| Item 1.01 | Entry into a Material Definitive Agreement. |
Merger Agreement
On
November 21, 2022, Forest Road Acquisition Corp. II, a Delaware corporation (“Acquiror”
or the “Company”), entered into an Agreement and Plan of
Merger (as it may be amended or supplemented from time to time, the “Merger Agreement”)
with Ariel Merger Sub I, Inc., a Delaware corporation and direct, wholly-owned subsidiary of Acquiror (“Merger Sub
I”), Ariel Merger Sub II, LLC, a Delaware limited liability company and
direct, wholly-owned subsidiary of Acquiror (“Merger Sub II”),
and Hyperloop Transportation Technologies, Inc. (“HyperloopTT”),
a Delaware corporation. Capitalized terms not defined but
otherwise used herein have the meanings ascribed to them in the Merger Agreement.
HyperloopTT is an innovative transportation and technology licensing
company focused on realizing the hyperloop, which is a vacuum tube-based system that is capable of transporting passengers and goods in
levitating capsules at airplane speeds on the ground. Founded in 2013, HyperloopTT is headquartered in Los Angeles, CA, and Toulouse,
France and has offices in North and South America, the Middle East, and Europe. Its European Research and Development Center in Toulouse,
France, is home to a full-scale test system. HyperloopTT is led by a management team of hyperloop business and technology professionals
and utilizes a global network of more than 800 engineers, creatives, and technologists, with 50 corporate and university partners. In
2019, HyperloopTT released the first comprehensive feasibility study analyzing a hyperloop system, which found, among other things, that
the system is economically and technically feasible. HyperloopTT has a portfolio of intellectual property assets, consisting of 40 granted
patents and an additional 26 in process. It seeks to license its hyperloop technology and know-how to potential customers that would include
government, infrastructure operators and transportation operators. To date, HyperloopTT has not yet licensed its technology and has not
generated any revenues since its inception; however, it is currently pursuing several potential hyperloop projects, specifically a commercial
prototype in Italy and an environmental impact study for a multi-state commercial line project in the Great Lakes region of the United
States.
Acquiror intends to file a registration statement on Form S-4 as soon
as reasonably practicable and it is currently anticipated that the transaction will close in the first half of 2023.
The Mergers
The Merger Agreement provides that, among other things and upon the
terms and subject to the conditions thereof, the following transactions will occur (together with the other agreements and transactions
contemplated by the Merger Agreement, the “Business Combination”):
| (i) | at the closing of the transactions contemplated by the Merger Agreement
(the “Closing”), in accordance with the Delaware General Corporation Law, as amended, and the Delaware Limited
Liability Companies Act, as amended, (x) Merger Sub I will be merged with and into HyperloopTT (the “First Merger”),
with HyperloopTT being the surviving entity in the First Merger and continuing (immediately following the First Merger) as a direct, wholly-owned
Subsidiary of Acquiror (the “Initial Surviving Entity”); and (y) immediately following the First Merger, the
Initial Surviving Entity will be merged with and into Merger Sub II (the “Second Merger”), with Merger Sub II
being the surviving entity in the Second Merger and continuing (immediately following the Second Merger) as a direct, wholly-owned Subsidiary
of Acquiror (the “Surviving Entity”) (the First Merger together with the Second Merger, the “Mergers”).
