STIPULATION OF SETTLEMENT – Form 8-K
| STIPULATION OF SETTLEMENT | |
|
This Document Relates To: |
This Stipulation of Settlement, dated
| 1 | All capitalized terms not otherwise defined are defined in section IV.1. |
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I. FACTUAL AND PROCEDURAL BACKGROUND
Workhorse is an electric vehicle manufacturer. The Company's flagship "next generation" all-electric C-Series vehicles are "last mile" delivery vehicles intended to take goods from logistics and distribution centers to final delivery addresses. The alleged wrongdoing primarily concerns alleged false and misleading statements regarding Workhorse's future business prospects, including its ability to win all, or a significant portion of, the
A. Proceedings in the Related Federal Securities Action
Workhorse, as well as certain of its current and now former officers, were named as defendants in a federal securities fraud class action, entitled Farrar v.
B. Proceedings in the Nevada State Court Derivative Action
On
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On
On
On
On
After the parties reached an agreement in principle to settle the Derivative Actions, on
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C. Proceedings in California Demand Futility Derivative Action
On
On
On
On
On
D. Proceedings in California Demand Refused Derivative Action
On
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On
On
On
On
E. Proceedings in Nevada Federal Court Derivative Action
On
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F. Proceedings in Ohio Derivative Action
On
On
On
On
G. The Extensive Settlement Negotiations
Plaintiffs' Counsel engaged in extensive settlement negotiations with the Individual Defendants and Defendants' Counsel over the course of several months.
On
On
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Over the next several months, the Settling Parties exchanged proposals and counter proposals and participated in multiple conference calls with Mediator Melnick. These extensive negotiations resulted in the execution on
The Settling Parties have expended significant time and resources participating in mediation and post-mediation conference calls and meetings during which the merits of the claims asserted in the Derivative Actions, as well as the defenses thereto, were extensively discussed between the Settling Parties and independently with Mediator Melnick.
The Settling Parties have now reached a definitive agreement to settle the Derivative Actions, upon the terms and subject to the conditions set forth in this Stipulation.
II. PLAINTIFFS' CLAIMS AND THE BENEFITS OF SETTLEMENT
Plaintiffs believe that the Derivative Actions have substantial merit, and Plaintiffs' entry into this Stipulation and Settlement is not intended to be and shall not be construed as an admission or concession concerning the relative strength or merit of the claims alleged in the Derivative Actions. However, Plaintiffs and Plaintiffs' Counsel recognize and acknowledge the significant risk, expense, and length of continued proceedings necessary to prosecute the Derivative Actions against the Individual Defendants through trial and possible appeals. Plaintiffs' Counsel are also mindful of the inherent risks of succeeding on the merits in derivative litigation, and the possible defenses to the claims alleged in the Derivative Actions.
Plaintiffs' Counsel have conducted extensive investigation and analysis, including, inter alia: (i) reviewing Workhorse's press releases, public statements,
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Based on Plaintiffs' Counsel's thorough review and analysis of the relevant facts, allegations, defenses, and controlling legal principles, Plaintiffs' Counsel believe that the Settlement set forth in this Stipulation is fair, reasonable, and adequate, and confers substantial benefits upon Workhorse. Based upon Plaintiffs' Counsel's evaluation, Plaintiffs have determined that the Settlement is in the best interests of Workhorse and have agreed to settle the Derivative Actions upon the terms and subject to the conditions set forth herein.
III. DEFENDANTS' DENIALS OF WRONGDOING AND LIABILITY
The Individual Defendants have denied and continue to deny each and all of the claims alleged by Plaintiffs in the Derivative Actions, and the Individual Defendants have expressly denied and continue to deny all charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts, or omissions alleged, or that could have been alleged in the Derivative Actions. The Individual Defendants believe that they have substantial defenses to the claims alleged against them in the Derivative Actions. The Individual Defendants believe that, at all relevant times, they acted in good faith, and in a manner they reasonably believed to be in the best interests of Workhorse and its stockholders. Nonetheless, Defendants have also taken into account the uncertainty and risks inherent in any litigation, especially in complex cases like the Derivative Actions. Defendants have, therefore, determined that it is in the best interests of Workhorse for the Derivative Actions to be settled in the manner and upon the terms and conditions set forth in this Stipulation.
Neither this Stipulation, nor any of its terms or provisions, nor entry of the Judgment, nor any document or exhibit referred or attached to this Stipulation, nor any action taken to carry out this Stipulation, is, may be construed as, or may be used as evidence of the validity of any of the Released Claims or an admission by or against the Individual Defendants of any fault, wrongdoing, or concession of liability.
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IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the undersigned counsel for the Settling Parties herein, in consideration of the benefits flowing to the Settling Parties from the Settlement, and subject to the approval of the Court, that the claims asserted in the Derivative Actions and the Released Claims shall be finally and fully compromised, settled, and released, and the Derivative Actions shall be dismissed with prejudice and with full preclusive effect as to all Settling Parties, upon and subject to the terms and conditions of this Stipulation, as set forth below.
1. Definitions
As used in this Stipulation, the following terms have the meanings specified below:
1.1 "Court" means the
1.2 "Current Workhorse Shareholders" means any Person who owned Workhorse common stock as of the date of the execution of this Stipulation and continues to hold their Workhorse common stock as of the date of the Settlement Hearing, excluding the Individual Defendants, the officers and directors of Workhorse, members of their immediate families, and their legal representatives, heirs, successors, or assigns, and any entity in which Individual Defendants have or had a controlling interest.
1.3 "Defendants" means, collectively, nominal defendant Workhorse and the Individual Defendants.
1.4 "Defendants' Counsel" means
1.5 "Derivative Actions" means collectively the derivative actions styled as In re
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1.6 "Effective Date" means the date by which the events and conditions specified in paragraph 6.1 of this Stipulation have been met and have occurred.
1.7 "Final" means the date upon which the last of the following shall occur with respect to the Judgment approving this Stipulation, substantially in the form of Exhibit E attached hereto: (1) the expiration of the time to file a notice of appeal from the Judgment; or (2) if an appeal has been filed, the
1.8 "Individual Defendants" means Defendants
1.9 "Judgment" means the Order and Final Judgment to be rendered by the Court, substantially in the form attached hereto as Exhibit E.
1.10 "Litigation Demands" means collectively, the demands served on Workhorse and/or members of its Board of Directors on behalf of stockholders
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1.11 "Notice" means the Notice of Pendency and Proposed Settlement of Shareholder Derivative Actions and of Settlement Hearing, substantially in the form attached hereto as Exhibit C.
1.12 "Person" means an individual, corporation, limited liability corporation, professional corporation, partnership, limited partnership, limited liability partnership, association, joint stock company, estate, legal representative, trust, unincorporated association, government or any political subdivision or agency thereof and any business or legal entity and their spouses, heirs, predecessors, successors, representatives, or assignees.
1.13 "Plaintiffs" means
1.14 "Plaintiffs' Counsel" means
1.15 "Related Persons" means: (i) a Person's spouses, marital communities, immediate family members, heirs, executors, personal representatives, estates, administrators, trusts, predecessors, successors, and assigns or other individual or entity in which any Person has a controlling interest, and each of their respective past and present officers, directors, employees, agents, affiliates, parents, subsidiaries, divisions, attorneys, accountants, auditors, advisors, insurers, co-insurers, re-insurers, heirs, executors, personal representatives, estates, administrators, trusts, predecessors, successors, and assigns; and (ii) with regard to Workhorse, all past or present agents, officers, directors, attorneys, accountants, auditors, advisors, insurers, co-insurers, reinsurers, partners, controlling shareholders, joint venturers, related or affiliated entities, advisors, employees, affiliates, predecessors, successors, parents, subsidiaries, insurers, and assigns for Workhorse.
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1.16 "Released Claims" means collectively, the Released Defendant Claims and the Released Plaintiff Claims.
1.17 "Released Defendant Claims" means any and all actions, suits, claims, debts, rights, liabilities, and causes of action of every nature and description, including both known and Unknown Claims (as defined in paragraph 1.26 below), whether arising under federal, state, common, or foreign law, that arise out of or relate in any way to the claims asserted in the complaints in the Derivative Actions or arise out of, or relate in any way to the institution, prosecution, or settlement of the claims against the Defendants, except for (i) any claims relating to the enforcement of the Settlement, or (ii) any claims by the Individual Defendants relating to insurance coverage or their right to indemnification.
1.18 "Released Defendant Persons" means, collectively, each and all of Individual Defendants, Workhorse, and each and all of the Related Persons of each of the Individual Defendants and Workhorse.
1.19 "Released Persons" means, collectively, the Released Defendant Persons and the Released Plaintiff Persons. "Released Person" means, individually, any of the Released Persons.
1.20 "Released Plaintiff Claims" means any and all actions, suits, claims, debts, rights, liabilities, and causes of action of every nature and description, including both known and Unknown Claims (as defined in paragraph 1.26 below), whether arising under federal, state, common, or foreign law, which exist derivatively on behalf of Workhorse, by Plaintiffs or any other shareholder of Workhorse that arise out of or relate in any way to the claims asserted or that could have been asserted in any of the complaints in the Derivative Actions or the Litigation Demands, or that arise out of, or relate in any way to the institution, prosecution, or settlement of the claims against the Defendants, except for any claims relating to enforcing the Settlement. Excluded from the term "Released Plaintiff Claims" are all claims alleged in the Securities Action.
1.21 "Released Plaintiff Persons" means each and all of the Plaintiffs and each and all of the Related Persons of each of the Plaintiffs.
1.22 "Securities Action" means the securities class actions styled as Farrar v.
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1.23 "Settlement" means the settlement and compromise of the Derivative Actions as provided for herein.
1.24 "Settlement Hearing" means the hearing or hearings at which the Court will review the adequacy, fairness, and reasonableness of the Settlement.
1.25 "Settling Parties" means, collectively, Plaintiffs and Defendants. "Settling Party" means, individually, any of the Settling Parties.
1.26 "Summary Notice" means the Summary Notice of Pendency and Proposed Settlement of Shareholder Derivative Actions and of Settlement Hearing, substantially in the form attached hereto as Exhibit D.
1.27 "Unknown Claims" means any Released Claim(s) that any Plaintiffs or Defendants do not know of or suspect to exist in his, her, or its favor at the time of the release of the Released Persons. With respect to any and all Released Claims, the Settling Parties agree that upon the Effective Date, the Settling Parties expressly waive the provisions, rights and benefits conferred by or under California Civil Code section 1542, or any other law of
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
The Settling Parties acknowledge that they may hereafter discover facts in addition to or different from those now known or believed to be true by them, with respect to the subject matter of the Released Claims, but it is the intention of the Settling Parties to completely, fully, finally, and forever compromise, settle, release, discharge, and extinguish any and all Released Claims, known or unknown, suspect or unsuspected, contingent or absolute, accrued or unaccrued, apparent or unapparent, which do now exist, or heretofore existed, or may hereafter exist, and without regard to the subsequent discovery of additional or different facts. The Settling Parties acknowledge that the foregoing waiver was separately bargained for and is a key element of this Stipulation of which this release is a part.
