As filed with the Securities and Exchange Commission on December 7, 2022
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form F-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Sono Group N.V.
(Exact Name of Registrant as Specified in its Charter)
Not Applicable
(Translation of Registrant’s Name into English)
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The Netherlands
(State or other Jurisdiction of
Incorporation or Organization)
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3711
(Primary Standard Industrial
Classification Code Number)
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Not Applicable
(I.R.S. Employer
Identification Number)
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Waldmeisterstraße 76
80935 Munich
Germany
+49 (0)89 4520 5818
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
+1 (302) 738 6680
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies of all communications, including communications sent to agent for service, should be sent to:
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Krystian M. Czerniecki
Clemens Rechberger
Sullivan & Cromwell LLP
Neue Mainzer Straße 52
60311 Frankfurt
Germany
+49 (69) 4272 5200
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Paul van der Bijl
NautaDutilh N.V.
Beethovenstraat 400
1082 PR Amsterdam
The Netherlands
+31 (20) 717-1000
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Approximate date of commencement of proposed sale to the public: From time to time after this registration statement becomes effective.
If only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ☐
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.C. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
If this Form is a registration statement pursuant to General Instruction I.C. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 7(a)(2)(B) of the Securities Act. ☐
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
This registration statement contains:
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a base prospectus which covers (i) the offering, issuance and sale by the registrant of up to a maximum aggregate offering price of $195,000,000 of the registrant’s ordinary shares from time to time in one or more offerings, including the at-the-market offering as described below; and (ii) the sale from time to time by the selling shareholder identified in the base prospectus of up to 30,000,000 ordinary shares, that may be issued by the registrant to the selling shareholder upon conversion of certain convertible debentures as described in the base prospectus, in one or more offerings; and
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a prospectus covering the offering, issuance and sale by the registrant of up to a maximum aggregate offering price of $135,000,000 of the registrant’s ordinary shares that may be issued and sold under an at market issuance sales agreement by and among the registrant, B. Riley Securities, Inc., Berenberg Capital Markets LLC and Cantor Fitzgerald & Co., referred to as the ATM prospectus.
The base prospectus immediately follows this explanatory note. The ATM prospectus immediately follows the base prospectus. The ordinary shares that may be offered, issued and sold by the registrant under the ATM prospectus are included in the $195,000,000 of securities that may be offered, issued and sold by the registrant under the base prospectus. Upon termination of the sales agreement, any portion of the $135,000,000 included in the ATM prospectus that is not sold pursuant to the at market issuance sales agreement will be available for sale in other offerings pursuant to the base prospectus and a corresponding prospectus supplement, and if no shares are sold under the at market issuance sales agreement, the full $135,000,000 of ordinary shares not sold may be sold in other offerings pursuant to the base prospectus and a corresponding prospectus supplement.
The information in this prospectus is not complete and may be changed. Neither we nor the selling shareholder may sell or accept an offer to buy these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting offers to buy these securities in any jurisdiction where such offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED DECEMBER 7, 2022
Sono Group N.V.
Up to $195,000,000 of Ordinary Shares offered by the Company
30,000,000 Ordinary Shares offered by the Selling Shareholder
We, Sono Group N.V., a public company with limited liability under Dutch law (naamloze vennootschap), may offer, from time to time, in one or more offerings, ordinary shares, each with a nominal value of €0.06, with an aggregate offering price of up to $195,000,000. We will provide the specific terms of any offering in one or more supplements to this prospectus. The prospectus supplements will also describe the specific manner in which these securities will be offered and may also supplement, update or amend information contained in this prospectus.
YA II PN, Ltd., a Cayman Islands exempt limited partnership, whom we refer to as Yorkville or the selling shareholder, may sell in one or more offerings pursuant to this prospectus up to an aggregate of 30,000,000 ordinary shares that may be issued to the selling shareholder upon conversion of convertible debentures in an aggregate principal amount of up to $31,100,000 acquired or to be acquired by the selling shareholder from us in a private placement pursuant to a securities purchase agreement dated December 7, 2022. More information about the private placement of the convertible debentures can be found under “Selling Shareholder — Private Placement of the Convertible Debentures.”
We collectively refer to the ordinary shares offered hereby as the “securities.” This prospectus describes the general terms of these securities and the general manner in which the securities will be offered.
The securities covered by this prospectus may be offered through one or more underwriters, dealers or agents, or directly to purchasers. The names of any underwriters, dealers or agents, if any, will be included in a supplement to this prospectus. For general information about the distribution of securities offered, please see “Plan of distribution” beginning on page 63.
You should read this prospectus and any applicable prospectus supplement, as well as any documents incorporated by reference into this prospectus or any prospectus supplement, carefully before you invest.
Our ordinary shares are traded on The Nasdaq Global Market (“Nasdaq”) under the symbol “SEV.” On December 6, 2022, the closing price for our ordinary shares as reported on Nasdaq was $1.26 per share.
Investing in our securities involves risks. See “Risk factors” beginning on page 11. We may include specific risk factors in an applicable prospectus supplement under the heading “Risk Factors.”
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
We are both an “emerging growth company” and a “foreign private issuer” as defined under applicable U.S. federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for this and future filings. See “Prospectus Summary — Implications of Being an Emerging Growth Company” and “Prospectus Summary — Implications of Being a Foreign Private Issuer.”
The date of this prospectus is , 202 .
TABLE OF CONTENTS
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EXPLANATORY NOTE
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For investors outside the United States: Neither we nor the selling shareholder, any underwriters, dealers or agents have done anything that would permit an offering pursuant to this prospectus, or authorize the possession or distribution of this prospectus, in any jurisdiction other than the United States where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities and the distribution of this prospectus outside the United States. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Sono Group N.V. is incorporated in The Netherlands, and a majority of its outstanding securities is owned by non-U.S. residents. Under the rules of the U.S. Securities and Exchange Commission, or the SEC, Sono Group N.V. is currently eligible for treatment as a “foreign private issuer.” As a foreign private issuer, we are not required to file periodic reports and consolidated financial statements with the SEC as frequently or as promptly as domestic registrants whose securities are registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
You should rely only on the information contained or incorporated by reference in this prospectus or any applicable prospectus supplement. Neither we nor the selling shareholder have authorized anyone else to provide you with different information, and neither we nor the selling shareholder take responsibility for any other information others may give you. The securities offered by this prospectus are being offered only in jurisdictions where the offer is permitted. You should not assume that the information contained or incorporated by reference in this prospectus or any applicable prospectus supplement is accurate as of any date other than the date on the front of each document. Our business, financial condition, results of operations and prospects may have changed since that date.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form F-3 that we filed with the U.S. Securities and Exchange Commission, or the SEC, utilizing a “shelf” registration process. Under this shelf process, we may sell ordinary shares with an aggregate offering price of up to $195,000,000, and the selling shareholder may sell up to an aggregate of 30,000,000 ordinary shares, in one or more offerings. We will not receive any proceeds from the sale by the selling shareholder of the ordinary shares offered by them described in this prospectus. This prospectus includes important information about us and the selling shareholder, provides you with a general description of the securities we, or the selling shareholder, may offer and also contains other information you should know before investing.
Each time we sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The applicable prospectus supplement may also add, update or change information contained in this prospectus. If there is any inconsistency between the information contained in this prospectus and any applicable prospectus supplement, you should rely on the information contained in the applicable prospectus supplement.
This prospectus does not contain all of the information provided in the registration statement that we filed with the SEC. You should read both this prospectus and any applicable prospectus supplement together with additional information described under the headings “Where you can find more information” and “Incorporation of certain information by reference.” You should rely only on information contained or incorporated by reference in this prospectus and, if applicable, any prospectus supplement and any related free writing prospectus. We have not authorized anyone to provide you with information different from that contained or incorporated by reference in this prospectus, any applicable prospectus supplement and any related free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it.
We have filed or incorporated by reference exhibits to the registration statement of which this prospectus forms a part. You should read the exhibits carefully for provisions that may be important to you.
We have historically conducted our business through Sono Motors GmbH, which became a wholly- owned subsidiary of Sono Group N.V. after a corporate reorganization: We were incorporated pursuant to the laws of The Netherlands as Sono Motors Finance B.V. on October 23, 2020 as a wholly-owned subsidiary of Sono Motors GmbH. As part of the corporate reorganization that was completed on November 27, 2020, our then-existing shareholders contributed all of their shares in Sono Motors GmbH to Sono Motors Finance B.V. in exchange for newly issued ordinary shares of Sono Motors Finance B.V. In addition, the sole issued and outstanding ordinary share in Sono Motors Finance B.V. at that time, which was held by Sono Motors GmbH, was canceled (ingetrokken). As a result, Sono Motors GmbH became a wholly-owned subsidiary of Sono Motors Finance B.V. and the then-existing shareholders of Sono Motors GmbH became the shareholders of Sono Motors Finance B.V. Also on November 27, 2020, Sono Motors Finance B.V. was converted into a public company with limited liability under Dutch law (naamloze vennootschap), and changed its legal name from Sono Motors Finance B.V. to Sono Group N.V. A portion of the newly issued ordinary shares of Sono Group N.V. was also converted into high voting shares in the share capital of Sono Group N.V. Only the ordinary shares of Sono Group N.V. are being offered hereby.
Immediately prior to the pricing of our initial public offering (“IPO”) on November 16, 2021, we issued additional ordinary shares to all of our existing shareholders, having the effect of a share split. Each of our existing shareholders received 0.71 additional ordinary shares per ordinary share or high voting share held by them immediately prior to the pricing of our IPO, rounded down to the nearest integer. This resulted in an issuance of 25,468,644 ordinary shares to our existing shareholders. These ordinary shares were issued for no consideration. The nominal value of these ordinary shares was charged against our reserves.
Unless otherwise indicated or the context otherwise requires, all references in this prospectus to “Sono Motors,” the “Company,” “we,” “our,” “ours,” “ourselves,” “us” or similar terms refer to (i) Sono Motors GmbH, together with its subsidiary Sono Motors Finance B.V. at that time, prior to the further implementation of the aforementioned corporate reorganization, (ii) Sono Motors Finance B.V., together with its subsidiary, as of the completion of the exchange of all ordinary shares in Sono Motors GmbH for
newly issued ordinary shares in Sono Motors Finance B.V. and prior to the conversion of Sono Motors Finance B.V. into Sono Group N.V. and (iii) Sono Group N.V., together with its subsidiary, after the aforementioned corporate reorganization, in which Sono Motors Finance B.V. was converted into Sono Group N.V.
We are registered with the Trade Register of the Chamber of Commerce (Kamer van Koophandel) under number 80683568 and our corporate seat is in Amsterdam, The Netherlands. Our registered office and principal executive office is at Waldmeisterstraße 76, 80935 Munich, Germany, and our telephone number is +49 (0)89 4520 5818.
Neither the delivery of this prospectus nor any sale made under it implies that there has been no change in our affairs or that the information in this prospectus is correct as of any date after the date of this prospectus. You should not assume that the information in this prospectus, including any information incorporated in this prospectus by reference, any applicable prospectus supplement or any free writing prospectus prepared by us, is accurate as of any date other than the date on the front of those documents. Our business, financial condition, results of operations and prospects may have changed since that date. You should not assume that the information contained in this prospectus is accurate as of any other date.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement (including amendments and exhibits to the registration statement) on Form F-3 under the Securities Act. This prospectus, which is part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed. Each statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit.
We are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. The SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our management board and supervisory board members and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
Our SEC filings, including the registration statement on Form F-3, are also available to you on the SEC’s website at http://www.sec.gov.
PROSPECTUS SUMMARY
This summary highlights information contained in more detail elsewhere in this prospectus and in the documents incorporated by reference herein. This summary may not contain all the information that may be important to you, and we urge you to read this entire prospectus and any documents incorporated by reference herein carefully before deciding to invest in our ordinary shares.
Sono Motors
Our Vision
We envision a world that no longer relies on the burning of fossil fuels. Our business was founded on a shared passion for finding a solution to climate-friendly, innovative and yet affordable mobility. The goal was to develop a solar-powered, family-sized car for the mass market. To realize this goal, our founders assembled an experienced team of engineers, designers, technicians, and industry experts who spent years developing solar technology suited for mobility applications. We developed and tested several prototypes to advance and refine our technology and enlisted driver feedback to create a design that would be simultaneously functional, convenient to operate, environmentally sustainable, and affordable.
From this process the Sion and our proprietary solar technology were born. The Sion is a solar electric vehicle, designed with a view to be accessible to everyday consumers and to be shared. Our technology allows us to integrate solar panels into the Sion’s bodywork to capture energy from the sun and store it in the Sion’s on-board battery. We believe the Sion unlocks the potential of solar energy in a car and advances our goal of providing a net-zero-emission vehicle solution for the mass market. We seek to license and sell our proprietary solar technology in order to accelerate the transition towards sustainable transport.
Business Overview
We believe we are a pioneer and technological leader in the field of solar-powered electric mobility. We intend to use our technology to create our solar and battery powered vehicle, the Sion. Our proprietary solar technology has, however, many other potential applications. We believe that our solar technology is suitable for different uses, such as buses, trucks, camper vans, trains and even boats, and has the potential to accelerate the transition towards sustainable transportation. We have successfully started to market, and are already generating limited revenues from, our proprietary solar technology.
Our disruptive solar technology allows for full solar integration. In the process of developing the Sion, we soon realized that the available solar technology was not well-suited for mobility applications. Traditional solar technology relies on glass to cover the solar cells. Glass is, however, heavy, relatively inflexible, expensive and dangerous in crash situations. Our polymer technology solves these issues. It is lightweight, allows for flexible surface integration via our patented injection molding process, is affordable due to fast and lean production and avoids the risk of bodily harm caused by broken glass. We have also developed other critical components for the use of solar technology in mobility applications. We have, through our maximum power point tracker central unit (“MCU”) solved the issue that solar cells will be mounted on different parts of the exterior, which will lead to uneven exposure to sunlight. Our technology allows for the seamless integration of solar cells into the full body of a car, such as the Sion, and the charging of its battery through the power of the sun. However, solar technology has many other potential applications, and its use cases extend far beyond passenger cars, allowing for grid-independent charging and a reduction of running costs or total costs of ownership in transport-related use cases, such as trucks, buses, recreational vehicles and boats. Fleet operators may use our technology to retrofit existing vehicles, to extend the range of battery electric vehicles (“BEVs”) or to comply with emission regulations. The transport and logistics industries in particular are very focused on total cost of ownership, and we believe our solar integration can reduce their running costs significantly. Manufacturers may also use our technology for new production vehicles. We have several patents granted or within the filing-process protecting our proprietary technology.
Our technology will be one of the distinctive features of the Sion. It will have the ability to recharge itself using solar energy panels installed on the exterior that leverage our polymer-based solar technology. We expect that solar power will reduce the number of charging intervals and, depending on the vehicle’s usage profile, may even eliminate the need for battery charging, positioning us to benefit from a significant
competitive advantage over conventional electric vehicles. The Sion’s polymer exterior significantly reduces the need for expensive metal-stamping tools and machinery costs, and the integration of solar modules into the bodywork eliminates the need for a costly paint shop, which helps us to accept reservations for the Sion locking in a comparatively low net entry price of currently €25.1 thousand. Consistent with our goal to lower CO2 emissions, each Sion will be outfitted with technology that can connect to our car- and ride- sharing networks through our proprietary hardware and software solutions. We expect that the Sion will be convenient to operate and share and comparatively affordable providing it with the potential to disrupt the market.
To make the Sion affordable for the mass market without compromising security or quality, we do things differently and, we believe, much more efficiently and sustainably than traditional car manufacturers or other pure EV manufacturers. We believe our production and distribution strategies will enable us to reduce production complexity, maintain relatively low overhead costs and significantly reduce our capital expenditures and distribution costs, thereby positioning us to become a price-value leader compared to competitors’ offerings in the relevant car segments. We intend to produce the Sion as a one-variant-only vehicle via a third-party producer and to rely on business-to-consumer direct distribution. All Sions will have the same exterior color and vehicle features, and will rely on existing off-the-shelf component parts from established automotive suppliers, such as Vitesco Technologies Germany GmbH (a former subsidiary of Continental AG), Hella GmbH & Co. KGaA and FinDreams Industry Co., Ltd., resulting in economies of scale through the partial elimination of development costs, reduced purchasing and manufacturing complexity, reduced logistical challenges and inventory costs, and lower risks associated with quality control and testing, all of which should facilitate more rapid growth of our operations. The contract manufacturer Valmet Automotive Inc. (“Valmet Automotive”) in Uusikaupunki, Finland will produce the Sion. Our goal is to offset 100% of the CO2 emissions generated by the production of the Sion and our future vehicle models, with a view to achieving full CO2 neutrality during the production cycle.
Rather than relying on dealerships to sell the Sion, we intend to rely on what we consider to be an innovative and effective way to sell directly to customers through our online platform. Customers can view the Sion, book a test drive and engage and place orders directly with us. As of September 1, 2022, we had more than 20,000 reservations, more than 3,500 of which were made in 2022, with advance payments resulting in total net cash inflows of approximately €43 million from ourcustomers. These reservations correspond to a net sales volume of approximately €435 million assuming all reservations actually result in sales. However, our customers may cancel their reservations without penalty according to our general terms and conditions, if no binding purchase agreement has been concluded by an agreed deadline, which varies. Some reservations are already cancelable as of the date of this prospectus. If we are able to commence commercial production of the Sion in the first quarter of 2024 as currently planned, we also intend to begin fulfilling customer reservations in the first quarter of 2024.
We are already generating limited revenues from our proprietary solar technology, having shipped prototypes and solar retrofits to customers. We are also building up a customer base by signing non-binding letters of intent and purchase orders. With respect to the Sion, we are still in the pre-production phase and presented the first vehicles from the third prototype generation, the Sion series validation vehicles (“SVVs”), in July 2022. We are currently working on assembling and testing numerous SVVs and bodies-in-white with the support of our partners thyssenkrupp Automotive Body Solutions and Bertrandt, which are located close to Sono Motors’ headquarters in Munich.
Our available cash and cash equivalents and proceeds generated, or planned to be generated, from the financings (i.e., the equity line of credit, the issuance of convertible debentures and the planned at market securities offerings) described below under “— Recent Developments” will not be sufficient to secure our substantial funding needs through the planned start of production of the Sion. According to our current estimates, we expect to need additional funding of at least €240 million until the start of commercial production of the Sion, which we currently envisage for the first quarter of 2024. In order to meet the targeted date for the start of commercial production of the Sion, we will need to raise substantial additional funds in the short term. We continue to actively consider various financing options, including registered offerings of newly issued shares and other equity securities. Assuming that we actually raise the additional funding we need, we currently plan to commence commercial production of the Sion in the first quarter of 2024, with pre-series production planned for 2023.
For the six-month period ended June 30, 2022, we had a loss for the period of €61.0 million, compared to a loss for the period for the six-month period ended June 30, 2021 of €24.4 million. For the year ended December 31, 2021, we had a loss for the period of €64.0 million, compared to a loss for the period for the year ended December 31, 2020 of €56.0 million. We have incurred net losses since our inception in March 2016, resulting in an accumulated deficit of €208.1 million as of June 30, 2022 compared to €147.1 million as of December 31, 2021. We believe that we will continue to incur losses and depend on external financing for the foreseeable future at least until we commence material deliveries of the Sion and the time when we significantly scale our operations, including the monetization of our solar technology.
Recent Developments
We initially intended for the Sion to be produced by National Electric Vehicle Sweden (“NEVS”), in Trollhättan, Sweden. In April 2022, we announced that we would switch to Valmet Automotive in Uusikaupunki, Finland. This change in the envisaged contract manufacturer contributed to an increase in our funding needs and led to a delay in the intended date for start of production from the first half of 2023 to the second half of 2023.
In May 2022, we issued 10,930,000 shares in a follow-on offering. The net proceeds from that offering were $40.6 million.
On June 13, 2022, we entered into a purchase agreement and a registration rights agreement with Joh. Berenberg, Gossler & Co. KG (the “ELOC Investor”) in relation to an equity line of credit (the “ELOC”). Pursuant to the purchase agreement, we have the right to sell to the ELOC Investor up to $150 million of our ordinary shares, subject to certain limitations and conditions set forth in the purchase agreement, from time to time until June 30, 2024. Sales of ordinary shares to the ELOC Investor pursuant to the purchase agreement, and the timing of any such sales, are solely at our option, and we are under no obligation to sell any securities to the ELOC Investor under the purchase agreement. Through the date of this prospectus, we sold 8,748,433 ordinary shares to the ELOC Investor. The total gross proceeds from these sales were $17.5 million. Under the terms of the securities purchase agreement relating to the convertible debentures described below, we are only permitted to have either the ELOC or an at market issuance sales agreement in place at any given time. In view of our entry into the at market issuance sales agreement described below on December 7, 2022, we currently expect that we will terminate the ELOC once sales may be made under the at market issuance sales agreement.
In July 2022, apart from presenting first vehicles from the third prototype generation, as described under “Sono Motors” above, we unveiled our “Solar Bus Kit”, a scalable business-to-business retrofit solution that reduces fuel consumption and inner-city greenhouse gas emissions, thereby contributing to climate protection. The Solar Bus Kit is a versatile and straightforward solution, optimized for the most common 12-meter public transport bus types on the European market, including Mercedes-Benz Citaro and MAN Lion City. Sono Motors plans to offer a complete and efficient retrofit solution for bus fleet operators who have a compelling need to reduce diesel consumption and CO2 emissions to meet their sustainability goals.
In September 2022, we signed a letter of intent with FINN GmbH, a Munich-based car subscription platform, aiming to solidify our mutual cooperation. FINN GmbH was one of our first business-to- business reservation holders. Following its initial, non-binding reservation of 5,500 Sion in 2020, FINN GmbH now intends to reserve and purchase a total of 12,600 Sion. We seek to reach a final agreement with FINN GmbH regarding our cooperation in 2023. FINN GmbH also offers our reservation holders a €500 discount on a car subscription.
On December 7, 2022, we entered into a securities purchase agreement with the selling shareholder Yorkville, pursuant to which we agreed to sell and issue to the selling shareholder convertible debentures in an aggregate principal amount of up to $31.1 million, which are convertible into our ordinary shares subject to certain conditions and limitations set forth in the securities purchase agreement. The first convertible debenture in a principal amount of $11.1 million was issued on December 7, 2022 upon signing of the securities purchase agreement, a second convertible debenture of $10.0 million will be issued upon filing with the SEC of the registration statement, of which this prospectus forms a part, registering the resale of ordinary shares resulting from the conversion of the convertible debentures, and a third debenture in an
aggregate principal amount of $10.0 million will be issued to Yorkville upon declaration of effectiveness of such registration statement by the SEC. In connection with the transaction, we have paid Yorkville a commitment fee of $1,088,500 and a due diligence and a structuring fee of $15,000. The convertible debentures provide a conversion right, according to which Yorkville may, at any time after the issuance date, subject to certain limitations, convert any portion of the outstanding and unpaid principal amount of the convertible debentures, together with any accrued but unpaid interest, into our ordinary shares at the lower of (i) $1.75 per ordinary share or (ii) 96.5% of the lowest daily volume weighted average price of our ordinary shares during the seven consecutive trading days immediately preceding the date of conversion, but not lower than a floor price of $0.15 per share, subject to adjustment in accordance with the terms of the convertible debentures, provided that, under no circumstances, the conversion price per ordinary share shall be less than the nominal value of one ordinary share (translated into United States Dollars on the applicable share delivery date). The convertible debentures may not be converted into ordinary shares to the extent such conversion would result in the selling shareholder and its affiliates having beneficial ownership of more than 4.99% of our then outstanding ordinary shares; provided that this limitation may be waived by the selling shareholder upon not less than 65 days’ prior notice to us. The convertible debentures provide us, subject to certain conditions, with a redemption right pursuant to which we, upon three (3) business days’ prior notice to the selling shareholder may redeem, in whole or in part, any of the outstanding principal and interest thereon plus a redemption premium equal to 4.0% of the principal amount being redeemed. The registration statement, of which this prospectus forms a part registers the resale by the selling shareholder of up to 30,000,000 ordinary shares that may be issued by us upon the conversion of the convertible debentures. Yorkville, a Cayman Islands exempt limited partnership, is a fund managed by Yorkville Advisors Global, LP, headquartered in Mountainside, New Jersey. For further information on the terms of the convertible debentures, the securities purchase agreement and on the registration rights agreement entered into in connection therewith, see “Selling Shareholder — Private Placement of Convertible Debentures”.
On December 7, 2022, we entered into an at market issuance sales agreement, referred to as the ATM sales agreement, with B. Riley Securities, Inc., Berenberg Capital Markets LLC and Cantor Fitzgerald & Co., referred to as the agents. In accordance with the terms of the ATM sales agreement, we may issue and sell, from time to time, ordinary shares, through or to the agents, acting as agent or principal. Sales of ordinary shares, if any, will be made by any method permitted that is deemed an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). Under the ATM sales agreement, the agents are not required to sell any specific amount but will act as our sales agents using commercially reasonable efforts consistent with each of their normal trading and sales practices, on mutually agreed terms between the agents and us. However, under the terms of the securities purchase agreement relating to the convertible debentures described above, we have undertaken to limit sales under the ATM sales agreement to not more than 2% of the daily trading volume of our ordinary shares on Nasdaq (the “Two Percent Cap”) for so long as any amounts are outstanding under the convertible debentures. The Two Percent Cap shall be increased on a trading day (i) to 10% if the trading volume on that trading day is between $5.0 million and $10 million and (ii) to 15% if the trading volume on that trading day is greater than $10 million. This prospectus is intended to cover, among others, the offering, issuance and sale by us of ordinary shares in at the market offerings as contemplated by the ATM sales agreement, with further details being specified in a prospectus relating to the ATM sales agreement.
On December 6, 2022, we published the convening notice for our annual general meeting of shareholders. One of the items on the agenda relates to an amendment of our articles of association in order effect of a reverse share split at a ratio of 5:1, such that every five ordinary shares or high-voting shares, as applicable, will be combined into one share of the same class (the “Reverse Share Split”). We expect that no fractional shares will be issued in connection with the Reverse Share Split. Instead, our transfer agent will sell, immediately prior to the implementation of the Reverse Share Split, all fractional ordinary shares that would otherwise be created as part of the Reverse Share Split on the Nasdaq Stock Exchange. A shareholder who would otherwise have received a fraction of an ordinary share will receive instead an amount of cash generated from such sales attributable to the shareholder's proportionate interest in the new proceeds of such sales, without interest.
Summary Risk Factors
Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” below or similarly entitled sections in documents incorporated by reference herein. You should read these
risks, together with all other information appearing or incorporated by reference in this prospectus or any applicable prospectus supplement, in light of your particular investment objectives and financial circumstances before you invest in our securities. We may be unable, for many reasons, including those that are beyond our control, to implement our business strategy. In particular, risks associated with our business include, but are not limited to, the following:
•
our history of significant losses and expected continuing losses for the foreseeable future, which lead to continued reliance on external financing and raise substantial doubt about our ability to continue as a going concern;
•
the dependence of our success and future growth upon the market’s willingness to adopt solar electric vehicles;
•
developments in vehicle technology that may adversely affect the demand for solar electric vehicles;
•
the competitiveness of the automotive market and the risk to fail to be among the first to serve the mass market with an electric vehicle with solar power capability;
•
high volatility of demand in the automobile industry;
•
our unproven ability to develop vehicles and the risk of failing to finalize development and realize the commercialization of the Sion within the intended timeframe, budget or at all;
•
time and financial constraints in the development of the Sion may require compromises regarding design, performance and quality;
•
the initial dependence on a single car model, the Sion;
•
that our customers may cancel their reservations for the Sion without penalty;
•
our intention to deploy technologies and solutions in our vehicles, including our solar module technology, which may not be fully functional or available on our anticipated schedule or at all, and may remain unproven and pose additional risks;
•
our dependence on the adequate protection of our intellectual property;
•
that our patent applications may not lead to the granting of patents or desired protection in time or at all, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours;
•
obstacles we may face in tapping additional revenue opportunities;
•
a delay in the commercial production of the Sion;
•
our possible inability to develop manufacturing processes and capabilities within our projected costs and timelines;
•
our unproven and still-evolving ability to manufacture vehicles of sufficient quality and appeal to customers on schedule and at scale and to commercialize our vehicles;
•
our dependence on our contract manufacturer Valmet Automotive for production of the Sion;
•
our dependence on the development, production, performance and durability of batteries being engineered by a single supplier;
•
our dependence on a single supplier for production of a central component of our solar panels;
•
our intention to outsource logistics management of our operations to third-party logistics (“3PL”) and potentially fourth-party logistics (“4PL”) services providers;
•
ongoing negotiations of contractual agreements with many of our prospective suppliers and business partners and potential renegotiations of these agreements as we scale our business;
•
the involvement of numerous third parties in our process, which adds significant complexity;
•
our dependence on the acceptance of our brand and any negative publicity relating to any of our business partners and their products or services, which could have a significant negative impact on our business and reputation;
•
the risk that the Sion or any of our future vehicles may fail to perform as expected;
•
our significant use of various communication channels for our public relations activities, including our website and social media;
•
damage to our reputation due to the perception that our advertisements were overly positive or that we do not live up to our promises;
•
noncompliance of our advertisements with all relevant legal requirements in the past or in the future;
•
product recalls that could materially adversely affect our business, prospects, operating results and financial condition;
•
any unauthorized control or manipulation of our vehicles’ systems;
•
risks associated with our growth strategy and international operations, including unfavorable regulatory, political, tax and labor conditions, which could harm our business;
•
our failure to manage our future growth effectively;
•
our inability to attract and retain key employees and hire qualified management, technical and vehicle engineering personnel, which could harm our ability to compete;
•
risks related to health epidemics, including the recent COVID-19 pandemic; and
•
the need to raise substantial additional funds in the short term and potentially beyond, which may not be available to us when we need them on acceptable terms or at all.
Corporate Information
Our principal executive offices are located at Waldmeisterstraße 76, 80935 Munich, Federal Republic of Germany. Our telephone number is +49 (0)89 4520 5818. Our website address is www.sonomotors.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our ordinary shares. We do business under the commercial name Sono Motors.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and is exempt from other burdens that are otherwise generally applicable to public companies. These provisions include:
•
an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), which would otherwise be applicable beginning with our annual report on Form 20-F for the year ending December 31, 2022;
•
to the extent that we no longer qualify as a foreign private issuer (1) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (2) exemptions from the requirements of holding a non-binding advisory vote on executive compensation, including golden parachute compensation; and
•
an exemption from compliance with the requirement that the Public Company Accounting Oversight Board has adopted that would otherwise require our independent registered public accounting firm to communicate “critical audit matters” in its report. A critical audit matter is any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective or complex auditor judgment.
We may take advantage of these provisions for up to five years following the completion of our IPO or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging
growth company if we have more than $1.235 billion in annual revenue, have more than $700 million in market capitalization of our shares held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold equity securities.
Implications of Being a Foreign Private Issuer
We report under the Exchange Act, as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
•
the rules under the Exchange Act requiring domestic filers to issue financial statements prepared in accordance with U.S. GAAP;
•
the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
•
the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing liability for insiders who profit from trades made in a short period of time; and
•
the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, and current reports on Form 8-K upon the occurrence of specified significant events.
We are required to file with the SEC, within four months after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing consolidated financial statements audited by an independent registered public accounting firm.
We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held of record by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents; (ii) more than 50% of our assets are located in the United States; or (iii) our business is administered principally in the United States. For purposes of determining whether more than 50% of our outstanding voting securities are held by U.S. residents, we intend to look to whether more than 50% of the voting power of our ordinary shares and high voting shares on a combined basis are directly or indirectly held of record by residents of the United States.
Both foreign private issuers and emerging growth companies are also exempt from certain more extensive executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company but remain a foreign private issuer, we will continue to be exempt from the more extensive compensation disclosure requirements for companies that are neither an emerging growth company nor a foreign private issuer and will continue to be permitted to follow our home country practice on such matters.
Summary Consolidated Financial Data
We present a summary of historical financial data of Sono Group N.V. below. The financial data as of December 31, 2021 and December 31, 2020 and for each of the years ended December 31, 2021, December 31, 2020 and December 31, 2019 has been taken or derived from our consolidated financial statements and the related notes thereto, which are incorporated by reference herein and which have been prepared in accordance with IFRS as issued by the IASB. The financial data as of June 30, 2021 and June 30, 2022 and for each of the six-month periods ended June 30, 2022 and June 30, 2021 has been taken or derived from our interim condensed consolidated financial statements and the related notes thereto, which are incorporated by reference herein and which have been prepared in accordance with IFRS as issued by the IASB and in particular IAS 34 Interim Financial Reporting. The accounting principles applied in the interim condensed consolidated financial statements are consistent with those used for the preparation of the consolidated
financial statements as of December 31, 2021 and December 31, 2020 and for each of the years ended December 31, 2021, December 31, 2020 and December 31, 2019.
The summary of historical financial data presented below are not necessarily indicative of the financial results for future periods. The summary of historical financial data below do not contain all the information included in our consolidated financial statements. You should read this information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto, each incorporated by reference herein.
Consolidated Statement of Profit or Loss and Other Comprehensive Income
| |
|
|
For the year ended December 31,
|
|
|
|
For the six-month periods
ended June 30,
|
|
| |
|
|
2021
|
|
|
2020
|
|
|
2019
|
|
|
|
2022
|
|
|
2021
|
|
| |
|
|
(in € millions)
|
|
|
|
(in € millions)
|
|
|
Revenue
|
|
|
|
|
0.0 |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
0.0 |
|
|
|
|
|
— |
|
|
|
Cost of sales
|
|
|
|
|
(0.0) |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
(0.1) |
|
|
|
|
|
— |
|
|
|
Gross profit
|
|
|
|
|
(0.0)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
(0.1)
|
|
|
|
|
|
— |
|
|
|
Cost of research and development
|
|
|
|
|
(40.6) |
|
|
|
|
|
(30.5) |
|
|
|
|
|
(4.9) |
|
|
|
|
|
|
(53.1) |
|
|
|
|
|
(12.8) |
|
|
|
Selling and distribution expenses
|
|
|
|
|
(3.2) |
|
|
|
|
|
(9.1) |
|
|
|
|
|
(2.1) |
|
|
|
|
|
|
(1.0) |
|
|
|
|
|
(1.6) |
|
|
|
General and administrative
expenses
|
|
|
|
|
(15.1) |
|
|
|
|
|
(14.4) |
|
|
|
|
|
(2.4) |
|
|
|
|
|
|
(7.6) |
|
|
|
|
|
(7.7) |
|
|
|
Other operating income/expenses
|
|
|
|
|
(0.2) |
|
|
|
|
|
(0.0) |
|
|
|
|
|
0.2 |
|
|
|
|
|
|
1.8 |
|
|
|
|
|
0.4 |
|
|
|
Impairment losses on financial
assets
|
|
|
|
|
(0.0) |
|
|
|
|
|
(0.0) |
|
|
|
|
|
— |
|
|
|
|
|
|
0.0 |
|
|
|
|
|
(0.0) |
|
|
|
Operating loss
|
|
|
|
|
(59.2) |
|
|
|
|
|
(54.0) |
|
|
|
|
|
(9.3) |
|
|
|
|
|
|
(60.1) |
|
|
|
|
|
(21.8) |
|
|
|
Interest and similar income
|
|
|
|
|
— |
|
|
|
|
|
0.0 |
|
|
|
|
|
— |
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Interest and similar expense
|
|
|
|
|
(4.8) |
|
|
|
|
|
(2.0) |
|
|
|
|
|
(0.7) |
|
|
|
|
|
|
(0.9) |
|
|
|
|
|
(2.6) |
|
|
|
Loss before tax
|
|
|
|
|
(63.9) |
|
|
|
|
|
(56.0) |
|
|
|
|
|
(10.0) |
|
|
|
|
|
|
(61.0) |
|
|
|
|
|
(24.4) |
|
|
|
Taxes on income
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
0.0 |
|
|
|
Deferred taxes on expense
|
|
|
|
|
0.0 |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
(0.0) |
|
|
|
Loss for the period
|
|
|
|
|
(64.0) |
|
|
|
|
|
(56.0) |
|
|
|
|
|
(10.0) |
|
|
|
|
|
|
(61.0) |
|
|
|
|
|
(24.4) |
|
|
|
Other comprehensive income (loss)
that will not be reclassified to profit
or loss
|
|
|
|
|
0.0 |
|
|
|
|
|
(0.0) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
(0.1) |
|
|
|
Total comprehensive loss for the
period
|
|
|
|
|
(63.9) |
|
|
|
|
|
(56.1) |
|
|
|
|
|
(10.0) |
|
|
|
|
|
|
(61.0) |
|
|
|
|
|
(24.5) |
|
|
|
Loss per share in €
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic/diluted(1)
|
|
|
(1.07)/(1.07)
|
|
|
(0.97)/(0.97)
|
|
|
(0.18)/(0.18)
|
|
|
|
(0.81)/(0.81)
|
|
|
(0.76)/(0.76)
|
|
|
Weighted average number of share for
calculation of earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic/diluted(1)
|
|
|
|
|
59,836,824 |
|
|
|
|
|
57,684,220 |
|
|
|
|
|
56,860,720 |
|
|
|
|
|
|
75,544,645 |
|
|
|
|
|
32,367,901 |
|
|
(1)
Please refer to Note 9.4 to the consolidated financial statements included in this prospectus for an explanation of the calculations of our basic and diluted net loss per share attributable to holders of our shares and the weighted-average number of shares used in the computation of the per share amounts.
Selected Cash Flow Statement Data
| |
|
|
For the year ended
December 31,
|
|
|
|
For the six-month periods
ended June 30,
|
|
| |
|
|
2021
|
|
|
2020
|
|
|
2019
|
|
|
|
2022
|
|
|
2021
|
|
| |
|
|
(in € millions)
|
|
|
|
(in € millions)
|
|
|
Net cash used in operating activities
|
|
|
|
|
(47.1) |
|
|
|
|
|
(1.2) |
|
|
|
|
|
(8.8) |
|
|
|
|
|
|
(59.0) |
|
|
|
|
|
(17.3) |
|
|
|
Net cash used in investing activities
|
|
|
|
|
(1.7) |
|
|
|
|
|
(0) |
|
|
|
|
|
(1.1) |
|
|
|
|
|
|
(24.0) |
|
|
|
|
|
(0.9) |
|
|
|
Net cash from (used in) financing activities
|
|
|
|
|
138.6 |
|
|
|
|
|
44.1 |
|
|
|
|
|
8.8 |
|
|
|
|
|
|
38.3 |
|
|
|
|
|
1.2 |
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
|
|
89.8 |
|
|
|
|
|
42.9 |
|
|
|
|
|
(1.1) |
|
|
|
|
|
|
(44.7) |
|
|
|
|
|
(17.1) |
|
|
|
Cash and cash equivalents at the beginning of the period
|
|
|
|
|
43.3 |
|
|
|
|
|
0.4 |
|
|
|
|
|
1.5 |
|
|
|
|
|
|
132.9 |
|
|
|
|
|
43.3 |
|
|
|
Cash and cash equivalents at end of period
|
|
|
|
|
132.9 |
|
|
|
|
|
43.3 |
|
|
|
|
|
0.4 |
|
|
|
|
|
|
89.8 |
|
|
|
|
|
26.1 |
|
|
Selected Balance Sheet Data
| |
|
|
As of December 31,
|
|
|
|
As of June 30,
|
|
| |
|
|
2021
|
|
|
2020
|
|
|
|
2022
|
|
| |
|
|
(in € millions)
|
|
|
|
(in € millions)
|
|
|
Total non-current assets
|
|
|
|
|
4.9 |
|
|
|
|
|
4.1 |
|
|
|
|
|
|
28.5 |
|
|
|
Total current assets
|
|
|
|
|
142.4 |
|
|
|
|
|
49.2 |
|
|
|
|
|
|
106.3 |
|
|
|
Total assets
|
|
|
|
|
147.3 |
|
|
|
|
|
53.3 |
|
|
|
|
|
|
134.7 |
|
|
|
Total equity
|
|
|
|
|
83.4 |
|
|
|
|
|
(5.0) |
|
|
|
|
|
|
62.1 |
|
|
|
Total liabilities
|
|
|
|
|
63.9 |
|
|
|
|
|
58.4 |
|
|
|
|
|
|
72.6 |
|
|
|
Total equity and liabilities
|
|
|
|
|
147.3 |
|
|
|
|
|
53.3 |
|
|
|
|
|
|
134.7 |
|
|
The Offering
Ordinary shares offered by the Company
Ordinary shares having an aggregate offering price of up to $195,000,000
Ordinary shares offered by the selling shareholder
30,000,000 ordinary shares
YA II PN, Ltd., or Yorkville, a Cayman Islands exempt limited partnership
Ordinary shares outstanding
As of the date of this prospectus, there were 90,554,115 ordinary shares outstanding
Ordinary shares outstanding after the offering
Up to 311,956,813 ordinary shares
One vote per ordinary share
We have two classes of shares outstanding, ordinary shares and high voting shares. The rights of the holders of ordinary shares and high voting shares are identical, except with respect to voting, conversion and preemptive rights. Each ordinary share is entitled to one vote per share and is not convertible into any other shares. Each high voting share is entitled to 25 votes per share, is convertible at the request by the holder at any time into one ordinary share and carries preemptive rights commensurate to its nominal value. Laurin Hahn and Jona Christians, two of our founders and management board members, hold all of the high voting shares. As of the date of this prospectus, they hold, in aggregate, approximately 68.0% of the voting power of our outstanding shares.
We currently expect that we will need substantial additional external funding until start of production of the Sion. Unless otherwise indicated in any applicable prospectus supplement, we intend to use the net proceeds from our sale of the securities to cover some of these funding requirements, including but not limited to capital expenditures, research and development, general working capital, and other general corporate purposes.
We will not receive any proceeds from the sale of any securities offered by the selling shareholder. As of the date hereof, we have received $11,500,000 from the sale of a convertible debenture to the selling shareholder, under a securities purchase agreement for convertible bonds (prior to accounting for a commitment fee of $1,088,500 and a due diligence and structuring fee of $15,000) and expect to receive a further up to $20,000 from the issuance and sale of a second and third convertible debenture We intend to use the proceeds from the sale of the convertible debentures to the selling shareholder to cover some of our funding requirements until start of production.
For more information see “Use of Proceeds.”
RISK FACTORS
Before making a decision to invest in our securities, you should carefully consider the risks and uncertainties described below and in any applicable prospectus supplement, as well as the risks and uncertainties related to our industry, our business and operations, our financial position and our regulatory, legal and tax risks described in the risk factor section in our most recent annual report on Form 20-F and in any updates to those risk factors in our reports on Form 6-K incorporated by reference herein, together with all other information appearing or incorporated by reference in this prospectus or any applicable prospectus supplement, in light of your particular investment objectives and financial circumstances. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our ordinary shares could decline and you could lose all or part of your investment.
This prospectus also contains forward-looking statements that involve risks and uncertainties. See “Information Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including the risks facing our Company.
Risks Related to the Offering and Our Ordinary Shares
Sales of substantial amounts of our ordinary shares in the public market, or the perception that these sales may occur, could cause the market price of our ordinary shares to decline.
Sales of substantial amounts of our ordinary shares in the public market, or the perception that these sales may occur, could cause the market price of our ordinary shares to decline. This could also impair our ability to raise additional capital through the sale of our equity securities. Under our articles of association, we are authorized to issue up to 320,000,000 ordinary shares. Upon an increase of our issued share capital to at least €25,000,000 our authorized share capital will automatically increase to EUR 102,000,000, divided into 1,500,000,000 ordinary shares and 8,000,000 high voting shares. An issuance of new ordinary shares may also lead to substantial dilution of our then existing shareholders. We cannot predict the size of future issuances of our shares, including in connection with the convertible debentures and the ATM sales agreement described herein, or the effect, if any, that future issuances and sales of shares would have on the market price of our ordinary shares.
The market price of our ordinary shares could fluctuate significantly, which could result in substantial losses for purchasers of our ordinary shares.
The stock market in general and the market for smaller technology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may lose some or all of your investment. The market price of our ordinary shares is affected by the supply and demand for our ordinary shares, which may be influenced by numerous factors, many of which are beyond our control, including:
•
fluctuation in actual or projected results of operations; changes in projected earnings or failure to meet securities analysts’ earnings expectations; the absence of analyst coverage;
•
negative analyst recommendations;
•
changes in trading volumes in our ordinary shares (including by the sale of shares granted to our employees under employee participation programs);
•
large-volume or targeted transactions by short-sellers;
•
changes in our shareholder structure;
•
changes in macroeconomic conditions;
•
the activities of competitors and sellers;
•
changes in the market valuations of comparable companies;
•
our ability to successfully finalize development of, market and commercialize the Sion as well as future car models;
•
the recruitment or departure of key management or scientific personnel or other key employees;
•
significant lawsuits, including patent, shareholder or customer litigation;
•
changes in investor and analyst perception with respect to our business or the car industry in general; and
•
changes in the statutory framework applicable to our business.
As a result, our share price may be subject to substantial fluctuation.
In addition, general market conditions and fluctuation of share prices and trading volumes could lead to pressure on the market price of our ordinary shares, even if there may not be a reason for this based on our business performance or earnings outlook. Prices for companies with a limited operating history, particularly in industries with barriers such as the car industry, may be more volatile compared to share prices for established companies or companies from other industries. The price of our shares has been volatile since our IPO.
If the market price of our ordinary shares declines as a result of the realization of any of these risks, investors could lose part or all of their investment in our ordinary shares.
Additionally, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the shares. If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.
Our dual-class share structure with different voting rights will limit your ability as a holder of ordinary shares to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of ordinary shares may view as beneficial.
We have a dual-class share structure, which we intend to maintain for the foreseeable future, as our share capital consists of ordinary shares and high voting shares. In respect of matters requiring the votes of shareholders, holders of ordinary shares will be entitled to one vote per share, while holders of high voting shares will be entitled to 25 votes per share. Each high voting share is convertible into one ordinary share at any time by the holder thereof, while ordinary shares are not convertible into high voting shares under any circumstances.
The high voting shares are held by Laurin Hahn and Jona Christians, two of our founders and management board members. As of December 6, 2022, Laurin Hahn held approximately 35.8% and Jona Christians held approximately 32.2% of our total voting rights. This concentration of ownership may discourage, delay or prevent a change in control of our Company, which could deprive our other shareholders of an opportunity to receive a premium for their ordinary shares as part of a sale of our Company and might ultimately affect the market price of our ordinary shares. This concentrated control will limit your ability to influence corporate matters that holders of ordinary shares may view as beneficial. In addition, certain index providers, such as S&P Dow Jones or FTSE Russell, view multi-class shares critically and have amended their rules so that companies with multi-class shares will no longer be added to their indexes.
Laurin Hahn and Jona Christians have indicated to us that they are looking for instruments to prevent erosion of their voting power in light of expected dilution due to the planned issuance of a substantial number of new shares to cover our funding needs. These instruments to prevent dilution may include the issuance of additional high voting shares, changes in the voting power of the existing high voting shares or the introduction of veto rights for Laurin Hahn and/or Jona Christians. Under Dutch law, Laurin Hahn and Jona Christians will not be prevented from voting on the introduction of instruments that favor them. A proposal to the shareholders meeting to introduce these instruments and/or their actual introduction may negatively affect our reputation and our share price and may make it more difficult for us to raise additional capital to cover our funding needs.
Future offerings of debt or equity securities by us could adversely affect the market price of our ordinary shares, and future issuances of equity securities could lead to a substantial dilution of our shareholders.
We will require significant additional capital in the future to finance our business operations and growth. For example, we will require additional funding to reach commercial operation, and we may seek to offer new equity in the future for such funding. The Company may seek to raise such capital through the issuance of additional equity or debt securities with conversion rights (e.g., convertible bonds and option rights). An issuance of additional equity or debt securities with conversion rights could potentially reduce the market price of our ordinary shares and the Company currently cannot predict the amounts and terms of such future offerings. We expect such funding to be in the form of, or at least include, additional equity fundraising, which will dilute existing shareholders
If such offerings of equity or debt securities with conversion rights are made without granting preemptive rights to our existing shareholders, these offerings would dilute the economic and voting rights of our existing shareholders. Preemptive rights may be restricted or excluded by a resolution of the general meeting or by another corporate body designated by the general meeting. Our management board has been authorized until the fifth anniversary of the pricing of our IPO to issue shares or grant rights to subscribe for shares up to our authorized share capital from time to time and to limit or exclude preemptive rights in connection therewith. This could cause existing shareholders to experience substantial dilution of their interest in us.
In addition, such dilution may arise from the acquisition or investments in companies in exchange, fully or in part, for newly issued ordinary shares, convertible rights in connection with financing arrangements the Company entered into before the IPO, stock options or conversion rights granted to our business partners or our customers as well as from the exercise of stock options or conversion rights granted to our employees in the context of existing or future stock option programs or the issuance of ordinary shares to employees in the context of existing or future employee participation programs.
Any future issuance of ordinary shares could reduce the market price of our ordinary shares and dilute the holdings of existing shareholders.
Future sales by major shareholders could materially adversely affect the market price of our ordinary shares.
For various reasons, shareholders may sell all or some of our ordinary shares, including in order to diversify their investments. Sales of a substantial number of our ordinary shares in the public market, or the perception that such sales might occur, could depress the market price of our ordinary shares and could impair our ability to raise capital through the sale of additional equity securities.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ordinary shares and trading volume could decline.
The trading market for our ordinary shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. If securities or industry analyst coverage results in downgrades of our ordinary shares or publishes inaccurate or unfavorable research about our business, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets and demand for our ordinary shares could decrease, which, in turn, could cause the market price or trading volume for our ordinary shares to decline significantly.
We are a Dutch public company. The rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions and may not protect investors in a similar fashion afforded by incorporation in a U.S. jurisdiction.
We are a public company (naamloze vennootschap) organized under the laws of The Netherlands. Our corporate affairs are governed by our articles of association, the rules of our management board and those of our supervisory board and by the laws governing companies incorporated in The Netherlands. However, there can be no assurance that Dutch law will not change in the future or that it will serve to protect
investors in a similar fashion afforded under corporate law principles in the United States, which could adversely affect the rights of investors.
The rights of shareholders and the responsibilities of management board members and supervisory board members may be different from the rights and obligations of shareholders and directors in companies governed by the laws of U.S. jurisdictions. In the performance of their duties, our management board members and supervisory board members are required by Dutch law to consider the interests of our Company, its shareholders, its employees and other stakeholders, in all cases with due observance of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a shareholder.
Our articles of association stipulate that the planet, humankind and society are important stakeholders of us and the highest principle pursued by us as part of our objects is the protection of the environment, nature and humankind. Under our articles of association, this principle shall form the foundation of our actions and the decisions of our management board and the supervisory board. On the basis of that premise, among other matters, our management board and the supervisory board may let the interests of the planet, humankind and society outweigh the interests of other stakeholders, provided that the interests of the latter stakeholders are not unnecessarily or disproportionately harmed. A resolution to amend the text or purport of these provisions of our articles of association shall require a unanimous vote in a general meeting where the entire issued share capital is represented.
For more information on relevant provisions of Dutch corporation law and of our articles of association, see “Description of Share Capital and Articles of Association — Comparison of Dutch Corporate Law and U.S. Corporate Law” in the accompanying prospectus.
We have broad discretion in the use of the net proceeds received by us from our sale of the securities and may invest or spend the proceeds in ways with which you do not agree and in ways that may not yield a return on your investment.
Although we currently intend to use the net proceeds received by us from our sale of the securities in the manner described in the section titled “Use of Proceeds” in this prospectus, our management has broad discretion in the application of the net proceeds from our sale of the securities and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our ordinary shares. You will not have the opportunity to influence our decisions on how to use our net proceeds from our sale of the securities. The failure by our management to apply these funds effectively could result in financial losses that could harm our business, cause the price of our ordinary shares to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from our sale of the securities in a manner that does not produce income or that loses value.
We do not anticipate paying any cash dividends for the foreseeable future.
We currently intend to retain our future earnings, if any, for the foreseeable future, to fund the development and growth of our business. We do not intend to pay any dividends to holders of our ordinary shares. As a result, capital appreciation in the price of our ordinary shares, if any, will be your only source of gain on an investment in our ordinary shares.
Shareholders may not be able to exercise preemptive rights and, as a result, may experience substantial dilution upon future issuances of ordinary shares.
In the event of an issuance of ordinary shares, subject to certain exceptions, each shareholder will have a pro rata preemptive right in proportion to the aggregate nominal value of the ordinary shares held by such holder. These preemptive rights may be restricted or excluded by a resolution of the general meeting or by another corporate body designated by the general meeting. Our management board, subject to approval of our supervisory board, has been authorized, for a period of five years to issue shares or grant rights to subscribe for shares up to our authorized share capital from time to time and to limit or exclude preemptive rights in connection therewith. This could cause existing shareholders to experience substantial dilution of their interest in us.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act that relate to our current expectations and views of future events. These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, these forward-looking statements can be identified by words or phrases such as “believe,” “may,” “will,” “expect,” “estimate,” “could,” “should,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar or comparable expressions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:
•
our future business and financial performance, including our revenue, operating expenses and our ability to achieve profitability and maintain our future business and operating results;
•
our strategies, plan, objectives and goals, including, for example, the planned completion of the development of the Sion and the beginning of its serial production as well as intended expansion of our product portfolio or geographic reach;
•
the number of reservations for the Sion and net sales volume potential;
•
the expected start of serial production of the Sion and the key steps to start production including indicative milestones and funding requirements;
•
the expected cost and capital expenditure savings using our strategy;
•
our planned monetization of our technological innovations;
•
our sustainability goals including our plan to offset CO2 from production;
•
our plan to generate revenue from emission certificate pooling under relevant EU regulations on CO2 credits (CO2 pooling);
•
our funding requirements; and
•
our expectations regarding the development of our industry, market size and the competitive environment in which we operate.
These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions, many of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and liquidity, and the development of the industries in which we operate are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including, without limitation, the risk factors set forth in “Risk Factors” in this prospectus and in any applicable prospectus supplement or free writing prospectus, and those included in the documents that we incorporate by reference herein and therein.
You should read this prospectus carefully with the understanding that our actual future results may be materially different from and worse than what we expect. The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus, including the uncertainties and factors discussed under “Risk Factors” and the documents that
we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results or performance may be materially different from what we expect. All forward-looking statements made in this prospectus are qualified by these cautionary statements.
Comparison of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.
USE OF PROCEEDS
We currently expect that we will need substantial additional funding until start of production of the Sion. Unless otherwise indicated in any applicable prospectus supplement, we intend to use the net proceeds from our sale of the ordinary shares in this offering to cover some of these funding requirements, including but not limited to capital expenditures, research and development, general working capital, and other general corporate purposes.
Our expected use of net proceeds from our sale of the securities represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of net proceeds will vary depending on numerous factors, including our progress towards start of serial production. As a result, our management will have broad discretion in the application of the net proceeds from our sale of the securities, and investors will be relying on our judgment regarding the application of the net proceeds from the sale of the securities.
We will not receive any proceeds from the sale of any securities offered by the selling shareholder. As of the date hereof, we have received $11,500,000 from the sale of a convertible debenture to the selling shareholder, under a securities purchase agreement for convertible bonds (prior to accounting for a commitment fee of $1,088,500 and a due diligence and structuring fee of $15,000). Furthermore, we expect to receive $10,000,000 from the sale of a second convertible debenture to the selling shareholder upon filing of the registration statement, of which this prospectus is a part, and a further $10,000,000 from the sale of a third convertible debenture to the selling shareholder upon effectiveness of such registration statement. We intend to use the proceeds from the sale of the convertible debentures to the selling shareholder to cover some of our funding requirements until start of production of the Sion.
SELLING SHAREHOLDER
This prospectus also covers the offering for resale, from time to time, in one or more offerings, of up to 30,000,000 ordinary shares that can be issued to the selling shareholder upon conversion of the convertible debentures acquired, or to be acquired, by it in a private placement. Apart from such private placement of convertible debentures, the selling shareholder has not had any material relationship with us within the past three years. We are registering the ordinary share included in this prospectus as being offered by the selling shareholder pursuant to the registration rights agreement, permitting the selling shareholder to offer such ordinary shares for resale from time to time.
We can provide no assurance that the selling shareholder will sell any of the ordinary shares registered for resale hereunder, see “Plan of Distribution.” In addition, the selling shareholder may sell the ordinary shares pursuant to this prospectus or in privately negotiated transactions. Accordingly, we cannot estimate the number of ordinary shares that the selling shareholder will sell under this prospectus. Information about the selling shareholder may change over time.
Private Placement of Convertible Debentures
The following description of the transaction does not purport to be complete and is qualified in its entirety by reference to the securities purchase agreement, the form of convertible debenture and the registration rights agreement, which we have filed with the SEC and incorporated by reference herein.
On December 7, 2022, we entered into a securities purchase agreement with the selling shareholder, YA II PN, Ltd. or Yorkville, under which we agreed to sell and issue to Yorkville convertible debentures in an aggregate principal amount of up to $31.1 million, which are convertible into our ordinary shares, subject to certain conditions and limitations set forth in the securities purchase agreement. A first convertible debenture in a principal amount of $11.1 million was issued on December 7, 2022 upon signing of the securities purchase agreement, a second convertible debenture in a principal amount of $10.0 million will be issued upon filing with the SEC of the registration statement, of which this prospectus is a part, registering the resale of ordinary shares resulting from the conversion of the convertible debentures, referred to as conversion shares, and a third convertible debenture in a principal amount of $10.0 million will be issued to Yorkville upon declaration of effectiveness of such registration statement by the SEC. YA II PN, Ltd., a Cayman Islands exempt limited partnership, is a fund managed by Yorkville Advisors Global, LP, headquartered in Mountainside, New Jersey.
The convertible debentures bear interest at an annual rate of 4.0%, payable at maturity, which will increase to an annual rate of 12.0% (i) for so long as the daily volume weighted average price of the ordinary shares is less than $0.15 for five trading days during a period of seven consecutive trading days (a “Triggering Event”) or (ii) upon the occurrence and during the continuance of an event of default. The convertible debentures will mature on December 7, 2023, as may be extended at the option of Yorkville.
The convertible debentures provide a conversion right, according to which Yorkville may, at any time after the issuance date, subject to certain limitations, convert any portion of the outstanding and unpaid principal amount of the convertible debenture, together with any accrued but unpaid interest, into our ordinary shares at the lower of (i) $1.75 per ordinary share (the “Fixed Conversion Price”) or (ii) 96.5% of the lowest daily volume weighted average price of the ordinary shares during the seven consecutive trading days immediately preceding the date of conversion (the “Variable Conversion Price”), but not lower than a floor price of $0.15 per share, subject to adjustment in accordance with the terms of the convertible debentures, provided that, under no circumstances, the conversion price per ordinary share shall be less than the nominal value of one ordinary share (translated into United States Dollars on the applicable share delivery date.
Yorkville has agreed that (i) it will use commercially reasonable efforts to convert at least $2.5 million of principal amount of convertible debentures per calendar month, subject to certain exceptions set forth in the convertible debentures, and (ii) it will not convert more than an aggregate of the greater of (y) 20% of monthly dollar trading value of the ordinary shares as reported on Bloomberg during regular trading hours during the applicable calendar month or (z) $5.0 million of principal amount of the convertible debentures per calendar month utilizing the Variable Conversion Price, subject to certain exceptions set forth in the
convertible debentures. The convertible debentures may not be converted into ordinary shares to the extent such conversion would result in Yorkville and its affiliates having beneficial ownership of more than 4.99% of our then outstanding ordinary shares; provided that this limitation may be waived by Yorkville upon not less than 65 days’ prior notice to us.
If, at any time after the issue date of the convertible debentures, and from time to time thereafter, a Triggering Event occurs, then we shall make monthly payments beginning on the 20th calendar day after the date on which the Triggering Event occurs (the “Triggering Date”) and continuing on the same day of each successive calendar month. Each monthly payment shall be an amount equal to the sum of (i) the Triggered Principal Amount (as defined below), plus (ii) a redemption premium equal to 6.0% of such Triggered Principal Amount, plus (iii) accrued and unpaid interest on the outstanding convertible debentures. Notwithstanding the foregoing, subject to certain conditions set forth in the convertible debentures, our obligation to make monthly prepayments may cease. “Triggered Principal Amount” means the quotient of (i) the aggregate principal amounts outstanding on the convertible debentures divided by (ii) the number of whole calendar months remaining between the Triggering Date and the maturity date.
The convertible debentures provide us, subject to certain conditions, the right, at our option, to redeem early a portion or all amounts outstanding under the convertible debentures; provided that (i) the trading price of the ordinary shares is less than the Fixed Conversion Price and (ii) we provide the holder of the convertible debentures with at least three (3) business days’ prior written notice. Each redemption payment will be the principal amount of the convertible debentures to be redeemed, plus a redemption premium equal to 4.0% of the principal amount being redeemed, plus accrued and unpaid interest on the outstanding convertible debentures. Yorkville shall have three (3) business days after receipt of a redemption notice to elect to convert all or any portion of the convertible debentures.
The convertible debentures include customary covenants and set forth certain events of default after which the convertible debentures may be declared immediately due and payable and set forth certain types of bankruptcy or insolvency events of default involving us after which the convertible debentures become automatically due and payable.
In connection with the securities purchase agreement, also on December 7, 2022, we entered into a registration rights agreement with Yorkville pursuant to which we agreed to prepare and file with the SEC the registration statement covering the resale by Yorkville of the conversion shares, of which this prospectus is a part.
The securities purchase agreement contains customary representations, warranties, conditions and indemnification obligations by each party. The representations, warranties and covenants contained in the securities purchase agreement were made only for purposes of the securities purchase agreement and as of specific dates, were solely for the benefit of the parties to such agreement and are subject to certain important limitations.
Beneficial Ownership of Selling Shareholder
The table below presents information regarding the selling shareholder and the ordinary shares that may be resold by the selling shareholder from time to time under this prospectus. This table is prepared based on information supplied to us by the selling shareholder, and reflects holdings as of December 6, 2022. The number of shares in the column “Maximum Number of Ordinary Shares to be Offered Pursuant to this Prospectus” represents all of the ordinary shares being offered for resale by the selling shareholder under this prospectus. The selling shareholder may sell some, all or none of the ordinary shares being offered for resale in this offering. We do not know how long the selling shareholder will hold the ordinary shares before selling them, and we are not aware of any existing arrangements between the selling shareholder and any other shareholder, broker, dealer, underwriter or agent relating to the sale or distribution of the ordinary shares being offered for resale by this prospectus.
Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act, and includes ordinary shares with respect to which the selling shareholder has sole or shared voting and investment power. The percentages of ordinary shares beneficially owned by the selling shareholder are based on an aggregate of 90,554,115 ordinary shares outstanding on December 7, 2022.
Because the conversion price to be paid by the selling shareholder for the ordinary shares will be determined on the date of conversion of the convertible debentures, the actual number of ordinary shares that we may issue to the selling shareholder may be fewer than the number of ordinary shares being offered for resale under this prospectus, or may be more than the number of shares being offered for resale under this prospectus. The fourth column assumes the resale by the selling shareholder of all of the ordinary shares being offered for resale pursuant to this prospectus.
|
Name of Selling Shareholder
|
|
|
Ordinary
shares
beneficially
owned
prior to
the offering
|
|
|
% of ordinary
shares owned
prior to
the offering
|
|
|
Maximum
number of
ordinary shares
to be offered
by this
prospectus(1)
|
|
|
Maximum
number of
ordinary shares
to be offered
by this
prospectus
a % of currently
outstanding
ordinary shares(2)
|
|
|
Number of
ordinary
shares
beneficially
owned
following
the offering
|
|
|
% of ordinary
shares
beneficially
owned
following
the offering
|
|
|
YA II PN, Ltd.(3)
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
30,000,000 |
|
|
|
|
|
33.1% |
|
|
|
|
|
0 |
|
|
|
|
|
0% |
|
|
(1)
Includes the ordinary shares underlying the convertible debentures that may be held by Yorkville and are covered by this prospectus. The presentation does not take into account that, under the terms of the convertible debentures, Yorkville may not convert the convertible debentures to the extent (but only to the extent) Yorkville or any of its affiliates would beneficially own a number of ordinary shares which would exceed 4.99% of our total ordinary shares issued and outstanding as of the execution of any such conversion.
(2)
Assumes that the total number of our issued and outstanding ordinary shares remains unchanged at 90,554,115 prior to the issuance of the ordinary shares underlying the convertible debentures.
(3)
YA II PN, Ltd. is the investor under the securities purchase agreement. Yorkville Advisors Global, LP (“Yorkville LP”) is YA II PN Ltd.’s investment manager and Yorkville Advisors Global II, LLC (“Yorkville LLC”) is the General Partner of Yorkville LP. All investment decisions for YA II PN, Ltd. are made by Yorkville LLC’s President and Managing Member, Mr. Mark Angelo. The address of YA is 1012 Springfield Avenue, Mountainside, NJ 07092, Attention: Mark Angelo, Portfolio Manager.
CAPITALIZATION AND INDEBTEDNESS
Our capitalization will be set forth in the applicable prospectus supplement or in a report on Form 6-K subsequently furnished to the SEC and specifically incorporated by reference into this prospectus.
The table below sets forth our cash and cash equivalents and capitalization (defined as long-term debt and shareholders’ equity) as of June 30, 2022 derived from our consolidated financial statements prepared in accordance with IFRS as issued by the IASB on an actual basis and on an as adjusted basis to give effect to:
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the issuance of 8,748,433 ordinary shares sold to the ELOC Investor for an aggregate net amount of €16.6 million between July 1, 2022 and the date of this prospectus; and
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the expected incurrence of an aggregate principal amount of $31,100,000 of debt in connection with the convertible debentures, net of estimated fees and expenses of approximately $1,115,000 million, assuming all convertible debentures are issued and sold to, but not converted by, the selling shareholder as described herein. We are still still evaluating the accounting impact of the convertible debentures.
You should read this table in conjunction with (i) our consolidated financial statements and notes thereto incorporated by reference in this prospectus, (ii) “About This Prospectus” and “Use of Proceeds” in this prospectus and (iii) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” incorporated by reference in this prospectus.
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As of June 30, 2022
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Actual
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Adjustments
for sales to the
ELOC Investor
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Adjustments
for issue and
sale of all
convertible
debentures(1)
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As
adjusted
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(in € millions)
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Cash and cash equivalents
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89.8 |
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16.6 |
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28.5 |
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135.0 |
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Long-term debt (including current portion)
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6.7 |
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— |
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29.5 |
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36.2 |
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Equity:
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Subscribed capital
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9.4 |
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0.5 |
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— |
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9.9 |
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Capital and other reserves
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260.9 |
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16.1 |
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— |
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277.0 |
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Accumulated deficit
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(208.1) |
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— |
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(1.0) |
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(209.1) |
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Total equity
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62.1 |
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16.6 |
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(1.0) |
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77.7 |
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Total capitalization
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68.8 |
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16.6 |
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28.5 |
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113.9 |
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(1)
The U.S. dollar amounts related to the convertible debentures reflected in the table have been converted into Euro at the reference rate published by the European Central Bank on December 6, 2022, which was $1.00 = €0.9509.
Updated information on our consolidated capitalization and indebtedness will be contained, if necessary, in a prospectus supplement or will be incorporated by reference herein.
DESCRIPTION OF SHARE CAPITAL AND ARTICLES OF ASSOCIATION
General
We were incorporated pursuant to the laws of The Netherlands as Sono Motors Finance B.V. on October 23, 2020 as a wholly-owned subsidiary of Sono Motors GmbH. As part of the corporate reorganization that was completed on November 27, 2020, our then-existing shareholders contributed all of their shares in Sono Motors GmbH to Sono Motors Finance B.V. in exchange for newly issued ordinary shares of Sono Motors Finance B.V. In addition, the sole issued and outstanding ordinary share in Sono Motors Finance B.V. at that time, which was held by Sono Motors GmbH, was canceled (ingetrokken). As a result, Sono Motors GmbH became a wholly-owned subsidiary of Sono Motors Finance B.V. and the then-existing shareholders of Sono Motors GmbH became the shareholders of Sono Motors Finance B.V. Also, on November 27, 2020, Sono Motors Finance B.V. was converted into a public company with limited liability under Dutch law (naamloze vennootschap), and changed its legal name from Sono Motors Finance B.V. to Sono Group N.V. A portion of the newly issued ordinary shares of Sono Group N.V. was also converted into high voting shares in the share capital of Sono Group N.V. As of completion of the corporate reorganization, the shareholders of Sono Group N.V. held an aggregate of 31,068,000 ordinary shares of Sono Group N.V. (share number does not reflect issuance of additional shares to all of our existing shareholders, replicating the effect of a share split, which took place immediately prior to pricing of our initial public offering).
Our affairs are governed by the provisions of our articles of association and internal rules, regulations and policies, as amended and restated from time to time, and by the provisions of applicable Dutch law.
We are registered with the Trade Register of the Chamber of Commerce (Kamer van Koophandel) under number 80683568. Our corporate seat is in Amsterdam, The Netherlands, and our registered office is in Munich, Germany.
The following is a summary of material information concerning our share capital and our articles of association. The summaries of our articles of association as set forth herein are qualified in their entirety by reference to the full text of our articles of association. This summary does not constitute legal advice regarding those matters and should not be regarded as such.
Share Capital
As of the date of this prospectus, we have a subscribed capital in the amount of € 9,713,696.46 which is divided into 86,894,941 ordinary shares, each with a nominal value of €0.06, and 3,000,000 high voting shares, each with a nominal value of €1.50.
Under Dutch law, our authorized share capital is the maximum capital that we may issue without amending our articles of association. An amendment of our articles of association would require a resolution of the general meeting upon proposal by the management board with the approval of the supervisory board. As of the execution of our deed of conversion and amendment as part of the corporate reorganization, our authorized share capital amounts to €25,200,000, divided into 320,000,000 ordinary shares, each with a nominal value of €0.06, and 4,000,000 high voting shares, each with a nominal value of €1.50. Upon an increase of our issued share capital to at least €25,000,000, our authorized share capital will automatically increase to €102,000,000, divided into 1,500,000,000 ordinary shares, each with a nominal value of €0.06, and 8,000,000 high voting shares, each with a nominal value of €1.50.
Our high voting shares carry the same economic rights entitlements as our ordinary shares. The high voting shares carry different voting rights than the ordinary shares, proportionate to the respective nominal value: for each high voting share, 25 votes can be exercised in the general meeting, whereas for each ordinary share one vote can be exercised in the general meeting. As a matter of Dutch law, preemptive rights for the holders of our ordinary shares and our high voting shares are linked to the nominal value of their shares, which implies that each high voting share carries a preemptive right representing 25 times the preemptive right attached to each ordinary share. Pursuant to our articles of association, each holder of high voting shares can convert any number of high voting shares held by a shareholder into ordinary shares as
described below. A holder of ordinary shares cannot convert its ordinary shares into high voting shares under our articles of association.
Upon receipt of a request for conversion of high voting shares into ordinary shares, the management board shall resolve to convert the relevant number of high voting shares into ordinary shares in a 1:25 ratio. A management board member who holds high voting shares that are the subject of the conversion request may generally participate in the decision making process of the management board and is only precluded therefrom, if the personal interests of such management board member in such decision conflict, directly or indirectly, with the interests of the Company and its business. The supervisory board shall resolve on the conversion request, if all management board members are precluded from the decision making process concerning a conversion request due to such conflicts of interest. Promptly following a conversion, the holder of high voting shares that made the conversion request shall be obligated to transfer 24 out of every 25 ordinary shares so received to us for no consideration, which will be canceled afterwards with the effect of a 1:1 conversion ratio. The conversion mechanism is structured in this manner in order to avoid a two-month waiting period which would be required under Dutch law if high voting shares were converted into ordinary shares of an actual 1:1 ratio. Neither the management board nor the Company is required to effect a conversion of high voting shares (a) if the conversion request does not comply with the specifications and requirements set out in our articles of association or if the management board reasonably believes that the information included in such request is incorrect or incomplete or (b) to the extent that we would not be permitted under mandatory Dutch law to acquire the relevant number of ordinary shares in connection with such conversion.
Any settlement of our ordinary shares issued in offerings under this prospectus will take place on the closing date of the relevant offering through The Depository Trust Company (“DTC”), in accordance with its customary settlement procedures for equity securities. Each person owning ordinary shares held through DTC must rely on the procedures thereof and on institutions that have accounts therewith to exercise any rights of a holder of the ordinary shares.
Our articles of association provide that, for as long as any of our ordinary shares are admitted to trading on Nasdaq, the New York Stock Exchange or on any other regulated stock exchange operating in the United States, the laws of the State of New York shall apply to the property law aspects of the ordinary shares reflected in the register administered by our transfer agent and New York State law will determine, for example, how our ordinary shares are transferred or encumbered. However, certain other aspects relating to our ordinary shares remain subject to Dutch law and Dutch law continues to determine, for example, how new shares are issued.
Ordinary Shares
The following summarizes the main rights of holders of our ordinary shares:
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each holder of ordinary shares is entitled to one vote per share on all matters to be voted on by shareholders generally, including the appointment of management board members and supervisory board members;
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there are no cumulative voting rights (but our high voting shares do carry 25 votes each, compared to one vote each per ordinary share);
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the holders of our ordinary shares are entitled to dividends and other distributions as may be declared from time to time by us out of funds legally available for that purpose, if any;
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upon our liquidation, dissolution or winding-up, the holders of ordinary shares will be entitled to share ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities; and
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the holders of ordinary shares have preemptive rights in case of share issuances or the grant or rights to subscribe for shares, except if such rights are limited or excluded by the corporate body authorized to do so and except in such cases as provided by Dutch law and our articles of association.
Shareholders’ Register
Pursuant to Dutch law and our articles of association, we must keep our shareholders’ register accurate and current. The management board keeps our shareholders’ register and records names and
addresses of all holders of registered shares, showing the date on which the shares were acquired, the date of the acknowledgement by or notification of us as well as the amount paid on each share. The register also includes the names and addresses of those with a right of usufruct (vruchtgebruik) on registered shares belonging to another or a pledge (pandrecht) in respect of such shares. The ordinary shares offered under this prospectus will be held through DTC, therefore DTC or its nominee will be recorded in the shareholders’ register as the holder of those ordinary shares. All shares are in registered form (op naam), provided that our management board may resolve that one or more ordinary shares are in bearer form (aan toonder) if certain requirements are met. We may issue share certificates (aandeelbewijzen) for registered shares in such form as may be approved by our management board.
Corporate Objectives
Pursuant to our articles of association, our main corporate objectives are:
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the design, development, manufacturing and production of electric vehicles, including with solar integration technology;
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the design, development, manufacturing, production and licensing of solar panels for mobility applications and consumer products;
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the design, development, licensing and operation of software-based mobility services;
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to develop electronic applications;
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to incorporate, to participate in, to finance, to hold any other interest in and to conduct the management or supervision of other entities, companies, partnerships and businesses;
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to acquire, to manage, to invest, to exploit, to encumber and to dispose of assets and liabilities;
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to furnish guarantees, to provide security, to warrant performance in any other way and to assume liability, whether jointly and severally or otherwise, in respect of obligations of group companies or other parties; and
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to do anything which, in the widest sense, is connected with or may be conducive to the objects described above.
Environment
As described in article 4 of our articles of association, the planet, humankind and society are important stakeholders of us and the highest principle pursued by us as part of our objects is the protection of the environment, nature and humankind. This principle shall form the foundation of the actions of our Company and the decisions of our management board and supervisory board. On the basis of that premise:
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our management board shall monitor for and, to the extent possible and practicable, is expected to favor environmentally-friendly alternatives for existing operations of the Company and its subsidiaries, in particular if those alternatives are more efficient in terms of resource consumption;
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additional costs or other increased expenditures shall not constitute a decisive factor when deciding whether or not to pursue an environmentally superior alternative for existing operations of the Company and its subsidiaries;
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products designed, developed, manufactured or produced by the Company and its subsidiaries should be durable, recyclable and sustainable; and
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our management board and supervisory board may let the interests of the planet, humankind and society outweigh the interests of other stakeholders, provided that the interests of the latter stakeholders are not unnecessarily or disproportionately harmed.
A management board member or supervisory board member who repeatedly and consistently violates these principles shall be considered to have breached his or her statutory duty to act in the best interests of the Company and its business.
A resolution to amend the text or purport of these provisions of our articles of association shall require a unanimous vote in a general meeting where the entire issued share capital is represented.
Limitations on the Rights to Own Securities
Our ordinary shares may be issued to individuals, corporations, trusts, estates of deceased individuals, partnerships and unincorporated associations of persons. Our articles of association contain no limitation on the rights to own our shares and no limitation on the rights of nonresidents of The Netherlands or foreign shareholders to hold or exercise voting rights.
Limitation on Liability and Indemnification Matters
Under Dutch law, management board members and supervisory board members may be held liable for damages in the event of improper or negligent performance of their duties. They may be held jointly and severally liable for damages to the company and to third parties for infringement of the articles of association or of certain provisions of Dutch law. In certain circumstances, they may also incur additional specific civil and criminal liabilities. Subject to certain exceptions, our articles of association provide for indemnification of our current and former management board members and supervisory board members (and other current and former officers and employees as designated by our management board, subject to approval by our supervisory board). No indemnification shall be given to an indemnified person:
(a)
if a competent court or arbitral tribunal has established, without having (or no longer having) the possibility for appeal, that the acts or omissions of such indemnified person that led to the financial losses, damages, expenses, suit, claim, action or legal proceedings as described above are of an unlawful nature (including acts or omissions which are considered to constitute malice, gross negligence, intentional recklessness and/or serious culpability attributable to such indemnified person);
(b)
to the extent that his or her financial losses, damages and expenses are covered under insurance and the relevant insurer has settled, or has provided reimbursement for, these financial losses, damages and expenses (or has irrevocably undertaken to do so);
(c)
in relation to proceedings brought by such indemnified person against the company, except for proceedings brought to enforce indemnification to which he is entitled pursuant to our articles of association, pursuant to an agreement between such indemnified person and the company which has been approved by the management board or pursuant to insurance taken out by the company for the benefit of such indemnified person; and
(d)
for any financial losses, damages or expenses incurred in connection with a settlement of any proceedings effected without the company’s prior consent.
