UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 17, 2020
PIVOTAL INVESTMENT CORPORATION II
(Exact Name of Registrant as Specified in Charter)
Delaware | 001-38971 | 83-4109918 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
c/o Graubard Miller
The Chrysler Building
405 Lexington Avenue, 11th Floor
New York, NY 10174
(Address of Principal Executive Offices) (Zip Code)
(212) 818-8800
(Registrants Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☒ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e 4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading
|
Name of each exchange on
|
||
Units, each consisting of one share of Class A common stock and one-third of one redeemable warrant | PIC.U | New York Stock Exchange | ||
Class A common stock, par value $0.0001 per share | PIC | New York Stock Exchange | ||
Redeemable warrants, exercisable for shares of Class A common stock at an exercise price of $11.50 per share | PIC WS | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
Agreement and Plan of Reorganization
On September 17, 2020, Pivotal Investment Corporation II, a Delaware corporation (Pivotal), entered into an Agreement and Plan of Reorganization (the Merger Agreement) by and among Pivotal, PIC II Merger Sub Corp., a Delaware corporation and wholly-owned subsidiary of Pivotal (Merger Sub), and XL Hybrids, Inc., a Delaware corporation (XL).
XL (commercially known as XL Fleet) is a leading provider of fleet electrification solutions for Class 2-6 commercial vehicles in North America. Since its founding in 2009, XL has deployed its hybrid and plug-in hybrid electric drive systems, along with its cloud-based on-board telematics solution, on thousands of vehicles across hundreds of fleets throughout the United States and Canada. XLs vision is to become the world leader in fleet electrification solutions, with a mission of accelerating the adoption of fleet electrification systems through cost effective, customer tailored and comprehensive solutions.
Pursuant to the Merger Agreement, Merger Sub will merge with and into XL, with XL surviving the merger (the Merger). As a result of the Merger, XL will become a wholly-owned subsidiary of Pivotal, with the securityholders of XL becoming securityholders of Pivotal. In connection with the Merger, an aggregate of 100,000,000 shares of Pivotal stock are being issued or reserved for issuance to XL securityholders.
The Merger is expected to be consummated in the fourth quarter of 2020 or first quarter of 2021, after the required approval by the stockholders of Pivotal and the fulfillment of certain other conditions described below.
The following summaries of the Merger Agreement and the other agreements to be entered into by the parties are qualified in their entirety by reference to the text of the Merger Agreement and agreements entered into in connection therewith. The Merger Agreement is attached as Exhibit 2.1 hereto and incorporated herein by reference.
Treatment of Company Securities
Immediately prior to the effective time of the Merger (the Effective Time), XL will cause each share of XLs preferred stock (the XL Preferred Stock) that is issued and outstanding immediately prior to the Effective Time to be automatically converted into shares of XLs common stock, (the XL Common Stock and, together with the XL Preferred Stock, the XL Stock) in accordance with the terms of XLs amended and restated certificate of incorporation. All of the shares of XL Preferred Stock so converted into shares of XL Common Stock will no longer be issued and outstanding and will cease to exist, and each holder of XL Preferred Stock will thereafter cease to have any rights with respect to such shares of XL Preferred Stock.