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1.28 "Workhorse" or the "Company" means nominal defendant Workhorse, a Nevada corporation, and its affiliates, subsidiaries, predecessors, successors, and assigns.
2. Terms of the Settlement
2.1 Cash Payment to Workhorse. Defendants shall cause to be paid to the Company
2.2 Corporate Governance Reforms. Workhorse shall, within thirty (30) days of final approval of the Settlement, adopt the corporate governance reforms identified in Exhibit A attached hereto ("Reforms") and maintain the Reforms for a period of no less than four (4) years from the date that they are adopted. The Board shall take steps necessary to authorize adequate funding for the costs of implementing and maintaining the Reforms.
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2.3 Workhorse's Board has unanimously approved a resolution reflecting their determination, in a good faith exercise of business judgment, that: (i) Plaintiffs' litigation and settlement efforts in connection with the Derivative Actions are a material cause of the Board's decision to adopt, implement, and maintain the Reforms, and that certain of the Reforms would not have been adopted, implemented, or maintained but for Plaintiffs' efforts; (b) the Reforms confer substantial and material corporate benefits on the Company and its stockholders; and (c) the Settlement is fair, reasonable, and in the best interests of Workhorse and its stockholders.
3. Approval and Notice
3.1 Promptly after execution of this Stipulation, the parties in the Nevada State Court Action shall submit this Stipulation together with its exhibits to the Court and shall jointly apply for entry of an order (the "Preliminary Approval Order"), substantially in the form of Exhibit B attached hereto, requesting: (i) preliminary approval of the Settlement set forth in this Stipulation; (ii) approval of the form and manner of providing notice of the Settlement to Current Workhorse Shareholders; and (iii) a date for the Settlement Hearing.
3.2 The notice to Current Workhorse Shareholders of the Settlement shall consist of a Notice of Pendency and Proposed Settlement of Shareholder Derivative Actions and of Settlement Hearing ("Notice"), which includes the general terms of the Settlement set forth in this Stipulation and the date of the Settlement Hearing, substantially in the form attached hereto as Exhibit C, as well as a Summary Notice of Pendency and Proposed Settlement of Shareholder Derivative Actions and of Settlement Hearing ("Summary Notice"), substantially in the form attached hereto as Exhibit D.
3.3 Workhorse shall undertake the administrative responsibility for giving notice to Current Workhorse Shareholders of the Settlement as detailed in this paragraph. Within ten (10) days after the entry of the Preliminary Approval Order, Workhorse shall: (i) publish the Summary Notice once in
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3.4 Pending the Effective Date, all proceedings in the Derivative Actions shall be stayed.
3.5 Pending the Court's determination as to final approval of the Settlement, Plaintiffs and all Current Workhorse Shareholders are barred and enjoined from commencing, prosecuting, instigating, or in any way participating in the commencement or prosecution of any action asserting any Released Claim against any of the Released Persons.
4. Attorneys' Fees and Reimbursement of Expenses
4.1 Plaintiffs intend to move for an award of attorneys' fees and expenses of no more than
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4.2 The Fee and Expense Amount, once paid, shall fully satisfy any and all claims against the Released Defendant Persons for an award of attorneys' fees and expenses by Plaintiffs, Plaintiffs' Counsel, or any other counsel purporting to represent any other Workhorse stockholder in connection with or related to the Derivative Actions, the Settlement, the Litigation Demands, and the Released Plaintiff Claims.
4.3 Defendants shall have no responsibility for, and no liability with respect to, the allocation of the attorneys' fees awarded among Plaintiffs' Counsel and/or to any other person who may assert some claim thereto. Any dispute regarding any allocation of the Fee and Expense Amount among Plaintiffs' Counsel shall have no effect on the Settlement, and such dispute shall be finally decided and resolved by
4.4 Plaintiffs' Counsel may apply to the Court for a service award of up to
4.5 The Individual Defendants and Workhorse agree among themselves that Workhorse and/or the insurers will pay any outstanding but unpaid attorneys' fees and expenses, and any future attorneys' fees and expenses, reasonably incurred by the Individual Defendants and their counsel in defending the Derivative Actions and consummating this Settlement.
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4.6 For the avoidance of doubt, nothing in this Stipulation expands, augments, alters, restricts, curtails or limits the indemnification obligations of Workhorse to the Individual Defendants, and nothing in this Stipulation expands, augments, alters, restricts, curtails or limits the obligations of the insurers, on the one hand, to Workhorse or the Released Defendant Persons, on the other hand.
5. Releases
5.1 Upon the Effective Date, Plaintiffs (acting on their own behalf and/or derivatively on behalf of Workhorse), Workhorse, and any Person acting derivatively on behalf of Workhorse shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever released, relinquished, discharged and dismissed with prejudice the Released Plaintiff Claims (including Unknown Claims) against the Released Defendant Persons.
5.2 Upon the Effective Date, Plaintiffs (acting on their own behalf and/or derivatively on behalf of Workhorse), Workhorse, and any Person acting derivatively on behalf of Workhorse, shall be forever barred and enjoined from asserting, commencing, instituting, or prosecuting any of the Released Plaintiff Claims against any Released Defendant Person.
5.3 Upon the Effective Date, each of the Individual Defendants and Workhorse shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever released, relinquished, and discharged the Released Defendant Claims (including Unknown Claims) against the Released Plaintiff Persons, and shall be forever barred and enjoined from asserting any Released Defendant Claims against any Released Plaintiff Person.
5.4 Nothing herein shall in any way impair or restrict the rights of any
5.5 Within five (5) days after entry of Judgment by the Court becomes Final, the parties to each of the Derivative Actions other than the Nevada State Court Action shall file the appropriate documents in their respective Derivative Actions to voluntarily dismiss the respective Derivative Actions with prejudice.
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6. Conditions of Settlement; Effect of Disapproval, Cancellation, or Termination
6.1 The Effective Date of this Stipulation shall be conditioned on the occurrence of all of the following events:
a. Court approval of the Settlement and approval of the content and method of providing Notice of the proposed Settlement to Current Workhorse Shareholders, and the subsequent dissemination of the Notice to Current Workhorse Shareholders;
b. Court entry of the Judgment, in all material respects in the form set forth as Exhibit E annexed hereto, approving the Settlement and dismissing the Nevada State Court Action with prejudice, without awarding costs to any party, except as provided herein;
c. dismissal with prejudice of the remaining Derivative Actions;
d. the passing of the date upon which the Judgment becomes Final.
6.2 If any of the conditions specified above in paragraph 6.1 are not met, then this Stipulation shall be canceled and terminated subject to paragraph 6.3, unless counsel for the Settling Parties mutually agree in writing to proceed with this Stipulation.
6.3 If for any reason the Effective Date of this Stipulation does not occur, or if this Stipulation is in any way canceled, terminated or fails to become Final in accordance with its terms: (a) all Settling Parties and Released Persons shall be restored to their respective positions in the Derivative Actions as of
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7. Miscellaneous Provisions
7.1 The Settling Parties: (a) acknowledge that it is their intent to consummate this Stipulation; and (b) agree to act in good faith and cooperate to take all reasonable and necessary steps to expeditiously implement the terms and conditions of this Stipulation.
7.2 In the event that any part of the Settlement is found to be unlawful, void, unconscionable, or against public policy by a court of competent jurisdiction, the remaining terms and conditions of the Settlement shall remain intact.
7.3 The Settling Parties intend this Settlement to be a final and complete resolution of all disputes between them with respect to the Derivative Actions. The Settlement comprises claims that are contested and shall not be deemed an admission by any
7.4 Each of the Individual Defendants expressly denies and continues to deny all allegations of wrongdoing or liability against himself or herself arising out of any conduct, statements, acts, or omissions alleged, or which could have been alleged, in the Derivative Actions. The existence of the provisions contained in this Stipulation shall not be deemed to prejudice in any way the respective positions of the Settling Parties with respect to the Derivative Actions, shall not be deemed a presumption, a concession, or admission by any of the Settling Parties of any fault, liability, or wrongdoing as to any facts, claims, or defenses that have been or might have been alleged or asserted in the Derivative Actions or with respect to any of the claims settled in the Derivative Actions, or any other action or proceeding, and shall not be interpreted, construed, deemed, invoked, offered, or received in evidence or otherwise used by any person in the Derivative Actions, or in any other action or proceeding, except for any litigation or judicial proceeding arising out of or relating to this Stipulation or the Settlement whether civil, criminal, or administrative, for any purpose other than as provided expressly herein. Notwithstanding the foregoing, any of the Released Defendant Persons may file this Stipulation or any judgment or order of the Court related hereto in order to support any and all defenses or counterclaims based on res judicata, collateral estoppel, good faith settlement, judgment bar or reduction or any other theory of claim preclusion or issue preclusion or similar defense or counterclaim.
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7.5 Plaintiffs and Plaintiffs' Counsel represent and warrant that: (i) each Plaintiff is a current stockholder of Workhorse; (ii) none of the Released Plaintiff Claims has been assigned, encumbered or in any manner transferred, in whole or in part, by Plaintiffs or Plaintiffs' Counsel; and (iii) neither Plaintiffs nor Plaintiffs' Counsel will attempt to assign, encumber or in any manner transfer, in whole or in part, any of the Released Plaintiff Claims.
7.6 Any planned, proposed, or actual sale, merger, or change-in-control of Workhorse shall not void this Stipulation. The Stipulation shall run to the Settling Parties' respective successors-in-interest. In the event of a planned, proposed, or actual sale, merger, or change-in- control of Workhorse, the Settling Parties shall continue to seek court approval of the Settlement expeditiously, including, but not limited to, the Settlement terms reflected in this Stipulation and the Fee and Expense Amount.
7.7 In the event any proceedings by or on behalf of Workhorse, whether voluntary or involuntary, are initiated under any chapter of the United States Bankruptcy Code, including an act of receivership, asset seizure, or similar federal or state law action ("Bankruptcy Proceedings"), the Settling Parties agree to use their reasonable best efforts to obtain all necessary orders, consents, releases, and approvals for effectuation of this Stipulation in a timely and expeditious manner. In the event of any Bankruptcy Proceedings by or on behalf of Workhorse, the Settling Parties agree that all dates and deadlines set forth herein will be extended for such periods of time as are necessary to obtain necessary orders, consents, releases and approvals from the bankruptcy court to carry out the terms and conditions of the Stipulation.
7.8 This Stipulation may be modified or amended only by a writing signed by the signatories hereto.
7.9 This Stipulation shall be deemed drafted equally by all Settling Parties.
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7.10 No representations, warranties, or inducements have been made to any of the Settling Parties concerning this Stipulation or its exhibits other than the representations, warranties, and covenants contained and memorialized in such documents.
7.11 Each counsel or other Person executing this Stipulation or its exhibits on behalf of any of the Settling Parties hereby warrants that such Person has the full authority to do so.
7.12 The exhibits to this Stipulation are material and integral parts hereof and are fully incorporated herein by this reference.
7.13 This Stipulation and the exhibits attached hereto constitute the entire agreement among the Settling Parties with respect to the subject matter hereof and supersede all prior and contemporaneous oral and written agreements and discussions, including the Term Sheet.
