Paragraph 15.1 of this Agreement
“Tender Offer” as defined in Recital (B) of this Agreement.
“Tender Shares” as defined in Recital (B) of this Agreement.
“Territory” means worldwide with the exception of the following countries or territory: Argentina, Belize, Cambodia, Easter Island, Iceland, Laos, Papua Nuova Guinea, Polynesia, Venezuela, Guatemala, Kazakhstan, Vietnam.
“Testoni” as defined in Paragraph (6) of the Preamble of this Agreement.
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“Third-Party Purchaser” means a bona fide third party that is not a Party or a related party or Affiliate of a Party.
“Three-Year Capital Plan” means the initial three financial year capital plan of Energica attached hereto as Annex 1.1(c) that includes (i) initial three-year projections of Energica’s estimated revenues, capital expenditures, operating expenses, marketing and promotional costs, projected balance sheet, P&L and statement of cash flow; (ii) the amounts of the minimum funding level over such three-year period. [Note: annex to be finalized between signing and closing in order to be attached to the version of this agreement which will be executed pursuant to the FA]
“Transfer”
any transfer by a deed inter vivos, howsoever made, of equity holdings in the share capital of a company, including, but not limited to, by way of gift, performance of a natural obligation, compulsory sale, datio in solutum, exchange and contribution in kind to companies and, more generally, any agreement the result of which is, either directly or indirectly, the transfer of ownership or in rem rights (pledge or usufruct) or the creation of rights (including pledge and usufruct rights) over equity participations in the share capital of a company or over option rights arising from equity holdings in the share capital of a company. The terms “Transfer (to)”, “Transferor”, “Transferable” shall have a meaning in accordance with the term “Transfer”.
“Transfer Notice” as defined in Paragraph 14.1 of this Agreement.
"US GAAP” as defined in Paragraph 9.9 of this Agreement.
“Vezzani” as defined in Paragraph (5) of the Preamble of this Agreement.
2.INTERPRETATION RULES
2.1In this Agreement, unless a different intention of the Parties clearly appears from the context:
(a)the definition of any name shall also include all its declensions and the definition of any verb shall also include all its conjugations;
(b)reference to any contract or document shall also be construed as a reference to the recitals and annexes as well as to the amendments, if any, thereof (in particular, any reference to this Agreement shall also be construed as a reference to the Recitals and Annexes thereof, which are an integral and essential part thereof and constitute as well a covenant between the Parties);
(c)reference to a Law or a provision thereof shall also be construed as a reference to that Law or provision thereof, as may be subsequently amended or interpreted as well as to any order implementing such Law or provision thereof;
(d)reference to any Person shall include also its successors, transferees or authorised assignees;
(e)the terms provided for in this Agreement must be calculated in accordance with Article 155 of the Italian Code of Civil Procedure, unless they are expressed in Business Days, in which case the relevant definition under Article 1 shall apply;
(f)the terms provided for in this Agreement for the performance of any of the Parties must be deemed of the essence in the interest of the other Party, pursuant to and for the purposes of Article 1457 of the Italian Civil Code;
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(g)the words “including”, “inclusive”, “included” or equivalent words shall be interpreted just by way of an example, and not by limitation;
(h)whenever a provision in this Agreement provides for a Party to “cause” (or equivalent words) a Person to perform (or not to perform) a certain act, such provision shall be interpreted as a promise of the fact of the third party (“promessa del fatto del terzo”) pursuant to and for the purposes of Article 1381 of the Italian Civil Code.
3.ANNEXES
3.1The following documents, duly initialled for identification, are enclosed to this Agreement (the “Annexes”):
–Annex 1.1(a) – Annual Business Plan
–Annex 1.1(b) – First Annual Business Plan
–Annex 1.1(c) – Three-Year Capital Plan
–Annex 9.1 – Powers of CRP Meccanica Designee [Note: Annex to be discussed and agreed upon before closing]
–Annex 20.1 – Communication Addresses
TITLE II
– SHAREHOLDERS’ AGREEMENT Purpose –
4.SHAREHOLDINGS COMMITTED TO THE SHAREHOLDERS’ AGREEMENT
Ideanomics, on one side, and the Founders, on the other side, shall commit to this Agreement all the Shares of Energica to which they are entitled at the Signing Date, agreeing that they shall keep them, and any increases or decreases thereto for any reason whatsoever during the term of this Agreement, bound to this Agreement and shall manage such Shares of Energica and all the shareholders’ rights pertaining thereto, in accordance and consistently with the provisions of the present Agreement.
5.PARTIES’ OBLIGATIONS
General undertaking
5.1The Parties – by exercising their respective voting rights in the shareholders’ meeting of the Company and by causing their designated board of directors’ members to exercise their corporate rights and powers – shall cause Energica and its corporate governance to be managed in accordance with the provisions under this Agreement and, as to any aspect not governed by this Agreement, by the provisions of the Company’s By-Laws.
Relationships between this Agreements and Company’s By-Laws
5.2The Parties acknowledge and agree that, with respect to the relationships among them regulated by this Agreement, in case of conflict between the provisions of this Agreement and those of Company’s By-Laws, the former shall prevail over the latter.
5.3The Parties therefore undertake to (i) act in good faith in accordance with the aforementioned principle, even by not exercising or waiving the exercise of the rights to which they are entitled under the Company’s By-Laws, to the extent necessary; (ii) give any consents, waivers and declarations and perform any other acts that may be required under the Company’s By-Laws to allow the exercise in good faith of the rights arising out from this Agreement; (iii) in case of conflict between the provisions of this Agreement and the provisions of the Company’s By-Laws, to act in good faith in accordance with the provisions of this Agreement, and (iv) to uniform, within the maximum extent allowed by the applicable Laws, the provisions of the Company’s By-Laws to this Agreement, in order avoid conflicts between them and this Agreement.
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Acknowledgment of CRP Meccanica position
5.4The Parties hereby acknowledge and recognize that a demerger process is currently ongoing in respect of CRP Meccanica and that, following such demerger and as a result thereof, the interest currently held in Energica by CRP Meccanica shall be held by a newly incorporated company ECMH S.r.l. (the “Demerger Beneficiary”).
In this respect, it is hereby acknowledged and agreed that, following the demerger, all the rights and obligations of CRP Meccanica pursuant to this Agreement shall be assigned to the Demerger Beneficiary, which will be bound by the provisions of this Agreement as if it was an original party thereto (it being understood that, since the effectiveness of the demerger, CRP Meccanica shall have no liability in respect of, or arising out from, this Agreement and being this latter automatically released therefrom by mutual agreement of all the other Parties, which is granted now for the time being and to the extent necessary).
6.ADDITIONAL FINANCING
Within 15 Business Days from the Delisting, Ideanomics will subscribe convertible notes issued by Energica for an amount up to euro 8 million, for a duration of 60 months, at an annual interest rate of 8.00% consistently with the financial needs of Energica as provided by the First Annual Business Plan 2022, each Annual Business Plan and the Three Year Capital Plan ("Additional Financing"). Energica will have the right to call tranches of up to euro 1,000,000 with a 30 day notice, or of a different size and timing as agreed upon the parties time by time. Energica will reimburse the interest starting from the expiry of the first year from subscription of the convertible notes on a monthly basis. At the maturity date, principal and outstanding interests of the convertible notes shall be reimbursed in cash by Energica or converted into Energica Share, at Ideanomics discretion, at a conversion price of euro 3.2 per Share.
TITLE III
– COMPANy’s CORPORATE GOVERNANCE –
7.BOARD OF DIRECTORS
7.1For the entire duration of this Agreement, the Parties hereby agree from time to time to take all actions within their respective power, including, without limitation, by voting their Shares of Energica and causing their respective Affiliates to vote their Shares of Energica, required to cause the board of directors of Energica (the “Board of Directors”) to consist of 5 (five) individuals designated in writing by the Parties as follows:
(a)Ideanomics shall have the right to designate 3 (three) members of the Board of Directors including the Vice-Chairman (“Ideanomics Designees”);
(b)CRP Meccanica shall have the right to designate 2 (two) members of the Board of Directors, including the Chairman of the Board of Directors and the chief executive officer (“CRP Meccanica Designees”).
7.2The members of the Board of Directors, appointed in accordance with the previous Paragraph 7.1, will be in charge for a period of 3 (three) financial years and might be re-appointed for the same period.
7.3The initial members of the Board of Directors will be Alf Poor, Tony Sklar and Robin Mackie (designated and appointed by Ideanomics) and Livia Cevolini and Andrea Vezzani (designated and appointed by CRP Meccanica).
Removal and cease of Ideanomics Designee
7.4At all times each of Ideanomics and CRP Meccanica shall have the right to require the removal, without cause, of the Ideanomics Designees and the CRP Meccanica Designees, respectively, and no other Person shall have any rights to remove the, or to require the removal of, Ideanomics Designees or the CRP Meccanica Designees, respectively. If Ideanomics or the Founders, as the case may be, shall, in accordance with the rights specified herein, require the removal of the Ideanomics Designees or the CRP Meccanica Designees, respectively, then the other Parties hereby agree to join with the other in recommending such removal as described above, and in causing Energica either to promptly call and hold a meeting of shareholders and to vote, or cause to be voted, in
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person or by proxy, all of the corporate capital of Energica held by the Parties entitled to vote at such meeting, effecting such removal.
7.5If a vacancy is created on the Board of Directors by reason of the death, disability, removal or resignation of an Ideanomics Designee or a CRP Meccanica Designee, each of the Parties hereby agrees (on behalf of himself and his Affiliates), in its capacity as a shareholder of Energica, to elect a director to fill such vacancy in accordance with the selection procedures set forth in Paragraph 7.1. Upon the designation of a successor director, each of the Energica Shareholders hereby agrees to:
(a)cause Energica to promptly hold a meeting of shareholders;
(b)vote (or cause to be voted) all of the Shares owned (or controlled) by such a Party (and entitled to vote at such meeting):
(i)in favour of the person (or persons) selected in accordance with Paragraph 7.1 to fill such vacancy and, if necessary,
(ii)in favour of removing any director elected to fill such vacancy other than in accordance with the selection procedures of Paragraph 7.1.
8.MEETINGS OF THE BOARD OF DIRECTORS
8.1The Board of Directors shall take all decisions by simple majority, save as specified in this Agreement and/or in the Company’s By-Laws.
9.POWERS OF THE BOARD OF DIRECTORS AND BUSINESS PLAN
9.1Save as specified in this Agreement and/or in Company’s By-Laws, the Board of Directors shall be granted with all the powers to manage Energica and the Parties undertake to cause their designated Board of Directors’ members to exercise their rights to grant the CRP Meccanica Designees with the powers set forth under Annex 9.1.
9.2Within November 15 of each year, or the next succeeding Business Day if such date is not a Business Day, the Management Team shall prepare and present to the Board of Directors for its approval a proposed Annual Business Plan for the subsequent financial year. The Annual Business Plan for the financial year ending on December 31, 2022 (“First Annual Business Plan”) is attached hereto as Annex 9.2. Each proposed Annual Business Plan shall address, among other things, each of the line items set forth in the First Annual Business Plan.
9.3In connection with the preparation of each proposed Annual Business Plan, the Management Team shall take such actions to estimate whether and to what extent third-party debt financing (“Debt Financing”) would then be available to Energica, with the aim that such Debt Financing would be at least sufficient to meet the projected debt funding for such financial year as set forth in the Three-Year Capital Plan. The proposed Annual Business Plan shall specifically include an estimate, by fiscal quarter, of sources and uses of funds for Energica for such subsequent financial year.
9.4After due consideration of such proposed Annual Business Plan, the Board shall vote on whether to approve (with such adjustments as the Board of Directors shall determine but within the limit of 20% of any line item of the Annual Business Plan) such proposed Annual Business Plan.
9.5If the Board of Directors approves such proposed Annual Business Plan, such proposed Annual Business Plan shall immediately become effective as the Annual Business Plan for the subsequent financial year.
9.6If the Board of Directors has not approved such proposed Annual Business Plan or the adjustment requested by the Board of Directors are above the threshold provided in Paragraph 9.4 on or prior to December 15, then each Party may a file a deadlock occurrence notice (“Deadlock Occurrence Notice”).
9.7During the period following receipt of such notice through December 31 of that financial year, the Management Team and the Board of Directors shall seek in good faith and shall use their commercially reasonable efforts to
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hold at least three (3) additional Board of Directors meetings with the goal of approving the proposed Annual Business Plan (with such changes as the Management Team and the Board of Directors shall determine). If (i) the Board approves such proposed Annual Business Plan (with such changes as the Management Team and the Board of Directors shall determine), such proposed Annual Business Plan shall immediately become effective as the Annual Business Plan for such subsequent financial year.
9.8If the Board of Directors has not approved such proposed Annual Business Plan on or prior to December 31 of the financial year in which the proposed Annual Business Plan was submitted to the Board of Directors, a “Business Plan Deadlock” shall be deemed to have occurred and the Parties shall follow the deadlock resolution procedures set forth in Paragraph 12, provided that after a Deadlock Occurrence Notice has been notified Energica shall operate on the basis of Annual Business Plan for the prior financial year.
9.9In the event that the Ideanomics auditor determines during the scope of such audit that Ideanomics ownership in Energica cannot be consolidated pursuant to the generally accepted accounting principles as in effect from time to time in the United States of America ("US GAAP”) due to Paragraph 9 of this Agreement, the Parties agree to consider that Paragraph 9 is modified or even deleted, so that Ideanomics can consolidate the investment in Energica and the Parties further agree to negotiate in good faith to amend the Agreement to accommodate the goals of the Parties, including the interest of the Founders to be protect as minority shareholders at Board of Directors’ level to the maximum possible extent with protective rights and/or non-substantive participating rights as permitted under US GAAP, and also comply with US GAAP.
10.BOARD OF STATUTORY AUDITORS
10.1The Parties hereby agree, from time to time, to take all actions within their respective power, including, without limitation, by voting their Shares of Energica and causing their respective Affiliates to vote their Shares of Energica, required to cause the Board of Statutory Auditors of the Company (the “Board of Statutory Auditors”) to be appointed as follows:
(a)Ideanomics shall have the right to appoint 2 (two) effective members and 1 (one) alternate member of the Board of Statutory Auditors;
(b)CRP Meccanica shall have the right to appoint 1 (one) effective member (including the Chairman) and 1 (one) alternate member of the Board of Statutory Auditors.
11.SHAREHOLDERS’ MEETING
11.1Save as for the provisions of the following Paragraph 11.2, the ordinary and extraordinary shareholders meeting of the Company shall be validly constituted and resolve with the majorities as required by the applicable Law.
11.2The resolutions of the shareholders meetings of the Company (either taken at ordinary or extraordinary seats) upon any of the following matters (the “Shareholders Meeting Reserved Matters”) shall be validly adopted with the favourable vote of the Founders Shares representing not less than 90% of the share capital of the Company:
(i)increases or decreases of Energica share capital (with the exception of those mandatory required by Italian Law to cover losses of capital);
(ii)mergers, demergers and change of the corporate form;
(iii)any change in the by-laws (including change in the corporate form), unless required by applicable Laws;
(iv)winding-up, liquidation of Energica and appointment/removal of liquidators and assignment of related authorizations and proposing any insolvency proceeding of any type;
(v)any resolution in respect of an IPO, to the extent falling within the competence of the shareholders’ meeting;
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12.DEADLOCK
12.1For the purposes hereof, a “Deadlock” shall occur whenever (i) no. 3 (three) consecutive shareholders’ meetings have been held on a Shareholder Meeting Reserved Matter held without reaching the quorum required under Paragraph 11.2 above to adopt the related decision; and (ii) either Party serves a written notice to the other Party stating that a Deadlock has occurred (the “Deadlock Occurrence Notice”).
12.2If a Deadlock occurs, the Parties shall appoint a committee composed of two representatives of adequate standing in order to discuss and identify a mutually satisfactory solution to the Deadlock (the “Committee”). In particular, the Committee shall be composed as follows: (i) Ideanomics shall be entitled to appoint no. 1 (one) member of the Committee; and (ii) the Founders shall be entitled to appoint, jointly, no. 1 (one) member of the Committee. It being understood that the Party serving the Deadlock Occurrence Notice shall appoint its representative in the context thereof and the other Party shall appoint its representative within 15 Business Days from receipt of such Deadlock Occurrence Notice.
12.3If the Committee reaches, within 25 Business Days from its appointment, a mutually satisfactory solution, suitable under any aspects for all the Parties (the “Deadlock Agreement”), a new shareholders meeting of Energica shall be called and held within the 15 Business Days following the date on which the aforementioned Deadlock Agreement has been reached, which shall resolve (inter alia) upon the matter on which the Deadlock occurred consistently with the Deadlock Agreement.
12.4In the event that:
(a)the Committee, for any reason, (i) is not appointed within the above-mentioned term; or (ii) does not reach a Deadlock Agreement within 25 Business Days from its appointment; or
(b)the shareholders’ meeting convened pursuant to Paragraph 12.3 above does not comply with the Deadlock Agreement,
either Party may serve a written notice to the other Party acknowledging that the Deadlock has not been resolved (the "Second Deadlock Notice"). The Second Deadlock Notice shall be sent within 10 Business Days after, respectively, (x) the failure to appoint the Committee within the above-mentioned term; (y) the expiration of the 25 Business Days given to the Committee to reach a Deadlock Agreement; or (z) the date of the shareholders meeting convened to resolve upon the Deadlock pursuant to Paragraph 12.3 above.
12.5Following the sending of the Second Deadlock Notice, the following shall apply:
(a)the Parties shall be granted with the following option rights:
(i)the Founders shall be granted, pursuant to article 1331 of the Italian civil code with the right to sell to Ideanomics all (and not less than all) the Shares held by the Founders in Energica (it being understood that Ideanomics hereby irrevocably grants, now for the time being, the Founders with the aforementioned right) (the “Put Option”); and
(ii)Ideanomics shall be granted, pursuant to article 1331 of the Italian civil code, with the right to purchase from the Founders all (and not less than all) the Shares held by the same in Energica (it being understood that the Founders hereby irrevocably grant, now for the time being, Ideanomics with the aforementioned right) (the “Call Option” and, together with the Put Option, the “Options”);
(the Shares subject to the Options, the “Optioned Shares”)
(b)in the event of exercise of any of the Options, the consideration per share for the sale of the Optioned Shares shall be equal to the higher between (a) euro 3.20 per share; and (b) the fair market value of Energica to be determined in accordance with article 2437-ter of the Italian civil code (the “Option Price”).
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(c)each Party shall be entitled to exercise the respective Option within 15 Business Days from the Second Deadlock Notice by sending to the other Party a notice in compliance with Article 20 below (the “Option Notice”), which shall include the calculation of the Option Price (the Party having sent an Option Notice, the “Option Party” and the Party having received an Option Notice, the “Receiving Party”).
(d)Within fifteen 15 Business Days following the receipt of the Option Notice, the Receiving Party shall be entitled to challenge the Option Price set out in the Option Notice by sending to the Option Party a notice in compliance with Article 20 below (the “Objection Notice”), and the Parties shall have twenty five 25 Business Days to meet and discuss in good faith the Option Price.
(e)Should the Parties fail to resolve the outstanding issues on the Option Price within 25 Business Days period mentioned in paragraph (d) above, the remaining issues in dispute shall be submitted to the Expert for resolution;
(f)If issues are submitted to the Expert for resolution, the Parties shall jointly appoint and engage such Expert upon the following terms and conditions:
(i)the Expert shall act as an arbitrator (arbitratore) pursuant to sections 1349, paragraph 1, and 1473, paragraph 1, of the Italian civil code, and shall make a decision in the interest of both Ideanomics and the Founders in a diligent and fair manner and in good faith (con equo apprezzamento e non con mero arbitrio);
(ii)the assessment of the Expert shall be limited to the issues remaining in dispute;
(iii)the Parties shall furnish or cause to be furnished to the Expert such work papers and other documents and information relating to the disputed issues as the Expert may request and are available to that Party and shall be afforded the opportunity to present to the Expert any material relating to the disputed issues and to discuss the issues with the Expert;
(iv)the determination by the Expert, as set forth in a notice to be delivered to both Ideanomics and the Founders within 30 calendar days of the submission to the Expert of the issues remaining in dispute, will be final, binding and conclusive on the Parties; and
(v)the Expert’s costs shall be equally shared between the Parties, unless the Expert’s decision confirms the position of any of the Parties in connection with the disputed matters, in which case the Expert’s costs shall be fully borne by the other Party.
(g)all the obligations instrumental in bringing into effect and making enforceable against Energica and third parties the sale and purchase of the Optioned Shares – in all cases free from any Restriction – (the “Option Closing”) shall take place at the offices of the notary or in the place that the Parties shall in advance agree in writing, on the date agreed between the Parties and in any event at the latest within 45 Business Days following the final determination of the Option Price (the “Option Closing Date”).
On the Option Closing Date, the Parties shall perform the following acts and fulfil the following requirements:
(i)the Founders shall deliver to Ideanomics the certificates (titoli) with clean title and free of any Restriction carrying the Optioned Shares, duly endorsed for transfer to Ideanomics with signatures authenticated by the Notary, pursuant to section 2355, paragraph 3, of the Italian civil code or, as the case may be, enter into any instrument in order to Transfer the Optioned Shares in favour of Ideanomics;
(ii)Ideanomics shall:
(x)pay to the Founders the Option Price in either cash or common stocks in the discretion of Ideanomics, provided that Ideanomics will be entitled to pay by way of common stocks a maximum portion equal to 50% of the Option Price;
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(iii)the Parties shall:
(x)cause the transfer of the Optioned Shares to be duly recorded in the share ledger (libro dei soci) of Energica;
(y)take any other actions, perform any other obligations, and execute or exchange any other instruments necessary or opportune to transfer to Ideanomics good and valid title to the Optioned Shares, as the case may be, and to consummate the transaction regulated herein.
The Optioned Shares will be transferred to Ideanomics with economic benefit (godimento) as of the relevant Option Closing Date and free of any Restriction.
Among the Parties, all actions to be taken, all contracts to be entered into and all instruments to be executed or exchanged at the Option Closing in accordance with this letter (g), will be deemed as one, single and simultaneous transaction. Accordingly, no such action will be deemed to have been taken, no such contract will be deemed to have been entered into and no such instrument will be deemed to have been executed or exchanged unless and until all other actions will have been taken, all other contracts will have been entered into, all other obligations will have been performed, and all other instruments will have been executed or exchanged as set forth in this letter (g).
12.6To the extent this is necessary, the Parties hereby mutually acknowledge and recognize that, notwithstanding the fact that no specific and autonomous consideration is set forth in respect of the Options, the same find their cause and reason in the overall terms and conditions included in this Agreement and the Framework Agreement and, therefore, shall be deemed as granted for consideration (concesse a titolo oneroso).
12.7It is agreed and understood that, for the purposes of this Article 12, the Founders shall be considered, and act, as a single Party.
TITLE IV
–Transfer of shares –
13.TRANSFER OF ENERGICA SHARES
General restrictions
13.1The Energica Shareholders shall not Transfer, directly or indirectly, any Shares held by each of them in the share capital of Energica until the expiry of the 12th month from the execution of this Agreement (“Lock-up Period”)
13.2The Energica Shareholders shall cause the directors of Energica not to register any transfer of Shares of Energica which has not been carried out in strict compliance with the terms set forth under this Article 13 and the relevant transferee shall have neither the voting right nor the right to receive any dividend or any distribution of profits pertaining to such transferred Shares.
Permitted Transfers
13.3As an exception to the non-transfer obligations and restrictions under this Article 13, Energica Shareholders may at any time Transfer, in whole or in part, their respective Shares in Energica to:
(a)any transferee upon succession or liquidation of assets between spouses or the inheritances or other transfer to a spouse (“Permitted Transferees”);
(b)any of their Affiliates or an Affiliate of any Permitted Transferee, or
(c)as a result of any transfer under Article 12 above
(the “Permitted Transfers”)
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provided that (i) the Energica Shareholder intending to carry out any transfer in accordance with this Paragraph 13.3 shall notify in writing the other Energica Shareholders in advance providing full information and the reasons of the intention to Transfer its Shares in Energica; and (ii) the relevant transferee agrees in writing to be bound by the terms and conditions of this Agreement.
14.PRE-EMPTION RIGHT
14.1Exception made for the Permitted Transfers under Paragraph 13.3, if – once the Lock-up Period has expired – any of the Energica Shareholders (the “Pre-emption Party”) intends to Transfer to third parties, in whole or in part, the Shares held by the same in the share capital of Energica (the “Offered Shares”), it shall send a written notice (the “Transfer Notice”) to such effect to the other Energica Shareholders, and shall allow the latter to exercise a pre-emption right (the “Pre-emption Right”) as set forth below.
14.2The Transfer Notice shall include the terms and conditions of the Transfer, including at least, inter alia, the following: (i) the indication of the Offered Shares; (ii) the price and the payment conditions at which the contemplated Transfer of the Offered Shares is intended to be made; (iii) the identity of the proposed purchaser of the Offered Shares; (iv) possible conditions to which the Transfer is subject, the indemnification obligations undertaken by the Pre-emption Party and the possible securities for the payment of the purchase price; (v) a copy of the offer transmitted by the prospective purchaser, which shall be a binding and irrevocable offer (pursuant and to the effects of article 1329 of the Italian Civil Code).
14.3Delivery of the Transfer Notice shall constitute an irrevocable and unconditional offer by the Pre-emption Party to sell the Offered Shares to the other Energica Shareholders, which shall have the right to acquire all or a part of the Offered Shares pursuant to the terms and conditions as set forth in the Transfer Notice (the “Pre-emption Offer”).
14.4If any of the Energica Shareholders intends to exercise its Pre-emption Right in respect of the Offered Shares and accept the Pre-emption Offer, it shall send to the Pre-emption Party a notice (the “Pre-emption Exercise Notice”) within 30 Business Days following its receipt of the Transfer Notice (the “Pre-emption Period”). It is agreed and understood that, should more of the Energica Shareholders exercise its Pre-emption Right, the same shall be deemed as being exercised by each of the same proportionally to the interest held by it in the share capital of Energica.
14.5If any of the Energica Shareholders exercises its Pre-emption Right: (i) the Pre-emption Party shall be obligated to sell the Offered Shares to such Energica Shareholders, which shall have the obligation to purchase the Offered Shares; and (ii) the sale and purchase of the Offered Shares, free and clear of any Restriction and in accordance with the other terms and conditions of the Transfer Notice, and the payment of the related purchase price to the Pre-emption Party, shall occur within 30 Business Days following the expiration of the Pre-emption Period.
14.6If no Energica Shareholder has delivered a Pre-emption Exercise Notice in accordance with the terms of Paragraph 14.4 during the Pre-emption Period, the Pre-emption Party may sell all (and not less than all) the Offered Shares to the third-party transferee, at the price and in accordance with the other terms and conditions of the Transfer Notice, provided that:
(a)the purchase and sale agreement providing for the sale of the Offered Shares to the third-party transferee is entered into no later than 90 days following the expiration of the Pre-emption Period (the “Sale Execution Period”); and
(b)the price and other terms and conditions of the Offered Shares are not modified (it being acknowledged that any modification of the price or of the other terms and conditions of the Transfer Notice shall require delivery of a new Transfer Notice by the Pre-emption Party).
14.7Absent the execution of the purchase and sale agreement providing for the Transfer of the Offered Shares prior to the expiration of the Sale Execution Period, the procedure set forth herein shall have to be complied with and a new Transfer Notice must be delivered by the Pre-emption Party prior to any subsequent Transfer of Shares.
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15.TAG-ALONG RIGHT
15.1Once the Lock-up Period has expired, subject to the application of the Pre-emption Right under Paragraph 14.1 and followings above, should an Energica Shareholders (the “Tagged Shareholders”), receive, and intend to accept, an offer to sell to a Third-Party Purchaser their interest in Energica, in whole or in part (the “Shares on Sale”), the other Energica Shareholders (the “Tag-Along Shareholders”) shall be entitled to sell the Shares held by the same in the share capital of Energica (the “Tag-Along Right”) at the same price and conditions offered to the Tagged Shareholders in accordance with the provisions below.
15.2To exercise the Tag-Along Right, the Tag-Along Shareholders shall deliver to the Tagged Shareholders, within 10 Business Days following receipt of a Transfer Notice, a written notice (a “Tag-Along Notice”) informing the same that they have elected to exercise the Tag-Along.
15.3Each Tag-Along Shareholder will be entitled to exercise the Tag-Along Right as follows:
(a)if the Transfer of the Shares on Sale does not result in a change in the Control over Energica, a number of Shares held in the share capital of Energica calculated on the basis of the following formula:
N1 = N2 x (T1/T2)
where: (i) N1 means the Shares owned by the Tag-Along Shareholder in the share capital of Energica to be Transferred; (ii) N2 means the overall Shares owned by the Tag-Along Shareholder in the share capital of Energica at the date of the delivery of the Transfer Notice; (iii) T1 means the Shares on Sale referred to in the Transfer Notice; and (iv) T2 means the overall Shares owned by the Tagged Shareholders in the share capital of Energica at the date of the delivery of the Transfer Notice.
(b)if the Transfer of the Shares on Sale results in a change in the Control over Energica, all of the Shares held in the share capital of Energica.
(the Shares that each Tag-Along Shareholder will be entitled to sell in accordance with (a) or (b) above, as the case may be, the “Tagged Shares”)
16.COMPLETION OF TRANSFER AFTER EXERCISE OF THE TAG-ALONG RIGHT
16.1A Tag-Along Shareholder shall transfer its Tagged Shares to the Third-Party Purchaser simultaneously with the transfer of that of the Tagged Shareholders. On the date of such transfer, the Tag-Along Shareholders shall:
(a)complete, execute and deliver to the third-party purchaser any documents necessary to implement the effective transfer of their Tagged Shares;
(b)receive the purchase price for their Tagged Shares as determined in accordance with the foregoing provisions.
16.2In the event that the Transfer of the shares the Tagged Shareholders (together with the Tagged Shares) has not been completed within 120 days from the delivery of a Transfer Notice, the procedure set forth in this Article 16 shall have to be complied with and a new Transfer Notice must be delivered prior to any subsequent Transfer of Shares.
17.IPO EXIT
17.1For the duration of this agreement, Ideanomics and the Founders shall collaborate to maximize the value of Energica through an IPO on a Recognised Stock Exchange to be identified and determined in agreement by the Parties (“Qualifying IPO”), or any other liquidity event, such as a trade sale of Energica Shares (jointly with the Qualifying IPO, a “Liquidity Event”) and shall use commercially reasonable efforts to periodically update the other Parties regarding the opportunity of a Liquidity Event and, if any, the material preparatory activities for any planned Liquidity Event, including the tentative timing thereof (as may be advised by an IPO global coordinator or other advisers appointed by Energica). The Parties will cooperate to realize the conditions to pursue a Liquidity Event within 60 months from the Signing Date.
– 15 –

