Item 2.01 Completion of Acquisition or Disposition of Assets.
Acquisition
As previously disclosed, on March 14, 2022, Local Bounti Corporation (the
"Company") entered into (a) a Purchase and Sale Agreement (the "SPA") by and
among (i) the Hollandia Produce Group, Inc. Employee Stock Ownership Trust (the
"Share Seller"), (ii) Mosaic Capital Investors I, LP, a Delaware limited
partnership ("Mosaic"), True West Capital Partners Fund II, L.P. f/k/a Seam Fund
II, L.P., a Delaware limited partnership ("TWC" and collectively with Mosaic and
the Share Seller, the "Sellers" and each individually, a "Seller"), (iii) Mosaic
Capital Investors LLC, a Delaware limited liability company (the "Sellers'
Representative"), solely in its capacity as Sellers' Representative,
(iv) Hollandia Produce Group, Inc., a California corporation (the "Target" or
"Pete's"), (v) Local Bounti Operating Company LLC, a Delaware limited liability
company and a wholly-owned subsidiary of the Company ("Purchaser"), and (vi) the
Company, pursuant to which Purchaser will acquire all of the issued and
outstanding shares of capital stock and rights to acquire capital stock of the
Target at the closing of the transactions contemplated by the SPA, the Georgia
UPA (as defined below) and the Georgia Corporation SPA (as defined below) (the
"Closing"), (b) a Unit Purchase Agreement (the "Georgia UPA") by and among the
Company, Purchaser and each of the holders of Class B Common Units of the
Georgia Company (each, a "Georgia Share Seller"), providing for the acquisition
by Purchaser at the Closing of all of the issued and outstanding Class B Common
Units of Hollandia Produce GA, LLC, a Delaware limited liability company, and a
majority-owned subsidiary of the Target (the "Georgia Company"), and (c) a Stock
Purchase Agreement (the "Georgia Corporation SPA," and collectively with the
Georgia UPA and the SPA, the "Purchase Agreements") by and among the Company,
Purchaser, Mosaic and TWC (Mosaic and TWC, together with the Sellers and the
Georgia Share Sellers, the "Selling Parties"), providing for the acquisition by
Purchaser at the Closing of all of the issued and outstanding shares of capital
stock of Hollandia Produce GA Investor Corporation, a Delaware corporation (the
"Georgia Corporation"), holding all of the issued and outstanding Series A
Preferred Units of the Georgia Company. The Closing occurred on April 4, 2022.
On April 4, 2022, pursuant to the Purchase Agreements, the Company (through
Purchaser) acquired all of the equity interests and rights to acquire equity
interests of the Target and its subsidiaries, including the minority interest in
the Georgia Company not owned by the Target, from the Selling Parties
(collectively, the "Transaction"). The total consideration paid at the Closing
to the Selling Parties in connection with the Purchase Agreements was
approximately $122.5 million (subject to certain adjustments as set forth in the
Purchase Agreements) consisting of a mix of cash and the Company's common stock,
par value $0.0001 (the "Common Stock"), which was comprised of approximately (i)
$92.5 million in cash consideration (subject to certain adjustments as set forth
in the Purchase Agreements) (the "Cash Consideration") and (ii) 5,654,600 shares
of Common Stock (the "Equity Consideration"), based on $30 million divided by a
volume weighted average price of the Common Stock over the 20 consecutive
trading days ending on and including February 28, 2022.
Also on April 4, 2022, in connection with the closing of the Transaction, the
Target also completed the transactions contemplated by that certain purchase and
sale agreement with STORE Master Funding XVIII, LLC ("STORE") to acquire all of
the properties previously leased by Pete's pursuant to certain sale-leaseback
agreements between the Target and STORE for an aggregate purchase price of
approximately $25.8 million which was paid by Purchaser in connection with the
Closing (the "Property Acquisition"), but not included in the total
consideration set forth above.