Under our articles of association, our management board may stipulate additional terms, conditions and restrictions in relation to the indemnification described above.
Shareholders’ Meeting
General meetings may be held in Amsterdam, Arnhem, Assen, The Hague, Haarlem, ‘s-Hertogenbosch, Groningen, Leeuwarden, Lelystad, Maastricht, Middelburg, Rotterdam, Schiphol (Haarlemmermeer), Utrecht or Zwolle, all in The Netherlands. The annual general meeting must be held within six months of the end of each financial year. Additional extraordinary general meetings may also be held whenever considered appropriate by our management board or the supervisory board and shall be held within three months after our management board has considered it to be likely that our equity has decreased to an amount equal to or lower than half of its paid-in and called-up share capital, in order to discuss the measures to be taken if so required.
Pursuant to Dutch law, one or more shareholders or others with meeting rights under Dutch law that jointly represent at least one-tenth of the issued share capital may request us to convene a general meeting, setting out in detail the matters to be discussed. If we have not taken the steps necessary to ensure that such meeting can be held within six weeks after the request, the requesting party/parties may, on their application, be authorized by the competent Dutch court in preliminary relief proceedings to convene a general meeting. The court shall disallow the application if it does not appear that the applicants have previously requested our management board and our supervisory board to convene a general meeting and neither our management
board nor our supervisory board has taken the necessary steps so that the general meeting could be held within six weeks after the request.
General meetings must be convened by an announcement published in a Dutch daily newspaper with national distribution. The notice must state the agenda, the time and place of the meeting, the record date (if any), the procedure for participating in the general meeting by proxy, as well as other information as required by Dutch law. The notice must be given at least 15 days prior to the day of the meeting. The agenda for the annual general meeting shall include, among other things, the adoption of the annual accounts, appropriation of our profits and proposals relating to the composition of the management board and supervisory board, including the filling of any vacancies in such bodies. In addition, the agenda shall include such items as have been included therein by the management board or the supervisory board. The agenda shall also include such items requested by one or more shareholders, or others with meeting rights under Dutch law, representing at least 3% of the issued share capital. Requests must be made in writing or by electronic means and received by us at least 60 days before the day of the meeting. No resolutions shall be adopted on items other than those that have been included in the agenda.
In accordance with the Dutch Corporate Governance Code (“DCGC”) and our articles of association, shareholders having the right to put an item on the agenda under the rules described above shall exercise such right only after consulting the management board in that respect. If one or more shareholders intend to request that an item be put on the agenda that may result in a change in the company’s strategy (for example, the removal of management board members or supervisory board members), the management board must be given the opportunity to invoke a reasonable period to respond to such intention. Such period shall not exceed 180 days (or such other period as may be stipulated for such purpose by Dutch law and/or the DCGC from time to time). If invoked, the management board must use such response period for further deliberation and constructive consultation, in any event with the shareholders(s) concerned, and shall explore the alternatives. At the end of the response time, the management board shall report on this consultation and the exploration of alternatives to the general meeting. This shall be supervised by our supervisory board. The response period may be invoked only once for any given general meeting and shall not apply: (a) in respect of a matter for which a response period has been previously invoked; or (b) if a shareholder holds at least 75% of the Company’s issued share capital as a consequence of a successful public bid. The response period may also be invoked in response to shareholders or others with meeting rights under Dutch law requesting that a general meeting be convened, as described above.
Moreover, our management board, with the approval of our supervisory board, can invoke a cooling- off period of up to 250 days when shareholders, using their right to have items added to the agenda for a general meeting or their right to request a general meeting, propose an agenda item for our general meeting to dismiss, suspend or appoint one or more management board members or supervisory board members (or to amend any provision in our articles of association dealing with those matters) or when a public offer for our Company is made or announced without our support, provided, in each case, that our management board believes that such proposal or offer materially conflicts with the interests of our Company and its business. During a cooling-off period, our general meeting cannot dismiss, suspend or appoint management board members and supervisory board members (or amend the provisions in our articles of association dealing with those matters) except at the proposal of our management board. During a cooling-off period, our management board must gather all relevant information necessary for a careful decision-making process and at least consult with shareholders representing 3% or more of our issued share capital at the time the cooling-off period was invoked, as well as with our Dutch works council (if we or, under certain circumstances, any of our subsidiaries would have one). Formal statements expressed by these stakeholders during such consultations must be published on our website to the extent these stakeholders have approved that publication. Ultimately one week following the last day of the cooling-off period, our management board must publish a report in respect of its policy and conduct of affairs during the cooling-off period on our website. This report must remain available for inspection by shareholders and others with meeting rights under Dutch law at our office and must be tabled for discussion at the next general meeting. Shareholders representing at least 3% of our issued share capital may request the Enterprise Chamber for early termination of the cooling-off period. The Enterprise Chamber must rule in favor of the request if the shareholders can demonstrate that:
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our management board, in light of the circumstances at hand when the cooling-off period was invoked, could not reasonably have concluded that the relevant proposal or hostile offer constituted a material conflict with the interests of our Company and its business;
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our management board cannot reasonably believe that a continuation of the cooling-off period would contribute to careful policy-making; or
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other defensive measures, having the same purpose, nature and scope as the cooling-off period, have been activated during the cooling-off period and have not since been terminated or suspended within a reasonable period at the relevant shareholders’ request (i.e., no ‘stacking’ of defensive measures).
The general meeting is presided over by the chairperson of the supervisory board. If no chairperson has been elected or if he or she is not present at the meeting, the general meeting shall be presided over by another supervisory board member present at the meeting. If no supervisory board member is present, the meeting shall be presided over by one of our CEOs. If no CEO has been elected or if they are not present at the meeting, the general meeting shall be presided over by another management board member present at the meeting. If no management board member is present at the meeting, the general meeting shall be presided over by any other person appointed by the general meeting. In each case, the person who should chair the general meeting pursuant to the rules described above may appoint another person to chair the general meeting instead. Management board members and supervisory board members may always attend a general meeting. In these meetings, they have an advisory vote. The chairperson of the meeting may decide at his or her discretion to admit other persons to the meeting.
All shareholders and others with meeting rights under Dutch law are authorized to attend the general meeting, to address the meeting and, insofar as they have such right, to vote pro rata to his or her shareholding. Shareholders may exercise these rights, if they are the holders of shares on the record date, if any, as required by Dutch law, which is currently the 28th day before the day of the general meeting. Under our articles of association, shareholders and others with meeting rights under Dutch law must notify us in writing or by electronic means of their identity and intention to attend the general meeting. This notice must be received by us ultimately on the seventh day prior to the general meeting, unless indicated otherwise when such meeting is convened.
Each ordinary share confers the right on the holder to cast one vote at the general meeting and each high voting share confers the right on the holder to cast 25 votes at the general meeting. Shareholders may vote by proxy. No votes may be cast at a general meeting on shares held by us or our subsidiaries or on shares for which we or our subsidiaries hold depository receipts. Nonetheless, the holders of a right of usufruct (vruchtgebruik) and the holders of a right of pledge (pandrecht) in respect of shares held by us or our subsidiaries in our share capital are not excluded from the right to vote on such shares, if the right of usufruct (vruchtgebruik) or the right of pledge (pandrecht) was granted prior to the time such shares were acquired by us or any of our subsidiaries. Neither we nor any of our subsidiaries may cast votes in respect of a share on which we or such subsidiary holds a right of usufruct (vruchtgebruik) or a right of pledge (pandrecht).
Shares which are not entitled to voting rights pursuant to the preceding sentences will not be taken into account for the purpose of determining the number of shareholders that vote and that are present or represented, or the amount of the share capital that is provided or that is represented at a general meeting.
Decisions of the general meeting are taken by a simple majority of votes cast, except where Dutch law or our articles of association provide for a qualified majority or unanimity. Our articles of association provide that, subject to any provision of mandatory Dutch law and any higher quorum requirement stipulated by our articles of association, if we become subject to a binding quorum requirement with respect to resolutions of our general meeting under applicable securities laws or listing rules, then such resolutions shall be subject to such quorum.
Management Board and Supervisory Board Members
Appointment of Management Board and Supervisory Board Member
Under our articles of association, each of Laurin Hahn and Jona Christians, two of our founders, as long as they hold, individually, at least 5% of our voting rights, can each make a binding nomination for the appointment of one supervisory board member. These supervisory board members can only be appointed by the general meeting upon such binding nominations. In addition, under our articles of association, our
management board members and our other supervisory board members are appointed by the general meeting upon binding nomination by our supervisory board. However, the general meeting may at all times overrule the binding nomination by a resolution adopted by at least a two-thirds majority of the votes cast, provided such majority represents more than half of the issued share capital. If the general meeting overrules the binding nomination, the supervisory board, Laurin Hahn or Jona Christians, as applicable, shall make a new nomination.
Our supervisory board has adopted a diversity policy for the composition of our management board and our supervisory board, as well as a profile for the composition of the supervisory board. The supervisory board shall make any nomination for the appointment of a management board member or supervisory board member with due regard to the rules and principles set forth in such diversity policy and profile, as applicable.
At a general meeting, a resolution to appoint a management board member or supervisory board member can only be passed in respect of candidates whose names are stated for that purpose in the agenda of that general meeting or in the explanatory notes thereto.
Under Dutch law, when nominating a person for appointment or reappointment as a supervisory board member, the nomination must be supported by reasons (if it concerns a reappointment, past performance must be taken into consideration) and the following information about such person must be provided: (i) age and profession; (ii) the aggregate nominal value of the shares held in the company’s capital; (iii) present and past positions, to the extent relevant for the performance of the tasks of a supervisory board member; and (iv) the name of each entity where such person already holds a position as supervisory board member or non-executive director (in case of multiple entities within the same group, the name of the group shall suffice).
Duties and Liabilities of Management Board and Supervisory Board Members
Under Dutch law, the management board is charged with the management of the company, subject to the restrictions contained in our articles of association, and the supervisory board is charged with the supervision of the policy of the management board and the general course of affairs of the company and of the business connected with it. The management board members may divide their tasks among themselves in or pursuant to the internal rules applicable to the management board. Each management board member and supervisory board member has a statutory duty to act in the corporate interest of the company and its business. Under Dutch law, the corporate interest extends to the interests of all corporate stakeholders, such as shareholders, creditors, employees, customers and suppliers. The duty to act in the corporate interest of the company also applies in the event of a proposed sale or break-up of the company, provided that the circumstances generally dictate how such duty is to be applied and how the respective interests of various groups of stakeholders should be weighed. Our articles of association stipulate that the planet, humankind and society are important stakeholders of us and the highest principle pursued by us as part of our objects is the protection of the environment, nature and humankind. Under our articles of association, this principle shall form the foundation of our actions and the decisions of our management board and the supervisory board. On the basis of that premise, among other matters, our management board and the supervisory board may let the interests of the planet, humankind and society outweigh the interests of other stakeholders, provided that the interests of the latter stakeholders are not unnecessarily or disproportionately harmed.
Any resolution of the management board regarding a material change in our identity or character requires approval of the general meeting.
Our management board is entitled to represent the Company. The power to represent the Company also vests in any two management board members acting jointly.
Dividends and Other Distributions
Dividends
We may only make distributions, whether a distribution of profits or of freely distributable reserves, to our shareholders to the extent our shareholders’ equity (eigen vermogen) exceeds the sum of the paid-in and
called-up share capital plus any reserves required by Dutch law or by our articles of association. Under our articles of association, the management board may decide that all or part of the profits are carried to reserves. After reservation by the management board of any profit, any remaining profit will be at the disposal of the general meeting for distribution, subject to restrictions of Dutch law and approval by our supervisory board.
We only make a distribution of dividends to our shareholders after the adoption of our annual accounts demonstrating that such distribution is legally permitted. The management board is permitted, subject to certain requirements, to declare interim dividends without the approval of the general meeting, but only with the approval of the supervisory board.
Dividends and other distributions shall be made payable not later than the date determined by the management board. Claims to dividends and other distributions not made within five years from the date that such dividends or distributions became payable will lapse and any such amounts will be considered to have been forfeited to us (verjaring).
Our current dividend policy is to retain all available funds and any future earnings to fund the completion of the development of the Sion and the start of its serial production as well as the further development and expansion of our business. If we were to revise this policy relating to a payment of future dividends, such revised policy would, subject to the restrictions described above, depend on many factors, such as our results of operations, financial condition, cash requirements, prospects and other factors deemed relevant by our management board and supervisory board.
Exchange Controls
Under Dutch law, there are no exchange controls applicable to the transfer to persons outside of The Netherlands of dividends or other distributions with respect to, or of the proceeds from the sale of, shares of a Dutch company, albeit those transfers being subject to applicable restrictions under trade and economic sanctions and measures, including those concerning export control, pursuant to EU regulations, the Sanctions Act 1977 (Sanctiewet 1977) or other legislation, applicable anti-boycott regulations, applicable anti-money-laundering regulations and similar rules and provided that, under circumstances, such dividends or other distributions must be reported to the Dutch Central Bank for statistical purposes. There are no special restrictions in the articles of association or Dutch law that limit the right of shareholders who are not citizens or residents of The Netherlands to hold or vote shares.
Squeeze-Out Procedures
A shareholder who holds at least 95% of our issued share capital for its own account, alone or together with group companies, may initiate proceedings against the other shareholders jointly for the transfer of their shares to such shareholder. The proceedings are held before the Enterprise Chamber, and can be instituted by means of a writ of summons served upon each of the other shareholders in accordance with the provisions of the Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering). The Enterprise Chamber may grant the claim for squeeze-out in relation to the other shareholders and will determine the price to be paid for the shares, if necessary, after appointment of one or three experts who will offer an opinion to the Enterprise Chamber on the value to be paid for the shares of the other shareholders. Once the order to transfer becomes final before the Enterprise Chamber, the person acquiring the shares shall give written notice of the date and place of payment and the price to the holders of the shares to be acquired whose addresses are known to it. Unless the addresses of all of them are known to the acquiring person, such a person is required to publish the same in a daily newspaper with a national circulation.
Dissolution and Liquidation
Under our articles of association, we may be dissolved by a resolution of the general meeting, subject to a proposal of the management board approved by our supervisory board. In the event of a dissolution, the liquidation shall be effected by the management board, under supervision of our supervisory board, unless the general meeting decides otherwise. During liquidation, the provisions of our articles of association will remain in force as far as possible. To the extent that any assets remain after payment of all debts, those remaining assets shall be distributed to our shareholders in proportion to their number of shares.
Dutch Corporate Governance Code
As a listed Dutch public company (naamloze vennootschap), we are subject to the DCGC. The DCGC contains both principles and best practice provisions on corporate governance that regulate relations between the management board, the supervisory board and the general meeting and matters in respect of financial reporting, auditors, disclosure, compliance and enforcement standards. The DCGC is based on a “comply or explain” principle. Accordingly, companies are required to disclose in their statutory annual reports, filed in The Netherlands, whether they comply with the provisions of the DCGC. If they do not comply with these provisions (for example, because of a conflicting Nasdaq requirement), the company is required to give the reasons for such non-compliance.
We do not comply with all principles and best practice provisions of the DCGC. As of the date of this prospectus, our main deviations from the DCGC are summarized below, but cannot exclude the possibility of deviating from additional provisions of the DCGC after the date hereof, including in order to follow market practice or governance practices in the United States.
Under our articles of association, management board members and supervisory board members are to be appointed on the basis of a binding nomination prepared by the supervisory board or certain of our shareholders. This means that the nominee will be appointed, unless the general meeting removes the binding nature of the nomination (in which case a new nomination will be prepared for a subsequent general meeting). Our articles of association provide that the general meeting can only pass such resolution by a two-thirds majority representing more than half of the issued share capital. However, the DCGC recommends that the general meeting can pass such a resolution by simple majority, representing no more than one-third of the issued share capital.
Under our articles of association, management board members and supervisory board members can only be dismissed by the general meeting by simple majority, provided that the supervisory board proposes the dismissal. In other cases, the general meeting can only pass such resolution by a two-thirds majority representing more than half of the issued share capital. The DCGC recommends that the general meeting can pass a resolution to dismiss a management board member or a supervisory board member by simple majority, representing no more than one-third of the issued share capital.
The DCGC recommends against providing equity awards as part of the compensation of a supervisory board member. However, we may deviate from this recommendation and grant equity awards to our supervisory board members, consistent with U.S. market practice.
Our long-term incentive plan allows us to set the terms and conditions of equity awards granted thereunder. Under that plan, we may grant shares that are not subject to a lock-up period of at least five years after the date of grant, and we may grant options without restricting the exercisability of those options during the first three years after the date of grant. In those cases, this would cause additional deviations from the DCGC.
The DCGC provides recommendations regarding the independence of our committees. We do not comply with all of these recommendations, due also to recent changes in the composition of our supervisory board.
Dutch Financial Reporting Supervision Act
On the basis of the Dutch Financial Reporting Supervision Act (Wet toezicht financiële verslaggeving), or the FRSA, the Dutch Authority for the Financial Markets (Stichting Autoriteit Financiële Markten), or AFM, supervises the application of financial reporting standards by Dutch companies whose securities are listed on a Dutch or foreign stock exchange.
Pursuant to the FRSA, the AFM has an independent right to (i) request an explanation from us regarding our application of the applicable financial reporting standards if, based on publicly known facts or circumstances, it has reason to doubt that the Company’s financial reporting meets such standards and (ii) recommend to us the making available of further explanations. If we do not comply with such a request or recommendation, the AFM may request that the Enterprise Chamber order us to (i) make available further explanations as recommended by the AFM, (ii) provide an explanation of the way we have
applied the applicable financial reporting standards to our financial reports or (iii) prepare or restate our financial reports in accordance with the Enterprise Chamber’s orders.
Listing
Our ordinary shares are listed on Nasdaq under the symbol “SEV.”
Transfer Agent and Registrar
Our transfer agent and registrar for the ordinary shares is the American Stock Transfer & Trust Company.
Comparison of Dutch Corporate Law and U.S. Corporate Law
The following comparison between Dutch corporate law, which applies to us, and Delaware corporation law, the law under which many publicly listed corporations in the United States are incorporated, discusses additional matters not otherwise described in this prospectus. Although we believe this summary is materially accurate, the summary is subject to Dutch law, including Book 2 of the Dutch Civil Code and the DCGC and Delaware corporation law, including the Delaware General Corporation Law.
Duties of Managing and Supervisory Board Members
The Netherlands. We have a two-tier board structure consisting of our management board (bestuur) and a separate supervisory board (raad van commissarissen).
Under Dutch law, the management board is charged with the management of the company, subject to the restrictions contained in our articles of association, and the supervisory board is charged with the supervision of the policy of the management board and the general course of affairs of the company and of the business connected with it. The management board members may divide their tasks among themselves in or pursuant to the internal rules applicable to the management board. Each management board member and supervisory board member has a statutory duty to act in the corporate interest of the company and its business. Under Dutch law, the corporate interest extends to the interests of all corporate stakeholders, such as shareholders, creditors, employees, customers and suppliers. The duty to act in the corporate interest of the company also applies in the event of a proposed sale or break-up of the company, provided that the circumstances generally dictate how such duty is to be applied and how the respective interests of various groups of stakeholders should be weighed. Our articles of association stipulate that the planet, humankind and society are important stakeholders of us and the highest principle pursued by us as part of our objects is the protection of the environment, nature and humankind. Under our articles of association, this principle shall form the foundation of our actions and the decisions of our management board and the supervisory board. On the basis of that premise, among other matters, our management board and the supervisory board may let the interests of the planet, humankind and society outweigh the interests of other stakeholders, provided that the interests of the latter stakeholders are not unnecessarily or disproportionately harmed.
Any resolution of the management board regarding a material change in our identity or character requires approval of the general meeting.
The approval of our supervisory board is required for certain resolutions of our management board, including concerning the following matters: the making of certain proposals to the general meeting; the issue of shares or the granting of rights to subscribe for shares; the limitation or exclusion of preemption rights; the acquisition of shares by us in our own capital; the drawing up or amendment of our management board rules; the performance of legal acts relating to non-cash contributions on shares; material changes to the identity or the character of the company or its business; the charging of amounts to be paid up on shares against the company’s reserves; the making of an interim distribution; and such other resolutions as the supervisory board shall have specified in a resolution to that effect and notified to the management board. The absence of the approval of the supervisory board shall result in the relevant resolution being null and void but shall not affect the powers of representation of the management board or of the management board members.
Our management board is entitled to represent the Company. The power to represent the Company also vests in any two management board members acting jointly.
Delaware. The board of directors bears the ultimate responsibility for managing the business and affairs of a corporation. In discharging this function, directors of a Delaware corporation owe fiduciary duties of care and loyalty to the corporation and to its stockholders. Delaware courts have decided that the directors of a Delaware corporation are required to exercise informed business judgment in the performance of their duties. Informed business judgment means that the directors have informed themselves of all material information reasonably available to them. Delaware courts have also imposed a heightened standard of conduct upon directors of a Delaware corporation who take any action designed to defeat a threatened change in control of the corporation. In addition, under Delaware law, when the board of directors of a Delaware corporation approves the sale or break-up of a corporation, the board of directors may, in certain circumstances, have a duty to obtain the highest value reasonably available to the stockholders.
Director Terms
The Netherlands. The DCGC provides the following best practice recommendations on the terms for tenure of management board members and supervisory board members:
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Management board members should be appointed for a maximum period of four years, without limiting the number of consecutive terms management board members may serve.
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Supervisory board members should be appointed for two consecutive periods of no more than four years. Thereafter, supervisory board members may be reappointed for a maximum of two consecutive periods of no more than two years, provided that the reasons for any reappointment after an eight-year term of office should be disclosed in the company’s annual report.
The general meeting shall at all times be entitled to suspend or dismiss a management board member or supervisory board member. Under our articles of association, the general meeting may only adopt a resolution to suspend or dismiss such director by at least a two-thirds majority of the votes cast, provided that such majority represents more than half of the issued share capital, unless the resolution is passed at the proposal of the supervisory board, in which case a simple majority of the votes cast is sufficient. In addition, the supervisory board may at any time suspend a management board member. A suspension by the supervisory board can at any time be lifted by the general meeting. If a management board member is suspended and the general meeting does not resolve to dismiss him or her within three months from the date of such suspension, the suspension shall lapse.
Delaware. The Delaware General Corporation Law generally provides for a one-year term for directors, but permits directorships to be divided into up to three classes with up to three-year terms, with the years for each class expiring in different years, if permitted by the certificate of incorporation, an initial bylaw or a bylaw adopted by the stockholders. A director elected to serve a term on a “classified” board may not be removed by stockholders without cause. There is no limit in the number of terms a director may serve.
Director Vacancies
The Netherlands. Our management board can temporarily fill vacancies in its midst caused by temporary absence or incapacity of management board members without requiring a shareholder vote. If all of our management board members are absent or incapacitated, our management shall be attributed to the supervisory board. The person charged with our management in this manner may designate one or more persons to be charged with our management instead of, or together with, such person(s). Our supervisory board can also temporarily fill vacancies in its midst caused by temporary absence or incapacity of supervisory board members without a shareholder vote. If all of our supervisory board members are absent or incapacitated, the supervision of our Company shall be attributed to the person who most recently ceased to hold office as the chairperson of our supervisory board, provided that such person is willing and able to accept such position, who may designate one or more other persons to be charged with the supervision of the Company, instead of, or together with, such former chairperson. The person charged with the supervision of the Company pursuant to this provision shall cease to hold that position when the general meeting has appointed one or more persons as supervisory board members.
Under Dutch law, management board members and supervisory board members are appointed and reappointed by the general meeting. Under our articles of association, each of Laurin Hahn and Jona Christians, two of our founders, as long as he holds at least 5% of our voting rights, can each make a binding nomination for the appointment of one supervisory board member. These supervisory board members can only be appointed by the general meeting upon such binding nominations. In addition, under our articles of association, our management board members and our other supervisory board members are appointed by the general meeting upon binding nomination by our supervisory board. However, the general meeting may at all times overrule the binding nomination by a resolution adopted by at least a two-thirds majority of the votes cast, provided such majority represents more than half of the issued share capital. If the general meeting overrules the binding nomination, the supervisory board, Laurin Hahn or Jona Christians, as applicable, shall make a new nomination.
Our supervisory board adopted a diversity policy for the composition of our management board and our supervisory board, as well as a profile for the composition of the supervisory board. The supervisory board shall make any nomination for the appointment of a management board member or supervisory board member with due regard to the rules and principles set forth in such diversity policy and profile, as applicable.
Under Dutch law, when nominating a person for appointment or reappointment as a supervisory board member, the nomination must be supported by reasons (if it concerns a reappointment, past performance must be taken into consideration) and the following information about such person must be provided: (i) age and profession; (ii) the aggregate nominal value of the shares held in the company’s capital; (iii) present and past positions, to the extent relevant for the performance of the tasks of a supervisory board member; and (iv) the name of each entity where such person already holds a position as supervisory board member or non-executive director (in case of multiple entities within the same group, the name of the group shall suffice).
Delaware. The Delaware General Corporation Law provides that vacancies and newly created directorships may be filled by a majority of the directors then in office (even though less than a quorum) unless (i) otherwise provided in the certificate of incorporation or bylaws of the corporation or (ii) the certificate of incorporation directs that a particular class of stock is to elect such director, in which case any other directors elected by such class, or a sole remaining director elected by such class, will fill such vacancy.
Conflict-of-Interest Transactions
The Netherlands. Under Dutch law and our articles of association, our management board members and supervisory board members shall not take part in any discussion or decision-making that involves a subject or transaction in relation to which he or she has a direct or indirect personal conflict of interest with us. Such a conflict of interest would generally arise if the management board member or supervisory board member concerned is unable to serve our interests and the business connected with it with the required level of integrity and objectivity due to the existence of the conflicting personal interest. Our articles of association provide that if as a result of conflicts of interests no resolution of the management board can be adopted, the resolution shall be passed by the supervisory board and that, if as a result of conflicts of interests no resolution of the supervisory board can be adopted, the resolution may nonetheless be adopted by the supervisory board as if none of the supervisory board members had a conflict of interest. In that case, each supervisory board member is entitled to participate in the discussion and decision-making process and to cast a vote.
The DCGC provides the following best practice recommendations in relation to conflicts of interests in respect of management board members or supervisory board members:
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A management board member should report any potential conflict of interest in a transaction that is of material significance to the company and/or to such person to the chairperson of the supervisory board and to the other members of the management board without delay. The management board member should provide all relevant information in that regard, including the information relevant to the situation concerning his or her spouse, registered partner or other life companion, foster child and relatives by blood or marriage up to the second degree.
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A supervisory board member should report any conflict of interest or potential conflict of interest in a transaction that is of material significance to the company and/or to such person to the chairperson of the supervisory board without delay and should provide all relevant information in that regard, including the relevant information pertaining to his or her spouse, registered partner or other life companion, foster child and relatives by blood or marriage up to the second degree. If the chairperson of the supervisory board has a conflict of interest or potential conflict of interest, he or she should report this to the vice-chairperson of the supervisory board without delay.
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The supervisory board should decide, outside the presence of the management board member or supervisory board member concerned, whether there is a conflict of interest.
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All transactions in which there are conflicts of interest with management board members or supervisory board members should be agreed on terms that are customary in the market.
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Decisions to enter into transactions in which there are conflicts of interest with management board members or supervisory board members that are of material significance to the company and/or to the relevant management board members or supervisory board members should require the approval of the supervisory board. Such transactions should be published in the annual report, together with a description of the conflict of interest and a declaration that the relevant best practice provisions of the DCGC have been complied with.
Delaware. The Delaware General Corporation Law generally permits transactions involving a Delaware corporation and an interested director of that corporation if:
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the material facts as to the director’s relationship or interest are disclosed and a majority of disinterested directors consent;
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the material facts are disclosed as to the director’s relationship or interest and a majority of shares entitled to vote thereon consent; or
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the transaction is fair to the corporation at the time it is authorized by the board of directors, a committee of the board of directors or the stockholders.
Proxy Voting by Directors
The Netherlands. An absent management board member may issue a proxy for a specific management board meeting but only to another management board member in writing or by electronic means. An absent supervisory board member may issue a proxy for a specific supervisory board meeting but only to another supervisory board member in writing or by electronic means.
Delaware. A director of a Delaware corporation may not issue a proxy representing the director’s voting rights as a director.
Shareholder Rights
Voting Rights
The Netherlands. In accordance with Dutch law and our articles of association, each issued ordinary share confers the right to cast one vote at the general meeting and each issued high voting share confers the right to cast 25 votes at the general meeting. No votes may be cast on shares that are held by us or our direct or indirect subsidiaries or on shares for which we or our subsidiaries hold depository receipts.
Nonetheless, the holders of a right of usufruct (vruchtgebruik) and the holders of a right of pledge (pandrecht) in respect of shares held by us or our subsidiaries in our share capital are not excluded from the right to vote on such shares, if the right of usufruct (vruchtgebruik) or the right of pledge (pandrecht) was granted prior to the time such shares were acquired by us or any of our subsidiaries. Neither we nor any of our subsidiaries may cast votes in respect of a share on which we or such subsidiary holds a right of usufruct (vruchtgebruik) or a right of pledge (pandrecht).
In accordance with our articles of association, for each general meeting, the management board may determine that a record date will be applied in order to establish which shareholders are entitled to attend
and vote at the general meeting. Such record date shall be the 28th day prior to the day of the general meeting. The record date and the manner in which shareholders can register and exercise their rights will be set out in the notice of the meeting which must be published in a Dutch daily newspaper with national distribution at least 15 days prior to the meeting (and such notice may therefore be published after the record date for such meeting). Under our articles of association, shareholders and others with meeting rights under Dutch law must notify us in writing or by electronic means of their identity and intention to attend the general meeting. This notice must be received by us ultimately on the seventh day prior to the general meeting, unless indicated otherwise when such meeting is convened.
Delaware. Under the Delaware General Corporation Law, each stockholder is entitled to one vote per share of stock, unless the certificate of incorporation provides otherwise. In addition, the certificate of incorporation may provide for cumulative voting at all elections of directors of the corporation, or at elections held under specified circumstances. Either the certificate of incorporation or the bylaws may specify the number of shares and/or the amount of other securities that must be represented at a meeting in order to constitute a quorum, but in no event will a quorum consist of less than one-third of the shares entitled to vote at a meeting.
Stockholders as of the record date for the meeting are entitled to vote at the meeting, and the board of directors may fix a record date that is no more than 60 nor less than 10 days before the date of the meeting, and if no record date is set then the record date is the close of business on the day next preceding the day on which notice is given, or if notice is waived then the record date is the close of business on the day next preceding the day on which the meeting is held. The determination of the stockholders of record entitled to notice or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, but the board of directors may fix a new record date for the adjourned meeting.
Shareholder Proposals
The Netherlands. Pursuant to our articles of association, extraordinary general meetings will be held whenever required under Dutch law or whenever our management board or supervisory board deems such to be appropriate or necessary. Pursuant to Dutch law, one or more shareholders or others with meeting rights under Dutch law representing at least one-tenth of the issued share capital may request us to convene a general meeting, setting out in detail the matters to be discussed. If we have not taken the steps necessary to ensure that such a meeting can be held within six weeks after the request, the requesting party or parties may, on their application, be authorized by the competent Dutch court in preliminary relief proceedings to convene a general meeting.
Also, the agenda for a general meeting shall include such items requested by one or more shareholders, and others entitled to attend general meetings, representing at least 3% of the issued share capital, except where the articles of association state a lower percentage. Our articles of association do not state such lower percentage. Requests must be made in writing or by electronic means and received by us at least 60 days before the day of the meeting.
In accordance with the DCGC and our articles of association, shareholders having the right to put an item on the agenda under the rules described above shall exercise such right only after consulting our management board in that respect. If one or more shareholders intend to request that an item be put on the agenda that may result in a change in our strategy (for example, the removal of management board members or supervisory board members), our management board must be given the opportunity to invoke a reasonable period to respond to such intention. Such period shall not exceed 180 days (or such other period as may be stipulated for such purpose by Dutch law and/or the DCGC from time to time). If invoked, our management board must use such response period for further deliberation and constructive consultation, in any event with the shareholders concerned, and shall explore the alternatives. At the end of the response time, our management board shall report on this consultation and the exploration of alternatives to our general meeting. This shall be supervised by our supervisory board. The response period may be invoked only once for any given general meeting and shall not apply (a) in respect of a matter for which a response period has been previously invoked; or (b) if a shareholder holds at least 75% of our issued share capital as a consequence of a successful public bid. The response period may also be invoked in response to shareholders or others with meeting rights under Dutch law requesting that a general meeting be convened, as described above.
Moreover, our management board, with the approval of our supervisory board, can invoke a cooling-off period of up to 250 days when shareholders, using their right to have items added to the agenda for a general meeting or their right to request a general meeting, propose an agenda item for our general meeting to dismiss, suspend or appoint one or more management board members or supervisory board members (or to amend any provision in our articles of association dealing with those matters) or when a public offer for our Company is made or announced without our support, provided, in each case, that our management board believes that such proposal or offer materially conflicts with the interests of our Company and its business. During a cooling-off period, our general meeting cannot dismiss, suspend or appoint management board members and supervisory board members (or amend the provisions in our articles of association dealing with those matters) except at the proposal of our management board. During a cooling-off period, our management board must gather all relevant information necessary for a careful decision-making process and at least consult with shareholders representing 3% or more of our issued share capital at the time the cooling-off period was invoked, as well as with our Dutch works council (if we or, under certain circumstances, any of our subsidiaries would have one). Formal statements expressed by these stakeholders during such consultations must be published on our website to the extent these stakeholders have approved that publication. Ultimately one week following the last day of the cooling-off period, our management board must publish a report in respect of its policy and conduct of affairs during the cooling-off period on our website. This report must remain available for inspection by shareholders and others with meeting rights under Dutch law at our office and must be tabled for discussion at the next general meeting. Shareholders representing at least 3% of our issued share capital may request the Enterprise Chamber for early termination of the cooling-off period. The Enterprise Chamber must rule in favor of the request if the shareholders can demonstrate that:
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our management board, in light of the circumstances at hand when the cooling-off period was invoked, could not reasonably have concluded that the relevant proposal or hostile offer constituted a material conflict with the interests of our Company and its business;
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our management board cannot reasonably believe that a continuation of the cooling-off period would contribute to careful policy-making; or
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other defensive measures, having the same purpose, nature and scope as the cooling-off period, have been activated during the cooling-off period and have not since been terminated or suspended within a reasonable period at the relevant shareholders’ request (i.e., no ‘stacking’ of defensive measures).
Delaware. Delaware law does not specifically grant stockholders the right to bring business before an annual or special meeting. However, if a Delaware corporation is subject to the SEC’s proxy rules, a stockholder who owns at least $2,000 in market value, or 1% of the corporation’s securities entitled to vote, may propose a matter for a vote at an annual or special meeting in accordance with those rules.
Action by Written Consent
The Netherlands. Under Dutch law, shareholders’ resolutions may be adopted in writing without holding a meeting of shareholders, provided that (i) the articles of association allow such action by written consent, (ii) the company has not issued bearer shares or, with its cooperation, depository receipts for shares in its capital, and (iii) the resolution is adopted unanimously by all shareholders that are entitled to vote. Although our articles of association allow for shareholders’ resolutions to be adopted in writing, the requirement of unanimity renders the adoption of shareholder resolutions without holding a meeting not feasible for us as a publicly traded company.
Delaware. Although permitted by Delaware law, publicly listed companies do not typically permit stockholders of a corporation to take action by written consent.
Appraisal Rights
The Netherlands. Subject to certain exceptions, Dutch law does not recognize the concept of appraisal or dissenters’ rights. However, Dutch law does provide for squeeze-out procedures as described under “Description of Share Capital and Articles of Association — Dividends and Other Distributions — Squeeze- Out Procedures.” Also, Dutch law provides for cash exit rights in certain situations for dissenting shareholders
of a company organized under Dutch law entering into certain types of mergers. In those situations, a dissenting shareholder may file a claim with the Dutch company for compensation. Such compensation shall then be determined by one or more independent experts. The shares of such a shareholder that are subject to such claim will cease to exist as of the moment of entry into effect of the merger.
Delaware. The Delaware General Corporation Law provides for stockholder appraisal rights, or the right to demand payment in cash of the judicially determined fair value of the stockholder’s shares, in connection with certain mergers and consolidations.
Shareholder Suits
The Netherlands. In the event a third party is liable to a Dutch company, only the company itself can bring a civil action against that party. The individual shareholders do not have the right to bring an action on behalf of the company. Only in the event that the cause for the liability of a third party to the company also constitutes a tortious act directly against a shareholder does that shareholder have an individual right of action against such third party in its own name. Dutch law provides for the possibility to initiate such actions collectively, in which a foundation or an association can act as a class representative and has standing to commence proceedings and claim damages if certain criteria are met. The court will first determine if those criteria are met. If so, the case will go forward as a class action on the merits after a period allowing class members to opt out from the case has lapsed. All members of the class who are residents of The Netherlands and who did not opt out will be bound to the outcome of the case. Residents of other countries must actively opt-in in order to be able to benefit from the class action. The defendant is not required to file defenses on the merits prior to the merits phase having commenced. It is possible for the parties to reach a settlement during the merits phase. Such a settlement can be approved by the court, which approval will then bind the members of the class, subject to a second opt-out. This new regime applies to claims brought after January 1, 2020 and which relate to certain events that occurred prior to that date. For other matters, the old Dutch class actions regime will apply. Under the old regime, no monetary damages can be sought. Also, a judgment rendered under the old regime will not bind individual class members. Even though Dutch law does not provide for derivative suits, directors and officers can still be subject to liability under U.S. securities laws.
Under our articles of association, except as otherwise approved by our management board, the sole and exclusive forum for any complaint asserting a cause of action arising under the Securities Act, as amended, to the fullest extent permitted by applicable law, shall be the U.S. federal district courts.
Delaware. Under the Delaware General Corporation Law, a stockholder may bring a derivative action on behalf of the corporation to enforce the rights of the corporation. An individual also may commence a class action suit on behalf of himself and other similarly situated stockholders where the requirements for maintaining a class action under Delaware law have been met. A person may institute and maintain such a suit only if that person was a stockholder at the time of the transaction which is the subject of the suit. In addition, under Delaware case law, the plaintiff normally must be a stockholder at the time of the transaction that is the subject of the suit and throughout the duration of the derivative suit.
Delaware law also requires that the derivative plaintiff make a demand on the directors of the corporation to assert the corporate claim before the suit may be prosecuted by the derivative plaintiff in court, unless such a demand would be futile.
Repurchase of Shares
The Netherlands. Under Dutch law, when issuing shares, a public company such as ours may not subscribe for newly issued shares in its own capital. Such a company may, however, subject to certain restrictions of Dutch law and its articles of association, acquire shares in its own capital. A listed public company such as ours may acquire fully paid shares in its own capital at any time for no valuable consideration. Furthermore, subject to certain provisions of Dutch law and its articles of association, such company may repurchase fully paid shares in its own capital if (i) the company’s shareholders’ equity less the payment required to make the acquisition does not fall below the sum of paid-in and called-up share capital plus any reserves required by Dutch law or its articles of association and (ii) the aggregate nominal value of shares of the company which the company acquires, holds or on which the company holds a pledge (pandrecht)
or which are held by a subsidiary of the company, would not exceed 50% of its then-current issued share capital. Such company may only acquire its own shares if its general meeting has granted the management board the authority to effect such acquisitions.
An acquisition of shares for a consideration must be authorized by our general meeting. Such authorization may be granted for a maximum period of 18 months and must specify the number of shares that may be acquired, the manner in which shares may be acquired and the price limits within which ordinary shares may be acquired. The actual acquisition may only be effected pursuant to a resolution of our management board, with the approval of our supervisory board. Our management board has been authorized until the date that is 18 months following the pricing of our IPO to cause the repurchase of shares (or depository receipts for shares) by us of up to 10% of our issued share capital, for a price per share not exceeding 110% of the average market price of our ordinary shares on Nasdaq (such average market price being the average of the closing prices on each of the five consecutive trading days preceding the date the acquisition is agreed upon by us). These shares may be used to deliver shares underlying awards granted pursuant to our equity-based compensation plans.
No authorization of the general meeting is required if fully paid ordinary shares are acquired by us with the intention of transferring such ordinary shares to our employees under an applicable employee share purchase plan.
Delaware. Under the Delaware General Corporation Law, a corporation may purchase or redeem its own shares unless the capital of the corporation is impaired or the purchase or redemption would cause an impairment of the capital of the corporation. A Delaware corporation may, however, purchase or redeem out of capital any of its preferred shares or, if no preferred shares are outstanding, any of its own shares if such shares will be retired upon acquisition and the capital of the corporation will be reduced in accordance with specified limitations.
Anti-Takeover Provisions
The Netherlands. Under Dutch law, various protective measures are possible and permissible within the boundaries set by Dutch law and Dutch case law. In this respect, certain provisions of our articles of association may make it more difficult for a third party to acquire control of us or effect a change in our management board and supervisory board. These provisions include:
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a dual-class share structure which consists of ordinary shares and high voting shares, with ordinary shares carrying one vote per share and high voting shares carrying 25 votes per share;
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a provision that each of Laurin Hahn and Jona Christians, two of our founders, as long as he holds at least 5% of our voting rights, can each make a binding nomination for the appointment of one supervisory board member, which can only be overruled by a two-thirds majority of votes cast representing more than 50% of our issued share capital;
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a provision that our management board members and the supervisory board members not appointed on the basis of a binding nomination by Laurin Hahn or Jona Christians as described above are appointed on the basis of a binding nomination prepared by our supervisory board which can only be overruled by a two-thirds majority of votes cast representing more than half of our issued share capital;
•
a provision that our management board members and supervisory board members may only be dismissed by the general meeting by a two-thirds majority of votes cast representing more than half of our issued share capital (unless the dismissal is proposed by the supervisory board in which case a simple majority of the votes cast would be sufficient);
•
a provision allowing, among other matters, the former chairperson of our supervisory board to manage our affairs if all of our supervisory board members are removed from office and to appoint others to be charged with the supervision of our affairs, until new supervisory board members are appointed by the general meeting on the basis of the binding nominations discussed above; and
•
a requirement that certain matters, including an amendment of our articles of association, may only be brought to our general meeting for a vote upon a proposal by our management board with the approval of our supervisory board.
In addition, Dutch law allows for staggered multi-year terms of our management board members and supervisory board members, as a result of which only part of our management board members and supervisory board members may be subject to appointment or re-appointment in any one year.
Furthermore, our management board may, under certain circumstances, invoke a reasonable period of up to 180 days to respond to certain shareholder proposals or a statutory cooling-off period of up to 250 days to respond to certain shareholder proposals or a hostile bid. See above under “Shareholder Proposals.”
Delaware. In addition to other aspects of Delaware law governing fiduciary duties of directors during a potential takeover, the Delaware General Corporation Law also contains a business combination statute that protects Delaware companies from hostile takeovers and from actions following the takeover by prohibiting some transactions once an acquirer has gained a significant holding in the corporation.
Section 203 of the Delaware General Corporation Law prohibits “business combinations,” including mergers, sales and leases of assets, issuances of securities and similar transactions by a corporation or a subsidiary with an interested stockholder that beneficially owns 15% or more of a corporation’s voting stock, within three years after the person becomes an interested stockholder, unless:
•
the transaction that will cause the person to become an interested stockholder is approved by the board of directors of the target prior to the transactions;
•
after the completion of the transaction in which the person becomes an interested stockholder, the interested stockholder holds at least 85% of the voting stock of the corporation not including shares owned by persons who are directors and officers of interested stockholders and shares owned by specified employee benefit plans; or
•
after the person becomes an interested stockholder, the business combination is approved by the board of directors of the corporation and holders of at least 66.67% of the outstanding voting stock, excluding shares held by the interested stockholder.
A Delaware corporation may elect not to be governed by Section 203 by a provision contained in the original certificate of incorporation of the corporation or an amendment to the original certificate of incorporation or to the bylaws of the company, which amendment must be approved by a majority of the shares entitled to vote and may not be further amended by the board of directors of the corporation. Such an amendment is not effective until 12 months following its adoption.
Inspection of Books and Records
The Netherlands. The management board and the supervisory board provide the general meeting, within a reasonable amount of time, all information that the shareholders require for the exercise of their powers, unless this would be contrary to an overriding interest of our Company. If the management board or supervisory board invokes such an overriding interest, it must give reasons.
Delaware. Under the Delaware General Corporation Law, any stockholder may inspect for any proper purpose certain of the corporation’s books and records during the corporation’s usual hours of business.
Dismissal of Directors
The Netherlands. Under our articles of association, the general meeting shall at all times be entitled to dismiss a management board member or supervisory board member. The general meeting may only adopt a resolution to suspend or dismiss a management board member or supervisory board member by at least a two-thirds majority of the votes cast, provided that such majority represents more than half of the issued share capital, unless the proposal was made by the supervisory board, in which latter case a simple majority is sufficient.
Delaware. Under the Delaware General Corporation Law, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except (i) unless the certificate of incorporation provides otherwise, in the case of a corporation whose board is classified, stockholders may effect such removal only for cause, or (ii) in
the case of a corporation having cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against such director’s removal would be sufficient to elect such director if then cumulatively voted at an election of the entire board of directors, or, if there are classes of directors, at an election of the class of directors of which he or she is a part.
Issuance of Shares
The Netherlands. Under Dutch law, a company’s general meeting is the corporate body authorized to resolve on the issuance of shares and the granting of rights to subscribe for shares. The general meeting can delegate such authority to another corporate body of the company, such as the management board, for a period not exceeding five years; this authorization may only be extended from time to time for a maximum period of five years.
Our management board has been authorized until the fifth anniversary of the pricing of our IPO to issue shares (of any class) or grant rights to subscribe for shares up to our authorized share capital from time to time. We may not subscribe for our own shares on issue.
Delaware. All creation of shares require the board of directors to adopt a resolution or resolutions, pursuant to authority expressly vested in the board of directors by the provisions of the company’s certificate of incorporation.
Preemptive Rights
The Netherlands. Under Dutch law, in the event of an issuance of shares, each shareholder will have a pro rata preemptive right in proportion to the aggregate nominal value of the shares held by such holder (with the exception of shares to be issued to employees or shares issued against a contribution other than in cash or pursuant to the exercise of a previously acquired right to subscribe for shares). Under our articles of association, the preemptive rights in respect of newly issued shares may be restricted or excluded by a resolution of the general meeting. Another corporate body, such as the management board, may restrict or exclude the preemptive rights in respect of newly issued shares if it has been designated as the authorized body to do so by the general meeting. Such designation can be granted for a period not exceeding five years. A resolution of the general meeting to restrict or exclude the preemptive rights or to designate another corporate body as the authorized body to do so requires a majority of not less than two-thirds of the votes cast, if less than one-half of our issued share capital is represented at the meeting. Our management board has been authorized until the fifth anniversary of the pricing of our IPO to limit or exclude preemptive rights in relation to an issuance of shares or a grant of rights to subscribe for shares that the management board is authorized to resolve upon (see above under “Issuance of Shares”).
Delaware. Under the Delaware General Corporation Law, stockholders have no preemptive rights to subscribe for additional issues of stock or to any security convertible into such stock unless, and to the extent that, such rights are expressly provided for in the certificate of incorporation.
Dividends
The Netherlands. Dutch law provides that dividends (if it concerns a distribution of profits) may be distributed after adoption of the annual accounts by the general meeting from which it appears that such dividend distribution is allowed. Moreover, dividends may be distributed, whether as a distribution of profits or of freely distributable reserves, only to the extent the shareholders’ equity exceeds the amount of the paid-in and called-up issued share capital and the reserves that must be maintained under the law or the articles of association. Interim dividends may be declared as provided in the articles of association and may be distributed to the extent that the shareholders’ equity exceeds the amount of the paid-in and called-up issued share capital plus any reserves as described above as apparent from our consolidated interim financial statements prepared under Dutch law.
Under our articles of association, our management board, with the approval of our supervisory board, may decide that all or part of the profits are carried to reserves. After the reservation of any profit, the remaining profit will be at the disposal of the general meeting at the proposal of the management board for distribution on the shares, subject to restrictions of Dutch law and approval by our supervisory board of
such proposal of our management board. Our management board is permitted, subject to certain requirements, to declare interim dividends without the approval of the general meeting, but only with the approval of the supervisory board. Dividends and other distributions shall be made payable not later than the date determined by the management board. Claims to dividends and other distributions not made within five years from the date that such dividends or distributions became payable will lapse and any such amounts will be considered to have been forfeited to us (verjaring).
Delaware. Under the Delaware General Corporation Law, a Delaware corporation may pay dividends out of its surplus (the excess of net assets over capital), or in case there is no surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year (provided that the amount of the capital of the corporation is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets). In determining the amount of surplus of a Delaware corporation, the assets of the corporation, including stock of subsidiaries owned by the corporation, must be valued at their fair market value as determined by the board of directors, without regard to their historical book value. Dividends may be paid in the form of common stock, property or cash.
Shareholder Vote on Certain Reorganizations
The Netherlands. Under Dutch law, the general meeting must approve resolutions of the management board relating to a significant change in the identity or the character of the company or the business of the company, which includes:
•
a transfer of the business or virtually the entire business to a third party;
•
the entry into or termination of a long-term cooperation of the company or a subsidiary with another legal entity or company or as a fully liable partner in a limited partnership or general partnership, if such cooperation or termination is of a far-reaching significance for the company; and
•
the acquisition or divestment by the company or a subsidiary of a participating interest in the capital of a company having a value of at least one-third of the amount of its assets according to its balance sheet and explanatory notes or, if the company prepares a balance sheet, according to its balance sheet and explanatory notes in the last adopted annual accounts of the company.
Delaware. Under the Delaware General Corporation Law, the vote of a majority of the outstanding shares of capital stock entitled to vote thereon generally is necessary to approve a merger or consolidation or the sale of all or substantially all of the assets of a corporation. The Delaware General Corporation Law permits a corporation to include in its certificate of incorporation a provision requiring for any corporate action the vote of a larger portion of the stock or of any class or series of stock than would otherwise be required.
Under the Delaware General Corporation Law, no vote of the stockholders of a surviving corporation to a merger is needed, however, unless required by the certificate of incorporation, if (i) the agreement of merger does not amend in any respect the certificate of incorporation of the surviving corporation, (ii) the shares of stock of the surviving corporation are not changed in the merger and (iii) the number of shares of common stock of the surviving corporation into which any other shares, securities or obligations to be issued in the merger may be converted does not exceed 20% of the surviving corporation’s common stock outstanding immediately prior to the effective date of the merger. In addition, stockholders may not be entitled to vote in certain mergers with other corporations that own 90% or more of the outstanding shares of each class of stock of such corporation, but the stockholders will be entitled to appraisal rights.
Remuneration of Management Board Members and Supervisory Board Members
The Netherlands. Under Dutch law and our articles of association, we must adopt a compensation policy for our management board. Such compensation policy and any changes thereto shall require the adoption by the general meeting. The supervisory board determines the remuneration of individual management board members with due observance of the compensation policy at the recommendation of our compensation committee. A proposal with respect to remuneration schemes in the form of shares or rights
to shares in which management board members may participate is subject to approval by our general meeting. Such a proposal must set out at least the maximum number of shares or rights to subscribe for shares to be granted to the management board and the criteria for granting or amendment. The compensation for our supervisory board members is set by the general meeting.
Delaware. Under the Delaware General Corporation Law, the stockholders do not generally have the right to approve the compensation policy for directors or the senior management of the corporation, although certain aspects of the compensation policy may be subject to stockholder vote due to the provisions of U.S. federal securities and tax law.
TAXATION
The following summary contains a description of Dutch, German and U.S. federal income tax considerations generally applicable to the acquisition, ownership and disposition of ordinary shares, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase ordinary shares. The summary is based upon the tax laws of The Netherlands and regulations thereunder, the tax laws of Germany and regulations thereunder and the tax laws of the United States and regulations thereunder as of the date hereof, which are subject to change. The discussion in this section reflects the views of NautaDutilh N.V. insofar as it relates to matters of Dutch tax law, Ebner Stolz Mönning Bachem Wirtschaftsprüfer Steuerberater Rechtsanwälte Partnerschaft mbB insofar as it relates to matters of German tax law and Sullivan & Cromwell LLP insofar as it relates to matters of United States federal income tax law. You should consult your tax advisor regarding the applicable tax consequences to you of investing in our ordinary shares.
Material Dutch Tax Considerations
General
The following is a general summary of certain material Dutch tax consequences of the acquisition, ownership and disposal of our ordinary shares. This summary does not purport to set forth all possible tax considerations or consequences that may be relevant to a holder or prospective holder or our ordinary shares and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as trusts or similar arrangements) may be subject to special rules. In view of its general nature, it should be treated with corresponding caution.
This summary is based on the tax laws of The Netherlands, published regulations thereunder and published authoritative case law, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. Where the summary refers to “The Netherlands” or “Dutch” it refers only to the part of the Kingdom of The Netherlands located in Europe.
This discussion is for general information purposes only and is not Dutch tax advice or a complete description of all Dutch tax consequences relating to the acquisition, ownership and disposal of our ordinary shares. Holders or prospective holders of our ordinary shares should consult their own tax advisor regarding the Dutch tax consequences relating to the acquisition, holding and disposal of our ordinary shares in light of their particular circumstances.
Please note that this section does not set forth the tax considerations for:
•
holders of ordinary shares if such holders have a substantial interest (aanmerkelijk belang) or deemed substantial interest (fictief aanmerkelijk belang) in us under the Dutch Income Tax Act 2001 (Wet inkomstenbelasting 2001). Generally, a holder of securities in a company is considered to hold a substantial interest in such company if such holder alone or, in the case of individuals, together with such holder’s partner for Dutch income tax purposes, or any relative by blood or marriage in the direct line (including foster children), directly or indirectly holds (i) an interest of 5% or more of the total issued and outstanding capital of that company or of 5% or more of the issued and outstanding capital of a certain class of shares of that company; or (ii) rights to acquire, directly or indirectly, such interest; or (iii) certain profit sharing rights in that company that relate to 5% or more of the company’s annual profits and/or to 5% or more of the company’s liquidation proceeds. A deemed substantial interest may arise if a substantial interest (or part thereof) in a company has been disposed of, or is deemed to have been disposed of, on a non-recognition basis;
•
holders of ordinary shares if the ordinary shares held by such holders qualify or qualified as a participation (deelneming) for purposes of the Dutch Corporate Income Tax Act 1969 (Wet op de vennootschapsbelasting 1969). Generally, a holder’s shareholding of 5% or more in our nominal paid-in share capital qualifies as a participation. A holder may also have a participation if (a) such holder does not have a shareholding of 5% or more but a related entity (statutorily defined term) has a participation or (b) the company in which the shares are held is a related entity (statutorily defined term);
•
pension funds, investment institutions (fiscale beleggingsinstellingen), exempt investment institutions (vrijgestelde beleggingsinstellingen) (as defined in the Dutch Corporate Income Tax Act 1969) and other entities that are, in whole or in part, not subject to or exempt from corporate income tax in The Netherlands as well as entities that are exempt from corporate income tax in their country of residence, such country of residence being another state of the EU, Norway, Liechtenstein, Iceland or any other state with which The Netherlands has agreed to exchange information in line with international standards; and
•
holders of ordinary shares who are individuals and for whom the ordinary shares or any benefit derived from the ordinary shares are a remuneration or deemed to be a remuneration for (employment) activities performed by such holders or certain individuals related to such holders (as defined in the Dutch Income Tax Act 2001).
Dividend Withholding Tax
Dividends distributed by us generally are subject to Dutch dividend withholding tax at a rate of 15%. Generally, we are responsible for the withholding of such dividend withholding tax at source; the Dutch dividend withholding tax is for the account of the holder of our ordinary shares.
However, as long as we continue to have our place of effective management in Germany, and not in The Netherlands, under the double tax treaty between Germany and The Netherlands, we will be considered to be exclusively tax resident in Germany and we will not be required to withhold Dutch dividend withholding tax. This exemption from withholding does not apply to dividends distributed by us to a holder who is resident or deemed to be resident in The Netherlands for Dutch income tax purposes or to holders of ordinary shares that are neither resident nor deemed to be resident of The Netherlands if the ordinary shares are attributable to a Dutch permanent establishment of such non-resident holder, in which case the following paragraph applies. See also “Risk Factors — Regulatory, Legal and Tax Risks — If we do pay dividends, we may need to withhold tax on such dividends payable to holders of our shares in both Germany and The Netherlands.”
Dividends distributed by us to individuals and corporate legal entities who are resident or deemed to be resident in The Netherlands for Dutch income tax purposes (“Dutch Resident Individuals” and “Dutch Resident Entities,” as the case may be) or to holders of ordinary shares that are neither resident nor deemed to be resident of The Netherlands if the ordinary shares are attributable to a Dutch permanent establishment of such non-resident holder are subject to Dutch dividend withholding tax at a rate of 15%.
The expression “dividends distributed” includes, among other things:
•
distributions in cash or in kind, deemed and constructive distributions and repayments of paid-in capital not recognized for Dutch dividend withholding tax purposes;
•
liquidation proceeds, proceeds of redemption of ordinary shares, or proceeds of the repurchase of ordinary shares (other than as temporary portfolio investment; tijdelijke belegging) by us or one of our subsidiaries or other affiliated entities, in each case to the extent such proceeds exceed the average paid-in capital of those ordinary shares as recognized for purposes of Dutch dividend withholding tax;
•
an amount equal to the par value of ordinary shares issued or an increase of the par value of ordinary shares, to the extent that it does not appear that a related contribution, recognized for purposes of Dutch dividend withholding tax, has been made or will be made; and
•
partial repayment of the paid-in capital, recognized for purposes of Dutch dividend withholding tax, if and to the extent that we have net profits (zuivere winst), unless (i) the general meeting has resolved in advance to make such repayment and (ii) the par value of the ordinary shares concerned has been reduced by an equal amount by way of an amendment of our articles of association. The term “net profits” includes anticipated profits that have yet to be realized.
Dutch Resident Individuals and Dutch Resident Entities generally are entitled a credit for any Dutch dividend withholding tax against their Dutch (corporate) income tax liability. For Dutch Resident Entities,
the credit in any given year is limited to the amount of corporate income tax payable in respect of the relevant year with an indefinite carry forward of any excess amount.
Dividend Stripping
Pursuant to legislation to counteract “dividend stripping,” a reduction, exemption, credit or refund of Dutch dividend withholding tax is denied if the recipient of the dividend is not the beneficial owner (uiteindelijk gerechtigde) of the dividend as described in the Dutch Dividend Withholding Tax Act 1965 (Wet op de dividendbelasting 1965). This legislation generally targets situations in which a shareholder retains its economic interest in shares but reduces the withholding tax costs on dividends by a transaction with another party. It is not required for these rules to apply that the recipient of the dividends is aware that a dividend stripping transaction took place.
The Dutch State Secretary for Finance takes the position that the definition of beneficial ownership introduced by this legislation will also be applied in the context of a double taxation convention.
Conditional Withholding Tax on Dividends (as of January 1, 2024)
As of January 1, 2024, a Dutch conditional withholding tax will be imposed on dividends distributed us to entities related (gelieerd) to the Company (within the meaning of the Dutch Withholding Tax Act 2021; Wet bronbelasting 2021), if such related entity:
(i)
is considered to be resident (gevestigd) in a jurisdiction that is listed in the yearly updated Dutch Regulation on low-taxing states and non-cooperative jurisdictions for tax purposes (Regeling laagbelastende staten en niet-coöperatieve rechtsgebieden voor belastingdoeleinden) (a “Listed Jurisdiction”); or
(ii)
has a permanent establishment located in a Listed Jurisdiction to which the ordinary shares are attributable; or
(iii)
holds the ordinary shares for the main purpose or one of the main purposes to avoid taxation for another person or entity and there is an artificial arrangement or transaction or a series of artificial arrangements or transactions; or
(iv)
is not considered to be the beneficial owner of the ordinary shares in its jurisdiction of residence because such jurisdiction treats another entity as the beneficial owner of the ordinary shares (a hybrid mismatch); or
(v)
is not resident in any jurisdiction (also a hybrid mismatch); or
(vi)
is a reverse hybrid (within the meaning of Article 2(12) of the Dutch Corporate Income Tax Act 1969), if and to the extent (x) there is a participant in the reverse hybrid which is related (gelieerd) to the reverse hybrid, (y) the jurisdiction of residence of such participant treats the reverse hybrid as transparent for tax purposes and (z) such participant would have been subject to the Dutch conditional withholding tax in respect of dividends distributed by us without the interposition of the reverse hybrid, all within the meaning of the Dutch Withholding Tax Act 2021.
The Dutch conditional withholding tax on dividends will be imposed at the highest Dutch corporate income tax rate in effect at the time of the distribution (currently 25.8%). The Dutch conditional withholding tax on dividends will be reduced, but not below zero, by any regular Dutch dividend withholding tax withheld in respect of the same dividend distribution. As such, based on the currently applicable rates, the overall effective tax rate of withholding the regular Dutch dividend withholding tax (as described above) and the Dutch conditional withholding tax on dividends will not exceed the highest corporate income tax rate in effect at the time of the distribution (currently 25.8%).
Taxes on Income and Capital Gains
Dutch Resident Entities
Generally speaking, if the holder of ordinary shares is a Dutch Resident Entity, any income derived or deemed to be derived from the ordinary shares or any capital gains realized on the disposal or deemed disposal
of the ordinary shares is subject to Dutch corporate income tax at a rate of 15.0% with respect to taxable profits up to €395,000 and 25.8% with respect to taxable profits in excess of that amount (rates and brackets for 2022).
Dutch Resident Individuals
If the holder of ordinary shares is a Dutch Resident Individual, any income derived or deemed to be derived from the ordinary shares or any capital gains realized on the disposal or deemed disposal of the ordinary shares is subject to Dutch income tax at the progressive rates (with a maximum of 49.50% in 2022), if:
(i)
the ordinary shares are attributable to an enterprise from which the holder of ordinary shares derives a share of the profit, whether as an entrepreneur (ondernemer) or as a person who has a co-entitlement to the net worth (medegerechtigd tot het vermogen) of such enterprise without being a shareholder (as defined in the Dutch Income Tax Act 2001); or
(ii)
the holder of ordinary shares is considered to perform activities with respect to the ordinary shares that go beyond ordinary asset management (normaal, actief vermogensbeheer) or otherwise derives benefits from the ordinary shares that are taxable as benefits from miscellaneous activities (resultaat uit overige werkzaamheden).
If the above-mentioned conditions (i) and (ii) do not apply to a Dutch Resident Individual, the Dutch Resident Individual’s net investment assets (rendementsgrondslag) for the year, will be subject to an annual Dutch income tax on a deemed return (with a maximum of 5.53% in 2022) under the regime for savings and investments (inkomen uit sparen en beleggen), insofar the Dutch Resident Individual’s net in-vestment assets for the year exceed a statutory threshold (heffingvrij vermogen).
The net investment assets for the year are the fair market value of the investment assets less the allowable liabilities on January 1 of the relevant calendar year. The ordinary shares are included as investment assets. For the net investment assets on January 1, 2022, the deemed return ranges from 1.82% up to 5.53% (depending on the aggregate amount of the net investment assets of the Dutch Resident Individual on January 1, 2022).
The deemed return on the Dutch Resident Individual’s net investment assets for the year is taxed at a flat rate of 31% (rate for 2022). Actual income or capital gains realized in respect of the shares are as such not subject to Dutch income tax.
Based on a decision of the Dutch Supreme Court (Hoge Raad) of December 24, 2021 (ECLI:NL:HR:2021:1963), the current system of taxation based on a deemed return may under specific circumstances contravene Section 1 of the First Protocol to the European Convention on Human Rights in combination with Section 14 of the European Convention on Human Rights. On June 28, 2022, the Dutch State Secretary for Finance has issued a decree amending the regime for taxation of savings and investments as in effect on the date of this Prospectus to comply with this Dutch Supreme Court ruling. On the basis of the decree as published on June 28, 2022, the tax will be levied at the lowest outcome of the following two calculation methods:
Method 1
Under method 1, the annual taxable benefit from a Dutch Resident Individual’s assets and liabilities taxed under this regime, including the ordinary shares is based on a deemed return (ranging from 1.82% and 5.53% in 2022) of the positive balance of the fair market value of those assets, including the ordinary shares and the fair market value of these liabilities.
Method 2
Under method 2, the annual taxable benefit from a Dutch Resident Individual’s assets and liabilities taxed under this regime, including the ordinary shares is based on the actual allocation of the Dutch Resident Individual’s assets and liabilities over the following three categories: (i) bank savings, (ii) other investments, including the ordinary shares and (iii) liabilities. The tax is calculated as follows:
(i)
a deemed return on the fair market value of the actual amount of bank savings; plus
(ii)
a deemed return on the fair market value of the actual amount of other investments, including the ordinary shares; minus
(iii)
a deemed return on the fair market value of the actual amount of liabilities.
Under the second method, the statutory threshold is divided pro-rata over the three assets and liabilities categories mentioned above.
Holders of ordinary shares are advised to consult their own tax advisor to ensure that the tax is levied in accordance with the decision of the Dutch Supreme Court.
Non-residents of The Netherlands
A holder of ordinary shares that is neither a Dutch Resident Entity nor a Dutch Resident Individual will not be subject to Dutch (corporate) income tax in respect of income derived or deemed to be derived from the ordinary shares or in respect of capital gains realized on the disposal or deemed disposal of the ordinary shares, provided that:
(i)
such holder does not have an interest in an enterprise or deemed enterprise (as defined in the Dutch Income Tax Act 2001 and the Dutch Corporate Income Tax Act 1969) which, in whole or in part, is either effectively managed in The Netherlands or carried on through a permanent establishment, a deemed permanent establishment or a permanent representative in The Netherlands and to which enterprise or part of an enterprise the ordinary shares are attributable; and
(ii)
in the event the holder is an individual, such holder does not carry out any activities in The Netherlands with respect to the ordinary shares that go beyond ordinary asset management and does not otherwise derive benefits from the ordinary shares that are taxable as benefits from miscellaneous activities in The Netherlands.
Gift and Inheritance Taxes
Residents of The Netherlands
Gift or inheritance taxes will arise in The Netherlands with respect to a transfer of ordinary shares by way of a gift by, or on the death of, a holder of such ordinary shares who is resident or deemed resident of The Netherlands at the time of the gift or the holder’s death.
Non-residents of The Netherlands
No gift or inheritance taxes will arise in The Netherlands with respect to a transfer of ordinary shares by way of gift by, or on the death of, a holder of ordinary shares who is neither resident nor deemed to be resident of The Netherlands, unless:
(i)
in the case of a gift of ordinary shares by an individual who at the date of the gift was neither resident nor deemed to be resident of The Netherlands, such individual dies within 180 days after the date of the gift, while being resident or deemed to be resident of The Netherlands;
(ii)
in the case of a gift of ordinary shares is made under a condition precedent, the holder of the ordinary shares is resident or is deemed to be resident of The Netherlands at the time the condition is fulfilled; or
(iii)
the transfer is otherwise construed as a gift or inheritance made by, or on behalf of, a person who, at the time of the gift or death, is or is deemed to be resident of The Netherlands.
For purposes of Dutch gift and inheritance taxes, among others, a person that holds the Dutch nationality will be deemed to be resident of The Netherlands if such person has been resident in The Netherlands at any time during the ten (10) years preceding the date of the gift or such person’s death. Additionally, for purposes of Dutch gift tax, among others, a person not holding the Dutch nationality will
be deemed to be resident of The Netherlands if such person has been resident in The Netherlands at any time during the twelve (12) months preceding the date of the gift. Applicable tax treaties may override deemed residency.
Value Added Tax (VAT)
No Dutch value-added tax will be payable by a holder of ordinary shares in respect of any payment in consideration for the holding or disposal of the ordinary shares.
Other Taxes and Duties
No Dutch registration tax, stamp duty or any other similar documentary tax or duty will be payable by a holder of ordinary shares in respect of any payment in consideration for the holding or disposal of the ordinary shares.
Real Property Transfer Tax
Under circumstances, our ordinary shares could, for the purposes of Dutch real property transfer tax (overdrachtsbelasting), be treated as real property (fictieve onroerende zaken) located in The Netherlands, in which case this tax could be payable upon acquisition of our ordinary shares.
Our ordinary shares will generally not be treated as real property (fictieve onroerende zaken) if at the time of, or at any time during the year preceding, the acquisition of the Shares:
(i)
our assets do not and did not include real property situated in The Netherlands; or
(ii)
our assets only include and included real property, situated either in or outside The Netherlands, that we do not and did not hold, and currently do not intend to hold, predominantly as a financial investment.
Real property as referred to under (i) and (ii) above includes legal ownership and more limited legal rights over the property (rights in rem) (zakelijke rechten) as well as contractual rights that give us economic exposure to the value of such real property, and certain participations or interests in entities that are treated as real property (fictieve onroerende zaken).
Our assets do not include and have not included real property situated in The Netherlands as described above.
Consequently, no Dutch real property transfer tax becomes payable upon an acquisition of our ordinary shares.
Material German Tax Considerations
The following section is the opinion of Ebner Stolz Mönning Bachem Wirtschaftsprüfer Steuerberater Rechtsanwälte Partnerschaft mbB (“German Tax Counsel”) of the material German tax considerations that become relevant when purchasing, holding or transferring the Company’s shares. The Company expects and intends to have its sole place of management in Germany and, therefore, qualifies as a corporation subject to German unlimited corporate income taxation; however, because a company’s tax residency depends on future facts regarding the location in which the Company is managed and controlled, German Tax Counsel cannot opine as to whether the Company will actually qualify as a corporation subject to German unlimited corporate income taxation and such a scenario in which the company does not qualify as a corporation subject to German unlimited income taxation is not discussed herein. This section does not set forth all German tax aspects that may be relevant for shareholders. The section is based on the German tax law applicable as of the date of this prospectus. It should be noted that the law may change following the issuance of this prospectus and that such changes may have retroactive effect.
The material German tax principles of purchasing, owning and transferring of shares are set forth in the following. This section does not purport to be a comprehensive or complete analysis or listing of all potential tax effects of the purchase, ownership or disposition of shares and does not set forth all tax considerations that may be relevant to a particular person’s decision to acquire ordinary shares. All of the
following is subject to change. Such changes could apply retroactively and could affect the consequences set forth below. This section does not refer to any U.S. Foreign Account Tax Compliance Act aspects.
Shareholders are advised to consult their own tax advisers with regard to the application of German tax law to their particular situations, in particular with respect to the procedure to be complied with to obtain a (potential) relief of withholding tax on dividends and on capital gains (Kapitalertragsteuer) and with respect to the influence of double tax treaty provisions, as well as any tax consequences arising under the laws of any state, local or other foreign jurisdiction. For German tax purposes, a “shareholder” may include an individual who or an entity that does not have the legal title to the shares, but to whom the shares are nevertheless attributed, based either on such individual or entity owning a beneficial interest in the shares or based on specific statutory provisions.
This section does not constitute particular tax advice. Potential purchasers of the Company’s shares are urged to consult their own tax advisers regarding the tax consequences of the purchase, ownership and disposition of shares in light of their particular circumstances.
Dividends Tax
Withholding Tax on Dividends
Dividends distributed from a company to its shareholders are subject to withholding tax, subject to certain exemptions (for example, repayments of capital from the tax equity account (steuerliches Einlagekonto)), as described in the following. The withholding tax rate is 25% plus 5.5% solidarity surcharge (Solidaritätszuschlag) thereon (in total 26.375%) and, if applicable, church tax (Kirchensteuer) of the gross dividend approved by the ordinary shareholders’ meeting. Withholding tax is to be withheld and passed on for the account of the shareholders by a domestic branch of a domestic or foreign credit or financial services institution (Kredit- und Finanzdienstleistungsinstitut) or a domestic securities institution (inländisches Wertpapierinstitut) which keeps and administers the shares and disburses or credits the dividends or disburses the dividends to a foreign agent, or by the securities custodian bank (Wertpapiersammelbank) to which the shares were entrusted for collective custody if the dividends are distributed to a foreign agent by such securities custodian bank (which is referred to as the “Dividend Paying Agent”). In case the shares are not held in collective deposit with a Dividend Paying Agent, the company is responsible for withholding and remitting the tax to the competent tax office.
Such withholding tax is levied and withheld irrespective of whether and to what extent the dividend distribution is taxable at the level of the shareholder and whether the shareholder is a person residing in Germany or in a foreign country.
In the case of dividends distributed to a parent company within the meaning of Art. 3 of the amended EU Directive 2011/96/EU of the Council of November 30, 2011 (the “EU Parent Subsidiary Directive”) domiciled in another member state of the EU, an exemption from withholding tax will be granted upon request if further prerequisites are satisfied (Freistellung im Steuerabzugsverfahren). This also applies to dividends distributed to a permanent establishment located in another member state of the EU of such a parent company or of a parent company tax resident in Germany if the participation in the company is attributable to this permanent establishment. The key prerequisite for the application of the EU Parent Subsidiary Directive is that the shareholder has held a direct participation in the share capital of the company of at least 10% for at least twelve months. If such twelve-month period is only completed after the receipt of the dividends, an exemption is not possible based on the EU Parent Subsidiary Directive. Rather, only a refund of withholding tax might be possible, subject to further prerequisites.
The withholding tax on distributions to other foreign resident shareholders might be reduced fully or partly in accordance with a double taxation treaty if Germany has concluded such double taxation treaty with the country of residence of the shareholder and if the shareholder does not hold his shares either as part of the assets of a permanent establishment or a fixed place of business in Germany or as business assets for which a permanent representative has been appointed in Germany. If the requirements for such a reduction are fulfilled, the reduction of the withholding tax would procedurally be granted in such a manner that the difference between the total amount withheld, including the solidarity surcharge, and the tax liability determined on the basis of the tax rate set forth in the applicable double taxation treaty (generally 15%
unless further qualifications are met) is refunded by the German tax administration upon request (Federal Central Office for Taxes (Bundeszentralamt für Steuern), main office in Bonn-Beuel, An der Küppe 1, 53225 Bonn, Germany) subject to the treaty and German anti-abuse rules.
In the case of dividends received by corporations whose statutory seat and effective place of management are not located in Germany and who are therefore not tax resident in Germany, two-fifths of the withholding tax deducted and remitted are refunded without the need to fulfill all prerequisites required for such refund under the EU Parent Subsidiary Directive or under a double taxation treaty or if no double taxation treaty has been concluded with the state of residence of the shareholder.
In order to receive a refund pursuant to a double taxation treaty or the aforementioned option for foreign corporations, the shareholder has to submit a completed form for refund (available at the Federal Central Office for Taxes (http://www.bzst.de) as well as at the German embassies and consulates) together with a withholding tax certificate (Kapitalertragsteuerbescheinigung) issued by the institution that withheld the tax.
The exemption from withholding tax in accordance with the EU Parent Subsidiary Directive or a double tax treaty and the aforementioned options for a refund of the withholding tax (with or without protection under a double taxation treaty) depend on whether certain additional prerequisites (in particular so- called substance requirements) are fulfilled. The applicable withholding tax relief will only be granted if the preconditions of the German anti avoidance rules (so called Directive Override or Treaty Override), in particular Section 50d, paragraph 3, German Income Tax Act (Einkommensteuergesetz) in its current version upon receipt of the dividends are fulfilled. In addition, e. g. Article 28 of the Convention between the Federal Republic of Germany and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and to certain other Taxes of August 29, 1989 in the amended version of June 4, 2008 (Bundesgesetzblatt II 2008, p. 611) provides for further prerequisites that need to be fulfilled in the case of a shareholder who is resident of the United States. Other treaties might provide for additional requirements.
The aforementioned reductions of (or exemptions from) withholding tax are further restricted if (i) the applicable double taxation treaty provides for a tax reduction resulting in an applicable tax rate of less than 15% and (ii) the shareholder is not a corporation that directly holds at least 10% in the equity capital of the distributing company and is subject to tax on its income and profits in its state of residence without being exempt. In this case, the reduction of (or exemption from) withholding tax is subject to the following three cumulative prerequisites: (i) the shareholder must qualify as beneficial owner of the shares in the distributing company for a minimum holding period of 45 consecutive days occurring within a period of 45 days prior and 45 days after the due date of the dividends, (ii) the shareholder has to bear at least 70% of the change in value risk related to the shares in the distributing company during the minimum holding period without being directly or indirectly hedged and (iii) the shareholder must not be required to fully or largely compensate directly or indirectly the dividends to third parties. However, these further prerequisites do not apply if the shareholder has been the beneficial owner of the shares in the distributing company for at least one uninterrupted year upon receipt of the dividends.
For individual or corporate shareholders tax resident outside Germany not holding the shares through a permanent establishment (Betriebsstätte) in Germany or as business assets (Betriebsvermögen) for which a permanent representative (ständiger Vertreter) has been appointed in Germany, any non-refundable part of any paid withholding tax (if any) is final (i.e., not creditable or otherwise refundable in respect of such shareholder’s income tax liability) and settles the shareholder’s limited tax liability in Germany. For individual or corporate shareholders tax resident in Germany (that are, for example, shareholders whose residence, domicile, registered office or place of management is located in Germany) holding their shares as business assets, as well as for shareholders tax resident outside of Germany holding their shares through a permanent establishment in Germany or as business assets for which a permanent representative has been appointed in Germany, the withholding tax withheld (including solidarity surcharge) can be credited against the shareholder’s personal income tax or corporate income tax liability in Germany. Any withholding tax (including solidarity surcharge) in excess of such tax liability is refunded. For individual shareholders tax resident in Germany holding the company’s shares as private assets, the withholding tax is generally a final tax (Abgeltungsteuer).
