424B3 1 d192826d424b3.htm 424B3 424B3
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-257997

JOINT PROXY STATEMENT FOR

EXTRAORDINARY GENERAL MEETING OF LEO HOLDINGS III CORP

AND SPECIAL MEETING OF WARRANT HOLDERS OF LEO HOLDINGS III CORP

PROSPECTUS FOR

99,809,606 SHARES OF COMMON STOCK AND 11,539,216 WARRANTS OF LEO HOLDINGS III CORP

(AFTER ITS DOMESTICATION AS A CORPORATION INCORPORATED IN THE STATE OF DELAWARE, WHICH WILL BE RENAMED LOCAL BOUNTI CORPORATION IN CONNECTION WITH THE DOMESTICATION DESCRIBED HEREIN)

 

 

The board of directors of Leo Holdings III Corp, a Cayman Islands exempted company (“Leo”), has unanimously approved the transactions (collectively, the “Business Combination”) contemplated by that certain Agreement and Plan of Merger, dated June 17, 2021 (as it may be amended and supplemented from time to time, the “Merger Agreement”), by and among Leo, Longleaf Merger Sub, Inc., a Delaware corporation (“Merger Sub 1”), Longleaf Merger Sub II, LLC (“Merger Sub 2”) and Local Bounti Corporation, a Delaware corporation (“Local Bounti”), a copy of which is attached to the joint proxy statement/prospectus as Annex A, including the domestication of Leo as a Delaware corporation (the “Domestication”). As described in this joint proxy statement/prospectus, Leo’s shareholders are being asked to consider a vote upon each of the Domestication and the Business Combination, among other items. As used in this joint proxy statement/prospectus, “New Local Bounti” or “Combined Company” refers to Leo after giving effect to the consummation of the Domestication and the Business Combination.

Following the Domestication, on the Closing Date (as defined below) prior to the First Effective Time (as defined below): (i) each issued and outstanding Class A ordinary share, par value $0.0001 per share (the “Class A ordinary shares”), and each issued and outstanding Class B ordinary share, par value $0.0001 per share (the “Class B ordinary shares”), of Leo will be converted into one share of common stock, par value $0.0001 per share, of Leo (collectively, the “New Local Bounti Common Stock”); (ii) each issued and outstanding whole warrant to purchase Class A ordinary shares of Leo will automatically represent the right to purchase one share of New Local Bounti Common Stock at an exercise price of $11.50 per share on the terms and conditions set forth in the Leo warrant agreement; (iii) the governing documents of Leo will be amended and restated and become the certificate of incorporation and the bylaws of New Local Bounti as described in this joint proxy statement/prospectus; and (iv) Leo’s name will change to “Local Bounti Corporation”. In connection with clauses (i) and (ii) of this paragraph, each issued and outstanding unit of Leo that has not been previously separated into the underlying Class A ordinary shares of Leo and the underlying warrants of Leo prior to the Domestication will be cancelled and will entitle the holder thereof to one share of New Local Bounti Common Stock and one-fifth of one warrant representing the right to purchase one share of New Local Bounti Common Stock at an exercise price of $11.50 per share on the terms and subject to the conditions set forth in the Leo warrant agreement.

On the date of Closing (as defined below), promptly following the consummation of the Domestication, Merger Sub 1 will merge with and into Local Bounti (the “First Merger”), with Local Bounti as the surviving company in the First Merger (the time that the First Merger becomes effective being referred to as the “First


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Effective Time”), followed immediately by the merger of the surviving company with and into Merger Sub 2, with Merger Sub 2 surviving the merger as a wholly owned subsidiary of Leo (the “Second Merger” and together with the First Merger, the “Mergers”) and, after giving effect to the Mergers, Local Bounti will be a wholly-owned subsidiary of Leo (the time that the Second Merger becomes effective being referred to as the “Second Effective Time” and, together with the First Effective Time, the “Effective Time”).

At the Effective Time, based on an implied pre-transaction equity value of $650.0 million (excluding convertible debt of Local Bounti and therefore will have a dilutive impact to both the public shareholders of Leo and the pre-transaction stockholders of Local Bounti), along with adjustments for certain payments contemplated by the Merger Agreement, the existing equityholders of Local Bounti will receive the consideration entitled to them under the Merger Agreement, including up to 2,500,000 earnout shares if certain price-based targets are met, as further described in this joint proxy statement/prospectus. See the sections entitled “The Business Combination,” “Proposal No. 1 - Business Combination Proposal — Consideration to Local Bounti Equityholders in the Business Combination” and “Questions and Answers for Shareholders of Leo — What will Local Bounti’s equityholders receive in return for the Business Combination with Leo?” of this proxy statement/prospectus for further information on the consideration being paid to the stockholders of Local Bounti.

The market value of the shares to be issued could vary significantly from the market value as of the date of this joint proxy statement/prospectus. It is anticipated that, upon completion of the Business Combination, (i) the Local Bounti stockholders will own, collectively, approximately 57.2% of the outstanding New Local Bounti Common Stock, and (ii) Leo’s initial shareholders will own approximately 6.3% of the outstanding New Local Bounti Common Stock (inclusive of 2.9% of shares of New Local Bounti Common Stock to be issued to holders of Local Bounti Convertible Notes), in each case, assuming that none of Leo’s outstanding public shares are redeemed in connection with the Business Combination, or approximately 76.4% (inclusive of 3.8% of shares of New Local Bounti Common Stock to be issued to holders of Local Bounti Convertible Notes) and 8.4%, respectively, assuming that, all of Leo’s outstanding public shares are redeemed in connection with the Business Combination. These percentages (i) assume that 59,493,616 shares of New Local Bounti Common Stock are issued to the holders of shares of common stock of Local Bounti at Closing (excluding the holders of Local Bounti warrants that are exercised by the holders thereof, at such holders’ option, prior to completion of the Business Combination and excluding the holders of Local Bounti convertible debt and the issuance of New Local Bounti Common Stock issuable upon conversion of such convertible debt), which would be the number of shares of New Local Bounti Common Stock issued to these holders if Closing were to occur on November 17, 2021; (ii) are based on 12,500,000 shares of New Local Bounti Common Stock to be issued in the PIPE Financing; (iii) do not take into account any exercise of public warrants or private placement warrants to purchase New Local Bounti Common Stock that will be outstanding immediately following Closing; (iv) do not take into account any shares of New Local Bounti Common Stock underlying vested and unvested Local Bounti RSUs that will be held by equityholders of Local Bounti immediately following Closing; (v) do not take into account any exercise of New Local Bounti Warrants (other than those exercised as set forth above) that will be outstanding immediately following Closing and (vi) assume the Convertible Notes will be automatically converted into shares of Local Bounti voting common stock and exchanged for 3,190,489 shares of New Local Bounti Common Stock at Closing. If the actual facts are different than these assumptions, the ownership percentages in New Local Bounti will be different.

Leo is also seeking approval from the holders of its outstanding public warrants, to amend certain provisions of its outstanding warrants, as further described in the accompanying joint proxy statement/prospectus.

Leo’s units, public shares and public warrants are currently listed on the NYSE under the symbols “LIII.U,” “LIII” and “LIII WS,” respectively. Leo will apply for listing, to be effective at the time of the Business Combination, of New Local Bounti Common Stock and warrants on the NYSE under the proposed symbols “LOCL” and “LOCLW,” respectively. It is a condition of the consummation of the Business Combination that Leo receive confirmation from the NYSE that New Local Bounti has been conditionally approved for listing on the NYSE, but there can be no assurance such listing condition will be met or that Leo will obtain such


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confirmation from the NYSE. If such listing condition is not met or if such confirmation is not obtained, the Business Combination will not be consummated unless the NYSE condition set forth in the Merger Agreement is waived by the applicable parties.

 

 

The accompanying joint proxy statement/prospectus provides shareholders and warrant holders of Leo with detailed information about the Business Combination and other matters to be considered at the extraordinary general meeting of Leo and the special meeting of warrant holders of Leo. We encourage you to read the entire accompanying joint proxy statement/prospectus, including the Annexes and other documents referred to therein, carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 38 of the accompanying joint proxy statement/prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

The accompanying joint proxy statement/prospectus is dated October 20, 2021, and is first being mailed to Leo’s shareholders and warrant holders on or about October 22, 2021.


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LEO HOLDINGS III CORP

21 Grosvenor Pl,

London SW1X 7HF, United Kingdom

Dear Leo Holdings III Corp Shareholders and Warrant Holders:

Shareholders are cordially invited to attend the extraordinary general meeting (the “extraordinary general meeting”) of Leo Holdings III Corp, a Cayman Islands exempted company (“Leo”), at 9:00 a.m., Eastern Time, on November 16, 2021, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50th Floor, New York, New York 10022, or via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned.

Warrant holders are cordially invited to attend the special meeting of public warrant holders (the “Warrant Holders Meeting”) of Leo, immediately following the extraordinary general meeting, at 9:30 a.m., Eastern Time, on November 16, 2021, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50th Floor, New York, New York 10022, or via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned.

As all shareholders and warrant holders will no doubt be aware, due to the current novel coronavirus (“COVID-19”) global pandemic, there are restrictions in place in many jurisdictions relating to the ability to conduct in-person meetings. As part of our precautions regarding COVID-19, we are planning for the possibility that the meeting may be held virtually over the Internet, but the physical location of the meeting will remain at the location specified above for the purposes of our amended and restated memorandum and articles of association. If we take this step, we will announce the decision to do so via a press release and posting details on our website that will also be filed with the SEC as proxy material.

As further described in the accompanying joint proxy statement/prospectus, following the Domestication, on the Closing Date and at the Effective Time (as described below), among other things, (i) Leo will change its name to “Local Bounti Corporation,” (ii) each outstanding Class A ordinary share of Leo and each outstanding Class B ordinary share of Leo will become one share of New Local Bounti Common Stock, and each outstanding warrant of Leo will become one warrant to purchase one share of New Local Bounti Common Stock, and (iii) the governing documents of Leo will be amended and restated. As used in the accompanying joint proxy statement/prospectus, “New Local Bounti” or the “Combined Company” refers to Leo after giving effect to the Domestication and the Business Combination (each as defined below).

At the extraordinary general meeting, Leo shareholders will be asked to consider and vote upon a proposal, which is referred to herein as the “Business Combination Proposal” to approve and adopt the Agreement and Plan of Merger, (and the transactions contemplated thereby) dated as of June 17, 2021 (as it may be amended and supplemented from time to time, the “Merger Agreement”), by and among Leo, Merger Sub 1, Merger Sub 2 and Local Bounti, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex A, including the transactions contemplated thereby (collectively, the “Business Combination”).

As further described in the accompanying joint proxy statement/prospectus, subject to the terms and conditions of the Merger Agreement, the following transactions will occur:

 

  (a)

On the Closing Date, prior to the time at which the First Effective Time occurs, Leo will change its jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”), and at the Effective Time, Leo will change its name to “Local Bounti Corporation” (“New Local Bounti”) (for further details, see “Proposal No. 2—The Domestication Proposal”).

 

  (b)

Merger Sub 1 will merge with and into Local Bounti (the “First Merger”), with Local Bounti as the surviving company in the First Merger, followed immediately by the merger of the resulting company


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  with and into Merger Sub 2 (the “Second Merger” and together with the First Merger, the “Mergers”), with Merger Sub 2 as the surviving company in the Second Merger and, after giving effect to such Mergers, Local Bounti shall be a wholly-owned subsidiary of Leo. In accordance with the terms and subject to the conditions of the Merger Agreement, at the Effective Time, based on the Transaction Value (i) each share of Local Bounti voting common stock will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock, earnout shares (as described herein) and up to $37.5 million of cash consideration (subject to certain conditions specified in the Merger Agreement), each as determined in the Merger Agreement, (ii) each share of Local Bounti restricted stock will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock and earnout shares (as described below), each as determined in the Merger Agreement, (iii) each Local Bounti restricted stock unit, whether or not then vested, will be assumed by Leo and convert into a Leo restricted stock unit, subject to the same terms and conditions as applied to such Local Bounti restricted stock unit immediately prior to the Closing with a value as if such Local Bounti restricted stock unit were settled prior to the closing of the Business Combination and shall be entitled to receive earnout shares (as described below), and (iv) each warrant of Local Bounti that is unexercised will be assumed by Leo and convert into a warrant to purchase New Local Bounti Common Stock and represent the right to receive the applicable portion of the merger consideration upon exercise of such warrant as if such warrant were exercised prior to the closing of the Business Combination. In addition, all convertible debt of Local Bounti will be fully converted into Local Bounti common stock as of immediately prior to the Closing and become eligible to receive New Local Bounti Common Stock (which amount, for the avoidance of doubt, is excluded from the implied pre-transaction equity value of Local Bounti) based on the number of shares of Local Bounti common stock issuable upon conversion of such convertible debt. Each Local Bounti equityholder entitled to receive a portion of the earnout consideration will receive its applicable portion of equal thirds of 2,500,000 earnout shares if the trading price of New Local Bounti Common Stock is greater than or equal to $13.00, $15.00 and $17.00 for any 20 trading days within any 30-trading day period and will also accelerate and be fully issuable in connection with any Change of Control (as defined in the Merger Agreement) if the applicable thresholds are met in such Change of Control.

In connection with the foregoing and concurrently with the execution of the Merger Agreement, Leo entered into Subscription Agreements (the “Subscription Agreements”) with certain institutional and accredited investors (the “PIPE Investors”), pursuant to which the PIPE Investors have agreed to subscribe for and purchase, and Leo has agreed to issue and sell to the PIPE Investors, an aggregate of 12,500,000 shares of New Local Bounti Common Stock at a price of $10.00 per share, on the Closing Date, for aggregate gross proceeds of $125.0 million (the “PIPE Financing”). The shares of New Local Bounti Common Stock to be issued pursuant to the Subscription Agreements have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act. Leo will grant the PIPE Investors certain registration rights in connection with the PIPE Financing. The PIPE Financing is contingent upon, among other things, the substantially concurrent closing of the Business Combination.

You will also be asked to consider and vote upon (a) a proposal to approve and adopt the Domestication (the “Domestication Proposal”), (b) on a non-binding advisory basis, certain material differences between Leo’s existing amended and restated memorandum and articles of association (the “Existing Governing Documents”) and the proposed new certificate of incorporation (the “Proposed Certificate of Incorporation”) and the proposed new bylaws (the “Proposed Bylaws”) of New Local Bounti upon the Domestication, copies of which are attached to the accompanying joint proxy statement/prospectus as Annexes C and D, respectively, which are referred to herein collectively as the “Governing Documents Proposals,” (c) a proposal to approve and adopt the Proposed Certificate of Incorporation upon the Domestication (the “Charter Proposal”), (d) a proposal to approve, for purpose of complying with NYSE Listing Rule 312.03, the issuance of New Local Bounti Common Stock in connection with the Business Combination and the PIPE Financing, which is referred to herein as the “NYSE Proposal,” (e) a proposal to approve and adopt the Local Bounti Corporation 2021 Equity Incentive Plan, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex J, which is referred to herein as the “Incentive Award Plan Proposal,” (f) a proposal to approve and adopt the Local Bounti Corporation 2021 Employee


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Stock Purchase Plan, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex K, which is referred to herein as the “Employee Stock Purchase Plan Proposal,” (g) a proposal to appoint each of the six (6) directors to serve on the board of directors of New Local Bounti until their respective successors are duly elected and qualified, which is referred to herein as the “Director Election Proposal” and (h) a proposal to adjourn the extraordinary general meeting to a later date or dates to the extent necessary, which is referred to herein as the “Adjournment Proposal.”

Leo is also seeking approval from the holders of its outstanding public warrants, (a) to amend certain provisions of its outstanding warrants (the “Warrant Amendment Proposal”), as further described in the accompanying joint proxy statement/prospectus, and (b) to adjourn the Warrant Holders Meeting to a later date or dates to the extent necessary (the “Warrant Holders Adjournment Proposal”).

The Business Combination will be consummated only if the Business Combination Proposal, the Domestication Proposal, the Charter Proposal and the NYSE Proposal (collectively, the “Condition Precedent Proposals”) are approved at the extraordinary general meeting. None of the Governing Documents Proposals, which will be voted upon on a non-binding advisory basis, or the Adjournment Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal or the Director Election Proposal is conditioned upon the approval of any other proposal. Each of these proposals is more fully described in the accompanying joint proxy statement/prospectus, which each shareholder is encouraged to read carefully and in its entirety.

The Adjournment Proposal provides for a vote to adjourn the extraordinary general meeting to a later date or dates (A) to the extent necessary to ensure that any required supplement or amendment to the accompanying joint proxy statement/prospectus is provided to Leo shareholders or, if as of the time for which the extraordinary general meeting is scheduled, there are insufficient Leo ordinary shares represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the extraordinary general meeting, (B) in order to solicit additional proxies from Leo shareholders in favor of one or more of the proposals at the extraordinary general meeting or (C) if Leo shareholders redeem an amount of the public shares such that the condition to consummation of the Business Combination that the aggregate cash proceeds to be received by Leo from the trust account in connection with the Business Combination, together with the aggregate proceeds from the PIPE Financing, equal to no less than $150,000,000 after deducting any amounts paid to Leo shareholders that exercise their redemption rights in connection with the Business Combination would not be satisfied (such condition to the consummation of the Business Combination, the “Aggregate Transaction Proceeds Condition”).

In connection with the Business Combination, certain related agreements have been, or will be entered into on or prior to the closing of the Business Combination, including the Subscription Agreements, Company Stockholder Support Agreements, the Sponsor Agreement, the Lock-Up Agreements and the Registration Rights Agreement (each as defined in the accompanying joint proxy statement/prospectus). See “Business Combination Proposal—Related Agreements” in the accompanying joint proxy statement/prospectus for more information.

Pursuant to the Existing Governing Documents, a holder of Leo’s public shares (a “public shareholder”) may request that Leo redeem all or a portion of such public shares for cash if the Business Combination is consummated. Holders of units must elect to separate the units into the underlying public shares and warrants prior to exercising redemption rights with respect to the public shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying public shares and warrants, or if a holder holds units registered in its own name, the holder must contact Continental Stock Transfer & Trust Company (“Continental”), Leo’s transfer agent, directly and instruct it to do so. The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, phone number and address to Continental in order to validly redeem its shares. Public shareholders may elect to redeem their public shares even if they vote “for” the Business Combination Proposal. If the Business Combination is not consummated, the public shares will be returned to the respective holder, broker or bank. If the Business Combination is consummated, and if a public shareholder properly exercises its right to redeem all or a portion of the public shares that it holds and timely delivers its shares to Continental, New Local Bounti will redeem such public shares for a per-share price, payable in cash,


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equal to the pro rata portion of the trust account established at the consummation of Leo’s initial public offering, calculated as of two business days prior to the consummation of the Business Combination. For illustrative purposes, as of June 30, 2021, this would have amounted to approximately $10.00 per issued and outstanding public share. If a public shareholder exercises its redemption rights in full, then it will be electing to exchange its public shares for cash and will no longer own public shares. The redemption will take place following the Domestication and, accordingly, it is shares of New Local Bounti Common Stock that will be redeemed immediately after consummation of the Business Combination. See “Extraordinary General Meeting of Leo — Redemption Rights” in the accompanying joint proxy statement/prospectus for a detailed description of the procedures to be followed if you wish to redeem your public shares for cash.

Notwithstanding the foregoing, a public shareholder, together with any affiliate of such public shareholder or any other person with whom such public shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares. Accordingly, if a public shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.

Leo Investors III LP (the “Sponsor”) and each of Lori Bush, Mary E. Minnick, Mark Masinter, Scott Flanders, Imran Khan and Scott McNealy (collectively, the “initial shareholders”) have, pursuant to the Sponsor Agreement, agreed to, among other things, vote all of their ordinary shares in favor of the proposals being presented at the extraordinary general meeting and waive their anti-dilution rights with respect to their Class B ordinary shares in connection with the consummation of the Business Combination. Such shares will be excluded from the pro rata calculation used to determine the per-share redemption price. As of the date of the accompanying joint proxy statement/prospectus, the initial shareholders own approximately 20% of the issued and outstanding ordinary shares. See “Business Combination Proposal—Related Agreements—Sponsor Agreement” in the accompanying joint proxy statement/prospectus for more information related to the Sponsor Agreement.

The Merger Agreement is subject to the satisfaction or waiver of certain other closing conditions as described in the accompanying joint proxy statement/prospectus. There can be no assurance that the parties to the Merger Agreement would waive any such provision of the Merger Agreement. In addition, in no event will Leo redeem public shares in an amount that would cause New Local Bounti’s net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) to be less than $5,000,001 after giving effect to the transactions contemplated by the Merger Agreement, the PIPE Financing and all of the Leo shareholder redemptions.

Leo is providing the accompanying joint proxy statement/prospectus and accompanying proxy cards to Leo’s shareholders and public warrant holders in connection with the solicitation of proxies to be voted at the extraordinary general meeting and/or Warrant Holders Meeting and at any adjournments of the extraordinary general meeting or Warrant Holders Meeting. Information about the extraordinary general meeting, the Warrant Holders Meeting, the Business Combination and other related business to be considered by Leo’s shareholders and public warrant holders at the extraordinary general meeting and Warrant Holders Meeting is included in the accompanying joint proxy statement/prospectus. Whether or not you plan to attend the extraordinary general meeting and/or Warrant Holders Meeting, all of Leo’s shareholders and public warrant holders are urged to read the accompanying joint proxy statement/prospectus, including the Annexes and other documents referred to therein, carefully and in their entirety. You should also carefully consider the risk factors described inRisk Factorsbeginning on page 38 of the accompanying joint proxy statement/prospectus.

After careful consideration, the board of directors of Leo has unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and unanimously recommends that shareholders vote “FOR” the adoption of the Merger Agreement and approval of the transactions contemplated thereby, including the Merger, and “FOR” all other proposals presented to Leo’s shareholders in the accompanying joint proxy statement/prospectus. The board of directors of Leo has also unanimously approved the Warrant Amendment and unanimously recommends that public


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warrant holders vote “FOR” the Warrant Amendment Proposal. When you consider the recommendation of these proposals by the board of directors of Leo, you should keep in mind that Leo’s directors and officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Business Combination Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” in the accompanying joint proxy statement/prospectus for a further discussion of these considerations.

The approval of each of the Domestication Proposal and the Charter Proposal requires a special resolution under Cayman Islands law, being the affirmative vote of at least two-thirds (2/3) of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter. The approval of each of the Business Combination Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal, the NYSE Proposal, the Director Election Proposal and the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter. Under the terms of the Existing Governing Documents, only the holders of Class B ordinary shares are entitled to vote on the election of directors to the Leo Board. Therefore, only holders of the Class B ordinary shares will vote on the election of directors at the extraordinary general meeting. Pursuant to the Sponsor Agreement, the initial holders have agreed to vote their Class B ordinary shares in favor of the Director Election Proposal. The Governing Documents Proposals are voted upon on a non-binding advisory basis only.

The approval of the Warrant Amendment Proposal requires the affirmative vote by the holders of at least 50% of the outstanding Leo public warrants. The approval of the Warrant Holders Adjournment Proposal, if presented, requires the affirmative vote by the holders of a majority of the outstanding Leo public warrants that are present and entitled to vote at the Warrant Holders Meeting.

Your vote is very important. Whether or not you plan to attend the extraordinary general meeting and/or the Warrant Holders Meeting, please vote as soon as possible by following the instructions in the accompanying joint proxy statement/prospectus to make sure that your shares are represented at the extraordinary general meeting and/or the Warrant Holders Meeting. If you hold your shares or public warrants in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares and/or public warrants are represented and voted at the extraordinary general meeting and/or the Warrant Holders Meeting. The Business Combination will be consummated only if the Condition Precedent Proposals are approved at the extraordinary general meeting. Each of the Condition Precedent Proposals is cross-conditioned on the approval of each other. The Condition Precedent Proposals (including the Business Combination) are not conditioned on the approval of the Warrant Amendment Proposal. The Warrant Amendment Proposal is conditioned on the approval of the Condition Precedent Proposals and the consummation of the Business Combination. None of the Governing Documents Proposals, which will be voted upon on a non-binding advisory basis, or the Adjournment Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal or the Director Election Proposal is conditioned upon the approval of any other proposal set forth in the accompanying joint proxy statement/prospectus. The Adjournment Proposal and the Warrant Holders Adjournment Proposal are not conditioned upon the approval of any other proposal set forth in the accompanying joint proxy statement/prospectus.

If you sign, date and return your proxy card(s) without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the extraordinary general meeting and/or Warrant Holders Meeting. If you fail to return your proxy card(s) or fail to instruct your bank, broker or other nominee how to vote, and do not attend the extraordinary general meeting and/or Warrant Holders Meeting in person, the effect will be, among other things, that your shares will not be counted for purposes of determining whether a quorum is present at the extraordinary general meeting and/or Warrant Holders Meeting. If you are a shareholder of record and/or public warrant holders of record and you attend the extraordinary general meeting and/or Warrant Holders Meeting and wish to vote in person, you may withdraw your proxy and vote in person at the extraordinary general meeting and/or Warrant Holders Meeting.


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TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND IN WRITING THAT YOUR PUBLIC SHARES ARE REDEEMED FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO LEO’S TRANSFER AGENT AT LEAST TWO BUSINESS DAYS PRIOR TO THE VOTE AT THE EXTRAORDINARY GENERAL MEETING. IN ORDER TO EXERCISE YOUR REDEMPTION RIGHT, YOU NEED TO IDENTIFY YOURSELF AS A BENEFICIAL HOLDER AND PROVIDE YOUR LEGAL NAME, PHONE NUMBER AND ADDRESS IN YOUR WRITTEN DEMAND. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATES (IF ANY) AND OTHER REDEMPTION FORMS TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DEPOSIT / WITHDRAWAL AT CUSTODIAN (DWAC) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL BE RETURNED TO YOU OR YOUR ACCOUNT. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.

On behalf of Leo’s board of directors, I would like to thank you for your support and look forward to the successful completion of the Business Combination.

Sincerely,

Edward C. Forst

Chairman of the Board of Directors

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

The accompanying joint proxy statement/prospectus is dated October 20, 2021 and is first being mailed to Leo’s shareholders and warrant holders on or about October 22, 2021.


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LEO HOLDINGS III CORP

21 Grosvenor Pl, London SW1X 7HF,

United Kingdom

NOTICE OF EXTRAORDINARY GENERAL MEETING

TO BE HELD ON NOVEMBER 16, 2021

TO THE SHAREHOLDERS OF LEO HOLDINGS III CORP:

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of the shareholders (the “extraordinary general meeting”) of Leo Holdings III Corp, a Cayman Islands exempted company (“Leo”), will be held at 9:00 am, Eastern Time, on November 16, 2021, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50th Floor, New York, New York 10022 or via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned.

As all shareholders will no doubt be aware, due to the current novel coronavirus (“COVID-19”) global pandemic, there are restrictions in place in many jurisdictions relating to the ability to conduct in-person meetings. As part of our precautions regarding COVID-19, we are planning for the possibility that the meeting may be held virtually over the Internet, but the physical location of the meeting will remain at the location specified above for the purposes of our amended and restated memorandum and articles of association. If we take this step, we will announce the decision to do so via a press release and posting details on our website that will also be filed with the SEC as proxy material. You are cordially invited to attend the extraordinary general meeting, which will be held for the following purposes:

 

   

Proposal No. 1—The Business Combination Proposal—to consider and vote upon a proposal by ordinary resolution to approve the Agreement and Plan of Merger, dated as of June 17, 2021 (as it may be amended and supplemented from time to time, the “Merger Agreement”), by and among Leo, Merger Sub 1, Merger Sub 2, and Local Bounti, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex A, and the transactions contemplated thereby (collectively, the “Business Combination”). Pursuant to the Merger Agreement, among other things, following the de-registration of Leo as an exempted company in the Cayman Islands (and the continuation and domestication of Leo as a corporation in the State of Delaware with the name “Local Bounti Corporation” following the Mergers described below) (a) Merger Sub 1 will merge with and into Local Bounti (the “First Merger”), with Local Bounti as the surviving company in the First Merger, followed immediately by the merger of the resulting company with and into Merger Sub 2 (the “Second Merger” and together with the First Merger, the “Mergers”), with Merger Sub 2 as the surviving company in the Second Merger and, after giving effect to the Mergers, Local Bounti shall be a wholly-owned subsidiary of Leo and (b) at the Effective Time, based on the Transaction Value, (i) each share of Local Bounti voting common stock (other than shares held by Local Bounti as treasury stock (which shares will be cancelled for no consideration as part of the First Merger) and dissenting shares) will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock, earnout shares (as described herein) and up to $37.5 million of cash consideration (subject to certain conditions specified in the Merger Agreement), each as determined in the Merger Agreement, (ii) each share of Local Bounti restricted stock will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock and earnout shares (as described below), each as determined in the Merger Agreement, (iii) each Local Bounti restricted stock unit, whether or not then vested, will be assumed by Leo and convert into a Leo restricted stock unit, subject to the same terms and conditions as applied to such Local Bounti restricted stock unit immediately prior to the Closing with a value as if such Local Bounti restricted stock unit were settled prior to the closing of the Business Combination, and (iv) each warrant of Local Bounti that is unexercised will be assumed by Leo and convert into a warrant to purchase New Local Bounti Common Stock and represent the right to receive the applicable portion of the merger consideration upon exercise of such warrant as if such


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warrant were exercised prior to the closing of the Business Combination; all convertible debt of Local Bounti will be fully converted into Local Bounti common stock as of immediately prior to the Closing and become eligible to receive New Local Bounti Common Stock (which amount, for the avoidance of doubt, is excluded from the implied pre-transaction equity value of Local Bounti and therefore will have a dilutive impact to both the public shareholders of Leo and the pre-transaction stockholders of Local Bounti) based on the number of shares of Local Bounti common stock issuable upon conversion of such convertible debt; each Local Bounti equityholder entitled to receive a portion of the earnout consideration will receive its applicable portion of equal thirds of 2,500,000 earnout shares if the trading price of New Local Bounti Common Stock is greater than or equal to $13.00, $15.00 and $17.00 for any 20 trading days within any 30-trading day period and will also accelerate and be fully issuable in connection with any Change of Control (as defined in the Merger Agreement) if the applicable thresholds are met in such Change of Control, as described in more detail in the accompanying proxy statement/prospectus; certain related agreements (including the Sponsor Agreement, the Subscription Agreements, the Registration Rights Agreement, the Company Stockholder Support Agreements and the Lock-Up Agreements, each in the form attached to the joint proxy statement/prospectus as Annex E, Annex F, Annex G, Annex H and Annex I, respectively); and the transactions contemplated thereby. We refer to this proposal as the “Business Combination Proposal.”

 

   

Proposal No. 2—Domestication Proposal—to consider and vote upon a proposal by special resolution to change the domicile of Leo by way of continuation from an exempted company incorporated under the laws of the Cayman Islands to a corporation incorporated under the laws of the State of Delaware pursuant to Part XII of the Companies Act (As Revised) of the Cayman Islands and Section 388 of the General Corporation Law of the State of Delaware (the “Domestication”). Upon the effectiveness of the Domestication, Leo will become a Delaware corporation and will change its corporate name to “Local Bounti Corporation” (together with Local Bounti following the Domestication and the Business Combination, the “Combined Company”) and all outstanding securities of Leo will convert to outstanding securities of the Combined Company, as described in more detail in the accompanying proxy statement/prospectus. We refer to this proposal as the “Domestication Proposal.”

 

   

Proposal No. 3—Charter Proposal — to consider and vote upon the approval by special resolution of the amendment and restatement of the Existing Governing Documents (as defined herein) in their entirety by the proposed new certificate of incorporation (the “Proposed Certificate of Incorporation”) of the Combined Company (a corporation incorporated in the State of Delaware, assuming the Domestication Proposal is approved and adopted, and the filing with and acceptance by the Secretary of State of Delaware of the Certificate of Corporate Domestication in accordance with Section 388 of the Delaware General Corporation Law (the “DGCL”)), including authorization of the change in authorized share capital as indicated therein and the change of name of Leo to “Local Bounti Corporation” in connection with the Business Combination. A copy of the Proposed Certificate of Incorporation is attached to the accompanying joint proxy statement/prospectus as Annex C. We refer to this proposal as the “Charter Proposal.”

 

   

Governing Documents Proposals—to consider and vote upon, on a non-binding advisory basis, certain governance provisions in the Proposed Certificate of Incorporation (such proposals, collectively, the “Governing Documents Proposals”) to approve the following material differences between the current amended and restated memorandum and articles of association of Leo (the “Existing Governing Documents”) and the Proposed Certificate of Incorporation and the proposed new bylaws (the “Proposed Bylaws” and, together with the Proposed Certificate of Incorporation, the “Proposed Governing Documents”) of the Combined Company:

 

   

Proposal No. 4—Governing Documents Proposal A—an amendment to change the authorized capital stock of Leo from (i) 500,000,000 Class A ordinary shares, par value $0.0001 per share, (ii) 50,000,000 Class B ordinary shares, par value $0.0001 per share and (iii) 5,000,000 preference shares, par value $0.0001 per share, to (a) 400,000,000 shares of common stock, par value $0.0001 per share, of New Local Bounti and (b) 100,000,000 shares of preferred stock, par value


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$0.0001 per share, of New Local Bounti (the “Preferred Stock”). We refer to this proposal as “Governing Documents Proposal A.”

 

   

Proposal No. 5—Governing Documents Proposal B—an amendment to authorize the New Local Bounti Board to issue any or all shares of Preferred Stock in one or more classes or series, with such terms and conditions as may be expressly determined by the New Local Bounti Board and as may be permitted by the DGCL. We refer to this proposal as “Governing Documents Proposal B.”

 

   

Proposal No. 6—Governing Documents Proposal C—an amendment to remove the ability of New Local Bounti stockholders to take action by written consent in lieu of a meeting. We refer to this proposal as “Governing Documents Proposal C.”

 

   

Proposal No. 7—Governing Documents Proposal D—certain other changes in connection with the replacement of the Existing Governing Documents with the Proposed Governing Documents as part of the Domestication, including (i) changing the post-Business Combination corporate name from “Leo Holdings III Corp” to “Local Bounti Corporation” (which is expected to occur upon the consummation of the Domestication), (ii) making New Local Bounti’s corporate existence perpetual, (iii) adopting Delaware as the exclusive forum for certain stockholder litigation and the federal district courts of the United States as the exclusive forum for litigation arising out of the Securities Act and (iv) removing certain provisions related to our status as a blank check company that will no longer be applicable upon consummation of the Business Combination, all of which the board of directors of Leo believes are necessary to adequately address the needs of the Combined Company after the Business Combination. We refer to this proposal as “Governing Documents Proposal D.”

 

   

Proposal No. 8—The NYSE Proposal—to consider and vote upon a proposal by ordinary resolution to approve for the purposes of complying with the applicable provisions of NYSE Listing Rule 312.03, the issuance of shares of New Local Bounti Common Stock and securities convertible into or exchangeable for New Local Bounti Common Stock in connection with the Business Combination and the PIPE Financing. We refer to this proposal as the “NYSE Proposal.”

 

   

Proposal No. 9—The Incentive Award Plan Proposal—to consider and vote upon the approval by ordinary resolution of the Local Bounti Corporation 2021 Equity Incentive Plan, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex J. We refer to this proposal as the “Incentive Award Plan Proposal.”

 

   

Proposal No. 10—The Employee Stock Purchase Plan Proposal—to consider and vote upon the approval by ordinary resolution of the Local Bounti Corporation 2021 Employee Stock Purchase Plan, a copy of which is attached to the accompanying joint proxy statement/prospectus as Annex K. We refer to this proposal as the “Employee Stock Purchase Plan Proposal.”

 

   

Proposal No. 11—Director Election Proposal—to consider and vote upon a proposal by ordinary resolution, that the persons named below be elected to serve on the Combined Company board of directors upon the Closing of the Business Combination: Pamela Brewster, Edward C. Forst, Craig M. Hurlbert, Travis Joyner, Mark J. Nelson and Matt Nordby. We refer to this proposal as the “Director Election Proposal.” Under the terms of the Existing Governing Documents, only the holders of Class B ordinary shares are entitled to vote on the election of directors to the Leo Board. Therefore, only holders of Class B ordinary shares will vote on the election of directors at the extraordinary general meeting.

 

   

Proposal No. 12—The Adjournment Proposal—to consider and vote upon a proposal by ordinary resolution to approve the adjournment of the extraordinary general meeting to a later date or dates (A) to the extent necessary to ensure that any required supplement or amendment to the accompanying joint proxy statement/prospectus is provided to Leo shareholders or, if as of the time for which the extraordinary general meeting is scheduled, there are insufficient Leo ordinary shares represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the extraordinary general meeting, (B) in order to solicit additional proxies from Leo shareholders in favor of one or more of the proposals at the extraordinary general meeting or (C) if Leo shareholders redeem an


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amount of the public shares such that the condition to consummation of the Business Combination that the aggregate cash proceeds to be received by Leo from the trust account in connection with the Business Combination, together with aggregate gross proceeds from the PIPE Financing, equal no less than $150,000,000 after deducting Leo’s unpaid expenses, liabilities, and any amounts paid to Leo shareholders that exercise their redemption rights in connection with the Business Combination would not be satisfied, at the extraordinary general meeting. We refer to this proposal as the “Adjournment Proposal.”

Each of the Business Combination Proposal, the Domestication Proposal, the Charter Proposal and the NYSE Proposal is conditioned on the approval and adoption of each of the other Condition Precedent Proposals. None of the Governing Documents Proposals, which will be voted upon on a non-binding advisory basis, or the Adjournment Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal or the Director Election Proposal is conditioned upon the approval of any other proposal. Additionally, as noted above, only the holders of Class B ordinary shares are entitled to vote on the Director Election Proposal. Pursuant to the Sponsor Agreement, the initial holders have agreed to vote their Class B ordinary shares in favor of the Director Election Proposal.

These items of business are described in the accompanying joint proxy statement/prospectus, which we encourage you to read carefully and in its entirety before voting.

Only holders of record of ordinary shares of Leo at the close of business on October 15, 2021 are entitled to notice of and to vote and have their votes counted at the extraordinary general meeting and any adjournment of the extraordinary general meeting. The accompanying joint proxy statement/prospectus and accompanying extraordinary general meeting proxy card are being provided to Leo’s shareholders in connection with the solicitation of proxies to be voted at the extraordinary general meeting and at any adjournment of the extraordinary general meeting. Whether or not you plan to attend the extraordinary general meeting, all of Leo’s shareholders are urged to read the accompanying joint proxy statement/prospectus, including the Annexes and the documents referred to therein carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factorsbeginning on page 38 of the accompanying joint proxy statement/prospectus.

After careful consideration, the board of directors of Leo has unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and unanimously recommends that shareholders vote “FOR” the adoption of the Merger Agreement and approval of the transactions contemplated thereby, including the Merger, and “FOR” all other proposals presented to Leo’s shareholders in the accompanying joint proxy statement/prospectus. When you consider the recommendation of these proposals by the board of directors of Leo, you should keep in mind that Leo’s directors and officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Business Combination Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” in the accompanying joint proxy statement/prospectus for a further discussion of these considerations.

Pursuant to the Existing Governing Documents, a public shareholder may request of Leo that New Local Bounti redeem all or a portion of its public shares for cash if the Business Combination is consummated. As a holder of public shares, you will be entitled to receive cash for any public shares to be redeemed only if you:

 

  (i)

(a) hold public shares, or (b) if you hold public shares through units, you elect to separate your units into the underlying public shares and warrants prior to exercising your redemption rights with respect to the public shares;

 

  (ii)

submit a written request to Continental, Leo’s transfer agent, in which you (i) request that New Local Bounti redeem all or a portion of your public shares for cash, and (ii) identify yourself as the beneficial holder of the public shares and provide your legal name, phone number and address; and

 

  (iii)

deliver your public shares to Continental, Leo’s transfer agent, physically or electronically through The Depository Trust Company.

Holders must complete the procedures for electing to redeem their public shares in the manner described above prior to 5:00 p.m., Eastern Time, on November 12, 2021 (two business days before the extraordinary general meeting) in order for their shares to be redeemed.


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Holders of units must elect to separate the units into the underlying public shares and warrants prior to exercising redemption rights with respect to the public shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying public shares and warrants, or if a holder holds units registered in its own name, the holder must contact Continental, Leo’s transfer agent, directly and instruct them to do so. The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, phone number and address to Continental in order to validly redeem its shares. Public shareholders (other than those who have agreed not to do so by executing a Transaction Support Agreement) may elect to redeem public shares regardless of if or how they vote in respect of the Business Combination Proposal. If the Business Combination is not consummated, the public shares will be returned to the respective holder, broker or bank. If the Business Combination is consummated, and if a public shareholder properly exercises its right to redeem all or a portion of the public shares that it holds and timely delivers its shares to Continental, Leo’s transfer agent, New Local Bounti will redeem such public shares for a per-share price, payable in cash, equal to the pro rata portion of the trust account established at the consummation of Leo’s initial public offering (the “trust account”), calculated as of two business days prior to the consummation of the Business Combination. For illustrative purposes, as of June 30, 2021, this would have amounted to approximately $10.00 per issued and outstanding public share. If a public shareholder exercises its redemption rights in full, then it will be electing to exchange its public shares for cash and will no longer own public shares. The redemption will take place following the Domestication and, accordingly, it is shares of New Local Bounti Common Stock that will be redeemed immediately after consummation of the Business Combination. See “Extraordinary General Meeting of Leo—Redemption Rights” in the accompanying joint proxy statement/prospectus for a detailed description of the procedures to be followed if you wish to redeem your public shares for cash.

Notwithstanding the foregoing, a public shareholder, together with any affiliate of such public shareholder or any other person with whom such public shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares. Accordingly, if a public shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.

The initial shareholders have, pursuant to the Sponsor Agreement, agreed to, among other things, vote all of their ordinary shares in favor of the proposals being presented at the extraordinary general meeting and waive their anti-dilution rights with respect to their Class B ordinary shares in connection with the consummation of the Business Combination. Such shares will be excluded from the pro rata calculation used to determine the per-share redemption price. As of the date of the accompanying joint proxy statement/prospectus, the initial shareholders own approximately 20% of the issued and outstanding ordinary shares. See “Business Combination Proposal—Related Agreements—Sponsor Agreement” in the accompanying joint proxy statement/prospectus for more information related to the Sponsor Agreement.

The Merger Agreement is subject to the satisfaction or waiver of certain other closing conditions as described in the accompanying joint proxy statement/prospectus. There can be no assurance that the parties to the Merger Agreement would waive any such provision of the Merger Agreement. In addition, in no event will Leo redeem public shares in an amount that would cause New Local Bounti’s net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) to be less than $5,000,001 after giving effect to the transactions contemplated by the Merger Agreement, the PIPE Financing and all of the Leo shareholder redemptions.