The Company has agreed to register the Equity Consideration for resale within
sixty days of the expiration of the lock-up on May 18, 2022 (see below) pursuant
to a registration rights agreement that the Company has entered into with the
Selling Parties (collectively, the "Registration Rights Agreement"). The
Registration Rights Agreement became effective at the Closing. The Registration
Rights Agreement provides that the Common Stock issued to the Selling Parties at
the Closing is subject to lock-up until May 18, 2022, subject to certain
Permitted Transfers (as defined in the Registration Rights Agreement).
The foregoing description of each of the Purchase Agreements and the
Registration Rights Agreement and the transactions contemplated thereby does not
purport to be complete and is qualified in its entirety by reference to the full
. . .
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
The information provided in Item 2.01 of this Current Report on Form 8-K is
hereby incorporated by reference into this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information required by this Item 3.02 and included in Item 2.01 is
incorporated into this Item 3.02 by reference.
The Company sold the Equity Consideration in reliance on the exemption from
registration provided by Section 4(a)(2) of the Securities Act of 1933, as
amended (the "Securities Act"), and/or Regulation D promulgated thereunder. The
Company relied on this exemption from registration based in part on
representations made by the Selling Parties in the Purchase Agreements and
accredited investor questionnaires completed by each of the Selling Parties.
The Company sold the CFSI Equity in reliance on the exemption from registration
provided by Section 4(a)(2) of the Securities Act and/or Regulation D
promulgated thereunder.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
(c)
Appointment of President
Following the Closing, effective April 4, 2022, the Company announced that Brian
Cook has been named President of the Company, reporting to co-Chief Executive
Officers Craig Hurlbert and Travis Joyner.
Mr. Cook, 43, previously served as Chief Executive Officer of Pete's, a leading
produce company specializing in hydroponic greenhouse-grown lettuce and cress,
from November 2017 to April 2022, when Local Bounti acquired
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Pete's. Mr. Cook also served as Vice President of Sales of Hollandia Produce
from February 2016 to November 2017. Prior to joining Hollandia Produce,
Mr. Cook served in various sales roles at several produce and retail advertising
companies. Mr. Cook currently serves as a Member of the Fresh Produce & Floral
Council Board and the Ventura College Agriculture Advisory Board.
In connection with Mr. Cook's appointment as President, the Company entered into
an employment agreement (the "Employment Agreement") with Mr. Cook that provides
for the following benefits, among other provisions:
• an annual base salary of $400,000;
• restricted stock units underlying 500,000 shares of Common Stock, vesting
over four years (the "Inducement Grant"); and
• a payment equal to six months base salary and COBRA coverage for up to
six months if Mr. Cook resigns for good reason (as defined in the
Employment Agreement) or the Company terminates Mr. Cook's employment
without cause (as defined in the Employment Agreement), or, if such
resignation or termination occurs within 12 months following a change in
control (as defined in the Employment Agreement), a payment equal to 12
months base salary, COBRA coverage for up to 12 months, the vesting of
all of Mr. Cook's equity awards at the time of the change in control.
Mr. Cook also entered into the Company's standard agreements with the Company
providing for (1) confidentiality and non-disparagement obligations applicable
during Mr. Cook's term and following the termination thereof for any reason,
(2) a standard intellectual property assignment provision, and
(3) a non-solicitation provision applicable during Mr. Cook's term and during
the one year period following the termination thereof for any reason.
Mr. Cook will also be eligible to participate in the Company's equity incentive
plans and long-term incentive plans and other benefits available to the
Company's executive officers. In addition, the Company entered into an
indemnification agreement with Mr. Cook on terms substantially similar to the
terms of the form of indemnification agreement filed as Exhibit 10.3 to the
Company's Current Report on Form 8-K, filed with the Securities and Exchange
Commission (the "SEC") on November 24, 2021.