Pursuant to special rules on the restriction of the aforementioned withholding tax credit, the credit of withholding tax is subject to the following three cumulative prerequisites: (i) the shareholder must qualify as beneficial owner of the shares in the distributing company for a minimum holding period of 45 consecutive days occurring within a period of 45 days prior and 45 days after the due date of the dividends, (ii) the shareholder has to bear at least 70% of the change in value risk related to the shares in the distributing company during the minimum holding period without being directly or indirectly hedged and (iii) the shareholder must not be required to fully or largely compensate directly or indirectly the dividends to third parties. Absent the fulfillment of all of the three prerequisites, three-fifths of the withholding tax imposed on the dividends must not be credited against the shareholder’s (corporate) income tax liability, but may, upon application, be deducted from the shareholder’s tax base for the relevant assessment period. A shareholder that has received gross dividends without any deduction of withholding tax in particular due to a tax exemption or to whom a withholding tax deduction has been refunded without qualifying for a full tax credit has to notify the competent local tax office accordingly, has to file withholding tax returns subject to specific filing requirements and has to make a payment in the amount of 15% withholding tax. The special rules on the restriction of withholding tax credit do not apply to a shareholder whose overall dividend earnings within an assessment period do not exceed €20,000 or that has been the beneficial owner of the shares in the company for at least one uninterrupted year upon receipt of the dividends.
Taxation of Dividend Income of Shareholders Tax Resident in Germany Holding the Company’s Shares as Private Assets
For individual shareholders (individuals) resident in Germany holding the Company’s shares as private assets, dividends are subject to a flat tax rate which is satisfied by the withholding tax actually withheld (Abgeltungsteuer). Accordingly, dividend income will be taxed at a flat tax rate of 25% plus 5.5% solidarity surcharge thereon (in total 26.375%) and church tax (Kirchensteuer) in case the shareholder is subject to church tax because of his individual circumstances. An automatic procedure for deduction of church tax by way of withholding will apply to shareholders being subject to church tax unless the shareholder has filed a blocking notice (Sperrvermerk) with the German Federal Tax Office (details related to the computation of the concrete tax rate including church tax are to be discussed with the individual tax adviser of the relevant shareholder). Except for an annual lump sum savings allowance (Sparer-Pauschbetrag) of up to €801 (for individual filers) or up to €1,602 (for married couples and for partners in accordance with the registered partnership law (Gesetz über die Eingetragene Lebenspartnerschaft) filing jointly), private individual shareholders will not be entitled to deduct expenses incurred in connection with the capital investment from their dividend income.
The income tax owed for the dividend income is satisfied by the withholding tax withheld by the Dividend Paying Agent. However, if the flat tax results in a higher tax burden as opposed to the private shareholder’s individual tax rate, the private shareholder can opt for taxation at his individual personal income tax rate (Günstigerprüfung). In that case, the final withholding tax will be credited against the income tax. However, pursuant to the German tax authorities and a court ruling, private shareholders are nevertheless not entitled to deduct expenses incurred in connection with the capital investment from their income. The option can be exercised only for all capital income from capital investments received in the relevant assessment period uniformly, and married couples as well as partners in accordance with the registered partnership law filing jointly may only jointly exercise the option.
Exceptions from the flat tax rate (satisfied by withholding at source) (Abgeltungsteuer) may apply- that is, only upon application-for shareholders who have a shareholding of at least 25% in the company and for shareholders who have a shareholding of at least 1% in the company and work for a company in a professional capacity through which the shareholder can exert significant entrepreneurial influence on the Company’s economic activity. In such a case, the same rules apply as for sole proprietors holding the shares as business assets. See “— Taxation of dividend income of shareholders tax resident in Germany holding the Company’s shares as business assets — Sole proprietors.”
Taxation of Dividend Income of Shareholders Tax Resident in Germany Holding the Company’s Shares as Business Assets
If a shareholder holds the company’s shares as business assets, the taxation of the dividend income depends on whether the respective shareholder is a corporation, a sole proprietor or a partnership.
Corporations
Dividend income of corporate shareholders is exempt from corporate income tax, provided that the incorporated entity holds a direct participation of at least 10% in the share capital of a company at the beginning of the calendar year in which the dividends are paid. The acquisition of a participation of at least 10% in the course of a calendar year is deemed to have occurred at the beginning of such calendar year for the purpose of this rule. Participations in the share capital of the company which a corporate shareholder holds through a partnership, including co-entrepreneurships (Mitunternehmerschaften), are attributable to such corporate shareholder only on a pro rata basis at the ratio of the interest share of the corporate shareholder in the assets of the relevant partnership. However, 5% of the tax exempt dividends are deemed to be non-deductible business expenses for tax purposes and therefore are subject to corporate income tax (plus solidarity surcharge) and trade tax, i.e., tax exemption of 95%. Business expenses incurred in connection with the dividends received are generally entirely tax-deductible.
For trade tax purposes the entire dividend income is subject to trade tax (i.e., the tax-exempt dividends must be added back when determining the trade taxable income), unless the corporation shareholder holds at least 15% of the company’s registered share capital at the beginning of the relevant tax assessment period (Erhebungszeitraum). In case of an indirect participation via a partnership please refer to the section “Partnerships” below.
If the shareholding is below 10% in the share capital, dividends are taxable at the applicable corporate income tax rate of 15% plus 5.5% solidarity surcharge thereon and trade tax (the rate of which depends on the municipalities the corporate shareholder resides in).
Special regulations apply which abolish the 95% tax exemption if the company’s shares are held as trading portfolio assets in the meaning of Section 340e of the German commercial code (Handelsgesetzbuch) by (i) a credit institution (Kreditinstitut) or (ii) a securities institution (Wertpapierinstitut) or (iii) a financial service institution (Finanzdienstleistungsinstitut). The 95% tax exemption is also abolished if the company’s shares have to be shown as current assets at the time of acquisition by a financial enterprise within the meaning of the German Banking Act (Kreditwesengesetz), in case more than 50% of the shares of such financial enterprise are held directly or indirectly by a credit institution or a securities institution or a financial service institution, as well as if the company’s shares are held by a life insurance company, a health insurance company or a pension fund in case the shares are attributable to the capital investments, resulting in fully taxable income.
Sole Proprietors
For sole proprietors (individuals) resident in Germany holding shares as business assets, dividends are subject to the partial income rule (Teileinkünfteverfahren). Accordingly, only (i) 60% of the dividend income will be taxed at his/her individual personal income tax rate plus 5.5% solidarity surcharge thereon and church tax (if applicable) and (ii) 60% of the business expenses related to the dividend income are deductible for tax purposes. In addition, the dividend income is entirely subject to trade tax if the shares are held as business assets of a permanent establishment in Germany within the meaning of the German Trade Tax Act (Gewerbesteuergesetz), unless the shareholder holds at least 15% of the company’s registered share capital at the beginning of the relevant tax assessment period. The trade tax levied is generally eligible for credit against the shareholder’s personal income tax liability based on the applicable municipal trade tax rate (but limited to a maximum rate) and the individual tax situation of the shareholder.
Partnerships
In case shares are held by a partnership, the partnership itself is not subject to corporate income tax or personal income tax. In this regard, corporate income tax or personal income tax (and church tax, if applicable) as well as solidarity surcharge, are levied only at the level of the partner with respect to their relevant part of the profit and depending on their individual circumstances.
If the partner is a corporation, the dividend income will be subject to corporate income tax plus solidarity surcharge. See “— Corporations.”
If the partner is an individual, the dividend income will be subject to the partial income rule. See “— Sole Proprietors.”
The dividend income is subject to trade tax at the level of the partnership (provided that the partnership is liable to trade tax), unless the partnership holds at least 15% of a company’s registered share capital at the beginning of the relevant assessment period, in which case the dividend income is exempt from trade tax.
There are no explicit statutory provisions concerning the taxation of dividends with regard to a corporate shareholder of the partnership. However, trade tax should be levied on 5% of the dividends to the extent they are attributable to the shares of such corporate partners to whom at least 10% of the shares of the company are attributable on a look-through basis, since such portion of the dividends should be deemed to be non- deductible business expenses.
If a partner is an individual, depending on the applicable municipal trade tax rate and the individual tax situation, the trade tax paid at the level of the partnership is generally partly or entirely credited against the partner’s personal income tax liability, if further prerequisites are satisfied.
Special regulations apply if the shares are held as trading portfolio assets by a partnership that qualifies as a credit institution, a securities institution, a financial service institution or a financial enterprise within the meaning of the German Banking Act (Kreditwesengesetz). In that case the partial income rule (Teileinkünfteverfahren) is not applicable.
In case of a corporation being a partner, special regulations apply with respect to trading portfolio assets of credit institutions, securities institutions, financial service institutions or financial enterprises within the meaning of the German Banking Act (Kreditwesengesetz) or life insurance companies, health insurance companies or pension funds. See “— Corporations.”
The actual trade tax charge, if any, at the level of the partnership depends on the shareholding quota of the partnership and the nature of the partners (e.g., individual or corporation).
Taxation of Dividend Income of Shareholders Tax Resident Outside of Germany
For foreign individual or corporate shareholders tax resident outside of Germany not holding the shares through a permanent establishment in Germany or as business assets for which a permanent representative has been appointed in Germany, the deducted withholding tax (possibly reduced by way of a tax relief under a double tax treaty or domestic tax law, such as in connection with the EU Parent Subsidiary Directive) is final (that is, not refundable) and settles the shareholder’s limited tax liability in Germany, unless the shareholder is entitled to apply for a withholding tax refund or exemption.
In contrast, individual or corporate shareholders tax resident outside of Germany holding the company’s shares through a permanent establishment in Germany or as business assets for which a permanent representative has been appointed in Germany are subject to the same rules as applicable (and described above) to shareholders resident in Germany holding the shares as business assets. The withholding tax withheld (including solidarity surcharge) is credited against the shareholder’s personal income tax or corporate income tax liability in Germany.
Taxation of Capital Gains
Withholding Tax on Capital Gains
Capital gains realized on the disposal of shares are subject to withholding tax if a German branch of a German or foreign credit or financial institution, a German securities trading company or a German securities trading bank stores or administrates or carries out the sale of the shares and pays or credits the capital gains. In those cases, the institution (and not the company) is required to deduct the withholding tax at the time of payment for the account of the shareholder and has to pay the withholding tax to the competent tax authority. In case the shares are held (i) as business assets by a sole proprietor, a partnership or a corporation and such shares are attributable to a German business or (ii) in case of a corporation being subject to unlimited corporate income tax liability in Germany, the capital gains are not subject to withholding tax. In case of clause (i), the withholding tax exemption is subject to the condition that the
paying agent has been notified by the beneficiary (Gläubiger) that the capital gains are exempt from withholding tax. The respective notification has to be filed by using the officially prescribed form.
Taxation of Capital Gains Realized by Shareholders Tax Resident in Germany Holding Shares as Private Assets
For individual shareholders (individuals) resident in Germany holding shares as private assets, capital gains realized on the disposal of shares are subject to final withholding tax. Accordingly, capital gains will be taxed at a flat tax rate of 25% plus a 5.5% solidarity surcharge thereon (in total 26.375%) and church tax, in case the shareholder is subject to church tax because of his individual circumstances. An automatic procedure for deduction of church tax by way of withholding will apply to shareholders being subject to church tax unless the shareholder has filed a blocking notice (Sperrvermerk) with the German Central Federal Tax Office (details related to the computation of the concrete tax rate including church tax are to be discussed with the individual tax adviser of the relevant shareholder). The taxable capital gain is calculated by deducting the acquisition costs of the shares and the expenses directly related to the disposal from the proceeds of the disposal. Apart from that, except for an annual lump sum savings allowance (Sparer- Pauschbetrag) of up to €801 (for individual filers) or up to €1,602 (for married couples and for partners in accordance with the registered partnership law (Gesetz über die Eingetragene Lebenspartnerschaft) filing jointly), private individual shareholders will not be entitled to deduct expenses incurred in connection with the capital investment from their capital gain.
In case the flat tax results in a higher tax burden as opposed to the private shareholder’s individual tax rate, the private shareholder can opt for taxation at his or her individual personal income tax rate (Günstigerprüfung). In that case, the withholding tax (including solidarity surcharge) withheld will be credited against the income tax. However, pursuant to the German tax authorities and case law the private shareholders are nevertheless not entitled to deduct expenses incurred in connection with the capital investment from their income. The option can be exercised only for all capital income from capital investments received in the relevant assessment period uniformly, and married couples as well as for partners in accordance with the registered partnership law filing jointly may only jointly exercise the option.
Capital losses arising from the sale of the shares can only be offset against other capital gains resulting from the disposition of the shares or shares in other stock corporations during the same calendar year.
Offsetting of overall losses with other income (such as business or rental income) and other capital income is not possible. Such losses are to be carried forward and to be offset against positive capital gains deriving from the sale of shares in stock corporations in future years. In case of a derecognition or transfer of worthless shares (or other capital assets), the utilization of such loss is further restricted and can only be offset up to the amount of €20,000 per calendar year.
The final withholding tax would not apply if the seller of the shares or, in the case of gratuitous transfer, its legal predecessor has held, directly or indirectly, at least 1% of the company’s registered share capital at any time during the five years prior to the disposal. In that case capital gains are subject to the partial income rule (Teileinkünfteverfahren). Accordingly, only (i) 60% of the capital gains would be taxed at his/ her individual personal income tax rate plus a 5.5% solidarity surcharge thereon and church tax (if applicable) and (ii) 60% of the business expenses related to the capital gains are deductible for tax purposes. The withholding tax withheld (including solidarity surcharge) would be credited against the shareholder’s personal income tax liability in Germany.
Taxation of Capital Gains Realized by Shareholders Tax Resident in Germany Holding the Company’s Shares as Business Assets
If a shareholder holds shares as business assets, the taxation of capital gains realized on the disposal of such shares depends on whether the respective shareholder is a corporation, a sole proprietor or a partnership:
Corporations
Capital gains realized on the disposal of shares by a corporate shareholder are generally exempt from corporate income tax and trade tax. However, 5% of the tax-exempt capital gains are deemed to be non- deductible business expenses for tax purposes and therefore are subject to corporate income tax (plus solidarity
surcharge) and trade tax, i.e., tax exemption of 95%. Business expenses incurred in connection with the capital gains are entirely tax-deductible.
Capital losses incurred upon the disposal of shares or other impairments of the share value are not tax- deductible.
Special regulations apply if the shares are held as trading portfolio assets by a credit institution, a securities institution, a financial service institution or a financial enterprise within the meaning of the German Banking Act (Kreditwesengesetz) as well as by a life insurance company, a health insurance company or a pension fund. See “— Taxation of dividend income of shareholders tax resident in Germany holding the Company’s shares as business assets — Corporations.”
Sole Proprietors
If the shares are held by a sole proprietor, capital gains realized on the disposal of the shares are subject to the partial income rule (Teileinkünfteverfahren). Accordingly, only (i) 60% of the capital gains will be taxed at his/her individual personal income tax rate plus a 5.5% solidarity surcharge thereon and church tax (if applicable) and (ii) 60% of the business expenses related to the capital gains are deductible for tax purposes. In addition, 60% of the capital gains are subject to trade tax if the shares are held as business assets of a permanent establishment in Germany within the meaning of the German Trade Tax Act (Gewerbesteuergesetz). The trade tax levied, depending on the applicable municipal trade tax rate and the individual tax situation, is generally partly or entirely credited (but limited to a maximum rate) against the shareholder’s personal income tax liability.
Partnerships
In case the shares are held by a partnership, the partnership itself is not subject to corporate income tax or personal income tax as well as a solidarity surcharge (and church tax) since partnerships qualify as transparent for German tax purposes. In this regard, corporate income tax or personal income tax as well as a solidarity surcharge (and church tax, if applicable), are levied only at the level of the partner with respect to their relevant part of the profit and depending on their individual circumstances.
If the partner is a corporation, the capital gains will be subject to corporate income tax plus a solidarity surcharge at the level of the partner. See “— Corporations.” Trade tax will be levied at the level of the partnership. With respect to both corporate income and trade tax, the 95% exemption rule as described above applies.
If the partner is an individual, the capital gains are subject to the partial income rule. See “— Sole Proprietors.”
In addition, if the partnership is liable to trade tax, 60% of the capital gains are subject to trade tax at the level of the partnership, to the extent the partners are individuals, and 5% of the capital gains are subject to trade tax, to the extent the partners are corporations. However, if a partner is an individual, depending on the applicable municipal trade tax rate and the individual tax situation, the trade tax paid at the level of the partnership is generally partly or entirely credited against the partner’s personal income tax liability (but limited to a maximum rate), if further prerequisites are satisfied.
Special regulations apply if the shares are held as trading portfolio assets by a partnership that qualifies as a credit institution, a securities institution, a financial service institution or a financial enterprise within the meaning of the German Banking Act (Kreditwesengesetz). In that case the partial income rule (Teileinkünfteverfahren) is not applicable.
With regard to corporate partners, special regulations apply if they are held as trading portfolio assets by credit institutions, securities institutions, financial service institutions or financial enterprises within the meaning of the German Banking Act or life insurance companies, health insurance companies or pension funds, as described above.
Taxation of Capital Gains Realized by Shareholders Tax Resident Outside of Germany
Capital gains realized on the disposal of the shares by a shareholder tax resident outside of Germany are subject to German taxation provided that (i) the company’s shares are held as business assets of a
permanent establishment or as business assets for which a permanent representative has been appointed in Germany, or (ii) the shareholder or, in case of a gratuitous transfer, its legal predecessor has held, directly or indirectly, at least 1% of the company’s shares capital at any time during a five-year period prior to the disposal. In these cases, capital gains are generally subject to the same rules as described above for shareholders resident in Germany. However, in case the shares held by a non-German tax resident corporation are not attributable to a German permanent establishment or permanent representative, the 5% taxation (see “— Taxation of capital gains realized by shareholders tax resident in Germany holding the company’s shares as business assets”) as a consequence of deemed non-deductible business expenses shall not apply to such non- German tax resident shareholders and such capital gains are consequently fully exempt from German corporate income and trade tax.
However, except for the cases referred to in clause (i) above, some of the double tax treaties concluded with Germany provide for a full exemption from German taxation.
Inheritance and Gift Tax
The transfer of the shares in Sono Group N.V. to another person by way of succession or donation is subject to German inheritance and gift tax (Erbschaft- und Schenkungsteuer) if:
(i)
the decedent, the donor, the heir, the donee or any other beneficiary has his/her/its residence, domicile, registered office or place of management in Germany at the time of the transfer, or is a German citizen who has not stayed abroad for more than five consecutive years without having a residence in Germany, or is a non-resident German citizen employed by a legal entity organized under German public law or is a dependent having German citizenship and living in the household of such citizen, if further prerequisites are satisfied; or
(ii)
irrespective of the personal circumstances the shares are held by the decedent or donor as business assets for which a permanent establishment in Germany is maintained or a permanent representative is appointed in Germany; or
(iii)
irrespective of the personal circumstances at least 10% of the shares are held, directly or indirectly by the decedent or donor, himself or together with a related party in terms of Section 1 para. 2 Foreign Tax Act (Außensteuergesetz).
Special regulations apply to qualified German citizens who maintain neither a residence nor their domicile in Germany but in a low tax jurisdiction, and to former German citizens, also resulting in inheritance and gift tax provided that certain conditions are met. The few double tax treaties on inheritance and gift tax which Germany has entered seek to prevent or mitigate a double taxation.
Abolishment of Solidarity Surcharge
The solidarity surcharge (Solidaritätszuschlag) has been partially abolished as of the assessment period 2021 for certain individuals. The solidarity surcharge shall, however, continue to apply for capital investment in general and, thus, on final withholding taxes levied. If, however, the withholding tax is not final or not levied at all, as the respective shares are held as business assets, solidarity surcharge may not be levied or levied at a reduced amount, depending on the circumstances of the individual. In addition, the solidarity surcharge continues to apply to corporations.
Other Taxes
No German capital transfer tax (Kapitalverkehrsteuer), value-added tax (Umsatzsteuer), stamp duty (Stempelgebühr) or similar taxes are levied when acquiring, holding or transferring shares in a company. No value-added tax will be levied unless the shareholder validly opts for it. Net wealth tax (Vermögensteuer) is currently not levied in Germany.
On January 22, 2013, the Council of the EU approved the resolution of the ministers of finance from 11 EU member states (including Germany) to introduce a Financial Transaction Tax (“FTT”) within the framework of enhanced cooperation. On February 14, 2013, the European Commission published a proposal
for a Council Directive implementing enhanced cooperation in the area of financial transaction tax. The plan focuses on levying a tax of 0.1% (0.01% for derivatives) on the purchase and sale of financial instruments.
On December 9, 2019, the German Federal Finance Minister announced another proposal for a directive for a financial transaction tax by way of an enhanced cooperation mechanism with 9 other participating EU member states (“New FTT”). Such proposal was revised again in April 2020. In addition, the German Federal Finance Ministry further prepared the implementation of the FTT or the New FTT by the creation of a new department (Referat) within the German Federal Finance Ministry. Such new department is referred to as “Finanztransaktionssteuer” (financial transaction tax).
In February 2021, the Portuguese Presidency of the Council of the EU proposed an inclusive discussion among all EU member states on tax design issues of the FTT at EU level.
The FTT and the New FTT proposal remain subject to negotiation between the participating EU member states and are subject to political discussion. They may, therefore, be altered prior to the implementation, the timing of which remains unclear. Additional EU member states may decide to participate.
Prospective holders of the shares are advised to seek their own professional advice in relation to FTT.
U.S. Federal Income Tax Considerations
This section describes United States federal income tax considerations generally applicable to owning ordinary shares. It applies to you only if you acquire your ordinary shares in offerings under this prospectus and you hold your ordinary shares as capital assets for tax purposes. This discussion addresses only United States federal income taxation and does not discuss all of the tax consequences that may be relevant to you in light of your individual circumstances, including foreign, state or local tax consequences, estate and gift tax consequences, and tax consequences arising under the Medicare contribution tax on net investment income or the alternative minimum tax. This section does not address all of the tax consequences that apply to U.S. holders that are ineligible for the benefits of the Convention Between the United States of America and Germany (the “Treaty”). In addition, this section does not apply to you if you are a member of a special class of holders subject to special rules, including:
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a broker or dealer in securities,
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a trader in securities that elects to use a mark-to-market method of accounting for securities holdings,
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a tax-exempt organization or governmental organization,
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a tax-qualified retirement plan,
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a bank, insurance company or other financial institution,
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a real estate investment trust or regulated investment company,
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a person that actually or constructively owns 10% or more of the combined voting power of our voting stock or of the total value of our stock,
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a person that holds ordinary shares as part of a straddle or a hedging or conversion transaction,
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a person that purchases or sells ordinary shares as part of a wash sale for tax purposes,
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a U.S. holder (as defined below) whose functional currency is not the U.S. dollar,
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a U.S. expatriate or former citizen or long-term resident of the United States,
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a corporation that accumulates earnings to avoid U.S. federal income tax,
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an S corporation, partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes (and investors therein), or
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a person deemed to sell ordinary shares under the constructive sale provisions of the Internal Revenue Code of 1986.
This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect, as well as on the Treaty. These laws are subject to change, possibly on a retroactive basis.
If an entity or arrangement that is treated as a partnership for United States federal income tax purposes holds the ordinary shares, the United States federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the ordinary shares should consult its tax advisor with regard to the United States federal income tax treatment of an investment in the ordinary shares.
You are a U.S. holder if you are a beneficial owner of ordinary shares and you are, for United States federal income tax purposes:
•
a citizen or resident of the United States,
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a domestic corporation,
•
an estate whose income is subject to United States federal income tax regardless of its source, or
•
a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.
A “non-U.S. holder” is a beneficial owner of ordinary shares that is not a United States person and is not a partnership for United States federal income tax purposes.
You should consult your own tax advisor regarding the United States federal, state and local tax consequences of owning and disposing of shares and ordinary shares in your particular circumstances.
Except as described below under “U.S. Holders — PFIC Rules,” this discussion assumes that we are not, and will not become, a PFIC for United States federal income tax purposes.
U.S. Holders
Dividends on Ordinary Shares
If you are a U.S. holder, the gross amount of any distribution on the ordinary shares that we pay out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes), other than certain pro-rata distributions of our shares, will be treated as a dividend that is subject to United States federal income taxation. If you are a noncorporate U.S. holder, dividends that constitute qualified dividend income will be taxable to you at the preferential rates applicable to long-term capital gains provided that you hold the ordinary shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and other requirements are met. Dividends we pay with respect to the ordinary shares generally will be qualified dividend income provided that, in the year that you receive the dividend, the ordinary shares are readily tradable on an established securities market in the United States. Our ordinary shares are listed on Nasdaq and we therefore expect that dividends on the ordinary shares will be qualified dividend income.
You must include any German tax withheld from the dividend payment in this gross amount even though you do not in fact receive it. The dividend is taxable to you when you receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution that you must include in your income will be the U.S. dollar value of the Euro payments made, determined at the spot Euro/U.S. dollar rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars.
Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return
of capital to the extent of your basis in the ordinary shares and thereafter as capital gain. However, we do not expect to calculate earnings and profits in accordance with United States federal income tax principles. Accordingly, you should expect to generally treat distributions we make as dividends.
Subject to certain limitations, it is possible that German tax withheld in accordance with the Treaty and paid over to Germany will be creditable or deductible against your United States federal income tax liability. However, under recently finalized Treasury regulations, it is possible that such withholding taxes will not be creditable unless you are eligible to claim the benefits of the Treaty and elect to apply the Treaty.
Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the preferential tax rates. To the extent a reduction or refund of the tax withheld is available to you under German law or under the Treaty, the amount of tax withheld that could have been reduced or that is refundable will not be eligible for credit against your United States federal income tax liability. See “— Material German Tax Considerations — Dividends Tax — Withholding Tax on Dividends,” above, for the procedures for obtaining a tax refund.
Dividends on ordinary shares will generally be income from sources outside the United States and will generally be “passive” income for purposes of computing the foreign tax credit allowable to you. However, if (a) we are 50% or more owned, by vote or value, by United States persons and (b) at least 10% of our earnings and profits are attributable to sources within the United States, then for foreign tax credit purposes, a portion of our dividends would be treated as derived from sources within the United States.
With respect to any dividend paid for any taxable year, the United States source ratio of our dividends for foreign tax credit purposes would be equal to the portion of our earnings and profits from sources within the United States for such taxable year, divided by the total amount of our earnings and profits for such taxable year.
Sale of Ordinary Shares
If you are a U.S. holder and you sell or otherwise dispose of your ordinary shares, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the amount that you realize and your tax basis in your ordinary shares. Capital gain of a noncorporate U.S. holder is generally taxed at preferential rates where the property is held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.
PFIC Rules
We believe that we were not classified as a PFIC for United States federal income tax purposes in our prior taxable year and we do not expect to become a PFIC in the current taxable year or the foreseeable future. However, this conclusion is a factual determination that is made annually and thus may be subject to change. It is therefore possible that we could become a PFIC in a future taxable year. In addition, our current position that we are not a PFIC is based in part upon the value of our goodwill which is based on the market value for our ordinary shares. Accordingly, we could become a PFIC in the future if there is a substantial decline in the value of our ordinary shares.
In general, if you are a U.S. holder, we will be a PFIC with respect to you if for any taxable year in which you held our ordinary shares:
•
at least 75% of our gross income for the taxable year is passive income, or
•
at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income.
“Passive income” generally includes dividends, interest, gains from the sale or exchange of investment property, rents and royalties (other than certain rents and royalties derived in the active conduct of a trade or business) and certain other specified categories of income. If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation’s income.
If we are treated as a PFIC, and you are a U.S. holder that did not make a mark-to-market election, as described below, you will generally be subject to special rules with respect to:
•
any gain you realize on the sale or other disposition of your ordinary shares and
•
any excess distribution that we make to you (generally, any distributions to you during a single taxable year, other than the taxable year in which your holding period in the ordinary shares begins, that are greater than 125% of the average annual distributions received by you in respect of the ordinary shares during the three preceding taxable years or, if shorter, your holding period for the ordinary shares that preceded the taxable year in which you receive the distribution).
Under these rules:
•
the gain or excess distribution will be allocated ratably over your holding period for the ordinary shares,
•
the amount allocated to the taxable year in which you realized the gain or excess distribution or to prior years before the first year in which we were a PFIC with respect to you will be taxed as ordinary income,
•
the amount allocated to each other prior year will be taxed at the highest tax rate in effect for that year, and
•
the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year.
Special rules apply for calculating the amount of the foreign tax credit with respect to excess distributions by a PFIC.
If we are a PFIC in a taxable year and our ordinary shares are treated as “marketable stock” in such year, you may make a mark-to-market election with respect to your ordinary shares. If you make this election, you will not be subject to the PFIC rules described above. Instead, in general, you will include as ordinary income each year the excess, if any, of the fair market value of your ordinary shares at the end of the taxable year over your adjusted basis in your ordinary shares. You will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of your ordinary shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). Your basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. Any gain that you recognize on the sale or other disposition of your ordinary shares would be ordinary income and any loss would be an ordinary loss to the extent of the net amount of previously included income as a result of the mark-to-market election and, thereafter, a capital loss.
Because we do not intend to provide the information necessary for a U.S. holder to comply with the requirements of a “qualified electing fund” election, such election will not be available to you with respect to your ordinary shares.
Your ordinary shares will generally be treated as stock in a PFIC if we were a PFIC at any time during your holding period in your ordinary shares, even if we are not currently a PFIC.
In addition, notwithstanding any election you make with regard to the ordinary shares, dividends that you receive from us will not constitute qualified dividend income to you if we are a PFIC (or are treated as a PFIC with respect to you) either in the taxable year of the distribution or the preceding taxable year. Dividends that you receive that do not constitute qualified dividend income are not eligible for taxation at the preferential rates applicable to qualified dividend income. Instead, you must include the gross amount of any such dividend paid by us out of our accumulated earnings and profits (as determined for United States federal income tax purposes) in your gross income, and it will be subject to tax at rates applicable to ordinary income.
If we are a PFIC and, at any time, have a foreign subsidiary that is classified as a PFIC, you generally would be deemed to own a portion of the shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution from, or dispose of all
or part of our interest in, the lower-tier PFIC or you otherwise were deemed to have disposed of an interest in the lower-tier PFIC. A mark-to-market election generally would not be available with respect to such lower-tier PFIC.
If you own ordinary shares during any year that we are a PFIC with respect to you, you may be required to file U.S. Internal Revenue Service (“IRS”) Form 8621.
Shareholder Reporting
A U.S. holder that owns “specified foreign financial assets” with an aggregate value in excess of $50,000 (and in some circumstances, a higher threshold) may be required to file an information report with respect to such assets with its tax return. “Specified foreign financial assets” may include financial accounts maintained by foreign financial institutions, as well as the following, but only if they are held for investment and not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-United States persons, (ii) financial instruments and contracts that have non-United States issuers or counterparties, and (iii) interests in foreign entities. U.S. Holders are urged to contact their tax advisors regarding these filing requirements.
Non-U.S. Holders
Dividends
If you are a non-U.S. holder, dividends paid to you in respect of ordinary shares will not be subject to United States federal income tax unless the dividends are “effectively connected” with your conduct of a trade or business within the United States, and the dividends are attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis. In such cases you generally will be taxed in the same manner as a U.S. holder. If you are a corporate non-U.S. holder, “effectively connected” dividends may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.
Capital Gains
If you are a non-U.S. holder, you will not be subject to United States federal income tax on gain recognized on the sale or other disposition of your ordinary shares unless:
•
the gain is “effectively connected” with your conduct of a trade or business in the United States, and the gain is attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis, or
•
you are an individual, you are present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist.
If you are a corporate non-U.S. holder, “effectively connected” gains that you recognize may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.
Backup Withholding and Information Reporting
If you are a noncorporate U.S. holder, information reporting requirements, on IRS Form 1099, generally will apply to dividend payments or other taxable distributions made to you within the United States, and the payment of proceeds to you from the sale of ordinary shares effected at a United States office of a broker.
Additionally, backup withholding may apply to such payments if you fail to comply with applicable certification requirements or (in the case of dividend payments) are notified by the IRS that you have failed to report all interest and dividends required to be shown on your federal income tax returns.
If you are a non-U.S. holder, you are generally exempt from backup withholding and information reporting requirements with respect to dividend payments made to you outside the United States by us or another non-United States payor. You are also generally exempt from backup withholding and information reporting requirements in respect of dividend payments made within the United States and the payment of the proceeds from the sale of ordinary shares effected at a United States office of a broker, as long as either (i) the payor or broker does not have actual knowledge or reason to know that you are a United States person and you have furnished a valid IRS Form W-8 or other documentation upon which the payor or broker may rely to treat the payments as made to a non-United States person, or (ii) you otherwise establish an exemption.
Payment of the proceeds from the sale of ordinary shares effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale effected at a foreign office of a broker could be subject to information reporting in the same manner as a sale within the United States (and in certain cases may be subject to backup withholding as well) if (i) the broker has certain connections to the United States, (ii) the proceeds or confirmation are sent to the United States or the sale has certain other specified connections with the United States.
You generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed your income tax liability by filing a refund claim with the IRS.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE IMPORTANT TO YOU. EACH PROSPECTIVE PURCHASER SHOULD CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN SHARES UNDER THE INVESTOR’S OWN CIRCUMSTANCES.
PLAN OF DISTRIBUTION
Offering by the Company
We may sell the securities in one or more of the following ways (or in any combination) from time to time:
•
through underwriters or dealers;
•
directly to a limited number of purchasers or to a single purchaser;
•
in “at-the-market” offerings, within the meaning of Rule 415(a)(4) of the Securities Act, to or through a market maker or into an existing trading market on an exchange or otherwise;
•
through agents; or
•
through any other method permitted by applicable law and described in the applicable prospectus supplement.
The prospectus supplement will state the terms of the offering of the securities, including:
•
the name or names of any underwriters, dealers or agents;
•
the purchase price of such securities and the proceeds to be received by us, if any;
•
any underwriting discounts or agency fees and other items constituting underwriters’ or agents’ compensation;
•
any public offering price; and
•
any discounts or concessions allowed or re-allowed or paid to dealers.
Any public offering price and any discounts or concessions allowed or re-allowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including:
•
negotiated transactions;
•
at a fixed public offering price or prices, which may be changed;
•
at market prices prevailing at the time of sale;
•
at prices related to prevailing market prices; or
•
at negotiated prices.
Unless otherwise stated in a prospectus supplement, the obligations of the underwriters to purchase any securities will be conditioned on customary closing conditions and the underwriters will be obligated to purchase all of such series of securities, if any are purchased.
The securities may be sold through agents from time to time. The prospectus supplement will name any agent involved in the offer or sale of the securities and any commissions paid to them. Generally, any agent will be acting on a best efforts basis for the period of its appointment.
Sales to or through one or more underwriters or agents in at-the-market offerings will be made pursuant to the terms of a distribution agreement with the underwriters or agents. Such underwriters or agents may act on an agency basis or on a principal basis. During the term of any such agreement, securities may be sold on a daily basis on any stock exchange, market or trading facility on which the securities are traded, in privately negotiated transactions or otherwise as agreed with the underwriters or agents. The distribution agreement will provide that any securities sold will be sold at negotiated prices or at prices related to the then prevailing market prices for our securities. Therefore, exact figures regarding proceeds that will be raised or commissions to be paid cannot be determined at this time and will be described in a prospectus supplement. Under the distribution agreement, we may also agree to sell, and the relevant underwriters or
agents may agree to solicit offers to purchase, blocks of our securities. The terms of each such distribution agreement will be described in a prospectus supplement.
We may authorize underwriters, dealers or agents to solicit offers by certain purchasers to purchase the securities at the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. The contracts will be subject only to those conditions set forth in the prospectus supplement, and the prospectus supplement will set forth any commissions paid for solicitation of these contracts.
Underwriters and agents may be entitled under agreements entered into with us to indemnification by us, against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which the underwriters or agents may be required to make.
The applicable prospectus supplement may also set forth whether or not underwriters may over-allot or effect transactions that stabilize, maintain or otherwise affect the market price of the securities at levels above those that might otherwise prevail in the open market, including, for example, by entering stabilizing bids, effecting syndicate covering transactions or imposing penalty bids.
Underwriters and agents may be customers of, engage in transactions with, or perform services for us and our affiliates in the ordinary course of business.
Securities sold pursuant to the registration statement of which this prospectus is a part will be authorized for listing and trading on Nasdaq. Any underwriters to whom securities are sold for public offering and sale may make a market in the securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. We can give no assurance as to the liquidity of or development or maintenance of trading markets for any of the securities.
Offering by the Selling Shareholder
We are registering securities to permit the resale of these securities by the selling shareholder from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale of securities by the selling shareholder.
The selling shareholder may sell all or a portion of the securities beneficially owned and offered hereby from time to time directly or through one or more underwriters, broker-dealers, or agents. If the securities are sold through underwriters or broker-dealers, the selling shareholder will be responsible for underwriting discounts or commissions or agent’s commissions. The securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions that may involve crosses or block transaction:
•
on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
•
in the over-the-counter market;
•
in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
•
through the writing of options, whether such options are listed on an options exchange or otherwise;
•
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
•
block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;
•
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
•
an exchange distribution in accordance with the rules of the applicable exchange;
•
privately negotiated transactions;
•
sales pursuant to Rule 144;
•
broker-dealers may agree with the selling shareholder to sell a specified number of such securities at a stipulated price per share;
•
a combination of any such methods of sale; or
•
any other method permitted pursuant to applicable law.
If the selling shareholder effects such transactions by selling securities to or through underwriters, broker-dealers, or agents, such underwriters, broker-dealers, or agents may receive commissions in the form of discounts, concessions, or commissions from the selling shareholder or commissions from purchasers of the securities for whom they may act as agent or to whom they may sell as principal (which discounts, concessions, or commissions as to particular underwriters, broker-dealers, or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the securities or otherwise, the selling shareholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the securities in the course of hedging in positions they assume. The selling shareholder may also loan or pledge securities to broker-dealers that in turn may sell such securities.
The selling shareholder may pledge or grant a security interest in some or all of the securities owned by it and, if it defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell the securities from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provisions of the Securities Act, and we will amend, if necessary, the list of selling shareholders to include the pledgee, transferee, or other successors in interest as selling shareholders under this prospectus. The selling shareholder also may transfer and donate the securities in other circumstances in which case the transferees, donees, pledgees, or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
The selling shareholder and any broker-dealer participating in the distribution of the securities may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed, to any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the securities is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of securities being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions, and other terms constituting compensation from the selling shareholder and any discounts, commissions, or concessions allowed or re-allowed or paid to broker-dealers.
Under the securities laws of some states, the securities may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states, the securities may not be sold unless such securities have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance that the selling shareholder will sell any or all of the securities registered pursuant to the shelf registration statement, of which this prospectus forms a part.
The selling shareholder and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act or the Securities Act, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the securities by the selling shareholder and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the securities to engage in market-making activities with respect to the securities. All of the foregoing may affect the marketability of the securities and the ability of any person or entity to engage in market-making activities with respect to the securities.
We will pay all expenses of the registration of the securities, including, without limitation, SEC filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that the selling shareholder will pay all underwriting discounts and selling commissions, if any.
Once sold under the registration statement, of which this prospectus forms a part, the securities will be freely tradable in the hands of persons other than our affiliates.
INCORPORATION BY REFERENCE
The SEC allows us to incorporate by reference information into this document. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be a part of this document, except for any information superseded by information that is included directly in this prospectus or incorporated by reference subsequent to the date of this prospectus.
We incorporate by reference herein
•
•
our report on Form 6-K submitted to the SEC on June 13, 2022, relating to the ELOC;
•
our report on Form 6-K submitted to the SEC on September 9, 2022, including our interim condensed consolidated financial statements as of June 30, 2022 and for each of the six month periods ended June 30, 2022 and June 30, 2021; and
•
our report on Form 6-K submitted to the SEC on December 7, 2022, providing an update on certain Company-related information.
All annual reports we file with the SEC pursuant to the Exchange Act on Form 20-F after the date of this prospectus and prior to termination or expiration of this registration statement shall be deemed incorporated by reference into this prospectus and to be part hereof from the date of filing of such documents. We may incorporate by reference any Form 6-K subsequently submitted to the SEC by identifying in such Form 6-K that it is being incorporated by reference into this prospectus.
Documents incorporated by reference in this prospectus are available from us without charge upon written or oral request, excluding any exhibits to those documents that are not specifically incorporated by reference into those documents. You can obtain documents incorporated by reference in this document by requesting them from:
Sono Group N.V.
Waldmeisterstraße 76
80935 Munich
Germany
+49 (0)89 4520 5818
You may also access these documents on our website, www.sonomotors.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.
You should rely only on information contained in, or incorporated by reference into, this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or incorporated by reference in this prospectus. We are not making offers to sell the securities in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation.
ENFORCEMENT OF CIVIL LIABILITIES
We are organized and existing under the laws of The Netherlands, and, as such, under Dutch private international law rules the rights of our shareholders and the civil liability of our management board members, supervisory board members and executive officers are governed in certain respects by the laws of The Netherlands. The ability of our shareholders in certain countries other than The Netherlands to bring an action against us, our management board members, supervisory board members and executive officers may be limited under applicable law. In addition, substantially all of our assets are located outside the United States.
As a result, it may not be possible for shareholders to effect service of process within the United States upon us or our management board members, supervisory board members and executive officers or to enforce judgments against us or them in U.S. courts, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States. In addition, it is not clear whether a Dutch court would impose civil liability on us or any of our management board members, supervisory board members and executive officers in an original action based solely upon the federal securities laws of the United States brought in a court of competent jurisdiction in The Netherlands.
As of the date of this prospectus, the United States and The Netherlands do not have a treaty providing for the reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters. With respect to choice of court agreements in civil or commercial matters, it is noted that the Hague Convention on Choice of Court Agreements entered into force for The Netherlands, but has not entered into force for the United States. Accordingly, a judgment rendered by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized and enforced by the competent Dutch courts. However, if a person has obtained a judgment rendered by a court in the United States that is enforceable under the laws of the United States and files a claim with the competent Dutch court, the Dutch court will in principle give binding effect to a foreign judgment if (i) the jurisdiction of the foreign court was based on a ground of jurisdiction that is generally acceptable according to international standards, (ii) the judgment by the foreign court was rendered in legal proceedings that comply with the Dutch standards of proper administration of justice including sufficient safeguards (behoorlijke rechtspleging), (iii) binding effect of such foreign judgment is not contrary to Dutch public order (openbare orde) and (iv) the judgment by the foreign court is not incompatible with a decision rendered between the same parties by a Dutch court, or with a previous decision rendered between the same parties by a foreign court in a dispute that concerns the same subject and is based on the same cause, provided that the previous decision qualifies for recognition in The Netherlands. Even if such a foreign judgement is given binding effect, a claim based thereon may, however, still be rejected if the foreign judgment is not or no longer formally enforceable.
Based on the lack of a treaty as described above, U.S. investors may not be able to enforce against us or our management board members, supervisory board members or certain experts named herein who are residents of The Netherlands or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.
The United States and Germany currently do not have a treaty providing for the reciprocal recognition and enforcement of judgments, in civil and commercial matters. Consequently, a final judgment for payment or declaratory judgments given by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized or enforceable in Germany. German courts may deny the recognition and enforcement of a judgment rendered by a U.S. court if they consider the U.S. court not to be competent or the decision to be in violation of German public policy principles. For example, judgments awarding punitive damages are generally not enforceable in Germany. A German court may reduce the amount of damages granted by a U.S. court and recognize damages only to the extent that they are necessary to compensate actual losses or damages.
In addition, actions brought in a German court against us, our management board and supervisory board and the experts named herein to enforce liabilities based on U.S. federal securities laws may be subject to certain restrictions. In particular, German courts generally do not award punitive damages. Litigation in Germany is also subject to rules of procedure that differ from the U.S. rules, including with respect to the taking and admissibility of evidence, the conduct of the proceedings and the allocation of costs. German
procedural law does not provide for pre-trial discovery of documents, nor does Germany support pre-trial discovery of documents under the 1970 Hague Evidence Convention. Proceedings in Germany would have to be conducted in the German language and all documents submitted to the court would, in principle, have to be translated into German. For these reasons, it may be difficult for a U.S. investor to bring an original action in a German court predicated upon the civil liability provisions of the U.S. federal securities laws against us, our management board and supervisory board and the experts named in this prospectus.
EXPENSES
The following table sets forth the expenses (other than underwriting discounts and commissions or agency fees and other items constituting underwriters’ or agents’ compensation, if any) expected to be incurred by us in connection with a possible offering of securities registered under this registration statement.
| |
|
|
Amount
|
|
|
SEC registration fee
|
|
|
|
$ |
25,919.04 |
|
|
|
FINRA filing fee
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To be provided by a prospectus supplement or a Report on Form 6-K that is incorporated by reference into this prospectus.
LEGAL MATTERS
NautaDutilh N.V. has advised us on certain legal matters as to Dutch law including the issuance of ordinary shares offered by this prospectus. We are also being represented as to certain matters of U.S. federal law and New York state law by Sullivan & Cromwell LLP.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the annual report on Form 20-F for the year ended December 31, 2021 have been so incorporated in reliance on the report (which contains an explanatory paragraph relating to the Company’s ability to continue as a going concern as described in Note 4.13.1 to the financial statements) of PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft is a member of the Chamber of Public Accountants (Wirtschaftsprüferkammer), Berlin, Germany.
The current address of PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, is Bernhard-Wicki-Straße 8, 80636 Munich, Germany.
Ordinary Shares
PROSPECTUS
, 20
The information in this prospectus is not complete and may be changed. We may not sell or accept an offer to buy these securities under this prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting offers to buy these securities in any jurisdiction where such offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED DECEMBER 7, 2022
Sono Group N.V.
Up to $135,000,000 of Ordinary Shares offered by the Company
We, Sono Group N.V., have entered into an at market issuance sales agreement (the “Sales Agreement”) with each of B. Riley Securities, Inc. (“B. Riley”), Berenberg Capital Markets LLC (“Berenberg”) and Cantor Fitzgerald & Co. (“Cantor” and, together with B. Riley and Berenberg, collectively the “Agents”) relating to the sale of our ordinary shares offered by this prospectus. In accordance with the terms of the Sales Agreement, under this prospectus we may offer and sell, from time to time, ordinary shares having an aggregate offering price of up to $135 million, through or to the Agents, acting as agents or principals. Sales of ordinary shares, if any, under this prospectus will be made by any method permitted that is deemed an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended, or the “Securities Act.” The Agents are not required to sell any specific amount but will act as our sales agents using commercially reasonable efforts consistent with each of their normal trading and sales practices, on mutually agreed terms between the Agents and us. There is no arrangement for funds to be received in any escrow, trust or similar arrangement.
The compensation to the Agents for the sales of our ordinary shares under the Sales Agreement will be 3.0% of the gross proceeds received from the sales. The net proceeds, if any, that we receive from the sales of the ordinary shares will depend on the number of shares actually sold and the offering price for such shares. See “Plan of Distribution” beginning on page 58 for additional information regarding the compensation to be paid to the Agents. In connection with the sale of the ordinary shares on our behalf, each of the Agents will be deemed to be an “underwriter” within the meaning of the Securities Act, and the compensation of the Agents will be deemed to be underwriting commissions or discounts..
Our ordinary shares are traded on The Nasdaq Global Market (“Nasdaq”) under the symbol “SEV.” On December 6, 2022, the closing price for our ordinary shares as reported on Nasdaq was $1.26 per share.
Investing in our securities involves significant risks. Before buying any securities, you should carefully consider the risk factors described in the section titled “Risk factors” beginning on page 8 and any additional risk factors incorporated by reference into this prospectus. We may include specific risk factors in an applicable prospectus supplement under the heading “Risk Factors.”
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
We are both an “emerging growth company” and a “foreign private issuer” as defined under applicable U.S. federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for this and future filings. See “Prospectus Summary — Implications of Being an Emerging Growth Company” and “Prospectus Summary — Implications of Being a Foreign Private Issuer”.
The date of this prospectus is , .
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ABOUT THIS PROSPECTUS
You should carefully read this entire prospectus, including the information included and referred to under “Risk Factors” below, and the financial statements and the other information incorporated by reference in this prospectus, before making an investment decision.
This prospectus is part of a registration statement on Form F-3 that we have filed with the Securities and Exchange Commission, or SEC, using a “shelf” registration process. Under the shelf registration statement, we may offer any combination of the securities described in the prospectus included in the shelf registration statement in one or more offerings, up to a total aggregate offering price of $195,000,000. Under this prospectus, we may offer ordinary shares having an aggregate offering price of up to $135,000,000 from time to time at prices and on terms to be determined by market conditions at the time of offering.
Before buying any of the ordinary shares that we are offering, we urge you to carefully read this prospectus, together with the information incorporated by reference as described under the heading “Incorporation of Certain Information by Reference” in this prospectus and the information in any free writing prospectus that we may authorize for use in connection with this offering. These documents contain important information that you should consider when making your investment decision.
This prospectus describes the specific terms of the securities we are offering and also adds to and updates information contained in the documents incorporated by reference into this prospectus. To the extent there is a conflict between the information contained in this prospectus, on the one hand, and the information contained in any document incorporated by reference into this prospectus that was filed with the SEC before the date of this prospectus, on the other hand, you should rely on the information in this prospectus. If any statement in one of these documents is inconsistent with a statement in another document having a later date — for example, a document incorporated by reference into this prospectus — the statement in the document having the later date modifies or supersedes the earlier statement.
You should rely only on the information contained in, or incorporated by reference into this prospectus and in any free writing prospectus that we may authorize for use in connection with this offering. We have not, and none of the Agents has, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, nor are any of the Agents, making an offer to sell or soliciting an offer to buy our ordinary shares in any jurisdiction in which an offer or solicitation is not authorized or in which the person making that offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make an offer or solicitation. You should assume that the information appearing in this prospectus, the documents incorporated by reference into this prospectus, and in any free writing prospectus that we may authorize for use in connection with this offering, is accurate only as of the date of those respective documents. Our business, financial condition, results of operations and prospects may have changed since those dates. You should read this prospectus, the documents incorporated by reference into this prospectus, and any free writing prospectus that we may authorize for use in connection with this offering, in their entirety before making an investment decision. You should also read and consider the information in the documents to which we have referred you in the sections of this prospectus entitled “Where You Can Find More Information” and “Incorporation of Certain Information by Reference.”
Unless otherwise indicated or the context otherwise requires, all references in this prospectus to “Sono Motors,” the “Company,” “we,” “our,” “ours,” “ourselves,” “us” or similar terms refer to (i) Sono Motors GmbH, together with its subsidiary Sono Motors Finance B.V. at that time, prior to the further implementation of the aforementioned corporate reorganization, (ii) Sono Motors Finance B.V., together with its subsidiary, as of the completion of the exchange of all ordinary shares in Sono Motors GmbH for newly issued ordinary shares in Sono Motors Finance B.V. and prior to the conversion of Sono Motors Finance B.V. into Sono Group N.V. and (iii) Sono Group N.V., together with its subsidiary, after the aforementioned corporate reorganization, in which Sono Motors Finance B.V. was converted into Sono Group N.V.
In this prospectus, unless otherwise indicated, all amounts in U.S. dollars have been converted from euros to U.S. dollars at an exchange rate of $1.0516 to €1.00, the official exchange rate quoted as of December 6, 2022 by the European Central Bank.
PROSPECTUS SUMMARY
This summary highlights information contained in more detail elsewhere in this prospectus and in the documents incorporated by reference herein. This summary may not contain all the information that may be important to you, and we urge you to read this entire prospectus and any documents incorporated by reference herein carefully before deciding to invest in our ordinary shares.
Sono Motors
Our Vision
We envision a world that no longer relies on the burning of fossil fuels. Our business was founded on a shared passion for finding a solution to climate-friendly, innovative and yet affordable mobility. The goal was to develop a solar-powered, family-sized car for the mass market. To realize this goal, our founders assembled an experienced team of engineers, designers, technicians, and industry experts who spent years developing solar technology suited for mobility applications. We developed and tested several prototypes to advance and refine our technology and enlisted driver feedback to create a design that would be simultaneously functional, convenient to operate, environmentally sustainable, and affordable.
From this process the Sion and our proprietary solar technology were born. The Sion is a solar electric vehicle, designed with a view to be accessible to everyday consumers and to be shared. Our technology allows us to integrate solar panels into the Sion’s bodywork to capture energy from the sun and store it in the Sion’s on-board battery. We believe the Sion unlocks the potential of solar energy in a car and advances our goal of providing a net-zero-emission vehicle solution for the mass market. We seek to license and sell our proprietary solar technology in order to accelerate the transition towards sustainable transport.
Business Overview
We believe we are a pioneer and technological leader in the field of solar-powered electric mobility. We intend to use our technology to create our solar and battery powered vehicle, the Sion. Our proprietary solar technology has, however, many other potential applications. We believe that our solar technology is suitable for different uses, such as buses, trucks, camper vans, trains and even boats, and has the potential to accelerate the transition towards sustainable transportation. We have successfully started to market, and are already generating limited revenues from, our proprietary solar technology.
Our disruptive solar technology allows for full solar integration. In the process of developing the Sion, we soon realized that the available solar technology was not well-suited for mobility applications. Traditional solar technology relies on glass to cover the solar cells. Glass is, however, heavy, relatively inflexible, expensive and dangerous in crash situations. Our polymer technology solves these issues. It is lightweight, allows for flexible surface integration via our patented injection molding process, is affordable due to fast and lean production and avoids the risk of bodily harm caused by broken glass. We have also developed other critical components for the use of solar technology in mobility applications. We have, through our maximum power point tracker central unit (“MCU”) solved the issue that solar cells will be mounted on different parts of the exterior, which will lead to uneven exposure to sunlight. Our technology allows for the seamless integration of solar cells into the full body of a car, such as the Sion, and the charging of its battery through the power of the sun. However, solar technology has many other potential applications, and its use cases extend far beyond passenger cars, allowing for grid-independent charging and a reduction of running costs or total costs of ownership in transport-related use cases, such as trucks, buses, recreational vehicles and boats. Fleet operators may use our technology to retrofit existing vehicles, to extend the range of battery electric vehicles (“BEVs”) or to comply with emission regulations. The transport and logistics industries in particular are very focused on total cost of ownership, and we believe our solar integration can reduce their running costs significantly. Manufacturers may also use our technology for new production vehicles. We have several patents granted or within the filing-process protecting our proprietary technology.
Our technology will be one of the distinctive features of the Sion. It will have the ability to recharge itself using solar energy panels installed on the exterior that leverage our polymer-based solar technology. We expect that solar power will reduce the number of charging intervals and, depending on the vehicle’s usage profile, may even eliminate the need for battery charging, positioning us to benefit from a significant
competitive advantage over conventional electric vehicles. The Sion’s polymer exterior significantly reduces the need for expensive metal-stamping tools and machinery costs, and the integration of solar modules into the bodywork eliminates the need for a costly paint shop, which helps us to accept reservations for the Sion locking in a comparatively low net entry price of currently €25.1 thousand. Consistent with our goal to lower CO2 emissions, each Sion will be outfitted with technology that can connect to our car- and ride- sharing networks through our proprietary hardware and software solutions. We expect that the Sion will be convenient to operate and share and comparatively affordable providing it with the potential to disrupt the market.
To make the Sion affordable for the mass market without compromising security or quality, we do things differently and, we believe, much more efficiently and sustainably than traditional car manufacturers or other pure EV manufacturers. We believe our production and distribution strategies will enable us to reduce production complexity, maintain relatively low overhead costs and significantly reduce our capital expenditures and distribution costs, thereby positioning us to become a price-value leader compared to competitors’ offerings in the relevant car segments. We intend to produce the Sion as a one-variant-only vehicle via a third-party producer and to rely on business-to-consumer direct distribution. All Sions will have the same exterior color and vehicle features, and will rely on existing off-the-shelf component parts from established automotive suppliers, such as Vitesco Technologies Germany GmbH (a former subsidiary of Continental AG), Hella GmbH & Co. KGaA and FinDreams Industry Co., Ltd., resulting in economies of scale through the partial elimination of development costs, reduced purchasing and manufacturing complexity, reduced logistical challenges and inventory costs, and lower risks associated with quality control and testing, all of which should facilitate more rapid growth of our operations. The contract manufacturer Valmet Automotive Inc. (“Valmet Automotive”) in Uusikaupunki, Finland will produce the Sion. Our goal is to offset 100% of the CO2 emissions generated by the production of the Sion and our future vehicle models, with a view to achieving full CO2 neutrality during the production cycle.
Rather than relying on dealerships to sell the Sion, we intend to rely on what we consider to be an innovative and effective way to sell directly to customers through our online platform. Customers can view the Sion, book a test drive and engage and place orders directly with us. As of September 1, 2022, we had more than 20,000 reservations, more than 3,500 of which were made in 2022, with advance payments resulting in total net cash inflows of approximately €43 million from our customers. These reservations correspond to a net sales volume of approximately €435 million assuming all reservations actually result in sales. However, our customers may cancel their reservations without penalty according to our general terms and conditions, if no binding purchase agreement has been concluded by an agreed deadline, which varies. Some reservations are already cancelable as of the date of this prospectus. If we are able to commence commercial production of the Sion in the first quarter of 2024 as currently planned, we also intend to begin fulfilling customer reservations in the first quarter of 2024.
We are already generating limited revenues from our proprietary solar technology, having shipped prototypes and solar retrofits to customers. We are also building up a customer base by signing non-binding letters of intent and purchase orders. With respect to the Sion, we are still in the pre-production phase and presented the first vehicles from the third prototype generation, the Sion series validation vehicles (“SVVs”), in July 2022. We are currently working on assembling and testing numerous SVVs and bodies-in-white with the support of our partners thyssenkrupp Automotive Body Solutions and Bertrandt, which are located close to Sono Motors’ headquarters in Munich.
Our available cash and cash equivalents and proceeds generated, or planned to be generated, from the financings (i.e., the equity line of credit, the issuance of convertible debentures and the planned at market securities offerings) described below under “— Recent Developments” will not be sufficient to secure our substantial funding needs through the planned start of production of the Sion. According to our current estimates, we expect to need additional funding of at least €240 million until the start of commercial production of the Sion, which we currently envisage for the first quarter of 2024. In order to meet the targeted date for the start of commercial production of the Sion, we will need to raise substantial additional funds in the short term. We continue to actively consider various financing options, including registered offerings of newly issued shares and other equity securities. Assuming that we actually raise the additional funding we need, we currently plan to commence commercial production of the Sion in the first quarter of 2024, with pre-series production planned for 2023.
For the six-month period ended June 30, 2022, we had a loss for the period of €61.0 million, compared to a loss for the period for the six-month period ended June 30, 2021 of €24.4 million. For the year ended December 31, 2021, we had a loss for the period of €63.9 million, compared to a loss for the period for the year ended December 31, 2020 of €56.0 million. We have incurred net losses since our inception in March 2016, resulting in an accumulated deficit of €208.1 million as of June 30, 2022 compared to €147.1 million as of December 31, 2021. We believe that we will continue to incur losses and depend on external financing for the foreseeable future at least until we commence material deliveries of the Sion and the time when we significantly scale our operations, including the monetization of our solar technology.
Recent Developments
We initially intended for the Sion to be produced by National Electric Vehicle Sweden (“NEVS”), in Trollhättan, Sweden. In April 2022, we announced that we would switch to Valmet Automotive in Uusikaupunki, Finland. This change in the envisaged contract manufacturer contributed to an increase in our funding needs and led to a delay in the intended date for start of production from the first half of 2023 to the second half of 2023.
In May 2022, we issued 10,930,000 shares in a follow-on offering. The net proceeds from that offering were $40.6 million.
On June 13, 2022, we entered into a purchase agreement and a registration rights agreement with Joh. Berenberg, Gossler & Co. KG (the “ELOC Investor”) in relation to an equity line of credit (the “ELOC”). Pursuant to the purchase agreement, we have the right to sell to the ELOC Investor up to $150 million of our ordinary shares, subject to certain limitations and conditions set forth in the purchase agreement, from time to time until June 30, 2024. Sales of ordinary shares to the ELOC Investor pursuant to the purchase agreement, and the timing of any such sales, are solely at our option, and we are under no obligation to sell any securities to the ELOC Investor under the purchase agreement. Through the date of this prospectus, we sold 8,748,433 ordinary shares to the ELOC Investor. The total gross proceeds from these sales were $17.5 million. Under the terms of the securities purchase agreement relating to the convertible debentures described below, we are only permitted to have either the ELOC or an at market issuance agreement in place at any given time. In view of our entry into the Sales Agreement described below on December 7, 2022, we currently expect that we will terminate the ELOC once sales may be made under the Sales Agreement.
In July 2022, apart from presenting first vehicles from the third prototype generation, as described under “Sono Motors” above, we unveiled our “Solar Bus Kit”, a scalable business-to-business retrofit solution that reduces fuel consumption and inner-city greenhouse gas emissions, thereby contributing to climate protection. The Solar Bus Kit is a versatile and straightforward solution, optimized for the most common 12-meter public transport bus types on the European market, including Mercedes-Benz Citaro and MAN Lion City. Sono Motors plans to offer a complete and efficient retrofit solution for bus fleet operators who have a compelling need to reduce diesel consumption and CO2 emissions to meet their sustainability goals.
In September 2022, we signed a letter of intent with FINN GmbH, a Munich-based car subscription platform, aiming to solidify our mutual cooperation. FINN GmbH was one of our first business-to- business reservation holders. Following its initial, non-binding reservation of 5,500 Sion in 2020, FINN GmbH now intends to reserve and purchase a total of 12,600 Sion. We seek to reach a final agreement with FINN GmbH regarding our cooperation in 2023. FINN GmbH also offers our reservation holders a €500 discount on a car subscription.
On December 6, 2022, we published the convening notice for our annual general meeting of shareholders. One of the items on the agenda relates to an amendment of our articles of association in order effect of a reverse share split at a ratio of 5:1, such that every five ordinary shares or high-voting shares, as applicable, will be combined into one share of the same class (the “Reverse Share Split”). We expect that no fractional shares will be issued in connection with the Reverse Share Split. Instead, our transfer agent will sell, immediately prior to the implementation of the Reverse Share Split, all fractional ordinary shares that would otherwise be created as part of the Reverse Share Split on the Nasdaq Stock Exchange. A shareholder who would otherwise have received a fraction of an ordinary share will receive instead an amount of cash generated from such sales attributable to the shareholder’s proportionate interest in the new proceeds of such sales, without interest.
On December 7, 2022, we entered into a securities purchase agreement with the selling shareholder Yorkville, pursuant to which we agreed to sell and issue to the Selling Shareholder convertible debentures in an aggregate principal amount of up to $31.1 million, which are convertible into our ordinary shares subject to certain conditions and limitations set forth in the securities purchase agreement. The first convertible debenture in a principal amount of $11.1 million was issued on December 7, 2022 upon signing of the Securities Purchase Agreement, a second convertible debenture of $10.0 million will be issued upon filing with the SEC of the registration statement, of which this prospectus forms a part, registering the resale of ordinary shares resulting from the conversion of the convertible debentures, and a third debenture in an aggregate principal amount of $10.0 million will be issued to Yorkville upon the effectiveness of such registration statement. The convertible debentures provide a conversion right, according to which Yorkville may, at any time after the issuance date, subject to certain limitations, convert any portion of the outstanding and unpaid principal amount of the convertible debentures, together with any accrued but unpaid interest, into our ordinary shares at the lower of (i) $1.75 per ordinary share or (ii) 96.5% of the lowest daily volume weighted average price of our ordinary shares during the seven consecutive trading days immediately preceding the date of conversion, but not lower than a floor price of $0.15 per share, subject to adjustment in accordance with the terms of the convertible debentures. The convertible debentures may not be converted into ordinary shares to the extent such conversion would result in the selling shareholders and its affiliates having beneficial ownership of more than 4.99% of our then outstanding ordinary shares; provided that this limitation may be waived by the selling shareholder upon not less than 65 days’ prior notice to us. The convertible debentures provide us, subject to certain conditions, with a redemption right pursuant to which we, upon three (3) business days’ prior notice to the selling shareholder may redeem, in whole or in part, any of the outstanding principal and interest thereon plus a redemption premium equal to 4.0% of the principal amount being redeemed. Yorkville, a Cayman Islands exempt limited partnership, is a fund managed by Yorkville Advisors Global, LP, headquartered in Mountainside, New Jersey.
Also on December 7, 2022, we entered into the Sales Agreement with the Agents. In accordance with the terms of the Sales Agreement, under this prospectus we may offer and sell, from time to time, ordinary shares having an aggregate offering price of up to $135 million, through or to the Agents, acting as agents or principals. Sales of ordinary shares, if any, will be made by any method permitted that is deemed an “at the market offering” as defined in Rule 415 under the Securities Act. Under the Sales Agreement, the Agents are not required to sell any specific amount but will act as our sales agents using commercially reasonable efforts consistent with each of their normal trading and sales practices, on mutually agreed terms between the agents and us. However, under the terms of the securities purchase agreement relating to the convertible debentures described above, we have undertaken to limit sales under the Sales Agreement per trading day to not more than 2% of the daily trading volume of our ordinary shares on Nasdaq (the “Two Percent Cap”), except that the Two Percent Cap shall be increased (i) to 10% if the trading volume on a trading day is between $5.0 million and $10 million and (ii) to 15% if the trading volume on a trading day is greater than $10 million.
Corporate Information
Our principal executive offices are located at Waldmeisterstraße 76, 80935 Munich, Federal Republic of Germany. Our telephone number is +49 (0)89 4520 5818. Our website address is www.sonomotors.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our ordinary shares. We do business under the commercial name Sono Motors.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and is exempt from other burdens that are otherwise generally applicable to public companies. These provisions include:
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an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley
Act”), which would otherwise be applicable beginning with our annual report on Form 20-F for the year ending December 31, 2022;
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to the extent that we no longer qualify as a foreign private issuer (1) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (2) exemptions from the requirements of holding a non-binding advisory vote on executive compensation, including golden parachute compensation; and
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an exemption from compliance with the requirement that the Public Company Accounting Oversight Board has adopted that would otherwise require our independent registered public accounting firm to communicate “critical audit matters” in its report. A critical audit matter is any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective or complex auditor judgment.
We may take advantage of these provisions for up to five years following the completion of our IPO or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.235 billion in annual revenue, have more than $700 million in market capitalization of our shares held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold equity securities.
Implications of Being a Foreign Private Issuer
We report under the Exchange Act, as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
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the rules under the Exchange Act requiring domestic filers to issue financial statements prepared in accordance with U.S. GAAP;
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the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
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the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing liability for insiders who profit from trades made in a short period of time; and
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the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, and current reports on Form 8-K upon the occurrence of specified significant events.
We are required to file with the SEC, within four months after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing consolidated financial statements audited by an independent registered public accounting firm.
We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held of record by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents; (ii) more than 50% of our assets are located in the United States; or (iii) our business is administered principally in the United States. For purposes of determining whether more than 50% of our outstanding voting securities are held by U.S. residents, we intend to look to whether more than 50% of the voting power of our ordinary shares and high voting shares on a combined basis are directly or indirectly held of record by residents of the United States.
Both foreign private issuers and emerging growth companies are also exempt from certain more extensive executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company but remain a foreign private issuer, we will continue to be exempt from the more extensive
compensation disclosure requirements for companies that are neither an emerging growth company nor a foreign private issuer and will continue to be permitted to follow our home country practice on such matters.
The Offering
Ordinary shares offered by the Company
Ordinary share having an aggregate offering price of up to $135,000,000
Ordinary shares outstanding
As of the date of this prospectus, there were 90,544,115 ordinary shares outstanding
Ordinary shares outstanding after the offering
Assuming a sales price of $1.26 per ordinary share (the last reported sales price of our ordinary shares on December 6, 2022), we will have 209,601,734 ordinary outstanding after the completion of this offering. The actual number of ordinary shares issued and outstanding will vary depending on the price at which the ordinary shares.
One vote per ordinary share
We have two classes of shares outstanding, ordinary shares and high voting shares. The rights of the holders of ordinary shares and high voting shares are identical, except with respect to voting, conversion and preemptive rights. Each ordinary share is entitled to one vote per share and is not convertible into any other shares. Each high voting share is entitled to 25 votes per share, is convertible at the request by the holder at any time into one ordinary share and carries preemptive rights commensurate to its nominal value. Laurin Hahn and Jona Christians, two of our founders and management board members, hold all of the high voting shares. As of the date of this prospectus, they hold, in aggregate, approximately 68.0% of the voting power of our outstanding shares.
We currently expect that we will need substantial additional external funding until start of production of the Sion. We intend to use the net proceeds from our sale of the ordinary shares under this prospectus to cover some of these funding requirements, including but not limited to capital expenditures, research and development, general working capital, and other general corporate purposes. For more information see “Use of Proceeds” on page 15.
Our ordinary shares are traded on The Nasdaq Global Market under the symbol “SEV.”
RISK FACTORS
Before making a decision to invest in our ordinary shares, you should carefully consider the risks and uncertainties described below, as well as the risks and uncertainties related to our industry, our business and operations, our financial position and our regulatory, legal and tax risks described in the risk factor section in our most recent annual report on Form 20-F and in any updates to those risk factors in our reports on Form 6-K incorporated by reference herein, together with all other information appearing or incorporated by reference in this prospectus, in light of your particular investment objectives and financial circumstances. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our ordinary shares could decline and you could lose all or part of your investment.
This prospectus also contains forward-looking statements that involve risks and uncertainties. See “Information Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including the risks facing our Company.
Additional Risks Related to This Offering
You may experience immediate and substantial dilution.
The offering prices per ordinary share in this offering may exceed the net tangible book value per ordinary share prior to this offering. Assuming that an aggregate of 107,142,857 ordinary shares are sold at a price of $1.26 per share pursuant to this prospectus, which was the last reported sale price of our common stock on the Nasdaq Capital Market on December 6, 2022, you would experience immediate dilution of $0.22 per ordinary share, representing the difference between our as adjusted net tangible book value per share as of June 30, 2022 after giving effect to this offering and the assumed offering price. The exercise of outstanding stock options may result in further dilution of your investment. See the section titled “Dilution” below for a more detailed illustration of the dilution you would incur if you participate in this offering. Because the sales of ordinary shares offered hereby will be made directly into the market or in negotiated transactions, the prices at which we sell these ordinary shares will vary and these variations may be significant. Purchasers of the ordinary shares we sell, as well as our existing shareholders, will experience significant dilution if we sell shares at prices significantly below the price at which they invested.
The actual number of ordinary shares we will issue under the Sales Agreement, at any one time or in total, is uncertain.
Subject to certain limitations in the Sales Agreement and compliance with applicable law, we have the discretion to deliver placement notices to an Agent at any time throughout the term of the Sales Agreement. The number of ordinary shares that are sold by an Agent after our delivering a placement notice will fluctuate based on the market price of our ordinary shares during the sales period and limits we set with an Agent.
The ordinary shares offered under this prospectus may be sold in “at the market” offerings, and investors who buy ordinary shares at different times will likely pay different prices.
Investors who purchase ordinary shares under this prospectus at different times will likely pay different prices, and so may experience different outcomes in their investment results. We will have discretion, subject to market demand, to vary the timing, prices, and numbers of ordinary shares sold, and there is no minimum or maximum sales price. Investors may experience declines in the value of their ordinary shares as a result of sales made at prices lower than the prices they paid.
Sales of substantial amounts of our ordinary shares in the public market, or the perception that these sales may occur, could cause the market price of our ordinary shares to decline.
Sales of substantial amounts of our ordinary shares in the public market, or the perception that these sales may occur, could cause the market price of our ordinary shares to decline. This could also impair our ability to raise additional capital through the sale of our equity securities. Under our articles of association,
we are authorized to issue up to 320,000,000 ordinary shares. Upon an increase of our issued share capital to at least €25,000,000 our authorized share capital will automatically increase to EUR 102,000,000, divided into 1,500,000,000 ordinary shares and 8,000,000 high voting shares. An issuance of new ordinary shares may also lead to substantial dilution of our then existing shareholders. We cannot predict the size of future issuances of our shares, including in connection with the convertible debentures and the ATM sales agreement described herein, or the effect, if any, that future issuances and sales of shares would have on the market price of our ordinary shares.
The market price of our ordinary shares could fluctuate significantly, which could result in substantial losses for purchasers of our ordinary shares.
The stock market in general and the market for smaller technology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may lose some or all of your investment. The market price of our ordinary shares is affected by the supply and demand for our ordinary shares, which may be influenced by numerous factors, many of which are beyond our control, including:
•
fluctuation in actual or projected results of operations; changes in projected earnings or failure to meet securities analysts’ earnings expectations; the absence of analyst coverage;
•
negative analyst recommendations;
•
changes in trading volumes in our ordinary shares (including by the sale of shares granted to our employees under employee participation programs);
•
large-volume or targeted transactions by short-sellers;
•
changes in our shareholder structure;
•
changes in macroeconomic conditions;
•
the activities of competitors and sellers;
•
changes in the market valuations of comparable companies;
•
our ability to successfully finalize development of, market and commercialize the Sion as well as future car models;
•
the recruitment or departure of key management or scientific personnel or other key employees;
•
significant lawsuits, including patent, shareholder or customer litigation;
•
changes in investor and analyst perception with respect to our business or the car industry in general; and
•
changes in the statutory framework applicable to our business.
As a result, our share price may be subject to substantial fluctuation.
In addition, general market conditions and fluctuation of share prices and trading volumes could lead to pressure on the market price of our ordinary shares, even if there may not be a reason for this based on our business performance or earnings outlook. Prices for companies with a limited operating history, particularly in industries with barriers such as the car industry, may be more volatile compared to share prices for established companies or companies from other industries. The price of our shares has been volatile since our IPO.
If the market price of our ordinary shares declines as a result of the realization of any of these risks, investors could lose part or all of their investment in our ordinary shares.
Additionally, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the shares. If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.
Our dual-class share structure with different voting rights will limit your ability as a holder of ordinary shares to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of ordinary shares may view as beneficial.
We have a dual-class share structure, which we intend to maintain for the foreseeable future, as our share capital consists of ordinary shares and high voting shares. In respect of matters requiring the votes of shareholders, holders of ordinary shares will be entitled to one vote per share, while holders of high voting shares will be entitled to 25 votes per share. Each high voting share is convertible into one ordinary share at any time by the holder thereof, while ordinary shares are not convertible into high voting shares under any circumstances.
The high voting shares are held by Laurin Hahn and Jona Christians, two of our founders and management board members. As of December 6, 2022, Laurin Hahn held approximately 35.8% and Jona Christians held approximately 32.2% of our total voting rights. This concentration of ownership may discourage, delay or prevent a change in control of our Company, which could deprive our other shareholders of an opportunity to receive a premium for their ordinary shares as part of a sale of our Company and might ultimately affect the market price of our ordinary shares. This concentrated control will limit your ability to influence corporate matters that holders of ordinary shares may view as beneficial. In addition, certain index providers, such as S&P Dow Jones or FTSE Russell, view multi-class shares critically and have amended their rules so that companies with multi-class shares will no longer be added to their indexes.
Laurin Hahn and Jona Christians have indicated to us that they are looking for instruments to prevent erosion of their voting power in light of expected dilution due to the planned issuance of a substantial number of new shares to cover our funding needs. These instruments to prevent dilution may include the issuance of additional high voting shares, changes in the voting power of the existing high voting shares or the introduction of veto rights for Laurin Hahn and/or Jona Christians. Under Dutch law, Laurin Hahn and Jona Christians will not be prevented from voting on the introduction of instruments that favor them. A proposal to the shareholders meeting to introduce these instruments and/or their actual introduction may negatively affect our reputation and our share price and may make it more difficult for us to raise additional capital to cover our funding needs.
Future offerings of debt or equity securities by us could adversely affect the market price of our ordinary shares, and future issuances of equity securities could lead to a substantial dilution of our shareholders.
We will require significant additional capital in the future to finance our business operations and growth. For example, we will require additional funding to reach commercial operation, and we may seek to offer new equity in the future for such funding. The Company may seek to raise such capital through the issuance of additional equity or debt securities with conversion rights (e.g., convertible bonds and option rights). An issuance of additional equity or debt securities with conversion rights could potentially reduce the market price of our ordinary shares and the Company currently cannot predict the amounts and terms of such future offerings. We expect such funding to be in the form of, or at least include, additional equity fundraising, which will dilute existing shareholders
If such offerings of equity or debt securities with conversion rights are made without granting preemptive rights to our existing shareholders, these offerings would dilute the economic and voting rights of our existing shareholders. Preemptive rights may be restricted or excluded by a resolution of the general meeting or by another corporate body designated by the general meeting. Our management board has been authorized until the fifth anniversary of the pricing of our IPO to issue shares or grant rights to subscribe for shares up to our authorized share capital from time to time and to limit or exclude preemptive rights in connection therewith. This could cause existing shareholders to experience substantial dilution of their interest in us.
In addition, such dilution may arise from the acquisition or investments in companies in exchange, fully or in part, for newly issued ordinary shares, convertible rights in connection with financing arrangements the Company entered into before the IPO, stock options or conversion rights granted to our business partners or our customers as well as from the exercise of stock options or conversion rights granted to our employees in the context of existing or future stock option programs or the issuance of ordinary shares to employees in the context of existing or future employee participation programs.
