Document:

Exhibit 4.1

 

SECURITIES
PURCHASE AGREEMENT

 

SECURITIES
PURCHASE AGREEMENT (this “Agreement”), dated as of January 10, 2017, by and among Workhorse Group Inc., a Nevada
corporation, with headquarters located at 100 Commerce Drive, Loveland, Ohio 45140 (the “Company”), and the
purchaser set forth on the signature pages hereto (the “Buyer”).

 

WHEREAS:

 

A. The
Company and the Buyer are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded
by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”
or “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”);

 

B. Buyer
desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement 6% convertible
debentures of the Company, in the form attached hereto as Exhibit “A”, in the aggregate principal amount of
Two Million Dollars ($2,000,000) (the “Debenture”), convertible into shares of common stock, par value $0.0001
per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions
set forth in such Debentures.

 

C. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, the Debenture; and

 

NOW
THEREFORE, the Company and the Buyer hereby agree as follows:

 

1. PURCHASE
AND SALE OF THE DEBENTURE.

 

a. Purchase
of Debenture. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees
to purchase from the Company the Debenture.

 

b. Form
of Payment. On the Closing Date (as defined below), (i) Buyer shall pay the purchase price for the Debenture (the “Purchase
Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written
wiring instructions, against delivery of the Debenture in the principal amount equal to the Purchase Price, and (ii) the Company
shall deliver such Debenture duly executed on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

 

c. Closing
Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below,
the date and time of the issuance and sale of the Debenture pursuant to this Agreement (the “Closing Date”)
shall be 12:00 noon, Eastern Time on January 10, 2017 or such other mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed
to by the parties.

 

     

    

    

 

2. BUYER’S
REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants to the Company that:

 

a. Investment
Purpose. As of the date hereof, the Buyer is purchasing the Debenture and the shares of Common Stock issuable upon conversion
of the Debentures (such shares of Common Stock issuable in connection with the Debentures being referred to herein as the “Conversion
Shares” and, collectively with the Debentures, the “Securities”) for its own account and not with
a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration
under the 1933 Act.

 

b. Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation
D (an “Accredited Investor”).

 

c. Reliance
on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Securities.

 

d. Governmental
Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.

 

e. Transfer
or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered
under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities
are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions
to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration,
which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined
in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell
or otherwise transfer the Securities only in accordance with this Section 2(e) and who is an Accredited Investor, (d) the Securities
are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule)
(“Regulation S”), and the Buyer shall have delivered to the Company an opinion of counsel that shall be in
form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the
Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company
nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder. Notwithstanding the foregoing or anything else contained herein
to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending
arrangement.

 

    	 	2	 

    

    

 

f. Legends.
The Buyer understands that the Debenture and, until such time as the Conversion Shares have been registered under the 1933 Act
or otherwise may be sold pursuant to Rule 144, the Conversion Shares may bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

 

“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE COMPANY
SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS
OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.”

 

The
legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Securities
upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Securities are registered
for sale under an effective registration statement filed under the 1933 Act, or (b) such holder provides the Company with an opinion
of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public
sale or transfer of such Securities may be made without registration under the 1933 Act, which opinion shall be accepted by the
Company so that the sale or transfer is effected or (c) such holder provides the Company with reasonable assurances that such
Securities can be sold pursuant to Rule 144 or Regulation S. The Buyer agrees to sell all Securities, including those represented
by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if
any.

 

g. Authorization;
Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered
on behalf of the Buyer, and this Agreement constitutes valid and binding agreements of the Buyer enforceable in accordance with
their terms.

 

h. Residency.
The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.

 

    	 	3	 

    

    

 

3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Buyer that:

 

a. Organization
and Qualification. The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated
and conducted. “Subsidiary” and “Subsidiaries” shall mean any corporation or other entity
of which at least a majority of the securities or other ownership interests having ordinary voting power (absolutely or contingently)
for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the
Company and/or any of its other Subsidiaries.

 

b. Authorization;
Enforcement. The Company has all requisite corporate power and authority to enter into and perform this Agreement.

 

c. Capitalization.
The capitalization of the Company is as set forth in the Commission Documents (as defined below).

 

d. Issuance
of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Debenture.

