SFT Shift Technologies Inc

Item 1.01 Entry into a Material Definitive Agreement.

On December 9, 2021, Shift Technologies, Inc. (the “Company”) and its wholly-owned indirect subsidiary Shift Operations LLC (the “Borrower” and together with the Company, the “Shift Parties”) entered into an Inventory Financing and Security Agreement (the “Ally Facility”) with Ally Bank, a Utah chartered state bank (“Ally Bank”) and Ally Financial, Inc., a Delaware corporation (“Ally Financial” and together with Bank, the “Lender”), pursuant to which the Lender provides up to $100 million in financing as part of its floorplan vehicle financing program.

In addition to other customary covenants under the Ally Facility, the Shift Parties are subject to financial covenants that require the Shift Parties to maintain, on a consolidated basis, at least 20% of the maximum credit line in unrestricted cash and cash equivalents, and that require the Borrower to maintain at least 10% in vehicle inventory equity and to maintain at least 10% of the maximum credit line in a restricted cash account with Ally Bank.

Advances under the Ally Facility will bear interest at a per annum rate equal to the prime rate designated from time to time by Ally Bank plus 150 basis points and will be determined using a 365/360 simple interest method of calculation, unless expressly prohibited by law. Advances under the Ally Facility, if not demanded earlier, are due and payable for each vehicle financed under the Ally Facility as and when such vehicle is sold, leased, consigned, gifted, exchanged, transferred, or otherwise disposed of. Interest under the Ally Facility is due and payable monthly upon demand. The Borrower is also required to make monthly principal reduction payments equal to 10% of the original principal amount for each vehicle subject to the floor plan for more than 180 days until the outstanding principal amount for such vehicle is reduced to the lesser of 50% of the original principal amount of such vehicle. Additionally, the Borrower is permitted at its election to make permissive principal payments to the Lender at any time before they are due and payable without premium or penalty.

Upon any event of default (including, without limitation, the Borrower’s obligation to pay upon demand any outstanding liabilities of the Ally Facility), the Lender may, at its option and without notice to the Borrower, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to the Lender and its affiliates by the Borrower.

The Ally Facility is secured by a grant of a security interest in substantially all of the assets of the Borrower, the Company and the other wholly-owned subsidiaries of the Company (together with the Company, the “Guarantors”), and payment is guaranteed by the Guarantors pursuant to a cross collateral, cross default, and guaranty agreement and joint guaranty in favor of the Lender.

The foregoing description of the Ally Facility is qualified in its entirety by reference to the full text of the Inventory Financing and Security Agreement, which will be filed, with any confidential terms redacted, as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2021.