The approval of each of the Domestication Proposal and the Charter Proposal requires a special resolution under Cayman Islands law, being the affirmative vote of at least two-thirds (2/3) of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter. The approval of each of the Business Combination Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal, the Director Election Proposal, the NYSE Proposal and the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or


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represented by proxy at the extraordinary general meeting and entitled to vote on such matter. Under the terms of the Existing Governing Documents, only the holders of Class B ordinary shares are entitled to vote on the Director Election Proposal. The Governing Documents Proposals are voted upon on a non-binding advisory basis only.

Unless we are required to meet virtually to take necessary precautions due to COVID-19, all shareholders of Leo are cordially invited to attend the extraordinary general meeting in person. To ensure your representation at the extraordinary general meeting, however, you are urged to mark, sign and date the enclosed extraordinary general meeting proxy card and return it as soon as possible in the pre-addressed postage paid envelope provided.

Your vote is very important. Whether or not you plan to attend the extraordinary general meeting, please vote as soon as possible by following the instructions in the accompanying joint proxy statement/prospectus to make sure that your shares are represented at the extraordinary general meeting. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the extraordinary general meeting. The Business Combination will be consummated only if the Condition Precedent Proposals are approved at the extraordinary general meeting. Each of the Condition Precedent Proposals is cross-conditioned on the approval of each other. None of the Governing Documents Proposals, which will be voted upon on a non-binding advisory basis, or the Adjournment Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal or the Director Election Proposal is conditioned upon the approval of any other proposal set forth in the accompanying joint proxy statement/prospectus.

If you sign, date and return your extraordinary general meeting proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the extraordinary general meeting. If you fail to return your extraordinary general meeting proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the extraordinary general meeting in person, the effect will be, among other things, that your shares will not be counted for purposes of determining whether a quorum is present at the extraordinary general meeting. If you are a shareholder of record and you attend the extraordinary general meeting and wish to vote in person, you may withdraw your proxy and vote in person.

Your attention is directed to the accompanying joint proxy statement/prospectus following this notice (including the Annexes and other documents referred to herein) for a more complete description of the proposed Business Combination and related transactions and each of the proposals. You are encouraged to read the accompanying joint proxy statement/prospectus carefully and in its entirety, including the Annexes and other documents referred to herein. If you have any questions or need assistance voting your ordinary shares, please contact Morrow Sodali LLC, our proxy solicitor, by calling (800) 662-5200 (toll free), or banks and brokers can call (203) 658-9400, or by emailing LIII.info@investor.morrowsodali.com.

Thank you for your participation. We look forward to your continued support.

By Order of the Board of Directors of Leo Holdings III Corp,

Edward C. Forst

Chairman of the Board of Directors

October 20, 2021.

IF YOU RETURN YOUR EXTRAORDINARY GENERAL MEETING PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE SHAREHOLDER PROPOSALS. TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND IN WRITING THAT YOUR PUBLIC SHARES ARE REDEEMED FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO LEO’S TRANSFER AGENT AT LEAST TWO (2) BUSINESS DAYS PRIOR TO THE VOTE AT THE EXTRAORDINARY GENERAL MEETING. IN ORDER TO EXERCISE YOUR REDEMPTION RIGHT, YOU NEED TO IDENTIFY YOURSELF AS A BENEFICIAL HOLDER AND PROVIDE YOUR LEGAL


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NAME, PHONE NUMBER AND ADDRESS IN YOUR WRITTEN DEMAND. YOU MAY TENDER YOUR SHARES FOR REDEMPTION BY EITHER DELIVERING YOUR SHARE CERTIFICATES (IF ANY) AND OTHER REDEMPTION FORMS TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DEPOSIT/WITHDRAWAL AT CUSTODIAN (DWAC) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE TENDERED SHARES WILL NOT BE REDEEMED FOR CASH AND WILL BE RETURNED TO THE APPLICABLE SHAREHOLDER. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE THE SECTION ENTITLED “EXTRAORDINARY GENERAL MEETING OF LEO —REDEMPTION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.


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LEO HOLDINGS III CORP

21 Grosvenor Pl, London SW1X 7HF,

United Kingdom

NOTICE OF WARRANT HOLDERS MEETING

TO BE HELD ON NOVEMBER 16, 2021

TO THE HOLDERS OF WARRANTS OF LEO HOLDINGS III CORP:

NOTICE IS HEREBY GIVEN that a meeting of the holders of warrants of Leo Holdings III Corp, a Cayman Islands exempted company (“Leo”) will be held at 9:30 am, Eastern Time, on November 16, 2021, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50th Floor, New York, New York 10022 or via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned (the “Warrant Holders Meeting”).

As all warrant holders will no doubt be aware, due to the current novel coronavirus (“COVID-19”) global pandemic, there are restrictions in place in many jurisdictions relating to the ability to conduct in-person meetings. As part of our precautions regarding COVID-19, we are planning for the possibility that the meeting may be held virtually over the Internet, but the physical location of the meeting will remain at the location specified above for the purposes of the warrant agreement. If we take this step, we will announce the decision to do so via a press release and posting details on our website that will also be filed with the SEC as proxy material. You are cordially invited to attend the Warrant Holders Meeting, which will be held for the following purposes:

 

   

Proposal No. 1—The Warrant Amendment Proposal—to consider and vote upon an amendment (the “Warrant Amendment”) to the warrant agreement that governs all of Leo’s outstanding warrants. The Warrant Amendment proposes to amend and restate the Warrant Agreement (as defined in the accompanying joint proxy statement/prospectus) to implement certain changes that are intended to result in the warrants of Leo being accounted for as equity within the balance sheet of New Local Bounti, instead of as a liability measured at fair value with non-cash fair value adjustments recorded in earning at each reporting period (the “Warrant Amendment Proposal”), the substantive text of which is included as Annex L to the accompanying joint proxy statement/prospectus; and

 

   

Proposal No. 2—The Warrant Holders Adjournment Proposal—to consider and vote upon a proposal to adjourn the Warrant Holders Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if it is determined by Leo that more time is necessary or appropriate to approve the Warrant Amendment Proposal (the “Warrant Holders Adjournment Proposal” and, together with the Warrant Amendment Proposal, the “Warrant Holders Proposals”).

The Warrant Holders Proposals are described in the accompanying joint proxy statement/prospectus, which we encourage you to read carefully and in its entirety before voting.

Only public warrant holders at the close of business on October 15, 2021 are entitled to notice of and to vote and have their votes counted at the Warrant Holders Meeting and any adjournment of the Warrant Holders Meeting. The accompanying joint proxy statement/prospectus and accompanying Warrant Holders Meeting proxy card are being provided to Leo’s public warrant holders in connection with the solicitation of proxies to be voted at the Warrant Holders Meeting and at any adjournment of the Warrant Holders Meeting. Whether or not you plan to attend the Warrant Holders Meeting, all of Leo’s public warrant holders are urged to read the accompanying joint proxy statement/prospectus, including Annex L and the documents referred to therein carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 38 of the accompanying joint proxy statement/prospectus.

After careful consideration, the board of directors of Leo has unanimously approved the Warrant Holders Proposals and the transactions contemplated thereby, and unanimously recommends that shareholders vote “FOR” the adoption of the Warrant Amendment, and “FOR” the Warrant Holders Adjournment Proposal, if presented.

The approval of the Warrant Amendment Proposal requires the affirmative vote by the holders of at least 50% of the outstanding Leo public warrants. The approval of the Warrant Holders Adjournment Proposal, if


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presented, requires the affirmative vote by the holders of a majority of the outstanding Leo public warrants that are present and entitled to vote at the Warrant Holders Meeting. The Business Combination (as defined in the accompanying joint proxy statement/prospectus) is not conditioned on the approval of the Warrant Amendment Proposal. The Warrant Amendment Proposal is conditioned on the approval of the Condition Precedent Proposals and the consummation of the Business Combination.

Unless we are required to meet virtually to take necessary precautions due to COVID-19, all public warrant holders of Leo are cordially invited to attend the Warrant Holders Meeting in person. To ensure your representation at the Warrant Holders Meeting, however, you are urged to mark, sign and date the enclosed Warrant Holders Meeting proxy card and return it as soon as possible in the pre-addressed postage paid envelope provided.

Your vote is very important. Whether or not you plan to attend the Warrant Holders Meeting, please vote as soon as possible by following the instructions in the accompanying joint proxy statement/prospectus to make sure that your public warrants are represented at the Warrant Holders Meeting. If you hold your public warrants in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your public warrants are represented and voted at the Warrant Holders Meeting. The Warrant Amendment will be consummated only if the Condition Precedent Proposals, as further described in the accompanying joint proxy statement/prospectus are approved. The Warrant Holders Adjournment Proposal is not conditioned upon the approval of any other proposal set forth in the accompanying joint proxy statement/prospectus.

If you sign, date and return your Warrant Holders Meeting proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the Warrant Holders Meeting. If you fail to return your Warrant Holders Meeting proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the Warrant Holders Meeting in person, the effect will be, among other things, that your public warrant will not be counted for purposes of determining whether a quorum is present at the Warrant Holders Meeting. If you are a public warrant holder of record and you attend the Warrant Holders Meeting and wish to vote in person, you may withdraw your Warrant Holders Meeting proxy and vote in person at the Warrant Holders Meeting.

Your attention is directed to the accompanying joint proxy statement/prospectus following this notice (including Annex L therein) for a more complete description of the proposed Warrant Amendment. You are encouraged to read the accompanying joint proxy statement/prospectus carefully and in its entirety, including Annex L and other documents referred to herein. If you have any questions or need assistance voting your public warrants, please contact Morrow Sodali LLC, our proxy solicitor, by calling (800) 662-5200 (toll free), or banks and brokers can call (203) 658-9400, or by emailing LIII.info@investor.morrowsodali.com.

Thank you for your participation. We look forward to your continued support.

By Order of the Board of Directors of Leo Holdings III Corp,

Edward C. Forst

Chairman of the Board of Directors

October 20, 2021.


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     Page  

ADDITIONAL INFORMATION

     i  

MARKET AND INDUSTRY DATA

     i  

TRADEMARKS

     i  

SELECTED DEFINITIONS

     i  

QUESTIONS AND ANSWERS FOR SHAREHOLDERS OF LEO

     vi  

QUESTIONS AND ANSWERS FOR PUBLIC WARRANT HOLDERS OF LEO

     xxvi  

SUMMARY OF THE JOINT PROXY STATEMENT/PROSPECTUS

     1  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS .

     36  

RISK FACTORS

     38  

EXTRAORDINARY GENERAL MEETING OF LEO

     95  

PROPOSAL NO. 1 - BUSINESS COMBINATION PROPOSAL

     102  

PROPOSAL NO. 2 - DOMESTICATION PROPOSAL

     142  

PROPOSAL NO. 3 - CHARTER PROPOSAL

     145  

PROPOSALS NO. 4 THROUGH 7 -.GOVERNING DOCUMENTS PROPOSALS

     146  

PROPOSAL NO. 4 - GOVERNING DOCUMENTS PROPOSAL A—APPROVAL OF AUTHORIZATION OF CHANGE TO AUTHORIZED CAPITAL STOCK, AS SET FORTH IN THE PROPOSED GOVERNING DOCUMENTS

     150  

PROPOSAL NO. 5 - GOVERNING DOCUMENTS PROPOSAL B—APPROVAL OF PROPOSAL REGARDING ISSUANCE OF PREFERRED STOCK OF NEW LOCAL BOUNTI AT THE BOARD OF DIRECTORS’ SOLE DISCRETION, AS SET FORTH IN THE PROPOSED GOVERNING DOCUMENTS

     152  

PROPOSAL NO. 6 - GOVERNING DOCUMENTS PROPOSAL C—APPROVAL OF PROPOSAL REGARDING THE ABILITY OF STOCKHOLDERS TO ACT BY WRITTEN CONSENT, AS SET FORTH IN THE PROPOSED GOVERNING DOCUMENTS

     154  

PROPOSAL NO. 7 - GOVERNING DOCUMENTS PROPOSAL D—APPROVAL OF OTHER CHANGES IN CONNECTION WITH ADOPTION OF THE PROPOSED GOVERNING DOCUMENTS

     155  

PROPOSAL NO. 8 - THE NYSE PROPOSAL

     158  

PROPOSAL NO. 9 - INCENTIVE AWARD PLAN PROPOSAL

     160  

PROPOSAL NO. 10 - EMPLOYEE STOCK PURCHASE PLAN PROPOSAL

     170  

PROPOSAL NO. 11 - DIRECTOR ELECTION PROPOSAL

     179  

PROPOSAL NO. 12 - ADJOURNMENT PROPOSAL

     182  

SPECIAL MEETING OF LEO WARRANT HOLDERS .

     184  

WARRANT HOLDERS PROPOSAL NO. 1 - THE WARRANT AMENDMENT PROPOSAL

     187  

WARRANT HOLDERS PROPOSAL NO. 2 - THE WARRANT HOLDERS ADJOURNMENT PROPOSAL .

     194  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DOMESTICATION TO LEO SHAREHOLDERS

     195  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     212  

INFORMATION ABOUT LEO

     227  

LEO’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     241  

INFORMATION ABOUT LOCAL BOUNTI

     247  

LOCAL BOUNTI’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     266  

EXECUTIVE COMPENSATION

     280  

MANAGEMENT OF NEW LOCAL BOUNTI FOLLOWING THE BUSINESS COMBINATION

     286  

BENEFICIAL OWNERSHIP OF SECURITIES

     294  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     297  

COMPARISON OF CORPORATE GOVERNANCE AND SHAREHOLDER RIGHTS

     301  


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     Page  

DESCRIPTION OF NEW LOCAL BOUNTI SECURITIES

     304  

SECURITIES ACT RESTRICTIONS ON RESALE OF NEW LOCAL BOUNTI COMMON STOCK

     310  

STOCKHOLDER PROPOSALS AND NOMINATIONS

     311  

SHAREHOLDER COMMUNICATIONS

     311  

LEGAL MATTERS

     312  

EXPERTS

     312  

DELIVERY OF DOCUMENTS TO SHAREHOLDERS

     312  

ENFORCEABILITY OF CIVIL LIABILITY

     312  

TRANSFER AGENT AND REGISTRAR

     312  

WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE

     313  

INDEX TO FINANCIAL STATEMENTS

     F-1  

Annex A-Agreement and Plan of Merger

     A-1  

Annex B-Amended and Restated Memorandum and Articles of Association of Leo

     B-1  

Annex C-Form of Certification of Incorporation of New Local Bounti

     C-1  

Annex D-Form of Bylaws of New Local Bounti

     D-1  

Annex E-Sponsor Agreement

     E-1  

Annex F-Form of Subscription Agreement

     F-1  

Annex G-Form of Amended and Restated Registration Rights Agreement

     G-1  

Annex H-Form of Company Stockholder Support Agreement

     H-1  

Annex I-Form of Lock-Up Agreement

     I-1  

Annex J-Form of Local Bounti Corporation 2021 Equity Incentive Plan

     J-1  

Annex K-Form of Local Bounti Corporation Employee Stock Purchase Plan

     K-1  

Annex L-Form of Amended and Restated Warrant Agreement

     L-1  


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ADDITIONAL INFORMATION

You may request copies of this joint proxy statement/prospectus and any other publicly available information concerning Leo, without charge, by written request to Leo Holdings III Corp, 21 Grosvenor Pl, London SW1X 7HF, United Kingdom, or by telephone request at (310) 800-1000; or Morrow Sodali LLC, our proxy solicitor, by calling (800) 662-5200 (toll free), or banks and brokers can call (203) 658-9400, or by emailing LIII.info@investor.morrowsodali.com. or from the SEC through the SEC website at http://www.sec.gov.

In order for Leo’s shareholders and warrant holders to receive timely delivery of the documents in advance of the extraordinary general meeting and Warrant Holder Meeting of Leo to be held on November 16, 2021, you must request the information no later than five business days prior to the date of the extraordinary general meeting and Warrant Holder Meeting, by November 8, 2021.

MARKET AND INDUSTRY DATA

Information contained in this joint proxy statement/prospectus concerning the market and the industry in which Local Bounti competes, including its market position, general expectations of market opportunity and market size, is based on information from various third-party sources, on assumptions made by Local Bounti based on such sources and Local Bounti’s knowledge of the markets for its services and solutions. Any estimates provided herein involve numerous assumptions and limitations, and you are cautioned not to give undue weight to such information. Third-party sources generally state that the information contained in such source has been obtained from sources believed to be reliable but that there can be no assurance as to the accuracy or completeness of such information. The industry in which Local Bounti operates is subject to a high degree of uncertainty and risk. As a result, the estimates and market and industry information provided in this joint proxy statement/prospectus are subject to change based on various factors, including those described in the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors — Risks Related to Local Bounti’s Business and New Local Bounti Following the Business Combination” and elsewhere in this joint proxy statement/prospectus. Notwithstanding the foregoing, we are responsible for the information provided in this joint proxy statement/prospectus.

TRADEMARKS

This document contains references to trademarks, trade names and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this joint proxy statement/prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

SELECTED DEFINITIONS

Unless otherwise stated in this joint proxy statement/prospectus or the context otherwise requires, references to:

 

   

Aggregate Transaction Proceeds Condition” are to the condition, pursuant to the Merger Agreement, that the aggregate cash proceeds to be received by Leo from the trust account in connection with the Business Combination, together with the aggregate proceeds from the PIPE Financing, equal to no less than $150,000,000, after deducting any amounts paid to Leo shareholders that exercise their redemption rights in connection with the Business Combination;

 

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Articles of Association” are to the amended and restated articles of association of Leo;

 

   

Business Combination” are to the Domestication, the Mergers and other transactions contemplated by the Merger Agreement, collectively, including the PIPE Financing;

 

   

Merger Agreement” are to that certain Agreement and Plan of Merger, dated June 17, 2021, by and among Leo, Merger Sub 1, Merger Sub 2, and Local Bounti, as it may be amended and supplemented from time to time;

 

   

Cayman Islands Companies Act” are to the Companies Act (As Revised) of the Cayman Islands as the same may be amended from time to time;

 

   

Charter Proposal” means Proposal No. 3 to approve the Proposed Certificate of Incorporation.

 

   

Class A ordinary shares” are to the Class A ordinary shares, par value $0.0001 per share, of Leo, which will automatically convert, on a one-for-one basis, into shares of New Local Bounti Common Stock in connection with the Domestication;

 

   

Class B ordinary shares” or “founder shares” are to the 6,875,000 Class B ordinary shares, par value $0.0001 per share, of Leo outstanding as of the date of this joint proxy statement/prospectus that were initially issued to our Sponsor in a private placement prior to our initial public offering and of which 60,000 shares were transferred to Mses. Lori Bush, Mary E. Minnick and Mark Masinter (20,000 shares each), and 45,000 shares were transferred to Messrs. Scott Flanders, Imran Khan and Scott McNealy (15,000 each) in February 2021, and, in connection with the Domestication, will automatically convert, on a one-for-one basis, into shares of New Local Bounti Common Stock;

 

   

Closing” are to the closing of the Business Combination;

 

   

Closing Date” means that date that is in no event later than the third (3rd) business day, following the satisfaction (or, to the extent permitted by applicable law, waiver) of the conditions described under the section entitled “Business Combination Proposal—Conditions to Closing of the Business Combination,” (other than those conditions that by their nature are to be satisfied at the Closing, but subject to satisfaction or waiver of such conditions) or at such other date as Leo and Local Bounti may agree in writing;

 

   

Condition Precedent Proposals” are to the Business Combination Proposal, the Domestication Proposal, the Charter Proposal and the NYSE Proposal, collectively;

 

   

Continental” are to Continental Stock Transfer & Trust Company;

 

   

Convertible Notes” are to the convertible promissory notes issued by Local Bounti in favor of certain holders of Convertible Notes;

 

   

Domestication” are to the transfer by way of continuation and deregistration of Leo from the Cayman Islands and the continuation and domestication of Leo as a corporation incorporated in the State of Delaware;

 

   

Effective Time” means the time at which the Merger becomes effective;

 

   

Equity Incentive Plan” are to the Local Bounti Corporation 2021 Equity Incentive Plan to be considered for adoption and approval by the shareholders pursuant to the Incentive Award Plan Proposal;

 

   

ESPP” are to the Local Bounti Corporation 2021 Employee Stock Purchase Plan to be considered for adoption and approval by the shareholders pursuant to the Employee Stock Purchase Plan Proposal;

 

   

extraordinary general meeting” are to the extraordinary general meeting of Leo at 9:00 a.m., Eastern Time, on November 16, 2021, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50th Floor, New York, New York 10022, or via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned. As part of our precautions regarding the novel

 

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coronavirus or COVID-19, we are planning for the possibility that the meeting may be held virtually over the Internet. If we take this step, we will announce the decision to do so via a press release and posting details on our website that will also be filed with the SEC as proxy material;

 

   

Existing Governing Documents” are to the Memorandum of Association and the Articles of Association of Leo;

 

   

initial public offering” are to Leo’s initial public offering that was consummated on March 2, 2021;

 

   

initial shareholders” are to Sponsor and each of Mses. Lori Bush and Mary E. Minnick and Messrs. Mark Masinter, Scott Flanders, Imran Khan and Scott McNealy;

 

   

Leo,” “we,” “us” or “our” are to Leo Holdings III Corp, a Cayman Islands exempted company, prior to the consummation of the Business Combination;

 

   

Leo Board” are to Leo board of directors;

 

   

private placement warrants” are to the 5,333,333 private placement warrants outstanding as of the date of this proxy statement/ prospectus that were issued to our Sponsor simultaneously with the closing of Leo’s initial public offering in a private placement at a price of $1.50 per warrant. Each private placement warrant is exercisable for one Class A ordinary share of Leo at a price of $11.50;

 

   

public warrants” are to the currently outstanding 5,500,000 redeemable warrants to purchase Class A ordinary shares of Leo that were issued by Leo in its initial public offering;

 

   

Leo warrants” are to the Leo public warrants and the Leo private placement warrants;

 

   

Leo warrant holders” refers to the holders of Leo public warrants;

 

   

Local Bounti” are to Local Bounti Corporation, a Delaware corporation, prior to the consummation of the Business Combination;

 

   

Local Bounti restricted common stock” are to outstanding shares of Local Bounti nonvoting common stock issued pursuant to Local Bounti’s existing equity incentive plan;

 

   

Local Bounti restricted stock units” are to outstanding restricted stock units of Local Bounti issued pursuant to Local Bounti’s existing equity incentive plan;

 

   

Local Bounti Securityholders” are to the holders of Local Bounti voting common stock, Local Bounti restricted common stock, Local Bounti restricted stock units and Local Bounti Warrants (and excluding the holders of Local Bounti Convertible Notes);

 

   

Local Bounti Stockholders” are to the holders of Local Bounti voting common stock and Local Bounti restricted common stock;

 

   

Local Bounti voting common stock” are to outstanding shares of Local Bounti voting common stock;

 

   

Local Bounti Warrants” are to outstanding warrants of Local Bounti;

 

   

Memorandum of Association” are to the amended and restated memorandum of association of Leo;

 

   

Mergers” are to the First Merger and Second Merger, collectively,

 

   

First Merger” are to the merger of Merger Sub 1 with and into Local Bounti pursuant to the Merger Agreement, with Local Bounti as the surviving company in the First Merger and, after giving effect to such First Merger, Local Bounti becoming a wholly-owned subsidiary of Leo;

 

   

Merger Sub 1” are to Longleaf Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Leo prior to the consummation of the Business Combination;

 

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Merger Sub 2” are to Longleaf Merger Sub II, LLC, a Delaware limited liability company and wholly-owned subsidiary of Leo prior to the consummation of the Business Combination;

 

   

New Local Bounti” or “Combined Company” are to Local Bounti Corporation (f/k/a Leo Holdings III Corp) upon and after the Domestication;

 

   

New Local Bounti Board” are to the board of directors of New Local Bounti;

 

   

New Local Bounti Common Stock” are to the common stock, par value $0.0001 per share, of New Local Bounti;

 

   

NYSE” are to the New York Stock Exchange;

 

   

ordinary shares” are to our Class A ordinary shares and our Class B ordinary shares;

 

   

PIPE Financing” are to the transactions contemplated by the Subscription Agreements, pursuant to which the PIPE Investors have collectively committed to subscribe for an aggregate of 12,500,000 shares of New Local Bounti Common Stock for an aggregate purchase price of $125.0 million to be consummated in connection with Closing;

 

   

PIPE Investors” means the investors that have signed the Subscription Agreements;

 

   

pro forma” are to giving pro forma effect to the Business Combination, including the Merger and the PIPE Financing;

 

   

Proposed Bylaws” are to the proposed bylaws of New Local Bounti to be effective upon the Domestication attached to this joint proxy statement/prospectus as Annex D;

 

   

Proposed Certificate of Incorporation” are to the proposed certificate of incorporation of New Local Bounti to be effective upon the Domestication attached to this joint proxy statement/prospectus as Annex C;

 

   

Proposed Governing Documents” are to the Proposed Certificate of Incorporation and the Proposed Bylaws;

 

   

public shareholders” are to holders of public shares, whether acquired in Leo’s initial public offering or acquired in the secondary market;

 

   

public shares” are to the currently outstanding 27,500,000 Class A ordinary shares of Leo, whether acquired in Leo’s initial public offering or in the secondary market;

 

   

redemption” are to each redemption of public shares for cash pursuant to the Existing Governing Documents;

 

   

SEC” are to the Securities and Exchange Commission;

 

   

Second Merger” are to the merger of the surviving corporation in the First Merger with and into Merger Sub 2, with Merger Sub 2 surviving the merger as a wholly owned subsidiary of Leo, to occur immediately after the First Merger;

 

   

Securities Act” are to the Securities Act of 1933, as amended;

 

   

Sponsor” are to Leo Investors III LP, a Cayman Islands exempted limited partnership;

 

   

Subscription Agreements” are to the subscription agreements, entered into by Leo and each of the PIPE Investors in connection with the PIPE Financing;

 

   

transfer agent” are to Continental, Leo’s transfer agent;

 

   

trust account” are to the trust account established at the consummation of Leo’s initial public offering that holds the proceeds of the initial public offering and is maintained by Continental, acting as trustee;

 

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units” are to the units of Leo, each unit representing one Class A ordinary share and one-fifth of one warrant to acquire one Class A ordinary share, that were offered and sold by Leo in its initial public offering and in its concurrent private placement;

 

   

Warrant Agreement” refers to the warrant agreement dated March 2, 2021, by and between Leo and Continental Stock Transfer & Trust Company, as warrant agent;

 

   

Warrant Amendment” refers to the proposed amendment to the Warrant Agreement in the form attached hereto as Annex L;

 

   

Warrant Amendment Proposal” means the proposal to be considered at the Warrant Holders Meeting to approve and consent to amend the Warrant Agreement;

 

   

Warrant Holders Adjournment Proposal” means the proposal to be considered at the Warrant Holders Meeting to adjourn the Warrant Holders Meeting to a later date or dates, if necessary to permit further solicitation and vote of proxies if it is determined by Leo that more time is necessary or appropriate to approve the Warrant Amendment Proposal; and

 

   

Warrant Holders Meeting” means the special meeting of the Leo public warrant holders, to be held following the extraordinary general meeting at 9:30 am, Eastern Time, on November 16, 2021, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50th Floor, New York, New York 10022 or via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned.

 

   

Warrant Holders Proposals” means the Warrant Amendment Proposal and the Warrant Holders Adjournment Proposal.

 

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QUESTIONS AND ANSWERS FOR SHAREHOLDERS OF LEO

The questions and answers below highlight only selected information from this document and only briefly address some commonly asked questions about the proposals to be presented at the extraordinary general meeting, including with respect to the proposed Business Combination. The following questions and answers do not include all the information that is important to Leo’s shareholders. We urge shareholders to read this joint proxy statement/prospectus, including the Annexes and the other documents referred to herein, carefully and in their entirety to fully understand the proposed Business Combination and the voting procedures for the extraordinary general meeting, which will be held at 9:00 a.m., Eastern Time, on November 16, 2021, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50 Floor, New York, New York 10022 or via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned.

 

Q:

Why am I receiving this joint proxy statement/prospectus?

 

A:

Leo shareholders are being asked to consider and vote upon, among other proposals, a proposal to approve and adopt the Merger Agreement and approve the transactions contemplated thereby, including the Business Combination. In accordance with the terms and subject to the conditions of the Merger Agreement, among other things, in connection with the Domestication, on the Closing Date prior to the Effective Time, based on the Transaction Value, (i) each share of Local Bounti voting common stock (other than shares held by Local Bounti as treasury stock (which shares will be cancelled for no consideration as part of the First Merger) and dissenting shares) will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock, earnout shares (as described herein) and up to $37.5 million of cash consideration (subject to certain conditions specified in the Merger Agreement), each as determined in the Merger Agreement, (ii) each share of Local Bounti restricted stock will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock and earnout shares (as described below), each as determined in the Merger Agreement, (iii) each Local Bounti restricted stock unit, whether or not then vested, will be assumed by Leo and convert into a Leo restricted stock unit, subject to the same terms and conditions as applied to such Local Bounti restricted stock unit immediately prior to the Closing with a value as if such Local Bounti restricted stock unit were settled prior to the Closing, and (iv) each warrant of Local Bounti that is unexercised will be assumed by Leo and convert into a warrant to purchase New Local Bounti Common Stock and represent the right to receive the applicable portion of the merger consideration upon exercise of such warrant as if such warrant were exercised prior to the Closing. In addition, all convertible debt of Local Bounti will be fully converted into Local Bounti common stock as of immediately prior to the Closing and become eligible to receive New Local Bounti Common Stock (which amount, for the avoidance of doubt, is excluded from the implied pre-transaction equity value of Local Bounti) based on the number of shares of Local Bounti common stock issuable upon conversion of such convertible debt. Each Local Bounti equityholder entitled to receive a portion of the earnout shares will receive its applicable portion of equal thirds of 2,500,000 earnout shares if the trading price of New Local Bounti Common Stock is greater than or equal to $13.00, $15.00 and $17.00 for any 20 trading days within any 30-trading day period and will also accelerate and be fully issuable in connection with any Change of Control (as defined in the Merger Agreement) if the applicable thresholds are met in such Change of Control. See “Business Combination Proposal.”

A copy of the Merger Agreement is attached to this joint proxy statement/prospectus as Annex A and you are encouraged to read the Merger Agreement in its entirety.

The approval of each of the Business Combination Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal, the Director Election Proposal, the NYSE Proposal and the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter, and each of the Domestication Proposal and the Charter Proposal requires a special resolution under Cayman Islands law, being the affirmative vote of at least

 

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two-thirds (2/3) of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter. Under the terms of the Existing Governing Documents, only the holders of Class B ordinary shares are entitled to vote on the Director Election Proposal. The Governing Documents Proposals are voted upon on a non-binding advisory basis only.

In connection with the Domestication, on the Closing Date prior to the Effective Time, (i) each issued and outstanding Class A ordinary share and each issued and outstanding Class B ordinary share of Leo will convert automatically by operation of law, on a one-for-one basis, into shares of New Local Bounti Common Stock; (ii) each issued and outstanding warrant to purchase Class A ordinary shares of Leo will automatically represent the right to purchase one share of New Local Bounti Common Stock at an exercise price of $11.50 per share of New Local Bounti Common Stock on the terms and conditions set forth in the warrant agreement; and (iii) each issued and outstanding unit of Leo that has not been previously separated into the underlying Class A ordinary share and underlying warrant upon the request of the holder thereof, will be cancelled and will entitle the holder thereof to one share of New Local Bounti Common Stock and one-fifth of one warrant to acquire one share of New Local Bounti Common Stock. The Proposed Governing Documents will be appropriately adjusted to give effect to any amendments contemplated by the Proposed Governing Documents that are not adopted and approved by the Leo shareholders. In connection with clause (i) and (ii), each issued and outstanding unit of Leo that has not previous been previously separated into the underlying Class A ordinary shares of Leo and underlying Leo warrants prior to the Domestication will be cancelled and will entitle the holder thereof to one share of New Local Bounti Common Stock and one-fifth of one warrant representing the right to purchase one share of New Local Bounti Common Stock at an exercise price of $11.50 per share on the terms and subject to the conditions set forth in the Leo warrant agreement. See “Domestication Proposal.”

The provisions of the Proposed Governing Documents will differ in certain material respects from the Existing Governing Documents. Please see “What amendments will be made to the current constitutional documents of Leo?” below.

THE VOTE OF SHAREHOLDERS IS IMPORTANT. SHAREHOLDERS ARE ENCOURAGED TO VOTE AS SOON AS POSSIBLE AFTER CAREFULLY REVIEWING THIS JOINT PROXY STATEMENT/PROSPECTUS.

 

Q:

What proposals are shareholders of Leo being asked to vote upon?

 

A:

At the extraordinary general meeting, Leo is asking holders of its ordinary shares to consider and vote upon separate proposals, as follows:

 

   

a proposal to approve by ordinary resolution and adopt the Merger Agreement, including the Merger, and the transactions contemplated thereby;

 

   

a proposal to approve by special resolution the Domestication;

 

   

a proposal to approve by special resolution the Proposed Certificate of Incorporation;

 

   

a proposal to approve, on a non-binding advisory basis, each of the Governing Documents Proposals and thereby (i) authorize change to authorized capital stock, (ii) authorize the Leo Board to make issuances of preferred stock, (iii) adopt Delaware as the exclusive forum for certain stockholder litigation and the federal district courts of the United States as the exclusive forum for litigation arising out of the Securities Act, and (iv) approve other changes to be made in connection with the adoption of the Proposed Governing Documents. A copy of the Proposed Certificate of Incorporation and Proposed Bylaws is attached to this joint proxy statement/prospectus as Annex C and D, respectively;

 

   

to authorize by way of ordinary resolution the change in the authorized capital stock of Leo from (i) 500,000,000 Class A ordinary shares, par value $0.0001 per share, (ii) 50,000,000 Class B ordinary shares, par value $0.0001 per share and (iii) 5,000,000 preference shares, par value $0.0001 per share, to (a) 400,000,000 shares of common stock, par value $0.0001 per share, of New Local Bounti and (b) 100,000,000 shares of preferred stock, par value $0.0001 per share, of New Local Bounti;

 

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to authorize the New Local Bounti Board to issue any or all shares of New Local Bounti Preferred Stock in one or more classes or series, with such terms and conditions as may be expressly determined by the New Local Bounti Board and as may be permitted by the DGCL;

 

   

to authorize the removal of the ability of New Local Bounti stockholders to take action by written consent in lieu of a meeting; and

 

   

to amend and restate the Existing Governing Documents and authorize all other changes necessary or, as mutually agreed in good faith by Leo and Local Bounti, desirable in connection with the replacement of Existing Governing Documents with the Proposed Governing Documents as part of the Domestication;

 

   

a proposal to approve by ordinary resolution shares of New Local Bounti Common Stock in connection with the Business Combination and the PIPE Financing in compliance with the NYSE listing requirements;

 

   

a proposal to approve and adopt by ordinary resolution the Equity Incentive Plan;

 

   

a proposal to approve and adopt by ordinary resolution the ESPP;

 

   

a proposal to approve and adopt by ordinary resolution the election of six (6) members of the board of directors of New Local Bounti following Closing; and

 

   

a proposal to approve by ordinary resolution the adjournment of the extraordinary general meeting to a later date or dates, if necessary, to, among other things, permit further solicitation and vote of proxies in the event that there are insufficient votes for the approval of one or more proposals at the extraordinary general meeting.

If our shareholders do not approve each of the Condition Precedent Proposals, then unless certain conditions in the Merger Agreement are waived by the applicable parties to the Merger Agreement, the Merger Agreement could terminate and the Business Combination may not be consummated.

For more information, please see “Business Combination Proposal,” “Domestication Proposal,” “Charter Proposal,” “Governing Documents Proposals,” “The NYSE Proposal,” “Incentive Award Plan Proposal,“Employee Stock Purchase Plan Proposal,”Director Election Proposal” and “Adjournment Proposal.”

Leo will hold the extraordinary general meeting to consider and vote upon these proposals. This joint proxy statement/prospectus contains important information about the Business Combination and the other matters to be acted upon at the extraordinary general meeting. Shareholders of Leo should read it carefully.

After careful consideration, the Leo Board has determined that the Business Combination Proposal, the Domestication Proposal, the Charter Proposal, each of the Governing Documents Proposals, the NYSE Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal, the Director Election Proposal and the Adjournment Proposal are in the best interests of Leo and its shareholders and unanimously recommends that you vote or give instruction to vote “FOR” each of those proposals.

The existence of financial and personal interests of one or more of Leo’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of Leo and its shareholders and what he or they may believe is best for himself or themselves in determining to recommend that shareholders vote for the proposals. In addition, Leo’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Business Combination Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” for a further discussion of these considerations.

 

Q:

Why is Leo proposing the Business Combination?

 

A:

Leo is a blank check company incorporated on January 8, 2021 as a Cayman Islands exempted company and incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase,

 

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  reorganization or similar business combination with one or more businesses. Leo intends to focus its search for a target business in the consumer sector and believes its management team is well suited to identify opportunities that have the potential to generate attractive risk-adjusted returns for its shareholders, although it may pursue a business combination opportunity in any business or industry.

Leo has focused its search on established companies with a leading competitive position, strong management team, collaborative and collegiate culture, robust financial profile and strong long-term potential for profitability.

Based on its due diligence investigations of Local Bounti and the industry in which it operates, including the financial and other information provided by Local Bounti in the course of negotiations, the Leo Board believes that Local Bounti meets the criteria and guidelines listed above. However, there is no assurance of this. See “Business Combination Proposal—The Leo Board’s Reasons for the Business Combination.”

Although the Leo Board believes that the Business Combination with Local Bounti presents a unique business combination opportunity and is in the best interests of Leo and its shareholders, the board of directors did consider certain potentially material negative factors in arriving at that conclusion. These factors are discussed in greater detail in the sections entitled “Business Combination Proposal—The Leo Board’s Reasons for the Business Combination.” and “Risk Factors—Risks Related to Local Bounti’s Business and New Local Bounti Following the Business Combination.”

 

Q:

Did the Leo Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

 

A:

No. The Leo Board did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combination. However, Leo’s management, the members of the Leo Board and the other representatives of Leo have substantial experience in evaluating the operating and financial merits of companies similar to Local Bounti and reviewed certain financial information of Local Bounti and compared it to certain publicly traded companies, selected based on the experience and the professional judgment of Leo’s management team, which enabled them to make the necessary analyses and determinations regarding the Business Combination. Accordingly, investors will be relying solely on the judgment of the Leo Board in valuing Local Bounti’s business and assuming the risk that the Leo Board may not have properly valued such business.

 

Q:

What will Local Bounti’s equityholders receive in return for the Business Combination with Leo?

 

A:

On the date of Closing, promptly following the consummation of the Domestication, Merger Sub 1 will merge with and into Local Bounti, with Local Bounti as the surviving company in the First Merger, followed immediately by the merger of the surviving company with and into Merger Sub 2, with Merger Sub 2 as the surviving company in the Second Merger and, after giving effect to such Merger, Local Bounti shall be a wholly-owned subsidiary of Leo. At the Effective Time, based on the Transaction Value, (i) each share of Local Bounti voting common stock (other than shares held by Local Bounti as treasury stock (which shares will be cancelled for no consideration as part of the First Merger) and dissenting shares) will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock, earnout shares (as described herein) and up to $37.5 million of cash consideration (subject to certain conditions specified in the Merger Agreement), each as determined in the Merger Agreement, (ii) each share of Local Bounti restricted stock will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock and earnout shares (as described below), each as determined in the Merger Agreement, (iii) each Local Bounti restricted stock unit, whether or not then vested, will be assumed by Leo and convert into a Leo restricted stock unit, subject to the same terms and conditions as applied to such Local Bounti restricted stock unit immediately prior to the Closing with a value as if such Local Bounti restricted stock unit were settled prior to the Closing, and (iv) each warrant of Local Bounti that is unexercised will be assumed by Leo and convert into a warrant to purchase New Local Bounti Common Stock and represent the right to receive the applicable portion of the merger consideration upon exercise of

 

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  such warrant as if such warrant were exercised prior to the Closing. In addition, all convertible debt of Local Bounti will be fully converted into Local Bounti common stock as of immediately prior to the Closing and become eligible to receive New Local Bounti Common Stock (which amount, for the avoidance of doubt, is excluded from the implied pre-transaction equity value of Local Bounti) based on the number of shares of Local Bounti common stock issuable upon conversion of such convertible debt. Each Local Bounti equityholder entitled to receive a portion of the earnout consideration will receive its applicable portion of equal thirds of 2,500,000 earnout shares if the trading price of New Local Bounti Common Stock is greater than or equal to $13.00, $15.00 and $17.00 for any 20 trading days within any 30-trading day period and will also accelerate and be fully issuable in connection with any Change of Control (as defined in the Merger Agreement) if the applicable thresholds are met in such Change of Control.

 

Q:

How will the combined company be managed following the business combination?

 

A:

Following the Closing, it is expected that the current management of Local Bounti will become the management of New Local Bounti, and the New Local Bounti Board will consist of up to six (6) directors, which will be divided into three classes (Class I, II and III) with Class I consisting of two (2) directors, Class II consisting of two (2) directors and Class III consisting of two (2) directors. Pursuant to the Merger Agreement, the New Local Bounti Board will consist of (i) two (2) individuals designated by Leo, (ii) four (4) individuals designated by Local Bounti, and (iii) one (1) individual mutually agreed upon by Local Bounti and Leo, who will serve as an independent director. Please see the section entitled “Management of New Local Bounti Following the Business Combination” for further information.

 

Q:

What equity stake will current Leo shareholders and current equityholders of Local Bounti hold in New Local Bounti immediately after the consummation of the Business Combination?

 

A:

As of the date of this Joint proxy statement/prospectus, there are (i) 27,500,000 Class A ordinary shares outstanding underlying units issued in Leo’s initial public offering and (ii) 6,875,000 Class B ordinary shares outstanding held by Leo’s initial shareholders. As of the date of this joint proxy statement/prospectus, there are outstanding 5,333,333 private placement warrants held by Sponsor and 5,500,000 public warrants. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share and, following the Domestication, will entitle the holder thereof to purchase one share of New Local Bounti Common Stock. Therefore, as of the date of this joint proxy statement/prospectus (without giving effect to the Business Combination and assuming that none of Leo’s outstanding public shares are redeemed in connection with the Business Combination), Leo’s fully-diluted share capital, giving effect to the exercise of all of the private placement warrants and public warrants, would be 45,208,333 ordinary shares.

