Foxconn says Lordstown Motors in breach of investment agreement

Lordstown Motors disclosed that on April 21, it received a letter from Foxconn asserting that the company was in breach of the investment agreement due to its previously disclosed receipt of a notice from the Nasdaq indicating the company was no longer in compliance with the $1.00 minimum bid price requirement for continued listing. Foxconn purported to terminate the investment agreement if the breach is not cured within 30 days. Foxconn has notified Foxconn that it believes the breach allegations in the notice are without merit. The investment agreement, by its terms, does not permit Foxconn to terminate it following the initial closing, and in any event, Foxconn cannot exercise termination rights because Foxconn has breached the investment agreement by failing to use necessary efforts to agree upon the electric vehicle program budget and EV program milestones to facilitate the funding of the additional preferred stock investment, Foxconn said in a filing. Therefore, the company believes the investment agreement remains in effect and intends to enforce its rights thereunder. Lordstown said it is in discussions with Foxconn to seek a resolution regarding these matters. However, to date, Foxconn has declined to revoke its "invalid" termination notice and has failed to confirm that it will proceed with the subsequent common closing or any preferred stock closing, it added. If the closing and funding do not occur, the Lordstown said it "will be deprived of critical funding necessary for its operations." The company is evaluating its legal and financial alternatives in the event a resolution is not reached. It added, "IF we are unable to resolve our dispute with Foxconn in a timely manner on terms that allow us to continue operating as planned, identify other sources of funding, identify a strategic partner and resolve our significant contingent liabilities, we may need to curtail or cease operations and seek protection by filing a voluntary petition for relief under the Bankruptcy Code. If this were to occur, the value available to our various stakeholders, including our creditors and stockholders, is uncertain."