Lordstown Motors Corp. filed SEC Form 8-K: Entry into a Material Definitive Agreement, Financial Statements and Exhibits
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| Item 1.01 | Entry into a Material Definitive Agreement |
As previously disclosed, on June 27, 2023 (the “Petition Date”), Lordstown Motors Corp., a Delaware corporation (the “Company”), Lordstown EV Corporation, a Delaware corporation (“Lordstown EV”) and Lordstown EV Sales LLC, a Delaware limited liability company (“Lordstown Sales,” and together with the Company and Lordstown EV, the “Selling Entities”) commenced voluntary proceedings under chapter 11 (“Chapter 11”) of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Chapter 11 proceedings are being jointly administered under the caption In re: Lordstown Motors Corp., et al., Cases No. 23-10831 through 23-10833 (the “Chapter 11 Cases”).
On the Petition Date, the Selling Entities filed a motion with the Bankruptcy Court seeking approval of (a) bidding procedures with respect to the marketing and sale of all, substantially all, or some of the Selling Entities’ assets (as may be amended, the “Bidding Procedures”), (b) one or more sales of all, substantially all, or some of the Selling Entities’ assets, and (c) certain related relief (the “Sale Motion”). On August 8, 2023, the Bankruptcy Court entered an order approving the Bidding Procedures (the “Bidding Procedures Order”). Among other things, the Bidding Procedures include dates, deadlines, and other requirements for the submission of “Qualified Bids” with respect to assets of the Selling Entities and provide for the conduct of an auction if the Selling Entities receive more than one Qualified Bid with respect to their assets.
The Selling Entities, with the assistance and advice of their professionals, have conducted a comprehensive marketing process for the sale of their assets consistent with the Bidding Procedures. In connection with that marketing and sale process, the Selling Entities received a Qualified Bid from LAS Capital LLC, a Delaware limited liability company (“LAS Capital”). On September 29, 2023, the Selling Entities entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with LAS Capital and Mr. Stephen S. Burns, an individual, as guarantor of certain obligations of LAS Capital under the Asset Purchase Agreement. Mr. Burns, whom the Selling Entities understand is the majority equityholder of LAS Capital, was the founder and former Chief Executive Officer and a member of the board of directors of the Company. Additionally, Mr. Julio Rodriguez, whom the Selling Entities understand is one of the indirect managers of LAS Capital, was the former Chief Financial Officer of the Company. Each of Mr. Burns and Mr. Rodriguez resigned from his respective position, as of June 14, 2021, and, each ceased being employed by and has had no management role with the Company since that time. In connection with the Selling Entities’ sale process, LAS Capital, including Mr. Burns and Mr. Rodriguez, have not had and do not currently have any affiliation with the Company, other than as a third party bidder in the Selling Entities’ Bankruptcy Court approved sale process.
Pursuant to the Asset Purchase Agreement, subject to the approval of the Bankruptcy Court and upon the terms and subject to the conditions set forth in the Asset Purchase Agreement, LAS Capital has agreed to acquire specified assets of the Selling Entities related to the design, production and sale of electric light duty vehicles focused on the commercial fleet market (collectively, the “Assets”) free and clear of liens, claims, encumbrances, and other interests, and assume certain specified liabilities of the Selling Entities (collectively, the “Liabilities” and such acquisition of the Assets and assumption of the Liabilities together, the “Transaction”) for a total purchase price of $10 million in cash (the “Purchase Price”). LAS Capital has deposited 10% of the Purchase Price into an escrow account as a good faith deposit which amount will either (i) be credited to the Purchase Price payable at the closing and released to the Selling Entities, (ii) be released to the Selling Entities upon the termination of the Asset Purchase Agreement in certain circumstances in which LAS Capital has breached the Asset Purchase Agreement, or (iii) be released to LAS Capital if the Asset Purchase Agreement is terminated for other reasons. If the Asset Purchase Agreement is terminated in certain circumstances in which LAS Capital has breached the Asset Purchase Agreement, LAS Capital will also be required to pay the Selling Entities a termination fee of $4,000,000. Mr. Burns has guaranteed the obligations of LAS Capital under the Asset Purchase Agreement, subject to a cap on such guarantee equal to the Purchase Price plus expenses incurred enforcing the terms of the Asset Purchase Agreement. He is a party to the Asset Purchase Agreement solely for the purpose of such guarantee and certain other specified provisions.