The following table illustrates varying ownership levels in New Local Bounti Common Stock immediately following the consummation of the Business Combination based on the varying levels of redemptions by the public shareholders and the following additional assumptions: (i) 59,493,616 shares of New Local Bounti Common Stock are issued to the holders of shares of common stock of Local Bounti at Closing, which would be the number of shares of New Local Bounti Common Stock issued to these holders if Closing were to occur on November 17, 2021; (ii) 12,500,000 shares of New Local Bounti Common Stock are issued in the PIPE Financing; (iii) no public warrants or private placement warrants to purchase New Local Bounti Common Stock that will be outstanding immediately following Closing have been exercised; (iv) no vested and unvested Local Bounti RSUs that will be held by equity holders of Local Bounti immediately following the Closing have been exercised; (v) all Local Bounti Warrants will be exchanged for comparable warrants that are exercisable for shares of New Local Bounti Common Stock; and (vi) the Convertible Notes will be automatically converted into shares of Local Bounti voting common stock and exchanged for 3,190,489 shares of New Local Bounti Common Stock at Closing. If the actual facts are different than these assumptions, the ownership percentages in New Local Bounti will be different.

Pursuant to the Merger Agreement, the consideration to be received by the Local Bounti equityholders in connection with the Business Combination will be an aggregate number of shares of New Local Bounti Common Stock equal to (i) $650.0 million plus $6,000,006, which reflects the estimated aggregate exercise price of all outstanding and unexercised warrants of Local Bounti at the consummation of the Business

 

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Combination if such warrants were exercised in full, minus the cash consideration and the debt repayment amount, divided by (ii) $10.00.

 

     Share Ownership in New Local Bounti  
     No redemptions
Percentage of Outstanding
Shares
    Maximum redemptions(1)
Percentage of Outstanding
Shares
 

Leo public shareholders

     25.1    

PIPE Investors

     11.4     15.2

Sponsor and our initial shareholders(2)

     6.3     8.4

Existing Local Bounti Stockholders(3)

     57.2     76.4

 

(1)

Assumes that all of Leo’s outstanding public shares are redeemed in connection with the Business Combination.

(2)

Includes 6,875,000 shares held by the Initial Shareholders originally acquired prior to or in connection with Leo’s initial public offering.

(3)

Represents shares of common stock of Local Bounti that will be converted to shares of New Local Bounti Common Stock in connection with the Business Combination. Includes 2.9% of shares of New Local Bounti Common Stock to be issued to holders of Local Bounti Convertible Notes).

For further details, see “Business Combination Proposal—Consideration to Local Bounti Equityholders in the Business Combination.”

 

Q:

Why is Leo proposing the Domestication?

 

A:

Our board of directors believes that there are significant advantages to us that will arise as a result of a change of our domicile to Delaware. Further, our board of directors believes that any direct benefit that the Delaware General Corporation Law (the “DGCL”) provides to a corporation also indirectly benefits its stockholders, who are the owners of the corporation. The board of directors believes that there are several reasons why transfer by way of continuation to Delaware is in the best interests of Leo and its shareholders, including, (i) the prominence, predictability and flexibility of the DGCL, (ii) Delaware’s well-established principles of corporate governance and (iii) the increased ability for Delaware corporations to attract and retain qualified directors, each of the foregoing are discussed in greater detail in the section entitled “Domestication Proposal—Reasons for the Domestication.”

To effect the Domestication, we will file an application for deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and file a certificate of corporate domestication and a certificate of incorporation with the Secretary of State of the State of Delaware, under which we will be domesticated and continue as a Delaware corporation.

The approval of the Domestication Proposal and the Charter Proposal is a condition to closing the Business Combination under the Merger Agreement. The approval of the Domestication Proposal and the Charter Proposal requires a special resolution under Cayman Islands law, being the affirmative vote of at least two-thirds (2/3) of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter. Broker non-votes will not be counted in connection with the determination of whether a valid quorum is established, and will have no effect on the Domestication Proposal or the Charter Proposal. Abstentions will be considered present for the purposes of establishing a quorum but, as a matter of Cayman Islands law, will not constitute a vote cast at the extraordinary general meeting and therefore will have no effect on the approval of each of the Domestication Proposal and the Charter Proposal. However, the NYSE requires that for the Domestication Proposal or the Charter Proposal to be approved, there must be more votes cast in favor of the proposal than the aggregate of votes against such proposal plus abstentions. Broker non-votes do not count as votes cast. Therefore, in order to maintain compliance with this NYSE requirement, abstentions will count as a vote “AGAINST” each of the Domestication Proposal and the Charter Proposal.

 

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Q:

What amendments will be made to the current constitutional documents of Leo?

 

A:

The consummation of the Business Combination is conditional, among other things, on the Domestication. Accordingly, in addition to voting on the Business Combination, Leo’s shareholders also are being asked to consider and vote upon a proposal to approve the Domestication, and replace Leo’s Existing Governing Documents, in each case, under Cayman Islands law with the Proposed Governing Documents, in each case, under the DGCL, which differ from the Existing Governing Documents in the following material respects:

 

    

Existing Governing Documents

  

Proposed Governing Documents

Authorized Shares
(Governing Documents Proposal A)
   The authorized capital stock under the Existing Governing Documents is 500,000,000 Class A ordinary shares of par value US$0.0001 per share, 50,000,000 Class B ordinary shares of par value US$0.0001 per share and 5,000,000 preference shares of par value US$0.0001 per share.    The Proposed Governing Documents authorize 400,000,000 shares of New Local Bounti Common Stock and 100,000,000 shares of New Local Bounti Preferred Stock.
   See paragraph 5 of the Memorandum of Association.    See Article IV of the Proposed Certificate of Incorporation.
Authorize the Board of Directors to Issue Preferred Stock Without Stockholder Consent
(Governing Documents Proposal B)
   The Existing Governing Documents authorize the issuance of 5,000,000 preference shares with such designation, rights and preferences as may be determined from time to time by our board of directors. Accordingly, our board of directors is empowered under the Existing Governing Documents, without shareholder approval, to issue preference shares with dividend, liquidation, redemption, voting or other rights which could adversely affect the voting power or other rights of the holders of ordinary shares.    The Proposed Governing Documents authorize the board of directors to issue all or any shares of preferred stock in one or more series and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as the board of directors may determine.
   See paragraph 5 of the Memorandum of Association and Article 3 of the Articles of Association.    See Article IV subsection 1.2 of the Proposed Certificate of Incorporation.
Shareholder/Stockholder Written Consent In Lieu of a Meeting
(Governing Documents Proposal C)
   The Existing Governing Documents provide that resolutions may be passed by a vote in person, by proxy at a general meeting, or by unanimous written resolution.    The Proposed Governing Documents allow stockholders to vote in person or by proxy at a meeting of stockholders, but prohibit the ability of stockholders to act by written consent in lieu of a meeting.
   See Article 1 of the Articles of Association.    See Article IV subsection 2.3 and Article VIII subsection 1 of the

 

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Existing Governing Documents

  

Proposed Governing Documents

      Proposed Certificate of Incorporation.
Corporate Name
(Governing Documents Proposal D)
   The Existing Governing Documents provide the name of the company is “Leo Holdings III Corp”    The Proposed Governing Documents will provide that the name of the corporation will be “Local Bounti Corporation”
   See paragraph 1 of the Memorandum of Association.    See Article I of the Proposed Certificate of Incorporation.
Perpetual Existence
(Governing Documents Proposal D)
   The Existing Governing Documents provide that if we do not consummate a business combination (as defined in the Existing Governing Documents) by March 2, 2023 (twenty-four months after the closing of Leo’s initial public offering), Leo will cease all operations except for the purposes of winding up and will redeem the shares issued in Leo’s initial public offering and liquidate its trust account.    The Proposed Governing Documents do not include any provisions relating to New Local Bounti’s ongoing existence; the default under the DGCL will make New Local Bounti’s existence perpetual.
   See Article 49 subsection 49.4 of the Articles of Association.    This is the default rule under the DGCL.
Exclusive Forum
(Governing Documents Proposal D)
   The Existing Governing Documents do not contain a provision adopting an exclusive forum for certain shareholder litigation.    The Proposed Governing Documents adopt Delaware as the exclusive forum for certain stockholder litigation and the U.S. federal district courts as the exclusive forum for litigation arising out of the Securities Act.
      See Article IX of the Proposed Certificate of Incorporation.
Provisions Related to Status as Blank Check Company
(Governing Documents Proposal D)
   The Existing Governing Documents set forth various provisions related to our status as a blank check company prior to the consummation of a business combination.    The Proposed Governing Documents do not include such provisions related to our status as a blank check company, which no longer will apply upon consummation of the Business Combination, as we will cease to be a blank check company at such time.
   See Article 49 of the Articles of Association.   

 

Q:

How will the Domestication affect my ordinary shares, warrants and units?

 

A:

In connection with the Domestication, on the Closing Date prior to the Effective Time, (i) each issued and outstanding Class A ordinary share and each issued and outstanding Class B ordinary share of Leo will

 

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  convert automatically by operation of law, on a one-for-one basis, into shares of New Local Bounti Common Stock; (ii) each issued and outstanding warrant to purchase Class A ordinary shares of Leo will automatically represent the right to purchase one share of New Local Bounti Common Stock at an exercise price of $11.50 per share of New Local Bounti Common Stock on the terms and conditions set forth in the warrant agreement; and (iii) each issued and outstanding unit of Leo that has not been previously separated into the underlying Class A ordinary share and underlying warrant upon the request of the holder thereof, will be cancelled and will entitle the holder thereof to one share of New Local Bounti Common Stock and one-fifth of one warrant to acquire one share of New Local Bounti Common Stock. See “Domestication Proposal.

In accordance with the terms and subject to the conditions of the Merger Agreement, at the Effective Time, based on the Transaction Value, (i) each share of Local Bounti voting common stock (other than shares held by Local Bounti as treasury stock (which shares will be cancelled for no consideration as part of the First Merger) and dissenting shares) will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock, earnout shares (as described herein) and up to $37.5 million of cash consideration (subject to certain conditions specified in the Merger Agreement), each as determined in the Merger Agreement, (ii) each share of Local Bounti restricted stock will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock and earnout shares (as described below), each as determined in the Merger Agreement, (iii) each Local Bounti restricted stock unit, whether or not then vested, will be assumed by Leo and convert into a Leo restricted stock unit, subject to the same terms and conditions as applied to such Local Bounti restricted stock unit immediately prior to the Closing with a value as if such Local Bounti restricted stock unit were settled prior to the Closing, and (iv) each warrant of Local Bounti that is unexercised will be assumed by Leo and convert into a warrant to purchase New Local Bounti Common Stock and represent the right to receive the applicable portion of the merger consideration upon exercise of such warrant as if such warrant were exercised prior to the Closing. In addition, all convertible debt of Local Bounti will be fully converted into Local Bounti common stock as of immediately prior to the Closing and become eligible to receive New Local Bounti Common Stock (which amount, for the avoidance of doubt, is excluded from the implied pre-transaction equity value of Local Bounti and therefore will have a dilutive impact to both the public shareholders of Leo and the pre-transaction stockholders of Local Bounti) based on the number of shares of Local Bounti common stock issuable upon conversion of such convertible debt. Each Local Bounti equityholder entitled to receive a portion of the earnout consideration will receive its applicable portion of equal thirds of 2,500,000 earnout shares if the trading price of New Local Bounti Common Stock is greater than or equal to $13.00, $15.00 and $17.00 for any 20 trading days within any 30-trading day period and will also accelerate and be fully issuable in connection with any Change of Control (as defined in the Merger Agreement) if the applicable thresholds are met in such Change of Control.

 

Q:

What are the U.S. federal income tax consequences of the Domestication?

 

A:

As discussed more fully under the section entitled “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders” below, the Domestication will qualify as a reorganization within the meaning of Section 368(a)(l)(F) of the Code. U.S. Holders (as defined in such section) of Leo public shares will be subject to Section 367(b) of the Code and, as a result:

 

   

a U.S. Holder of Leo public shares whose Leo public shares have a fair market value of less than $50,000 on the date of the Domestication, and who on the date of the Domestication owns (actually and constructively) less than 10% of the total combined voting power of all classes of Leo public shares entitled to vote and less than 10% of the total value of all classes of Leo public shares, will generally not recognize any gain or loss and will generally not be required to include any part of Leo’s earnings in income pursuant to the Domestication;

 

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a U.S. Holder of Leo public shares whose Leo public shares have a fair market value of $50,000 or more on the date of the Domestication, but who on the date of the Domestication owns (actually and constructively) less than 10% of the total combined voting power of all classes of Leo public shares entitled to vote and less than 10% of the total value of all classes of Leo public shares will generally recognize gain (but not loss) on the exchange of Leo public shares for shares in New Local Bounti (a Delaware corporation) pursuant to the Domestication. As an alternative to recognizing gain, any such U.S. Holder may file an election to include in income as a dividend the “all earnings and profits amount” (as defined in Treasury Regulation Section 1.367(b)-2(d)) attributable to such holder’s Leo public shares, provided certain other requirements are satisfied. Leo does not expect to have significant cumulative earnings and profits on the date of the Domestication; and

 

   

a U.S. Holder of Leo public shares who on the date of the Domestication owns (actually and constructively) 10% or more of the total combined voting power of all classes of Leo public shares entitled to vote or 10% or more of the total value of all classes of Leo public shares will generally be required to include in income as a dividend the “all earnings and profits amount” (as defined in Treasury Regulation Section 1.367(b)-2(d)) attributable to its Leo public shares, provided certain other requirements are satisfied. Any such U.S. Holder that is a corporation may, under certain circumstances, effectively be exempt from taxation on a portion or all of the deemed dividend pursuant to Section 245A of the Code. Leo does not expect to have significant cumulative earnings and profits on the date of the Domestication.

Furthermore, even though the Domestication will qualify as a reorganization under Section 368(a)(1)(F) of the Code, a U.S. Holder of Leo public shares or public warrants may, in certain circumstances, still recognize gain (but not loss) upon the exchange of its Leo public shares or public warrants for the common stock or warrants of the Delaware corporation pursuant to the Domestication under the “passive foreign investment company,” or PFIC, rules of the Code. Proposed Treasury Regulations with a retroactive effective date have been promulgated under Section 1291(f) of the Code which generally require that a U.S. person who disposes of stock of a PFIC (including for this purpose exchanging public warrants for newly issued warrants in the Domestication) must recognize gain equal to the excess, if any, of the fair market value of the common stock or warrants of the Delaware corporation received in the Domestication and the U.S. Holder’s adjusted tax basis in the corresponding Leo public shares or public warrants surrendered in exchange therefor, notwithstanding any other provision of the Code. Because Leo is a blank check company with no current active business, subject to the potential application of the start-up exception discussed below, we believe that Leo may be classified as a PFIC for U.S. federal income tax purposes. As a result, these proposed Treasury Regulations, if finalized in their current form, may require a U.S. Holder of Leo public shares or public warrants to recognize gain on the exchange of such shares or warrants for common stock or warrants of the Delaware corporation pursuant to the Domestication, unless such U.S. holder has made certain tax elections with respect to such U.S. Holder’s public shares. A U.S. Holder cannot currently make the aforementioned elections with respect to such U.S. Holder’s public warrants. The tax on any such gain so recognized would be imposed at the rate applicable to ordinary income and an interest charge would apply based on complex rules designed to offset the tax deferral to such U.S. Holder on the undistributed earnings, if any, of Leo. It is not possible to determine at this time whether, in what form, and with what effective date, final Treasury Regulations under Section 1291(f) of the Code will be adopted. For a more complete discussion of the potential application of the PFIC rules to U.S. Holders as a result of the Domestication, see the discussion in the section entitled “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders — U.S. Holders — PFIC Considerations.

In the event that the Domestication is completed on or before December 31, 2021, it is possible that Leo may be eligible for the “start-up exception.” If the start-up exception applies, Leo will not have been a PFIC for its first taxable year that ends as a result of the Domestication. For more information on the start-up exception, see the section entitled “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders — U.S. Holders — PFIC Considerations.”

 

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For a description of the tax consequences for shareholders exercising redemption rights in connection with the Business Combination, see the sections entitled “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders — U.S. Holders — Tax Consequences to U.S. Holders That Elect to Exercise Redemption Rights” and “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders — Non-U.S. Holders — Tax Consequences to Non-U.S. Holders That Elect to Exercise Redemption Rights.”

Additionally, the Domestication may cause Non-U.S. Holders (as defined in “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders”) to become subject to U.S. federal withholding taxes on any dividends paid in respect of such Non-U.S. Holder’s New Local Bounti Common Stock after the Domestication.

As more fully described in the section entitled “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders,” because of the inherently factual nature of the tests under the applicable Treasury Regulations to determine the applicability of Section 367(b) of the Code to any particular U.S. Holder, and the uncertainty regarding the application of certain provisions of the PFIC rules, counsel is unable to opine on the application of the these rules to a U.S. Holder on the receipt of New Local Bounti Common Stock in exchange for Leo public shares and New Local Bounti Warrants in exchange for Leo public warrants in the Domestication.

The tax consequences of the Domestication are complex and will depend on a holder’s particular circumstances. All holders are urged to consult their tax advisors on the tax consequences to them of the Domestication under their particular circumstances, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws. For a more complete discussion of the U.S. federal income tax considerations of the Domestication, including with respect to public warrants, see “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders.”

 

Q:

Do I have redemption rights?

 

A:

If you are a holder of public shares, you have the right to request that we redeem all or a portion of your public shares for cash provided that you follow the procedures and deadlines described elsewhere in this joint proxy statement/prospectus. Public shareholders (other than those who have agreed not to do so by executing a Transaction Support Agreement) may elect to redeem all or a portion of the public shares held by them regardless of if or how they vote in respect of the Business Combination Proposal. If you wish to exercise your redemption rights, please see the answer to the next question: “How do I exercise my redemption rights?

Notwithstanding the foregoing, a public shareholder, together with any affiliate of such public shareholder or any other person with whom such public shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares. Accordingly, if a public shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.

The initial shareholders have agreed to waive their redemption rights with respect to all of their ordinary shares in connection with the consummation of the Business Combination. Such shares will be excluded from the pro rata calculation used to determine the per-share redemption price.

 

Q:

How do I exercise my redemption rights?

 

A:

In connection with the proposed Business Combination, pursuant to the Existing Governing Documents, Leo’s public shareholders (other than those who have agreed not to do so by executing a Transaction Support Agreement) may request that Leo redeem all or a portion of such public shares for cash if the Business Combination is consummated. If you are a public shareholder and wish to exercise your right to redeem the public shares, you must:

 

  (i)

(a) hold public shares, or (b) if you hold public shares through units, you elect to separate your units into the underlying public shares and public warrants prior to exercising your redemption rights with respect to the public shares;

 

  (ii)

submit a written request to Continental, Leo’s transfer agent, in which you (i) request that we redeem all or a portion of your public shares for cash, and (ii) identify yourself as the beneficial holder of the public shares and provide your legal name, phone number and address; and

 

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  (iii)

deliver your public shares to Continental, our transfer agent, physically or electronically through The Depository Trust Company (“DTC”).

Holders must complete the procedures for electing to redeem their public shares in the manner described above prior to 5:00 p.m., Eastern Time, on November 12, 2021 (two business days before the extraordinary general meeting) in order for their shares to be redeemed.

The address of Continental, Leo’s transfer agent, is listed under the question “Who can help answer my questions?” below.

Holders of units must elect to separate the units into the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying public shares and public warrants, or if a holder holds units registered in its own name, the holder must contact Continental, our transfer agent, directly and instruct them to do so.

Public shareholders will be entitled to request that their public shares be redeemed for a pro rata portion of the amount then on deposit in the trust account as of two business days prior to the consummation of the Business Combination including interest earned on the funds held in the trust account and not previously released to us (net of taxes payable). For illustrative purposes, as of June 30, 2021, this would have amounted to approximately $10.00 per issued and outstanding public share. However, the proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public shareholders, regardless of whether such public shareholders vote or, if they do vote, irrespective of if they vote for or against the Business Combination Proposal. Therefore, the per share distribution from the trust account in such a situation may be less than originally expected due to such claims. Whether you vote, and if you do vote irrespective of how you vote, on any proposal, including the Business Combination Proposal, will have no impact on the amount you will receive upon exercise of your redemption rights. It is expected that the funds to be distributed to public shareholders electing to redeem their public shares will be distributed promptly after the consummation of the Business Combination.

Any request for redemption, once made by a holder of public shares, may be withdrawn at any time up to the time the vote is taken with respect to the Business Combination Proposal at the extraordinary general meeting. If you deliver your shares for redemption to Continental, our transfer agent, and later decide prior to the extraordinary general meeting not to elect redemption, you may request that our transfer agent return the shares (physically or electronically) to you. You may make such request by contacting Continental, our transfer agent, at the phone number or address listed at the end of this section.

Any corrected or changed written exercise of redemption rights must be received by Continental, our transfer agent, prior to the vote taken on the Business Combination Proposal at the extraordinary general meeting. No request for redemption will be honored unless the holder’s public shares have been delivered (either physically or electronically) to Continental, our transfer agent, at least two business days prior to the vote at the extraordinary general meeting.

If a holder of public shares properly makes a request for redemption and the public shares are delivered as described above, then, if the Business Combination is consummated, we will redeem the public shares for a pro rata portion of funds deposited in the trust account, calculated as of two business days prior to the consummation of the Business Combination. The redemption takes place following the Domestication and, accordingly, it is shares of New Local Bounti Common Stock that will be redeemed immediately after consummation of the Business Combination.

If you are a holder of public shares and you exercise your redemption rights, such exercise will not result in the loss of any warrants that you may hold.

 

Q:

If I am a holder of units, can I exercise redemption rights with respect to my units?

 

A:

No. Holders of issued and outstanding units must elect to separate the units into the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If you hold your

 

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  units in an account at a brokerage firm or bank, you must notify your broker or bank that you elect to separate the units into the underlying public shares and public warrants, or if you hold units registered in your own name, you must contact Continental, our transfer agent, directly and instruct them to do so. The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, phone number and address to Continental in order to validly redeem its shares. You are requested to cause your public shares to be separated and delivered to Continental, our transfer agent, by 5:00 p.m., Eastern Time, November 12, 2021 (two business days before the extraordinary general meeting) in order to exercise your redemption rights with respect to your public shares.

 

Q:

What are the U.S. federal income tax consequences of exercising my redemption rights?

 

A:

We expect that a U.S. Holder (as defined in “U.S. Federal Income Tax Considerations—U.S. Holders”) that exercises its redemption rights to receive cash from the trust account in exchange for its shares of New Local Bounti Common Stock will generally be treated as selling such shares of New Local Bounti Common Stock resulting in the recognition of capital gain or capital loss. There may be certain circumstances in which the redemption may be treated as a distribution for U.S. federal income tax purposes depending on the amount of shares of New Local Bounti Common Stock that such U.S. Holder owns or is deemed to own (including through the ownership of warrants) prior to and following the redemption. For a more complete discussion of the U.S. federal income tax considerations of an exercise of redemption rights, see “U.S. Federal Income Tax Considerations.

Additionally, because the Domestication will occur immediately prior to the redemption by any public shareholder, U.S. Holders exercising redemption rights will take into account the potential tax consequences of Section 367(b) of the Code as well as potential tax consequences of the U.S. federal income tax rules relating to PFICs. The tax consequences of the exercise of redemption rights, including pursuant to Section 367(b) of the Code and the PFIC rules, are discussed more fully below under “U.S. Federal Income Tax Considerations—U.S. Holders.” All holders of our public shares considering exercising their redemption rights are urged to consult their tax advisor on the tax consequences to them of an exercise of redemption rights, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws.

 

Q:

What happens to the funds deposited in the trust account after consummation of the Business Combination?

 

A:

Following the closing of our initial public offering, an amount equal to $275,000,000 ($10.00 per unit) of the net proceeds from our initial public offering and the sale of the private placement warrants was placed in the trust account. As of June 30, 2021, funds in the trust account totaled approximately $275 million and were held in U.S. treasury securities. These funds will remain in the trust account, except for the withdrawal of interest to pay taxes, if any, until the earliest of (i) the completion of a business combination (including the Closing) or (ii) the redemption of all of the public shares if we are unable to complete a business combination by March 2, 2023 (unless such date is extended in accordance with the Existing Governing Documents), subject to applicable law.

If our initial business combination is paid for using equity or debt securities or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemptions or purchases of the public shares, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of New Local Bounti, the payment of principal or interest due on indebtedness incurred in completing our Business Combination, to fund the purchase of other companies or for working capital. See “Summary of the Proxy Statement/Prospectus—Sources and Uses of Funds for the Business Combination.”

 

Q:

What happens if a substantial number of the public shareholders vote in favor of the Business Combination Proposal and exercise their redemption rights?

 

A:

Our public shareholders are not required to vote “AGAINST” the Business Combination in order to exercise their redemption rights, although redemption is only available if the Business Combination is consummated.

 

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  Accordingly, the Business Combination may be consummated even though the funds available from the trust account and the number of public shareholders are reduced as a result of redemptions by public shareholders. In no event will Leo redeem public shares in an amount that would cause our net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) to be less than $5,000,001 after giving effect to the transactions contemplated by the Merger Agreement, the PIPE Financing and all of the Leo shareholder redemptions.

Additionally, as a result of redemptions, the trading market for the New Local Bounti Common Stock may be less liquid than the market for the public shares was prior to consummation of the Business Combination and we may not be able to meet the listing standards for the NYSE or another national securities exchange.

 

Q:

What conditions must be satisfied to complete the Business Combination?

 

A:

The consummation of the Business Combination is conditioned upon, among other things, (i) the approval by our shareholders of the Condition Precedent Proposals being obtained; (ii) the applicable waiting period under the HSR Act relating to the Merger Agreement having expired or been terminated; (iii) Leo having at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) after giving effect to the transactions contemplated by the Merger Agreement, the PIPE Financing and all of the Leo shareholder redemptions; (iv) the Aggregate Transaction Proceeds Condition; (v) the approval by the NYSE of our initial listing application in connection with the Business Combination; (vi) the consent of the holders of a majority of voting common stock of Local Bounti and the conversion of all Local Bounti equity interests other than Convertible Debt, and (vii) the consummation of the Domestication. For more information about conditions to the consummation of the Business Combination, see “Business Combination Proposal—Conditions to Closing of the Business Combination.”

 

Q:

When do you expect the Business Combination to be completed?

 

A:

It is currently expected that the Business Combination will be consummated in the second half of 2021. This date depends, among other things, on the approval of the proposals to be put to Leo shareholders at the extraordinary general meeting. However, such extraordinary general meeting could be adjourned if the Adjournment Proposal is adopted by our shareholders at the extraordinary general meeting and we elect to adjourn the extraordinary general meeting to a later date or dates to consider and vote upon a proposal to approve by ordinary resolution the adjournment of the extraordinary general meeting to a later date or dates (A) to the extent necessary to ensure that any required supplement or amendment to the accompanying joint proxy statement/prospectus is provided to Leo shareholders or, if as of the time for which the extraordinary general meeting is scheduled, there are insufficient Leo ordinary shares represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the extraordinary general meeting, (B) in order to solicit additional proxies from Leo shareholders in favor of one or more of the proposals at the extraordinary general meeting or (C) if Leo shareholders redeem an amount of public shares such that the Aggregate Transaction Proceeds Condition would not be satisfied. For a description of the conditions for the completion of the Business Combination, see “Business Combination Proposal—Conditions to Closing of the Business Combination.”

 

Q:

What happens if the Business Combination is not consummated?

 

A:

Leo will not complete the Domestication to Delaware unless all other conditions to the consummation of the Business Combination have been satisfied or waived by the parties in accordance with the terms of the Merger Agreement. If Leo is not able to consummate the Business Combination with Local Bounti nor able to complete another business combination by March 2, 2023, in each case, as such date may be extended pursuant to our Existing Governing Documents, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to

 

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  receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable laws.

 

Q:

Do I have appraisal rights in connection with the proposed Business Combination and the proposed Domestication?

 

A:

Neither our shareholders nor our warrant holders have appraisal rights in connection with the Business Combination or the Domestication under the Cayman Islands Companies Act or under the DGCL.

 

Q:

What do I need to do now?

 

A:

We urge you to read this joint proxy statement/prospectus, including the Annexes and the documents referred to herein, carefully and in their entirety and to consider how the Business Combination will affect you as a shareholder and/or warrant holder. Our shareholders should then vote as soon as possible in accordance with the instructions provided in this joint proxy statement/prospectus and on the enclosed extraordinary general meeting proxy card.

 

Q:

How do I vote?

 

A:

If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or nominee, and were a holder of record of ordinary shares on October 15, 2021, the record date for the extraordinary general meeting, you may vote with respect to the proposals in person or virtually at the extraordinary general meeting, or by completing, signing, dating and returning the enclosed extraordinary general meeting proxy card in the postage-paid envelope provided. For the avoidance of doubt, the record date does not apply to Leo shareholders that hold their shares in registered form and are registered as shareholders in Leo’s register of members. All holders of shares in registered form on the day of the extraordinary general meeting are entitled to vote at the extraordinary general meeting.

 

Q:

If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

 

A:

No. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” If this is the case, this joint proxy statement/prospectus may have been forwarded to you by your brokerage firm, bank or other nominee, or its agent. As the beneficial holder, you have the right to direct your broker, bank or other nominee as to how to vote your shares. If you do not provide voting instructions to your broker on a particular proposal on which your broker does not have discretionary authority to vote, your shares will not be voted on that proposal. This is called a “broker non-vote.” Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the extraordinary general meeting. If you decide to vote, you should provide instructions to your broker, bank or other nominee on how to vote in accordance with the information and procedures provided to you by your broker, bank or other nominee.

 

Q:

When and where will the extraordinary general meeting be held?

 

A:

The extraordinary general meeting will be held at 9:00 a.m., Eastern Time, on November 16, 2021, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50 Floor, New York, New York 10022, or via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned.. As part of our precautions regarding COVID-19, we are planning for the possibility that the meeting may be held virtually over the Internet. If we take this step, we will announce the decision to do so via a press release and posting details on our website that will also be filed with the SEC as proxy material. Only shareholders who held ordinary shares of Leo at the close of business on the record date will be entitled to vote at the extraordinary general meeting.

 

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Q:

What impact will the COVID-19 Pandemic have on the Business Combination?

 

A:

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the coronavirus outbreak on the business of Leo and Local Bounti, and there is no guarantee that efforts by Leo and Local Bounti to address the adverse impacts of the coronavirus will be effective. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and actions taken to contain the coronavirus or its impact, among others. If Leo or Local Bounti are unable to recover from a business disruption on a timely basis, the Business Combination and New Local Bounti’s business, financial condition and results of operations following the completion of the Business Combination would be adversely affected. The Business Combination may also be delayed and adversely affected by the coronavirus outbreak and become more costly. Each of Leo and Local Bounti may also incur additional costs to remedy damages caused by any such disruptions, which could adversely affect its financial condition and results of operations.

 

Q:

Who is entitled to vote at the extraordinary general meeting?

 

A:

We have fixed October 15, 2021 as the record date for the extraordinary general meeting. If you were a shareholder of Leo at the close of business on the record date, you are entitled to vote on matters that come before the extraordinary general meeting. However, a shareholder may only vote his or her shares if he or she is present in person or is represented by proxy at the extraordinary general meeting.

 

Q:

How many votes do I have?

 

A:

Leo shareholders are entitled to one vote at the extraordinary general meeting for each ordinary share held of record as of the record date. As of the close of business on the record date for the extraordinary general meeting, there were 34,375,000 ordinary shares issued and outstanding, of which 27,500,000 were issued and outstanding public shares.

 

Q:

What constitutes a quorum?

 

A:

A quorum of Leo shareholders is necessary to hold a valid meeting. A quorum will be present at the extraordinary general meeting if one or more shareholders who together hold not less than a majority of the issued and outstanding ordinary shares entitled to vote at the extraordinary general meeting are represented in person or by proxy at the extraordinary general meeting. As of the record date for the extraordinary general meeting, 17,187,501 ordinary shares would be required to achieve a quorum.

 

Q:

What vote is required to approve each proposal at the extraordinary general meeting?

 

A:

The following votes are required for each proposal at the extraordinary general meeting:

 

  (i)

Business Combination Proposal: The approval of the Business Combination Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter.

 

  (ii)

Domestication Proposal: The approval of the Domestication Proposal requires a special resolution under Cayman Islands law, being the affirmative vote of at least two-thirds (2/3) of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter.

 

  (iii)

Charter Proposal: The approval of the Charter Proposal requires a special resolution under Cayman Islands law, being the affirmative vote of at least two-thirds (2/3) of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter.

 

  (iii)

Governing Documents Proposals: Each of the Governing Documents Proposals will be voted upon on a non-binding advisory basis only.

 

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  (iv)

The NYSE Proposal: The approval of the NYSE Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter.

 

  (v)

Incentive Award Plan Proposal: The approval of the Incentive Award Plan Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter.

 

  (vi)

Employee Stock Purchase Plan Proposal: The approval of the Employee Stock Purchase Plan Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (vii)

Director Election Proposal: The approval of the Director Election Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting. Under the terms of the Existing Governing Documents, only the holders of Class B ordinary shares are entitled to vote on the election of directors to the Leo Board. Therefore, only holders of Class B ordinary shares will vote on the election of directors at the extraordinary general meeting.

 

  (viii)

Adjournment Proposal: The approval of the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter.

As of the record date, Leo had 34,375,000 ordinary shares issued and outstanding. Leo shareholders are entitled to one vote at the extraordinary general meeting for each ordinary share held of record as of the record date.

Assuming all holders that are entitled to vote on such matter vote all of their ordinary shares in person or by proxy, 17,187,501 shares, will need to be voted in favor of each of the Business Combination Proposal, the NYSE Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal, the Director Election Proposal and the Adjournment Proposal in order to approve each of the Business Combination Proposal, the NYSE Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal, the Director Election Proposal and the Adjournment Proposal. Additionally, as noted above, only the holders of Class B ordinary shares are entitled to vote on the Director Election Proposal. Pursuant to the Sponsor Agreement, the initial holders have agreed to vote their Class B ordinary shares in favor of the Director Election Proposal.

Assuming all holders that are entitled to vote on such matter vote all of their ordinary shares in person or by proxy, 22,916,667 shares, will need to be voted in favor of the Domestication Proposal and the Charter Proposal in order to approve the Domestication Proposal and the Charter Proposal.

 

Q:

Why is Leo proposing the Governing Documents Proposals?

 

A:

Leo is requesting that its shareholders vote upon, on a non-binding advisory basis, proposals to approve certain governance provisions contained in the Proposed Certificate of Incorporation that materially affect shareholder rights. This separate vote is not required by Cayman Islands law separate and apart from the Charter Proposal, but pursuant to SEC guidance, Leo is required to submit these provisions to its shareholders separately for approval. However, the shareholder vote regarding this proposal is an advisory vote, and is not binding on Leo and the Leo Board (separate and apart from the approval of the Charter Proposal). Furthermore, the Business Combination is not conditioned on the separate approval of the Governing Documents Proposals (separate and apart from approval of the Charter Proposal). Please see the section entitled “Governing Documents Proposals” for additional information.

 

Q:

What are the recommendations of the Leo Board?

 

A:

The Leo Board believes that the Business Combination Proposal and the other proposals to be presented at the extraordinary general meeting are in the best interest of Leo and its shareholders and unanimously

 

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  recommends that its shareholders vote “FOR” the Business Combination Proposal, “FOR” the Domestication Proposal, “FOR” the Charter Proposal, “FOR” each of the separate Governing Documents Proposals, “FOR” the NYSE Proposal, “FOR” the Incentive Award Plan Proposal, “FOR” the Employee Stock Purchase Plan Proposal, “FOR” the Director Election Proposal and “FOR” the Adjournment Proposal, in each case, if presented to the extraordinary general meeting.

The existence of financial and personal interests of one or more of Leo’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of Leo and its shareholders and what he or they may believe is best for himself or themselves in determining to recommend that shareholders vote for the proposals. In addition, Leo’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Business Combination Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” for a further discussion of these considerations.

 

Q:

How do Sponsor and the other initial shareholders intend to vote their shares?

 

A:

Unlike some other blank check companies in which the initial shareholders agree to vote their shares in accordance with the majority of the votes cast by the public shareholders in connection with an initial business combination, our initial shareholders have agreed to vote all their shares in favor of all the proposals being presented at the extraordinary general meeting. As of the date of this joint proxy statement/prospectus, our initial shareholders own approximately 20% of the issued and outstanding ordinary shares.

At any time at or prior to the Business Combination, during a period when they are not then aware of any material nonpublic information regarding us or our securities, our initial shareholders, Local Bounti and/or their directors, officers, advisors or respective affiliates may purchase public shares from institutional and other investors who vote, or indicate an intention to vote, against any of the Condition Precedent Proposals, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire public shares or vote their public shares in favor of the Condition Precedent Proposals. Such a purchase may include a contractual acknowledgement that such shareholder, although still the record or beneficial holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our initial shareholders, Local Bounti and/or their directors, officers, advisors or respective affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights, such selling shareholder would be required to revoke their prior elections to redeem their shares. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that (i) the Business Combination Proposal, the NYSE Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal, the Director Election Proposal (under the terms of the Existing Governing Documents, only the holders of Class B ordinary shares are entitled to vote on the Director Election Proposal) and the Adjournment Proposal are approved by the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter (ii) the Domestication Proposal and the Charter Proposal are approved by the affirmative vote of at least two-thirds (2/3) of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter, (iii) otherwise limit the number of public shares electing to redeem and (iv) New Local Bounti’s net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) being at least $5,000,001 after giving effect to the transactions contemplated by the Merger Agreement, the PIPE Financing and all of the Leo shareholder redemptions.

Entering into any such arrangements may have a depressive effect on the ordinary shares. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he or she owns, either at or prior to the Business Combination.

 

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If such transactions are effected, the consequence could be to cause the Business Combination to be consummated in circumstances where such consummation could not otherwise occur. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the proposals to be presented at the extraordinary general meeting and would likely increase the chances that such proposals would be approved. We will file or submit a Current Report on Form 8-K to disclose any material arrangements entered into or significant purchases made by any of the aforementioned persons that would affect the vote on the proposals to be put to the extraordinary general meeting or the redemption threshold.

Any such report will include descriptions of any arrangements entered into or significant purchases by any of the aforementioned persons.

 

Q:

What happens if I sell my Leo ordinary shares before the extraordinary general meeting?

 

A:

The record date for the extraordinary general meeting is earlier than the date of the extraordinary general meeting and earlier than the date that the Business Combination is expected to be completed. If you transfer your public shares after the applicable record date, but before the extraordinary general meeting, unless you grant a proxy to the transferee, you will retain your right to vote at such general meeting.

 

Q:

May I change my vote after I have mailed my signed extraordinary general meeting proxy card?

 

A:

Yes. Shareholders may send a later-dated, signed extraordinary general meeting proxy card to our general counsel at our address set forth below so that it is received by our general counsel prior to the vote at the extraordinary general meeting (which is scheduled to take place on November 16, 2021) or attend the extraordinary general meeting in person and vote. Shareholders also may revoke their proxy by sending a notice of revocation to our general counsel, which must be received by our general counsel prior to the vote at the extraordinary general meeting. However, if your shares are held in “street name” by your broker, bank or another nominee, you must contact your broker, bank or other nominee to change your vote.

 

Q:

What happens if I fail to take any action with respect to the extraordinary general meeting?

 

A:

If you fail to vote with respect to the extraordinary general meeting and the Business Combination is approved by shareholders and the Business Combination is consummated, you will become a stockholder and/or warrant holder of New Local Bounti. If you fail to vote with respect to the extraordinary general meeting and the Business Combination is not approved, you will remain a shareholder and/or warrant holder of Leo. However, if you fail to vote with respect to the extraordinary general meeting, you will nonetheless be able to elect to redeem your public shares in connection with the Business Combination.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

Shareholders may receive more than one set of voting materials, including multiple copies of this joint proxy statement/prospectus and multiple extraordinary general meeting proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one extraordinary general meeting proxy card. Please complete, sign, date and return each extraordinary general meeting proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your ordinary shares.

 

Q:

Who will solicit and pay the cost of soliciting proxies for the extraordinary general meeting?

 

A:

Leo will pay the cost of soliciting proxies for the extraordinary general meeting. Leo has engaged Morrow Sodali LLC (“Morrow”) to assist in the solicitation of proxies for the extraordinary general meeting. Leo has agreed to pay Morrow a fee of $32,500.00, plus disbursements, and will reimburse Morrow for its reasonable out-of-pocket expenses and indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. Leo will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of Class A ordinary shares for their expenses in forwarding soliciting materials to beneficial owners of Class A ordinary shares and in obtaining voting instructions from those owners. Leo’s directors and officers may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

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Q:

Where can I find the voting results of the extraordinary general meeting?

 

A:

The preliminary voting results will be announced at the extraordinary general meeting. Leo will publish final voting results of the extraordinary general meeting in a Current Report on Form 8-K within four business days after the extraordinary general meeting.

 

Q:

Who can help answer my questions?

 

A:

If you have questions about the Business Combination or if you need additional copies of the joint proxy statement/prospectus or the enclosed extraordinary general meeting proxy card you should contact:

Morrow Sodali LLC

470 West Avenue

Stamford, Connecticut 06902

Individuals, please call toll-free: (800) 662-5200

Banks and brokers, please call: (203) 658-9400

E-mail: LIII.info@investor.morrowsodali.com

You also may obtain additional information about Leo from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information; Incorporation by Reference.” If you are a holder of public shares and you intend to seek redemption of your public shares, you will need to deliver your public shares (either physically or electronically) to Continental, Leo’s transfer agent, at the address below prior to the extraordinary general meeting. Holders must complete the procedures for electing to redeem their public shares in the manner described above prior to 5:00 p.m., Eastern Time, on November 12, 2021 (two business days before the extraordinary general meeting) in order for their shares to be redeemed. If you have questions regarding the certification of your position or delivery of your stock, please contact:

Continental Stock Transfer & Trust Company

1 State Street 30th Floor

New York, New York 10004

Attention: Mark Zimkind

E-mail: mzimkind@continentalstock.com

 

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QUESTIONS AND ANSWERS FOR PUBLIC WARRANT HOLDERS OF LEO

The questions and answers below highlight only selected information from this joint proxy statement/prospectus and only briefly address some commonly asked questions about the Warrant Holders Meeting and the proposed amendment to the warrants. The following questions and answers do not include all the information that is important to Leo public warrant holders. Leo public warrant holders are encouraged to read carefully this entire joint proxy statement/prospectus, including the Annexes and the other documents referred to herein.

 

Q:

What is being voted on at the Warrant Holders Meeting?

 

A:

At the Warrant Holders Meeting, the holders of Leo public warrants are being asked to vote on the following Warrant Holders Proposals:

 

   

a proposal to amend and restate the Warrant Agreement to implement certain changes that are intended to result in the warrants of Leo being accounted for as equity within the balance sheet of New Local Bounti, instead of as a liability measured at fair value with non-cash fair value adjustments recorded in earning at each reporting period; and

 

   

a proposal to adjourn the Warrant Holders Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if it is determined by Leo that more time is necessary or appropriate to approve the Warrant Amendment Proposal.

Leo will hold the Warrant Holders Meeting to consider and vote upon these proposals. This joint proxy statement/prospectus contains important information about the proposals to be tabled at the Warrant Holders Meeting. Holders of Leo public warrants are urged to read carefully this entire joint proxy statement/prospectus, including Annex L hereto.

