Exhibit 10.1

 

 

EXCHANGE AGREEMENT

 

This Exchange Agreement (the “Agreement”) is dated as of June 4, 2018 (the
“Effective Date”), by and between Workhorse Group Inc., a Nevada corporation
(the “Company”), and the holder(s) identified on the signature pages hereto
(each, a “Holder” and collectively, the “Holders”).

WHEREAS, the Holder holds a warrant issued on September 18, 2017 as amended from
time to time (the “Warrant”) to purchase that number of shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”) as set forth on
the Holder’s signature page hereto (collectively, the “Warrant Shares”);

WHEREAS, for the mutual benefit of the Company and the Holder, the Company
desires to exchange the Warrant owned by it for 0.7 shares of Common Stock for
each Warrant Share issuable upon a cash exercise (without regards to any
limitations on exercise contained therein) of the Warrant (the “Exchange
Shares”) (subject to adjustment for forward and reverse stock splits and the
like) (the “Exchange”) issued in reliance on the exemption from registration
provided by Section 3(a)(9) of the Securities Act of 1933, as amended (the
“Securities Act”); and

WHEREAS, following the Exchange, the Warrant shall be cancelled and the Holder
shall have no further rights under such Warrant.

WHEREAS, concurrently herewith, the Company is entering into agreements with
certain other Holders (each, an “Other Holder”) of Warrants to Purchase Common
Stock issued on September 18, 2017 (each, an “Other Warrant” and such
agreements, each an “Other Agreement”) substantially in the form of this
Agreement (other than with respect to the identity of the Holder, any provision
regarding the reimbursement of legal fees and proportional changes reflecting
the different holdings of such Other Holders).

NOW, THEREFORE, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 3(a)(9) of the Securities Act, the Company and the
Holder have agreed as follows:

1. Exchange. As of the Effective Date, the Holder hereby agrees to exchange the
Warrant for the Exchange Shares. The Exchange Shares issued in exchange for the
Warrant will be issued without restrictive legends in accordance with the
exemption from registration provided by Section 3(a)(9) of the Securities Act
and Rule 144(d)(3)(ii). Neither the Holder nor the Company (nor any of their
Affiliates (as defined herein) nor any person acting on behalf of or for the
benefit of any of the foregoing), has paid or given, or agreed to pay or give,
directly or indirectly, any commission or other remuneration (within the meaning
of Section 3(a)(9) of the Securities Act and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder) for soliciting the
Exchange.

2. No Consideration. The Exchange Shares shall be issued to the Holder in
exchange for the Warrant without the payment of any other consideration by the
Holder that would not be consistent with the application of Section 3(a)(9) of
the Securities Act to the issuance of the Exchange Shares. The Holder hereby
agrees that, upon and subject to the consummation of the Exchange pursuant to
Section 3 below, including delivery of the Exchange Shares, all of the Company’s
obligations under the terms and conditions of the Warrant shall be automatically
terminated and cancelled in full without any further action required, and that
this Section 3 shall constitute an instrument of cancellation of such Warrant.

 

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3. Mechanics of Exchange.

 

i. Delivery of Original Warrant and Exchange Shares. Within one (1) Trading Day
(as defined in the Warrant) following the execution of this Agreement by the
Company and the Holder, the Company shall deliver, or cause to be delivered, to
the Holder, the Exchange Shares being acquired upon the exchange of the Warrant
by Deposit/Withdrawal at Custodian in accordance with the instructions set forth
on the Holder’s signature page hereto which such Exchange Shares shall be issued
without a standard restricted legend. The Holder shall deliver the original
Warrant to the Company for cancellation within five (5) Trading Days following
the date of execution of this Agreement. Notwithstanding any non-delivery of the
original Warrant in accordance with this Section 3(i), the Warrant shall be
deemed terminated and cancelled in accordance with Section 2 of this Agreement.

ii. Fractional Shares. No fractional shares shall be issued upon the exchange of
the Warrant. As to any fraction of a share which the Holder would otherwise be
entitled to acquire upon such exchange, the Company shall round up to the next
whole share.

 

iii. Transfer Taxes and Expenses. The issuance of the Exchange Shares on
exchange of the Warrant shall be made without charge to the Holder for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such Exchange Shares. The Company shall pay all transfer agent
fees required for same-day processing of the delivery of any Exchange Shares.