The Asset Purchase Agreement contains customary representations, warranties and covenants of the parties for a transaction involving the acquisition of assets from a debtor in bankruptcy. None of the representations, warranties or pre-closing covenants contained in the Asset Purchase Agreement survive the closing nor does the Asset Purchase Agreement provide for indemnification for any breach of such representations, warranties or covenants. The completion of the Transaction is subject to a number of customary conditions, which, among others, include the entry of an order of the Bankruptcy Court authorizing and approving the Transaction, the performance by each party of its obligations under the Asset Purchase Agreement and the accuracy of each party’s representations. The Asset Purchase Agreement contains certain termination rights for both the Company and LAS Capital, including the right to terminate the Asset Purchase Agreement if the Transaction is not consummated by October 31, 2023, or to the extent the board of directors of any of the Selling Entities determines that proceeding with the transactions contemplated by the Asset Purchase Agreement or failing to terminate the Asset Purchase Agreement would be inconsistent with its fiduciary duties. LAS Capital also has the right to terminate the Asset Purchase Agreement if the Sale Hearing (as defined below) does not occur on or before October 18, 2023, or if the Bankruptcy Court has not entered into the Sale Order (as defined below) on or before October 21, 2023.
Although the Selling Entities received several non-binding proposals for the purchase of specified assets, the Selling Entities through their Board determined that none of these other proposals was a Qualified Bid in accordance with the Bid Procedures and determined LAS Capital to be the successful bidder under the Bidding Procedures. As a result, the Selling Entities have cancelled the auction in accordance with the Bidding Procedures are seeking the Bankruptcy Court’s approval of the Asset Purchase Agreement and the Transaction in accordance with the Sale Motion (the “Sale Order”). A hearing before the Bankruptcy Court to consider approval of the Sale Motion, the Asset Purchase Agreement, and the Transaction (the “Sale Hearing”) is currently scheduled for October 18, 2023.
The foregoing summary of the Asset Purchase Agreement is not complete and is qualified in its entirety by reference to the full text of the Asset Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The representations, warranties and covenants set forth in the Asset Purchase Agreement have been made only for purposes of the Asset Purchase Agreement and solely for the benefit of the parties thereto, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Asset Purchase Agreement instead of establishing these matters as facts. In addition, information regarding the subject matter of the representations and warranties made in the Asset Purchase Agreement may change after the date of the Asset Purchase Agreement. Accordingly, the Asset Purchase Agreement is included with this Current Report on Form 8-K only to provide investors with information regarding its terms and not to provide investors with any other factual information regarding the Company, its subsidiaries, the Assets or Liabilities, or the Company’s or its subsidiaries’ respective businesses as of the date of the Asset Purchase Agreement or as of any other date.
The Asset Purchase Agreement as well as other Bankruptcy Court filings and further information about the Chapter 11 Cases can be accessed free of charge at a website maintained by the Company’s claims, noticing, and solicitation agent, Kurtzman Carson Consultants LLC, at www.kccllc.net/lordstown. The information in that website or available elsewhere is not incorporated by reference and does not constitute part of this Form 8-K.
Cautionary Note Regarding Trading in the Company’s Class A Common Stock
The Company’s stockholders are cautioned that trading in shares of the Company’s Class A common stock during the pendency of the Chapter 11 Cases will be highly speculative and will pose substantial risks. The Company cannot be certain that holders of the Class A common stock will receive any payment or other distribution on account of those shares following the Chapter 11 Cases. As a result, the shares of Class A common stock may have little or no value. Trading prices for the Company’s Class A common stock may bear little or no relation to actual recovery, if any, by holders thereof in the Company’s Chapter 11 Cases. Accordingly, the Company urges extreme caution with respect to existing and future investments in its Class A common stock.