 

Q:

What is the purpose of the Warrant Amendment for which approval is being sought?

 

A:

Approval is being sought from public warrant holders as of the record date in order to amend the Warrant Agreement to implement certain changes that are intended to result in the warrants of Leo being accounted for as equity within the balance sheet of New Local Bounti, instead of as a liability measured at fair value with non-cash fair value adjustments recorded in earnings at each reporting period. A summary of the Warrant Amendment Proposal is set forth in the section entitled “Warrant Holders Proposal No. 1 - The Warrant Amendment Proposal” of this joint proxy statement/prospectus and a complete copy of the Warrant Amendment is included as Annex L to this joint proxy statement/prospectus.

On April 12, 2021, the staff at the Securities and Exchange Commission (the “SEC staff”) issued a statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Statement”). In the SEC Statement, the SEC staff noted that certain provisions in the typical SPAC warrant agreement may require that the warrants be classified as a liability measured at fair value, with changes in fair value reported each period in earnings, as compared to the historical treatment of the warrants as equity, which has been the practice of most SPACs, including Leo. Leo had previously classified its private placement warrants and public warrants as equity.

After considering the SEC Statement, Leo concluded that there were misstatements in the March 2, 2021 audited closing balance sheet Leo filed with the SEC on Form 8-K on March 9, 2021. Based on the guidance in Accounting Standards Codification (“ASC”) 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity,” Leo concluded that provisions in the warrant agreement preclude the warrants from being accounted for as components of equity. As the warrants meet the definition of a derivative as contemplated in ASC 815, the warrants should have been recorded as derivative liabilities on the balance sheet and measured at fair value at inception and at each reporting date in accordance with ASC 820, “Fair Value Measurement,” with changes in fair value recognized in the statement of operations in the period of change. Further, ASC 815 requires that upfront costs and fees related to items for which the fair value option is elected (Leo’s warrant liabilities) should have been recognized as expense as incurred.

 

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Leo has corrected the accounting for the warrants in its Quarterly Report on Form 10-Q: The effect of the revision on specific line items in Leo’s March 2, 2021 audited closing date balance sheet can be found in Note 10 of the Notes to unaudited condensed financial statements included elsewhere in this joint proxy statement/prospectus.

Leo is asking the Warrant Holders to amend the warrants such that warrants will be classified as equity instruments following the completion of the Business Combination in order to reduce the accounting complexity associate with quarterly valuations for the derivative liability of the warrants and thereby reducing the associated cost and resources necessary for such accounting treatment.

 

Q:

When and where will the Warrant Holders Meeting be held?

 

A.

The Warrant Holders Meeting will be held following the extraordinary general meeting at 9:30 am, Eastern Time, on November 16, 2021, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50th Floor, New York, New York 10022 or via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned. Only Leo warrant holders at the close of business on October 15, 2021 will be entitled to vote at the Warrant Holders Meeting and at any adjournments and postponements thereof.

 

Q:

Who is entitled to vote at the Warrant Holders Meeting?

 

A.

Leo has fixed October 15, 2021 as the record date for the Warrant Holders Meeting. If you were a Leo public warrant holder at the close of business on the record date, you are entitled to vote on matters that come before the Warrant Holders Meeting. However, a Leo public warrant holder may only vote his, her or its warrants if he, she or it is present in person or is represented by proxy at the Warrant Holders Meeting.

 

Q:

How do I vote?

 

A.

If you are a record owner of warrants, there are two ways to vote your warrants at the Warrant Holders Meeting:

You can vote by signing and returning the enclosed Warrant Holders Meeting proxy card. If you vote by proxy card, your “proxy,” whose name is listed on the Warrant Holders Meeting proxy card, will vote your public warrants as you instruct on the Warrant Holders Meeting proxy card. If you sign and return the Warrant Holders Meeting proxy card but do not give instructions on how to vote your Leo public warrants, your Leo public warrants will be voted as recommended by the Leo Board “FOR” the Warrant Amendment Proposal and the Warrant Holders Adjournment Proposal (if presented). Votes received after a matter has been voted upon at the Warrant Holders Meeting will not be counted.

You can attend the Warrant Holders Meeting and vote in person. When you arrive, you will receive a ballot that you may use to cast your vote.

If your warrants are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the warrants you beneficially own are properly counted. If you wish to attend the Warrant Holders Meeting and vote in person and your warrants are held in “street name,” you must obtain a legal proxy from your broker, bank or nominee. That is the only way Leo can be sure that the broker, bank or nominee has not already voted your warrants.

 

Q:

How many votes do I have?

 

A:

Holders of Leo public warrants are entitled to one vote at the Warrant Holders Meeting for each Leo public warrant held of record as of the record date. As of the date of this joint proxy statement/prospectus there are 5,500,000 Leo public warrants issued and outstanding.

 

Q:

What constitutes a quorum?

 

A:

A quorum of Leo public warrant holders is necessary to hold a valid meeting. A quorum will be present at the Warrant Holders Meeting if a majority of the warrants outstanding and entitled to vote at the Warrant

 

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  Holders Meeting are represented in person or by proxy. As of the record date for the Warrant Holders Meeting, 2,750,001 Leo public warrants would be required to achieve a quorum.

 

Q:

What if I do not vote my Leo public warrants or if I abstain from voting?

 

A.

The approval of the Warrant Amendment Proposal requires the affirmative vote by the holders of at least 50% of the outstanding Leo public warrants. The Warrant Holders Adjournment Proposal, if presented, requires the affirmative vote by the holders of a majority of the outstanding Leo public warrants that are present and entitled to vote at the Warrant Holders Meeting. At the Warrant Holders Meeting, Leo will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, failure to vote or an abstention will not count as a vote cast at the Warrant Holders Meeting, and will have (i) the same effect as a vote against the Warrant Amendment Proposal and (ii) no effect on the Warrant Holder Adjournment Proposal, if presented.

 

Q:

What do I do if I want to vote against the warrant amendments?

 

A:

If you are a Leo public warrant holder at the close of business on the record date and you wish to vote against the Warrant Amendment Proposal, you should sign and return your Warrant Holders Meeting proxy card indicating a vote “AGAINST.” Alternatively, you may vote in person at the Warrant Holders Meeting. If you are a Leo public warrant holder at the close of business on the record date and you do not sign and return your Warrant Holders Meeting proxy card to your broker or vote in person at the Warrant Holders Meeting, that will have the same effect as a vote against the Warrant Amendment Proposal.

 

Q:

What will happen to the warrants if the Warrant Amendment Proposal is not approved?

 

A:

If the Warrant Amendment Proposal is not approved, the warrants will continue to be classified as liabilities on the financial statements of New Local Bounti following the completion of the Business Combination, which will (a) increase the administrative costs of New Local Bounti and (b) cause non-cash non-operating expenses to be reflected higher than if the warrants were accounted for as equity.

 

Q:

What are the recommendations of the Leo Board?

 

A:

After careful consideration, the Leo Board believes that the Warrant Amendment Proposal and the Warrant Holders Adjournment Proposal (if presented) are in the best interest of Leo and the holders of Leo public warrants and unanimously recommends that its public warrant holders vote “FOR” the Warrant Amendment Proposal and “FOR” the Warrant Holders Adjournment Proposal, in each case, if presented to the Warrant Holders Meeting.

The existence of financial and personal interests of one or more of Leo’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of Leo and its public warrant holders and what he or they may believe is best for himself or themselves in determining to recommend that public warrant holders vote for the proposals. In addition, Leo’s officers have interests in the Business Combination that may conflict with your interests as a holder of Leo public warrants. See the section entitled “Business Combination Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” for a further discussion of these considerations.

 

Q:

What changes will be made to the terms of the warrants if the Warrant Amendment becomes operative?

 

A:

We encourage you to review the substantive text of the proposed Warrant Amendment attached as Annex L to this joint proxy statement/prospectus. Please see the section entitled “The Warrant Amendment” for additional information.

 

Q:

What is the record date?

 

A:

The record date will be the close of business October 15, 2021. All Leo public warrant holders of record at the close of business on this date will be entitled to vote on the Warrant Amendment.

 

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Q:

What vote is required to approve the Warrant Holder Proposals presented at the Warrant Holder Meeting?

 

A:

The approval of the Warrant Amendment Proposal requires the affirmative vote by the holders of at least 50% of the outstanding Leo public warrants. The approval of the Warrant Holders Adjournment Proposal, if presented, requires the affirmative vote by the holders of a majority of the outstanding Leo public warrants that are present and entitled to vote at the Warrant Holders Meeting.

 

Q:

If the Warrant Amendment is approved, when will it become effective?

 

A:

The Warrant Amendment is expected to become effective promptly following the Warrant Holders Meeting, but is conditioned on the approval of Condition Precedent Proposals and the consummation of the Business Combination. If the Business Combination is not completed, the Warrant Amendment will not become effective, even if the Leo public warrant holders have approved the Warrant Amendment Proposal.

 

Q:

In addition to receiving the necessary approval from Leo public warrant holders, what are the other conditions to the Warrant Amendment?

 

A:

The Warrant Amendment Proposal is conditioned on the approval of Condition Precedent Proposals and the consummation of the Business Combination. If the Business Combination is not completed, the Warrant Amendment will not become effective, even if the Leo public warrant holders have approved the Warrant Amendment Proposal.

 

Q:

If I purchase Leo public warrants after the record date, am I entitled to vote on the Warrant Amendment?

 

A:

No. Only Leo public warrant holders on the record date will be eligible to vote on the Warrant Amendment. If you purchase Leo public warrants after this date, you will not be entitled to vote on the Warrant Amendment.

 

Q:

What happens if I sell my Leo public warrants prior to the record date for the Warrant Holders Meeting?

 

A:

The record date for the Warrant Holders Meeting is October 15, 2021. If you transfer your Leo public warrants after the record date, unless the transferee obtains from you a proxy to vote as to those warrants, you will retain your right to vote on Warrant Holders Proposals. If you transfer your Leo public warrants prior to the record date, you will have no right to participate in the Warrant Holders Meeting.

 

Q:

Who do I call if I have any questions about how to vote or any other questions relating to the Warrant Amendment Proposal or the Warrant Amendment?

 

A:

Questions concerning the terms of the Warrant Amendment Proposal should be directed to Leo’s proxy solicitor at:

Morrow Sodali LLC

470 West Avenue

Stamford, Connecticut 06902

Individuals, please call toll-free: (800) 662-5200

Banks and brokers, please call: (203) 658-9400

E-mail: LIII.info@investor.morrowsodali.com

You also may obtain additional information about Leo from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information; Incorporation by Reference.” If you have questions regarding the certification of your warrant position, please contact Leo’s warrant agent:

Continental Stock Transfer & Trust Company

1 State Street 30th Floor

New York, New York 10004

Attention: Mark Zimkind

E-mail: mzimkind@continentalstock.com

 

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SUMMARY OF THE JOINT PROXY STATEMENT/PROSPECTUS

This summary highlights selected information from this joint proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the proposals to be submitted for a vote at the extraordinary general meeting, including the Business Combination, you should read this joint proxy statement/prospectus, including the Annexes and other documents referred to herein, carefully and in their entirety. The Merger Agreement is the legal document that governs the Business Combination and the other transactions that will be undertaken in connection with the Business Combination. The Merger Agreement is also described in detail in this joint proxy statement/prospectus in the section entitled “Business Combination Proposal—The Merger Agreement.”

Business Summary

Unless otherwise indicated or the context otherwise requires, references in this Business Summary to “we,” “us,” “our” and other similar terms refer to Local Bounti® prior to the Business Combination and to New Local Bounti and its consolidated subsidiaries after giving effect to the Business Combination.

Company Overview

Local Bounti was founded in August 2018 and is headquartered in Hamilton, Montana. Local Bounti is a producer of sustainably grown living lettuce, herbs and loose leaf lettuce. Local Bounti is a Controlled Environment Agriculture (“CEA”) company that utilizes patent pending Stack & Flow TechnologyTM, which is a hybrid of vertical farming and hydroponic greenhouse farming, to grow healthy food sustainably and affordably. Through Local Bounti’s CEA process, it is Local Bounti’s goal to produce its products in an environmentally sustainable manner that will increase harvest efficiency, limit water usage and reduce the carbon footprint of the production and distribution process. The environmental greenhouse conditions in Local Bounti’s facilities help to ensure nutritional value and taste, and the products are non-GMO and pesticide and herbicide free. Local Bounti’s products use 90% less water and 90% less land than conventional agriculture to produce. Local Bounti’s first CEA facility in Hamilton, Montana commenced construction in 2019 and reached full commercial operation in the second half of 2020.

The Parties to the Business Combination

Leo

Leo is a blank check company incorporated on January 8, 2021 as a Cayman Islands exempted company and incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Leo has neither engaged in any operations nor generated any revenue to date. Based on Leo’s business activities, it is a “shell company” as defined under the Exchange Act because it has no operations and nominal assets consisting almost entirely of cash.

On March 2, 2021, Leo consummated an initial public offering of 27,500,000 units at an offering price of $10.00 per unit, and a private placement with Sponsor of 5,333,333 private placement warrants at an offering price of $1.50 per warrant. Each unit sold in the initial public offering consists of one Class A ordinary share and one-fifth of one redeemable warrant. Each whole public warrant entitles the holder to purchase one public share at an exercise price of $11.50 per share, subject to adjustment. Each private placement warrant is exercisable for one Class A ordinary share at a price of $11.50 per share.

Following the closing of Leo’s initial public offering, an amount equal to $275,000,000 of the net proceeds from its initial public offering and the sale of the private placement warrants was placed in the trust

 

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account. The trust account may be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in United States Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government obligations. As of June 30, 2021 funds in the trust account totaled approximately $275 million and were held in U.S. treasury securities. These funds will remain in the trust account, except for the withdrawal of interest to pay taxes, if any, until the earliest of (i) the completion of Leo’s initial business combination, (ii) the redemption of any public shares properly tendered in connection with a shareholder vote to amend the Existing Governing Documents to modify the substance and timing of our obligation to redeem 100% of the public shares if Leo does not complete a business combination by March 2, 2023, or (iii) the redemption of all of the public shares if Leo is unable to complete a business combination by March 2, 2023 (unless such date is extended in accordance with the Existing Governing Documents), subject to applicable law.

Leo’s units, public shares and public warrants are currently listed on the NYSE under the symbols “LIII.U,” “LIII” and “LIII WS,” respectively.

Leo’s principal executive office is located at Albany Financial Center, South Ocean Blvd Suite #507, P.O. Box SP-63158, New Providence, Nassau, The Bahamas, and its telephone number is (310) 800-1000.

Local Bounti

Local Bounti is a Delaware corporation. Local Bounti’s principal executive office is located at 490 Foley Lane, Hamilton, MT 59840, and its telephone number is (406) 361-3711.

Merger Sub 1

Merger Sub 1 is a Delaware corporation and wholly-owned subsidiary of Leo formed for the purpose of effecting the Business Combination. Merger Sub 1 owns no material assets and does not operate any business.

Merger Sub 1’s principal executive office is located at Albany Financial Center, South Ocean Blvd Suite #507, P.O. Box SP-63158, New Providence, Nassau, The Bahamas, and its telephone number is (310) 800-1000.

Merger Sub 2

Merger Sub 2 is a Delaware limited liability company and wholly-owned subsidiary of Leo formed for the purpose of effecting the Business Combination. Merger Sub 2 owns no material assets and does not operate any business.

Merger Sub 2’s principal executive office is located at Albany Financial Center, South Ocean Blvd Suite #507, P.O. Box SP-63158, New Providence, Nassau, The Bahamas, and its telephone number is (310) 800-1000.

Proposals to be Put to the Shareholders of Leo at the Extraordinary General Meeting

The following is a summary of the proposals to be put to the extraordinary general meeting of Leo and certain transactions contemplated by the Merger Agreement. None of the Governing Documents Proposals, which will be voted upon on a non-binding advisory basis, or the Adjournment Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal or the Director Election Proposal is conditioned upon the approval of any other proposal. The transactions contemplated by the Merger Agreement will be consummated only if the Condition Precedent Proposals are approved at the extraordinary general meeting.

As discussed in this joint proxy statement/prospectus, Leo is asking its shareholders to approve by ordinary resolution the Merger Agreement, pursuant to which, among other things, on the date of Closing,

 

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promptly following the consummation of the Domestication, Merger Sub 1 will merge with and into Local Bounti, with Local Bounti as the surviving company in the First Merger, immediately followed by the merger of the surviving company with and into Merger Sub 2, with Merger Sub 2 surviving the Second Merger, and, after giving effect to the Merger, Local Bounti shall be a wholly-owned subsidiary of Leo. In accordance with the terms and subject to the conditions of the Merger Agreement, at the Effective Time, based on the Transaction Value, (i) each share of Local Bounti voting common stock (other than shares held by Local Bounti as treasury stock (which shares will be cancelled for no consideration as part of the First Merger) and dissenting shares) will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock, earnout shares (as described herein) and up to $37.5 million of cash consideration (subject to certain conditions specified in the Merger Agreement), each as determined in the Merger Agreement, (ii) each share of Local Bounti restricted stock will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock and earnout shares (as described below), each as determined in the Merger Agreement, (iii) each Local Bounti restricted stock unit, whether or not then vested, will be assumed by Leo and convert into a Leo restricted stock unit, subject to the same terms and conditions as applied to such Local Bounti restricted stock unit immediately prior to the Closing with a value as if such Local Bounti restricted stock unit were settled prior to the Closing, and (iv) each warrant of Local Bounti that is unexercised will be assumed by Leo and convert into a warrant to purchase New Local Bounti Common Stock and represent the right to receive the applicable portion of the merger consideration upon exercise of such warrant as if such warrant were exercised prior to the Closing. In addition, all convertible debt of Local Bounti will be fully converted into Local Bounti common stock as of immediately prior to the Closing and become eligible to receive New Local Bounti Common Stock (which amount, for the avoidance of doubt, is excluded from the implied pre-transaction equity value of Local Bounti and therefore will have a dilutive impact to both the public shareholders of Leo and the pre-transaction stockholders of Local Bounti) based on the number of shares of Local Bounti common stock issuable upon conversion of such convertible debt.

Based on the foregoing, the post-closing ownership of the New Local Bounti is expected to be as follows (assuming no redemptions):

 

Combined Company Constituent Party

   Combined Company Shares (1)      Voting%  

PIPE Investors

     12,500,000        11.4

Local Bounti Common Stock (restricted and unrestricted)

     59,493,616        54.3

Local Bounti Convertible Note Holders

     3,190,489        2.9

Sponsor

     6,875,000        6.3

Public Shareholders (assuming no redemptions)

     27,500,000        25.1

Total

     109,559,105        100.0

 

(1)

Excludes 5,500,000 public warrants and excludes 5,333,333 private warrants. Subject to final adjustment as set forth in the Merger Agreement.

Each Local Bounti equityholder entitled to receive a portion of the earnout consideration will receive its applicable portion of equal thirds of 2,500,000 earnout shares if the trading price of New Local Bounti Common Stock is greater than or equal to $13.00, $15.00 and $17.00 for any 20 trading days within any 30-trading day period and will also accelerate and be fully issuable in connection with any Change of Control (as defined in the Merger Agreement) if the applicable thresholds are met in such Change of Control.

After consideration of the factors identified and discussed in the section entitled “Business Combination Proposal—The Leo Board’s Reasons for the Business Combination,” the Leo Board concluded that the Business

 

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Combination met all of the requirements disclosed in the prospectus for Leo’s initial public offering, including that the businesses of Local Bounti had a fair market value of at least 80% of the balance of the funds in the trust account at the time of execution of the Merger Agreement. For more information about the transactions contemplated by the Merger Agreement, see “Business Combination Proposal.”

Consideration to Local Bounti Equityholders in the Business Combination

In accordance with the terms and subject to the conditions of the Merger Agreement, at the Effective Time, based on the Transaction Value, (i) each share of Local Bounti voting common stock (other than shares held by Local Bounti as treasury stock (which shares will be cancelled for no consideration as part of the First Merger) and dissenting shares) will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock, earn out shares (as described herein) and up to $37.5 million of cash consideration (subject to certain conditions specified in the Merger Agreement), each as determined in the Merger Agreement, (ii) each share of Local Bounti restricted stock will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock and earnout shares (as described below), each as determined in the Merger Agreement, (iii) each Local Bounti restricted stock unit, whether or not then vested, will be assumed by Leo and convert into a Leo restricted stock unit, subject to the same terms and conditions as applied to such Local Bounti restricted stock unit immediately prior to the Closing with a value as if such Local Bounti restricted stock unit were settled prior to the Closing, and (iv) each warrant of Local Bounti that is unexercised will be assumed by Leo and convert into a warrant to purchase New Local Bounti Common Stock and represent the right to receive the applicable portion of the merger consideration upon exercise of such warrant as if such warrant were exercised prior to the Closing. In addition, all convertible debt of Local Bounti will be fully converted into Local Bounti common stock as of immediately prior to the Closing and become eligible to receive New Local Bounti Common Stock (which amount, for the avoidance of doubt, is excluded from the implied pre-transaction equity value of Local Bounti and therefore will have a dilutive impact to both the public shareholders of Leo and the pre-transaction stockholders of Local Bounti) based on the number of shares of Local Bounti common stock issuable upon conversion of such convertible debt.

Based on the foregoing, the post-closing ownership of the New Local Bounti is expected to be as follows (assuming no redemptions):

 

Combined Company Constituent Party

   Combined Company Shares (1)      Voting%  

PIPE Investors

     12,500,000        11.4

Local Bounti Common Stock (restricted and unrestricted)

     59,493,616        54.3

Local Bounti Convertible Note Holders

     3,190,489        2.9

Sponsor

     6,875,000        6.3

Public Shareholders (assuming no redemptions)

     27,500,000        25.1

Total

     109,559,105        100.0

 

(1)

Excludes 5,500,000 public warrants and excludes 5,333,333 private warrants. Subject to final adjustment as set forth in the Merger Agreement.

Each Local Bounti equityholder entitled to receive a portion of the earnout consideration will receive its applicable portion of equal thirds of 2,500,000 earnout shares if the trading price of New Local Bounti Common Stock is greater than or equal to $13.00, $15.00 and $17.00 for any 20 trading days within any 30-trading day period and will also accelerate and be fully issuable in connection with any Change of Control (as defined in the Merger Agreement) if the applicable thresholds are met in such Change of Control.

 

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For further details, see “Business Combination Proposal—Business Combination Consideration.”

Conditions to Closing of the Business Combination

The consummation of the Business Combination is conditioned upon, among other things, (i) the approval by our shareholders of the Condition Precedent Proposals being obtained; (ii) the applicable waiting period under the HSR Act relating to the Merger Agreement having expired or been terminated; (iii) Leo having at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) after giving effect to the transactions contemplated by the Merger Agreement, the PIPE Financing and all of the Leo shareholder redemptions; (iv) the Aggregate Transaction Proceeds Condition; (v) the approval by the NYSE of our initial listing application in connection with the Business Combination; (vi) the consent of the holders of a majority of voting common stock of Local Bounti and the conversion of all Local Bounti equity interests other than convertible debt; and (vii) the consummation of the Domestication. For further details, see “Business Combination Proposal—Conditions to Closing of the Business Combination.” The consummation of the Business Combination is not conditioned upon the approval of the Warrant Amendment Proposal.

Domestication Proposal

As discussed in this joint proxy statement/prospectus, Leo will ask its shareholders to approve by special resolution the Domestication Proposal. As a condition to closing the Business Combination pursuant to the terms of the Merger Agreement, the board of directors of Leo has unanimously approved the Domestication Proposal. The Domestication Proposal, if approved, will authorize a change of Leo’s jurisdiction of incorporation from the Cayman Islands to the State of Delaware. Accordingly, while Leo is currently incorporated as an exempted company under the Cayman Islands Companies Act, upon Domestication, New Local Bounti will be governed by the DGCL. There are differences between Cayman Islands corporate law and Delaware corporate law as well as the Existing Governing Documents and the Proposed Governing Documents. The approval of each of the Domestication Proposal and the Charter Proposal requires a special resolution under Cayman Islands law, being the affirmative vote of holders at least two-thirds (2/3) of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter. Accordingly, we encourage shareholders to carefully consult the information set out below under “Comparison of Corporate Governance and Shareholder Rights.”

For further details, see “Domestication Proposal;” “Charter Proposal” and “Governing Documents Proposals.”

Charter Proposal

Leo will ask to approve the amendment and restatement of the Existing Governing Documents in their entirety by the Proposed Certificate of Incorporation, including authorization of the change in authorized share capital as indicated therein and the change of name of Leo to “Local Bounti Corporation.” We encourage shareholders to carefully consult the information set out below under the section entitled “Charter Proposal” of this joint proxy statement/prospectus and a complete copy of the Proposed Certificate of Incorporation is attached hereto as Annex C.

Governing Documents Proposals

Leo will ask its shareholders to approve, on a non-binding advisory basis, four separate proposals in connection with the replacement of the Existing Governing Documents, under Cayman Islands law, with the Proposed Governing Documents, under the DGCL. The Leo Board has unanimously approved each of the Governing Documents Proposals and believes such proposals are necessary to adequately address the needs of

 

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New Local Bounti after the Business Combination. A brief summary of each of the Governing Documents Proposals is set forth below. These summaries are qualified in their entirety by reference to the complete text of the Proposed Governing Documents.

 

   

Governing Documents Proposal A—to authorize by way of ordinary resolution the change in the authorized capital stock of Leo from (i) 500,000,000 Class A ordinary shares, par value $0.0001 per share, (ii) 50,000,000 Class B ordinary shares, par value $0.0001 per share and (iii) 1,000,000 preference shares, par value $0.0001 per share, to (a) 400,000,000 shares of common stock, par value $0.0001 per share, of New Local Bounti and (b) 100,000,000 shares of preferred stock, par value $0.0001 per share, of New Local Bounti.

 

   

Governing Documents Proposal B—to authorize the New Local Bounti Board to issue any or all shares of New Local Bounti Preferred Stock in one or more classes or series, with such terms and conditions as may be expressly determined by the New Local Bounti Board and as may be permitted by the DGCL.

 

   

Governing Documents Proposal C—to authorize the removal of the ability of New Local Bounti stockholders to take action by written consent in lieu of a meeting.

 

   

Governing Documents Proposal D—to amend and restate the Existing Governing Documents and authorize all other changes necessary or, as mutually agreed in good faith by Leo and Local Bounti, desirable in connection with the replacement of Existing Governing Documents with the Proposed Governing Documents as part of the Domestication, including (i) changing the post-Business Combination corporate name from “Leo Holdings III Corp” to “Local Bounti Corporation” (which is expected to occur after the consummation of the Domestication in connection with the Business Combination), (ii) making New Local Bounti’s corporate existence perpetual, (iii) adopting Delaware as the exclusive forum for certain stockholder litigation and the federal district courts of the United States as the exclusive forum for litigation arising out of the Securities Act, and (iv) removing certain provisions related to our status as a blank check company that will no longer be applicable upon consummation of the Business Combination, all of which the Leo Board believes is necessary to adequately address the needs of New Local Bounti after the Business Combination.

The Proposed Governing Documents differ in certain material respects from the Existing Governing Documents, and we encourage shareholders to carefully consult the information set out in the section entitled “Governing Documents Proposals” and the full text of the Proposed Governing Documents of New Local Bounti, attached hereto as Annexes C and D.

The NYSE Proposal

Our shareholders are also being asked to approve, by ordinary resolution, the NYSE Proposal. Our units, public shares and public warrants are listed on NYSE and, as such, we are seeking shareholder approval for issuance of New Local Bounti Common Stock in connection with the Business Combination and the PIPE Financing pursuant to NYSE Listing Rule 312.03.

For additional information, see “The NYSE Proposal.”

Incentive Award Plan Proposal

Our shareholders are also being asked to approve, by ordinary resolution, the Incentive Award Plan Proposal. Pursuant to the Equity Incentive Plan, a number of shares of New Local Bounti Common Stock which will not exceed (i) 14% of the total number of issued and outstanding shares of New Local Bounti Common Stock outstanding as of the Closing, plus (ii) the number of shares of Local Bounti’s common stock subject to

 

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awards or issued under the 2020 Stock Plan (as defined below) that otherwise would have been returned to the 2020 Stock Plan on or after the 2021 Plan Effective Date (as defined below) on account of the expiration, cancellation, forfeiture or repurchase of awards granted thereunder. The Equity Incentive Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase annually by 4% of the outstanding number of shares of New Local Bounti Common Stock on the immediately preceding December 31, or such lesser amount as determined by the Board of New Local Bounti. For additional information, see “Incentive Award Plan Proposal.” The full text of the Incentive Award Plan is attached hereto as Annex J.

Employee Stock Purchase Plan Proposal

Our shareholders are also being asked to approve, by ordinary resolution, the Employee Stock Purchase Plan Proposal. A total of 1.5% of the shares of New Local Bounti Common Stock will be reserved for issuance under the ESPP. Based upon a price per share of $10.00, the maximum aggregate market value of the New Local Bounti Common Stock that could be potentially be issued under the ESPP at Closing is approximately $16,433,865. The ESPP provides that the number of shares reserved and available for issuance under the ESPP will automatically increase each January 1, beginning on January 1, 2022 through 2031, by 1% of the outstanding number of shares of New Local Bounti Common Stock on the immediately preceding December 31, or such lesser amount as determined by the New Local Bounti Board. For additional information, see “Employee Stock Purchase Plan Proposal.” The full text of the ESPP is attached hereto as Annex K.

Director Election Proposal

Our shareholders are also being asked to elect, by ordinary resolution, six directors to serve on the New Local Bounti Board of Directors. Under the terms of the Existing Governing Documents, only the holders of Class B ordinary shares are entitled to vote on the election of directors to the Leo Board. Therefore, only holders of Class B ordinary shares will vote on the election of directors at the extraordinary general meeting. Pursuant to the Sponsor Agreement, the initial holders have agreed to vote their Class B ordinary shares in favor of the Director Election Proposal. Following the Closing, it is expected that the current management of Local Bounti will become the management of New Local Bounti, and the New Local Bounti Board will consist of six directors divided into three (3) classes, designated Class I, II and III, with Class I consisting of two (2) directors, Class II consisting of two (2) directors and Class III consisting of two (2) directors. Pursuant to the Merger Agreement, the New Local Bounti Board will consist of Pamela Brewster, Edward C. Forst, Craig M. Hurlbert, Travis Joyner, Mark J. Nelson and Matt Nordby. For additional information, see “Director Election Proposal.”

Adjournment Proposal

If, based on the tabulated vote, there are not sufficient votes at the time of the extraordinary general meeting to authorize Leo to consummate the Business Combination, the Leo Board may submit a proposal to adjourn the extraordinary general meeting to a later date or dates to consider and vote upon a proposal to approve by ordinary resolution the adjournment of the extraordinary general meeting to a later date or dates. For additional information, see “Adjournment Proposal.”

Each of the Business Combination Proposal, the Domestication Proposal, the Charter Proposal and the NYSE Proposal is conditioned on the approval and adoption of each of the other Condition Precedent Proposals. None of the Governing Documents Proposals, which will be voted upon on a non-binding advisory basis, or the Adjournment Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal or the Director Election Proposal is conditioned upon the approval of any other proposal.

 

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Proposals to be Put to the Holders of Leo Public Warrants at the Warrant Holders Meeting

The following is a summary of the proposals to be put to the Warrant Holders Meeting. The Warrant Amendment Proposal is conditioned on the approval of the Condition Precedent Proposals and the consummation of the Business Combination. The Warrant Holders Adjournment Proposal is not conditioned upon the approval of any other proposal set forth in this proxy statement/prospectus.

Warrant Amendment Proposal

Leo is proposing that its holders of Leo public warrants approve a proposal to amend and restate the Warrant Agreement to implement certain changes that are intended to result in the Leo warrants being accounted for as equity within the balance sheet of New Local Bounti, instead of as a liability measured at fair value with non-cash fair value adjustments recorded in earnings at each reporting period. Assuming the holders of Leo public warrants vote in favor of the amended warrant terms, New Local Bounti anticipates that the amended warrants would meet the criteria for equity classification. A summary of the Warrant Amendment Proposal is set forth in the section entitled “Warrant Holders Proposal No. 1 - The Warrant Amendment Proposal” of this joint proxy statement/prospectus.

Warrant Holders Adjournment Proposal

The Warrant Holders Adjournment Proposal, if adopted, will allow the Leo Board to adjourn the Warrant Holders Meeting to a later date or dates, including, if necessary to permit further solicitation and vote of proxies if it is determined by Leo that more time is necessary or appropriate to approve the Warrant Amendment Proposal. A summary of the Warrant Holders Adjournment Proposal is set forth in the section entitled “Warrant Holder Proposal No. 2 - The Warrant Holders Adjournment Proposal” of this joint proxy statement/prospectus.

Leo Boards Reasons for the Business Combination

On June 15, 2021, the Leo Board (i) approved the Merger Agreement and related transaction agreements and the transactions contemplated thereby, (ii) determined that the Business Combination is in the best interests of Leo and its shareholders, and (iii) recommended that Leo’s shareholders approve and adopt the Business Combination.

In evaluating the Business Combination and making these determinations and this recommendation, the Leo Board consulted with Leo’s management and considered a number of factors.

The Leo Board and management also considered the general criteria and guidelines that Leo believed would be important in evaluating prospective target businesses as described in the prospectus for Leo’s initial public offering. The Leo Board also considered that they could enter into a business combination with a target business that does not meet those criteria and guidelines. In the prospectus for its initial public offering, Leo stated that it intended to focus on acquiring a company or companies that it believes:

 

  (i)

are underperforming their potential but can demonstrate a clear microeconomic thesis for value creation;

 

  (ii)

are at an inflection point, such as those requiring additional management expertise;

 

  (iii)

have potential to improve the target’s growth prospects and help it realize opportunities to create shareholder value following the consummation of a business combination;

 

  (iv)

have significant embedded and/or underexploited expansion opportunities, accomplishable through a combination of accelerating organic growth and finding attractive add-on acquisition targets;

 

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  (v)

exhibit unrecognized value or other characteristics that have been misevaluated by the marketplace based on our company-specific analysis and due diligence review; and

 

  (vi)

will offer attractive risk-adjusted equity returns for our shareholders evaluated based on (a) the potential for organic growth in cash flows, (b) the ability to achieve cost savings, (c) the ability to accelerate growth, including through the opportunity for follow-on acquisitions, and (d) the prospects for creating value through other value creation initiatives.

In considering the Business Combination, the Leo Board determined that the Business Combination was an attractive business opportunity that met the vast majority of the criteria and guidelines above, although not weighted or in any order of significance.

In particular, the Leo Board considered the following factors:

 

  1.

Best-in-class Unit Economics. The Leo Board noted that Local Bounti has achieved high yield and low-cost operations, enabled by its unique hybrid facility configuration that addresses the operational challenges of conventional greenhouse and vertical farming.

 

  2.

Superior Product vs. Traditional Agriculture. The Leo Board noted Local Bounti’s ability to provide locally grown, pesticide- and herbicide-free produce delivered at peak freshness with longer shelf life and security of year-round supply. Proximity of Local Bounti’s farms to end consumers also enables significant reduction in transportation logistics costs and associated environmental impact.

 

  3.

Large Total Addressable Market. The Leo Board noted that, based on publicly available research on controlled environment agriculture, the Western US market opportunity is $10.6 billion, with total US market for vegetables and herbs estimated to reach $30 billion by 2025.

 

  4.

Wide Product Offering Appealing to a Broad Customer Base. The Leo Board noted that Local Bounti offers a growing number of SKUs, and that its products are currently sold in more than 500 retail stores, including Albertsons, Associated Food Stores and URM-served retail banners such as Rosauers, Super 1 Foods and Yoke’s.

 

  5.

Proven and Experienced Management Team. Following the Business Combination, Local Bounti’s current management team will remain in place. Led by Co-Chief Executive Officers Craig M. Hurlbert and Travis Joyner, The Leo Board noted that Local Bounti’s management team has a best-in-class track record at scaling early-stage companies, with Fortune 500 and public company experience as well.

 

  6.

Strategic Plan with Multiple Levers of Growth. The Leo Board believes that Local Bounti’s strategic plan is attractive, with focus on organic growth, investments into key areas of its business and brand awareness, and by pursuing new growth opportunities domestically and internationally.

 

  (i)

Organic Growth. Local Bounti plans to expand its geographic and market reach by building additional facilities in markets west of the Mississippi and the Pacific Northwest, where it has a first mover advantage. Local Bounti’s pre-engineered, modular facility construction enables rapid scaling of new facilities with low execution risk. Furthermore, Local Bounti intends to expand the number of SKUs it offers, with potential for expansion into 40+ SKUs.

 

  (ii)

Investment. Local Bounti intends to grow all key areas of its business including sales, marketing, technology and genetics, enabling a sustainable competitive advantage, and continuously improving its unit economics and product offering. In addition, Local Bounti plans to invest in increasing its brand awareness to help it achieve strong retailer and customer loyalty.

 

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  (iii)

Pursue New Growth Domestically and Internationally. In addition to expanding domestically, Local Bounti plans to opportunistically evaluate an international expansion strategy, leveraging the opportunity to deliver its controlled environment agriculture expertise and technology to additional markets.

 

  7.

Financial Condition. The Leo Board also considered factors such as Local Bounti’s historical financial results, outlook, financial plan and debt structure, as well as valuations and trading of publicly traded companies and valuations of precedent merger and acquisition targets in similar and adjacent sectors.

 

  8.

Terms of Transaction. The Leo Board reviewed and considered the terms of the Merger Agreement and the related agreements, including the parties’ conditions to their respective obligations to complete the transactions contemplated therein and their ability to terminate the agreement. See “ —The Merger Agreement” and “ —Related Agreements” for detailed discussions of the terms and conditions of these agreements.

 

  9.

Results of Review of Transactions. The Leo management team evaluated several companies which the Leo management team thought could add value through its relationships and expertise. The Leo Board considered that it was not aware of any alternative transactions that would be reasonably likely to be more favorable to the Leo shareholders than the terms of the Business Combination. In particular, since Leo’s initial public offering, representatives of Leo had considered over 30 potential acquisition targets and entered into nondisclosure agreements with approximately 10 potential acquisition targets (other than Local Bounti) or their representatives. Despite these efforts, the Leo Board was not aware of any transaction available to Leo that it believed was more favorable than the Business Combination. In addition, the Leo Board considered that the terms of the Business Combination had been negotiated on an arm’s-length basis in light of each party’s judgment about its ability to negotiate different or better terms. Based on the negotiations, the Leo Board considered that it believed that the terms of the Merger Agreement and related agreements were the best terms to which Local Bounti were reasonably likely to agree. See “ —Background to the Business Combination” for more information on Leo’s consideration of other transactions and the negotiations of the terms of the Business Combination. The Leo Board also considered that Leo could decide not to consummate an initial business combination and return to its shareholders their pro rata portion of the trust account, however, the Leo Board determined that, in light of the other factors considered by the board noted in this section, the Business Combination was more beneficial to Leo’s shareholders than not consummating an initial business combination.

 

  10.

Continued Ownership by Sellers. The Leo Board considered that Local Bounti’s equity holders would be receiving a majority of its consideration in equity in the combined company, which will be subject to certain restrictions. The Leo Board considered this as a sign of confidence in the combined company following the Business Combination and the benefits to be realized by each company as a result of the Business Combination.

 

  11.

Results of Due Diligence. The Leo Board considered the scope of the due diligence investigation conducted by Leo’s management and outside advisors and evaluated the results thereof and information available to it related to Local Bounti, including:

 

  (i)

multiple meetings and calls with the Local Bounti management team regarding its operations and projections and the proposed transaction;

 

  (ii)

review of materials related to Local Bounti made available by Local Bounti, including material contracts, strategic plans, key metrics and performance indicators, benefit plans, insurance policies, litigation information, financial statements, risk mitigation materials and other legal diligence;

 

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  (iii)

review of financial due diligence materials prepared by professional advisors, including quality of earnings reports and tax due diligence reports;

 

  (iv)

review of commercial due diligence materials prepared by professional advisors, including a market and competitive assessment and a business plan assessment;

 

  (v)

other financial, accounting, tax, legal, environmental, regulatory and real estate diligence; and

 

  (vi)

discussions with industry experts.

The Leo Board also identified and considered the following factors and risks weighing negatively against pursuing the Business Combination, although not weighted or in any order of significance:

 

  12.

Potential Inability to Complete the Business Combination. The Leo Board considered the possibility that the Business Combination may not be completed and the potential adverse consequences to Leo if the Business Combination is not completed, in particular the expenditure of time and resources in pursuit of the Business Combination and the loss of the opportunity to participate in the transaction. In particular, they considered the uncertainty related to the Closing primarily outside of the control of the parties to the transaction, including the need for antitrust approval. In addition, the Leo Board considered the risk that the current public shareholders of Leo would redeem their public shares for cash in connection with consummation of the Business Combination, thereby reducing the amount of cash available to the combined company following the consummation of the Business Combination and potentially requiring Local Bounti and the Sellers to waive certain conditions under the Merger Agreement in order for the Business Combination to be consummated. The Leo Board noted that the Merger Agreement includes a condition that, after giving effect to redemptions by holders of Leo Class A ordinary shares in connection with the Business Combination and the PIPE Investment, the combined company shall have net available cash equal to no less than $150,000,000. As of July 7, 2021, without giving effect to any future redemptions that may occur, the trust account has approximately $275,000,000. Further, the Leo Board considered the risk that current public shareholders would exercise their redemption rights is mitigated because Local Bounti will be acquired at an attractive aggregate purchase price.

 

  13.

Local Bounti Business Risks. The Leo Board considered that Leo shareholders would be subject to the execution risks associated with the combined company if they retained their public shares following the Closing, which were different from the risks related to holding public shares of Leo prior to the Closing. In this regard, the Leo Board considered that there were risks associated with successful implementation of the combined company’s long term business plan and strategy, the combined company realizing the anticipated benefits of the Business Combination on the timeline expected or at all. The Leo Board considered that the failure of any of these activities to be completed successfully may decrease the actual benefits of the Business Combination and that Leo shareholders may not fully realize these benefits to the extent that they expected to retain the public shares following the completion of the Business Combination. For additional description of these risks, please see “Risk Factors.”