7.14 In the event that there exists a conflict or inconsistency between the terms of this Stipulation and the terms of any exhibit hereto, the terms of this Stipulation shall prevail.
7.15 This Stipulation may be executed in one or more counterparts, including by signature transmitted by facsimile or e-mailed PDF files. Each counterpart, when so executed, shall be deemed to be an original, and all such counterparts together shall constitute the same instrument.
7.16 This Stipulation shall be considered to have been negotiated, executed and delivered, and to be wholly performed, in the
7.17 Any dispute between Plaintiffs and Defendants, which arises out of or related to the Settlement shall be resolved by Mediator Melnick, first by way of mediation and, if unsuccessful, then by way of final, binding, non-appealable resolution.
7.
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IN WITNESS WHEREOF, the Settling Parties have caused this Stipulation to be executed by their duly authorized attorneys.
| DATED: |
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| /s/ |
|
| DAVID C. O'MARA | |
| 311 |
|
| Telephone: (775) 323-1321 | |
| Facsimile: (775) 323-4082 | |
|
MATTHEW L. SHARP, LTD. MATTHEW L. SHARP |
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| Telephone: (775) 324-1500 | |
| Facsimile: (775) 284-0675 | |
| Co-Liaison Counsel for Plaintiffs | |
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Telephone: (619) 525-3990 |
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| Facsimile: (619) 525-3991 | |
|
THOMAS J. McKENNA |
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Telephone: (212) 983-1300 |
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| Facsimile: (212) 983-0383 | |
| Co-Lead Counsel for Plaintiffs |
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| DATED: |
|
| /s/ |
|
| Telephone: (702) 873-4100 | |
|
RICHARD ZELICHOV |
|
| Telephone: (310) 788-4680 | |
| Attorneys for Defendants |
|
| DATED: |
|
| /s/ |
|
| Telephone: (702) 669-4600 | |
| Facsimile: (702) 669-4650 | |
|
|
|
| Telephone: (212) 455-2000 | |
| Facsimile: (212) 455-2502 | |
| Attorneys for Defendants |
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| DATED: |
MORRIS LAW GROUP |
| /s/ |
|
|
|
|
| Telephone: (702) 474-9400 | |
| Telephone: (310) 228-3700 | |
| Facsimile: (310) 228-3701 | |
| Attorneys for |
|
| DATED: |
THE BROWN LAW FIRM, P.C. |
| /s/ |
|
| Telephone: (516) 922-5427 | |
| Facsimile: (516) 344-6204 | |
| THE ROSEN LAW FIRM, P.A. | |
| Telephone: (212) 686-1060 | |
| Facsimile: (212) 202-3827 | |
| Telephone: (212) 421-6492 | |
| Facsimile: (212) 421-6553 |
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| Telephone: (212) 709-8245 | |
| Facsimile: (917) 634-3035 | |
| LAW OFFICES OF |
|
| Telephone: (714) 984-2000 | |
| Facsimile: (714) 489-8128 | |
| Attorneys for Plaintiffs in the California Demand Futility Action | |
| DATED: |
|
| /s/ |
|
| Telephone: (619) 230-0063 | |
| Facsimile: (619) 255-1856 | |
| Telephone: (770) 200-3104 | |
| Facsimile: (770) 200-3101 | |
| Attorneys for Plaintiffs in the California Demand Refused Action | |
| DATED: |
|
| /s/ |
|
| Suite 200 | |
| Telephone: (415) 788-4220 | |
| Facsimile: (415) 788-0161 |
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| MUCKLEROY LUNT | |
| Telephone: (702) 907-0097 | |
| Facsimile: (702) 938-4065 | |
| Attorneys for Plaintiffs in the Nevada Federal Court Action | |
| DATED: |
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| /s/ |
|
| Telephone: (877) 216-1552 | |
| Telephone: (877) 216-1552 | |
| MEYER WILSON CO., LPA | |
| Telephone: (614) 224-6000 | |
| Facsimile: (614) 224-6066 | |
| Attorneys for Plaintiffs in the Ohio Action | |
| IT IS SO ORDERED. | |
| DATED: | |
| DISTRICT COURT JUDGE |
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EXHIBIT A
SETTLEMENT TERM SHEET
1.Introductory Clause: This settlement term sheet sets forth the material terms ("Settlement Term Sheet") of the resolution of the Derivative Actions1 ("Settlement"). The Settling Parties (defined below) recognize that a formal, final Stipulation and Agreement of Settlement (the "Settlement Agreement") will be executed by all parties reflecting the Settlement, including all material deal points set forth herein.
2.Settling Parties: The "Settling Parties" are: (a) plaintiffs in each of the Derivative Actions ("Plaintiffs"); (b) Defendants
3.Settlement Consideration: In consideration for the Settlement and release of all claims asserted in connection with the Derivative Actions, Defendants shall cause to be paid to the Company
4.Adequate Funding: The Board shall take steps necessary to authorize adequate funding for the costs of implementing and maintaining the Reforms.
5.Board Resolution: Workhorse shall acknowledge in the Settlement Agreement that the independent members of the Company's Board have unanimously approved a resolution reflecting their determination, in a good faith exercise of their business judgment, that: (a) Plaintiffs' litigation and settlement efforts in connection with the Derivative Actions are a material cause of the Board's decision to adopt, implement, and maintain the Reforms, and that certain of the Reforms would not have been adopted, implemented, or maintained but for Plaintiffs' efforts; (b) the Reforms confer substantial and material corporate benefits on the Company and its stockholders; and (c) the Settlement is fair, reasonable, and in the best interests of the Company and its stockholders.
| 1 | The "Derivative Actions" refer to, collectively: In re |
1
6.Attorneys' Fees and Expenses: Workhorse will pay (or cause Defendants' insurance carrier(s) to pay) the attorneys' fees and expenses awarded by the Court in In re
If the parties are able to reach agreement on the Fee and Expense Amount, then such agreed upon Fee and Expense Amount will be paid within fifteen (15) business days of the entry of an order by the Court preliminarily approving the Settlement, to be held in the escrow account of
If the parties are unable to reach agreement on the Fee and Expense Amount, then the Fee and Expense Amount will be paid in the amount ordered by the Court within fifteen (15) business days following the Court approval of the Fee and Expense amount, notwithstanding the existence of any collateral attacks on the Settlement, including without limitation, any objections or appeals, subject to Plaintiffs' Counsel's obligations, which shall be joint and several as to each law firm that comprise Plaintiffs' Counsel, (i) to retuall released fees and expenses within thirty (30) days following notice that the Settlement has failed to become effective (as that term is customarily defined in agreements to settle shareholder derivative actions); and (ii) to refund any amount by which the award of such fees and expenses is reduced within thirty (30) business days following notice of such reduction.
| 2 | Plaintiffs' Counsel means the following law firms: |
2
Plaintiffs may seek the Court's approval of reasonable service awards for each Plaintiff, to be paid from the Fee and Expense Amount, and Defendants shall not oppose any such request. Plaintiffs' Counsel shall allocate the Fee and Expense Amount among themselves; Defendants bear no responsibility for the allocation of the Fee and Expense Amount among Plaintiffs' Counsel. Any dispute regarding any allocation of the Fee and Expense Amount among Plaintiffs' Counsel shall be finally decided and resolved by Mr.
7. Court Approval: The Settlement is contingent on approval by the Court; without Court approval, there is no Settlement. The Settlement will be submitted for approval by the Court.
8.No Admission of Liability: The Settling Parties expressly acknowledge that nothing in this Settlement Term Sheet or in the Settlement Agreement, including payment of the Fee and Expense Amount, constitutes an admission of liability by the Defendants, and the Settlement Agreement shall contain usual and customary language providing that no Defendant makes any admission of liability and that the Settlement and any related documents cannot be used in other proceedings as evidence that Defendants committed any wrongdoing.
9.Settlement Documentation: The Settling Parties will use their best efforts to draft, finalize, and execute the Settlement Agreement within thirty (30) days of executing this Settlement Term Sheet.
10.Effect of Termination: In the event of termination of the Settlement as provided for in the Settlement Agreement, the Settling Parties shall revert to their respective statuses in the Derivative Actions as of the date and time immediately prior to execution of this Settlement Term Sheet, and the terms and provisions of the Settlement Term Sheet shall be rendered void and shall have no further force and effect.
11.Plaintiffs' Release: Upon the Effective Date of the Settlement,3 Plaintiffs (acting on their own behalf and derivatively on behalf of Workhorse), current Workhorse stockholders, and Workhorse will release as against the Defendants and their respective agents, attorneys, assigns, insurers, and other related persons all claims and causes of action of every nature and description, whether known or unknown, whether arising under federal, state, common or foreign
3 "Effective Date" means the date on which a final order of the reviewing Court approving the Settlement and dismissing the Derivative Actions with prejudice, as to all Defendants, with each
3
12.Defendants' Release: Upon the Effective Date of the Settlement, the Defendants will release as against Plaintiffs and their respective agents, attorneys, assigns, and related persons all claims and causes of action of every nature and description, whether known or unknown, whether arising under federal, state, common or foreign law, that arise out of or relate in any way to the claims asserted in the complaints in the Derivative Actions or arise out of, or relate in any way to the institution, prosecution, or settlement of the claims against the Defendants, except for any claims relating to the enforcement of the Settlement. The releases shall include a waiver of California Civil Code § 1542 and equivalent provisions in any other state statutory or common law.
13.Notice of the Settlement: Within ten (10) calendar days after receiving preliminary approval of the Settlement, Workhorse shall: (i) publish a short-form notice once in
14.Stay and Dismissal of Proceedings: Upon the execution of this Settlement Term Sheet, the parties in the Derivative Actions shall promptly request that the courts in the respective Derivative Actions stay all proceedings and/or enter an order enjoining all other Workhorse stockholders from commencing, instituting, or prosecuting any of the claims described in Paragraph 11 above, except for any proceedings necessary to effectuate the Settlement and the finalization of the Settlement, as well as any other obligations provided for in this Settlement Term Sheet. In addition; upon execution of this Settlement Term Sheet, Plaintiffs and Defendants in In re
4 The "Litigation Demands" refer to, collectively, the demands served on Workhorse and/or members of its Board of Directors on behalf of stockholders
4
15.Rule 11 Compliance: The Settling Parties agree that each has complied fully with the strictures of Rule 11 of the Federal Rules of Civil Procedure, and all similar applicable Nevada state law provisions, and that the proposed final judgment will contain a statement to reflect this compliance.
16.Documents: Within thirty (30) days of the Effective Date, upon Defendants' request, Plaintiffs shall each certify that they have destroyed any documents obtained from the Defendants that were marked Confidential in connection with the Derivative Actions.
