10-K
1
f10k2020_forestroadacq.htm
ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,
2020
☐ TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number: 001-39735
FOREST ROAD ACQUISITION CORP.
(Exact name of registrant as specified
in its charter)
1177 Avenue of the Americas, 5th Floor New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number,
including area code: (917) 310-3722
Securities registered pursuant to Section 12(b)
of the Act:
Securities registered pursuant to Section 12(g)
of the Act: None
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
No ☒
Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth
company. See definition of “large accelerated filer,” “accelerated filer, “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
The registrant’s shares were not
listed on any exchange and had no value as of the last business day of the second fiscal quarter of 2020. The registrant’s
units begin trading on The New York Stock Exchange on November 25, 2020 and the registrant’s shares of Class A common stock
and warrants began trading on The New York Stock Exchange on January 15, 2021. The aggregate market value of the units outstanding,
other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the closing price for
the units on December 31, 2020, as reported on The New York Stock Exchange was $315,000,000.
As of March 22, 2021, there were 30,000,000
shares of Class A common stock, par value $0.0001 per share, and 7,500,000 shares of Class B common stock, par value $0.0001
per share, of the registrant issued and outstanding.
TABLE OF CONTENTS
PART I PAGE
Item 1. Business 1
Item 1A. Risk Factors 17
Item 1B. Unresolved Staff Comments 17
Item 2. Properties 17
Item 3. Legal Proceedings 17
Item 4. Mine Safety Disclosures 17
PART II
Item 6. Selected Financial Data 18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 20
Item 8. Financial Statements and Supplementary Data 20
Item 9A. Controls and Procedure 20
Item 9B. Other Information 20
PART III
Item 10. Directors, Executive Officers and Corporate Governance 21
Item 11. Executive Compensation 28
Item 14. Principal Accounting Fees and Services 31
PART IV
Item 15. Exhibits and Financial Statement Schedules 32
i
Unless otherwise stated
in this report or the context otherwise requires, references to:
● “common stock” are to our Class A common stock and our Class B common stock;
● “directors” are to our current directors and director nominees;
● “our team” are to our executive officers, directors and strategic advisors;
ii
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report, including, without limitation,
statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, or the Exchange Act. These forward-looking statements can be identified by the use of forward-looking terminology,
including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,”
“plans,” “may,” “will,” “potential,” “projects,” “predicts,”
“continue,” or “should,” or, in each case, their negative or other variations or comparable terminology.
These risks and uncertainties include, but are not limited to, the following risks, uncertainties and other factors:
● our ability to select an appropriate target business or businesses;
● our public securities’ potential liquidity and trading;
● the lack of a market for our securities;
● the trust account not being subject to claims of third parties; or
● our financial performance.
The forward-looking statements contained
in this report are based on our current expectations and beliefs concerning future developments and their potential effects on
us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number
of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance
to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks
or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from
those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
iii
PART I
Item 1. Business
Overview
We are a blank check company incorporated
on September 24, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or other similar business combination with one or more businesses, which we refer to
throughout this report as our initial business combination. Since our initial public offering, we have concentrated our efforts
on identifying businesses in the telecommunications, media and technology (“TMT”) space that align with the following
macro themes:
● new audience aggregation platforms transforming the TMT landscape;
● premium IP driving significant value expansion;
● consumer behavior fundamentally changing;
● cutting-edge technologies facilitating new offerings;
● evolving ecosystem reshaping traditional business models; and
● companies in need of capital due to idiosyncratic market conditions.
We seek to capitalize on the significant
experience, relationships and contacts of our officers and directors, Forest Road, the managing member of our sponsor, and strategic
advisors to complete our initial business combination. We believe that our team’s distinguished and long-term track
record of sourcing, acquiring, and building next-generation media and entertainment platforms, along with other investments
and operational experience in consumer-facing industries, will provide us with differentiated consumer insights and sourcing
opportunities.
On
February 9, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BB Merger Sub,
LLC, a Delaware limited liability company and direct, wholly-owned subsidiary of Forest Road, MFH Merger Sub, LLC, a Delaware limited
liability company and direct, wholly-owned subsidiary of Forest Road, The Beachbody Company Group, LLC, a Delaware limited liability
company (“Beachbody”), and Myx Fitness Holdings, LLC, a Delaware limited liability company (“Myx”).