At the Effective Time, by virtue of the Merger:
|
Each share of XL Common Stock issued and outstanding immediately prior to the Effective Time (including each share of XL Common Stock issued as a result of the conversion of XL Preferred Stock described above and any conversion or exchange of XLs convertible promissory notes (each, a XL Convertible Note) described below will be automatically converted into the right to receive that number of shares of Pivotals common stock (Pivotal Common Stock) equal to the Exchange Ratio described below. |
|
Each outstanding option to purchase shares of XL Common Stock, whether or not exercisable and whether or not vested, immediately prior to the Effective Time (each, an XL Option) will be assumed by Pivotal and converted into an option to purchase a number of shares of Pivotal Common Stock equal to the product of (x) the number of shares of XL Common Stock subject to such XL Option immediately prior to the Effective Time and (y) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such XL Option immediately prior to the Effective Time divided by (B) the Exchange Ratio. |
|
Each warrant, issued by XL and outstanding immediately prior to the Effective Time, to purchase shares of XL Stock (each, an XL Warrant) will be automatically assumed by Pivotal and will become a warrant to acquire, on the same terms and conditions as were applicable under each such XL Warrant, a number of shares of Pivotal Common Stock equal to the product of (x) the number of shares of XL Stock subject to such XL Warrant immediately prior to the Effective Time as adjusted pursuant to the terms of such XL Warrant and (y) the Exchange Ratio, at an exercise price equal to (A) the exercise price of such XL Warrant immediately prior to the Effective Time as adjusted pursuant to the terms of such XL Warrant divided by (B) the Exchange Ratio. |
The Exchange Ratio is the quotient obtained by dividing (i) 100,000,000 by (i) the sum of (a) the number of issued and outstanding shares of XL Common Stock immediately prior to the Effective Time (including all shares of XL Common Stock issued as a result of the conversion or exchange of XL Preferred Stock and XL Convertible Notes) plus (b) the number of shares of XL Common Stock issuable upon the exercise, conversion or other exchange of XL Convertible Notes, XL Options and XL Warrants which are not converted, exchanged or exercised prior to the Effective Time and are to remain outstanding as of and immediately following the Effective Time plus (c) the number of shares of XL Common Stock issuable upon the exercise, conversion or other exchange of any other debt or equity securities of XL outstanding immediately prior to the Effective Time.
Representations and Warranties
The Merger Agreement contains customary representations and warranties of each of Pivotal, Merger Sub and XL relating, among other things, to their proper organization and qualification and operations.
No Solicitation
The Merger Agreement requires that during the period from the date of the Merger Agreement and continuing until the earlier of the termination of the Merger Agreement pursuant to its terms or the closing of the Merger, (a) XL will not, and will cause its controlled affiliates, employees, agents, officers, directors and representatives not to, directly or indirectly, solicit or enter into discussions or transactions with, or encourage, or provide any information to, any corporation, partnership or other entity or group concerning any merger, sale of ownership interests in XL and/or a material portion of the assets of XL or similar transaction involving XL and (b) each of Pivotal and Merger Sub will not, and will cause its respective controlled affiliates, employees, agents, officers, directors and representatives not to, directly or indirectly, solicit or enter into discussions or transactions with, or encourage, or provide any information to, any corporation, partnership or other entity or group concerning any merger, purchase of ownership interests and/or assets, recapitalization or similar business combination transaction. In addition, (i) XL will, and will cause its controlled affiliates, employees, agents, officers, directors and representatives to, immediately cease any and all existing discussions or negotiations with any person conducted heretofore with respect to any alternative merger, sale of ownership interests in and/or a material portion of the assets of XL or recapitalization or similar business combination transaction involving XL and (ii) each of Pivotal and Merger Sub will, and will cause its respective controlled affiliates, employees, agents, officers, directors and representatives to, immediately cease any and all existing discussions or negotiations with any Person conducted heretofore with respect to any alternative merger, purchase of ownership interests and/or assets, recapitalization or similar business combination transaction.
Covenants
The Merger Agreement includes customary covenants of the parties with respect to business operations prior to consummation of the Merger and efforts to satisfy conditions to the consummation of the Merger.
The Merger Agreement also contains additional covenants of the parties, including, among others, covenants providing for Pivotal and XL to cooperate in the preparation of the Registration Statement on Form S-4 required to be prepared in connection with the Merger (the Registration Statement).
