Sec Form 13D Filing - BORGWARNER INC (BWA) filing for ROMEO POWER, INC (RMO) - 2021-01-08

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. )*

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Romeo Power, Inc.

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(Name of Issuer)

Common Stock, par value $0.0001 per share

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(Title of Class of Securities)

749641106

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(CUSIP Number)

Tonit M. Calaway

BorgWarner Inc.

3850 Hamlin Road

Auburn Hills, Michigan 48326

(248) 754-9200

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(Name, Address and Telephone Number of Person Authorized

to Receive Notices and Communications)

December 29, 2020

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(Date of Event Which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §240.13d-1(e), §240.13d-1(f) or §240.13d-1(g), check the following box. ☐

NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits.  See Rule 13d-7 for other parties to whom copies are to be sent.

The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of section 18 of the Securities Exchange Act of 1934 (the “Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

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CUSIP No. 749641106

This statement on Schedule 13D (this “Schedule 13D”) relates to the common stock, par value $0.0001 per share (&#x 201C;Romeo Common Stock”), of Romeo Power, Inc., a Delaware corporation formerly known as RMG Acquisition Corp. (the “Issuer”).  The address of the principal executive offices of the Issuer is 50 West Street, Suite 40 C, New York, NY 10006.

The information in Items 4 and 6 of this Schedule 13D is incorporated by reference.

In May 2019, BorgWarner invested $50 million in exchange for a 20% equity interest in Romeo Systems, Inc., an industry leading energy storage technology company incorporated in the State of Delaware focused on designing and manufacturing lithium-ion battery modules and packs for commercial electric vehicles (“RS”).  BorgWarner funded this amount from cash on hand.

On December 29, 2020, RS consummated a business combination pursuant to an Agreement and Plan of Merger, dated October 5, 2020, as amended on November 18, 2020 (the “Merger Agreement”), by and among the Issuer, RMG Merger Sub, Inc., a wholly-owned subsidiary of the Issuer incorporated in the State of Delaware (“Merger Sub”), and RS.  Pursuant to the terms of the Merger Agreement, a business combination between the Issuer and RS was effected through the merger of Merger Sub with and into RS, with RS surviving as the surviving company and as a wholly-owned subsidiary of the Issuer (the “Business Combination”).

Upon the consummation of the Business Combination, the stockholders of RS, including BorgWarner, received a number of shares of Romeo Common Stock based on an exchange ratio (the “Exchange Ratio”), the numerator of which was equal to (i) $900 million, (ii) plus net cash of RS, (iii) less debt of RS, (iv) plus the aggregate exercise price of all RS options and warrants (all calculated at the closing of the Business Combination), (v) divided by $10, and the denominator of which was equal to the number of outstanding shares of RS, including shares issuable upon conversion of outstanding convertible notes.  As a result of the Business Combination, the stockholders of RS, including BorgWarner, became stockholders of the Issuer.  The Issuer remains listed on the NYSE and trades under the new ticker symbol “RMO”.

The foregoing description of the Merger Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Merger Agreement, which is filed herewith as Exhibit 1 to this Schedule 13D and incorporated herein by reference.

The information in Items 3 and 6 of this Schedule 13D is incorporated by reference.

BorgWarner holds the securities of the Issuer for strategic investment purposes, having acquired securities of RS in May 2019 as part of its effort to expand its electrification portfolio and systems expertise.  BorgWarner intends to review and evaluate its investment in the Issuer on a continuous basis.  Depending upon

various factors, including but not limited to the business, prospects, financial condition and strategic priorities of BorgWarner and the Issuer and other developments concerning BorgWarner and the Issuer, market conditions and other factors that BorgWarner may deem relevant to its investment decision, and subject to compliance with applicable laws, rules and regulations, BorgWarner may in the future take actions with respect to its investment in the Issuer as it deems appropriate with respect to any or all matters required to be disclosed in this Schedule 13D, including without limitation changing its intentions or increasing or decreasing its investment in the Issuer or engaging in any hedging or other derivative transactions with respect to Romeo Common Stock.