Consummation of the transactions contemplated by the Merger
Agreement (the “Merger) is subject to customary conditions of the respective parties, including the approval of the Merger
by our stockholders in accordance with our amended and restated certificate of incorporation and the completion of a redemption
offer whereby we will be providing our public stockholders with the opportunity to redeem their shares of our common stock for
cash equal to their pro rata share of the aggregate amount on deposit in our trust account.
For the risks associated with the Merger and Beachbody and Myx,
see the Company’s preliminary registration statement on Form S-4, as amended from time to time (the “Form S-4”)
containing information about the Merger, Beachbody and Myx, as initially filed with the Securities and Exchange Commission on February
16, 2021.
The Merger Agreement and related agreements are further described
in the Form 8-K/A, filed by us on February 16, 2021. For additional information regarding the Merger Agreement and the transactions
contemplated therein, Beachbody and Myx please see the Form S-4.
Other than as specifically discussed, this Annual Report does
not assume that the closing of the Merger will occur.
1
Initial Public Offering
The registration statement for our initial
public offering became effective on November 24, 2020. On November 30, 2020, we consummated our initial public offering of 30,000,000
units, which included 3,900,000 units issued pursuant to the partial exercise by the underwriters of their over-allotment option.
Each unit consists of one share of Class A common stock of the Company, par value $0.0001 per share, and one-third of one redeemable
warrant of the Company, with each whole warrant entitling the holder thereof to purchase one share of Class A common stock for
$11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $300,000,000.
Simultaneously with the closing of the
initial public offering, we completed the private sale of an aggregate of 5,333,333 warrants to Forest Road Acquisition Sponsor
LLC, our “sponsor”, at a purchase price of $1.50 per private placement warrant, generating gross proceeds of $8,000,000.
A total of $300,000,000, comprised of $292,000,000
of the proceeds from the initial public offering (which amount includes $10,500,000 of the underwriters’ deferred discount)
and $8,000,000 of the proceeds of the sale of the private placement warrants, was placed in a U.S.-based trust account maintained
by Continental Stock Transfer & Trust Company, acting as trustee.
Our units began trading on November 25, 2020
on The New York Stock Exchange (the “NYSE”) under the symbol FRX.U.” On January 13, 2021, we announced that the
holders of the Company’s units may elect to separately trade the shares of Class A common stock and warrants included in the
units commencing on January 15, 2021. Each unit consists of one share of Class A common stock and one-third of one warrant to
purchase one share of Class A common stock. Any units not separated will continue to trade on NYSE under the symbol “FRX.U”. Any
underlying shares of Class A common stock and warrants that are separated will trade on NYSE under the symbols “FRX” and
“FRX WS,” respectively.
Our Team
Our officers and directors, Forest Road
and strategic advisors consist of seasoned investors and industry executives with an extensive track record of identifying, investing
in, building, operating, and advising leading businesses. In particular, the team possesses a deep understanding of the TMT space,
the evolution of these sectors, and market opportunities. Our collective team has experience in:
● sourcing, structuring, acquiring, and integrating businesses;
● developing and growing companies, both organically and through acquisitions;
● identifying, monitoring, and recruiting world-class talent;
● accessing the capital markets, including financing businesses;
In the event we are unable to consummate
the Merger, we believe our team will be able to source superior TMT investment opportunities through an extensive network including
private equity, venture capital, growth equity, asset managers, investment banks and leading global corporations. Additionally,
we believe they have the operational expertise to drive efficiencies at a target company following a business combination, and
given their extensive experience with public market investors, are well positioned to develop a thoughtful investor relations strategy.
2
Market Opportunity
We believe that many companies operating
in the TMT space have characteristics that make them attractive investment opportunities given the disruption, evolution, and
unprecedented tailwinds and headwinds facing the broader landscape. These companies are poised for long-term growth and have
the potential to unlock unrealized value as public companies, particularly when partnered with our team, which brings strategic,
operating, and deal-making expertise as well as public company experience. In the event we are unable to consummate the Merger,
we intend to focus on businesses that leverage the following macro themes:
Business Strategy
Our strategy is to identify and partner
with high growth businesses in the TMT space that can benefit from the investment and operational expertise of our team to deliver
value to our shareholders.