Conditions to Closing
General Conditions
Consummation of the Merger is conditioned on approval by Pivotals stockholders. In addition, the consummation of the Merger contemplated by the Merger Agreement is conditioned upon, among other things:
|
Pivotal having at least $5,000,001 of net tangible assets remaining prior to the Merger after taking into account the holders of Pivotals public shares that properly demanded that Pivotal redeem their public shares for their pro rata share of the trust account; |
|
all specified waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended shall have expired; |
|
the Registration Statement shall have become effective in accordance with the provisions of the Securities Act of 1933, as amended (Securities Act), no stop order shall have been issued by the Securities and Exchange Commission (SEC) which remains in effect with respect to the Registration Statement, and no proceeding seeking such a stop order shall have been threatened or initiated by the SEC which remains pending; |
|
approval of the Merger by XLs stockholders; |
|
the Pivotal Common Stock to be issued to XL stockholders in the Merger shall have been approved for listing on the NYSE, subject to official notice thereof and public holder requirements; and |
|
completion of the PIPE Offering (defined below). |
XLs Conditions to Closing
The obligations of XL to consummate the Merger are also conditioned upon, among other things:
|
the accuracy of the representations and warranties of Pivotal and Merger Sub (subject to certain bring-down standards); |
|
performance of the covenants of Pivotal and Merger Sub required by the Merger Agreement to be performed on or prior to the closing; |
|
no order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any governmental authority or statute, rule or regulation that is in effect and prohibits or enjoins the consummation of the Merger; |
|
no material adverse effect with respect to Pivotal shall have occurred between the date of the Merger Agreement and the closing of the Merger; |
|
Pivotal executing the Registration Rights Agreement described below; |
|
Pivotal filing its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware and adopting its amended bylaws; |
|
certain officers and directors of Pivotal having resigned as of the closing date; |
|
Pivotal terminating its existing registration rights agreement; and |
|
Pivotals initial stockholders executing the Lock-Up Agreement described below. |
Pivotals and Merger Subs Conditions to Closing
The obligations of Pivotal and Merger Sub to consummate the Merger are also conditioned upon, among other things:
|
the accuracy of the representations and warranties of XL (subject to certain bring-down standards); |
|
performance of the covenants of XL required by the Merger Agreement to be performed on or prior to the closing; |
|
no order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any governmental authority or statute, rule or regulation that is in effect and prohibits or enjoins the consummation of the Merger; |
|
no material adverse effect with respect to XL shall have occurred between the date of the Merger Agreement and the closing of the Merger; |
|
XL having delivered certain audited financial statements to Pivotal; |
|
certain XL stockholders having executed the Lock-Up Agreement described below; |
|
the conversion of XLs outstanding preferred stock and derivative securities, as set forth in the Merger Agreement; |
|
XL having obtained required lender consent to the Merger Agreement or having repaid in full the outstanding principal and accrued interest under its Paycheck Protection Program loan; and |
|
XL having delivered a certificate of non-foreign status. |
Waivers
Either Pivotal or XL may waive any inaccuracies in the representations and warranties made to such party contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement and waive compliance with any agreements or conditions for the benefit of itself or such party contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement. Notwithstanding the foregoing, pursuant to Pivotals amended and restated certificate of incorporation, Pivotal cannot consummate the proposed business combination if it has less than $5,000,001 of net tangible assets remaining either immediately prior to or upon consummation of the Merger after taking into account the holders of public shares that properly demanded that Pivotal redeem their public shares for their pro rata share of the trust account.
Termination
The Merger Agreement may be terminated:
|
by mutual written consent of Pivotal and XL; |
|
by either Pivotal or XL if the Merger is not consummated on or before January 16, 2021 (Outside Date), provided that the right to terminate the Merger Agreement will not be available to any party whose action or failure to act has been a principal cause of or primarily resulted in the failure of the Merger to occur on or before such date and such action or failure to act constitutes a breach of the Merger Agreement; |
|
by either Pivotal or XL if a governmental entity shall have issued an order, decree or ruling or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the merger, which order, decree, judgment, ruling or other action is final and non-appealable; |
|
by either Pivotal or XL if the other party has breached any of its covenants or representations and warranties in any material respect and has not cured by the Outside Date, provided that the terminating party is itself not in material breach; |
|
by Pivotal if XL shall have failed to deliver the Support Agreements described below within one (1) day following the execution of the Merger Agreement; |
|
by Pivotal, if XL fails to obtain stockholder approval by written consent within ten (10) Business Days following the approval of the proxy statement/prospectus by the SEC; |
|
by either Pivotal or XL if, at the Pivotal stockholder meeting called to approve the Merger, the Merger shall fail to be approved by the required vote (subject to any adjournment or recess of the meeting); or |
|
by either Pivotal or XL if, immediately following consummation of the Merger, Pivotal will have less than $5,000,001 of net tangible assets following the exercise by the holders of Pivotal Common Stock issued in Pivotals initial public offering of their redemption rights. |
Lock-Up Agreement
Certain XL stockholders have entered into a lock-up agreement (the Lock-Up Agreement) which provides that such stockholders shares of Pivotal Common Stock issued in the Merger will be subject to a 12-month lockup period, which period may be earlier terminated if the reported closing sale price of the Pivotal Common Stock equals or exceeds $15.00 per share (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations or other similar transactions) for a period of twenty (20) trading days during a
thirty (30)-trading day period commencing at least one hundred fifty (150) days following the closing of the Merger, subject to certain exceptions. The Merger Agreement also requires the Company to use reasonable best efforts to cause all other XL stockholders not party to the Lock-Up Agreement as of the date hereof to agree to the foregoing lock-up restrictions prior to the Effective Time.