Forward-looking Statements
This report includes forward looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by words such as “feel,” “believes,” “expects,” “estimates,” “projects,” “intends,” “should,” “is to be,” “may,” or the negative of such terms, or other comparable terminology. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements contained herein due to many factors. With respect to the matters addressed in this report, those factors include, but are not limited to the risks and uncertainties regarding the ability of the Debtors to meet the closing conditions and successfully consummate the Asset Purchase Agreement, the Bankruptcy Court’s approval of the terms and conditions of, and the transactions contemplated by, the Asset Purchase Agreement. The Chapter 11 Cases remain subject to additional uncertainties, including regarding changes to the terms and conditions of the Proposed Plan and Proposed Disclosure Statement before they become final; the approvals required from the Bankruptcy Court and stakeholders that will be entitled to vote on the Proposed Plan; our ability to successfully complete the Chapter 11 Cases, including our ability to successfully market and sell all, substantially all or some of our assets pursuant to the Asset Purchase Agreement or otherwise, to successfully resolve litigation and other claims that may be filed against us, and to finish developing, negotiating, confirming and consummating the Proposed Plan or any Chapter 11 plan; our ability to obtain timely approval of the Bankruptcy Court with respect to our motions filed in the Chapter 11 Cases; the adverse impact of the Chapter 11 Cases on our business, financial condition and results of operations; the impact of the SEC investigation and any other pending or future litigation or claims asserted with respect to or by the Company, and possible claims by suppliers for our inability to meet obligations to them, the availability of insurance coverage with respect to such litigation or claims, adverse publicity with respect to these matters, as well as the significant ongoing costs associated with such litigation; the outcome of our efforts to market and sell our assets in connection with the Chapter 11 Cases and ability to realize value for such assets; our ability to retain key employees, and the costs associated therewith, to facilitate the Chapter 11 Cases, and the impact of the loss of employees on our prospects for realizing any value from any sale of our assets; risks regarding our limited liquidity and unlikely access to financing as we continue to incur significant costs during and in connection with, the Chapter 11 Cases, have significant known and contingent liabilities and claims for which we will continue to incur legal costs and may be subject to significant uninsured losses, face uncertainty as to the ability to realize value through the sale of our assets and litigation claims, and other claims that may be filed against us, lack any meaningful revenue stream and do not expect an ongoing business following the Chapter 11 Cases; and the actions and decisions of our stakeholders and other third parties who have interests in our Chapter 11 Cases that may be inconsistent with our operational and strategic plans and adversely impact the Chapter 11 Cases or our ability to realize value from any of our assets.
In light of these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements and the periodic financial information reported to the Bankruptcy Court which is not presented in accordance with GAAP and may differ materially from information that has been or may in the future be provided in our periodic SEC filings and may reflect estimates based on assumptions that may change significantly during the course of the Chapter 11 Cases or due to other contingencies (and which is also subject to the further qualifications provided therein with respect thereto). Additional information on potential factors that could affect the Company and its forward-looking statements is included in the Company’s Form 10-K, Form 10-Q and subsequent filings with the SEC. All forward-looking statements are qualified in their entirety by this cautionary statement. Any forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this report.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit Number |
Description |
| 2.1 | Asset Purchase Agreement dated September 29, 2023 among the Selling Parties, LAS Capital LLC and Stephen S. Burns.* |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL) |
*The schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished to the SEC upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| LORDSTOWN MOTORS CORP. | ||
| By: | /s/ Adam Kroll | |
| Name: | Adam Kroll | |
| Date: September 29, 2023 | Title: | Chief Financial Officer |