Sec Form 13D Filing - Power Sustainable Capital Inc. filing for LION ELEC CO COM (LEV) - 2022-12-23

¹ Represents (i) 77,143,685 Common Shares held by the Reporting Persons, (ii) 2,270,895 Common Shares which may be acquired by Power Energy throu gh the exercise of its options under that certain Option Agreement, dated November 27, 2020, by and among Power Energy, on the one hand, and XPND, 9368-2722 and 9231-9979, on the other hand, and (iii) 9,842,519 Common Shares issuable upon exercise of Warrants owned by the Reporting Persons. Each capitalized term in this footnote has the meaning ascribed to it herein below.

² All percentages of Common Shares outstanding contained herein are based on 227,922,481 Common Shares outstanding, consisting of (i) 218,079,962 Common Shares, as disclosed in the Company’s prospectus supplement filed on December 13, 2022, and (ii) 9,842,519 Common Shares issuable upon the exercise of Warrants held by the Reporting Persons.

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³ See footnote 1.

⁴ See footnote 2.

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Item 1. Security and Company

This Schedule 13D (as may be amended and supplemented from time to time, the “Schedule 13D”) relates to the common shares (the “Common Shares”) of The Lion Electric Company, a corporation governed by the laws of Québec (the “Company”). The principal executive offices of the Company are located at 921 chemin de la Rivière-du-Nord, Saint-Jerome, Quebec, J7Y 5G2, Canada.

Item 2. Identity and Background

(a)	This statement is being filed by the following persons (the “Reporting Persons”):

(i)	Power Sustainable Capital Inc., a corporation governed by the laws of Canada (“Power Sustainable”)

(ii)	Power Energy Corporation, a corporation governed by the laws of Canada (“Power Energy”).

(b)	The address of each of the Reporting Persons is 751 Square Victoria, Montreal, Quebec, H2Y 2J3, Canada.

(c)

Set forth in Annex A attached hereto and incorporated herein by reference is a list of the persons required to be identified in respect of the Reporting Persons pursuant to General Instruction C to Schedule 13D (collectively, the “Covered Persons”), and the business address and, in the case of Covered Persons who are not Reporting Persons, the present principal occupation, of each of the Covered Persons. The principal business of the Reporting Persons is making securities and other investments.

(d)	During the last five years, none of the Reporting Persons and, to the best of the Reporting Persons’ knowledge, none of the Covered Persons, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e)

During the last five years, none of the Reporting Persons and, to the best of the Reporting Persons’ knowledge, none of the Covered Persons, was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f)	Information regarding the citizenship of each of the Covered Persons is set forth in Annex A.

Item 3. Source and Amount of Funds or Other Consideration

On December 16, 2022, Power Energy purchased 9,842,519 units (“Units”) in an offering (the “Offer”) by the Company at a purchase price of $2.54 per unit, with each Unit consisting of one Common Share and one common share purchase warrant (each a “Warrant”).  Each Warrant entitles the holder thereof to purchase one Common Share at an exercise price of $2.80 per share, exercisable for a period of five years following the closing of the Offer. All of the foregoing Units were acquired with funds advanced by Power Sustainable, Power Energy’s sole owner.

 On May 6, 2021, the Company completed the transactions contemplated by that certain Business Combination Agreement, dated as of November 30, 2020, entered into between Lion Electric Merger Sub Inc. and Northern Genesis Acquisition Corp. (the “Business Combination”). Immediately prior to the completion of the Business Combination, the Company completed a reorganization (the “Pre-Closing Reorganization”) which included a share split, pursuant to which each Common Share outstanding immediately prior to such share split was converted into 4.1289 Common Shares.