17.Disputes: The Settling Parties will seek to resolve disputes, if any, that arise out of the finalization of the Settlement documentation through mediation before
18.Governing Law: This Settlement Term Sheet shall be governed by, construed, performed, and enforced in accordance with the laws of the
19.Binding Agreement: This Settlement Term Sheet is intended by the Settling Parties to be a binding agreement that sets forth certain material terms and obligations of the Settling Parties in connection with the Settlement, and the Settling Parties shall use their best efforts to consummate the Settlement contemplated herein. This Term Sheet may be executed in counterparts, including by signature transmitted electronically. Each counterpart when so transmitted shall be deemed to be an original and all such counterparts together shall constitute the same instrument. This Settlement Term Sheet shall be read and interpreted according to its plain meaning and any ambiguity shall not be construed against any
IT IS HEREBY AGREED by the undersigned as of
5
| /s/ |
/s/ John P. Stigi III | |
| John P. Stigi III | ||
| 5040 Shoreham Place | 1901 Avenue for the Stars, | |
| Suite 1600 | ||
| Telephone: (619) 525-3990 | ||
| Facsimile: (619) 525-3991 | Tel.: (310) 228-3700 | |
| Email: [email protected] | Fax: (310) 228-3701 | |
| Email-: [email protected] | ||
| Co-Lead Counsel for Plaintiffs in Nevada State Court Action | Attorneys for |
|
| /s/ Richard H. Zelichov | ||
| Richard H. Zelichov | ||
| THE O'MARA LAW FIRM | ||
| Telephone: (775) 323-1321 | Tel.: (310) 788-4680 | |
| Facsimile: (775) 323-4082 | Email: richard.zelichov@katten;com | |
| Email: [email protected] | ||
| Co-Liaison Counsel for Plaintiffs in Nevada State Court Action | Attorneys for Defendants |
|
| /s/ |
/s/ |
|
| Telephone: (212) 983-1300 | Tel.: (212) 455-3539 | |
| Facsimile: (212) 983-0383 | Fax: (212) 455-2502 | |
| Email: [email protected] | Email: [email protected] |
6
| Co-Lead Counsel for Plaintiffs in Nevada State Court Action | Attorneys for Defendants |
| Matthew L Sharp | |
| MATTHEW L. SHARP, LTD. | |
| Telephone: (775) 324-1500 | |
| Facsimile: (775) 284-0675 | |
| E-mail: [email protected] | |
| Co-Liaison Counsel for Plaintiffs in Nevada State Court Action | |
| Telephone: (770) 200-3104 | |
| Facsimile: (770) 200-310 I | |
| Email: michaelf@johnsonfistel. com | |
| /s/ |
|
| Telephone: (619) 230-0063 | |
| Facsimile: (619) 255-1856 | |
| Email: [email protected] | |
| Counsel for Plaintiffs in |
|
| /s/ |
|
| Three Embarcadero Center, Suite 1650 | |
| Tel: (415) 788-4220 | |
| Fax: (415) 788-0161 | |
| [email protected] [email protected] |
7
| MUCKLEROY LUNT | |
| Telephone: (702) 907-0097 | |
| Facsimile: (702) 938-4065 | |
| Email: [email protected] | |
| Counsel for Plaintiffs in Nevada Federal Action | |
| /s/ |
|
| THE BROWN LAW FIRM, P.C. | |
| Telephone: (516) 922-5427 | |
| Facsimile: (516) 344-6204 | |
| Email: [email protected] | |
| TIIE ROSEN LAW FIRM, P.A. | |
| Telephone: (212) 686-1060 | |
| Facsimile: (212) 202-3827 | |
| Email: [email protected] | |
| /s/ |
|
| Tel 212 421.6492 | |
| Facsimile: 212.421.6553 | |
| Email [email protected] | |
| Facsimile: (917) 634-3035 | |
| Email: [email protected] | |
| [email protected] |
8
| LAW OFFICES OF HANI S. BUSHRA | |
| Telephone: (714) 984-2000 | |
| Facsimile: (714) 489-8128 | |
| Email: [email protected] | |
| Counsel for Plaintiffs in |
9
COMPROMISE AND SETTLEMENT NEGOTIATIONS (FRE 408)
MEDIATION PRIVILEGE
EXHIBIT A TO TERM SHEET
CORPORATE GOVERNANCE REFORMS
The corporate governance reforms set forth below ("Corporate Governance Reforms") shall be implemented and maintained for a period of no less than four {4) years from the date of adoption. Defendants1 acknowledge that Plaintiffs'2 efforts, including their efforts in investigating, preparing, commencing, and prosecuting the Derivative Actions,3 were a material cause for the implementation of the Corporate Governance Reforms, and that the Corporate Governance Reforms confer substantial benefits on the Company.
1.Creation of a Disclosure Controls Committee
No Board of Directors ("Board") member shall serve on the Disclosure Committee. The Disclosure Committee members shall consist entirely of senior officers and representatives from the key functional areas of the Company, as defined below.
The mission of the Disclosure Committee will include ensuring effective procedures and protocols are in place at the Company so that all the Company's
One of the responsibilities of the Disclosure Committee is to review the Company's statements in its
| 1 |
| 2 | Plaintiffs are |
| 3 | The "Derivative Actions" refer to: (1) Cohen, et al. v. Hughes, et al., Case No. 2:21-cv- 08734-CJC-PVC ( |
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COMPROMISE AND SETTLEMENT NEGOTIATIONS (FRE 408)
MEDIATION PRIVILEGE
The Disclosure Committee shall hold regular meetings prior to the preparation and filing of the Company's Form 10-Ks and I0-Qs, and ad-hocmeetings from time to time as directed by the Disclosure Committee's chairperson, the Chief Compliance Officer ("CCO").
The Disclosure Committee shall include the following members:
| o | Chief Compliance Officer |
| o | Chief Financial Officer |
| o | Chief Accounting Officer |
| o | Director, Internal Audit |
| o | Director, Financial Rep01ting |
| o | General Counsel |
| o | Chief Technology Officer |
| o | President, Commercial Vehicles |
| o | President, Aerospace |
| o | Vice President, Manufacturing |
| o | Vice President, |
| o | Any service provider of outsourced control testing and tax |
Representatives of the Company's independent auditors and other personnel of the Company, or representatives of its outside advisors, may be invited to attend Disclosure Committee meetings as deemed. necessary or appropriate by the Disclosure Committee in performing its duties and responsibilities.
The CCO shall timely inform the Audit Committee regarding any material concerns of the Disclosure Committee. The Disclosure Committee shall have a Charter, which shall be posted on the Company's website.
The responsibilities of the Disclosure Committee shall be to:
| a. | Establish controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act and other information that the Company may disclose to the public is recorded, processed, summarized, and reported accurately and within the time periods specified in the |
|
| b. | Design, implement, and monitor the Company's disclosure controls and procedures and assist the Company with compliance with Regulation FD. | |
| c. | Evaluate the effectiveness of the Company's disclosure controls and procedures on at least an annual basis. | |
| d. | Review the Company's Form 10-Qs and Form 10-Ks. |
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COMPROMISE AND SETTLEMENT NEGOTIATIONS (FRE 408)
MEDIATION PRIVILEGE
| e. | Review (or delegate to an appropriate subcommittee of the Disclosure Committee the review of) the Company's other Exchange Act filings (including Form 8-Ks, and Proxy Statements), registration statements, press releases containing financial information, information about material acquisitions or dispositions or other information material to the Company's security holders, correspondence to stockholders, and presentations to analysts and investors, which includes analyst and investor conferences and scripts utilized during question and answer sessions of earnings conference calls. | |
| f. | Review each Exchange Act report prior to filing with the |
|
| g. | Report to and advise the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") with respect to the certifications they must provide for the Company's quarterly and annual reports. | |
| h. | Evaluate the materiality of information and events relating to or affecting the Company and determine the timing and appropriate method of disclosure of information deemed material. | |
| i. | Undertake any other duties or responsibilities as the CEO or CFO may from time to time prescribe. | |
| j. | Institute pre-clearing mechanisms for any material information disseminated on social media and other non- |
2.Creation of Chief Compliance Officer Position
The Board shall direct Workhorse to create the position of CCO, who shall chair the Disclosure Committee and report directly to the Board and work with the Board and the Board committees, as necessary, to facilitate the Board's oversight responsibilities. The CCO must have executive-level experience in risk mitigation, legal-regulatory compliance, and appropriate public disclosures at a public company. The role of the Chief Compliance Officer may be combined with the role of General Counsel or Chief Legal Officer.
The CCO's duties shall include, but not be limited to, oversight and administration of Workhorse's corporate governance policies (including the Code of Ethics and/or Code of Conduct), fostering a culture that integrates compliance and ethics into business processes and practices through awareness and training, maintaining and monitoring a system for accurate public and internal disclosures, and reporting and investigating potential compliance and ethics concerns.
Workhorse's CCO shall be primarily responsible for managing Workhorse's ethics and compliance program and for assisting the Board in fulfilling its oversight duties regarding Workhorse's compliance with applicable rules, laws, regulations, and accounting standards, including those laws, regulations and standards that affect its reports filed with the
3
COMPROMISE AND SETTLEMENT NEGOTIATIONS (FRE 408)
MEDIATION PRIVILEGE
In performing his or her duties and fulfilling the responsibilities described herein, the CCO shall keep the Audit Committee and Board timely informed, seek the Audit Committee's or Board's assistance, and may delegate responsibilities.
The responsibilities and duties of Workhorse's CCO shall include the following:
| a. | Working with the Audit Committee to evaluate and define the goals of Workhorse's ethics and compliance program in light of trends in corporate practice and changes in laws that affect Workhorse's disclosure obligations regarding the Company's risk exposure. |
| b. | Managing and overseeing Workhorse's ethics and compliance program, implementing procedures for monitoring and evaluating the program's performance, and communicating with and informing the Board regarding progress toward meeting program goals. |
| c. | Acting as the liaison between management, including the Disclosure Committee, Audit Committee, and the Board, in which capacity the CCO shall: (i) be primarily responsible for assessing organizational risk for misconduct and noncompliance with applicable laws and regulations; (ii) report material risks relating to compliance or disclosure issues to the Audit Committee as promptly as practicable after the identification of these risks; and (iii) make written recommendations for further evaluation and/or remedial action within deadlines established by the Audit Committee. |
| d. | Performing a review of Workhorse's draft quarterly and annual reports filed with the |
| e. | Reviewing and approving Workhorse's press releases, and related materials prior to their publication to confirm that disclosures included therein are complete, timely and accurate and to mitigate the risk that such disclosures will fail to comply with applicable laws and regulations, and reporting any material issues that may merit · disclosure to the Disclosure Committee. |
| f. | Promptly reporting to the Audit Committee any allegations of compliance and ethics concerns relating to fraud, reporting violations, or material risks relating to Workhorse's legal and regulatory compliance, and preparing written reports, as appropriate, to the Audit Committee and Board evaluating, and where necessary recommending, remedial actions, including public disclosure of the material risk, if warranted |
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COMPROMISE AND SETTLEMENT NEGOTIATIONS (FRE 408)
MEDIATION PRIVILEGE
| g. | Working with the Audit Committee to evaluate the adequacy of Workhorse's compliance policies and procedures and developing proposals for improving these policies and procedures. This includes meeting with the Audit Committee at least twice per year to discuss ongoing and potential litigation and compliance issues. |
| h. | Overseeing employee training in risk assessment and compliance. |
| i. | Implementing and maintaining systems for the timely compliance with all Section 16 reporting and disclosure requirements. |
| J. | Receiving up-to-date lists from all Board members and executive officers of companies in which they are a director, an officer, and/or of which they own a controlling interest, and promptly update the list and report to the |
3.Related Party Transactions
The Audit Committee shall continue to review all "related party transactions" (defined as transactions required to be disclosed pursuant to Item 404(a) of Regulation S-K) on an ongoing basis.