In addition, Pivotal has agreed to cause its initial stockholders to amend existing lock-up agreements with respect to the Pivotal Common Stock, Class B common stock of Pivotal, and warrants of Pivotal held by them, and enter into the Lock-Up Agreement, so that the lock-up restrictions with respect to such initial stockholders securities will be identical to the lock-up restrictions applicable to the XL stockholders.
The foregoing description of the Lock-Up Agreement is qualified in its entirety by reference to the text of the Lock-Up Agreement. The form of Lock-Up Agreement is attached as Exhibit B to the Merger Agreement filed as Exhibit 2.1 hereto and incorporated herein by reference.
Registration Rights Agreement
Certain XL and Pivotal stockholders have entered into a registration rights agreement (the Registration Rights Agreement) pursuant to which they will be granted certain rights to have registered, in certain circumstances, the resale under the Securities Act of the Pivotal Common Stock held by them, subject to certain conditions set forth therein. Pivotal will use reasonable best efforts to terminate its existing registration rights agreement and shall offer to the Pivotal stockholders who are parties to the existing registration rights agreement the opportunity to enter into the Registration Rights Agreement.
The foregoing description of the Registration Rights Agreement is qualified in its entirety by reference to the text of the Registration Rights Agreement. The form of Registration Rights Agreement is attached as Exhibit C to the Merger Agreement filed as Exhibit 2.1 hereto and incorporated herein by reference.
XL Support Agreements
In connection with the execution of the Merger Agreement, certain officers, directors and 5% or greater holders of XL Stock, who collectively hold approximately 47% of the issued and outstanding shares of XL Common Stock on an as-converted basis have entered into agreements with Pivotal (the Support Agreements) pursuant to which such stockholders have agreed, among other things, (i) to vote all of their respective shares of XL Stock in favor of the Merger at a meeting called to approve the Merger by XL stockholders (or in an action by written consent approving the Merger) and (ii) to the extent such stockholders are holders of XLs Series D preferred stock, to deliver a signature to the request for conversion required to effect the conversion of XL Preferred Stock into XL Common Stock immediately prior to the Effective Time.
The foregoing description of the Support Agreements is qualified in its entirety by reference to the text of the Support Agreements. The form of Support Agreement is attached as Exhibit 10.2 hereto and incorporated herein by reference.
Incentive Equity Plan
Prior to the consummation of the Merger, Pivotal will adopt an incentive equity plan, the form and terms of which shall be agreed by XL and Pivotal and submitted for adoption by Pivotal stockholders at the Pivotal stockholder meeting to approve the Merger.
Subscription Agreements
On September 17, 2020, Pivotal entered into subscription agreements (Subscription Agreements) with certain accredited investors (Investors), pursuant to which in connection with the Merger, Pivotal will issue an aggregate of 15,000,000 shares of Pivotal Common Stock to the Investors at a price of $10 per share, for aggregate gross proceeds to Pivotal of $150,000,000 (the PIPE Offering). The closing of the PIPE Offering is conditioned upon, among other customary closing conditions, (i) Pivotal receiving shareholder approval of the issuance of the shares of Pivotal Common Stock to be issued to the Investors pursuant to the rules and regulations of the NYSE and (ii) Pivotal and XL consummating the Merger prior to or substantially concurrently with the closing of the PIPE Offering.