 

4. Representations and Undertakings of the Holders. The Holder hereby represents
and warrants as of the date hereof to the Company as follows (unless as of a
specific date therein, in which case they shall be accurate as of such date):

 

(i) This Agreement has been duly authorized, validly executed and delivered by
the Holder and is a valid and binding agreement and obligation of the Holder
enforceable against the Holder in accordance with its terms, subject to
limitations on enforcement by general principles of equity and by bankruptcy or
other laws affecting the enforcement of creditors’ rights generally, and the
Holder has full power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and thereunder.

 

(ii) The Holder understands that the Exchange Shares are being offered, sold,
issued and delivered to it in reliance upon specific provisions of federal and
applicable state securities laws, and that the Company is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and
understandings of the Holder set forth herein for purposes of qualifying for
exemptions from registration under the Securities Act and applicable state
securities laws.

 

(iii) The Holder is not acquiring the Exchange Shares as a result of any
advertisement, article, notice or other communication regarding the Exchange
Shares published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
advertisement.

 

(iv) The Holder, either alone or together with its representatives, has such
knowledge, sophistication and experience in and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Exchange Shares, and has so evaluated the merits and risks of such investment.
The Holder is able to bear the economic risk of an investment in the Exchange
Shares and, at the present time, is able to afford a complete loss of such
investment.

 

(v) The Holder acknowledges that the offer, sale, issuance and delivery of the
Exchange Shares to it is intended to be exempt from registration under the
Securities Act, by virtue of Section 3(a)(9) thereof.

 

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(vi) The Holder owns and holds, beneficially and of record, the entire right,
title, and interest in and to its Warrant free and clear of all rights and
Encumbrances (as defined below). The Holder has full power and authority to
transfer and dispose of its Warrant to the Company free and clear of any right
or Encumbrances. Other than the transactions contemplated by this Agreement,
there is no outstanding vote, plan, pending proposal, or other right of any
person to acquire the Holder’s Warrant. As used herein, “Encumbrances” shall
mean any security or other property interest or right, claim, lien, pledge,
option, charge, security interest, contingent or conditional sale, or other
title claim or retention agreement, interest or other right or claim of third
parties, whether perfected or not perfected, voluntarily incurred or arising by
operation of law, and including any agreement (other than this Agreement) to
grant or submit to any of the foregoing in the future.

 

(vii) The Holder is an accredited investor as such term is defined in Rule 501
of Regulation D.

 

5. Representations and Undertakings of the Company.

(i) The Exchange Shares have been duly authorized by all necessary corporate
action, and, when issued and delivered in accordance with the terms hereof, the
Exchange Shares shall be validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of refusal
of any kind.

 

(ii) This Agreement has been duly authorized, validly executed and delivered on
behalf of the Company and is a valid and binding agreement and obligation of the
Company enforceable against the Company in accordance with its terms, subject to
limitations on enforcement by general principles of equity and by bankruptcy or
other laws affecting the enforcement of creditors’ rights generally, and the
Company has full power and authority to execute and deliver this Agreement and
the other agreements and documents contemplated hereby and to perform its
obligations hereunder and thereunder.

 

(iii) The Company represents that it has not paid, and shall not pay, any
commissions or other remuneration, directly or indirectly, to any third party
for the solicitation of the Exchange pursuant to this Agreement. Other than the
exchange of the Warrant, the Company has not received and will not receive any
consideration from the Holder for the Exchange Shares.

 

(iv) Except with respect to the material terms and conditions of the
transactions contemplated by this Agreement, the Company confirms that neither
it nor any other person acting on its behalf has provided the Holder or its
agents or counsel with any information that constitutes or could reasonably be
expected to constitute material, nonpublic information. The Company understands
and confirms that the Holder will rely on the foregoing representations in
effecting the transactions herein.

 

(v) The Company represents that the Exchange Shares take on the registered
characteristics of the Warrants and that the holding period of the Exchange
Shares for purposes of Rule 144 commenced on September 18, 2017, the issuance
date of the Warrant.

 