The Company agrees to maintain a related party transaction policy that includes the following provisions:
| a. | The approval of the Audit Committee shall be required for any related party transaction, and the Audit Committee shall not grant any such approval without first fully considering all material aspects of the proposed transaction and determining that the transaction is in the best interests of, the Company. In performing its review, the Audit Committee shall be allowed to retain, at the Company's expense, outside counsel that is, in the Audit Committee's judgment, independent from both the Company and the other parties to the proposed related party transaction. |
| b. | The Company shall make the Related Party Transaction Policy publicly available, including by posting it on the Company's website and describing its contents in Workhorse's next proxy statement filed with the |
5
COMPROMISE AND SETTLEMENT NEGOTIATIONS (FRE 408)
MEDIATION PRIVILEGE
4.Audit Committee and Internal Controls Changes
The Audit Committee Chatter shall include the provisions below, and the amended Audit Committee Charter shall be posted on the Company's website.
a.Addition of Risk Management Responsibilities
The Audit Committee Charter shall be amended to include the following risk management responsibilities:
| (i) | Administer the risk management policies of the Company and conduct oversight of the Company's risk management framework; however, nothing herein shall abrogate the risk assessment and oversight responsibilities of the Board and its existing committees. |
| (ii) | Identify and monitor material risks relating to Workhorse's compliance with all applicable laws and regulations and public disclosures (including all |
| (iii) | Monitor Compliance with Workhorse's Code of Conduct. |
| (iv) | Conduct an annual review of the effectiveness of Workhorse's policies and procedures related to legal and regulatory compliance, including its disclosure controls and procedures, with the assistance of the CCO. |
| (v) | Maintain procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters, nd post the relevant policy on the Company's website. |
b.Composition of Audit Committee and Number of Meetings
The Audit Committee shall be required to meet at least four (4) times annually, including meetings prior to commencement and completion of the annual audit and prior to filing with the
c.Changes to Audit Committee Charter
The Audit Committee shall oversee the work of the Disclosure Committee. The Audit Committee shall meet separately with the Disclosure Committee (or an appropriate subcommittee of the Disclosure Committee) at least once each quarter and more frequently if necessary to effectively supervise the Company's disclosure function and specific disclosure issues of particular importance.
6
COMPROMISE AND SETTLEMENT NEGOTIATIONS {FRE 408)
MEDIATION PRIVILEGE
The Audit Committee shall review with the Disclosure Committee (or an appropriate subcommittee of the Disclosure Committee) any :financial statements, including, but not limited to, any Form 10-Q, Form 10-K, Form 8-K, and annual Proxy Statement issued by the Company for accurate disclosures. Prior to the issuance of earnings or production guidance, the Audit Committee shall review and approve any such guidance with the Disclosure Committee (or an appropriate subcommittee of the Disclosure Committee) to ensure that the proposed guidance has a reasonable basis and that all material risks and contingencies are properly disclosed.
The Audit Committee shall meet with the outside auditors at least four (4) times annually, including before the filing of Workhorse's quarterly and annual reports with the
Additionally, the Audit Committee Charter shall be revised to add a provision requiring that the Audit Committee review and discuss ·any material, proposed compliance-related disclosures in the Company's annual and quarterly financial statements with the CCO.
The minutes of the Audit Committee, including the foregoing meetings with the Manufacturing and Operations Sub-Committee, shall be maintained by Workhorse's General Counsel for no less than seven (7) years.
d.Insider Trading Controls
The Company shall continue to post its Insider Trading Policy on the Company's website. The Insider Trading Policy shall continue to require pre-approval by the Company's General Counsel prior to any trades being made by any of the Company's directors or executive officers. To the extent that any of the Company's directors or executive officers establish a IObS-1 trading plan ("Trading Plans"), the Company's General Counsel shall review and approve such Trading Plans or modifications thereto and shall ensure that the Trading Plans are structured pursuant to the standards articulated in SEC Rule I0b-5-1 and any amendments thereto. Individuals who have established a Trading Plan shall not enter into any hedging or pledging agreements with respect to Company securities during the time a Trading Plan is in effect.
5. Improvements to the Nominating and Corporate Governance Committee Charter
| a. |
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COMPROMISE AND SETTLEMENT NEGOTIATIONS (FRE 408)
MEDIATION PRIVILEGE
| b. | In accordance with its duties to develop and recommend Corporate Governance Guidelines to the Board, the |
6. Improvements to the Compensation Committee Charter
The Compensation Committee Charter shall be amended to include the provisions below, and the amended Compensation Committee Charter shall be posted on the Company's website.
| a. | The Compensation Committee shall review on an annual basis the CEO's and CFO's contribution to Workhorse's culture of ethics and compliance and their effectiveness and dedication to ensuring Workhorse's compliance with applicable laws, rules, and regulations. |
| b. | In determining, setting, or approving annual short-term compensation arrangements, the Compensation Committee shall consider the particular executive's performance as it relates to both legal compliance and compliance with the Company's internal policies and' procedures. This shall not affect payments or benefits that are required to be paid pursuant to the Company's plans, policies, or agreements. |
| c. | In determining, setting, or approving termination benefits and/or separation pay to executive officers, the Compensation Committee shall consider the circumstances surrounding the particular executive officer's departure and the executive's performance as it relates to both legal compliance and compliance with the Company's internal policies and procedures. This shall not affect payments or benefits that are required to be paid pursuant to the Company's plans, policies, or agreements. |
7.Board Independence
The Company shall amend its By-laws to require that at least three-fourths of the Board be comprised of independent directors. In addition to the standards required by the
If the Company fails to comply with the independence requirements set forth herein due to one or more vacancies of the Board, or if one or more directors cease to be independent due to circumstances beyond their reasonable control, Workhorse shall regain compliance with these requirements as soon as practicable.
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COMPROMISE AND SETTLEMENT NEGOTIATIONS (FRE 408)
MEDIATION PRIVILEGE
8.Additional Board Reforms
a.Non-Executive Chairman/Lead Independent Director Role
The Company's Corporate Governance Principles shall be revised to require that the Company have either a Non-Executive Chairman or, if the Company has a combined CEO/Chairman role, a Lead Independent Director.
In addition to the duties of all Board members, the independent, Non-Executive Chairman or Lead Independent Director, as the case may be, shall be responsible for the following functions:
| (i) | Coordinating the activities of the independent directors. |
| (ii) | Determining an appropriate schedule of Workhorse's Board meetings, seeking to ensure that the independent directors can perform their duties responsibly while not interfering with the flow of Workhorse's operations. |
| (iii) | Evaluating and making recommendations to the Board relating to the nature, quality, quantity, and timing of information provided to the independent directors by the Company's management. |
| (iv) | Approving the agenda for the Board meetings. |
| (v) | Coordinating the retention of counsel or consultants who report directly to the Board. |
| (vi) | Receiving reports from the Nominating Committee regarding compliance with and implementation of corporate governance policies. |
| (vii) | Receiving reports from the Nominating Committee regarding recommended revisions to corporate governance policies. |
| (viii) | Coordinating and developing the agenda for, and moderating executive sessions of, Workhorse's independent directors. |
| (ix) | Acting as the principal liaison between the independent directors and the CEO on topics or issues as requested by the independent directors, any Committee of the Board, or any other sensitive issues or topics. |
| (x) | Participating in Workhorse's annual stockholders meeting. |
| (xi) | Evaluating, along with the members of the Compensation Committee, the CEO's performance, and meeting with the CEO to discuss such evaluation. |
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COMPROMISE AND SETTLEMENT NEGOTIATIONS (FRE 408)
MEDIATION PRIVILEGE
b.Director Orientation and Continuing Education
Each member of the Board must annually participate in continuing education related to corporate governance practices and other topics pertinent to the Company's business. Such training may be delivered by an outside entity specializing in director education, the Company's General Counsel or outside counsel, or another industry expert.
c.Meetings in Executive Session
The independent directors of the Board shall meet in executive session at each regularly scheduled meeting of the Board, with a minimum requirement to meet at least four times annually outside the presence of any director who serves as an officer of Workhorse.
d.Stockholder Meetings
Absent extraordinary circumstances, all directors shall be required to attend the Company's annual meeting of stockholders in person. During the annual stockholder meeting, stockholders shall have the right to ask questions, both orally and in writing, regardless of whether such questions were submitted in advance. Polls should remain open at the annual meeting until all agenda items have been discussed.
e.Authorization to Retain Counsel
The Board's Committees shall continue to have standing authorization, at their discretion, to obtain, at the Company's expense, legal counsel or other advisors of their choice, who shall report directly to the Board or the committee.
9. New Code of Conduct; Publication of Corporate Governance Policies and Other Documentaries
The Company shall adopt a new Code of Conduct to replace its existing Code of Ethics. The Company shall place its policies for corporate governance on the Company's website for public access and review, including the changes outlined herein. Additionally, the Company shall continue to publish its Articles of Incorporation and current By-laws on its website for public access and review, including the changes outlined herein.
10.Employee Training
The Company shall provide all new hires and appropriate employee populations with training on expectations with respect to integrity and compliance with the Code of Conduct. The Company shall require the appropriate employee populations to attest on an annual basis that they have read, understand, and will comply with the Code of Conduct.
| a. | Workhorse's CCO shall be charged with primary responsibility for education pursuant to this provision. |
| b. | Training shall be live, in person or via video conference, where practicable. In the limited circumstances where live training is not possible, training should be interactive, Internet based training. The CCO shall maintain a record of employee participation at the training sessions. |
10
COMPROMISE AND SETTLEMENT NEGOTIATIONS (FRE 408)
MEDIATION PRIVILEGE
11. Whistleblower Policy
The Company shall post information regarding its third-party compliance hotline on the Company intranet site and make clear that it is available to assist on matters pertaining to a potential violation of the Code of Conduct. The third-party compliance hotline shall be confidential, and reports made to the compliance hotline relating to accounting, auditing, or embezzlement matters shall be directed to the Chairperson of the Audit Committee. The Company shall periodically remind employees of how to raise an integrity or compliance concern.
Workhorse's written policy on reporting violations of Company policies and receipt of complaints regarding financial reporting or accounting issues and the internal reporting of violations will adequately notify employees of the following: (i) complaints may be directed to an employee's manager, any member of Human Resources, the CCO, or via the Company's third party compliance hotline; (ii) reports made through the Company's third-party compliance hotline may be made anonymously (unless prohibited by local law); (iii) information gathered during investigations into reports will be kept confidential to the extent possible; and (iv) Workhorse strictly prohibits retaliation against any individual who raises complaints in good faith.