We believe that media and entertainment
is undergoing rapid and aggressive technology-induced change, resulting in new monetization opportunities and secular growth
as opportunities to reach consumers expand, new entrants seek to gain market share, and the “old guard” adapts to the
evolving needs of today’s consumers. We believe that our team’s experience in building and executing strategies that
combine capabilities and expertise in consumer preferences and technology/product development differentiates our ability to source
a successful partner.
Our selection process leverages our officers
and directors, Forest Road, and our strategic advisors’ deep relationship network, industry experiences, and deal sourcing
capabilities to access a broad spectrum of differentiated opportunities. Specifically, the relationships and reputation we have
built in the TMT space allow us to source proprietary deal flow from certain of our clients, their affiliates, and colleagues,
as well as provide differentiated sources of intelligence for the team to analyze as we work through business and transaction due
diligence to ensure we are partnering with a fundamentally sound long-term company. Since our initial public offering, members
of our team have communicated with and, in the event that the Merger is not consummated, we expect them to continue to communicate
with their network of relationships to articulate our initial business combination criteria, including the parameters of our search
for a target business.
3
Competitive Advantages
In the event we do not consummate the Merger,
we will capitalize on the ability of our team to identify, acquire, and operate a business that will benefit from their involvement
by utilizing the following differentiating factors to our advantage:
Our Business Combination Criteria
Consistent with our business strategy,
we have identified the following general criteria and guidelines to evaluate prospective target businesses, which we would continue
to use in the event we are unable to consummate the Merger. We use these criteria and guidelines in evaluating initial business
combination opportunities, but we may decide to enter into our initial business combination with a target business that does not
meet these criteria and guidelines. In the event we do not consummate the Merger, we will seek to identify and acquire high-quality companies
in the TMT space that possess the following characteristics:
4
These criteria and guidelines are not intended
to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent
relevant, on these general guidelines as well as other considerations, factors, and criteria that our team may deem relevant. In
the event that the Merger is not consummated and we decide to enter into our initial business combination with a target business
that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria
in our stockholder communications related to our initial business combination.
Initial Business Combination
In accordance with the rules of the NYSE,
the Merger, or an alternative initial business combination, must occur with one or more target businesses that together have an
aggregate fair market value of at least 80% of the assets held in the trust account (excluding the amount of deferred underwriting
discounts held in trust and taxes payable on the income earned on the trust account) at the time of our signing a definitive agreement
in connection with our initial business combination. If our board of directors is not able to independently determine the fair
market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm or another
independent entity that commonly renders valuation opinions with respect to satisfaction of such criteria. Our shareholders may
not be provided with a copy of such opinion nor will they be able to rely on such opinion. Subject to this requirement, our management
will have virtually unrestricted flexibility in identifying and selecting one or more prospective businesses, but if the business
combination involves more than one target business, as with the Merger, the 80% fair market value test will be based on the aggregate
value of all of the target businesses and we will treat the target businesses together as our initial business combination for
purposes of a seeking stockholder approval or conducting a tender offer, as applicable.
We anticipate structuring our initial business
combination so that the post-transaction company in which our public shareholders own shares will own or acquire 100% of the
outstanding equity interests or assets of the target business or businesses, such as in connection with the Merger. In the event
the Merger is not consummated, we may structure our initial business combination such that the post-transaction company owns
or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the prior
owners of the target business, the target management team or shareholders or for other reasons, but we will only complete such
business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of
the target business or otherwise acquires a controlling interest in the target business sufficient for it not to be required to
register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our shareholders
prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations
ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue
a substantial number of new shares in exchange for all of the outstanding capital stock, shares or other equity interests of a
target business or issue a substantial number of new shares to third- parties in connection with financing our initial business
combination. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of
a substantial number of new shares, our shareholders immediately prior to our initial business combination could own less than
a majority of our issued and outstanding shares subsequent to our initial business combination. If less than 100% of the equity
interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion
of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% fair market value test.
In the event the Merger and the related
financing arrangement described in the Form S-4 are not consummated, we may need to obtain additional financing to complete our
initial business combination, either because the transaction requires more cash than is available from the proceeds held in our
trust account or because we become obligated to redeem a significant number of our public shares upon completion of the business
combination, in which case we may issue additional securities or incur debt in connection with such business combination. There
are no prohibitions on our ability to issue securities or incur debt in connection with our initial business combination.