TITLE V
– FINAL PROVISIONS –
18.EXCLUSIVITY UNDERTAKING
18.1For the entire duration of this Agreement and for the 2 years from the termination thereof, Ideanomics hereby shall not, directly or indirectly, - and undertakes to cause its Affiliates as well as any Person Controlled by the same or, directly or indirectly, referable to them not to:
(a)carry out in any part of the Territory, in any way, activities included in, or coinciding, or anyway in competition with the Relevant Business other than through Energica;
(b)encourage, incite or instigate, even indirectly, any employees or independent contractor of Energica to resign or otherwise withdraw from the relationship binding them to Energica
(c)hire any employee of Energica or set up any relationship with any independent contractor of the same, even in the event that the proposal to set up an employment or cooperation relationship comes spontaneously from such employees or independent contractors
18.2To the extent necessary, the Parties acknowledge and agree – and Ideanomics expressly accepts – that the consideration for the obligations under Paragraph 18.1 find its cause and reason in the overall terms and conditions included in this Agreement and the Framework Agreement and, therefore, such obligation shall be deemed as undertaken for consideration (a titolo oneroso).
18.3Each of the covenants set out in this Article 18 is expressly considered fair and reasonable by the Parties. However, if any of the covenants set out in this Article 18 is held to be invalid or ineffective but would be valid and effective if part of the wording of such covenants is deleted or if the duration is shortened or if the area of application is reduced, the restrictions shall apply with such modification as may be necessary to make it valid and effective.
19.TERM
19.1This Agreement shall remain valid and in force for the earlier of 5 (five) years from the Signing Date or a Liquidity Event.
19.2
19.3The Shareholders Agreement shall be deemed automatically terminated and without effect ex nunc (i.e., prospectively only) with respect to either Party in the event that such a Party ceases of being a shareholder of Energica in compliance with the provisions of this Agreement.
20.NOTICES
20.1All notices between the Parties to be given under or howsoever relating to this Agreement shall be given in writing and transmitted (i) by hand delivery, or (ii) registered letter with return receipt, or (iii) certified electronic mail, or (iv) telefax or electronic mail confirmed by registered letter with return receipt, to the addresses listed in Annex 20.1 (or to any other address that may be subsequently notified by the Parties in accordance with this Article 20.
The notices given pursuant to Paragraph 20.1 shall be deemed duly served:
(a)if delivered by hand or sent by registered letter or certified email, on the date of delivery, as shown in the relevant receipt;
(b)if sent in advance via facsimile or non-certified email, when received in a readable format by the recipient but subject to confirmation of the receipt of the register letter, it being understood that any
– 16 –

notice received on a day other than a Business Day or after 6 pm of a Business Day shall be deemed served on the following Business Day.
21.ENTIRE AGREEMENT
21.1The understandings contained in this Agreement represent the full and complete expression of the Parties’ intention in connection with the transaction regulated hereunder and, as such, supersede and novate any other previous agreement of whatever form and kind, between them.
22.COSTS
22.1Each Party shall bear any and all expenses and costs incurred or to be incurred in relation to the negotiation and execution of this Agreement, including, without limitation, any costs payable for legal and professional assistance.
22.2Any registration tax due in connection with the registration of this Agreement (if any) shall be borne by the Party who shall have caused such registration.
23.CONFIDENTIALITY
23.1The Parties undertake to keep strictly private and confidential any information concerning their commitments relating to this Agreement, the transaction regulated hereunder and any other agreement or deed implementing and or relating to this Agreement. The disclosure of any information to third parties shall be allowed only insofar as it is necessary to perform this Agreement, or fulfil any obligation of the Law or any Order or any request by Consob.
24.AMENDMENTS
24.1Pursuant to and for the purposes of Article 1352 of the Italian Civil Code, any amendment or addition to this Agreement shall be valid and effective only if contained in a specific amendment deed entered into in writing by the Parties.
25.ASSIGNMENT
25.1Unless otherwise agreed under specific provisions of this Agreement, no Party shall be entitled to wholly or partly assign this Agreement or any of the rights or obligations arising therefrom without the other Party’s prior written consent.
26.TOLERANCE
26.1Any tolerance by a Party of any conduct of the other Party that may amount to a breach of the provisions of this Agreement shall not be regarded as a waiver of the rights arising from the provisions breached or of the right to claim for due performance of all terms and conditions of this Agreement.
27.APPLICABLE LAW
27.1This Agreement shall be governed and construed according to the laws of the Republic of Italy.
28.EXCLUSIVE JURISDICTION
28.1Without prejudice to the above, any legal proceedings howsoever connected with this Agreement shall be subject to the exclusive jurisdiction of the Courts of Milan.
* * * * * * * * *
We are looking forward to being notified of your acceptance.
Yours sincerely,
– 17 –

August 29, 2021
VIA EMAIL
Robin Mackie
Offer of Employment
Dear Mr. Mackie:
This Employment Agreement (“Employment Agreement” or “Agreement”) is made and entered effective as of the __ day of August 2021 (the “Effective Date”) by and between Ideanomics, Inc. (Nasdaq: IDEX) (the “Company”) and you as President of Ideanomics Mobility. The Board of Directors of the Company (the “Board”) has approved the Company entering into this Agreement. If you accept the offer contained in this Agreement, it will supersede and replace any prior consulting agreement or employment letter between you and the Company and will be subject to the terms and conditions set forth below.
1.Job Duties
As President of Ideanomics Mobility, you will report to the Chief Executive Officer of the Company and to the Board of Directors of the Company. You shall have the duties, responsibilities, and authority for such a position in an organization of the size and nature of the Company, subject to the Company’s Board of Directors or its designee (collectively, the “Board”). All the companies and entities within Ideanomics Mobility report directly to the Executive, as well as any joint ventures or investments the Company makes it this segment of the business. Specific duties and responsibilities include:
•Developing a compelling vision for Ideanomics Mobility as a whole;
•Developing and committing to a comprehensive multi-year plan for growth and operating performance, with the first year of such plan the budget for the business;
• Promoting and developing a management culture involving all individuals within Ideanomics Mobility that is open, collaborative and inclusive; creating a structure and process for its implementation to include recruitment, talent development & retention in the areas of project management ,engineering and operations.
•Approving the strategy and direction of all the companies and entities within Ideanomics Mobility worldwide, however, supporting the leaders of individual businesses within Ideanomics Mobility in the development and execution of their business strategies and the achievement of their operating objectives;
•Leading cross-functional efforts to achieve synergies among the various Ideanomics Mobility businesses in procurement, engineering, energy management and information services that will lead to a backbone of superior, adaptable, efficient, reliable interrelated and cost-effective products and services;
•Building trusted relationships with key EV industry, customer, suppler and other participants on a national and international level
•Determining missing elements and entities required for success of the Ideanomics Mobility vision and the multi-year development plan and identify entities operating in those areas outside the Company,
•Recommending acquisition or investment relationships with those outside entities, participating in the negotiation and technical evaluation of them and collaborating with stakeholders throughout the organization to affect their acquisition or investment.
2.Location
Until such time as your visa to work in the United States of America (“USA”) is approved the principal place of your employment will be in the United Kingdom; however, you will be required to travel to other locations worldwide in connection with the performance of your job duties. You will be expected to relocate to the USA within 12 weeks of your visa to work in the USA being approved.
3.Other Benefits
Relocation Assistance. Upon your relocation to the USA you will be entitled for a period of up to 6 months to an allowance of $7,000 per month for rental accommodation. You be entitled to 2 business class roundtrip flights for you and your spouse to visit the USA in preparation for your relocation. You will be entitled to reimbursement for reasonable expenses related to moving your furniture and other personal effects.


United Kingdom Health Insurance. During the period of your employment in the United Kingdom, the Company will pay 80% of Health Insurance premiums for you and your spouse. Upon relocation to the USA you will be eligible to participate in the health insurance plans that are available to all Company employees.
Flights to the United Kingdom. During the period of your relocation you will be entitled 6 round-trip business class fares per year for your spouse to return the United Kingdom for personal reasons.
4.Compensation
Base Salary. The Company shall pay you an initial Base Salary of Four Hundred Fifty Thousand Dollars annually ($450,000), less all required withholdings and deductions, payable in accordance with the Company’s regular payroll policies (the “Base Salary”). The Base Salary shall be subject to review and adjustment from time to time depending upon your job performance and that of Ideanomics Mobility. Your Base Salary shall not be decreased without your consent and you shall receive a yearly cost of living increase of 5%.
Performance Incentive. In addition to the Base Salary, you shall also be eligible to receive a performance-related cash bonus of up to Three Hundred Thousand Dollars ($300,000) based on performance objectives for the remainder of calendar year 2021, mutually agreed by the Board or an appropriate committee of the Company and yourself within the next 45 days. The performance objectives and the corresponding cash incentive will be an amendment to this agreement and the performance objectives relevant for your bonuses shall be discussed with you and agreed upon between the Board and you. In addition, you shall also be eligible to receive a cash bonus of up to 100% of your Base Salary after each succeeding fiscal year through amendments to this Agreement. Such amendments will be set no later than 60 days prior to the end of the calendar year. The Company anticipates that any 2021-based performance bonuses, if issued, shall be paid within ninety (90) days from the end of the bonus year, and in no event later than April 15 of the year following the bonus year. All performance bonuses paid pursuant to this paragraph shall be less all required withholdings and deductions.
Equity Compensation. Subject to your continued functioning as President of Automotive/GM of IDEX Mobility, you will receive an additional grant of common stock options in our IDEX Nasdaq listed equity of 1,500,000 shares as the following objectives are reached:
a)The award of 50% of the stock options will be triggered by IDEX Nasdaq listed equity reaching $5.00 per share and remaining above that level for a period of 90 days.
b)The award of 15% of the stock options will be triggered when IDEX consolidated annual audited revenues meet or exceed $250 million.
c)The award of a further 15% of the stock options will be triggered when IDEX consolidated annual audited revenues exceed $400 million
d)The remaining 20% would be awarded when IDEX records it first profitable year results.
The price of the stock options listed for items b), c) and d) will be the price of the shares of IDEX common stock at the close of the days on which those results are announced. All options in this section of Equity Compensation will be fully vested when awarded.
5.Term of Employment
This offer of employment is for one year beginning from the date of this Agreement (the “Term”), subject to the termination rights below. The Company promises to employ you during the Term, subject to its rights to terminate this Agreement at an earlier date as set forth herein. You, in turn, promise to devote your full business time and efforts to the performance of your job duties during the Term, subject to your rights to terminate this Agreement at an earlier date as set forth herein. The Term and the terms of this Agreement shall automatically continue unless you and the Company agree otherwise in a written document (excluding e-mail) signed by both parties. The Term shall be extended for a further year upon your relocation to the United States.
6.Termination of this Agreement
The Company and the Executive understand and agree that the Executive is employed at-will, and either the Executive or the Company can terminate their employment relationship at any time, for any reason or no reason, with or without cause, and with or without notice. In the event that the Company terminates this Agreement without “Cause” or you terminate this Agreement for “Good Reason”, it shall pay to you (i) your then-Base Salary through the remainder of the Term, or renewal Term, as the case may be. Whether and to the extent you are granted any deferred compensation or


unvested equity that would vest during the initial Term but-for your termination without “Cause,” all such awards shall immediately accelerate and vest and be payable to you upon your termination without “Cause.” Any Base Salary payments owed to you because of a termination of employment without “Cause” shall be paid to you in accordance with the Company’s regular payroll practices. In the event that you terminate this Agreement before the end of the Term or the Company terminates this Agreement with “Cause,” the only monetary compensation to which you shall be entitled from the Company shall be the Base Salary for your work performed through the date of termination of this Agreement. All payments described above will be made, if, and only if, the Executive executes a valid and comprehensive release of any and all claims that the Executive may have against the Company in a form provided by the Company and Executive executes such form within fourteen (14) days of tender.
For purposes of this Agreement, the Company shall have “Cause” to terminate this Agreement if, in the Company’s reasonable discretion: (a) you willfully fail to comply with a reasonable directive of the DocuSign Envelope ID: B96FBD95-B0A6-4577-9DAD-3E17D93E40F9 BOD and fail to cure such willful non-compliance within thirty (30) days of the Company’s notice of your willful non-compliance, provided such willful non-compliance is curable; (b) you are convicted of, or plead guilty or nolo contendre to, a felony or any crime involving fraud or dishonesty or which has an adverse effect upon the Company’s reputation or business; (c) you engage in any act of fraud, dishonesty, or embezzlement; or (d) the Company determines in its reasonable discretion that you violated a securities law or related regulation; or (e) you materially breach this Agreement and fail to cure such material breach within thirty (30) days of the Company’s notice of such breach, provided such breach is curable.
Good Reason. For purposes of this Agreement, "Good Reason” shall mean the occurrence of any of the following, without the Executive’s prior written consent: (i) a material diminution of Executive's duties or responsibilities, (ii) a material reduction in Executive's Compensation or Benefits, (iii) any requirement that the Executive report to anyone other than the Board, or (v) any material breach of this Agreement. However, none of the foregoing events or conditions will constitute Good Reason unless: (x) the Executive provides the Company with written objection to the event or condition within 30 days following the occurrence thereof, (y) the Company does not reverse or cure the event or condition within 30 days of receiving that written objection, and (z) the Executive resigns his employment within 30 days following the expiration of that cure period.
In the event you terminate this Agreement before the end of the Term, you promise to give the Company at least sixty (60) days’ notice of your decision. In exchange, the Company shall continue to pay you your Base Salary during the sixty (60) day notice period. However, you understand and agree that the Company shall have the right to unilaterally reduce or waive any portion of the sixty (60) day notice period and accelerate your final date of employment following notice of your decision to terminate this Agreement. You further acknowledge and agree that your failure to comply with the sixty (60) day notice period shall constitute a material breach of this Agreement in light of your substantial responsibilities for the Company.
7.Confidential Information
Except as authorized or directed by the Company in connection with the performance of your duties and obligations, or as provided below, you will not, at any time either during your employment or after your employment ends for any reason, directly or indirectly, disclose, use, or make available to any other person or entity any Confidential Information that has come into your possession, custody, or control in the course of your employment with the Company, and you will not use any such Confidential Information for your own personal use or advantage or the use or advantage of any person or entity other than the Company, or make any such Confidential Information available to others.
For purposes of this confidentiality obligation, “Confidential Information” means all confidential information, proprietary information, trade secrets, or other information (whether oral or written) regarding the business or affairs of the Company, the Company’s affiliates, or any of the Company’s clients or business partners, including, without limitation, information as to any of the Company’s products; services; systems; designs; inventions; finances (including prices, costs, and revenues); marketing plans; sales; sales strategies; prospects; pricing; pricing strategies; investments; investment strategies and methodologies; portfolio management strategies; programs; methods of operation; prospective and existing contracts; customer lists and other business arrangements, business plans, procedures, and strategies; costs; profits; databases; personnel (including but not limited to personal information about employees, members, partners, and agents of the Company and its affiliates); operational methods; financial models; potential transactions; pending negotiations; computer programs; algorithms; pending patent applications; systems; contractual negotiations; terms of agreements; client lists; customer lists; investor lists; lists of potential clients, customers, and/or investors; financial results; business developments; internal controls; and security procedures. Confidential Information also includes the performance track record of all investments and other transactions in which the Company participates during your employment, which is the sole and exclusive property of the Company. Confidential Information does not include: (a) information that has DocuSign


Envelope ID: B96FBD95-B0A6-4577-9DAD-3E17D93E40F9 been lawfully and without breach of obligation made available to the general public without restriction; (b) information that, by way of documentary evidence, you can demonstrate was previously known to you prior to your affiliation with the Company; or (c) information for which you receive express written authorization from the Company to possess after your employment with the Company ends. The foregoing is not an exhaustive list, and Confidential Information also may include, without limitation, any other information, documents or materials that may be identified as confidential or proprietary, or which would otherwise appear to a reasonable person, in the context in which the information, documents or materials are received, provided or learned, to be confidential. This letter will also be treated as Confidential Information; provided you may keep a personal copy of this letter, and may disclose the contents of this letter to a personal attorney, financial advisor or tax accountant, or, solely with respect to restrictive covenants, a prospective employer.
Notwithstanding anything herein to the contrary, nothing in this letter, or any other agreement or policy of the Company will prevent you from sharing any Confidential Information or other information with regulators or appropriate governmental agencies, including but not limited to governing taxing authorities, whether in response to a subpoena or otherwise, without notice to the Company, or responding to any other lawful subpoena or legal process, provided in such case, unless otherwise prohibited by law or court order or decree, you provide the Company with reasonable notice of such subpoena or legal process. You hereby are notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (a) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (b) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (c) to your attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.
Upon termination of your employment with the Company for any reason, you promise to deliver to the Company all property, proprietary materials, Confidential Information, documents, and computer media in any form (and all copies thereof) relating or belonging to the Company or any Company affiliate, including the Company’s clients or business partners, that is in your possession.
8.Non-Competition Promise
In consideration for the offer of employment described within this letter, you promise not to, directly or indirectly, on behalf of yourself or any other person or entity, engage in “Competitive Activities” during the “Restricted Period.” For purposes of this non-competition obligation, “Competitive Activities” means any activity (whether or not for compensation and whether as an owner, employee, contractor, agent, or in any other capacity) engaged in or related to the business of Ideanomics Mobility or the financing activities of Ideanomics Capital, or other geographic region in which the Company conducted business at any time during your employment. For purposes of this non-competition obligation, “Restricted Period” means any period for which you receive the Base Salary pursuant to this Agreement and two (2) months after your employment at the Company ends for any reason.
The Company may elect to waive or shorten this non-competition obligation, but you acknowledge that such waiver or shortening of this non-competition obligation must be set forth in a signed writing (excluding e-mail) executed by a duly authorized Company officer. Notwithstanding anything to the contrary, (a) your ownership or investment of any entity that is engaged in Competitive Activities shall not constitute a breach of this non-competition obligation, provided such ownership or investment is limited to five percent (5%) or less of such entity’s outstanding shares, and (b) you shall not be precluded from DocuSign Envelope ID: B96FBD95-B0A6-4577-9DAD-3E17D93E40F9 devoting reasonable periods of time to charitable and community activities, managing your personal investments and serving on boards of businesses not in competition with the Company.
Subject to the prior approval of the Company you may serve on boards and advisor committees related to the businesses operated by Ideanomics Mobility & Ideanomics Capital. The Company agrees that you can continue to your position as Non-Executive Chairman of LiveWork.
9.Non-Solicitation Promises
In further consideration for the offer of employment described within this letter, you promise not to, directly or indirectly, on behalf of yourself or any other person or entity, during your employment and for a period of six (6) consecutive months immediately following the termination of your employment for any reason, solicit any actual or potential client, investor, or business partner of the Company for the purpose of performing any services that the Company


also performed during your employment with the Company. For purposes of the non-solicitation obligation described within this paragraph, a potential client, investor, or business partner of the Company shall mean any person or entity that the Company solicited for business during your final two (2) years of employment with the Company, unless you had a preexisting business relationship prior to joining the Company.
In further consideration for the offer of employment described within this letter, you promise not to, directly or indirectly, on behalf of yourself or any other person or entity, during your employment and for a period of twelve (12) months following the termination of your employment for any reason, solicit any employee, officer, contractor, or other agent of the Company to terminate his or her business relationship with the Company; provided that this non-solicitation obligation shall not apply to any employee, officer, contractor, or other agent of the Company who did not have a business relationship with the Company at any time during your final six (6) months of employment with the Company, unless you had a preexisting business relationship with such person or introduced such person for hire by the Company.
10.Non-Disparagement
You agree not to disparage the Company, its officers and owners, or its clients and business partners in any way during or after your employment with the Company. This non-disparagement obligation prohibits you from making any statement that would or is reasonably likely to defame, criticize, malign, or in any way be materially and financially harmful to the business reputation of the foregoing entities or individuals. Notwithstanding the foregoing, nothing herein shall prohibit you from testifying or responding in good faith to any subpoena or other legal process, provided that you provide reasonable advance notice to the Company of your receipt of such subpoena or other legal process.
11.Reasonableness of Promises; Injunctive Relief
You acknowledge and agree that the promises set forth in Sections 5, 6, 7, and 8of this letter are reasonable and narrowly tailored to protect the Company’s legitimate business interests, including the Company’s interests in protecting the competitive advantage it derives from its Confidential Information and customer good will. Accordingly, in the event you breach or threaten to breach one or more of the promises in Sections 5,6, 7, or 8 of this Agreement, you acknowledge and agree that the Company shall be entitled to injunctive relief from a court of competent jurisdiction enjoining such actual or threatened breach, in addition to any other remedy available at law or equity. You further acknowledge that the promises in Sections 5, 6, 7, and 8of this letter shall survive termination of your employment relationship. You further agree that in the event of a legal action to enforce this Agreement, the prevailing party shall be entitled to reimbursement by the non-prevailing party for its costs associated with such legal action, including the prevailing party’s reasonable attorneys’ fees.
12.Inventions
You agree that any and all improvements, inventions, discoveries, developments, creations, processes, methods, designs, and works of authorship, and any documents, things, or information relating thereto, whether patentable or not, within the scope of or pertinent to your primary job duties (as described in Section 1 above) or your other performance of work for the Company, which you may conceive, make, author, create, invent, develop, or reduce to practice, or which you previously have conceived, made, authored, created, invented, developed, or reduced to practice, in whole or in part, during your employment with the Company, whether alone or with others, whether during or outside of normal working hours, whether inside or outside of the Company’s offices, and whether with or without the use of the Company’s computers, systems, materials, equipment, or other property, will be and remain the sole and exclusive property of the Company (the foregoing, individually and collectively, “Work Product”). To the maximum extent allowable by law, any Work Product subject to copyright protection will be considered “works made for hire” for the Company under U.S. copyright law. To the extent that any Work Product that is subject to copyright protection is not considered a work made for hire, or to the extent that you otherwise have or retain any ownership or other rights in any Work Product (or any intellectual property rights therein), you hereby assign and transfer to the Company all such rights in the Work Product, including but not limited to the intellectual property rights therein, effective automatically as and when such Work Product is conceived, made, authored, created, invented, developed, or reduced to practice. The Company will have the full right to use, assign, license, and/or transfer all rights in, with, to, or relating to Work Product (and all intellectual property rights therein). You will, whenever requested to do so by the Company (whether during your employment or thereafter), at the Company’s expense, execute any and all applications, assignments, and/or other instruments, and do all other things (including giving testimony in any legal proceeding) which the Company may deem necessary or appropriate in order to (a) apply for, obtain, maintain, enforce, or defend patent, trademark, copyright, or similar registrations of the United States or any other country for any Work Product, (b) assign, transfer, convey, or otherwise make available to the Company any right, title, or interest which you might otherwise have in any Work Product, and/or (c) confirm the Company’s right, title, and interest in any Work


Product. You will promptly communicate, disclose, and, upon request, report upon and deliver all Work Product to the Company, and will not use or permit any Work Product to be used for any purpose other than on behalf of the Company, whether during your employment or thereafter.
13.Business Related Expense Reimbursements
You may occasionally incur business related expenses in the course of your job duties. Your permitted business expenses include: (a) your travel expenses related to the performance of your job duties; and (b) reasonable expenses related to the entertainment of clients or other potential business partners of the Company. However, you understand that all business expenses are subject to review, and the Company reserves the right to deny a business expense reimbursement request in the event it reasonably determines that the expense was not related to your job duties. The Company will reimburse you for an appropriate business-related expense, provided you submit proof of payment and details concerning the expense in a timely manner, and in no event later than sixty (60) days after the expense was incurred. Violation of this policy may result in the denial of an expense reimbursement request. In the event you intentionally submit a false expense reimbursement request, you shall be subject to disciplinary action, up to and including immediate termination of employment for “Cause.” Duly submitted reimbursement requests are typically processed within thirty (30) days of submission.
14.No Conflicts
By signing below, you represent to the Company that you are not presently subject to any obligation that would otherwise prohibit you from performing the above-referenced job duties for the Company, such as a non-competition promise or other restrictive covenant. You further represent to the Company that you DocuSign Envelope ID: B96FBD95-B0A6-4577-9DAD-3E17D93E40F9 are not in possession of any confidential or proprietary information belonging to any entity or person that directly or indirectly competes with the Company.
15.Dispute Resolution
Should any dispute arise between you and the Company or any Company affiliate regarding any aspect of your employment relationship, you and the Company or the Company affiliate will confer in good faith to promptly resolve such dispute. In the event that you and the Company or the Company affiliate are unable to resolve the dispute, and should either party to the dispute desire to pursue a claim against the other party, both you and the Company or the Company affiliate agree to have the dispute resolved by final and binding Arbitration held in New York County, New York. The Arbitration shall be conducted by JAMS or the American Arbitration Association and provided by an impartial third-party Arbitration provider in accordance with the employment dispute rules then in effect. All previously unasserted claims arising under federal, state, or local statutory or common law and all disputes relating to the validity of this contract, as well as this Arbitration provision, shall be decided by binding and final arbitration. Any award of the Arbitrator(s), is final and binding, and may be entered as a judgment in any court of competent jurisdiction. The prevailing party shall be entitled to reimbursement of his/its related costs, including reasonable attorneys’ fees, from the non-prevailing party. Notwithstanding the foregoing, nothing in this letter shall prohibit either party from applying to a court of competent jurisdiction (instead of an arbitrator) for injunctive relief to enjoin an actual or threatened breach of each other’s obligations set forth in this letter.
16.Severability
You acknowledge and agree that in the event any court or arbitrator of competent jurisdiction determines that one or more of the provisions of this letter is unenforceable, such court or arbitrator shall be entitled to equitably reform such unenforceable provision so that the provision is given its maximum affect permitted under applicable law. Each provision of this letter is severable from other provisions hereof, and if one or more provisions are declared invalid, the remaining provisions shall nevertheless remain in full force and effect.
17.Prior Agreements
You acknowledge and agree that this document replaces and supersedes any previous offer of employment to you by the Company (whether oral or in writing), and sets forth the parties’ entire understanding regarding the subject matter described herein. By signing below, you are not relying upon any representation or promise that is not explicitly set forth within this letter.


18.Governing Law
You agree that this letter and your employment with the Company shall be governed by the laws of the State of New York. Any legal proceeding arising from dispute related to your employment with the Company must be commenced within New York County, New York.
19.Miscellaneous
You acknowledge that this letter is the product of arms-length negotiations between you and the Company and, therefore, neither you nor the Company will be considered the drafter of this letter. This letter may be executed in one or more counterparts, each of which shall constitute an original. Original signatures shall not be required.


If these terms are agreeable to you, please sign and date this letter and return it to Alf Poor, Chief Executive Officer of the Company,
Sincerely,
Alf Poor
Chief Executive Officer
/s/ Alf Poor
Date:
Accepted and Agreed
/s/ Robin Mackie
Robin Mackie


EXHIBIT A
LIST OF PRIOR INVENTIONS AND ORIGINAL WORKS OF AUTHORSHIP
Title Date Identifying Number or Brief Description
________    No inventions or improvements
________    Additional Sheets Attached
Signature of Employee: /s/ Robin JD Macki
Print Name of Employee: Robin JD Macki
Date:_______________



THE MDI KEEPER’S FUND, L.P.
SUBSCRIPTION AGREEMENT
US_ACTIVE-125412688


SUBSCRIPTION INSTRUCTIONS
In order to subscribe to purchase a limited partnership interest (an “Interest”) in The MDI Keeper’s Fund, L.P. (the “Partnership”), each prospective investor (an “Investor”) must take the following actions and return all required documents to the Partnership’s U.S. counsel, Reed Smith LLP (“Fund Counsel”), by email to Aaron Bourke at abourke@reedsmith.com and Grace Park at gpark@reedsmith.com, on or before the relevant closing date. Capitalized terms used but not otherwise defined in these Subscription Instructions shall have the respective meanings given to them in the Partnership’s Amended and Restated Limited Partnership Agreement (the “Partnership Agreement”), which Partnership Agreement will be provided to the Investor under separate cover.
1.Subscription Agreement. The Investor must complete and sign the signature page to the Subscription Agreement below (the “Subscription Agreement”) and return the signed Subscription Agreement to Fund Counsel.
2.Investor Profile Form. The Investor must complete the Investor Profile Form (which is included in the Subscription Agreement after the signature page) and return it to Fund Counsel.
3.Accredited Investor Representation. The Investor must complete the Accredited Investor Representation (which is attached to the Subscription Agreement as Annex A) and return it to Fund Counsel.
4.Benefit Plan Matters Questionnaire. The Investor must complete the Benefit Plan Matters Questionnaire (which is attached to the Subscription Agreement as Annex B) and return it to Fund Counsel.
5.Qualified Purchaser Questionnaire. The Investor must complete the Qualified Purchaser Questionnaire (which is attached to the Subscription Agreement as Annex C) and return it to Fund Counsel.
6.Bad Actor Rule Questionnaire. The Investor must complete the Bad Actor Rule Questionnaire (which is attached to the Subscription Agreement as Annex D) and return it to Fund Counsel.
7.Municipal Advisor Rule Questionnaire. The Investor must complete the Status as Municipal Entity or Obligated Person Questionnaire (which is attached to the Subscription Agreement as Annex E) and return it to Fund Counsel.
8.Notice of Identification Verification. The Investor must complete the Notice of Identification Verification (which is attached to the Subscription Agreement as Annex F) and return it to Fund Counsel along with all requested documentation.
9.Special Representation and Warranty. If the Investor is an entity and cannot make the representations set forth in Section 3(n)(iii) of the Subscription Agreement, the Investor must complete the Special Representation and Warranty (which is attached to the Subscription Agreement as Annex G) and return it to Fund Counsel.
10.Internal Revenue Service Form W-9 / W-8. The Investor must provide Fund Counsel with a copy of a completed and executed applicable Internal Revenue Service Form W-9 or Form W-8, as described in Section 4 of the Subscription Agreement. Blank copies of these forms are available at https://www.irs.gov/forms-instructions.