Pivotal has agreed that, as soon as reasonably practicable, but in no event later than 45 days following the closing of the Merger, it shall file a registration statement with the Securities and Exchange Commission registering the resale by the Investors of the shares of Pivotal Common Stock issued to them in the PIPE Offering and use its commercially reasonable efforts to have such registration statement declared effective as promptly as reasonably practicable after the filing of the registration statement, but in no event more than 60 days after the filing of the registration statement (or 90 days after the filing of the registration statement if the SEC determines to review the registration statement).
The shares of Pivotal Common Stock were offered and sold to the Investors in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Regulation D under the Securities Act.
The foregoing description of the Subscription Agreements is qualified in its entirety by reference to the text of the Subscription Agreements. The form of Subscription Agreement is attached as Exhibit 10.1 hereto and incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities
The information set forth in Item 1.01 relating to the Subscription Agreements is incorporated by reference herein.
Item 7.01 Regulation FD Disclosure.
On September 18, 2020, Pivotal issued a press release announcing the execution of the Merger Agreement and the related transactions described in Item 1.01 above. The press release is attached hereto as Exhibit 99.1.
Attached as Exhibit 99.2 to this Current Report on Form 8-K is the investor presentation that will be used by Pivotal with respect to the Merger. Also attached as Exhibit 99.3 to this Current Report on Form 8-K is an investor call script that will be used to discuss the proposed Merger.
The information set forth under this Item 7.01, including Exhibits 99.1, 99.2 and 99.3, is intended to be furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing.
Important Additional Information and Where to Find It
IN CONNECTION WITH THE PROPOSED MERGER, PIVOTAL INTENDS TO FILE WITH THE SEC THE REGISTRATION STATEMENT ON FORM S-4, WHICH WILL INCLUDE A PROXY STATEMENT/PROSPECTUS, AND CERTAIN OTHER RELATED DOCUMENTS, WHICH WILL BE BOTH THE PROXY STATEMENT TO BE DISTRIBUTED TO PIVOTALS STOCKHOLDERS IN CONNECTION WITH PIVOTALS SOLICITATION OF PROXIES FOR THE VOTE BY PIVOTALS STOCKHOLDERS WITH RESPECT TO THE MERGER AND CERTAIN OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, AS WELL AS OTHER MATTERS THAT MAY BE DESCRIBED IN THE REGISTRATION STATEMENT, AS WELL AS THE PROSPECTUS RELATING TO THE OFFER AND SALE OF THE SECURITIES OF PIVOTAL COMMON STOCK TO BE ISSUED IN THE MERGER. INVESTORS AND SECURITY HOLDERS OF PIVOTAL AND XL ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS. INVESTORS AND SECURITY HOLDERS WILL BE ABLE TO OBTAIN FREE COPIES OF THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS CONTAINING IMPORTANT INFORMATION ABOUT PIVOTAL AND XL ONCE SUCH DOCUMENTS ARE FILED WITH THE SEC, THROUGH THE WEBSITE MAINTAINED BY THE SEC AT WWW.SEC.GOV. COPIES OF THE DOCUMENTS FILED WITH
THE SEC BY PIVOTAL WHEN AND IF AVAILABLE, CAN BE OBTAINED FREE OF CHARGE ON PIVOTALS WEBSITE AT WWW.PIVOTALAC.COM OR BY DIRECTING A WRITTEN REQUEST TO PIVOTAL INVESTMENT CORPORATION II, C/O GRAUBARD MILLER, 405 LEXINGTON AVENUE, 11TH FLOOR, NEW YORK, NEW YORK 10174.
THIS CURRENT REPORT AND THE EXHIBITS HERETO ARE NOT A PROXY STATEMENT OR SOLICITATION OF A PROXY, CONSENT OR AUTHORIZATION WITH RESPECT TO ANY SECURITIES OR IN RESPECT OF THE PROPOSED TRANSACTIONS AND SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OF PIVOTAL OR XL, NOR SHALL THERE BE ANY SALE OF ANY SUCH SECURITIES IN ANY STATE OR JURISDICTION IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH STATE OR JURISDICTION.