Prior to the Pre-Closing Reorganization, Power Energy owned 13,743,819 Common Shares, which were acquired by Power Energy in October 2017, pursuant to a subscription agreement, by and among, the Company and Power Energy and a share purchase agreement, by and among the Company, Power Energy and certain other parties thereto. Following the Pre-Closing Reorganization, but prior to the Business Combination or PIPE Transaction (defined below), Power Energy owned 69,959,334 Common Shares, representing (i) 56,746,854 Common Shares, as

a result of the stock split in Pre-Closing Reorganization and (ii) 13,212,480 Common Shares that could be acquired by Power Energy through the Option Agreement (as defined below).  On May 6, 2021, Power Energy purchased 1,662,500 Common Shares from the Company, at a price of $10.00 per share, in a private placement that closed immediately prior to the closing of the Business Combination, pursuant to a subscription agreement previously entered into by and between Power Energy and the Company on November 30, 2020 (the “PIPE Transaction”). Following the Pre-Closing Reorganization, Business Combination, PIPE Transaction, and the exercise of the first and second call options under the Option Agreement, but prior to the Offer, Power Energy beneficially owned 69,572,061 Common Shares, representing (i) 67,301,166 Common Shares held and (ii) 2,270,895 Common Shares that could be acquired by Power Energy through the Option Agreement. All of the foregoing Common Shares were acquired with funds advanced by Power Sustainable.

The information set forth in Item 5(c) regarding Pierre-Olivier Perras is incorporated herein by reference.

Item 4.  Purpose of Transaction.

The information set forth in Items 3 and 6 of this Schedule 13D is incorporated by reference in its entirety into this Item 4.

General

The Reporting Persons beneficially own the Common Shares and Warrants for investment purposes. The Reporting Persons continuously assess the Company’s business, financial condition, results of operations and prospects, general economic conditions, other developments and additional investment opportunities. Depending on such assessments, and subject to any restrictions described herein, the Reporting Persons may acquire additional securities of the Company or new securities of the Company or may determine to purchase, sell or otherwise dispose of all or some of the Company’s securities beneficially owned by the Reporting Persons in the open market, as applicable, in privately negotiated transactions, in transactions directly with the Company or otherwise. Such actions will depend upon a variety of factors, including, without limitation, current and anticipated future trading prices, the financial condition, results of operations and prospects of the Company, alternative investment opportunities, general economic, financial market and industry conditions and other factors that the Reporting Persons may deem material to their investment decision.

Lock-Up Letter

On December 12, 2022, Power Energy entered into a lock-up letter with B. Riley Securities, and National Bank Financial, Inc. (collectively, the “Underwriters”) with respect to the Common Shares owned by Power Energy following the Offer (the “Lock-Up Agreement”). Pursuant to the Lock-Up Agreement, Power Energy agreed, subject to certain customary exceptions, not to (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Shares owned by Power Energy or any securities convertible into or exercisable or exchangeable for Common Shares, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Shares, in each case  until the date that is 90 days after December 12, 2022.

Nomination Rights Agreement

On May 6, 2021, in connection with the closing of the Business Combination, Power Energy entered into a Nomination Rights Agreement with the Company and 9368-2672 Québec Inc. (“9368-2672”), pursuant to which each of Power Energy and 9368-2672 were granted certain rights to nominate members of the Company’s board of directors (the “Board”) for so long as it holds a requisite percentage of the total voting power of the Company. Under the terms of the Nomination Rights Agreement, each of Power Energy and 9368-2672 will, for so long as it and its affiliates collectively hold at least 20% of the outstanding Common Shares on a non-diluted basis, be entitled to designate a number of director nominees equal to the product of (rounding to the nearest whole number) (i) the percentage of the outstanding Common Shares held by it (on a non-diluted basis) multiplied by (ii) the size of the Board.

The Nomination Rights Agreement further provides that for so long as Power Energy has the right to designate a director nominee, it shall have the right to designate one of its director nominees as the Chairman of the Board. In the event that such designated director nominee is not an independent director, the remaining directors will select a lead independent director from amongst the independent directors of the Board. Each of Power Energy and 9368-2672 also has the right under the Nomination Rights Agreement to appoint one member of each committee of the Board, except as otherwise set forth therein.