11.Partnership Agreement Signature Page. The Investor must complete, sign and return to Fund Counsel a counterpart signature page to the agreed form Partnership Agreement, a copy of which is being provided under separate cover. A blank Partnership Agreement signature page is attached hereto as Exhibit A.
12.Payment. The Investor must be prepared to make capital contributions to the Partnership at the times and in the amounts described in the Partnership Agreement. The Investor should make these capital contributions in accordance with the “Wiring Instructions for Investors” set forth below.
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WIRING INSTRUCTIONS FOR INVESTORS
You must transfer your capital contributions to the Partnership from an account in your name
When wiring funds, please note the following:
1.All wire transfers must be in U.S. Dollars and comprised exclusively of immediately available funds. All wire transfers should be sent in accordance with the instructions contained in the applicable Call Notice (as defined in the Partnership Agreement).
2.Please have your bank identify your name on the wire transfer.
3.Your bank’s wiring fees may not be deducted from the amount required to be contributed to the Partnership. Accordingly, you may wish to have your bank charge its wiring fees separately.
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IMPORTANT INFORMATION FOR INVESTORS
1.YOUR SUBSCRIPTION AGREEMENT WILL NOT BE DEEMED COMPLETE UNTIL ALL OF THE REQUIRED DOCUMENTATION LISTED HEREIN IS RECEIVED BY FUND COUNSEL. PLEASE NOTE THAT EXCEPTIONS TO ANY OF THE ABOVE REQUIREMENTS MAY ONLY BE MADE WITH THE CONSENT (SUCH CONSENT NOT TO BE UNREASONABLY WITHHELD) OF THE GENERAL PARTNER.
2.THESE INSTRUCTIONS HAVE BEEN INCLUDED FOR THE CONVENIENCE OF INVESTORS. NO INVESTOR SHOULD SUBSCRIBE TO PURCHASE AN INTEREST UNTIL IT HAS CAREFULLY REVIEWED THE MEMORANDUM (AS DEFINED IN THE SUBSCRIPTION AGREEMENT), THE PARTNERSHIP AGREEMENT AND THE SUBSCRIPTION AGREEMENT AND CONSULTED WITH ITS OWN LEGAL, TAX AND FINANCIAL ADVISORS.
3.THE INTERESTS HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE SECURITIES LAWS, AND MAY NOT BE OFFERED FOR SALE, TRANSFERRED OR SOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND ALL OTHER APPLICABLE SECURITIES LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. IN ADDITION, THE INTERESTS MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, EXCEPT AS PROVIDED IN THE PARTNERSHIP AGREEMENT. ACCORDINGLY, (1) THE INTERESTS MUST BE ACQUIRED FOR INVESTMENT ONLY, AS THEY WILL BE SUBJECT TO SIGNIFICANT RESTRICTIONS ON TRANSFERABILITY, AND (2) THE INVESTOR SHOULD BE AWARE THAT IT MAY BE REQUIRED TO BEAR THE RISKS OF ITS INVESTMENT IN THE INTERESTS FOR AN INDEFINITE PERIOD OF TIME.
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SUBSCRIPTION AGREEMENT
THE MDI KEEPER’S FUND, L.P.
To:    The MDI Keeper’s Fund, L.P. (the “Partnership”)
c/o Legacy Two GP, LLC (the “General Partner”)
107 Abbotsford Court
Durham, NC 27712
Tel: +1 804-397-9791
Email: kim.saunders@mdikeepers.com
Dear Sir or Madam:
Reference is made to the Confidential Private Placement Memorandum of the Partnership dated November 2020 (as supplemented through the date set forth under the Investor’s name below, the “Memorandum”) heretofore furnished to the undersigned subscribing investor (the “Investor”) with respect to the offering of limited partnership interests in the Partnership. Capitalized terms used but not otherwise defined in this Subscription Agreement (as well as the term “person”) shall have the respective meanings given to them in the Amended and Restated Limited Partnership Agreement of the Partnership, as in effect at the time of the Closing referred to in Section 5 below (the “Partnership Agreement”). The Memorandum, the Partnership Agreement, any letter agreement among the Partnership, the General Partner and the Investor dated as of the date of the Closing (the “Side Letter”) and each other item of written material furnished or made available to the Investor by the Partnership, the General Partner or the Investment Advisor prior to the date set forth under the Investor’s name below and marked specifically by the Partnership, the General Partner or the Investment Advisor as having been intended for reliance by the Investor, are sometimes referred to herein collectively as the “Offering Materials”.
The Investor hereby agrees as follows:
Section 1. Applicability of this Agreement. The Investor has executed the signature pages to this Subscription Agreement and upon the execution of such signature pages (or counterparts thereof) by the Partnership and the General Partner, this Subscription Agreement shall constitute a valid and legally binding agreement among the Partnership, the General Partner and the Investor.
The General Partner will notify the Investor of its acceptance or rejection of the application within five (5) Business Days after making a decision regarding the application. For the avoidance of doubt, the Investor's application to subscribe for an interest in the Partnership shall be deemed to be accepted only after the General Partner countersigns this Subscription Agreement.
Section 2. Subscription for a Limited Partnership Interest. Subject to the terms and conditions set forth in this Subscription Agreement and the Partnership Agreement, the Investor hereby subscribes for and agrees to purchase from the Partnership a limited partnership interest (the “Interest”) in the Partnership, in an amount equal to the “Amount of Commitment” (as set forth in the Investor Profile Form below), at a purchase price equal to 100% of such amount, payable in the manner and at the times provided in the Partnership Agreement, and agrees to adhere to and be bound by the Partnership Agreement and become a Limited Partner of the Partnership. The Interest and the limited partnership interests in the Partnership purchased from time to time by Limited Partners other than the Investor are collectively referred to herein as the “Interests.”


Section 3. Representations, Warranties, Covenants and Agreements of the Investor. The Investor hereby represents and warrants to, and agrees with, the Partnership, the General Partner, the Investment Advisor and each other person who acquires Interests from time to time as follows:
(a)Suitability/Review of Offering Materials. The Investor has read, has carefully reviewed and understands the Offering Materials and has consulted with its own attorney, accountant or investment adviser (collectively, the “Investment Representatives”) with respect to the investment in the Interest contemplated hereby and its suitability for the Investor. Any specific acknowledgment set forth below with respect to any statement contained in the Offering Materials shall not be deemed to limit the generality of the representations and warranties contained in this Section 3(a). The Investor understands that the representations, warranties, covenants and agreements made by the Investor in this Subscription Agreement are being relied upon by the Partnership, the General Partner and the Investment Advisor in determining the Investor’s suitability as a purchaser of Interests and the Partnership’s, the General Partner’s and the Investment Advisor’s compliance with applicable securities and other laws.
(b)Risk Factors, Conflicts, Etc. The Investor understands the risks of, and other considerations relating to, a purchase of the Interest, including the risks set forth in the Memorandum, including those disclosed in Section 5 (“Risk Factors”), Section 6 (“Certain Tax Considerations”) and Section 7 (“Legal and Regulatory Considerations”), and has been advised by the General Partner to consult with its own tax, legal, accounting and regulatory advisers in order to fully understand the federal, state, local, and foreign income tax, legal and regulatory consequences of an investment in the Partnership and the Investor has been afforded such opportunity by the General Partner to so consult with its tax, legal, accounting and regulatory advisers.
(c)Purchase for Investment. The Investor is purchasing the Interest for its own account, for investment purposes only, and not as a nominee or agent for the benefit of any other person, and without a view towards resale or distribution thereof, in whole or in part.
(d)Restrictions on Transfer. The Investor understands and acknowledges that: (i) the Interest has not been registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or under any other applicable securities laws, in reliance on exemptions therefrom and, therefore, the Interest cannot be resold or otherwise disposed of unless it is subsequently registered under the Securities Act and such other applicable securities laws or unless an exemption from such registration is available; (ii) the transfer of the Interest and the substitution of another Limited Partner for the Investor are restricted by the terms of the Partnership Agreement; (iii) the Investor is agreeing not to resell or otherwise dispose of all or any part of the Interest, except as permitted by law, including without limitation all applicable securities laws, and by the terms of the Partnership Agreement; (iv) legends stating that the Interest has not been registered under the Securities Act or any other applicable securities law and setting forth or referring to the restrictions on the transferability of the Interest will be placed on all documents evidencing the Interest, if any, and stop-order or similar instructions prohibiting transfer of the Interest may be placed by the General Partner in the Partnership’s books and records as a means of preventing the sale or disposition of the Interest otherwise than in accordance with the terms of the Partnership Agreement and applicable law; (v) there is no public or other market for the Interest, and it is not anticipated that such a market will ever develop; (vi) the Partnership does not have any intention of registering the Interest under the Securities Act or any other securities law or of supplying any information which may be necessary to enable the Investor to sell the Interest; and (vii) for the foregoing reasons and other reasons, the Investor may be required to retain ownership of the Interest and bear the economic risk of its investment in the Interest until the termination of the Partnership.
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(e)Accredited Investor. One or more of the categories set forth in the Accredited Investor Representation attached hereto as Annex A correctly describe the Investor, and the Investor has so indicated by signing or having its authorized representative sign on the blank line following each and every category that so describes it.
(f)Knowledge and Experience. The Investor currently has, and had immediately prior to its receipt of any offer regarding the Interest, such knowledge, experience and acumen in financial and business matters as to be able to evaluate the merits and risks of an investment in the Interest. The Investor has evaluated the merits and risks of investing in the Interest (including without limitation the risk of loss of its entire investment) and has determined that the Interest is a suitable investment for the Investor.
(g)Opportunity to Verify Information. During the course of this transaction, and prior to the purchase of the Interest, the Investor and its Investment Representatives have been furnished with any and all written materials relating to the Partnership or the offering of the Interests that were requested by the Investor and its Investment Representatives, and have been afforded the opportunity to ask questions of the General Partner or the Investment Advisor concerning the Partnership, the General Partner, the Investment Advisor, the Partnership Agreement and the terms and conditions of the offering of the Interests, and all such questions have been answered to the satisfaction of the Investor. The Investor has also had the opportunity to obtain any additional information which it considers necessary to verify the information contained in the Offering Materials. Notwithstanding the foregoing, the Investor and its Investment Representatives have relied only on the Offering Materials.
(h)Merits and Risks of an Investment in the Interest. The Investor has been furnished with and has carefully reviewed the Offering Materials and has not relied, in making an investment in the Interest, on any other offering or private placement memorandum, any other representations, statements or materials or any other information whatsoever furnished by or on behalf of the General Partner, the Investment Advisor or the Partnership. The Investor has examined or has had an opportunity to examine, prior to the date hereof, such other information (which information has not been provided by or on behalf of the Partnership, the General Partner or the Investment Advisor and with respect to which the Partnership, the General Partner and the Investment Advisor take no responsibility and make no representation or warranty) as it deems necessary to evaluate and understand the merits and risks of an investment in the Interest and of becoming a Limited Partner of the Partnership. The Investor understands and acknowledges that: (i) an investment in the Interest involves certain risks, including, without limitation, risk of loss of the Investor’s entire investment, lack of liquidity and substantial restrictions on the transferability of the Interest; (ii) each of the General Partner and the Investment Advisor may receive substantial compensation in connection with the management and operations of the Partnership; (iii) neither the United States Securities and Exchange Commission nor any other governmental agency or authority has passed upon the Interests or made any finding or determination as to the fairness of an investment in the Interests or the accuracy or adequacy of the disclosures made to the Investor by or on behalf of the General Partner or the Partnership or any other person; and (iv) the Investor is not entitled to cancel, terminate or revoke this Subscription Agreement or any of the rights or powers conferred by the Investor herein.
(i)Investment Objectives. The purchase of the Interest by the Investor is consistent with the general investment objectives of the Investor. The Investor has adequate means of providing for the Investor’s current needs and contingencies, has no need for liquidity in connection with its investment in the Interest and at the present time could afford a complete loss of such investment.
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(j)No Distribution of Offering Materials. The Investor has not in any manner distributed the Offering Materials received by it or disclosed any of the contents thereof to any person other than its Investment Representatives.
(k)Full Contribution; Default. The Investor understands that, except as otherwise provided in the Partnership Agreement, the Investor may not make less than the full amount of any required Contribution, and that the Partnership Agreement contains default provisions pursuant to which the Investor may (among other things) lose all or a material portion of its investment in the Interest upon a failure by it to make any such required Contribution.
(l)No Actions, Suits or Proceedings. There are no actions, suits or proceedings pending, or, to the knowledge of the Investor, threatened against or affecting the Investor or the assets of the Investor in any court or before or by any U.S. federal, state, municipal, foreign or other governmental department, commission, board, bureau, agency or instrumentality which, if adversely determined, would impair the ability of the Investor to perform under this Subscription Agreement or the Partnership Agreement as provided herein and therein.
(m)Qualified Client.
(i)As of the Initial Closing Date, the Investor (A) has a net worth that exceeds $2,100,000 or (B) is a “qualified purchaser” as defined in Section 2(a)(51) of the Investment Company Act of 1940, as amended (the “1940 Act”), and has fully completed Annex C hereto. If the Investor is an entity that would be classified as an “investment company” under Section 3(a) of the 1940 Act but for the Investor’s reliance on the exclusion from the definition of “investment company” contained in Section 3(c)(1) of the 1940 Act (a “Private Investment Company”), each of the Investor’s equity owners is (x) either an entity (other than a Private Investment Company or an entity described in clause (ii) below) or a natural person with, in each case, a net worth in excess of $2,100,000 or (y) a “qualified purchaser” as defined in Section 2(a)(51) of the 1940 Act. (Instructions to the Investor: For purposes of calculating a natural person’s net worth, include assets held jointly with such person’s spouse but (A) do not include such person’s primary residence as an asset and (B) do not include debt secured by such person’s primary residence as a liability; provided, however, that such person’s net worth must be reduced by (C) any debt secured by his or her primary residence that is in excess of the estimated fair market value of such primary residence as of the Initial Closing Date and (D) any debt secured by his or her primary residence that is in excess of the amount of any such debt that was outstanding 60 days prior to the Initial Closing Date, other than as a result of the initial acquisition of such primary residence.)
(ii)The Investor is not an investment company registered or required to be registered under the 1940 Act and is not a “business development company” as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”).
(iii)If the Investor is unable to make any of the representations set forth in paragraphs (i) and (ii) of this Section 3(m), the Investor shall have so indicated to the General Partner and the Investment Advisor in writing and shall have provided the General Partner and the Investment Advisor at least five (5) Business Days prior to the date hereof with evidence (including opinions of outside counsel, if requested by the General Partner or the Investment
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Advisor) satisfactory in form and substance to the General Partner and the Investment Advisor relating to compliance with such laws, rules and regulations, and to such other matters, as the General Partner or the Investment Advisor shall request. The representations and warranties set forth in this Section 3(m) shall be deemed repeated and reaffirmed by the Investor as of each date that the Investor is required to make a Contribution to the Partnership.
(n)1940 Act.
(i)General. The Investor understands that the Partnership is not being registered as an “investment company” under the 1940 Act by reason of either: (A) the provisions of Section 3(c)(1) thereof, which excludes from the definition of an investment company any issuer which has not made and does not presently propose to make a public offering of its securities and whose outstanding securities (other than short-term paper) are beneficially owned by not more than 100 persons; or (B) the provisions of Section 3(c)(7) thereof, which excludes from the definition of an investment company any issuer that has not made and does not presently propose to make a public offering of its securities and whose outstanding securities (other than short-term paper) are beneficially owned by persons who, at the time of acquisition of such securities, are “qualified purchasers.” The Investor understands and acknowledges that the General Partner does not have any intention of registering the Partnership as an “investment company” under the 1940 Act. The Investor hereby acknowledges that in order to avoid registering the Partnership as an investment company under the 1940 Act, the General Partner has the right, as provided in the Partnership Agreement, to require any Limited Partner to withdraw from the Partnership in whole or in part.
(ii)“Qualified Purchaser” Status. The Investor has fully completed Annex C hereto, and the information set forth in Annex C hereto is correct. The Investor hereby acknowledges that the Partnership, the General Partner and the Investment Advisor will rely on the information provided by the Investor in Annex C in determining whether the Partnership is exempt from registration as an “investment company” under the 1940 Act by reason of the provisions of Section 3(c)(7) thereof.
(iii)3(c)(1) Status
(A)The Investor, if not a natural person, hereby acknowledges, represents, warrants and agrees that: (A) it is “one person” for purposes of Section 3(c)(1) of the 1940 Act; and (B) if the Investor’s Commitment and the Commitments of any other Limited Partners that are the Investor’s Affiliates together equal or exceed 10% of the aggregate Commitments of all the Partners, the Investor is not an “investment company” as defined in Section 3(a) of the 1940 Act, and the Investor has not relied and does not intend to rely upon either of the exceptions from such definition set forth in Sections 3(c)(1) and 3(c)(7) of the 1940 Act in order to avoid being classified as an investment company. The Investor hereby acknowledges that the Partnership, the General Partner and the Investment Advisor will rely on the representations made by the Investor in this Section 3(n) in determining whether the Partnership is exempt from registration as an “investment company” under the 1940 Act by reason of the provisions of Section 3(c)(1) thereof.
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(B)The Investor has not been formed, organized, reorganized, capitalized or recapitalized for the purpose of acquiring the Interest. The Investor’s Commitment is not more than 40% of the Investor’s total assets or, if the Investor is a private investment fund with binding, unconditional capital commitments from the Investor’s partners or members, not more than 40% of the Investor’s committed capital. The Investor’s equity holders, partners, members or other beneficial owners do not have and will not have individual discretion as to their participation or non-participation through the Investor in (A) the Investor’s purchase of an Interest or (B) particular investments made by the Partnership. The Investor is not a participant-directed defined contribution plan.
(iv)If the Investor is unable to make any of the representations set forth in paragraph (iii) of this Section 3(n), the Investor shall so indicate to the General Partner in writing and shall, prior to the date hereof, (x) complete Annex G and (y) provide the General Partner with any additional evidence (including opinions of outside counsel, if requested by the General Partner) satisfactory in form and substance to the General Partner relating to compliance with the Securities Act, the 1940 Act, the Investment Advisers Act and such other matters as the General Partner shall request. The representations and warranties set forth in this Section 3(n) shall be deemed repeated and reaffirmed by the Investor as of each date that the Investor is required to make a Contribution to the Partnership.
(o)Employee Benefit Plans. In the event that the Investor is (i) an “employee benefit plan” (as such term is defined in Section 3(3) of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and is subject to Part 4 of Title I of ERISA (an “Employee Benefit Plan”), (ii) a “plan” (as such term is defined in Section 4975(e)(1) of the Code) to which the provisions of Section 4975 of the Code are applicable (a “Plan”), (iii) any other person, any of the assets of which, or held by which, constitute, under applicable law, assets of an Employee Benefit Plan or Plan, or (iv) a plan or arrangement subject to law substantially similar to Part 4 of Title I of ERISA or Section 4975 of the Code (“Similar Law”), the Investor represents that: (1) assuming that the assets of the Partnership do not constitute “plan assets” for purposes of ERISA or Similar Law, its purchase of the Interest will not be (A) a “prohibited transaction” under ERISA or the Code or (B) a violation of Similar Law; (2) it has been informed of and understands the investment objectives, policies and strategies of the Partnership; (3) assuming that the assets of the Partnership do not and will not constitute “plan assets” for purposes of ERISA or Similar Law, the investment of the Investor’s assets in the Interest is consistent with the provisions of applicable law including, without limitation, ERISA, Section 4975 of the Code or Similar Law, and is consistent with all instruments governing the investment of such Investor’s assets; and (4) the Investor’s decision to invest in the Interest was made by plan fiduciaries independent of the Partnership, the General Partner, the Investment Advisor and their respective employees, representatives, agents or affiliates, which fiduciaries are duly authorized to make such investment decisions and, in making such decision with respect to the Interest, have not relied on any advice or recommendation of the Partnership, the General Partner, the Investment Advisor or any of their respective employees, representatives, agents or affiliates. The information set forth in Annex B hereto, which has been fully completed by the Investor, is true and correct.
(p)Final Form of Agreements. The Investor understands and acknowledges that its investment in the Interest will be subject to the terms and conditions of this Subscription Agreement and the Partnership Agreement, as the same may be amended, supplemented or otherwise modified from time to time thereafter in accordance with their respective terms.
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(q)Organization, Power and Authority. In the event that the Investor is a corporation, trust, partnership, limited liability company or other entity, the Investor is duly and validly formed, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has all requisite power and authority under its constitutive documents and such laws to execute and deliver this Subscription Agreement, the Partnership Agreement and the Side Letter (if any), and to perform its obligations hereunder and thereunder.
(r)Execution; Enforceability. Each of this Subscription Agreement, the Partnership Agreement and the Side Letter (if any) has been duly authorized, executed and delivered by the Investor and, assuming the due authorization, execution and delivery hereof and thereof by the General Partner, the Partnership (in the case of this Subscription Agreement and the Side Letter) and the other Limited Partners (in the case of the Partnership Agreement), is a valid and legally binding obligation of the Investor, enforceable against the Investor in accordance with its terms, except as the enforceability hereof or thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to the enforcement of creditors’ rights generally and by general principles of equity.
(s)No Conflict with Other Instruments, Laws. The execution and delivery by the Investor of this Subscription Agreement, the Partnership Agreement and the Side Letter (if any), the performance by the Investor of its obligations under this Subscription Agreement, the Partnership Agreement and the Side Letter (if any), and the consummation of the transactions contemplated hereby and thereby, do not and will not result in a violation of, constitute a default or require notice or consent under, or conflict with, any term of the Investor’s constitutive documents or any mortgage, indenture, contract, agreement, instrument, judgment, decree, order, law, rule or regulation applicable to the Investor or any of its properties or assets.
(t)Certain Tax Matters. The Investor acknowledges and understands that the Partnership has been organized, and has been and will be managed, so as to qualify for the benefit of a safe harbor under Section 7704 of the Code from “publicly traded partnership” status, the effect of which will be to restrict the transferability of the Interest. If the Investor is a partnership, grantor trust or “S corporation” (in each case, as defined in the Code), then less than 50% of the aggregate value of any beneficial owner’s interest in the Investor is attributable to the Investor’s (direct or indirect) ownership of an Interest in the Partnership.
(u)Bank Holding Company Act; International Banking Act. Except as otherwise indicated by the Investor on its signature page hereto, the Investor (i) is not subject to the United States Bank Holding Company Act of 1956, as amended (the “BHCA”), and is not directly or indirectly “controlled” (as that term is defined in the BHCA) by a person that is subject to the BHCA, (ii) is not subject to the International Banking Act of 1978, as amended, and (iii) is not a “banking entity” as such term is defined under Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act as implemented by the final implementing regulations (12 C.F.R. Part 248) issued by the Board of Governors of the Federal Reserve System on December 10, 2013 (the “Dodd-Frank Act”).
(v)Counsel to the General Partner and/or the Investment Advisor Does Not Represent the Investor. The Investor understands and acknowledges that Reed Smith LLP and any other law firm engaged by the General Partner and/or the Investment Advisor represents only the General Partner and/or the Investment Advisor and does not represent or owe any duty to the Investor, in connection with this Subscription Agreement, the Partnership Agreement, the Side Letter (if any)
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and the offering of Interests in the Partnership. The Investor understands and acknowledges that no independent counsel has been retained to represent the Limited Partners, and further acknowledges that it has had, or has had the opportunity to have, its own counsel represent it in connection with this Subscription Agreement, the Partnership Agreement, the Side Letter (if any) and the offering of the Interest.
(w)No Operating History; Reliance. The Investor understands that the Partnership has no financial or operating history prior to the Initial Closing Date.
(x)Disclosure. The Investor understands and agrees that each of the Partnership, the General Partner, the Investment Advisor and their respective Affiliates may present this Subscription Agreement and the information provided in answers to this Subscription Agreement to such parties (such as attorneys, auditors, brokers, regulators and governmental authorities) as it deems necessary or advisable to facilitate the acceptance and management of the Investor’s Commitment and Contributions, including but not limited to (i) in connection with anti-money laundering and similar laws, (ii) if called upon to establish (x) the availability under any applicable law of an exemption from registration of the Interests or (y) compliance with applicable law and any relevant exemptions thereto by the Partnership, the General Partner, the Investment Advisor or any of their respective Affiliates, or (iii) if the contents thereof are relevant to any issue in any action, suit or proceeding to which the Partnership, the General Partner, the Investment Advisor or any of their respective Affiliates is a party. The Investor understands and agrees that each of the Partnership, the General Partner, the Investment Advisor and their respective Affiliates may also release information about the Investor if directed to do so by the Investor, if compelled to do so by law or in connection with any government or self-regulatory organization request or investigation.
(y)Notification. The Investor agrees to notify the General Partner and the Investment Advisor promptly if any representation or warranty contained in this Subscription Agreement, including any information provided to the General Partner or the Investment Advisor pursuant to the provisions hereof, the Investor Profile Form, or Annex A, Annex B, Annex C, Annex D, Annex E, Annex F or (if applicable) Annex G hereto, becomes untrue prior to or after the Closing. The Investor agrees promptly to provide such information and execute and deliver such documents, as the General Partner or the Investment Advisor may request from time to time prior to or after the Closing (i) to determine the eligibility of the Investor to acquire the Interest, (ii) to verify the accuracy of the Investor’s representations and warranties herein, (iii) to enable the General Partner, the Investment Advisor or the Partnership to comply with any law or regulation to which it may be subject, (iv) to determine the eligibility of the Investor to hold the Interest or (v) to enable the General Partner or the Investment Advisor to determine the Partnership’s, the General Partner’s or the Investment Advisor’s compliance with applicable regulatory requirements or the tax status of the Partnership.
(z)U.S. Patriot Act Confirmation.
(i)The Investor represents that neither it nor, to its knowledge, any person controlling, controlled by or under common control with it, nor any person having a beneficial interest in it:
(A)is a person listed in the Annex to Executive Order No. 13224 (2001) issued by the President of the United States (Executive Order Blocking Property
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and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism)1;
(B)is named on the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Office of Foreign Assets Control (“OFAC”) or any other sanctions program maintained by OFAC2;
(C)is a non-U.S. shell bank3 or providing banking services indirectly to a non-U.S. shell bank;
(D)is a senior non-U.S. political figure or an immediate family member or close associate4 of such figure; or
(E)is otherwise prohibited from investing in the Partnership pursuant to applicable U.S. anti-money laundering, anti-terrorist and asset control laws, regulations, rules or orders (categories (A) through (E) together, a “Prohibited Investor”).
(ii)The Investor agrees to provide to the General Partner and the Investment Advisor, promptly upon request, all information that the General Partner or the Investment Advisor deems necessary or appropriate to comply with applicable U.S. and non-U.S. anti-money laundering, anti-terrorist and asset control laws, regulations, rules and orders.
(iii)The Investor consents to the disclosure to U.S. and non-U.S. regulators and law enforcement authorities by the General Partner, the Investment Advisor and their respective Affiliates and agents of such information about the Investor as the General Partner or the Investment Advisor deems necessary or appropriate to comply with applicable U.S. and non-U.S. anti-money laundering, anti-terrorist and asset control laws, regulations, rules and orders.
(iv)The Investor represents and warrants that it has conducted reasonably thorough due diligence with respect to all of its beneficial owners in order to (A) identify all of its beneficial owners and (B) verify the identity of all of its beneficial owners.
(v)The Investor represents and warrants that it will retain evidence of any such due diligence and identities, consistent with customary and appropriate document retention policies. For purposes of the preceding clause (iv) and this clause (v), it is understood and agreed that for any Investor that is a Publicly Traded Company or an ERISA Partner, the term “beneficial owner” shall exclude the investors and beneficiaries of such Publicly Traded Company or such ERISA Partner, respectively. “Publicly Traded Company” shall mean a person whose securities are listed on a national securities exchange or quoted on an automated quotation system in the U.S., or a wholly-owned subsidiary of such a person.
1 This information may be found online at www.treas.gov
2 This information may be found online at www.treas.gov/ofac
3 A non-U.S. shell bank is a non-U.S. bank without a physical presence in any country.
4 For purposes of clause (D), a “close associate” of a senior non-U.S. political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior non-U.S. political figure, including a person who is in a position to conduct substantial financial transactions on behalf of such figure.
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(vi)The Investor acknowledges that if, following its admission to the Partnership as a Limited Partner (A) the General Partner reasonably believes that the Investor is a Prohibited Investor or is otherwise engaged in suspicious activity or (B) the Investor refuses to promptly provide all information that the General Partner or the Investment Advisor requests, then in each case the General Partner shall have the right (and may be obligated) to prohibit additional Contributions by the Investor, segregate the assets constituting the Investor’s investment in the Partnership in accordance with applicable regulations or immediately require the Investor to withdraw from the Partnership. The Investor further acknowledges that the Investor shall have no claim against the General Partner, the Partnership, the Investment Advisor or any of their respective Affiliates or agents for any form of damages as a result of any of the actions described in the preceding sentence.
(aa)Accuracy of Information. The Investor agrees that all information provided by it or on its behalf to the General Partner or the Investment Advisor pursuant to the provisions hereof, the Investor Profile Form, or Annex A, Annex B, Annex C, Annex D, Annex E, Annex F or (if applicable) Annex G shall be true, accurate and correct in all respects.
(bb)Beneficial Owner. If the Investor is acting as agent, representative or nominee for any other person or persons (each such other person, a “Beneficial Owner”), the Investor acknowledges and agrees that the representations, warranties and agreements made herein are made by the Investor (i) with respect to the Investor and (ii) with respect to each Beneficial Owner. The Investor further represents and warrants that it has all requisite power and authority from said Beneficial Owner(s) to execute and perform the Investor’s obligations under this Subscription Agreement, the Partnership Agreement and the Side Letter (if any).
(cc)Additional Representations (Non-U.S. Persons Only). If the Investor is not a U.S. Person (as defined below), then the Investor shall check the box so indicating on the Investor’s signature page hereto, and the Investor hereby represents and warrants to, and agrees with, the Partnership, the General Partner the Investment Advisor and each other person who acquires Interests from time to time as follows:
(i)The Investor is not a “U.S. Person” and is not acquiring the Interests for the account or benefit, directly or indirectly, of any “U.S. Person”. As used herein, the term “U.S. Person” shall mean (i) any U.S. citizen (other than a permanent U.S. non-resident), or any natural person resident in the United States; (ii) any partnership, corporation or other entity created, organized or incorporated in or under the laws of the United States; (iii) any estate of which any executor or administrator is a U.S. Person; (iv) any trust of which any trustee is a U.S. Person; (v) any agency or branch of a foreign entity located in the United States; (vi) any nondiscretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person; (vii) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (viii) any partnership or corporation if: (A) organized or incorporated under the laws of any foreign jurisdiction; and (B) formed by a U.S. Person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by “accredited investors” (as defined in Rule 501(a) under the Securities Act) who are not natural persons, estates or trusts. As used herein, the term “United States” shall mean the United States of America, its territories and possessions, which include Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam, Wake Island and the Northern Mariana Islands, any state of the
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United States, and the District of Columbia. The Investor agrees to transfer the Interest only as permitted by the terms of the Partnership Agreement and in accordance with the provisions of Regulation S under the Securities Act, it being understood that the General Partner shall not consent to any transfer of the Interest not made in accordance with the provisions of Regulation S under the Securities Act and that any such transfer shall be null and void.
(ii)Except for offers and sales to discretionary or similar accounts held for the benefit or account of a non-U.S. Person by a U.S. dealer or other professional fiduciary, all offers to sell and offers to buy the Interest were made to or by the Investor while the Investor was outside the United States and, at the time that the Investor’s order to buy the Interests was originated (and at the time this Subscription Agreement was executed by the Investor), the Investor was outside the United States.
The representations and warranties set forth in this Section 3 are true and correct as of the date hereof, shall be true and correct as of the Closing (and, in the case of the representations and warranties with respect to the Investor set forth in subsections (j), (l), (m), (n), (o), (p), (q), (r) (s), (t), (u), (z), (aa), (bb) and (cc)(i) of this Section 3 shall be true and correct for so long as the Investor holds all or any part of the Interest), and shall survive the Closing pursuant to Section 5 hereof. The acknowledgements and agreements set forth in this Section 3 shall survive the Closing pursuant to Section 5 hereof, and the Investor shall comply with such agreements for so long as the Investor holds all or any part of the Interest.
Section 4. Tax Forms.
(a)If the Investor is a “United States person” as defined in Section 7701(a)(30) of the Code (a “U.S. Tax Person”), the Investor agrees to deliver to the General Partner, on or prior to the date of the Closing (as defined below), an accurate and complete signed copy of Internal Revenue Service Form W-9 (available at https://www.irs.gov/forms-instructions) (or any successor form thereto), and such other related forms (including, without limitation, any certificate with respect thereto) as the General Partner may request. In addition, (i) if the General Partner informs the Investor that a change in law renders the previous form inaccurate or incomplete in any material respect, or otherwise requires an update to the previous form, the Investor shall (subject to the last sentence of this paragraph) deliver promptly to the General Partner an accurate and complete signed copy of an updated Form W-9 (or any successor form thereto), and (ii) if at any time that a change in factual circumstances renders the previous form inaccurate or incomplete in any material respect, or otherwise requires an update to the previous form, the Investor shall (subject to the last sentence of this paragraph) deliver promptly to the General Partner an accurate and complete signed copy of an updated Form W-9 (or any successor form thereto). In either case, the Investor shall inform the General Partner promptly if the result of the change in circumstances or law is that the Investor no longer may provide such form.
(b)If the Investor is not a U.S. Tax Person, it agrees to deliver to the General Partner, on or prior to the date of the Closing, an accurate and complete signed copy of an applicable Internal Revenue Service Form W-8 (available at https://www.irs.gov/forms-instructions) (or any successor form thereto), and such other related forms (including, without limitation, any certificate with respect thereto) as the General Partner may request. In addition, (i) if the General Partner informs the Investor that a change in law renders the previous form inaccurate or incomplete in any material respect, or otherwise requires an update to the previous form, the Investor shall (subject to the last sentence of this paragraph) deliver promptly to the General Partner an accurate and complete signed
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copy of an updated applicable Form W-8 (or any successor form thereto), and (ii) if at any time that a change in factual circumstances renders the previous form inaccurate or incomplete in any material respect, or otherwise requires an update to the previous form, the Investor shall (subject to the last sentence of this paragraph) deliver promptly to the General Partner an accurate and complete signed copy of an updated applicable Form W-8 (or any successor form thereto). In either case, the Investor shall inform the General Partner promptly if the result of the change in circumstances or law is that the Investor no longer may provide such form.
(c)The Investor agrees to provide the General Partner at the time or times prescribed by applicable law and at such other time or times requested by the General Partner with (i) any information as is necessary (in the sole determination of the General Partner) for the General Partner to determine whether the Investor is a U.S. Tax Person or a United States owned foreign entity as defined in Section 1471(d)(3) of the Code (a “United States owned foreign entity”) and (ii) any additional information and documentation that the General Partner requests as is necessary (in the sole determination of the General Partner) for the General Partner to ensure that the General Partner and the Partnership comply with their obligations (if any) under Sections 1471 through 1474 of the Code and any current or future United States Treasury regulations or official interpretations thereof. If the Investor is a U.S. Tax Person or a United States owned foreign entity, the Investor also hereby agrees to (A) provide the General Partner and the Partnership its name, address, U.S. taxpayer identification number and, if such Investor is a United States owned foreign entity, the name, address and taxpayer identification number of each of its “substantial United States owners” (as defined in Section 1473(2) of the Code) and any other information requested by the General Partner promptly following any such request and (B) update any information provided pursuant to clause (A) promptly upon becoming aware that any such information previously provided has become obsolete or incorrect or that such update is otherwise required. The Investor acknowledges and agrees that the Partnership may provide such information and any other information concerning its investment in the Interest to the U.S. Internal Revenue Service or other applicable taxing authorities.
Section 5. Closing and Contribution.
(a)Closing. Subject to Section 9 below, the closing (the “Closing”) of the sale and purchase of the Interest shall take place on such date and at such place as shall be selected by the General Partner. As soon as practicable following the Closing, the General Partner shall deliver to the Investor a counterpart signature page of the Partnership Agreement, which shall be executed by the Investor and the General Partner, a copy of the fully-executed Partnership Agreement, and a counterpart of this Subscription Agreement, which shall be executed by the Investor, the General Partner and the Partnership.
(b)Contribution. Subject to the terms and conditions of the Partnership Agreement, the initial Contribution of the Investor for the purchase of the Interest, and each subsequent Contribution, shall take place at such time and in such manner as are specified in the Partnership Agreement.
Section 6. Agreements with Other Limited Partners. Each of the General Partner and the Partnership represents that each other Limited Partner admitted to the Partnership as a Limited Partner at the Closing (or at any prior or subsequent closing for the sale and purchase of Interests from the Partnership) has executed and delivered, or will execute and deliver, a subscription agreement in which each such other Limited Partner agrees to subscribe for and purchase Interests from the Partnership and makes representations, warranties and agreements which are comparable in scope to
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those made by the Investor in Section 3 hereof. The purchases of Interests by the Investor and such other Limited Partners are to be separate purchases from the Partnership, and the sales of Interests to the Investor and such other Limited Partners are to be separate sales by the Partnership. This Subscription Agreement and such other subscription agreements are sometimes collectively referred to herein as the “Subscription Agreements.”
Section 7. Partnership Agreement. The Investor acknowledges receipt of the agreed form Partnership Agreement as in effect at the time of the Closing, and hereby specifically accepts, adopts and agrees to adhere to and be bound by each and every provision thereof.
Section 8. Indemnification. The Investor agrees to indemnify and hold harmless the Partnership, the General Partner, the Investment Advisor, their respective Affiliates, officers, directors, managers, employees, members and partners and anyone acting on behalf of the Partnership, the General Partner or the Investment Advisor from and against all Losses which any of them may incur by reason of the failure of the Investor to fulfill any of the terms or conditions of this Subscription Agreement or by reason of any breach of any of the covenants, agreements, representations or warranties made by the Investor herein or otherwise in connection with the Partnership.
Section 9. Rejection of Subscription. Unless otherwise agreed in writing by the General Partner, the Investor’s Commitment shall not be less than US$10,000,000. The Investor acknowledges and confirms that the General Partner has the right, in its sole discretion, to accept or reject the subscription for the Interest contained in this Subscription Agreement, in whole or in part, at any time prior to the Closing for any reason.
Section 10. Survival of Covenants, Agreements, Representations and Warranties. All covenants, agreements, acknowledgments, representations and warranties of the parties contained herein shall survive the execution and delivery of this Subscription Agreement, any investigation at any time made by or on behalf of the Investor, the Partnership, the General Partner or any other person, the sale and purchase of the Interest and payment therefor and the admission of the Investor as a Limited Partner of the Partnership.
Section 11. Expenses. Except as otherwise provided in the Partnership Agreement with respect to Organizational Expenses, each party hereto shall pay its own expenses relating to this Subscription Agreement and the purchase and sale of the Interest hereunder.
Section 12. Privacy Notice. If a natural person (or an entity that is an “alter ego” of a natural person (e.g., a revocable grantor trust, an individual retirement account or an estate planning vehicle)), the Investor acknowledges that it has received, read and understood the initial privacy notice with respect to the Investment Advisor’s and General Partner’s collection and maintenance of non-public personal information regarding the Investor.
Section 13. Bad Actor Rule Compliance. Neither the Investor, nor any person who for purposes of Rule 506(d) and Rule 506(e) under the Securities Act (collectively, the “Bad Actor Rule”) beneficially owns or will beneficially own the Investor’s interest in the Partnership, is subject to any conviction, order, judgment, decree, suspension, expulsion or bar described in the Bad Actor Rule, whether it occurred or was issued before, on or after September 23, 2013, and agrees that it will notify the General Partner promptly upon becoming aware that the foregoing is not, or is no longer, correct. The Investor has fully completed Annex D hereto, and the information set forth in Annex D hereto is true and correct.
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Section 14. Municipal Advisor Rules. The Investor understands that the Investor must provide the General Partner with information necessary to determine whether the Investor is a “municipal entity” or an “obligated person” as those terms are defined in Section 15B(e) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), for purposes of compliance with the U.S. Securities and Exchange Commission’s Municipal Advisor Rules. The Investor has fully completed Annex E hereto, and the information set forth in Annex E hereto is true and correct.
Section 15. General Provisions.
(a)Notice. All notices, requests and other communications required or permitted to be given by or to any party hereto pursuant to this Subscription Agreement shall be in writing and delivered (i) in person, by registered or certified mail or by private courier, (ii) by facsimile or (iii) by electronic mail. Unless otherwise specifically provided in this Subscription Agreement, a notice shall be deemed to have been effectively given (w) if transmitted by electronic mail, on the date when delivery is confirmed by electronic receipt or another method (x) on the date of sending, if transmitted by facsimile, (y) on the second (2nd) Business Day after being mailed by registered or certified mail or sent by courier to the proper address, or (z) on the date of delivery, if delivered in person.
All such notices, requests and other communications shall be addressed, in each case:
(A)If to the Partnership or the General Partner, to:
Legacy Two GP, LLC
107 Abbotsford Court
Durham, NC 27712
Attention: Kim Saunders
Email: kim.saunders@mdikeepers.com
With a copy to:
Reed Smith LLP
599 Lexington Avenue
New York, NY 10022
Attention: James A. Mercadante, Esq.
Email: jmercadante@reedsmith.com
or to such other address, email address or facsimile number as the General Partner shall provide in writing from time to time;
(B)If to the Investment Advisor, to:
Legacy Two Advisors, LLC
107 Abbotsford Court
Durham, NC 27712
Attention: Kim Saunders
Email: kim.saunders@mdikeepers.com
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With a copy to:
Reed Smith LLP
599 Lexington Avenue
New York, NY 10022
Attention: James A. Mercadante, Esq.
Email: jmercadante@reedsmith.com
or to such other address, email address or facsimile number as the Investment Advisor shall provide in writing from time to time; and
(C)If to the Investor, to the address, email address or facsimile number set forth in the Investor’s completed Investor Profile Form, or to such other address, email address or facsimile number as the Investor shall provide in writing from time to time.
(b)Binding Nature; Third Party Beneficiaries. This Subscription Agreement shall (i) be binding upon the Investor, the Partnership and the General Partner and their legal representatives, successors and permitted assigns thereof and (ii) if the Investor consists of more than one person, be binding upon the joint and several obligations of all such persons. No person other than the parties hereto shall have any rights under or in respect of this Agreement, except that the indemnified Persons specified in Section 8 hereof shall be entitled to the benefits of, and to enforce their respective rights under, such Section.
(c)Amendments. Neither this Subscription Agreement nor any term hereof may be amended, waived, terminated or otherwise modified except with the written consent of the Investor, the Partnership and the General Partner.
(d)No Assignment. The Investor shall not assign or otherwise transfer this Subscription Agreement or any of the Investor’s rights or obligations hereunder to any other person, and any such purported assignment or transfer shall be null and void.
(e)Counterparts; Electronic Signatures. This Subscription Agreement may be executed in multiple counterparts by the parties hereto. All counterparts so executed shall constitute one valid and binding agreement among the Investor, the General Partner and the Partnership (and, to the extent of their rights as third party beneficiaries hereunder, the indemnified persons specified in Section 8), notwithstanding that all parties are not signatories to the original or the same counterpart. Each counterpart shall be deemed an original signature page to this Subscription Agreement, all of which together shall constitute one agreement to be valid as of the date of this Subscription Agreement. Documents executed, scanned and transmitted by facsimile, email or any other electronic means and electronic signatures shall be deemed original signatures for the purposes of this Subscription Agreement and all matters related hereto, with such scanned and electronic signatures having the same legal effect as original signatures. This Subscription Agreement and any other document necessary for the consummation of the transactions contemplated by this Subscription Agreement may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, Title 15, United States Code, Sections 7001 et seq., the Uniform Electronic Transaction Act and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on each party as if it were physically executed.
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(f)Severability. If any provision of this Subscription Agreement is determined to be invalid or unenforceable under any applicable law, then such provision shall be deemed inoperative to the extent of such invalidity or unenforceability, and shall be deemed modified to conform with such applicable law. Any provision hereof which may be deemed invalid or unenforceable under any applicable law shall not affect the validity or enforceability of any other provisions hereof, and to this extent the provisions hereof shall be severable.
(g)Governing Law. This Subscription Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to any rules or principles of conflicts of law that would cause the application of the laws of any jurisdiction other than the State of Delaware.
(h)Dispute Resolution. The parties agree to submit to the non-exclusive jurisdiction of the courts of the State of Delaware for the purposes of all legal proceedings arising out of, or relating to, this Subscription Agreement or the transactions contemplated by it. The parties to this Subscription Agreement irrevocably waive any objection which they now or hereafter have to the laying of venue of any such action or proceeding brought in the aforesaid courts.
(i)Entire Agreement. Each of the Investor Profile Form, Annex A, Annex B, Annex C, Annex D, Annex E, Annex F, (if applicable) Annex G and Exhibit A is a part of this Subscription Agreement. This Subscription Agreement, together with the Investor Profile Form, Annex A, Annex B, Annex C, Annex D, Annex E, Annex F, (if applicable) Annex G and Exhibit A hereto, the Partnership Agreement and the Exhibits and Schedules thereto, and the Side Letter (if any), supersede any and all oral or written agreements or understandings heretofore made, and contain the entire agreement of the parties hereto, with respect to their subject matter.
(j)Section Headings. Captions in this Subscription Agreement are for convenience only and do not define, limit or otherwise affect any term of this Subscription Agreement. Unless the context otherwise expressly requires, all references herein to Sections are to Sections of this Subscription Agreement
[Signature pages follow]
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SUBSCRIPTION AGREEMENT SIGNATURE PAGE (INVESTOR)
(THE INVESTOR MUST COMPLETE THIS SECTION)
The undersigned agrees that the execution of this signature page constitutes the execution and delivery of this Subscription Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement this ___ day of_____________, 20 .
INDIVIDUAL ENTITY
Signature Print Name of Entity
By:
Print Name Authorized Signatory
Additional Investor Signature (for jointly held Interests)
Print Name and Title
Print Name
•Non-U.S. Person: Please check this box if you are not a U.S. Person (as defined in Section 3(cc)(i) of this Subscription Agreement):
o
•Fund of Funds: Please check this box if you are a fund of funds:
o
•Bank Holding Company: Please check this box if you are subject to the BHCA or you are directly or indirectly “controlled” (as that term is defined in the BHCA) by a person that is subject to the BHCA:
o
•International Banking Act: Please check this box if you are subject to the International Banking Act of 1978, as amended:
o
•Banking Entity: Please check this box if you are a “banking entity” as defined under Section 619 of the Dodd-Frank Act:
o
Signature Page to The MDI Keeper’s Fund, L.P. Subscription Agreement
(Page 1 of 2)