Additionally, as part of its evaluation of the Business Combination, the Leo Board thoroughly reviewed the projections for the Combined Company, which included expansion to projected revenue of $462 million and 8 facilities by 2025. While the Leo Board recognized the inherent risks associated with achieving these projected results, the Leo Board gained comfort in these projections through a number of factors. First, Leo engaged a third-party industry consultant to evaluate Local Bounti’s current operations and plans for expansion. The consultant validated that Local Bounti has already achieved its projected unit economic performance in its operational

 

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facility. Additionally, the consultant validated that Local Bounti’s planned facility expansion is prudent and achievable based on its proposed business plan. Second, the Leo Board considered that Local Bounti’s access to additional capital, through both the proposed Business Combination with Leo and its planned entrance into a proposed credit facility from Cargill, would provide Local Bounti the resources necessary to perform in-line with projections. Third, the Leo Board evaluated Local Bounti’s management team and determined the team to be comprised of industrious, seasoned industry executives with extensive experience scaling early-stage companies. Craig M. Hurlbert, Local Bounti’s Co-CEO, has a track record of building successful businesses through his former roles, including as CEO and Chairman of TAS Energy. Local Bounti’s other Co-CEO, Travis Joyner, has a long career in private equity and management consulting. Local Bounti’s CFO, Kathleen Valiasek, has extensive experience as a public company CFO, most recently at Amyris. The Chief Innovation Officer, B. David Vosburg Jr., has extensive experience in agricultural technology through his previous roles as CFO of Crop One and CFO of Sensei Ag. Through these experiences, along with additional management experience at Plenty, Bushel Boy Farms, Earthbound Farms, Jacks Links, Zappos, Chobani, and other established brands, the Leo Board determined that Local Bounti’s management team was prudent in forming their business projections and is well-equipped to support the business following the proposed Business Combination.

 

  14.

Limitations of Review. The Leo Board considered that they were not obtaining an opinion from any independent investment banking or accounting firm that the price Leo is paying to acquire Local Bounti is fair to Leo or its shareholders from a financial point of view. In addition, the senior management reviewed only certain materials in connection with its due diligence review of Local Bounti. Accordingly, the Leo Board considered that Leo may not have properly valued Local Bounti.

 

  15.

No Survival of Remedies for Breach of Representations, Warranties or Covenants of Local Bounti. The Leo Board considered that the terms of the Merger Agreement provide that Leo will have no surviving remedies against the majority shareholders of Local Bounti after the Closing to recover for losses as a result of any inaccuracies or breaches of certain of Local Bounti’s and the Sellers’ fundamental representations, warranties or post-closing covenants set forth in the agreement. As a result, Leo shareholders could be adversely affected by, among other things, a decrease in the financial performance or worsening of financial condition of Local Bounti prior to the Closing, whether determined before or after the Closing, without any ability to reduce the consideration to be paid in the Business Combination or recover for the amount of any damages. The Leo Board determined that this structure was appropriate and customary, in light of the fact that several transactions include similar terms and the owners of Local Bounti would continue to be equity holders in the combined company.

 

  16.

Interests of Leos Directors and Executive Officers. The Leo Board considered the potential additional or different interests of Leo’s directors and executive officers, as described in the section entitled “ —Interests of Leos Directors and Executive Officers in the Business Combination.” However, Leo’s board of directors concluded that the potentially disparate interests would be mitigated because (i) these interests were disclosed in the prospectus for Leo’s initial public offering and are included in this joint proxy statement/prospectus and (ii) these disparate interests would exist with respect to a business combination by Leo with any other target business(es).

Based on its review of the forgoing considerations, the Leo Board concluded that the potentially negative factors associated with the Business Combination were outweighed by the potential benefits that it expects Leo shareholders will receive as a result of the Business Combination.

 

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The preceding discussion of the information and factors considered by the Leo Board is not intended to be exhaustive but includes the material factors considered by the Leo Board. In view of the complexity and wide variety of factors considered by the Leo Board in connection with its evaluation of the Business Combination, the Leo Board did not consider it practical to, nor did it attempt to, quantify, rank, or otherwise assign relative weights to the different factors that it considered in reaching its decision. In addition, in considering the factors described above, individual members of the Leo Board may have given different weight to different factors. The Leo Board considered this information as a whole and overall considered the information and factors to be favorable to, and in support of, its determinations and recommendations.

This explanation of the Leo Board’s reasons for its approval of the Business Combination, and all other information presented in this section, is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Note Regarding Forward-Looking Statements.”

Related Agreements

This section describes certain additional agreements entered into or to be entered into in connection with the Merger Agreement. For additional information, see “Business Combination Proposal—Related Agreements.”

PIPE Financing

In connection with the foregoing and concurrently with the execution of the Merger Agreement, Leo entered into Subscription Agreements (the “Subscription Agreements”) with and certain investors (the “PIPE Investors”), pursuant to which the PIPE Investors have agreed to subscribe for and purchase, and Leo has agreed to issue and sell to the PIPE Investors, on the Closing Date, an aggregate of 12,500,000 shares of New Local Bounti Common Stock at a price of $10.00 per share, for aggregate gross proceeds of $125.0 million (the “PIPE Financing”). The shares of New Local Bounti Common Stock to be issued pursuant to the Subscription Agreements have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act. Leo will grant the PIPE Investors certain registration rights in connection with the PIPE Financing. The PIPE Financing is contingent upon, among other things, the substantially concurrent closing of the Business Combination. For additional information, see “Business Combination Proposal—Related Agreements—PIPE Financing.”

Amended and Restated Registration Rights Agreement

At the Closing, Leo, Local Bounti, the initial shareholders and key stockholders of Local Bounti will enter into an Amended and Restated Registration Rights Agreement (the “Amended and Restated Registration Rights Agreement”), pursuant to which, among other things, the initial shareholders and key stockholders of Local Bounti are granted customary shelf, demand and piggy-back registration rights and the initial shareholders and key stockholders of Local Bounti agree not to transfer certain securities through the date that is six months from the Closing Date, subject to certain exceptions. For additional information, see “Business Combination Proposal—Related Agreements—Registration Rights Agreement.”

Sponsor Agreement

Concurrently with the execution of the Merger Agreement, Leo, the Sponsor, the other initial shareholders and Local Bounti entered into the Sponsor Agreement (the “Sponsor Agreement”), pursuant to which the Sponsor and each of the other initial shareholders has agreed to, among other things, (i) vote in favor of the Merger Agreement and the transactions contemplated thereby (including the Merger), (ii) waive any adjustment to the conversion ratio set forth in the governing documents of Leo or any other anti-dilution or

 

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similar protection with respect to the Class B ordinary shares in connection with the Merger Agreement, and (iii) be bound by certain other covenants and agreements related to the Business Combination. For additional information, see “Business Combination Proposal—Related Agreements—Sponsor Agreement.”

Ownership of New Local Bounti

As of the date of this joint proxy statement/prospectus, there are 27,500,000 ordinary shares issued and outstanding, which includes an aggregate of 6,875,000 Class B ordinary shares. As of the date of this joint proxy statement/prospectus, there is outstanding an aggregate of 10,833,333 warrants, comprised of 5,333,333 private placement warrants held by Sponsor and 5,500,000 public warrants. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share and, following the Domestication, will entitle the holder thereof to purchase one share of New Local Bounti Common Stock. Therefore, as of the date of this joint proxy statement/prospectus (without giving effect to the Business Combination and assuming that none of Leo’s outstanding public shares are redeemed in connection with the Business Combination), Leo’s fully-diluted share capital would be 45,208,333 ordinary shares.

The following table illustrates varying ownership levels in New Local Bounti Common Stock immediately following the consummation of the Business Combination based on the varying levels of redemptions by the public shareholders and the following additional assumptions: (i) 59,493,616 shares of New Local Bounti Common Stock are issued to the holders of shares of common stock of Local Bounti at Closing (excluding the holders of Local Bounti warrants that are exercised by the holders thereof at such holders’ option prior to completion of the Business Combination, and excluding holders of the Convertible Notes and the issuance of New Local Bounti Common Stock issuable upon conversion of the Convertible Notes), which would be the number of shares of New Local Bounti Common Stock issued to these holders if Closing were to occur on November 17, 2021; (ii) 12,500,000 shares of New Local Bounti Common Stock are issued in the PIPE Financing pursuant to the Subscription Agreements; (iii) no public warrants or private placement warrants to purchase New Local Bounti Common Stock that will be outstanding immediately following Closing have been exercised; (iv) no vested and unvested options to purchase shares of New Local Bounti Common Stock that will be held by equityholders of Local Bounti immediately following the Closing have been exercised; (v) no Local Bounti Warrants (other than those that will settle and terminate pursuant to their terms prior to completion of the Business Combination) have been exchanged for comparable warrants that are exercisable for shares of New Local Bounti Common Stock and (vi) the Convertible Notes will be automatically converted into shares of Local Bounti voting common stock and exchanged for 3,190,489 shares of New Local Bounti Common Stock at Closing. If the actual facts are different than these assumptions, the ownership percentages in New Local Bounti will be different.

 

     Share Ownership in New Local Bounti  
     No redemptions
Percentage of Outstanding
Shares
    Maximum redemptions(1)
Percentage of Outstanding
Shares
 

Leo public shareholders

     25.1     —  

PIPE Investors

     11.4     15.2

Sponsor and our initial shareholders(2)(3)

     6.3     8.4

Existing Local Bounti Stockholders(4)

     57.2     76.4

 

(1)

Assumes that all of Leo’s outstanding public shares are redeemed in connection with the Business Combination.

(2)

Includes 6,875,000 shares held by the initial shareholders originally acquired prior to or in connection with Leo’s initial public offering (including 20,000 shares held by each of Lori Bush, Mary E. Minnick and Mark Masinter, and 15,000 shares held by each of Scott Flanders, Imran Khan and Scott McNealy).

 

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(3)

Excludes 1,100,000 shares of common stock to be purchased by certain officers and directors of Leo in connection with the PIPE Financing.

(4)

Represents shares of common stock of Local Bounti that will be converted to shares of New Local Bounti Common Stock in connection with the Business Combination. Includes 2.9% of shares of New Local Bounti Common Stock to be issued to holders of Local Bounti Convertible Notes.

For further details, see “Business Combination Proposal—Consideration to Local Bounti Equityholders in the Business Combination.”

Date, Time and Place of Extraordinary General Meeting of Leo’s Shareholders

The extraordinary general meeting of Leo, will be held at 9:00 a.m., Eastern Time, on November 16, 2021, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50 Floor, New York, New York 10022, or via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned, to consider and vote upon the proposals to be put to the extraordinary general meeting, including if necessary, the Adjournment Proposal, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the extraordinary general meeting, each of the Condition Precedent Proposals have not been approved. As part of our precautions regarding COVID-19, we are planning for the possibility that the meeting may be held virtually over the Internet. If we take this step, we will announce the decision to do so via a press release and posting details on our website that will also be filed with the SEC as proxy material.

Date, Time and Place of Warrant Holders Meeting

The Warrant Holders Meeting will be held at 9:30 am, Eastern Time, on November 16, 2021, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50th Floor, New York, New York 10022 or via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned.

Voting Power; Record Date for the extraordinary general meeting

Leo shareholders will be entitled to vote or direct votes to be cast at the extraordinary general meeting if they owned ordinary shares at the close of business on October 15, 2021, which is the “record date” for the extraordinary general meeting. Shareholders will have one vote for each ordinary share owned at the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. Our warrants do not have voting rights. As of the close of business on the record date, there were 34,375,000 ordinary shares issued and outstanding, of which 27,500,000 were issued and outstanding public shares.

Voting Power; Record Date for the Warrant Holders Meeting

Holders of Leo public warrants will be entitled to vote or direct votes to be cast at the Warrant Holders Meeting if they owned ordinary shares at the close of business on October 15, 2021, which is the “record date” for the Warrant Holders Meeting. Holder of Leo public warrants will have one vote for each Leo public warrant owned at the close of business on the record date. If your Leo public warrants are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the Leo public warrants you beneficially own are properly counted. As of the close of business on the record date, there were 5,500,000 Leo public warrants issued and outstanding.

 

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Quorum and Required Vote for Proposals for the extraordinary general Meeting

A quorum of Leo shareholders is necessary to hold a valid meeting. A quorum will be present at the extraordinary general meeting if one or more shareholders who together hold not less than a majority of the issued and outstanding ordinary shares entitled to vote at the extraordinary general meeting are represented in person or by proxy at the extraordinary general meeting. As of the record date for the extraordinary general meeting, 17,187,501 ordinary shares would be required to achieve a quorum.

The initial shareholders have, pursuant to the Sponsor Agreement, agreed to, among other things, vote all of their ordinary shares in favor of the proposals being presented at the extraordinary general meeting. As of the date of this joint proxy statement/prospectus, the initial shareholders own approximately 20% of the issued and outstanding ordinary shares. See “Business Combination Proposal—Related Agreements—Sponsor Agreement” in the accompanying joint proxy statement/prospectus for more information related to the Sponsor Agreement.

The proposals presented at the extraordinary general meeting require the following votes:

 

  (i)

Business Combination Proposal: The approval of the Business Combination Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter.

 

  (ii)

Domestication Proposal: The approval of the Domestication Proposal requires a special resolution under Cayman Islands law, being the affirmative vote of at least two-thirds (2/3) of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter.

 

  (iii)

Governing Documents Proposals: Each of the Governing Documents Proposals will be voted upon on a non-binding advisory basis only.

 

  (iv)

The NYSE Proposal: The approval of the NYSE Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter.

 

  (v)

Incentive Award Plan Proposal: The approval of the Incentive Award Plan Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter.

 

  (vi)

Director Election Proposal: The approval of the Director Election Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting. Under the terms of the Existing Governing Documents, only the holders of Class B ordinary shares are entitled to vote on the election of directors to the Leo Board. Therefore, only holders of Class B ordinary shares will vote on the election of directors at the extraordinary general meeting. Pursuant to the Sponsor Agreement, the initial holders have agreed to vote their Class B ordinary shares in favor of the Director Election Proposal.

 

  (vii)

Employee Stock Purchase Plan Proposal: The approval of the Employee Stock Purchase Plan Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (viii)

Adjournment Proposal: The approval of the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter.

 

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Quorum and Required Vote for Proposals for the Warrant Holders Meeting

A quorum of holders of Leo public warrants is necessary to hold a valid meeting. A quorum will be present at the Warrant Holders Meeting if a majority of the warrants outstanding and entitled to vote at the Warrant Holders Meeting are represented in person or by proxy. As of the record date for the Warrant Holders Meeting, 2,750,001 Leo public warrants would be required to achieve a quorum.

The proposals presented at the Warrant Holders Meeting require the following votes:

 

  (i)

Warrant Amendment Proposal: The approval of the Warrant Amendment Proposal requires the affirmative vote by the holders of at least 50% of the outstanding Leo public warrants.

 

  (ii)

Warrant Holders Adjournment Proposal: The approval of the Warrant Holders Adjournment Proposal, if presented, requires the affirmative vote by the holders of a majority of the outstanding Leo public warrants that are present and entitled to vote at the Warrant Holders Meeting.

Redemption Rights

Pursuant to the Existing Governing Documents, a public shareholder may request of Leo that New Local Bounti redeem all or a portion of its public shares for cash if the Business Combination is consummated. As a holder of public shares, you will be entitled to receive cash for any public shares to be redeemed only if you:

 

  (i)

(a) hold public shares, or (b) if you hold public shares through units, you elect to separate your units into the underlying public shares and warrants prior to exercising your redemption rights with respect to the public shares;

 

  (ii)

submit a written request to Continental, Leo’s transfer agent, in which you (i) request that New Local Bounti redeem all or a portion of your public shares for cash, and (ii) identify yourself as the beneficial holder of the public shares and provide your legal name, phone number and address; and

 

  (iii)

deliver your public shares to Continental, Leo’s transfer agent, physically or electronically through DTC.

Holders must complete the procedures for electing to redeem their public shares in the manner described above prior to 5:00 p.m., Eastern Time, on November 12, 2021 (two business days before the extraordinary general meeting) in order for their shares to be redeemed.

Holders of units must elect to separate the units into the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying public shares and public warrants, or if a holder holds units registered in its own name, the holder must contact Continental, Leo’s transfer agent, directly and instruct them to do so. The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, phone number and address to Continental in order to validly redeem its shares. Public shareholders (other than those who have agreed not to do so by executing a Transaction Support Agreement) may elect to redeem all or a portion of the public shares held by them regardless of if or how they vote in respect of the Business Combination Proposal. If the Business Combination is not consummated, the public shares will be returned to the respective holder, broker or bank. If the Business Combination is consummated, and if a public shareholder properly exercises its right to redeem all or a portion of the public shares that it holds and timely delivers its shares to Continental, Leo’s transfer agent, New Local Bounti will redeem such public shares for a per-share price, payable in cash, equal to the pro rata portion of the trust account, calculated as of two business days prior to the consummation of the Business Combination. For illustrative purposes, as of June 30, 2021, this would have amounted to approximately

 

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$10.00 per issued and outstanding public share. If a public shareholder exercises its redemption rights in full, then it will be electing to exchange its public shares for cash and will no longer own public shares. The redemption takes place following the Domestication and accordingly it is shares of New Local Bounti Common Stock that will be redeemed immediately after consummation of the Business Combination. See “Extraordinary General Meeting of Leo—Redemption Rights” in this joint proxy statement/prospectus for a detailed description of the procedures to be followed if you wish to redeem your public shares for cash.

Notwithstanding the foregoing, a public shareholder, together with any affiliate of such public shareholder or any other person with whom such public shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares. Accordingly, if a public shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.

The initial shareholders have, pursuant to the Sponsor Agreement, agreed to, among other things, vote all of their ordinary shares in favor of the proposals being presented at the extraordinary general meeting and waive their anti-dilution rights with respect to their Class B ordinary shares in connection with the consummation of the Business Combination. Such shares will be excluded from the pro rata calculation used to determine the per-share redemption price. As of the date of this joint proxy statement/prospectus, the initial shareholders own approximately 20% of the issued and outstanding ordinary shares. See “Business Combination Proposal—Related Agreements—Sponsor Agreement” in the accompanying joint proxy statement/prospectus for more information related to the Sponsor Agreement.

Holders of the warrants will not have redemption rights with respect to the warrants.

Appraisal Rights

Neither Leo shareholders nor Leo warrant holders have appraisal rights in connection with the Business Combination or the Domestication under the Cayman Islands Companies Act or under the DGCL.

Proxy Solicitation

Proxies may be solicited by mail, telephone or in person. Leo has engaged Morrow to assist in the solicitation of proxies.

If a shareholder and/or holder of Leo public warrants grants a proxy, it may still vote its shares and/or Leo public warrants, as applicable, in person if it revokes its proxy before the extraordinary general meeting and/or the Warrant Holders Meeting, as applicable. A shareholder and/or holder of Leo public warrants also may change its vote by submitting a later-dated proxy as described in the sections entitled “Extraordinary General Meeting of Leo—Revoking Your Proxy” and “Special Meeting of Leo Warrant Holders—Revoking Your Proxy.”

Interests of Leo Directors and Executive Officers in the Business Combination

When you consider the recommendation of the Leo Board in favor of approval of the Business Combination Proposal, you should keep in mind that the initial shareholders, including Leo’s directors and executive officers, have interests in such proposal that are different from, or in addition to, those of Leo shareholders and warrant holders generally. These interests include, among other things, the interests listed below:

 

   

the fact that our initial shareholders have agreed not to redeem any Class A ordinary shares held by them in connection with a shareholder vote to approve a proposed initial business combination;

 

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the fact that the Sponsor paid an aggregate of $25,000 for the 6,875,000 Class B ordinary shares currently owned by the initial shareholders and such securities will have a significantly higher value at the time of the Business Combination. Such shares had an estimated aggregate market value of $68,475,000 based upon the closing price of $9.96 per share on the NYSE on the record date;

 

   

the fact that the Sponsor paid an aggregate purchase price of $8,000,000 (or $1.50 per warrant) for its private placement of 5,333,333 private placement warrants to purchase Class A ordinary shares and such private placement warrants will expire worthless if an initial business combination is not consummated by Mach 2, 2023. A portion of the proceeds from such private placement were placed in the trust account. Such warrants had an estimated aggregate value of approximately $4,213,333 based on the closing price of $0.79 per public warrant on the NYSE on the record date;

 

   

the fact that the initial shareholders and Leo’s other current officers and directors have agreed to waive their rights to liquidating distributions from the trust account with respect to any ordinary shares (other than public shares) held by them if Leo fails to complete an initial business combination by March 2, 2023. In such event, the 6,875,000 founder shares held by our initial shareholders, which were acquired for an aggregate purchase price of $25,000 prior to Leo’s initial public offering, would be worthless because the holders thereof are not entitled to participate in any redemption or distribution with respect to such shares;

 

   

the fact that the Amended and Restated Registration Rights Agreement will be entered into by the initial shareholders;

 

   

the fact that, at the option of the Sponsor, any amounts outstanding under any loan made by the Sponsor or any of its affiliates to Leo in an aggregate amount of up to $1,500,000 may be converted into warrants to purchase Class A ordinary shares in connection with the consummation of the Business Combination;

 

   

the fact that certain of Leo’s directors and officers have committed to purchase up to an aggregate of 1,100,000 shares of common stock ($11,000,000 in the aggregate) in connection with the PIPE Financing on the same terms as the other PIPE Investors;

 

   

the continued indemnification of Leo’s directors and officers and the continuation of Leo’s directors’ and officers’ liability insurance after the Business Combination (i.e., a “tail policy”);

 

   

the fact that the Sponsor and Leo’s officers and directors will lose their entire investment in Leo and will not be reimbursed for any loans extended, fees due or out-of-pocket expenses incurred in connection with activities on our behalf, such as identifying potential target businesses and performing due diligence on suitable business combinations unless an initial business combination is consummated by March 2, 2023, although no such amounts require reimbursement as of the date of this joint proxy statement/prospectus;

 

   

the fact that if the trust account is liquidated, including in the event Leo is unable to complete an initial business combination by March 2, 2023, the Sponsor has agreed to indemnify Leo to ensure that the proceeds in the trust account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the trust account on the liquidation date, by the claims of prospective target businesses with which Leo has entered into an acquisition agreement or claims of any third party for services rendered or products sold to Leo, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the trust account;

 

   

following the completion of the Business Combination, the Sponsor, Leo’s officers and directors and their respective affiliates will be entitled to reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and completing an initial business combination (which will be the Business Combination should it occur), and repayment of any other loans, if any, and on

 

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such terms as to be determined by Leo from time to time, made by the Sponsor or certain of Leo’s officers and directors to finance transaction costs in connection with an intended initial business combination (which will be the Business Combination should it occur). If Leo fails to complete an initial business combination within the required period, the Sponsor and Leo’s officers and directors and their respective affiliates will not have any claim against the trust account for reimbursement; and

 

   

pursuant to the Amended and Restated Registration Rights Agreement, the Sponsor and certain of Leo’s directors and officers will have customary registration rights, including demand and piggy-back rights, subject to cooperation and cut-back provisions with respect to the shares of New Local Bounti common stock and New Local Bounti warrants held by such parties.

Except as otherwise described above, we do not believe that that there are any material Leo securities held by the Sponsor, our officers and directors, loans extended by (or fees due to) the Sponsor, our officers and directors, or out-of-pocket expenses for which the Sponsor, our officers and directors are awaiting reimbursement from Leo.

The initial shareholders have, pursuant to the Sponsor Agreement, agreed to, among other things, vote all of their ordinary shares in favor of the proposals being presented at the extraordinary general meeting and waive their anti-dilution rights with respect to their Class B ordinary shares in connection with the consummation of the Business Combination. Such shares will be excluded from the pro rata calculation used to determine the per-share redemption price. As of the date of this joint proxy statement/prospectus, the initial shareholders own approximately 20% of the issued and outstanding ordinary shares. See “Business Combination Proposal—Related Agreements—Sponsor Agreement” in the accompanying joint proxy statement/prospectus for more information related to the Sponsor Agreement.

At any time at or prior to the Business Combination, during a period when they are not then aware of any material nonpublic information regarding us or our securities, our initial shareholders, Local Bounti and/or their directors, officers, advisors or respective affiliates may purchase public shares from institutional and other investors who vote, or indicate an intention to vote, against any of the Condition Precedent Proposals, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire public shares or vote their public shares in favor of the Condition Precedent Proposals. Such a purchase may include a contractual acknowledgement that such shareholder, although still the record or beneficial holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our initial shareholders, Local Bounti and/or their directors, officers, advisors or respective affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights, such selling shareholder would be required to revoke their prior elections to redeem their shares. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that (i) the Business Combination Proposal, the NYSE Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal, the Director Election Proposal (under the terms of the Existing Governing Documents, only the holders of Class B ordinary shares are entitled to vote on the Director Election Proposal), and the Adjournment Proposal are approved by the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter (ii) the Domestication Proposal and the Charter Proposal are approved by the affirmative vote of at least two-thirds (2/3) of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter, (iii) otherwise limit the number of public shares electing to redeem and (iv) New Local Bounti’s net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) being at least $5,000,001 after giving effect to the transactions contemplated by the Merger Agreement, the PIPE Financing and all of the Leo shareholder redemptions.

 

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Entering into any such arrangements may have a depressive effect on the ordinary shares. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he or she owns, either at or prior to the Business Combination.

If such transactions are effected, the consequence could be to cause the Business Combination to be consummated in circumstances where such consummation could not otherwise occur. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the proposals to be presented at the extraordinary general meeting and would likely increase the chances that such proposals would be approved. We will file or submit a Current Report on Form 8-K to disclose any material arrangements entered into or significant purchases made by any of the aforementioned persons that would affect the vote on the proposals to be put to the extraordinary general meeting or the redemption threshold. Any such report will include descriptions of any arrangements entered into or significant purchases by any of the aforementioned persons.

The existence of financial and personal interests of one or more of Leo’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of Leo and its shareholders and what he or they may believe is best for himself or themselves in determining to recommend that shareholders vote for the proposals. In addition, Leo’s officers have interests in the Business Combination that may conflict with your interests as a shareholder.

Recommendation to Shareholders of Leo

The Leo Board believes that the Business Combination Proposal and the other proposals to be presented at the extraordinary general meeting are in the best interest of Leo and its shareholders and unanimously recommends that its shareholders vote “FOR” the Business Combination Proposal, “FOR” the Domestication Proposal, “FOR” the Charter Proposal, “FOR” each of the Governing Documents Proposals, “FOR” the NYSE Proposal, “FOR” the Incentive Award Plan Proposal, “FOR” the Employee Stock Purchase Plan Proposal, “FOR” the Director Election Proposal and “FOR” the Adjournment Proposal, in each case, if presented to the extraordinary general meeting.

The existence of financial and personal interests of one or more of Leo’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of Leo and its shareholders and what he or they may believe is best for himself or themselves in determining to recommend that shareholders vote for the proposals. In addition, Leo’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Business Combination Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” for a further discussion of these considerations.

Recommendation to Holders of Leo public warrants

The Leo Board believes that the Warrant Amendment Proposal and the Warrant Holders Adjournment Proposal (if applicable) to be presented at the Warrant Holders Meeting are in the best interest of Leo and the holders of Leo public warrants and unanimously recommends that the holders of Leo public warrants vote “FOR” the Warrant Amendment Proposal and “FOR” the Warrant Holders Adjournment Proposal, if presented to the Warrant Holders Meeting.

The existence of financial and personal interests of one or more of Leo’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of Leo and the holders of Leo public warrants and what he or they may believe is best for himself or themselves in determining to recommend that the holders of Leo public warrants vote for the proposals. In addition, Leo’s officers have interests in the Business Combination that may conflict with your interests as a holder of Leo public warrants shareholder. See the section entitled “Business Combination Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” for a further discussion of these considerations.

 

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Sources and Uses of Funds for the Business Combination

The following tables summarize the sources and uses for funding the Business Combination assuming a Closing Date of June 30, 2021, and (i) assuming that none of Leo’s outstanding public shares are redeemed in connection with the Business Combination and (ii) assuming that, 25,000,000 of Leo’s outstanding public shares are redeemed in connection with the Business Combination (representing the maximum amount of public shares that can be redeemed while still satisfying the Aggregate Transaction Proceeds Condition (“Maximum Redemptions”). The number of Class A ordinary shares redeemable assuming Maximum Redemptions assumes that the per share redemption price is $10.0; the actual per share redemption price will be equal to the pro rata portion of the trust account calculated as of two business days prior to the consummation of the Business Combination.

No Redemption (in millions)

 

Sources of Funds(1)

    

Uses(1)

 

Leo Cash Held in Trust(2)

  $ 275     

Cash Consideration to Balance Sheet

  $ 362  

PIPE Financing

    125     

Transaction Fees and Expenses(3)

    38  
 

 

 

      

 

 

 

Total Sources

  $ 400     

Total Uses

  $ 400  
 

 

 

      

 

 

 

Maximum Redemption (in millions)

 

Sources of Funds(1)

    

Uses(1)

 

Leo Cash Held in Trust(2)

  $ 275     

Cash Consideration to Balance Sheet

  $ 112  

PIPE Financing

    125     

Transaction Fees and Expenses(3)

    38  
           Shareholder Redemptions(4)   250  
 

 

 

      

 

 

 

Total Sources

  $ 400     

Total Uses

  $ 400  
 

 

 

      

 

 

 

 

(1)

Totals might be affected by rounding. Cash Consideration to Balance Sheet includes the cash consideration amount, the transaction bonus amount and the debt payoff amount payable pursuant to the Merger Agreement.

(2)

As of June 30, 2021.

(3)

Represents the total estimated transaction fees and expenses incurred by Leo and Local Bounti as part of the Business Combination.

(4)

Assumes that the maximum number of Class A ordinary shares that can be redeemed are redeemed, while still satisfying the Aggregate Transaction Proceeds Condition.

Material U.S. Federal Income Tax Consequences

As discussed more fully under the section entitled “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders” below, the Domestication will qualify as a reorganization within the meaning of Section 368(a)(l)(F) of the Code. U.S. Holders (as defined in such section) of Leo public shares will be subject to Section 367(b) of the Code and, as a result:

 

 

a U.S. Holder of Leo public shares whose Leo public shares have a fair market value of less than $50,000 on the date of the Domestication, and who on the date of the Domestication owns (actually and constructively) less than 10% of the total combined voting power of all classes of Leo public shares entitled to vote and less than 10% of the total value of all classes of Leo public shares, will generally not recognize any gain or loss and will generally not be required to include any part of Leo’s earnings in income pursuant to the Domestication;

 

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a U.S. Holder of Leo public shares whose Leo public shares have a fair market value of $50,000 or more on the date of the Domestication, but who on the date of the Domestication owns (actually and constructively) less than 10% of the total combined voting power of all classes of Leo public shares entitled to vote and less than 10% of the total value of all classes of Leo public shares will generally recognize gain (but not loss) on the exchange of Leo public shares for shares in New Local Bounti (a Delaware corporation) pursuant to the Domestication. As an alternative to recognizing gain, such U.S. Holder may file an election to include in income as a dividend the “all earnings and profits amount” (as defined in Treasury Regulation Section 1.367(b)-2(d)) attributable to such holder’s Leo public shares, provided certain other requirements are satisfied. Leo does not expect to have significant cumulative earnings and profits on the date of the Domestication; and

 

 

a U.S. Holder of Leo public shares who on the date of the Domestication owns (actually and constructively) 10% or more of the total combined voting power of all classes of Leo public shares entitled to vote or 10% or more of the total value of all classes of Leo public shares will generally be required to include in income as a dividend the “all earnings and profits amount” (as defined in Treasury Regulation Section 1.367(b)-2(d)) attributable to its Leo public shares, provided certain other requirements are satisfied. Any such U.S. Holder that is a corporation may, under certain circumstances, effectively be exempt from taxation on a portion or all of the deemed dividend pursuant to Section 245A of the Code. Leo does not expect to have significant cumulative earnings and profits on the date of the Domestication.

Furthermore, even though the Domestication will qualify as a reorganization under Section 368(a)(1)(F) of the Code, a U.S. Holder of Leo public shares or public warrants may, in certain circumstances, still recognize gain (but not loss) upon the exchange of its Leo public shares or public warrants for the common stock or warrants of the Delaware corporation pursuant to the Domestication under the “passive foreign investment company,” or PFIC, rules of the Code. Proposed Treasury Regulations with a retroactive effective date have been promulgated under Section 1291(f) of the Code which generally require that a U.S. person who disposes of stock of a PFIC (including for this purpose exchanging public warrants for newly issued warrants in the Domestication) must recognize gain equal to the excess, if any, of the fair market value of the common stock or warrants of the Delaware corporation received in the Domestication and the U.S. Holder’s adjusted tax basis in the corresponding Leo public shares or public warrants surrendered in exchange therefor, notwithstanding any other provision of the Code. Because Leo is a blank check company with no current active business, subject to the potential application of the start-up exception discussed below, we believe that Leo may be classified as a PFIC for U.S. federal income tax purposes. As a result, these proposed Treasury Regulations, if finalized in their current form, may require a U.S. Holder of Leo public shares or public warrants to recognize gain on the exchange of such shares or warrants for common stock or warrants of the Delaware corporation pursuant to the Domestication, unless such U.S. holder has made certain tax elections with respect to such U.S. Holder’s public shares. A U.S. Holder cannot currently make the aforementioned elections with respect to such U.S. Holder’s public warrants. The tax on any such gain so recognized would be imposed at the rate applicable to ordinary income and an interest charge would apply based on complex rules designed to offset the tax deferral to such U.S. Holder on the undistributed earnings, if any, of Leo. It is not possible to determine at this time whether, in what form, and with what effective date, final Treasury Regulations under Section 1291(f) of the Code will be adopted. For a more complete discussion of the potential application of the PFIC rules to U.S. Holders as a result of the Domestication, see the discussion in the section entitled “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders — U.S. Holders — PFIC Considerations.

In the event that the Domestication is completed on or before December 31, 2021, it is possible that Leo may be eligible for the “start-up exception.” If the start-up exception applies, Leo will not have been a PFIC for its first taxable year that ends as a result of the Domestication. For more information on the start-up exception, see the section entitled “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders — U.S. Holders — PFIC Considerations.”

 

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For a description of the tax consequences for shareholders exercising redemption rights in connection with the Business Combination, see the sections entitled “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders — U.S. Holders — Tax Consequences to U.S. Holders That Elect to Exercise Redemption Rights” and “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders — Non-U.S. Holders — Tax Consequences to Non-U.S. Holders That Elect to Exercise Redemption Rights.”

Additionally, the Domestication may cause Non-U.S. Holders (as defined in “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders”) to become subject to U.S. federal withholding taxes on any dividends paid in respect of such Non-U.S. Holder’s New Local Bounti Common Stock after the Domestication.

As more fully described in the section entitled “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders,” because of the inherently factual nature of the tests under the applicable Treasury Regulations to determine the applicability of Section 367(b) of the Code to any particular U.S. Holder, and the uncertainty regarding the application of certain provisions of the PFIC rules, counsel is unable to opine on the application of the these rules to a U.S. Holder on the receipt of New Local Bounti Common Stock in exchange for Leo public shares and New Local Bounti Warrants in exchange for Leo public warrants in the Domestication.

The tax consequences of the Domestication are complex and will depend on a holder’s particular circumstances. All holders are urged to consult their tax advisors on the tax consequences to them of the Domestication under their particular circumstances, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws. For a more complete discussion of the U.S. federal income tax considerations of the Domestication, including with respect to public warrants, see “Material U.S. Federal Income Tax Consequences of the Domestication to Leo Shareholders.”

Expected Accounting Treatment

The Domestication

There will be no accounting effect or change in the carrying amount of the consolidated assets and liabilities of Leo as a result of the Domestication. The business, capitalization, assets and liabilities and financial statements of New Local Bounti immediately following the Domestication will be the same as those of Leo immediately prior to the Domestication.

The Business Combination

The Business Combination will be accounted for as a reverse recapitalization in conformity with accounting principles generally accepted in the United States of America, or GAAP. Under this method of accounting, Leo has been treated as the “acquired” company for financial reporting purposes. This determination was primarily based on existing Local Bounti Stockholders comprising a relative majority of the voting power of the Combined Company, Local Bounti’s operations prior to the acquisition comprising the only ongoing operations of New Local Bounti, and Local Bounti’s senior management comprising a majority of the senior management of New Local Bounti. Accordingly, for accounting purposes, the financial statements of the combined entity will represent a continuation of the financial statements of Local Bounti with the Business Combination being treated as the equivalent of Local Bounti issuing stock for the net assets of Leo, accompanied by a recapitalization. The net assets of Leo will be stated at historical costs, with no goodwill or other intangible assets recorded.

Regulatory Matters

Under the HSR Act and the rules that have been promulgated thereunder, certain transactions may not be consummated unless information has been furnished to the Antitrust Division of the Department of Justice (“Antitrust Division”) and the Federal Trade Commission (“FTC”) and certain waiting period requirements have been satisfied. The Leo portion of the Business Combination is subject to these requirements and may not be

 

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completed until the expiration of a 30-day waiting period following the filing of the required Notification and Report Forms with the Antitrust Division and the FTC or until early termination is granted. Leo and Local Bounti filed the required forms under the HSR Act with the Antitrust Division and the FTC on April 5, 2021 and requested early termination of the waiting period under the HSR Act.

At any time before or after consummation of the Business Combination, notwithstanding expiration or termination of the waiting period under the HSR Act, the applicable competition authorities in the United States or any other applicable jurisdiction could take such action under applicable antitrust laws as such authority deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Business Combination, conditionally approving the Business Combination upon divestiture of New Local Bounti’s assets, subjecting the completion of the Business Combination to regulatory conditions or seeking other remedies. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. Leo cannot assure you that the Antitrust Division, the FTC, any state attorney general, or any other government authority will not attempt to challenge the Business Combination on antitrust grounds, and, if such a challenge is made, Leo cannot assure you as to its result.

At any time before or after consummation of the Business Combination, notwithstanding termination of the waiting period under the HSR Act, the applicable competition authorities in the United States or any other applicable jurisdiction could take such action under applicable antitrust laws as such authority deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Business Combination, conditionally approving the Business Combination upon divestiture of New Local Bounti’s assets, subjecting the completion of the Business Combination to regulatory conditions or seeking other remedies. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. Leo cannot assure you that the Antitrust Division, the FTC, any state attorney general, or any other government authority will not attempt to challenge the Business Combination on antitrust grounds, and, if such a challenge is made, Leo cannot assure you as to its result.

None of Leo and Local Bounti are aware of any material regulatory approvals or actions that are required for completion of the Business Combination other than the expiration or early termination of the waiting period under the HSR Act. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.

Emerging Growth Company

Leo is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. Leo has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, Leo, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of Leo’s financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.

 

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We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of Leo’s initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

Smaller Reporting Company

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the prior June 30, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June 30.

Summary of Risk Factors

Our business is subject to numerous risks. In evaluating the proposals set forth in this joint proxy statement/prospectus, you should carefully read this joint proxy statement/prospectus, including the annexes, and especially consider the factors discussed in the section entitled “Risk Factors.” The occurrence of one or more of the events or the circumstances described in the section titled “Risk Factors,” alone or in combination with other events or circumstances, may materially adversely affect our business, financial condition and operating results. Below is a summary of the principal factors that could cause our actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf.

Risks Related to Local Bounti’s Business and New Local Bounti Following the Business Combination

 

 

Local Bounti is an early stage company with a history of losses and expects to incur significant expenses and continuing losses for the foreseeable future. Local Bounti has only recently started to generate revenue and its ability to continue to generate revenue is uncertain given Local Bounti’s limited operating history. Local Bounti may never achieve or sustain profitability. Local Bounti’s business could be adversely affected if it fails to effectively manage its future growth.

 

 

Local Bounti will require additional financing to achieve its goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, may force Local Bounti to delay, limit, reduce or terminate its operations and future growth.

 

 

Local Bounti currently relies on a single facility for all its operations.

 

 

Local Bounti’s first facility has been in operation at commercial capacity for less than 12 months, which makes it difficult to forecast future results of operations.

 

 

Local Bounti’s operating results forecast rely in large part upon assumptions and analyses developed by Local Bounti. If these assumptions and analyses prove to be incorrect, Local Bounti’s actual operating results may suffer.

 

 

The build-out of new facilities will require significant expenditures for capital improvements and operating expenses and may be subject to delays in construction and unexpected costs due to governmental approvals and permitting requirements, reliance on third parties for construction, delays relating to material delivery and supply chains, and fluctuating material prices.

 

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Local Bounti’s ability to decrease its cost of goods sold over time is dependent on its ability to scale its operations and Local Bounti may not be able to achieve such decreases due to factors outside of its control such as inflation or global supply chain interruptions.

 

 

Any damage to or problems with Local Bounti’s CEA facilities could severely impact Local Bounti’s operations and financial condition.

 

 

Local Bounti depends on employing a skilled local labor force, and failure to attract and retain qualified employees could negatively impact its business, results of operations and financial condition.

 

 

If Local Bounti fails to develop and maintain its brand, its business could suffer.

 

 

Local Bounti’s estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which it competes achieves the forecasted growth, Local Bounti’s business could fail to grow at similar rates, if at all.

 

 

The effects of COVID-19 and other potential future public health crises, epidemics, pandemics or similar events on Local Bounti’s business, operating results and cash flows are uncertain.

 

 

If Local Bounti cannot maintain its company culture or focus on its vision as it grows, Local Bounti’s business and competitive position may be harmed.

 

 

Local Bounti may be unable to successfully execute on its growth strategy.

 

 

Local Bounti’s operating costs to grow and sell its products may be higher than expected, which could impact its results and financial condition.

 

 

If Local Bounti’s estimates or judgments relating to its critical accounting policies prove to be incorrect, its results of operations could be adversely affected.

 

 

Local Bounti will incur increased costs as a result of operating as a public company, and its management will devote substantial time to new compliance initiatives.

 

 

Local Bounti’s ability to use net operating loss carryforwards and other tax attributes may be limited in connection with the business combination or other ownership changes.

 

 

Local Bounti faces risks inherent in the CEA business, including the risks of diseases and pests.

 

 

Local Bounti may not be able to compete successfully in the highly competitive natural food market.

 

 

Local Bounti’s ability to generate and grow revenue is dependent on its ability to increase the yield in each of the anticipated product lines it intends to grow. If Local Bounti is unable to increase the yield in each or most of these product lines, Local Bounti’s projection may not be achieved on currently anticipated timelines or at all.

 

 

Local Bounti may need to defend itself against intellectual property infringement claims, which may be time-consuming and could cause Local Bounti to incur substantial costs.

 

 

The loss of any registered trademark or other intellectual property could enable other companies to compete more effectively with Local Bounti.

 

 

Local Bounti relies on information technology systems and any inadequacy, failure, interruption or security breaches of those systems may harm its ability to effectively operate its business.

 

 

Local Bounti could be adversely affected by a change in consumer preferences, perception and spending habits in the food industry, and failure to develop and expand its product offerings or gain market acceptance of its products could have a negative effect on Local Bounti’s business.

 

 

Demand for lettuce, cilantro, basil and other greens and herbs is subject to seasonal fluctuations and may adversely impact Local Bounti’s results of operations in certain quarters.

 

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Local Bounti has entered into agreements on September 3, 2021 for a term loan facility with Cargill Financial Services Inc. (“Cargill Financial”), one of its existing lenders and an investor in the PIPE Financing, for a $200 million term loan credit facility. The credit facility is secured by all of the Combined Company’s assets, including its intellectual property. Additionally, the definitive documentation states that if there is an occurrence of an uncured event of default, Cargill Financial will be able to foreclose on all Local Bounti assets, and securities in the Combined Company could be rendered worthless.