 

e. Acknowledgment
of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance
of the Conversion Shares.

 

f. Bad
Actor Representation. None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer,
other officer of the Company participating in the offering, any beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under
the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”
and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification
Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person
is subject to a Disqualification Event.

 

g. Litigation.
There is no action, suit, proceeding, or investigation (including without limitation any suit, proceeding, or investigation
involving the prior employment of any of the Company’s employees, their use in connection with the Company’s business
of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements
with prior employers) pending or, to the best of the Company’s knowledge, currently threatened before any court, administrative
agency, or other governmental body. The Company is not a party or subject to, and none of its assets is bound by, the provisions
of any order, writ, injunction, judgment, or decree of any court or government agency or instrumentality. There is no action,
suit, or proceeding by the Company currently pending or that the Company intends to initiate.

 

    	 	4	 

    

    

 

h. Disclosure.
The Company has fully provided the Buyer with all the information that the Buyer has requested for deciding whether to purchase
the Securities and all material information that the Company believes is reasonably necessary to enable a reasonable Buyer to
make such decision. Neither this Agreement, nor any other agreements, statements or certificates made or delivered to Buyer in
connection herewith or therewith contains any untrue statement of a material fact or, when taken together, omits to state a material
fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading.

 

i. Shell
Company Status. During the previous twelve (12) months, the Company has not been a shell as such term is defined in Rule
144(i) under the Securities Act.

 

j. Commission
Documents, Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the Commission pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all
of the foregoing including filings incorporated by reference therein being referred to herein as the “Commission Documents”).
The Company has not provided to the Buyer any material non-public information or other information which, according to applicable
law, rule or regulation, was required to have been disclosed publicly by the Company but which has not been so disclosed, other
than (i) with respect to the transactions contemplated by this Agreement, or (ii) pursuant to a non-disclosure or confidentiality
agreement signed by the Buyer. At the time of the respective filings, the Commission Documents complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such documents. As of their respective filing dates, none of the Commission
Documents contained any untrue statement of a material fact; and none omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the Commission Documents (the “Financial Statements”) comply
as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission
or other applicable rules and regulations with respect thereto. The Financial Statements have been prepared in accordance with
United States generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in the Financial Statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present
in all material respects the consolidated financial position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments)

 

k. No
Material Adverse Effect. Since September 30, 2016, neither the Company, nor any Subsidiary has experienced or suffered
any Material Adverse Effect. For the purposes of this Agreement, “Material Adverse Effect” means any of (i)
a material and adverse effect on the legality, validity or enforceability of this Agreement or the other Transaction Documents,
(ii) a material adverse effect on the business, operations, properties, or financial condition of the Company, its Subsidiaries,
individually, or in the aggregate and/or any condition, circumstance, or situation that would prohibit or otherwise materially
interfere with the ability of the Company to perform any of its obligations under this Agreement or the other Transaction Documents
in any material respect or (iii) an adverse impairment to the Company’s ability to perform on a timely basis its obligations
under this Agreement or the other Transaction Document.

 

    	 	5	 

    

    

 

l. Compliance
with Law. The Company and its Subsidiaries have all material franchises, permits, licenses, consents and other governmental
or regulatory authorizations and approvals necessary for the conduct of their respective business as now being conducted by it
unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations
and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

m. Compliance.
Except as set forth in the in Schedule 3(r), the Company: (i) is not in default under or in violation of (and no event
has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company), nor
has the Company received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether
or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator
or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection,
occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not
have or reasonably be expected to result in a Material Adverse Effect.

 

n. No
Violation. The business of the Company and any Subsidiary is not being conducted in violation of any federal, state,
local or foreign governmental laws, or rules, regulations and ordinances of any governmental entity, except for possible violations
which singularly or in the aggregate could not reasonably be expected to have a Material Adverse Effect. The Company is not required
under federal, state, local or foreign law, rule or regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under
the Transaction Documents, or issue and sell the Debentures, the Warrants or Conversion Shares in accordance with the terms hereof
or thereof (other than (x) any consent, authorization or order that has been obtained as of the date hereof, (y) any filing or
registration that has been made as of the date hereof or (z) any filings which may be required to be made by the Company with
the Commission or state securities administrators subsequent to the Closing).