While the Company's Code of Conduct provides reporting resources for potential whistleblowers and notes that retaliation against whistleblowers will not be tolerated, the Board shall require management to adopt a standalone written policy protecting whistleblowers and better informing them of their reporting options (the "Whistleblower Policy"). The policy shall be posted on the Company's website and in the Company's facilities and shall provide as follows:
| a. | The Company's Whistleblower Policy shall: |
| (i) | Encourage interested parties to bring forward ethical and legal violations and/or a reasonable belief that ethical and legal violations have occurred to the parties identified in the Code of Conduct, the CCO and the Audit Committee. The CCO shall review material complaints with the Audit Committee or full Board; and |
| (ii) | Effectively communicate that Workhorse is serious about adherence to its corporate governance policies and that whistleblowing is an important tool in achieving this goal. |
| b. | The Whistleblower Policy-with the endorsement of the Board and the most senior management of the Company-will include the following provisions: |
| (i) | Retaliation against whistleblowers is illegal, and persons who retaliate against whistleblowers may be subject to serious penalties; |
| (ii) | Whistleblower complaints may be submitted anonymously (unless prohibited by local law) and will be handled in confidence to the extent possible; |
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COMPROMISE AND SETTLEMENT NEGOTIATIONS (FRE 408)
MEDIATION PRIVILEGE
| (iii) | If a whistleblower brings his or her complaint to an outside regulator or other governmental entity, he or she will be protected by the terms of the Whistleblower Policy just as if he or she directed the complaint internally, including through the Company's third-party compliance hotline; |
| (iv) | An employee's compliance with the stated values, business standards, and ethical standards of the Company may be considered in the performance review process; and |
| (v) | The Whistleblower Policy will contain a strict non-retaliation policy. |
| c. | The Company shall remind employees of whistleblower options and whistleblower protections in employee communications provided at least twice a year and via the Company's intranet. |
| d. | The Company may pay a cash award to a whistleblower under appropriate circumstances. |
12.Review of Clawback Policy
The Company shall publish its Clawback Policy on its website. Within ninety (90) days of entry of a final order and judgment approving the Settlement, the Company shall in good faith review the terms of the clawback policy with respect to Financial Restatements, Detrimental Activity and Termination for Cause, including considering the
The Company shall further publicly disclose in the event that the Clawback Policy is triggered and, in that event, whether any decisions are made to recover or not to recover compensation under the Clawback Policy, including the amount and percentage of any recovered compensation.
12
EXHIBIT B
IN THE EIGHTH JUDICIAL DISTRICT COURT OF THE
IN AND FOR
| IN RE WORKHORSE GROUP INC. STOCKHOLDER DERIVATIVE LITIGATION |
Lead Case No. A-21-833050-B
(Consolidated with Case No. A-21-836888-B) |
| This Document Relates To: ALL ACTIONS. | [PROPOSED] PRELIMINARY APPROVAL ORDER |
| Judge: |
|
| Exhibit B |
WHEREAS, the Parties to the above-captioned consolidated shareholder derivative action ("Nevada State Court Action") have made an application, pursuant to
WHEREAS, unless otherwise defined herein, all capitalized terms contained herein shall have the same meanings as set forth in the Stipulation; and
WHEREAS, the Court has read and considered the Stipulation and exhibits annexed thereto, and good cause appearing;
NOW THEREFORE, IT IS HEREBY ORDERED:
1. This Court hereby preliminarily approves, subject to further consideration at the Settlement Hearing described below, the Stipulation of Settlement, including the terms and conditions for settlement and dismissal with prejudice of the Nevada State Court Action.
-1-
2. A Settlement Hearing shall be held before this Court on , 2023 at _.m.), to be held at
3. The Court approves, as to form and content, the notices attached as Exhibits C (the "Notice") and D (the "Summary Notice") to the Stipulation, and finds that the publication of the two notices as set forth below meets the requirements of
4. Within ten (10) days after the entry of the Preliminary Approval Order, Workhorse shall: (i) publish the Summary Notice once in
5. Workhorse's Counsel shall file with the Court an appropriate affidavit or declaration with respect to filing and posting the Notice and Summary Notice within twenty (20) days after the entry of the Preliminary Approval Order.
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6. Neither the Stipulation nor the Settlement, including any Exhibits attached hereto, nor any act performed or document executed pursuant to or in furtherance of the Stipulation or the Settlement shall be deemed to prejudice in any way the respective positions of the Settling Parties with respect to the Derivative Actions and Litigation Demands; shall be deemed a presumption, a concession, or admission by any of the Settling Parties of any fault, liability, or wrongdoing as to any facts, claims, or defenses that have been or might have been alleged or asserted in the Derivative Actions, Litigation Demands or with respect to any of the claims settled in the Derivative Actions or Litigation Demands, or any other action or proceeding; may be construed as, or may be used as evidence of the validity of any of the Released Claims or an admission by or against the Individual Defendants of any fault, wrongdoing, or concession of liability; and shall not be interpreted, construed, deemed, invoked, offered, or received in evidence or otherwise used by any person in the Derivative Actions or Litigation Demands, or in any other action or proceeding, except for any litigation or judicial proceeding arising out of or relating to this Stipulation or the Settlement whether civil, criminal, or administrative, for any purpose other than as provided expressly herein. Neither the Stipulation nor the Settlement shall be admissible in any proceeding for any purpose, except to enforce the terms of the Settlement, and except that any of the Released Defendant Persons may file the Stipulation or any judgment or order of the Court related hereto in order to support any and all defenses or counterclaims based on res judicata, collateral estoppel, good faith settlement, judgment bar or reduction or any other theory of claim preclusion or issue preclusion or similar defense or counterclaim
7. Pending final determination by the Court of whether the Settlement should be approved, this Court preliminarily bars and enjoins Plaintiffs, all other Current Workhorse Shareholders, and the Company, on behalf of themselves, from commencing, instituting, filing, intervening in, participating in (as a nominal defendant or otherwise), receiving any benefit from, or prosecuting any of the Released Claims against any of the Released Persons. All proceedings and discovery in the Nevada State Court Action shall be stayed except as otherwise provided for in the Stipulation, and no party to the Nevada State Court Action or any Current Workhorse Shareholder shall file or prosecute any action or proceeding in any court or tribunal relating to the Settlement or asserting any of the Released Claims against the Released Persons.
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8. All Current Workhorse Shareholders shall be bound by all orders, determinations and judgments of the Court in the Nevada State Court Action concerning the Settlement, whether favorable or unfavorable to Current Workhorse Shareholders.
9. Any Current Workhorse Shareholder may appear and show cause, if he, she or it has any reason why the terms of the Settlement of the Nevada State Court Action should not be approved as fair, reasonable and adequate, or why the Order and Final Judgment should not be entered thereon, provided, however, that, unless otherwise ordered by the Court, no Current Workhorse Shareholder shall be heard or entitled to contest the approval of all or any of the terms and conditions of the Settlement, or, if approved, the Order and Final Judgment to be entered thereon approving same, unless, no later than twenty (20) days before the Settlement Hearing, such person files with the Court a statement of objection signed by the objector, even if represented by counsel, setting forth appropriate proof of Workhorse stock ownership as of
All written objections and supporting papers must be submitted to the Court by mailing them to:
Clerk of the Court
Eighth Judicial District Court of The
in and for
OR by filing them in person at any location of the Eighth Judicial District Court of The
The written objections and supporting papers must also be delivered to counsel for plaintiffs and counsel for Workhorse so they are received no later than 20 calendar days before the Settlement Hearing.
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Co-Lead Counsel for Plaintiffs:
Telephone: (619) 525-3990
Facsimile: (619) 525-3991
THOMAS J. McKENNA
Telephone: (212) 983-1300
Facsimile: (212) 983-0383
Attorneys for
MORRIS LAW GROUP
STEVE MORRIS
ROSA SOLIS-RAINEY
Telephone: (702) 474-9400
Telephone: (310) 228-3700
Facsimile: (310) 228-3701
Any Current Workhorse Shareholder who does not make an objection in the manner provided herein shall be deemed to have waived such objection and shall forever be foreclosed from making any objection to the fairness, reasonableness or adequacy of the Settlement as incorporated in the Stipulation, unless otherwise ordered by the Court, but shall otherwise be bound by the Order and Final Judgment to be entered and the releases to be given.
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10. Any attorney hired by a Current Workhorse Shareholder for the purpose of objecting to the Settlement must file a notice of appearance with the Clerk of the Court no later than ___________, 2023.
11. Plaintiffs' Counsel and Defendants' Counsel are directed to promptly furnish each other with copies of any and all objections that are served upon them or otherwise come into their possession.
12. The Court may approve the Settlement, with such modifications as may be agreed to by Settling Parties, if appropriate, without further notice to Current Workhorse Shareholders.
13. The Court may, for good cause, extend any of the deadlines set forth in this order without further notice to Current Workhorse Shareholders.
DATED: __________________
| IT IS SO ORDERED: | |
| HONORABLE |
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EXHIBIT C
NOTICE OF PENDENCY OF DERIVATIVE ACTION, PROPOSED AGREEMENT OF
SETTLEMENT AND RELEASE, AND SETTLEMENT HEARING
TO: ALL CURRENT RECORD HOLDERS AND BENEFICIAL OWNERS OF COMMON STOCK OF WORKHORSE GROUP INC. ("WORKHORSE" OR THE "COMPANY") AS OF
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. THIS NOTICE RELATES TO A PROPOSED SETTLEMENT OF IN RE WORKHORSE GROUP INC. STOCKHOLDER DERIVATIVE LITIGATION, LEAD CASE NO. A-21-833050-B, A SHAREHOLDER DERIVATIVE ACTION, AND CONTAINS IMPORTANT INFORMATION REGARDING YOUR RIGHTS. IF THE COURT APPROVES THE SETTLEMENT, YOU WILL BE FOREVER BARRED FROM CONTESTING THE APPROVAL OF THE PROPOSED SETTLEMENT AND FROM PURSUING THE "RELEASED CLAIMS," AS DEFINED HEREIN.
THIS ACTION IS NOT A "CLASS ACTION." THUS, THERE IS NO COMMON FUND UPON WHICH YOU CAN MAKE A CLAIM FOR A MONETARY PAYMENT
Notice is hereby provided to you of the proposed settlement (the "Settlement") of this shareholder derivative lawsuit.1 This Notice is provided by Order of the
| 1 | A derivative lawsuit involves claims brought by a shareholder on behalf of a company, rather than on behalf of himself or herself or the other shareholders of the company. The recovery in a derivative action is for the benefit of the company rather than directly for individual shareholders. |
1
1. WHY THE COMPANY HAS ISSUED THIS NOTICE
On
The terms of the Settlement are set forth fully in the Stipulation, which can be viewed and downloaded at https://ir.workhorse.com/. This Notice is a summary only and does not describe all of the details of the Stipulation and terms of the Settlement. For full details of the matters discussed in this Notice, please review the Stipulation and visit https://ir.workhorse.com/.