(vi) The Company shall, on or before 5:30 p.m., New York City Time, on June 4,
2018, issue a current report on Form 8-K (“8-K Filing”) disclosing all material
terms of the Transactions and including the form of this Agreement and the form
of leak-out agreement contemplated to be entered into hereby, each as an exhibit
thereto. Upon the issuance of the 8-K Filing, the Holder shall not be in
possession of any material, non-public information received from the Company,
any of its subsidiaries or any of its respective officers, directors, employees
or agents that is not disclosed in the 8-K Filing. In addition, effective upon
the 8-K Filing, the Company acknowledges and agrees that any and all
confidentiality or similar obligations under any agreement with respect to the
transactions contemplated by the Exchange Documents or as otherwise disclosed in
the 8-K Filing, 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 any of the Holder or any of its
affiliates, on the other hand, shall terminate. The Company shall not, and shall
cause each of its subsidiaries and each of their respective officers, directors,
employees and agents, not to, provide the Holder with any material, non-public
information regarding the Company or any of its subsidiaries from the date
hereof until the close of business on June 20, 2018. To the extent that the
Company delivers any material, non-public information to the Holder without the
Holder’s express prior written consent, the Company hereby covenants and agrees
that the Holder shall not have any duty of confidentiality to the Company, any
of its subsidiaries or any of their respective officers, directors, employees,
affiliates or agent with respect to, or a duty to the to the Company, any of its
Subsidiaries or any of their respective officers, directors, employees,
affiliates or agent or not to trade on the basis of, such material, non-public
information. The Company shall not disclose the name of the Holder in any
filing, announcement, release or otherwise, unless such disclosure is required
by law or regulation. The Company understands and confirms that the Holder will
rely on the foregoing representations in effecting transactions in securities of
the Company.

 

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(vii) The Company undertakes to promptly provide, at its own cost and expense,
to the transfer agent, with a copy to the Holder, all legal opinions (if any)
necessary for the Exchange Shares to be issued hereunder.

 

(viii) The Company shall promptly secure the listing or designation for
quotation (as applicable) of all of the Exchange Shares upon each trading market
upon which the Common Stock is then listed or designated for quotation (as
applicable). The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 5(viii).

 

(ix)       Subject to the provisions of this Section 5(ix), the Company will
indemnify and hold the Holder and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title), each Person who controls the Holder
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any
other title) of such controlling persons (each, a “Holder Party”) harmless from
any and all losses, liabilities, obligations, claims, contingencies, damages,
costs and expenses, including all judgments, amounts paid in settlements, court
costs and reasonable attorneys’ fees and costs of investigation that any such
Holder Party may suffer or incur as a result of or relating to (a) any breach of
any of the representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other document contemplated hereby (the
"Transaction Documents") or (b) any action instituted against the Holder Parties
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Holder Party, with
respect to the Transactions or any of the other transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such
Holder’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Holder Party may have with
any such stockholder or any violations by such Holder Party of state or federal
securities laws or any conduct by such Holder Party which constitutes fraud,
gross negligence or willful misconduct). If any action shall be brought against
any Holder Party in respect of which indemnity may be sought pursuant to this
Agreement, such Holder Party shall promptly notify the Company in writing, and
the Company shall have the right to assume the defense thereof with counsel of
its own choosing reasonably acceptable to the Holder Party. Any Holder Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Holder Party except to the extent that (i) the
employment thereof has been specifically authorized by the Company in writing,
(ii) the Company has failed after a reasonable period of time to assume such
defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of counsel, a material conflict on any material issue between
the position of the Company and the position of such Holder Party, in which case
the Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel. The Company will not be liable to any Holder
Party under this Agreement (y) for any settlement by a Holder Party effected
without the Company’s prior written consent, which shall not be unreasonably
withheld or delayed; or (z) to the extent, but only to the extent, that a loss,
claim, damage or liability is attributable to such Holder’s breach of any of the
representations, warranties, covenants or agreements made by such Holder in this
Agreement or in the other Transaction Documents. The indemnification required by
this Section 5(ix) shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or are incurred. The indemnity agreements contained herein shall be in
addition to any cause of action or similar right of any Holder Party against the
Company or others and any liabilities the Company may be subject to pursuant to
law.

 

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(x) Other than in respect of an Exempt Issuance, from the date hereof until 4:00
p.m., New York City Time, on June 18, 2018, neither the Company nor any
subsidiary shall issue, enter into any agreement to issue or announce the
issuance or proposed issuance of any shares of Common Stock, Options and/or
Convertible Securities (as defined in the Warrants). As used herein, "Exempt
Issuance" means the issuance of (a) shares of Common Stock or options to
employees, officers or directors of the Company pursuant to any stock or option
plan duly adopted for such purpose, by a majority of the non-employee members of
the Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose for services rendered to the
Company, (b) shares of Common Stock upon the exchange of the Warrants being
exchanged hereunder (and the Warrants being exchanged by Other Holders),
provided that the terms of any such exchange has not been amended since the date
of this Agreement, and (c) securities upon the exercise or exchange of or
conversion of any securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this Agreement,
provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the exercise
price, exchange price or conversion price of such securities (other than in
connection with stock splits or combinations) or to extend the term of such
securities.