As a result of direct and indirect securities holdings, Power Corporation of Canada (“PCC”) and the Desmarais Family Residuary Trust (the “Trust”), which was created on October 8, 2013 under the Last Will and Testament of Paul G. Desmarais, the trustees of which are Paul Desmarais Jr., André Desmarais, Sophie Desmarais, Michel Plessis-Bélair and Guy Fortin, may be deemed to control the Reporting Persons. Decisions with respect to voting the shares of PCC held directly and indirectly by the Trust are determined by a majority of the trustees, excluding Sophie Desmarais. PCC, a corporation organized under the laws of Canada, is an international management and holding company with its principal place of business at 751 Victoria Square, Montreal, Québec, H2Y 2J3, Canada. The Trust was formed under the laws of Québec and has its address at 759 Square Victoria, Montreal, Québec, H2Y 2J7, Canada.

(c)  Other than as disclosed in Item 3, the Reporting Persons have not engaged in any transaction during the past 60 days involving Common shares. On December 16, 2022, Mr. Perras acquired 3,937 Units in the Offer at a purchase price of $2.54 per Unit, with each Unit consisting of one Common Share and one Warrant.

(d)          No person other than Power Energy is known by the Reporting Persons to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Common Stock beneficially owned by the Reporting Persons and described in this Item 5.

(e)          Not applicable.

On November 27, 2020, Power Energy, on the one hand, and XPND, 9368-2722 and 9231-9979, on the other hand (collectively, the “Option Securityholders”) entered into an option agreement (the “Option Agreement”) pursuant to which each Option Securityholder has granted an option to Power Energy to acquire Common Shares held by such Option Securityholder. Under the Option Agreement, Power Energy has the right, subject to the terms and conditions set out therein, to purchase from the Option Securityholders, on a pro rata basis (i) up to 2,100,000 Common Shares at a price per share of $12.44 (or, following the completion of the Pre-Closing Reorganization, up to 8,670,690 Common Shares at a price per share of $3.01) at any time on or before March 15, 2022, (ii) up to 550,000 Common Shares at a price per share of $26.09 (or, following the completion of the Pre-Closing Reorganization, up to 2,270,895 Common Shares at a price per share of $6.32) at any time on or before April 30, 2022, and (iii) up to 550,000 Common Shares at a price per share of $65.22 (or, following the completion of the Pre-Closing Reorganization, up to 2,270,895 Common Shares at a price per share of $15.80) at any time on or before October 31, 2023. Under the Option Agreement, Power Energy may elect to exercise any of the foregoing options on a cashless basis, whereby the number of Common Shares to be so acquired will be determined on the basis of the market price of the Common Shares as of immediately prior to such exercise. Power Energy has exercised its rights under the Option Agreement to acquire 8,891,812 Common Shares.

Pursuant to the Company’s Omnibus Plan, the Company awards Deferred Share Units (each, a “DSU”) to outside members of the Board (“Outside Directors”), including Mr. Perras. On December 23, 2022, the Company awarded 16,070 DSUs to Mr. Perras, bringing his total holdings of DSUs to 24,266. As disclosed in the Company’s Annual Report Pursuant to Section 13 of the Securities Exchange Act of 1934, filed by the Company on March 29, 2022 with respect to the fiscal year ended December 31, 2021, all DSUs granted to Company directors under the Omnibus Plan vest entirely on the date of grant and take the form of a bookkeeping entry credited to the eligible director’s account,

to be paid after the director ceases to act as a Company director. In the event any dividend were to be paid on the Common Shares, outstanding DSUs would earn dividend equivalents in the form of additional DSUs at the same rate as dividends would be paid on the Common Shares. DSUs will be settled in cash and/or in Common Shares of the Company purchased on the open market or issued from the Company’s treasury, at the discretion of the Board. Each Outside Director can elect to receive up to 100% of his or her annual cash retainer in the form of DSUs. The cash and equity retainers are payable bi-annually with the number of DSUs to be issued determined based on the volume-weighted average trading price on the Toronto Stock Exchange for the five trading days prior to each such issuance.

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