On [insert date], at [insert time]., in Courtroom [-] of the
2. SUMMARY OF THE ACTION
On
Several other stockholder derivative actions were filed on behalf of Workhorse: (i) the California Demand Futility Action (filed
On
| 2 | Specifically, |
| 3 | This Notice should be read in conjunction with, and is qualified in its entirety by reference to, the text of the Stipulation, which has been filed with the Court. A link to the Form 8-K filed with the |
| 4 | "Litigation Demands" means collectively, the demands served on Workhorse and/or members of its Board of Directors on behalf of stockholders |
2
On
On
3. SETTLEMENT
On
Pursuant to the Stipulation, the Defendants shall cause Workhorse to be paid
In addition to the above
| 1) | Board Independence Reforms: Workhorse's By-laws will be amended to require that at least two-thirds of the Company's Board be comprised of independent directors. |
| 2) | Lead Director/Non-Executive Chairman: The Company's Corporate Governance Principles will be revised to require that Workhorse have either a Non- Executive Chairman of the Board or a Lead Independent Director. |
| 3) | Creation of Chief Compliance Officer Position: The Company will create the position of Chief Compliance Officer ("CCO"); the CCO will be responsible for the oversight and administration of the Company's corporate governance policies and fostering a culture of compliance and ethical business practices. |
| 4) | Creation of a Disclosure Controls Committee: The Company will maintain a Disclosure Control Committee comprised of senior officers from key function areas that will meet regularly to confirm that effective procedures and controls are in place to ensure the accuracy and completeness of the Company's |
| 5 | As set forth in the Stipulation, Plaintiffs refer to |
3
| 5) | Audit Committee and Risk Management Enhancements: The Audit Committee Charter will be amended to delineate the committee's responsibility for managing and monitoring the material risks relating to Workhorse's compliance with applicable laws, regulations, and disclosure obligations. |
| 6) | Insider Trading Controls: The Company's Insider Trading Policies will require officers and directors to obtain pre-approval from Workhorse's General Counsel for any trade(s) made outside of 10b5-1 trading plans. |
| 7) | Clawback Policy Review: The Company will review its Clawback policy to ensure that it conforms with |
| 8) | Whistleblower Protections and Policy Enhancements: The Company will adopt a standalone written policy providing enhanced protections for whistleblowers and better inform potential whistleblowers of their reporting options. |
The above measures represent a summary of the corporate governance reforms Workhorse and the Defendants have agreed to institute or maintain as part of the Settlement. The full list of corporate governance reforms is set forth in Exhibit A of the Stipulation, available at [insert url].
Workhorse and its Board acknowledged and agreed that Plaintiffs' efforts, including their efforts in investigating, preparing, commencing, and prosecuting the Derivative Actions, were a material cause for the implementation of these reforms, and that the reforms confer substantial benefits upon Workhorse and its shareholders.
The Stipulation also provides for the entry of judgment dismissing the Nevada State Court Action against the Defendants with prejudice and, as explained fully in the Stipulation, releasing and discharging certain known and unknown claims that could have been brought in any court, whether arising under federal, state, common, or foreign law, which exist derivatively on behalf of Workhorse, by Plaintiffs or any other shareholder of Workhorse that arise out of or relate in any way to the claims asserted or that could have been asserted in any of the complaints in the Nevada State Court Action, the California Demand Futility Action, the California Demand Refused Action, the Nevada Federal Court Action, the Ohio Action, or the Litigation Demands, or that arise out of, or relate in any way to the institution, prosecution, or settlement of the claims against the Defendants by Plaintiffs in the Nevada State Court Action, the California Demand Futility Action, the California Demand Refused Action, the Nevada Federal Court Action, the Ohio Action, or the Litigation Demands, against the Defendants, Workhorse, and Workhorse's past, present, and future officers and/or directors.
4. PLAINTIFFS' ATTORNEYS' FEES AND EXPENSES
After negotiating the financial recovery and the corporate governance reforms, Plaintiffs' Counsel, the Company and Defendants, began negotiating the attorneys' fees that Workhorse or Defendants' insurance carrier(s) would pay to Plaintiffs' Counsel. Those negotiations are ongoing. In the event agreement is not reached, and in light of the substantial benefits secured for Workhorse by Plaintiffs and their respective counsel in connection with the Settlement and the litigation leading up to it, Plaintiffs' Counsel have reserved the right to seek an aggregate award from the Court of no more than
4
5. REASONS FOR THE SETTLEMENT
The Court did not decide in favor of the Plaintiffs or the Defendants (together, the "Parties"). The proposed Settlement was negotiated at arm's-length by attorneys representing the Parties and with the substantial assistance of
5.1 Why Did the Plaintiffs Agree to Settle?
Plaintiffs' Counsel investigated claims and the underlying events and transactions alleged in the Action. Plaintiffs' Counsel have analyzed the evidence adduced during their investigation and have researched the applicable law with respect to the claims of Plaintiffs, Workhorse, and its shareholders against the Defendants and the potential defenses thereto.
Based upon their investigation, Plaintiffs and Plaintiffs' Counsel have concluded that the terms and conditions of the Settlement are fair, reasonable, and adequate to Plaintiffs, current shareholders of Workhorse, and Workhorse, and in their best interests, and have agreed to settle the claims raised in the Action pursuant to the terms and provisions of the Stipulation after considering, among other things: (a) the substantial benefits that Workhorse and its shareholders will receive from the Settlement; (b) the attendant risks of continued litigation of the Action; and
(c) the desirability of permitting the Settlement to be consummated.
In particular, Plaintiffs and Plaintiffs' Counsel considered the significant litigation risk inherent in this Action. The law imposes significant burdens on Plaintiffs for pleading and proving a shareholder derivative claim. Further, there was a significant risk that continued litigation would deplete the Company's directors and officers insurance and impair Workhorse's ability to obtain a monetary recovery.
While Plaintiffs believe their claims are meritorious, Plaintiffs acknowledge that there is a substantial risk that the Action may not succeed in producing a recovery in light of the applicable legal standards and possible defenses. Plaintiffs and Plaintiffs' Counsel believe that, under the circumstances, they have obtained the best possible relief for Workhorse and its shareholders.
5
5.2 Why Did the Defendants Agree to Settle?
The Individual Defendants have denied and continue to deny each and all of the claims and allegations alleged by Plaintiffs in the Derivative Actions and Litigation Demands, and the Individual Defendants have expressly denied and continue to deny all charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts, or omissions alleged, or that could have been alleged in the Derivative Actions and Litigation Demands. The Individual Defendants believe that they have substantial defenses to the claims and allegations alleged against them in the Derivative Actions and Litigation Demands. The Individual Defendants believe that, at all relevant times, they acted in good faith, and in a manner they reasonably believed to be in the best interests of Workhorse and its stockholders. Nonetheless, Defendants have also taken into account the uncertainty and risks inherent in any litigation, especially in complex cases like the Derivative Actions. Defendants have, therefore, determined that it is in the best interests of Workhorse for the Derivative Actions and Litigation Demands to be settled in the manner and upon the terms and conditions set forth in this Stipulation.
6. SETTLEMENT HEARING
On [insert date], at [insert time]., in Courtroom [-] of the
7. RIGHT TO ATTEND SETTLEMENT HEARING
Any Current Workhorse Shareholder may, but is not required to, appear in person at the Settlement Hearing. If you want to be heard at the Settlement Hearing, then you must first comply with the procedures for objecting, which are set forth below. The Court has the right to change the hearing dates or times without further notice. Thus, if you are planning to attend the Settlement Hearing, you should confirm the date and time before going to the Court. CURRENT WORKHORSE SHAREHOLDERS WHO HAVE NO OBJECTION TO THE SETTLEMENT DO NOT NEED TO APPEAR AT THE SETTLEMENT HEARING OR TAKE ANY OTHER ACTION.
8. RIGHT TO OBJECT TO SETTLEMENT AND PROCEDURES FOR DOING SO
You have the right to object to any aspect of the Settlement. You must object in writing, and you may request to be heard at the Settlement Hearing. If you choose to object, then you must follow these procedures.
8.1 You Must Make Detailed Objections in Writing
Any objection must be presented in writing and must contain the following information. The Court may not consider any objection that does not substantially include the following information:
| 1) | Your name, legal address, and telephone number; |
6
| 2) | The case name and number ( |
| 3) | Proof of being a current Workhorse stockholder as of the Record Date, |
| 4) | The date(s) you acquired your Workhorse shares; |
| 5) | A statement of your position regarding the matters to be heard the Settlement Hearing, including the grounds for each objection or the reasons you desire to appear and be heard; |
| 6) | Notice of whether you intend to appear at the Settlement Hearing (though attendance is not required if you have lodged your objection); |
| 7) | Copies of any papers you intend to submit to the Court, along with the names of any witness(es) you intent to call to testify at the Settlement Hearing and the subject(s) of any expected testimony; |
| 8) | The identities of any cases, by name, court, and docket number, in which the objector or his, her, or its attorney has objected to a settlement in the last three years. |
8.2You Must Timely Deliver Written Objections to the Court, Plaintiffs' Counsel, and Defendants' Counsel
YOUR WRITTEN OBJECTIONS MUST BE ON FILE WITH THE CLERK OF THE COURT NO LATER THAN 20 CALENDAR DAYS BEFORE THE SETTLEMENT HEARING.
The Court Clerk's Address is: the Clerk of the Court,
YOU ALSO MUST DELIVER COPIES OF THE MATERIALS TO COUNSEL FOR PLAINTIFFS AND COUNSEL FOR WORKHORSE SO THEY ARE RECEIVED NO LATER THAN 20 CALENDAR DAYS BEFORE THE SETTLEMENT HEARING.
Co-Lead Counsel for Plaintiffs:
Telephone: (619) 525-3990
Facsimile: (619) 525-3991
THOMAS J. McKENNA
Telephone: (212) 983-1300
Facsimile: (212) 983-0383
7
Attorneys for
MORRIS LAW GROUP
STEVE MORRIS
ROSA SOLIS-RAINEY
Telephone: (702) 474-9400
Telephone: (310) 228-3700
Facsimile: (310) 228-3701
9. HOW TO OBTAIN MORE INFORMATION
This Notice summarizes the Settlement. It is not a complete statement of the events of the Action, the Settlement, or the Stipulation.
You may inspect the Stipulation and other papers in the Action at the Clerk of the Court,
PLEASE DO NOT CALL, WRITE, OR OTHERWISE DIRECT QUESTIONS TO EITHER THE COURT OR THE CLERK'S OFFICE. Any questions you have about matters in this Notice should be directed by telephone to
DATED: [INSERT]
BY ORDER OF THE COURT DISTRICT COURT OF NEVADA
8
EXHIBIT D
IN THE EIGHTH JUDICIAL DISTRICT COURT OF THE
| IN RE WORKHORSE GROUP INC. STOCKHOLDER DERIVATIVE LITIGATION |
Lead Case No. A-21-833050-B (Consolidated with Case No. A-21-836888-B) |
|
This Document Relates To: ALL ACTIONS. |
Judge: Exhibit D |
NOTICE OF PROPOSED DERIVATIVE SETTLEMENT
TO: ALL RECORD HOLDERS AND BENEFICIAL OWNERS OF
COMMON STOCK AS OF
PLEASE TAKE NOTICE that the above-captioned consolidated derivative action (the "Nevada State Court Action") is being settled on the terms set forth in a Stipulation of Settlement, dated
| 1 | This notice should be read in conjunction with, and is qualified in its entirety by reference to, the text of the Stipulation, which has been filed with the |
| 2 | "Derivative Actions" means collectively the derivative actions styled as In re |
| 3 | "Litigation Demands" means collectively, the demands served on Workhorse and/or members of its Board of Directors on behalf of stockholders |
1
The full Board reviewed the derivative settlement parameters, and exercising its business judgment and mindful of its duties to stockholders, approved the Settlement.