SUBSCRIPTION AGREEMENT SIGNATURE PAGE
(THE GENERAL PARTNER AND THE PARTNERSHIP)
The undersigned hereby accept the Investor’s Commitment in an amount equal to US$ ___________.
IN WITNESS WHEREOF, the undersigned have executed this Subscription Agreement this ___ day of ______________, 20_.
General Partner: Partnership:
LEGACY TWO GP, LLC THE MDI KEEPER’S FUND, L.P.
By: Legacy Two GP, LLC, its General Partner
By: By:
Name: Name:
Title: Title:
Signature Page to The MDI Keeper’s Fund, L.P. Subscription Agreement
(Page 2 of 2)

INVESTOR PROFILE FORM
ALL INVESTORS MUST COMPLETE THIS INVESTOR PROFILE FORM (3 PAGES).
Name of Investor (Please Print or Type)
US$
Amount of Commitment (please set forth numerically and in writing)
Tax I.D. Number/Other Government Issued I.D. Number
Type of Investor—Please check one:
o Individual o Corporation o Trust
o Joint Tenants (with Rights of Survivorship) o Partnership o Other - specify:
Full Mailing Address (Exactly as it should appear on labels):
o Mr. o Mrs. o Ms. o Miss o Dr. o Other
— —
Telephone Number Fax Number
E-mail Address
Residence (if an individual) or Address of Principal Place of Business (if an entity), if different from above:
— —
Telephone Number Fax Number
E-mail Address
COMMUNICATIONS TO INVESTOR
Please send all courier communications to (Initial one):
________ Mailing Address
Initial here
________ Residence or Principal Place of Business Address
Initial here


INVESTOR PROFILE FORM (CONTINUED)
In addition, please send a copy of all communications to (if applicable):
o Mr. o Mrs. o Ms. o Miss o Dr. o Other
—  — 
Telephone Number Fax Number
E-mail Address
o Mr. o Mrs. o Ms. o Miss o Dr. o Other
—  — 
Telephone Number Fax Number
E-mail Address
GENERAL ELIGIBILITY REQUIREMENTS
The Investor hereby warrants and represents that: (Please initial one and complete blanks)

________ 1. If an individual, the Investor is of legal age and is a:
Initial
citizen of:
resident of:
OR
_______ 2. If a corporation, partnership, trust or other legal entity, the Investor is:
Initial
organized under the laws of:
on (insert date of organization):
has its principal place of business in:


INVESTOR PROFILE FORM (CONTINUED)
WIRING INSTRUCTIONS
Please wire cash distributions to the following account:
Name of Bank:
Bank Address:
ABA# or Swift Code:
Account Name:
Account Number:
Additional Wiring Information:
Name of Banking Officer:
Telephone Number: Fax Number:
WIRING INSTRUCTIONS—INTERMEDIARY BANK (IF APPLICABLE)
Please wire cash distributions to the following account:
Name of Bank:
Bank Address:
ABA# or Swift Code:
Account Name:
Account Number:
Additional Wiring Information:
Name of Banking Officer:
Telephone Number: Fax Number:

ANNEX A
ACCREDITED INVESTOR REPRESENTATION
The Investor hereby represents and warrants, pursuant to Section 3(e) of the Subscription Agreement, that he, she or it is correctly and in all respects described by the category or categories set forth below directly under which the Investor, or the authorized representative thereof, has signed his or her name, as of the Initial Closing Date. Capitalized terms used but not defined in this Annex A shall have the respective meanings given to them in the Subscription Agreement.
For Individuals Only
1.A director, executive officer, or general partner of the issuer of the securities being offered or sold, or a director, executive officer, or general partner of a general partner of that issuer; or any other “knowledgeable employee”5 of the issuer of the securities being offered or sold.
_____________________
2.A natural person whose individual net worth, or joint net worth with that person’s spouse or spousal equivalent6, at the time of purchase, exceeds $1,000,000. For purposes of calculating net worth (a) do not include your primary residence as an asset and (b) do not include debt secured by your primary residence as a liability, provided, however, you must reduce your net worth by (c) any debt secured by your primary residence that is in excess of the estimated fair market value of your primary residence at the time of purchase and (d) any debt secured by your primary residence that is in excess of the amount of any such debt that was outstanding 60 days prior to the effective date of this Subscription Agreement, other than as a result of the initial acquisition of your primary residence.
_____________________
3.A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse or spousal equivalent in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.
_____________________
5 A “knowledgeable employee” of a private fund (such as the Partnership) is defined in Rule 3c-5(a)(4) promulgated under the Investment Company Act as any natural person who is (i) an executive officer, director, trustee, general partner advisory board member, or person serving in a similar capacity, of the private fund or an affiliated management person (as defined in Rule 3c-5(a)(1)) of the private fund; or (ii) an employee of the private fund or an affiliated management person of the private fund (other than an employee performing solely clerical, secretarial or administrative functions with regard to such private fund or its investments) who, in connection with his or her regular functions or duties, participates in the investment activities of such private fund, other private funds, or investment companies the investment activities of which are managed by such affiliated management person of the private fund, provided that such employee has been performing such functions and duties for or on behalf of the private fund or the affiliated management person of the private fund, or substantially similar functions or duties for or on behalf of another company for at least 12 months. An “affiliated management person”, as defined in Rule 3c-5(a)(1) promulgated under the Investment Company Act, means an affiliated person (as such term is defined in Section 2(a)(3) of the Investment Company Act) that manages the investment activities of a private fund. For the purpose of this item, a knowledgeable employee’s accredited investor status will be attributed to the employee’s spouse with respect to joint investments in the Fund.
6 For purposes hereof, a “spousal equivalent” has the meaning set forth in 17 CFR §275.202(a)(11)(G)-1(d)(9) (i.e., a cohabitant occupying a relationship generally equivalent to that of a spouse).
A - 1
ANNEX A
4.A natural person who holds a General Securities Representative license (Series 7), a Private Securities Offerings Representative license (Series 82) or a Licensed Investment Adviser Representative license (Series 65).
_____________________
For Entities (and Certain Trusts) Only
5.A bank as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity.
_____________________
6.A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (the “Exchange Act”).
_____________________
7.An insurance company as defined in Section 2(a)(13) of the Securities Act.
_____________________
8.An investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that act.
_____________________
9.A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.
_____________________
10.A plan established and maintained by a state, its political subdivisions, or an agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets in excess of $5,000,000.
_____________________
11.An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self- directed plan, with investment decisions made solely by Persons that are accredited investors.
_____________________
A - 2
ANNEX A
12.A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended (the “Advisers Act”).
_____________________
13.An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, a partnership or a limited liability company, not formed for the specific purpose of acquiring Interests, with total assets in excess of $5,000,000.
_____________________
14.A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring Interests, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act.
_____________________
15.A “family office”7 (i) with at least $5,000,000 in assets under management, (ii) not formed for the specific purpose of making an investment in the securities being offered hereunder, and (iii) whose prospective investment is directed by an individual who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment, or a “family client”8 of a family office that meets the requirements set forth above, whose prospective investment in the securities being offered hereunder is directed by such family office.
_____________________
16.An investment adviser registered under Section 203 of the Advisers Act or under the laws of one or more states, or an exempt reporting adviser under Section 203(l) or Section 203(m) of the Advisers Act.
_____________________
17.A Rural Business Investment Company9.
_____________________
18.An entity with investments10 in excess of $5,000,000 that was not formed for the specific purpose of investing in the securities offered hereunder.
_____________________
7 For the purposes of this item, the definition of a “family office” encompasses a “family office” as defined in the “family office rule” under 17 CFR 275.202(a)(11)(G)-1.
8 For the purposes of this item, the definition of a “family client” encompasses a “family client” as defined in the “family office rule” under 17 CFR 275.202(a)(11)(G)-1.
9 A Rural Business Investment Company, as defined in Section 384A of the consolidated Farm and Rural Development Act, means a company that has been granted final approval by the Secretary of Agriculture under 7 U.S.C. 2009cc-3(e), and has entered into a participation agreement with the Secretary of Agriculture.
10 For the purposes of this item, “investments” has the meaning as defined in Rule 2a51-1(b) under the Investment Company Act.
A - 3
ANNEX A
19.An entity as to which all the equity owners are accredited investors, or a revocable trust that may be amended or revoked at any time by the grantors, as to which all the grantors are accredited investors.
_____________________
NOTE: If the undersigned qualifies as an “accredited investor” under this Category 19 only, a list of equity owners (or grantors, as applicable) of the undersigned, and the accredited investor category in this Annex A that each such equity owner (or grantor) satisfies, should be listed on the below table as indicated. Please attach additional pages if necessary.
Equity Owners (or Grantors)
Accredited Investor Category Under Annex A
That Equity Owner (or Grantor) Satisfies
A - 4
ANNEX B
Benefit Plan Matters Questionnaire
Capitalized terms used but not defined in this Annex B shall have the respective meanings given to them in the Subscription Agreement.
For Individuals Only
(i)Is the Investor subscribing as a trustee or custodian for an individual retirement account (“IRA”)?
o Yes          o No
(ii)Does the Investor, or do any of its affiliates, (a) have discretionary authority or control with respect to the assets of the Partnership or (b) provide investment advice for a fee (direct or indirect) with respect to the assets of the Partnership? (For this purpose, an “affiliate” includes any person, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the person and “control” with respect to a person other than an individual means the power to exercise a controlling influence over the management or policies of such person.)
o Yes          o No
For Entities Only
(iii)Is the Investor, or is the Investor acting (directly or indirectly) on behalf of an ERISA Partner?
o Yes          o No
(iv)Is the Investor a pooled investment fund?
o Yes          o No
B-1
ANNEX B
If yes, the Investor hereby certifies to either 1 or 2 below:
(Please initial one)
____________ Initial
1.Less than 25% of the value of each class of equity interests in the Investor (excluding from this computation interests held by (a) any individual or entity (other than an ERISA Partner) having discretionary authority or control over the assets of the Investor, (b) any individual or entity who provides investment advice for a fee (direct or indirect) with respect to the assets of the Investor and (c) any affiliate of such individuals or entities) is held by ERISA Partners.
____________ Initial
2.Twenty-five percent or more of the value of any class of equity interests in the Investor (excluding from this computation interests held by (i) any individual or entity (other than an ERISA Partner) having discretionary authority or control over the assets of the Investor, (ii) any individual or entity who provides investment advice for a fee (direct or indirect) with respect to the assets of the Investor and (iii) any affiliate of such individuals or entities) is held by ERISA Partners;
and
____% of the equity interest in the Investor is held by ERISA Partners.
(v)Is the Investor, or is the Investor acting (directly or indirectly) on behalf of, (y) an insurance company using general account assets which may be deemed to be the assets of any of the foregoing types of plans, accounts or arrangements, pursuant to John Hancock Mutual Life Insurance Company v. Harris Trust & Savings Bank, 510 U.S. 86 (1993), or otherwise or (z) an entity which is deemed to hold the assets of any ERISA Partner or other plan, individual retirement account or other arrangement that is subject to Section 4975 of the Code pursuant to Section 3(42) of ERISA and 29 C.F.R. § 2510.3-101, or otherwise (each a “Plan Asset Vehicle”)?
o Yes          o No
If the answer to the question above is “Yes”, what percentage of the Plan Asset Vehicle includes or constitutes “plan assets” (the “Plan Asset Percentage”)?
_____________________
The Investor agrees to notify the General Partner promptly in writing if there is any change in the percentage of the Investor's assets set forth in (iv) or (v) above that are treated as "plan assets" for the purpose of ERISA and any regulations promulgated thereunder.
B-2
ANNEX B
(vi)If questions (iii), (iv), and (v) above were answered “No”, please indicate whether or not the Investor is subject to any provisions of any federal, state, local, non-U.S. or other laws or regulations that are similar to those provisions contained in Title I of ERISA or Section 4975 of the Code. Otherwise, please skip this question.
o Yes          o No
(vii)Is the Investor subscribing as a trustee or custodian for an individual retirement account (“IRA”)?
o Yes          o No
If yes, is the Investor a qualified IRA custodian or trustee?
o Yes          o No
(viii)List below (and on a supplemental sheet if required) the name of each employer whose employees participate in each ERISA-subject plan that is, directly or indirectly, making an investment in the Partnership and each “affiliate” (as defined in Section 407(d)(7) of ERISA) of such an employer. Indicate next to each name the maximum dollar amount which the Partnership is permitted to invest in any class of publicly traded securities issued by such employer or affiliate.
$
$
(ix)Please indicate whether or not the Investor is a Limited Partner that (a) is a governmental plan or a church plan within the meaning of Sections 3(32) and 3(33), respectively, of ERISA.
o Yes          o No
(x)Does the Investor, or do any of its affiliates, (a) have discretionary authority or control with respect to the assets of the Partnership or (b) provide investment advice for a fee (direct or indirect) with respect to the assets of the Partnership? (For this purpose, an “affiliate” includes any person, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the person and “control” with respect to a person other than an individual means the power to exercise a controlling influence over the management or policies of such person.)
o Yes          o No
The Investor agrees to notify the Partnership of any change with respect to the foregoing information and to provide such further information as the Partnership may reasonably require.
B-3
ANNEX C
Qualified Purchaser Questionnaire
Capitalized terms used but not defined in this Annex C shall have the respective meanings given to them in the Subscription Agreement. All references in this Annex C to “Rules” are to rules promulgated under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
For Individuals Only
1.Answer this question only if you are an individual: Do you own11 investments12 of the types listed below worth13 in the aggregate $5 million or more?
o          Yes
o          No
•securities of public companies;14
•securities of registered investment companies such as mutual funds (including money market funds) and publicly-traded closed-end funds;
•securities of private investment companies that are exempt from the Investment Company Act under Section 3(c)(1) or 3(c)(7) thereof;15
•cash and cash-equivalents16 held for investment purposes;
•real estate held for investment purposes;17
11 A natural person (i.e., an individual) may include in the amount of such person’s investments any investment held jointly with that person’s spouse, or investments in which the person’s spouse shares a community property or similar shared ownership interest. In determining whether spouses who are making a joint investment in the Partnership are qualified purchasers, one may include in the amount of each spouse’s investments any investments owned by the other spouse (whether or not the investments are held jointly). One must deduct from the amount of any such investments any amounts of outstanding indebtedness incurred by either spouse to acquire such investments. (See Rule 2a51-1(g)(2)).
12 A natural person also may include in the amount of such person’s investments any investments held in an account the investments of which are directed by and held for the benefit of such person. (See Rule 2a51-l(g)(4)).
13 For purposes of this Questionnaire, value investments based upon either their fair market value on the most recent practicable date or their cost. In valuing an investment, exclude the principal amount of any outstanding debt, including margin loans, incurred to acquire, or for the purpose of acquiring, the investment. (See Rule 2a51-1(d)).
14 A “public company” is any company that (i) files reports under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, or (ii) has a class of securities that are listed on a “designated offshore securities market” as such term is defined by Regulation S under the Securities Act of 1933, as amended. For example, a company whose equity securities are listed on a national securities exchange or traded on the Nasdaq Stock Market would be a “public company”. (See Rule 2a51-1 (a)(7)).
15 You may also include interests in companies that are (i) exempt from the Investment Company Act by Section 3(c)(2), (3), (4), (5), (6), (8), or (9) of the Investment Company Act, (ii) exempt from the Investment Company Act by Rule 3a-6 or 3a-7, or (iii) commodity pools. (See Rules 2a51-1(b) and 2a51-l(a)(3)).
16 Cash-equivalents include bank deposits, certificates of deposit, bankers acceptances, similar bank instruments held for investment purposes and the net cash surrender value of an insurance policy.
17 Real estate held for investment purposes excludes real estate used by you or your “related persons” (a spouse or former spouse, sibling, direct lineal descendant or ancestor by birth or adoption or a spouse of such descendant or ancestor): (i) for personal purposes, (ii) as a place of business, or (iii) in connection with the conduct of a trade or business (unless the purchaser is engaged primarily in the business of investing, trading or developing real estate and the real estate in question is part of such business). Residential real estate may be considered “held for investment” if deductions on the property are not disallowed by Section 280A of the Internal Revenue Code of 1986, as amended. (See Rule 2a51-1(c)(1)).
C - 1
ANNEX C
•securities of non-public companies that have shareholders’ equity18 of at least $50 million;
•securities of other non-public companies that are not controlled by, under common control with, or controlling you;19
•commodity futures contracts, options on such contracts and options on physical commodities traded on or subject to the rules of (i) a contract market designated under the Commodity Exchange Act and the rules thereunder or (ii) a non-U.S. board of trade or exchange as contemplated in the rules thereunder (collectively, “Commodity Interests”);20
•physical commodities as to which a Commodity Interest is traded on a market described above, including certain precious metals;21
•swaps and other financial contracts;22 or
•if you are a private investment company described above or a commodity pool, amounts payable to you pursuant to a binding capital commitment.
Note: If you are an individual and answered this question, you need not answer any other questions in this Questionnaire.
The undersigned Investor hereby represents and warrants, pursuant to Section 3(n) of the Subscription Agreement, that this Annex C has been fully completed by the Investor, and that the information set forth in this Annex C is correct.
[Write or Type Name of Investor]
Signature:
18 Shareholders’ equity” should be the amount reflected as such on the relevant company’s most recent financial statements prepared in accordance with generally accepted accounting principles (which cannot be more than 16 months old). (See Rule 2a51-l(b)(1)(iii)).
19 For purposes of this question, you are deemed to “control” a company if either (i) you are an officer or director of the company and you own directly or indirectly any voting securities of the company, or (ii) you own directly or indirectly more than 25% of the voting securities of the company. (See Investment Company Act Section 2(a)(9)).
20 Commodity Interests should be valued at their initial margin or option premium. (See Rules 2a51-1(a)(1) and 2a51-1(d)(1)).
21 See Rules 2a51-1(b)(4) and 2a51-1(a)(5).
22 A “financial contract” is defined in Section 3(c)(2)(B)(ii) of the Investment Company Act as any arrangement that (i) takes the form of an individually negotiated contract, agreement or option to buy, sell, lend, swap or repurchase, or other similar individually negotiated transaction commonly entered into by participants in the financial markets, (ii) is in respect of securities, commodities, currencies, interest or other rates, other measures of value, or any other financial or economic interest similar in purpose or function to any of the foregoing, and (iii) is entered into in response to a request from a counter party for a quotation, or is otherwise entered into and structured to accommodate the objectives of the counter party to such arrangement.
C - 2
ANNEX C
For Entities Only
2.Answer this question only if (a) you are an entity, such as a corporation, limited liability company, partnership or trust, (b) but you are not a Family Company23 and (c) you were not formed for the specific purpose of investing in the Partnership: Do you own investments of the types described in Question 1 above worth in the aggregate $25 million or more?
o          Yes
o          No
3.Answer this question only if (a) you are a Family Company and (b) you were not formed for the specific purpose of investing in the Partnership: Do you own investments of the types described in Question 1 above worth in the aggregate $5 million or more?
o          Yes
o          No
4.Answer this question only if you are an entity that was formed for the specific purpose of acquiring an interest in the Partnership: Is it true that each of your beneficial owners24 (a) was not formed for the specific purpose of investing in you and (b) (i) owns investments of the types listed in Question 1 above worth in the aggregate $25 million or more, (ii) is a Family Company that owns, or an individual that owns, investments of the types listed in Question 1 above worth in the aggregate $5 million or more, or (iii) is a trust to which each settlor or other Person who contributed assets satisfies either of the foregoing items (i) and (ii)?
o          Yes
o          No
5.Answer this question only if you are an entity that answered no to Question 2 or 3 above: Is it true that each of your beneficial owners (a) was not formed for the specific purpose of investing in you and (b) (i) owns investments of the types listed in Question 1 above worth in the aggregate $25 million or more, (ii) is a Family Company that owns, or an individual that owns, investments of the types listed in Question 1 above worth in the aggregate $5 million or more, or (iii) is a trust to which each settlor or other Person who contributed assets satisfies either of the foregoing items (i) and (ii)?
o          Yes
o          No
23 A “Family Company” is an entity that owns at least $5 million in investments and that is owned directly or indirectly by or for two or more natural persons who are related as siblings or spouses (including former spouses), or direct lineal descendants by birth or adoption, spouses of such persons, the estates of such persons, or foundations, charitable organizations or trusts established by or for the benefit of such persons. (See Investment Company Act Section 2(a)(51)(A)(ii).) One must deduct from the value of such Family Company’s investments the amount of any outstanding indebtedness incurred by an owner of such Family Company to acquire such investments.
24 In the case of a trust, all beneficiaries, including contingent beneficiaries, are considered to be “beneficial owners”.
C - 3
ANNEX C
6.Answer this question only if you answered “no” to Question 2 or 3 above and you are a trust that was not formed for the specific purpose of investing in the Partnership: Is it true that each of your trustees (or other Persons authorized to make decisions with respect to the trust) and each of your grantors (or other Persons who have contributed assets to the trust) (a) was not formed for the specific purpose of investing in you and (b) either (i) owns investments of the types listed in Question 1 above worth in the aggregate $25 million or more or (ii) is a Family Company that owns, or an individual that owns, investments of the type listed in Question 1 above worth in the aggregate $5 million or more?25
o          Yes
o          No
7.Answer this question only if you are a private investment company or a non-U.S. investment company and you (i) are not required to register as an “investment company” under the Investment Company Act pursuant to Section 3(c)(l) or 3(c) (7) thereof and (ii) had any investors on or before April 30, 1996: Have you received the consent required under Section 2(a)(51)(C) of the Investment Company Act from all of your beneficial owners to be a “qualified purchaser” under the Investment Company Act?
o          Yes
o          No
The undersigned Investor hereby represents and warrants, pursuant to Section 3(n) of the Subscription Agreement, that this Annex C has been fully completed by the Investor, and that the information set forth in this Annex C is correct.
[Write or Type Name of Investor]
By:
Name:
Title:
25 See Investment Company Act Section 2(A)(51)(A)(iii).
C - 4
ANNEX D
BAD ACTOR RULE QUESTIONNAIRE
For purposes of this Annex D, the term “Investor” includes any person who for the purposes of Rule 506(d) and Rule 506(e) under the Securities Act beneficially owns or will beneficially own the Investor’s Interest. Capitalized terms used but not defined herein have the meanings given to them in the Subscription Agreement and the annexes thereto.
For All Investors
Please check all boxes that apply:
(A)Convictions. The Investor has not been convicted, within the last ten years, of any felony or misdemeanor:
(1)In connection with the purchase or sale of any security;
(2)Involving the making of any false filing with the U.S. Securities and Exchange Commission (the “SEC”); or
(3)Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities.
True ...................
False ...................
(B)Court Orders, Judgments or Decrees. The Investor is not subject to any order, judgment or decree of any court of competent jurisdiction, entered within the last five years, that restrains or enjoins it from engaging or continuing to engage in any conduct or practice:
(1)In connection with the purchase or sale of any security;
(2)Involving the making of any false filing with the SEC; or
(3)Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities.
True ...................
False ...................
(C)Agency Final Orders. The Investor is not subject to a final order of a U.S. state securities commission (or an agency or officer of a U.S. state performing like functions); a U.S. state authority that supervises or examines banks, savings associations, or credit unions; a U.S. state insurance commission (or an agency or officer of a U.S. state performing like functions); an appropriate U.S. federal banking agency; the U.S. Commodity Futures Trading Commission; or the U.S. National Credit Union Administration that:
(1)Bars it from: (i) association with an entity regulated by such commission, authority, agency, or officer; (ii) engaging in the business of securities, insurance or banking; or (iii) engaging in savings association or credit union activities; or
D - 1
ANNEX D
(2)Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative or deceptive conduct entered within the last ten years.
True ...................
False ...................
Definition of the term “final order.” For the purposes of this Annex D, the term “final order” means a written directive or declaratory statement issued by a federal or state agency described in this clause (C) under applicable statutory authority that provides for notice and an opportunity for hearing, which constitutes a final disposition or action by that federal or state agency.
(D)SEC Orders. The Investor is not subject to an order of the SEC entered pursuant to section 15(b) or 15B(c) of the Exchange Act or section 203(e) or (f) of the Investment Advisers Act that:
(1)Suspends or revokes its registration as a broker, dealer, municipal securities dealer or investment adviser;
(2)Places limitations on its activities, functions or operations; or
(3)Bars it from being associated with any entity or from participating in the offering of any penny stock.
True ...................
False ...................
(E)SEC Cease and Desist Orders. The Investor is not subject to any order of the SEC entered within the last five years that orders it to cease and desist from committing or causing a violation or future violation of:
(1)Any scienter-based anti-fraud provision of the U.S. federal securities laws, including without limitation section 17(a)(1) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 under the Exchange Act, Section 15(c)(1) of the Exchange Act and Section 206(1) of the Investment Advisers Act, or any other rule or regulation thereunder; or
(2)Section 5 of the Securities Act.
True ...................
False ...................
(F)Securities Association or Securities Exchange Suspension or Expulsion. The Investor is not suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade.
True ...................
False ...................
D - 2
ANNEX D
(G)Refusal Order, Stop Order or Suspension of Regulation A Exemption. The Investor has not filed (as a registrant or issuer), and it is not and was not named as an underwriter in, any registration statement or Regulation A offering statement filed with the SEC that, within the last five years, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, and it is not the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued.
True ...................
False ...................
(H)U.S. Postal Service False Representation Order. The Investor is not subject to a United States Postal Service false representation order entered within the last five years, and it is not subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.
True ...................
False ...................
(I)To the best of its knowledge, the Investor is not currently the subject of any threatened or pending investigation, proceeding, action or other event that, if adversely determined, would give rise to any of the events described in paragraphs (A)-(H) above.
True ...................
False ...................
If you answered “False” to any of the preceding questions, please contact the General Partner to discuss the relevant facts and discuss whether a supplemental submission will be required.
D - 3
ANNEX E
STATUS AS MUNICIPAL ENTITY OR OBLIGATED PERSON
Capitalized terms used but not defined herein have the meanings given to them in the Subscription Agreement and the annexes thereto.
For All Investors
1Is the Investor a Municipal Entity? A Municipal Entity is a State (as defined below), political subdivision of a State, or municipal corporate instrumentality of a State, including (a) any agency, authority, or instrumentality of the State, political subdivision, or municipal corporate instrumentality; (b) any plan, program, or pool of assets sponsored or established by the State, political subdivision, or municipal corporate instrumentality or any agency, authority, or instrumentality thereof; or (c) any other issuer of municipal securities.
Yes ...................
No ...................
2Is the Investor an Obligated Person? An Obligated Person is a person, including an issuer of municipal securities, who is either generally or through an enterprise, fund, or account of such person, committed by contract or other arrangement to support the payment of all or part of the obligations on the municipal securities to be sold in an offering of municipal securities, but excluding (a) a person that would be an obligated person solely because it provides municipal bond insurance, letters of credit or other liquidity facilities, (b) a person whose financial information or operating data is not material to a municipal securities offering, without reference to any municipal bond insurance, letter of credit, liquidity facility or other credit enhancement, and (c) the federal government.
Yes ...................
No ...................
3Please tick with an “X” either Box (a) or Box (b), as appropriate
none of the assets of the Investor to be invested in the Partnership are or at any time will be, either Proceeds of Municipal Securities or Municipal Escrow Investments, as those terms are defined below; or
the assets of the Investor to be invested in the Partnership are or may be, either Proceeds of Municipal Escrow Investment, as those terms are defined below.
4If the Investor is a fund, is the Investor managed or advised by a registered municipal advisor:
Yes ...................
No ...................
Not Applicable ...................
5If the Investor is a fund, does the Investor specifically market to Municipal Entities for the investment of Proceeds of Municipal Securities:
Yes ...................
No ...................
Not Applicable ...................
“Proceeds of Municipal Securities” means monies derived by a Municipal Entity from the sale of municipal securities, investment income derived from the investment or reinvestment of such monies, or monies of a Municipal Entity or Obligated Person held in funds under legal documents for the
E - 1
ANNEX E
municipal securities that are reasonably expected to be used as security or a source of payment for the payment of the debt service on the municipal securities, including reserves, sinking funds, and pledged funds created for such purpose, and the investment income derived from the investment or reinvestment of monies in such funds, but does not include monies that have been spent to carry out the authorized purposes of municipal securities. Proceeds of Municipal Securities deposited in a retirement fund or account are deemed to have been spent to carry out the authorized purposes of the municipal securities unless they are accounted for separately from other monies in the fund or account and remain under the control of the municipal entity that deposited the proceeds into the retirement fund or account. Monies derived from a municipal security issued by an education trust established by a State under Section 529(b) of the U.S. Internal Revenue Code are not Proceeds of Municipal Securities.
“Municipal Escrow Investments” means Proceeds of Municipal Securities or any other funds of a Municipal Entity that are deposited in an escrow account to pay the principal of, premium, if any, and interest on one or more issues of municipal securities.
“State” means any state of the United States, the District of Columbia, Puerto Rico, the Virgin Islands or any other possession of the United States.
E - 2
ANNEX F
NOTICE OF IDENTIFICATION VERIFICATION
ANTI-MONEY LAUNDERING POLICY
Capitalized terms used but not defined in this Annex F shall have the respective meanings given to them in the Subscription Agreement.
In connection with your participation in the Partnership, we will verify your identification against applicable government lists to the extent necessary for the Partnership to fulfill its anti- money laundering responsibilities. Any information provided will remain confidential, except in circumstances where we are required by the laws of the United States, or other applicable jurisdiction, to disclose it to appropriate governmental bodies.
By your signature below, you hereby consent to our verification of your identification against applicable governmental lists in accordance with our anti-money laundering responsibilities and agree to provide the additional identification information requested below.
Investor’s Signature:
Investor’s Name and Title:
Entity Name (if applicable):
Address:
City/State/Country
Date:
Identification Documentation
Copies of documents verifying the identity of an Investor must be provided with this document.
•For Individuals: driver’s license, passport, or another form of government issued picture identification.
•For Corporate Entities: copy of articles of incorporation or government issued business license and a certificate of existence/good standing.
•For Non-Corporate Entities: copy of the partnership agreement, trust agreement, or other evidence of continued existence.
F - 1
ANNEX G
SPECIAL REPRESENTATION AND WARRANTY
For Entities Only
NOTE: This special representation and warranty should only be completed if the Investor cannot make the representations set forth in Section 3(n)(iii) of this Subscription Agreement.
By your signature on this page you represent, warrant and covenant as of the date hereof, as of the Closing and for so long as you hold all or any part of your Interest and have not informed the General Partner in writing of any change pursuant to the following sentence, that the total number of your beneficial owners listed below your signature below is correct. You agree to promptly notify the General Partner in writing should your total number of beneficial owners change, which such notification shall include an updated representation and warranty confirming the total number of your beneficial owners as of the date thereof and for so long as you hold all or any part of your Interest and have not informed the General Partner in writing of any further change pursuant to this sentence.
THE INVESTOR
Date of Execution: _______________
[Please Print or Type Name of the Investor]
By:
Name:
Title:
Your Total Number of Beneficial Owners:
G - 1
EXHIBIT A
Exhibit A
Blank Partnership Agreement Signature Page
[See attached]



[Notarization required]
Investment Agreement
relating to
PRETTL Electronics Automotive GmbH


Parties
1.PRETTL Electronics GmbH, a limited liability company under the laws of Germany, with business address at Robert-Bosch-Straße 10, 01454 Radeberg, registered with the commercial register at the local court of Dresden under HRB 34431,
- hereinafter the “Existing Shareholder” –
and
2.Ideanomics, Inc., a Nevada corporation, with business address at 1441 Broadway, Suite 5116, New York, NY 10018, USA
- hereinafter the “Investor” -
and
3.PRETTL Electronics Automotive GmbH, a limited liability company under the laws of Germany, with business address at Robert-Bosch-Straße 10, 01454 Radeberg, registered with the commercial register at the local court of Dresden under HRB 40004,
- hereinafter the “Company” -
- Parties No. 1 and 2 hereinafter individually a “Shareholder” and, collectively, the “Shareholders” -
- Parties No. 1 through 3 hereinafter individually a “Party” and, collectively, the “Parties” -
Page 2 of 21