There is no arrangement or understanding between Mr. Cook and any other person
pursuant to which Mr. Cook was appointed as President. Mr. Cook does not have
any family relationships with any director or other executive officer of the
Company. In accordance with the requirements of Item 404(a) of Regulation S-K
promulgated under the Securities Act, in connection with the Transaction,
Mr. Cook received $1,082,252 in cash and 124,735 shares of Common Stock in
consideration as a Selling Party.
The foregoing description of the Employment Agreement does not purport to be
complete and is subject to, and qualified in its entirety by, the full text of
the Employment Agreement a copy of which will be filed with the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 2022 and is
incorporated by reference herein.
Item 7.01 Regulation FD Disclosure.
On April 5, 2022, the Company also issued a press release regarding the closing
of the Transaction (the "Closing Press Release"). A copy of the Closing Press
Release is furnished herewith as Exhibit 99.1 and is incorporated herein by
reference.
The information included in this Item 7.01 and in the Closing Press Release
attached hereto as Exhibit 99.1 is being furnished and shall not be deemed
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or otherwise subject to the liabilities of that
section, nor shall any such information or exhibits be deemed incorporated by
reference in any filing under the Securities Act or the Exchange Act, except as
shall be expressly set forth by specific reference in such document.
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Cautionary Notice Regarding Forward-Looking Statements
Certain statements in this Current Report on Form 8-K and the documents
incorporated by reference herein are "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such forward-looking statements are often identified by words such as
"anticipate," "approximate," "believe," "commit," "continue," "could,"
"estimate," "expect," "hope," "intend," "may," "outlook," "plan," "project,"
"potential," "should," "would," "will" and other similar words or expressions.
Such forward-looking statements reflect the Company's current expectations or
beliefs concerning future events and actual events may differ materially from
historical results or current expectations. The reader is cautioned not to place
undue reliance on these forward-looking statements, which are not a guarantee of
future performance and are subject to a number of uncertainties, risks,
assumptions and other factors, many of which are outside the control of the
Company. The forward-looking statements in this Current Report on Form 8-K
address a variety of subjects including, for example, the business prospects of
the Company following the Transaction. The following factors, among others,
could cause actual results to differ materially from those described in these
forward-looking statements: the effects of disruption to Local Bounti's
businesses as a result of the Transaction; the impact of transaction costs on
Local Bounti's interim 2022 and full year 2022 financial results; Local Bounti's
ability to retain Pete's customers following the consummation of the
Transaction; Local Bounti's ability to achieve the anticipated benefits from the
Transaction; the uncertainty of water supply (and related uncertainty for
certain water rights) for Pete's facilities located in California; Local
Bounti's ability to effectively integrate the acquired operations into its own
operations; the ability of Local Bounti to retain and hire key personnel; the
uncertainty of projected financial information; the diversion of management time
on Transaction-related issues; Local Bounti's increased leverage as a result of
additional indebtedness incurred in connection with the Transaction;
restrictions contained in Local Bounti's debt facility agreements with Cargill;
Local Bounti's ability to repay, refinance, restructure and/or extend its
indebtedness as it comes due; and unknown liabilities that may be assumed in the
Transaction. In addition, actual results are subject to other risks and
uncertainties that relate more broadly to the Company's overall business,
including Local Bounti's ability to generate revenue; the risk that Local Bounti
may never achieve or sustain profitability; the risk that Local Bounti could
fail to effectively manage its future growth; the risk that Local Bounti will
fail to obtain additional necessary capital when needed on acceptable terms, or
at all; Local Bounti's ability to build out additional facilities; reliance on
third parties for construction, delays relating to material delivery and supply