IF YOU WERE A RECORD OR BENEFICIAL OWNER OF WORKHORSE COMMON STOCK AS OF
On________, 2023, at _____ _.m., the Court will hold a hearing (the "Settlement Hearing") in the Nevada State Court Action, either in person, telephonically or via video. The purpose of the Settlement Hearing is to determine (i) whether the Settlement is fair, reasonable and adequate (ii) whether a final judgment should be entered and the Nevada State Court Action should be dismissed with prejudice pursuant to the Stipulation; and (iii) whether to approve up to
Any Current Workhorse Shareholder that objects to the Settlement shall have a right to appear and to be heard at the Settlement Hearing, provided that he, she or it was a stockholder of record or beneficial owner as of
1. Your name, legal address, and telephone number;
2. The case name and number (
3. Proof of being a Current Workhorse Shareholder as of the Record Date,
2
4. The date(s) you acquired your Workhorse shares;
5. A statement of each objection being made;
6.Notice of whether you intend to appear at the Settlement Hearing (you are not required to appear);
7.Copies of any papers you intend to submit to the Court, along with the names of any witness(es) you intend to call to testify at the Settlement Hearing and the subject(s) of their testimony; and
8.The identities of any cases, by name, court, and docket number, in which the objector or his, her, or its attorney has objected to a settlement in the last three years.
Only Current Workhorse Shareholders who have filed and delivered valid and timely written notices of objection will be entitled to be heard at the Settlement Hearing unless the Court orders otherwise. If you wish to object to the proposed Settlement, you must file the written objection described above with the Court on or before __________, 2023.
Any Current Workhorse Shareholder as of
Inquiries may be made to Plaintiffs' Counsel:
PLEASE DO NOT CONTACT THE COURT REGARDING THIS NOTICE
DATED: ___________, 2023
3
EXHIBIT E
IN THE EIGHTH JUDICIAL DISTRICT COURT OF THE
IN AND FOR
| IN RE WORKHORSE GROUP INC. STOCKHOLDER DERIVATIVE LITIGATION |
Lead Case No. A-21-833050-B (Consolidated with Case No. A-21-836888-B) |
|
This Document Relates To: ALL ACTIONS. |
[PROPOSED] ORDER AND FINAL JUDGMENT Judge: Exhibit E |
This matter came before the Court for a hearing pursuant to the Order of this Court entered on ______ __, 2023 ("Preliminary Approval Order"), on the application of the Settling Parties for approval of the Settlement set forth in the Stipulation of Settlement executed by counsel for the Parties as of
The Court has received a declaration attesting to (i) the publication of the Summary Notice once in
Therefore, due and adequate notice having been given to Current Workhorse Shareholders as required by the Preliminary Approval Order, and the Court having considered all papers filed and proceedings in the Nevada State Court Action and otherwise being fully informed of the matters herein, and good cause appearing therefore,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED as follows:
1. This Court has jurisdiction over the subject matter of the Nevada State Court Action, including the terms and conditions of the Stipulation and all exhibits thereto, over the Settling Parties to the Stipulation, and over Current Workhorse Shareholders.
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2. Based on evidence submitted by Workhorse's counsel, the Court finds that the Summary Notice and Notice were posted and published according to this Court's Preliminary Approval Order. This Court further finds that the form and content of the Summary Notice and Notice, as previously preliminarily approved by the Court, complied with the requirements of Nevada Rules of Civil Procedure 23.1, satisfied the requirements of due process, and constituted due and sufficient notice of the matters set forth therein.
3. A full opportunity has been offered to Current Workhorse Shareholders to object to the proposed Settlement and to participate in the hearing thereon, and, as such, all Current Workhorse Shareholders are bound by this Order.
4. The Settlement is found to be fair, reasonable, adequate and in the best interests of Workhorse and Current Workhorse Shareholders.
5. The Court finds, for settlement purposes, that: (1) the Nevada State Court Action was properly brought as a shareholder derivative suit pursuant to the Nevada Rules of Civil Procedure and (2) plaintiffs
6. The Stipulation and the terms of the proposed Settlement set forth therein are, in all respects, hereby finally approved. The Settling Parties to the Stipulation are directed to consummate the Settlement in accordance with the terms and provisions of the Stipulation.
7. The Nevada State Court Action and all claims contained therein, as well as all Released Claims, are hereby dismissed with prejudice in their entirety, on the merits, as against all Released Persons. Each party shall bear its own fees and costs, except as set forth herein.
8. Upon the Effective Date, Plaintiffs, (acting on their own behalf and/or derivatively on behalf of Workhorse), Workhorse, and any Person acting derivatively on behalf of Workhorse shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever released, relinquished, discharged and dismissed with prejudice the Released Plaintiff Claims (including Unknown Claims) against the Released Defendant Persons.
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9. Upon the Effective Date, Plaintiffs, (acting on their own behalf and/or derivatively on behalf of Workhorse), Workhorse, and any Person acting derivatively on behalf of Workhorse, shall be forever barred and enjoined from asserting, commencing, instituting, or prosecuting any of the Released Plaintiff Claims against any Released Defendant Person.
10. Upon the Effective Date, each of the Individual Defendants and Workhorse shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever released, relinquished, and discharged the Released Defendant Claims (including Unknown Claims) against the Released Plaintiff Persons, and shall be forever barred and enjoined from asserting any Released Defendant Claims against any Released Plaintiff Person. For the avoidance of doubt, nothing in this Order expands, augments, alters, restricts, curtails or limits the indemnification obligations of Workhorse to the Individual Defendants, and nothing in this Order expands, augments, alters, restricts, curtails or limits the obligations of the insurers, on the one hand, to Workhorse or the Released Defendant Persons, on the other hand.
11. Plaintiffs' Counsel in the action are hereby awarded attorneys' fees and a reimbursement of expenses of $______________ million ("Fee and Expense Award"). This Court finds that this amount is fair and reasonable under the facts and circumstances of this case. Payment of such Fee and Expense Award shall be made in accordance with the provisions of the Stipulation.
12. Plaintiffs are each granted service awards in the amount of
13. This Order and Final Judgment, the Stipulation and all of its provisions, and any negotiations, proceedings or agreements relating to the Stipulation and the Settlement, and any matters arising in connection with such negotiations, proceedings or agreements, and any acts performed or documents executed pursuant to or in furtherance of this Stipulation:
a. shall not be offered or received against any of the Released Persons as evidence of a presumption, concession, or admission of any kind;
-3-
b. shall not be offered or received against any of the Released Persons as evidence of an admission by any of those Released Persons with respect to the truth of any fact alleged in any of the Derivative Actions or Litigation Demands or the validity of any Released Claim, or the deficiency of any defense that has been or could have been asserted, or of any liability, negligence, fault, or wrongdoing of the Released Persons;
c. shall not be offered or received against the Released Persons as evidence of any fault, misrepresentation, omission or other actionable conduct with respect to any statement or written document approved or made by any of the Released Persons;
d. shall not be offered or received against the Released Persons as evidence of any liability, negligence, fault or wrongdoing, or in any way referred to for any other reason as against any of the Released Persons, in any other civil, criminal or administrative action or proceeding, other than such proceedings as may be necessary to effectuate the provisions of this Stipulation; however, the Released Persons may refer to the Stipulation to effectuate the release of Released Claims and other liability protections granted them hereunder;
e. shall not be construed against any of the Released Persons as an admission or concession that the consideration to be given hereunder represents the amount that could be or would have been recovered after trial;
f. shall not be construed as or received in evidence as an admission, concession or presumption against Plaintiffs that any of their claims are without merit, or that any defenses asserted by the Defendants have any merit, or that damages recoverable in the Derivative Actions or Litigation Demands would not have exceeded the Settlement Amount; and
g. shall not, in the event the Stipulation and Settlement are disapproved, cancelled, or terminated (collectively, "Termination"), be used by any Party for any purpose in any trial in any of the Derivative Actions or Litigation Demands;
-4-
h. provided that, any Party may file or introduce the Stipulation and/or the Order and Final Judgment in any action or proceeding that may be brought to enforce the terms of the Stipulation and/or the Final Judgment.
14. Except in the event of a Termination, the Settling Parties agree not to assert under Rule 11 of the Nevada Rules of Civil Procedure or any similar law, rule or regulation, that the Derivative Actions or Litigation Demands were brought or defended in bad faith or without a reasonable basis. The Settling Parties agree that the terms of this Settlement were negotiated at arms' length and in good faith by the Settling Parties and reflect a settlement that was reached voluntarily based upon adequate information and after consultation with their respective experienced legal counsel.
15. Without in any way affecting the finality of this Order and Final Judgment, this Court shall retain jurisdiction over the Settling Parties to the Stipulation and the Released Parties with respect to all matters related to the Derivative Actions and Litigation Demands and to consider any matters or disputes arising out of or relating to the Settlement, and the Settling Parties submit to the jurisdiction of the Court for purposes of implementing and enforcing the Settlement embodied in the Stipulation and Order and Final Judgment, and for matters or disputes arising out of or relating to the Settlement.
16. Any order regarding an award of attorneys' fees and expenses, or any appeal, modification or change of such an order, shall in no way disturb or affect the finality of this Order and Final Judgment and shall be considered separate from this Order and Final Judgment.
17. This Settlement shall be a final and complete resolution of all disputes among the Settling Parties. No party to the Stipulation may assert in any forum that the Derivative Actions or Litigation Demands were brought, commenced or prosecuted by the Plaintiffs or their counsel in bad faith or that the Derivative Actions or Litigation Demands were not filed or pursued in good faith or were not settled voluntarily after negotiating at arm's-length and in good faith after consultation with competent legal counsel.
-5-
18. The Settling Parties are hereby authorized, without further approval of the Court, to unanimously agree to and adopt in writing such amendments, modifications, and expansions of the Stipulation and all exhibits attached thereto, provided that such amendments, modifications, and expansions of the Stipulation are done in accordance with the terms of the Stipulation, are not materially inconsistent with this Order and Final Judgment and do not materially limit the rights of Current Workhorse Shareholders or the Released Persons under the Stipulation.
19. In the event that the Settlement does not become effective in accordance with the terms of the Stipulation, then this Order and Final Judgment shall be rendered null and void to the extent provided by and in accordance with the Stipulation and shall be vacated, and in such event, all orders entered and releases delivered in connection herewith shall be null and void to the extent provided by and in accordance with the Stipulation, and the provisions of Paragraph 6.3 of the Stipulation shall apply.
20. The provisions of this Order and Final Judgment constitute a full and complete adjudication of the matters considered and adjudged herein, and the Court determines that there is no just reason for delay in the entry of judgment. The Clerk is hereby directed to immediately enter this Order and Final Judgment.
DATED: ________________
| IT IS SO ORDERED: | |
| HONORABLE |
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