Risks Related to the Business Combination and Leo

 

 

Our Sponsor and our executive officers and directors have entered into letter agreements with us to vote in favor of the Business Combination, regardless of how our public shareholders vote.

 

 

Subsequent to consummation of the Business Combination, we may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the share price of our securities, which could cause you to lose some or all of your investment.

 

 

Our ability to successfully effect the Business Combination and to be successful thereafter will be dependent upon the efforts of key personnel of New Local Bounti, some of whom may be from Leo and Local Bounti, and some of whom may join New Local Bounti following the Business Combination. The loss of key personnel or the hiring of ineffective personnel after the Business Combination could negatively impact the operations and profitability of New Local Bounti.

 

 

The ability of Leo’s shareholders to exercise redemption rights with respect to Leo’s Public Shares may prevent Leo from completing the Business Combination or optimizing its capital structure.

 

 

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of New Local Bounti Common Stock to drop significantly, even if New Local Bounti’s business is doing well.

 

 

The public stockholders will experience immediate dilution as a consequence of the issuance of New Local Bounti Common Stock as consideration in the Business Combination and in the PIPE Financing.

 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF LEO

Leo is providing the following selected historical financial data to assist you in your analysis of the financial aspects of the Business Combination. The selected historical financial data as of January 18, 2021 and for the period from January 8, 2021 (inception) through January 18, 2021, are derived from Leo’s audited financial statements included elsewhere in this joint proxy statement/prospectus. The selected historical interim financial data as of June 30, 2021 and for the six months ended June 30, 2021 are derived from Leo’s unaudited interim financial statements included elsewhere in this joint proxy statement/prospectus.

The information is only a summary and should be read in conjunction with Leo’s consolidated financial statements and related notes and “Leo’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this joint proxy statement/prospectus. Leo’s historical results are not necessarily indicative of future results, and the results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.

 

     Period from
January 8, 2021
(inception)
through
January 18,
2021 (audited)
     Period from
January 8, 2021
(inception)
through
June 30, 2021
(unaudited)
 

Statement of Operations Data

     

Operating Costs

   $ 10,484      $ 623,937  
  

 

 

    

 

 

 

Loss from operations

     (10,484      (623,937
  

 

 

    

 

 

 

Weighted average shares outstanding of Class A ordinary shares, basic and diluted

     5,750,000        27,500,000  
  

 

 

    

 

 

 

Basic and diluted net income per share, Class A ordinary shares

   $ 5,750,000      $ 0.00  
  

 

 

    

 

 

 

Weighted average shares outstanding of Class B ordinary shares, basic and diluted

     5,750,000        6,608,477  
  

 

 

    

 

 

 

Basic and diluted net loss per share, Class B ordinary shares

   $ 0.00      $ (0.65
  

 

 

    

 

 

 
     June 30, 2021
(unaudited)
     January 18, 2021
(audited)
 

Condensed Balance Sheet Data (At Period End):

     

Total assets

   $ 276,386,096      $ 49,516  

Total liabilities

   $ 22,325,494      $ 35,000  

Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 2,593,940 and 0 shares issued and outstanding (excluding 24,906,060 and 0 shares subject to possible redemption)

     259        —    

Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 6,875,000 and 5,750,000 shares issued and outstanding

     688        575  

Total shareholders’ equity

   $ 5,000,002      $ 14,516  

 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF LOCAL BOUNTI

Local Bounti’s selected historical consolidated statements of operations and cash flows information for the years ended December 31, 2020 and 2019, and its selected historical consolidated balance sheet information as of December 31, 2020 and 2019 are derived from Local Bounti’s audited financial statements included elsewhere in this joint proxy statement/prospectus. Local Bounti’s selected historical statements of operations and cash flows information for the six months ended June 30, 2021 and 2020 and its selected historical balance sheet information as of June 30, 2021 are derived from Local Bounti’s unaudited interim financial statements included elsewhere in this joint proxy statement/prospectus.

The selected historical consolidated information in this section should be read in conjunction with each of Local Bounti’s financial statements and related notes and “Local Bounti’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere herein. The historical results included below and elsewhere in this joint proxy statement/prospectus are not indicative of the future performance of Local Bounti following the Business Combination.

 

     For the six months ended
June 30,
     For the years ended
December 31,
 

(in thousands, except per share information)

           2021                      2020              2020      2019  

Statement of Operations Information:

           

Sales

   $ 165      $ —        $ 82      $ —    

Net loss

     (16,988      (3,095      (8,409      (3,406

Net loss per share attributable to shareholders, basic and diluted

   $ (1.72)      $ (0.31    $ (0.84    $ (0.35

Statement of Cash Flows Information:

           

Net cash provided by (used in) operating activities

   $ (7,720    $ (2,238    $ (3,838    $ (1,119

Net cash used in investing activities

     (8,087      (3,654      (3,422      (3,743

Net cash provided by financing activities

     38,906        4,630        5,168        6,999  

 

     As of June 30,
2021
     As of December 31,  
(in thousands)    2020      2019  

Balance Sheet Information:

        

Total assets

   $ 43,525      $ 9,102      $ 5,888  

Total liabilities

     58,142        11,673        3,334  

Total shareholders’ equity (deficit)

     (14,617      (2,571      2,554  

 

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SUMMARY UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL INFORMATION

The following summary unaudited pro forma condensed combined financial information (the “summary pro forma information”) gives effect to the Business Combination described in the section titled “Unaudited Pro Forma Condensed Combined Financial Information.” The Business Combination will be accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Leo will be treated as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of New Local Bounti issuing ordinary shares for the net assets of Leo, accompanied by a recapitalization. The net assets of Leo will be stated at historical cost, with no goodwill or other intangible assets recorded. The summary pro forma balance sheet as of June 30, 2021 gives effect to the Business Combination as if it had occurred on June 30, 2021. The summary pro forma statements of operations for the six months ended June 30, 2021 and for the year ended December 31, 2020 gives effect to the Business Combination as if it had occurred on January 1, 2020.

The summary pro forma information has been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial information of the post-combination business included elsewhere in this joint proxy statement/prospectus and the accompanying notes to the unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with, the audited financial statements and related notes of Leo and Local Bounti for the applicable periods included elsewhere in this joint proxy statement/prospectus. The summary pro forma information has been presented for informational purposes only and is not necessarily indicative of what the post-combination business’ actual financial position or results of operations would have been had the Business Combination been completed as of the dates indicated. In addition, the summary pro forma information does not purport to project the future financial position or operating results of the post-combination business.

The summary pro forma information gives effect to the Business Combination and related transactions, and has been prepared assuming two redemption scenarios as follows:

 

 

Assuming No Redemptions — This presentation assumes that no public shareholder exercises redemption rights with respect to its public shares for a pro rata portion of the funds in Leo’s trust account.

 

 

Assuming Maximum Redemptions — This presentation assumes that public shareholders (who are not Leo Initial Shareholders or an officer or director of Leo) holding approximately 24,906,060 of public shares exercise their redemption rights and that such public shares are redeemed for their pro rata share ($10.00 per share, plus any pro rata interest earned on the trust account not previously released to Leo (net of taxes payable), as of two business days prior to the consummation of the Business Combination) of the funds in Leo’s trust account for aggregate redemption proceeds of $249.1 million. Under the Merger Agreement, the consummation of the Business Combination is conditioned upon, among other things, the net tangible assets of Leo being more than $5.0 million and the aggregate cash proceeds available to New Local Bounti from the initial public offering (net of redemptions) and the PIPE Financing, prior to the payment of any transaction expenses (including deferred underwriting expenses from the initial public offering), be not less than $150.0 million. This scenario gives effect to the maximum number of redemptions that meet all of the conditions to permit consummation of the Business Combination.

 

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     Combined Pro Forma  

(in thousands, except share and per share data)

   Assuming No
Redemptions
     Assuming
Maximum
Redemptions
 

Selected Unaudited Pro Forma Condensed Combined Statement of Operations Information for the Six Months Ended June 30, 2021

     

Sales

   $ 165      $ 165  

Net loss

     (18,247      (18,247

Net loss per share attributable to ordinary shareholders, basic and diluted

     (0.17      (0.21

Weighted average ordinary shares outstanding, basic and diluted

     110,515,489        85,609,429  

Selected Unaudited Pro Forma Condensed Combined Statement of Operations Information for the Year Ended December 31, 2020

     

Sales

   $ 82      $ 82  

Net loss

     (27,015      (27,015

Net loss per share attributable to ordinary shareholders, basic and diluted

     (0.24      (0.32

Weighted average ordinary shares outstanding, basic and diluted

     110,515,489        85,609,429  

Selected Unaudited Pro Forma Condensed Combined Balance Sheet Information as of June 30, 2021

     

Total assets

   $ 360,861      $ 121,300  

Total liabilities

     38,515        38,515  

Total shareholders’ equity

     322,346        82,785  

 

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COMPARATIVE PER SHARE DATA

The following table sets forth selected historical comparative share information for Leo and Local Bounti and unaudited pro forma combined per share information of the post-combination business after giving effect to the Business Combination, assuming two redemption scenarios as follows:

 

 

Assuming No Redemptions — This presentation assumes that no public shareholder exercises redemption rights with respect to its public shares for a pro rata portion of the funds in Leo’s trust account.

 

 

Assuming Maximum Redemptions — This presentation assumes that public shareholders (who are not Leo Initial Shareholders or an officer or director of Leo) holding approximately 24,906,060 of public shares exercise their redemption rights and that such public shares are redeemed for their pro rata share ($10.00 per share, plus any pro rata interest earned on the trust account not previously released to Leo (net of taxes payable)), as of two business days prior to the consummation of the Business Combination) of the funds in Leo’s trust account for aggregate redemption proceeds of $249.1 million. Under the Merger Agreement, the consummation of the Business Combination is conditioned upon, among other things, the net tangible assets of Leo being more than $5.0 million and the aggregate cash proceeds available to New Local Bounti from the initial public offering (net of redemptions) and the PIPE Financing, prior to the payment of any transaction expenses (including deferred underwriting expenses from the initial public offering), be not less than $150.0 million. This scenario gives effect to the maximum number of redemptions that meet all of the conditions to permit consummation of the Business Combination.

The unaudited pro forma combined book value per share information reflects the Business Combination as if it had occurred on June 30, 2021. The weighted average shares outstanding and net loss per share information give pro forma effect to the Business Combination as if it had occurred on January 1, 2020.

This information is only a summary and should be read together with the selected historical financial information included elsewhere in this joint proxy statement/prospectus and the unaudited or audited, as applicable, financial statements of Leo and Local Bounti and related notes that are included elsewhere in this joint proxy statement/prospectus. The unaudited pro forma combined per share information of Leo and Local Bounti is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information and related notes included elsewhere in this joint proxy statement/prospectus.

The unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have occurred had the companies been combined during the periods presented, nor the earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of Leo and Local Bounti would have been had the companies been combined during the periods presented.

 

                Pro Forma Combined     Local Bounti equivalent
pro forma

per share information (3)
 
    Leo
(Historical)(1)
    Local
Bounti
(Historical)
    Assuming
No
Redemptions
    Assuming
Maximum
Redemptions
    Assuming
No
Redemptions
    Assuming
Maximum
Redemptions
 

As of and for the Six Months Ended
June 30, 2021
(4)

           

Book value per
share (2)

  $ 0.15     $ (1.48   $ 3.27     $ 1.42     $ 0.66     $ 0.29  

Net income (loss) per share attributable to ordinary shareholders, basic and diluted

  $ (0.65   $ (1.72   $ (0.17   $ (0.21   $ (0.03   $ (0.04

 

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                Pro Forma Combined     Local Bounti equivalent
pro forma

per share information (3)
 
    Leo
(Historical)(1)
    Local
Bounti
(Historical)
    Assuming
No
Redemptions
    Assuming
Maximum
Redemptions
    Assuming
No
Redemptions
    Assuming
Maximum
Redemptions
 

Weighted average ordinary shares outstanding, basic and diluted

    34,108,477       9,886,283       110,515,489       85,609,429       543,115,995       420,717,953  

Basic and diluted net income per redeemable ordinary share

  $ —              

Weighted average redeemable ordinary shares outstanding, basic and diluted

    24,906,060            

Basic and diluted net income per non-redeemable ordinary share

  $ (0.65          

Weighted average non-redeemable ordinary shares outstanding, basic and diluted

    6,608,477            

For the Year Ended December 31,
2020
(4)

           

Net loss per share attributable to ordinary shareholders, basic and diluted

  $ —       $ (0.84   $ (0.24   $ (0.32   $ (0.05   $ (0.06

Weighted average ordinary shares outstanding, basic and diluted

    —         9,997,049       110,515,489       85,609,429       543,115,995       420,717,953  

Basic and diluted net income per redeemable ordinary share

  $ —              

Weighted average redeemable ordinary shares outstanding, basic and diluted

    —              

Basic and diluted net income per non-redeemable ordinary share

  $ —              

Weighted average non-redeemable ordinary shares outstanding, basic and diluted

    —              

 

(1)

Leo was incorporated on January 8, 2021 and therefore did not have any operations or historical financial information for the year ended December 31, 2020

 

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(2)

Book value per share = Total equity/shares outstanding.

(3)

The equivalent pro forma basic and diluted per share data for Local Bounti is calculated by multiplying the pro forma combined per share data by the Exchange Ratio, which is expected to be approximately 4.914388 New Local Bounti Ordinary Shares.

(4)

There were no cash dividends declared in the period presented.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this joint proxy statement/prospectus may constitute “forward-looking statements” for purposes of the federal securities laws, including within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. You should note that on April 8, 2021, the staff of the SEC issued a public statement entitled “SPACs, IPOs and Liability Risk under the Securities Act,” in which the SEC staff indicated that there is uncertainty as to the availability of the safe harbor in connection with a SPAC merger. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future, including those relating to the Business Combination. The information included in this joint proxy statement/prospectus in relation to Local Bounti has been provided by Local Bounti and its respective management, and forward-looking statements include statements relating to our and its respective management team’s expectations, hopes, beliefs, intentions or strategies regarding the future, including those relating to the Business Combination. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “can,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this joint proxy statement/prospectus may include, for example, statements about:

 

   

our ability to complete the Business Combination with Local Bounti or, if we do not consummate such Business Combination, any other initial business combination;

 

   

satisfaction or waiver of the conditions to the Business Combination including, among others: (i) the approval by our shareholders of the Condition Precedent Proposals being obtained; (ii) the applicable waiting period under the Hart-Scott-Rodino Act of 1976 (the “HSR Act”) relating to the Merger Agreement having expired or been terminated; (iii) Leo having at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) after giving effect to the transactions contemplated by the Merger Agreement, the PIPE Financing and all of the Leo shareholder redemptions; (iv) the Aggregate Transaction Proceeds Condition; (v) the approval by the NYSE of our initial listing application in connection with the Business Combination; (vi) the consent of the voting common stockholders of Local Bounti and the conversion of Local Bounti and (vii) the consummation of the Domestication;

 

   

our ability to consummate the PIPE Financing or raise financing in the future;

 

   

the occurrence of any event, change or other circumstances, including the outcome of any legal proceedings that may be instituted against Leo and Local Bounti following the announcement of the Merger Agreement and the transactions contemplated therein, that could give rise to the termination of the Merger Agreement;

 

   

the projected financial information, growth rate and market opportunity of New Local Bounti;

 

   

the amount of redemption requirements made by Public Shareholders;

 

   

the ability to obtain and/or maintain the listing of the New Local Bounti Common Stock and the warrants on the NYSE, and the potential liquidity and trading of such securities;

 

   

the risk that the proposed Business Combination disrupts current plans and operations of Local Bounti as a result of the announcement and consummation of the proposed Business Combination;

 

   

the ability to recognize the anticipated benefits of the proposed Business Combination, which may be affected by, among other things, competition, the ability of the Combined Company to grow and manage growth profitably and retain its key employees;

 

   

costs related to the proposed Business Combination;

 

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changes in applicable laws or regulations;

 

   

the inability to develop and maintain effective internal controls;

 

   

our ability to raise financing in the future;

 

   

our success in retaining or recruiting, or changes required in, our officers, key employees or directors following the completion of the Business Combination;

 

   

our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving the Business Combination;

 

   

the period over which Local Bounti anticipates its existing cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements;

 

   

the potential for Local Bounti’s business development efforts to maximize the potential value of its portfolio;

 

   

regulatory developments in the United States and foreign countries;

 

   

the impact of laws and regulations;

 

   

Local Bounti’s estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

 

   

Local Bounti’s financial performance;

 

   

Local Bounti’s ability to remediate the material weakness in its internal controls over financial reporting;

 

   

the effect of COVID-19 on the foregoing, including our ability to consummate the Business Combination due to the uncertainty resulting from the recent COVID-19 pandemic; and

 

   

other factors detailed under the section entitled “Risk Factors.”

The forward-looking statements contained in this joint proxy statement/prospectus are based on current expectations and beliefs concerning future developments and their potential effects on us and/or Local Bounti. There can be no assurance that future developments affecting us and/or Local Bounti will be those that we and/or Local Bounti have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control or the control of Local Bounti) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Some of these risks and uncertainties may in the future be amplified by the COVID-19 outbreak and there may be additional risks that we consider immaterial or which are unknown. It is not possible to predict or identify all such risks. Neither we nor Local Bounti undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Before any shareholder grants its proxy or instructs how its vote should be cast or vote on the proposals to be put to the extraordinary general meeting, such stockholder should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this joint proxy statement/prospectus may adversely affect us.

 

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RISK FACTORS

You should carefully consider all the following risk factors, together with all of the other information in this joint proxy statement/prospectus, including the financial information, before deciding how to vote or instruct your vote to be cast to approve the Proposals described in this joint proxy statement/prospectus.

The value of your investment following the completion of the Business Combination will be subject to significant risks affecting, among other things, the Combined Company’s business, financial condition and results of operations. If any of the events described below occur, the Combined Company’s post-Business Combination business and financial results could be adversely affected in material respects. This could result in a decline, which may be significant, in the trading price of the Combined Company’s securities and you therefore may lose all or part of your investment. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to the businesses of Leo and Local Bounti.

Risks Related to Local Bounti’s Business and New Local Bounti Following the Business Combination

Throughout this section, unless otherwise indicated or the context otherwise requires, references in this section to “Local Bounti,” “we,” “us,” “our” and other similar terms refer to Local Bounti and its subsidiaries prior to the Business Combination and to the Combined Company and its consolidated subsidiaries after giving effect to the Business Combination.

Risks Related to Local Bounti’s Business

Local Bounti is an early stage company with a history of losses and expects to incur significant expenses and continuing losses for the foreseeable future. Local Bounti has only recently started to generate revenue and its ability to continue to generate revenue is uncertain given Local Bounti’s limited operating history. Local Bounti may never achieve or sustain profitability. Local Bounti’s business could be adversely affected if it fails to effectively manage its future growth.

Local Bounti has generated revenue of $82 thousand and $0, and incurred net losses of $8.4 million and $3.4 million for the years ended December 31, 2020 and 2019, respectively. Local Bounti has generated revenue of $165 thousand and $0, and incurred net losses of $17.0 million and $3.1 million for the six months ended June 30, 2021 and 2020, respectively. Local Bounti has only recently started to generate revenue and given that it has limited operating history, Local Bounti’s ability to continue to generate revenue is uncertain. Local Bounti believes it will continue to incur net losses for the foreseeable future as it continues its facility expansion and commercial sales of its products. Local Bounti expects to expend substantial resources as it:

 

   

operates its existing facilities;

 

   

completes the commissioning of the expanded portion of the Montana Facility (as defined below) and completes the construction of other facilities for which building has commenced or is expected to commence in the near term;

 

   

identifies and invests in future growth opportunities, including expansion into new markets, development of new facilities, introduction of new products, and commercialization of new crops;

 

   

invests in creating and protecting intellectual property; and

 

   

incurs additional general administration expenses, including increased finance, legal and accounting expenses, associated with being a public company and growing operations.

Supporting the growth of Local Bounti’s business will place significant demands on its management and operations teams and will require resources, financial and otherwise, which may not be available in a cost-effective manner. If Local Bounti does not effectively manage its growth strategy, execute on its business plan, respond to competitive pressures, take advantage of market opportunities, or satisfy customer requirements, there could be adverse effects on Local Bounti’s business, financial condition and results of operations.

 

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These expenditures alternatively may not result in the growth of Local Bounti’s business, which could adversely affect Local Bounti’s financial condition and results of operations.

Local Bounti will require additional financing to achieve its goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, may force Local Bounti to delay, limit, reduce or terminate its operations and future growth.

The CEA business is extremely capital-intensive and Local Bounti expects to expend significant resources to complete the build-out of its facilities, scale its production capacity, and invest in its technology platform, capabilities, and new products. These expenditures are expected to include costs of constructing and commissioning new facilities, costs associated with growing plants for sale, such as electricity and packaging, working capital, costs of attracting and retaining a skilled local labor force, and costs associated with research and development in support of future commercial opportunities.

After giving effect to the Closing, Local Bounti expects that its existing cash and credit available under its loan agreements will be sufficient to fund its planned operating expenses, capital expenditure requirements and any debt service payments through at least the next 36 months. However, Local Bounti’s operating plan may change because of factors currently unknown, and Local Bounti may need to seek additional funds sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations. Such financings may result in dilution to stockholders, issuance of securities with priority as to liquidation and dividend and other rights more favorable than common stock, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect Local Bounti’s business. In addition, Local Bounti may seek additional capital due to favorable market conditions or strategic considerations even if it believes that it has sufficient funds for current or future operating plans. There can be no assurance that financing will be available to Local Bounti on favorable terms, or at all. The inability to obtain financing when needed may make it more difficult for Local Bounti to operate its business or implement its growth plans.

Local Bounti currently relies on a single facility for all its operations.

Local Bounti’s first CEA facility in Hamilton, Montana (the “Montana Facility”) commenced construction in 2019 and reached full commercial operation in the second half of 2020. Local Bounti purchased land for its second facility in Pasco, Washington in June 2021. The Pasco facility was initially planned as a 32-pond facility, but has been increased to a 40-pond facility to meet anticipated demand. The Pasco facility is scheduled to be completed and operational by the second quarter of 2022 and fully commissioned by the third quarter of 2022. However, for the immediate future, Local Bounti will rely solely on the operations at the Montana Facility. Adverse changes or developments affecting the Montana Facility could impair Local Bounti’s ability to produce its products. Any shutdown or period of reduced production at the Montana Facility, which may be caused by regulatory noncompliance or other issues, as well as other factors beyond Local Bounti’s control, such as severe weather conditions, natural disaster, fire, power interruption, work stoppage, disease outbreaks or pandemics (such as COVID-19), equipment failure or delay in supply delivery, would significantly disrupt Local Bounti’s ability to grow and deliver its produce in a timely manner, meet its contractual obligations and operate its business. Local Bounti’s greenhouse equipment is costly to replace or repair, and its equipment supply chains may be disrupted in connection with pandemics, such as COVID-19, trade wars or other factors. If any material amount of Local Bounti’s machinery were damaged, Local Bounti would be unable to predict when, if at all, it could replace or repair such machinery or find co-manufacturers with suitable alterative machinery, which could adversely affect Local Bounti’s business, financial condition and operating results.

Local Bounti’s first facility has been in operation at commercial capacity for less than 12 months, which makes it difficult to forecast future results of operations.

The Montana Facility began commercial operations in the second half of 2020, marking the beginning of Local Bounti’s first growing season. As a result, Local Bounti’s ability to accurately forecast future results of

 

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operations is limited and subject to a number of uncertainties, including its ability to plan for and model future growth. In future periods, revenue growth could slow or revenue could decline for a number of reasons, including slowing demand for Local Bounti’s products, increasing competition, a decrease in the growth of the overall market, or Local Bounti’s failure, for any reason, to take advantage of growth opportunities. If Local Bounti’s assumptions regarding these risks and uncertainties and future revenue growth are incorrect or change, or if Local Bounti does not address these risks successfully, its operating and financial results could differ materially from Local Bounti’s expectations, and its business could suffer.

Local Bounti’s operating results forecast relies in large part upon assumptions and analyses developed by Local Bounti’s management. If these assumptions and analyses prove to be incorrect, Local Bounti’s actual operating results may suffer.

Local Bounti’s operating results forecast appearing elsewhere in this joint proxy statement/prospectus reflects current estimates of future performance and assumptions developed by Local Bounti. Whether actual operating and financial results and business developments will be consistent with Local Bounti’s expectations and assumptions as reflected in its forecast depends on a number of factors, many of which are outside Local Bounti’s control, including, but not limited to:

 

   

demand for Local Bounti’s products;

 

   

competition, including from established and future competitors;

 

   

Local Bounti’s ability to manage its growth;

 

   

ability to obtain necessary governmental approvals;

 

   

Local Bounti’s ability to satisfy the production demands associated with customer orders;

 

   

whether Local Bounti can manage relationships with key partners and suppliers;

 

   

Local Bounti’s ability to retain existing key management, integrate recent hires and attract, retain and motivate qualified personnel;

 

   

the overall strength and stability of domestic and international economies;

 

   

regulatory, legislative, and political changes;

 

   

consumer spending habits

 

   

ability to produce target yields; and

 

   

Local Bounti’s ability to mitigate risk associated with plant pathogens.

Unfavorable changes in any of these or other factors, most of which are beyond Local Bounti’s control, could materially and adversely affect its business, results of operations and financial results.

The build-out of new facilities will require significant expenditures for capital improvements and operating expenses and may be subject to delays in construction and unexpected costs due to governmental approvals and permitting requirements, reliance on third parties for construction, delays relating to material delivery and supply chains, and fluctuating material prices.

Local Bounti’s build-out of new CEA facilities will be dependent on a number of key inputs and their related costs including materials such as steel and glass and other supplies, as well as electricity and other local utilities. Local Bounti intends to use substantial pre-engineered, pre-fabricated and standardized components when building our modular facilities. We have developed key partnerships with agricultural and equipment vendors for construction of future CEA facilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact Local Bounti’s business, financial condition and operating results. Local Bounti plans to rely on local contractors for the building of its

 

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second CEA facility, which is scheduled to be completed and operational by the second quarter of 2022 and fully commissioned by the third quarter of 2022, and may rely on local contractors to build future CEA facilities. If Local Bounti or its contractors encounter unexpected costs, delays or other problems in building any CEA facility, Local Bounti’s financial position and ability to execute on its growth strategy could be negatively affected. Any inability to secure required materials and services to build out such facility, or to do so on appropriate terms, could have a materially adverse impact on Local Bounti’s business, financial condition and operating results. Local Bounti may also face unexpected delays in obtaining the required governmental permits and approvals in connection with the build-out of its planned facilities which could require significant time and financial resources and delay its ability to operate these facilities.

The costs to procure such materials and services to build new facilities may fluctuate widely based on the impact of numerous factors beyond Local Bounti’s control including, international, economic and political trends, foreign currency fluctuations, expectations of inflation, global or regional consumptive patterns, speculative activities and increased or improved production and distribution methods.

COVID-19 continues to impact worldwide economic activity, and the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, which are creating disruption in global supply chains such as closures or other restrictions on the conduct of business operations of manufacturers, suppliers and vendors. The recovery from COVID-19 also may have risks in that increased economic activity globally or regionally may result in high demand for, and constrained access to, materials and services required for Local Bounti to construct and commission new facilities, which may lead to increased costs or delays that could materially and adversely affect the Local Bounti’s business.

Global demand on shipping and transport services may cause Local Bounti to experience delays in the future, which could impact Local Bounti’s ability to obtain materials or build its facilities in a timely manner. These factors could otherwise disrupt Local Bounti’s operations and could negatively impact its business, financial condition and results of operations. Logistical problems, unexpected costs, and delays in facility construction, whether or not caused by the COVID-19 pandemic, which cannot be directly controlled by Local Bounti, can cause prolonged disruption to or increased costs of third-party transportation services used to ship materials, which could negatively affect Local Bounti’s facility building schedule, and more generally its business, financial condition, results of operations and prospects. If Local Bounti experiences significant unexpected delays in construction, it may have to delay or limit its production depending on the timing and extent of the delays, which could harm Local Bounti’s business, financial condition and results of operation.

Local Bounti’s ability to decrease its cost of goods sold over time is dependent on its ability to scale its operations and Local Bounti may not be able to achieve such decreases due to factors outside of its control such as inflation or global supply chain interruptions.

Local Bounti’s future profitability will depend on, among other things, its ability to scale its operations and continuously reduce its cost of goods, enabling Local Bounti to remain cost competitive. Despite Local Bounti’s efforts to scale its operations, Local Bounti may not able to decrease its costs of goods due to factors outside of Local Bounti’s control, such as inflation or global supply chain interruptions. Periods of inflation or expectations of inflation could increase Local Bounti’s costs of doing business, which is typically an expense recovered through increased product prices. Furthermore, Local Bounti’s reliance on third parties to procure certain raw goods from supplier partners throughout the world exposes Local Bounti to risks including reduced control over product costs, product supply and delivery delays. Global supply chain interruptions may make in difficult for suppliers to ship their goods due to reduced capacity at distribution facilities and transportation networks, which may cause an increase in shipping costs. The loss or disruption of supply arrangements and inflation are factors outside of Local Bounti’s control which could materially affect Local Bounti’s ability to decrease its costs for goods overtime.

 

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Any damage to or problems with Local Bounti’s CEA facilities could severely impact Local Bounti’s operations and financial condition.

If Local Bounti is unable to attain reliable performance of its facilities, there could be severe adverse impact on its business. Local Bounti faces risks including, but not limited to:

 

   

Production Scale. Local Bounti’s strategy to develop new commercial facilities includes the expected operation of facilities that are at meaningfully larger production scale than its existing Montana Facility. Local Bounti may encounter unexpected challenges as it operates larger facilities, which could cause it to be unable to operate larger facilities reliably. The inability to operate larger facilities would have a material negative impact on the Local Bounti’s business and financial condition.

 

   

Channel Mix. Local Bounti relies on making assumptions about the expected channel mix of its facilities. Demand for Local Bounti’s products fluctuates due to changes in customer orders which typically do not work on long-term contracts in the produce industry. If Local Bounti is not correct in forecasting demand by channel to achieve its expected results, it may experience a reduced average sales price or a supply-demand imbalance, which could negatively affect its financial performance. Demand for loose leaf lettuce products may also be subject to some degree of seasonality due to consumer behavior. As a result, comparisons of Local Bounti’s sales and operating results between different periods may not necessarily be meaningful comparisons. If Local Bounti is unable to operate facilities to reliably achieve the target channel mix on average, there could be material adverse effects on its business, operational results, and financial performance.

 

   

Energy Interruption. Local Bounti grows plants with and without sunlight, thus requiring lighting technology and adequate power supply as primary factors of production. Local Bounti considers the reliability of utilities and related infrastructure as a key factor in its site selection criteria for facility locations. Local Bounti may use generators to maintain energy supply in the case of an outage, but there is no guarantee that power can be maintained or that generators will provide full or redundant coverage to maintain normal operations in the event of a power outage, which could result in reduced crop yield, negative effects on crop quality, or more generally adverse impact to Local Bounti’s results of operations.

 

   

Supply of Seeds and Other Inputs. Local Bounti uses certain seed supplies that may be specifically tailored to grow high-quality plants in its CEA facilities. If there were a field crop failure where Local Bounti would have to depend on an alternative supply of seeds from qualified back-up suppliers, the reliability of production of Local Bounti’s products could be diminished for a period of time. Local Bounti also depends on consistent access of other inputs and supplies to operate its facilities reliably, including water supply, nutrients, growth media, food safety testing, sanitation supplies, packaging materials, among others. If Local Bounti does not maintain access to these inputs of production, then its ability to operate its facilities could be materially and adversely affected.

 

   

Labor. Local Bounti depends on the know-how of its employees and farm operations teams, their experience, and their oversight of the operations of its facilities. Local Bounti relies on access to competitive, local labor supply, including skilled and unskilled positions, to operate its facilities consistently and reliably. Any issues affecting Local Bounti’s access to or relations with workers could negatively affect facility operations or financial condition.

 

   

Food Safety and Quality Assurance. Local Bounti is subject to food and safety standards set forth by its own internal practices and by regulatory authorities, including the United States Department of Agriculture (“USDA”) as Harmonized Good Agricultural Practices (GAP Plus+). The Combined Company is also subject to United States Food and Drug Administration (“FDA”) requirements, including requirements being implemented pursuant to the Food Safety Modernization Act (“FSMA”).

 

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Local Bounti’s ability to operate facilities reliably may be interrupted for some period of time, or permanently, by any widespread food safety or quality issues involving loose leaf lettuce or other fresh produce, even if not involving Local Bounti’s facilities or products at all. Such events could erode consumer confidence in and demand for Local Bounti’s products, which could impact its ability to operate facilities reliably, and could generally cause serious adverse effects to Local Bounti’s business and financial condition.

 

   

Weather. Local Bounti’s ability to operate facilities reliably may be adversely affected by severe weather including hurricanes, tornados, lightning strikes, wind, snow, hail and rain. Such weather events could cause damage or destruction to all or part of Local Bounti’s facilities, could interrupt the supply of labor or other inputs necessary to operate the facility, and could affect the customers or distribution channels. In connection with the impact of unpredictable natural disasters, Local Bounti could experience significant delays in or stoppage of production. Severe weather events or natural disasters could result in significant losses and seriously disrupt Local Bounti’s business.

 

   

Community Actions. Local Bounti’s failure to engage with and align with communities could lead to community actions that impact facilities access and operations. Such actions could impact individual or even groups of facilities.

 

   

Other Factors Affecting Reliability of Facility Operations. In general, if Local Bounti is unable to grow and harvest product to its internal yield targets and quality standards, package and distribute product, sell at competitive prices, or maintain consistent access to the supply inputs necessary to operate facilities reliably, its operational performance and financial condition could be materially and negatively affected.

In addition, Local Bounti may experience unexpected delays in building its facilities for a variety of reasons, including limited labor due to COVID-19 or other factors, unexpected construction problems or supply chain disruptions, all of which could harm Local Bounti’s business, financial condition and results of operation.

Local Bounti depends on employing a skilled local labor force, and failure to attract and retain qualified employees could negatively impact its business, results of operations and financial condition.

Local Bounti’s operations require significant labor, and the growing season for indoor vertical farming is year-round. There is competition for skilled agricultural labor and even if Local Bounti is able to identify, hire and train its labor force, there is no guarantee that Local Bounti will be able to retain these employees. Any shortage of labor or lack of regular availability could restrict Local Bounti’s ability to operate its facilities profitably, or at all.

In addition, Local Bounti’s success and future growth depend largely upon the continued services of its executive officers as well as other key team members. These executives and key team members have been primarily responsible for determining the strategic direction of the business and executing Local Bounti’s growth strategy and are integral to Local Bounti’s brand, culture and reputation with distributors and others in the industry. From time to time, there may be changes in Local Bounti’s executive management team or other key team members resulting from the hiring or departure of these personnel. The loss of one or more of executive officers or key team members, or the failure by the executive team and key team members to effectively work together and lead the company, could harm Local Bounti’s business. Local Bounti’s earlier growth stage may result in less management depth with less established succession planning than may be found in later-stage companies.

In addition, efforts by labor unions to organize Local Bounti’s employees could divert management attention away from regular day-to-day operations and increase its operating expenses. Labor unions may make attempts to organize Local Bounti’s non-unionized employees. Local Bounti is not aware of any activities relating to union organizations at its current facilities, but it cannot predict which, if any, groups of employees may seek union representation in the future or the outcome of any collective bargaining. If Local Bounti is

 

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unable to negotiate acceptable collective bargaining agreements, it may have to wait through “cooling off” periods, which are often followed by union-initiated work stoppages, including strikes. Depending on the type and duration of any work stoppage, Local Bounti’s operating expenses could increase significantly, which could negatively impact its financial condition, results of operations and cash flows.

If Local Bounti fails to develop and maintain its brand, its business could suffer.

The Local Bounti brand is recognized for creating clean, nutritious, locally-grown and high-quality products, which Local Bounti believes to be differentiated and enabled by its technology platform. Local Bounti’s success depends, in part, on its ability to maintain and grow the value of the Local Bounti brand. Promoting and positioning Local Bounti’s brand and reputation will depend on, among other factors, the success of its product offerings, food safety and quality assurance, its marketing and merchandising efforts, its continued focus on the environment and sustainability, and its ability to provide consistent, high-quality products to customers. Any negative publicity, regardless of its accuracy, could impair Local Bounti’s business.

Use of social and digital media by Local Bounti, its consumers and third parties increases the speed and extent that information or misinformation and opinions can be shared. Negative publicity about Local Bounti, its partners, or its products on social or digital media could seriously damage Local Bounti’s brand and reputation. Brand value is based on perceptions of subjective qualities, and any incident that erodes the confidence of Local Bounti’s consumers, customers, distributors, or other strategic partners, including adverse publicity or a governmental investigation, litigation or regulatory enforcement action, could reduce the value of Local Bounti’s brand and materially damage its business. If Local Bounti does not achieve and maintain favorable perception of its brand, Local Bounti’s business, financial condition and results of operations could be adversely affected.

Local Bounti’s estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which it competes achieves the forecasted growth, Local Bounti’s business could fail to grow at similar rates, if at all.

Market opportunity estimates and growth forecasts included in this joint proxy statement/prospectus, including those Local Bounti has generated itself, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The ongoing COVID-19 pandemic and related economic impact creates additional uncertainty. Variables that go into the calculation of Local Bounti’s market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of customers covered by these market opportunity estimates will purchase Local Bounti’s products at all or generate any particular level of revenue for Local Bounti. Any expansion in Local Bounti’s market depends on a number of factors, including the cost and perceived value associated with its product and those of its competitors. Even if the market in which Local Bounti competes meets the size estimates and growth forecast in this joint proxy statement/prospectus, Local Bounti’s business could fail to grow at the rate it anticipates, if at all. Local Bounti’s growth is subject to many factors, including success in implementing its business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this joint proxy statement/prospectus, should not be taken as indicative of Local Bounti’s future revenue or growth prospects.

The effects of COVID-19 and other potential future public health crises, epidemics, pandemics or similar events on Local Bounti’s business, operating results and cash flows are uncertain.

In connection with the COVID-19 pandemic, governments have implemented significant measures, including closures, quarantines, travel restrictions and other social distancing directives, intended to control the spread of the virus. Companies have also taken precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses. To the extent that these restrictions remain in place, additional prevention and mitigation measures are implemented in the future, or there is uncertainty about the effectiveness of these or any other measures to contain or treat COVID-19, there is likely to be an adverse impact on global economic conditions and consumer confidence and spending, which could materially and adversely affect Local Bounti’s operations and demand for its products.

 

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While Local Bounti has been able to continuously operate through the COVID-19 pandemic, the fluid nature of the COVID-19 pandemic and uncertainties regarding the related economic impact are likely to result in sustained market turmoil, which could also negatively impact Local Bounti’s business, financial condition and cash flows. Although Local Bounti’s business is considered an “essential business,” the COVID-19 pandemic could result in labor shortages, which could result in Local Bounti’s inability to plant and harvest crops at full capacity and could result in spoilage or loss of unharvested crops. The impact of COVID-19 on any of Local Bounti’s suppliers, distributors, transportation or logistics providers may negatively affect its costs of operation and supply chain. If the disruptions caused by COVID-19, including decreased availability of labor, continue for an extended period, Local Bounti’s ability to meet the demands of distributors and customers may be materially impacted.

Further, COVID-19 may impact customer and consumer demand. Retail and grocery stores may be impacted if governments continue to implement regional business closures, quarantines, travel restrictions and other social distancing directives to slow the spread of the virus. There may also be significant reductions or volatility in consumer demand for Local Bounti products due to travel restrictions or social distancing directives, as well as the temporary inability of consumers to purchase these products due to illness, quarantine or financial hardship, shifts in demand away from one or more of Local Bounti products, decreased consumer confidence and spending or pantry-loading activity, any of which may negatively impact Local Bounti’s results, including as a result of an increased difficulty in planning for operations and future growing seasons.

The recovery from COVID-19 also may have risks in that increased economic activity globally or regionally may result in high demand for, and constrained access to, materials and services required for Local Bounti to expand its business, such as those needed to construct and commission new farming facilities, which may lead to increased costs or delays that could materially and adversely affect Local Bounti’s business.

The extent of COVID-19’s effect on Local Bounti’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on Local Bounti’s business. However, if the pandemic continues to persist as a severe worldwide health crisis, the disease could negatively impact Local Bounti’s business, financial condition results of operations and cash flows, and may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

If Local Bounti cannot maintain its company culture or focus on its vision as it grows, Local Bounti’s business and competitive position may be harmed.

Local Bounti strives to deliver the freshest, locally grown produce. Local Bounti relies on its people, their experience, and their relationships. Any failure to preserve Local Bounti’s culture or any loss of focus on the company’s mission could negatively affect its ability to retain and recruit personnel, which is critical to growth and pursuit of its strategic goals. As Local Bounti increases its number of employees and develops the infrastructure of a public company, it may find it difficult to maintain important values. If Local Bounti fails to maintain its company culture or mission, its business and competitive position may be harmed.

Local Bounti may be unable to successfully execute on its growth strategy.

Local Bounti may not be successful in implementing its growth strategy which includes the development of new commercial facilities and the expansion of its product lines and technological capabilities.

 

   

New Facilities Expansion. The Combined Company’s strategy to develop new CEA facilities has required and will continue to require substantial time and resources. Local Bounti expects to make significant investments to identify attractive markets, select and control sites, perform engineering design and local permitting, construct and commission new facilities, among other activities.

 

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These facilities require sizeable, useable space for agricultural production, including site-specific requirements such as sufficient access to, reliability of, and cost of utilities and other infrastructure; the ability to obtain the appropriate permits and approvals; adequate local labor availability; road access for input supply and distribution of output for sale; among other requirements.

Local Bounti depends on third party general contractors to build its facilities. If Local Bounti does not effectively manage these projects and relationships, new facilities may not be completed on schedule or within allocated budgets. These delays and increased costs could adversely affect Local Bounti’s financial results.

Local Bounti may be unsuccessful in identifying available future sites that support its planned growth strategy, and even if identified, Local Bounti may not be able to lease or purchase the land for any number of reasons. Because of the capital-intensive nature of these projects, Local Bounti will need to prioritize which target regions and which sites it plans to develop, and there can be no guarantee that Local Bounti will select or prioritize sites that will ultimately prove to be appropriate for construction or for operation. Further, Local Bounti may spend time and resources developing sites that may never become developed into facilities, or may be developed at the expense of other appropriate sites, which may ultimately have been a better selection for reasons such as profitability, operational reliability, or market accessibility.

If Local Bounti does not align production capacity of its new commercial facilities with consumer demand and efficient distribution channels, or if Local Bounti does not maintain competitive pricing, it may have underutilized assets which do not perform to expected operational results or profitability, which could adversely affect its business, financial condition and results of operations.