In connection with such purposes, BorgWarner Ithaca LLC, a wholly-owned subsidiary of BorgWarner (“BorgWarner Ithaca”), formed a joint venture (the “JV”) with the Issuer in June 2019, which is owned 60% by BorgWarner Ithaca and 40% by the Issuer.  The respective rights of BorgWarner and the Issuer in respect of the JV are set forth in a Joint Venture Operating Agreement (the “JV Agreement”) and in an Intellectual Property License Agreement (the “License Agreement”), each entered into in May 2019.  These agreements, copies of which are attached hereto as Exhibits 2 and 3, respectively:

•	allocate rights to exploit the Issuer’s current and future intellectual property rights (“Romeo IP”) between the Issuer and the JV based on geography and vehicle type;

•	provide a license to the Issuer and BorgWarner of the JV’s intellectual property rights;

•	require the JV to pay the Issuer a royalty for products sold by the JV;

•	grant BorgWarner and the JV rights of first refusal to manufacture products in the Issuer’s field if the Issuer proposes to expand its manufacturing capacity;

•

provide BorgWarner broad commercial rights to commercialize Romeo IP (or the option to acquire those rights for a payment) under circumstances involving the Issuer’s insolvency, an event of default under any debt instrument, termination of the JV Agreement due to the Issuer’s breach or engagement with competitors of BorgWarner or the JV;

•	govern the management and funding mechanisms of the JV;

•	include put and call options for BorgWarner regarding the membership interest held by BorgWarner and the Issuer, respectively, in the JV;

•	include other customary provisions related to transfers or issuances of membership interests in the JV;

•	obligate the Issuer to provide engineering services to the JV to support customer applications; and

•	grant BorgWarner a first-priority security interest in the Issuer’s interest in the JV to secure the Issuer’s performance of its obligations under any agreement relating to the JV or BorgWarner’s investment in the Issuer.

BorgWarner’s put option gives BorgWarner the right to require the Issuer to purchase BorgWarner’s membership interest in the JV.  The put option became exercisable on December 28, 2020 and may be exercised by BorgWarner at any time.  BorgWarner may exercise its call option, which allows it to purchase the Issuer’s membership interest in the JV, at any time after June 28, 2022.

The purchase price payable upon the exercise of the put or call options is based on the value of the purchased membership interest at the time of the exercise as determined by a mutually agreed independent appraiser using standard valua tion methodologies taking into account a discount for lack of marketability (“Market Value”).  The purchase price to be paid in connection with BorgWarner’s exercise of its put option will be 90% of the Market Value of BorgWarner’s membership interest in the JV if it is exercised on or prior to June 28, 2021, 95% if it is exercised after June 28, 2021 and on or prior to June 28, 2022 and 100% if it is exercised after June 28, 2022.  The purchase price to be paid in connection with BorgWarner’s exercise of its call option will be 100% of the Market Value of the Issuer’s membership interest in the JV, provided that if BorgWarner or any of its affiliates directly competes with the JV in a manner that is materially adverse to the JV at any time prior to June 28, 2024, the price at

which BorgWarner may exercise its call option will be the Market Value of the Issuer’s membership interest in the JV plus (i) 40% if it is exercised on or prior to June 28, 2021, (ii) 30% if it is exercised after June 28, 2021 and on or prior to June 28, 2022, (iii) 20% if it is exercised after June 28, 2022 and on or prior to June 28, 2023, and (iv) 10% if it is exercised after June 28, 2023 and on or prior to June 28, 2024.

BorgWarner may, at any time or from time to time, exercise its rights under the JV Agreement and the License Agreement, and BorgWarner’s exercise of any such rights may relate to or result in any of the transactions or other matters specified in clauses (a) through (j) of Item 4 of Schedule 13D.

Upon the consummation of the Business Combination, certain stockholders of the Issuer, including BorgWarner, entered into a Stockholders’ Agreement (the “Stockholders’ Agreement”) with the Issuer, pursuant to which (i) BorgWarner agreed to vote its securities of the Issuer in favor of directors nominated by certain other stockholders of the Issuer for so long as such stockholders maintain ownership of a certain percentage interests in the Issuer, and (ii) BorgWarner has the right to designate one director for election to the Issuer’s board of directors (the “Romeo Board”) for so long as BorgWarner maintains ownership of at least 7,677,071 shares of Romeo Common Stock, equating to 5% of the securities of the Issuer that were issued and outstanding as of the closing of the Business Combination.  A copy of the Stockholders’ Agreement is attached hereto as Exhibit 4. The director that BorgWarner designates may have influence over the corporate activities of the Issuer, including activities that may relate to transactions described in clauses (a) through (j) of Item 4 of Schedule 13D, and therefore, BorgWarner may indirectly have such influence.