5
Sourcing of Potential Initial Business
Combination Targets
In the event the Merger is not consummated,
our team’s significant operating and transaction experience and relationships will provide us with a substantial number of
alternative initial business combination targets. Over the course of their careers, the members of our team have developed a broad
network of contacts and corporate relationships around the world, which includes private equity firms, venture capitalists and
entrepreneurs. This network has grown through the activities of our team sourcing, acquiring and financing businesses, the reputation
of our team for integrity and fair dealing with sellers, financing sources and target management teams and the experience of our
team in executing transactions under varying economic and financial market conditions.
This network has provided our team with
a flow of referrals, which in the past has resulted in numerous transactions which were proprietary or where a limited group of
investors were invited to participate in the sale process. In the event the Merger is not consummated, this network will provide
us with multiple investment opportunities. In addition, we anticipate that target business combination candidates will be brought
to our attention by various unaffiliated sources, including participants in our targeted markets and their advisors, private equity
funds and large business enterprises seeking to divest non-core assets or divisions.
While we do not anticipate engaging the
services of professional firms or other individuals that specialize in business acquisitions on any formal basis, in the event
the Merger is not consummated, we may engage these firms or other individuals in the future, in which event we may pay a finder’s
fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction.
We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that
may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management
determines is in our best interest to pursue. Payment of a finder’s fee is customarily tied to completion of a transaction,
in which case any such fee will be paid out of the funds held in the trust account. In no event, however, will our sponsor or any
of our existing officers or directors, or any entity with which they are affiliated, be paid any finder’s fee, consulting
fee or other compensation by the company prior to, or for any services they render in order to effectuate, the completion of our
initial business combination (regardless of the type of transaction that it is). In addition, we pay Forest Road $10,000 per month
for office space, secretarial and administrative services provided to members of our team. Other than the foregoing, there will
be no finder’s fees, reimbursement, consulting fee, monies in respect of any payment of a loan or other compensation paid
by us to our sponsor, officers or directors, or any affiliate of our sponsor or officers prior to, or in connection with any services
rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that
it is).
We are not prohibited from pursuing an
initial business combination with a company that is affiliated with our sponsor, executive officers or directors, or completing
the business combination through a joint venture or other form of shared ownership with our sponsor, executive officers or directors.
In the event the Merger is not consummated and we seek to complete an initial business combination with a target that is affiliated
with our sponsor, executive officers or directors, we, or a committee of independent directors, would obtain an opinion from an
independent investment banking firm or another independent entity that commonly renders valuation opinions stating that such an
initial business combination is fair to our company from a financial point of view. We are not required to obtain, and have not
obtained, a fairness opinion in connection with the Merger.
Members of our team directly or indirectly
own founder shares and/or private placement warrants and, accordingly, may have a conflict of interest in determining whether a
particular target business is an appropriate business with which to effectuate our initial business combination. Further, each
of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the
retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with
respect to our initial business combination. For example, it is anticipated that Kevin Mayer, one of our strategic advisors, will
be elected as a director of the combined company in connection with the consummation of the Merger.
Each of our officers and directors presently
has, and any of them in the future may have, additional, fiduciary or contractual obligations to another entity pursuant to which
such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any
of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or
she has then current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations
to present such business combination opportunity to such other entity. Our amended and restated certificate of incorporation provides
that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly
offered to such person solely in his or her capacity as a director or officer of the company and such opportunity is one we are
legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director
or officer is permitted to refer that opportunity to us without violating another legal obligation. We do not believe, however,
that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete
our initial business combination.
Our officers, directors and strategic advisors
have agreed not to participate in the formation of, or become an officer, director or strategic advisor of, any other special purpose
acquisition company with a class of securities registered under the Exchange Act without our prior written consent, which will
not be unreasonably withheld.
6
Financial Position
With funds available
for a business combination initially in the amount of $290,717,054, we offer a target business a variety of options such as creating
a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening
its balance sheet by reducing its debt ratio. Because we are able to complete our initial business combination using our cash,
debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that
will allow us to tailor the consideration to be paid to the target business to fit its needs and desires.
Lack of Business Diversification
For an indefinite period of time after
the completion of our initial business combination, the prospects for our success may depend entirely on the future performance
of a single business. Upon consummation of the Merger, the prospects of our success will depend entirely on Beachbody and Myx.
Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries,
it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line
of business. By completing our initial business combination with only a single entity, our lack of diversification may:
Limited Ability to Evaluate the Target’s
Management Team
Although we intend to closely scrutinize
the management of a prospective target business when evaluating the desirability of effecting our initial business combination
with that business, our assessment of the target business’s management may not prove to be correct. In addition, the future
management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role
of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination
as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial
business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following
our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our
initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience
or knowledge relating to the operations of the particular target business. In the event the Merger is consummated, Mr. Mayer will
serve as a director of the combined company following the Merger.
We cannot assure you that any of our key
personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any
of our key personnel will remain with the combined company will be made at the time of our initial business combination.
Following a business combination, we may
seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we
will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or
experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability
to Approve Our Initial Business Combination
The Merger requires the approval of our
stockholders. However, in the event the Merger is not consummated, in connection with any alternative proposed business combination,
we may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC subject to the provisions of
our amended and restated certificate of incorporation. We will, however, seek stockholder approval if it is required by law or
applicable stock exchange rule, or we may decide to seek stockholder approval for business or other legal reasons.
Presented in the table below is a graphic
explanation of the types of initial business combinations we may consider in the event the Merger is not consummated and whether
stockholder approval is currently required under Delaware law for each such transaction.
TYPE OF TRANSACTION WHETHER STOCKHOLDER APPROVAL IS REQUIRED
Purchase of assets No
Purchase of stock of target not involving a merger with the company. No
Merger of target into a subsidiary of the company. No
Merger of the company with a target Yes
7
Under NYSE’s listing rules, stockholder
approval is required in connection with the Merger. In the event the Merger is not consummated, in connection with any alternative
proposed business combination, stockholder approval would be required under NYSE’s rules for our initial business combination
in certain circumstance, for example, if:
Permitted Purchases of Our Securities
If we seek stockholder
approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination
pursuant to the tender offer rules, our sponsor, initial stockholders, directors, executive officers or their affiliates may purchase
shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion
of our initial business combination. There is no limit on the number of shares our initial stockholders, directors, officers or
their affiliates may purchase in such transactions, subject to compliance with applicable law and NYSE rules. However, they have
no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for
any such transactions. None of the funds in the trust account will be used to purchase shares or public warrants in such transactions.
If they engage in such transactions, they will be restricted from making any such purchases when they are in possession of any
material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange
Act.
In the event that our sponsor, initial
stockholders, directors, officers or their affiliates purchase shares in privately negotiated transactions from public stockholders
who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior
elections to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject
to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange
Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers
will comply with such rules.
The purpose of any such purchases of shares
could be to (i) vote such shares in favor of the Merger or an alternative business combination in the event the Merger is
not consummated and thereby increase the likelihood of obtaining stockholder approval of the business combination or (ii) to
satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash
at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose
of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants
on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases
of our securities may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if such purchases are made,
the public “float” of our Class A common stock or public warrants may be reduced and the number of beneficial
holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of
our securities on the NYSE.
8
Our sponsor, initial stockholders, officers,
directors and/or their affiliates anticipate that they may identify the stockholders with whom our initial stockholders, officers,
directors or their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by
our receipt of redemption requests submitted by stockholders (in the case of Class A common stock) following our mailing of
proxy materials in connection with the Merger or an alternative initial business combination in the event the Merger is not consummated.
To the extent that our sponsor, officers, directors or their affiliates enter into a private purchase, they would identify and
contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the
trust account or vote against our initial business combination, whether or not such stockholder has already submitted a proxy with
respect to our initial business combination but only if such shares have not already been voted at the stockholder meeting related
to our initial business combination. Our sponsor, executive officers, directors or any of their affiliates will select which stockholders
to purchase shares from based on a negotiated price and number of shares and any other factors that they may deem relevant, and
will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
Our sponsor, officers, directors and/or their affiliates will be restricted from making purchases of shares if the purchases would
violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. We expect any such purchases will be reported pursuant to
Section 13 and Section 16 of the Exchange Act to the extent such purchases are subject to such reporting requirements.
Redemption Rights for Public Stockholders
upon Completion of Our Initial Business Combination
We will provide our public stockholders
with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial
business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account
calculated as of two business days prior to the consummation of the initial business combination, including interest earned on
the funds held in the trust account (which interest shall be net of taxes payable), divided by the number of then outstanding public
shares, subject to the limitations and on the conditions described herein. The amount in the trust account is initially anticipated
to be $10.00 per public share. The per share amount we will distribute to investors who properly redeem their shares will not be
reduced by the deferred underwriting commissions paid to the representative of the underwriters. Our initial stockholders, sponsor,
officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption
rights with respect to any founder shares and public shares they may hold in connection with the completion of our initial business
combination.