Local Bounti’s ability to compete successfully in new geographies depends on its ability to secure placement of its product with new customers, some of which the company does not have existing relationships with today. Local Bounti’s current strategy for new facility development depends on securing new customers such as food retailers and food service distributors. If Local Bounti does not secure placement of its product with customers that can be supplied from new facilities, its business, financial condition and results of operations could be adversely affected.

Similarly, to date, Local Bounti’s products have only been available commercially in the northwestern United States. When entering new geographies or markets, Local Bounti may not attract consumers at the same rate, due to factors such as demographics, price, product selection, brand perception or awareness, or other reasons. If Local Bounti does not attract demand for its products in new markets, its business, financial condition and results of operations could be adversely affected.

Local Bounti’s strategy for new facility development depends on operating facilities that are at significantly larger production scale than its existing facilities. Local Bounti may encounter unexpected challenges at larger facilities, which may be related to construction, engineering and design, operations and logistics, sales and marketing, ramp-up schedule to full capacity, or otherwise.

If Local Bounti is unable to develop and operate facilities at a larger scale than existing facilities, its business, financial condition and results of operations could be adversely affected.

 

   

Expansion of Loose Leaf Lettuce Product Portfolio. Local Bounti expects to continue to develop and commercialize new varieties of loose leaf lettuce as a source of revenue growth. Local Bounti’s research and development efforts focus on new varieties to expand product offerings, enhance farm unit economics, and create competitive advantages. If Local Bounti does not successfully commercialize new varieties of loose leaf lettuce products, its business, prospects, financial condition and results of operations could be materially and adversely affected.

 

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Alternatively, even if Local Bounti does succeed in commercializing new varieties of loose leaf lettuce products, there can be no guarantee that these products would result in overall growth of Local Bounti’s business through incremental revenue or economic benefit, which could materially and adversely affect Local Bounti’s financial condition and results of operations.

 

   

Expansion into Additional Markets and Verticals. In the future, Local Bounti may pursue new markets, new crops, and new product categories, by leveraging its technology platform to target what the company may see as opportunities to expand its addressable market. If it chooses to pursue such opportunities, Local Bounti will need to prioritize which opportunities it plans to develop, and there can be no guarantee that Local Bounti will select or prioritize ones that ultimately prove appropriate for commercialization. Further, Local Bounti may spend time and resources developing opportunities that may never materialize into new commercial business applications, or that may be developed at the expense of other appropriate commercial opportunities, which may ultimately have been a better selection for reasons such as revenue growth, profitability, market expansion, or other financial and strategic considerations.

Local Bounti may not be able to implement its growth strategy successfully. Local Bounti’s operating results and financial condition will be adversely affected if it fails to implement its growth strategy or if it invests resources in a growth strategy that ultimately proves unsuccessful.

Local Bounti’s operating costs to grow and sell its products may be higher than expected, which could impact its results and financial condition.

If Local Bounti is unable to secure access to inputs on terms consistent with expected costs, there could be material adverse impact on Local Bounti’s business. Local Bounti faces operational risks including, but not limited to:

 

   

Utilities. Local Bounti is subject to market prices and may experience fluctuating, rising, or volatile energy costs which could negatively affect its business, financial condition, and results of operation. Local Bounti may decide to enter into supply agreements to mitigate such risks, where such options are present on favorable terms, but there is no guarantee of cost to operate its facilities.

 

   

Labor. Local Bounti relies on access to local labor supply, including skilled and unskilled positions. The Combined Company may face pressure to increase wages in order to attract and retain appropriate staffing of its facilities. Increases to minimum wages or competitive wages may cause Local Bounti’s labor costs to run higher than expected, which could negatively affect its financial performance and cash flows.

 

   

Packaging Materials. Local Bounti packages its products in form factors consistent with comparable products in order to distribute and present on-shelf. If raw material costs increase, or if Local Bounti is unable to achieve its expected packaging materials costs for any reason, its financial performance could be adversely impacted.

 

   

Depreciation and Useful Life of Assets. Local Bounti relies on making assumptions about the expected useful life of the assets used to operate its facilities. If the useful life turns out to be materially shorter than expected, the Combined Company may need to invest additional capital to replace these assets, and the corresponding depreciation expense may be greater than expected which would affect the Combined Company’s profitability and financial condition generally. If the cost of maintaining equipment necessary to its operations is greater than anticipated, it could adversely impact the Combined Company’s operations and financial results. There also may be future tax implications of Local Bounti’s ability to make accurate assumptions about the expected useful life of its assets, and if Local Bounti is unable to correctly forecast such information, its financial condition could be materially and negatively impacted.

 

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Seeds and Other Supplies. Local Bounti may rely on certain seed supplies that may be specifically tailored to grow high-quality plants in its CEA facilities. If there were a field crop failure where Local Bounti would have to depend on an alternative supply of seeds from qualified back-up suppliers, the cost of seeds and its impact on production of Local Bounti’s products could be negatively impacted for a period of time. Local Bounti also depends on consistent access of other inputs and supplies to operate its facilities reliably, including water supply, nutrients, growth media, food safety testing, sanitation supplies and packaging materials, among others. If the cost of any of these inputs increases materially, then Local Bounti’s financial results could be adversely affected.

 

   

Distribution of Finished Goods. Local Bounti may partially rely on third-party distribution and logistics to deliver its products. While the Combined Company believes there to be a competitive market of supply chain service providers, if the cost of such services increases materially due to rising fuel costs, labor costs, or other macroeconomic factors, which may be beyond its control, then Local Bounti’s financial results could be materially and negatively impacted.

If Local Bounti’s estimates or judgments relating to its critical accounting policies prove to be incorrect, its results of operations could be adversely affected.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in Local Bounti’s consolidated financial statements and related notes appearing elsewhere in this joint proxy statement/prospectus. Local Bounti bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, as provided in the section entitled “Local Bounti Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant estimates and judgments involve the useful lives of fixed assets, the valuation of instruments issued for financing and stock-based compensation, and income taxes, among others. Local Bounti’s results of operations may be adversely affected if its assumptions change or if actual circumstances differ from those in its assumptions, which could cause the Combined Company’s results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of its common stock after the Closing.

Local Bounti will incur increased costs as a result of operating as a public company, and its management will devote substantial time to new compliance initiatives.

If Local Bounti completes the Business Combination and becomes a public company, it will incur significant legal, accounting and other expenses that it did not incur as a private company, and these expenses may further increase if Local Bounti is no longer an emerging growth company, as defined in Section 2(a) of the Securities Act. As a public company, Local Bounti will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and Nasdaq. Local Bounti’s management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, Local Bounti expects these rules and regulations to substantially increase its legal and financial compliance costs and to make some activities more time-consuming and costly. The increased costs may increase Local Bounti’s net loss. For example, Local Bounti expects these rules and regulations to make it more difficult and more expensive for it to obtain director and officer liability insurance and it may be forced to accept reduced policy limits or incur substantially higher costs to maintain the same or similar coverage. Local Bounti cannot predict or estimate the amount or timing of additional costs it may incur to respond to these requirements. The impact of these requirements could also make it more difficult for Local Bounti to attract and retain qualified persons to serve on its board of directors, its board committees or as executive officers.

 

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Local Bounti has identified material weaknesses in its internal control over financial reporting as of December 31, 2020 and 2019. If Local Bounti fails to develop and maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results in a timely manner, which may adversely affect investor confidence in the Combined Company.

In connection with Local Bounti’s financial statement close process for the years ended December 31, 2020 and 2019, Local Bounti identified a material weakness in the design and operating effectiveness of its internal control over financial reporting. The material weakness Local Bounti identified resulted from a lack of sufficient number of qualified personnel, causing a lack of segregation of duties, within its accounting function who possessed an appropriate level of expertise to effectively perform the following functions:

 

   

design and maintain formal accounting policies, procedures and controls over significant accounts and disclosures to appropriately analyze, record and disclose complex technical accounting matters, including, among other matters, equity transactions and stock-based compensation, commensurate with its accounting and reporting requirements;

 

   

identify, select and apply GAAP sufficiently to provide reasonable assurance that transactions were being appropriately recorded; and

 

   

assess risk and design appropriate control activities over information technology systems and financial and reporting processes necessary to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its financial statements would not be prevented or detected on a timely basis. These deficiencies could result in additional material misstatements to its consolidated financial statements that could not be prevented or detected on a timely basis.

Local Bounti’s management is in the process of developing a remediation plan which shall include, without limitation, the hiring of additional accounting and finance personnel with technical public company accounting and financial reporting experience. The material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.

The Combined Company’s management will monitor the effectiveness of the Combined Company’s remediation plans and will make changes management determines to be appropriate.

If not remediated, these material weaknesses could result in material misstatements to the Combined Company’s annual or interim consolidated financial statements that might not be prevented or detected on a timely basis, or in delayed filing of required periodic reports. If the Post-Combination Company is unable to assert that its internal control over financial reporting is effective, or when required in the future, if the Combined Company’s independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of the internal control over financial reporting, investors may lose confidence in the accuracy and completeness of the Post-Combination Company’s financial reports, the market price of the Common Stock could be adversely affected and the Combined Company could become subject to litigation or investigations by the NYSE, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Local Bounti’s ability to use net operating loss carryforwards and other tax attributes may be limited in connection with the business combination or other ownership changes.

Local Bounti has incurred losses during its history and does not expect to become profitable in the near future, and may never achieve profitability. To the extent that Local Bounti continues to generate taxable losses,

 

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unused losses will carry forward to offset future taxable income, if any, until such unused losses expire, if at all. As of December 31, 2020 and June 30, 2021, Local Bounti had U.S. federal net operating loss carryforwards of approximately $7.2 million and $15.5 million, respectively.

Under U.S. federal tax legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, U.S. federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income.

In addition, Local Bounti’s net operating loss carryforwards are subject to review and possible adjustment by the IRS, and state tax authorities. Under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Local Bounti’s federal net operating loss carryforwards and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in the ownership of Local Bounti. An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Local Bounti’s ability to utilize its net operating loss carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in connection with the business combination or other transactions. Similar rules may apply under state tax laws. Local Bounti has not yet determined the amount of the cumulative change in its ownership resulting from the Business Combination or other transactions, or any resulting limitations on its ability to utilize its net operating loss carryforwards and other tax attributes. If Local Bounti earns taxable income, such limitations could result in increased future income tax liability to Local Bounti and its future cash flows could be adversely affected. Local Bounti has recorded a valuation allowance related to its net operating loss carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

Risks Related to the Natural Food Market

Local Bounti faces risks inherent in the CEA business, including the risks of diseases and pests.

Local Bounti is subject to the risks inherent in an agricultural business, such as insects, plant diseases and similar agricultural risks, which may include crop losses, for which Local Bounti may not be insured. Although Local Bounti’s products are grown in climate-controlled, indoor vertical farms, there can be no assurance that natural elements will not affect the production of these products. In particular, plant diseases or pest infestations are possible and have the potential to materially impact production.

Although Local Bounti has taken and continues to take precautions to guard against crop diseases and pests, these efforts may not be sufficient. In addition, diseases and pests can make their way into greenhouses from outside sources over which Local Bounti has limited or no control. Diseases and pests can be inadvertently brought in by employees, from seeds and propagation vendors and from the trucks that transport supplies to the greenhouse. Once a disease or pest is introduced, Local Bounti will need to quickly identify the problem and take remedial action to preserve the growing season. Failure to identify and remediate any diseases or pests in a timely manner could cause the loss of all or a portion of Local Bounti’s crop and result in substantial time and resources to resume operations. Crop losses because of these agricultural risks could negatively impact Local Bounti’s business, prospects, financial condition, results of operations and cash flows.

Local Bounti may not be able to compete successfully in the highly competitive natural food market.

Local Bounti operates in the highly competitive natural foods environment. With the importing of crops rapidly increasing, Local Bounti’s competition includes large-scale operations in Mexico, Canada and to a

 

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lesser extent the western United States. In this market, competition is based on, among other things, product quality and taste, brand recognition and loyalty, product variety, product packaging and package design, shelf space, reputation, price, advertising, promotion and nutritional claims.

The produce industry generally does not work on long-term contracts and is dependent upon consistent sales targets to be successful. Local Bounti’s ability to compete depends in part on its ability to secure placement of its product with customers; moreover, as Local Bounti enters new markets, its ability to compete will depend in part on its ability to secure placement of its products with new customers, some of which Local Bounti does not have existing relationships with today. Similarly, Local Bounti’s products historically have been available for consumers only in the northwestern United States. When entering new geographies, the Local Bounti may not be able to secure placement of its product with new customers, or its products may not attract end consumers at the same rate, which could materially and adversely affect its results of operations and financial condition.

Local Bounti may not be able to compete against competition from traditional field farm operators, both domestic and abroad, as well as from indoor growers or high-tech agricultural startups that are focused on local production within or near major cities, which would take away potential market share from Local Bounti.

Some of these competitors have products that are well accepted in the marketplace today. Further, Local Bounti cannot be certain that it will successfully compete with competitors that may have greater resources, including financial resources, sales resources, technical resources, or other resources. Competitors also may have lower operational costs, and as a result may be able to offer comparable or substitute products to customers at a lower price. This could put pressure on Local Bounti to lower its prices, resulting in reduced profitability or causing Local Bounti to lose market share if it fails to lower prices. Retailers may also market competitive products under their own private labels, which are generally sold at lower prices, and may change the merchandising of Local Bounti’s products such that Local Bounti has less favorable placement.

The CEA business is generally capital intensive but has relatively low barriers to entry, and Local Bounti will not be able to prevent competitors from building and operating their own indoor farming sites.

In addition, Local Bounti’s ability to compete successfully depends, in large part, on its ability to implement its growth strategy of building additional CEA facilities and expanding its product line. Local Bounti’s financial condition and operating results will be adversely affected if it fails to implement its growth strategy or if Local Bounti invests resources in a growth strategy that ultimately proves unsuccessful.

Local Bounti’s ability to generate and grow revenue is dependent on its ability to increase the yield in each of the anticipated product lines it intends to grow. If Local Bounti is unable to increase the yield in each or most of these product lines, Local Bounti’s project revenue targets may not be achieved on currently anticipated timelines or at all.

If Local Bounti is unable to grow product to its yield targets and quality specifications, its business, prospects, operational performance, and financial condition could be materially and adversely affected. Local Bounti faces risks including, but not limited to:

 

   

Mechanical Failure. Local Bounti relies on its mechanical designs and equipment to provide the physical space and structures in which plants are grown. It also provides the design and controls related to environmental conditions, nutrient delivery, lighting, conveyance, and other elements necessary to grow plants in its systems. If mechanical issues or failures occur, the yield and quality of Local Bounti’s products could be diminished for a period of time, which more generally could negatively impact Local Bounti’s operations and financial condition;

 

   

Systems or Software Failure. Local Bounti relies on integrated controls and computing to optimize and control the growing environments for its produce. A failure in these systems or software could reduce output, lower yield or damage crop quality, which negatively impact operations and financial conditions;

 

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Human Error. Local Bounti relies on the know-how of its operations teams, their experience, and their oversight of the operations of its facilities. If issues are caused by human error during the various phases of seeding, germination, growing, harvesting, or other standard operating procedures, or if Local Bounti employees fail to properly oversee facility operations, then the yield and quality of Local Bounti’s products could be diminished, which more generally could have material and adverse effects on Local Bounti’s business, operating results, and financial condition; and

 

   

Seed Supply and Quality. Local Bounti may rely on certain seed supplies that may be specifically tailored to grow high-quality plants in its CEA facilities. Seeds may originate from field-grown plants, where seeds are harvested, then bred to generate seed inventory. If there were a field crop failure where Local Bounti would have to rely on an alternative supply of seeds from qualified back-up suppliers, the yield or quality of production of Local Bounti’s products could be diminished for a period of time. Bad seed lots, low germination rates, and similar issues that affect growing also could result in Local Bounti’s inability to achieve proper and consistent product yields or product quality, which could materially and adversely affect performance, and more generally could negatively impact Local Bounti’s business, financial condition and operating results.

Risks Related to Local Bounti’s Technology, Intellectual Property and Infrastructure

Local Bounti may need to defend itself against intellectual property infringement claims, which may be time-consuming and could cause Local Bounti to incur substantial costs.

Local Bounti’s defense of intellectual property rights claims brought against it or its customers, suppliers and partners, with or without merit, could adversely affect Local Bounti’s relationships with its customers, may deter future customers from purchasing its products, could be time-consuming, expensive to litigate or settle, divert management resources and attention and force Local Bounti to acquire intellectual property rights and licenses, which may involve substantial royalty or other payments and may not be available on acceptable terms or at all. Further, a party making such a claim, if successful, could secure a judgment that requires Local Bounti to pay substantial damages or obtain an injunction. An adverse determination also could invalidate Local Bounti’s intellectual property rights and adversely affect its ability to offer its products to its customers and may require Local Bounti to procure or develop substitute intellectual property that does not infringe, which could require significant effort and expense. Any of these events could adversely affect Local Bounti’s business, operating results, financial condition and prospects.

The loss of any registered trademark or other intellectual property could enable other companies to compete more effectively with Local Bounti.

Local Bounti owns patents, trademarks and other proprietary rights that are important to its business, including Local Bounti’s principal trademarks, “Local BountiTM,” “Stack & Flow TechnologyTM,” and “Farm of the FutureTM.” Local Bounti’s trademarks are valuable assets that reinforce the distinctiveness of its brand to consumers, and Local Bounti’s operations utilize intellectual property that is patented. Local Bounti believes that the protection of its patents, trademarks, copyrights and domain names is important to its success. Local Bounti has also invested a significant amount of money in establishing and promoting its trademarked brand. A patent for our “Stack & Flow Technology TM” was submitted in August 2020. Additionally, an additional patent protecting additional features of our growing technology was submitted in September 2021 and another is expected to be submitted in the fourth quarter of 2021. Local Bounti also relies on unpatented proprietary expertise and copyright protection to develop and maintain its competitive position. Local Bounti’s continued success depends, to a significant degree, upon its ability to protect and preserve its intellectual property, including patents, trademarks and copyrights.

 

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Local Bounti relies on confidentiality agreements and patent, trademark and copyright law to protect its intellectual property rights. These confidentiality agreements with team members and certain consultants, contract employees, suppliers and independent contractors generally require that all information made known to them be kept strictly confidential.

Local Bounti cannot assure you that the steps it has taken to protect its intellectual property rights are adequate, that Local Bounti’s intellectual property rights can be successfully defended and asserted in the future or that third parties will not infringe upon or misappropriate any such rights. In addition, Local Bounti’s trademark rights and related registrations may be challenged in the future and could be canceled or narrowed. Local Bounti’s failure to protect its trademark rights could prevent Local Bounti in the future from challenging third parties who use names and logos similar to Local Bounti’s trademarks, which may in turn cause consumer confusion or negatively affect consumers’ perception of Local Bounti’s brand and products. Moreover, intellectual property disputes and proceedings and infringement claims may result in a significant distraction for management and significant expense, which may not be recoverable regardless of whether Local Bounti is successful. Such proceedings may be protracted with no certainty of success, and an adverse outcome could subject Local Bounti to liabilities, force Local Bounti to cease use of certain trademarks or other intellectual property or force Local Bounti to enter into licenses with others. Any one of these occurrences may negatively impact Local Bounti’s business, financial condition and results of operations.

Local Bounti relies on information technology systems and any inadequacy, failure, interruption or security breaches of those systems may harm its ability to effectively operate its business.

Local Bounti is dependent on various information technology systems, including, but not limited to, networks, applications and outsourced services in connection with the current and planned operation of its business. A failure of these information technology systems to perform as anticipated could cause Local Bounti’s business to suffer. For example, Local Bounti growers are aided in their work by climate and greenhouse operations software. If this software does not perform as anticipated, Local Bounti’s operations may be adversely affected resulting in decreased yield or quality, mitigation expenses, waste, additional labor expenses and partial or full loss of the crop.

In addition, Local Bounti’s information technology systems may be vulnerable to damage or interruption from circumstances beyond Local Bounti’s control, including fire, natural disasters, systems failures, viruses and security breaches. Any such damage or interruption could negatively impact Local Bounti’s business.

Local Bounti uses or plans to use computers, software and technology in substantially all aspects of its business operations. Local Bounti’s employees also use or plan to use mobile devices, social networking and other online activities to connect with crew members, distributors, customers and consumers. Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of information. Cybersecurity incidents are increasing in their frequency, sophistication and intensity, with third-party phishing and social engineering attacks in particular increasing in connection with the COVID-19 pandemic. Local Bounti’s business involves sensitive information and intellectual property, including know-how, private information about crew members and financial and strategic information about the company and its business partners.

While Local Bounti has implemented and plans to implement measures to prevent security breaches and cyber incidents, these preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss, misappropriation or release of sensitive information or intellectual property, or interference with Local Bounti’s information technology systems or the technology systems of third parties on which it relies, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers and distributors, potential liability and competitive disadvantage all of which could negatively impact Local Bounti’s business, financial condition or results of operations.

 

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Risks Related to our Customers

Local Bounti could be adversely affected by a change in consumer preferences, perception and spending habits in the food industry, and failure to develop and expand its product offerings or gain market acceptance of its products could have a negative effect on Local Bounti’s business.

The market in which Local Bounti operates is subject to changes in consumer behavior. Local Bounti’s performance will depend significantly on factors that may affect the level and pattern of consumer spending in the U.S. food industry market in which Local Bounti operates, including consumer preference, income, confidence in and perception of the safety and quality of Local Bounti’s products and competitive products, and shifts in the perceived value for Local Bounti’s products relative to alternatives. Such factors include consumer preference, consumer income, consumer confidence in and perception of the safety and quality of Local Bounti products and shifts in the perceived value for Local Bounti products relative to alternatives.

 

   

Consumer Preferences. Local Bounti’s first commercialized crops are leafy greens and fresh herbs, including variations of loose leaf and living lettuce, basil and cilantro. There is no guarantee that leafy greens and herbs will continue to be demanded by consumers, or that consumers will prefer the leafy greens and herbs grown by Local Bounti versus competitors. Consumer trends toward crops with lower yields or at lower price points may adversely affect Bounti’s financial performance. If Local Bounti expands its product offerings to include other produce, it will similarly be impacted by consumer preferences for such products.

 

   

Safety and Quality Concerns. Media coverage regarding the safety or quality of, or diet or health issues relating to, Local Bounti’s products or the processes involved in their production, may damage consumer confidence in Local Bounti products. For example, manufacturers and regulatory authorities have issued recalls of loose leaf lettuce in the past due to issues such as salmonella contamination. Any widespread safety or quality issues loose leaf lettuce or other fresh vegetables and herbs — even if not involving Local Bounti — could adversely affect consumer confidence in and demand for such loose leaf lettuce. Further, CEA is a relatively small, new industry, and a food safety incident involving an indoor farming producer other than Local Bounti, including direct competitors, may adversely affect consumer perception of or demand for Local Bounti’s products.

 

   

Consumer Income. A general decline in the consumption of Local Bounti products could occur at any time as a result of change in consumer spending habits, including an inability to purchase Local Bounti products due to financial hardship or increased price sensitivity, which may be exacerbated by the effects of the COVID-19 pandemic.

 

   

Desire for Sustainable Products. A general decline in the consumption of Local Bounti products could occur at any time as a result of change in consumer spending habits, including an unwillingness to pay a premium for products that are more sustainable or meet ESG objectives in a manner more in-line with consumer preferences.

 

   

Price Compression. Tomatoes have decreased in price consistently over the past 10 to 15 years due to an increase in production. Loose leaf lettuce may follow this trend and this could pose a risk to the gross margins of the Combined Company, which could negatively and materially affect the Combined Company’s financial performance.

The success of Local Bounti products will depend on a number of factors including Local Bounti’s ability to accurately anticipate changes in market demand and consumer preferences, its ability to differentiate the quality of Local Bounti products from those of its competitors, and the effectiveness of marketing and advertising campaigns for Local Bounti products. Local Bounti may not be successful in identifying trends in consumer preferences and growing or developing products that respond to such trends in a timely manner. Local Bounti or its retail partners also may not be able to effectively promote Local Bounti products by marketing and advertising campaigns and gain market acceptance. If Local Bounti products fail to gain market acceptance, are

 

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restricted by regulatory requirements or have quality problems, Local Bounti may not be able to fully recover costs and expenses incurred in its operations, and Local Bounti’s business, financial condition or results of operations could be materially and adversely affected.

Demand for lettuce, cilantro, basil and other greens and herbs is subject to seasonal fluctuations and may adversely impact Local Bounti’s results of operations in certain quarters.

Demand for leafy greens products may be subject to some degree of seasonality due to consumer behavior. As a result, comparisons of Local Bounti’s sales and operating results between different periods may not necessarily be meaningful comparisons. If Local Bounti is not correct in forecasting demand and planning its growing seasons accordingly, Local Bounti may experience reduced average sales prices or a supply-demand imbalance, which could adversely impact its results of operations at certain times of the year.

As Local Bounti grows its sales into the retail channel and increase sales through individual retailers, the loss or significant reductions in orders from Local Bounti’s top retail customers could have a material adverse impact on its business.

Local Bounti’s customers include retailers and food service distributors. Sales to Local Bounti’s top retail customers contribute to a signification portion of Local Bounti’s revenue, accounting for approximately 70% of Local Bounti’s gross revenue for the year ended December 31, 2020 and 79% of Local Bounti’s gross revenue for the six months ended June 30, 2021. Local Bounti believes sales to its top retailer customers will continue to constitute a significant portion of its revenues, income and cash flow for the foreseeable future. Local Bounti’s inability to resolve a significant dispute with any of its top retail customers, a change in the business condition (financial or otherwise) of any of its top retail customers, even if unrelated to Local Bounti, a significant reduction in sales to any top retail customer, or the loss of any of top retail customer can adversely affect Local Bounti’s business, financial condition or results of operations.

Risks Related to Legal Matters and Regulations

The unavailability, reduction or elimination of government and economic incentives could negatively impact Local Bounti’s business, prospects, financial condition and operating results.

Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, the reduced need for such subsidies and incentives due to the perceived success of Local Bounti’s operations or other reasons may result in the diminished competitiveness of the CEA facility industry generally or Local Bounti products in particular. This could materially and adversely affect Local Bounti’s business, prospects, financial condition and operating results.

Local Bounti may be subject to litigation and government inquiries and investigations involving its business, the outcome of which is unpredictable, and an adverse decision in any such matter could have a material effect on Local Bounti’s financial position and results of operations.

From time to time, Local Bounti may be party to various claims and litigation proceedings. Local Bounti will evaluate these claims and litigation proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, Local Bounti may establish reserves, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from Local Bounti’s assessments and estimates. Local Bounti is not currently party to any material litigation.

Even when not merited, the defense of these lawsuits may divert management’s attention, and Local Bounti may incur significant expenses in defending these lawsuits. The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may

 

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result in adverse monetary damages, penalties or injunctive relief against Local Bounti, which could negatively impact its financial position, cash flows or results of operations. Any claims or litigation, even if fully indemnified or insured, could damage Local Bounti’s reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.

Furthermore, while Local Bounti maintains insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable. Even if Local Bounti believes a claim is covered by insurance, insurers may dispute Local Bounti’s entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of Local Bounti’s recovery.

Local Bounti’s business involves significant risks and uncertainties that may not be covered by indemnity or insurance.

While Local Bounti maintains insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable. Even if Local Bounti believes a claim is covered by insurance, insurers may dispute Local Bounti’s entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of Local Bounti’s recovery. Any settlement or judgment against Local Bounti that exceeds the policy limits or not covered by its policies or not subject to insurance would have to be paid from Local Bounti’s cash reserves, which would reduce Local Bounti’s capital resources.

Local Bounti’s future operations could expose it to the risk of material environmental and regulatory liabilities, including unforeseen costs associated with compliance and remediation efforts, and government and third party claims, which could have a material adverse effect on Local Bounti’s reputation, results of operations and cash flows.

The manufacture and marketing of food products is highly regulated. Local Bounti and its suppliers are subject to a variety of laws and regulations. These laws and regulations apply to many aspects of Local Bounti’s business, including the production, packaging, labeling, distribution, advertising, sale, quality, and safety of its products, as well as the health and safety of its employees and the protection of the environment.

Local Bounti is subject to regulation by various government agencies, including the USDA, the FDA, the Federal Trade Commission, the Occupational Health and Safety Administration, and the U.S. Environmental Protection Agency, as well as various state and local agencies. Local Bounti is also regulated outside the United States by various international regulatory bodies. In addition, depending on customer specification, Local Bounti may be subject to certain voluntary, third-party standards, such as Global Food Safety Initiative, or GFSI, standards and review by voluntary organizations, such as the Council of Better Business Bureaus’ National Advertising Division. Local Bounti could incur costs, including fines, penalties and third-party claims, because of any violations of, or liabilities under, such requirements, including any competitor or consumer challenges relating to compliance with such requirements. The loss of third-party accreditation could result in lost sales and customers, and may adversely affect Local Bounti’s business, results of operation, and financial condition. In connection with the marketing and advertisement of its products, Local Bounti could be the target of claims relating to false or deceptive advertising, including under the auspices of the Federal Trade Commission and the consumer protection statutes of some states.

CEA farming is a relatively new industry lacking a deep body of specific regulations applicable to its operations. As the industry matures, Local Bounti may become subject to new regulations that may adversely affect its business.

The regulatory environment in which Local Bounti operates could change significantly and adversely in the future. Any change in production, labeling or packaging requirements for Local Bounti’s products may

 

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lead to an increase in costs or interruptions in production, either of which could adversely affect its operations and financial condition. New or revised government laws and regulations could result in additional compliance costs and, in the event of non-compliance, civil remedies, including fines, injunctions, withdrawals, recalls, or seizures and confiscations, as well as potential criminal sanctions, any of which may adversely affect Local Bounti’s business, results of operations, and financial condition.

Political issues and considerations could have a significant effect on Local Bounti’s business.

With the beginning of a new presidential administration, there is uncertainty with respect to, among other things, legislation, regulation and government policy at the federal, state and local levels. Specific legislative and regulatory proposals discussed during the 2020 election which may adversely impact Local Bounti include, but are not limited to, changes to existing trade agreements, import and export regulations, tariffs, travel restrictions, customs duties, income tax regulations and the federal tax code, public company reporting requirements, environmental regulations, antitrust enforcement and regulation related to the COVID-19 pandemic. Any changes in the political issues and considerations may have a negative impact on Local Bounti’s business, its financial condition and results of operations could be adversely affected.

Food-safety and foodborne-illness incidents or advertising or product mislabeling may materially adversely affect Local Bounti’s business by exposing Local Bounti to lawsuits, product recalls, or regulatory enforcement actions, increasing Local Bounti’s operating costs and reducing demand for its product offerings.

Selling food for human consumption involves inherent legal and other risks, and there is increasing governmental scrutiny of and public awareness regarding food safety. Unexpected side effects, illness, injury or death related to allergens, foodborne illnesses or other food safety incidents caused by Local Bounti products, or involving its suppliers, could result in the discontinuance of sales of these products or Local Bounti’s relationships with such suppliers, or otherwise result in increased operating costs, regulatory enforcement actions, or harm to Local Bounti’s reputation. Shipment of adulterated or misbranded products, even if inadvertent, can result in criminal or civil liability. Such incidents could also expose Local Bounti to product liability, negligence, or other lawsuits, including consumer class action lawsuits. Any claims brought against us may exceed or be outside the scope of Local Bounti’s existing or future insurance policy coverage or limits. Any judgment against Local Bounti that is more than Local Bounti’s policy limits or not covered by Local Bounti’s policies or not subject to insurance would have to be paid from Local Bounti’s cash reserves, which would reduce Local Bounti’s capital resources.

The occurrence of foodborne illnesses or other food safety incidents could also adversely affect the price and availability of affected raw materials, resulting in higher costs, disruptions in supply and a reduction in sales. Furthermore, any instances of food contamination or regulatory noncompliance, whether or not caused by Local Bounti’s actions, could compel Local Bounti, its suppliers, distributors or customers, depending on the circumstances, to conduct a recall in accordance with Food and Drug Administration regulations, and comparable state laws. Food recalls could result in significant losses due to their costs, the destruction of product inventory, lost sales due to the unavailability of the product for a period of time, potential loss of existing distributors or customers and a potential negative impact on Local Bounti’s ability to attract new customers due to negative consumer experiences or because of an adverse impact on Local Bounti’s brand and reputation. The costs of a recall could be outside the scope of Local Bounti’s existing or future insurance policy coverage or limits.

In addition, food companies have been subject to targeted, large-scale tampering as well as to opportunistic, individual product tampering, and Local Bounti, like any food company, could be a target for product tampering. Forms of tampering could include the introduction of foreign material, chemical contaminants, and pathogenic organisms into consumer products as well as product substitution. Food and Drug Administration regulations require companies like Local Bounti to analyze, prepare, and implement mitigation strategies specifically to address tampering designed to inflict widespread public health harm. If Local Bounti

 

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does not adequately address the possibility, or any actual instance, of product tampering, Local Bounti could face possible seizure or recall of its products, suspension of its facilities’ registrations, and/or the imposition of civil or criminal sanctions, which could materially adversely affect Local Bounti’s business, financial condition, and operating results.

Local Bounti’s brand and reputation may be diminished due to real or perceived quality or food-safety issues with its products, which could negatively impact Local Bounti’s business, reputation, operating results and financial condition.

Real or perceived quality or food safety concerns or failures to comply with applicable food regulations and requirements, whether or not ultimately based on fact and whether or not involving Local Bounti (such as incidents involving Local Bounti’s competitors), could cause negative publicity and reduced confidence in Local Bounti’s brand or products, which could in turn harm its reputation and sales, and could adversely affect its business, financial condition and operating results. Brand value is also based on perceptions of subjective qualities, such as appearance and taste, and any incident that erodes the loyalty of Local Bounti’s consumers, including changes to product appearance, taste or packaging, could significantly reduce the value of Local Bounti’s brand and significantly damage its business.

Local Bounti also has no control over its products once a third-party distributor takes possession of them. Distributors or consumers may store Local Bounti products under conditions and for periods of time inconsistent with the USDA, the FDA, and other governmental guidelines, which may adversely affect the quality and safety of Local Bounti’s products.

If consumers do not perceive Local Bounti’s products to be of high quality or safe, then the value of its brand would be diminished, and its business, results of operations and financial condition would be adversely affected. Any loss of confidence on the part of consumers in the quality and safety of Local Bounti’s products would be difficult and costly to overcome. Any such negative effect could be exacerbated by Local Bounti’s market positioning as a socially conscious grower of high-quality produce and may significantly reduce Local Bounti’s brand value. Issues regarding the safety of any of Local Bounti’s products, regardless of the cause, may harm its brand, reputation and operating results.

Local Bounti’s operations are, or will be, subject to regulation by the USDA, the FDA and other federal, state and local regulation, and while Local Bounti intends to comply with all such applicable regulations, there is no assurance that Local Bounti is, or will be, in compliance with all such regulations.

Local Bounti’s operations are, or will be, subject to extensive regulation by the USDA, the FDA and other federal, state and local authorities. Specifically, Local Bounti is or will be subject to the requirements of the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by the FDA. This comprehensive regulatory program governs, among other things, the growing, packaging, labeling and safety of food. Under this program, the Food and Drug Administration requires that facilities that grow and pack, food products comply with a range of requirements, including standards for the growing, harvesting, packing and holding of produce. The Montana Facility is subject to periodic inspection by federal, state and local authorities. If Local Bounti cannot successfully grow products that conform to its specifications and the strict regulatory requirements of the USDA, the FDA or other federal applicable regulations, Local Bounti may be subject to adverse inspectional findings or enforcement actions, which could materially impact Local Bounti’s ability to market its products, or could result in a recall of Local Bounti products that have already been distributed. While Local Bounti intends to comply with all such applicable regulations, there is no assurance that Local Bounti is, or will be, in compliance will all such regulations. If the USDA, the FDA (under the FSMA) or a comparable regulatory authority determines that Local Bounti has not complied with the applicable regulatory requirements, Local Bounti’s business may be materially impacted.

 

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Local Bounti seeks to comply with applicable regulations through a combination of employing internal experience and expert personnel to ensure quality-assurance compliance (i.e., assuring that products are not adulterated or misbranded) and contracting with third-party laboratories that conduct analyses of products to identify any potential contaminants before distribution. Failure by Local Bounti to comply with applicable laws and regulations or maintain permits, licenses or registrations relating to its operations could subject Local Bounti to civil remedies or penalties, including fines, injunctions, recalls or seizures, warning letters, restrictions on the marketing or production of products, or refusals to permit the import of raw materials, as well as potential criminal sanctions, which could result in increased operating costs resulting in a material effect on Local Bounti’s operating results and business.

Failure by any suppliers of raw materials to comply with food safety, environmental or other laws and regulations, or with the specifications and requirements of Local Bounti’s products, may disrupt Local Bounti’s supply of products and adversely affect its business.

If Local Bounti’s current or future suppliers of raw materials fail to comply with food safety, environmental, or other laws and regulations, or face allegations of non-compliance, Local Bounti’s operations may be disrupted. Additionally, downstream distribution partners are required to maintain the quality of Local Bounti products and to comply with Local Bounti’s standards and specifications. In the event of actual or alleged non-compliance, Local Bounti might be forced to find alternative suppliers and may be subject to lawsuits related to such non-compliance by such suppliers. As a result, Local Bounti’s supply of produce and finished inventory could be disrupted or Local Bounti’s costs could increase, which would adversely affect Local Bounti’s business, results of operations, and financial condition. The failure of any supplier to comply with Local Bounti’s specifications and requirements could adversely affect Local Bounti’s reputation in the marketplace and result in product recalls, product liability claims, and economic loss. Additionally, actions Local Bounti may take to mitigate the impact of any disruption or potential disruption in its supply of produce, including increasing inventory in anticipation of a potential supply or production interruption, may adversely affect Local Bounti’s business, results of operations, and financial condition.

Risks Related to Local Bounti’s Term Loan Facility

Local Bounti has entered into agreements for a term loan facility with Cargill Financial Services Inc. (“Cargill Financial”), one of its existing lenders, for a $200 million term loan credit facility. The credit facility is secured by all of the Combined Company’s assets, including its intellectual property. Additionally, the definitive documentation states that if there is an occurrence of an uncured event of default, Cargill Financial will be able to foreclose on all Local Bounti assets, and securities in the Combined Company could be rendered worthless.

Local Bounti entered into agreements for a $200 million loan credit facility in September 2021 with Cargill Financial. The credit facility is secured by all of the Combined Company’s assets, including its intellectual property. Additionally, the definitive documentation states that if Local Bounti defaults on its obligations, Cargill Financial could foreclose on all Local Bounti assets, which would materially harm Local Bounti’s business, financial condition and results of operations. The pledge of these assets and other restrictions may also limit Local Bounti’s flexibility in raising capital for other purposes. Because all of Local Bounti’s assets are pledged under the term loan, Local Bounti’s ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on Local Bounti’s financial flexibility. See the section entitled “Information about Local Bounti’s Business – Cargill Credit Facility Agreements” located elsewhere in this joint proxy statement/prospectus for more information about the anticipated credit facility.

 

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Risks Relating to Ownership of the Local Bounti Common Stock after the Closing

The stock price following the Closing will be volatile, and you may not be able to sell shares at or above the price at the Closing.

After the Closing, the trading price of the Local Bounti Common Stock and Local Bounti Warrants will be volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond Local Bounti’s control. These factors include:

 

   

actual or anticipated fluctuations in operating results;

 

   

failure to meet or exceed financial estimates and projections of the investment community or that Local Bounti provides to the public;

 

   

issuance of new or updated research or reports by securities analysts or changed recommendations for the industry in general;

 

   

announcements of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

 

   

operating and share price performance of other companies in the industry or related markets;

 

   

the timing and magnitude of investments in the growth of the business;

 

   

actual or anticipated changes in laws and regulations;

 

   

additions or departures of key management or other personnel;

 

   

increased labor costs;

 

   

decreased pricing of product;

 

   

disputes or other developments related to intellectual property or other proprietary rights, including litigation;

 

   

the ability to market new and enhanced solutions on a timely basis;

 

   

sales of substantial amounts of the Local Bounti Common Stock by Local Bounti’s directors, executive officers or significant stockholders or the perception that such sales could occur;

 

   

changes in capital structure, including future issuances of securities or the incurrence of debt; and

 

   

general economic, political and market conditions.

In addition, the stock market in general, and the stock prices of technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of Local Bounti Common Stock, regardless of actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources.

Local Bounti does not intend to pay cash dividends for the foreseeable future.

Following the Business Combination, Local Bounti currently intends to retain its future earnings, if any, to finance the further development and expansion of its business and does not intend to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of Local Bounti’s board of directors and will depend on its financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as its board of directors deems relevant.

 

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Anti-takeover provisions contained in the Proposed Organizational Documents and applicable laws could impair a takeover attempt.

Upon the Closing, the Proposed Organizational Documents will afford certain rights and powers to the New Local Bounti Board that could contribute to the delay or prevention of an acquisition that it deems undesirable. Local Bounti will also be subject to Section 203 of the DGCL and other provisions of Delaware law that limit the ability of stockholders in certain situations to effect certain business combinations. Any of the foregoing provisions and terms that have the effect of delaying or deterring a change in control could limit the opportunity for stockholders to receive a premium for their shares of Local Bounti Common Stock, and could also affect the price that some investors are willing to pay for the Local Bounti Common Stock. See also “Description of the Securities.”

Local Bounti is subject to risks related to taxation in the United States.

Significant judgments based on interpretations of existing tax laws or regulations are required in determining Local Bounti’s provision for income taxes. Local Bounti’s effective income tax rate could be adversely affected by various factors, including, but not limited to, changes in the mix of earnings in tax jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in existing tax policies, laws, regulations or rates, changes in the level of non-deductible expenses (including share-based compensation), changes in the location of Local Bounti’s operations, changes in Local Bounti’s future levels of research and development spending, mergers and acquisitions or the results of examinations by various tax authorities. Although Local Bounti believes its tax estimates are reasonable, if the IRS or any other taxing authority disagrees with the positions taken on its tax returns, Local Bounti could have additional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a material impact on our results of operations and financial position.

Changes to applicable tax laws and regulations or exposure to additional income tax liabilities could affect Local Bounti’s business and future profitability.

Local Bounti is a U.S. corporation and thus subject to U.S. corporate income tax on its worldwide income. Further, since Local Bounti’s operations and customers are located throughout the United States, Local Bounti will be subject to various U.S. state and local taxes. U.S. federal, state, local and non-U.S. tax laws, policies, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to Local Bounti and may have an adverse effect on its business and future profitability.

Local Bounti received a loan as part of the CARES Act and Local Bounti’s application for such loan could in the future be determined to have been impermissible which could adversely impact its business and reputation.