chains, and fluctuating material prices; Local Bounti's ability to decrease its
cost of goods sold over time; potential for damage to or problems with Local
Bounti's CEA facilities; Local Bounti's ability to attract and retain qualified
employees; Local Bounti ability to develop and maintain its brand or brands it
may acquire; Local Bounti's ability to maintain its company culture or focus on
its vision as it grows; Local Bounti's ability to execute on its growth
strategy; the risks of diseases and pests destroying crops; Local Bounti's
ability to compete successfully in the highly competitive natural food market;
Local Bounti's ability to defend itself against intellectual property
infringement claims; changes in consumer preferences, perception and spending
habits in the food industry; seasonality; Local Bounti's ability to achieve its
sustainability goals; and other risks and uncertainties indicated from time to
time, including those under "Risk Factors" and "Forward-Looking Statements" in
Local Bounti's Annual Report on Form 10-K for the year ended December 31, 2021
filed with the Securities and Exchange Commission (the SEC) on March 30, 2022,
as supplemented by subsequent Quarterly Reports on Form 10-Q and Annual Reports
on Form 10-K, and other reports and documents Local Bounti files from time to
time with the SEC. Local Bounti cautions that the foregoing list of factors is
not exclusive and cautions readers not to place undue reliance upon any
forward-looking statements, which speak only as of the date hereof. Local Bounti
does not undertake or accept any obligation or undertaking to update or revise
any forward-looking statements to reflect any change in its expectations or any
change in events, conditions or circumstances on which any such statement is
based.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
As permitted under this item, the Company will file the historical financial
statements required to be filed by this item by amendment to this Current Report
on Form 8-K not later than 71 days after the date this Current Report on Form
8-K is required to be filed.
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(b) Pro Forma Financial Information.
As permitted under this item, the Company will file the pro forma financial
information required to be filed by this item by amendment to this Current
Report on Form 8-K not later than 71 days after the date this Current Report on
Form 8-K is required to be filed.
(d) Exhibits.
Exhibit No. Description
2.1† Purchase and Sale Agreement, dated as of March 14, 2022, by and
among Local Bounti Corporation and (i) the Hollandia Produce
Group, Inc. Employee Stock Ownership Trust, (ii) Mosaic Capital
Investors I, LP, True West Capital Partners Fund II, L.P. f/k/a
Seam Fund II, L.P., (iii) Mosaic Capital Investors LLC, solely in
its capacity as Sellers' Representative, (iv) Hollandia Produce
Group, Inc., and (v) Local Bounti Operating Company LLC
(incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K filed with the SEC on March 15, 2022)
2.2† Unit Purchase Agreement, dated as of March 14, 2022, by and
among Local Bounti Corporation, Local Bounti Operating Company
LLC, and each of the holders of Class B Common Units of Hollandia
Produce GA, LLC (incorporated by reference to Exhibit 2.2 to the
Company's Current Report on Form 8-K filed with the SEC on
March 15, 2022)
2.3† Stock Purchase Agreement, dated as of March 14, 2022, by and
among Local Bounti Corporation, Local Bounti Operating Company
LLC, Mosaic Capital Investors I, LP, and True West Capital
Partners Fund II, L.P. f/k/a Seam Fund II, L.P. (incorporated by
reference to Exhibit 2.3 to the Company's Current Report on Form
8-K filed with the SEC on March 15, 2022)
10.1 Registration Rights Agreement, dated March 14, 2022, by and
among Local Bounti Corporation and certain other parties
(incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed with the SEC on March 15, 2022)
10.2† First Amendment to Credit Agreements and Subordination
Agreement, dated as of March 14, 2022, by and among Local Bounti
Operating Company LLC, Local Bounti Corporation and Cargill
Financial Services International, Inc. (incorporated by reference
to Exhibit 10.2 to the Company's Current Report on Form 8-K filed
with the SEC on March 15, 2022)
99.1 Closing Press Release dated April 5, 2022
104 Cover Page Interactive Data File (formatted as Inline XBRL)
† Certain exhibits and schedules to this Exhibit have been omitted in accordance
with Regulation S-K Item 601(a)(5). The Company hereby agrees to furnish
supplementally a copy of any omitted exhibit or schedule to the SEC upon its
request.
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