Limitations on Redemptions
Our amended and restated certificate of
incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets
to be less than $5,000,001. In addition, pursuant to the Merger Agreement, Beachbody’s obligation to consummate the Merger
is subject to the amount of available cash in (i) the trust account, after deducting the amount required to satisfy obligations
to public stockholders that exercise their redemption rights, and (ii) the financing described in the Form S-4 is at least $350,000,000.
In the event the Merger is not consummated, an alternative proposed initial business combination may impose a minimum cash requirement
for: (i) cash consideration to be paid to the target or its owners; (ii) cash for working capital or other general corporate
purposes; or (iii) the retention of cash to satisfy other conditions. In the event the aggregate cash consideration we would
be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required
to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash
available to us, we will not complete the initial business combination or redeem any shares in connection with such initial business
combination, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof. We may,
however, raise funds through the issuance of equity-linked securities or through loans, advances or other indebtedness in connection
with our initial business combination, including pursuant to forward purchase agreements or backstop arrangements we may enter
into, in order to, among other reasons, to satisfy such net tangible assets or minimum cash requirements.
Manner of Conducting Redemptions
In connection with the Merger, we will
provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the
Merger in connection with a stockholder meeting called to approve the Merger. In the event the Merger is not consummated, in connection
with an alternative proposed initial business combination, we will provide our public stockholders with the opportunity to redeem
all or a portion of their public shares upon the completion of our initial business combination either (i) in connection with
a stockholder meeting called to approve the initial business combination or (ii) without a stockholder vote by means of a
tender offer. The decision as to whether we will seek stockholder approval of a proposed initial business combination or conduct
a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the
transaction and whether the terms of the transaction would require us to seek stockholder approval under applicable law or stock
exchange listing requirements. Asset acquisitions and stock purchases would not typically require stockholder approval while direct
mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock
or seek to amend our amended and restated certificate of incorporation would require stockholder approval. So long as we obtain
and maintain a listing for our securities on NYSE, we will be required to comply with NYSE’s stockholder approval rules.
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The requirement that we provide our public
stockholders with the opportunity to redeem their public shares by one of the two methods listed above will be contained in provisions
of our amended and restated certificate of incorporation and will apply whether or not we maintain our registration under the Exchange
Act or our listing on NYSE. Such provisions may be amended if approved by holders of 65% of our common stock entitled to vote thereon.
If we amend such provisions of our amended and restated certificate of incorporation, we will provide our public stockholders with
the opportunity to redeem their public shares in connection with a stockholder meeting.
If we provide our public stockholders with
the opportunity to redeem their public shares in connection with a stockholder meeting, we will
● file proxy materials with the SEC.
We will complete the Merger, or, if the
Merger is not consummated and we seek stockholder approval in connection with a proposed alternative initial business combination,
we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted
in favor of the initial business combination. A quorum for such meeting will consist of the holders present in person or by proxy
of shares of outstanding capital stock of the Company representing a majority of the voting power of all outstanding shares of
capital stock of the Company entitled to vote at such meeting. Our initial stockholders will count towards this quorum and, pursuant
to the letter agreement, our sponsor, officers and directors have agreed to vote any founder shares they hold and any public shares
purchased during or after our initial public offering (including in open market and privately-negotiated transactions) in favor
of our initial business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock
voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result,
in addition to our initial stockholders’ founder shares, we would need only 11,250,001, or 37.5%, of the 30,000,000 public
shares sold in our initial public offering to be voted in favor of an initial business combination in order to have our initial
business combination approved (assuming all outstanding shares are voted). These quorum and voting thresholds, and the voting agreements
of our initial stockholders, may make it more likely that we will consummate our initial business combination. Each public stockholder
may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction or whether they
were a stockholder on the record date for the stockholder meeting held to approve the proposed transaction.