Contents
2
3
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5
5
6
7
7
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8
9
10
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10
14
15
15
17
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Annexes
Annex 17.1 – Addresses 24
Annex 20.1.6 – Investor Disclosure 25
Annex 3.1.3 – Articles of Association 10
Annex 3.2 – Rules of Procedure for the Management 10
Annex 3.5 – Shareholders’ Agreement 10
Annex 8.1.2 – Shareholders’ List 14
Annex 9.1.2a) – 2020 Accounts 15
Annex 9.1.2b) – Management Accounts 15
Annex 9.1.4 – Public grants and subsidies 16
Annex 9.1.5 – IP-Rights 16
Annex 9.1.6 – Employees 16
Annex 9.1.7a) – Related Person Agreements 17
Annex 9.1.7c) – Material Contracts 17
Annex 9.1.9 – Insurances 18
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I.Preliminary Remarks
1Facts
1.1The object of the Company is development, manufacture, sales and service of electronic and electromechanical products, systems and equipment for the automotive, energy, industrial, communications and medical technology sectors. (“Business”).
1.2The Existing Shareholder is currently the sole shareholder of the Company holding the Company’s entire share capital (Stammkapital) of DEM 51,000 (German Marks (DEM) fifty one thousand), represented by one share with serial number one and a nominal value of DEM 51,000.
1.3In the course of this Financing Round (as defined below) the current share capital will be converted to Euro and split in multiple shares with a nominal value of EUR 1.00 each. After the conversion and the split the Company’s share capital will amount to EUR 26,076 (Euro twenty six thousand, seventy six) and be represented by 26,076 shares with a nominal value of EUR 1.00 each (“Common Shares”).
1.4The Company intends to raise an equity financing and the Investor intends to invest in the Company in return for subscribing for new Preferred Shares (“Financing Round”). For purposes of implementing the Financing Round, the Existing Shareholder will resolve upon (i) the conversion and split of the Company’s registered share capital as described in section 1.3 and (ii) the increase of the Company’s registered share capital from EUR 26,076 (Euro twenty six thousand, seventy six) by EUR 11,175 (Euro eleven thousand, one hundred seventy five) to EUR 37,251 (in words: Euro thirty seven thousand, two hundred fifty one) (“Capital Increase”), by issuing 11,175 new preferred shares (Vorzugsgeschäftsanteile), each with a nominal value of EUR 1.00 (in words: Euro one) (each such share as well as any further share of such class: a “Preferred Share” and, collectively, the “Preferred Shares”), against payment of the respective nominal value, with the Preferred Shares carrying the rights and privileges as set forth in the Company’s Articles of Association and in this Investment Agreement.
1.5The issuance of Preferred Shares in this Financing Round is calculated at a pre-money valuation of the Company on a fully-diluted basis in the amount of EUR 17,500,000 (Euro seventeen million, five hundred thousand), resulting in an underlying share price comprising the capital contributions in the nominal value and the further contributions to the capital reserves of the Company within the meaning of section 272 (2) no. 4 Commercial Code (sonstige Leistungen in die Kapitalrücklage der Gesellschaft gemäß § 272 Abs. 2 Nr. 4 HGB) of EUR 671.12 per Preferred Share (“Preferred Share Price”).
1.6The Parties intend to enter in this investment agreement (hereinafter, including its Annexes, the “Investment Agreement”).
NOW, THEREFORE, the Parties agree as follows:
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2Definitions
Throughout this Investment Agreement, certain words and expressions have been defined to carry specific meaning. Such words and expressions shall have the meaning ascribed to them in such definitions. Hereafter is an index of these definitions:
2020 Accounts 15 Insolvency Code 8
Articles of Association 10 Investment Agreement 6
Business 6 Investor 2
Business Day 8 IP-Rights 16
Business Guarantee Claim 20 Liability Cap 21
Business Guarantees 15 Limited Liability Companies Act 9
Capital Increase 6 Management Accounts 15
Civil Code 8 Material Contracts 17
Closing Date 11 Part(y/ies) 2
Common Shares 6 Permits 16
Company 2 Preferred Share Price 6
De Minimis Claims 21 Preferred Shares 6
Defaulting Investor 12 Shareholder(s) 2
Existing Shareholder 2 Signing Date 9
Financing Round 6 Stock Corporation Act 9
Grace Period 13 Threshold Amount 21
Guarantor 14 Title Guarantee Claim 19
Holders of Preferred Shares 8 Title Guarantee(s) 14
In addition to the terms previously listed and defined throughout this Investment Agreement, except where the context requires a different interpretation, the words and expressions set out below shall have the following meaning or the meaning given to them in this Agreement:
Business Day
means any day (other than a Saturday, Sunday or legally recognized public holiday in Frankfurt am Main) on which banks in Frankfurt am Main are open for non-automated business.
Civil Code
means the German Civil Code (Bürgerliches Gesetzbuch (BGB)).
Commercial Code
means the German Commercial Code (Handelsgesetzbuch (HGB)).
Holders of Preferred Shares
means all holders of Preferred Shares that are Parties to this Investment Agreement; each a Holder of Preferred Shares.
Insolvency Code
means the German Insolvency Code (Insolvenzordnung (Inso)).
Limited Liability Companies Act
means the German Limited Liability Companies Act (GmbHG).
Notarization Act
means the German Notarization Act (Beurkundungsgesetz (BeurkG)).
Signing Date
means the date on which this Investment Agreement is notarized.
Stock Corporation Act
means the German Stock Corporation Act (Aktiengesetz (AktG)).
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II.Investment Agreement
3Capital Increase and other Corporate Measures
3.1Without undue delay (unverzüglich) after notarization of this Investment Agreement, the Existing Shareholder shall hold an extraordinary shareholders’ meeting of the Company in notarized form and shall, waiving all requirements as to form and notice periods for convocation and holding of a shareholders’ meeting, resolve unanimously and with all votes:
3.1.1to convert the Company’s share capital from German Marks (DEM) to Euros (EUR), resulting in a share capital of EUR 26,076 and to split the share capital in 26,076 shares with a nominal amount of EUR 1.00 each, with serial numbers 2 through 26,077.
3.1.2to increase the Company’s share capital from EUR 26,076 by EUR 11,175 to EUR 37,251 by issuing 11,175 Preferred Shares with serial numbers 26,078 through 37,252 each with a nominal amount of EUR 1.00, exclusively to the Investor in return for payment of the Preferred Shares’ nominal amount.
3.1.3and to amend and restate the Company’s articles of association (“Articles of Association”) as set forth in Annex 3.1.3.
3.2Without undue delay (unverzüglich) after notarization of this Investment Agreement, the Existing Shareholder shall hold an extraordinary shareholders’ meeting of the Company, and shall, waiving all requirements as to form and notice periods for convocation and holding of a shareholders’ meeting, resolve on the adoption of rules of procedure for the Company’s management board (Geschäftsführung); the so adopted rules of procedure for the Company’s management board (Geschäftsführung) are attached hereto for evidence purposes (zu Beweiszwecken) as Annex 3.2.
3.3The Preferred Shares shall be entitled to participate in the profits of the Company with effect as of the beginning of the business year in which the Capital Increase is registered with the commercial register of the Company.
3.4The Existing Shareholder hereby undertakes vis-à-vis the Investor, to do or cause to be done everything necessary or appropriate for the implementation of the measures agreed in Section 3.1 above and to refrain from any actions which could block, prevent or undermine such measures. Thus, the Existing Shareholder hereby waives any subscription rights (Bezugsrechte) to the Preferred Shares issued under the Capital Increase and undertakes to renew such waiver when the share capital of the Company is increased pursuant to Section 3.1.2 above. Further, the Existing Shareholder hereby waives any rights to appeal any of the resolutions stated above and undertakes not to vote for a withdrawal (Aufhebung) of any of the above stated resolutions.
3.5Immediately after the conclusion of this Investment Agreement, the Parties shall enter in the Shareholders’ Agreement (“Shareholders’ Agreement”) in the form as attached hereto in Annex 3.5.
4Subscription of Preferred Shares
4.1The Investor hereby undertakes vis-à-vis the other Shareholder, but not vis-à-vis the Company, to subscribe for (übernehmen) and submit to the Company a duly signed and at least certified (beglaubigte) subscription declaration (Übernahmeerklärung) for the Preferred Shares issued under the Capital Increase without undue delay (unverzüglich) after all of the resolutions set forth in Section 3.1 have been duly passed. The Company hereby undertakes to accept (annehmen) the subscription declaration of the Investor and authorizes the acting notary public, its official representative (Notarvertreter) and its legal successor to receive all such subscription declarations on the Company’s behalf (Empfangsvollmacht).
4.2The Investor hereby undertakes vis-à-vis the other Shareholder, but not vis-à-vis the Company, to pay within five (5) Business Days after the Investor has subscribed for its Preferred Shares the issue price of such Preferred Shares in Euros and free of bank charges and costs to the Company’s bank account at
Bank: Commerzbank AG
IBAN: DE64 8504 0000 0800 1216 00
BIC (SWIFT): COBADEFFXXX
Purpose: “Capital Increase”
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The Company procures (steht dafür ein) that the bank account will not have a debit balance at the time when the payments are to be made, so that the Company’s management board (Geschäftsführung) can freely dispose of the amounts paid.
4.3Without undue delay (unverzüglich) after the subscription of all Preferred Shares issued under the Capital Increase and the receipt of the total capital contributions towards the share capital in the nominal value for such Preferred Shares, the Company shall apply for registration of the Capital Increase and the Articles of Association with the commercial register and shall take all other actions and make all other declarations necessary or appropriate for the Capital Increase and the Articles of Association to become effective.
4.4Should the commercial register make objections to the Capital Increase and/or the Articles of Association, the Shareholders undertake, vis-à-vis each other, to remove such objections without undue delay (unverzüglich), in particular by way of adopting the necessary resolutions in the shareholders' meeting of the Company in order to achieve the purpose and intention of the provisions subject to such objections to the broadest extent permissible.
4.5To the extent legally permissible the Shareholders undertake vis-à-vis each other, as from the Signing Date until the Capital Increase and the Articles of Association have been registered with the commercial register (“Closing Date”), to treat each other as if the Articles of Association had already come in force and the Investor has already acquired the Preferred Shares to be issued pursuant to Section 3.1.2 above upon subscription. Thus, the Existing Shareholder undertakes vis-à-vis the Investor, as from the subscription of the new Preferred Shares, to put the Investor internally in such position as it would be in, if it had acquired the financial rights (Vermögensrechte) and, to the extent legally permissible, the administrative rights (Verwaltungsrechte) under this Investment Agreement, the Shareholders’ Agreement and the Articles of Association resulting from the Preferred Shares to be issued pursuant to Section 3.1.2 upon subscription.
4.6Upon registration of the Capital Increase with the commercial register, the Shareholders will hold the shares in the Company as set forth in the table below:
Shareholder Number of Shares Class of
Shares 		Number of
Shares in the
nominal
amount of EUR 1.00 		Serial
Numbers
PRETTL Electronics GmbH 26,076 Common Shares 26,076 2 – 26,077
Ideanomics Inc. 11,175 Preferred Shares 11,175 26,078 – 37,252
Total: 37,251 37,251 2 – 37,252
5Payments in the Company’s Capital Reserves
5.1Subject to the condition precedent (aufschiebende Bedingung) that the Investor has received appropriate evidence by the Company (e.g., by submission of a pdf-copy of an excerpt from the commercial register) that the Capital Increase has been registered with the commercial register, the Investor undertakes, vis-à-vis the Existing Shareholder, but not vis-à-vis the Company, to make a payment to the Company’s capital reserves within the meaning of section 272 (2) no. 4 Commercial Code (sonstige Leistungen in die Kapitalrücklage der Gesellschaft gemäß § 272 Abs. 2 Nr. 4 HGB) in the following amount:
Investor Payment Amount in EUR
Ideanomics Inc. 7,488,537.38
Total: 7,488,537.38
5.2The payment to be provided by the Investor pursuant to Section 5.1 is due and payable within ten (10) Business Days after the condition precedent (aufschiebende Bedingung) set forth in Section 5.1 above has been completely fulfilled or effectively waived vis-à-vis the Company in writing by the Investor.
5.3For the avoidance of doubt, the Parties acknowledge and agree that (i) the Company itself does not have a claim to demand the payment pursuant to Section 5.1 above, (ii) the obligation of the Investors to make the payment pursuant to Section 5.1 above is no subsidiary obligation (Nebenleistungspflicht)
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within the meaning of section 3 (2) Limited Liability Companies Act and (iii) this Section 5.3 does not constitute a real contract for the benefit of a third party (kein echter Vertrag zugunsten Dritter) neither to the benefit of the Company, nor to the benefit of any third person.
5.4The payment provided for in Section 5.1 above has to be made in Euros and without deduction of charges and costs to the Company’s bank account as stated in Section 4.2 above or any other bank account of the Company communicated by the Company in writing to the respective Investor for such purpose. The Company shall inform all Shareholders without undue delay (unverzüglich) after receipt of the payments pursuant to Section 5.1above.
6Defaulting Investor
6.1If and to the extent the Investor does not (i) subscribe to all of the Preferred Shares assigned to it in due form as set forth in this Investment Agreement, (ii) make payment of the nominal value of EUR 1.00 per each Preferred Share subscribed to as set forth in this Investment Agreement, or (iii) make the Investor’s contribution in accordance with Section 5 when due and payable (in which cases (i) – (iii) the Investor shall be referred to as “Defaulting Investor”), the Defaulting Investor shall correct such non-compliance within a period of five (5) Business Days as of receipt of a written reminder by the Existing Shareholder or the Company (“Grace Period”).
6.1.1If the Defaulting Investor has not or not completely complied with its obligation to subscribe to all of the Preferred Shares (as assigned to the Defaulting Investor as set forth in this Investment Agreement) in due form as set forth in Section 4.1 within the Grace Period, the Company may withdraw from the subscription agreement (Übernahmevertrag) with the Defaulting Investor and, with effect for all Parties, exclude the Defaulting Investor from this Investment Agreement with respect to all Preferred Shares (as assigned to the Defaulting Investor as set forth in this Investment Agreement) by giving notice to the Defaulting Investor and all (other) Parties in Text Form.
If the Defaulting Investor does not hold any other shares (of any other series of shares) in the Company, the Defaulting Investor shall, upon receipt of the Company’s notice pursuant to the foregoing sentence 1, automatically and without any further action required cease to be a party to this Investment Agreement and the Shareholders’ Agreement; Section 15 shall, however, continue to apply also vis-à-vis the Defaulting Investor.
The Defaulting Investor shall be liable for all expenses incurred, and damages suffered by, the Company and the (other) Shareholders as a consequence of the default.
6.1.2If the Defaulting Investor has not or not completely complied with its obligation to make payment of the nominal value of EUR 1.00 (in words: one Euro) per each Preferred Share subscribed to it as set forth in Section 4.2 within the Grace Period, the Company may withdraw from the subscription agreement (Übernahmevertrag) with the Defaulting Investor and, with effect for all Parties, exclude the Defaulting Investor from this Investment Agreement and the Shareholders’ Agreement with respect to all Preferred Shares (as assigned to the Defaulting Investor as set forth in this Investment Agreement) by giving notice to the Defaulting Investor and all (other) Parties in Text Form. Section 6.1.1 sentence 2 and sentence 3 shall apply mutatis mutandis.
6.1.3If the Defaulting Investor has not or not completely complied with its payment obligations as set forth in Section 5 within the Grace Period, the Company may, with effect for all Parties, exclude the Defaulting Investor from this Investment Agreement with respect to all Preferred Shares (as assigned to the Defaulting Investor as set forth in this Investment Agreement) by giving notice to the Defaulting Investor and all (other) Parties in Text Form.
Section 6.1.1 sentence 2 and sentence 3 shall apply mutatis mutandis.
The Defaulting Investor further already hereby irrevocably offers to transfer and assign to the Company, for consideration equal to all payments and/or contributions made by the Defaulting Investor to the Company in compliance with Section 4 and Section 5, all Preferred Shares that have been issued to the Defaulting Investor, provided, however, that the Defaulting Investor shall only have a claim for repayment if and to the extent such repayment by the Company can be made in compliance with statutory law, in particular, in accordance with section 33 Limited Liability Companies Act. The Parties acknowledge and agree that the Preferred Shares transferred by the Defaulting Investor to the Company pursuant to this Section 6.1.3 are upon such transfer taking effect deemed and to be treated as Common Shares for all purposes of this Investment Agreement and the Articles of Association. All
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Shareholders hereby consent to any transfer of shares in the Company as contemplated in this Section 6.1.3 contractually and by way of a shareholders’ resolution (by waiving any and all formal requirements for the convening and holding of shareholders’ meetings). The transfer of shares in the Company pursuant to this Section 6.1.3 is not subject to any other provisions of this Investment Agreement relating to transfers of shares.
6.2All Shareholders shall without undue delay (unverzüglich) upon an according request by any Existing Shareholder or the Company (i) confirm any consent given pursuant to this Section 6 in a shareholders’ meeting and (ii) exercise all of their shareholder’s rights in such a way as is required or useful to implement the measures and transactions contemplated in Section 6.1 (e.g., resolve on an amendment of the Articles of Association).
7Use of Funds
7.1Save as otherwise approved by the Company’s shareholders’ meeting including the consenting vote of the Investor, any funds provided by the Investor to the Company pursuant to this Investment Agreement may only be used for the funding of general corporate purposes, including further development of the product, services and technology, recruiting and financing of working capital. None of the funds provided by the Investor to the Company pursuant to this Investment Agreement may be used to satisfy any debts or other liabilities of the Company other than accounts payable in the ordinary course of business.
7.2The Company undertakes, to give proof of the use of the funds provided by the Investor pursuant to this Investment Agreement. Such proof is limited to an extent reasonable and appropriate and is only required to be provided upon request of the Investor.
8Title Guarantees
8.1Each Existing Shareholder hereby guarantees, subject to any applicable limitations contained in this Investment Agreement, to the Investor by way of an independent guarantee (selbständiges Garantieversprechen) pursuant to section 311 (1) Civil Code that the statements set forth in Section 8.1.1 through (and including) Section 8.1.4 (collectively the “Title Guarantees” and each a “Title Guarantee”) are true and correct as of the Signing Date and the Closing Date:
8.1.1The Existing Shareholder has full power and authority to enter in and perform this Investment Agreement, and this Investment Agreement constitutes valid and binding obligations of the Existing Shareholder in accordance with the terms herein.
8.1.2The Existing Shareholder is the sole legal and beneficial owner of the shares in the Company allocated to it in the current list of shareholders in Annex 8.1.2.
8.1.3The shares held by the Existing Shareholder are validly issued and fully paid in. The respective share capital (Stammeinlage) has not been directly or indirectly repaid (whether openly or concealed) to the relevant Existing Shareholder (Rückgewähr von Einlagen). No hidden contributions in kind (verdeckte Sacheinlagen) have been made. There exist no obligations to make further contributions (Nachschusspflichten).
8.1.4The shares of the Existing Shareholder are free of any encumbrances, liens or other third party rights in rem or by contractual agreement (other than those under this Investment Agreement, the Shareholders’ Agreement and the Company’s articles of association).
8.2The Parties agree and explicitly confirm that the Title Guarantees do not constitute and shall not be qualified as an agreement on the legal and factual nature (Beschaffenheitsvereinbarung) within the meaning of section 434 (1) Civil Code nor as a quality guarantee for certain features of goods sold (Garantie für die Beschaffenheit der Sache) within the meaning of section 443 and section 444 Civil Code.
9Business Guarantees
9.1The Exiting Shareholder (“Guarantor”) hereby guarantees, subject to any applicable limitations contained in this Investment Agreement, to the Investor by way of an independent guarantee (selbständiges Garantieversprechen) pursuant to section 311 (1) Civil Code that the statements set
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forth in Section 9.1.1 through and including Section 9.1.11 (collectively the “Business Guarantees” and each a “Business Guarantee”) are true and correct as of the date of this Investment Agreement:
9.1.1Relations under Corporate Law
a)The Company has been validly incorporated under German law and exists as an effective legal entity.
b)The information set forth in Section 1.1 and 1.2 is correct.
c)No silent partnerships (stille Beteiligungen), loans with profit participation (partiarische Darlehen), profit participation rights (Genussrechte) or other rights exist, which entitle any third party to participate in profits, turnover or liquidation proceeds of the Company other than set forth in this Investment Agreement, the Shareholders’ Agreement or in the Articles of Association.
d)Other than the 100% participation in Prettl Electronics Automotive North America Inc. the Company does not hold any shares or other interests in any other legal entity or partnership and is not bound by any agreement towards any other party to acquire such shares or other interests, or form or participate in the formation of, any other legal entity.
e)No conversion, subscription, option or similar rights exist, which might impose an obligation on the Company or on any Shareholder to issue new shares, transfer existing shares or to grant voting rights in the Company to any third party or shareholder of the Company, except as otherwise set out in this Investment Agreement or the Shareholders’ Agreement.
f)The Company is not a party to any so-called “enterprise agreements” (Unternehmensverträge) within the meaning of sections 291, 292 Stock Corporation Act.
9.1.2Financial Accounts / Financial Situation
a)The Company's financial accounts as of 31 December 2020, attached hereto as Annex 9.1.2a). (the "2020 Accounts"), have been prepared in accordance with the provisions of the German Commercial Code (HGB) and generally accepted accounting principles as applied in Germany under observation of accounting and valuation continuity and give in all respects a true and fair view of the assets, financial conditions and results of the operations (ein den tatsächlichen Verhältnissen entsprechendes Bild der Vermögens, Finanz- und Ertragslage) of the Company as of, and with respect to the financial year ending on 31 December 2020.
b)The Company’s management accounts (betriebswirtschaftliche Auswertungen) for the time period from 1 January through 31 May 2021, attached hereto as Annex 9.1.2b). (the "Management Accounts"), have been prepared in accordance with past practice and do not contain any materially false or misleading statements, taking into account the preliminary nature of such Management Accounts and the fact that no year-end bookings are included.
c)Since 1 January 2021, the Company and its business have been managed with the care of a diligent businessman (Sorgfalt eines ordentlichen Geschäftsmannes) in compliance with past practice, and no exceptional business transaction or other event has occurred which alone or together with other transactions or events have adversely affected, or are to the Guarantors’ Best Knowledge expected to adversely affect, the Company's situation as to its assets, financials and/or results. Except as otherwise disclosed in this Investment Agreement, the Company has – in the aggregate – no liabilities beyond the threshold of EUR 50,000.00, and is not party to any continuing obligation (Dauerschuldverhältnis).
d)The Company is neither over-indebted (überschuldet) nor unable, or threatened to become unable, to pay its debts when due (zahlungsunfähig) in the meaning of sections 17 through (and including) 19 Insolvency Code. No insolvency proceedings concerning the Company and/or its assets are pending or have been applied for and no fact or circumstances exist which would require or justify the application for insolvency proceedings concerning the Company.
9.1.3Real Estate
The Company does not own any real property and has not committed to acquire real property.
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9.1.4Permits, Public Subsidies
a)The Company holds any and all official permits required for the continuation of the Company’s present and anticipated business (“Permits”). To the Guarantor’s Best Knowledge, no concrete circumstances exist, that could lead to the revocation or restriction of any such Permit. To the Guarantors' Best Knowledge, the business of the Company is, and has been, conducted in all material respects in compliance with all material laws applicable to its business operations.
b)The Company has not applied for, received or used any public grants (Zuschüsse), allowance, aids or other subsidies (Subventionen) in whatever form except as disclosed in Annex 9.1.4.
9.1.5Intellectual Property Rights, Assets
a)All assets of the Company required for the conduct of its business are owned or leased by the Company, and the Company is free to dispose of them where such assets are owned. To the extent that rights under retention of title exist according to normal commercial practice, these have been created exclusively for liabilities of the Company. In this respect, the Company can dispose freely of such assets in the course of its regular business. All assets of any kind of the Company are (except for any statutory security interest of any kind) free of any encumbrances, charges, liens, pledges, or other security interests.
b)All of the assets that form part of the Company's operating assets (Betriebsvermögen) are in proper working condition.
c)To the Guarantors’ Best Knowledge, the Company holds all intellectual property rights, including but not limited to patents, utility models and designs, trade and service marks, including logos, and domain names as well as any and all works protectable under copyright, including but not limited to software (collectively the “IP-Rights”) which are necessary to conduct the Company's business as currently conducted and which are included in Annex 9.1.5. To the Guarantors’ Best Knowledge, the Company does not infringe any third party IP-Rights.
9.1.6Employees
The anonymized list attached hereto in Annex 9.1.6 correctly and completely contains all managing directors, employees and, as specifically marked, freelancers of the Company by function/position, including their annual gross salaries, bonus entitlements, dates of their employment agreements and dates of start of services and amounts of any unpaid salaries and expenses to employees and freelancers covering periods up until the date of this Investment Agreement. To the Guarantors' Best Knowledge, the Company has never employed any freelancers that may be qualified as pretend self-employed persons (Scheinselbständige).
9.1.7Contractual Relationships
a)Annex 9.1.7a) contains a complete and accurate list of all existing agreements between the Company and any of the following persons or entities:
aa)Any person or entity that – directly or indirectly – holds a share or other interest in the Company,
bb)any of the Company’s managing directors,
cc)any relatives within the meaning of Section 15 German Tax Code (Abgabenordnung) of any of the aforesaid persons, and
dd)any entity, in which any one or more of the aforesaid persons or entities, directly or indirectly, hold an interest of more than 5 % in aggregate. The terms and conditions of these agreements are to the Guarantor’s Best Knowledge at arms’ length.
b)The Company has not issued any guarantees or letters of support in favour of any third parties, nor is it liable for any third-party obligations, not even conditionally.
c)Annex 9.1.7c) contains a true and accurate list of all of the following agreements, to which the Company is a party and the main contractual obligations of which have not been completely fulfilled (“Material Contracts”):
aa)agreements for joint ventures, strategic alliances, joint development of products and other forms of cooperation or similar purposes;
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bb)loan agreements with the Company as a lender or borrower and other instruments evidencing financial indebtedness of the Company;
cc)agreements regarding swaps, options, forward sales or purchases, futures and other financial derivates and combinations thereof;
dd)agreements to sell or otherwise dispose of any assets with a fair market value or replacement value in excess of EUR 25,000 in the individual case;
ee)agreements relating to capital expenditures involving an amount exceeding EUR 50,000 in the individual case except for any agreement already within the scope of any other bullet under this 9.1.7c) and except for any employees and employment agreements;
ff)real estate lease agreements with the Company as landlord or tenant involving an annual rent (without ancillary costs) in excess of EUR 50,000 p.a.; and
gg)agency agreements, agreements with independent dealers and distributors, franchise agreements or other distribution agreements.
d)Except as disclosed otherwise in Annex 9.1.7c) all Material Contracts are to the Guarantor’s Best Knowledge valid and not terminated. These contracts are not affected by any material breach of contract by the Company. The Company has not received any termination notice regarding any Material Contract. To the Guarantor’s Best Knowledge no grounds for immediate termination for good cause exist or have been communicated to the Company.
9.18Data protection
The Company has
a)at all times complied with applicable data protection laws, in particular the General Data Protection Regulation (GDPR) in all respects;
b)introduced and applied appropriate data protection policies and procedures concerning the collection, use, storage, retention and security of personal data and implemented appropriate technical and organisational measures to protect personal data against unauthorised or unlawful processing;
c)maintained complete, accurate and up to date records of all their personal data processing activities as required by applicable data protection laws;
d)issued appropriate privacy notices to data subjects which comply with all applicable requirements of applicable data protection laws;
e)put in place an adequate data breach response plan to comply with the related requirements of applicable data protection laws;
f)an agreement in place with each processor which incorporates the terms stipulated by Article 28 of the GDPR and complies with applicable data protection laws;
g)not been contacted or sanctioned by any supervisory authority, court or third party with respect to a data protection breach at the Sold Business; and
h)not suffered any breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorised disclosure of, or access to any personal data.
9.1.9Insurance
The Company continuously was and will be integrated in the umbrella group insurance policy of Prettl Produktions Holding GmbH; therefore the Company has entered into insurance policies in line with the industrial practice (the “Group Insurance Policy). The insurance policies listed in Annex 9.1.9 will remain in force irrespective of the consummation of the Transaction. No circumstances exist which could question the existence of the insurance cover, in particular the Company is not in arrears with the payment of insurance premiums or has failed to comply with any obligations under the policies. With the exception of the cases listed in Annex 9.1.9, no insurable damages have occurred or have been notified to the Company since 1 January 2021 and until and including the Signing Date.
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9.1.10Products
a)To the Guarantor’s Best Knowledge, all services and products currently and in the past four years designed, manufactured, sold or distributed in the Company are in compliance with all material applicable regulations, safety standards, and technical norms.
b)The Company has not designed, manufactured, sold or distributed services or products which to the Guarantor’s Best Knowledge do not comply with all representations, warranties or guarantees given in the Investment Agreement.
c)There have not been any product recalls, reworks or post-sale warnings issued by the Company or by agents acting on its behalf relating to any product designed, manufactured, sold or distributed by it, nor have there been considerations or internal investigations by the Company in relation to a decision to such effect.
d)There have been no product guarantee claims (Produktgewährleistungsansprüche) or product liability claims (Produkthaftpflichtansprüche) brought forward against the Company in the last five years.
9.1.11Litigation; Taxes
a)The Company did submit all tax and duties declarations to be handed in including the registrations and declarations for the payment of social insurance contributions in due form and time. All records, books and data to be maintained by the Company in relation to taxes pursuant to applicable law have been correctly maintained and are up-to-date. No audit or other examination or investigation with respect to taxes is currently in progress or has been announced by the competent authority. There is no pending litigation or dispute in relation to taxes.
b)There is no pending litigation, either before court or an arbitration tribunal or otherwise, and to the Best Knowledge of the Guarantor no criminal proceedings or investigations or other investigations by any authorities, in which the Company is involved, either as plaintiff, defendant or otherwise, with a value (Streit- oder Gegenstandswert) or amount at stake in each case in excess of EUR 20,000.00; no such litigation proceedings or investigations have been threatened in writing or to the Guarantor’s Best Knowledge are otherwise to be expected or intended on the basis of specific circumstances.
9.2The Parties agree and explicitly confirm that the Business Guarantees do not constitute and shall not be qualified as an agreement on the legal and factual nature (Beschafffenheitsvereinbarung) within the meaning of section 434 (1) Civil Code nor as a quality guarantee for certain features of goods sold (Garantie für die Beschaffenheit der Sache) within the meaning of section 443 and section 444 Civil Code.
9.3Without limiting the generality of the foregoing, the Investor acknowledges that (i) in deciding on the acquisition of the Preferred Shares, and in determining the terms of the acquisition, the Investor has not relied on, and (ii) the Existing Shareholder shall not be responsible, and give no representation, warranty or guarantee with respect to any projections, estimates or budgets delivered or made available to the Investor or its counsel, accountants or advisors of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) or the future business operations of the Company.
9.4For the purpose of this Investment Agreement the term “Best Knowledge” shall mean only the actual knowledge of any of the Guarantors (positive Kenntnis) as well as - from a proper businessman's point of view - the lack of knowledge due to gross negligence as of the Closing Date.
10Remedies in case of Breach of Title Guarantees
In the event of any breach or non-fulfillment of a Title Guarantee (“Title Guarantee Claim”) the Existing Shareholder shall, subject to any applicable limitations contained in this Investment Agreement, put the Investor in the same position it would have been in if the respective Title Guarantee(s) had not been breached (Naturalrestitution). To the extent that such restitution in kind (i) is not possible, (ii) is not sufficient, or (iii) has not been made by the Existing Shareholder within a period of two (2) months after the Existing Shareholder has been informed about the breach or non-fulfillment in writing by the Investor, the Existing Shareholder shall be obliged to pay damages for non-performance
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(Schadenersatz in Geld) to the Investor, provided, however, that such damages shall only cover actual damages suffered by the Investor, and shall, in particular, not cover internal administration or overhead costs (Ersatz vergeblicher Aufwendungen), consequential damages (Folgeschäden), loss of profits (entgangener Gewinn), any value reduction (due to, for example, lost earnings or decreased cash flow) or any arguments that the Preferred Share Price was calculated based on incorrect assumptions. Section 254 Civil Code and the principles of setting-off any advantages (Vorteilsausgleichung) shall apply.
11Remedies in case of Breach of Business Guarantees
In the event of any breach or non-fulfillment by any of the Guarantors of any of the Business Guarantees (“Business Guarantee Claim”) the Guarantor shall, subject to any applicable limitations contained in this Investment Agreement, put the Investor in the same position it would have been in if the respective Business Guarantee(s) had not been breached (Naturalrestitution). To the extent that such restitution in kind (i) is not possible, (ii) is not sufficient, or (iii) has not been made by the Guarantor within a period of two (2) months after the Guarantor has been informed about the breach or non-fulfillment in writing by the Investor, the Guarantor shall pay damages for non-performance (Schadenersatz in Geld) to such Investor, provided, however, that damages shall only cover actual damages suffered by the Investor, and shall, in particular, not cover internal administration or overhead costs (Ersatz vergeblicher Aufwendungen), consequential damages (Folgeschäden), loss of profits (entgangener Gewinn), any value reduction (due to, for example, lost earnings or decreased cash flow) or any arguments that the Preferred Share Price was calculated based on incorrect assumptions. Section 254 Civil Code and the principles of setting-off any advantages (Vorteilsausgleichung) shall apply.
12Limitation of Liability
12.1Section 442 Civil Code and section 377 Commercial Code do not apply, neither directly nor mutatis mutandis.
12.2For the avoidance of doubt, the Parties agree that, to the extent a guarantee that has been breached relates to the legal, economic or financial situation of the Company and the Investor requests the payment to himself and not to the Company, the Investor’s claim for damages shall be limited to the percentage of the damage incurred by the Company which is equal to the percentage of the registered share capital of the Company acquired by the Investor under this Investment Agreement.
12.3The Existing Shareholder shall not be liable for, and the Investor shall not be entitled to claim for, any damage of the Investor under or in connection with this Investment Agreement if and to the extent (i) any damage of the Investor is (in terms of amount and reason) actually covered and actually compensated by existing insurance policies, (ii) any damage of the Investor is compensated by third parties and/or (iii) the damage to which the claim relates is specifically provided for and covered in the Financial Statement as of 31 December 2020.
12.4If the Investor becomes aware of any circumstances which reasonably indicates the possibility of a breach of a guarantee pursuant to Sections 8 and 9, the Investor shall without undue delay but in any case within twenty (20) Business Days notify the Existing Shareholder thereof. Such notice shall state the nature and the circumstances of the possible breach as well as the likely amount involved to the extent such determination is possible at the time of the notice. The Investor shall provide all documents, other materials and information required by the Existing Shareholder and their advisors to investigate the alleged breach.
12.5No Liability accrues to the Existing Shareholder / the Guarantor under or in connection with any Title Guarantee Claim and/or Business Guarantee Claim (i) if the individual claim of the Investor is less than EUR 20,000.00 (Euro twenty thousand) (“De Minimis Claims”) and (ii) if the aggregate amount of claims does not exceed an aggregate amount of EUR 75,000.00 (in words: Euro seventy-five thousand) (“Threshold Amount”) (Freibetrag). If the aggregate amount of De Minimis Claims exceeds the Threshold Amount, the Investor may, subject to the other provisions set forth in this Investment Agreement, claim only the amount in excess of the Threshold Amount (Freibetrag).
12.6The aggregate total liability of the Existing Shareholder vis-à-vis the Investor under Sections 10 and 11 is limited to 60% of the amount equal to the investment actually rendered by the Investor in the Company under this Investment Agreement (“Liability Cap”). The Liability Cap shall not apply to the Title Guarantees, provided however, that the overall liability of the Existing Shareholder shall in no event
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exceed the amount equal to the investment actually rendered by the Investor in the Company under this Investment Agreement.
12.7The Investor is not entitled to bring any claim under this Section 12 and, generally, this Investment Agreement, if the underlying facts or circumstances to which the claim relates were disclosed in this Investment Agreement or any annex to this Investment Agreement or were otherwise known to the Investor, its counsel, accountants or advisors. For purposes of this Agreement, information and/or documentation shall be deemed to be “known” if it is fully and accurately disclosed in the Data Room from 20 May 2021 to 28 July 2021. Without limiting the generality of the foregoing, the Parties acknowledge and agree that a mere reference in the Data Room to a source or document which is not included in full in the Data Room, shall not result in any fact, matter or circumstance contained in such non-included source or document being fairly disclosed. Two identical copies of the contents of the documents made available in the Data Room to the Investor or its counsel, accountants or advisors with respect to the Company or its Business the Company have been provided to the acting public notary for notarial custody (notarielle Verwahrung). Upon the written request of one of the Parties, which shall be made available to the other Party without undue delay, each Party may request to be provided with one of the copies if such Party claims to be examining the possibility of invoking a claim for a breach of a guarantee under this Investment Agreement or the possibility of a defence against a claim for such breach.
12.8The Parties agree that, except in case of fraud (arglistige) or willful misconduct (Vorsatz), all consequences of a breach of a Title Guarantee and/or a Business Guarantee are exclusively governed by the terms and conditions of this Investment Agreement and that the Investor shall have no right whatsoever with regard to a breach of a Title Guarantee and/or Business Guarantee other than the rights explicitly stated herein. Any further warranty claims (Gewährleistungsansprüche) in connection with defects of the economic, financial or legal situation of the Company or its assets, whether for damages (Schadenersatz), reduction of price (Minderung), rescission (Rücktritt) or avoidance (Anfechtung) irrespective of the respective legal basis, whether based on law or contract, including but not limited to claims based on non-contractual performance (culpa in contrahendo, positive Vetragsverletzung) or claims based on frustration of contract (Störung der Geschäftsgrundlage) or tort (unerlaubte Handlung) are excluded and waived by the Investor.
12.9The exclusions and/or limitations of liability set forth in this Section 12 do not apply to any damages incurred by fraud (Betrug), willful misconduct (Vorsatz), or willful concealment (arglistige Täuschung) by or on behalf of the respective Existing Shareholder or a Guarantor, respectively.
12.10Section 254 of the BGB shall remain unaffected, i.e. the Investor is in particular obliged to prevent to the extent reasonably possible and circumstances being within its control, the occurrence of any damages and to limit the scope of any damages incurred.
12.11If the Investor or the Existing Shareholder become aware of any claim by a third party which may give rise to a claim of the Investor for a breach of guarantees pursuant to Sections 8 and 9, the Investor or the Existing Shareholder shall without undue delay but in any case within ten (10) Business Days notify the other Party of such third party claim and shall provide to the other Party with all documents, other materials and information required by the other Party and their advisors to evaluate such third party claim. The Parties shall cooperate in defending such third party claim. With respect to third party claims being brought against the Company, the Parties agree that the third party claim shall, in principle, be defended by the Company, taking into account the legitimate interests of the Parties. Each Party shall be entitled to participate in all negotiations and meetings with the third party. To the extent there is no breach of a guarantee pursuant to Sections 8 and 9, the costs and expenses reasonably incurred by the Parties in connection with the proceeding relating to the third party claim shall be borne by each Party. However, if there is a breach of a guarantee pursuant to Sections 8 and 9, the aforesaid costs and expenses reasonably incurred by the Parties shall be borne by the Existing Shareholder.
12.12Any payments made by the Existing Shareholder under this Section 12 in conjunction with Sections 8 and 9 shall be considered as an adjustment of the Investor’s contribution in the Company, but shall not result in an increase of any liability cap stipulated in this Investment Agreement.
12.13To the extent permitted by law, the Existing Shareholder is liable to any other Party in any manner with regard to the subjects of this Investment Agreement except as specifically set forth herein.
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13Limitation Periods
13.1All Title Guarantee Claims are time-barred (verjährt) three (3) years after the Signing Date.
13.2All Business Guarantee Claims are time-barred (verjährt) eighteen (18) months after the Signing Date.
13.3Section 203 Civil Code does not apply.
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III.General Provisions
14Assignments, Set-off and Retention
14.1Except as expressly provided otherwise in this Investment Agreement, any assignment of rights and/or obligations resulting from or in connection with this Investment Agreement requires the prior written consent of the other Parties hereto. Section 354a Commercial Code remains unaffected.
14.2The consent to a transfer of shares in the Company is deemed as consent to the assignment of rights and obligations associated therewith. If and to the extent a consent is not required for the transfer of shares in the Company, a consent is neither required for the assignment of rights and obligations associated with such shares.
14.3Except as expressly provided otherwise in this Investment Agreement, no Party is entitled (i) to set off (aufrechnen) any rights and claims it may have against any rights or claims any other Party may have under this Investment Agreement or otherwise, or (ii) to refuse to perform any obligation it may have under this Investment Agreement on the grounds that it has a right of retention (Zurückbehaltungsrecht) unless the rights or claims of the relevant Party claiming a right to set off or retention have been acknowledged (anerkannt) in writing by the relevant other Party/Parties or have been confirmed by final decision of a competent court (Gericht).
15Confidentiality, Press Release
15.1The Parties shall, without limitation in time, keep confidential and may not disclose the contents of this Investment Agreement, its conclusion and implementation as well as any confidential information relating to the Company or any of its subsidiaries, except if and to the extent
15.1.1the Parties have given prior written approval to such disclosure;
15.1.2the relevant facts or circumstances are or become known to the public in general (other than as a result of a breach of this Section 15 or any other confidentiality agreement by such Party);
15.1.3disclosure is required (i) for the purpose of any judicial proceedings out of this Investment Agreement or any other agreement entered in under or pursuant to this Investment Agreement, or (ii) pursuant to any statute or law, official or judicial orders, or provisions or regulations relating to a stock exchange;
15.1.4disclosure is made to a tax or other authority in connection with the tax or other affairs of the disclosing Party;
15.1.5disclosure is made to employees, attorneys, accountants, tax consultants, or other professional advisors of a Party, provided that such employees and advisors are subject to secrecy duty by law or a corresponding confidentiality obligation;
15.1.6disclosure is made to banks which provide financing to the Company or the disclosing Party; or
15.1.7disclosure is made to a third party (i) that intends to subscribe for or acquire shares in the Company or (ii) in connection with a transaction set forth in the Shareholders’ Agreement, provided that such third party is subject to a confidentiality obligation.
15.2The Parties may not make any public announcements or issue a press release or respond to any enquiry from the press or other media concerning or relating to this Investment Agreement or its subject matter or the Company or any ancillary matter, unless otherwise agreed by the Company and both Parties, provided that the subject matter of such information intended to be disseminated is not in the public domain or is otherwise in possession of the recipient of such information. If a public announcement is required by law or by the capital markets rules applicable to the respective Party or is necessary pursuant to similar requirements of a regulatory authority, the Parties shall use their best efforts to coordinate with one another in advance.
16Form of Notices
Any statement, declaration, notification or other communication that is required to be in writing under this Investment Agreement suffices to be transmitted by telefax or pdf-copy via e-mail in order to be effective, unless a formal notarization or another specific form is required by mandatory law of by this Investment Agreement.
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17Delivery Addresses and Authorized Recipients
17.1Each Party shall, at any time while a party to this Investment Agreement, keep the Company informed of its current mailing address and contact data. As of the Signing Date, the Parties may direct any and all declarations to be issued under or in connection with this Investment Agreement or otherwise in relation to the Company vis-à-vis another Party, to the persons and addresses set forth in Annex 17.1, and any declaration directed to such persons and addresses is deemed received by the respective Party, to which such declaration is addressed, if delivered by hand or telefax or e-mail (if declaration is required to be in writing: pdf-copy) on the same day, and if sent by courier or mail no later than on the third (3.) day after dispatch. If any Party to this Investment Agreement wishes to change its delivery address, such Party shall inform the other Parties in writing thereof, and such change becomes effective for the purposes of this Investment Agreement and, in particular, this Section 17.1, upon the lapse of five (5) Business Days as of receipt of such information.
17.2Each person assigned to a Party stated in Annex 17.1 is authorized recipient (Zustellungsbevollmächtigter) for the respective Parties, including for the purposes of serving statements of claims and any other statements, applications, declarations, correspondence or court orders relating to disputes in respect of this Investment Agreement or otherwise in connection with the Company. Section 17.1 last sentence applies mutatis mutandis.
17.3In addition to the foregoing provisions, declarations are being considered to have been received if having been delivered to a Party pursuant to the general rules under German law regarding the receipt of declarations.
17.4Whether or not the advisor to a Party received a declaration for its information is irrelevant for the purpose of determining the receipt of the declaration by that Party, even if Annex 17.1 specifically provides that a declaration should be given to the respective advisor.
18Entire Agreement, Form of Amendments
18.1This Investment Agreement constitutes the final and complete expression of agreement between the Parties with respect to the subject matter hereof and supersedes any and all previous negotiations, agreements and understandings, whether written or verbal, between the Parties with respect to the subject matter of this Investment Agreement or parts thereof. There are no side agreements to this Investment Agreement apart from the Annexes mentioned herein and the contracts to be concluded on the basis of this Investment Agreement.
18.2Any amendment of, supplement to or termination (Aufhebung) of this Investment Agreement, including this Section 18.2, requires to be in writing in order to be effective, unless a stricter form requirement (e.g., a notarization) applies by mandatory law. This also applies to any waiver of any right or claim under this Investment Agreement. Section 16 applies mutatis mutandis to this Section 18.2.
19Costs
All charges, costs and other expenses in connection with the preparation, conclusion and implementation of the Financing Round are borne by the Party which has commissioned such costs or expenses; provided, however, that the Company is obliged to bear any notary and court costs and expenses associated with the conclusion and consummation of this Investment Agreement, including the Capital Increase, and the conclusion of the Shareholders’ Agreement.
20Investor Guarantees
20.1The Investor hereby guarantees by way of an independent promise of guarantee pursuant to Section 311 para. 1 of the BGB (selbständiges Garantieversprechen im Sinne des § 311 Abs. 1 BGB) that
20.1.1the Investor is validly incorporated, in existence and duly registered under the laws of their respective jurisdiction and the Investor has full power to enter into this Investment Agreement;
20.1.2the execution, delivery and performance by the Investor of its obligations under this Investment Agreement and the consummation of the transactions contemplated hereby are within the Investor’s corporate powers and have been duly authorized or will be duly authorized by all necessary corporate actions of the Investor, and this Investment Agreement is legally valid, binding and enforceable against the Investor at its terms;
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20.1.3the Investor has available cash or available contracted loan facilities which will at Closing provide in immediately available funds the necessary cash resources to pay the capital contributions and meet its other payment obligations under this Investment Agreement and, in the case of loan facilities, they involve no material preconditions and the Investor will be able to satisfy all conditions of drawdown to such loan facilities at or before Signing;
20.1.4unless stated otherwise in this Investment Agreement or in the Shareholders’ Agreement no consent, approval, clearance or waiver by any corporate board or governmental authority is required for the execution and performance of the Investment Agreement by the Investor;
20.1.5the execution and performance of this Investment Agreement and the consummation of the transactions contemplated hereby do not violate (i) the articles of association or bylaws of the Investor, or (ii) any applicable law, regulation, judgement, injunction or order binding on the Investor, any of its affiliates within the meaning of Section 15 et seqq. AktG and (iii) there is no action, lawsuit, investigation or proceeding pending against the Investor, any of its affiliates within the meaning of Section 15 et seqq. AktG before any court, arbitration panel or governmental authority which in any challenges or seeks to prevent, alter or delay the transactions contemplated by this Investment Agreement;
20.1.6there are no proceedings or investigations whatsoever pending against the Investor, except as disclosed in Annex 20.1.6; and
20.1.7no bankruptcy, insolvency or judicial composition proceedings have been commended, or applied for, under any applicable law against the Investor, nor is the Investor compelled under any applicable law to apply for the commencement of such proceedings as a result of it being over-indebted (überschuldet) or illiquid (zahlungsunfähig) as of the Signing Date.
20.2Indemnification
In the event that the Investor is in breach of any guarantees pursuant to Section 20, the Investor shall indemnify and hold harmless the Existing Shareholder from any damages incurred by the Existing Shareholder it being understood that damages shall be the same damages as defined in Sections 10 and 11. All claims of the Existing Shareholder arising under this Section 20 shall be (i) limited to the investment actually rendered by the Investor in the Company under this Investment Agreement and (ii) time-barred upon expiration of a period of three (3) years after the Closing Date.
21Invalid Provisions, Unintended Gaps (Salvatorische Klausel)
21.1In the event that one or more provisions of this Investment Agreement is or becomes partly or entirely void, invalid or unenforceable, the validity and enforceability of the remaining provisions of this Investment Agreement is not affected thereby. In such case, the Parties shall replace the partly or entirely void, invalid or unenforceable provision with a valid and enforceable provision, which the Parties would have agreed on had they been aware of the voidness, invalidity or unenforceability of the respective provision. The same applies in the event that this Investment Agreement contains any unintended gaps (unbeabsichtigte Vertragslücken). It is the express intention of the Parties that the preceding provisions of this Section 21.1 do not merely shift the burden of proof (keine bloße Beweislastumkehr) but that section 139 Civil Code does not apply in its entirety, so that none of the Parties will have to argue (darlegen) and prove (beweisen) the Parties' intent to uphold this Investment Agreement even without the void, invalid, unenforceable or missing provision.
21.2In the event that one or more provisions of this Investment Agreement is or becomes partly or entirely void, invalid or unenforceable due to not being implemented in the Articles of Association, the Shareholders shall, upon request of any Shareholder, amend the Articles of Association accordingly.
22Interpretation, German Terms
22.1The table of contents, headings and sub-headings of this Investment Agreement are inserted for convenience purposes only and do not affect in any way the interpretation of this Investment Agreement.
22.2Unless the context otherwise requires (i) the terms “including” and “in particular” and all forms and derivations thereof always mean “including, without limitation” and “in particular, without limitation”, respectively; (ii) the words “hereof”, “herein” and “hereunder” and words of similar import refer to this Investment Agreement as a whole and not to any particular provision of this Investment Agreement; (iii)
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any reference to a gender includes all other genders and (iv) definitions contained in this Investment Agreement are applicable to the singular as well as the plural forms of such terms.
22.3Where a German term has been inserted in quotation marks and/or italics it alone (and not the English term to which it relates) is authoritative for the purpose of the interpretation of the relevant English term in this Investment Agreement.
22.4This Investment Agreement is drafted in English for convenience purposes only and the fact that the English language is used is not a reason to refer to the laws, doctrine or case law of any English speaking jurisdiction in the interpretation of this Investment Agreement.
23Governing Law and Jurisdiction
23.1It is the Parties’ mutual agreement that this Investment Agreement is governed by the laws of the Federal Republic of Germany, excluding both German private international law and the United Nations Convention on Contracts for the International Sale of Goods.
23.2To the extent permissible by law, exclusive place of jurisdiction for all disputes arising from or in connection with this Investment Agreement or regarding its validity is Dresden, Germany.
*****
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[Notarization required]
Shareholders‘ Agreement
relating to
PRETTL Electronics Automotive GmbH