 

o. No
Conflicts. The execution, delivery and performance of this Agreement and the Transaction Documents by the Company and
the consummation by the Company of the transactions contemplated herein and therein do not and will not (i) violate any provision
of the Articles or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company or any
Subsidiary is a party or by which it or its properties or assets are bound, (iii) create or impose a lien, mortgage, security
interest, pledge, charge or encumbrance (collectively, “Lien”) of any nature on any property of the Company
or any Subsidiary under any agreement or any commitment to which the Company or any Subsidiary is a party or by which the Company,
or any Subsidiary is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of
any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any Subsidiary or by which any property or asset of the Company, or any Subsidiary
are bound or affected, provided, however, that, excluded from the foregoing in all cases are such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material
Adverse Effect.

 

    	 	6	 

    

    

 

4. COVENANTS.

 

a. Best
Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Section 6 and
7 of this Agreement.

 

b. Blue
Sky Laws. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine
is necessary to qualify the Securities for sale to the Buyer at the applicable closing pursuant to this Agreement under applicable
securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification),
and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.

 

c. Use
of Proceeds. The Company shall use the proceeds from the sale of the Debentures for working capital purposes.

 

d. Securities
Compliance. The Company shall notify the Commission in accordance with its rules and regulations, of the transactions
contemplated by this Agreement and the Transaction Documents, including filing a Form D with respect to the Securities, as required
under Regulation D and applicable “blue sky” laws if such Securities are offered pursuant to Rule 506 of Regulation
D and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation,
for the legal and valid issuance of the Debentures and Conversion Shares to the Buyer or subsequent holders.

 

e. No
Integrated Offerings. The Company shall not make any offers or sales of any security (other than the securities being
offered or sold hereunder) under circumstances that would require registration of the securities being offered or sold hereunder
under the Securities Act.

 

5. INDEMNITY.

 

a. General
Indemnity. The Company agrees to indemnify and hold harmless the Buyer (and their respective directors, officers, managers,
partners, members, shareholders, affiliates, agents, successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements)
incurred by the Buyer as a result of any material breach of the material representations, warranties or covenants made by the
Company herein. Buyer severally but not jointly agrees to indemnify and hold harmless the Company and its directors, officers,
affiliates, agents, successors and assigns from and against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Company
as a result of any breach of the representations, warranties or covenants made by the Buyer herein. The maximum aggregate liability
of the Buyer pursuant to its indemnification obligations under this Section 5 shall not exceed the portion of the Purchase Price
paid by the Buyer hereunder. In no event shall any “Indemnified Party” (as defined below) be entitled to recover consequential
or punitive damages resulting from a breach or violation of this Agreement.

 

    	 	7	 

    

    

 

b. Indemnification
Procedure. Any party entitled to indemnification under this Section 5 (an “Indemnified Party”) will
give written notice to the indemnifying party of any matters giving rise to a claim for indemnification; provided, that
the failure of any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying
party of its obligations under this Section 5 except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any action, proceeding or claim is brought against an Indemnified Party in respect of which indemnification
is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the reasonable judgment of the
Indemnified Party a conflict of interest between it and the indemnifying party may exist with respect of such action, proceeding
or claim, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. In the event that the indemnifying
party advises an Indemnified Party that it will contest such a claim for indemnification hereunder, or fails, within thirty (30)
days of receipt of any indemnification notice to notify, in writing, such person of its election to defend, settle or compromise,
at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such
defense), then the Indemnified Party may, at its option, defend, settle or otherwise compromise or pay such action or claim. In
any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the Indemnified Party’s costs and expenses arising out of the defense, settlement or compromise of
any such action, claim or proceeding shall be losses subject to indemnification hereunder. The Indemnified Party shall cooperate
fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying
party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party which relates
to such action or claim. The indemnifying party shall keep the Indemnified Party fully apprised at all times as to the status
of the defense or any settlement negotiations with respect thereto. If the indemnifying party elects to defend any such action
or claim, then the Indemnified Party shall be entitled to participate in such defense with counsel of its choice at its sole cost
and expense. The indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall be liable for any settlement if
the indemnifying party is advised of the settlement but fails to respond to the settlement within thirty (30) days of receipt
of such notification. Notwithstanding anything in this Section 5 to the contrary, the indemnifying party shall not, without the
Indemnified Party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect
thereof which imposes any future obligation on the Indemnified Party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the Indemnified Party of a release from all liability in respect of such claim.
The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar rights of the Indemnified
Party against the indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to pursuant to the
law.