Participants in the Solicitation
PIVOTAL AND XL AND THEIR RESPECTIVE DIRECTORS AND EXECUTIVE OFFICERS, UNDER SEC RULES, MAY BE DEEMED TO BE PARTICIPANTS IN THE SOLICITATION OF PROXIES OF PIVOTALS STOCKHOLDERS IN CONNECTION WITH THE PROPOSED TRANSACTIONS. INVESTORS AND SECURITY HOLDERS MAY OBTAIN MORE DETAILED INFORMATION REGARDING THE NAMES AND INTERESTS IN THE PROPOSED TRANSACTIONS OF PIVOTALS DIRECTORS AND OFFICERS IN PIVOTALS FILINGS WITH THE SEC, INCLUDING PIVOTALS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019, WHICH WAS FILED WITH THE SEC ON MARCH 30, 2020. XL AND ITS DIRECTORS AND EXECUTIVE OFFICERS MAY ALSO BE DEEMED TO BE PARTICIPANTS IN THE SOLICITATION OF PROXIES FROM THE STOCKHOLDERS OF PIVOTAL IN CONNECTION WITH THE MERGER. INFORMATION REGARDING THE PERSONS WHO MAY, UNDER SEC RULES, BE DEEMED PARTICIPANTS IN THE SOLICITATION OF PROXIES TO PIVOTALS STOCKHOLDERS IN CONNECTION WITH THE PROPOSED TRANSACTIONS WILL BE SET FORTH IN THE REGISTRATION STATEMENT FOR THE PROPOSED TRANSACTIONS THAT PIVOTAL INTENDS TO FILE WITH THE SEC, WHICH WILL INCLUDE A PROXY STATEMENT AND PROSPECTUS FOR THE TRANSACTIONS. ADDITIONAL INFORMATION REGARDING THE INTERESTS OF PARTICIPANTS IN THE SOLICITATION OF PROXIES IN CONNECTION WITH THE PROPOSED TRANSACTIONS WILL BE INCLUDED IN THE REGISTRATION STATEMENT.
SOME OF XLS FINANCIAL INFORMATION AND DATA CONTAINED IN THE EXHIBITS HERETO DOES NOT CONFORM TO SEC REGULATION S-X IN THAT IT INCLUDES CERTAIN FINANCIAL INFORMATION NOT DERIVED IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). ACCORDINGLY, SUCH INFORMATION AND DATA WILL BE ADJUSTED AND PRESENTED DIFFERENTLY IN PIVOTALS FILINGS WITH THE SEC. PIVOTAL AND XL BELIEVE THAT THE PRESENTATION OF NON-GAAP MEASURES PROVIDES INFORMATION THAT IS USEFUL TO INVESTORS AS IT INDICATES MORE CLEARLY THE ABILITY OF XL TO MEET CAPITAL EXPENDITURES AND WORKING CAPITAL REQUIREMENTS AND OTHERWISE MEET ITS OBLIGATIONS AS THEY BECOME DUE.
THE FINANCIAL PROJECTIONS INCLUDED IN THE EXHIBITS HERETO ARE FORWARD-LOOKING STATEMENTS THAT ARE BASED ON ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND PIVOTALS AND XLS CONTROL. WHILE ALL PROJECTIONS ARE NECESSARILY SPECULATIVE, PIVOTAL AND XL BELIEVE THAT THE PROSPECTIVE FINANCIAL INFORMATION COVERING PERIODS BEYOND TWELVE MONTHS FROM ITS DATE OF PREPARATION CARRIES INCREASINGLY HIGHER LEVELS OF UNCERTAINTY AND SHOULD BE READ IN THAT CONTEXT. THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND PROJECTED RESULTS, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR MATERIALLY LESS THAN THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF PROJECTIONS IN THIS REPORT AND THE EXHIBITS HERETO SHOULD NOT BE REGARDED AS AN INDICATION THAT PIVOTAL AND XL, OR THEIR REPRESENTATIVES, CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS.