Following the Mergers, Acquiror will change its name to “Hyperloop Transportation Technologies, Inc.” (“New HyperloopTT”); |
| (ii) | in connection with the Mergers, among other things, (a) all outstanding
shares of HyperloopTT common stock (including both Class A and Class B shares of common stock) will be cancelled in exchange for the right
to receive, in the aggregate, a number of shares of common stock in New HyperloopTT that is approximately equal to the quotient obtained
by dividing (x) the Closing Consideration Value (as defined below) by (y) $10.00 (the “Exchange Ratio”); (b)
all outstanding shares of HyperloopTT preferred stock will be cancelled in exchange for the right to receive, in the aggregate, a number
of shares of common stock in New HyperloopTT that is approximately equal to the product of (x) that number of shares of common stock that
such shares of preferred stock would otherwise convert into at the effective time of the First Merger (the “First Effective
Time”) and (y) the Exchange Ratio; (c) each HyperloopTT option (whether vested or unvested) and each outstanding HyperloopTT
warrant that is outstanding and unexercised as of immediately prior to the First Effective Time shall be assumed and converted into a
right to purchase a number of shares of Acquiror common stock, with each such Acquiror option and warrant then representing the right
to purchase (x) the number of whole shares of Acquiror common stock equal to the product of (A) the number of HyperloopTT common or preferred
stock, as applicable, subject to such HyperloopTT option or warrant, as applicable, immediately prior to the First Effective Time and
(B) the Exchange Ratio, (y) at an exercise price per share of Acquiror common stock (rounded up to the nearest whole cent) equal to the
quotient obtained by dividing (A) the exercise price per HyperloopTT common preferred stock applicable to such HyperloopTT option or warrant,
as applicable, immediately prior to the First Effective Time by (B) the Exchange Ratio; and (d) certain HyperloopTT convertible notes
will be extinguished and cancelled and converted into shares of HyperloopTT common stock or Acquiror common stock; and |
| (iii) | upon the effective time of the Second Merger, the name of the Acquiror will be renamed “Hyperloop Transportation Technologies,
Inc.” |
“Closing Consideration Value” means the quotient
of (a) $600,000,000 divided by (b) the sum of (i) the total number of shares of HyperloopTT common stock issued and outstanding immediately
prior to the effectiveness of the First Merger (including shares of HyperloopTT common stock issued upon the conversion of certain HyperloopTT
convertible notes immediately prior to the effectiveness of the First Merger), plus (ii) the total number of shares of HyperloopTT common
stock underlying all HyperloopTT options (whether or not then vested or exercisable) that are outstanding immediately prior to the First
Effective Time, plus (iii) the number of shares of Acquiror common stock issuable upon the conversion of certain HyperloopTT convertible
notes, plus (iv) the shares of HyperloopTT common stock issuable upon conversion of shares of HyperloopTT preferred stock, plus (v) the
total number of shares of HyperloopTT common stock and preferred stock underlying all HyperloopTT warrants that are outstanding immediately
prior to the First Effective Time; plus (vi) the total number of Company Common Shares issuable in connection with or underlying any equity
component of the Bridge Financing (as defined below).
The Board of Directors of Acquiror (the “Board”)
has (i) unanimously approved and declared advisable the Merger Agreement and the Business Combination and (ii) resolved to recommend approval
of the Merger Agreement and related matters by the shareholders of Acquiror.
Conditions to Closing
The Merger Agreement is subject to the satisfaction or waiver of certain
customary closing conditions by the parties thereto, including, among others, (i) approval of the Business Combination and related agreements
and transactions by the equityholders of Acquiror and HyperloopTT, (ii) effectiveness of the registration statement on Form S-4 to be
filed by Acquiror in connection with the Business Combination, (iii) expiration or termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act, (iv) receipt of approval for listing on the New York Stock Exchange, Nasdaq Global Select Market or the
Nasdaq Global Market (or another national securities exchange mutually agreed to by the parties) the shares of Acquiror common stock
to be issued in connection with the Mergers, and (v) the absence of any injunctions.
Other conditions to HyperloopTT’s and Acquiror’s obligations
to consummate the Business Combination include, among others, that there will be Available Cash (as defined below) equal to no less than
$40,000,000.
“Available Cash” means an amount equal to
(i) all cash available in the trust account into which the proceeds of Acquiror’s initial public offering and private placements
of its warrants have been deposited for the benefit of Acquiror, certain of its public shareholders and the underwriters of Acquiror’s
initial public offering (the “Trust Account”), after deducting the amount required to satisfy Acquiror’s
obligations to its shareholders (if any) that exercise their rights to redeem the Acquiror common stock held by them plus (ii) the aggregate
amount of cash that has been funded to and remains with, or that will be funded concurrently with the Closing to, Acquiror or HyperloopTT
pursuant to or in connection with (a) any equity, equity linked or other financing commitment and (b) the exercise of any HyperloopTT
options.