Parties
1.PRETTL Electronics GmbH, a limited liability company under the laws of Germany, with business address at Robert-Bosch-Strasse 10, 01454 Radeberg, Germany, registered with the commercial register at the local court of Dresden under HRB 34431,
- hereinafter the “Existing Shareholder” –
and
2.Ideanomics, Inc., a Nevada corporation, with business address at 1441 Broadway, Suite 5116, New York, NY 10018, USA,
- hereinafter the “Investor” -
and
3.PRETTL Electronics Automotive GmbH, a limited liability company under the laws of Germany, with business address at Robert-Bosch-Strasse 10, 01454 Radeberg, Germany, registered with the commercial register at the local court of Dresden under HRB 40004,
- hereinafter the “Company” -
- Parties No. 1 and 2 hereinafter individually a “Shareholder” and, collectively, the “Shareholders” -
- Parties No. 1 through 3 hereinafter individually a “Party” and, collectively, the “Parties” -
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Contents
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I.Preliminary Remarks
1Facts
1.1The object of the Company is development, manufacture, sales and service of electronic and electromechanical products, systems and equipment for the automotive, energy, industrial, communications and medical technology sectors. (“Business”).
1.2The Existing Shareholder is currently the sole shareholders of the Company holding the Company’s entire share capital (Stammkapital) of DEM 51,000 (German Marks (DEM) fifty one thousand), represented by one share with serial number one and a nominal value of DEM 51,000.
1.3In the course of this Financing Round (as defined below) the current share capital will be converted to Euro and split in multiple shares with a nominal value of EUR 1.00 each. After the conversion and the split the Company’s share capital will amount to EUR 26,076 (Euro twenty six thousand, seventy six) and be represented by 26,076 shares with a nominal value of EUR 1,00 each (“Common Shares”).
1.4In order to raise an equity financing, the Investor has, pursuant to the Investment Agreement concluded on the date hereof (deed-roll No. [●] of the notary [●], [●]; the “Investment Agreement”), agreed to invest into the Company, (i) by subscribing to newly issued preferred shares and (ii) by making cash contributions into the Company in an amount of EUR 7,499,712.38 (Euro seven million four hundred ninety nine seven hundred twelve and thirty eight cents) in total, all of the foregoing pursuant to the terms and conditions as set forth in the Investment Agreement.
1.5The Parties intend to continue to develop the Company and the Business on the basis of jointly developed business plans and a constructive, trustful and cooperative relationship in the interest of a long-term strategic partnership.
1.6The Parties intend to agree to enter into this shareholders’ agreement (hereinafter, including its Annexes, the “Shareholders’ Agreement”).
NOW, THEREFORE, the Parties agree as follows:
2Definitions
Throughout this Shareholders’ Agreement, certain words and expressions have been defined to carry specific meaning. Such words and expressions shall have the meaning ascribed to them in such definitions. Hereafter is an index of these definitions:
Acquisition Limit 12 Limited Liability Companies Act 6
Advisory Board 17 Lower Price 16
Affiliate(s) 6 Management Board 17
Anti-Dilution Capital Increase 16 Other Shareholder(s) 11
Business 4 Part(y/ies) 2
Business Day 6 Prospective Acquirer 11
Civil Code 6 Purchase Statement 12
Commercial Code 6 Put Exercise Notice 17
Common Shares 4 Put Option 17
Company 2 Sale Shares 11
Dilution Protection Shares 16 Selling Shareholder 11
Down Round 16 Shareholder(s) 2
Existing Shareholder 2 Shareholders’ Agreement 4
Future Equity Financing 15 Signing Date 6
Holders of Preferred Shares 6 Stock Corporation Act 7
Investment Agreement 4 Takeover Act 7
Investor 2 Transfer Notice 11
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In addition to the terms previously listed and defined throughout this Investment Agreement, except where the context requires a different interpretation, the words and expressions set out below shall have the following meaning or the meaning given to them in this Agreement:
Affiliate(s)
means any other person or entity who or which, directly or indirectly, controls, is controlled by, or is under common control with the respective Party, including without limitation any stockholder, partner, officer, director, member or fund manager of such Party and any of their relatives pursuant to Section 15 German Revenue Code (§ 15 AO) and any investment company, equity fund or source of investment capital now or hereafter existing that is managed or advised or controlled by or under common control with one or more general partners or managing members of, or shares the same management company or advisory company with such Party and the Prettl Privatstiftung.
Anti-Dilution Capital Increase
has the meaning as set forth in Section 12.1.
Business Day
means any day (other than a Saturday, Sunday or legally recognized public holiday in Frankfurt am Main) on which banks in Frankfurt am Main are open for non-automated business.
Civil Code
means the German Civil Code (Bürgerliches Gesetzbuch (BGB)).
Commercial Code
means the German Commercial Code (Handelsgesetzbuch (HGB)).
Holders of Preferred Shares
means all holders of Preferred  Shares that are Parties to this Shareholders’ Agreement; each a Holder of Preferred Shares.
Limited Liability Companies Act
means the German Limited Liability Companies Act (GmbHG).
Preferred Share(s)
means the 11,175 preferred shares (Vorzugsgeschäftsanteile) with serial numbers 26,078 through 37,252 as well as all other shares issued by the Company as Preferred Shares from time to time (including after a split or consolidation of such shares); each a Preferred Share.
Signing Date
means the date on which this Shareholders’ Agreement is notarized.
Stock Corporation Act
means the German Stock Corporation Act (Aktiengesetz (AktG)).
Takeover Act
means the German Securities Takeover Act (Wertpapierübernahmegesetz (WpÜG)).
Transformation Act
means the German Transformation Act (Umwandlungsgesetz (UmwG)).
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II.Shareholders’ Agreement
3Consent Requirements for Certain Shareholders’ Resolutions
3.1In addition to any statutory matters and those matters set forth in this Shareholders’ Agreement and the Articles of Association, the following matters in particular require a resolution by the shareholders’ meeting with a majority of at least 75 % of the votes cast unless such measures are set forth in the Company’s annual budget that has been adopted by a shareholders’ resolution for the relevant financial year and the development budget attached hereto as Annex 3.1, in which case a shareholders’ approval shall not be required:
a)Approval of the Company’s annual budget;
b)any reorganization within the meaning of section 1 Transformation Act (Umwandlungsgesetz);
c)winding-up and/or liquidation of the Company;
d)(i) application for the opening of insolvency procedures or protective screen procedures (Schutzschirmverfahren) relating to the Company (unless a duty to file for insolvency exists under applicable statutory law) and (ii) non mandatory filing for insolvency proceedings or any application under the German Stabilization and Restructuring Framework Act for Companies (Gesetz über den Stabilisierungs- und Restrukturierungsrahmen für Unternehmen – StaRUG), if applicable;
e)amendments of the Articles of Association, including capital increases (in particular capital increases from authorized capital), capital decreases and other capital measures including the issuance of subscription rights, as well as all other resolutions which are, according to statutory law, subject to a qualified majority;
f)creating any new class or series of shares having rights, preferences or privileges senior to or on a parity with Preferred Shares;
g)altering or changing the rights, preferences or privileges of Preferred Shares other than by creating a new class or series of shares;
h)any grant of rights or issuance of instruments with a right to convert into or exchange for shares in the Company (e.g., convertible loans or convertible bonds);
i)conclusion, amendment and termination of enterprise agreements (Unternehmensverträge) within the meaning of section 291 et. seq. Stock Corporation Act, as well as of agreements which may cause a major restriction of the Company’s entrepreneurial freedom and activity;
j)sale or other disposal of the Company’s assets as a whole or a material portion thereof (excluding assets with regard to the working capital in the ordinary course of business), if these assets exceed an amount of EUR 100,000.00 per business year or if these assets are material Company assets;
k)acquisition and sale of own shares by the Company (Erwerb und Veräußerung eigener Geschäftsanteile);
l)approval of dispositions (Verfügungen) of shares or parts of shares in the Company, including any transfer, pledge or other encumbrance, establishment of a usufruct, implementation and termination of a trust relationship or a sub-participation as well as any other legal transactions and measures, in particular in accordance with the Transformation Act, equaling a transfer from an economical perspective;
m)resolutions regarding and in connection with the redemption (Einziehung) of shares in the Company;
n)approval of the annual financial accounts, appropriation of the annual results, allocation of profits into reserves of the Company, decreasing or increasing of reserves of the Company, distribution of dividends including interim dividends as well as any other distributions of any kind to shareholders of the Company except as otherwise set out in this Shareholders’ Agreement;
o)decisions on audit requirements (including any waiver of such audit requirements) as well as the appointment of the Company’s auditor;
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p)establishment and dissolution of an advisory board (Beirat), any amendments of its size, rights and competences as well as the adoption, amendment and suspension of rules of procedure for the advisory board (Beirat);
q)adoption, amendment and cancellation of rules of procedure (Geschäftsordnung) for the management board (Geschäftsführung) of the Company;
r)granting approval to measures and transactions of the Company’s management board (Geschäftsführung) requiring approval pursuant to (i) the Articles of Association, (ii) the rules of procedure for the Company’s management board (Geschäftsführung), and/or (iii) this Shareholders’ Agreement;
s)determining the numbers of managing directors, appointment and dismissal of managing directors; conclusion, amendment and termination of managing director service agreements (including release from their work for the Company, approval of any secondary employment and waiver of any statutory and/or (post-) contractual non-compete obligations) as well as the making and receipt of declarations on behalf of the Company with regard to these service agreements; exemption of managing directors from the restrictions of section 181 Civil Code, revocation of such exemptions as well as granting managing directors sole and joint powers of representation, except as otherwise set out in this Shareholders’ Agreement;
t)discharge (Entlastung) of the members of the management board (Geschäftsführung); and
u)implementation of an employee incentive or similar plan at the Company under which employees and/or advisors of the Company and/or other persons or entities may be granted virtual or actual shares or virtual or actual options, as well as any further amendment (in particular with respect to content and volume) to an existing employee incentive or similar plan.
3.2The Parties agree that the consent requirements pursuant to Section 3.1 above shall also apply to all direct and indirect affiliated companies (verbundene Unternehmen) of the Company pursuant to section 15 et. seq. of the Stock Corporation Act and the Company shall ensure and safeguard at all times the proper implementation of such consent requirements at the respective level.
3.3Further requirements for shareholders’ resolutions under mandatory law or under the Articles of Association remain unaffected.
4Information Rights
4.1The Company shall provide to each Shareholder:
4.1.1If not otherwise required by law, unaudited annual financial statements of the Company within ninety (90) calendar days after the end of each business year;
4.1.2for each quarter a reporting package to include unaudited monthly management accounts and a cash-flow analysis;
4.1.3at least forty-five (45) calendar days prior to the end of each business year a detailed operating and capital budget in respect of the next business year.
4.2Section 51a Limited Liability Companies Act remains unaffected.
5Share Transfer Restrictions, Lock-Up, Assignment of rights an obligations
5.1In order to ensure that shares in the Company are solely transferred in compliance with this Shareholders’ Agreement, the transferability of shares in the Company is restricted (vinkuliert) and any disposal of shares in the Company requires the approval of the shareholders’ meeting by way of shareholders’ resolution in accordance with section 3.1l) of this Shareholders’ Agreement and section 9 of the Articles of Association in order to be effective. Such approval is to be granted if all applicable provisions relating to the transfer of shares in the Company under this Shareholders’ Agreement are being complied with and has to be denied otherwise.
5.2Sections 5.1 sentence 1 applies mutatis mutandis to any transfer of the economic interest or benefit of shares in the Company, e.g., by way of implementation and termination of trust (Treuhand), sub-participation (Unterbeteiligung), a silent partnership (stille Beteiligung), profit participation (Gewinnbeteiligung), voting trust agreements (Stimmbindungsvereinbarung) or similar legal arrangements, as well as to any encumbrance, pledge, establishment of a usufruct or other disposal
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(Verfügung) of shares or any assignment of the administrative rights resulting from the company shares as well as the transfer of these rights for the sake of exercising them as well as any other legal transactions and measures, in particular in accordance with the Transformation Act, equaling a transfer from an economical perspective.
5.3Any rights and/or obligations under this Sharesholders’ Agreement may not be assigned and transferred, in whole or in part, and no rights to any rights hereunder may be granted to other parties without the prior written approval of the other Party hereto, except for any transfers and/or assignments to an Affiliate that do not request the consent of the other Party.
5.4The Shareholders undertake to exercise their voting rights in a shareholders’ meeting in such way that the provisions set forth in this Section 5 will be observed accordingly.
6Protection against Indirect Share Transfers
6.1The Existing Shareholder hereby guarantees to the Investor by way of an independent guarantee (selbstständiges Garantieversprechen) pursuant to section 311 (1) Civil Code that the shares in the Existing Shareholder are being held as follows:
Shareholder Total Nominal
Value 		Serial Numbers Partizipation in %
PRETTL
Beteiligungs Holding GmbH 		1,657,500.00 1 – 1,657,500 51
Prettl Industrie
Holding GmbH 		1,592,500.00 1,657,501 – 3,250,000 49
Total 3,250,000 1- 3,250,000 100
Other than this Shareholders’ Agreement and the Company’s articles of association, there are no trust agreements, sub-participations or other agreements with possible effects on the legal and/or economic ownership of the shares in the Existing Shareholders.
6.2Any transfer of shares in the Existing Shareholder to a competitor of the Company shall be invalid without an approving shareholders’ resolution, taken with a majority of 75% of the votes cast. For the purposes of this section, competitor is any company, entity or person listed in Annex 6.2, which shall be reviewed updated by the Parties as reasonably necessary, but at least annually. Such approval shall in any case be granted in case of a transfer to an Affiliate. In case of a breach of this obligation the shares held by Existing Shareholder in the Company may be redeemed in accordance with section 10 of the Articles of Association. The Existing Shareholder herewith declares its consent to such redemption.
7Transfer Notice
7.1If any Shareholder intends to transfer (including by way of a swap or contribution) its shares in the Company in whole or in part with or without consideration (such Shareholder the “Selling Shareholder” and the shares in the Company intended to be transferred by the Selling Shareholder the “Sale Shares”) to another Shareholder or a third party (“Prospective Acquirer”), then the Selling Shareholder is obliged to inform all other Shareholders (collectively the “Other Shareholders” and each an “Other Shareholder”) of such intention without undue delay (unverzüglich) and in writing (“Transfer Notice”). The Transfer Notice must include in particular the following information:
7.1.1name / firm name and statutory seat and address of the Selling Shareholder and the Prospective Acquirer;
7.1.2the number of the Sale Shares;
7.1.3the purchase price or other consideration to be paid by the Prospective Acquirer for the Sale Shares and the due date for such payment or other consideration; and
7.1.4representations, warranties, indemnities and other claims to be given by the Selling Shareholder as well as the remedies available in case of a breach thereof.
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7.2If the Selling Shareholder intends to transfer shares in the Company for consideration other than cash, the Selling Shareholder shall, for the purpose of the right of first refusal under Section 8 and the tag-along right pursuant to Section 9, indicate in the Transfer Notice the value of any non-cash consideration in cash according to the consideration's fair market value. In such event, each Other Shareholder is entitled to request that such consideration's fair market value is (save in case of manifest error (offenbare Unbilligkeit) pursuant to section 319 Civil Code) ultimately determined by an independent expert (Schiedsgutachter), provided that such request must be made in writing to the Selling Shareholder within two (2) weeks as of receipt of the Transfer Notice. If such request is made within said time period, the Selling Shareholder and the requesting Other Shareholder(s) shall agree on the person of the independent expert, or, failing such agreement within a further two (2) weeks period, the independent expert is to be determined by the Institut der Wirtschaftsprüfer in Deutschland e.V. in Düsseldorf. The outcome of the expert's opinion (save in case of manifest error (offenbare Unbilligkeit) pursuant to section 319 Civil Code) ultimately determines the consideration's fair market value for the purpose of the right of first refusal under Section 8 and the tag-along right under Section 9. The Selling Shareholder shall forward the expert's opinion to all Other Shareholders to the effect that for all purposes of Sections 8 and 9 below (i) the fair market value as determined by the independent expert replaces the fair market value originally stated by the Selling Shareholder in the Transfer Notice, and (ii) the Transfer Notice is deemed received by the Other Shareholders at the date of receipt of the expert’s opinion, and not at the date the original Transfer Notice has been received. In the event that the expert's opinion shows the consideration's fair market value to deviate by more than 10 % from the value stated by the Selling Shareholder in the Transfer Notice, the Selling Shareholder shall bear the costs of the expert’s opinion, otherwise the requesting Other Shareholder(s) shall bear such cost in equal parts inter se.
8Right of First Refusal
8.1If a Selling Shareholder intends to transfer Sale Shares to a Prospective Acquirer all Other Shareholders have a right of first refusal on a pro rata basis as set forth in the following provisions to acquire the Sale Shares at the terms and conditions set forth in the Transfer Notice.
8.2Within three (3) weeks after receipt of the Transfer Notice, each Other Shareholder shall state in writing to the Selling Shareholder (“Purchase Statement”) the maximum number of shares (separately per each class of shares, of which shares are intended to be sold by the Selling Shareholder, if applicable) such Other Shareholder is willing to acquire (“Acquisition Limit”) in accordance with this Section 8. The Purchase Statement is binding in accordance with Sections 8.3 and 8.4 below.
8.3If the aggregate number of shares (or of shares of any particular class of shares, of which shares are intended to be sold by the Selling Shareholder, if applicable) under all Acquisition Limits falls short of the aggregate number of shares (or of any class of shares, if applicable), which the Selling Shareholder intends to transfer pursuant to the Transfer Notice, the Selling Shareholder shall inform all Other Shareholders accordingly, submitting copies of all Purchase Statements, and the Other Shareholders who have submitted Purchase Statements to the Selling Shareholder have the right to acquire such Sale Shares on a pro rata basis for which no Purchase Statements have been issued by the Other Shareholders within one (1) week after receipt of the statement of the Selling Shareholder according to the principles set forth in Section 8.2. In case such Other Shareholders do not take up such Sale Shares for which no Purchase Statements have been issued no right of first refusal applies at all. Subject to Sections 9 and 21 the Selling Shareholder is entitled to transfer the Sale Shares within three (3) months after the expiry of the one (1) week period set forth in sentence 1 of this Section 8.3 to the Prospective Acquirer, but only in strict compliance with the terms and conditions stated in the Transfer Notice. A notarially certified (notariell beglaubigte) copy of the notarized agreement concluded between the Selling Shareholder and the Prospective Acquirer is to be submitted to each Other Shareholder for review. Section 8.3 sentence 3 and 4 also applies in case no Other Shareholder submits a Purchase Statement.
8.4If the aggregate number of shares (and of each and every class of shares, of which shares are intended to be sold by the Selling Shareholder, if applicable) under all Acquisition Limits equals or exceeds the aggregate number of shares (and of any class of shares, if applicable), which the Selling Shareholder intends to transfer pursuant to the Transfer Notice, the Selling Shareholder shall inform all Other Shareholders accordingly, submitting copies of all Purchase Statements, and those Other Shareholders, who have issued Purchase Statements, are entitled and obliged to acquire from the Selling Shareholder all of the Sale Shares at the terms and conditions set forth in the Transfer Notice as
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follows: Each Other Shareholder, that has issued a Purchase Statement with regard to shares of a specific class contained in the Sale Shares shall acquire such number of the Sale Shares of that specific class as limited by such Other Shareholder’s Acquisition Limit and up to such Acquisition Limit pro rata in the ratio of the number of shares held by the Other Shareholders who have issued Purchase Statements with regard to shares of that specific class inter se, unless the Other Shareholders who have issued a Purchase Statement agree otherwise. The Other Shareholder who issued its Purchase Statement first (time of receipt of the Purchase Statement by the Selling Shareholder is decisive) shall purchase indivisible fractional amounts. The Selling Shareholder and the Other Shareholders who are entitled and obliged to acquire from the Selling Shareholder the Sale Shares under the preceding sentences shall without undue delay (unverzüglich) and in any event within three (3) weeks after expiry of the time limit for the Purchase Statement under Section 8.2 enter into a notarized share sale and transfer agreement in accordance with the terms and conditions stated in the Transfer Notice, the respective Purchase Statement and the allocation of the Sale Shares pursuant to this Section 8.4.
8.5If the Selling Shareholder intends to transfer Sale Shares for a consideration other than cash, the Other Shareholders have the right to exercise their right of first refusal pursuant to this Section 8 against consideration in cash at least equal to the fair market value of the proposed non-cash consideration as determined pursuant to Section 7.2.
8.6For the avoidance of doubt, (i) no share sale and/or transfer effected for the implementation of the right of first refusal pursuant to this Section 8 triggers the obligations under Section 7 and (ii) no right of first refusal applies to any share sale and/or transfer effected for the implementation of the right of first refusal under this Section 8 and the implementation of the tag-along right under Section 9.
9Tag Along Right
9.1Each Other Shareholder is entitled to request from the Selling Shareholder who is entitled to transfer Sale Shares to the Prospective Acquirer pursuant to Section 8.3 above, that all or a part of its shares regardless of the class of its shares in the Company are sold and/or transferred to the Prospective Acquirer on a pro rata basis at the terms and conditions set forth in the Transfer Notice. The tag-along right is to be exercised by written declaration to the Selling Shareholder within three (3) weeks as of receipt of the Transfer Notice, stating the maximum (and, if desired minimum) number and class of shares in the Company that are being requested to be co-sold to the Prospective Acquirer and may be made jointly with the issuance of a Purchase Statement pursuant to Section 8.2. The Selling Shareholder shall inform the Prospective Acquirer about the fact and to what extent other Shareholders have exercised their tag-along rights.
9.2Without undue delay (unverzüglich) after expiry of the three (3) weeks period as set forth in Section 9.1, the Selling Shareholder is obliged to inform the Other Shareholders who have exercised their tag-along right in writing of the aggregate nominal amount of shares in the Company the Prospective Acquirer is prepared to acquire. If the Prospective Acquirer is not prepared to additionally acquire all the shares in the Company in respect of which a tag-along right pursuant to Section 9.1 has been exercised, then the Other Shareholders who have exercised their tag-along right shall inform the Selling Shareholder within one (1) week after receipt of the notification under the preceding sentence, whether they request to sell their shares in the Company on a pro rata basis according to the nominal amount of shares in the Company held by the Selling Shareholder and such Other Shareholders inter se at the date of receipt of the Transfer Notice or all their shares in the Company pursuant to Section 9.3 below, as the case may be. Such request is binding on the Selling Shareholder; i.e., the Selling Shareholder shall procure that the Sale Shares and the shares in the Company in respect of which a tag-along right has been exercised are sold to the Prospective Acquirer in accordance with this Section 9.2 and the provisions below.
9.3In the event that the Prospective Acquirer would hold directly and/or indirectly 50 % or more of all shares in the Company after acquisition of the Sale Shares and the shares from the Other Shareholders who have exercised their tag-along right under Section 9.2 above (if any), all Other Shareholders enjoy a tag-along right in accordance with the provisions of this Section 9 which may be exercised with respect to all of their shares in the Company, irrespective of the class, and any transfer to the Prospective Acquirer may only be made if the Prospective Acquirer, in the event the respective Other Shareholder who has exercised its tag-along right so demands, takes all shares in the Company held by the respective Other Shareholder. For the purposes of the preceding provisions, shares in the Company already held and/or to be acquired in connection with such acquisition by an Affiliate of the
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Prospective Acquirer or a person acting in concert within the meaning of section 2 (5) Takeover Act (Wertpapiererwerbs- und Übernahme Gesetzt WpÜG) with the Prospective Acquirer are deemed to be held by the Prospective Acquirer. Sentence 1 of this Section 9.3 applies mutatis mutandis if the Prospective Acquirer is a competitor of the Company or an Affiliate of a competitor of the Company.
9.4If the Prospective Acquirer rejects to acquire the Sale Shares as well as the shares in respect of which a tag-along right under the preceding provisions has been exercised, either in total in case of Section 9.3 or on a pro rata basis in case of Section 9.1, none of the Sale Shares may be sold and/or transferred to the Prospective Acquirer.
9.5No tag-along right applies with respect to share sales and/or transfers effected for implementation of the right of first refusal under Section 8 or the tag-along right under this Section 9. No share sale and no transfer effected for implementation of the tag-along right under this Section 9 triggers the obligations under Section 7.
10Permitted Transfers
10.1Sections 7, 8 and 9 do not apply to any sale and/or transfer of shares in the Company nor to any transactions described in Section 5.2 by a Shareholder to an Affiliate.
10.2All Shareholders shall exercise their voting rights to consent to any such transfers as set forth in this Section 10 and all Parties shall take all actions and give all declarations which are necessary to validly enact any transaction contemplated under this Section 10.
11Financing, Future Capital Increases, Distribution of Dividends
11.1Neither the Existing Shareholder nor the Investor shall have any obligation to provide additional financing to the Company, unless this Shareholders’ Agreement is expressly stating otherwise.
11.2Any future financial needs of the Company may be financed in the following order (i) from the Company’s cash flow or the reversal of accruals, (ii) by way of bank financing or other debt-financing granted by Third Parties, each on non-recourse basis or (iii) by shareholder loans or capital increase. The Existing Shareholder and the Investor shall resolve upon the financing structure for add-on acquisitions and investments by way of a resolution by the shareholders’ meeting with a majority of at least 75 % of the votes cast. Neither the Existing Shareholder nor the Investor is obliged to participate in the financing of add-on acquisitions and investments.
11.3In the event that, subsequent to the Capital Increase, an equity financing of the Company including an increase of the Company’s registered share capital is implemented (“Future Equity Financing”), each Shareholder shall have the right to subscribe to the newly issued shares on a pro rata basis (i) to such extent as is necessary to preserve its shareholding prior to the Future Equity Financing and (ii) under the same terms and conditions at which the new shares are generally issued.
11.4Subject to their statutory subscription rights pursuant to Section 11.1 and a shareholders’ resolution by the shareholders’ meeting with a majority of at least 75 % of the votes cast, the Investor (i) shall, in good faith, support and agree to a Future Equity Financing, (ii) shall submit any and all declarations and conduct any and all acts necessary or required for the implementation of Future Equity Financing or the accession of further investors, including entering into and/or amending investment agreements and shareholders’ agreements, issuing any instruments and passing any and all resolutions in shareholders’ meetings of the Company that may be reasonable or required for such purpose, and (iii) agree and acknowledge that the terms and conditions of Future Equity Financings, in particular, may include the introduction and issuance of new (classes of) preferred shares, carrying preference rights such as, e.g., senior proceeds preferences, tag along rights, drag along rights, first refusal rights, first offer rights, IPO demand rights, right to establish an advisory board, right to appoint members of an advisory board, right to dilution protection, consent requirements for certain actions and measures, etc., provided, however, that such measures do not result in an obligation to make additional contributions (unless the relevant Party agrees to the additional contribution or to the other obligation), and provided further that any unilateral alteration to the disadvantage of the rights or preferences granted to an individual holder of Shares only (and not of the rights or preferences granted to all holders of Shares equally) shall also require the consent of that respective affected holder of Share.
11.5The Existing Shareholder and the Investor shall discuss in good faith in each annual shareholders’ meeting in which the audited annual financial statements are to be adopted if and to what extent the annual profits of the Company, if any, shall be distributed to the Existing Shareholder and the Investor.
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In the first three years after signing of this agreement there shall be no dividend distribution. Following the period of three years after signing of this agreement, of the profits of the Company, unless otherwise agreed, at least an amount equal to 50% of the annual profits generated in a given financial year without taking into account the results of preceeding financial years (in German: 50% des Jahresüberschusses aus dem letzten zurückliegenden Geschäftsjahr vor Berücksichtigung von Ergebnissen aus den Vorjahren) shall be subject to distribution, provided that (i) no borrowings shall be made by the Company to generate cash needed for any distributions (taking into due consideration the most recent business plan); and that (ii) the company shall retain a sufficient amount of cash for capital expenditure pursuant to the approved annual budget of the Company for the following financial year, provided however, that unless otherwise agreed for purposes of determining the distributable dividends only, such capital expenditure shall not exceed 50% of the annual profits in the preceding financial year. Any deviating distribution of dividends shall require a resolution by the shareholders’ meeting with a majority of at least 75 % of the votes cast.
12Dilution Protection
12.1In the event that at any time after the Signing Date new shares in the Company are issued from an increase of the Company’s share capital (other than from retained earnings (Gesellschaftsmitteln)) at a price per share in the nominal amount of EUR 1.00 (including contributions to the Company’s capital reserves pursuant to section 272 (2) Commercial Code and/or the assignment of any claims to the Company that may be agreed in that context) which is less than the Preferred Share Price as adjusted from time to time in accordance with Section 12.5 and/or Section 24 (“Lower Price”) (such share issue at the Lower Price: a “Down Round”), the Shareholders shall upon request of the Investor resolve, concurrently with or without undue delay (unverzüglich) after the resolution on the capital increase for the Down Round, a capital increase against cash contributions (Barkapitalerhöhung) to protect the Investor against dilution pursuant to the following provisions (“Anti-Dilution Capital Increase”).
12.2Under the Anti-Dilution Capital Increase new Preferred Shares (“Dilution Protection Shares”) have to be issued at an issue price (Ausgabebetrag) per Dilution Protection Share equal to its nominal value without premium. Only the Investor is admitted to subscribe for the Dilution Protection Shares. All other Shareholders shall waive any subscription rights (Bezugsrechte) in connection with the Anti-Dilution Capital Increase. The Dilution Protection Shares are entitled to participate in the profits of the Company with effect as of the beginning of the business year in which the Anti-Dilution Capital Increase is registered with the commercial register. For the avoidance of doubt, the Investor is not obliged to subscribe for any Dilution Protection Shares from the Anti-Dilution Capital Increase.
12.3The total number “N” of Dilution Protection Shares to be offered to the Investor under the Anti-Dilution Capital Increase has to be calculated as follows:
FORMULAA.JPG
and
CAPTUREA.JPG
with
I = Sum of (i) all investments into the Company made by the Investor with respect to its Preferred Shares prior to the Down Round, (ii) all investments into the Company made by all investors participating in the Down Round.
S = Sum of (i) all Preferred Shares subscribed to by all Holders of Preferred Shares, (ii) all Shares issued in the Down Round subscribed to by all investors participating in the Down Round.
Ii = Investment made by Investor with respect to the Preferred Shares held by it prior to the Down Round.
Si = Number of Preferred Shares held by the Investor prior to the Down Round.
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The number of Dilution Protection Shares so calculated is in each case to be rounded (by applying general mathematical principles) to the next closest multiple of the amount of EUR 1.00 pursuant to section 5 (2), sentence 1 Limited Liability Companies Act.
12.4The Investor is not protected against any dilution resulting from this Section 12:
12.4.1if shares in the Company are issued to employees, managing directors, advisors or other supporters of the Company under a respective incentive plan; or
12.4.2if shares are issued in connection with internal financing rounds by and between the Shareholders; or
12.4.3with respect to shares issued as Dilution Protection Shares under an Anti-Dilution Capital Increase.
12.5In the event of the implementation of an Anti-Dilution Capital Increase for the purpose of dilution protection under this Section 12, the Preferred Share Price as applicable from time to time is for purposes of this Section 12 automatically adjusted with effect for the time after implementation of the Anti-Dilution Capital Increase to equal the relevant weighted average share price (P) applied for the purpose of calculating the volume of the Anti-Dilution Capital Increase pursuant to Section 12.3.
Any shares issued in the Down Round at the Lower Price may in no event be equipped with rights, preferences or privileges senior to Preferred Shares.
13Investor Put Option
13.1The Existing Shareholder hereby irrevocably offers to the Investor to purchase and acquire, subject to the terms and conditions in Section 13.3, all or, at the discretion of each Put Option Holder, a portion of the shares held by the Investor at an aggregate purchase price of EUR 1.00 (in words: Euro one), immediately upon acceptance of such offer by the Investor (“Put Option”).
13.2The Investor may accept the Put Option by notarizing in front of a notary an exercise notice, indicating (i) the number of shares that are sold and transferred pursuant to the Put Option and their respective consecutive numbers, and (ii) the relevant purchaser (“Put Exercise Notice”). The Existing Shareholder hereby waives the right to receive any declaration of acceptance pursuant to section 151 sentence 1 Civil Code (Verzicht auf den Zugang der Annahmeerklärung) made by the Investor. Subject to the condition precedent (aufschiebende Bedingung) that the Put Exercise Notice is duly notarized by a notary, the Investor exercising its Put Option hereby accepts the sale and assignment of shares that are sold and transferred pursuant to the Put Option (as indicated in the Put Exercise Notice) to the Existing Shareholder.
13.3With respect to any shares sold pursuant to the Put Option, the respective Put Option Holder makes no representations and warranties, except as the common title guarantees as described in Section 8 of the Investment Agreement, neither expressly nor implied, of any nature vis-à-vis the Existing Shareholder. The Existing Shareholder hereby already waives any claims under statutory representations and warranties (gesetzliche Gewährleistungsrechte) (section 434 et seq. Civil Code) with respect to any shares sold pursuant to the Put Option, irrespective of whether any defects (Mängel) exist. Any claims related to statutory, contractual or pre-contractual obligations (including section 280 through 284, 311, 311 a, 323 et seq. Civil Code), frustration of contract (Störung der Geschäftsgrundlage) (section 313 Civil Code), unjustified enrichment (ungerechtfertigte Bereicherung) (section 812 et seq. Civil Code) or tort (Deliktsrecht) (section 823 et seq. Civil Code) with respect to the shares sold pursuant to the Put Option are, to the extent legally permissible, hereby excluded. Furthermore, the Existing Shareholder has no right whatsoever to rescind, reverse, cancel or otherwise terminate the sale of shares pursuant to the Put Option or exercise any right or remedy which would have a similar effect.
14Corporate Bodies
14.1The Company shall have the following corporate bodies:
a)the management board (the “Management Board”);
b)the advisory board (the “Advisory Board”);
c)the shareholders’ meeting.
14.2The Parties shall instruct the managing directors (Geschäftsführer) of the Company to comply with the Articles of Association and the Rules of Procedure for the Management Board.
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15Management Board
15.1The Management Board of the Company shall consists of three members (the “Managing Directors”). If the Existing Shareholder and the Investor mutually agree, only one Managing Director will be appointed.
15.2Subject to Sections 15.3 and 15.4 below, the Managing Directors shall be appointed and removed by a resolution by the shareholders’ meeting with a majority of at least 75 % of the votes cast.
15.3The investor is entitled to nominate one (1) Managing Director and the Existing Shareholder is entitled to nominate two (2) Managing Directors including the CEO of the Company (each the “Appointed Managing Director” and the nominating Party the “Nominating Party”) in their sole discretion and to request removal of such Appointed Managing Director in their sole discretion.
All candidates nominated by the Existing Shareholder and/or the Investor for the position of an Appointed Managing Director will be presented to and interviewed by both Parties.
In case the Investor and the Existing Shareholder do not jointly appoint a candidate within a shareholders‘ meeting within six (6) weeks after the profile of a candidate has been submitted to the other Party by the Nominating Party who is nominating such candidate, the Nominating Party may call and invite for a shareholders‘ assembly of the Company in accordance with Section 6 of the Articles of Association and may request the other Party to exercise its voting rights in such shareholders‘ assembly in favour of the candidate nominated by the Nominating Party for the position of an Appointed Managing Director and consequently each Party shall exercise its voting rights in the shareholders‘ meeting so that the candidate nominated by the Nominating Party for the position of an Appointed Managing Director is appointed as Managing Director, unless the nomination made by a Nominating Party is unacceptable (unzumutbar) for the other Party for reasons inherent to the person of the nominee.
If either the Investor or the Existing Shareholder rejects the nomination by the other Party of a Managing Director as being unacceptable, both Parties shall discuss the nomination in good faith and take into adequate consideration the reasoning brought forward by the other Party against such nominee. Reasons inherent to the person of the nominee shall be reputational issues which could reasonably negatively affect the relationship with customers, suppliers, or otherwise have a negative effect on the Business of the Company, e.g. threatening, past or current personal bankruptcy, criminal indictments or indictments of tax evasion. If either the Investor or the Existing Shareholder rejects the nomination by the other Party, the other Party shall have the right to nominate another candidate who shall then be appointed as Managing Director in accordance with this Section 15.3.
15.4Sections 15.2 and 15.3 shall apply accordingly in case an Appointed Managing Director resigns or is requested to be removed from office by the Nominating Party nominating such Appointed Managing Director in accordance with Section 15.3, it being understood that neither a review or agreement nor an observation of any time period is required for the removal from office of an Appointed Managing Director.
15.5Currently the managing directors of the Company as well as of Prettl Electronics Automotive North America, Inc. are Carsten Ellermeier and Miroslav Dziuba. The Parties agree that Carsten Ellermeier and Miroslav Dziuba will be removed as managing directors of the Company as well as of Prettl Electronics Automotive North America, Inc. and new managing directors will be installed. As new managing director of Prettl Electronics Automotive North America, Inc., Mr. Christian Priess has been appointed recently.
16Advisory Board
16.1The Company shall have an Advisory Board consisting of three (3) members.
16.2Each Party is entitled to nominate one member of the Advisory Board. The third member of the Advisory Board will be jointly nominated by the Existing Shareholder and the Investor. If the Existing Shareholder and the Investor cannot agree on the third member of the Advisory Board, the already nominated members of the Advisory Board will jointly nominate the third member.
16.3The Advisory Board shall only have advising function and the function described in Section 18.
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17Agreements with Prettl-Group Entities
At least at the beginning, the Company needs the services provided by certain Prettl – Affiliates as listed in Annex 17. Therefore, the termination of an Intercompany Agreement listed in Annex 17 by the Company and/or the Prettl – Affiliate being the contractual party of the respective agreement requires a resolution by the shareholders’ meeting with a majority of at least 75 % of the votes cast.
18Deadlock
18.1If there is a Deadlock in respect of any of the matters, listed in Section 3.1 lit. a), k) to o) and lit q) to u) including such measures at controlled entities of the Company, each Party shall be entitled to send a conciliation notice (the “Conciliation Notice”) to the other Party requiring the Parties to negotiate in good faith to attempt to amicably resolve the Deadlock. If the Deadlock is not resolved within thirty (30) Business Days of the receipt of the Conciliation Notice, then such Deadlock shall jointly be referred to the respective chairman of the Parties who shall within thirty (30) Business Days, take necessary steps on the best efforts to amicably resolve the Deadlock in a commercially reasonable manner.
18.2If the Deadlock is not resolved in accordance with the provisions of Section 18.1, the Parties are obliged to refer such matter, on which the Deadlock has occurred to the Advisory Board within ten (10) Business Days from expiry of the time period specified in Section 18.1.
The Advisory Board shall try to resolve the matter amicably by unanimous decision, however, the Advisory Board is authorised to decide on such matter by final and binding majority resolution. The Advisory Board shall, in respect of the matter present a decision as soon as practicable immediately after its notification but no later than twenty-one (21) Business Days from the date of its notification (the “Advisory Board Mediation Period”).
18.3If a dispute is resolved under section 18.1 or 18.2, the Parties shall jointly sign a respective declaration and shall exercise all voting rights and other powers of control available to them to procure that such resolution is fully and promptly carried into effect.
18.4If the Advisory Board has not provided its decision within the Advisory Board Mediation Period, such Deadlock shall be dropped and the Parties shall continue to carry on the Business in the usual way.
19Use of Name “PRETTL”
19.1The Parties agree that the Products which the Company will develop, produce and distribute, will, at least in the TERRITORY not be distributed and sold under a trade name, mark, brand or logo that consists of or contains the word “PRETTL” or “Prettl”.
19.2The Parties agree that within a period of six months as of the date of this Agreement the name of Prettl Electronics Automotive North America, Inc. will be changed and the new name will not contain the word “PRETTL” or “Prettl”. The Existing Shareholder is also entitled to demand that the name of the Company will be changed accordingly.
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III.General Provisions
20Effective Date, Term, Extent of Application
20.1This Shareholders’ Agreement becomes effective on the Signing Date, irrespective of whether all shareholders of the Company have become a party hereto.
20.2Each Party hereto may terminate this Shareholders’ Agreement in writing with twelve (12) months’ notice to the end of a calendar year, but in no event with effect to a date prior to 31 December 2031. The right to terminate this Shareholders’ Agreement for good cause (aus wichtigem Grund) remains unaffected. If a Party intends to terminate this Shareholders’ Agreement for good cause (aus wichtigem Grund), such Party shall notify the Company in writing thereof, which shall forward a copy of such notice to the other Parties. If a Party ceases to be a party to this Shareholders’ Agreement as a result of a termination or for any other reason this does not impair the effectiveness of this Shareholders’ Agreement, which continues to be in force and effect among the other Parties; this also applies in the event of death, insolvency or liquidation of any of the Parties. The termination rights of the Parties pursuant to Section 723 para. 1 BGB shall be excluded.
20.3Each Party is entitled to terminate the Shareholders’ Agreement for cause, in particular if
a)any material act or omission by the other Party, or its respective Affiliates, agents or employees occurs, constituting intentional misrepresentation, fraud, wilful misconduct, bribery, theft of embezzlement with respect to the Company and such default has not been cured to the satisfaction of the non defaulting Party within sixty (60) days of the receipt of written notice of such act or omission from the other party; or
b)the other Party is in breach of a material obligation under this Shareholders’ Agreement and/or the Investment Agreement and/or the Articles of Association of the Company and does not sustainably cease the breach of the material obligation within sixty (60) days following a written formal notice of default (Abmahnung) which specifies the breach and refers to the termination right; or
c)(preliminary) insolvency proceedings having been opened over the assets of the other Party or in case the opening of insolvency proceedings has been rejected due to lack of assets (Ablehnung der Insolvenzeröffnung mangels Masse).
20.4A termination for cause must be declared in writing to the other Party (i) in case of Sections 20.3(a) and 20.3(b) within three (3) weeks after the relevant cure period pursuant to Sections 20.3(a) and 20.3(b) has elapsed and (ii) in case of Section 20.3(c) or in all other cases within three (3) weeks after the Party entitled to terminate the Shareholders’ Agreement has learned of the facts relevant for the termination. The Parties shall have no right to assert reasons for the termination of which they have been aware at the time of the termination for cause (Nachschieben von Kündigungsgründen). If the other Party does not receive the termination in due time, the reasons for the termination on which such a termination is based on, shall be exhausted and a subsequent termination for cause cannot be based on such reasons. The other Party shall have the right to object to the termination within three (3) weeks as of receipt of the termination. If the other Party does not object to the termination declared in accordance with this Section 20.4, such termination shall be deemed valid. It the other Party objects the termination in writing within the 3-week-period stating reasons for the non-existence of the reasons for the termination for cause, the Parties shall without undue delay upon receipt of the objection by the terminating Party use their best efforts to come to an agreement on the validity of the termination for cause. Regardless of the existence of a valid objection, the time limits for a termination for cause set forth in Section 20.4 shall apply as of the expiry of the 3-week-period.
20.5This Shareholders’ Agreement applies to any and all shares in the Company held by any of the Parties from time to time, irrespective of whether third parties participate in such shares by way of trusts, sub-participations, or other ways of beneficial interest or similar legal relations and irrespective of whether at all times all of the shareholders of the Company have become a Party hereto. The shares in the Company remain in the particular ownership of the respective Shareholder. No joint ownership (Eigentum zur gesamten Hand) or co-ownership (Miteigentum) is established by this Shareholders’ Agreement. If a Shareholder disposes of all of its shares in the Company or in case all shares of a Shareholder in the Company are redeemed, such Shareholder ceases to be a party to this Shareholders’ Agreement with effect as of the point in time such disposal or redemption becomes effective; any obligations accrued prior to the point in time such disposal or redemption becomes
Page 16 of 18