On April 15, 2020, Local Bounti received a Small Business Administration (“SBA”) loan in the amount of $104 thousand with fixed interest of 1% per annum as part of the CARES Act (the “PPP Loan”). Although under the CARES Act Local Bounti was eligible to apply for forgiveness of all loan proceeds used to pay payroll costs, rent, utilities and other qualifying expenses, provided that it retains a certain number of employees and maintains compensation within certain regulatory parameters of the PPP, Local Bounti repaid the PPP Loan in full in June 2021.

In applying for the PPP Loan, Local Bounti was required to certify, among other things, that the then current economic uncertainty made the PPP Loan necessary to support its ongoing operations. Local Bounti made these certifications in good faith after analyzing, among other things, the requirements of the PPP Loan, Local Bounti’s then-current business activity and its ability to access other sources of liquidity sufficient to support its ongoing operations in a manner that would not be significantly detrimental to its business. Local Bounti believes that it satisfied all eligibility criteria for the PPP Loan, and that its receipt of the PPP Loan was consistent with the broad objectives of the CARES Act. The certification regarding necessity described above did not at the time

 

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contain any objective criteria and continues to be subject to interpretation. If, despite Local Bounti’s good-faith belief that it has satisfied all eligibility requirements for the PPP Loan, Local Bounti is later determined to have violated any of the laws or governmental regulations that apply to it in connection with the PPP Loan, or it is otherwise determined that it was ineligible to receive the PPP Loan, Local Bounti may be subject to civil, criminal and administrative penalties. Any violations or alleged violations may result in adverse publicity and damage to Local Bounti’s reputation, a review or audit by the SBA or other government entity or claims under the False Claims Act. These events could consume significant financial and management resources and could have a material adverse effect on Local Bounti’s business, results of operations and financial condition.

If analysts do not publish research about Local Bounti’s business or if they publish inaccurate or unfavorable research, Local Bounti’s stock price and trading volume could decline.

The trading market for the common stock of Local Bounti will depend in part on the research and reports that analysts publish about its business. Local Bounti does not have any control over these analysts. If one or more of the analysts who cover Local Bounti downgrade its common stock or publish inaccurate or unfavorable research about its business, the price of its common stock would likely decline. If few analysts cover Local Bounti, demand for its common stock could decrease and its common stock price and trading volume may decline. Similar results may occur if one or more of these analysts stop covering Local Bounti in the future or fail to publish reports on it regularly.

Local Bounti may be subject to securities litigation, which is expensive and could divert management attention.

The market price of Local Bounti’s common stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. Local Bounti may be the target of this type of litigation in the future. Securities litigation against Local Bounti could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm its business.

Future resales of common stock after the consummation of the Business Combination may cause the market price of Local Bounti’s securities to drop significantly, even if Local Bounti’s business is doing well.

Pursuant to the Amended and Restated Registration Rights Agreement and Lock-Up Agreements, after the consummation of the Business Combination and subject to certain exceptions, the Sponsor and the Local Bounti stockholders will be contractually restricted from selling or transferring any of its shares of common stock (not including the shares of Local Bounti Common Stock issued in the PIPE Financing pursuant to the terms of the Subscription Agreements) (the “Lock-up Shares”). Such restrictions for Local Bounti stockholders begin at Closing and end on the date that is 180 days after the Closing. Such restrictions for the Sponsor begin at Closing and end on the earlier of (i) the date that is one year after the Closing and (ii), the date on which the last reported sale price of Local Bounti Common Stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing.

However, following the expiration of such lockup, the Sponsor and the Local Bounti stockholders will not be restricted from selling shares of New Local Bounti common stock held by them, other than by applicable securities laws. Additionally, the Third Party PIPE Investors will not be restricted from selling any of the shares of Local Bounti Common Stock acquired in the PIPE Financing following the Closing, other than by applicable securities laws. As such, sales of a substantial number of shares of Local Bounti common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of Local Bounti common stock. Upon completion of the Business Combination, the Sponsor and the Local Bounti stockholders (not including the shares of Local Bounti Common Stock issued in the PIPE Financing pursuant to the terms of the Subscription Agreements and including the shares of Local Bounti common stock reserved in respect of Local Bounti restricted stock awards

 

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and restricted stock units outstanding as of immediately prior to the Closing that will be converted into restricted stock awards and restricted stock units based on Local Bounti common stock) will collectively own approximately 60.3% of the outstanding shares of Local Bounti common stock, assuming that no public shareholders redeem their public shares in connection with the Business Combination. Assuming all of the public shares are redeemed in connection with the Business Combination, in the aggregate, the ownership of the Sponsor and the Local Bounti stockholders would rise to 80.3% of the outstanding shares of Local Bounti common stock (not including the shares of Local Bounti Common Stock issued in the PIPE Financing pursuant to the terms of the Subscription Agreements and including the shares of Local Bounti common stock reserved in respect of Local Bounti restricted stock awards and restricted stock units outstanding as of immediately prior to the Closing that will be converted into restricted stock awards and restricted stock units based on Local Bounti common stock).

The shares held by Sponsor and the Local Bounti stockholders may be sold after the expiration of the applicable lock-up period under the Amended and Restated Registration Rights Agreement and Lock-Up Agreements. As restrictions on resale end and registration statements (filed after the Closing to provide for the resale of such shares from time to time) are available for use, the sale or possibility of sale of these shares could have the effect of increasing the volatility in Local Bounti’s share price or the market price of Local Bounti Common Stock could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate the Business Combination, require substantial financial and management resources and increase the time and costs of completing a business combination.

The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because Local Bounti is not currently subject to Section 404 of the Sarbanes-Oxley Act. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act are significantly more stringent than those required of Local Bounti as a privately held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable to Local Bounti after the Business Combination. If we are not able to implement the requirements of Section 404, including any additional requirements once we are no longer an emerging growth company, in a timely manner or with adequate compliance, we may not be able to assess whether its internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of Local Bounti Common Stock. Additionally, once we are no longer an emerging growth company, we will be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting.

The obligations associated with being a public company will involve significant expenses and will require significant resources and management attention, which may divert from Local Bounti’s business operations.

As a public company, Local Bounti will become subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires the filing of annual, quarterly and current reports with respect to a public company’s business and financial condition. The Sarbanes-Oxley Act requires, among other things, that a public company establish and maintain effective internal control over financial reporting. As a result, Local Bounti will incur significant legal, accounting and other expenses that Local Bounti did not previously incur. Local Bounti’s entire management team and many of its other employees will need to devote substantial time to compliance, and may not effectively or efficiently manage its transition into a public company.

These rules and regulations will result in Local Bounti incurring substantial legal and financial compliance costs and will make some activities more time-consuming and costly. For example, these rules and regulations

 

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will likely make it more difficult and more expensive for Local Bounti to obtain director and officer liability insurance, and it may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be difficult for Local Bounti to attract and retain qualified people to serve on its board of directors, its board committees or as executive officers.

We are currently an emerging growth company within the meaning of the Securities Act, and to the extent we have taken advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

We are currently an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information they may deem important. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

If we cease to be an emerging growth company, we will no longer be able to take advantage of certain exemptions from reporting, and, absent other exemptions or relief available from the SEC, we will also be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We will incur additional expenses in connection with such compliance and our management will need to devote additional time and effort to implement and comply with such requirements.

 

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Risks Related to the Business Combination and Leo

Unless the context otherwise requires, any reference in this section of this joint proxy statement/prospectus to the “Leo,” “we,” “us” or “our” refers to Leo prior to the Business Combination and to New Local Bounti following the Business Combination.

Our Sponsor and our executive officers and directors have entered into letter agreements with us to vote in favor of the Business Combination, regardless of how our public shareholders vote.

Unlike some other blank check companies in which the initial shareholders agree to vote their shares in accordance with the majority of the votes cast by the public shareholders in connection with an initial business combination, our Sponsor and our other initial shareholders, pursuant to the Sponsor Agreement, have agreed, among other things, to vote all of their public shares and Class B ordinary shares in favor of all the proposals being presented at the extraordinary general meeting, including the Business Combination Proposal and the transactions contemplated thereby (including the Merger). As of the date of this joint proxy statement/prospectus, our initial shareholders own approximately 20% of the issued and outstanding ordinary shares.

Neither the Leo Board nor any committee thereof obtained a third-party valuation in determining whether or not to pursue the Business Combination.

Neither the Leo Board nor any committee thereof is required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from another independent firm that the price that Leo is paying for Local Bounti is fair to Leo from a financial point of view. Neither the Leo Board nor any committee thereof obtained a third party valuation in connection with the Business Combination. In analyzing the Business Combination, the Leo Board and management conducted due diligence on Local Bounti and researched the industry in which Local Bounti operates. The Leo Board reviewed, among other things, financial due diligence materials prepared by professional advisors, including quality of earnings reports and tax due diligence reports, financial and market data information on selected comparable companies, the implied purchase price multiple of Local Bounti and the financial terms set forth in the Merger Agreement, and concluded that the Business Combination was in the best interest of its shareholders. Accordingly, investors will be relying solely on the judgment of the Leo Board and management in valuing Local Bounti, and the Leo Board and management may not have properly valued Local Bounti’s business. The lack of a third-party valuation may also lead an increased number of shareholders to vote against the Business Combination or demand redemption of their shares, which could potentially impact our ability to consummate the Business Combination. See “Business Combination Proposal—The Leo Board’s Reasons for the Business Combination.”

The COVID-19 pandemic triggered an economic crisis which may delay or prevent the consummation of the Business Combination.

In December 2019, a coronavirus (COVID-19) outbreak was reported in China, and, in March 2020, the World Health Organization declared it a pandemic. Since being initially reported in China, the coronavirus has spread throughout the world and has resulted in unprecedented restrictions and limitations on operations of many businesses, educational institutions and governmental entities, including in the United States and Canada. Given the ongoing and dynamic nature of the COVID-19 crisis, it is difficult to predict the impact on the business of Leo, Local Bounti and New Local Bounti, and there is no guarantee that efforts by Leo, Local Bounti and New Local Bounti to address the adverse impact of COVID-19 will be effective. If Leo or Local Bounti are unable to recover from a business disruption on a timely basis, the Business Combination and New Local Bounti’s business and financial conditions and results of operations following the completion of the Business Combination would be adversely affected. The Business Combination may also be delayed and adversely affected by the coronavirus pandemic, and become more costly. Each of Leo and Local Bounti may also incur additional costs to remedy damages caused by such disruptions, which could adversely affect its financial condition and results of operations.

 

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Since the initial shareholders, including Leo’s directors and executive officers, have interests that are different, or in addition to (and which may conflict with), the interests of our shareholders, a conflict of interest may have existed in determining whether the Business Combination with Local Bounti is appropriate as our initial business combination. Such interests include that Sponsor, as well as our executive officers and directors, will lose their entire investment in us if our business combination is not completed.

When you consider the recommendation of the Leo Board in favor of approval of the Business Combination Proposal, you should keep in mind that the initial shareholders, including Leo’s directors and executive officers, have interests in such proposal that are different from, or in addition to (which may conflict with), those of Leo shareholders and warrant holders generally.

These interests include, among other things, the interests listed below:

 

   

the fact that our initial shareholders have agreed not to redeem any Class A ordinary shares held by them in connection with a shareholder vote to approve a proposed initial business combination;

 

   

the fact that the Sponsor paid an aggregate of $25,000 for the 6,875,000 Class B ordinary shares currently owned by the initial shareholders and such securities will have a significantly higher value at the time of the Business Combination. Such shares had an estimated aggregate market value of $68,475,000 based upon the closing price of $9.96 per share on the NYSE on the record date;

 

   

the fact that the Sponsor paid an aggregate purchase price of $8,000,000 (or $1.50 per warrant) for its private placement of 5,333,333 private placement warrants to purchase Class A ordinary shares and such private placement warrants will expire worthless if an initial business combination is not consummated by March 2, 2023. A portion of the proceeds from such private placement were placed in the trust account. Such warrants had an estimated aggregate value of approximately $4,213,333 based on the closing price of $0.79 per public warrant on the NYSE on the record date;

 

   

Edward C. Forst, Chairman of the board of Leo, is expected to be a director of the Combined Company after the consummation of the Business Combination. As such in the future he may receive cash fees, stock options, stock awards or other remuneration that the New Local Bounti Board determines to pay its directors;

 

   

the fact that the initial shareholders and Leo’s current officers and directors have agreed to waive their rights to liquidating distributions from the trust account with respect to any ordinary shares (other than public shares) held by them if Leo fails to complete an initial business combination by March 2, 2023. In such event, the 6,875,000 founder shares held by our initial shareholders, which were acquired for an aggregate purchase price of $25,000 prior to Leo’s initial public offering, would be worthless because the holders thereof are not entitled to participate in any redemption or distribution with respect to such shares;

 

   

the fact that the Amended and Restated Registration Rights Agreement will be entered into by the initial shareholders;

 

   

the fact that, at the option of the Sponsor, any amounts outstanding under any loan made by the Sponsor or any of its affiliates to Leo in an aggregate amount of up to $1,500,000 may be converted into warrants to purchase Class A ordinary shares in connection with the consummation of the Business Combination;

 

   

the fact that certain of Leo’s directors and officers have committed to purchase up to an aggregate of 1,100,000 shares of common stock ($11,000,000 in the aggregate) in connection with the PIPE Financing on the same terms as the other PIPE Investors;

 

   

the continued indemnification of Leo’s directors and officers and the continuation of Leo’s directors’ and officers’ liability insurance after the Business Combination (i.e., a “tail policy”);

 

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the fact that the Sponsor and Leo’s officers and directors will lose their entire investment in Leo and will not be reimbursed for any loans extended, fees due or out-of-pocket expenses incurred in connection with activities on our behalf, such as identifying potential target businesses and performing due diligence on suitable business combinations unless an initial business combination is consummated by March 2, 2023, although no such amounts require reimbursement as of the date of this joint proxy statement/prospectus;

 

   

the fact that if the trust account is liquidated, including in the event Leo is unable to complete an initial business combination by March 2, 2023, the Sponsor has agreed to indemnify Leo to ensure that the proceeds in the trust account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the trust account on the liquidation date, by the claims of prospective target businesses with which Leo has entered into an acquisition agreement or claims of any third party for services rendered or products sold to Leo, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the trust account;

 

   

following the completion of the Business Combination, the Sponsor, Leo’s officers and directors and their respective affiliates will be entitled to reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and completing an initial business combination (which will be the Business Combination should it occur), and repayment of any other loans, if any, and on such terms as to be determined by Leo from time to time, made by the Sponsor or certain of Leo’s officers and directors to finance transaction costs in connection with an intended initial business combination (which will be the Business Combination should it occur). If Leo fails to complete an initial business combination within the required period, the Sponsor and Leo’s officers and directors and their respective affiliates will not have any claim against the trust account for reimbursement; and

 

   

pursuant to the Amended and Restated Registration Rights Agreement, the Sponsor and certain of Leo’s directors and officers will have customary registration rights, including demand and piggy-back rights, subject to cooperation and cut-back provisions with respect to the shares of New Local Bounti common stock and New Local Bounti warrants held by such parties.

Except as otherwise described above, we do not believe that that there are any material Leo securities held by the Sponsor, our officers and directors, loans extended by (or fees due to) the Sponsor, our officers and directors, or out-of-pocket expenses for which the Sponsor, our officers and directors are awaiting reimbursement from Leo.

See “Business Combination Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” for additional information on interests of Leo’s directors and executive officers.

The personal and financial interests of the initial shareholders as well as Leo’s directors and executive officers may have influenced their motivation in identifying and selecting Local Bounti as business combination targets, completing an initial business combination with Local Bounti and influencing the operation of the business following the initial business combination. In considering the recommendations of the Leo Board to vote for the proposals, its shareholders should consider these interests.

The exercise of Leo’s directors’ and executive officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in Leo’s shareholders’ best interest.

In the period leading up to the Closing, events may occur that, pursuant to the Merger Agreement, would require Leo to agree to amend the Merger Agreement, to consent to certain actions taken by Local Bounti or to waive rights that Leo is entitled to under the Merger Agreement. Such events could arise because of changes in the course of Local Bounti’s business, a request by Local Bounti to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or the occurrence of other events that would have

 

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a material adverse effect on Local Bounti’s business and would entitle Leo to terminate the Merger Agreement. In any of such circumstances, it would be at Leo’s discretion, acting through its board of directors, to grant its consent or waive those rights. The existence of financial and personal interests of one or more of the directors described in the preceding risk factors may result in a conflict of interest on the part of such director(s) between what he or they may believe is best for Leo and its shareholders and what he or they may believe is best for himself or themselves in determining whether or not to take the requested action. As of the date of this joint proxy statement/prospectus, Leo does not believe there will be any changes or waivers that Leo’s directors and executive officers would be likely to make after shareholder approval of the Business Combination Proposal has been obtained. While certain changes could be made without further shareholder approval, Leo will circulate a new or amended joint proxy statement/prospectus and resolicit Leo’s shareholders if changes to the terms of the transaction that would have a material impact on its shareholders are required prior to the vote on the Business Combination Proposal.

Subsequent to consummation of the Business Combination, we may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the share price of our securities, which could cause you to lose some or all of your investment.

We cannot assure you that the due diligence conducted in relation to Local Bounti has identified all material issues or risks associated with Local Bounti, its business or the industry in which it competes. As a result of these factors, we may incur additional costs and expenses and we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence has identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. If any of these risks materialize, this could have a material adverse effect on our financial condition and results of operations and could contribute to negative market perceptions about our securities or New Local Bounti. Accordingly, any shareholders of Leo who choose to remain New Local Bounti stockholders following the Business Combination could suffer a reduction in the value of their shares and warrants. Such shareholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the registration statement or joint proxy statement/prospectus relating to the Business Combination contained an actionable material misstatement or material omission.

Our warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.

Our warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction will be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

Notwithstanding the foregoing, these provisions of the warrant agreement do not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants will be deemed to have notice of and to have consented to the forum provisions in our warrant agreement.

If any action, the subject matter of which is within the scope of the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for

 

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the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder will be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.

This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.

Our ability to successfully effect the Business Combination and to be successful thereafter will be dependent upon the efforts of key personnel of New Local Bounti, some of whom may be from Leo and Local Bounti, and some of whom may join New Local Bounti following the Business Combination. The loss of key personnel or the hiring of ineffective personnel after the Business Combination could negatively impact the operations and profitability of New Local Bounti.

Our ability to successfully effect the Business Combination and be successful thereafter will be dependent upon the efforts of our key personnel. Although some of Leo’s key personnel may remain with the target business in senior management or advisory positions following our business combination, we expect New Local Bounti’s current management to remain in place. We cannot assure you that we will be successful in integrating and retaining such key personnel, or in identifying and recruiting additional key individuals we determine may be necessary following the Business Combination.

The ability of our public shareholders to exercise redemption rights with respect to a large number of our shares could increase the probability that the Business Combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your shares.

Since the Merger Agreement requires us to meet the Aggregate Transaction Proceeds Condition at Closing, there is increased probability that the Business Combination would be unsuccessful. If the Business Combination is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you are in need of immediate liquidity, you could attempt to sell your shares in the open market; however, at such time our shares may trade at a discount to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your shares in the open market.

The unaudited pro forma financial information included elsewhere in this joint proxy statement/prospectus may not be indicative of what New Local Bounti’s actual financial position or results of operations would have been.

The unaudited pro forma financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and has been prepared based on a number of assumptions including, but not limited to, Local Bounti being considered the accounting acquirer in the Business Combination, the debt obligations and the cash and cash equivalents of Local Bounti at the Closing and the number of public shares that are redeemed in connection with the Business Combination. Accordingly, such pro forma financial information may not be indicative of our future operating or financial performance and our actual financial condition and results of operations may vary materially from our pro forma results of operations and balance sheet contained elsewhere in this joint proxy statement/prospectus, including as a result of such assumptions not being accurate. Additionally, the

 

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final acquisition accounting adjustments could differ materially from the unaudited pro forma adjustments presented in this joint proxy statement/prospectus. Any increase or decrease in the fair value of the assets acquired and liabilities assumed, as compared to the information shown herein, could also change the portion of the purchase consideration allocable to goodwill and could impact the operating results of New Local Bounti following the Business Combination due to differences in the allocation of the purchase consideration, depreciation and amortization related to some of these assets and liabilities. The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies or cost savings that may be associated with the Business Combination. See “Unaudited Pro Forma Condensed Combined Financial Information.”

During the pendency of the Business Combination, Leo will not be able to enter into a business combination with another party because of restrictions in the Merger Agreement. Furthermore, certain provisions of the Merger Agreement will discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

Certain covenants in the Merger Agreement impede the ability of Leo to make acquisitions or complete other transactions that are not in the ordinary course of business pending completion of the Business Combination. As a result, Leo may be at a disadvantage to its competitors during that period. In addition, while the Merger Agreement is in effect, neither Leo nor Local Bounti may solicit, assist, facilitate the making, submission or announcement of, or intentionally encourage any alternative acquisition proposal, such as a merger, material sale of assets or equity interests or other business combination, with any third party, even though any such alternative acquisition could be more favorable to Leo’s shareholders than the Business Combination. In addition, if the Business Combination is not completed, these provisions will make it more difficult to complete an alternative business combination following the termination of the Merger Agreement due to the passage of time during which these provisions have remained in effect.

If the conditions to the Merger Agreement are not met, the Business Combination may not occur.

Even if the Merger Agreement is approved by the shareholders of Leo, specified conditions must be satisfied or waived before the parties to the Merger Agreement are obligated to complete the Business Combination. For a list of the material closing conditions contained in the Merger Agreement, see the section entitled “Business Combination Proposal—Conditions to Closing of the Business Combination.” Leo and Local Bounti may not satisfy all of the closing conditions in the Merger Agreement. If the closing conditions are not satisfied or waived, the Business Combination will not occur, or will be delayed pending later satisfaction or waiver, and such delay may cause Leo and Local Bounti to each lose some or all of the intended benefits of the Business Combination.

Because Leo is incorporated under the laws of the Cayman Islands, in the event the Business Combination is not completed, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. Federal courts may be limited.

Because Leo is currently incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests and your ability to protect your rights through the U.S. Federal courts may be limited prior to the Domestication. Leo is currently an exempted company under the laws of the Cayman Islands. As a result, it may be difficult for investors to effect service of process within the United States upon Leo’s directors or executive officers, or enforce judgments obtained in the United States courts against Leo’s directors or officers.

Until the Domestication is effected, Leo’s corporate affairs are governed by the Memorandum of Association and the Articles of Association, the Cayman Islands Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of its directors to Leo under the laws of the Cayman Islands are to a large extent

 

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governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of Leo’s shareholders and the fiduciary responsibilities of its directors under Cayman Islands law are different from what they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws as compared to the United States, and certain states, such as Delaware, may have more fully developed and judicially interpreted bodies of corporate law. In addition, Cayman Islands companies may not have standing to initiate a shareholders derivative action in a Federal court of the United States.

The courts of the Cayman Islands are unlikely (i) to recognize or enforce against Leo judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against Leo predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

The Public Shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the Leo Board or controlling shareholders than they would as public shareholders of a United States company.

The ability of Leo’s shareholders to exercise redemption rights with respect to Leo’s Public Shares may prevent Leo from completing the Business Combination or optimizing its capital structure.

Leo does not know how many shareholders will ultimately exercise their redemption rights in connection with the Business Combination. As such, the Business Combination is structured based on Leo’s expectations (and those of the other parties to the Merger Agreement) as to the number of shares that will be submitted for redemption. In addition, if a larger number of shares are submitted for redemption than Leo initially expected, Leo may need to seek to arrange for additional third party financing to be able to satisfy the Aggregate Transaction Proceeds Condition (or such lower amount designated by the Seller if the Seller waives the condition).

If too many Public Shareholders elect to redeem their shares and additional third-party financing is not available to Leo, Leo may not be able to complete the Business Combination. Even if such third-party financing is available, Leo’s ability to obtain such financing is subject to restrictions set forth in the Merger Agreement. For information regarding the parameters of such restrictions, please see the sections of this joint proxy statement/prospectus entitled “Business Combination Proposal—Conditions to Closing of the Business Combination.

Furthermore, raising such additional financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. For information on the consequences if the Business Combination is not completed or must be restructured, please see the section of this joint proxy statement/ prospectus entitled “Risk Factors — Risks Related to the Business Combination and Leo.

 

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Sponsor, as well as Local Bounti, our directors, executive officers, advisors and their affiliates may elect to purchase public shares prior to the consummation of the Business Combination, which may influence the vote on the Business Combination and reduce the public “float” of our Class A ordinary shares.

At any time at or prior to the Business Combination, during a period when they are not then aware of any material nonpublic information regarding us or our securities, our initial shareholders, Local Bounti and/or their directors, officers, advisors or respective affiliates may purchase public shares from institutional and other investors who vote, or indicate an intention to vote, against any of the Condition Precedent Proposals, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire public shares or vote their public shares in favor of the Condition Precedent Proposals. Such a purchase may include a contractual acknowledgement that such shareholder, although still the record or beneficial holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our initial shareholders, Local Bounti and/or their directors, officers, advisors or respective affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights, such selling shareholder would be required to revoke their prior elections to redeem their shares. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that (i) the Business Combination Proposal, the NYSE Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal, the Director Election Proposal (under the terms of the Existing Governing Documents, only the holders of Class B ordinary shares are entitled to vote on the Director Election Proposal), and the Adjournment Proposal are approved by the affirmative vote of at least a majority of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter (ii) the Domestication Proposal and the Charter Proposal are approved by the affirmative vote of at least two-thirds (2/3) of the votes cast by the holders of the issued ordinary shares present in person or represented by proxy at the extraordinary general meeting and entitled to vote on such matter, (iii) otherwise limit the number of public shares electing to redeem and (iv) New Local Bounti’s net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) being at least $5,000,001 after giving effect to the transactions contemplated by the Merger Agreement, the PIPE Financing and all of the Leo shareholder redemptions.

Entering into any such arrangements may have a depressive effect on the ordinary shares. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he or she owns, either at or prior to the Business Combination.

If such transactions are effected, the consequence could be to cause the Business Combination to be consummated in circumstances where such consummation could not otherwise occur. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the proposals to be presented at the extraordinary general meeting and would likely increase the chances that such proposals would be approved.

In addition, if such purchases are made, the public “float” of our public shares and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.

If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by shareholders may be less than $10.00 per share (which was the offering price in our initial public offering).

Our placing of funds in the trust account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be

 

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prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.

Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Upon redemption of our public shares, if we are unable to complete our business combination within the prescribed time frame, or upon the exercise of a redemption right in connection with our business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. Accordingly, the per share redemption amount received by public shareholders could be less than the $10.00 per share initially held in the trust account, due to claims of such creditors. In order to protect the amounts held in the trust account, Sponsor has agreed to be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduces the amount of funds in the trust account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the trust account or to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. Moreover, even in the event that an executed waiver is deemed to be unenforceable against a third party, Sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether Sponsor has sufficient funds to satisfy its indemnity obligations and we have not asked Sponsor to reserve for such indemnification obligations. Therefore, we cannot assure you that Sponsor would be able to satisfy those obligations. None of our officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

Additionally, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, or if we otherwise enter compulsory or court supervised liquidation, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the trust account, we may not be able to return to our public shareholders $10.00 per share (which was the offering price in our initial public offering).

We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.

We agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our executive officers and directors agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account for any reason whatsoever (except to the extent they are entitled to funds from the trust account due to their ownership of public shares).

Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the trust account or (ii) we consummate the Business Combination. Our obligation to indemnify our officers and directors may discourage shareholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our executive officers and directors, even though such an action, if successful,

 

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might otherwise benefit us and our shareholders. Furthermore, a shareholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.

If, after we distribute the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our board of directors may be exposed to claims of punitive damages.

If, after we distribute the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our shareholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing it and us to claims of punitive damages, by paying public shareholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.

If, before distributing the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our shareholders and the per share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.

If, before distributing the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the trust account, the per share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.

If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete the Business Combination.

If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:

 

   

restrictions on the nature of our investments; and

 

   

restrictions on the issuance of securities, each of which may make it difficult for us to complete the Business Combination.

In addition, we may have imposed upon us burdensome requirements, including:

 

   

registration as an investment company;

 

   

adoption of a specific form of corporate structure; and

 

   

reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.

In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.

 

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We do not believe that our principal activities and the Business Combination will subject us to the Investment Company Act. To this end, the proceeds held in the trust account may only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement, the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. An investment in our securities is not intended for persons who are seeking a return on investments in government securities or investment securities. The trust account is intended as a holding place for funds pending the earliest to occur of either: (i) the completion of our initial business combination (which shall be the Business Combination should it occur); (ii) the redemption of any public shares properly tendered in connection with a shareholder vote to amend the amended and restated memorandum and articles of association to modify the substance or timing of our obligation to provide for the redemption of our public shares in connection with an initial business combination (which shall be the Business Combination should it occur); or (iii) absent an initial business combination (which shall be the Business Combination should it occur) within 24 months from the closing of the initial public offering, our return of the funds held in the trust account to our public shareholders as part of our redemption of the public shares. If we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete a business combination. If we are unable to complete the Business Combination, our public shareholders may only receive their pro rata portion of the funds in the trust account that are available for distribution to public shareholders, and our warrants will expire worthless.

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to consummate the Business Combination, and results of operations.

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to consummate the Business Combination, and results of operations.

Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.

If we are forced to enter into an insolvent liquidation, any distributions received by shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, we were unable to pay our debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover all amounts received by our shareholders. Furthermore, our directors may be viewed as having breached their fiduciary duties to us or our creditors and/or may have acted in bad faith, and thereby exposing themselves and our company to claims, by paying public shareholders from the trust account prior to addressing the claims of creditors. Claims may be brought against us for these reasons.

You may only be able to exercise your public warrants on a “cashless basis” under certain circumstances, and if you do so, you will receive fewer common stock from such exercise than if you were to exercise such warrants for cash.

The warrant agreement provides that in the following circumstances holders of warrants who seek to exercise their warrants will not be permitted to do for cash and will, instead, be required to do so on a cashless

 

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basis in accordance with Section 3(a)(9) of the Securities Act: (i) if the common stock issuable upon exercise of the warrants are not registered under the Securities Act in accordance with the terms of the warrant agreement; (ii) if we have so elected and the common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of “covered securities” under Section 18(b)(1) of the Securities Act; and (iii) if we have so elected and we call the public warrants for redemption. If you exercise your public warrants on a cashless basis, you would pay the warrant exercise price by surrendering all of the warrants for that number of common stock equal to the quotient obtained by dividing (x) the product of the number of common stock underlying the warrants, multiplied by the excess of the “fair market value” of our common stock (as defined in the next sentence) over the exercise price of the warrants by (y) the fair market value. The “fair market value” is the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is received by the warrant agent or on which the notice of redemption is sent to the holders of warrants, as applicable. As a result, you would receive fewer shares of common stock from such exercise than if you were to exercise such warrants for cash.

We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A ordinary shares held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our ordinary shares held by

 

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non-affiliates exceeds $250 million as of the prior June 30, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We identified a material weakness in our internal control over financial reporting related to the accounting for the warrants we issued in connection with our initial public offering and private placement in March 2021. As a result of this material weakness, our management concluded that our disclosure controls and procedures were not effective as of June 30, 2021. This material weakness resulted in a misstatement of our warrant liabilities, additional paid-in capital and accumulated deficit in our previously issued audited balance sheet dated March 2, 2021, filed on a Current Report on Form 8-K on March 9, 2021.

Any failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our ordinary shares are listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our business. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.

On April 12, 2021, the SEC issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”), wherein the SEC expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to being treated as equity. Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our warrants, and pursuant to the guidance in ASC 815, Derivatives and Hedging, determined the warrants

 

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should be classified as derivative liabilities measured at fair value on our balance sheet, with any changes in fair value to be reported each period in earnings on our statement of operations.

As a result of the recurring fair value measurement, our financial statements may fluctuate quarterly, based on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.

Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate the Business Combination, require substantial financial and management resources and increase the time and costs of completing a business combination.

The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies. Local Bounti is not a publicly reporting company required to comply with Section 404 of the Sarbanes-Oxley Act and New Local Bounti management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable to New Local Bounti after the Business Combination. If we are not able to implement the requirements of Section 404, including any additional requirements once we are no longer an emerging growth company, in a timely manner or with adequate compliance, we may not be able to assess whether its internal control over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of New Local Bounti Common Stock. Additionally, once we are no longer an emerging growth company, we will be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting.

The price of New Local Bounti Common Stock and New Local Bounti’s warrants may be volatile.

Upon consummation of the Business Combination, the price of New Local Bounti Common Stock and New Local Bounti’s warrants may fluctuate due to a variety of factors, including:

 

   

changes in the industries in which New Local Bounti and its customers operate;

 

   

variations in its operating performance and the performance of its competitors in general;

 

   

material and adverse impact of the COVID-19 pandemic on the markets and the broader global economy;

 

   

actual or anticipated fluctuations in New Local Bounti’s quarterly or annual operating results;

 

   

publication of research reports by securities analysts about New Local Bounti or its competitors or its industry;

 

   

the public’s reaction to New Local Bounti’s press releases, its other public announcements and its filings with the SEC;

 

   

New Local Bounti’s failure or the failure of its competitors to meet analysts’ projections or guidance that New Local Bounti or its competitors may give to the market;

 

   

additions and departures of key personnel;

 

   

changes in laws and regulations affecting its business;

 

   

commencement of, or involvement in, litigation involving New Local Bounti;

 

   

changes in New Local Bounti’s capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

the volume of shares of New Local Bounti Common Stock available for public sale; and

 

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general economic and political conditions such as recessions, interest rates, fuel prices, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism.

These market and industry factors may materially reduce the market price of New Local Bounti Common Stock and New Local Bounti’s warrants regardless of the operating performance of New Local Bounti.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of New Local Bounti Common Stock to drop significantly, even if New Local Bounti’s business is doing well.

Sales of a substantial number of shares of New Local Bounti Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of New Local Bounti Common Stock.

It is anticipated that, upon completion of the Business Combination, (i) the Local Bounti Stockholders will own, collectively, approximately 57.2% (inclusive of 2.9% of shares of New Local Bounti Common Stock to be issued to holders of Local Bounti Convertible Notes) of the outstanding New Local Bounti Common Stock, and (ii) Leo’s initial shareholders will own approximately 6.3% of the outstanding New Local Bounti Common Stock, in each case, assuming that none of Leo’s outstanding public shares are redeemed in connection with the Business Combination, or approximately 76.4% (inclusive of 3.8% of shares of New Local Bounti Common Stock to be issued to holders of Local Bounti Convertible Notes) and 8.4%, respectively, assuming that, all of Leo’s outstanding public shares are redeemed in connection with the Business Combination. These percentages (i) assume that 59,493,616 shares of New Local Bounti Common Stock are issued to the holders of shares of common stock of Local Bounti at Closing (excluding the holders of Local Bounti warrants that are exercised by the holders thereof, at such holders’ option, prior to completion of the Business Combination), which would be the number of shares of New Local Bounti Common Stock issued to these holders if Closing were to occur on November 17, 2021; (ii) are based on 12,500,000 shares of New Local Bounti Common Stock to be issued in the PIPE Financing; (iii) do not take into account any exercise of public warrants or private placement warrants to purchase New Local Bounti Common Stock that will be outstanding immediately following Closing; (iv) do not take into account any shares of New Local Bounti Common Stock underlying vested and unvested Local Bounti RSUs that will be held by equityholders of Local Bounti immediately following Closing; (v) do not take into account any exercise of New Local Bounti Warrants (other than those exercised as set forth above) that will be outstanding immediately following Closing and (vi) assume the Convertible Notes will be automatically converted into shares of Local Bounti voting common stock exchanged for 3,190,489 shares of New Local Bounti Common Stock at Closing. If the actual facts are different than these assumptions, the ownership percentages in New Local Bounti will be different.

We intend to file one or more registration statements prior to or shortly after the Closing to provide for the resale of such shares from time to time. As restrictions on resale end and the registration statements are available for use, the market price of New Local Bounti Common Stock could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

The public stockholders will experience immediate dilution as a consequence of the issuance of New Local Bounti Common Stock as consideration in the Business Combination and in the PIPE Financing.

In accordance with the terms and subject to the conditions of the Merger Agreement, at the Effective Time, based on the Transaction Value (i) each share of Local Bounti voting common stock (other than shares held by Local Bounti as treasury stock (which shares will be cancelled for no consideration as part of the First Merger) and dissenting shares) will be cance-lled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock, earn out shares (as described herein) and up to $37.5 million of cash consideration (subject to certain conditions specified in the Merger Agreement),

 

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each as determined in the Merger Agreement, (ii) each share of Local Bounti restricted stock will be cancelled and converted into the right to receive the applicable portion of the merger consideration comprised of New Local Bounti Common Stock and earnout shares (as described below), each as determined in the Merger Agreement, (iii) each Local Bounti restricted stock unit, whether or not then vested, will be assumed by Leo and convert into a Leo restricted stock unit, subject to the same terms and conditions as applied to such Local Bounti restricted stock unit immediately prior to the Closing with a value as if such Local Bounti restricted stock unit were settled prior to the Closing, and (iv) each warrant of Local Bounti that is unexercised will be assumed by Leo and convert into a warrant to purchase New Local Bounti Common Stock and represent the right to receive the applicable portion of the merger consideration upon exercise of such warrant as if such warrant were exercised prior to the Closing. In addition, all convertible debt of Local Bounti will be fully converted into Local Bounti common stock as of immediately prior to the Closing and become eligible to receive New Local Bounti Common Stock (which amount, for the avoidance of doubt, is excluded from the implied pre-transaction equity value and therefore will have a dilutive impact to both the public shareholders of Leo and the pre-transaction stockholders of Local Bounti) based on the number of shares of Local Bounti common stock issuable upon conversion of such convertible debt.

Based on the foregoing, the post-closing ownership of the New Local Bounti is expected to be as follows (assuming no redemptions):

 

Combined Company Constituent Party

  Combined Company Shares (1)     Voting %

PIPE Investors

    12,500,000     11.4%

Local Bounti Common Stock (restricted and unrestricted)

    59,493,616     54.3%

Local Bounti Convertible Note Holders

    3,190,489     2.9%

Sponsor

    6,875,000     6.3%

Public Shareholders (assuming no redemptions)

    27,500,000     25.1%

Total

    109,559,105     100.0%

 

(1)

Excludes 5,500,000 public warrants and excludes 5,333,333 private placement warrants. Subject to final adjustment as set forth in the Merger Agreement.

Each Local Bounti equityholder entitled to receive a portion of the earnout consideration will receive its applicable portion of equal thirds of 2,500,000 earnout shares if the trading price of New Local Bounti Common Stock is greater than or equal to $13.00, $15.00 and $17.00 for any 20 trading days within any 30-trading day period and will also accelerate and be fully issuable in connection with any Change of Control (as defined in the Merger Agreement) if the applicable thresholds are met in such Change of Control.

The issuance of additional common stock will significantly dilute the equity interests of existing holders of Leo securities, and may adversely affect prevailing market prices for the New Local Bounti Common Stock and/or the New Local Bounti warrants.

Warrants will become exercisable for New Local Bounti Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

If the Business Combination is completed, outstanding warrants to purchase an aggregate of 10,833,333 shares of New Local Bounti Common Stock will become exercisable in accordance with the terms of the warrant agreement governing those securities. These warrants will become exercisable 30 days after the completion of the Business Combination. The exercise price of these warrants will be $11.50 per share. To the extent such warrants are exercised, additional shares of New Local Bounti Common Stock will be issued, which will result in dilution to the holders of New Local Bounti Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of New Local Bounti Common Stock. However, there is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

 

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The provisions of the amended and restated memorandum and articles of association that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from our trust account) may be amended with the approval of holders of not less than two-thirds of our ordinary shares who attend and vote at a general meeting of Leo (or 65% of our ordinary shares with respect to amendments to the trust agreement governing the release of funds from our trust account), which is a lower amendment threshold than that of some other special purpose acquisition companies. It may be easier for us, therefore, to amend the amended and restated memorandum and articles of association to facilitate the completion of the Business Combination that some of our shareholders may not support.

The amended and restated memorandum and articles of association provide that any of its provisions related to pre-Business Combination activity (including the requirement to deposit proceeds of the initial public offering and the private placement of warrants into the trust account and not release such amounts except in specified circumstances, and to provide Redemption Rights to Public Shareholders as described herein) may be amended if approved by special resolution, meaning holders of not less than two-thirds of our ordinary shares who attend and vote at a general meeting of Leo, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of 65% of our ordinary shares. Leo’s directors and executive officers, who collectively beneficially owned 20% of our issued and outstanding ordinary shares, will participate in any vote to amend the amended and restated memorandum and articles of association and/or trust agreement and will have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of the amended and restated memorandum and articles of association which govern our pre-Business Combination behavior more easily than some other special purpose acquisition companies, and this may increase our ability to complete the Business Combination with which you do not agree. Our shareholders may pursue remedies against us for any breach of the amended and restated memorandum and articles of association.

The Sponsor, executive officers and directors agreed, pursuant to agreements with us, that they will not propose any amendment to the amended and restated memorandum and articles of association to modify the substance or timing of our obligation to provide for the redemption of our public shares in connection with the Business Combination or to redeem 100% of our public shares if we do not complete the Business Combination within 24 months from the closing of the initial public offering, unless we provide our Public Shareholders with the opportunity to redeem their Class A ordinary shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (net of taxes paid or payable), divided by the number of then outstanding public shares. Our shareholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against the Sponsor, executive officers or directors for any breach of these agreements. As a result, in the event of a breach, our shareholders would need to pursue a shareholder derivative action, subject to applicable law.

We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 50% of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of Class A ordinary shares purchasable upon exercise of a warrant could be decreased, all without your approval.

Our warrants were issued in registered form under a warrant agreement between Continental, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash, shorten the exercise period or decrease the number of Class A ordinary shares or common stock, as applicable, purchasable upon exercise of a warrant.

 

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We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.

We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of the New Local Bounti Common Stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you to: (i) exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so; (ii) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants; or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants.

In addition, we may redeem your warrants at any time after they become exercisable and prior to their expiration at a price of $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants prior to redemption for a number of Class A ordinary shares determined based on the redemption date and the fair market value of our Class A ordinary shares.

The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants, including because the number of ordinary shares received is capped at 0.361 Class A ordinary shares per warrant (subject to adjustment) irrespective of the remaining life of the warrants. None of the private placement warrants will be redeemable by us, subject to certain circumstances, so long as they are held by our sponsor or its permitted transferees.

The NYSE may not list New Local Bounti’s securities on its exchange, which could limit investors’ ability to make transactions in New Local Bounti’s securities and subject New Local Bounti to additional trading restrictions.

An active trading market for New Local Bounti’s securities following the Business Combination may never develop or, if developed, it may not be sustained. In connection with the Business Combination, in order to continue to maintain the listing of our securities on the NYSE, we will be required to demonstrate compliance with the NYSE’s listing requirements. We will apply to have New Local Bounti’s securities listed on the NYSE upon consummation of the Business Combination. We cannot assure you that we will be able to meet all listing requirements. Even if New Local Bounti