Covenants
The Merger Agreement contains certain covenants, including, among others,
providing for (i) the parties to generally conduct their respective businesses in the ordinary course through the Closing, (ii) the parties
to not initiate any negotiations or enter into any agreements for certain alternative transactions, (iii) HyperloopTT to prepare and deliver
to Acquiror certain audited and unaudited consolidated financial statements of HyperloopTT, (iv) Acquiror to prepare and file a registration
statement on Form S-4 and take certain other actions to obtain the requisite approval of Acquiror shareholders of certain proposals regarding
the Business Combination, and (v) the parties to use reasonable best efforts to obtain any approvals required to consummate the Business
Combination from governmental agencies.
The Merger Agreement also provides that, each of Acquiror and HyperloopTT
may pursue such financing arrangements that the parties may mutually agree to seek in connection with the Business Combination (it being
understood and agreed that the consummation of any such other additional financing arrangements by HyperloopTT or Acquiror shall be subject
to the parties’ mutual agreement), including equity and debt financing transactions and/or non-redemption back-stop or forward purchase
arrangements with beneficiaries of funds deposited in the Trust Account. Additionally, HyperloopTT or any of its subsidiaries may enter
into and consummate, upon commercially reasonable terms, additional convertible note or other debt financing transactions with reputable
third party financing sources that, in the aggregate, provide proceeds to HyperloopTT and its subsidiaries in an amount up to $10,000,000
(the “Bridge Financing”); provided, that in connection with any such transactions, HyperloopTT shall consult
with Acquiror and consider in good faith any reasonable comments and suggestions provided by Acquiror in connection therewith. Upon HyperloopTT’s
request, Acquiror shall, and shall cause its representatives to, reasonably cooperate with HyperloopTT and its representatives in connection
with such efforts.
Representations and Warranties
The Merger Agreement contains customary representations and warranties
by Acquiror, Merger Sub I, Merger Sub II, and HyperloopTT. The representations and warranties of the respective parties to the Merger
Agreement will not survive the Closing.
Termination
The Merger Agreement may be terminated at any
time prior to the Closing (i) by mutual written consent of Acquiror and HyperloopTT, (ii) by Acquiror or HyperloopTT, if approvals of
the shareholders of Acquiror, to the extent required under the Merger Agreement, are not obtained as set forth therein, (iii) by either
Acquiror or HyperloopTT in certain other circumstances set forth in the Merger Agreement, including (a) if any final and nonappealable
Governmental Order (as defined in the Merger Agreement) will have been issued or otherwise entered into making consummation of the Business
Combination illegal or otherwise preventing or prohibiting consummation of the Business Combination and (b) in the event of certain uncured
breaches by the other party, and (iv) by any of Acquiror or HyperloopTT, if the Closing has not occurred on or before March 10, 2023,
subject to certain extension rights. Additionally, Acquiror may terminate the Merger Agreement if (i) HyperloopTT has not consummated
(including funding) Bridge Financing of at least $5,000,000 by January 15, 2023, or (ii) if HyperloopTT has not entered into definitive
documentation with third party(ies) by January 15, 2023, pursuant to which HyperloopTT will, at Closing, have immediately available funds
sufficient to satisfy the Available Cash closing condition discussed above.