If the Merger is not consummated and if
a stockholder vote is not required in connection with a proposed alternative initial business combination and we do not decide
to hold a stockholder vote for business or other legal reasons, we will
In the event we conduct redemptions pursuant
to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a)
under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender
offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number
of public shares, which number will be based on the requirement that we may not redeem public shares in an amount that would cause
our net tangible assets to be less than $5,000,001. If public stockholders tender more shares than we have offered to purchase,
we will withdraw the tender offer and not complete the initial business combination.
In the Merger is not consummated and upon
the public announcement of a proposed alternative initial business combination, if we elect to conduct redemptions pursuant to
the tender offer rules, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares
of our Class A common stock in the open market, in order to comply with Rule 14e-5 under the Exchange Act.
We intend to require our public stockholders
seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,”
to, at the holder’s option, either deliver their stock certificates to our transfer agent or deliver their shares to our
transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) system, prior to
the date set forth in the proxy materials or tender offer documents, as applicable. In the case of proxy materials, this date may
be up to two business days prior to the vote on the proposal to approve the initial business combination. In addition, if we conduct
redemptions in connection with a stockholder vote, we intend to require a public stockholder seeking redemption of its public shares
to also submit a written request for redemption to our transfer agent two business days prior to the vote in which the name of
the beneficial owner of such shares is included. The proxy materials or tender offer documents, as applicable, that we will furnish
to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public
stockholders to satisfy such delivery requirements. We believe that this will allow our transfer agent to efficiently process any
redemptions without the need for further communication or action from the redeeming public stockholders, which could delay redemptions
and result in additional administrative cost. If the proposed initial business combination is not approved and we continue to search
for a target company, we will promptly return any certificates or shares delivered by public stockholders who elected to redeem
their shares.
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Limitation on Redemption Upon Completion
of Our Initial Business Combination If We Seek Stockholder Approval
The Merger requires the approval of our
stockholders. In connection with the stockholder approval of the Merger or, if the Merger is not consummated and we seek stockholder
approval of a proposed alternative initial business combination and we do not conduct redemptions in connection with our initial
business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a
public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in
concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption
rights with respect to more than an aggregate of 15% of the shares of common stock sold in our initial public offering, which we
refer to as the Excess Shares, without our prior consent. Absent this provision, a public stockholder holding more than an aggregate
of 15% of the shares sold in our initial public offering could threaten to exercise its redemption rights if such holder’s
shares are not purchased by us, our sponsor or our management at a premium to the then-current market price or on other undesirable
terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in our initial public offering
without our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block
our ability to complete our initial business combination, particularly in connection with a business combination with a target
that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting
our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
Delivering Stock Certificates in Connection
with the Exercise of Redemption Rights
As described above, we intend to require
our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street
name,” to, at the holder’s option, either deliver their stock certificates to our transfer agent or deliver their shares
to our transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) system,
prior to the date set forth in the proxy materials or tender offer documents, as applicable. In the case of proxy materials, this
date may be up to two business days prior to the vote on the proposal to approve the initial business combination. In addition,
if we conduct redemptions in connection with a stockholder vote, we intend to require a public stockholder seeking redemption of
its public shares to also submit a written request for redemption to our transfer agent two business days prior to the vote in
which the name of the beneficial owner of such shares is included. The proxy materials or tender offer documents, as applicable,
that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether
we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have up to
two business days prior to the vote on the initial business combination if we distribute proxy materials, or from the time we send
out our tender offer materials until the close of the tender offer period, as applicable, to submit or tender its shares if it
wishes to seek to exercise its redemption rights. In the event that a stockholder fails to comply with these or any other procedures
disclosed in the proxy or tender offer materials, as applicable, its shares may not be redeemed. Given the relatively short exercise
period, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with
the above-referenced process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent
will typically charge the broker submitting or tendering shares a fee of approximately $80.00 and it would be up to the broker
whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we
require holders seeking to exercise redemption rights to submit or tender their shares. The need to deliver shares is a requirement
of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
Any request to redeem such shares, once
made, may be withdrawn at any time up to the date set forth in the proxy materials or tender offer documents, as applicable. Furthermore,
if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides
prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return
the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares
electing to redeem their shares will be distributed promptly after the completion of our initial business combination.
If the Merger or an alternative proposed
initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise
their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In
such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.
If the Merger is not completed, we may
continue to try to complete an alternative proposed initial business combination with a different target until November 30, 2022.
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Redemption of Public Shares and Liquidation
if No Initial Business Combination
Our amended and restated certificate of