Forward-Looking Statements
THIS CURRENT REPORT AND THE EXHIBITS HERETO INCLUDE FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS MAY DIFFER FROM EXPECTATIONS, ESTIMATES AND PROJECTIONS AND, CONSEQUENTLY, YOU SHOULD NOT RELY ON THESE FORWARD LOOKING STATEMENTS AS PREDICTIONS OF FUTURE EVENTS. WORDS SUCH AS EXPECT, ESTIMATE, PROJECT, BUDGET, FORECAST, ANTICIPATE, INTEND, PLAN, MAY, WILL, COULD, SHOULD, BELIEVES, PREDICTS, POTENTIAL, CONTINUE, AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS.
IN ADDITION TO FACTORS PREVIOUSLY DISCLOSED IN PIVOTALS REPORTS FILED WITH THE SEC AND THOSE IDENTIFIED ELSEWHERE IN THIS COMMUNICATION, THE FOLLOWING FACTORS, AMONG OTHERS, COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM FORWARD-LOOKING STATEMENTS OR HISTORICAL PERFORMANCE: ABILITY OF THE PARTIES TO SATISFY THE CLOSING CONDITIONS TO THE MERGER, INCLUDING APPROVAL BY STOCKHOLDERS OF PIVOTAL AND XL ON THE EXPECTED TERMS AND SCHEDULE AND THE RISK THAT ANY THIRD-PARTY APPROVALS OR CONSENTS REQUIRED FOR THE MERGER ARE NOT OBTAINED OR ARE OBTAINED SUBJECT TO CONDITIONS THAT ARE NOT ANTICIPATED; DELAY IN CLOSING THE MERGER; FAILURE TO REALIZE THE BENEFITS EXPECTED FROM THE PROPOSED MERGER; THE EFFECTS OF PENDING AND FUTURE LEGISLATION; RISKS RELATED TO DISRUPTION OF MANAGEMENT TIME FROM ONGOING BUSINESS OPERATIONS DUE TO THE PROPOSED MERGER; BUSINESS DISRUPTION FOLLOWING THE MERGER; RISKS RELATED TO XLS BUSINESS, INCLUDING THE HIGHLY COMPETITIVE NATURE OF ITS INDUSTRY; LITIGATION, COMPLAINTS, PRODUCT LIABILITY CLAIMS AND/OR ADVERSE PUBLICITY; COST INCREASES OR SHORTAGES IN COMPONENTS NECESSARY FOR XLS PRODUCTS AND SERVICES; PRIVACY AND DATA PROTECTION LAWS, PRIVACY OR DATA BREACHES, OR THE LOSS OF DATA; THE IMPACT OF THE COVID-19 PANDEMIC ON XLS BUSINESS; AND MACROECONOMIC FACTORS BEYOND PIVOTALS OR XLS CONTROL.
NEITHER PIVOTAL NOR XL UNDERTAKE ANY OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE, EXCEPT AS REQUIRED BY LAW. IMPORTANT FACTORS, AMONG OTHERS, THAT MAY AFFECT ACTUAL RESULTS INCLUDE XLS ABILITY TO EXECUTE ON ITS BUSINESS PLANS AND XLS ESTIMATES OF EXPENSES AND FUTURE REVENUES AND PROFITABILITY. OTHER FACTORS INCLUDE THE POSSIBILITY THAT THE PROPOSED TRANSACTIONS DO NOT CLOSE, INCLUDING DUE TO THE FAILURE TO RECEIVE REQUIRED SECURITY HOLDER APPROVALS, OR THE FAILURE OF OTHER CLOSING CONDITIONS.
