Material Event - Form 8-K

Item 1.01. Entry into a Material Definitive Agreement.

Securities Purchase Agreement

As previously disclosed, on March 15, 2024, Workhorse Group Inc. (the "Company") entered into a securities purchase agreement (the "Securities Purchase Agreement") with an institutional investor (the "Investor") under which the Company agreed to issue and sell, in one or more registered public offerings by the Company directly to the Investor, (i) senior secured convertible notes for up to an aggregate principal amount of $139,000,000 (the "Notes") that will be convertible into shares of the Company's common stock, par value of $0.001 per share (the "Common Stock") and (ii) warrants (the "Warrants") to purchase shares of Common Stock in multiple tranches over a period beginning on March 15, 2024. Pursuant to the Securities Purchase Agreement, on May 10, 2024, the Company issued and sold to the Investor a (i) Note in the original principal amount of $6,285,714 (the "First Additional Note") and (ii) Warrant to purchase up to 36,785,453 shares of Common Stock (the "First Additional Warrant"). Refer to the Company's Current Report on Form 8-K filed on March 15, 2024 for additional information related to the Securities Purchase Agreement, the Notes, and the Warrants. The First Additional Note was issued pursuant to the Company's Indenture between the Company and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"), dated December 27, 2023 (the "Base Indenture"), and a Third Supplemental Indenture to be entered into between the Company and the Trustee (together with the Base Indenture, the "Indenture").

As previously disclosed, on March 15, 2024, the Company issued and sold to the Investor (i) a Note in original principal amount of $9,000,000 (the "Initial Note") and (ii) a Warrant to purchase up to 31,992,890 shares of Common Stock (the "Initial Warrant") pursuant to the Securities Purchase Agreement and a prospectus supplement filed on March 15, 2024. As of the date hereof, the Initial Note has been fully converted into shares of our common stock and is no longer outstanding, and no shares have been issued pursuant to the Initial Warrant. Upon our filing of one or more additional prospectus supplements, and our satisfaction of certain other conditions, the Securities Purchase Agreement contemplates additional closings of up to $123,714,286 in aggregate principal amount of additional Notes and a corresponding Warrant pursuant to the Securities Purchase Agreement as further described on our Current Report on Form 8-K filed on March 15, 2024. The description of the Securities Purchase Agreement, form of Note, form of Warrant, Indenture, Security Agreement and Subsidiary Guarantee contained therein are hereby incorporated by reference herein in its entirety.

No Note may be converted and no Warrant may be exercised to the extent that such conversion or exercise would cause the then holder of such Note or Warrant to become the beneficial owner of more than 4.99%, or, at the option of such holder, 9.99% of the Company's then outstanding Common Stock, after giving effect to such conversion or exercise (the "Beneficial Ownership Cap").

Notes

Like the Initial Note, the First Additional Note was issued with original issue discount of 12.5%, resulting in $5,500,000 of proceeds to the Company before fees and expenses.The First Additional Note is senior, secured obligations of the Company, ranking senior to all other unsecured indebtedness, subject to certain limitations and are unconditionally guaranteed by each of the Company's subsidiaries, pursuant to the terms of a certain security agreement and subsidiary guarantee.

Like the Initial Note, the First Additional Note bears interest at a rate of 9.0% per annum, payable in arrears on the first trading day of each calendar quarter, at the Company's option, either in cash or in-kind by compounding and becoming additional principal. Upon the occurrence and during the continuance of an event of default, the interest rate will increase to 18.0% per annum. Unless earlier converted or redeemed, the First Additional Note will mature on the one-year anniversary of the date hereof, subject to extension at the option of the holders in certain circumstances as provided in the First Additional Note.