Any future issuance of ordinary shares could reduce the market price of our ordinary shares and dilute the holdings of existing shareholders.
Future sales by major shareholders could materially adversely affect the market price of our ordinary shares.
For various reasons, shareholders may sell all or some of our ordinary shares, including in order to diversify their investments. Sales of a substantial number of our ordinary shares in the public market, or the perception that such sales might occur, could depress the market price of our ordinary shares and could impair our ability to raise capital through the sale of additional equity securities.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ordinary shares and trading volume could decline.
The trading market for our ordinary shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. If securities or industry analyst coverage results in downgrades of our ordinary shares or publishes inaccurate or unfavorable research about our business, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets and demand for our ordinary shares could decrease, which, in turn, could cause the market price or trading volume for our ordinary shares to decline significantly.
We are a Dutch public company. The rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions and may not protect investors in a similar fashion afforded by incorporation in a U.S. jurisdiction.
We are a public company (naamloze vennootschap) organized under the laws of The Netherlands. Our corporate affairs are governed by our articles of association, the rules of our management board and those of our supervisory board and by the laws governing companies incorporated in The Netherlands. However, there can be no assurance that Dutch law will not change in the future or that it will serve to protect investors in a similar fashion afforded under corporate law principles in the United States, which could adversely affect the rights of investors.
The rights of shareholders and the responsibilities of management board members and supervisory board members may be different from the rights and obligations of shareholders and directors in companies governed by the laws of U.S. jurisdictions. In the performance of their duties, our management board members and supervisory board members are required by Dutch law to consider the interests of our Company, its shareholders, its employees and other stakeholders, in all cases with due observance of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a shareholder.
Our articles of association stipulate that the planet, humankind and society are important stakeholders of us and the highest principle pursued by us as part of our objects is the protection of the environment, nature and humankind. Under our articles of association, this principle shall form the foundation of our actions and the decisions of our management board and the supervisory board. On the basis of that premise, among other matters, our management board and the supervisory board may let the interests of the planet, humankind and society outweigh the interests of other stakeholders, provided that the interests of the latter stakeholders are not unnecessarily or disproportionately harmed. A resolution to amend the text or purport of these provisions of our articles of association shall require a unanimous vote in a general meeting where the entire issued share capital is represented.
For more information on relevant provisions of Dutch corporation law and of our articles of association, see “Description of Share Capital and Articles of Association — Comparison of Dutch Corporate Law and U.S. Corporate Law” in the accompanying prospectus.
We have broad discretion in the use of the net proceeds received by us from our sale of the securities and may invest or spend the proceeds in ways with which you do not agree and in ways that may not yield a return on your investment.
Although we currently intend to use the net proceeds received by us from our sale of the securities in the manner described in the section titled “Use of Proceeds” in this prospectus, our management has broad
discretion in the application of the net proceeds from our sale of the securities and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our ordinary shares. You will not have the opportunity to influence our decisions on how to use our net proceeds from our sale of the securities. The failure by our management to apply these funds effectively could result in financial losses that could harm our business, cause the price of our ordinary shares to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from our sale of the securities in a manner that does not produce income or that loses value.
We do not anticipate paying any cash dividends for the foreseeable future.
We currently intend to retain our future earnings, if any, for the foreseeable future, to fund the development and growth of our business. We do not intend to pay any dividends to holders of our ordinary shares. As a result, capital appreciation in the price of our ordinary shares, if any, will be your only source of gain on an investment in our ordinary shares.
Shareholders may not be able to exercise preemptive rights and, as a result, may experience substantial dilution upon future issuances of ordinary shares.
In the event of an issuance of ordinary shares, subject to certain exceptions, each shareholder will have a pro rata preemptive right in proportion to the aggregate nominal value of the ordinary shares held by such holder. These preemptive rights may be restricted or excluded by a resolution of the general meeting or by another corporate body designated by the general meeting. Our management board, subject to approval of our supervisory board, has been authorized, for a period of five years to issue shares or grant rights to subscribe for shares up to our authorized share capital from time to time and to limit or exclude preemptive rights in connection therewith. This could cause existing shareholders to experience substantial dilution of their interest in us.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act that relate to our current expectations and views of future events. These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, these forward-looking statements can be identified by words or phrases such as “believe,” “may,” “will,” “expect,” “estimate,” “could,” “should,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar or comparable expressions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:
•
our future business and financial performance, including our revenue, operating expenses and our ability to achieve profitability and maintain our future business and operating results;
•
our strategies, plan, objectives and goals, including, for example, the planned completion of the development of the Sion and the beginning of its serial production as well as intended expansion of our product portfolio or geographic reach;
•
the number of reservations for the Sion and net sales volume potential;
•
the expected start of serial production of the Sion and the key steps to start production including indicative milestones and funding requirements;
•
the expected cost and capital expenditure savings using our strategy;
•
our planned monetization of our technological innovations;
•
our sustainability goals including our plan to offset CO2 from production;
•
our plan to generate revenue from emission certificate pooling under relevant EU regulations on CO2 credits (CO2 pooling);
•
our funding requirements; and
•
our expectations regarding the development of our industry, market size and the competitive environment in which we operate.
These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions, many of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and liquidity, and the development of the industries in which we operate are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including, without limitation, the risk factors set forth in “Risk Factors” in this prospectus and in any applicable prospectus supplement or free writing prospectus, and those included in the documents that we incorporate by reference herein and therein.
You should read this prospectus carefully with the understanding that our actual future results may be materially different from and worse than what we expect. The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus , and any document incorporated by reference to this prospectus, including the uncertainties and
factors discussed under “Risk Factors” completely and with the understanding that our actual future results or performance may be materially different from what we expect. All forward-looking statements made in this prospectus are qualified by these cautionary statements.
Comparison of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.
USE OF PROCEEDS
We currently expect that we will need substantial additional funding until start of production of the Sion and we intend to use the net proceeds from our sale of the ordinary shares in this offering to cover some of these funding requirements, including but not limited to capital expenditures, research and development, general working capital, and other general corporate purposes.
Our expected use of net proceeds from our sale of the securities represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of net proceeds will vary depending on numerous factors, including our progress towards start of serial production. As a result, our management will have broad discretion in the application of the net proceeds from our sale of the securities, and investors will be relying on our judgment regarding the application of the net proceeds from the sale of the securities.
DILUTION
If you invest in this offering, your ownership interest will be diluted to the extent of the difference between the public offering price per ordinary share and the as adjusted net tangible book value per ordinary share after giving effect to this offering. We calculate net tangible book value per ordinary share by dividing the net tangible book value, which is total tangible assets less total liabilities, by the number of outstanding ordinary shares. Dilution represents the difference between the price per ordinary share paid by purchasers of ordinary shares in this offering and the as adjusted net tangible book value per ordinary share of our common stock immediately after giving effect to this offering. Our net tangible book value as of June 30, 2022 was approximately €61.9 million, or €0.76 (corresponding to $65.1 million or $0.80 per share) per ordinary share.
After giving effect to the sale of our ordinary shares during the term of the Sales Agreement in the aggregate amount of $135.0 million at an assumed offering price of $1.26 per share, the last reported sale price of our ordinary shares on Nasdaq on December 6, 2022, and after deducting commissions and estimated aggregate offering expenses payable by us, our net tangible book value as of June 30, 2022, would have been $195.6 million, or $1.04 per ordinary share. This represents an immediate increase in the net tangible book value of $0.24 per ordinary share to our existing stockholders and an immediate dilution in net tangible book value of $0.22 per ordinary share to new investors. The following table illustrates this per share dilution:
| |
Assumed public offering price per ordinary share
|
|
|
|
|
|
|
|
|
|
$ |
1.26 |
|
|
| |
Net tangible book value per ordinary share as of June 30, 2022
|
|
|
|
$ |
0.80 |
|
|
|
|
|
|
|
|
| |
Increase in net tangible book value per ordinary share attributable to this offering
|
|
|
|
$ |
0.24 |
|
|
|
|
|
|
|
|
| |
As adjusted net tangible book value per ordinary share as of June 30, 2022, after giving effect to this offering
|
|
|
|
|
|
|
|
|
|
$ |
1.04 |
|
|
| |
Dilution per share to new investors purchasing shares in this offering
|
|
|
|
|
|
|
|
|
|
$ |
0.22 |
|
|
The table above assumes for illustrative purposes that an aggregate of 107,142,857 ordinary shares are sold during the term of the Sales Agreement with the Agents at a price of $1.26 per ordinary share, the last reported sale price of our ordinary shares on Nasdaq on December 6, 2022, for aggregate gross proceeds of $135.0 million. The ordinary shares subject to the Sales Agreement are being sold from time to time at various prices. An increase of $1.00 per ordinary share in the price at which the ordinary shares are sold from the assumed offering price per share shown in the table above, to $2.26 per share, assuming all of our ordinary shares in the aggregate amount of $135.0 million during the remaining term of the Sales Agreement are sold at that price, would increase our adjusted net tangible book value per ordinary share after the offering to $1.38 and; would increase the dilution in net tangible book value per ordinary share to new investors in this offering to $0.88 per ordinary share, after deducting commissions and estimated aggregate offering expenses payable by us. A decrease of $1.00 per share in the price at which the ordinary shares are sold from the assumed offering price per ordinary share shown in the table above, to $0.26 per ordinary share, assuming all of our ordinary shares in the aggregate amount of $135.0 million during the term of the Sales Agreement are sold at that price, would decrease our adjusted net tangible book value per ordinary share after the offering to $0.33; and would lead to an accretion in net tangible book value per ordinary share to new investors in this offering of $0.07 per ordinary share, after deducting commissions and estimated aggregate offering expenses payable by us. This information is supplied for illustrative purposes only.
The above discussion and table are based on 81,507,641 ordinary shares issued and outstanding as of June 30, 2022, and excludes the impact of the issuance of 8,748,433 ordinary shares for aggregate gross proceeds of $17.5 million to the ELOC Investor under the ELOC described under “Prospectus Summary — Recent Developments” above as well as the issuance of 298,041 shares to employees for aggregate gross proceeds of $0.0 million.
To the extent that options outstanding as of June 30, 2022 have been or are exercised, or other ordinary shares are issued, investors purchasing shares in this offering could experience further dilution. In addition, to the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these ordinary shares could result in further dilution to our shareholders.
DESCRIPTION OF SHARE CAPITAL AND ARTICLES OF ASSOCIATION
General
We were incorporated pursuant to the laws of The Netherlands as Sono Motors Finance B.V. on October 23, 2020 as a wholly-owned subsidiary of Sono Motors GmbH. As part of the corporate reorganization that was completed on November 27, 2020, our then-existing shareholders contributed all of their shares in Sono Motors GmbH to Sono Motors Finance B.V. in exchange for newly issued ordinary shares of Sono Motors Finance B.V. In addition, the sole issued and outstanding ordinary share in Sono Motors Finance B.V. at that time, which was held by Sono Motors GmbH, was canceled (ingetrokken). As a result, Sono Motors GmbH became a wholly-owned subsidiary of Sono Motors Finance B.V. and the then-existing shareholders of Sono Motors GmbH became the shareholders of Sono Motors Finance B.V. Also, on November 27, 2020, Sono Motors Finance B.V. was converted into a public company with limited liability under Dutch law (naamloze vennootschap), and changed its legal name from Sono Motors Finance B.V. to Sono Group N.V. A portion of the newly issued ordinary shares of Sono Group N.V. was also converted into high voting shares in the share capital of Sono Group N.V. As of completion of the corporate reorganization, the shareholders of Sono Group N.V. held an aggregate of 31,068,000 ordinary shares of Sono Group N.V. (share number does not reflect issuance of additional shares to all of our existing shareholders, replicating the effect of a share split, which took place immediately prior to pricing of our initial public offering).
Our affairs are governed by the provisions of our articles of association and internal rules, regulations and policies, as amended and restated from time to time, and by the provisions of applicable Dutch law.
We are registered with the Trade Register of the Chamber of Commerce (Kamer van Koophandel) under number 80683568. Our corporate seat is in Amsterdam, The Netherlands, and our registered office is in Munich, Germany.
The following is a summary of material information concerning our share capital and our articles of association. The summaries of our articles of association as set forth herein are qualified in their entirety by reference to the full text of our articles of association. This summary does not constitute legal advice regarding those matters and should not be regarded as such.
Share Capital
As of the date of this prospectus, we have a subscribed capital in the amount of € 9,713,696.46 which is divided into 86,894,941 ordinary shares, each with a nominal value of €0.06, and 3,000,000 high voting shares, each with a nominal value of €1.50.
Under Dutch law, our authorized share capital is the maximum capital that we may issue without amending our articles of association. An amendment of our articles of association would require a resolution of the general meeting upon proposal by the management board with the approval of the supervisory board. As of the execution of our deed of conversion and amendment as part of the corporate reorganization, our authorized share capital amounts to €25,200,000, divided into 320,000,000 ordinary shares, each with a nominal value of €0.06, and 4,000,000 high voting shares, each with a nominal value of €1.50. Upon an increase of our issued share capital to at least €25,000,000, our authorized share capital will automatically increase to €102,000,000, divided into 1,500,000,000 ordinary shares, each with a nominal value of €0.06, and 8,000,000 high voting shares, each with a nominal value of €1.50.
Our high voting shares carry the same economic rights entitlements as our ordinary shares. The high voting shares carry different voting rights than the ordinary shares, proportionate to the respective nominal value: for each high voting share, 25 votes can be exercised in the general meeting, whereas for each ordinary share one vote can be exercised in the general meeting. As a matter of Dutch law, preemptive rights for the holders of our ordinary shares and our high voting shares are linked to the nominal value of their shares, which implies that each high voting share carries a preemptive right representing 25 times the preemptive right attached to each ordinary share. Pursuant to our articles of association, each holder of high voting shares can convert any number of high voting shares held by a shareholder into ordinary shares as
described below. A holder of ordinary shares cannot convert its ordinary shares into high voting shares under our articles of association.
Upon receipt of a request for conversion of high voting shares into ordinary shares, the management board shall resolve to convert the relevant number of high voting shares into ordinary shares in a 1:25 ratio. A management board member who holds high voting shares that are the subject of the conversion request may generally participate in the decision making process of the management board and is only precluded therefrom, if the personal interests of such management board member in such decision conflict, directly or indirectly, with the interests of the Company and its business. The supervisory board shall resolve on the conversion request, if all management board members are precluded from the decision making process concerning a conversion request due to such conflicts of interest. Promptly following a conversion, the holder of high voting shares that made the conversion request shall be obligated to transfer 24 out of every 25 ordinary shares so received to us for no consideration, which will be canceled afterwards with the effect of a 1:1 conversion ratio. The conversion mechanism is structured in this manner in order to avoid a two-month waiting period which would be required under Dutch law if high voting shares were converted into ordinary shares of an actual 1:1 ratio. Neither the management board nor the Company is required to effect a conversion of high voting shares (a) if the conversion request does not comply with the specifications and requirements set out in our articles of association or if the management board reasonably believes that the information included in such request is incorrect or incomplete or (b) to the extent that we would not be permitted under mandatory Dutch law to acquire the relevant number of ordinary shares in connection with such conversion.
Any settlement of our ordinary shares issued in offerings under this prospectus will take place on the closing date of the relevant offering through The Depository Trust Company (“DTC”), in accordance with its customary settlement procedures for equity securities. Each person owning ordinary shares held through DTC must rely on the procedures thereof and on institutions that have accounts therewith to exercise any rights of a holder of the ordinary shares.
Our articles of association provide that, for as long as any of our ordinary shares are admitted to trading on Nasdaq, the New York Stock Exchange or on any other regulated stock exchange operating in the United States, the laws of the State of New York shall apply to the property law aspects of the ordinary shares reflected in the register administered by our transfer agent and New York State law will determine, for example, how our ordinary shares are transferred or encumbered. However, certain other aspects relating to our ordinary shares remain subject to Dutch law and Dutch law continues to determine, for example, how new shares are issued.
Ordinary Shares
The following summarizes the main rights of holders of our ordinary shares:
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each holder of ordinary shares is entitled to one vote per share on all matters to be voted on by shareholders generally, including the appointment of management board members and supervisory board members;
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there are no cumulative voting rights (but our high voting shares do carry 25 votes each, compared to one vote each per ordinary share);
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the holders of our ordinary shares are entitled to dividends and other distributions as may be declared from time to time by us out of funds legally available for that purpose, if any;
•
upon our liquidation, dissolution or winding-up, the holders of ordinary shares will be entitled to share ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities; and
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the holders of ordinary shares have preemptive rights in case of share issuances or the grant or rights to subscribe for shares, except if such rights are limited or excluded by the corporate body authorized to do so and except in such cases as provided by Dutch law and our articles of association.
Shareholders’ Register
Pursuant to Dutch law and our articles of association, we must keep our shareholders’ register accurate and current. The management board keeps our shareholders’ register and records names and
addresses of all holders of registered shares, showing the date on which the shares were acquired, the date of the acknowledgement by or notification of us as well as the amount paid on each share. The register also includes the names and addresses of those with a right of usufruct (vruchtgebruik) on registered shares belonging to another or a pledge (pandrecht) in respect of such shares. The ordinary shares offered under this prospectus will be held through DTC, therefore DTC or its nominee will be recorded in the shareholders’ register as the holder of those ordinary shares. All shares are in registered form (op naam), provided that our management board may resolve that one or more ordinary shares are in bearer form (aan toonder) if certain requirements are met. We may issue share certificates (aandeelbewijzen) for registered shares in such form as may be approved by our management board.
Corporate Objectives
Pursuant to our articles of association, our main corporate objectives are:
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the design, development, manufacturing and production of electric vehicles, including with solar integration technology;
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the design, development, manufacturing, production and licensing of solar panels for mobility applications and consumer products;
•
the design, development, licensing and operation of software-based mobility services;
•
to develop electronic applications;
•
to incorporate, to participate in, to finance, to hold any other interest in and to conduct the management or supervision of other entities, companies, partnerships and businesses;
•
to acquire, to manage, to invest, to exploit, to encumber and to dispose of assets and liabilities;
•
to furnish guarantees, to provide security, to warrant performance in any other way and to assume liability, whether jointly and severally or otherwise, in respect of obligations of group companies or other parties; and
•
to do anything which, in the widest sense, is connected with or may be conducive to the objects described above.
Environment
As described in article 4 of our articles of association, the planet, humankind and society are important stakeholders of us and the highest principle pursued by us as part of our objects is the protection of the environment, nature and humankind. This principle shall form the foundation of the actions of our Company and the decisions of our management board and supervisory board. On the basis of that premise:
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our management board shall monitor for and, to the extent possible and practicable, is expected to favor environmentally-friendly alternatives for existing operations of the Company and its subsidiaries, in particular if those alternatives are more efficient in terms of resource consumption;
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additional costs or other increased expenditures shall not constitute a decisive factor when deciding whether or not to pursue an environmentally superior alternative for existing operations of the Company and its subsidiaries;
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products designed, developed, manufactured or produced by the Company and its subsidiaries should be durable, recyclable and sustainable; and
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our management board and supervisory board may let the interests of the planet, humankind and society outweigh the interests of other stakeholders, provided that the interests of the latter stakeholders are not unnecessarily or disproportionately harmed.
A management board member or supervisory board member who repeatedly and consistently violates these principles shall be considered to have breached his or her statutory duty to act in the best interests of the Company and its business.
A resolution to amend the text or purport of these provisions of our articles of association shall require a unanimous vote in a general meeting where the entire issued share capital is represented.
Limitations on the Rights to Own Securities
Our ordinary shares may be issued to individuals, corporations, trusts, estates of deceased individuals, partnerships and unincorporated associations of persons. Our articles of association contain no limitation on the rights to own our shares and no limitation on the rights of nonresidents of The Netherlands or foreign shareholders to hold or exercise voting rights.
Limitation on Liability and Indemnification Matters
Under Dutch law, management board members and supervisory board members may be held liable for damages in the event of improper or negligent performance of their duties. They may be held jointly and severally liable for damages to the company and to third parties for infringement of the articles of association or of certain provisions of Dutch law. In certain circumstances, they may also incur additional specific civil and criminal liabilities. Subject to certain exceptions, our articles of association provide for indemnification of our current and former management board members and supervisory board members (and other current and former officers and employees as designated by our management board, subject to approval by our supervisory board). No indemnification shall be given to an indemnified person:
(a) if a competent court or arbitral tribunal has established, without having (or no longer having) the possibility for appeal, that the acts or omissions of such indemnified person that led to the financial losses, damages, expenses, suit, claim, action or legal proceedings as described above are of an unlawful nature (including acts or omissions which are considered to constitute malice, gross negligence, intentional recklessness and/or serious culpability attributable to such indemnified person);
(b) to the extent that his or her financial losses, damages and expenses are covered under insurance and the relevant insurer has settled, or has provided reimbursement for, these financial losses, damages and expenses (or has irrevocably undertaken to do so);
(c) in relation to proceedings brought by such indemnified person against the company, except for proceedings brought to enforce indemnification to which he is entitled pursuant to our articles of association, pursuant to an agreement between such indemnified person and the company which has been approved by the management board or pursuant to insurance taken out by the company for the benefit of such indemnified person; and
(d) for any financial losses, damages or expenses incurred in connection with a settlement of any proceedings effected without the company’s prior consent.
Under our articles of association, our management board may stipulate additional terms, conditions and restrictions in relation to the indemnification described above.
Shareholders’ Meeting
General meetings may be held in Amsterdam, Arnhem, Assen, The Hague, Haarlem, ‘s-Hertogenbosch, Groningen, Leeuwarden, Lelystad, Maastricht, Middelburg, Rotterdam, Schiphol (Haarlemmermeer), Utrecht or Zwolle, all in The Netherlands. The annual general meeting must be held within six months of the end of each financial year. Additional extraordinary general meetings may also be held whenever considered appropriate by our management board or the supervisory board and shall be held within three months after our management board has considered it to be likely that our equity has decreased to an amount equal to or lower than half of its paid-in and called-up share capital, in order to discuss the measures to be taken if so required.
Pursuant to Dutch law, one or more shareholders or others with meeting rights under Dutch law that jointly represent at least one-tenth of the issued share capital may request us to convene a general meeting, setting out in detail the matters to be discussed. If we have not taken the steps necessary to ensure that such meeting can be held within six weeks after the request, the requesting party/parties may, on their application, be authorized by the competent Dutch court in preliminary relief proceedings to convene a general meeting. The court shall disallow the application if it does not appear that the applicants have previously requested our management board and our supervisory board to convene a general meeting and neither our management
board nor our supervisory board has taken the necessary steps so that the general meeting could be held within six weeks after the request.
General meetings must be convened by an announcement published in a Dutch daily newspaper with national distribution. The notice must state the agenda, the time and place of the meeting, the record date (if any), the procedure for participating in the general meeting by proxy, as well as other information as required by Dutch law. The notice must be given at least 15 days prior to the day of the meeting. The agenda for the annual general meeting shall include, among other things, the adoption of the annual accounts, appropriation of our profits and proposals relating to the composition of the management board and supervisory board, including the filling of any vacancies in such bodies. In addition, the agenda shall include such items as have been included therein by the management board or the supervisory board. The agenda shall also include such items requested by one or more shareholders, or others with meeting rights under Dutch law, representing at least 3% of the issued share capital. Requests must be made in writing or by electronic means and received by us at least 60 days before the day of the meeting. No resolutions shall be adopted on items other than those that have been included in the agenda.
In accordance with the DCGC and our articles of association, shareholders having the right to put an item on the agenda under the rules described above shall exercise such right only after consulting the management board in that respect. If one or more shareholders intend to request that an item be put on the agenda that may result in a change in the company’s strategy (for example, the removal of management board members or supervisory board members), the management board must be given the opportunity to invoke a reasonable period to respond to such intention. Such period shall not exceed 180 days (or such other period as may be stipulated for such purpose by Dutch law and/or the DCGC from time to time). If invoked, the management board must use such response period for further deliberation and constructive consultation, in any event with the shareholders(s) concerned, and shall explore the alternatives. At the end of the response time, the management board shall report on this consultation and the exploration of alternatives to the general meeting. This shall be supervised by our supervisory board. The response period may be invoked only once for any given general meeting and shall not apply: (a) in respect of a matter for which a response period has been previously invoked; or (b) if a shareholder holds at least 75% of the Company’s issued share capital as a consequence of a successful public bid. The response period may also be invoked in response to shareholders or others with meeting rights under Dutch law requesting that a general meeting be convened, as described above.
Moreover, our management board, with the approval of our supervisory board, can invoke a cooling- off period of up to 250 days when shareholders, using their right to have items added to the agenda for a general meeting or their right to request a general meeting, propose an agenda item for our general meeting to dismiss, suspend or appoint one or more management board members or supervisory board members (or to amend any provision in our articles of association dealing with those matters) or when a public offer for our Company is made or announced without our support, provided, in each case, that our management board believes that such proposal or offer materially conflicts with the interests of our Company and its business. During a cooling-off period, our general meeting cannot dismiss, suspend or appoint management board members and supervisory board members (or amend the provisions in our articles of association dealing with those matters) except at the proposal of our management board. During a cooling-off period, our management board must gather all relevant information necessary for a careful decision-making process and at least consult with shareholders representing 3% or more of our issued share capital at the time the cooling-off period was invoked, as well as with our Dutch works council (if we or, under certain circumstances, any of our subsidiaries would have one). Formal statements expressed by these stakeholders during such consultations must be published on our website to the extent these stakeholders have approved that publication. Ultimately one week following the last day of the cooling-off period, our management board must publish a report in respect of its policy and conduct of affairs during the cooling-off period on our website. This report must remain available for inspection by shareholders and others with meeting rights under Dutch law at our office and must be tabled for discussion at the next general meeting. Shareholders representing at least 3% of our issued share capital may request the Enterprise Chamber for early termination of the cooling-off period. The Enterprise Chamber must rule in favor of the request if the shareholders can demonstrate that:
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our management board, in light of the circumstances at hand when the cooling-off period was invoked, could not reasonably have concluded that the relevant proposal or hostile offer constituted a material conflict with the interests of our Company and its business;
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our management board cannot reasonably believe that a continuation of the cooling-off period would contribute to careful policy-making; or
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other defensive measures, having the same purpose, nature and scope as the cooling-off period, have been activated during the cooling-off period and have not since been terminated or suspended within a reasonable period at the relevant shareholders’ request (i.e., no ‘stacking’ of defensive measures).
The general meeting is presided over by the chairperson of the supervisory board. If no chairperson has been elected or if he or she is not present at the meeting, the general meeting shall be presided over by another supervisory board member present at the meeting. If no supervisory board member is present, the meeting shall be presided over by one of our CEOs. If no CEO has been elected or if they are not present at the meeting, the general meeting shall be presided over by another management board member present at the meeting. If no management board member is present at the meeting, the general meeting shall be presided over by any other person appointed by the general meeting. In each case, the person who should chair the general meeting pursuant to the rules described above may appoint another person to chair the general meeting instead. Management board members and supervisory board members may always attend a general meeting. In these meetings, they have an advisory vote. The chairperson of the meeting may decide at his or her discretion to admit other persons to the meeting.
All shareholders and others with meeting rights under Dutch law are authorized to attend the general meeting, to address the meeting and, insofar as they have such right, to vote pro rata to his or her shareholding. Shareholders may exercise these rights, if they are the holders of shares on the record date, if any, as required by Dutch law, which is currently the 28th day before the day of the general meeting. Under our articles of association, shareholders and others with meeting rights under Dutch law must notify us in writing or by electronic means of their identity and intention to attend the general meeting. This notice must be received by us ultimately on the seventh day prior to the general meeting, unless indicated otherwise when such meeting is convened.
Each ordinary share confers the right on the holder to cast one vote at the general meeting and each high voting share confers the right on the holder to cast 25 votes at the general meeting. Shareholders may vote by proxy. No votes may be cast at a general meeting on shares held by us or our subsidiaries or on shares for which we or our subsidiaries hold depository receipts. Nonetheless, the holders of a right of usufruct (vruchtgebruik) and the holders of a right of pledge (pandrecht) in respect of shares held by us or our subsidiaries in our share capital are not excluded from the right to vote on such shares, if the right of usufruct (vruchtgebruik) or the right of pledge (pandrecht) was granted prior to the time such shares were acquired by us or any of our subsidiaries. Neither we nor any of our subsidiaries may cast votes in respect of a share on which we or such subsidiary holds a right of usufruct (vruchtgebruik) or a right of pledge (pandrecht).
Shares which are not entitled to voting rights pursuant to the preceding sentences will not be taken into account for the purpose of determining the number of shareholders that vote and that are present or represented, or the amount of the share capital that is provided or that is represented at a general meeting.
Decisions of the general meeting are taken by a simple majority of votes cast, except where Dutch law or our articles of association provide for a qualified majority or unanimity. Our articles of association provide that, subject to any provision of mandatory Dutch law and any higher quorum requirement stipulated by our articles of association, if we become subject to a binding quorum requirement with respect to resolutions of our general meeting under applicable securities laws or listing rules, then such resolutions shall be subject to such quorum.
Management Board and Supervisory Board Members
Appointment of Management Board and Supervisory Board Member
Under our articles of association, each of Laurin Hahn and Jona Christians, two of our founders, as long as they hold, individually, at least 5% of our voting rights, can each make a binding nomination for the appointment of one supervisory board member. These supervisory board members can only be appointed by the general meeting upon such binding nominations. In addition, under our articles of association, our
management board members and our other supervisory board members are appointed by the general meeting upon binding nomination by our supervisory board. However, the general meeting may at all times overrule the binding nomination by a resolution adopted by at least a two-thirds majority of the votes cast, provided such majority represents more than half of the issued share capital. If the general meeting overrules the binding nomination, the supervisory board, Laurin Hahn or Jona Christians, as applicable, shall make a new nomination.
Our supervisory board has adopted a diversity policy for the composition of our management board and our supervisory board, as well as a profile for the composition of the supervisory board. The supervisory board shall make any nomination for the appointment of a management board member or supervisory board member with due regard to the rules and principles set forth in such diversity policy and profile, as applicable.
At a general meeting, a resolution to appoint a management board member or supervisory board member can only be passed in respect of candidates whose names are stated for that purpose in the agenda of that general meeting or in the explanatory notes thereto.
Under Dutch law, when nominating a person for appointment or reappointment as a supervisory board member, the nomination must be supported by reasons (if it concerns a reappointment, past performance must be taken into consideration) and the following information about such person must be provided: (i) age and profession; (ii) the aggregate nominal value of the shares held in the company’s capital; (iii) present and past positions, to the extent relevant for the performance of the tasks of a supervisory board member; and (iv) the name of each entity where such person already holds a position as supervisory board member or non-executive director (in case of multiple entities within the same group, the name of the group shall suffice).
Duties and Liabilities of Management Board and Supervisory Board Members
Under Dutch law, the management board is charged with the management of the company, subject to the restrictions contained in our articles of association, and the supervisory board is charged with the supervision of the policy of the management board and the general course of affairs of the company and of the business connected with it. The management board members may divide their tasks among themselves in or pursuant to the internal rules applicable to the management board. Each management board member and supervisory board member has a statutory duty to act in the corporate interest of the company and its business. Under Dutch law, the corporate interest extends to the interests of all corporate stakeholders, such as shareholders, creditors, employees, customers and suppliers. The duty to act in the corporate interest of the company also applies in the event of a proposed sale or break-up of the company, provided that the circumstances generally dictate how such duty is to be applied and how the respective interests of various groups of stakeholders should be weighed. Our articles of association stipulate that the planet, humankind and society are important stakeholders of us and the highest principle pursued by us as part of our objects is the protection of the environment, nature and humankind. Under our articles of association, this principle shall form the foundation of our actions and the decisions of our management board and the supervisory board. On the basis of that premise, among other matters, our management board and the supervisory board may let the interests of the planet, humankind and society outweigh the interests of other stakeholders, provided that the interests of the latter stakeholders are not unnecessarily or disproportionately harmed.
Any resolution of the management board regarding a material change in our identity or character requires approval of the general meeting.
Our management board is entitled to represent the Company. The power to represent the Company also vests in any two management board members acting jointly.
Dividends and Other Distributions
Dividends
We may only make distributions, whether a distribution of profits or of freely distributable reserves, to our shareholders to the extent our shareholders’ equity (eigen vermogen) exceeds the sum of the paid-in and
called-up share capital plus any reserves required by Dutch law or by our articles of association. Under our articles of association, the management board may decide that all or part of the profits are carried to reserves. After reservation by the management board of any profit, any remaining profit will be at the disposal of the general meeting for distribution, subject to restrictions of Dutch law and approval by our supervisory board.
We only make a distribution of dividends to our shareholders after the adoption of our annual accounts demonstrating that such distribution is legally permitted. The management board is permitted, subject to certain requirements, to declare interim dividends without the approval of the general meeting, but only with the approval of the supervisory board.
Dividends and other distributions shall be made payable not later than the date determined by the management board. Claims to dividends and other distributions not made within five years from the date that such dividends or distributions became payable will lapse and any such amounts will be considered to have been forfeited to us (verjaring).
Our current dividend policy is to retain all available funds and any future earnings to fund the completion of the development of the Sion and the start of its serial production as well as the further development and expansion of our business. If we were to revise this policy relating to a payment of future dividends, such revised policy would, subject to the restrictions described above, depend on many factors, such as our results of operations, financial condition, cash requirements, prospects and other factors deemed relevant by our management board and supervisory board.
Exchange Controls
Under Dutch law, there are no exchange controls applicable to the transfer to persons outside of The Netherlands of dividends or other distributions with respect to, or of the proceeds from the sale of, shares of a Dutch company, albeit those transfers being subject to applicable restrictions under trade and economic sanctions and measures, including those concerning export control, pursuant to EU regulations, the Sanctions Act 1977 (Sanctiewet 1977) or other legislation, applicable anti-boycott regulations, applicable anti-money-laundering regulations and similar rules and provided that, under circumstances, such dividends or other distributions must be reported to the Dutch Central Bank for statistical purposes. There are no special restrictions in the articles of association or Dutch law that limit the right of shareholders who are not citizens or residents of The Netherlands to hold or vote shares.
Squeeze-Out Procedures
A shareholder who holds at least 95% of our issued share capital for its own account, alone or together with group companies, may initiate proceedings against the other shareholders jointly for the transfer of their shares to such shareholder. The proceedings are held before the Enterprise Chamber, and can be instituted by means of a writ of summons served upon each of the other shareholders in accordance with the provisions of the Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering). The Enterprise Chamber may grant the claim for squeeze-out in relation to the other shareholders and will determine the price to be paid for the shares, if necessary, after appointment of one or three experts who will offer an opinion to the Enterprise Chamber on the value to be paid for the shares of the other shareholders. Once the order to transfer becomes final before the Enterprise Chamber, the person acquiring the shares shall give written notice of the date and place of payment and the price to the holders of the shares to be acquired whose addresses are known to it. Unless the addresses of all of them are known to the acquiring person, such a person is required to publish the same in a daily newspaper with a national circulation.
Dissolution and Liquidation
Under our articles of association, we may be dissolved by a resolution of the general meeting, subject to a proposal of the management board approved by our supervisory board. In the event of a dissolution, the liquidation shall be effected by the management board, under supervision of our supervisory board, unless the general meeting decides otherwise. During liquidation, the provisions of our articles of association will remain in force as far as possible. To the extent that any assets remain after payment of all debts, those remaining assets shall be distributed to our shareholders in proportion to their number of shares.
Dutch Corporate Governance Code
As a listed Dutch public company (naamloze vennootschap), we are subject to the DCGC. The DCGC contains both principles and best practice provisions on corporate governance that regulate relations between the management board, the supervisory board and the general meeting and matters in respect of financial reporting, auditors, disclosure, compliance and enforcement standards. The DCGC is based on a “comply or explain” principle. Accordingly, companies are required to disclose in their statutory annual reports, filed in The Netherlands, whether they comply with the provisions of the DCGC. If they do not comply with these provisions (for example, because of a conflicting Nasdaq requirement), the company is required to give the reasons for such non-compliance. See “Risk Factors — Risks Related to Our Ordinary shares — We are not obligated to, and do not, comply with all best practice provisions of the Dutch Corporate Governance Code.”
We do not comply with all principles and best practice provisions of the DCGC. As of the date of this prospectus, our main deviations from the DCGC are summarized below, but cannot exclude the possibility of deviating from additional provisions of the DCGC after the date hereof, including in order to follow market practice or governance practices in the United States.
Under our articles of association, management board members and supervisory board members are to be appointed on the basis of a binding nomination prepared by the supervisory board or certain of our shareholders. This means that the nominee will be appointed, unless the general meeting removes the binding nature of the nomination (in which case a new nomination will be prepared for a subsequent general meeting). Our articles of association provide that the general meeting can only pass such resolution by a two-thirds majority representing more than half of the issued share capital. However, the DCGC recommends that the general meeting can pass such a resolution by simple majority, representing no more than one-third of the issued share capital.
Under our articles of association, management board members and supervisory board members can only be dismissed by the general meeting by simple majority, provided that the supervisory board proposes the dismissal. In other cases, the general meeting can only pass such resolution by a two-thirds majority representing more than half of the issued share capital. The DCGC recommends that the general meeting can pass a resolution to dismiss a management board member or a supervisory board member by simple majority, representing no more than one-third of the issued share capital.
The DCGC recommends against providing equity awards as part of the compensation of a supervisory board member. However, we may deviate from this recommendation and grant equity awards to our supervisory board members, consistent with U.S. market practice.
Our long-term incentive plan allows us to set the terms and conditions of equity awards granted thereunder. Under that plan, we may grant shares that are not subject to a lock-up period of at least five years after the date of grant, and we may grant options without restricting the exercisability of those options during the first three years after the date of grant. In those cases, this would cause additional deviations from the DCGC.
The DCGC provides recommendations regarding the independence of our committees. We do not comply with all of these recommendations, due also to recent changes in the composition of our supervisory board.
Dutch Financial Reporting Supervision Act
On the basis of the Dutch Financial Reporting Supervision Act (Wet toezicht financiële verslaggeving), or the FRSA, the Dutch Authority for the Financial Markets (Stichting Autoriteit Financiële Markten), or AFM, supervises the application of financial reporting standards by Dutch companies whose securities are listed on a Dutch or foreign stock exchange.
Pursuant to the FRSA, the AFM has an independent right to (i) request an explanation from us regarding our application of the applicable financial reporting standards if, based on publicly known facts or circumstances, it has reason to doubt that the Company’s financial reporting meets such standards and (ii) recommend to us the making available of further explanations. If we do not comply with such a request or recommendation, the AFM may request that the Enterprise Chamber order us to (i) make
available further explanations as recommended by the AFM, (ii) provide an explanation of the way we have applied the applicable financial reporting standards to our financial reports or (iii) prepare or restate our financial reports in accordance with the Enterprise Chamber’s orders.
Listing
Our ordinary shares are listed on Nasdaq under the symbol “SEV.”
Transfer Agent and Registrar
Our transfer agent and registrar for the ordinary shares is the American Stock Transfer & Trust Company.
Comparison of Dutch Corporate Law and U.S. Corporate Law
The following comparison between Dutch corporate law, which applies to us, and Delaware corporation law, the law under which many publicly listed corporations in the United States are incorporated, discusses additional matters not otherwise described in this prospectus. Although we believe this summary is materially accurate, the summary is subject to Dutch law, including Book 2 of the Dutch Civil Code and the DCGC and Delaware corporation law, including the Delaware General Corporation Law.
Duties of Managing and Supervisory Board Members
The Netherlands. We have a two-tier board structure consisting of our management board (bestuur) and a separate supervisory board (raad van commissarissen).
Under Dutch law, the management board is charged with the management of the company, subject to the restrictions contained in our articles of association, and the supervisory board is charged with the supervision of the policy of the management board and the general course of affairs of the company and of the business connected with it. The management board members may divide their tasks among themselves in or pursuant to the internal rules applicable to the management board. Each management board member and supervisory board member has a statutory duty to act in the corporate interest of the company and its business. Under Dutch law, the corporate interest extends to the interests of all corporate stakeholders, such as shareholders, creditors, employees, customers and suppliers. The duty to act in the corporate interest of the company also applies in the event of a proposed sale or break-up of the company, provided that the circumstances generally dictate how such duty is to be applied and how the respective interests of various groups of stakeholders should be weighed. Our articles of association stipulate that the planet, humankind and society are important stakeholders of us and the highest principle pursued by us as part of our objects is the protection of the environment, nature and humankind. Under our articles of association, this principle shall form the foundation of our actions and the decisions of our management board and the supervisory board. On the basis of that premise, among other matters, our management board and the supervisory board may let the interests of the planet, humankind and society outweigh the interests of other stakeholders, provided that the interests of the latter stakeholders are not unnecessarily or disproportionately harmed.
Any resolution of the management board regarding a material change in our identity or character requires approval of the general meeting.
The approval of our supervisory board is required for certain resolutions of our management board, including concerning the following matters: the making of certain proposals to the general meeting; the issue of shares or the granting of rights to subscribe for shares; the limitation or exclusion of preemption rights; the acquisition of shares by us in our own capital; the drawing up or amendment of our management board rules; the performance of legal acts relating to non-cash contributions on shares; material changes to the identity or the character of the company or its business; the charging of amounts to be paid up on shares against the company’s reserves; the making of an interim distribution; and such other resolutions as the supervisory board shall have specified in a resolution to that effect and notified to the management board. The absence of the approval of the supervisory board shall result in the relevant resolution being null and void but shall not affect the powers of representation of the management board or of the management board members.
Our management board is entitled to represent the Company. The power to represent the Company also vests in any two management board members acting jointly.
Delaware. The board of directors bears the ultimate responsibility for managing the business and affairs of a corporation. In discharging this function, directors of a Delaware corporation owe fiduciary duties of care and loyalty to the corporation and to its stockholders. Delaware courts have decided that the directors of a Delaware corporation are required to exercise informed business judgment in the performance of their duties. Informed business judgment means that the directors have informed themselves of all material information reasonably available to them. Delaware courts have also imposed a heightened standard of conduct upon directors of a Delaware corporation who take any action designed to defeat a threatened change in control of the corporation. In addition, under Delaware law, when the board of directors of a Delaware corporation approves the sale or break-up of a corporation, the board of directors may, in certain circumstances, have a duty to obtain the highest value reasonably available to the stockholders.
Director Terms
The Netherlands. The DCGC provides the following best practice recommendations on the terms for tenure of management board members and supervisory board members:
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Management board members should be appointed for a maximum period of four years, without limiting the number of consecutive terms management board members may serve.
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Supervisory board members should be appointed for two consecutive periods of no more than four years. Thereafter, supervisory board members may be reappointed for a maximum of two consecutive periods of no more than two years, provided that the reasons for any reappointment after an eight-year term of office should be disclosed in the company’s annual report.
The general meeting shall at all times be entitled to suspend or dismiss a management board member or supervisory board member. Under our articles of association, the general meeting may only adopt a resolution to suspend or dismiss such director by at least a two-thirds majority of the votes cast, provided that such majority represents more than half of the issued share capital, unless the resolution is passed at the proposal of the supervisory board, in which case a simple majority of the votes cast is sufficient. In addition, the supervisory board may at any time suspend a management board member. A suspension by the supervisory board can at any time be lifted by the general meeting. If a management board member is suspended and the general meeting does not resolve to dismiss him or her within three months from the date of such suspension, the suspension shall lapse.
Delaware. The Delaware General Corporation Law generally provides for a one-year term for directors, but permits directorships to be divided into up to three classes with up to three-year terms, with the years for each class expiring in different years, if permitted by the certificate of incorporation, an initial bylaw or a bylaw adopted by the stockholders. A director elected to serve a term on a “classified” board may not be removed by stockholders without cause. There is no limit in the number of terms a director may serve.
Director Vacancies
The Netherlands. Our management board can temporarily fill vacancies in its midst caused by temporary absence or incapacity of management board members without requiring a shareholder vote. If all of our management board members are absent or incapacitated, our management shall be attributed to the supervisory board. The person charged with our management in this manner may designate one or more persons to be charged with our management instead of, or together with, such person(s). Our supervisory board can also temporarily fill vacancies in its midst caused by temporary absence or incapacity of supervisory board members without a shareholder vote. If all of our supervisory board members are absent or incapacitated, the supervision of our Company shall be attributed to the person who most recently ceased to hold office as the chairperson of our supervisory board, provided that such person is willing and able to accept such position, who may designate one or more other persons to be charged with the supervision of the Company, instead of, or together with, such former chairperson. The person charged with the supervision of the Company pursuant to this provision shall cease to hold that position when the general meeting has appointed one or more persons as supervisory board members.
Under Dutch law, management board members and supervisory board members are appointed and reappointed by the general meeting. Under our articles of association, each of Laurin Hahn and Jona Christians, two of our founders, as long as he holds at least 5% of our voting rights, can each make a binding nomination for the appointment of one supervisory board member. These supervisory board members can only be appointed by the general meeting upon such binding nominations. In addition, under our articles of association, our management board members and our other supervisory board members are appointed by the general meeting upon binding nomination by our supervisory board. However, the general meeting may at all times overrule the binding nomination by a resolution adopted by at least a two-thirds majority of the votes cast, provided such majority represents more than half of the issued share capital. If the general meeting overrules the binding nomination, the supervisory board, Laurin Hahn or Jona Christians, as applicable, shall make a new nomination.
Our supervisory board adopted a diversity policy for the composition of our management board and our supervisory board, as well as a profile for the composition of the supervisory board. The supervisory board shall make any nomination for the appointment of a management board member or supervisory board member with due regard to the rules and principles set forth in such diversity policy and profile, as applicable.
Under Dutch law, when nominating a person for appointment or reappointment as a supervisory board member, the nomination must be supported by reasons (if it concerns a reappointment, past performance must be taken into consideration) and the following information about such person must be provided: (i) age and profession; (ii) the aggregate nominal value of the shares held in the company’s capital; (iii) present and past positions, to the extent relevant for the performance of the tasks of a supervisory board member; and (iv) the name of each entity where such person already holds a position as supervisory board member or non-executive director (in case of multiple entities within the same group, the name of the group shall suffice).
Delaware. The Delaware General Corporation Law provides that vacancies and newly created directorships may be filled by a majority of the directors then in office (even though less than a quorum) unless (i) otherwise provided in the certificate of incorporation or bylaws of the corporation or (ii) the certificate of incorporation directs that a particular class of stock is to elect such director, in which case any other directors elected by such class, or a sole remaining director elected by such class, will fill such vacancy.
Conflict-of-Interest Transactions
The Netherlands. Under Dutch law and our articles of association, our management board members and supervisory board members shall not take part in any discussion or decision-making that involves a subject or transaction in relation to which he or she has a direct or indirect personal conflict of interest with us. Such a conflict of interest would generally arise if the management board member or supervisory board member concerned is unable to serve our interests and the business connected with it with the required level of integrity and objectivity due to the existence of the conflicting personal interest. Our articles of association provide that if as a result of conflicts of interests no resolution of the management board can be adopted, the resolution shall be passed by the supervisory board and that, if as a result of conflicts of interests no resolution of the supervisory board can be adopted, the resolution may nonetheless be adopted by the supervisory board as if none of the supervisory board members had a conflict of interest. In that case, each supervisory board member is entitled to participate in the discussion and decision-making process and to cast a vote.
The DCGC provides the following best practice recommendations in relation to conflicts of interests in respect of management board members or supervisory board members:
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A management board member should report any potential conflict of interest in a transaction that is of material significance to the company and/or to such person to the chairperson of the supervisory board and to the other members of the management board without delay. The management board member should provide all relevant information in that regard, including the information relevant to the situation concerning his or her spouse, registered partner or other life companion, foster child and relatives by blood or marriage up to the second degree.
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A supervisory board member should report any conflict of interest or potential conflict of interest in a transaction that is of material significance to the company and/or to such person to the chairperson of the supervisory board without delay and should provide all relevant information in that regard, including the relevant information pertaining to his or her spouse, registered partner or other life companion, foster child and relatives by blood or marriage up to the second degree. If the chairperson of the supervisory board has a conflict of interest or potential conflict of interest, he or she should report this to the vice-chairperson of the supervisory board without delay.
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The supervisory board should decide, outside the presence of the management board member or supervisory board member concerned, whether there is a conflict of interest.
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All transactions in which there are conflicts of interest with management board members or supervisory board members should be agreed on terms that are customary in the market.
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Decisions to enter into transactions in which there are conflicts of interest with management board members or supervisory board members that are of material significance to the company and/or to the relevant management board members or supervisory board members should require the approval of the supervisory board. Such transactions should be published in the annual report, together with a description of the conflict of interest and a declaration that the relevant best practice provisions of the DCGC have been complied with.
Delaware. The Delaware General Corporation Law generally permits transactions involving a Delaware corporation and an interested director of that corporation if:
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the material facts as to the director’s relationship or interest are disclosed and a majority of disinterested directors consent;
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the material facts are disclosed as to the director’s relationship or interest and a majority of shares entitled to vote thereon consent; or
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the transaction is fair to the corporation at the time it is authorized by the board of directors, a committee of the board of directors or the stockholders.
Proxy Voting by Directors
The Netherlands. An absent management board member may issue a proxy for a specific management board meeting but only to another management board member in writing or by electronic means. An absent supervisory board member may issue a proxy for a specific supervisory board meeting but only to another supervisory board member in writing or by electronic means.
Delaware. A director of a Delaware corporation may not issue a proxy representing the director’s voting rights as a director.
Shareholder Rights
Voting Rights
The Netherlands. In accordance with Dutch law and our articles of association, each issued ordinary share confers the right to cast one vote at the general meeting and each issued high voting share confers the right to cast 25 votes at the general meeting. No votes may be cast on shares that are held by us or our direct or indirect subsidiaries or on shares for which we or our subsidiaries hold depository receipts.
Nonetheless, the holders of a right of usufruct (vruchtgebruik) and the holders of a right of pledge (pandrecht) in respect of shares held by us or our subsidiaries in our share capital are not excluded from the right to vote on such shares, if the right of usufruct (vruchtgebruik) or the right of pledge (pandrecht) was granted prior to the time such shares were acquired by us or any of our subsidiaries. Neither we nor any of our subsidiaries may cast votes in respect of a share on which we or such subsidiary holds a right of usufruct (vruchtgebruik) or a right of pledge (pandrecht).
In accordance with our articles of association, for each general meeting, the management board may determine that a record date will be applied in order to establish which shareholders are entitled to attend
and vote at the general meeting. Such record date shall be the 28th day prior to the day of the general meeting. The record date and the manner in which shareholders can register and exercise their rights will be set out in the notice of the meeting which must be published in a Dutch daily newspaper with national distribution at least 15 days prior to the meeting (and such notice may therefore be published after the record date for such meeting). Under our articles of association, shareholders and others with meeting rights under Dutch law must notify us in writing or by electronic means of their identity and intention to attend the general meeting. This notice must be received by us ultimately on the seventh day prior to the general meeting, unless indicated otherwise when such meeting is convened.
Delaware. Under the Delaware General Corporation Law, each stockholder is entitled to one vote per share of stock, unless the certificate of incorporation provides otherwise. In addition, the certificate of incorporation may provide for cumulative voting at all elections of directors of the corporation, or at elections held under specified circumstances. Either the certificate of incorporation or the bylaws may specify the number of shares and/or the amount of other securities that must be represented at a meeting in order to constitute a quorum, but in no event will a quorum consist of less than one-third of the shares entitled to vote at a meeting.
Stockholders as of the record date for the meeting are entitled to vote at the meeting, and the board of directors may fix a record date that is no more than 60 nor less than 10 days before the date of the meeting, and if no record date is set then the record date is the close of business on the day next preceding the day on which notice is given, or if notice is waived then the record date is the close of business on the day next preceding the day on which the meeting is held. The determination of the stockholders of record entitled to notice or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, but the board of directors may fix a new record date for the adjourned meeting.
Shareholder Proposals
The Netherlands. Pursuant to our articles of association, extraordinary general meetings will be held whenever required under Dutch law or whenever our management board or supervisory board deems such to be appropriate or necessary. Pursuant to Dutch law, one or more shareholders or others with meeting rights under Dutch law representing at least one-tenth of the issued share capital may request us to convene a general meeting, setting out in detail the matters to be discussed. If we have not taken the steps necessary to ensure that such a meeting can be held within six weeks after the request, the requesting party or parties may, on their application, be authorized by the competent Dutch court in preliminary relief proceedings to convene a general meeting.
Also, the agenda for a general meeting shall include such items requested by one or more shareholders, and others entitled to attend general meetings, representing at least 3% of the issued share capital, except where the articles of association state a lower percentage. Our articles of association do not state such lower percentage. Requests must be made in writing or by electronic means and received by us at least 60 days before the day of the meeting.
In accordance with the DCGC and our articles of association, shareholders having the right to put an item on the agenda under the rules described above shall exercise such right only after consulting our management board in that respect. If one or more shareholders intend to request that an item be put on the agenda that may result in a change in our strategy (for example, the removal of management board members or supervisory board members), our management board must be given the opportunity to invoke a reasonable period to respond to such intention. Such period shall not exceed 180 days (or such other period as may be stipulated for such purpose by Dutch law and/or the DCGC from time to time). If invoked, our management board must use such response period for further deliberation and constructive consultation, in any event with the shareholders concerned, and shall explore the alternatives. At the end of the response time, our management board shall report on this consultation and the exploration of alternatives to our general meeting. This shall be supervised by our supervisory board. The response period may be invoked only once for any given general meeting and shall not apply (a) in respect of a matter for which a response period has been previously invoked; or (b) if a shareholder holds at least 75% of our issued share capital as a consequence of a successful public bid. The response period may also be invoked in response to shareholders or others with meeting rights under Dutch law requesting that a general meeting be convened, as described above.
Moreover, our management board, with the approval of our supervisory board, can invoke a cooling-off period of up to 250 days when shareholders, using their right to have items added to the agenda for a general meeting or their right to request a general meeting, propose an agenda item for our general meeting to dismiss, suspend or appoint one or more management board members or supervisory board members (or to amend any provision in our articles of association dealing with those matters) or when a public offer for our Company is made or announced without our support, provided, in each case, that our management board believes that such proposal or offer materially conflicts with the interests of our Company and its business. During a cooling-off period, our general meeting cannot dismiss, suspend or appoint management board members and supervisory board members (or amend the provisions in our articles of association dealing with those matters) except at the proposal of our management board. During a cooling-off period, our management board must gather all relevant information necessary for a careful decision-making process and at least consult with shareholders representing 3% or more of our issued share capital at the time the cooling-off period was invoked, as well as with our Dutch works council (if we or, under certain circumstances, any of our subsidiaries would have one). Formal statements expressed by these stakeholders during such consultations must be published on our website to the extent these stakeholders have approved that publication. Ultimately one week following the last day of the cooling-off period, our management board must publish a report in respect of its policy and conduct of affairs during the cooling-off period on our website. This report must remain available for inspection by shareholders and others with meeting rights under Dutch law at our office and must be tabled for discussion at the next general meeting. Shareholders representing at least 3% of our issued share capital may request the Enterprise Chamber for early termination of the cooling-off period. The Enterprise Chamber must rule in favor of the request if the shareholders can demonstrate that:
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our management board, in light of the circumstances at hand when the cooling-off period was invoked, could not reasonably have concluded that the relevant proposal or hostile offer constituted a material conflict with the interests of our Company and its business;
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our management board cannot reasonably believe that a continuation of the cooling-off period would contribute to careful policy-making; or
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other defensive measures, having the same purpose, nature and scope as the cooling-off period, have been activated during the cooling-off period and have not since been terminated or suspended within a reasonable period at the relevant shareholders’ request (i.e., no ‘stacking’ of defensive measures).
Delaware. Delaware law does not specifically grant stockholders the right to bring business before an annual or special meeting. However, if a Delaware corporation is subject to the SEC’s proxy rules, a stockholder who owns at least $2,000 in market value, or 1% of the corporation’s securities entitled to vote, may propose a matter for a vote at an annual or special meeting in accordance with those rules.
Action by Written Consent
The Netherlands. Under Dutch law, shareholders’ resolutions may be adopted in writing without holding a meeting of shareholders, provided that (i) the articles of association allow such action by written consent, (ii) the company has not issued bearer shares or, with its cooperation, depository receipts for shares in its capital, and (iii) the resolution is adopted unanimously by all shareholders that are entitled to vote. Although our articles of association allow for shareholders’ resolutions to be adopted in writing, the requirement of unanimity renders the adoption of shareholder resolutions without holding a meeting not feasible for us as a publicly traded company.
Delaware. Although permitted by Delaware law, publicly listed companies do not typically permit stockholders of a corporation to take action by written consent.
Appraisal Rights
The Netherlands. Subject to certain exceptions, Dutch law does not recognize the concept of appraisal or dissenters’ rights. However, Dutch law does provide for squeeze-out procedures as described under “Description of Share Capital and Articles of Association — Dividends and Other Distributions — Squeeze- Out Procedures.” Also, Dutch law provides for cash exit rights in certain situations for dissenting
shareholders of a company organized under Dutch law entering into certain types of mergers. In those situations, a dissenting shareholder may file a claim with the Dutch company for compensation. Such compensation shall then be determined by one or more independent experts. The shares of such a shareholder that are subject to such claim will cease to exist as of the moment of entry into effect of the merger.
Delaware. The Delaware General Corporation Law provides for stockholder appraisal rights, or the right to demand payment in cash of the judicially determined fair value of the stockholder’s shares, in connection with certain mergers and consolidations.
Shareholder Suits
The Netherlands. In the event a third party is liable to a Dutch company, only the company itself can bring a civil action against that party. The individual shareholders do not have the right to bring an action on behalf of the company. Only in the event that the cause for the liability of a third party to the company also constitutes a tortious act directly against a shareholder does that shareholder have an individual right of action against such third party in its own name. Dutch law provides for the possibility to initiate such actions collectively, in which a foundation or an association can act as a class representative and has standing to commence proceedings and claim damages if certain criteria are met. The court will first determine if those criteria are met. If so, the case will go forward as a class action on the merits after a period allowing class members to opt out from the case has lapsed. All members of the class who are residents of The Netherlands and who did not opt out will be bound to the outcome of the case. Residents of other countries must actively opt-in in order to be able to benefit from the class action. The defendant is not required to file defenses on the merits prior to the merits phase having commenced. It is possible for the parties to reach a settlement during the merits phase. Such a settlement can be approved by the court, which approval will then bind the members of the class, subject to a second opt-out. This new regime applies to claims brought after January 1, 2020 and which relate to certain events that occurred prior to that date. For other matters, the old Dutch class actions regime will apply. Under the old regime, no monetary damages can be sought. Also, a judgment rendered under the old regime will not bind individual class members. Even though Dutch law does not provide for derivative suits, directors and officers can still be subject to liability under U.S. securities laws.
Under our articles of association, except as otherwise approved by our management board, the sole and exclusive forum for any complaint asserting a cause of action arising under the Securities Act, as amended, to the fullest extent permitted by applicable law, shall be the U.S. federal district courts.
Delaware. Under the Delaware General Corporation Law, a stockholder may bring a derivative action on behalf of the corporation to enforce the rights of the corporation. An individual also may commence a class action suit on behalf of himself and other similarly situated stockholders where the requirements for maintaining a class action under Delaware law have been met. A person may institute and maintain such a suit only if that person was a stockholder at the time of the transaction which is the subject of the suit. In addition, under Delaware case law, the plaintiff normally must be a stockholder at the time of the transaction that is the subject of the suit and throughout the duration of the derivative suit.
Delaware law also requires that the derivative plaintiff make a demand on the directors of the corporation to assert the corporate claim before the suit may be prosecuted by the derivative plaintiff in court, unless such a demand would be futile.
Repurchase of Shares
The Netherlands. Under Dutch law, when issuing shares, a public company such as ours may not subscribe for newly issued shares in its own capital. Such a company may, however, subject to certain restrictions of Dutch law and its articles of association, acquire shares in its own capital. A listed public company such as ours may acquire fully paid shares in its own capital at any time for no valuable consideration. Furthermore, subject to certain provisions of Dutch law and its articles of association, such company may repurchase fully paid shares in its own capital if (i) the company’s shareholders’ equity less the payment required to make the acquisition does not fall below the sum of paid-in and called-up share capital plus any reserves required by Dutch law or its articles of association and (ii) the aggregate nominal value of shares of the company which the company acquires, holds or on which the company holds a pledge (pandrecht)
or which are held by a subsidiary of the company, would not exceed 50% of its then-current issued share capital. Such company may only acquire its own shares if its general meeting has granted the management board the authority to effect such acquisitions.
An acquisition of shares for a consideration must be authorized by our general meeting. Such authorization may be granted for a maximum period of 18 months and must specify the number of shares that may be acquired, the manner in which shares may be acquired and the price limits within which ordinary shares may be acquired. The actual acquisition may only be effected pursuant to a resolution of our management board, with the approval of our supervisory board. Our management board has been authorized until the date that is 18 months following the pricing of our IPO to cause the repurchase of shares (or depository receipts for shares) by us of up to 10% of our issued share capital, for a price per share not exceeding 110% of the average market price of our ordinary shares on Nasdaq (such average market price being the average of the closing prices on each of the five consecutive trading days preceding the date the acquisition is agreed upon by us). These shares may be used to deliver shares underlying awards granted pursuant to our equity-based compensation plans.
No authorization of the general meeting is required if fully paid ordinary shares are acquired by us with the intention of transferring such ordinary shares to our employees under an applicable employee share purchase plan.
Delaware. Under the Delaware General Corporation Law, a corporation may purchase or redeem its own shares unless the capital of the corporation is impaired or the purchase or redemption would cause an impairment of the capital of the corporation. A Delaware corporation may, however, purchase or redeem out of capital any of its preferred shares or, if no preferred shares are outstanding, any of its own shares if such shares will be retired upon acquisition and the capital of the corporation will be reduced in accordance with specified limitations.
Anti-Takeover Provisions
The Netherlands. Under Dutch law, various protective measures are possible and permissible within the boundaries set by Dutch law and Dutch case law. In this respect, certain provisions of our articles of association may make it more difficult for a third party to acquire control of us or effect a change in our management board and supervisory board. These provisions include:
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a dual-class share structure which consists of ordinary shares and high voting shares, with ordinary shares carrying one vote per share and high voting shares carrying 25 votes per share;
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a provision that each of Laurin Hahn and Jona Christians, two of our founders, as long as he holds at least 5% of our voting rights, can each make a binding nomination for the appointment of one supervisory board member, which can only be overruled by a two-thirds majority of votes cast representing more than 50% of our issued share capital;
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a provision that our management board members and the supervisory board members not appointed on the basis of a binding nomination by Laurin Hahn or Jona Christians as described above are appointed on the basis of a binding nomination prepared by our supervisory board which can only be overruled by a two-thirds majority of votes cast representing more than half of our issued share capital;
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a provision that our management board members and supervisory board members may only be dismissed by the general meeting by a two-thirds majority of votes cast representing more than half of our issued share capital (unless the dismissal is proposed by the supervisory board in which case a simple majority of the votes cast would be sufficient);
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a provision allowing, among other matters, the former chairperson of our supervisory board to manage our affairs if all of our supervisory board members are removed from office and to appoint others to be charged with the supervision of our affairs, until new supervisory board members are appointed by the general meeting on the basis of the binding nominations discussed above; and
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a requirement that certain matters, including an amendment of our articles of association, may only be brought to our general meeting for a vote upon a proposal by our management board with the approval of our supervisory board.
In addition, Dutch law allows for staggered multi-year terms of our management board members and supervisory board members, as a result of which only part of our management board members and supervisory board members may be subject to appointment or re-appointment in any one year.
Furthermore, our management board may, under certain circumstances, invoke a reasonable period of up to 180 days to respond to certain shareholder proposals or a statutory cooling-off period of up to 250 days to respond to certain shareholder proposals or a hostile bid. See above under “Shareholder Proposals.”
Delaware. In addition to other aspects of Delaware law governing fiduciary duties of directors during a potential takeover, the Delaware General Corporation Law also contains a business combination statute that protects Delaware companies from hostile takeovers and from actions following the takeover by prohibiting some transactions once an acquirer has gained a significant holding in the corporation.
Section 203 of the Delaware General Corporation Law prohibits “business combinations,” including mergers, sales and leases of assets, issuances of securities and similar transactions by a corporation or a subsidiary with an interested stockholder that beneficially owns 15% or more of a corporation’s voting stock, within three years after the person becomes an interested stockholder, unless:
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the transaction that will cause the person to become an interested stockholder is approved by the board of directors of the target prior to the transactions;
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after the completion of the transaction in which the person becomes an interested stockholder, the interested stockholder holds at least 85% of the voting stock of the corporation not including shares owned by persons who are directors and officers of interested stockholders and shares owned by specified employee benefit plans; or
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after the person becomes an interested stockholder, the business combination is approved by the board of directors of the corporation and holders of at least 66.67% of the outstanding voting stock, excluding shares held by the interested stockholder.
A Delaware corporation may elect not to be governed by Section 203 by a provision contained in the original certificate of incorporation of the corporation or an amendment to the original certificate of incorporation or to the bylaws of the company, which amendment must be approved by a majority of the shares entitled to vote and may not be further amended by the board of directors of the corporation. Such an amendment is not effective until 12 months following its adoption.
Inspection of Books and Records
The Netherlands. The management board and the supervisory board provide the general meeting, within a reasonable amount of time, all information that the shareholders require for the exercise of their powers, unless this would be contrary to an overriding interest of our Company. If the management board or supervisory board invokes such an overriding interest, it must give reasons.
Delaware. Under the Delaware General Corporation Law, any stockholder may inspect for any proper purpose certain of the corporation’s books and records during the corporation’s usual hours of business.
Dismissal of Directors
The Netherlands. Under our articles of association, the general meeting shall at all times be entitled to dismiss a management board member or supervisory board member. The general meeting may only adopt a resolution to suspend or dismiss a management board member or supervisory board member by at least a two-thirds majority of the votes cast, provided that such majority represents more than half of the issued share capital, unless the proposal was made by the supervisory board, in which latter case a simple majority is sufficient.
Delaware. Under the Delaware General Corporation Law, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except (i) unless the certificate of incorporation provides otherwise, in the case of a corporation whose board is classified, stockholders may effect such removal only for cause, or (ii) in
the case of a corporation having cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against such director’s removal would be sufficient to elect such director if then cumulatively voted at an election of the entire board of directors, or, if there are classes of directors, at an election of the class of directors of which he or she is a part.
Issuance of Shares
The Netherlands. Under Dutch law, a company’s general meeting is the corporate body authorized to resolve on the issuance of shares and the granting of rights to subscribe for shares. The general meeting can delegate such authority to another corporate body of the company, such as the management board, for a period not exceeding five years; this authorization may only be extended from time to time for a maximum period of five years.
Our management board has been authorized until the fifth anniversary of the pricing of our IPO to issue shares (of any class) or grant rights to subscribe for shares up to our authorized share capital from time to time. We may not subscribe for our own shares on issue.
Delaware. All creation of shares require the board of directors to adopt a resolution or resolutions, pursuant to authority expressly vested in the board of directors by the provisions of the company’s certificate of incorporation.
Preemptive Rights
The Netherlands. Under Dutch law, in the event of an issuance of shares, each shareholder will have a pro rata preemptive right in proportion to the aggregate nominal value of the shares held by such holder (with the exception of shares to be issued to employees or shares issued against a contribution other than in cash or pursuant to the exercise of a previously acquired right to subscribe for shares). Under our articles of association, the preemptive rights in respect of newly issued shares may be restricted or excluded by a resolution of the general meeting. Another corporate body, such as the management board, may restrict or exclude the preemptive rights in respect of newly issued shares if it has been designated as the authorized body to do so by the general meeting. Such designation can be granted for a period not exceeding five years. A resolution of the general meeting to restrict or exclude the preemptive rights or to designate another corporate body as the authorized body to do so requires a majority of not less than two-thirds of the votes cast, if less than one-half of our issued share capital is represented at the meeting. Our management board has been authorized until the fifth anniversary of the pricing of our IPO to limit or exclude preemptive rights in relation to an issuance of shares or a grant of rights to subscribe for shares that the management board is authorized to resolve upon (see above under “Issuance of Shares”).
Delaware. Under the Delaware General Corporation Law, stockholders have no preemptive rights to subscribe for additional issues of stock or to any security convertible into such stock unless, and to the extent that, such rights are expressly provided for in the certificate of incorporation.
Dividends
The Netherlands. Dutch law provides that dividends (if it concerns a distribution of profits) may be distributed after adoption of the annual accounts by the general meeting from which it appears that such dividend distribution is allowed. Moreover, dividends may be distributed, whether as a distribution of profits or of freely distributable reserves, only to the extent the shareholders’ equity exceeds the amount of the paid-in and called-up issued share capital and the reserves that must be maintained under the law or the articles of association. Interim dividends may be declared as provided in the articles of association and may be distributed to the extent that the shareholders’ equity exceeds the amount of the paid-in and called-up issued share capital plus any reserves as described above as apparent from our consolidated interim financial statements prepared under Dutch law.
Under our articles of association, our management board, with the approval of our supervisory board, may decide that all or part of the profits are carried to reserves. After the reservation of any profit, the remaining profit will be at the disposal of the general meeting at the proposal of the management board for distribution on the shares, subject to restrictions of Dutch law and approval by our supervisory board of
such proposal of our management board. Our management board is permitted, subject to certain requirements, to declare interim dividends without the approval of the general meeting, but only with the approval of the supervisory board. Dividends and other distributions shall be made payable not later than the date determined by the management board. Claims to dividends and other distributions not made within five years from the date that such dividends or distributions became payable will lapse and any such amounts will be considered to have been forfeited to us (verjaring).
Delaware. Under the Delaware General Corporation Law, a Delaware corporation may pay dividends out of its surplus (the excess of net assets over capital), or in case there is no surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year (provided that the amount of the capital of the corporation is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets). In determining the amount of surplus of a Delaware corporation, the assets of the corporation, including stock of subsidiaries owned by the corporation, must be valued at their fair market value as determined by the board of directors, without regard to their historical book value. Dividends may be paid in the form of common stock, property or cash.
Shareholder Vote on Certain Reorganizations
The Netherlands. Under Dutch law, the general meeting must approve resolutions of the management board relating to a significant change in the identity or the character of the company or the business of the company, which includes:
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a transfer of the business or virtually the entire business to a third party;
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the entry into or termination of a long-term cooperation of the company or a subsidiary with another legal entity or company or as a fully liable partner in a limited partnership or general partnership, if such cooperation or termination is of a far-reaching significance for the company; and
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the acquisition or divestment by the company or a subsidiary of a participating interest in the capital of a company having a value of at least one-third of the amount of its assets according to its balance sheet and explanatory notes or, if the company prepares a balance sheet, according to its balance sheet and explanatory notes in the last adopted annual accounts of the company.
Delaware. Under the Delaware General Corporation Law, the vote of a majority of the outstanding shares of capital stock entitled to vote thereon generally is necessary to approve a merger or consolidation or the sale of all or substantially all of the assets of a corporation. The Delaware General Corporation Law permits a corporation to include in its certificate of incorporation a provision requiring for any corporate action the vote of a larger portion of the stock or of any class or series of stock than would otherwise be required.
Under the Delaware General Corporation Law, no vote of the stockholders of a surviving corporation to a merger is needed, however, unless required by the certificate of incorporation, if (i) the agreement of merger does not amend in any respect the certificate of incorporation of the surviving corporation, (ii) the shares of stock of the surviving corporation are not changed in the merger and (iii) the number of shares of common stock of the surviving corporation into which any other shares, securities or obligations to be issued in the merger may be converted does not exceed 20% of the surviving corporation’s common stock outstanding immediately prior to the effective date of the merger. In addition, stockholders may not be entitled to vote in certain mergers with other corporations that own 90% or more of the outstanding shares of each class of stock of such corporation, but the stockholders will be entitled to appraisal rights.
Remuneration of Management Board Members and Supervisory Board Members
The Netherlands. Under Dutch law and our articles of association, we must adopt a compensation policy for our management board. Such compensation policy and any changes thereto shall require the adoption by the general meeting. The supervisory board determines the remuneration of individual management board members with due observance of the compensation policy at the recommendation of our compensation committee. A proposal with respect to remuneration schemes in the form of shares or rights
to shares in which management board members may participate is subject to approval by our general meeting. Such a proposal must set out at least the maximum number of shares or rights to subscribe for shares to be granted to the management board and the criteria for granting or amendment. The compensation for our supervisory board members is set by the general meeting.
Delaware. Under the Delaware General Corporation Law, the stockholders do not generally have the right to approve the compensation policy for directors or the senior management of the corporation, although certain aspects of the compensation policy may be subject to stockholder vote due to the provisions of U.S. federal securities and tax law.
TAXATION
The following summary contains a description of Dutch, German and U.S. federal income tax considerations generally applicable to the acquisition, ownership and disposition of ordinary shares, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase ordinary shares. The summary is based upon the tax laws of The Netherlands and regulations thereunder, the tax laws of Germany and regulations thereunder and the tax laws of the United States and regulations thereunder as of the date hereof, which are subject to change. The discussion in this section reflects the views of NautaDutilh N.V. insofar as it relates to matters of Dutch tax law, Ebner Stolz Mönning Bachem Wirtschaftsprüfer Steuerberater Rechtsanwälte Partnerschaft mbB insofar as it relates to matters of German tax law and Sullivan & Cromwell LLP insofar as it relates to matters of United States federal income tax law. You should consult your tax advisor regarding the applicable tax consequences to you of investing in our ordinary shares.
Material Dutch Tax Considerations
General
The following is a general summary of certain material Dutch tax consequences of the acquisition, ownership and disposal of our ordinary shares. This summary does not purport to set forth all possible tax considerations or consequences that may be relevant to a holder or prospective holder or our ordinary shares and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as trusts or similar arrangements) may be subject to special rules. In view of its general nature, it should be treated with corresponding caution.
This summary is based on the tax laws of The Netherlands, published regulations thereunder and published authoritative case law, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. Where the summary refers to “The Netherlands” or “Dutch” it refers only to the part of the Kingdom of The Netherlands located in Europe.
This discussion is for general information purposes only and is not Dutch tax advice or a complete description of all Dutch tax consequences relating to the acquisition, ownership and disposal of our ordinary shares. Holders or prospective holders of our ordinary shares should consult their own tax advisor regarding the Dutch tax consequences relating to the acquisition, holding and disposal of our ordinary shares in light of their particular circumstances.
Please note that this section does not set forth the tax considerations for:
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holders of ordinary shares if such holders have a substantial interest (aanmerkelijk belang) or deemed substantial interest (fictief aanmerkelijk belang) in us under the Dutch Income Tax Act 2001 (Wet inkomstenbelasting 2001). Generally, a holder of securities in a company is considered to hold a substantial interest in such company if such holder alone or, in the case of individuals, together with such holder’s partner for Dutch income tax purposes, or any relative by blood or marriage in the direct line (including foster children), directly or indirectly holds (i) an interest of 5% or more of the total issued and outstanding capital of that company or of 5% or more of the issued and outstanding capital of a certain class of shares of that company; or (ii) rights to acquire, directly or indirectly, such interest; or (iii) certain profit sharing rights in that company that relate to 5% or more of the company’s annual profits and/or to 5% or more of the company’s liquidation proceeds. A deemed substantial interest may arise if a substantial interest (or part thereof) in a company has been disposed of, or is deemed to have been disposed of, on a non-recognition basis;
•
holders of ordinary shares if the ordinary shares held by such holders qualify or qualified as a participation (deelneming) for purposes of the Dutch Corporate Income Tax Act 1969 (Wet op de vennootschapsbelasting 1969). Generally, a holder’s shareholding of 5% or more in our nominal paid-in share capital qualifies as a participation. A holder may also have a participation if (a) such holder does not have a shareholding of 5% or more but a related entity (statutorily defined term) has a participation or (b) the company in which the shares are held is a related entity (statutorily defined term);
•
pension funds, investment institutions (fiscale beleggingsinstellingen), exempt investment institutions (vrijgestelde beleggingsinstellingen) (as defined in the Dutch Corporate Income Tax Act 1969) and other entities that are, in whole or in part, not subject to or exempt from corporate income tax in The Netherlands as well as entities that are exempt from corporate income tax in their country of residence, such country of residence being another state of the EU, Norway, Liechtenstein, Iceland or any other state with which The Netherlands has agreed to exchange information in line with international standards; and
•
holders of ordinary shares who are individuals and for whom the ordinary shares or any benefit derived from the ordinary shares are a remuneration or deemed to be a remuneration for (employment) activities performed by such holders or certain individuals related to such holders (as defined in the Dutch Income Tax Act 2001).
Dividend Withholding Tax
Dividends distributed by us generally are subject to Dutch dividend withholding tax at a rate of 15%. Generally, we are responsible for the withholding of such dividend withholding tax at source; the Dutch dividend withholding tax is for the account of the holder of our ordinary shares.
However, as long as we continue to have our place of effective management in Germany, and not in The Netherlands, under the double tax treaty between Germany and The Netherlands, we will be considered to be exclusively tax resident in Germany and we will not be required to withhold Dutch dividend withholding tax. This exemption from withholding does not apply to dividends distributed by us to a holder who is resident or deemed to be resident in The Netherlands for Dutch income tax purposes or to holders of ordinary shares that are neither resident nor deemed to be resident of The Netherlands if the ordinary shares are attributable to a Dutch permanent establishment of such non-resident holder, in which case the following paragraph applies. See also “Risk Factors — Regulatory, Legal and Tax Risks — If we do pay dividends, we may need to withhold tax on such dividends payable to holders of our shares in both Germany and The Netherlands.”
Dividends distributed by us to individuals and corporate legal entities who are resident or deemed to be resident in The Netherlands for Dutch income tax purposes (“Dutch Resident Individuals” and “Dutch Resident Entities,” as the case may be) or to holders of ordinary shares that are neither resident nor deemed to be resident of The Netherlands if the ordinary shares are attributable to a Dutch permanent establishment of such non-resident holder are subject to Dutch dividend withholding tax at a rate of 15%.