effective (in particular any obligations under Section 15 (Confidentiality) of the Investment Agreement) remain unaffected.
20.6The costs of the notarization of this Shareholders’ Agreement shall be borne by the Investor. All other costs and expenses in connection with the preparation, conclusion and performance of this Shareholders’ Agreement, including any professional fees, costs and expenses of its advisors, shall be borne by the Party commissioning such costs.
21Termination of the Shareholders’ Agreement
21.1This Shareholders’ Agreement terminates
a)In case of a valid termination pursuant to Section 20.1 to 20.4;
b)In case a Party ceases to be a shareholder of the Company as a result of a transfer or a redemption of shares, except when a third party assumes all rights and obligations under this Shareholders’ Agreement pursuant to Section 22.
21.2Sections 15 through 18 and 21 through 23 of the Investment Agreement (Confidentiality, Press Release, Form of Notices, Delivery Addresses and Authorized Recipients, Entire Agreement, Form of Amendments, Invalid Provisions, Unintended Gaps (Salvatorische Klausel), Interpretation, German Terms, Governing Law and Jurisdiction) and this Section 21.2 shall continue to apply after termination of this Shareholders’ Agreement.
22Accession to this Shareholders’ Agreement
22.1Except in case of a transfer of all shares in the Company, shares in the Company must not be transferred by way of individual succession (Einzelrechtsnachfolge) and respective approval required under this Shareholders’ Agreement or the Articles of Association may not be granted, unless the acquirer accedes, or has otherwise become a party, to this Shareholders’ Agreement beforehand or simultaneously with the acquisition of the shares in the Company. As a consequence of such accession, the acquirer fully assumes the legal position of the transferor in respect of the shares acquired from the transferor, except for rights and obligations specifically granted to a specifically named Shareholder (individually or jointly with others) stay with such Shareholder as long as such Shareholder holds shares in the Company, and pass to an acquirer of such Shareholder’s shares only in case such Shareholder expressly agrees so with the acquirer or transfers all of its shares to such acquirer. Sentence 1 of this Section 22.1 applies mutatis mutandis to any issuance of new shares in the Company.
22.2The Parties hereby expressly and irrevocably offer third parties, who hold, acquire or subscribe for shares in the Company to accede to this Shareholders’ Agreement (as amended from time to time) and each of them individually, except for the Company, waive the receipt of the acceptance declaration pursuant to section 151 Civil Code. Furthermore, the Parties authorize each other individually to direct such offer to the aforementioned third parties. The Parties agree that such third parties may accept the offer of accession to this Shareholders’ Agreement (as amended from time to time) by way of a notarized accession declaration, stating the Party, that has directed the offer of accession to such third party, as well as the Party, from which shares have been or are being acquired (except in case shares are subscribed for within a capital increase of the Company). The accession becomes effective upon receipt of an execution copy (Ausfertigung) of the notarized accession declaration by the Company, provided that such accession declaration does not contain any amendment or alteration to this Shareholders’ Agreement (as amended from time to time) and is unconditional except for its becoming effective upon such third party's acquisition of shares in the Company. The Company shall inform all other Parties in writing upon an accession to this Shareholders’ Agreement without undue delay (unverzüglich).
23Articles of Association
The rights and obligation of the Parties relating to the Company and their participation therein as shareholders are governed by mandatory law, this Shareholders’ Agreement and the Articles of Association of the Company as amended from time to time. Except as expressly provided otherwise in this Shareholders’ Agreement, any provisions in this Shareholders’ Agreement, to the extent legally permissible and among the Parties hereto, prevail over the provisions of Articles of Association in case they conflict.The Parties shall exercise their voting and other rights and powers available to them to give effect to the provisions of this Shareholders’ Agreement and, if necessary, ensure that any amendment is made to the Articles of Association in order to reflect the provisions of this Shareholders’ Agreement.
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24Adjustments of Preferred Share Prices
In the event of (i) an increase of the Company's share capital from retained earnings (Kapitalerhöhung aus Gesellschaftsmitteln) by issuance of new shares, (ii) a decrease of the Company's share capital (Kapitalherabsetzung) and number of shares without repayment to the Company’s shareholders, (iii) a stock split or consolidation of shares, or (iv) any structural measure with a similar effect, the Preferred Share Price (as applicable from time to time) is adjusted accordingly for all purposes of this Shareholders’ Agreement.
25Final Provisions
With respect to this Shareholders’ Agreement, Sections 14 through 18 and 21 through 23 of the Investment Agreement (Assignments, Set-off and Retention, No Joint Entitlement, No Joint Liability, Confidentiality, Press Release, Form of Notices, Delivery Addresses and Authorized Recipients, Entire Agreement, Form of Amendments, Invalid Provisions, Unintended Gaps (Salvatorische Klausel), Interpretation, German Terms, Governing Law and Jurisdiction) shall apply mutatis mutandis.
*****
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Exhibit 31.1
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Alfred P. Poor certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Ideanomics, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 22, 2021
By:
/s/ Alfred P. Poor
Name:
Alfred P. Poor
Title:
Chief Executive Officer
(Principal Executive Officer)



Exhibit 31.2
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Conor McCarthy certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Ideanomics, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 22, 2021
By: /s/ Conor McCarthy
Name: Conor McCarthy
Title: Chief Financial Officer
(Principal Financial and Accounting Officer)



Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Alfred P. Poor, Chief Executive Officer of Ideanomics, Inc. (the “Company”), DOES HEREBY CERTIFY that:
1.The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2021 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
IN WITNESS WHEREOF, the undersigned has executed this statement this November 22, 2021.
By: /s/ Alfred P. Poor
Name: Alfred P. Poor
Title: Chief Executive Officer
(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission (“SEC”) or its staff upon request.

The foregoing certification is being furnished to the SEC pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.


Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Conor McCarthy, Chief Financial Officer of Ideanomics, Inc. (the “Company”), DOES HEREBY CERTIFY that:
1.The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2021 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
IN WITNESS WHEREOF, the undersigned has executed this statement this November 22, 2021.
By: /s/ Conor McCarthy
Name: Conor McCarthy
Title: Chief Financial Officer
(Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission (“SEC”) or its staff upon request.

The foregoing certification is being furnished to the SEC pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.