 

    	 	8	 

    

    

 

6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL. The obligation of the Company hereunder to issue and sell the Debenture to
the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto,
provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole
discretion:

 

a. The
Buyer shall have executed this Agreement and delivered the same to the Company.

 

b. The
Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

 

c. The
representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

 

d. No
litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this
Agreement.

 

7. CONDITIONS
TO THE BUYER’S OBLIGATION TO PURCHASE. The obligation of the Buyer hereunder to purchase the Debentures at the Closing
is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions
are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

 

a. The
Company shall have executed this Agreement and delivered the same to the Buyer.

 

b. The
Company shall have delivered to the Buyer the duly executed Debenture in accordance with Section 1(b) above.

 

c. The
representations and warranties of the Company shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

 

    	 	9	 

    

    

 

d. No
litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this
Agreement.

 

8. GOVERNING
LAW; MISCELLANEOUS.

 

a. Governing
Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES
HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN CINCINNATI, OHIO WITH RESPECT
TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.
BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY
WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS’
FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

 

b. Counterparts;
Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

 

c. Headings.
The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation
of, this Agreement.

 

d. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.

 

    	 	10	 

    

    

 

e. Entire
Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement
may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement.

 

f. Notices.
Any notices required or permitted to be given under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a recognized overnight delivery service) or by facsimile
and shall be effective five days after being placed in the mail, if mailed by regular United States mail, or upon receipt, if
delivered personally or by courier (including a recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:

 

	If
    to the Company, to:	Workhorse
    Group Inc.
	 	100
    Commerce Drive
	 	Loveland,
    OH 45140
	 	Attention: Julio
    Rodriguez, CFO
	 	 
	With
    a copy to:	Fleming,
        PLLC

        Attn:
        Stephen Fleming

	 	49
        Front Street, Suite 206

        Rockville
        Centre, NY 11570

	 	Telephone: (516)
    833-5034
	 	Facsimile: (516)
    977-1029

 

If
to the Buyer(s), to the address set forth on the signature page. Each party shall provide notice to the other party of any change
in address.

 

g. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company and the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to
any person that purchases Securities in a private transaction from a Buyer or to any of its “affiliates,” as that
term is defined under the 1934 Act, without the consent of the Company.

 

h. Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

    	 	11	 

    

    

 

IN
WITNESS WHEREOF, the Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

 

COMPANY:

 

WORKHORSE
GROUP INC.

 

	By:	/s/
    Julio Rodriguez	 
	Name:	Julio
    Rodriguez	 
	Title:	Chief
    Financial Officer	 

 

BUYER:

 

	By:	/s/
    Joseph T. Lukens	 
	Name:	Joseph
    T. Lukens	 
	Title:	 	 

 

ADDRESS:

 

 

12Exhibit 4.2

 

THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”)
SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN
VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. 

 

Workhorse
Group Inc.

 

6% CONVERTIBLE DEBENTURE 

 

	$2,000,000.00	January 10, 2017

 

FOR VALUE RECEIVED, Workhorse Group
Inc., a Nevada corporation (the “Company”) with its principal executive office at 100 Commerce Drive, Loveland,
Ohio 45140, promises to pay to the order of JOSEPH T. LUKENS (the “Holder”) or registered assigns, on
the two year anniversary of the date hereof (the “Original Issue Date”), unless accelerated due to the occurrence
of an Event of Default (the earlier of such dates is referred to as the “Maturity Date”), the principal amount
of Two Million Dollars ($2,000,000.00) (the “Principal Amount”) and interest on the Principal Amount, in such
coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and
private debts. Interest on this Debenture shall accrue on the Principal Amount outstanding from time to time at a rate per annum
computed in accordance with Section 2 hereof. This Debenture may be prepaid by the Company without penalty. This Debenture is issued
pursuant to that certain Securities Purchase Agreement of the same date hereof (the “Agreement”).