The expression “dividends distributed” includes, among other things:
•
distributions in cash or in kind, deemed and constructive distributions and repayments of paid-in capital not recognized for Dutch dividend withholding tax purposes;
•
liquidation proceeds, proceeds of redemption of ordinary shares, or proceeds of the repurchase of ordinary shares (other than as temporary portfolio investment; tijdelijke belegging) by us or one of our subsidiaries or other affiliated entities, in each case to the extent such proceeds exceed the average paid-in capital of those ordinary shares as recognized for purposes of Dutch dividend withholding tax;
•
an amount equal to the par value of ordinary shares issued or an increase of the par value of ordinary shares, to the extent that it does not appear that a related contribution, recognized for purposes of Dutch dividend withholding tax, has been made or will be made; and
•
partial repayment of the paid-in capital, recognized for purposes of Dutch dividend withholding tax, if and to the extent that we have net profits (zuivere winst), unless (i) the general meeting has resolved in advance to make such repayment and (ii) the par value of the ordinary shares concerned has been reduced by an equal amount by way of an amendment of our articles of association. The term “net profits” includes anticipated profits that have yet to be realized.
Dutch Resident Individuals and Dutch Resident Entities generally are entitled a credit for any Dutch dividend withholding tax against their Dutch (corporate) income tax liability. For Dutch Resident Entities,
the credit in any given year is limited to the amount of corporate income tax payable in respect of the relevant year with an indefinite carry forward of any excess amount.
Dividend Stripping
Pursuant to legislation to counteract “dividend stripping,” a reduction, exemption, credit or refund of Dutch dividend withholding tax is denied if the recipient of the dividend is not the beneficial owner (uiteindelijk gerechtigde) of the dividend as described in the Dutch Dividend Withholding Tax Act 1965 (Wet op de dividendbelasting 1965). This legislation generally targets situations in which a shareholder retains its economic interest in shares but reduces the withholding tax costs on dividends by a transaction with another party. It is not required for these rules to apply that the recipient of the dividends is aware that a dividend stripping transaction took place.
The Dutch State Secretary for Finance takes the position that the definition of beneficial ownership introduced by this legislation will also be applied in the context of a double taxation convention.
Conditional Withholding Tax on Dividends (as of January 1, 2024)
As of January 1, 2024, a Dutch conditional withholding tax will be imposed on dividends distributed us to entities related (gelieerd) to the Company (within the meaning of the Dutch Withholding Tax Act 2021; Wet bronbelasting 2021), if such related entity:
1.
is considered to be resident (gevestigd) in a jurisdiction that is listed in the yearly updated Dutch Regulation on low-taxing states and non-cooperative jurisdictions for tax purposes (Regeling laagbelastende staten en niet-coöperatieve rechtsgebieden voor belastingdoeleinden) (a “Listed Jurisdiction”); or
2.
has a permanent establishment located in a Listed Jurisdiction to which the ordinary shares are attributable; or
3.
holds the ordinary shares for the main purpose or one of the main purposes to avoid taxation for another person or entity and there is an artificial arrangement or transaction or a series of artificial arrangements or transactions; or
4.
is not considered to be the beneficial owner of the ordinary shares in its jurisdiction of residence because such jurisdiction treats another entity as the beneficial owner of the ordinary shares (a hybrid mismatch); or
5.
is not resident in any jurisdiction (also a hybrid mismatch); or
6.
is a reverse hybrid (within the meaning of Article 2(12) of the Dutch Corporate Income Tax Act 1969), if and to the extent (x) there is a participant in the reverse hybrid which is related (gelieerd) to the reverse hybrid, (y) the jurisdiction of residence of such participant treats the reverse hybrid as transparent for tax purposes and (z) such participant would have been subject to the Dutch conditional withholding tax in respect of dividends distributed by us without the interposition of the reverse hybrid, all within the meaning of the Dutch Withholding Tax Act 2021.
The Dutch conditional withholding tax on dividends will be imposed at the highest Dutch corporate income tax rate in effect at the time of the distribution (currently 25.8%). The Dutch conditional withholding tax on dividends will be reduced, but not below zero, by any regular Dutch dividend withholding tax withheld in respect of the same dividend distribution. As such, based on the currently applicable rates, the overall effective tax rate of withholding the regular Dutch dividend withholding tax (as described above) and the Dutch conditional withholding tax on dividends will not exceed the highest corporate income tax rate in effect at the time of the distribution (currently 25.8%).
Taxes on Income and Capital Gains
Dutch Resident Entities
Generally speaking, if the holder of ordinary shares is a Dutch Resident Entity, any income derived or deemed to be derived from the ordinary shares or any capital gains realized on the disposal or deemed disposal
of the ordinary shares is subject to Dutch corporate income tax at a rate of 15.0% with respect to taxable profits up to €395,000 and 25.8% with respect to taxable profits in excess of that amount (rates and brackets for 2022).
Dutch Resident Individuals
If the holder of ordinary shares is a Dutch Resident Individual, any income derived or deemed to be derived from the ordinary shares or any capital gains realized on the disposal or deemed disposal of the ordinary shares is subject to Dutch income tax at the progressive rates (with a maximum of 49.50% in 2022), if:
1.
the ordinary shares are attributable to an enterprise from which the holder of ordinary shares derives a share of the profit, whether as an entrepreneur (ondernemer) or as a person who has a
2.
co-entitlement to the net worth (medegerechtigd tot het vermogen) of such enterprise without being a shareholder (as defined in the Dutch Income Tax Act 2001); or
3.
the holder of ordinary shares is considered to perform activities with respect to the ordinary shares that go beyond ordinary asset management (normaal, actief vermogensbeheer) or otherwise derives benefits from the ordinary shares that are taxable as benefits from miscellaneous activities (resultaat uit overige werkzaamheden).
If the above-mentioned conditions (i) and (ii) do not apply to a Dutch Resident Individual, the Dutch Resident Individual’s net investment assets (rendementsgrondslag) for the year, will be subject to an annual Dutch income tax on a deemed return (with a maximum of 5.53% in 2022) under the regime for savings and investments (inkomen uit sparen en beleggen), insofar the Dutch Resident Individual’s net in-vestment assets for the year exceed a statutory threshold (heffingvrij vermogen).
The net investment assets for the year are the fair market value of the investment assets less the allowable liabilities on January 1 of the relevant calendar year. The ordinary shares are included as investment assets. For the net investment assets on January 1, 2022, the deemed return ranges from 1.82% up to 5.53% (depending on the aggregate amount of the net investment assets of the Dutch Resident Individual on January 1, 2022).
The deemed return on the Dutch Resident Individual’s net investment assets for the year is taxed at a flat rate of 31% (rate for 2022). Actual income or capital gains realized in respect of the shares are as such not subject to Dutch income tax.
Based on a decision of the Dutch Supreme Court (Hoge Raad) of December 24, 2021 (ECLI:NL:HR:2021:1963), the current system of taxation based on a deemed return may under specific circumstances contravene Section 1 of the First Protocol to the European Convention on Human Rights in combination with Section 14 of the European Convention on Human Rights. On June 28, 2022, the Dutch State Secretary for Finance has issued a decree amending the regime for taxation of savings and investments as in effect on the date of this Prospectus to comply with this Dutch Supreme Court ruling. On the basis of the decree as published on June 28, 2022, the tax will be levied at the lowest outcome of the following two calculation methods:
Method 1
Under method 1, the annual taxable benefit from a Dutch Resident Individual’s assets and liabilities taxed under this regime, including the ordinary shares is based on a deemed return (ranging from 1.82% and 5.53% in 2022) of the positive balance of the fair market value of those assets, including the ordinary shares and the fair market value of these liabilities.
Method 2
Under method 2, the annual taxable benefit from a Dutch Resident Individual’s assets and liabilities taxed under this regime, including the ordinary shares is based on the actual allocation of the Dutch Resident
Individual’s assets and liabilities over the following three categories: (i) bank savings, (ii) other investments, including the ordinary shares and (iii) liabilities. The tax is calculated as follows:
1.
a deemed return on the fair market value of the actual amount of bank savings; plus
2.
a deemed return on the fair market value of the actual amount of other investments, including the ordinary shares; minus
3.
a deemed return on the fair market value of the actual amount of liabilities.
Under the second method, the statutory threshold is divided pro-rata over the three assets and liabilities categories mentioned above.
Holders of ordinary shares are advised to consult their own tax advisor to ensure that the tax is levied in accordance with the decision of the Dutch Supreme Court.
Non-residents of The Netherlands
A holder of ordinary shares that is neither a Dutch Resident Entity nor a Dutch Resident Individual will not be subject to Dutch (corporate) income tax in respect of income derived or deemed to be derived from the ordinary shares or in respect of capital gains realized on the disposal or deemed disposal of the ordinary shares, provided that:
1.
such holder does not have an interest in an enterprise or deemed enterprise (as defined in the Dutch Income Tax Act 2001 and the Dutch Corporate Income Tax Act 1969) which, in whole or in part, is either effectively managed in The Netherlands or carried on through a permanent establishment, a deemed permanent establishment or a permanent representative in The Netherlands and to which enterprise or part of an enterprise the ordinary shares are attributable; and
2.
in the event the holder is an individual, such holder does not carry out any activities in The Netherlands with respect to the ordinary shares that go beyond ordinary asset management and does not otherwise derive benefits from the ordinary shares that are taxable as benefits from miscellaneous activities in The Netherlands.
Gift and Inheritance Taxes
Residents of The Netherlands
Gift or inheritance taxes will arise in The Netherlands with respect to a transfer of ordinary shares by way of a gift by, or on the death of, a holder of such ordinary shares who is resident or deemed resident of The Netherlands at the time of the gift or the holder’s death.
Non-residents of The Netherlands
No gift or inheritance taxes will arise in The Netherlands with respect to a transfer of ordinary shares by way of gift by, or on the death of, a holder of ordinary shares who is neither resident nor deemed to be resident of The Netherlands, unless:
1.
in the case of a gift of ordinary shares by an individual who at the date of the gift was neither resident nor deemed to be resident of The Netherlands, such individual dies within 180 days after the date of the gift, while being resident or deemed to be resident of The Netherlands;
2.
in the case of a gift of ordinary shares is made under a condition precedent, the holder of the ordinary shares is resident or is deemed to be resident of The Netherlands at the time the condition is fulfilled; or
3.
the transfer is otherwise construed as a gift or inheritance made by, or on behalf of, a person who, at the time of the gift or death, is or is deemed to be resident of The Netherlands.
For purposes of Dutch gift and inheritance taxes, among others, a person that holds the Dutch nationality will be deemed to be resident of The Netherlands if such person has been resident in The
Netherlands at any time during the ten (10) years preceding the date of the gift or such person’s death. Additionally, for purposes of Dutch gift tax, among others, a person not holding the Dutch nationality will be deemed to be resident of The Netherlands if such person has been resident in The Netherlands at any time during the twelve (12) months preceding the date of the gift. Applicable tax treaties may override deemed residency.
Value Added Tax (VAT)
No Dutch value-added tax will be payable by a holder of ordinary shares in respect of any payment in consideration for the holding or disposal of the ordinary shares.
Other Taxes and Duties
No Dutch registration tax, stamp duty or any other similar documentary tax or duty will be payable by a holder of ordinary shares in respect of any payment in consideration for the holding or disposal of the ordinary shares.
Real Property Transfer Tax
Under circumstances, our ordinary shares could, for the purposes of Dutch real property transfer tax (overdrachtsbelasting), be treated as real property (fictieve onroerende zaken) located in The Netherlands, in which case this tax could be payable upon acquisition of our ordinary shares.
Our ordinary shares will generally not be treated as real property (fictieve onroerende zaken) if at the time of, or at any time during the year preceding, the acquisition of the Shares:
1.
our assets do not and did not include real property situated in The Netherlands; or
2.
our assets only include and included real property, situated either in or outside The Netherlands, that we do not and did not hold, and currently do not intend to hold, predominantly as a financial investment.
Real property as referred to under (i) and (ii) above includes legal ownership and more limited legal rights over the property (rights in rem) (zakelijke rechten) as well as contractual rights that give us economic exposure to the value of such real property, and certain participations or interests in entities that are treated as real property (fictieve onroerende zaken).
Our assets do not include and have not included real property situated in The Netherlands as described above.
Consequently, no Dutch real property transfer tax becomes payable upon an acquisition of our ordinary shares.
Material German Tax Considerations
The following section is the opinion of Ebner Stolz Mönning Bachem Wirtschaftsprüfer Steuerberater Rechtsanwälte Partnerschaft mbB (“German Tax Counsel”) of the material German tax considerations that become relevant when purchasing, holding or transferring the Company’s shares. The Company expects and intends to have its sole place of management in Germany and, therefore, qualifies as a corporation subject to German unlimited corporate income taxation; however, because a company’s tax residency depends on future facts regarding the location in which the Company is managed and controlled, German Tax Counsel cannot opine as to whether the Company will actually qualify as a corporation subject to German unlimited corporate income taxation and such a scenario in which the company does not qualify as a corporation subject to German unlimited income taxation is not discussed herein. This section does not set forth all German tax aspects that may be relevant for shareholders. The section is based on the German tax law applicable as of the date of this prospectus. It should be noted that the law may change following the issuance of this prospectus and that such changes may have retroactive effect.
The material German tax principles of purchasing, owning and transferring of shares are set forth in the following. This section does not purport to be a comprehensive or complete analysis or listing of all
potential tax effects of the purchase, ownership or disposition of shares and does not set forth all tax considerations that may be relevant to a particular person’s decision to acquire ordinary shares. All of the following is subject to change. Such changes could apply retroactively and could affect the consequences set forth below. This section does not refer to any U.S. Foreign Account Tax Compliance Act aspects.
Shareholders are advised to consult their own tax advisers with regard to the application of German tax law to their particular situations, in particular with respect to the procedure to be complied with to obtain a (potential) relief of withholding tax on dividends and on capital gains (Kapitalertragsteuer) and with respect to the influence of double tax treaty provisions, as well as any tax consequences arising under the laws of any state, local or other foreign jurisdiction. For German tax purposes, a “shareholder” may include an individual who or an entity that does not have the legal title to the shares, but to whom the shares are nevertheless attributed, based either on such individual or entity owning a beneficial interest in the shares or based on specific statutory provisions.
This section does not constitute particular tax advice. Potential purchasers of the Company’s shares are urged to consult their own tax advisers regarding the tax consequences of the purchase, ownership and disposition of shares in light of their particular circumstances.
Dividends Tax
Withholding Tax on Dividends
Dividends distributed from a company to its shareholders are subject to withholding tax, subject to certain exemptions (for example, repayments of capital from the tax equity account (steuerliches Einlagekonto)), as described in the following. The withholding tax rate is 25% plus 5.5% solidarity surcharge (Solidaritätszuschlag) thereon (in total 26.375%) and, if applicable, church tax (Kirchensteuer) of the gross dividend approved by the ordinary shareholders’ meeting. Withholding tax is to be withheld and passed on for the account of the shareholders by a domestic branch of a domestic or foreign credit or financial services institution (Kredit- und Finanzdienstleistungsinstitut) or a domestic securities institution (inländisches Wertpapierinstitut) which keeps and administers the shares and disburses or credits the dividends or disburses the dividends to a foreign agent, or by the securities custodian bank (Wertpapiersammelbank) to which the shares were entrusted for collective custody if the dividends are distributed to a foreign agent by such securities custodian bank (which is referred to as the “Dividend Paying Agent”). In case the shares are not held in collective deposit with a Dividend Paying Agent, the company is responsible for withholding and remitting the tax to the competent tax office.
Such withholding tax is levied and withheld irrespective of whether and to what extent the dividend distribution is taxable at the level of the shareholder and whether the shareholder is a person residing in Germany or in a foreign country.
In the case of dividends distributed to a parent company within the meaning of Art. 3 of the amended EU Directive 2011/96/EU of the Council of November 30, 2011 (the “EU Parent Subsidiary Directive”) domiciled in another member state of the EU, an exemption from withholding tax will be granted upon request if further prerequisites are satisfied (Freistellung im Steuerabzugsverfahren). This also applies to dividends distributed to a permanent establishment located in another member state of the EU of such a parent company or of a parent company tax resident in Germany if the participation in the company is attributable to this permanent establishment. The key prerequisite for the application of the EU Parent Subsidiary Directive is that the shareholder has held a direct participation in the share capital of the company of at least 10% for at least twelve months. If such twelve-month period is only completed after the receipt of the dividends, an exemption is not possible based on the EU Parent Subsidiary Directive. Rather, only a refund of withholding tax might be possible, subject to further prerequisites.
The withholding tax on distributions to other foreign resident shareholders might be reduced fully or partly in accordance with a double taxation treaty if Germany has concluded such double taxation treaty with the country of residence of the shareholder and if the shareholder does not hold his shares either as part of the assets of a permanent establishment or a fixed place of business in Germany or as business assets for which a permanent representative has been appointed in Germany. If the requirements for such a reduction are fulfilled, the reduction of the withholding tax would procedurally be granted in such a manner that the
difference between the total amount withheld, including the solidarity surcharge, and the tax liability determined on the basis of the tax rate set forth in the applicable double taxation treaty (generally 15% unless further qualifications are met) is refunded by the German tax administration upon request (Federal Central Office for Taxes (Bundeszentralamt für Steuern), main office in Bonn-Beuel, An der Küppe 1, 53225 Bonn, Germany) subject to the treaty and German anti-abuse rules.
In the case of dividends received by corporations whose statutory seat and effective place of management are not located in Germany and who are therefore not tax resident in Germany, two-fifths of the withholding tax deducted and remitted are refunded without the need to fulfill all prerequisites required for such refund under the EU Parent Subsidiary Directive or under a double taxation treaty or if no double taxation treaty has been concluded with the state of residence of the shareholder.
In order to receive a refund pursuant to a double taxation treaty or the aforementioned option for foreign corporations, the shareholder has to submit a completed form for refund (available at the Federal Central Office for Taxes (http://www.bzst.de) as well as at the German embassies and consulates) together with a withholding tax certificate (Kapitalertragsteuerbescheinigung) issued by the institution that withheld the tax.
The exemption from withholding tax in accordance with the EU Parent Subsidiary Directive or a double tax treaty and the aforementioned options for a refund of the withholding tax (with or without protection under a double taxation treaty) depend on whether certain additional prerequisites (in particular so-called substance requirements) are fulfilled. The applicable withholding tax relief will only be granted if the preconditions of the German anti avoidance rules (so called Directive Override or Treaty Override), in particular Section 50d, paragraph 3, German Income Tax Act (Einkommensteuergesetz) in its current version upon receipt of the dividends are fulfilled. In addition, e. g. Article 28 of the Convention between the Federal Republic of Germany and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and to certain other Taxes of August 29, 1989 in the amended version of June 4, 2008 (Bundesgesetzblatt II 2008, p. 611) provides for further prerequisites that need to be fulfilled in the case of a shareholder who is resident of the United States. Other treaties might provide for additional requirements.
The aforementioned reductions of (or exemptions from) withholding tax are further restricted if (i) the applicable double taxation treaty provides for a tax reduction resulting in an applicable tax rate of less than 15% and (ii) the shareholder is not a corporation that directly holds at least 10% in the equity capital of the distributing company and is subject to tax on its income and profits in its state of residence without being exempt. In this case, the reduction of (or exemption from) withholding tax is subject to the following three cumulative prerequisites: (i) the shareholder must qualify as beneficial owner of the shares in the distributing company for a minimum holding period of 45 consecutive days occurring within a period of 45 days prior and 45 days after the due date of the dividends, (ii) the shareholder has to bear at least 70% of the change in value risk related to the shares in the distributing company during the minimum holding period without being directly or indirectly hedged and (iii) the shareholder must not be required to fully or largely compensate directly or indirectly the dividends to third parties. However, these further prerequisites do not apply if the shareholder has been the beneficial owner of the shares in the distributing company for at least one uninterrupted year upon receipt of the dividends.
For individual or corporate shareholders tax resident outside Germany not holding the shares through a permanent establishment (Betriebsstätte) in Germany or as business assets (Betriebsvermögen) for which a permanent representative (ständiger Vertreter) has been appointed in Germany, any non-refundable part of any paid withholding tax (if any) is final (i.e., not creditable or otherwise refundable in respect of such shareholder’s income tax liability) and settles the shareholder’s limited tax liability in Germany. For individual or corporate shareholders tax resident in Germany (that are, for example, shareholders whose residence, domicile, registered office or place of management is located in Germany) holding their shares as business assets, as well as for shareholders tax resident outside of Germany holding their shares through a permanent establishment in Germany or as business assets for which a permanent representative has been appointed in Germany, the withholding tax withheld (including solidarity surcharge) can be credited against the shareholder’s personal income tax or corporate income tax liability in Germany. Any withholding tax
(including solidarity surcharge) in excess of such tax liability is refunded. For individual shareholders tax resident in Germany holding the company’s shares as private assets, the withholding tax is generally a final tax (Abgeltungsteuer).
Pursuant to special rules on the restriction of the aforementioned withholding tax credit, the credit of withholding tax is subject to the following three cumulative prerequisites: (i) the shareholder must qualify as beneficial owner of the shares in the distributing company for a minimum holding period of 45 consecutive days occurring within a period of 45 days prior and 45 days after the due date of the dividends, (ii) the shareholder has to bear at least 70% of the change in value risk related to the shares in the distributing company during the minimum holding period without being directly or indirectly hedged and (iii) the shareholder must not be required to fully or largely compensate directly or indirectly the dividends to third parties. Absent the fulfillment of all of the three prerequisites, three-fifths of the withholding tax imposed on the dividends must not be credited against the shareholder’s (corporate) income tax liability, but may, upon application, be deducted from the shareholder’s tax base for the relevant assessment period. A shareholder that has received gross dividends without any deduction of withholding tax in particular due to a tax exemption or to whom a withholding tax deduction has been refunded without qualifying for a full tax credit has to notify the competent local tax office accordingly, has to file withholding tax returns subject to specific filing requirements and has to make a payment in the amount of 15% withholding tax. The special rules on the restriction of withholding tax credit do not apply to a shareholder whose overall dividend earnings within an assessment period do not exceed €20,000 or that has been the beneficial owner of the shares in the company for at least one uninterrupted year upon receipt of the dividends.
Taxation of Dividend Income of Shareholders Tax Resident in Germany Holding the Company’s Shares as Private Assets
For individual shareholders (individuals) resident in Germany holding the Company’s shares as private assets, dividends are subject to a flat tax rate which is satisfied by the withholding tax actually withheld (Abgeltungsteuer). Accordingly, dividend income will be taxed at a flat tax rate of 25% plus 5.5% solidarity surcharge thereon (in total 26.375%) and church tax (Kirchensteuer) in case the shareholder is subject to church tax because of his individual circumstances. An automatic procedure for deduction of church tax by way of withholding will apply to shareholders being subject to church tax unless the shareholder has filed a blocking notice (Sperrvermerk) with the German Federal Tax Office (details related to the computation of the concrete tax rate including church tax are to be discussed with the individual tax adviser of the relevant shareholder). Except for an annual lump sum savings allowance (Sparer-Pauschbetrag) of up to €801 (for individual filers) or up to €1,602 (for married couples and for partners in accordance with the registered partnership law (Gesetz über die Eingetragene Lebenspartnerschaft) filing jointly), private individual shareholders will not be entitled to deduct expenses incurred in connection with the capital investment from their dividend income.
The income tax owed for the dividend income is satisfied by the withholding tax withheld by the Dividend Paying Agent. However, if the flat tax results in a higher tax burden as opposed to the private shareholder’s individual tax rate, the private shareholder can opt for taxation at his individual personal income tax rate (Günstigerprüfung). In that case, the final withholding tax will be credited against the income tax. However, pursuant to the German tax authorities and a court ruling, private shareholders are nevertheless not entitled to deduct expenses incurred in connection with the capital investment from their income. The option can be exercised only for all capital income from capital investments received in the relevant assessment period uniformly, and married couples as well as partners in accordance with the registered partnership law filing jointly may only jointly exercise the option.
Exceptions from the flat tax rate (satisfied by withholding at source) (Abgeltungsteuer) may apply- that is, only upon application-for shareholders who have a shareholding of at least 25% in the company and for shareholders who have a shareholding of at least 1% in the company and work for a company in a professional capacity through which the shareholder can exert significant entrepreneurial influence on the Company’s economic activity. In such a case, the same rules apply as for sole proprietors holding the shares as business assets. See “— Taxation of dividend income of shareholders tax resident in Germany holding the Company’s shares as business assets — Sole proprietors.”
Taxation of Dividend Income of Shareholders Tax Resident in Germany Holding the Company’s Shares as Business Assets
If a shareholder holds the company’s shares as business assets, the taxation of the dividend income depends on whether the respective shareholder is a corporation, a sole proprietor or a partnership.
Corporations
Dividend income of corporate shareholders is exempt from corporate income tax, provided that the incorporated entity holds a direct participation of at least 10% in the share capital of a company at the beginning of the calendar year in which the dividends are paid. The acquisition of a participation of at least 10% in the course of a calendar year is deemed to have occurred at the beginning of such calendar year for the purpose of this rule. Participations in the share capital of the company which a corporate shareholder holds through a partnership, including co-entrepreneurships (Mitunternehmerschaften), are attributable to such corporate shareholder only on a pro rata basis at the ratio of the interest share of the corporate shareholder in the assets of the relevant partnership. However, 5% of the tax exempt dividends are deemed to be non-deductible business expenses for tax purposes and therefore are subject to corporate income tax (plus solidarity surcharge) and trade tax, i.e., tax exemption of 95%. Business expenses incurred in connection with the dividends received are generally entirely tax-deductible.
For trade tax purposes the entire dividend income is subject to trade tax (i.e., the tax-exempt dividends must be added back when determining the trade taxable income), unless the corporation shareholder holds at least 15% of the company’s registered share capital at the beginning of the relevant tax assessment period (Erhebungszeitraum). In case of an indirect participation via a partnership please refer to the section “Partnerships” below.
If the shareholding is below 10% in the share capital, dividends are taxable at the applicable corporate income tax rate of 15% plus 5.5% solidarity surcharge thereon and trade tax (the rate of which depends on the municipalities the corporate shareholder resides in).
Special regulations apply which abolish the 95% tax exemption if the company’s shares are held as trading portfolio assets in the meaning of Section 340e of the German commercial code (Handelsgesetzbuch) by (i) a credit institution (Kreditinstitut) or (ii) a securities institution (Wertpapierinstitut) or (iii) a financial service institution (Finanzdienstleistungsinstitut). The 95% tax exemption is also abolished if the company’s shares have to be shown as current assets at the time of acquisition by a financial enterprise within the meaning of the German Banking Act (Kreditwesengesetz), in case more than 50% of the shares of such financial enterprise are held directly or indirectly by a credit institution or a securities institution or a financial service institution, as well as if the company’s shares are held by a life insurance company, a health insurance company or a pension fund in case the shares are attributable to the capital investments, resulting in fully taxable income.
Sole Proprietors
For sole proprietors (individuals) resident in Germany holding shares as business assets, dividends are subject to the partial income rule (Teileinkünfteverfahren). Accordingly, only (i) 60% of the dividend income will be taxed at his/her individual personal income tax rate plus 5.5% solidarity surcharge thereon and church tax (if applicable) and (ii) 60% of the business expenses related to the dividend income are deductible for tax purposes. In addition, the dividend income is entirely subject to trade tax if the shares are held as business assets of a permanent establishment in Germany within the meaning of the German Trade Tax Act (Gewerbesteuergesetz), unless the shareholder holds at least 15% of the company’s registered share capital at the beginning of the relevant tax assessment period. The trade tax levied is generally eligible for credit against the shareholder’s personal income tax liability based on the applicable municipal trade tax rate (but limited to a maximum rate) and the individual tax situation of the shareholder.
Partnerships
In case shares are held by a partnership, the partnership itself is not subject to corporate income tax or personal income tax. In this regard, corporate income tax or personal income tax (and church tax, if
applicable) as well as solidarity surcharge, are levied only at the level of the partner with respect to their relevant part of the profit and depending on their individual circumstances.
If the partner is a corporation, the dividend income will be subject to corporate income tax plus solidarity surcharge. See “— Corporations.”
If the partner is an individual, the dividend income will be subject to the partial income rule. See “— Sole Proprietors.”
The dividend income is subject to trade tax at the level of the partnership (provided that the partnership is liable to trade tax), unless the partnership holds at least 15% of a company’s registered share capital at the beginning of the relevant assessment period, in which case the dividend income is exempt from trade tax.
There are no explicit statutory provisions concerning the taxation of dividends with regard to a corporate shareholder of the partnership. However, trade tax should be levied on 5% of the dividends to the extent they are attributable to the shares of such corporate partners to whom at least 10% of the shares of the company are attributable on a look-through basis, since such portion of the dividends should be deemed to be non- deductible business expenses.
If a partner is an individual, depending on the applicable municipal trade tax rate and the individual tax situation, the trade tax paid at the level of the partnership is generally partly or entirely credited against the partner’s personal income tax liability, if further prerequisites are satisfied.
Special regulations apply if the shares are held as trading portfolio assets by a partnership that qualifies as a credit institution, a securities institution, a financial service institution or a financial enterprise within the meaning of the German Banking Act (Kreditwesengesetz). In that case the partial income rule (Teileinkünfteverfahren) is not applicable.
In case of a corporation being a partner, special regulations apply with respect to trading portfolio assets of credit institutions, securities institutions, financial service institutions or financial enterprises within the meaning of the German Banking Act (Kreditwesengesetz) or life insurance companies, health insurance companies or pension funds. See “— Corporations.”
The actual trade tax charge, if any, at the level of the partnership depends on the shareholding quota of the partnership and the nature of the partners (e.g., individual or corporation).
Taxation of Dividend Income of Shareholders Tax Resident Outside of Germany
For foreign individual or corporate shareholders tax resident outside of Germany not holding the shares through a permanent establishment in Germany or as business assets for which a permanent representative has been appointed in Germany, the deducted withholding tax (possibly reduced by way of a tax relief under a double tax treaty or domestic tax law, such as in connection with the EU Parent Subsidiary Directive) is final (that is, not refundable) and settles the shareholder’s limited tax liability in Germany, unless the shareholder is entitled to apply for a withholding tax refund or exemption.
In contrast, individual or corporate shareholders tax resident outside of Germany holding the company’s shares through a permanent establishment in Germany or as business assets for which a permanent representative has been appointed in Germany are subject to the same rules as applicable (and described above) to shareholders resident in Germany holding the shares as business assets. The withholding tax withheld (including solidarity surcharge) is credited against the shareholder’s personal income tax or corporate income tax liability in Germany.
Taxation of Capital Gains
Withholding Tax on Capital Gains
Capital gains realized on the disposal of shares are subject to withholding tax if a German branch of a German or foreign credit or financial institution, a German securities trading company or a German securities trading bank stores or administrates or carries out the sale of the shares and pays or credits the capital gains. In those cases, the institution (and not the company) is required to deduct the withholding tax
at the time of payment for the account of the shareholder and has to pay the withholding tax to the competent tax authority. In case the shares are held (i) as business assets by a sole proprietor, a partnership or a corporation and such shares are attributable to a German business or (ii) in case of a corporation being subject to unlimited corporate income tax liability in Germany, the capital gains are not subject to withholding tax. In case of clause (i), the withholding tax exemption is subject to the condition that the paying agent has been notified by the beneficiary (Gläubiger) that the capital gains are exempt from withholding tax. The respective notification has to be filed by using the officially prescribed form.
Taxation of Capital Gains Realized by Shareholders Tax Resident in Germany Holding Shares as Private Assets
For individual shareholders (individuals) resident in Germany holding shares as private assets, capital gains realized on the disposal of shares are subject to final withholding tax. Accordingly, capital gains will be taxed at a flat tax rate of 25% plus a 5.5% solidarity surcharge thereon (in total 26.375%) and church tax, in case the shareholder is subject to church tax because of his individual circumstances. An automatic procedure for deduction of church tax by way of withholding will apply to shareholders being subject to church tax unless the shareholder has filed a blocking notice (Sperrvermerk) with the German Central Federal Tax Office (details related to the computation of the concrete tax rate including church tax are to be discussed with the individual tax adviser of the relevant shareholder). The taxable capital gain is calculated by deducting the acquisition costs of the shares and the expenses directly related to the disposal from the proceeds of the disposal. Apart from that, except for an annual lump sum savings allowance (Sparer- Pauschbetrag) of up to €801 (for individual filers) or up to €1,602 (for married couples and for partners in accordance with the registered partnership law (Gesetz über die Eingetragene Lebenspartnerschaft) filing jointly), private individual shareholders will not be entitled to deduct expenses incurred in connection with the capital investment from their capital gain.
In case the flat tax results in a higher tax burden as opposed to the private shareholder’s individual tax rate, the private shareholder can opt for taxation at his or her individual personal income tax rate (Günstigerprüfung). In that case, the withholding tax (including solidarity surcharge) withheld will be credited against the income tax. However, pursuant to the German tax authorities and case law the private shareholders are nevertheless not entitled to deduct expenses incurred in connection with the capital investment from their income. The option can be exercised only for all capital income from capital investments received in the relevant assessment period uniformly, and married couples as well as for partners in accordance with the registered partnership law filing jointly may only jointly exercise the option.
Capital losses arising from the sale of the shares can only be offset against other capital gains resulting from the disposition of the shares or shares in other stock corporations during the same calendar year.
Offsetting of overall losses with other income (such as business or rental income) and other capital income is not possible. Such losses are to be carried forward and to be offset against positive capital gains deriving from the sale of shares in stock corporations in future years. In case of a derecognition or transfer of worthless shares (or other capital assets), the utilization of such loss is further restricted and can only be offset up to the amount of €20,000 per calendar year.
The final withholding tax would not apply if the seller of the shares or, in the case of gratuitous transfer, its legal predecessor has held, directly or indirectly, at least 1% of the company’s registered share capital at any time during the five years prior to the disposal. In that case capital gains are subject to the partial income rule (Teileinkünfteverfahren). Accordingly, only (i) 60% of the capital gains would be taxed at his/ her individual personal income tax rate plus a 5.5% solidarity surcharge thereon and church tax (if applicable) and (ii) 60% of the business expenses related to the capital gains are deductible for tax purposes. The withholding tax withheld (including solidarity surcharge) would be credited against the shareholder’s personal income tax liability in Germany.
Taxation of Capital Gains Realized by Shareholders Tax Resident in Germany Holding the Company’s Shares as Business Assets
If a shareholder holds shares as business assets, the taxation of capital gains realized on the disposal of such shares depends on whether the respective shareholder is a corporation, a sole proprietor or a partnership:
Corporations
Capital gains realized on the disposal of shares by a corporate shareholder are generally exempt from corporate income tax and trade tax. However, 5% of the tax-exempt capital gains are deemed to be non- deductible business expenses for tax purposes and therefore are subject to corporate income tax (plus solidarity surcharge) and trade tax, i.e., tax exemption of 95%. Business expenses incurred in connection with the capital gains are entirely tax-deductible.
Capital losses incurred upon the disposal of shares or other impairments of the share value are not tax- deductible.
Special regulations apply if the shares are held as trading portfolio assets by a credit institution, a securities institution, a financial service institution or a financial enterprise within the meaning of the German Banking Act (Kreditwesengesetz) as well as by a life insurance company, a health insurance company or a pension fund. See “— Taxation of dividend income of shareholders tax resident in Germany holding the Company’s shares as business assets — Corporations.”
Sole Proprietors
If the shares are held by a sole proprietor, capital gains realized on the disposal of the shares are subject to the partial income rule (Teileinkünfteverfahren). Accordingly, only (i) 60% of the capital gains will be taxed at his/her individual personal income tax rate plus a 5.5% solidarity surcharge thereon and church tax (if applicable) and (ii) 60% of the business expenses related to the capital gains are deductible for tax purposes. In addition, 60% of the capital gains are subject to trade tax if the shares are held as business assets of a permanent establishment in Germany within the meaning of the German Trade Tax Act (Gewerbesteuergesetz). The trade tax levied, depending on the applicable municipal trade tax rate and the individual tax situation, is generally partly or entirely credited (but limited to a maximum rate) against the shareholder’s personal income tax liability.
Partnerships
In case the shares are held by a partnership, the partnership itself is not subject to corporate income tax or personal income tax as well as a solidarity surcharge (and church tax) since partnerships qualify as transparent for German tax purposes. In this regard, corporate income tax or personal income tax as well as a solidarity surcharge (and church tax, if applicable), are levied only at the level of the partner with respect to their relevant part of the profit and depending on their individual circumstances.
If the partner is a corporation, the capital gains will be subject to corporate income tax plus a solidarity surcharge at the level of the partner. See “— Corporations.” Trade tax will be levied at the level of the partnership. With respect to both corporate income and trade tax, the 95% exemption rule as described above applies.
If the partner is an individual, the capital gains are subject to the partial income rule. See “— Sole Proprietors.”
In addition, if the partnership is liable to trade tax, 60% of the capital gains are subject to trade tax at the level of the partnership, to the extent the partners are individuals, and 5% of the capital gains are subject to trade tax, to the extent the partners are corporations. However, if a partner is an individual, depending on the applicable municipal trade tax rate and the individual tax situation, the trade tax paid at the level of the partnership is generally partly or entirely credited against the partner’s personal income tax liability (but limited to a maximum rate), if further prerequisites are satisfied.
Special regulations apply if the shares are held as trading portfolio assets by a partnership that qualifies as a credit institution, a securities institution, a financial service institution or a financial enterprise within the meaning of the German Banking Act (Kreditwesengesetz). In that case the partial income rule (Teileinkünfteverfahren) is not applicable.
With regard to corporate partners, special regulations apply if they are held as trading portfolio assets by credit institutions, securities institutions, financial service institutions or financial enterprises within the
meaning of the German Banking Act or life insurance companies, health insurance companies or pension funds, as described above.
Taxation of Capital Gains Realized by Shareholders Tax Resident Outside of Germany
Capital gains realized on the disposal of the shares by a shareholder tax resident outside of Germany are subject to German taxation provided that (i) the company’s shares are held as business assets of a permanent establishment or as business assets for which a permanent representative has been appointed in Germany, or (ii) the shareholder or, in case of a gratuitous transfer, its legal predecessor has held, directly or indirectly, at least 1% of the company’s shares capital at any time during a five-year period prior to the disposal. In these cases, capital gains are generally subject to the same rules as described above for shareholders resident in Germany. However, in case the shares held by a non-German tax resident corporation are not attributable to a German permanent establishment or permanent representative, the 5% taxation (see “— Taxation of capital gains realized by shareholders tax resident in Germany holding the company’s shares as business assets”) as a consequence of deemed non-deductible business expenses shall not apply to such non- German tax resident shareholders and such capital gains are consequently fully exempt from German corporate income and trade tax.
However, except for the cases referred to in clause (i) above, some of the double tax treaties concluded with Germany provide for a full exemption from German taxation.
Inheritance and Gift Tax
The transfer of the shares in Sono Group N.V. to another person by way of succession or donation is subject to German inheritance and gift tax (Erbschaft- und Schenkungsteuer) if:
1.
the decedent, the donor, the heir, the donee or any other beneficiary has his/her/its residence, domicile, registered office or place of management in Germany at the time of the transfer, or is a German citizen who has not stayed abroad for more than five consecutive years without having a residence in Germany, or is a non-resident German citizen employed by a legal entity organized under German public law or is a dependent having German citizenship and living in the household of such citizen, if further prerequisites are satisfied; or
2.
irrespective of the personal circumstances the shares are held by the decedent or donor as business assets for which a permanent establishment in Germany is maintained or a permanent representative is appointed in Germany; or
3.
irrespective of the personal circumstances at least 10% of the shares are held, directly or indirectly by the decedent or donor, himself or together with a related party in terms of Section 1 para. 2 Foreign Tax Act (Außensteuergesetz).
Special regulations apply to qualified German citizens who maintain neither a residence nor their domicile in Germany but in a low tax jurisdiction, and to former German citizens, also resulting in inheritance and gift tax provided that certain conditions are met. The few double tax treaties on inheritance and gift tax which Germany has entered seek to prevent or mitigate a double taxation.
Abolishment of Solidarity Surcharge
The solidarity surcharge (Solidaritätszuschlag) has been partially abolished as of the assessment period 2021 for certain individuals. The solidarity surcharge shall, however, continue to apply for capital investment in general and, thus, on final withholding taxes levied. If, however, the withholding tax is not final or not levied at all, as the respective shares are held as business assets, solidarity surcharge may not be levied or levied at a reduced amount, depending on the circumstances of the individual. In addition, the solidarity surcharge continues to apply to corporations.
Other Taxes
No German capital transfer tax (Kapitalverkehrsteuer), value-added tax (Umsatzsteuer), stamp duty (Stempelgebühr) or similar taxes are levied when acquiring, holding or transferring shares in a company. No
value-added tax will be levied unless the shareholder validly opts for it. Net wealth tax (Vermögensteuer) is currently not levied in Germany.
On January 22, 2013, the Council of the EU approved the resolution of the ministers of finance from 11 EU member states (including Germany) to introduce a Financial Transaction Tax (“FTT”) within the framework of enhanced cooperation. On February 14, 2013, the European Commission published a proposal for a Council Directive implementing enhanced cooperation in the area of financial transaction tax. The plan focuses on levying a tax of 0.1% (0.01% for derivatives) on the purchase and sale of financial instruments.
On December 9, 2019, the German Federal Finance Minister announced another proposal for a directive for a financial transaction tax by way of an enhanced cooperation mechanism with 9 other participating EU member states (“New FTT”). Such proposal was revised again in April 2020. In addition, the German Federal Finance Ministry further prepared the implementation of the FTT or the New FTT by the creation of a new department (Referat) within the German Federal Finance Ministry. Such new department is referred to as “Finanztransaktionssteuer” (financial transaction tax).
In February 2021, the Portuguese Presidency of the Council of the EU proposed an inclusive discussion among all EU member states on tax design issues of the FTT at EU level.
The FTT and the New FTT proposal remain subject to negotiation between the participating EU member states and are subject to political discussion. They may, therefore, be altered prior to the implementation, the timing of which remains unclear. Additional EU member states may decide to participate.
Prospective holders of the shares are advised to seek their own professional advice in relation to FTT.
U.S. Federal Income Tax Considerations
This section describes United States federal income tax considerations generally applicable to owning ordinary shares. It applies to you only if you acquire your ordinary shares in offerings under this prospectus and you hold your ordinary shares as capital assets for tax purposes. This discussion addresses only United States federal income taxation and does not discuss all of the tax consequences that may be relevant to you in light of your individual circumstances, including foreign, state or local tax consequences, estate and gift tax consequences, and tax consequences arising under the Medicare contribution tax on net investment income or the alternative minimum tax. This section does not address all of the tax consequences that apply to U.S. holders that are ineligible for the benefits of the Convention Between the United States of America and Germany (the “Treaty”). In addition, this section does not apply to you if you are a member of a special class of holders subject to special rules, including:
•
a broker or dealer in securities,
•
a trader in securities that elects to use a mark-to-market method of accounting for securities holdings,
•
a tax-exempt organization or governmental organization,
•
a tax-qualified retirement plan,
•
a bank, insurance company or other financial institution,
•
a real estate investment trust or regulated investment company,
•
a person that actually or constructively owns 10% or more of the combined voting power of our voting stock or of the total value of our stock,
•
a person that holds ordinary shares as part of a straddle or a hedging or conversion transaction,
•
a person that purchases or sells ordinary shares as part of a wash sale for tax purposes,
•
a U.S. holder (as defined below) whose functional currency is not the U.S. dollar,
•
a U.S. expatriate or former citizen or long-term resident of the United States,
•
a corporation that accumulates earnings to avoid U.S. federal income tax,
•
an S corporation, partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes (and investors therein), or
•
a person deemed to sell ordinary shares under the constructive sale provisions of the Internal Revenue Code of 1986.
This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect, as well as on the Treaty. These laws are subject to change, possibly on a retroactive basis.
If an entity or arrangement that is treated as a partnership for United States federal income tax purposes holds the ordinary shares, the United States federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the ordinary shares should consult its tax advisor with regard to the United States federal income tax treatment of an investment in the ordinary shares.
You are a U.S. holder if you are a beneficial owner of ordinary shares and you are, for United States federal income tax purposes:
•
a citizen or resident of the United States,
•
a domestic corporation,
•
an estate whose income is subject to United States federal income tax regardless of its source, or
•
a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.
A “non-U.S. holder” is a beneficial owner of ordinary shares that is not a United States person and is not a partnership for United States federal income tax purposes.
You should consult your own tax advisor regarding the United States federal, state and local tax consequences of owning and disposing of shares and ordinary shares in your particular circumstances.
Except as described below under “U.S. Holders — PFIC Rules,” this discussion assumes that we are not, and will not become, a PFIC for United States federal income tax purposes.
U.S. Holders
Dividends on Ordinary Shares
If you are a U.S. holder, the gross amount of any distribution on the ordinary shares that we pay out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes), other than certain pro-rata distributions of our shares, will be treated as a dividend that is subject to United States federal income taxation. If you are a noncorporate U.S. holder, dividends that constitute qualified dividend income will be taxable to you at the preferential rates applicable to long-term capital gains provided that you hold the ordinary shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and other requirements are met. Dividends we pay with respect to the ordinary shares generally will be qualified dividend income provided that, in the year that you receive the dividend, the ordinary shares are readily tradable on an established securities market in the United States. Our ordinary shares are listed on Nasdaq and we therefore expect that dividends on the ordinary shares will be qualified dividend income.
You must include any German tax withheld from the dividend payment in this gross amount even though you do not in fact receive it. The dividend is taxable to you when you receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution that you must include in your income will be the U.S. dollar value of the Euro payments made, determined at the spot Euro/U.S. dollar rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars.
Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the ordinary shares and thereafter as capital gain. However, we do not expect to calculate earnings and profits in accordance with United States federal income tax principles. Accordingly, you should expect to generally treat distributions we make as dividends.
Subject to certain limitations, it is possible that German tax withheld in accordance with the Treaty and paid over to Germany will be creditable or deductible against your United States federal income tax liability. However, under recently finalized Treasury regulations, it is possible that such withholding taxes will not be creditable unless you are eligible to claim the benefits of the Treaty and elect to apply the Treaty.
Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the preferential tax rates. To the extent a reduction or refund of the tax withheld is available to you under German law or under the Treaty, the amount of tax withheld that could have been reduced or that is refundable will not be eligible for credit against your United States federal income tax liability. See “— Material German Tax Considerations — Dividends Tax — Withholding Tax on Dividends,” above, for the procedures for obtaining a tax refund.
Dividends on ordinary shares will generally be income from sources outside the United States and will generally be “passive” income for purposes of computing the foreign tax credit allowable to you. However, if (a) we are 50% or more owned, by vote or value, by United States persons and (b) at least 10% of our earnings and profits are attributable to sources within the United States, then for foreign tax credit purposes, a portion of our dividends would be treated as derived from sources within the United States.
With respect to any dividend paid for any taxable year, the United States source ratio of our dividends for foreign tax credit purposes would be equal to the portion of our earnings and profits from sources within the United States for such taxable year, divided by the total amount of our earnings and profits for such taxable year.
Sale of Ordinary Shares
If you are a U.S. holder and you sell or otherwise dispose of your ordinary shares, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the amount that you realize and your tax basis in your ordinary shares. Capital gain of a noncorporate U.S. holder is generally taxed at preferential rates where the property is held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.
PFIC Rules
We believe that we were not classified as a PFIC for United States federal income tax purposes in our prior taxable year and we do not expect to become a PFIC in the current taxable year or the foreseeable future. However, this conclusion is a factual determination that is made annually and thus may be subject to change. It is therefore possible that we could become a PFIC in a future taxable year. In addition, our current position that we are not a PFIC is based in part upon the value of our goodwill which is based on the market value for our ordinary shares. Accordingly, we could become a PFIC in the future if there is a substantial decline in the value of our ordinary shares.
In general, if you are a U.S. holder, we will be a PFIC with respect to you if for any taxable year in which you held our ordinary shares:
•
at least 75% of our gross income for the taxable year is passive income, or
•
at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income.
“Passive income” generally includes dividends, interest, gains from the sale or exchange of investment property, rents and royalties (other than certain rents and royalties derived in the active conduct of a trade or business) and certain other specified categories of income. If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation’s income.
If we are treated as a PFIC, and you are a U.S. holder that did not make a mark-to-market election, as described below, you will generally be subject to special rules with respect to:
•
any gain you realize on the sale or other disposition of your ordinary shares and
•
any excess distribution that we make to you (generally, any distributions to you during a single taxable year, other than the taxable year in which your holding period in the ordinary shares begins, that are greater than 125% of the average annual distributions received by you in respect of the ordinary shares during the three preceding taxable years or, if shorter, your holding period for the ordinary shares that preceded the taxable year in which you receive the distribution).
Under these rules:
•
the gain or excess distribution will be allocated ratably over your holding period for the ordinary shares,
•
the amount allocated to the taxable year in which you realized the gain or excess distribution or to prior years before the first year in which we were a PFIC with respect to you will be taxed as ordinary income,
•
the amount allocated to each other prior year will be taxed at the highest tax rate in effect for that year, and
•
the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year.
Special rules apply for calculating the amount of the foreign tax credit with respect to excess distributions by a PFIC.
If we are a PFIC in a taxable year and our ordinary shares are treated as “marketable stock” in such year, you may make a mark-to-market election with respect to your ordinary shares. If you make this election, you will not be subject to the PFIC rules described above. Instead, in general, you will include as ordinary income each year the excess, if any, of the fair market value of your ordinary shares at the end of the taxable year over your adjusted basis in your ordinary shares. You will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of your ordinary shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). Your basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. Any gain that you recognize on the sale or other disposition of your ordinary shares would be ordinary income and any loss would be an ordinary loss to the extent of the net amount of previously included income as a result of the mark-to-market election and, thereafter, a capital loss.
Because we do not intend to provide the information necessary for a U.S. holder to comply with the requirements of a “qualified electing fund” election, such election will not be available to you with respect to your ordinary shares.
Your ordinary shares will generally be treated as stock in a PFIC if we were a PFIC at any time during your holding period in your ordinary shares, even if we are not currently a PFIC.
In addition, notwithstanding any election you make with regard to the ordinary shares, dividends that you receive from us will not constitute qualified dividend income to you if we are a PFIC (or are treated as a PFIC with respect to you) either in the taxable year of the distribution or the preceding taxable year. Dividends that you receive that do not constitute qualified dividend income are not eligible for taxation at the preferential rates applicable to qualified dividend income. Instead, you must include the gross amount of any such dividend paid by us out of our accumulated earnings and profits (as determined for United
States federal income tax purposes) in your gross income, and it will be subject to tax at rates applicable to ordinary income.
If we are a PFIC and, at any time, have a foreign subsidiary that is classified as a PFIC, you generally would be deemed to own a portion of the shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution from, or dispose of all or part of our interest in, the lower-tier PFIC or you otherwise were deemed to have disposed of an interest in the lower-tier PFIC. A mark-to-market election generally would not be available with respect to such lower-tier PFIC.
If you own ordinary shares during any year that we are a PFIC with respect to you, you may be required to file U.S. Internal Revenue Service (“IRS”) Form 8621.
Shareholder Reporting
A U.S. holder that owns “specified foreign financial assets” with an aggregate value in excess of $50,000 (and in some circumstances, a higher threshold) may be required to file an information report with respect to such assets with its tax return. “Specified foreign financial assets” may include financial accounts maintained by foreign financial institutions, as well as the following, but only if they are held for investment and not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-United States persons, (ii) financial instruments and contracts that have non-United States issuers or counterparties, and (iii) interests in foreign entities. U.S. Holders are urged to contact their tax advisors regarding these filing requirements.
Non-U.S. Holders
Dividends
If you are a non-U.S. holder, dividends paid to you in respect of ordinary shares will not be subject to United States federal income tax unless the dividends are “effectively connected” with your conduct of a trade or business within the United States, and the dividends are attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis. In such cases you generally will be taxed in the same manner as a U.S. holder. If you are a corporate non-U.S. holder, “effectively connected” dividends may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.
Capital Gains
If you are a non-U.S. holder, you will not be subject to United States federal income tax on gain recognized on the sale or other disposition of your ordinary shares unless:
•
the gain is “effectively connected” with your conduct of a trade or business in the United States, and the gain is attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis, or
•
you are an individual, you are present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist.
If you are a corporate non-U.S. holder, “effectively connected” gains that you recognize may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.
Backup Withholding and Information Reporting
If you are a noncorporate U.S. holder, information reporting requirements, on IRS Form 1099, generally will apply to dividend payments or other taxable distributions made to you within the United States, and the payment of proceeds to you from the sale of ordinary shares effected at a United States office of a broker.
Additionally, backup withholding may apply to such payments if you fail to comply with applicable certification requirements or (in the case of dividend payments) are notified by the IRS that you have failed to report all interest and dividends required to be shown on your federal income tax returns.
If you are a non-U.S. holder, you are generally exempt from backup withholding and information reporting requirements with respect to dividend payments made to you outside the United States by us or another non-United States payor. You are also generally exempt from backup withholding and information reporting requirements in respect of dividend payments made within the United States and the payment of the proceeds from the sale of ordinary shares effected at a United States office of a broker, as long as either (i) the payor or broker does not have actual knowledge or reason to know that you are a United States person and you have furnished a valid IRS Form W-8 or other documentation upon which the payor or broker may rely to treat the payments as made to a non-United States person, or (ii) you otherwise establish an exemption.
Payment of the proceeds from the sale of ordinary shares effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale effected at a foreign office of a broker could be subject to information reporting in the same manner as a sale within the United States (and in certain cases may be subject to backup withholding as well) if (i) the broker has certain connections to the United States, (ii) the proceeds or confirmation are sent to the United States or the sale has certain other specified connections with the United States.
You generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed your income tax liability by filing a refund claim with the IRS.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE IMPORTANT TO YOU. EACH PROSPECTIVE PURCHASER SHOULD CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN SHARES UNDER THE INVESTOR’S OWN CIRCUMSTANCES.
PLAN OF DISTRIBUTION
We have entered into the Sales Agreement with each of B. Riley, Berenberg and Cantor relating to the offer and sale of shares of our ordinary shares offered by this prospectus through or to the Agents as our agents or principals. In accordance with the terms of the Sales Agreement, under this prospectus we may offer and sell ordinary shares having an aggregate offering price of up to $135,000,000. Sales of our ordinary shares, if any, under this prospectus may be made by any method that is deemed an “at the market offering” as defined in Rule 415 under the Securities Act.
Each time we wish to issue and sell ordinary shares under the Sales Agreement, we will notify an Agent of the number of shares to be issued, the dates on which such sales are anticipated to be made and any minimum price below which sales may not be made. Once we have so instructed such Agent, unless such Agent declines to accept the terms of such notice, such Agent has agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell such shares up to the amount specified on such terms. The obligations of the Agents under the Sales Agreement to sell our ordinary shares are subject to a number of conditions that we must meet.
The settlement between us and the Agents is generally anticipated to occur on the second trading day following the date on which the sale was made. Sales of our ordinary shares as contemplated in this prospectus will be settled through the facilities of The Depository Trust Company or by such other means as we and the Agents may agree upon. There is no arrangement for funds to be received in an escrow, trust or similar arrangement.
We will pay the Agents a commission at a rate of 3.0% of the aggregate gross proceeds we receive from each sale of our ordinary shares. Because there is no minimum offering amount required as a condition to close this offering, the actual total public offering amount, commissions and proceeds to us, if any, are not determinable at this time. In connection with the sale of the ordinary shares on our behalf, each of the Agents will be deemed to be an “underwriter” within the meaning of the Securities Act, and the compensation of the Agents will be deemed to be underwriting commissions or discounts. In addition, we have agreed to reimburse the Agents for the fees and disbursements of its counsel, payable upon execution of the Sales Agreement, in an amount not to exceed $110,000, in addition to certain ongoing disbursements of its legal counsel up to $30,000 per year. We have agreed to provide indemnification and contribution to the Agents with respect to certain civil liabilities, including liabilities under the Securities Act. We estimate that the total expenses for the offering, excluding compensation and expenses payable to the Agents under the terms of the Sales Agreement, will be approximately $500,000.
The offering of our ordinary shares pursuant to the Sales Agreement will terminate as permitted therein. We, B. Riley, Berenberg and Cantor may each terminate the Sales Agreement at any time upon five days’ prior notice.
Each of the Agents and/or their respective affiliates have provided, currently provide, and/or may in the future provide, various investment banking and other financial services for us, for which they have received, currently receive, and/or or may in the future receive, customary fees and commissions. To the extent required by Regulation M under the Exchange Act, none of the Agents will engage in any market making activities involving our ordinary shares while the offering is ongoing under this prospectus.
In addition, in the ordinary course of their business activities, each of B. Riley, Berenberg and Cantor and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. Each of B. Riley, Berenberg and Cantor and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
This prospectus in electronic format may be made available on a website maintained by the Agents, and each of the Agents may distribute this prospectus electronically.
ENFORCEMENT OF CIVIL LIABILITIES
We are organized and existing under the laws of The Netherlands, and, as such, under Dutch private international law rules the rights of our shareholders and the civil liability of our management board members, supervisory board members and executive officers are governed in certain respects by the laws of The Netherlands. The ability of our shareholders in certain countries other than The Netherlands to bring an action against us, our management board members, supervisory board members and executive officers may be limited under applicable law. In addition, substantially all of our assets are located outside the United States.
As a result, it may not be possible for shareholders to effect service of process within the United States upon us or our management board members, supervisory board members and executive officers or to enforce judgments against us or them in U.S. courts, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States. In addition, it is not clear whether a Dutch court would impose civil liability on us or any of our management board members, supervisory board members and executive officers in an original action based solely upon the federal securities laws of the United States brought in a court of competent jurisdiction in The Netherlands.
As of the date of this prospectus, the United States and The Netherlands do not have a treaty providing for the reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters. With respect to choice of court agreements in civil or commercial matters, it is noted that the Hague Convention on Choice of Court Agreements entered into force for The Netherlands, but has not entered into force for the United States. Accordingly, a judgment rendered by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized and enforced by the competent Dutch courts. However, if a person has obtained a judgment rendered by a court in the United States that is enforceable under the laws of the United States and files a claim with the competent Dutch court, the Dutch court will in principle give binding effect to a foreign judgment if (i) the jurisdiction of the foreign court was based on a ground of jurisdiction that is generally acceptable according to international standards, (ii) the judgment by the foreign court was rendered in legal proceedings that comply with the Dutch standards of proper administration of justice including sufficient safeguards (behoorlijke rechtspleging), (iii) binding effect of such foreign judgment is not contrary to Dutch public order (openbare orde) and (iv) the judgment by the foreign court is not incompatible with a decision rendered between the same parties by a Dutch court, or with a previous decision rendered between the same parties by a foreign court in a dispute that concerns the same subject and is based on the same cause, provided that the previous decision qualifies for recognition in The Netherlands. Even if such a foreign judgement is given binding effect, a claim based thereon may, however, still be rejected if the foreign judgment is not or no longer formally enforceable.
Based on the lack of a treaty as described above, U.S. investors may not be able to enforce against us or our management board members, supervisory board members or certain experts named herein who are residents of The Netherlands or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.
The United States and Germany currently do not have a treaty providing for the reciprocal recognition and enforcement of judgments, in civil and commercial matters. Consequently, a final judgment for payment or declaratory judgments given by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized or enforceable in Germany. German courts may deny the recognition and enforcement of a judgment rendered by a U.S. court if they consider the U.S. court not to be competent or the decision to be in violation of German public policy principles. For example, judgments awarding punitive damages are generally not enforceable in Germany. A German court may reduce the amount of damages granted by a U.S. court and recognize damages only to the extent that they are necessary to compensate actual losses or damages.
In addition, actions brought in a German court against us, our management board and supervisory board and the experts named herein to enforce liabilities based on U.S. federal securities laws may be subject to certain restrictions. In particular, German courts generally do not award punitive damages. Litigation in Germany is also subject to rules of procedure that differ from the U.S. rules, including with respect to the taking and admissibility of evidence, the conduct of the proceedings and the allocation of costs. German
procedural law does not provide for pre-trial discovery of documents, nor does Germany support pre-trial discovery of documents under the 1970 Hague Evidence Convention. Proceedings in Germany would have to be conducted in the German language and all documents submitted to the court would, in principle, have to be translated into German. For these reasons, it may be difficult for a U.S. investor to bring an original action in a German court predicated upon the civil liability provisions of the U.S. federal securities laws against us, our management board and supervisory board and the experts named in this prospectus.
LEGAL MATTERS
NautaDutilh N.V. has advised us on certain legal matters as to Dutch law including the issuance of ordinary shares offered by this prospectus. We are also being represented as to certain matters of U.S. federal law and New York state law by Sullivan & Cromwell LLP. Dorsey & Whitney LLP has acted as counsel to the Agents in connection with this offering.
EXPERTS
The financial statements incorporated in this prospectus by reference to the Annual Report on Form 20-F for the year ended December 31, 2021 have been so incorporated in reliance on the report (which contains an explanatory paragraph relating to the Company’s ability to continue as a going concern as described in Note 4.13.1 to the financial statements) of PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft is a member of the Chamber of Public Accountants (Wirtschaftsprüferkammer), Berlin, Germany.
The current address of PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, is Bernhard-Wicki-Straße 8, 80636 Munich, Germany.
WHERE YOU CAN FIND MORE INFORMATION
As permitted under SEC rules, this prospectus, which is part of a registration statement on Form F-3, do not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed. Each statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit.
We are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. The SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our management board and supervisory board members and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
Our SEC filings, including the registration statement on Form F-3 mentioned above, are also available to you on the SEC’s website at http://www.sec.gov.
INCORPORATION BY REFERENCE
The SEC allows us to incorporate by reference information into this document. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be a part of this document, except for any information superseded by information that is included directly in this prospectus or incorporated by reference subsequent to the date of this prospectus.
We incorporate by reference herein
•
•
our report on Form 6-K submitted to the SEC on June 13, 2022, relating to the ELOC;
•
our report on Form 6-K submitted to the SEC on September 9, 2022, including our interim condensed consolidated financial statements as of June 30, 2021 and June 30, 2022 and for each of the six month periods ended June 30, 2022 and June 30, 2021; and
•
our report on Form 6-K submitted to the SEC on December 7, 2022, providing an update on certain Company-related information.
All annual reports we file with the SEC pursuant to the Exchange Act on Form 20-F after the date of this prospectus and prior to termination or expiration of the related registration statement shall be deemed incorporated by reference into this prospectus and to be part hereof from the date of filing of such documents. We may incorporate by reference any Form 6-K subsequently submitted to the SEC by identifying in such Form 6-K that it is being incorporated by reference into this prospectus.
Documents incorporated by reference in this prospectus are available from us without charge upon written or oral request, excluding any exhibits to those documents that are not specifically incorporated by reference into those documents. You can obtain documents incorporated by reference in this document by requesting them from:
Sono Group N.V.
Waldmeisterstraße 76
80935 Munich
Germany
+49 (0)89 4520 5818
You may also access these documents on our website, www.sonomotors.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.
Up to $150,000,000 of Ordinary Shares
PROSPECTUS
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B. Riley Securities
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Berenberg
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Cantor
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You should rely only on the information contained in this prospectus. No dealer, salesperson or other person is authorized to give information that is not contained in this prospectus. This prospectus is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is correct only as of the date of this prospectus, regardless of the time of the delivery of this prospectus or any sale of these securities.
, 20
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 8. Indemnification of directors and officers
Under Dutch law, management board members and supervisory board members may be held liable for damages in the event of improper or negligent performance of their duties. They may be held jointly and severally liable for damages to the company and to third parties for infringement of the articles of association or of certain provisions of Dutch law. In certain circumstances, they may also incur additional specific civil and criminal liabilities. Subject to certain exceptions, our articles of association provide for indemnification of our current and former management board members and supervisory board members (and other current and former officers and employees as designated by our management board, subject to approval by our supervisory board). No indemnification shall be given to an indemnified person:
(a)
if a competent court or arbitral tribunal has established, without having (or no longer having) the possibility for appeal, that the acts or omissions of such indemnified person that led to the financial losses, damages, expenses, suit, claim, action or legal proceedings as described above are of an unlawful nature (including acts or omissions which are considered to constitute malice, gross negligence, intentional recklessness and/or serious culpability attributable to such indemnified person);
(b)
to the extent that his or her financial losses, damages and expenses are covered under insurance and the relevant insurer has settled, or has provided reimbursement for, these financial losses, damages and expenses (or has irrevocably undertaken to do so);
(c)
in relation to proceedings brought by such indemnified person against the company, except for proceedings brought to enforce indemnification to which he is entitled pursuant to our articles of association, pursuant to an agreement between such indemnified person and the company which has been approved by the management board or pursuant to insurance taken out by the company for the benefit of such indemnified person; and
(d)
for any financial losses, damages or expenses incurred in connection with a settlement of any proceedings effected without the company’s prior consent.
Under our articles of association, our management board may stipulate additional terms, conditions and restrictions in relation to the indemnification described above.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Item 9. Exhibits
Reference is made to the Exhibit Index included herewith which is incorporated herein by reference.
Item 10. Undertakings
(a)
The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (§ 230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
Provided, however, That:
(A)
Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-8 (§ 239.16b of this chapter), and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) that are incorporated by reference in the registration statement; and
(B)
Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 (§ 239.13 of this chapter) or Form F-3 (§ 239.33 of this chapter) and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) (§ 230.424(b) of this chapter) that is part of the registration statement.
(C)
Provided further, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is for an offering of asset-backed securities on Form S-1 (§ 239.11 of this chapter) or Form S-3 (§ 239.13 of this chapter), and the information required to be included in a post-effective amendment is provided pursuant to Item 1100(c) of Regulation AB (§ 229.1100(c)).
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4)
To file a post-effective amendment to the registration statement to include any financial statements required by “Item 8.A. of Form 20-F” at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3 (§ 239.33 of this chapter), a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Act or § 210.3-19 of this chapter if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3.
(5)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(A)
Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B)
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(6)
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b)
The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(d)
The undersigned registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)
For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
EXHIBIT INDEX
The following documents are filed as part of this registration statement:
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Exhibit Number
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Description of Exhibit
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1.1*
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Form of Underwriting Agreement
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1.2**
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At Market Issuance Sales Agreement, dated December 7, 2022 by and between Sono Group N.V., B. Riley Securities In., Berenberg Capital Markets LLC and Cantor Fitzgerald & Co.
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4.1**
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Registration Rights Agreement by and between Sono Group N.V. and YA II PN, Ltd., dated December 7, 2022
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5.1**
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Opinion of NautaDutilh N.V., Dutch counsel of Sono Motors, as to the validity of the ordinary shares
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8.1**
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Opinion of NautaDutilh N.V., Dutch counsel of Sono Motors, as to Dutch tax matters
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8.2**
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Opinion of Sullivan & Cromwell LLP as to U.S. tax matters
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8.3**
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Opinion of Ebner Stolz Mönning Bachem Wirtschaftsprüfer Steuerberater Rechtsanwälte Partnerschaft mbB
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10.1**
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Securities Purchase Agreement by and between Sono Group N.V. and YA II PN, Ltd., dated December 7, 2022
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10.2**
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Form of Convertible Debenture
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23.1**
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Consent of PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft
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23.2**
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Consent of NautaDutilh N.V. (included in Exhibit 8.1)
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23.3**
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Consent of Sullivan & Cromwell LLP (included in Exhibit 8.2.)
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23.4**
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Consent of Ebner Stolz Mönning Bachem Wirtschaftsprüfer Steuerberater Rechtsanwälte Partnerschaft mbB (included in Exhibit 8.3)
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24.1**
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Powers of Attorney (included on signature page to the registration statement)
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107**
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Calculation of Filing Fee Table
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*
To be filed, if necessary, by amendment or furnished on Form 6-K.
**
Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Munich, Germany, on December 7, 2022.
Sono Group N.V.
By:
/s/ Laurin Hahn
Name:
Laurin Hahn
Title:
Chief Executive Officer and Member of the Management Board
By:
/s/ Jona Christians
Name:
Jona Christians
Title:
Chief Executive Officer and
Member of the Management Board
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below does hereby constitute and appoint Laurin Hahn and Jona Christians, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution and re-substitution, for and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and sign any registration statement for the same offering covered by the registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Laurin Hahn
Laurin Hahn
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Chief Executive Officer and
Member of the Management Board
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December 7, 2022
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/s/ Jona Christians
Jona Christians
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Chief Executive Officer and
Member of the Management Board
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December 7, 2022
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/s/ Torsten Kiedel
Torsten Kiedel
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Chief Financial Officer,
Controller/Principal Accounting Officer
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December 7, 2022
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/s/ Thomas Hausch
Thomas Hausch
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Chief Operating Officer and
Member of the Management Board
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December 7, 2022
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/s/ Markus Volmer
Markus Volmer
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Chief Technology Officer and
Member of the Management Board
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December 7, 2022
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SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the Securities Act of 1933, as amended, the undersigned, the duly appointed representative in the United States of Sono Group N.V. has signed this registration statement or amendment thereto in the city of Newark, State of Delaware on December 7, 2022.
Puglisi & Associates
By:
/s/ Donald J. Puglisi
Name:
Donald J. Puglisi
Title:
Managing Director
Exhibit 1.2
SONO
GROUP N.V.
Ordinary Shares
(nominal value €0.06 per share)
At Market Issuance Sales Agreement
December 7, 2022
B. Riley Securities, Inc.
299 Park Avenue, 21st Floor
New York, NY 10171
Berenberg Capital Markets LLC
1251 Avenue of the Americas, 53rd
Floor
New York, NY 10020
Cantor Fitzgerald & Co.
499 Park Avenue
New York, NY 10022
Ladies and Gentlemen:
Sono Group N.V., a
public limited liability company (naamloze vennootschap) incorporated under the laws of the Netherlands (the
“Company”), confirms its agreement (this “Agreement”) with B. Riley Securities, Inc.
(“B. Riley Securities”), Berenberg Capital Markets LLC (“Berenberg”) and Cantor
Fitzgerald & Co. (“Cantor”; each of B. Riley Securities, Berenberg and Cantor, individually, an
“Agent” and, collectively, the “Agents”) as follows:
1. Issuance
and Sale of Shares. The Company agrees that, from time to time during the term of this Agreement, on the terms and subject to the
conditions set forth herein, it may issue and sell through or to the Agents, as sales agents or principals, ordinary shares, nominal value
€0.06 per share, in the capital of the Company (the “Ordinary Shares”), subject to the limitations set forth in
Section 5(d) (the “Placement Shares”). The issuance and sale of Placement Shares through the Agents
will be effected pursuant to the Registration Statement (as defined below), although nothing in this Agreement shall be construed as requiring
the Company to use the Registration Statement to issue any Placement Shares.
The Company has filed or will
file, in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations thereunder (the
“Securities Act”), with the Securities and Exchange Commission (the “Commission”), a registration
statement on Form F-3, including (i) a base prospectus relating to certain securities to be issued from time to time by the
Company and (ii) a prospectus specifically relating to the Placement Shares (the “ATM Prospectus”), and which
incorporates or will incorporate by reference documents that the Company has filed or will file in accordance with the provisions of the
Securities Exchange Act of 1934, as amended and the rules and regulations thereunder (the “Exchange Act”). The
Company will furnish to the Agents, for use by the Agents, copies of the ATM Prospectus. Except where the context otherwise requires,
such registration statement, and any post-effective amendment thereto, including all documents filed as part thereof or incorporated by
reference therein, and including any information contained in a Prospectus (as defined below) subsequently filed with the Commission pursuant
to Rule 424(b) under the Securities Act or deemed to be a part of such registration statement pursuant to Rule 430B, or
any subsequent registration statement on Form F-3 filed pursuant to Rule 415(a)(6) under the Securities Act by the Company
to cover any Placement Shares or any subsequent registration statement on Form F-3 filed pursuant to 462(b) under the Securities
Act, is herein called the “Registration Statement.” The ATM Prospectus, including all documents incorporated or deemed
incorporated therein by reference to the extent such information has not been superseded or modified in accordance with Rule 412
under the Securities Act (as qualified by Rule 430B(g)), included in the Registration Statement, as it may be supplemented by any
prospectus supplement, in the form in which such ATM Prospectus and/or prospectus supplement have most recently been filed by the Company
with the Commission pursuant to Rule 424(b) under the Securities Act is herein called the “Prospectus.” Any
reference herein to the Registration Statement, the Prospectus or any amendment or supplement thereto shall be deemed to refer to and
include the documents incorporated by reference therein, and any reference herein to the terms “amend,” “amendment”
or “supplement” with respect to the Registration Statement or the Prospectus shall be deemed to refer to and include the filing
after the execution hereof of any document with the Commission incorporated by reference therein (the “Incorporated Documents”).
For purposes of this Agreement,
all references to the Registration Statement, the Prospectus or to any amendment or supplement thereto shall be deemed to include the
most recent copy filed with the Commission pursuant to its Electronic Data Gathering Analysis and Retrieval System, or if applicable,
the Interactive Data Electronic Application system when used by the Commission (collectively, “EDGAR”).
2. Placements.
Following effectiveness of the Registration Statement, each time that the Company wishes to issue and sell Placement Shares hereunder
(each, a “Placement”), it will notify an Agent (the “Designated Agent”) by electronic mail (or other
written method mutually agreed to in writing by the parties) of the number of Placement Shares, the time period during which sales are
requested to be made, any limitation on the number of Placement Shares that may be sold in any one day and any minimum price below which
sales may not be made (a “Placement Notice”), the form of which is attached hereto as Schedule 1. The Placement
Notice shall originate from any of the individuals from the Company set forth on Schedule 3 (with a copy to each of the other individuals
from the Company listed on such schedule), and shall be addressed to each of the individuals from the Designated Agent set forth on Schedule
3, as such Schedule 3 may be amended from time to time. The Placement Notice shall be effective immediately upon receipt by
the Designated Agent unless and until (i) the Designated Agent promptly declines to accept the terms contained therein for any reason,
in its sole discretion, (ii) the entire amount of the Placement Shares thereunder has been sold, (iii) the Company suspends
or terminates the Placement Notice, which suspension and termination rights may be exercised by the Company in its sole discretion, or
(iv) this Agreement has been terminated under the provisions of Section 13. The amount of any discount, commission or
other compensation to be paid by the Company to the Designated Agent in connection with the sale of the Placement Shares through the Designated
Agent acting as sales agent pursuant to this Agreement shall be calculated in accordance with the terms set forth in Schedule 2.
It is expressly acknowledged and agreed that neither the Company nor the Designated Agent will have any obligation whatsoever with respect
to a Placement or any Placement Shares unless and until the Company delivers a Placement Notice to the Designated Agent and the Designated
Agent does not decline such Placement Notice pursuant to the terms set forth above, and then only upon the terms specified therein and
herein. In the event of a conflict between the terms of Sections 2 or 3 of this Agreement and the terms of a Placement Notice,
the terms of the Placement Notice will control.
3. Sale
of Placement Shares by the Agents. Subject to the terms and conditions of this Agreement, for the period specified in a Placement
Notice, the Designated Agent will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable
state and federal laws, rules and regulations and the rules of The Nasdaq Global Market (the “Exchange”),
to sell the Placement Shares up to the amount specified in, and otherwise in accordance with the terms of, such Placement Notice. The
Designated Agent will provide written confirmation to the Company no later than the opening of the Trading Day (as defined below) immediately
following the Trading Day on which it has made sales of Placement Shares hereunder setting forth the number of Placement Shares sold on
such day, the compensation payable by the Company to the Designated Agent pursuant to Section 2 with respect to such sales
through the Designated Agent acting as sales agent pursuant to this Agreement, and the Net Proceeds (as defined below) payable to the
Company, with an itemization of the deductions made by the Designated Agent (as set forth in Section 5(b)) from the gross
proceeds that it receives from such sales. Subject to the terms of a Placement Notice, the Designated Agent may sell Placement Shares
by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act.
Notwithstanding the foregoing, no sale may be made in a privately negotiated transaction by the Designated Agent pursuant to this Agreement
without the prior written consent of the Company. “Trading Day” means any day on which Ordinary Shares are purchased
and sold on the Exchange.
4. Suspension
of Sales. The Company or the Designated Agent may, upon notice to the other party in writing (including by email correspondence to
each of the individuals of the other party set forth on Schedule 3, if receipt of such correspondence is actually acknowledged
by any of the individuals to whom the notice is sent, other than via auto-reply) or by telephone (confirmed immediately by verifiable
facsimile transmission or email correspondence to each of the individuals of the other party set forth on Schedule 3), suspend
any sale of Placement Shares (a “Suspension”); provided, however, that such Suspension shall not affect or impair
any party’s obligations with respect to any Placement Shares sold hereunder prior to the receipt of such notice. While a Suspension
is in effect, any obligation under Sections 7(l), 7(m), 7(n) and 7(o) with respect to the delivery
of certificates, opinions, or comfort letters to the Agents, shall be waived. Each of the parties agrees that no such notice under this
Section 4 shall be effective against any other party unless it is made to one of the individuals of such other party named
on Schedule 3 hereto, as such Schedule may be amended from time to time.