 

6.       Miscellaneous.

 

(i)       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: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party) or by electronic mail; or (iii) one business day after deposit
with an overnight courier service, in each case properly addressed to the party
to receive the same. The addresses, facsimile numbers and email addresses for
such communications shall be:

 

If to the Company:

Workhorse Group Inc.

100 Commerce Drive

Loveland, OH 045140

Attn: Stephen S. Burns, CEO

Fax No: 513-900-8845

E-mail: steve.burns@workhorse.com

 

If to the Holder, to the Holder’s address or e-mail address set forth on the
signature page hereto, or to such other address, facsimile number and/or 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)
mechanically or electronically generated by the sender’s facsimile machine or
email containing the time, date, recipient facsimile number and an image of the
first page of such transmission 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.

 

(ii)       This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
negotiations, letters and understandings relating to the subject matter hereof
and are fully binding on the parties hereto.

(iii)       This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument. This Agreement may be
executed and accepted by facsimile or PDF signature and any such signature shall
be of the same force and effect as an original signature.

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(iv)       The terms of this Agreement shall be binding upon and shall inure to
the benefit of each of the parties hereto and their respective successors and
assigns.

(v)       This Agreement may not be amended or modified except in writing signed
by each of the parties hereto.

 

(vi)       Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.

 

(vii)       Neither the Company nor the Holder has paid or given, or will pay or
give, to any person, any commission, fee or other remuneration, directly or
indirectly, in connection with the transactions contemplated by this Agreement.

 

(ix)       All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York. Each party 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 with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such
action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such action or proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for 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 other manner
permitted by law. If any party hereto shall commence an action or proceeding to
enforce any provisions of this Agreement, then, the prevailing party in such
action or proceeding shall be reimbursed by the non-prevailing party for its
reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

 

(x)       The obligations of the Holder under this Agreement are several and not
joint with the obligations of any Other Holder, and the Holder shall not be
responsible in any way for the performance of the obligations of any Other
Holder under any Other Agreement. Nothing contained herein or in any Other
Agreement, and no action taken by the Holder pursuant hereto, shall be deemed to
constitute the Holder and Other Holders as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Holder and Other Holders are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by this Agreement
or any Other Agreement and the Company acknowledges that, to the best of its
knowledge, the Holder and the Other Holders are not acting in concert or as a
group with respect to such obligations or the transactions contemplated by this
Agreement or any Other Agreement. The Company and the Holder confirm that the
Holder has independently participated in the negotiation of the transactions
contemplated hereby with the advice of its own counsel and advisors. The Holder
shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement, and it shall not
be necessary for any Other Holder to be joined as an additional party in any
proceeding for such purpose.

 

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(xi)       The parties hereto herby acknowledge and agree that each Other
Agreement shall not in any way be construed as the Holder or any Other Holder
acting in concert or as a group with respect to the purchase, disposition or
voting of securities of the Company or otherwise. The Company hereby represents
and warrants as of the date hereof and covenants and agrees that, during the
period commencing on the date hereof until the one year anniversary of the date
hereof, none of the terms offered to any Person with respect to the
Transactions, including, without limitation with respect to any consent,
release, amendment, settlement, or waiver relating to the Transactions or any
Other Warrant (each an “Settlement Document”), is or will be more favorable to
such Person (other than any reimbursement of legal fees) than those of the
Holder and this Agreement. If, and whenever on or after the date hereof, the
Company enters into a Settlement Document, then the terms and conditions of this
Agreement shall be, without any further action by the Holder or the Company,
automatically amended and modified in an economically and legally equivalent
manner such that the Holder shall receive the benefit of the more favorable
terms and/or conditions (as the case may be) set forth in such Settlement
Document, provided that upon written notice to the Company at any time the
Holder may elect not to accept the benefit of any such amended or modified term
or condition, in which event the term or condition contained in this Agreement
shall apply to the Holder as it was in effect immediately prior to such
amendment or modification as if such amendment or modification never occurred
with respect to the Holder. The provisions of this Section 5(o) shall apply
similarly and equally to each Settlement Document.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date provided above.

  THE COMPANY       WORKHORSE GROUP INC.     By:                    

Name:
Title:

 

 

[COMPANY SIGNATURE PAGE TO EXCHANGE AGREEMENT]

 

HOLDER                 Holder Name                 Authorized Person (signature)
                Authorized Person (print name),                 Title          
      Number of shares underlying Warrant                 Number of Exchange
Shares                 Address for Notice to Holder:              

Instructions for delivery of Exchange Shares:

 

DTC Participant:       DTC Number:       Account Number:  

 

[HOLDER SIGNATURE PAGES TO EXCHANGE AGREEMENT]