 

1. Conversion.  

 

A. This
Debenture shall be convertible into shares of common stock of the Company, $0.001 par value per share (the “Common Stock”),
at the option of the Holder, in whole or in part at any time and from time to time, after the Original Issue Date. The number of
shares of Common Stock issuable upon a conversion hereunder equals the quotient obtained by dividing (x) the Principal Amount and
interest to be converted by (y) the Conversion Price (as defined herein). The Company shall deliver Common Stock certificates to
the Holder prior to the third (3rd) trading day after a Conversion Date.

 

B. The Holder shall effect
conversions by delivering to the Company a completed notice in the form attached hereto as Exhibit A (a “Conversion Notice”).
The date on which a Conversion Notice is delivered is the “Conversion Date.” Unless the Holder is converting
the entire principal amount outstanding under this Debenture, the Holder is not required to physically surrender this Debenture
to the Company in order to effect conversions. Conversions hereunder shall have the effect of lowering the outstanding principal
amount of this Debenture plus all accrued and unpaid interest thereon in an amount equal to the applicable conversion. The Holder
and the Company shall maintain records showing the principal amount converted and the date of such conversions. In the event of
any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.

 

C. The Holder is entitled,
at its option, to convert, and sell on the same day, at any time, until payment in full of this Debenture, all or any part of the
principal amount of the Debenture, plus accrued interest, into shares of the Company’s common stock, par value $0.0001 per
share, at the price per share equal to $6.42 (the “Conversion Price”).

 

    	 	1	 

    

    

 

D.
Upon the closing of any future equity, convertible equity or convertible debt financing of the Company of at least $5,000,000
(a “Financing”) all unpaid principal and accrued but unpaid interest hereunder shall automatically convert
into the same securities offered in the Financing.

 

2. Computation
of Interest.

 

A. Base
Interest Rate; Payment of Interest. The outstanding Principal Amount shall bear interest at the rate of 6.0% per annum. Interest
shall be based on a 360 day year. Accrued interest will be due and payable on the Maturity Date.

 

B. Maximum
Rate. In the event that it is determined that, under the laws relating to usury applicable to the Company or the indebtedness
evidenced by this Debenture (“Applicable Usury Laws”), the interest charges and fees payable by the Company
in connection herewith or in connection with any other document or instrument executed and delivered in connection herewith cause
the effective interest rate applicable to the indebtedness evidenced by this Debenture to exceed the maximum rate allowed by law
(the “Maximum Rate”), then such interest shall be recalculated for the period in question and any excess over
the Maximum Rate paid with respect to such period shall be credited, without further agreement or notice, to the Principal Amount
outstanding hereunder to reduce said balance by such amount with the same force and effect as though the Company had specifically
designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free
prepayment. All such deemed prepayments shall be applied to the principal balance payable at maturity. In no event shall any agreed-to
or actual exaction as consideration for this Debenture exceed the limits imposed or provided by Applicable Usury Laws in the jurisdiction
in which the Company is resident applicable to the use or detention of money or to forbearance in seeking its collection in the
jurisdiction in which the Company is resident.

 

3. Stock
Dividends and Stock Splits. If the Company, at any time while this Debenture is outstanding: (A) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any securities of the Company
which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock (collectively, “Common Stock Equivalents”); (B)
subdivides outstanding shares of Common Stock into a larger number of shares; (C) combines (including by way of a reverse stock
split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues, in the event of a reclassification of
shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding
immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately
after such event. Any adjustment made pursuant to this Section 3 shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re classification.

 

4. Affirmative
Covenants. The Company covenants and agrees that, so long as this Debenture shall be outstanding, it will perform the obligations
set forth in this Section 4:

 

A. Maintenance
of Existence. The Company will do or cause to be done all things reasonably necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and comply with all laws applicable to the Company, except where the failure
to comply would not have a material adverse effect on the Company; and

 

    	 	2	 

    

    

 

B. Books
and Records. The Company will at all times keep true and correct books, records and accounts reflecting its business affairs.
Such books and records shall be open at reasonable times and upon reasonable notice to the inspection of the Holder or its agents.