5. Sale
and Delivery to the Designated Agent; Settlement.
a. Sale
of Placement Shares. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein
set forth, following the effectiveness of the Registration Statement, and unless the sale of the Placement Shares described therein has
been declined, suspended, or otherwise terminated in accordance with the terms of this Agreement, the Designated Agent, for the period
specified in the Placement Notice, will use its commercially reasonable efforts consistent with its normal trading and sales practices
and applicable state and federal laws, rules and regulations and the rules of the Exchange to sell such Placement Shares up
to the amount specified in, and otherwise in accordance with the terms of, such Placement Notice. The Company acknowledges and agrees
that (i) there can be no assurance that the Designated Agent will be successful in selling Placement Shares, (ii) the Designated
Agent will incur no liability or obligation to the Company or any other person or entity if it does not sell Placement Shares for any
reason other than a failure by the Designated Agent to use its commercially reasonable efforts consistent with its normal trading and
sales practices and applicable state and federal laws, rules and regulations and the rules of the Exchange to sell such Placement
Shares as required under this Agreement and (iii) the Designated Agent shall be under no obligation to purchase Placement Shares
on a principal basis pursuant to this Agreement, except as otherwise agreed by the Designated Agent and the Company, the terms of which,
including any discount, commission or other compensation to be paid by the Company to the Designated Agent in connection with such purchase
of Placement Shares by the Designated Agent on a principal basis, shall be set forth in a separate written term sheet.
b. Settlement
of Placement Shares. Unless otherwise specified in the applicable Placement Notice, settlement for sales of Placement Shares will
occur on the second (2nd) Trading Day (or such earlier day as is industry practice for regular-way trading and agreed
by the parties hereto) following the date on which such sales are made (each, a “Settlement Date”). The Designated
Agent shall notify the Company of each sale of Placement Shares no later than the opening of the Trading Day immediately following the
Trading Day on which the Designated Agent has sold Placement Shares. The amount of proceeds to be delivered to the Company on a Settlement
Date against receipt of the Placement Shares sold through the Designated Agent acting as sales agent pursuant to this Agreement (the “Net
Proceeds”) will be equal to the aggregate sales price received by the Designated Agent, after deduction for (i) the Designated
Agent’s commission, discount or other compensation payable by the Company for such sales through the Designated Agent acting as
sales agent pursuant to Section 2 hereof, and (ii) any transaction fees imposed by any governmental or self-regulatory
organization in respect of such sales.
c. Delivery
of Placement Shares. On each Settlement Date, subject to delivery of the related Net Proceeds by the Designated Agent to the Company
(or, if the related Net Proceeds cannot be delivered to the Company on or prior to such Settlement Date, delivery of a written confirmation
by the Designated Agent that the Designated Agent is keeping such Net Proceeds in escrow for the sole account and benefit and at the instruction
of the Company, with such Net Proceeds in that case to be delivered to the Company promptly following the Settlement Date), the Company
will issue the Placement Shares sold through the Designated Agent being settled on such Settlement Date to its transfer agent pursuant
to a deed of issue (each, a “Deed of Issue”), and the Company will cause its transfer agent to electronically transfer
such Placement Shares by crediting the Designated Agent’s or its designee’s account (provided the Designated Agent shall have
given the Company written notice of such designee prior to the Settlement Date) at The Depository Trust Company through its Deposit and
Withdrawal at Custodian System (“DWAC”) or by such other means of delivery as may be mutually agreed upon by the parties
hereto, which in all cases shall be freely tradeable, transferable, registered shares. On each Settlement Date, the Designated Agent will
deliver the related Net Proceeds in same day funds to an account designated by the Company on, or prior to, the Settlement Date and in
any event before the execution by the Company of the relevant Deed of Issue, provided that, if the related Net Proceeds cannot be delivered
to the Company on or prior to such Settlement Date, the Designated Agent shall deliver instead its written confirmation that the Designated
Agent is keeping such Net Proceeds in escrow for the sole account and benefit and at the instruction of the Company, with such Net Proceeds
in that case to be delivered to the Company promptly following the Settlement Date. Upon request by the Company, the Designated Agent
will provide DWAC instructions or other instructions for delivery by other means with respect to the transfer of the Placement Shares
being sold. The Company agrees that if the Company, or its transfer agent (if applicable), defaults in its obligation to deliver duly
authorized Placement Shares by 2:30 P.M., Eastern Standard Time, on a Settlement Date (other than as a result of a failure by the Designated
Agent to provide instructions for delivery), the Company agrees that in addition to and in no way limiting the rights and obligations
set forth in Section 11(a) hereto, it will (i) take all necessary action to cause the full amount of the Net Proceeds
that were delivered to the Company’s account with respect to such settlement, together with any costs incurred by the Designated
Agent in connection with recovering such Net Proceeds, to be immediately returned to the Designated Agent no later than 5:00 P.M., Eastern
Standard Time, on such Settlement Date, by wire transfer of immediately available funds to an account designated by the Designated Agent,
(ii) indemnify and hold the Designated Agent harmless against any loss, claim, damage, or reasonable and documented expense (including
reasonable and documented legal fees and expenses), as incurred, arising out of or in connection with such default by the Company, or
its transfer agent (if applicable), and (iii) pay to the Designated Agent (without duplication) any commission, discount, or other
compensation to which it would otherwise have been entitled absent such default.
d. Limitations
on Offering Size. Under no circumstances shall the Company cause or request the offer or sale of any Placement Shares if, after giving
effect to the sale of such Placement Shares, the aggregate number or gross sales proceeds of Placement Shares sold pursuant to this Agreement
would exceed the least of: (i) the number or dollar amount of Ordinary Shares registered and available for offer and sale under the
effective Registration Statement pursuant to which the offering is being made, (ii) the number or dollar amount of Ordinary Shares
set forth in the Prospectus, (iii) the number or dollar amount of Ordinary Shares permitted to be offered and sold under Form F-3
(including General Instruction I.B.5 thereof, if applicable), (iv) the number of Ordinary Shares comprised in the Company’s
authorized share capital but unissued and not otherwise reserved for issuance (including (a) in relation to equity or debt securities
convertible into or exchangeable or exercisable for or that can be settled in Ordinary Shares and (b) Ordinary Shares remaining available
for issuance under the Company's equity incentive plans), or (v) the number of Ordinary Shares the Company’s management board
and/or its supervisory board is authorized to issue without pre-emptive rights pursuant to a resolution to that effect of the general
meeting of shareholders of the Company in accordance with the Company’s articles of association and applicable Dutch law, and notified
to the Designated Agent in writing. Under no circumstances shall the Company cause or request the offer or sale of any Placement Shares
pursuant to this Agreement at a price lower than the higher of (i) the minimum price authorized from time to time by the Company’s
management board or supervisory board and notified to the Designated Agent in writing and (ii) the aggregate nominal value of the
applicable Placement Shares. Notwithstanding anything to the contrary contained herein, the parties hereto agree that compliance with
the limitations set forth in this Section 5(d) on the number or dollar amount of Placement Shares that may be issued
and sold under this Agreement from time to time shall be the sole responsibility of the Company, and that the Agents shall have no obligation
in connection with such compliance.
e. Sales
Through Agents. With respect to the offering and sale of Placement Shares pursuant to this Agreement, the Company agrees that any
offer to sell Placement Shares, any solicitation of an offer to buy Placement Shares, and any sales of Placement Shares shall only be
effected by or through one single Agent as the Designated Agent on any single given Trading Day, and in no event shall the Company request
that more than one Agent offer or sell Placement Shares pursuant to this Agreement on the same Trading Day.
6. Representations
and Warranties of the Company. Except as disclosed in the Registration Statement or the Prospectus (including the Incorporated Documents),
the Company represents and warrants to, and agrees with each of the Agents that as of the date of this Agreement and as of each Applicable
Time (as defined below), unless such representation, warranty or agreement specifies a different date or time:
a. Registration
Statement and Prospectus. The Registration Statement has been or will be filed with the Commission and has been or will be declared
effective under the Securities Act prior to the issuance of any Placement Notices by the Company. The ATM Prospectus will name B. Riley
Securities, Berenberg and Cantor as the agents in the section entitled “Plan of Distribution.” The Company has not received,
and has no notice of, any order of the Commission preventing or suspending the use of the Registration Statement, or threatening or instituting
proceedings for that purpose. The Registration Statement meets the requirements of Rule 415 under the Securities Act and complies
in all material respects with said Rule. Any statutes, regulations, contracts or other documents that are required to be described in
the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement have been or will be so described
or filed, as applicable. Copies of the Registration Statement, the Prospectus, and any such amendments or supplements and all documents
incorporated by reference therein that were filed with the Commission on or prior to the date of this Agreement have been delivered, or
are available through EDGAR, to the Agents and their counsel. The Company has not distributed and, prior to the later to occur of each
Settlement Date and completion of the distribution of the Placement Shares, will not distribute any offering material in connection with
the offering or sale of the Placement Shares other than the Registration Statement and the Prospectus and any Issuer Free Writing Prospectus
(as defined below) to which the Agents have consented, which consent will not be unreasonably withheld, conditioned or delayed, or as
required by applicable law or the listing maintenance requirements of the Exchange.
b. No
Misstatement or Omission. At each Settlement Date, the Registration Statement and the Prospectus, as of such date, will conform in
all material respects with the requirements of the Securities Act. The Registration Statement, as of its effective date, does not contain
an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements
therein not misleading. The Prospectus and any amendment and supplement thereto, on the date thereof and at each Applicable Time (defined
below), did not or will not include an untrue statement of a material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading. The documents incorporated by reference in the Prospectus
or any prospectus supplement did not, and any further documents filed and incorporated by reference therein will not, when filed with
the Commission, contain an untrue statement of a material fact or omit to state a material fact required to be stated in such document
or necessary to make the statements in such document, in light of the circumstances under which they were made, not misleading. The foregoing
shall not apply to statements in, or omissions from, any such document made in reliance upon, and in conformity with, information furnished
to the Company by an Agent specifically for use in the preparation thereof.
c. Conformity
with Securities Act and Exchange Act. The Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or any amendment
or supplement thereto, and the Incorporated Documents, when such documents were or are filed with the Commission under the Securities
Act or the Exchange Act or became or become effective under the Securities Act, as the case may be, conformed or will conform in all material
respects with the requirements of the Securities Act and the Exchange Act, as applicable.
d. Financial
Information. The consolidated historical financial statements and schedules of the Company and its consolidated subsidiaries included
or incorporated by reference in the Registration Statement and the Prospectus present fairly in all material aspects the financial condition,
results of operations and cash flows of the Company and its consolidated Subsidiaries as of the dates and for the periods indicated, comply
as to form, in all material aspects with the applicable accounting requirements of the Securities Act and have been prepared in conformity
with international financial reporting standards as issued by the International Accounting Standards Board (“IFRS”)
and applied on a consistent basis throughout the periods involved (except as otherwise noted therein). The supporting schedules, if any,
present fairly in accordance with IFRS the information required to be stated therein in all material respects. The summary financial information
included or incorporated by reference in the Registration Statement and the Prospectus present fairly, in all material respects, on the
basis stated in the Registration Statement and the Prospectus, the information included therein and have been compiled on a basis consistent
with that of the audited financial statements included therein. The pro forma financial statements or data included or incorporated by
reference in the Registration Statement or the Prospectus, if any, comply with the requirements of Regulation S-X of the Securities Act,
including, without limitation, Article 11 thereof, and the assumptions used in the preparation of such pro forma financial statements
and data are reasonable, the pro forma adjustments used therein are appropriate to give effect to the circumstances referred to therein
and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements and data. The
other financial and statistical data with respect to the Company and the Subsidiaries contained or incorporated by reference in the Registration
Statement or the Prospectus, if any, are accurately and fairly presented and prepared on a basis consistent with the financial statements
and books and records of the Company. There are no financial statements (historical or pro forma) that are required to be included or
incorporated by reference in the Registration Statement or the Prospectus that are not included or incorporated by reference as required.
The interactive date in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement, when
required to be filed by the Company under the Exchange Act, has been prepared in accordance with the Commission’s rules and
guidelines applicable thereto.
e. Conformity
with EDGAR Filing. The Prospectus delivered to the Agents for use in connection with the sale of the Placement Shares pursuant to
this Agreement will be identical to the versions of the Prospectus created to be transmitted to the Commission for filing via EDGAR, except
to the extent permitted by Regulation S-T.
f. Organization.
The Company and each subsidiary of the Company that is a significant subsidiary (as such term is defined in Rule 1-02 of Regulation
S-X promulgated by the Commission) (each, a “Subsidiary,” collectively, the “Subsidiaries”), have
been duly formed or incorporated, as applicable, and are validly existing and are in good standing (to the extent good standing is a known
concept in the applicable jurisdiction) under the laws of the jurisdiction in which the Company and each Subsidiary is existing or organized
(to the extent applicable) with full power and authority to own or lease, as the case may be, and to operate their respective properties
and conduct their respective business as described in the Registration Statement and the Prospectus, and are duly qualified to do business
as a foreign corporation and are in good standing (to the extent good standing is a known concept in the applicable jurisdiction) under
the laws of each jurisdiction which requires such qualification, except where the failure to be so qualified or in good standing would
not reasonably be expected, individually or in the aggregate, to have a material adverse effect on the assets, business, operations, earnings,
properties, condition (financial or otherwise), prospects, shareholders’ equity or results of operations of the Company and the
Subsidiaries taken as a whole, or prevent the consummation of the transactions contemplated hereby (a “Material Adverse Effect”).
g. Subsidiaries.
As of the date hereof, the Company’s only Subsidiaries are set forth on Schedule 6(g). All the outstanding shares of capital
stock of each Subsidiary of the Company have been duly and validly authorized and issued and are fully paid and non-assessable, and, except
as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Company’s Subsidiaries are owned by the
Company either directly or through wholly owned Subsidiaries free and clear of any perfected security interest or any other security interests,
mortgages, pledges, claims, liens, encumbrances or equity. No Subsidiary of the Company is currently prohibited, directly or indirectly,
from paying any dividends to the Company, from making any other distribution on such Subsidiary’s capital stock, from repaying to
the Company any loans or advances to such subsidiary from the Company or from transferring any of such Subsidiary’s property or
assets to the Company or any other Subsidiary of the Company.
h. No
Violation or Default. Except as otherwise set forth in the Prospectus, neither the Company nor any of its Subsidiaries is in violation
or default of (i) any provision of its articles of association or bylaws, (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it
is a party or bound or to which its property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree of
any court or arbitrator or governmental or regulatory authority having jurisdiction over the Company or such Subsidiary or any of its
properties, as applicable, except in the case of clauses (ii) and (iii) for any such breach, violation or imposition as would
not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. To the Company’s knowledge, no
other party under any material contract or other agreement to which it or any Subsidiary is a party is in default in any respect thereunder
where such default would reasonably be expected to have a Material Adverse Effect.
i. No
Material Adverse Change. Subsequent to the respective dates as of which information is given in the Prospectus, and except as disclosed
in the Prospectus, there has been no (a) change, nor any development or event involving a prospective change, in the condition (financial
or otherwise), results of operations, business, properties or prospects of the Company and its Subsidiaries, taken as a whole, that is
material and adverse to the Company and its Subsidiaries; (b) dividend or distribution of any kind declared, paid or made by the
Company on any class of its share capital; and (c) material adverse change in the share capital, short-term indebtedness, long-term
indebtedness, net current assets or net assets of the Company and its Subsidiaries, other than in each case above in the ordinary course
of business or as otherwise disclosed in the Prospectus (including any document incorporated by reference therein).
j. Capitalization.
The authorized, issued and outstanding share capital of the Company was as set forth in the Prospectus as of the dates reflected therein.
There are no authorized or outstanding phantom equity, rights to receive shares, RSUs, options, conversion rights, warrants, preemptive
rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable
for or that can be settled in, any share capital of the Company or any of its Subsidiaries other than those described in the Prospectus.
The issued and outstanding Ordinary Shares have been duly authorized and validly issued and are fully paid and non-assessable (meaning
that the holders of the Ordinary Shares will not by reason of merely being such a holder, be subject to assessment or calls by the Company
or its creditors for further payment on such Ordinary Shares). None of the issued Ordinary Shares were issued in violation of the preemptive
or other similar rights of any security holder of the Company. All issued and outstanding Ordinary Shares are free of any third party
rights and conform to the description of the Ordinary Shares contained in the Prospectus. The Company has filed with the Commission true
and correct copies of the English translation of the Company’s Articles of Association as in effect on the date of this Agreement
(the “Articles of Association”).
k. F-3
Eligibility. (i) At the time of filing of the Registration Statement with the Commission and (ii) at the
time of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the Securities Act (whether
such amendment was or will be by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the
Exchange Act or form of prospectus), the Company met the then applicable requirements for the use of Form F-3 under the
Securities Act, including compliance with General Instruction I.B.1 or General Instruction I.B.5 of Form F-3, as applicable. As
of the close of trading on the Exchange on the Trading Day immediately prior to the date of this Agreement, the aggregate market
value of the outstanding voting and non-voting common equity (as defined in Rule 405) of the Company held by persons other
than affiliates of the Company (pursuant to Rule 144 of the Securities Act, those that directly, or indirectly through one or more
intermediaries, control, or are controlled by, or are under common control with, the Company) (the “Non-Affiliate Shares”),
was approximately $79.0 million (calculated by multiplying (x) the price at which the common equity of the Company was last sold
on the Exchange on October 17, 2022, by (y) the number of Non-Affiliate Shares on October 17, 2022). The Company is not a
shell company (as defined in Rule 405 under the Securities Act) and has not been a shell company for at least 12 calendar months
previously.
l. Authorization;
Enforceability. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement.
Except for approvals by or taken on behalf of the Company’s management board or supervisory board as may be required in connection
with any issuance and sale of Placement Shares hereunder (which approvals shall either (A) be obtained prior to the delivery of any
Placement Notice to an Agent or (B) be included in the relevant Deed of Issue), the execution, delivery and performance by the Company
of this Agreement and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by all necessary
corporate action, and no further consent or authorization of the Company, its management board, its supervisory board or its general meeting
of shareholders is required. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms, except as (i) such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to,
or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application
(including any limitation of equitable remedies) and (ii) the indemnification and contribution provisions of Section 11
hereof may be limited by U.S. federal or state securities laws and public policy considerations in respect thereof.
m. Authorization
of Placement Shares. The Placement Shares to be issued and sold by the Company pursuant to a particular Placement Notice will be,
upon the execution of the relevant Deed of Issue, duly authorized by all necessary corporate action on the part of the Company. The Placement
Shares, when issued and sold against payment therefor in accordance with this Agreement and a Deed of Issue, shall be validly issued and
outstanding, fully paid and non-assessable (meaning that a holder of Placement Shares will not by reason of merely being such a holder,
be subject to assessment or calls by the Company or its creditors for further payment on such Placement Shares), any preemptive rights
of any existing shareholders relating to the issuance and sale of the Placement Shares by the Company hereunder are validly excluded or
waived and will be excluded or waived prior to the issuance of such Placement Shares, and the issuance and sale of the Placement Shares
is not subject to any rights of first refusal or other similar rights to subscribe for or purchase the Placement Shares, and the purchaser
of Placement Shares issued and sold pursuant to this Agreement shall be entitled to all rights accorded to a holder of Ordinary Shares.
The Ordinary Shares of the Company, including the Placement Shares, conform in all material respects to the descriptions thereof contained
in the Prospectus.
n. No
Consents Required. No consent, approval, authorization, order, registration or qualification of or with any court or arbitrator or
any governmental or regulatory authority is required for the execution, delivery and performance by the Company of this Agreement, and
the issuance and sale by the Company of the Placement Shares as contemplated hereby, except for such consents, approvals, authorizations,
orders and registrations or qualifications (i) as may be required under applicable U.S. federal or state securities laws or by the
by-laws and rules of the Financial Industry Regulatory Authority (“FINRA”) or the Exchange, including any notices
that may be required by the Exchange, in connection with the sale of the Placement Shares by the Company to or through the Agents, (ii) as
may be required under the Securities Act and (iii) as have been previously obtained by the Company.
o. No
Preferential Rights. (i) No person, as such term is defined in Rule 1-02 of Regulation S-X promulgated under the Securities
Act (each, a “Person”) has any preemptive rights, rights of first refusal, or any other rights (whether pursuant to
a “poison pill” provision or otherwise) to purchase any Ordinary Shares or other securities of the Company from the Company
which have not been duly waived with respect to the offering contemplated hereby, (ii) no Person has the right to act as an underwriter
or as a financial advisor to the Company in connection with the offer and sale of the Placement Shares, except in each case for such rights
as have been waived on or prior to the date hereof or as provided for under this Agreement, and (iii) except as disclosed in the
Prospectus, no Person has the right, contractual or otherwise, to require the Company to register under the Securities Act any Ordinary
Shares or other securities of the Company, or to include any such shares or other securities in the Registration Statement or the offering
contemplated thereby, whether as a result of the filing or effectiveness of the Registration Statement or the sale of the Placement Shares
as contemplated thereby or otherwise, except in each case for such rights as have been waived on or prior to the date hereof or as provided
for under this Agreement.
p. Independent
Public Accountant. To the knowledge of the Company, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (the “Auditor”),
whose report is filed with the Commission as part of the Registration Statement, are independent public accountants with respect to the
Company within the meaning of the Securities Act and the applicable published rules and regulations thereunder. To the Company’s
knowledge, the Auditor is not in violation of the auditor independence requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”) with respect to the Company.
q. Enforceability
of Agreements. To the Company’s knowledge, all agreements between the Company and third parties expressly referenced in the
Prospectus, other than such agreements that have expired by their terms or whose termination is disclosed in documents filed by the Company
on EDGAR, are legal, valid and binding obligations of the Company and, to the Company’s knowledge, enforceable in accordance with
their respective terms, except as (i) such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights
and remedies or by other equitable principles of general application (including any limitation of equitable remedies) and (ii) the
indemnification provisions of certain agreements may be limited by U.S. federal or state securities laws or public policy considerations
in respect thereof, and except for any unenforceability that, individually or in the aggregate, would not have a Material Adverse Effect.
r. No
Litigation. Except as set forth in the Prospectus, no action, suit or proceeding (including any inquiries or investigations) by or
before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries or its or
their property is pending or, to the knowledge of the Company, threatened that (i) would reasonably be expected to have a material
adverse effect on the performance of this Agreement or the consummation of any of the transactions contemplated hereby or (ii) could
reasonably be expected to have a Material Adverse Effect.
s. Licenses
and Permits. The Company and its Subsidiaries possess all licenses, certificates, permits, approvals, consents and other authorizations
(collectively, the “Permits”) issued by all applicable authorities necessary to conduct their respective businesses
as presently conducted, except where the failure to possess such Permits would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such Permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling
or finding, would reasonably be expected to have a Material Adverse Effect.
t. No
Material Defaults. Neither the Company nor any Subsidiary has defaulted on any installment on indebtedness for borrowed money or on
any rental on one or more long-term leases, which defaults, individually or in the aggregate, would reasonably be expected to have a Material
Adverse Effect. The Company has not filed a report pursuant to Section 13(a) or 15(d) of the Exchange Act since the filing
of its last Annual Report on Form 20-F, indicating that it (i) has failed to pay any dividend or sinking fund installment on
preferred shares or (ii) has defaulted on any installment on indebtedness for borrowed money or on any rental on one or more long-term
leases.
u. Certain
Market Activities. Neither the Company, nor any Subsidiary, nor, to the knowledge of the Company, any of their respective management
board or supervisory board members, officers or controlling persons has taken, directly or indirectly, any action designed, or that has
constituted or would reasonably be expected to cause or result in, under the Exchange Act or otherwise, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of the Placement Shares.
v. Broker/Dealer
Relationships. Neither the Company nor any Subsidiary or any related entities (i) is required to register as a “broker”
or “dealer” in accordance with the provisions of the Exchange Act or (ii) directly or indirectly through one or more
intermediaries, controls or is a “person associated with a member” or “associated person of a member” (within
the meaning set forth in the FINRA Manual).
w. No
Reliance. The Company has not relied upon any Agent or legal counsel for the Agents for any legal, tax or accounting advice in connection
with the offering and sale of the Placement Shares.
x. Taxes.
The Company and its Subsidiaries have filed all tax returns that are required to be filed or have requested extensions thereof (except
in any case in which the failure to so file would not have a Material Adverse Effect or except as set forth in or contemplated in the
Prospectus) and have paid all taxes required to be paid by them and any other assessment, fine or penalty levied against them, to the
extent that any of the foregoing is due and payable, except for any such assessment, fine or penalty that is currently being contested
in good faith, or as would not reasonably be expected to have a Material Adverse Effect, or except as set forth in or contemplated in
the Prospectus; and there is no tax deficiency which has been or might reasonably be expected to be asserted or threatened against the
Company or any of its Subsidiaries, except as would not reasonably be expected to have a Material Adverse Effect.
y. Title
to Property; Leases. Each of the Company and each of its Subsidiaries owns or leases all such properties and assets as are necessary
to the conduct of its operations as presently conducted, except as would not reasonably be expected to have a Material Adverse Effect.
z. Intellectual
Property. The Company and its Subsidiaries own, possess, license or have other valid rights to use, on reasonable terms, all patents,
patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual property necessary for the conduct of the Company’s business as now conducted
or as proposed in the Prospectus to be conducted (collectively, the “Intellectual Property”). Except as set forth in
the Prospectus, (i) the Intellectual Property is owned by the Company or any of its Subsidiaries free and clear of all liens, security
interests, or encumbrances; (ii) to the knowledge of the Company, there is no material infringement, misappropriation or other violation
by third parties of any Intellectual Property, and there is no pending or threatened action, suit, proceeding or claim by the Company
or its Subsidiaries against any third party for such infringement, misappropriation or other violation, and neither the Company nor its
Subsidiaries are aware of any facts which would form a reasonable basis for any such action, suit, proceeding or claim; (iii) there
is no pending or, to the Company’s Knowledge, threatened action, suit, proceeding or claim by others against the Company or its
Subsidiaries challenging the Company’s or its Subsidiaries’ rights in or to any Intellectual Property, and neither the Company
nor its Subsidiaries are aware of any facts which would form a reasonable basis for any such action, suit, proceeding or claim; (iv) there
is no pending or, to the Company’s Knowledge, threatened material action, suit, proceeding or claim by others challenging the validity
or scope of any Intellectual Property, including interferences, oppositions, reexaminations, or government proceedings, and neither the
Company nor its Subsidiaries are aware of any facts which would form a reasonable basis for any such material action, suit, proceeding
or claim; (v) the patents, trademarks and copyrights included within the Intellectual Property are valid, enforceable and subsisting,
and the patent, trademark, and copyright applications included within the Intellectual Property are subsisting and have not been abandoned;
(vi) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company
or its Subsidiaries infringe, misappropriate or otherwise violate, or would, upon the commercialization of any product or service described
in the Prospectus infringe, misappropriate, or otherwise violate, any patent, trademark, copyright, trade secret or other proprietary
rights of others, and neither the Company nor its Subsidiaries are aware of any facts which would form a reasonable basis for any such
action, suit, proceeding or claim; (vii) the development, manufacture, sale, and any current or proposed use of any of the products,
proposed products or processes of the Company and its Subsidiaries referred to in the Prospectus in the current or proposed conduct of
the business of the Company and its Subsidiaries, have not, do not currently, and to the Company’s knowledge, will not upon commercialization,
infringe, misappropriate or otherwise violate any patent, trademark, copyright, trade secret or other proprietary right of any third party;
(viii) all Intellectual Property owned by or licensed to the Company or its Subsidiaries or under which the Company or its Subsidiaries
have rights has been duly and properly filed and maintained and to the Company’s knowledge there are no material defects in any
of the patents or patent applications in the Intellectual Property; (ix) no Intellectual Property has been adjudged by a court of
competent jurisdiction invalid or unenforceable, in whole or in part; (x) to the Company’s knowledge, there is no prior art
that may render any issued patent held by the Company invalid; (xi) all prior art of which the Company or its Subsidiaries are aware
that is material to the validity of a U.S. patent or to the patentability of a pending U.S. patent application that the Company or its
Subsidiaries own, possess, license or have other rights to use has been disclosed to the U.S. Patent and Trademark Office in compliance
with 37 CFR §1.56 during the prosecution of such applicable patent or applicable patent application, and, in the case of all other
patents and patent applications included in the Intellectual Property, all such prior art has been disclosed to the patent office of other
jurisdictions where required; and (xii) to the Company’s knowledge, there is no reason for the scope of any issued claims under
any patents included in the Intellectual Property, or for the scope of any claims that issue under any pending patent applications included
in the Intellectual Property, to be materially less than the scope reflected in such patent or patent application, respectively, as of
the date hereof. Each person who has created or developed any Intellectual Property as an employee of or contractor to the Company or
its Subsidiaries has done so pursuant to a binding and enforceable written agreement (or pursuant to similar obligations by operation
of law) which includes provisions sufficient to ensure that the Company or its Subsidiaries are the exclusive owner of such Intellectual
Property. To the Company’s knowledge, no employee, consultant or independent contractor of the Company is in or has ever been in
violation in any material respect of any term of any employment contract, patent disclosure agreement, invention assignment agreement,
non-competition agreement, non-solicitation agreement, non-disclosure agreement or any restrictive covenant to or with a former employer
or independent contractor where the basis of such violation relates to such employee’s employment or independent contractor’s
engagement with the Company or its Subsidiaries or actions undertaken while employed or engaged with the Company or its Subsidiaries.
The Company and its Subsidiaries have taken and will take reasonable steps in accordance with standard industry practices to maintain
and protect the confidentiality of the trade secrets and other confidential Intellectual Property used in connection with the businesses
of the Company and its Subsidiaries and, to the knowledge of the Company, such confidential Intellectual Property has not been compromised
or disclosed to or accessed by any third party except pursuant to nondisclosure and confidentiality agreements.
aa. Compliance
with Applicable Laws. The Company has not been advised, and has no reason to believe, that it and each of its Subsidiaries are not
conducting business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting
business, except where failure to be so in compliance would not reasonably be expected to result in a Material Adverse Effect. The Company
has complied and shall comply with all applicable U.S. federal and applicable state securities laws and all applicable Dutch laws in connection
with the offer, issuance and sale of the Placement Shares hereunder, including, without limitation, the applicable requirements of the
Securities Act; provided, however, that, for purposes of the representations and warranties made by the Company in this sentence,
the Company is assuming that no act or omission on the part of the Agents would make the statements made in this sentence untrue. The
Company is subject to and in compliance in all material respects with the reporting requirements of Section 13 or Section 15(d) of
the Exchange Act.
bb. Environmental
Laws. The Company and its Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws
and regulations and any order of any domestic or foreign government or governmental authority relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”),
(ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses as described in the Prospectus, and (iii) have not received notice of any actual or potential
liability under any Environmental Law, except where such non-compliance with Environmental Laws, failure to receive required permits,
licenses or other approvals, or liability would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth
in the Prospectus, neither the Company nor any of its Subsidiaries has been named as a “potentially responsible party” under
the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or equivalent legislation. In the ordinary
course of its business, the Company periodically reviews the effect of Environmental Laws on the business, operations and properties of
the Company and its Subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws,
or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On
the basis of such review and to the best of its knowledge, the Company has reasonably concluded that such associated costs and liabilities
would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect, except as set forth in the Prospectus.
cc. Internal
Accounting Controls; Disclosure Controls. Except as set forth in the Prospectus, the Company and each of its Subsidiaries maintains
a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with IFRS and to maintain asset accountability; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as set forth in the Prospectus,
the Company and its Subsidiaries’ internal control over financial reporting (as defined under Rule 13a-15(f) of the Exchange
Act) are effective and the Company and its Subsidiaries are not aware of any material weakness in their internal control over financial
reporting. Except as set forth in the Prospectus, the Company and its Subsidiaries maintain “disclosure controls and procedures”
(as such term is defined in Rule 13a-15(e) under the Exchange Act) that have been designed to ensure that material information
relating to the Company and its Subsidiaries is made known to the Company’s principal executive officer and principal financial
officer by others within those entities and such disclosure controls and these procedures are effective in all material respects to perform
the functions for which they were established.
dd. Sarbanes-Oxley
Act. There is and has been no failure on the part of the Company or, to the knowledge of the Company, any of the Company’s directors
or officers, in their capacities as such, to comply in all material respects with any applicable provisions of the Sarbanes-Oxley Act
and the rules and regulations promulgated thereunder, including Section 402 relating to loans.
ee. Finder’s
Fees. Neither the Company nor any Subsidiary has incurred any liability for any finder’s fees, brokerage commissions or similar
payments in connection with the transactions herein contemplated, except as may otherwise exist with respect to the Agents pursuant to
this Agreement.
ff. Employees;
Labor Laws; Absence of Compensation Issues. No labor dispute with the employees of the Company or any of its Subsidiaries exists or
is threatened in writing or to the Company’s Knowledge, imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or its Subsidiaries’ principal suppliers, manufacturers or contractors, that would reasonably
be expected to have a Material Adverse Effect, except as set forth in the Prospectus. None of the following events has occurred, exists
or is reasonably likely to occur that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect
or except as set forth in or contemplated in the Prospectus: (i) a failure by the Company or any of its Subsidiaries to fulfill
its obligations, if any, under the minimum funding standards of any applicable pension, labor, employee benefits or similar laws or regulations;
(ii) an audit or investigation by any taxing authority, any labor authority, any pension regulator or any other governmental agency
or regulatory agency with respect to the employment or compensation of employees by any of the Company or any of its Subsidiaries; (iii) any
breach of any contractual obligation, or any violation of law, with respect to (x) any employee benefit plans, agreements or arrangements
or (y) the employment or compensation of employees by the Company or any of its subsidiaries; (iv) any event or condition giving
rise to a liability under any pension, labor employee benefits or similar laws or regulations; or (v) the filing of a claim by, for
or in respect of one or more employees or former employees of the Company or any of its Subsidiaries related to (x) any employee
benefit plans, agreements or arrangements or (y) their employment or compensation.
gg. Investment
Company Act. Neither the Company nor any Subsidiary is or, after giving effect to the offering and sale of the Placement Shares, will
be required to register as an “investment company” or an entity “controlled” by an “investment company,”
as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).
hh. Compliance
with Anti-Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times within
the past five years in material compliance with applicable financial recordkeeping and reporting requirements and the money laundering
statutes and the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered
or enforced by any relevant domestic or foreign governmental authority (collectively, the “Money Laundering Laws”)
and no action, suit or proceeding by or before any domestic or foreign court or governmental authority involving the Company or any of
its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
ii. Off-Balance
Sheet Arrangements. The Company and the Subsidiaries do not have any material liabilities or obligations, direct or contingent (including
any off-balance sheet obligations or any “variable interest entities” as that term is used in Accounting Standards Codification
Paragraph 810-10-25-20), not described in the Registration Statement and the Prospectus which are required to be described in the Registration
Statement and the Prospectus.
jj. Underwriter
Agreements. Other than with respect to this Agreement and the ordinary shares purchase agreement, dated as of June 13, 2022,
by and between the Company and Joh. Berenberg, Gossler & Co. KG, the Company is not a party to any agreement with an agent or
underwriter for any other “at the market” or continuous equity transaction.
kk. Forward-Looking
Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act) contained in the Registration Statement or the Prospectus has been made or reaffirmed without a reasonable basis or has
been disclosed other than in good faith.
ll. Margin
Rules. Neither the issuance, sale and delivery of the Placement Shares nor the application of the proceeds thereof by the Company
as described in the Prospectus will violate Regulation T, U or X of the Board of Governors of the Federal Reserve System.
mm. Insurance.
Except as otherwise disclosed in the Prospectus, the Company and each of its Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as the Company reasonably believes are adequate and customary in the
businesses in which they are engaged; neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied
for; and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business
at a cost that would not reasonably be expected have a Material Adverse Effect.
nn. Compliance
with Anti-Bribery Laws. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer,
agent, employee, affiliate or other person acting on behalf of the Company or any of its Subsidiaries is aware of or has taken any action,
directly or indirectly, that could result in a violation or a sanction for violation by such persons of the Foreign Corrupt Practices
Act of 1977 or the U.K. Bribery Act 2010, each as may be amended, or similar law of any other relevant jurisdiction, or the rules or
regulations thereunder; and the Company and its Subsidiaries have instituted and maintain policies and procedures to ensure compliance
therewith. No part of the proceeds of the sale of Placement Shares by the Company pursuant to this Agreement, if any, will be used, directly
or indirectly, in violation of the Foreign Corrupt Practices Act of 1977 or the U.K. Bribery Act 2010, each as may be amended, or similar
law of any other relevant jurisdiction, or the rules or regulations thereunder.
oo. Status
Under the Securities Act. The Company was not and is not an ineligible issuer as defined in Rule 405 under the Securities Act
at the times specified in Rules 164 and 433 under the Securities Act in connection with the offering of the Placement Shares.
pp. No
Misstatement or Omission in an Issuer Free Writing Prospectus. Each Issuer Free Writing Prospectus, as of its issue date and as of
each Applicable Time (as defined in Section 25 below), did not, does not and will not, through the completion of the Placement
or Placements for which such Issuer Free Writing Prospectus is issued, include any information that conflicted, conflicts or will conflict
with the information contained in the Registration Statement or the Prospectus, including any incorporated document deemed to be a part
thereof that has not been superseded or modified. The foregoing sentence does not apply to statements in or omissions from any Issuer
Free Writing Prospectus based upon and in conformity with written information furnished to the Company by an Agent specifically for use
therein.
qq. No
Conflicts. Neither the execution of this Agreement by the Company, nor the issuance, offering or sale of the Placement Shares, nor
the consummation by the Company of any of the transactions contemplated herein, nor the compliance by the Company with the terms and provisions
hereof will (i) result in a violation of any provision of the Company’s Articles of Association or the organizational documents
of any of the Company’s Subsidiaries, (ii) conflict with or result in a breach or violation of any of the terms or provisions
of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give rise to any
rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company or any of its Subsidiaries is a party or is bound, (iii) create
or impose a lien, charge or encumbrance on any property or assets of the Company or any of its Subsidiaries under any agreement or any
commitment to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to
which any of their respective properties or assets is subject, or (iv) result in a violation of any U.S. federal, state, local or
foreign statute, rule, regulation, order, judgment or decree applicable to the Company or any of its Subsidiaries or by which any property
or asset of the Company or any of its Subsidiaries are bound or affected (including U.S. federal and state securities laws and regulations,
applicable Dutch law and the rules and regulations of the Exchange), except, in the case of clauses (ii), (iii) and (iv), for
such conflicts, defaults, terminations, amendments, acceleration, cancellations, liens, charges, encumbrances and violations as would
not, individually or in the aggregate, have a Material Adverse Effect.
rr. Compliance
with Sanctions Laws. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer,
agent, employee or affiliate of the Company or any of its Subsidiaries (i) is, or is controlled or 50% or more owned in the aggregate
by or is acting on behalf of, one or more individuals or entities that are currently the subject of any sanctions administered or enforced
by the United States (including any administered or enforced by the Office of Foreign Assets Control of the U.S. Department of the Treasury,
the U.S. Department of State or the Bureau of Industry and Security of the U.S. Department of Commerce), the United Nations Security Council,
the European Union, a member state of the European Union, sanctions administered or enforced by Her Majesty’s Treasury of the United
Kingdom, or other relevant sanctions authority (collectively, “Sanctions” and such persons, “Sanctioned Persons”
and each such person, a “Sanctioned Person”), (ii) is located, organized or resident in a country or territory
that is, or whose government is, the subject of Sanctions that broadly prohibit dealings with that country or territory (collectively,
“Sanctioned Countries” and each, a “Sanctioned Country”) or (iii) will, directly or indirectly,
use the proceeds of the sale of Placement Shares by the Company pursuant to this Agreement, if any, or lend, contribute or otherwise make
available such proceeds to any Subsidiary, joint venture partner or other individual or entity in any manner that would result in a violation
of any Sanctions by, or could result in the imposition of Sanctions against, any individual or entity. Neither the Company nor any of
its Subsidiaries has knowingly engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a
Sanctioned Country, in the preceding three years, nor does the Company or any of its Subsidiaries have any plans to knowingly engage in
dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country.
ss. Fair
Summaries. There is no franchise, contract or other document of a character required to be described in the Registration Statement
or the Prospectus, or to be filed as an exhibit to the Registration Statement, which is not described or filed as required; and the statements
contained or incorporated by reference in the Registration Statement or the Prospectus under the captions “Business—Intellectual
Property”, “Business—Legal Proceedings”, “Regulatory Environment”, and “Description of Share
Capital and Articles of Association” in each case insofar as such statements summarize legal matters, agreements, documents, or
proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings, and the statements
contained in the Commission documents under the caption “Taxation,” insofar as such statements purport to summarize certain
federal income tax laws of the United States and certain tax laws of the Netherlands and Germany, constitute a fair summary of the principal
U.S. federal income tax consequences, Dutch tax consequences and German tax consequences, respectively, of an investment in the Placement
Shares as per the date such information is presented in the Registration Statement or the Prospectus (or in the documents incorporated
by reference therein), subject to the introduction and exceptions in each of the statements.
tt. Lending
Relationships. Except as disclosed in the Prospectus, the Company (i) does not have any material lending or other relationship
with any bank or lending affiliate of any of the Agents and (ii) does not intend to use any of the proceeds from the sale of the
Placement Shares hereunder to repay any outstanding debt owed to any affiliate of any of the Agents.
uu. Share
Transfer Taxes. There are no documentation taxes (commonly referred to as stamp duties) or any other similar duties, taxes, fees or
charges under federal law, the laws of any state, any foreign law, or any political subdivision thereof, required to be paid in connection
with the execution and delivery of this Agreement or the issuance by the Company or sale by the Company of the Placement Shares. Without
limiting the generality of the foregoing, no transaction, stamp or other issuance or transfer taxes or duties, and assuming that the Agents
are not subject to taxation in the Netherlands as a result of having a substantial interest (aanmerkelijk belang) in the Company
or otherwise due to tax residence, deemed tax residence or the existence of a permanent establishment in the Netherlands, no capital gain,
income, transfer, withholding or other tax or duty is payable in the Netherlands by or on behalf of the Agents to any taxing authority
thereof or therein by reason only of (i) the issuance, sale and delivery of the Placement Shares by the Company; (ii) the purchase
from the Company, and the initial sale and delivery by the Agents of the Placement Shares to purchasers thereof; (iii) the holding
or transfer of the Placement Shares; or (iv) the execution and delivery of this Agreement or any other document to be furnished hereunder.
vv. IT
Systems. (i) Except as may be included or incorporated by reference in the Prospectus, (x) to the Company’s knowledge,
there has been no material security breach or incident, unauthorized access or disclosure, or other material compromise of or relating
to any of the Company’s or its Subsidiaries’ information technology and computer systems, networks, hardware, software, data
and databases (including the data of their respective customers, employees, suppliers, vendors and any third party data maintained by
or on behalf of them), equipment or technology (collectively, “IT Systems and Data”) and (y) the Company and its
Subsidiaries have not been notified in writing of, and have no knowledge of any event or condition that would reasonably be expected to
result in, any material security breach or incident, unauthorized access or disclosure or other material compromise to their IT Systems
and Data; (ii) the Company and its Subsidiaries have been and are presently in compliance with all applicable laws or statutes, all
judgments, orders, rules and regulations of any relevant court or arbitrator or governmental or regulatory authority, internal policies
and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data
from unauthorized use, access, misappropriation or modification, and (iii) except as may be included or incorporated by reference
in the Prospectus, the Company and its Subsidiaries have implemented commercially reasonable controls, policies, procedures, and technological
safeguards and backup and disaster recovery technology to maintain and protect the integrity, continuous operation, redundancy and security
of their IT Systems and Data consistent with industry standards and practices, or as required by applicable regulatory standards, except
as would not, in the case of clause (ii) or (iii), individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect.
ww. Statistical
and Market-Related Data. (i) Any third-party statistical and market-related data included or incorporated by reference in the
Registration Statement or the Prospectus, including but not limited to the market reports referred to or incorporated by reference in
the Prospectus under the heading “Market and Industry Data” are based on or derived from sources that the Company reasonably
believes to be reliable and accurate, (ii) to the extent required, the Company has obtained the written consent to the use of such
data from such sources, and (iii) the Company’s expectations or estimates included or incorporated by reference in the Registration
Statement or the Prospectus based on such third-party statistical and market-related data represent the Company’s good faith expectations
or estimates.
xx. Compliance
with Nasdaq Rules. There is and has been no failure on the part of the Company or, to the knowledge of the Company, any of the Company's
officers, directors or director nominees, in their capacities as such, to comply with (as and when applicable), the applicable requirements
of Nasdaq Marketplace Rules. Further, there is and has been no failure on the part of the Company or, to the knowledge of the Company,
any of the Company’s officers, directors or director nominees, in their capacities as such, to comply with (as and when applicable)
the phase-in requirements and all other applicable provisions of Nasdaq corporate governance requirements set forth in the Nasdaq Marketplace
Rules.
yy. Listing
and Maintenance Requirements; DTC Eligibility. The Ordinary Shares are registered pursuant to Section 12(b) of the Exchange
Act, and except as may be disclosed in the Prospectus, the Company has taken no action designed to, or which to its knowledge is likely
to have the effect of, terminating the registration of the Ordinary Shares under the Exchange Act, nor has the Company received any notification
that the Commission is contemplating terminating such registration. The Ordinary Shares are currently listed on the Exchange under the
trading symbol “SEV.” Except as disclosed in the Prospectus, the Company has not received notice from the Exchange to the
effect that the Company is not in compliance with the listing or maintenance requirements of the Exchange. Except as disclosed in the
Prospectus, the Company is in compliance with all applicable listing and maintenance requirements of the Exchange. The Ordinary Shares
may be issued and transferred electronically to third parties via DTC through its DWAC delivery system. The Company has not received notice
from DTC to the effect that a suspension of, or restriction on, accepting additional deposits of the Ordinary Shares, electronic trading
or book-entry services by DTC with respect to the Ordinary Shares is being imposed or is contemplated.
zz. Foreign
Private Issuer Status. The Company is a “foreign private issuer” within the meaning of Rule 405 under the Securities
Act.
aaa. Passive
Foreign Investment Company. The Company was not a Passive Foreign Investment Company (“PFIC”) within the meaning
of Section 1297 of the United States Internal Revenue Code of 1986, as amended for its 2021 taxable year and, based on the Company’s
current projected income, assets and activities, the Company does not expect to be classified as a PFIC for its current taxable year or
in the foreseeable future.
bbb. Emerging
Growth Company Status. The Company is an “emerging growth company” as defined in Section 2(a)(19) of the Securities
Act, as modified by the Jumpstart Our Business Startups Act of 2012.
ccc. Solvency.
The Company is not in or subject to a bankruptcy, insolvency or suspension of payments proceeding in the Netherlands or in any other jurisdiction.
ddd. No
Integration. Neither the Company nor, to the Company’s knowledge, any of its affiliates (within the meaning of Securities Act
Rule 144) has, prior to the date hereof, made any offer or sale of any securities which could be “integrated” (within
the meaning of the Securities Act) with the offer and sale of the Placement Shares hereunder.
eee. Dividends
and Payments in Foreign Currency. Except as described in the Prospectus, all dividends and other distributions declared and payable
on the Placement Shares may under current Dutch law and regulations be paid to the holders of Placement Shares in Euros and may be converted
into foreign currency that may be transferred out of the Netherlands.
fff. Submission
to Jurisdiction. The Company has the power to submit, and pursuant to Section 18 of this Agreement, has legally, validly,
effectively and irrevocably submitted, to the personal jurisdiction of each United States federal court and New York state court located
in the State of New York, Borough of Manhattan, in the City of New York, New York, U.S.A. (each, a “New York Court”),
and the Company has the power to designate, appoint and authorize, and pursuant to Section 18 of this Agreement, has legally,
validly, effectively and irrevocably designated, appointed and authorized an agent for service of process in any action arising out of
or relating to this Agreement or any of the transactions contemplated hereby in any New York Court, and service of process effected on
such authorized agent will be effective to confer valid personal jurisdiction over the Company as provided in Section 18 of
this Agreement.
ggg. Absence
of Immunity From Jurisdiction. Neither the Company nor any of its Subsidiaries nor any of its or their properties or assets has any
immunity from the jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) under the laws of (i) any jurisdiction in which they own or lease property or assets,
(ii) the United States or the State of New York, or (iii) the Netherlands with respect to themselves or their property and assets.
To the extent that the Company or any of its respective properties, assets or revenues may have or may hereafter become entitled to any
such right of immunity in any such court in which proceedings may at any time be commenced, the Company waives or will waive such right
to the extent permitted by law and has consented to such relief and enforcement as provided in Section 18 of this Agreement.
hhh. Enforceability
of Judgments. Subject to the conditions and qualifications set forth in the Prospectus, a final and conclusive judgment against the
Company for a definitive sum of money entered by any court in the United States may be enforced by a Dutch court.
Any certificate signed by an
officer of the Company and delivered to the Agents or to counsel for the Agents pursuant to or in connection with this Agreement shall
be deemed to be a representation and warranty by the Company, as applicable, to the Agents as to the matters set forth therein.
7. Covenants
of the Company. The Company covenants and agrees with the Agents that:
a. Registration
Statement Amendments. After the date of this Agreement and during any period in which a prospectus relating to any Placement Shares
is required to be delivered by the Agents under the Securities Act (including in circumstances where such requirement may be satisfied
pursuant to Rule 172 under the Securities Act) (the “Prospectus Delivery Period”) (i) the Company will notify
the Agents promptly of the time when any subsequent amendment to the Registration Statement, other than documents incorporated by reference
or amendments not related to any Placement, has been filed with the Commission and/or has become effective or any subsequent supplement
to the Prospectus has been filed and of any request by the Commission for any amendment or supplement to the Registration Statement or
Prospectus related to the Placement Shares or for additional information related to the Placement Shares, (ii) the Company will prepare
and file with the Commission, promptly upon the Agents’ request, any amendments or supplements to the Registration Statement or
Prospectus that, upon the advice of the Company’s legal counsel, may be necessary or advisable in connection with the distribution
of the Placement Shares by the Agents (provided, however, that the failure of the Agents to make such request shall not relieve
the Company of any obligation or liability hereunder, or affect the Agents’ right to rely on the representations and warranties
made by the Company in this Agreement and provided, further, that the only remedy the Agents shall have with respect to the failure to
make such filing shall be to cease making sales under this Agreement until such amendment or supplement is filed); (iii) the Company
will not file any amendment or supplement to the Registration Statement (other than an amendment or supplement relating to an offering
of the Company’s securities which is unrelated to the offering of Placement Shares) or Prospectus relating to the Placement Shares
or a security convertible into the Placement Shares (other than an Incorporated Document) unless a copy thereof has been submitted to
the Agents within a reasonable period of time before the filing and the Agents have not reasonably objected thereto within two Business
Days of receiving such copy (provided, however, that (A) the failure of the Agents to make such objection shall not relieve
the Company of any obligation or liability hereunder, or affect the Agents’ right to rely on the representations and warranties
made by the Company in this Agreement and (B) the Company has no obligation to provide the Agents any advance copy of such filing
or to provide the Agents an opportunity to object to such filing if the filing does not name the Agents or does not relate to the transactions
herein provided; and provided, further, that the only remedy the Agents shall have with respect to the failure by the Company to provide
the Agents with such copy or obtain such consent shall be to cease making sales under this Agreement) and the Company will furnish to
the Agents at the time of filing thereof a copy of any document that upon filing is deemed to be incorporated by reference into the Registration
Statement or Prospectus, except for those documents available via EDGAR; and (iv) the Company will cause each amendment or supplement
to the Prospectus to be filed with the Commission as required pursuant to the applicable paragraph of Rule 424(b) of the Securities
Act or, in the case of any document to be incorporated therein by reference, to be filed with the Commission as required pursuant to the
Exchange Act, within the time period prescribed (the determination to file or not file any amendment or supplement with the Commission
under this Section 7(a), based on the Company’s reasonable opinion or reasonable objections, shall be made exclusively
by the Company).
b. Notice
of Commission Stop Orders. The Company will advise the Agents, promptly after it receives notice or obtains knowledge thereof, of
the issuance or threatened issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, of
the suspension of the qualification of the Placement Shares for offering or sale in any jurisdiction, or of the initiation or threatening
of any proceeding for any such purpose; and it will use its commercially reasonable efforts to prevent the issuance of any stop order
or to obtain its withdrawal if such a stop order should be issued. The Company will advise the Agents promptly after it receives any request
by the Commission for any amendments to the Registration Statement or any amendment or supplements to the Prospectus or any Issuer Free
Writing Prospectus or for additional information related to the offering of the Placement Shares or for additional information related
to the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus.
c. Delivery
of Prospectus; Subsequent Changes. During the Prospectus Delivery Period, the Company will use commercially reasonable efforts to
comply with all requirements imposed upon it by the Securities Act, as from time to time in force, and to file on or before their respective
due dates all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant
to Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange Act. If during the Prospectus Delivery Period
any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading,
or if during such Prospectus Delivery Period it is necessary to amend or supplement the Registration Statement or Prospectus to comply
with the Securities Act, the Company will promptly notify the Designated Agent to suspend the offering of Placement Shares during such
period and the Company will promptly amend or supplement the Registration Statement or Prospectus (at the expense of the Company) so as
to correct such statement or omission or effect such compliance; provided, however, that the Company may delay the filing of any
amendment or supplement, if in the judgment of the Company, it is in the best interest of the Company.
d. Listing
of Placement Shares. During the Prospectus Delivery Period, the Company will use its commercially reasonable efforts to cause the
Placement Shares to be listed on the Exchange and to qualify the Placement Shares for sale under the securities laws of such jurisdictions
in the United States as the Agents reasonably designate and to continue such qualifications in effect so long as required for the distribution
of the Placement Shares; provided, however, that the Company shall not be required in connection therewith to qualify as a foreign
corporation or dealer in securities, file a general consent to service of process, or subject itself to taxation in any jurisdiction if
it is not otherwise so subject.
e. Delivery
of Registration Statement and Prospectus. The Company will furnish to the Agents and their counsel (at the reasonable expense of the
Company) copies of the Registration Statement, the Prospectus (including all documents incorporated by reference therein) and all amendments
and supplements to the Registration Statement or Prospectus that are filed with the Commission during the Prospectus Delivery Period (including
all documents filed with the Commission during such period that are deemed to be incorporated by reference therein), in each case as soon
as reasonably practicable and in such quantities as the Agents may from time to time reasonably request and, at the Agents’ request,
will also furnish copies of the Prospectus to each exchange or market on which sales of the Placement Shares may be made; provided,
however, that the Company shall not be required to furnish any document (other than the Prospectus) to the Agents to the extent such
document is available on EDGAR.
f. Earnings
Statement. The Company will make generally available to its security holders as soon as practicable, but in any event not later than
15 months after the end of the Company’s current fiscal quarter, an earnings statement covering a 12-month period that satisfies
the provisions of Section 11(a) and Rule 158 of the Securities Act.
g. Use
of Proceeds. The Company will use the Net Proceeds as described in the Prospectus in the section titled “Use of Proceeds.”
h. Notice
of Other Sales. Without the prior written consent of the Agents, the Company will not, directly or indirectly, offer to sell, sell,
contract to sell, grant any option to sell or otherwise dispose of any Ordinary Shares (other than the Placement Shares offered pursuant
to this Agreement) or securities convertible into or exchangeable for Ordinary Shares, warrants or any rights to purchase or acquire,
Ordinary Shares during the period beginning on the date on which any Placement Notice is delivered to the Agents hereunder and ending
on the fifth (5th) Trading Day immediately following the final Settlement Date with respect to Placement Shares sold pursuant
to such Placement Notice (or, if the Placement Notice has been terminated or suspended prior to the sale of all Placement Shares covered
by a Placement Notice, the date of such suspension or termination); and will not directly or indirectly in any other “at the market”
or continuous equity transaction offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of any Ordinary
Shares (other than the Placement Shares offered pursuant to this Agreement) or securities convertible into or exchangeable for Ordinary
Shares, warrants or any rights to purchase or acquire, Ordinary Shares prior to the termination of this Agreement; provided, however,
that such restrictions will not apply in connection with the Company’s issuance or sale of (i) Ordinary Shares, options to
purchase Ordinary Shares or Ordinary Shares issuable upon the exercise of options or vesting of equity awards, pursuant to any share option,
equity incentive or benefits plan, share ownership plan or dividend reinvestment plan (but not Ordinary Shares subject to a waiver to
exceed plan limits in its dividend reinvestment plan) of the Company whether now in effect or hereafter implemented; (ii) Ordinary
Shares issuable upon conversion of securities or the exercise or vesting of warrants, options or other rights in effect or outstanding
or hereafter implemented, and disclosed in filings by the Company available on EDGAR or otherwise in writing to the Agents, (iii) Ordinary
Shares, or securities convertible into or exercisable for Ordinary Shares, offered and sold in a privately negotiated transactions to
vendors, customers, strategic partners or potential strategic partners or other investors conducted in a manner so as not to be integrated
with the offering of Ordinary Shares hereby, (iv) Ordinary Shares in connection with any acquisition, strategic investment or other
similar transaction (including any joint venture, strategic alliance or partnership) and (v) convertible debentures issued or to
be issued to YA II PN, Ltd. or any of its designees, successors or affiliates, pursuant to that certain securities purchase agreement,
dated as of December 7, 2022, between the Company and YA II PN, Ltd., and Ordinary Shares issuable upon conversion of such
convertible debentures.
i. Change
of Circumstances. The Company will, at any time during the pendency of a Placement Notice, advise the Agents promptly after it shall
have received notice or obtained knowledge thereof, of any information or fact that would alter or affect in any material respect any
representation, warranty or certification made by the Company in this Agreement or in any certificate provided by the Company to the Agents pursuant to this Agreement.
j. Due
Diligence Cooperation. During the term of this Agreement, the Company will cooperate with any reasonable due diligence review conducted
by the Agents or its representatives in connection with the transactions contemplated hereby, including, without limitation, providing
information and making available documents and senior corporate officers, during regular business hours and at the Company’s principal
offices, as the Agents may reasonably request.
k. Required
Filings Relating to Placement of Placement Shares. The Company agrees that on such dates as the Securities Act shall require, the
Company will (i) file a prospectus supplement with the Commission under the applicable paragraph of Rule 424(b) under the
Securities Act (each and every date a filing under Rule 424(b) is made, a “Filing Date”), which prospectus
supplement will set forth, within the relevant period, the amount of Placement Shares sold through the Agents, the Net Proceeds to the
Company and the compensation payable by the Company to the Agents with respect to such Placement Shares (provided that the
Company may satisfy its obligations under this Section 7(k)(i) by making a filing in accordance with the Exchange
Act including such information), and (ii) deliver such number of copies of each such prospectus supplement to each exchange or market
on which such sales were effected as may be required by the rules or regulations of such exchange or market.
l. Representation
Dates; Certificate. Each time during the term of this Agreement that the Company:
(i) amends
the Registration Statement or amends or supplements the Prospectus relating to the Placement Shares by post-effective amendment, sticker
or prospectus supplement (other than a prospectus supplement filed in accordance with Section 7(k) of this Agreement),
but not by means of incorporation of documents by reference into the Registration Statement or the Prospectus relating to the Placement
Shares;
(ii) files
an Annual Report on Form 20-F under the Exchange Act;
(iii) files
a Form 20-F/A containing amended (or restated) financial information or a material amendment to a previously filed Annual Report
on Form 20-F under the Exchange Act;
(iv) files
a Report of Foreign Private Issuer on Form 6-K that includes financial information as of the end of the Company’s most recent
fiscal quarter under the Exchange Act; or
(v) files
a Report of Foreign Private Issuer on Form 6-K containing amended (or restated) financial information under the Exchange Act;
(Each date of filing of one or more of the documents
referred to in clauses (i) through (v) shall be a “Representation Date.”)
the Company shall furnish the Agents (but in the
case of clause (v) above only if any Agent reasonably determines that the information contained in such Form 6-K is material)
with a certificate, in the form attached hereto as Exhibit 7(l). The requirement to provide a certificate under this Section 7(l) shall
be automatically waived for any Representation Date occurring at a time at which no Placement Notice is pending, which waiver shall continue
until the earlier to occur of the date the Company delivers a Placement Notice hereunder (which for such calendar quarter shall be considered
a Representation Date) and the next occurring Representation Date on which the Company files its Annual Report on Form 20-F. Notwithstanding
the foregoing, (i) upon the delivery of the first Placement Notice hereunder and (ii) if the Company subsequently decides to
sell Placement Shares following a Representation Date when the Company relied on such waiver and did not provide the Agents with a certificate
under this Section 7(l), then before the Agents sell any Placement Shares, the Company shall provide the Agents with a certificate,
in the form attached hereto as Exhibit 7(l), dated the date of the Placement Notice.
m. Legal
Opinions. On or prior to the date of the first Placement Notice given hereunder the Company shall cause to be furnished to the Agents
(i) the written opinions and a negative assurance letter of Sullivan & Cromwell LLP, U.S. counsel for the Company (“Company
U.S. Counsel”), (ii) the written opinions of NautaDutilh N.V., counsel for the Company as to certain matters of Dutch law
(“Company Dutch Counsel”), (iii) the written opinions of QiP, counsel for the Company as to intellectual property
matters (“Company IP Counsel”), and (iv) the written opinions of Vossius, counsel to the Company as to certain
trademark matters (“Company Trademark Counsel”), or in each case such other counsel reasonably satisfactory to the
Agents, each in form and substance reasonably satisfactory to the Agents and their counsel. Thereafter, within five (5) Trading Days
of each Representation Date with respect to which the Company is obligated to deliver a certificate in the form attached hereto as Exhibit 7(l) for
which no waiver is applicable (but in the case of Section 7(l)(iv), only if requested by any Agent in its sole discretion),
the Company shall cause to be furnished to the Agents a negative assurance letter of Company U.S. Counsel in form and substance reasonably
satisfactory to the Agents; provided that, in lieu of such negative assurance letter for subsequent periodic filings under the Exchange
Act, Company U.S. Counsel may furnish the Agents with a letter (a “Reliance Letter”) to the effect that the Agents
may rely on the negative assurance letter previously delivered under this Section 7(m) to the same extent as if it were
dated the date of such letter (except that statements in such prior letter shall be deemed to relate to the Registration Statement and
the Prospectus as amended or supplemented as of the date of the Reliance Letter).
n. Comfort
Letter. On or prior to the date of the first Placement Notice given hereunder and within five (5) Trading Days after each subsequent
Representation Date with respect to which the Company is obligated to deliver a certificate in the form attached hereto as Exhibit 7(l) for
which no waiver is applicable, other than pursuant to Section 7(l)(iv), the Company shall cause its independent accountants
to furnish the Agents letters (each, a “Comfort Letter”), dated the date the Comfort Letter is delivered, which shall
meet the requirements set forth in this Section 7(n). The Comfort Letter from the Company’s independent accountants
shall be in a form and substance reasonably satisfactory to the Agents, (i) confirming that they are independent public accountants
with respect to the Company within the meaning of the Securities Act and the applicable published rules and regulations thereunder,
(ii) stating, as of such date, the conclusions and findings of such firm with respect to the financial information and other matters
ordinarily covered by accountants’ “comfort letters” to underwriters in connection with registered public offerings
(the first such Comfort Letter, the “Initial Comfort Letter”) and (iii) updating the Initial Comfort Letter with
any information that would have been included in the Initial Comfort Letter had it been given on such date and modified as necessary to
relate to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letter.
o. CFO
Certificate. If requested by any Agent in its sole discretion, on or prior to the date the first Placement Notice is given hereunder
and within five (5) Trading Days after each subsequent Representation Date with respect to which the Company is obligated to deliver
a Comfort Letter pursuant to Section 7(n), the Company shall furnish the Agents with a certificate, signed on behalf of the
Company by its Chief Financial Officer, substantially in the form attached hereto as Exhibit 7(o), dated the date that the
applicable Comfort Letter is delivered, and revised as appropriate to relate to the Registration Statement and the Prospectus, as amended
and supplemented to the date of such letter, and/or any Incorporated Documents incorporated by reference therein (a “CFO Certificate”).
p. Market
Activities. The Company will not, directly or indirectly, (i) take any action designed to cause or result in, or that constitutes
or would constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of
Ordinary Shares or (ii) sell, bid for, or purchase Ordinary Shares in violation of Regulation M, or pay anyone any compensation for
soliciting purchases of the Placement Shares other than the Agents.
q. Investment
Company Act. The Company will conduct its affairs in such a manner so as to reasonably ensure that neither it nor the Subsidiaries
will be or become, at any time prior to the termination of this Agreement, an “investment company,” as such term is defined
in the Investment Company Act.
r. No
Offer to Sell. Other than an Issuer Free Writing Prospectus approved in advance by the Company and the Agents in their capacity as
agents hereunder pursuant to Section 23, none of the Agents nor the Company (including its agents and representatives, other
than the Agents in their capacity as such) will make, use, prepare, authorize, approve or refer to any written communication (as defined
in Rule 405), required to be filed with the Commission, that constitutes an offer to sell or solicitation of an offer to buy Placement
Shares hereunder.
s. Sarbanes-Oxley
Act. Except as otherwise set forth in the Prospectus, the Company will maintain and keep accurate books and records reflecting its
assets and maintain internal accounting controls in a manner designed to provide reasonable assurance that (i) transactions are executed
in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with IFRS and to maintain asset accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company will maintain
disclosure controls and procedures that are designed to ensure that material information relating to the Company and its Subsidiaries
is made known to the Company’s principal executive officer and principal financial officer by others within those entities as appropriate
to allow timely decisions regarding required disclosure.
8. Representations
and Covenants of the Agents. Each of the Agents represents and warrants that it is duly registered as a broker-dealer under FINRA,
the Exchange Act and the applicable statutes and regulations of each state in which the Placement Shares will be offered and sold, except
such states in which such Agent is exempt from registration or such registration is not otherwise required. Each of the Agents shall continue,
for the term of this Agreement, to be duly registered as a broker-dealer under FINRA, the Exchange Act and the applicable statutes and
regulations of each state in which the Placement Shares will be offered and sold, except such states in which it is exempt from registration
or such registration is not otherwise required, during the term of this Agreement. Each of the Agents shall comply with all applicable
law and regulations in connection with the transactions contemplated by this Agreement, including the issuance and sale through such Agent
of the Placement Shares.
9. Payment
of Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement, including (i) the
preparation, filing, including any fees required by the Commission, and printing of the Registration Statement (including financial statements
and exhibits) as originally filed and of each amendment and supplement thereto and each Free Writing Prospectus, in such number as the
Agents shall deem reasonably necessary, (ii) the printing and delivery to the Agents of this Agreement and such other documents as
may be required in connection with the offering, purchase, sale, issuance or delivery of the Placement Shares, (iii) the preparation,
issuance and delivery of the certificates, if any, for the Placement Shares to the Agents, including any share or other transfer taxes
and any capital duties, stamp duties or other duties or taxes payable upon the sale, issuance or delivery of the Placement Shares to the
Agents, (iv) the fees and disbursements of the counsel, accountants and other advisors to the Company, (v) the reasonable fees
and disbursements of U.S. counsel to the Agents up to $100,000 upon the execution of this Agreement, the reasonable fees and disbursements
of Dutch counsel to the Agents up to $10,000 upon the execution of this Agreement, and an additional $7,500 per quarter for the Agents’
out-of-pocket expenses associated with ongoing due diligence (which shall include the reasonable fees and disbursements of the Agents’
U.S. counsel and Dutch counsel in connection therewith) so long as this Agreement remains in effect and excluding any period during which
a Suspension is in place pursuant to Section 4 (provided that such additional fee shall be paid upon the resumption of sale
upon the ending of any Suspension); (vi) the fees and expenses of the transfer agent and registrar for the Ordinary Shares, (vii) the
filing fees incident to any review by FINRA of the terms of the sale of the Placement Shares, and (viii) the fees and expenses incurred
in connection with the listing of the Placement Shares on the Exchange.
10. Conditions
to the Agents’ Obligations. The obligations of the Agents hereunder with respect to a Placement will be subject to the continuing
accuracy and completeness of the representations and warranties made by the Company herein (other than those representations and warranties
made as of a specified date or time), to the due performance in all material respects by the Company of its obligations hereunder, to
the completion by the Agents of a due diligence review satisfactory to them in their reasonable judgment, and to the continuing reasonable
satisfaction (or waiver by the Agents in their sole discretion) of the following additional conditions (it being acknowledged and agreed
that in the event of any failure of any of the following additional conditions to be satisfied (or waived by the Agents in their sole
discretion), the Company shall not deliver a Placement Notice to any Agent or otherwise cause or request the offer or sale of any Placement
Shares at any time for so long as such failure has occurred and is continuing, until such time that all of such additional conditions
are satisfied (or waived by the Agents in their sole discretion)):
a. Registration
Statement Effective. The Registration Statement shall be and remain effective and shall be and remain available for the sale of all
Placement Shares contemplated to be issued by any Placement Notice.
b. No
Material Notices. None of the following events shall have occurred and be continuing: (i) receipt by the Company of any request
for additional information from the Commission or any other federal or state governmental authority during the period of effectiveness
of the Registration Statement, the response to which would require any post-effective amendments or supplements to the Registration Statement
or the Prospectus (other than immaterial amendments or supplements to documents incorporated by reference therein) if such post effective
amendments or supplements have not been made and become effective; (ii) the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the Registration Statement or receipt by the Company of notification
of the initiation of any proceedings for that purpose; (iii) receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Placement Shares for sale in any jurisdiction or receipt by the Company
of notification of the initiation of, or a threat to initiate, any proceeding for such purpose; or (iv) the occurrence of any event
that makes any material statement made in the Registration Statement or the Prospectus or any material Incorporated Document untrue in
any material respect or that requires the making of any changes in the Registration Statement, the Prospectus or any material Incorporated
Document so that, in the case of the Registration Statement, it will not contain any materially untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and, that in
the case of the Prospectus or any material Incorporated Document, it will not contain any materially untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
c. No
Misstatement or Material Omission. The Agents shall not have advised the Company that the Registration Statement or Prospectus, or
any amendment or supplement thereto, contains an untrue statement of fact that in the Agents’ reasonable opinion is material, or
omits to state a fact that in the Agents’ reasonable opinion is material and is required to be stated therein or is necessary to
make the statements therein not misleading.
d. Material
Changes. Except as contemplated in the Prospectus, or disclosed in the Company’s reports filed with the Commission, there shall
not have been any Material Adverse Effect, or any development that would reasonably be expected to cause a Material Adverse Effect, the
effect of which, in the reasonable judgment of the Agents (without relieving the Company of any obligation or liability it may otherwise
have), is such that it is impracticable or inadvisable to proceed with the offering of the Placement Shares on the terms and in the manner
contemplated in the Prospectus.
e. Company
Counsel Legal Opinions. The Agents shall have received (i) the written opinions and negative assurance letter (or Reliance Letter,
as applicable) of Company U.S. Counsel, (ii) the written opinions of Company Dutch Counsel, (iii) the written opinions of Company
IP Counsel and (iv) the written opinions of Company Trademark Counsel, in each case required to be delivered pursuant to Section 7(m) on
or before the date on which such delivery of such written opinions and negative assurance letter (or Reliance Letter, as applicable) are
required pursuant to Section 7(m).
f. Agents’
Counsel Legal Opinion. The Agents shall have received from Dorsey & Whitney LLP, counsel for the Agents, such written opinion
or opinions and negative assurance letter, on or before the date on which the delivery of the written opinions of Company U.S. Counsel
is required pursuant to Section 7(m), with respect to such matters as the Agents may reasonably require, and the Company shall
have furnished to such counsel such documents as counsel for the Agents may request to enable them to pass upon such matters.
g. Comfort
Letter. The Agents shall have received the Comfort Letter required to be delivered pursuant Section 7(n) on or before
the date on which such delivery of such letter is required pursuant to Section 7(n).
h. Representation
Certificate. The Agents shall have received the certificate required to be delivered pursuant to Section 7(l) on
or before the date on which delivery of such certificate is required pursuant to Section 7(l).
i. CFO
Certificate. The Agents shall have received the CFO Certificate required to be delivered pursuant to Section 7(o) on
or before the date on which delivery of such CFO Certificate is required pursuant to Section 7(o).
j. Secretary’s
Certificate. On or prior to the first Representation Date, the Agents shall have received a certificate, signed on behalf of the Company
by its corporate Secretary, in form and substance reasonably satisfactory to the Agents and their counsel.
k. No
Suspension. Trading in the Ordinary Shares shall not have been suspended on the Exchange and the Ordinary Shares shall not have been
delisted from the Exchange.
l. Other
Materials. On each date on which the Company is required to deliver a certificate pursuant to Section 7(l), the Company
shall have furnished to the Agents such appropriate further information, certificates and documents as the Agents may reasonably request
and which are usually and customarily furnished by an issuer of securities in connection with a securities offering of the type contemplated
hereby. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof.
m. Securities
Act Filings Made. All filings with the Commission required by Rule 424 under the Securities Act to have been filed prior to the
issuance of any Placement Notice hereunder shall have been made within the applicable time period prescribed for such filing by Rule 424.
n. Approval
for Listing. The Placement Shares shall either have been approved for listing on the Exchange, subject only to notice of issuance,
or the Company shall have filed an application for listing of the Placement Shares on the Exchange at, or prior to, the issuance of any
Placement Notice.
o. No
Termination Event. There shall not have occurred any event that would permit the Agents to terminate this Agreement pursuant to Section 13(a).
11. Indemnification
and Contribution.
a. Company
Indemnification. The Company agrees to indemnify and hold harmless each Agent, its partners, members, directors, officers, employees
and agents and each person, if any, who controls such Agent within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act as follows:
(i) against
any and all loss, liability, claim, damage and expense whatsoever, as incurred, joint or several, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission
or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading,
or arising out of any untrue statement or alleged untrue statement of a material fact included in any related Issuer Free Writing Prospectus
or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary
in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(ii) against
any and all loss, liability, claim, damage and expense whatsoever, as incurred, joint or several, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided
that (subject to Section 11(d) below) any such settlement is effected with the written consent of the Company, which
consent shall not unreasonably be delayed or withheld; and
(iii) against
any and all expense whatsoever, as incurred (including the reasonable and documented out-of-pocket fees and disbursements of counsel),
reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above,
provided,
however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising
out of any untrue statement or omission or alleged untrue statement or omission made solely in reliance upon and in conformity with written
information furnished to the Company by any Agent expressly for use in the Registration Statement (or any amendment thereto), or in any
related Issuer Free Writing Prospectus or the Prospectus (or any amendment or supplement thereto).
b. Indemnification
by the Agents. Each Agent, severally and not jointly, agrees to indemnify and hold harmless the Company and its directors and officers,
and each person, if any, who (i) controls the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act or (ii) is controlled by or is under common control with the Company against any and all loss, liability, claim,
damage and expense described in the indemnity contained in Section 11(a), as incurred, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendments thereto) or in any related
Issuer Free Writing Prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with information
relating to such Agent and furnished to the Company in writing by such Agent expressly for use therein.
c. Procedure.
Any party that proposes to assert the right to be indemnified under this Section 11 will, promptly after receipt of notice
of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under
this Section 11, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served,
but the omission so to notify such indemnifying party will not relieve the indemnifying party from (i) any liability that it might
have to any indemnified party otherwise than under this Section 11 and (ii) any liability that it may have to any indemnified
party under the foregoing provisions of this Section 11 unless, and only to the extent that, such omission results in the
forfeiture or material impairment of substantive rights or defenses by the indemnifying party. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in
and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement
of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action,
with counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of
its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other reasonable
expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such indemnified party unless (1) the employment of counsel
by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded
(based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party, (3) a conflict or potential conflict of interest exists (based on advice
of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will
not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not
in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable and documented out-of-pocket fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable and documented out-of-pocket fees, disbursements
and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party
or parties. All such reasonable and documented out-of-pocket fees, disbursements and other charges will be reimbursed by the indemnifying
party promptly after the indemnifying party receives a written invoice relating to fees, disbursements and other charges in reasonable
detail. An indemnifying party will not, in any event, be liable for any settlement of any action or claim effected without its written
consent. No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 11
(whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent (1) includes an unconditional
release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (2) does
not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.
d. Contribution.
In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs
of this Section 11 is applicable in accordance with its terms but for any reason is held to be unavailable from the Company
or an Agent, the Company and such Agent will contribute to the total losses, claims, liabilities, expenses and damages (including any
investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit
or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than the Agents,
such as persons who control the Company within the meaning of the Securities Act or the Exchange Act, officers of the Company who signed
the Registration Statement and directors of the Company, who also may be liable for contribution) to which the Company and the Agents
may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and
the Agents on the other hand. The relative benefits received by the Company on the one hand and the Agents on the other hand shall be
deemed to be in the same proportion as the total Net Proceeds from the sale of the Placement Shares (before deducting expenses) received
by the Company bear to the total compensation received by the Agents (before deducting expenses) from the sale of Placement Shares on
behalf of the Company. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation
of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing
sentence but also the relative fault of the Company, on the one hand, and such Agent, on the other hand, with respect to the statements
or omission that resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant
equitable considerations with respect to such offering. Such relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information
supplied by the Company or such Agent, the intent of the parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and each Agent agree that it would not be just and equitable if contributions
pursuant to this Section 11(d) were to be determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result
of the loss, claim, liability, expense, or damage, or action in respect thereof, referred to above in this Section 11(d) shall
be deemed to include, for the purpose of this Section 11(d), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim to the extent consistent with Section 11(c) hereof.
Notwithstanding the foregoing provisions of this Section 11(d), an Agent shall not be required to contribute any amount in
excess of the commissions received by it under this Agreement and no person found guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 11(d), any person who controls a party to this Agreement within the meaning
of the Securities Act or the Exchange Act, and any officers, directors, partners, employees or agents of an Agent, will have the same
rights to contribution as that party, and each officer who signed the Registration Statement and director of the Company will have the
same rights to contribution as the Company, subject in each case to the provisions hereof. Any party entitled to contribution, promptly
after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under
this Section 11(d), will notify any such party or parties from whom contribution may be sought, but the omission to so notify
will not relieve that party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 11(d) except
to the extent that the failure to so notify such other party materially prejudiced the substantive rights or defenses of the party from
whom contribution is sought. Except for a settlement entered into pursuant to the last sentence of Section 11(c) hereof,
no party will be liable for contribution with respect to any action or claim settled without its written consent if such consent is required
pursuant to Section 11(c) hereof. The Agents’ respective obligations to contribute pursuant to this Section 11(d) are
several in proportion to the respective number of Placement Shares they have sold hereunder, and not joint.