Brady D. Ericson, Vice President of BorgWarner and President and General Manager of BorgWarner Ithaca (d/b/a BorgWarner Morse Systems), is currently serving as a member of the Romeo Board as BorgWarner’s initial designee under the Stockholders’ Agreement, and he has been appointed to serve on the Finance and Investment Committee of the Romeo Board. Mr. Ericson was a member of RS’ board of directors from May 2019 until the consummation of the Business Combination as one of two designees of BorgWarner.  Should Mr. Ericson resign as a member of the Romeo Board at a time that BorgWarner still has its right to designate a director on the Romeo Board, BorgWarner will have the right to appoint Mr. Ericson’s successor.

Except as described in this Item 4, BorgWarner does not have any current plans or proposals that relate to or that would result in any of the transactions or other matters specified in clauses (a) through (j) of Item 4 of Schedule 13D, provided that BorgWarner, at any time and from time to time, may review or reconsider and change its positions and/or intentions.

(a) and (b)   

The aggregate number and percentage of shares of Romeo Common Stock to which this Schedule 13D relates is 19,315,399 newly issued shares (the “Shares”), constituting approximately 15.2% of the outstanding shares of Romeo Common Stock after giving effect to the issuance. This percentage is based on an aggregate of 126,787,151 shares of Romeo Common Stock outstanding as of December 29, 2020.  BorgWarner has sole voting and dispositive power over the Shares.

(c)       

Except as described in this Schedule 13D, there have been no transactions in the shares of Romeo Common Stock (or securities convertible into Romeo Common Stock) effected by BorgWarner or, to the knowledge of BorgWarner, any person identified on Schedule A, during the past 60 days.

(d)       

Except as described in this Schedule 13D, to the knowledge of BorgWarner, neither BorgWarner nor any person identified on Schedule A knows any person other than BorgWarner who has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities reported herein.

(e)       

Not applicable.

The information set forth in Items 3 and 4 of this Schedule 13D is incorporated herein by reference.

On October 5, 2020, in connection with the execution of the Merger Agreement, BorgWarner entered into an agreement together with other stockholders of the Issuer (the “Lock-Up Agreement”) pursuant to which BorgWarner and such other stockholders agreed to not sell or otherwise dispose of their shares in the Issuer for 180 days after the date of the closing of the Business Combination (subject to certain exceptions).  A copy of the Lock-Up Agreement is attached hereto as Exhibit 5.

Upon the consummation of the Business Combination, certain RS stockholders, including BorgWarner, and other parties thereto entered into the Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Issuer agreed to file a shelf registration statement with respect to the registrable securities under the Registration Rights Agreement.  The Issuer also agreed to provide customary “piggyback” registration rights.  The Registration Rights Agreement also provides that the Issuer will pay certain expenses relating to such registrations and indemnify the stockholders against certain liabilities.  A copy of the Registration Rights Agreement is attached hereto as Exhibit 6.

Other than the Merger Agreement, the Stockholders’ Agreement, the Lock-Up Agreement and the Registration Rights Agreement, to the knowledge of BorgWarner, there are no contracts arrangements, understandings or relationships (legal or otherwise) between BorgWarner, or any BorgWarner subsidiary or any person listed on Schedule A, and any person with respect to the securities of the Issuer, including, but not limited to, transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies, including any securities pledged or otherwise subject to a contingency the occurrence of which would give another person voting power or investment power over such securities other than standard default and similar provisions contained in loan agreements.

SIGNATURE

After reasonable inquiry and to the best of the undersigned’s knowledge, the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: January 8, 2021

Schedule A

DIRECTORS AND EXECUTIVE OFFICERS OF BORGWARNER INC.

The name and current principal occupation or employment of each director and executive officer of BorgWarner as of January 8, 2021 are as set forth below.  The business address and phone number of each such director and executive officer is 3850 Hamlin Road, Auburn Hills, WI 48326, (248) 754-9200.  All directors and executive officers set forth below are United States citizens, except for Frédéric B. Lissalde, who is a citizen of France; Alex Ashmore, who is a citizen of the United Kingdom; Stefan J. Demmerle and Volker Weng, who are each citizens of Germany; and Davide Girelli, who is a citizen of Italy.

Dated: January 8, 2021