Certain Related Agreements
Sponsor Support Agreement
Concurrently with the execution of the Merger Agreement, Acquiror,
Forest Road Acquisition Sponsor II LLC, a Delaware limited liability company (“Sponsor”), and HyperloopTT entered
into a support agreement (the “Sponsor Support Agreement”), by and among Acquiror, Sponsor, and HyperloopTT,
whereby Sponsor agreed, among other things, to:
| (a) | not (i) sell, offer to sell, contract or agree to sell, hypothecate,
pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, file (or participate in the
filing of) a registration statement with the SEC (other than the proxy statement / prospectus or the registration statement in connection
with the Merger Agreement) or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within
the meaning of Section 16 of the Securities Act of 1934 (the “Exchange Act”), with respect to any of its 8,750,000
shares of Acquiror Class B common stock and 6,000,000 Acquiror warrants (together with any other equity securities of Acquiror that Sponsor
holds of record or beneficially as of the date of the Sponsor Support Agreement or acquires record or beneficial ownership of after the
date of the Sponsor Support Agreement, collectively, the “Subject Acquiror Equity Securities”), (ii) enter into
any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of
its Subject Acquiror Equity Securities or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii); |
| (b) | deliver to HyperloopTT a duly executed copy of that certain
amended and restated registration rights agreement by and among HyperloopTT, Sponsor and certain of the pre-closing HyperloopTT equityholders,
in substantially the form attached as Exhibit C to the Merger Agreement (the “Registration Rights Agreement”); |
| (c) | vote in favor of approving the Merger Agreement and the Business
Combination; and |
| (d) | waive any adjustment to the conversion ratio with respect to shares
of Acquiror Class B common stock held by Sponsor as set forth in Acquiror’s Amended and Restated Certificate of Incorporation, in
each case, subject to the terms and conditions set forth in the Sponsor Agreement. |
HyperloopTT Support Agreement
Concurrently with the execution of the Merger Agreement., Acquiror
also entered into a support agreement (the “HyperloopTT Support Agreement”), by and among Acquiror, HyperloopTT
and certain pre-Closing equityholders of HyperloopTT (the “HyperloopTT Equityholders”) with terms similar to
those of the Sponsor Support Agreement. Under the HyperloopTT Support Agreement, the HyperloopTT Equityholders have agreed to vote or
cause to be voted or to execute and deliver a written consent with respect to the HyperloopTT equity interests held by the HyperloopTT
Equityholders adopting the Merger Agreement and approving the Business Combination.
The foregoing description of the Merger Agreement, Sponsor Support
Agreement and HyperloopTT Support Agreement, and the transactions and documents contemplated thereby, is not complete and is subject to
and qualified in its entirety by reference to the Merger Agreement, Sponsor Support Agreement, and HyperloopTT Support Agreement, copies
of which are filed with this Current Report on Form 8-K as Exhibit 2.1, Exhibit 10.1 and Exhibit 10.2, respectively,
and the terms of which are incorporated by reference herein.
The Merger Agreement, Sponsor Support Agreement and HyperloopTT Support
Agreement have been included to provide investors with information regarding their terms. They are not intended to provide any other factual
information about Acquiror or its affiliates. The representations, warranties, covenants and agreements contained in the Merger Agreement,
Sponsor Support Agreement and HyperloopTT Support Agreement and the other documents related thereto were made only for purposes of the
Merger Agreement, as of the specific dates therein, were solely for the benefit of the parties to the Merger Agreement, Sponsor Support
Agreement and HyperloopTT Support Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified
by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement, Sponsor
Support Agreement or HyperloopTT Support Agreement instead of establishing these matters as facts, and may be subject to standards of
materiality applicable to the contracting parties that differ from those applicable to shareholders. Shareholders are not third-party
beneficiaries under the Merger Agreement, Sponsor Support Agreement or HyperloopTT Support Agreement and should not rely on the representations,
warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the
parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations
and warranties may change after the date of Merger Agreement, Sponsor Support Agreement or HyperloopTT Support Agreement, as applicable,
which subsequent information may or may not be fully reflected in Acquiror’s public disclosures.
Transfer Restrictions and Registration Rights
The Merger Agreement contemplates
that, at the Closing, New HyperloopTT, Sponsor, and certain HyperloopTT equityholders will enter into the Registration Rights Agreement,
pursuant to which New HyperloopTT will agree to register for resale, pursuant to Rule 415 under the Securities Act, certain shares of
common stock and other equity securities of New HyperloopTT that are held by the parties thereto from time to time.
The Registration Rights Agreement also contains a lock-up provision,
pursuant to which, subject to certain exceptions, Sponsor and certain pre-Closing HyperloopTT equityholders will agree not to transfer
certain of their equity securities in New HyperloopTT until the earlier of (i) 180 days following the date of the Closing and (ii) subsequent
to the Closing, (A) if the closing price of the New HyperloopTT common stock equals or exceeds $12.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and other similar customary adjustments) for any five trading days within
any10 trading day period or (B) the date on which New HyperloopTT completes a liquidation, merger, capital stock exchange, reorganization
or other similar transaction that results in all of New HyperloopTT’s shareholders having the right to exchange their shares of
common stock for cash, securities or other property.