Material Agreement 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 July 18, 2024, the Company issued and sold to the Investor a (i) Note in the original principal amount of $4,000,000 (the "Third Additional Note") and (ii) Warrant to purchase up to 2,715,777 shares of Common Stock (the "Third 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 Third 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 Fifth Supplemental Indenture, dated July 18, 2024, entered into between the Company and the Trustee (together with the Base Indenture, the "Indenture").

As previously disclosed, the Company has issued and sold to the Investor (i) Notes in aggregate original principal amount of $22,285,714 (the "Prior Notes") and (ii) Warrants to purchase up to 5,487,198 shares of Common Stock (the "Prior Warrants") pursuant to the Securities Purchase Agreement (following adjustment in connection with the Company's 1-for-20 reverse stock split, which became effective on June 17, 2024). As of July 17, 2024, $5,600,000 aggregate principal amount remains outstanding under the Notes, and no shares have been issued pursuant to the Warrants. 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 $112,714,286 in aggregate principal amount of additional Notes and a corresponding Warrant pursuant to the Securities Purchase Agreement as further described in 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 is 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 Prior Notes, the Third Additional Note was issued with original issue discount of 12.5%, resulting in $3,500,000 of proceeds to the Company before fees and expenses.The Third Additional Note is a senior, secured obligation of the Company, ranking senior to all other unsecured indebtedness, subject to certain limitations and is unconditionally guaranteed by each of the Company's subsidiaries, pursuant to the terms of a certain security agreement and subsidiary guarantee.

Like the Prior Notes, the Third 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 Third 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 Third Additional Note.

Like the Prior Notes, all amounts due under the Third Additional Note are convertible at any time, in whole or in part, and subject to the Beneficial Ownership Cap, at the option of the holders into shares of Common Stock at a conversion price equal to the lower of $1.1783 (the "Reference Price") or (b) the greater of (x) $0.3708 (the "Floor Price") and (y) 87.5% of the volume weighted average price of the Common Stock during the ten trading days ending and including the trading day immediately preceding the delivery or deemed delivery of the applicable conversion notice, as elected by the converting holder. The Reference Price and Floor Price are subject to customary adjustments upon any stock split, stock dividend, stock combination, recapitalization or similar event. The Reference Price is also subject to full-ratchet adjustment in connection with a subsequent offering at a per share price less than the Reference Price then in effect. Subject to the rules and regulations of Nasdaq, we have the right, at any time, with the written consent of the Investor, to lower the reference price to any amount and for any period of time deemed appropriate by our board of directors. Upon the satisfaction of certain conditions, we may prepay the Third Additional Note upon 15 business days' written notice by paying an amount equal to the greater of (i) the face value of the Third Additional Note at premium of 25% (or 75% premium, during the occurrence and continuance of an event of default, or in the event certain redemption conditions are not satisfied) and (ii) the equity value of the shares of Common Stock underlying the Third Additional Note. The equity value of the Common Stock underlying the Third Additional Note is calculated using the two greatest volume weighted average prices of our Common Stock during the period immediately preceding the date of such redemption and ending on the date we make the required payment.