12. Representations
and Agreements to Survive Delivery. The indemnity and contribution agreements contained in Section 11 of this Agreement
and all representations and warranties of the Company herein or in certificates delivered pursuant hereto shall survive, as of their respective
dates, regardless of (i) any investigation made by or on behalf of the Agents, any controlling persons, or the Company (or any of
their respective officers, directors or controlling persons), (ii) delivery and acceptance of the Placement Shares and payment therefor
or (iii) any termination of this Agreement.
13. Termination.
a. An
Agent may terminate this Agreement with respect to itself, by notice to the Company, as hereinafter specified at any time (1) if
there has been, since the time of execution of this Agreement or since the date as of which information is given in the Prospectus, any
Material Adverse Effect, or any development that would have a Material Adverse Effect that, in the sole judgment of such Agent, is material
and adverse and makes it impractical or inadvisable to market the Placement Shares or to enforce contracts for the sale of the Placement
Shares, (2) if there has occurred any material adverse change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving
a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such
as to make it, in the judgment of such Agent, impracticable or inadvisable to market the Placement Shares or to enforce contracts for
the sale of the Placement Shares, (3) if trading in the Ordinary Shares has been suspended or limited by the Commission or the Exchange,
or if trading generally on the Exchange has been suspended or limited, or minimum prices for trading have been fixed on the Exchange,
(4) if any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market shall have occurred
and be continuing, (5) if a major disruption of securities settlements or clearance services in the United States shall have occurred
and be continuing, or (6) if a banking moratorium has been declared by either U.S. Federal or New York authorities. Any such termination
shall be without liability of any party to any other party except that the provisions of Section 9 (Payment of Expenses),
Section 11 (Indemnification and Contribution), Section 12 (Representations and Agreements to Survive Delivery),
Section 18 (Applicable Law; Consent to Jurisdiction; Currency Provisions) and Section 19 (Waiver of Jury Trial)
hereof shall remain in full force and effect notwithstanding such termination. If an Agent elects to terminate this Agreement as provided
in this Section 13(a), such Agent shall provide the required notice as specified in Section 14 (Notices).
b. The
Company shall have the right, by giving five (5) days’ notice as hereinafter specified to terminate this Agreement in its sole
discretion at any time after the date of this Agreement. Any such termination shall be without liability of any party to any other party
except that the provisions of Section 9 (Payment of Expenses), Section 11 (Indemnification and Contribution),
Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Applicable Law; Consent to Jurisdiction;
Currency Provisions) and Section 19 (Waiver of Jury Trial) hereof shall remain in full force and effect notwithstanding such
termination.
c. Each
Agent shall have the right, by giving five (5) days’ notice as hereinafter specified to terminate this Agreement with respect
to itself in its sole discretion at any time after the date of this Agreement. Any such termination shall be without liability of any
party to any other party except that the provisions of Section 9 (Payment of Expenses), Section 11 (Indemnification
and Contribution), Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Applicable Law;
Consent to Jurisdiction; Currency Provisions) and Section 19 (Waiver of Jury Trial) hereof shall remain in full force and
effect notwithstanding such termination.
d. Unless
earlier terminated pursuant to this Section 13, this Agreement shall automatically terminate upon the issuance and sale of
all of the Placement Shares through the Agents on the terms and subject to the conditions set forth herein except that the provisions
of Section 9 (Payment of Expenses), Section 11 (Indemnification and Contribution), Section 12 (Representations
and Agreements to Survive Delivery), Section 18 (Applicable Law; Consent to Jurisdiction; Currency Provisions) and Section 19
(Waiver of Jury Trial) hereof shall remain in full force and effect notwithstanding such termination.
e. This
Agreement shall remain in full force and effect unless terminated pursuant to Sections 13(a), (b), (c), or (d) above
or otherwise by mutual agreement of the parties; provided, however, that any such termination by mutual agreement shall in all
cases be deemed to provide that Section 9 (Payment of Expenses), Section 11 (Indemnification and Contribution),
Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Applicable Law; Consent to Jurisdiction;
Currency Provisions) and Section 19 (Waiver of Jury Trial) shall remain in full force and effect. Upon termination of this
Agreement, the Company shall not have any liability to an Agent for any discount, commission or other compensation with respect to any
Placement Shares not otherwise sold by an Agent under this Agreement. To the extent this Agreement is terminated by one Agent or by the
Company with respect to one Agent pursuant to Sections 13(a) (b) or (c) above, this Agreement shall terminate
only with respect to such Agent and shall remain in full force and effect with respect to the Company and the other Agents, unless and
until terminated pursuant to Sections 13(a), (b), (c), or (d) above.
f. Any
termination of this Agreement shall be effective on the date specified in such notice of termination; provided, however, that such
termination shall not be effective until the close of business on the date of receipt of such notice by an Agent or the Company, as the
case may be. If such termination shall occur prior to the Settlement Date for any sale of Placement Shares, such Placement Shares shall
settle in accordance with the provisions of this Agreement.
14. Notices.
All notices or other communications required or permitted to be given by any party to any other party pursuant to the terms of this Agreement
shall be in writing, unless otherwise specified, and if sent to the Agents, shall be delivered to:
B. Riley Securities, Inc.
299 Park Avenue, 21st Floor
New York, NY 10171
| Attention: | General Counsel |
| Email: | atmdesk@brileyfin.com |
and
Berenberg Capital
Markets LLC
1251 Avenue of
the Americas, 53rd Floor
New York, NY 10020
| Attention: | Equity Capital Markets |
| Email: | ecm-bcm@berenberg-us.com |
and
Cantor Fitzgerald & Co.
499 Park Avenue
New York, NY 10022
| Attention: | Capital Markets |
and
Cantor Fitzgerald & Co.
499 Park Avenue
New York, NY 10022
| Attention: | General Counsel |
with a copy to:
Dorsey & Whitney LLP
51 West 52nd Street
New York, NY 10019-6119
| Attention: | Anthony J. Marsico |
and if to the Company, shall be delivered to:
Sono Group N.V.
Waldmeisterstraße 76
80935 Munich
Germany
| Attention: | Johannes Trischler and Benedict
Schneider |
| Telephone: | +49 (89) 4520 5818 |
| Email: | legal@sonomotors.com |
with a copy to:
Sullivan & Cromwell LLP
Neue Mainzer Straße 52
60311 Frankfurt, Germany
| Attention: | Clemens Rechberger |
| Telephone: | +49 (69) 4272 5200 |
Each party to this Agreement may change such address
for notices by sending to the parties to this Agreement written notice of a new address for such purpose. Each such notice or other communication
shall be deemed given (i) when delivered personally or by verifiable facsimile transmission on or before 4:30 p.m., New York City
time, on a Business Day or, if such day is not a Business Day, on the next succeeding Business Day, (ii) when delivered by email,
upon confirmation of receipt by the receiving party, (iii) on the next Business Day after timely delivery to a nationally-recognized
overnight courier and (iv) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid). For purposes of this Agreement, “Business Day” shall mean any day on which the
Exchange and commercial banks in the City of New York are open for business.
An electronic communication (“Electronic
Notice”) shall be deemed written notice for purposes of this Section 14 if sent to the electronic mail address specified
by the receiving party under separate cover. Electronic Notice shall be deemed received at the time the party sending Electronic Notice
receives confirmation of receipt by the receiving party. Any party receiving Electronic Notice may request and shall be entitled to receive
the notice on paper, in a nonelectronic form (“Nonelectronic Notice”) which shall be sent to the requesting party within
ten (10) days of receipt of the written request for Nonelectronic Notice.
15. Successors
and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and each Agent and their respective successors
and the affiliates, controlling persons, officers and directors referred to in Section 11 hereof. References to any of the
parties contained in this Agreement shall be deemed to include the successors and permitted assigns of such party. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns
any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
Neither the Company nor any Agent may assign its rights or obligations under this Agreement without the prior written consent of the Company,
in the case of an assignment by any Agent, and without the prior written consent of the Agents, in the case of an assignment by the Company.
16. Adjustments
for Share Splits. The parties acknowledge and agree that all share-related numbers and per-share nominal values contained in this
Agreement shall be adjusted to take into account any share consolidation, share split, share dividend, corporate domestication or similar
event effected with respect to the Placement Shares.
17. Entire
Agreement; Amendment; Severability; Waiver. This Agreement (including all schedules and exhibits attached hereto and Placement Notices
issued pursuant hereto) constitutes the entire agreement and supersedes all other prior and contemporaneous agreements and undertakings,
both written and oral, among the parties hereto with regard to the subject matter hereof. Neither this Agreement nor any term hereof may
be amended except pursuant to a written instrument executed by the Company and the Agents; provided, however, that Schedule
3 of this Agreement may be amended by any party from time to time by sending a notice containing a revised Schedule 3 to
the other parties in the manner provided in Section 14. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or unenforceable as written by a court of competent jurisdiction,
then such provision shall be given full force and effect to the fullest possible extent that it is valid, legal and enforceable, and the
remainder of the terms and provisions herein shall be construed as if such invalid, illegal or unenforceable term or provision was not
contained herein, but only to the extent that giving effect to such provision and the remainder of the terms and provisions hereof shall
be in accordance with the intent of the parties as reflected in this Agreement. No implied waiver by a party shall arise in the absence
of a waiver in writing signed by such party. No failure or delay in exercising any right, power, or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of
any right, power, or privilege hereunder.
18. Applicable
Law; Consent to Jurisdiction; Currency Provisions. This Agreement shall be governed by and construed in accordance with the internal
procedural and substantive laws of the State of New York, without giving effect to any laws or rules of such state that would cause
the application of the laws of any other jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement
or the transactions contemplated hereby (“Related Proceedings”) may be instituted in the federal courts of the United
States of America located in the Borough of Manhattan in the City of New York or the courts of the State of New York in each case located
in the Borough of Manhattan in the City of New York (collectively, the “Specified Courts”), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court
(a “Related Judgment”), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive
any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been
brought in an inconvenient forum. By the execution and delivery of this Agreement, the Company acknowledges that it has, by separate written
instrument, irrevocably designated and appointed Puglisi & Associates, with offices at 850 Library Avenue, Suite 204, Newark,
Delaware 19711 (together with any successor, the “Agent for Service”) as its authorized agent upon which process may
be served in any suit or proceeding arising out of or relating to this Agreement that may be instituted in any state or federal court
sitting in the City of New York, or brought under federal or state securities laws, and acknowledges that the Agent for Service has accepted
such designation. The Company further agrees to take any and all action, including the execution and filing of any and all such documents
and instruments, as may be necessary to continue such designation and appointment of the Agent for Service in full force and effect until
one year after termination of this Agreement.
With respect to any Related
Proceeding, each party irrevocably waives, to the fullest extent permitted by applicable law, all immunity (whether on the basis of sovereignty
or otherwise) from jurisdiction, service of process, attachment (both before and after judgment) and execution to which it might otherwise
be entitled in the Specified Courts, and with respect to any Related Judgment, each party waives any such immunity in the Specified Courts
or any other court of competent jurisdiction, and will not raise or claim or cause to be pleaded any such immunity at or in respect of
any such Related Proceeding or Related Judgment, including, without limitation, any immunity pursuant to the United States Foreign Sovereign
Immunities Act of 1976, as amended.
The obligations of the Company
pursuant to this Agreement in respect of any sum due to any Agent shall, notwithstanding any judgment in a currency other than United
States dollars, not be discharged until the first Business Day, following receipt by such Agent of any sum adjudged to be so due in such
other currency, on which such Agent may in accordance with normal banking procedures purchase United States dollars with such other currency.
If the United States dollars so purchased are less than the sum originally due to such Agent in United States dollars hereunder, the Company
agrees as a separate obligation and notwithstanding any such judgment, to indemnify such Agent against such loss. If the United States
dollars so purchased are greater than the sum originally due to such Agent hereunder, such Agent agrees to pay to the Company an amount
equal to the excess of the dollars so purchased over the sum originally due to such Agent hereunder.
All payments made by the Company
under this Agreement shall be made free and clear of any withholding or deduction for or on account of any present or future taxes, duties,
assessments or governmental charges of whatever nature (including any amounts that result from the payment of fees, compensation or reimbursement
of costs contemplated by this Agreement) imposed or levied by or on behalf of the Netherlands or by any department, agency or other political
subdivision or any taxing authority thereof or therein, and all interest, penalties or similar liabilities with respect thereto (collectively,
“Dutch Taxes”), unless such deduction or withholding is required by law. If any Dutch Taxes are required by law to
be deducted or withheld by the Company in connection with such payment or repurchase, the Company will increase the amount to be paid
to the Agents so that the full amount of such payment is received by the Agents, provided that the Company will not be required to pay
any such additional amounts to the extent that the obligation to withhold or deduct any amounts arises as a result of any present or former
connection between any Agent and the relevant jurisdiction other than any such connection arising solely as a result of the transaction
described in this agreement.
19. WAIVER
OF JURY TRIAL. THE COMPANY AND THE AGENTS EACH HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
20. Use
of Information. The Agents may not use any information gained in connection with this Agreement and the transactions contemplated
by this Agreement, including due diligence, to advise any party with respect to transactions not expressly approved by the Company.
21. Counterparts.
This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile
signature or signature delivered by e-mail in a “.pdf” format data file, including any electronic signature complying with
the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com, www.echosign.adobe.com, etc., shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the signature were an original signature.
22. Effect
of Headings. The section, Schedule and Exhibit headings herein are for convenience only and shall not affect the construction
hereof.
23. Permitted
Free Writing Prospectuses. The Company represents, warrants and agrees that, unless it obtains the prior consent of each Agent, and
each Agent represents, warrants and agrees, severally as to itself and not jointly, that, unless it obtains the prior consent of the Company,
it has not made and will not make any offer relating to the Placement Shares that would constitute an Issuer Free Writing Prospectus,
or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405, required to be filed with the
Commission. Any such free writing prospectus consented to by the Agents or by the Company, as the case may be, is hereinafter referred
to as a “Permitted Free Writing Prospectus.” The Company represents and warrants that it has treated and agrees that it will
treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as defined in Rule 433, and has
complied and will comply with the requirements of Rule 433 applicable to any Permitted Free Writing Prospectus, including timely
filing with the Commission where required, legending and record keeping. For the purposes of clarity, the parties hereto agree that all
free writing prospectuses, if any, listed in Exhibit 23 hereto are Permitted Free Writing Prospectuses.
24. Absence
of Fiduciary Relationship. The Company acknowledges and agrees that:
a. each
Agent is acting solely as agent in connection with the public offering of the Placement Shares and in connection with each transaction
contemplated by this Agreement and the process leading to such transactions, and no fiduciary or advisory relationship between the Company
or any of its respective affiliates, shareholders (or other equity holders), creditors or employees or any other party, on the one hand,
and the Agents, on the other hand, has been or will be created in respect of any of the transactions contemplated by this Agreement, irrespective
of whether or not any Agent has advised or is advising the Company on other matters, and the Agents have no obligation to the Company
with respect to the transactions contemplated by this Agreement except the obligations expressly set forth in this Agreement;
b. it
is capable of evaluating and understanding, and understands and accepts, the terms, risks and conditions of the transactions contemplated
by this Agreement;
c. the
Agents have not provided any legal, accounting, regulatory or tax advice with respect to the transactions contemplated by this Agreement
and it has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate;
d. it
is aware that the Agents and their respective affiliates are engaged in a broad range of transactions which may involve interests that
differ from those of the Company and the Agents have no obligation to disclose such interests and transactions to the Company by virtue
of any fiduciary, advisory or agency relationship or otherwise; and
e. it
waives, to the fullest extent permitted by law, any claims it may have against the Agents for breach of fiduciary duty or alleged breach
of fiduciary duty in connection with the sale of Placement Shares under this Agreement and agrees that the Agents shall not have any liability
(whether direct or indirect, in contract, tort or otherwise) to it in respect of such a fiduciary duty claim or to any person asserting
a fiduciary duty claim on its behalf or in right of it or the Company, employees or creditors of Company, other than in respect of the
Agents’ obligations under this Agreement and to keep information provided by the Company to the Agents and their counsel confidential
to the extent not otherwise publicly-available.
25. Definitions.
As used in this Agreement, the following terms have the respective meanings set forth below:
“Applicable Time”
means (i) each Representation Date and (ii) the time of each sale of any Placement Shares pursuant to this Agreement.
“Issuer Free Writing
Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433, relating to the Placement Shares
that (1) is required to be filed with the Commission by the Company, (2) is a “road show” that is a “written
communication” within the meaning of Rule 433(d)(8)(i) whether or not required to be filed with the Commission, or (3) is
exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a description of the Placement Shares or of the offering
that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required
to be filed, in the form retained in the Company’s records pursuant to Rule 433(g) under the Securities Act.
“Rule 172,”
“Rule 405,” “Rule 415,” “Rule 424,” “Rule 424(b),”
“Rule 430B,” and “Rule 433” refer to such rules under the Securities Act.
All references in this Agreement
to financial statements and schedules and other information that is “contained,” “included” or “stated”
in the Registration Statement or the Prospectus (and all other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information that is incorporated by reference in the Registration Statement or the Prospectus,
as the case may be.
All references in this Agreement
to the Registration Statement, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy
filed with the Commission pursuant to EDGAR; all references in this Agreement to any Issuer Free Writing Prospectus (other than any Issuer
Free Writing Prospectuses that, pursuant to Rule 433, are not required to be filed with the Commission) shall be deemed to include
the copy thereof filed with the Commission pursuant to EDGAR; and all references in this Agreement to “supplements” to the
Prospectus shall include, without limitation, any supplements, “wrappers” or similar materials prepared in connection with
any offering, sale or private placement of any Placement Shares by the Agents outside of the United States.
[Remainder of the page intentionally left
blank]
If the foregoing correctly
sets forth the understanding between the Company and each of the Agents, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company and each of the Agents.
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SONO GROUP N.V. |
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By: |
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Name: Laurin Hahn |
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Title: CEO |
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By: |
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Name: Torsten Kiedel |
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Title: CFO |
| ACCEPTED as of the date first-above written: |
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B. RILEY SECURITIES, INC. |
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By: |
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Name: Patrice McNicoll |
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Title: Co-Head of Investment Banking |
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BERENBERG CAPITAL MARKETS LLC |
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By: |
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Name: Zachary Brantly |
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Title: Head of US Investment Banking |
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By: |
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Name: Matthew G. Rosenblatt |
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Title: CCO, Ops. Principal |
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CANTOR FITZGERALD & CO. |
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By: |
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Name: Sage Kelly |
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Title: Global Head of Investment Banking |
[Signature Page to At
Market Issuance Sales Agreement]
SCHEDULE 1
FORM OF PLACEMENT NOTICE
| To: | [B. Riley Securities, Inc.][Berenberg Capital Markets LLC][Cantor Fitzgerald & Co.] |
| Attention: | [_______________] |
| Subject: | At Market Issuance--Placement
Notice |
Ladies and Gentlemen:
Pursuant to the terms
and subject to the conditions contained in the At Market Issuance Sales Agreement between Sono Group N.V., a public limited
liability company (naamloze vennootschap) incorporated under the laws of the Netherlands (the “Company”),
and B. Riley Securities, Inc., Berenberg Capital Markets LLC and Cantor Fitzgerald & Co., dated December
7, 2022, the Company hereby requests that [identify Designated Agent] sell up to [__________] of the
Company’s ordinary shares, nominal value €0.06 per share, in the capital of the Company, at a minimum market price of
$[_____] per share, during the time period beginning [month, day, time] and ending [month, day, time].
[The Company may include such other sales parameters as it
deems appropriate.]
SCHEDULE 2
Compensation
The Company shall pay to the
Designated Agent in cash, upon each sale of Placement Shares pursuant to this Agreement, an amount equal to 3.0% of the gross proceeds
from each sale of Placement Shares.
SCHEDULE 3
Notice Parties
The Company
B. Riley Securities, Inc.
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| with a copy to atmdesk@brileyfin.com |
Berenberg Capital Markets LLC
| ### |
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| ### |
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| ### |
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| with a copy to bcm-ecm@berenberg-us.com |
Cantor Fitzgerald & Co.
| ### |
### |
| with a copy to CFCEO@cantor.com |
SCHEDULE 6(g)
Subsidiaries
| Company |
Jurisdiction |
| Sono Motors GmbH |
Germany |
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EXHIBIT 7(1)
Form of
Representation Date Certificate
___________, 20___
This Representation Date
Certificate (this “Certificate”) is executed and delivered in connection with Section 7(l) of
the At Market Issuance Sales Agreement (the “Agreement”), dated December 7, 2022, and entered into between Sono
Group N.V., a public limited liability company (naamloze vennootschap) incorporated under the laws of the Netherlands (the
“Company”), and B. Riley Securities, Inc., Berenberg Capital Markets LLC and Cantor Fitzgerald &
Co. All capitalized terms used but not defined herein shall have the meanings given to such terms
in the Agreement.
The Company hereby certifies
as follows:
1. As
of the date of this Certificate (i) the Registration Statement does not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, (ii) the
Prospectus does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and (iii) no
event has occurred that requires the filing with the Commission of any amendment to the Registration Statement or any amendment or supplement
to the Prospectus in order to make the certifications set forth in clauses (i) and (ii) of this paragraph 1 to be true and
correct.
2. Each
of the representations and warranties of the Company contained in the Agreement were, when originally made, and are, as of the date of
this Certificate, true and correct in all material respects, except for those representations and warranties that speak solely as of
a specific date, which were as of such date, and are, as of the date of this Certificate, true and correct in all material respects.
3. Except
as waived by the Agents in writing, each of the covenants required to be performed by the Company in the Agreement on or prior to the
date of the Agreement, this Representation Date, and each such other date prior to the date hereof as set forth in the Agreement, has
been duly, timely and fully performed in all material respects and each condition required to be complied with by the Company on or prior
to the date of the Agreement, this Representation Date, and each such other date prior to the date hereof as set forth in the Agreement
has been duly, timely and fully complied with in all material respects.
4. Subsequent
to the date of the most recent financial statements in the Prospectus, and except as described in the Prospectus, including Incorporated
Documents, there has been no Material Adverse Effect.
5. No
stop order suspending the effectiveness of the Registration Statement or of any part thereof has been issued, and no proceedings for
that purpose have been instituted or are pending or threatened, by the Commission or any other federal or state governmental authority.
6. No
order suspending the qualification or exemption from qualification of any of the Placement Shares for sale in any U.S. state or other
jurisdiction under the state securities or Blue Sky laws of any U.S. state or other jurisdiction are in effect, and no proceeding for
such purpose is pending before, or threatened, to the Company’s knowledge or in writing by, any securities or other governmental
authority of any U.S. state or other jurisdiction.
The undersigned has executed
this Representation Date Certificate as of the date first written above.
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SONO GROUP N.V. |
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By: |
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Name: |
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Title: |
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By: |
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Name: |
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Title: |
EXHIBIT 7(o)
Form of
CFO Certificate
___________, 20___
Reference
is made to that certain At Market Issuance Sales Agreement (the “Agreement”), dated December 7,
2022, and entered into between Sono Group N.V., a public limited liability company (naamloze vennootschap) incorporated under
the laws of the Netherlands (the “Company”), and B. Riley Securities, Inc., Berenberg Capital Markets LLC.
and Cantor Fitzgerald & Co. (collectively, the “Agents”). This
certificate (this “Certificate”) is being furnished to the Agents pursuant to Section 7(o) of
the Agreement solely to assist the Agents in conducting their due diligence investigation of the Company in connection with the
public offering of the Company’s ordinary shares, nominal value €0.06 per share, in the capital of the Company, pursuant
to the Agreement, and may be relied upon by the Agents for this purpose. All capitalized terms used but not defined herein shall
have the meanings given to such terms in the Agreement.
In connection with the foregoing, I,
[__________], Chief Financial Officer of the Company, do hereby certify on behalf of the Company, and not in my individual capacity, as
follows:
| 1. | I am knowledgeable with respect to the accounting records and internal accounting practices, policies,
procedures and controls of the Company and its subsidiaries and have responsibility for and review financial and accounting matters with
respect to the Company and its subsidiaries. |
| 2. | I have reviewed the Registration Statement, including the ATM Prospectus, and all reports, statements,
filings, and other documents incorporated or deemed to be incorporated by reference therein, including, without limitation, the Company’s
annual report on Form 20-F for its fiscal year ended December 31, 202[_] (collectively, the “Offering Documents”),
including the circled information contained or incorporated by reference in the Offering Documents set forth in Annex A attached
hereto (the “Circled Information”). |
| 3. | Either I, or one or more employees of the Company who are responsible for the Company’s financial
and accounting matters and report directly to me and whom I directly supervise, have calculated, derived or compiled the Circled Information
or the information on which the Circled Information is primarily based. As of the date of this Certificate, the Circled Information matched
or was accurately derived from the applicable internal accounting and other books and records of the Company or from published or otherwise
reasonably reliable statistical and other information regarding the Company’s industry or business through reasonable research efforts
by the Company in all material respects. |
| 4. | Nothing has come to my attention that caused
me to believe that each item of Circled Information was not accurate in all material respects as of the date of this Certificate, except
for any item of Circled Information that speaks solely as of a specific date, in which case as of such other date. |
[Signature page follows]
IN
WITNESS WHEREOF, the undersigned has executed this certificate as of the date first written above.
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By: |
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Name: |
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Title: Chief Financial Officer |
[Signature
Page to Chief Financial Officer’s Certificate]
EXHIBIT 23
Permitted Issuer Free Writing Prospectuses
None.
Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS
AGREEMENT (this “Agreement”), dated as of December 7, 2022, by and between SONO GROUP N.V., a Dutch
public limited liability company (the “Company”), and YA II PN, Ltd., a Cayman Islands exempt limited partnership
(the “Investor”).
WITNESSETH
WHEREAS:
A. In
connection with the Securities Purchase Agreement of even date herewith by and between the parties hereto (the “Securities Purchase
Agreement”), the Company has agreed, upon the terms and subject to the conditions of the Securities Purchase Agreement, to issue
and sell to the Investor up to $31,100,000 of convertible debentures (the “Convertible Debentures”), which shall be
convertible into ordinary shares of the Company, nominal value €0.06 (the “Ordinary Shares”) (as converted, the
“Conversion Shares”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Securities
Purchase Agreement.
B. To
induce the Investor to execute and deliver the Securities Purchase Agreement, the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively,
the “Securities Act”), and applicable state securities laws and other rights as provided for herein.
AGREEMENT
NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement,
the following terms shall have the following meanings:
(a)
“Effectiveness Deadline” means, with respect to a Registration Statement filed hereunder, the 60th calendar
day following the filing date thereof, provided, however, in the event the Company is notified by the U.S. Securities and Exchange Commission
(“SEC”) that one of the Registration Statements, as defined below, will not be reviewed or is no longer subject to
further review and comments, the Effectiveness Deadline as to such Registration Statement shall be the fifth business day following the
date on which the Company is so notified if such date precedes the date required above.
(b)
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
(c)
“Filing Deadline” means, with respect to a Registration Statement required hereunder, the 21st calendar
day following the date hereof.
(d)
“Person” means a corporation, a limited liability company, an association, a partnership, an organization, a
business, an individual, a governmental or political subdivision thereof or a governmental agency.
(e)
“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus
that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of
the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
(f)
“Registrable Securities” means all of (i) the Ordinary Shares issuable upon conversion of the Convertible Debentures,
(ii) the additional shares issuable in connection with any anti-dilution provisions of the Convertible Debentures (without giving effect
to any limitations on exercise set forth in the Convertible Debentures) and (iii) any Ordinary Shares issued or issuable with respect
to any shares described in subsections (i) and (ii) above by way of any stock split, stock dividend or other distribution, recapitalization
or similar event or otherwise (in each case without giving effect to any limitations on exercise set forth in the Convertible Debentures).
“Registration Statement” means the registration statements of the Company required to be filed hereunder (including
any additional registration statements contemplated by Section 2(c) hereunder), including in each case the Prospectus, amendments and
supplements to such registration statement or Prospectus, including post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in such registration statement.
(g)
“Required Registration Amount” means (i) with respect to the initial Registration Statement, at least 30,000,000
Ordinary Shares issuable upon conversion of all Convertible Debentures then outstanding and (ii) to the extent that additional Registrable
Securities remain outstanding after substantially all shares under the initial Registration Statement have been sold, the Company shall
be required to file additional Registration Statements for such Registrable Securities as soon as permissible under SEC rules and regulations,
in each case subject to any cutback set forth in Section 2(d).
(h)
“Rule 144” means Rule 144 under the Securities Act or any successor rule thereto.
(i) “Rule
415” means Rule 415 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the SEC having substantially the same purpose and effect as such Rule.
(j) “SEC” means the Securities and Exchange Commission or any other federal agency administering the Securities
Act and the Exchange Act at the time.
(k)
“Securities Act” shall have the meaning set forth in the Recitals above.
2. REGISTRATION.
(a)
The Company’s registration obligations set forth in this Section 2 including its obligations to file Registration Statements,
obtain effectiveness of Registration Statements, and maintain the continuous effectiveness of any Registration Statement that has been
declared effective shall begin on the date hereof and continue until all the Registrable Securities have been sold or may permanently
be sold without any restrictions pursuant to Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter
to such effect, addressed and acceptable to the Company’s transfer agent and the Investor (the “Registration Period”).
(b)
Subject to the terms and conditions of this Agreement, the Company shall (i) on or prior to the Filing Deadline, prepare and file
with the SEC an initial Registration Statement on Form F-3 or Form F-1 or any successor forms thereto covering the resale by the Investor
of Registrable Securities and (ii) as soon as permissible under SEC rules and regulations, in the case of any cutback set forth in Section
2(d), file additional Registration Statements for such Registrable Securities. Each Registration Statement prepared pursuant hereto shall
register for resale at least the number of Ordinary Shares equal to the Required Registration Amount as of date the Registration Statement
is initially filed with the SEC. Each Registration Statement shall contain “Selling Stockholders” and “Plan
of Distribution” sections. The Company shall use its best efforts to have each Registration Statement declared effective by
the SEC as soon as practicable, but in no event later than the Effectiveness Deadline. By 9:30 am on the business day following the date
of effectiveness, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final Prospectus to be used in
connection with sales pursuant to such Registration Statement. Prior to the filing of the Registration Statement with the SEC, the Company
shall furnish a draft of the Registration Statement to the Investor for their review and comment. The Investor shall furnish comments
on the Registration Statement to the Company within 24 hours of the receipt thereof from the Company.
(c) During
the Registration Period, the Company shall (i) promptly prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the Prospectus used in connection with a Registration Statement, which
Prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, (ii) prepare and file with the SEC additional Registration
Statements in order to register for resale under the Securities Act all of the Registrable Securities; (iii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and as so
supplemented or amended to be filed pursuant to Rule 424; (iv) respond as promptly as reasonably possible to any comments received
from the SEC with respect to a Registration Statement or any amendment thereto and as promptly as reasonably possible provide the
Investor true and complete copies of all correspondence from and to the SEC relating to a Registration Statement (provided that the
Company may excise any information contained therein which would constitute material non-public information unless the Investor has
executed a confidentiality agreement with the Company); and (v) comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are
required to be filed pursuant to this Agreement (including pursuant to this Section 2(c)) by reason of the Company’s filing a
report on Form 20-F or Form 6-K or any analogous report under the Exchange Act, the Company shall incorporate such report by
reference into the Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day
on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement the Registration
Statement.
(d)
Reduction of Registrable Securities Included in a Registration Statement. Notwithstanding anything contained herein, in
the event that the SEC requires the Company to reduce the number of Registrable Securities to be included in a Registration Statement
in order to allow the Company to rely on Rule 415 with respect to a Registration Statement or otherwise comply with the SEC’s rules
and regulations, then the Company shall be obligated to include in such Registration Statement (which may be a subsequent Registration
Statement if the Company needs to withdraw a Registration Statement and refile a new Registration Statement in order to rely on Rule 415)
only such limited portion of the Registrable Securities as the SEC shall permit. Any Registrable Securities that are excluded in accordance
with the foregoing terms are hereinafter referred to as “Cut Back Securities.” To the extent Cut Back Securities exist,
promptly following such time as may be permitted by the SEC, the Company shall be required to file a Registration Statement covering the
resale of the Cut Back Securities (subject also to the terms of this Section) and shall use best efforts to cause such Registration Statement
to be declared effective as promptly as practicable thereafter.
(e)
Failure to File or Obtain Effectiveness of the Registration Statement or Remain Current. If: (i) a Registration Statement
is not filed on or prior to the end of the Filing Deadline, or (ii) a Registration Statement is not declared effective on or prior to
Effectiveness Deadline or the Company fails to file with the SEC a request for acceleration in accordance with Rule 461 promulgated under
the Securities Act, within five business days of the date that the Company is notified (orally or in writing, whichever is earlier) by
the SEC that a Registration Statement will not be “reviewed,” or not subject to further review, or (iii) after a Registration
Statement has been declared effective by the SEC, sales cannot be made pursuant to such Registration Statement for any reason (including,
without limitation, by reason of a stop order or the Company’s failure to update such Registration Statement but excluding any Allowed
Delay as set forth in Section 2(g) hereof or the inability of the Investor to sell the Registrable Securities covered thereby due to market
conditions), or (iv) after the date that is six months from the date hereof, the Company does not have available adequate current public
information as set forth in Rule 144(c) (any such failure or breach being referred to as an “Event”), then in addition
to any other rights the holders of the Convertible Debentures may have hereunder or under applicable law, the Company shall be in breach
of the term and conditions of this Agreement and such Event shall be deemed an event of default under the Convertible Debentures for so
long as such Event remains uncured.
(f) Piggy-Back
Registrations. If at any time there is not an effective Registration Statement covering all of the Registrable Securities and
the Company proposes to register the offer and sale of any Ordinary Shares under the Securities Act (other than a registration (i)
pursuant to a Registration Statement on Form S-8 (or other registration solely relating to an offering or sale to employees or
directors of the Company pursuant to any employee stock plan or other employee benefit arrangement), (ii) pursuant to a Registration
Statement on Form S-4 (or similar form that relates to a transaction subject to Rule 145 under the Securities Act or any successor
rule thereto), or (iii) in connection with any dividend or distribution reinvestment or similar plan), whether for its own account
or for the account of one or more stockholders of the Company and the form of Registration Statement to be used may be used for any
registration of Registrable Securities, the Company shall give prompt written notice (in any event no later than five days prior to
the filing of such Registration Statement) to the holders of Registrable Securities of its intention to effect such a registration
and, shall include in such registration all Registrable Securities with respect to which the Company has received written requests
for inclusion from the holders of Registrable Securities; provided, however, that, the Company shall not be required
to register any Registrable Securities pursuant to this Section 2(f) that have been sold or may permanently be sold without any
restrictions pursuant to Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company’s transfer agent.
(g)
For not more than twenty (20) consecutive days or for a total of not more than thirty (30) days in any twelve (12) month
period, the Company may suspend the use of any Prospectus included in any Registration Statement contemplated by this Section in the event
that the Company determines in good faith that such suspension is necessary to (A) delay the disclosure of material nonpublic information
concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of
the Company or (B) amend or supplement the affected Registration Statement or the related Prospectus so that such Registration Statement
or Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the case of the Prospectus in light of the circumstances under which they were made, not
misleading (an “Allowed Delay”); provided, that the Company shall promptly (a) notify the Investor in writing
of the commencement (and the termination) of an Allowed Delay, but shall not (without the prior written consent of the Investor) disclose
to the Investor any material nonpublic information giving rise to an Allowed Delay, (b) advise the Investor in writing to cease all
sales under such Registration Statement until the end of the Allowed Delay, and (c) use commercially reasonable efforts to terminate
an Allowed Delay as promptly as practicable.
3. RELATED
OBLIGATIONS.
(a) The
Company shall, not less than three business days prior to the filing of each Registration Statement and not less than one business
day prior to the filing of any related amendments and supplements to all Registration Statements (except for annual reports on Form
20-F, supplements and amendments to update the Registration Statement solely for information reflected in the Company’s annual
reports on Form 20-Fand interim financial reports and current reports on Form 6-K), furnish to the Investor electronic copies of all
such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will
be subject to the reasonable and prompt review by the Investor. The Company shall not file a Registration Statement or any such
Prospectus or any amendments or supplements thereto to which the Investor shall reasonably object in good faith; provided
that, the Company is notified of such objection in writing no later than two (2) business day after the Investor has been so
furnished copies of a Registration Statement.
(b)
The Company shall furnish to the Investor, without charge, (i) at least one electronic copy of the Registration Statement as declared
effective by the SEC and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by
reference, all exhibits and the preliminary prospectus, (ii) an electronic copy of the final prospectus included in such Registration
Statement and all amendments and supplements thereto , and (iii) such other documents in electronic form, which are not publicly available
through EDGAR, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities
owned by the Investor.
(c)
The Company shall use its best efforts to (i) register and qualify the Registrable Securities covered by a Registration Statement
under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investor reasonably requests,
(ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations
and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions
as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection therewith or as a condition thereto to (w) make any change to its articles
of association, (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section
3(c), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify the Investor of the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws
of any jurisdiction in the United States or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
As promptly as practicable after becoming aware of such event or development, the Company shall notify the Investor of the happening of
any event as a result of which the Prospectus included in a Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic
information), and promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission,
and deliver an electronic copy of such supplement or amendment to the Investor. The Company shall also promptly notify the Investor in
writing (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and when a Registration Statement
or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investor by email on
the same day of such effectiveness), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related
prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d)
The Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction within the United
States of America and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest
possible moment and to notify the Investor who holds Registrable Securities being sold of the issuance of such order and the resolution
thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
(e)
The Company shall hold in confidence and not make any disclosure of information concerning the Investor provided to the Company
unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction, (iv) such information is independently
developed by an employee of the Company who has not had access to the information received from the Investor; or (v) such information,
at the time of disclosure by the Investor or thereafter, is obtained by the Company from a third party that has the right to share such
information or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement
or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning the Investor is
sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Investor
and allow the Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(f)
The Company shall use its best efforts to cause all the Registrable Securities to be listed on each securities exchange on which
the Ordinary Shares are then listed. The Company shall pay all fees and expenses in connection with satisfying its obligation under this
Section 3(g).
(g)
The Company shall cooperate with the Investor to facilitate the timely preparation and delivery of certificates representing the
Registrable Securities to be sold pursuant to such Registration Statement or pursuant to Rule 144 free of any restrictive legends and
representing such number of Ordinary Shares and registered in such names as the Investor may reasonably request a reasonable period of
time prior to sales of Registrable Securities pursuant to such Registration Statement or Rule; provided, that the Company may satisfy
its obligations hereunder without issuing physical stock certificates through the use of The Depository Trust Company's Direct Registration
System.
(h)
The Company shall use its best efforts to cause the Registrable Securities covered by the applicable Registration Statement to
be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of
such Registrable Securities.
(i)
The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.
(j)
Within two business days after a Registration Statement which covers Registrable Securities is declared effective by the SEC,
the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities
(with copies to the Investor whose Registrable Securities are included in such Registration Statement) confirmation that such Registration
Statement has been declared effective by the SEC.
(k)
The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable
Securities pursuant to a Registration Statement.
4. OBLIGATIONS
OF THE INVESTOR.
(a)
The Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section
3(d) the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement covering such
Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section
3(d) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, subject to compliance
with the securities laws, the Company shall cause its transfer agent to deliver unlegended certificates for Ordinary Shares to a transferee
of the Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities
with respect to which the Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company
of the happening of any event of the kind described in Section 3(d) and for which the Investor has not yet settled.
(b)
The Investor covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable
to it or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.
5. EXPENSES
OF REGISTRATION.
All expenses incurred by the
Company in complying with its obligations pursuant to this Agreement and in connection with the registration, and related obligations
pursuant to Sections 2 and 3 of this Agreement, of Registrable Securities shall be paid by the Company, including, without limitation,
all registration, listing and qualification fees, printers, fees and expenses of the Company's counsel and accountants. For the avoidance
of doubt, the Company shall not bear legal fees of Investor’s counsel associated with the review of the Registration Statement,
any comment letters issued by the SEC relating to such Registration Statement, this Agreement and other agreements and documents reviewed
in connection with the transactions contemplated by this Agreement).
6. INDEMNIFICATION.
With respect to Registrable
Securities which are included in a Registration Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor, the
directors, officers, partners, employees, agents, representatives of, and each Person, if any, who controls the Investor within the meaning
of the Securities Act or the Exchange Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several
(collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body
or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”),
to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement
or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities
or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”),
or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein
not misleading; (ii) any untrue statement or alleged untrue statement of a material fact contained in any final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to
state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements
therein were made, not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act,
any other law, including, without limitation, any state securities law, or any rule or regulation there under relating to the offer or
sale of the Registrable Securities pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being,
collectively, “Violations”). The Company shall reimburse the Investor and each such controlling person promptly as
such expenses are incurred and are due and payable, for any reasonable legal fees or disbursements or other reasonable expenses incurred
by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (w) shall not apply to a Claim by an Indemnified Person arising out of or based
upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified
Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement
thereto; (x) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered
the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(b) or
3(d); (y) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent
of the Company, which consent shall not be unreasonably withheld; and (z) shall not apply to the extent that any Claim by an Indemnified
Person is finally determined by a court or arbitral tribunal to have resulted from the willful misconduct or gross negligence of the
Investor or any other Indemnified Person, and any expenses incurred in connection therewith that were previously reimbursed to the Investor
or any other Indemnified Person by the Company will be repaid to the Company by the Investor and such other Indemnified Person. Such
indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person.
(b)
In connection with a Registration Statement, the Investor agrees to severally and not jointly indemnify, hold harmless and defend,
to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers, employees,
representatives, or agents and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange
Act (each an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject,
under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or is based upon any
Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with information
furnished to the Company by the Investor for use in connection with such Registration Statement; and, subject to Section 6(d), the Investor
will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim, whether
pending or threatened; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
the Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of such Indemnified Party. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any prospectus shall not inure
to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the prospectus was corrected
and such new prospectus was delivered to the Investor prior to the Investor’s use of the prospectus to which the Claim relates.
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall,
if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with
the fees and expenses of not more than one (1) counsel for such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such
proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The
indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action,
claim or proceeding effected without its prior written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified
Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder,
the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying
party is prejudiced in its ability to defend such action.
(d)
The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified
Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification
by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law.
8. REPORTS
UNDER THE EXCHANGE ACT.
With a view to making available
to the Investor the benefits of Rule 144 promulgated under the Securities Act or any similar rule or regulation of the SEC that may at
any time permit the Investor to sell securities of the Company to the public without registration, and as a material inducement to the
Investor’s purchase of the Convertible Debentures, the Company represents, warrants, and covenants to the following:
(a)
The Company is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act and has filed all required reports
under section 13 or 15(d) of the Exchange Act during the 12 months prior to the date hereof (or for such shorter period that the issuer
was required to file such reports), other than Form 6-K reports.
(b)
During the Registration Period, the Company shall use its best efforts to file with the SEC in a timely manner all required reports
under section 13 or 15(d) of the Exchange Act (it being understood that nothing herein shall limit the Company’s obligations under
the Securities Purchase Agreement) and such reports shall conform to the requirement of the Exchange Act and the SEC for filing thereunder.
(c)
The Company shall furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or interim
report of the Company and such other reports and documents so filed by the Company, which copies may be in electronic form, and (iii)
such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration.
9. AMENDMENT
OF REGISTRATION RIGHTS.
Provisions of this Agreement
may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively),
only with the written consent of the Company and the Investor. Any amendment or waiver effected in accordance with this Section 9
shall be binding upon the Investor and the Company.
10. MISCELLANEOUS.
(a)
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered pursuant to the notice provisions of the Securities Purchase Agreement or to such
other address and/or electronic mail address and/or to the attention of such other person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by
the recipient of such notice, consent, waiver or other communication, (B) electronically generated by the sender’s email service
provider containing the time, date, and recipient email or (C) provided by a courier or overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with
this section.
(b)
Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
(c) The
laws of the State of New York shall govern all issues concerning the relative rights of the Company and the Investors as its
stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be
governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the Supreme Court of
the State of New York, sitting in New York County, New York and federal courts for the Southern District of New York sitting New
York, New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient
forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(d)
This Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.
(e)
The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(f)
This Agreement may be executed in identical counterparts, both which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party. Facsimile or other electronically scanned
and delivered signatures (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions
Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com), including by e-mail attachment, shall
be deemed to have been duly and validly delivered and be valid and effective for all purposes of this Agreement.
(g)
Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(h)
The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and
no rules of strict construction will be applied against any party.
(i)
This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other Person.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the Investor and the Company have caused their signature page to this Registration Rights Agreement to be duly executed as of the date
first above written.
| |
COMPANY: |
| |
SONO GROUP, N.V. |
| By: | Yorkville Advisors Global, LP |
| | Its: | Investment Manager |
| By: | Yorkville Advisors Global II, LLC |
| | Its: | General Partner |
Exhibit 5.1
| ATTORNEYS
• CIVIL LAW NOTARIES • TAX ADVISERS |
 |
| |
|
P.O. Box 7113
1007 JC Amsterdam
Beethovenstraat 400
1082 PR Amsterdam
T +31 20 71 71 000
F +31 20 71 71 111
|
Amsterdam,
7 December 2022. |
To the Company:
We
have acted as legal counsel as to Dutch law to the Company in connection with the filing of the Registration Statement with the
SEC. This opinion letter is rendered to you in order to be filed with the SEC as an exhibit to the Registration Statement.
Capitalised terms used in this opinion letter
have the meanings set forth in Exhibit A to this opinion letter. The section headings used in this opinion letter are for convenience
of reference only and are not to affect its construction or to be taken into consideration in its interpretation.
This opinion letter is strictly limited to the
matters stated in it and may not be read as extending by implication to any matters not specifically referred to in it. Nothing in this
opinion letter should be taken as expressing an opinion in respect of any representations or warranties, or other information, contained
in any document reviewed by us in connection with this opinion letter.
In rendering the opinions expressed in this opinion
letter, we have reviewed and relied upon a draft of the Registration Statement and pdf copies of the Corporate Documents and the Opinion
Documents and we have assumed that any issuance of Debentures and Registered Shares has been or shall be, as applicable, effected for
bona fide commercial reasons. We have not investigated or verified any factual matter disclosed to us in the course of our review.
This
opinion letter sets out our opinion on certain matters of the laws with general applicability of the Netherlands, and, insofar as they
are directly applicable in the Netherlands, of the European Union, as at today's date and as presently interpreted under published authoritative
case law of the Dutch courts, the General Court and the Court of Justice of the European Union. We do not express any opinion
on Dutch or European competition law, data protection law, tax law, securitisation law or regulatory law. No undertaking is assumed on
our part to revise, update or amend this opinion letter in connection with, or to notify or inform you of, any developments and/or changes
of Dutch law subsequent to today's date. We do not purport to opine on the consequences of amendments to the Registration Statement,
the Corporate Documents or the Opinion Documents subsequent to the date of this opinion letter.
All legal relationships
are subject to NautaDutilh N.V.'s general terms and conditions (see https://www.nautadutilh.com/terms), which apply mutatis mutandis
to our relationship with third parties relying on statements of NautaDutilh N.V., include a limitation of liability clause, have been
filed with the Rotterdam District Court and will be provided free of charge upon request. NautaDutilh N.V.; corporate seat Rotterdam;
trade register no. 24338323.
The opinions expressed in this opinion letter
are to be construed and interpreted in accordance with Dutch law. The competent courts at Amsterdam, the Netherlands, have exclusive
jurisdiction to settle any issues of interpretation or liability arising out of or in connection with this opinion letter. Any legal
relationship arising out of or in connection with this opinion letter (whether contractual or non-contractual), including the above submission
to jurisdiction, is governed by Dutch law and shall be subject to the general terms and conditions of NautaDutilh. Any liability arising
out of or in connection with this opinion letter shall be limited to the amount which is paid out under NautaDutilh's insurance policy
in the matter concerned. No person other than NautaDutilh may be held liable in connection with this opinion letter.
In this opinion letter, legal concepts are expressed
in English terms. The Dutch legal concepts concerned may not be identical in meaning to the concepts described by the English terms as
they exist under the law of other jurisdictions. In the event of a conflict or inconsistency, the relevant expression shall be deemed
to refer only to the Dutch legal concepts described by the English terms.
For the purposes of this opinion letter, we have
assumed that:
| a. | each
copy of a document conforms to the original, each original is authentic, and each signature
is the genuine signature of the individual purported to have placed that signature; |
| b. | if
any signature under any document is an electronic signature (as opposed to a handwritten
("wet ink") signature) only, it is either a qualified electronic signature within
the meaning of the eIDAS Regulation, or the method used for signing is otherwise sufficiently
reliable; |
| c. | the
Registration Statement has been or will be declared effective by the SEC in the form reviewed
by us; |
| d. | at
each Relevant Moment, Ordinary Shares shall have been admitted for trading on a regulated
market, a multilateral trading facility or a comparable trading system outside the European
Economic Area as referred to in Section 2:86c(1) DCC; |
| e. | the
Current Articles are the Articles of Association currently in force and as they will be in
force at each Relevant Moment; |
| f. | at
each Relevant Moment, the authorised share capital (maatschappelijk kapitaal) of the
Company shall allow for the issuance of the Registered Shares; |
| g. | at
each Relevant Moment, the Company will not have (i) been dissolved (ontbonden),
(ii) ceased to exist pursuant to a merger (fusie) or a division (splitsing),
(iii) been converted (omgezet) into another legal form, either national or foreign,
(iv) had its assets placed under administration (onder bewind gesteld), (v) been
declared bankrupt (failliet verklaard), (vi) been granted a suspension of payments
(surseance van betaling verleend), (vii) started or become subject to statutory
proceedings for the restructuring of its debts (akkoordprocedure) or (viii) been
made subject to similar proceedings in any jurisdiction or otherwise been limited in its
power to dispose of its assets; |
| h. | any
Debentures and any Registered Shares shall be issued, and any pre-emption rights in connection
therewith shall have been excluded, pursuant to resolutions validly passed by the corporate
body (orgaan) of the Company duly authorised to do so; |
| i. | the
issue price for any Registered Shares shall at least equal the aggregate nominal value thereof,
the conversion price of any Debentures at least equals the aggregate nominal value of the
underlying Debenture Shares, and any such issue or conversion price shall have been paid
or otherwise satisfied in cash (in accordance with the terms of the Sales Agreement with
respect to the ATM Shares and in accordance with the terms of the Debentures with respect
to the Debenture Shares) and shall have been received and accepted by the Company ultimately
upon the issuance of the relevant Registered Shares and, where relevant, the Company shall
have consented to payment in a currency other than Euro; |
| j. | any
Debenture Shares issued in connection with the conversion of Debentures shall be issued pursuant
to a valid conversion of such Debentures in accordance with their respective terms; |
| k. | no
Registered Shares shall be offered to the public (aanbieden aan het publiek) in the
Netherlands other than in conformity with the Prospectus Regulation and the rules promulgated
thereunder; and |
| l. | at
each Relevant Moment, each of the assumptions made in this opinion letter will be correct
in all aspects by reference to the facts and circumstances then existing. |
Based upon and subject to the foregoing and subject
to the qualifications set forth in this opinion letter and to any matters, documents or events not disclosed to us, we express the following
opinions:
Corporate Status
| 1. | The
Company has been duly incorporated as a besloten vennootschap met beperkte aansprakelijkheid
and is validly existing as a naamloze vennootschap. |
Registered Shares
| 2. | Subject
to receipt by the Company of payment in full for, or other satisfaction of the issue
price for the Registered Shares, and when issued by the Company and accepted by the acquiror(s) thereof,
the Registered Shares shall be validly issued, fully paid and non-assessable. |
The opinions expressed above are subject to the
following qualifications:
| A. | Opinion 1 must not be read to imply that
the Company cannot be dissolved (ontbonden). A company such as the Company may be
dissolved, inter alia by the competent court at the request of the company's board of directors,
any interested party (belanghebbende) or the public prosecution office in certain
circumstances, such as when there are certain defects in the incorporation of the company.
Any such dissolution will not have retro-active effect. |
| B. | Pursuant
to Section 2:7 DCC, any transaction entered into by a legal entity may be nullified
by the legal entity itself or its liquidator in bankruptcy proceedings (curator) if
the objects of that entity were transgressed by the transaction and the other party to the
transaction knew or should have known this without independent investigation (wist of
zonder eigen onderzoek moest weten). The Dutch Supreme Court (Hoge Raad der Nederlanden)
has ruled that in determining whether the objects of a legal entity are transgressed, not
only the description of the objects in that legal entity's articles of association (statuten)
is decisive, but all (relevant) circumstances must be taken into account, in particular whether
the interests of the legal entity were served by the transaction. Based on the objects clause
contained in the Current Articles, we have no reason to believe that, by issuing Debentures
or the Registered Shares, the Company would transgress the description of the objects contained
in its Articles of Association. However, we cannot assess whether there are other relevant
circumstances that must be taken into account, in particular whether the interests of the
Company are served by issuing Debentures or Registered Shares since this is a matter of fact. |
| C. | Pursuant
to Section 2:98c DCC, a company such as the Company may grant loans (leningen verstrekken)
only in accordance with the restrictions set out in Section 2:98c DCC, and may not provide
security (zekerheid stellen), give a price guarantee (koersgarantie geven)
or otherwise bind itself, whether jointly and severally or otherwise with or for third parties
(zich op andere wijze sterk maken of zich hoofdelijk of anderszins naast of voor anderen
verbinden) with a view to (met het oog op) the subscription or acquisition by
third parties of shares in its share capital or depository receipts. This prohibition also
applies to its subsidiaries (dochtervennootschappen). It is generally assumed that
a transaction entered into in violation of Section 2:98c DCC is null and void (nietig). |
| D. | The opinions expressed in this opinion
letter may be limited or affected by: |
| a. | rules relating
to Insolvency Proceedings or similar proceedings under a foreign law and other rules affecting
creditors' rights generally; |
| b. | the
provisions of fraudulent preference and fraudulent conveyance (Actio Pauliana) and
similar rights available in other jurisdictions to insolvency practitioners and insolvency
office holders in bankruptcy proceedings or creditors; |
| c. | claims based on tort (onrechtmatige
daad); |
| d. | sanctions
and measures, including but not limited to those concerning export control, pursuant to European
Union regulations, under the Dutch Sanctions Act 1977 (Sanctiewet 1977) or other legislation; |
| e. | the
Anti-Boycott Regulation, Anti Money Laundering Laws and related legislation; |
| f. | any intervention, recovery or resolution
measure by any regulatory or other authority or governmental body in relation to financial
enterprises or their affiliated entities; and |
| g. | the
rules of force majeure (niet toerekenbare tekortkoming), reasonableness and fairness
(redelijkheid en billijkheid), suspension (opschorting), dissolution (ontbinding),
unforeseen circumstances (onvoorziene omstandigheden) and vitiated consent (i.e.,
duress (bedreiging), fraud (bedrog), abuse of circumstances (misbruik van
omstandigheden) and error (dwaling)) or a difference of intention (wil)
and declaration (verklaring). |
| E. | The term "non-assessable" has
no equivalent in the Dutch language and for purposes of this opinion letter such term should
be interpreted to mean that a holder of an Ordinary Share shall not by reason of merely being
such a holder be subject to assessment or calls by the Company or its creditors for further
payment on such Ordinary Share. |
| F. | This opinion letter does not purport to
express any opinion or view on the operational rules and procedures of any clearing
or settlement system or agency. |
We consent to the filing of this opinion letter
as an exhibit to the Registration Statement and also consent to the reference to NautaDutilh in the Registration Statement under the
caption "Legal Matters". In giving this consent we do not admit or imply that we are a person whose consent is required
under Section 7 of the United States Securities Act of 1933, as amended, or any rules and regulations promulgated thereunder.
| Sincerely yours, |
|
| |
|
| /s/ NautaDutilh N.V. |
|
| NautaDutilh N.V. |
|
EXHIBIT A
LIST
OF DEFINITIONS
"Anti Money Laundering Laws"
|
The
European Anti-Money Laundering Directives, as implemented in the Netherlands in the Money Laundering and Terrorist Financing Prevention
Act (Wet ter voorkoming van witwassen en financieren van terrorisme) and the Dutch Criminal Code (Wetboek van Strafrecht). |
| |
|
| "Anti-Boycott
Regulation" |
The
Council Regulation (EC) No 2271/96 of 22 November 1996 on protecting against the effects of the extra-territorial application
of legislation adopted by a third country, and actions based thereon or resulting therefrom. |
| |
|
| "Articles
of Association" |
The
Company's articles of association (statuten) as they read from time to time. |
| |
|
| "ATM
Shares" |
The Ordinary Shares issuable
pursuant to the Sales Agreement with an aggregate offering price of up to USD 135,000,000 and registered pursuant to the
Registration Statement. |
| |
|
| "Bankruptcy
Code" |
The
Dutch Bankrupcty Code (Faillissementswet). |
| |
|
| "Commercial
Register" |
The
Dutch Commercial Register (handelsregister). |
| |
|
| "Company" |
Sono
Group N.V., a public company with limited liability (naamloze vennootschap), registered with the Commercial Register under
number 80683568. |
| |
|
| "Corporate
Documents" |
The
Deed of Incorporation, the Deed of Conversion and the Current Articles. |
| |
|
| "Current
Articles" |
The
articles of association (statuten) of the Company as they read immediately after the execution of the Deed of Amendment, which,
according to the Extract, was the last amendment to the Articles of Association. |
| |
| "DCC" |
The
Dutch Civil Code (Burgerlijk Wetboek). |
| |
|
| "Debenture
Shares" |
Up to 30,000,000 Ordinary
Shares issuable upon conversion of the Debentures in accordance with their terms and registered pursuant to the Registration
Statement. |
| |
|
| "Debenture
SPA" |
The
signed Securities Purchase Agreement between the Company and YA II PN, Ltd., dated 7 December 2022. |
| |
|
| "Debentures" |
The
convertible debentures issued or to be issued by the Company pursuant to the Debenture SPA substantially in the form of Exhibit A
thereto. |
| |
|
| "Deed
of Amendment" |
The
deed of amendment to the articles of association (akte van statutenwijziging) of the Company dated 17 November 2021. |
| |
|
| "Deed
of Conversion" |
The
deed of conversion and amendment to the articles of association (akte van omzetting en statutenwijziging) dated 27
November 2020. |
| |
|
| "Deed
of Incorporation" |
The
Company's deed of incorporation (akte van oprichting) dated 23 October 2020. |
| |
|
"eIDAS Regulation"
|
Regulation
(EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust
services for electronic transactions in the internal market and repealing Directive 1999/93/EC. |
| |
|
| "Extract" |
In
relation to the Company, a pdf copy of an extract from the Commercial Register, received by us by e-mail and dated the date of this
opinion letter. |
| |
|
| "Insolvency
Proceedings" |
Any
insolvency proceedings within the meaning of Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015
on insolvency proceedings (recast), as amended by Regulation (EU) 2021/2260 of the European Parliament and of the Counsel of 15 December 2021,
listed in Annex A thereto and any statutory proceedings for the restructuring of debts (akkoordprocedure) pursuant to the
Bankruptcy Code. |
| |
| "NautaDutilh" |
NautaDutilh
N.V. |
| |
|
| "the
Netherlands" |
The
European territory of the Kingdom of the Netherlands and "Dutch" is in or from the Netherlands. |
| |
|
| "Opinion
Documents" |
The
Sales Agreement and the Debenture SPA. |
| |
|
| "Ordinary
Shares" |
Ordinary
shares in the Company's capital, with a nominal value of EUR 0.06 each. |
| |
|
| "Prospectus
Regulation" |
Regulation
(EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities
are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC. |
| |
|
| "Registered
Shares" |
Ordinary Shares with an
aggregate offering price of up to USD 195,000,000 and registered pursuant to the Registration Statement, including the ATM
Shares, and the Debenture Shares. |
| |
|
| "Registration
Statement" |
The
Company's registration statement on Form F-3 filed or to be filed with the SEC in the form reviewed by us on or about 7 December 2022,
containing a prospectus and a prospectus supplement covering the offering, issuance and/or sale, as applicable, of the Registered
Shares. |
| |
|
| "Relevant
Moment" |
Each
time when one or more Registered Shares are issued by the Company. |
| |
|
| "Sales
Agreement" |
The
signed At Market Issuance Sales Agreement entered into between the Company, B. Riley Securities, Inc., Berenberg Capital Markets
LLC and Cantor Fitzgerald & Co., dated 7 December 2022.
|
| |
|
| "SEC" |
The
United States Securities and Exchange Commission. |
Exhibit 8.1
| ATTORNEYS
• CIVIL LAW NOTARIES • TAX ADVISERS |
 |
| |
|
Beethovenstraat 400
1082 PR Amsterdam
T +31 20 71 71 000 |
Amsterdam, December 7, 2022 |
To the Company:
We
have acted as tax counsel as to Dutch law to the Company in connection with the filing of the Registration Statement with the
SEC. This opinion letter is rendered to you in order to be filed with the SEC as an exhibit to the Registration Statement.
Capitalised terms used in this opinion letter have the meanings set
forth in Exhibit A to this opinion letter. The section headings used in this opinion letter are for convenience of reference only
and are not to affect its construction or to be taken into consideration in its interpretation.
This
opinion letter is strictly limited to the matters stated in it and may not be read as extending by implication to any matters not specifically
referred to in it. Nothing in this opinion letter should be taken as expressing an opinion in respect of any representations or warranties,
or other information, contained in any document reviewed by us in connection with this opinion letter.
In rendering the opinion expressed in this opinion letter, we have
reviewed and relied upon a draft of the Registration Statement. We have not investigated or verified any factual matter disclosed to
us in the course of our review.
This
opinion letter sets out our opinion on certain matters of the tax laws with general applicability of the Netherlands, and, insofar as
they are directly applicable in the Netherlands, of the European Union, as at today's date and as presently interpreted under published
authoritative case law of the Dutch courts, the General Court and the Court of Justice of the European Union. We do not express
any opinion on Dutch or European law other than the Dutch tax law opinion below. No undertaking is assumed on our part to revise, update
or amend this opinion letter in connection with or to notify or inform you of, any developments and/or changes of Dutch tax law subsequent
to today's date. We do not purport to opine on the consequences of amendments to the Registration Statement subsequent to the date of
this opinion letter.
The opinion expressed in this opinion letter is to be construed and
interpreted in accordance with Dutch tax law. The competent courts at Amsterdam, the Netherlands, have exclusive jurisdiction to settle
any issues of interpretation or liability arising out of or in connection with this opinion letter. Any legal relationship arising out
of or in connection with this opinion letter (whether contractual or non-contractual), including the above submission to jurisdiction,
is governed by Dutch law and shall be subject to the general terms and conditions of NautaDutilh. Any liability arising out of or in
connection with this opinion letter shall be limited to the amount which is paid out under NautaDutilh's insurance policy in the matter
concerned. No person other than NautaDutilh may be held liable in connection with this opinion letter.
This communication
is confidential and may be subject to professional privilege. All legal relationships are subject to NautaDutilh N.V.'s general terms
and conditions (see https://www.nautadutilh.com/terms), which apply mutatis mutandis to our relationship with third parties relying on
statements of NautaDutilh N.V., include a limitation of liability clause, have been filed with the Rotterdam District Court and will
be provided free of charge upon request. NautaDutilh N.V.; corporate seat Rotterdam; trade register no. 24338323.
In this opinion letter and in the Dutch Tax Section, legal and tax
concepts are expressed in English terms. The Dutch legal and tax concepts concerned may not be identical in meaning to the concepts described
by the English terms as they exist under the law of other jurisdictions. In the event of a conflict or inconsistency, the relevant expression
shall be deemed to refer only to the Dutch legal and tax concepts described by the English terms.
For the purposes of this opinion letter, we have assumed that:
| a. | the
Registration Statement has been or will be declared effective by the SEC in the form reviewed
by us; and |
| b. | the
place of effective management of the Company is in Germany, and not in the Netherlands, and
the Company will therefore be a tax resident of Germany under German national tax law. |
Based upon and subject to the foregoing and subject to any matters,
documents or events not disclosed to us, we express the following opinion:
Dutch Tax Section
The
Dutch Tax Section constitutes our opinion and we hereby confirm that with respect to matters of Dutch tax law referred to therein
it is accurate and set forth in full as per the date of the Registration Statement, subject to the introduction and exceptions
in the first paragraphs of the Dutch Tax Section under the caption "General".
We
consent to the filing of this opinion letter as an exhibit to the Registration Statement and also consent to the reference to NautaDutilh
in the Registration Statement under the caption "Legal Matters". In giving this consent we do not admit or imply that
we are a person whose consent is required under Section 7 of the United States Securities Act of 1933, as amended, or any rules and
regulations promulgated thereunder.
| Sincerely yours, |
|
| |
|
| /s/ NautaDutilh N.V. |
|
| NautaDutilh N.V. |
|
EXHIBIT A
LIST
OF DEFINITIONS
| "Commercial
Register" |
The
Dutch Commercial Register (handelsregister). |
| |
|
| "Company" |
Sono
Group N.V., a public company with limited liability (naamloze vennootschap), registered with the Commercial Register under
number 80683568. |
| |
|
| "Dutch
Tax Section" |
The
statements contained in the Registration Statement under the caption "Material Dutch Tax Considerations". |
| |
|
| "NautaDutilh" |
NautaDutilh
N.V. |
| |
|
| "the
Netherlands" |
The
European territory of the Kingdom of the Netherlands and "Dutch" is in or from the Netherlands. |
| |
|
| "Ordinary
Shares" |
Ordinary
shares in the Company's capital, with a nominal value of EUR 0.06 each. |
| |
|
| "Registration
Statement" |
The
Company's registration statement on Form F-3 filed or to be filed with the SEC in the form reviewed by us. |
| |
|
| "SEC" |
The
United States Securities and Exchange Commission. |
Exhibit 8.2
[Letterhead of Sullivan & Cromwell
LLP]
December 7,
2022
| Sono Group N.V., |
| |
Waldmeisterstraße 76, |
| |
|
80935 Munich, Germany. |
Ladies and Gentlemen:
We have acted as your tax counsel in connection
with the registration statement on Form F-3 (the “Registration Statement”) filed with the Securities and Exchange Commission
(the “SEC”) on the date hereof.
We hereby confirm to you that, insofar as it
relates to matters of United States federal income tax law, the discussion under the caption “Taxation—U.S. Federal Income
Tax Considerations” in the prospectus included in the Registration Statement, subject to the qualifications, exceptions, assumptions
and limitations contained herein and therein, is our opinion.
We hereby consent to the filing of this opinion
with the SEC as Exhibit 8 to the Registration Statement. In giving this consent, we do not hereby admit that we are included in
the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the SEC thereunder.
| |
Very truly yours, |
| |
|
| |
/s/
Sullivan & Cromwell LLP |
| |
Sullivan & Cromwell
LLP |
Exhibit 8.3
[Letterhead of Ebner Stolz Mönning Bachem
Wirtschaftsprüfer Steuerberater Rechtsanwälte Partnerschaft mbB]
December 7, 2022
| Sono Group N.V., |
| |
Waldmeisterstraße 76, |
| |
|
80935 Munich, Germany. |
Ladies and Gentlemen:
We have acted as your German tax advisor in connection
with the registration statement on Form F-3 (the “Registration Statement”) filed with the Securities and Exchange Commission
(the “SEC”) on the date hereof.
This opinion is limited to German tax law in
effect on the date of this opinion. This opinion (including all terms used in it) is to be construed in accordance with German tax law.
For the purpose of this opinion, we have examined
the Registration Statement, including the documents incorporated by reference therein, which we determined to be the only documents relevant
to rendering this opinion, while relying upon the accuracy of the factual statements therein.
For the purpose of this opinion, we have made
the following assumptions:
| · | The Registration Statement has been or will be filed with the
SEC in the form referred to in this opinion. |
| · | The effective place of management of the Issuer is located in
Munich, Germany. |
| · | The factual statements in the Registration Statement are true
and correct in all respects. |
We hereby confirm to you that, insofar as it
relates to matters of German tax law, the discussion under the caption “Material German Tax Considerations” in the prospectus
included in the Registration Statement, subject to the qualifications, exceptions, assumptions and limitations contained herein and therein,
is our opinion.
We hereby consent to the filing of this opinion
with the SEC as Exhibit 8 to the Registration Statement. In giving this consent, we do not hereby admit that we are included in
the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the SEC thereunder.
| |
Very truly yours, |
| |
|
| |
/s/ Ebner Stolz Mönning
Bachem Wirtschaftsprüfer Steuerberater Rechtsanwälte Partnerschaft mbB |
| |
Ebner Stolz Mönning Bachem Wirtschaftsprüfer Steuerberater Rechtsanwälte Partnerschaft mbB |
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE
AGREEMENT (this “Agreement”), dated as of December 7, 2022, is between SONO GROUP N.V., a Dutch
public limited liability company (the “Company”), and YA II PN, LTD. (the “Buyer”).
WITNESSETH
WHEREAS, the Company
and the Buyer desire to enter into this transaction for the Company to sell and the Buyer to purchase the Convertible Debentures (as defined
below) pursuant to an exemption from registration pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D (“Regulation
D”) as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of
1933, as amended (the “Securities Act”);
WHEREAS, the parties
desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Buyer, as provided
herein, and the Buyer shall purchase convertible debentures in the form attached hereto as “Exhibit A” (the “Convertible
Debentures”) in the aggregate principal amount of $31,100,000, which shall be convertible into ordinary shares of the Company,
nominal value of €0.06 per share (the “Ordinary Shares”) (as converted, the “Conversion Shares”),
of which a Convertible Debenture in the aggregate principal amount of $11,100,000 shall be purchased upon the signing this Agreement (the
“First Closing”), a Convertible Debenture in the aggregate principal amount of $10,000,000 shall be purchased upon
the filing of a registration statement with the SEC (the “Registration Statement”) registering the resale of the Conversion
Shares by the Buyer (the “Second Closing”), and a Convertible Debenture in the aggregate principal amount $10,000,000
shall be purchased on or about the date the Registration Statement has first been declared effective by the SEC (the “Third Closing”)
(each of the First Closing, Second Closing and Third Closing individually referred to as a “Closing” and collectively
referred to as the “Closings”), in each case at a purchase price equal to 100% of the principal amount of such Convertible
Debenture (the “Purchase Price”) as set forth on the Schedule of Buyer attached as Schedule I to this Agreement (“Schedule
of Buyer”);
WHEREAS, contemporaneously
with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement (the
“Registration Rights Agreement”) pursuant to which the Company has agreed to provide certain registration rights under
the Securities Act and the rules and regulations promulgated thereunder, and applicable state securities laws; and
WHEREAS, the Convertible
Debentures and the Conversion Shares are collectively referred to herein as the “Securities.”
AGREEMENT
NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer hereby agree as follows:
| 1. | PURCHASE AND SALE OF CONVERTIBLE DEBENTURES. |
(a)
Purchase of Convertible Debentures. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
7 below, the Company shall issue and sell to the Buyer, and the Buyer agrees to purchase from the Company at each Closing Convertible
Debentures with a principal amount corresponding to the applicable Purchase Price set forth on the Schedule of Buyer attached as Schedule
I hereto.
(b)
Closing Dates. Each Closing shall occur at the offices Yorkville Advisors Global, LP, 1012 Springfield Avenue, Mountainside,
NJ 07092. The date and time of each Closing shall be as follows: (i) the First Closing shall be at 10:00 a.m., New York time, on the
first Business Day on which the conditions to the First Closing set forth in Sections 6 and 7 below are satisfied or waived (or such
other date as is mutually agreed to by the Company and the Buyer) (the “First Closing Date”), (ii) the Second Closing
shall be at 10:00 a.m., New York time, on the date on which the Registration Statement is filed by the Company with the SEC as set forth
in the Registration Rights Agreement or the first Business Day thereafter, provided the conditions to the Second Closing set forth in
Sections 6 and 7 below are satisfied or waived (or such other date as is mutually agreed to by the Company and the Buyer) (the “Second
Closing Date”), and (iii) the Third Closing shall be at 10:00 a.m., New York time, on the first Business Day after the Registration
Statement is first declared effective by the SEC, provided the conditions to the Third Closing set forth in Sections 6 and 7 below are
satisfied or waived (or such other date as is mutually agreed to by the Company and the Buyer) (the “Third Closing Date”
and, together with the First Closing Date and the Second Closing Date, collectively referred to as the “Closing Dates”).
As used herein “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in
New York, New York are authorized or required by law to remain closed.
(c)
Form of Payment; Deliveries. Subject to the satisfaction of the terms and conditions of this Agreement, on each Closing
Date, (i) the Buyer shall deliver to the Company the Purchase Price for the Convertible Debentures to be issued and sold to Buyer at
such Closing, minus any fees or expenses to be paid directly from the proceeds of such Closing as set forth herein, and (ii) the
Company shall deliver to the Buyer the Convertible Debentures, duly executed on behalf of the Company, with an aggregate principal amount
corresponding to the applicable Purchase Price set forth opposite the Buyer’s name on the Schedule of Buyer attached as Schedule
I hereto.
(d) Commitment
Fee. The Company shall pay to the Buyer a commitment fee (the “Commitment Fee”) equal to $1,088,500. The
Commitment Fee shall be deducted from the Purchase Price payable by the Buyer in the First Closing and shall thus be deemed to have
been paid to the Buyer at the First Closing.
(e)
Home Country Practice. Prior to the date hereof, the Company has taken all actions required pursuant to Nasdaq Rule 5615(a)(3)
to duly and validly rely on the exemption for foreign private issuers from applicable rules and regulations of the Nasdaq by adopting
the home country practice (the “Home Country Practice”) in connection with the transactions contemplated hereunder
(including an exemption from any Nasdaq rules that would otherwise require seeking shareholder approval in respect of such transactions).
The Company may issue the relevant Conversion Shares upon conversion of any outstanding Convertible Debentures without regard to the limitations
imposed by Nasdaq Rule 5635(d). So long as any Convertible Debentures are outstanding, the Company shall comply with the Home Country
Practice rules and shall not take any action to change its Home Country Practice or become subject to Nasdaq Rule 5635(d). The Company
will exert reasonable best efforts to maintain the listing and trading of its Ordinary Shares on The Nasdaq Global Market (the “Principal
Market”) and shall comply in all respects with the Company’s reporting, filing and other obligations under the bylaws
or rules of the Principal Market. The Company’s practices in connection with the transactions contemplated hereunder are not prohibited
by its home country’s laws.
| 2. | BUYER’S REPRESENTATIONS AND WARRANTIES. |
The Buyer hereby represents
and warrants to the Company that, as of the date hereof and as of each Closing Date:
(a)
Investment Purpose. The Buyer is acquiring the Securities for its own account for investment purposes and not with a view
towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under or exempt
from the registration requirements of the Securities Act; provided, however, that by making the representations herein, the Buyer does
not agree, or make any representation or warranty, to hold any of the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with, or pursuant to, a registration statement covering such Securities or
an available exemption under the Securities Act. The Buyer does not presently have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities. “Person” means an individual, corporation, limited liability company,
association, partnership, limited partnership, syndicate, person (including, without limitation, a “person” as defined in
Section 13(d)(3) of the Exchange Act), trust, association, or other entity and any Governmental Entity (as defined below).
(b)
Accredited Investor Status. The Buyer is an institutional “Accredited Investor” as that term is defined in
Rule 501(a)(3) of Regulation D.
(c)
Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities pursuant to applicable United States securities laws.
(d)
Information. The Buyer and its advisors (and its counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information the Buyer deemed material to making an informed investment decision
regarding its purchase of the Securities, which have been requested by the Buyer. The Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and its management. Neither such inquiries nor any other due diligence investigations
conducted by the Buyer or its advisors, if any, or its representatives shall modify, amend or affect the Buyer’s right to rely
on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the
Securities involves a high degree of risk. The Buyer has sought such accounting, legal and tax advice, as it has considered necessary
to make an informed investment decision with respect to its acquisition of the Securities.
(e)
Transfer or Resale. The Buyer understands that: (i) the Securities have not been registered under the Securities Act or
any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder,
(B) the Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such Securities
to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration requirements,
or (C) the Buyer provides the Company with reasonable assurances (in the form of seller and broker representation letters) and a legal
opinion under Section 2(e)(i)(B) that such Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the
Securities Act, as amended (or a successor rule thereto) (collectively, “Rule 144”), in each case following the applicable
holding period set forth therein; and (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or
the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder.
(f)
Legends. The Buyer agrees to the imprinting, so long as it is required by this Section 2(f), of a restrictive legend on
the Securities in substantially the following form:
THE SECURITIES FOR WHICH THIS
CERTIFICATE HAS BEEN ISSUED AND THOSE SECURITIES INTO WHICH THEY ARE CONVERTIBLE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES AND THOSE SECURITIES INTO WHICH THEY ARE CONVERTIBLE HAVE
BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS
Certificates for the Conversion Shares shall not
contain any legend (including the legend set forth above), (i) while a registration statement covering the resale of such Conversion Shares
is effective under the Securities Act, (ii) following any sale of such Conversion Shares pursuant to Rule 144, (iii) if such Conversion
Shares are eligible for sale under Rule 144, or (iv) if such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of the SEC). The Buyer agrees that the removal of restrictive
legend from certificates for Securities as set forth in this Section 3(f) is predicated upon the Company’s reliance that the Buyer
will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold pursuant to a registration statement, they will be sold in compliance
with the plan of distribution set forth therein.