 

5. Events
of Default

 

A. The
term “Event of Default” shall mean any of the events set forth in this Section 5.A.:

 

(i)Non-Payment of Obligations.
The Company shall default in the payment of the Principal Amount or accrued interest of this Debenture as and when the same shall
become due and payable, whether by acceleration or otherwise.

 

(ii)Non-Performance
of Affirmative Covenants. The Company shall materially default in the due observance or performance of any covenant set forth
in Section 4.

 

(iii)Bankruptcy, Insolvency,
etc. The Company shall:

 

(a) apply
for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Company, or make
a general assignment for the benefit of creditors; or

 

(b) permit
or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Company, and, if such
case or proceeding is not commenced by the Company or converted to a voluntary case, such case or proceeding shall be consented
to or acquiesced in by the Company or shall result in the entry of an order for relief.

 

B. Action
if Bankruptcy. If any Event of Default described in clause (iii) of Section 5.A. shall occur, the outstanding Principal Amount
of this Debenture and all other obligations hereunder shall automatically be and become immediately due and payable, without notice
or demand.

 

C. Action
if Other Event of Default. If any Event of Default (other than any Event of Default described in clause (iii) of Section 5.A.)
shall occur for any reason, whether voluntary or involuntary, and be continuing, for thirty (30) days after written notice thereof
by Holder to the Company, during which period such Event of Default is not cured, the Holder may, upon notice to the Company, declare
all or any portion of the outstanding Principal Amount of the Debenture, together with interest accrued thereon, to be due and
payable and any or all other obligations hereunder to be due and payable, whereupon the full unpaid principal amount hereof, such
accrued interest and any and all other such obligations which shall be so declared due and payable shall be and become immediately
due and payable, without further notice, demand, or presentment.

 

6. Miscellaneous.

 

A. Parties
in Interest. All covenants, agreements and undertakings in this Debenture binding upon the Company or the Holder shall bind
and inure to the benefit of the successors and permitted assigns of the Company and the Holder, respectively, whether so expressed
or not.

 

    	 	3	 

    

    

 

B. Governing
Law; Forum. This Debenture shall be governed by the laws of the State of Ohio as applied to contracts entered into and to be
performed entirely within the State of Ohio and the parties consent to the jurisdiction of
the courts of the State of Ohio and the United States District Courts situated in Hamilton County, Ohio.

 

C. Waiver
of Jury Trial. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS DEBENTURE OR ANY OTHER DOCUMENT
OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
OR WRITTEN), OR ACTIONS OF THE HOLDER OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER PURCHASING THIS DEBENTURE.

 

D. Notice.
All notices shall be in writing, and shall be deemed given when actually delivered to a party at its address and in accordance
with the procedure set forth in the Agreement.

 

E. No
Waiver. No delay in exercising any right hereunder shall be deemed a waiver thereof, and no waiver shall be deemed to have
any application to any future default or exercise of rights hereunder.

 

    	 	4	 

    

    

 

IN WITNESS WHEREOF, this Debenture
has been executed and delivered on the date specified above by the duly authorized representative of the Company.

 

	 	WORKHORSE GROUP INC.
	 	 	 
	 	By:	/s/ Julio Rodriguez
	 	Name:	 Julio Rodriguez
	 	Title: 	Chief Financial Officer

 

    	 	5	 

    

    

 

EXHIBIT “A”

 

CONVERSION NOTICE

 

(To be executed by the Holder in order to Convert
the Debenture) 

 

	TO: 

 

The undersigned hereby irrevocably elects to convert
$__________________ of the principal amount of Debenture No. ____ into Shares of Common Stock of WORKHORSE GROUP INC., according
to the conditions stated therein, as of the Conversion Date written below.

 

	Conversion Date:	 
	Amount to be converted:	$        
	Conversion Price:	$        
	Number of shares of Common Stock to be issued:	 
	
        Amount of Debenture

        Unconverted:
	$          
	 	 
	 	 
	Please issue the shares of Common Stock in the following name and to the following address:
	Issue to:	 
	 	 
	Authorized Signature:	 
	Name:	 
	Title:	 
	Broker DTC Participant Code:	 
	Account Number:

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