(g) Organization;
Authority. The Buyer is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction
Documents (as defined below) to which it is a party and otherwise to carry out its obligations hereunder and thereunder.
(h)
Authorization, Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the
Buyer and shall constitute the legal, valid and binding obligations of the Buyer enforceable against the Buyer in accordance with its
terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and
remedies.
(i)
No Conflicts. The execution, delivery and performance by the Buyer of this Agreement and the consummation by the Buyer
of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of the Buyer, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Buyer is a
party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities
laws) applicable to the Buyer, except, in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations
which could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Buyer
to perform its obligations hereunder.
(j)
Certain Trading Activities. The Buyer has not directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with the Buyer, engaged in any transactions in the securities of the Company (including, without limitation, any
Short Sales (as defined below) involving the Company's securities) during the period commencing as of the time that the Buyer first contacted
the Company or the Company's agents regarding the specific investment in the Company contemplated by this Agreement and ending immediately
prior to the execution of this Agreement by the Buyer.
| 3. | REPRESENTATIONS AND WARRANTIES OF THE COMPANY. |
The Company hereby makes the
representations and warranties set forth below to the Buyer:
(a)
Organization and Qualification. The Company and each of its Subsidiaries are entities duly formed, validly existing and,
except as disclosed in the SEC Documents, as defined in Section 3(j) below, in good standing (to the extent good standing is a known
concept in the applicable jurisdiction) under the laws of the jurisdiction in which they are formed, and have the requisite power and
authority to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. The
Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing (to the extent good
standing is a known concept in the applicable jurisdiction) in every jurisdiction in which its ownership of property or the nature of
the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good
standing would not reasonably be expected to have a Material Adverse Effect (as defined below). As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including
results thereof) or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, (ii) the transactions contemplated
hereby or in any of the other Transaction Documents or any other agreements or instruments to be entered into by the Company in connection
herewith or therewith or (iii) the authority or ability of the Company to perform any of its obligations under any of the Transaction
Documents (as defined below). “Subsidiaries” means any Person in which the Company, directly or indirectly, owns a
majority of the outstanding capital stock having voting power or holds a majority of the equity or similar interest of such Person, and
each of the foregoing, is individually referred to herein as a “Subsidiary.”
(b)
Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform
its obligations under this Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof
and thereof. The execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Convertible Debentures
and the reservation for issuance and issuance of the Conversion Shares issuable upon conversion of the Convertible Debentures), have
been duly authorized by the Company's management board and supervisory board and no further filing, consent or authorization is required
by the Company, its management board or its supervisory board or its general meeting of shareholders or any Governmental Entity (as defined
below). This Agreement has been, and the other Transaction Documents to which the Company is a party will be prior to the Closing, duly
executed and delivered by the Company, and each constitutes the legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or
state securities law. “Transaction Documents” means, collectively, this Agreement, the
Registration Rights Agreement, the Convertible Debentures, and each of the other agreements and instruments entered into by the Company
or delivered by the Company in connection with the transactions contemplated hereby and thereby, as may be amended from time to time.
(c)
Issuance of Securities. The issuance of the Securities has been duly authorized and, upon issuance and payment in accordance
with the terms of the Transaction Documents the Securities shall be validly issued, fully paid and non-assessable (meaning
that the holders of the Securities will not by reason of merely being such a holder, be subject to assessment or calls by the Company
or its creditors for further payment on such Securities) and free from all preemptive or similar rights,
mortgages, defects, claims, liens, pledges, charges, taxes, rights of first refusal, encumbrances, security interests and other encumbrances
(collectively “Liens”) with respect to the issuance thereof. As of each Closing Date, the number of Ordinary Shares
comprised in the Company's authorized share capital but unissued and not otherwise reserved for issuance (including (i) in relation to
equity or debt securities convertible into or exchangeable or exercisable for or that can be settled in Ordinary Shares (other than the
Convertible Debentures) and (ii) Ordinary Shares remaining available for issuance under the Company's equity incentive plans) shall be
not less than the maximum number of Ordinary Shares issuable upon conversion of all the Convertible Debentures then outstanding (assuming
for purposes hereof that (x) the Convertible Debentures are convertible at the Floor Price (as defined in the Convertible Debentures)
as of the date of determination, and (y) any such conversion shall not take into account any limitations on the conversion of Convertible
Debentures set forth therein) (the “Required Reserve Amount”). Upon issuance in accordance with conversion of the
Convertible Debentures in accordance with their terms, the Conversion Shares, when issued, will be validly issued, fully paid and nonassessable
(meaning that the holders of the Conversion Shares will not by reason of merely being such a holder, be subject to assessment or calls
by the Company or its creditors for further payment on such Conversion Shares) and free from all preemptive or similar rights or Liens
with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Ordinary Shares.
(d)
No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Convertible Debentures,
the Conversion Shares, and the reservation for issuance of the Conversion Shares from the Company’s authorized share capital) will
not (i) result in a violation of the Company’s articles of association, or other organizational documents of the Company or any
of its Subsidiaries, or any capital stock or other securities of the Company or any of its Subsidiaries, (ii) conflict with, or constitute
a default under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including, without limitation, U.S. federal and state securities laws and regulations, the securities laws of the
jurisdictions of the Company's incorporation or in which it or its subsidiaries operate and the rules and regulations of Principal
Market and including all applicable laws, rules and regulations of the country of incorporation of the Company) applicable to the Company
or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, except in
the case of (ii) and (iii) for any conflict, default, right or violation that would not reasonably be expected to result in a Material
Adverse Effect.
(e)
Consents. The Company is not required to obtain any material consent from, authorization or order of, or make any filing
or registration with (other than any filings as may be required by any federal or state securities agencies and any filings as may be
required by the Principal Market), any Governmental Entity (as defined below) or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each
case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company
or any Subsidiary is required to obtain pursuant to the preceding sentence have been or will be obtained or effected on or prior to each
Closing Date, and neither the Company nor any of its Subsidiaries are aware of any facts or circumstances which might prevent the Company
or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings contemplated by the Transaction
Documents. The Company is not in violation of the requirements of the Principal Market and has no knowledge of any facts or circumstances
which could reasonably lead to delisting or suspension of the Ordinary Shares in the foreseeable future. The Company has notified the
Principal Market of the issuance of all of the Securities hereunder, which does not require obtaining the approval of the stockholders
of the Company or any other Person or Governmental Entity, and the Principal Market has completed its review of the related Listing of
Additional Share form. “Governmental Entity” means any nation, state, county, city, town, village, district, or other political
jurisdiction of any nature, federal, state, local, municipal, foreign, or other government, governmental or quasi-governmental authority
of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal), multi-national
organization or body; or body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature or instrumentality of any of the foregoing, including any entity or enterprise
owned or controlled by a government or a public international organization or any of the foregoing.
(f) Acknowledgment
Regarding Buyer's Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of
an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that
the Buyer is not (i) an officer or director of the Company or any of its Subsidiaries, (ii) to its knowledge, an
"affiliate" (as defined in Rule 144) of the Company or any of its Subsidiaries or (iii) to its knowledge, a
“beneficial owner” of more than 10% of the shares of Ordinary Shares (as defined for purposes of Rule 13d-3 of the 1934
Act). The Company further acknowledges that neither the Buyer (nor any affiliate of the Buyer) is acting as a financial advisor or
fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by the Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. The Company further represents to the Buyer that the Company's decision to enter into the Transaction
Documents to which it is a party has been based solely on the independent evaluation by the Company and its representatives.
(g) No
Integrated Offering. None of the Company, its Subsidiaries or any of their affiliates, nor any Person acting on their behalf has,
directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to require approval of stockholders of the Company under any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any
of the securities of the Company are listed or designated for quotation. None of the Company, its Subsidiaries, their affiliates nor
any Person acting on their behalf will take any action or steps that would cause the offering of any of the Securities to be integrated
with other offerings of securities of the Company.
(h) Dilutive
Effect. The Company understands and acknowledges that the number of Conversion Shares will increase in certain circumstances. The
Company further acknowledges its obligation to issue the Conversion Shares upon conversion of the Convertible Debentures in accordance
with the terms thereof is absolute and unconditional, regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
(i)
SEC Documents; Financial Statements. Since its initial public offering in November 2021, the Company has timely filed
all reports and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act (all
of the foregoing filed prior to the date hereof and all exhibits and appendices included therein and financial statements, notes and
schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”).
The Company has delivered or has made available to the Buyer or their respective representatives true, correct and complete copies of
each of the SEC Documents not available on the EDGAR system. To the best of the Company’s knowledge, as of their respective dates,
the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they were made, not misleading. To the best of the Company’s
knowledge, as of their respective dates, the financial statements of the Company included in the SEC Documents complied in all material
respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect
as of the time of filing. Such financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board, consistently applied, during the periods involved (except,
if applicable, (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually
or in the aggregate). The reserves, if any, established by the Company or the lack of reserves, if applicable, are reasonable based upon
facts and circumstances known by the Company on the date hereof and there are no loss contingencies that are required to be accrued by
the Statement of Financial Accounting Standard No. 5 of the Financial Accounting Standards Board which are not provided for by the Company
in its financial statements or otherwise. No other information provided by or on behalf of the Company to the Buyer which is not included
in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make
the statements therein not misleading, in the light of the circumstance under which they are or were made. The Company is not currently
contemplating to amend or restate any of the financial statements (including, without limitation, any notes or any letter of the independent
accountants of the Company with respect thereto) included in the SEC Documents (the “Financial
Statements”), nor is the Company currently aware of facts or circumstances which would require the Company to amend or restate
any of the Financial Statements, in each case, in order for any of the Financials Statements to be in compliance with IFRS and the rules
and regulations of the SEC. The Company has not been informed by its independent accountants that they recommend that the Company amend
or restate any of the Financial Statements or that there is any need for the Company to amend or restate any of the Financial Statements.
(j) Absence
of Certain Changes. Since the date of the Company's most recent audited financial statements contained in its Form 20-F, and except
as disclosed in the SEC documents that have been filed after the date of such Form 20-F, there has been no Material Adverse Effect, nor
any event or occurrence specifically affecting the Company or its Subsidiaries that would be reasonably expected to result in a Material
Adverse Effect. Since the date of the Company's most recent audited financial statements contained in its Form 20-F, neither the Company
nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any material assets, individually or in the aggregate,
outside of the ordinary course of business or (iii) made any material capital expenditures, individually or in the aggregate, outside
of the ordinary course of business. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to
any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company
or any Subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.
(k)
No Undisclosed Events, Liabilities, Developments or Circumstances. No event, liability, development or circumstance has
occurred or exists, or is reasonably expected to exist or occur specific to the Company, any of its Subsidiaries or any of their respective
businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise), that has
not been publicly disclosed and would reasonably be expected to have a Material Adverse Effect.
(l) Conduct
of Business; Regulatory Permits. Except as disclosed in the SEC Documents, neither the Company nor any of its Subsidiaries is
in violation of any term under its Articles of Association, any certificate of designation, preferences or rights of any other outstanding
series of preferred stock of the Company or any of its Subsidiaries or their organizational charter, certificate of formation, memorandum
of association, Articles of Association or certificate of incorporation or, respectively, which would reasonably be expected to have
a Material Adverse Effect. Except as disclosed in the SEC Documents, neither the Company nor any of its Subsidiaries is in violation
of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries,
and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except in all cases
for violations which would not reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing,
the Company is not in violation of any of the rules, regulations or requirements of the Principal Market and has no knowledge of any
facts or circumstances that could reasonably lead to delisting or suspension of the Ordinary Shares by the Principal Market in the foreseeable
future. During the one year prior to the date hereof, (i) the Ordinary Shares have been listed or designated for quotation on the Principal
Market, (ii) trading in the Ordinary Shares has not been suspended by the SEC or the Principal Market and (iii) the Company has received
no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Ordinary Shares
from the Principal Market, which has not been publicly disclosed. The Company and each of its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such certificates, authorizations or permits would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, and neither the Company nor any of its Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such certificate, authorization or permit. There is no agreement, commitment, judgment,
injunction, order or decree binding upon the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries is
a party which has or would reasonably be expected to have the effect of prohibiting or materially impairing any business practice of
the Company or any of its Subsidiaries, any acquisition of property by the Company or any of its Subsidiaries or the conduct of business
by the Company or any of its Subsidiaries as currently conducted other than such effects, individually or in the aggregate, which have
not had and would not reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries.
(m)
Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries nor any director, officer, agent, employee,
nor any other person acting for or on behalf of the Company or any of its Subsidiaries (individually and collectively, a “Company
Affiliate”) have violated the U.S. Foreign Corrupt Practices Act or any other applicable anti-bribery or anti-corruption laws,
nor has any Company Affiliate offered, paid, promised to pay, or authorized the payment of any money, or offered, given, promised to
give, or authorized the giving of anything of value, to any officer, employee or any other person acting in an official capacity for
any Governmental Entity to any political party or official thereof or to any candidate for political office (individually and collectively,
a “Government Official”) or to any person under circumstances where such Company Affiliate knew or was aware of a
high probability that all or a portion of such money or thing of value would be offered, given or promised, directly or indirectly, to
any Government Official, for the purpose, in violation of applicable law, of: (i) (A) influencing any act or decision of such Government
Official in his/her official capacity, (B) inducing such Government Official to do or omit to do any act in violation of his/her lawful
duty, (C) securing any improper advantage, or (D) inducing such Government Official to influence or affect any act or decision of any
Governmental Entity, or (ii) assisting the Company or its Subsidiaries in obtaining or retaining business for or with, or directing business
to, the Company or its Subsidiaries.
(n)
Equity Capitalization.
(i)
Definitions:
(A)
“High Voting Shares” means the Company's high voting shares, nominal value of €1.50 per share that form
part of the Company’s authorized and/or issued share capital from time to time, as applicable.
(ii) Authorized
Share Capital. As of the date hereof, the authorized share capital of the Company consists of (A) 320,000,000 Ordinary Shares, of
which, 90,554,115 are issued and outstanding and (B) 4,000,000 High Voting Shares, of which 3,000,000 are issued and outstanding.
(iii)
Valid Issuance; Available Shares. All of such outstanding shares in the Company's capital are duly authorized and
have been validly issued and are fully paid and non-assessable (meaning that the holders of those shares will not by reason of merely
being such a holder, be subject to assessment or calls by the Company or its creditors for further payment on such shares).
(iv)
Existing Securities; Obligations. Except as disclosed in the SEC Documents: (A) none of the Company's or any Subsidiary's
shares, interests or capital stock is subject to preemptive rights or any other similar rights or Liens suffered or permitted by the
Company or any Subsidiary; (B) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests
or capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to issue additional shares, interests or capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries;
(C) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any
of their securities under the Securities Act (except pursuant to this Agreement); (D) there are no outstanding securities or instruments
of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company
or any of its Subsidiaries; (E) there are no securities or instruments containing anti-dilution or similar provisions that will
be triggered by the issuance of the Securities; and (G) neither the Company nor any Subsidiary has any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement.
(v)
Organizational Documents. The Company has furnished to the Buyer or filed on EDGAR true, correct and complete copies of
the Company's Articles of Association, as amended and as in effect on the date hereof (the “Articles of Association”).
(o)
Litigation. Except as disclosed in the SEC Documents, there is no action, suit, arbitration, proceeding, inquiry or investigation
before or by the Principal Market, any court, public board, other Governmental Entity, self-regulatory organization or body pending or,
to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Ordinary Shares or any of
the Company's or its Subsidiaries' officers or directors, whether of a civil or criminal nature or otherwise, in their capacities as
such, which would reasonably be expected to result in a Material Adverse Effect. The Company is not aware of any event which might result
in or form the basis for any such action, suit, arbitration, investigation, inquiry or other proceeding. Without limitation of the foregoing,
there has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving
the Company, any of its Subsidiaries or any current or former director or officer of the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries is the subject of any order, writ, judgment, injunction, decree, determination or award of any
Governmental Entity that would reasonably be expected to result in a Material Adverse Effect.
(p)
Manipulation of Price. Neither the Company nor any of its Subsidiaries has, and, to the knowledge of the Company, no Person
acting on their behalf has, directly or indirectly, (i) taken any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company or any of its Subsidiaries to facilitate the sale or resale of any of the Securities, (ii)
sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other securities of the Company or any of its Subsidiaries.
(q)
Registration Eligibility. The Company is eligible to register the resale of the Conversion Shares by the Buyer using either
Form F-1 or Form F-3 promulgated under the Securities Act.
(r)
Shell Company Status. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).
(s)
Sanctions Matters. Neither the Company nor any of its Subsidiaries or, to the knowledge of the Company, any director,
officer or controlled affiliate of the Company or any director or officer of any Subsidiary, is a Person that is, or is owned or controlled
by a Person that is (i) the subject of any sanctions administered or enforced by the U.S. Department of Treasury’s Office
of Foreign Asset Control (“OFAC”), the United Nations Security Council, the European Union, Her Majesty’s Treasury,
or other relevant sanctions authorities, including, without limitation, designation on OFAC’s Specially Designated Nationals and
Blocked Persons List or OFAC’s Foreign Sanctions Evaders List or other relevant sanctions authority (collectively, “Sanctions”),
or (ii) located, organized or resident in a country or territory that is the subject of Sanctions that broadly prohibit dealings
with that country or territory (including, without limitation, the Crimea region, the Donetsk People’s Republic and Luhansk People’s
Republic in Ukraine, Cuba, Iran, North Korea, Russia, Sudan and Syria “Sanctioned Countries”)). Neither the
Company nor any of its Subsidiaries nor any director, officer or controlled affiliate of the Company or any of its Subsidiaries, has
ever had funds blocked by a United States bank or financial institution, temporarily or otherwise, as a result of OFAC concerns.
(t)
Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided the Buyer or its
agents or counsel with any information that constitutes or could reasonably be expected to constitute material, non-public information
concerning the Company or any of its Subsidiaries, other than the existence of the transactions contemplated by this Agreement and the
other Transaction Documents. The Company understands and confirms that the Buyer will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosures provided to the Buyer regarding the Company and its Subsidiaries, their businesses
and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of the Company or any
of its Subsidiaries, taken as a whole, are true and correct in all material respects and do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under
which they were made, not misleading. All of the written information furnished after the date hereof by or on behalf of the Company or
any of its Subsidiaries to the Buyer pursuant to or in connection with this Agreement and the other Transaction Documents, taken as a
whole, will be true and correct in all material respects as of the date on which such information is so provided and will not contain
any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or information exists
with respect to the Company or any of its Subsidiaries or its or their business, properties, liabilities, prospects, operations (including
results thereof) or conditions (financial or otherwise), which, under applicable law, rule or regulation, requires public disclosure
at or before the date hereof or announcement by the Company but which has not been so publicly disclosed. All financial projections and
forecasts that have been prepared by or on behalf of the Company or any of its Subsidiaries and made available to the Buyer have been
prepared in good faith based upon reasonable assumptions and represented, at the time each such financial projection or forecast was
delivered to the Buyer, the Company's best estimate of future financial performance (it being recognized that such financial projections
or forecasts are not to be viewed as facts and that the actual results during the period or periods covered by any such financial projections
or forecasts may differ from the projected or forecasted results). The Company acknowledges and agrees that the Buyer does not make or
has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set
forth in Section 2.
(u)
No General Solicitation. Neither the Company, nor any of its affiliates, nor any Person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act)
in connection with the offer or sale of the Securities.
(v)
Private Placement. Assuming the accuracy of the Buyer’s representations and warranties set forth in Section 2, no
registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Buyer as contemplated
hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Primary Market.
(a)
Reporting Status. For the period beginning on the date hereof, and ending 6 months after the date on which all the Convertible
Debentures are no longer outstanding (the “Reporting Period”), the Company shall use its best efforts file on a timely
basis all reports required to be filed with the SEC pursuant to the Exchange Act, and the Company shall not terminate its status as an
issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would no longer
require or otherwise permit such termination.
(b) Use
of Proceeds. Neither the Company nor any of its Subsidiaries will, directly or indirectly, use the proceeds of the transactions
contemplated herein to repay any loans to any executives or employees of the Company or to make any payments in respect of any
related party debt. Neither the Company nor any of its Subsidiaries will, directly or indirectly, use the proceeds from the
transactions contemplated herein, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture
partner or other Person (a) for the purpose of funding or facilitating any activities or business of or with any Person or in
any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions or is a Sanctioned Country,
or (b) in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in
the transactions contemplated by this Agreement, whether as underwriter, advisor, investor or otherwise). For the past five years,
neither the Company nor any of its Subsidiaries has engaged in, and is not now engaged in, any dealings or transactions with any
Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions or was a
Sanctioned Country.
(c)
Listing. To the extent applicable, the Company shall promptly secure the listing or designation for quotation (as the case
may be) of all of the Underlying Securities (as defined below) upon each national securities exchange and automated quotation system,
if any, upon which the Ordinary Shares are then listed or designated for quotation (as the case may be, each an “Eligible Market”),
subject to official notice of issuance, and shall use reasonable efforts to maintain such listing or designation for quotation (as the
case may be) of all Underlying Securities from time to time issuable under the terms of the Transaction Documents on such Eligible Market
for the Reporting Period. Neither the Company nor any of its Subsidiaries shall take any action which could be reasonably expected to
result in the delisting or suspension of the Ordinary Shares on an Eligible Market during the Reporting Period. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this Section 4(c). “Underlying Securities”
means the (i) the Conversion Shares, and (ii) any Ordinary Shares of the Company issued or issuable with respect to the Conversion Shares,
including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise
and (2) shares of capital stock of the Company into which the Ordinary Shares are converted or exchanged without regard to any limitations
on conversion of the Convertible Debentures.
(d)
Fees. The Company shall pay to YA Global II SPV, LLC, an affiliate of the Buyer, a one-time due diligence and structuring
fee of $15,000. Any unpaid balance of due diligence and structuring fee shall be deducted from the Purchase Price payable to the Company
at the First Closing.
(e)
Pledge of Securities. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and
agrees that, subject to compliance with applicable federal and state securities laws, the Securities may be pledged by the Buyer in connection
with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The Company hereby agrees
to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities
to such pledgee by the Buyer.
(f) Disclosure
of Transactions and Other Material Information. On or before 9:30 a.m., New York time, on the first Business Day after the date
of this Agreement, the Company shall file a current report on Form 6-K describing all the material terms of the transactions
contemplated by the Transaction Documents in the form required by the Exchange Act and attaching all the material Transaction
Documents (including, without limitation, this Agreement (and all schedules to this Agreement) (including all attachments, the
“Current Report”). From and after the filing of the Current Report, the Company shall have disclosed all
material, non-public information (if any) provided to the Buyer by the Company or any of its Subsidiaries or any of their respective
officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. In addition,
effective upon the filing of the Current Report and/or the Company’s interim report for the nine-month period ended September
30, 2022 on Form 6-K, whichever is later, the Company acknowledges and agrees that any and all confidentiality or similar
obligations with respect to the transactions contemplated by the Transaction Documents under any agreement, whether written or oral,
between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the
one hand, and the Buyer or any of its affiliates, on the other hand, including without limitation the confidentiality provisions set
forth in the Non-Binding Term Sheet dated as of November 21, 2022, shall terminate. The Company shall not, and the Company shall
cause each of its Subsidiaries and each of its and their respective officers, directors, employees and agents not to, provide the
Buyer with any material, non-public information regarding the Company or any of its Subsidiaries from and after the date hereof
without first obtaining the express prior written consent of the Buyer (which may be granted or withheld in the Buyer's sole
discretion).
(g)
Reservation of Shares. So long as any of the Convertible Debentures remain outstanding, the Company shall take all action
necessary to at all times have a number of Ordinary Shares comprised in the Company's authorized share capital but unissued and not otherwise
reserved for issuance (including (i) in relation to equity or debt securities convertible into or exchangeable or exercisable for or that
can be settled in Ordinary Shares (other than the Convertible Debentures) and (ii) Ordinary Shares remaining available for issuance under
the Company's equity incentive plans) that is no less than the Required Reserve Amount; provided that at no time shall the number of Ordinary
Shares reserved pursuant to this Section 4(g) be reduced other than proportionally with respect to all Ordinary Shares in connection with
any conversion (other than pursuant to the conversion of the Convertible Debentures in accordance with their terms) and/or cancellation,
or reverse stock split. If at any time the number of Ordinary Shares reserved pursuant to this Section 4(g) becomes less than the Required
Reserve Amount, the Company will promptly take all corporate action necessary to propose to its general meeting of shareholders an increase
of its authorized share capital necessary to meet the Company's obligations pursuant to the Transaction Documents, recommending that shareholders
vote in favor of such increase.
(h)
Conduct of Business. During the Reporting Period, the business of the Company and its Subsidiaries shall not be conducted
in violation of any law, ordinance or regulation of any Governmental Entity, except where such violations would not reasonably be expected
to result, either individually or in the aggregate, in a Material Adverse Effect.
(i)
Short Selling. The Buyer hereby agrees that it shall not directly or indirectly, engage in any Short Sales involving the
Company’s securities during the period commencing on the date hereof and ending when no Convertible Debentures remain outstanding.
"Short Sales" means all "short sales" as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act.
(j) Trading Information. Upon the Company’s request, the Buyer agrees to provide the Company with trading reports setting
forth the number and average sales prices of Ordinary Shares sold by the Buyer in the prior trading week along with the total aggregate
number of Ordinary Shares traded on each Trading Day. “Trading Day” means a day on which the Ordinary Shares are quoted or
traded on an Eligible Market on which the Ordinary Shares are then quoted or listed; provided, that in the event that the Ordinary Shares
are not listed or quoted, then Trading Day shall mean a Business Day.
(k) Certain
Issuances and Charter Amendments. From the date hereof until all the Convertible Debentures have been repaid, unless the Buyer shall
have given prior written consent, the Company shall not, and shall not permit any of its subsidiaries (whether or not a subsidiary on
the date hereof) to, directly or indirectly (i) amend its charter documents, including, without
limitation, its Articles of Association, in any manner that materially and adversely affects any rights of the holders of the Convertible
Debentures, (ii) increase the nominal value of its Ordinary Shares (except in the context of the reverse share split that was proposed
to the Company’s general meeting on December 6, 2022), (iii) make any payments in respect of any related party debt, or (iv) enter
into, agree to enter into, or effect, any Variable Rate Transaction other than with the Buyer. “Variable Rate Transaction”
shall mean a transaction in which the Company (i) issues or sells any equity or debt securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Ordinary Shares either (A) at a conversion price, exercise price,
exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the Ordinary Shares at any
time after the initial issuance of such equity or debt securities, or (B) with a conversion, exercise or exchange price that is subject
to being reset at some future date after the initial issuance of such equity or debt security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the Company or the market for the Ordinary Shares (including, without
limitation, any “full ratchet” or “weighted average” anti-dilution provisions, but not including any standard
anti-dilution protection for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction), or (ii)
enters into any agreement, including but not limited to an “equity line of credit,” or other continuous offering or similar
offering of Ordinary Shares; provided that this provision shall not apply to the Company’s existing committed equity facility
entered into between the Company and Joh. Berenberg, Gossler & Co. KG (“Berenberg”) pursuant to the purchase agreement
dated June 12, 2022 between the Company and Berenberg (the “Berenberg Agreement”) or an agreement for an “at-the-market”
or other continuous offering of Ordinary Shares (an “ATM Agreement”) with one or more U.S. registered broker-dealers
(whereby the Company may sell Ordinary shares at prices determined in the future, but subject to the Two Percent Cap (as defined below));
provided further that the Company shall only have either the Berenberg Agreement or a single ATM Agreement in place at any time. Upon
a written request by the Investor, the Company shall provide the Investor with trading statements and other information confirming its
compliance with the restrictions set forth herein.
With
respect to the Berenberg Agreement, or any existing or future ATM Agreement, so long as any amounts are outstanding under the Convertible
Debentures, the Company hereby undertakes that, unless otherwise waived with the Buyer’s prior written consent (which may be given
or withheld at the Buyer’s sole discretion), it will limit the use of the Berenberg Agreement or such ATM Agreement to no more than
two percent (2%) (the “Two Percent Cap”) of the daily trading volume of the Company’s Ordinary Shares on the
Principal Market. Notwithstanding the foregoing, if the trading volume of the Company’s Ordinary Shares (as measured by multiplying
the volume of Ordinary Shares traded on the Principal Market by the Volume Weighted Average Price of such Ordinary Shares) on a trading
day is:
| (a) | between $5.0 million and $10.0 million, then the Two Percent
Cap shall be increased from two percent (2%) to ten percent (10%) on such trading day; and |
| (b) | greater than $10.0 million, then the Two Percent Cap shall be
increased from two percent (2%) to fifteen percent (15%) on such trading day. |
(a)
Register. The Company shall maintain at its principal executive offices or with the transfer agent and registrar of the
Company (or at such other office or agency of the Company as it may designate by notice to the Buyer), a register for the Convertible
Debentures in which the Company shall record the name and address of the Person in whose name the Convertible Debentures have been issued
(including the name and address of each transferee), the amount of Convertible Debentures held by such Person. The Company shall keep
the register open and available at all times during business hours for inspection of the Buyer or its legal representatives.
(b)
Transfer Restrictions. The Securities may only be disposed of in compliance with state and federal securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate
of the Buyer or in connection with a pledge as contemplated herein, the Company may require the transferor thereof to provide to the Company
an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall
be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities
under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement
and shall have the rights and obligations of the Buyer under this Agreement.
| 6. | CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. |
The obligation of the Company
hereunder to issue and sell the Convertible Debentures to the Buyer at each Closing is subject to the satisfaction, at or before each
Closing Date, of each of the following conditions, provided that these conditions are for the Company's sole benefit and may be waived
by the Company at any time in its sole discretion by providing the Buyer with prior written notice thereof:
(a)
The Buyer shall have executed each of the relevant Transaction Documents to which it is a party and delivered the same to the Company.
(b)
The Buyer shall have delivered to the Company the relevant Purchase Price (less, with respect to the First Closing only, the amounts
to be withheld pursuant to Section 1(d) and Section 4(d)) for the Convertible Debentures being purchased by the Buyer at the Closing by
wire transfer of immediately available funds in accordance with the Closing Statement (as defined in Section 7(i) below).
(c)
The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and
as of each Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such specific date), and the Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer
at or prior to such Closing Date.
| 7. | CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE. |
The obligation of the Buyer hereunder to purchase
the Convertible Debentures at each Closing is subject to the satisfaction, at or before each Closing Date, of each of the following conditions,
provided that these conditions are for the Buyer's sole benefit and may be waived by the Buyer at any time in its sole discretion by providing
the Company with prior written notice thereof:
(a)
The Company shall have duly executed and delivered to the Buyer each of the relevant Transaction Documents to which it is a party
and the Company shall have duly executed and delivered to the Buyer (by a member of the Company’s management board serving at the
time of adoption of the authorization of the execution and delivery of this Agreement and the other Transaction Documents) a Convertible
Debenture with the applicable principal amount corresponding to the relevant Purchase Price set forth opposite the Buyer’s name
on Schedule of Buyer attached as Schedule I for the Closing.
(b)
The Buyer shall have received the opinion of counsel to the Company, dated as of the First Closing Date, in the form reasonably
acceptable to the Buyer.
(c)
Each and every representation and warranty of the Company shall be true and correct in all material respects (other than representations
and warranties qualified by materiality, which shall be true and correct in all respects) as of the date when made and as of each Closing
Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be
true and correct as of such specific date) and the Company shall have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to each Closing Date as set
forth in each Transaction Document.
(d) The
Ordinary Shares (A) shall be designated for quotation or listed (as applicable) on the Principal Market and (B) shall not have been
suspended, as of each Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by
the SEC or the Principal Market have been threatened, as of each Closing Date, either (I) in writing by the SEC or the Principal
Market or (II) by falling below the minimum maintenance requirements of the Principal Market.
(e)
The Company shall have obtained all governmental, regulatory or third-party consents and approvals, if any, necessary for the sale
of the Securities, including without limitation, those required by the Principal Market, if any.
(f)
No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or Governmental Entity of competent jurisdiction that prohibits the consummation of any of the transactions contemplated
by the Transaction Documents.
(g)
From the date hereof to the applicable Closing Date, no event or series of events shall have occurred that has resulted in or would
reasonably be expected to result in a Material Adverse Effect
(h)
The Company shall have obtained approval of the Principal Market to list or designate for quotation (as the case may be) the maximum
number of Conversion Shares issuable pursuant to the Convertible Debentures to be issued at the Closing.
(i)
The Buyer shall have received a letter, duly executed by an officer of the Company, setting forth the wire amounts of the Buyer
and the wire transfer instructions of the Company (the “Closing Statement”).
(j)
(i) From the date hereof to the applicable Closing Date, trading in the Ordinary Shares shall not have been suspended by the SEC
or the Principal Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the Closing), (ii) the closing price of the Ordinary Shares during each of the five (5) consecutive Trading Days immediately
prior to the applicable Closing Date shall be at least 120% of the Floor Price (as defined in the Convertible Debentures), and (iii) at
any time from the date hereof to the applicable Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not
have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service,
or on the Principal Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities
nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude
in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of the Buyer,
makes it impracticable or inadvisable to purchase the Securities at the Closing.
(k)
The Company and its Subsidiaries shall have delivered to the Buyer such other documents, instruments or certificates relating to
the transactions contemplated by this Agreement as the Buyer or its counsel may reasonably request.
(l)
Solely with respect to the Second Closing, the Company shall have filed the Registration Statement with the SEC in accordance
with the provisions set forth in the Registration Rights Agreement, including the filing deadline set forth therein.
(m)
Solely with respect to the Third Closing, the Registration Statement shall be effective in accordance with the provisions set forth
in the Registration Rights Agreement, including the effectiveness deadline set forth therein.
In the event
that the First Closing shall not have occurred within five (5) days of the date hereof, then the Buyer shall have the right to terminate
its obligations under this Agreement at any time on or after the close of business on such date without liability of the Buyer to any
other party; provided, however, the right to terminate this Agreement under this Section 8 shall not be available to the Buyer if
the failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of the Buyer's breach
of this Agreement, provided further that no such termination shall affect any obligation of the Company under this Agreement to reimburse
the Buyer for the expenses described herein unless the Buyer shall be deemed to breach this Agreement. Nothing contained in this Section
8 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or
the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations
under this Agreement or the other Transaction Documents.
(a)
Recitals. The recitals to this Agreement are a material and substantive part of this Agreement. The recitals are incorporated
herein and made part of this Agreement.
(b) Governing
Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of
any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or under any of the other Transaction Documents or with any transaction contemplated hereby or thereby, and
hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices
to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing
contained herein shall be deemed or operate to preclude any Buyer from bringing suit or taking other legal action against the
Company in any other jurisdiction to collect on the Company's obligations to such Buyer or to enforce a judgment or other court
ruling in favor of such Buyer. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.
(c)
Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file
of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such signature page were an original thereof.
(d)
Electronic Signatures. The words “execution,” “signed,” “signature,” and words of like
import in this Agreement shall be deemed to include electronic signatures or electronic records, each of which shall be of the same legal
effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may
be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce
Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions
Act.
(e)
Headings; Gender. The headings of this Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include
the masculine, feminine, neuter, singular and plural forms thereof. The terms "including," "includes," "include"
and words of like import shall be construed broadly as if followed by the words "without limitation." The terms "herein,"
"hereunder," "hereof" and words of like import refer to this entire Agreement instead of just the provision in which
they are found.
(f) Entire
Agreement, Amendments. This Agreement supersedes all other prior oral or written agreements between the Buyer, the Company,
their affiliates and persons acting on their behalf with respect to the matters discussed herein (including, without limitation, any
term sheets, including that Non-Binding Convertible Debenture Term Sheet dated as of November 21, 2022)(the “Term
Sheet”), except to the extent that any provisions of that the Term Sheet are binding under their terms and intended to survive
termination of the Term Sheet) and which shall terminate in accordance with the terms set forth in the Term Sheet , and this
Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any
representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be charged with enforcement.
(g)
Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this
Agreement must be in writing by letter and email and will be deemed to have been delivered: upon the later of (A) either (i) receipt,
when delivered personally or (ii) one (1) Business Day after deposit with an overnight courier service with next day delivery specified,
in each case, properly addressed to the party to receive the same and (B) receipt, when sent by electronic mail. The addresses and e-mail
addresses for such communications shall be:
| If to the Company, to: |
SONO GROUP N.V. |
| |
Waldmeisterstraße 76
80935 Munich
Germany
Telephone: +49 (89) 4520 5818
Attention: Legal Department
E-Mail: legal@sonomotors.com
|
| With Copy to: |
Sullivan & Cromwell LLP
Neue Mainzer Strasse 52
60311 Frankfurt am Main
Germany
Telephone: +49 (69) 4272 5200
Attention: Clemens Rechberger
E-Mail: ###
|
| If to the Buyer, to its address and e-mail address set forth on the Schedule of Buyer, with copies to the Buyer's representatives as set forth on the Schedule of Buyer, |
| |
|
| With copy to: |
David Fine, Esq.
c/o Yorkville Advisors Global, LP
1012 Springfield Avenue
Mountainside, NJ 07092
Email: legal@yorkvilleadvisors.com |
or to such other address, e-mail
address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) electronically generated by the sender's e-mail service provider containing the time, date, recipient
e-mail address or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.
(h)
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of any of the Convertible Debentures (but excluding any purchasers of Underlying Securities,
unless pursuant to a written assignment by the Buyer). The Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Buyer. In connection with any transfer of any or all of its Securities, the Buyer may assign
all, or a portion, of its rights and obligations hereunder in connection with such Securities without the consent of the Company, in which
event such assignee shall be deemed to be the Buyer hereunder with respect to such transferred Securities.
(i)
Indemnification.
(i)
In consideration of the Buyer's execution and delivery of the Transaction Documents and acquiring the Securities thereunder and
in addition to all of the Company's other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and
hold harmless the Buyer its stockholders, partners, members, officers, directors, employees and agents (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses
in connection therewith, and including reasonable attorneys' fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (i) any misrepresentation or breach of any representation
or warranty made by the Company in any of the Transaction Documents, (ii) any breach of any covenant, agreement or obligation of the Company
or any Subsidiary contained in any of the Transaction Documents or (iii) any cause of action, suit, proceeding or claim brought or made
against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company or any Subsidiary)
or which otherwise involves such Indemnitee that arises out of or results from (A) the execution, delivery, performance or enforcement
of any of the Transaction Documents, (B) , or (C) the status of the Buyer or holder of the Securities either as an investor in the Company
pursuant to the transactions contemplated by the Transaction Documents or as a party to this Agreement (including, without limitation,
as a party in interest or otherwise in any action or proceeding for injunctive or other equitable relief). The Company will not be liable
to any Indemnitee under the foregoing indemnification provisions, for any settlement by an Indemnitee effected without the Company’s
prior written consent (except as set forth below), or (b) to the extent that any Indemnified Liability of such Indemnitee is finally determined
by a court or arbitral tribunal to have resulted from the willful misconduct or gross negligence of the Buyer or any other Indemnitee,
and any expenses incurred in connection therewith that were previously reimbursed to the Buyer or any other Indemnitee by the Company
will be repaid to the Company by the Buyer and such other Indemnitee. To the extent that the foregoing undertaking by the Company may
be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
(ii) Promptly
after receipt by an Indemnitee under this Section 9(i) of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is to be
made against the Company under this Section 9(i), deliver to the Company a written notice of the commencement thereof, and the
Company shall have the right to participate in, and, to the extent the Company so desires, to assume control of the defense thereof
with counsel mutually reasonably satisfactory to the Company and the Indemnitee; provided, however, that an Indemnitee shall
have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the Company if: (A) the Company
has agreed in writing to pay such fees and expenses; (B) the Company shall have failed promptly to assume the defense of such
Indemnified Liability and to employ counsel reasonably satisfactory to such Indemnitee in any such Indemnified Liability; or
(C) the named parties to any such Indemnified Liability (including any impleaded parties) include both such Indemnitee and the
Company, and such Indemnitee shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnitee and the Company (in which case, if such Indemnitee notifies the Company in writing that it elects
to employ separate counsel at the expense of the Company, then the Company shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the Company), provided further, that in the case of clause (C) above the Company shall
not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for the Indemnitees. The
Indemnitee shall reasonably cooperate with the Company in connection with any negotiation or defense of any such action or
Indemnified Liability by the Company and shall furnish to the Company all information reasonably available to the Indemnitee which
relates to such action or Indemnified Liability. The Company shall keep the Indemnitee reasonably apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. The Company shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent, provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company shall not, without the prior written consent of the Indemnitee, consent to
entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such Indemnified Liability or
litigation, and such settlement shall not include any admission as to fault on the part of the Indemnitee. Following indemnification
as provided for hereunder, the Company shall be subrogated to all rights of the Indemnitee with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the Company
within a reasonable time of the commencement of any such action shall not relieve the Company of any liability to the Indemnitee
under this Section 9(i), except to the extent that the Company is materially and adversely prejudiced in its ability to defend such
action.
(iii)
The indemnification required by this Section 9(i) shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, within ten (10) days after bills supporting the Indemnified Liabilities are received by the Company.
(iv)
The indemnity agreement contained herein shall be in addition to (A) any cause of action or similar right of the Indemnitee against
the Company or others, and (B) any liabilities the Company may be subject to pursuant to the law.
(j)
No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.
[REMAINDER PAGE
INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
IN WITNESS WHEREOF,
the Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
| By: | Yorkville Advisors Global, LP |
| | Its: | Investment Manager |
| By: | Yorkville Advisors Global II, LLC |
| | Its: | General Partner |
LIST OF EXHIBITS:
EXHIBIT A
FORM OF CONVERTIBLE DEBENTURES
SCHEDULE I
SCHEDULE OF BUYER
| (a) | |
| |
(c) | |
| Buyer | |
| |
Purchase Price
for Convertible
Debentures | |
| YA II PN, Ltd. | |
| |
| | |
| 1012 Springfield Avenue | |
First Closing: | |
$ | 11,100,000.00 | |
| Mountainside, NJ 07092 | |
Second Closing | |
$ | 10,000,000.00 | |
| Email: Legal@yorkvilleadvisors.com | |
Third Closing | |
$ | 10,000,000.00 | |
| | |
Total: | |
$ | 31,100,000.00 | |
The Commitment Fee in
the amount of $1,088,500 shall be deducted from the proceeds of the First Closing.
Legal Representative’s Address and E-Mail Address
David Fine, Esq.
1012 Springfield Avenue
Mountainside, NJ 07092
Email: Legal@yorkvilleadvisors.com
Exhibit 10.2
NEITHER THIS DEBENTURE NOR THE SECURITIES
INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
sono
group n.v.
Convertible
Debenture
| Principal Amount:
[$11,100,000][$10,000,000] |
Debenture Issuance Date: December [•],
2022
Debenture Number: SEV-[1][2][3]
FOR VALUE RECEIVED, SONO
GROUP N.V., a Dutch public limited liability company (the “Company”), hereby promises to pay to the order of YA
II PN, Ltd., or its registered assigns (the “Holder”), the amount set out above as the principal amount (as reduced
or increased pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due,
whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof)
and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate from the date set out
above as the Debenture Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon the
Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Convertible
Debenture (including all debentures issued in exchange, transfer or replacement hereof, this “Debenture”) was originally
issued pursuant to the Securities Purchase Agreement dated as of December [•], 2022, as it may be amended from time to time (the
“Securities Purchase Agreement”) between the Company and the Buyers listed on the Schedule of Buyers attached thereto.
Certain capitalized terms used herein are defined in Section 14.
(1) GENERAL
TERMS
(a) Maturity
Date. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued
and unpaid Interest, and any other amounts outstanding pursuant to the terms of this Debenture. The “Maturity Date”
shall be [_____________]1, as may be extended
at the option of the Holder. Other than as specifically permitted by this Debenture, the Company may not prepay or redeem any portion
of the outstanding Principal and accrued and unpaid Interest
(b) Interest Rate and Payment of Interest. Interest shall accrue on the outstanding Principal balance hereof at an annual rate
equal to 4% (“Interest Rate”), which Interest Rate shall increase to an annual rate of 12% for so long as any Triggering
Event remains in effect or upon an Event of Default for so long as it remains uncured. Interest shall be calculated based on a 365-day
year and the actual number of days elapsed, to the extent permitted by applicable law.
1
Insert date 12 months from the issuance date of the first debenture to be issued.
(2) PAYMENTS
(a) Monthly
Payments. If, any time after the Issuance Date set forth above, and from time to time thereafter, a Triggering Event occurs, then
the Company shall make monthly payments beginning on the 20th Trading Day after the Triggering Date and continuing on the
same day of each successive calendar month, being the 1st of the month through the last day of the same month, (the “Calendar
Month”). Each monthly payment shall be in an amount equal to the sum of (i) the quotient of (y) the aggregate outstanding Principal
balances on this Debenture and all Other Debentures divided by (z) the number of whole Calendar Months remaining between the Triggering
Date and the Maturity Date (the “Triggered Principal Amount”), plus (ii) the Redemption Premium (as defined below)
in respect of such Triggered Principal Amount, and (iii) accrued and unpaid interest hereunder as of each payment date. The obligation
of the Company to make monthly prepayments related to a Floor Price Trigger (as defined below) shall cease (with respect to any payment
that has not yet come due) if at any time after the Triggering Date (A) the daily VWAP is greater than the 110% of the Floor Price for
a period of 5 consecutive Trading Days, or (B) the Company has reduced the Floor Price to the greater of (y) 20% of the VWAP of the Company’s
Ordinary Shares on the date of such reduction of the Floor Price or (z) the nominal value of the Company’s Ordinary Shares (but
only if such nominal value is less than the Company’s VWAP on such date), unless a subsequent Triggering Date occurs.
(b) Early
Redemption. The Company at its option shall have the right, but not the obligation, to redeem (“Optional Redemption”)
early a portion or all amounts outstanding under this Debenture as described in this Section; provided that (i) the trading price
of the Ordinary Shares is less than the Fixed Conversion Price and (ii) the Company provides the Holder with at least three (3) Business
Days’ prior written notice (each, a “Redemption Notice”) of its desire to exercise an Optional Redemption. Each
Redemption Notice shall be irrevocable and shall specify the outstanding balance of the Convertible Debentures to be redeemed and the
applicable Redemption Premium. The “Redemption Amount” shall be equal to the outstanding Principal balance being redeemed
by the Company, plus the applicable Redemption Premium, plus all accrued and unpaid interest. After receipt of the Redemption Notice,
the Holder shall have five (5) Business Days to elect to convert all or any portion of the Debenture. On the 6th Business Day
after the Redemption Notice, the Company shall deliver to the Holder the Redemption Amount with respect to the Principal amount redeemed
after giving effect to conversions effected during the five (5) Business Day period.
(3) EVENTS
OF DEFAULT.
(a) An
“Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it
shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):
(i)
the Company's failure to pay to the Holder any amount of Principal, Redemption Premium, Interest, or other amounts when and as
due under this Debenture or any other Transaction Document;
(ii)
The Company or any Subsidiary of the Company shall commence, or there shall be commenced against the Company or any Subsidiary
of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company
or any Subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or
any Subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of sixty one
(61) days; or the Company or any Subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company or any Subsidiary of the Company suffers any appointment of any custodian,
private or court appointed receiver or the like for it or all or substantially all of its property which continues undischarged or unstayed
for a period of sixty one (61) days; or the Company or any Subsidiary of the Company makes a general assignment of all or substantially
all of its assets for the benefit of creditors; or the Company or any Subsidiary of the Company shall fail to pay, or shall state that
it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any Subsidiary of the Company
shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company
or any Subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Company or any Subsidiary of the Company for the purpose of effecting
any of the foregoing;
(iii)
The Company or any Subsidiary of the Company shall default in any of its obligations under any obligation or any promissory note,
mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued,
or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring
arrangement of the Company or any Subsidiary of the Company in an amount exceeding $200,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable and such default is
not thereafter cured within five (5) Business Days;
(iv)
The Ordinary Shares shall cease to be quoted or listed for trading, fail to have a bid price or VWAP, or fail to maintain a trading
market on any Primary Market, as applicable, for a period of ten (10) consecutive Trading Days;
(v)
The Company or any Subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section 14) unless
in connection with such Change of Control Transaction this Debenture is retired;
(vi)
The Company’s (A) failure to issue and deliver the required number of Ordinary Shares to the Holder within four (4) Business
Days after the applicable Share Delivery Date or (B) notice, written or oral, to any holder of the Debenture, including by way of public
announcement, at any time, of its intention not to comply with a request for conversion of the Debenture into Ordinary Shares that is
tendered in accordance with the provisions of the Debenture, other than pursuant to Section 4(c);
(vii)
The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined in Section 4(b)(ii) herein)
within five Business Days after such payment is due;
(viii)
The Company’s failure to timely file with the Commission any Periodic Report on or before the due date of such filing as
established by the Commission, it being understood, for the avoidance of doubt, that due date includes any permitted filing deadline extension
under Rule 12b-25 under the Exchange Act . For purposes hereof, “Periodic Reports” means the Company’s (i) Annual
Report on Form 20-F for the fiscal year ending December 31, 2022, (ii) any current report to be filed on Form 6-K, and (iii) all other reports
required to be filed by the Company with the Commission under applicable laws and regulations (including, without limitation, Regulation
S-K) for so long as any amounts are outstanding under this Debenture or any Other Debentures; provided that all such Periodic Reports
shall include, when filed, all information, financial statements, audit reports (when applicable) and other information required to be
included in such Periodic Reports in compliance with all applicable laws and regulations;
(ix) Any representation or warranty made or deemed made by or on behalf of the Company in or in connection with any Transaction Document,
or any waiver hereunder or thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in
connection with any Transaction Document, or any waiver thereunder, shall prove to have been incorrect in any material respect (or, in
the case of any such representation or warranty already qualified by materiality, such representation or warranty shall prove to have
been incorrect) when made or deemed made;
(x) Any material provision of any Transaction Document, at any time after its execution and
delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all Obligations, ceases
to be in full force and effect; or the Company or any other Person contests in writing the validity or enforceability of any provision
of any Transaction Document; or the Company denies in writing that it has any or further liability or obligation under any Transaction
Document, or purports in writing to revoke, terminate or rescind any Transaction Document; or
(xi)
The Company shall fail to observe or perform any material covenant, agreement or warranty contained in, or otherwise commit any
material breach or default of any provision of this Debenture (except as may be covered by Section (3)(a)(i) through (3)(a)(xii) hereof)
or any other Transaction Document (as defined in Section 14) which is not cured or remedied within the time prescribed (if any);
(xii)
Any Event of Default (as defined in the Other Debentures or in any Transaction Document other than this Debenture) occurs with
respect to any Other Debentures held by the Holder;
(b)
During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred and has not been cured
within the applicable cure period, if any, (other than an event with respect to the Company described in Section 2(a)(ii)), the full
unpaid Principal amount of this Debenture, together with interest and other amounts owing in respect thereof and other Obligations accrued
hereunder and under any other Transaction Document, to the date of acceleration shall become at the Holder's election given by notice
pursuant to Section 7, immediately due and payable in cash; provided that, in case of any event with respect to the Company described
in Section 2(a)(ii), the full unpaid Principal amount of this Debenture, together with interest and other amounts owing in respect thereof
and other Obligations accrued hereunder and under any other Transaction Document, to the date of acceleration, shall automatically become
due and payable, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the
Company. Furthermore, in addition to any other remedies, the Holder shall have the right (but not the obligation) to convert, at the
Conversion Rate, on one or more occasions all or part of the Conversion Amount in accordance with Section 4 hereof (subject to the beneficial
ownership limitations set out in Section (4)(c)) at any time after (x) an Event of Default (provided that such Event of Default is continuing)
or (y) the Maturity Date. The Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice
of any kind (other than required notice of conversion) and the Holder may immediately enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by the Holder in
writing at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
(4) CONVERSION
OF DEBENTURE. This Debenture shall be convertible into Ordinary Shares, on the terms and conditions set forth in this Section 4.
(a) Conversion
Right. Subject to the limitations of Section (4)(c), at any time or times on or after the Issuance Date, the Holder shall be entitled
to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and non-assessable (meaning
that the holders of the Ordinary Shares will not by reason of merely being such a holder, be subject to assessment or calls by the Company
or its creditors for further payment on such Ordinary Shares) Ordinary Shares in accordance with Section (4)(b), at the Conversion Rate
(as defined below). The number of Ordinary Shares issuable upon conversion of any Conversion Amount pursuant to this Section (4)(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”). The Company
shall not issue any fraction of an Ordinary Share upon any conversion. All calculations under this Section (4) shall be rounded to the
nearest $0.0001. If the issuance would result in the issuance of a fraction of an Ordinary Share, the Company shall round such fraction
of an Ordinary Share up to the nearest whole share. The Company shall pay any and all issuance tax, stamp duties and similar documentary
taxes that may be payable with respect to the issuance and delivery of Ordinary Shares upon conversion of any Conversion Amount.
(i)
“Conversion Amount” means the portion of the Principal and/or accrued Interest to be converted, redeemed or
otherwise with respect to which this determination is being made.
(ii) “Conversion
Price” means, as of any Conversion Date (as defined below) or other date of determination the lower of (i) $1.75 per Ordinary
Share (the “Fixed Conversion Price”), or (ii) 96.5% of the lowest daily VWAP of the Ordinary Shares during the seven
(7) consecutive Trading Days immediately preceding the Conversion Date or other date of determination (the “Variable Conversion
Price”) but not lower than the Floor Price provided that, under no circumstances, will the Conversion Price per Ordinary Share
be less than the nominal value of one Ordinary Share (translated into USD on the applicable Share Delivery Date (as defined below)). The
Conversion Price shall be adjusted from time to time pursuant to the other terms and conditions of this Debenture.
(b) Mechanics
of Conversion.
(i) Optional
Conversion. To convert any Conversion Amount into Ordinary Shares on any date (a “Conversion Date”), the
Holder shall (A) transmit by email (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a
copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion
Notice”) to the Company and (B) if required by Section (4)(b)(iii), surrender this Debenture to a nationally recognized
overnight delivery service for delivery to the Company (or an indemnification undertaking reasonably satisfactory to the Company
with respect to this Debenture in the case of its loss, theft or destruction). On or before the third (3rd) Trading Day
following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall (X) if
legends are not required to be placed on certificates of Ordinary Shares and provided that the Transfer Agent is participating in
the Depository Trust Company's (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number
of Ordinary Shares to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its
Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered Ordinary Shares
in the name of the Holder or its designee, for the number of Ordinary Shares to which the Holder shall be entitled which
certificates shall not bear any restrictive legends unless required pursuant to rules and regulations of the Commission. If this
Debenture is physically surrendered for conversion and the outstanding Principal of this Debenture is greater than the Principal
portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three (3)
Business Days after receipt of this Debenture and at its own expense, issue and deliver to the holder a new Debenture representing
the outstanding Principal not converted. The Person or Persons entitled to receive the Ordinary Shares issuable upon a conversion of
this Debenture shall be treated for all purposes as the record holder or holders of such Ordinary Shares upon the transmission of a
Conversion Notice. In connection with any conversion of a Conversion Amount into Ordinary Shares on a Conversion Date, the Company
shall, on the relevant Share Delivery Date, set off (verrekenen) its debt under the relevant Debenture(s) to pay such
Conversion Amount against its receivable from the Holder to pay up in full, and satisfy the issue price, for the relevant Ordinary
Shares issuable upon such conversion (and, for that purpose, such issue price shall be the same amount as the Conversion
Amount).
(ii)
Company's Failure to Timely Convert. If within three (3) Trading Days after the Company's receipt of an email copy of a
Conversion Notice the Company shall fail to issue and deliver a certificate to the Holder or credit the Holder's balance account with
DTC for the number of Ordinary Shares to which the Holder is entitled upon its conversion of any Conversion Amount, and if on or after
such Trading Day the Holder purchases (in an open market transaction or otherwise) Ordinary Shares to deliver in satisfaction of a sale
by the Holder of Ordinary Shares issuable upon such conversion that the Holder anticipated receiving from the Company (a “Buy-In”),
then the Company shall, within three (3) Business Days after the Holder's request and in the Holder's discretion, either (i) pay cash
to the Holder in an amount equal to the Holder's total purchase price (including brokerage commissions and other out of pocket expenses,
if any) for the Ordinary Shares so purchased (the “Buy-In Price”), at which point the Company's obligation to deliver
such certificate (and to issue such Ordinary Shares) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Ordinary Shares and pay cash to the Holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) such number of Ordinary Shares, times (B) the Closing Price on the Conversion Date.
(iii) Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Debenture in accordance with the
terms hereof, the Holder shall not be required to physically surrender this Debenture to the Company unless (A) the full Conversion
Amount represented by this Debenture is being converted or (B) the Holder has provided the Company with prior written notice (which
notice may be included in a Conversion Notice) requesting reissuance of this Debenture upon physical surrender of this Debenture.
The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or
shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this
Debenture upon conversion.
(c) Limitations
on Conversions.
(i)
Beneficial Ownership. The Holder shall not have the right to convert any portion of this Debenture or receive Ordinary Shares
hereunder to the extent that after giving effect to such conversion or receipt of such Ordinary Shares, the Holder, together with any
affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 4.99% of the number of Ordinary Shares outstanding immediately after giving effect to such conversion or receipt
of shares as payment of interest. Since the Holder will not be obligated to report to the Company the number of Ordinary Shares it may
hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of Ordinary Shares in excess of
4.99% of the then outstanding Ordinary Shares without regard to any other shares which may be beneficially owned by the Holder or an affiliate
thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit
any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies,
the determination of which portion of the Principal amount of this Debenture is convertible shall be the responsibility and obligation
of the Holder. If the Holder has delivered a Conversion Notice for a Principal amount of this Debenture that, without regard to any other
shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder,
the Company shall notify the Holder of this fact and shall honor the conversion for the maximum Principal amount permitted to be converted
on such Conversion Date in accordance with Section (4)(a) and, any Principal amount tendered for conversion in excess of the permitted
amount hereunder shall remain outstanding under this Debenture. The provisions of this Section may be waived by the Holder upon not less
than 65 days prior notice to the Company.
(ii)
Other Conversion Limitations. The Holder agrees that it shall use commercially reasonable efforts to convert a minimum (the
“Conversion Minimum”) of $2,500,000 of Principal amount of this Debenture and any Other Debenture held by the Holder
per Calendar Month; provided that the Conversion Minimum shall not apply upon the occurrence of an Event of Default or a Triggering
Event, or in any Calendar Month for which the Equity Conditions have not been satisfied, or with the Company’s consent. The Holder
agrees not convert more than an aggregate of the greater of (y) 20% of monthly dollar trading value of the Ordinary Shares as reported
by Bloomberg during regular trading hours during the applicable Calendar Month or (z) $5,000,000 of Principal amount of this Debenture
and any Other Debenture held by the Holder per Calendar Month utilizing the Variable Conversion Price; provided this limitation
shall not apply (i) at any time upon the occurrence of an Event of Default, (ii) with respect to any conversions utilizing the Fixed Conversion
Price, or (iii) with the Company’s consent.
(d)
Other Provisions.
(i)
All calculations under this Section (4) shall be rounded to the nearest $0.0001 or whole share.
(ii)
The Company covenants that the number of Ordinary Shares comprised in the Company's authorized share capital but unissued and
not otherwise reserved for issuance (including (i) in relation to equity or debt securities convertible into or exchangeable or exercisable
for or that can be settled in Ordinary Shares (other than the Debenture and the Other Debentures) and (ii) Ordinary Shares remaining available
for issuance under the Company's equity incentive plans) shall be not less than the maximum number of Ordinary Shares issuable upon conversion
of this Debenture and the Other Debentures (assuming for purposes hereof that (x) this Debentures and such Other Debentures are convertible
at the Floor Price as of the date of determination, (y) any such conversion shall not take into account any limitations on the conversion
of the Convertible Debentures set forth herein, including the Floor Price (the “Required Reserve Amount”), provided
that at no time shall the number of Ordinary Shares reserved pursuant to this section 4(d)(ii) be reduced other than proportionally with
respect to all Ordinary Shares in connection with any conversion (other than pursuant to the conversion of this Debenture and the Other
Debentures in accordance with their terms) and/or cancellation, or reverse stock split. If at any time the number of Ordinary Shares reserved
pursuant to this section 4(d)(ii) becomes less than the Required Reserve Amount, the Company will promptly take all corporate action necessary
to propose to its general meeting of shareholders an increase of its authorized share capital necessary to meet the Company's obligations
pursuant to this Debenture, recommending that shareholders vote in favor of such an increase. The Company covenants that, upon issuance
in accordance with conversion of this Debenture in accordance with its terms, the Ordinary Shares, when issued, will be validly issued,
fully paid and non-assessable (meaning that the holders of the Ordinary Shares will not by reason of merely being such a holder, be subject
to assessment or calls by the Company or its creditors for further payment on such Ordinary Shares).
(iii)
Nothing herein shall limit the Holder's right to pursue actual damages or declare an Event of Default pursuant to Section (3) herein
for the Company’s failure to deliver certificates representing Ordinary Shares upon conversion within the period specified herein
and the Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise
of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable
law.
(iv)
Legal Opinions. The Company is obligated to cause its legal counsel to deliver legal opinions to the Company’s transfer
agent or registrar, as may be required in connection with any legend removal upon the expiration of any holding period or other requirement
for which the Underlying Shares may bear legends restricting the transfer thereof.
(e) Adjustment
of Conversion Price upon Subdivision or Combination of Ordinary Shares. If the Company, at any time while this Debenture is
outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on its Ordinary Shares or any
other equity or equity equivalent securities payable in Ordinary Shares, (b) subdivide outstanding Ordinary Shares into a larger
number of shares, (c) combine (including by way of reverse stock split) outstanding Ordinary Shares into a smaller number of shares,
or (d) issue by reclassification of shares of the Ordinary Shares any shares of capital stock of the Company, then each of the Fixed
Conversion Price and the Floor Price shall be multiplied by a fraction of which the numerator shall be the number of Ordinary Shares
(excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of Ordinary
Shares outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the
record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination or re-classification.
(f) Other
Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of Ordinary Shares are entitled to receive securities or other assets with respect to or in exchange
for Ordinary Shares (a “Corporate Event”), the Company shall make appropriate provision to ensure that the Holder
will thereafter have the right to receive upon a conversion of this Debenture, at the Holder's option, (i) in addition to the Ordinary
Shares receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to
such Ordinary Shares had such Ordinary Shares been held by the Holder upon the consummation of such Corporate Event (without taking into
account any limitations or restrictions on the convertibility of this Debenture) or (ii) in lieu of the Ordinary Shares otherwise receivable
upon such conversion, such securities or other assets received by the holders of Ordinary Shares in connection with the consummation
of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Debenture initially been issued with
conversion rights for the form of such consideration (as opposed to Ordinary Shares) at a conversion rate for such consideration commensurate
with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required
Holders. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without
regard to any limitations on the conversion or redemption of this Debenture. Notwithstanding the foregoing, the Company shall have the
right to pay in cash the Principal amount of this Debenture, together with interest and other amounts owing in respect thereof, immediately
prior to the consummation of the Fundamental Transaction in accordance with the early redemption provisions set forth in Section 2(b).
(g) Whenever
the Conversion Price is adjusted pursuant to Section 4 hereof, the Company shall promptly provide the Holder with a written notice setting
forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
(h) In
case of any (1) merger or consolidation of the Company or any Subsidiary of the Company with or into another Person, or (2) sale by
the Company or any Subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related
transactions, the Holder shall have the right to (A) exercise any rights under Section (3)(b), (B) convert the aggregate amount of
this Debenture then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be
held by holders of Ordinary Shares following such merger, consolidation or sale, and the Holder shall be entitled upon such event or
series of related events to receive such amount of securities, cash and property as the Ordinary Shares into which such aggregate
outstanding amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales, would have
been entitled to receive, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a
convertible Debenture with a Principal amount equal to the aggregate Principal amount of this Debenture then held by the Holder,
plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Debenture shall have terms
identical (including with respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights and
privileges of the Holder of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued. In the
case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible
Debentures shall be based upon the amount of securities, cash and property that each share of Ordinary Shares would receive in such
transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive
the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision
shall similarly apply to successive such events.
(5) REISSUANCE
OF THIS DEBENTURE.
(a) Transfer.
If this Debenture is to be transferred, the Holder shall surrender this Debenture to the Company, whereupon the Company will forthwith
issue and deliver upon the order of the Holder a new Debenture (in accordance with Section (7)(d)), registered in the name of the registered
transferee or assignee, representing the outstanding Principal being transferred by the Holder (along with any accrued and unpaid interest
thereof) and, if less than the entire outstanding Principal is being transferred, a new Debenture (in accordance with Section (7)(d))
to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Debenture,
acknowledge and agree that, by reason of the provisions of Section (4)(b)(iii) following conversion or redemption of any portion of this
Debenture, the outstanding Principal represented by this Debenture may be less than the Principal stated on the face of this Debenture.
(b) Lost,
Stolen or Mutilated Debenture. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Debenture, and, in the case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Debenture, the Company
shall execute and deliver to the Holder a new Debenture (in accordance with Section (5)(d)) representing the outstanding Principal.
(c) Debenture
Exchangeable for Different Denominations. This Debenture is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Debenture or Debentures (in accordance with Section (5)(d)) representing in the aggregate the outstanding
Principal of this Debenture, and each such new Debenture will represent such portion of such outstanding Principal as is designated by
the Holder at the time of such surrender.
(d) Issuance
of New Debentures. Whenever the Company is required to issue a new Debenture pursuant to the terms of this Debenture, such new
Debenture (i) shall be of like tenor with this Debenture, (ii) shall represent, as indicated on the face of such new Debenture, the
Principal remaining outstanding (or in the case of a new Debenture being issued pursuant to Section (5)(a) or Section (5)(c), the
Principal designated by the Holder which, when added to the Principal represented by the other new Debentures issued in connection
with such issuance, does not exceed the Principal remaining outstanding under this Debenture immediately prior to such issuance of
new Debentures), (iii) shall have an issuance date, as indicated on the face of such new Debenture, which is the same as the
Issuance Date of this Debenture, (iv) shall have the same rights and conditions as this Debenture, and (v) shall represent accrued
and unpaid Interest from the Issuance Date.
(6) NOTICES.
Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing
by letter and email and will be deemed to have been delivered: upon the later of (A) either (i) receipt, when delivered personally
or (ii) one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case,
properly addressed to the party to receive the same and (B) receipt, when sent by electronic mail. The addresses and e-mail
addresses for such communications shall be:
| If to the Company, to: |
Sono Group N.V. |
| |
Waldmeisterstraße 76
80935 Munich
Germany |
| |
Attn: Legal Department |
| |
Telephone: |
| |
Email: legal@sonomotors.com |
| |
|
|
with a copy (which shall not constitute notice) to:
|
Sullivan & Cromwell LLP
Neue Mainzer Strasse 52
60311 Frankfurt am Main
Attention: Clemens Rechberger |
| |
|
| If to the Holder: |
YA II PN, Ltd |
| |
c/o Yorkville Advisors Global, LLC
1012 Springfield Avenue |
| |
Mountainside, NJ 07092 |
| |
Attention: Mark Angelo |
| |
Telephone: 201-985-8300 |
| |
Email: Legal@yorkvilleadvisors.com |
or at such other address and/or
email and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three
(3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice,
consent, waiver or other communication, (ii) electronically generated by the sender's email service provider containing the time, date,
recipient email address or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal
service, receipt by email or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii)
above, respectively.
(7) Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Company, which
are absolute and unconditional, to pay the Principal of, interest and other charges (if any) on, this Debenture at the time, place, and
rate, and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the Company. As long as this Debenture
is outstanding, the Company shall not and shall cause its Subsidiaries not to, without the consent of the Holder, (i) amend its articles
of association so as to materially and adversely affect any rights of the Holder; (ii) repay, repurchase or offer to repay, repurchase
or otherwise acquire Ordinary Shares or other equity securities; or (iii) enter into any agreement with respect to any of the foregoing.
(8) This
Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other
proceedings of the Company, unless and to the extent converted into Ordinary Shares in accordance with the terms hereof.
(9) CHOICE
OF LAW; VENUE.
This Debenture shall be governed
by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of laws thereof. Each of the
parties consents to the jurisdiction of the Supreme Court of the State of New York located in the City of New York, Borough of Manhattan,
and the U.S. District Court for the Southern District of New York in connection with any dispute arising under this Debenture and hereby
waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens to the bringing of
any such proceeding in such jurisdictions. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.
(10) If
the Company fails to materially comply with the terms of this Debenture, then, to the extent reasonably incurred and documented, the
Company shall reimburse the Holder for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses
incurred by the Holder in any action in connection with this Debenture, including, without limitation, those incurred: (i) during any
workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations,
(ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding
or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.
(11) Any
waiver by the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Debenture. The failure of the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing.
(12) If
any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.
If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company
covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the Principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so)
hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though
no such law has been enacted.
(13) Whenever
any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding
Business Day.
(14) CERTAIN
DEFINITIONS. For purposes of this Debenture, the following terms shall have the following meanings:
(a)
“Bloomberg” means Bloomberg Financial Markets.
(b)
“Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the
United States or a day on which banking institutions are authorized or required by law or other government action to close.
(c) “Change
of Control Transaction” means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through
legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the
voting power of the Company (except that the acquisition of voting securities by the Holder or any other current holder of
convertible securities of the Company shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement
at one time or over time of more than one-half of the members of the management board or supervisory board of the Company (other
than as due to the death or disability of a member of the management board or supervisory board) which is not approved by a majority
of those individuals who are members of the management board or supervisory board on the date hereof (or by those individuals who
are serving as members of the board of directors on any date whose nomination to the management board or supervisory board was
approved by a majority of the members of the management board or supervisory board who are members on the date hereof), (c) the
merger, consolidation or sale of fifty percent (50%) or more of the assets of the Company or any Subsidiary of the Company in one or
a series of related transactions with or into another entity, or (d) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set forth above in (a), (b) or (c). No transfer to a
wholly-owned Subsidiary shall be deemed a Change of Control Transaction under this provision.
(d)
“Closing Price” means the price per share in the last reported trade of the Ordinary Shares on a Primary Market
or on the exchange which the Ordinary Shares is then listed as quoted by Bloomberg.
(e)
“Commission” means the Securities and Exchange Commission.
(f)
“Ordinary Shares” means the Ordinary Shares, nominal value €0.06, of the Company and shares of any other
class into which such shares may hereafter be changed or reclassified.
(g) “Equity
Conditions” means that each of the following conditions is satisfied: (i) on each Trading Day during the applicable
Calendar Month of determination (the “Equity Conditions Measuring Period”), either (x) the Underlying Shares
Registration Statement filed pursuant to the Registration Rights Agreement shall be effective and available for the resale of all
applicable Ordinary Shares to be issued in connection with the event requiring determination or (y) all applicable Ordinary Shares
to be issued in connection with the event requiring determination shall be eligible for sale without restriction and without the
need for registration under any applicable federal or state securities laws; (ii) on each day during the Equity Conditions Measuring
Period, the Ordinary Shares are designated for quotation on the Principal Market and shall not have been suspended from trading on
such exchange or market nor shall delisting or suspension by such exchange or market have been threatened or pending either (A) in
writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such
exchange or market; (iii) during the Equity Conditions Measuring Period, the Company shall have delivered Conversion Shares upon
conversion of the Debentures to the Holder on a timely basis as set forth in Section (4)(b) hereof; (iv) any applicable Ordinary
Shares to be issued in connection with the event requiring determination may be issued in full without violating Section (4)(c)
hereof; (v) during the Equity Conditions Measuring Period, there shall not have occurred either (A) an Event of Default or (B) an
event that with the passage of time or giving of notice would constitute an Event of Default; and (vii) the Company shall have no
knowledge of any fact that would cause (x) the Registration Statements required pursuant to the Registration Rights Agreement not to
be effective and available for the resale of all applicable Ordinary Shares to be issued in connection with the event requiring
determination or (y) any applicable Ordinary Shares to be issued in connection with the event requiring determination not to be
eligible for sale without restriction and without the need for registration under any applicable federal or state securities
laws
(h)
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
(i)
“Floor Price” means $0.15 per share or such lower price per share as may be established by the Company from
time to time.
(j)
“Fundamental Transaction means any of the following: (1) the Company effects any merger or consolidation of the Company
with or into another Person and the Company is the non-surviving company (other than a merger or consolidation with a wholly owned Subsidiary
of the Company for the purpose of redomiciling the Company), (2) the Company effects any sale of all or substantially all of its assets
in one or a series of related transactions, (3) any tender offer or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Ordinary Shares are permitted to tender or exchange their shares for other securities, cash or property,
or (4) the Company effects any reclassification of the Ordinary Shares or any compulsory share exchange pursuant to which the Ordinary
Shares is effectively converted into or exchanged for other securities, cash or property.
(k) “Obligations”
means all of the Company’s now existing and hereafter created or arising obligations, indebtedness and liabilities of any kind
(whether primary or secondary, conditional or unconditional, contingent or noncontingent, joint or several) owed to the Holder, whether
existing, created, incurred or arising in the Company’s capacity as a borrower, guarantor, indemnitor, customer, purchaser, lessee,
licensee, applicant, counterparty, debtor or other obligor, including (a) any loan amount, principal, interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable
in such proceeding), fee, charge, indemnification obligation, reimbursement obligation, royalty, premium, cost, expense, price, rent
or other amount owed by the Company to the Holder at any time, including future advances, protective advances and other financial accommodations,
(b) any obligations, indebtedness or liabilities of the Company to the Holder under any Transaction Document at any time, and (c) any
of the foregoing that may have been, or that may be, acquired by the Holder from any third party, the Company at any time.
(l)
“Other Debentures” means any debentures issued pursuant to the Securities Purchase Agreement (other than this
Debenture) and any other debentures, notes, or other instruments issued in exchange, replacement, or modification of the foregoing.
(m)
“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government
or political subdivision thereof or a governmental agency.
(n)
“Primary Market” means any of The New York Stock Exchange, the Nasdaq Global Market or the Nasdaq Global Select
Market, and any successor to any of the foregoing markets or exchanges.
(o)
“Redemption Premium” means either (i) six percent (6%) in the case of a Triggered Principal Amount or (ii) four
percent (4%) in the case of an Optional Redemption, in each case of the Principal amount being redeemed or paid.
(p)
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(q)
“Subsidiary” means, with respect to any Person, any corporation, association, partnership or other business
entity of which more than 50% of the total voting power of shares of capital stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries
of such Person; or (iii) one or more Subsidiaries of such Person.
(r)
“Trading Day” means a day on which the Ordinary Shares are quoted or traded on a Primary Market on which the
Ordinary Shares are then quoted or listed; provided, that in the event that the Ordinary Shares are not listed or quoted, then Trading
Day shall mean a Business Day.
(s)
“Transaction Document” means, each of, the Other Debentures, the Securities Purchase Agreement, the Registration
Rights Agreement and any and all documents, agreements, instruments or other items executed or delivered in connection with any of the
foregoing.
(t)
“Triggering Event” shall mean the daily VWAP is less than the Floor Price for five Trading Days during a period
of seven consecutive Trading Days (a “Floor Price Trigger,” and the date on which a Floor Price Trigger occurs, a “Triggering
Date”).
(u)
“Underlying Shares” means the Ordinary Shares issuable upon conversion of this Debenture or as payment of interest
in accordance with the terms hereof.
(v)
“Underlying Shares Registration Statement” means a registration statement meeting the requirements set forth
in the Registration Rights Agreement, covering among other things the resale of the Underlying Shares and naming the Holder as a “selling
stockholder” thereunder.
(w)
“VWAP” means, for any security as of any date, the daily dollar volume-weighted average price for such security
on the Primary Market during regular trading hours as reported by Bloomberg through its “Historical Prices – Px Table with
Average Daily Volume” functions.
[Signature Page Follows]
IN WITNESS WHEREOF,
the Company has caused this Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth above.
EXHIBIT I
CONVERSION NOTICE
(To be executed by the Holder in order to
Convert the Debenture)
TO: SONO GROUP N.V.
Via Email:
The undersigned hereby irrevocably
elects to convert a portion of the outstanding and unpaid Conversion Amount of Debenture No. SEV-[1][2][3] into Ordinary Shares of SONO
GROUP N.V., according to the conditions stated therein, as of the Conversion Date written below.
| Conversion Date: |
|
| Principal Amount to be Converted: |
|
| Accrued Interest to be Converted: |
|
| Total Conversion Amount to be converted: |
|
| Fixed Conversion Price: |
|
| Variable Conversion Price: |
|
| Applicable Conversion Price: |
|
| Number of Ordinary Shares to be issued: |
|
| Please issue the Ordinary Shares in the following name and deliver them to the following account: |
| Issue to: |
|
| Broker DTC Participant Code: |
|
| Account Number: |
|
| Authorized Signature: |
|
| Name: |
|
| Title: |
|
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We hereby consent to the incorporation by reference in this Registration
Statement on Form F-3 of Sono Group N.V. of our report dated April 19, 2022 relating to the financial statements, which appears
in Sono Group N.V.’s Annual Report on Form 20-F for the year ended December 31, 2021. We also consent to the reference
to us under the heading “Experts” in such Registration Statement.
Munich, Germany
December 7, 2022
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft
| /s/Alexander Fiedler |
|
/s/ppa. Sylvia Eichler |
| Wirtschaftsprüfer |
|
Wirtschaftsprüferin |
| (German Public Auditor) |
|
(German Public Auditor) |
![[MISSING IMAGE: lg_sonomotors1-bw.jpg]](/stocks/ssm/documents/ca141a22-1ac5-444b-94fe-caf79376c8bd/asset/lg_sonomotors1-bw.jpg)