ADDITIONAL INFORMATION CONCERNING THESE AND OTHER RISK FACTORS WILL BE CONTAINED IN THE REGISTRATION STATEMENT ON FORM S-4 AND PIVOTALS OTHER FILINGS WITH THE SEC. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS CONCERNING PIVOTAL AND XL, THE PROPOSED TRANSACTIONS OR OTHER MATTERS AND ATTRIBUTABLE TO PIVOTAL AND XL OR ANY PERSON ACTING ON THEIR BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS ABOVE. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON ANY FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE. NEITHER PIVOTAL NOR XL UNDERTAKE OR ACCEPT ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENT TO REFLECT ANY CHANGE IN THEIR EXPECTATIONS OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED, EXCEPT AS REQUIRED BY APPLICABLE LAW.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
* |
Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). Pivotal agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: September 18, 2020 | PIVOTAL INVESTMENT CORPORATION II | |||||
By: |
/s/ Jonathan J. Ledecky |
|||||
Jonathan J. Ledecky | ||||||
Chief Executive Officer |
Exhibit 2.1
EXECUTION VERSION
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PIVOTAL INVESTMENT CORPORATION II,
PIC II MERGER SUB CORP.
and
XL HYBRIDS, INC.
DATED AS OF SEPTEMBER 17, 2020
TABLE OF CONTENTS
Page | ||||||
ARTICLE I THE MERGER |
1 | |||||
1.1 |
The Merger | 1 | ||||
1.2 |
Effective Time; Closing | 1 | ||||
1.3 |
Effect of the Merger | 2 | ||||
1.4 |
Governing Documents | 2 | ||||
1.5 |
Effect on Securities | 2 | ||||
1.6 |
Merger Consideration Exchange Procedures | 3 | ||||
1.7 |
Lost, Stolen or Destroyed Certificates | 4 | ||||
1.8 |
Tax Consequences | 4 | ||||
1.9 |
Taking of Necessary Action; Further Action | 4 | ||||
1.10 |
Outstanding Company Derivative Securities | 4 | ||||
1.11 |
Payment of Expenses | 5 | ||||
1.12 |
Support Agreements | 6 | ||||
1.13 |
Private Financing | 6 | ||||
1.14 |
Appraisal Rights | 6 | ||||
ARTICLE II REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY |
7 | |||||
2.1 |
Organization and Qualification | 7 | ||||
2.2 |
Subsidiaries | 7 | ||||
2.3 |
Capitalization | 8 | ||||
2.4 |
Authority Relative to this Agreement | 9 | ||||
2.5 |
No Conflict; Required Filings and Consents | 10 | ||||
2.6 |
Compliance | 10 | ||||
2.7 |
Financial Statements | 10 | ||||
2.8 |
No Undisclosed Liabilities | 11 | ||||
2.9 |
Absence of Certain Changes or Events | 11 | ||||
2.10 |
Litigation | 12 | ||||
2.11 |
Employee Benefit Plans | 12 | ||||
2.12 |
Labor Matters | 14 | ||||
2.13 |
Restrictions on Business Activities | 14 | ||||
2.14 |
Title to Property | 14 | ||||
2.15 |
Taxes | 15 | ||||
2.16 |
Environmental Matters | 16 | ||||
2.17 |
Brokers; Third Party Expenses | 16 | ||||
2.18 |
Intellectual Property | 16 | ||||
2.19 |
Agreements, Contracts and Commitments | 18 | ||||
2.20 |
Insurance | 20 | ||||
2.21 |
Governmental Actions/Filings | 20 | ||||
2.22 |
Interested Party Transactions | 20 | ||||
2.23 |
Board Approval | 20 | ||||
2.24 |
Proxy Statement | 20 | ||||
2.25 |
No Additional Representations and Warranties | 21 |
i
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB |
21 | |||||
3.1 |
Organization and Qualification | 21 | ||||
3.2 |
Subsidiaries | 21 | ||||
3.3 |
Capitalization | 22 | ||||
3.4 |
Authority Relative to this Agreement | 23 | ||||
3.5 |
No Conflict; Required Filings and Consents | 23 | ||||
3.6 |
Compliance | 24 | ||||
3.7 |
Parent SEC Reports and Financial Statements | 24 | ||||
3.8 |
No Undisclosed Liabilities | 25 | ||||
3.9 |
Absence of Certain Changes or Events | 25 | ||||
3.10 |
Litigation | 25 | ||||
3.11 |
Employee Benefit Plans | 25 | ||||
3.12 |
Labor Matters | 25 | ||||
3.13 |
Business Activities | 25 | ||||
3.14 |
Title to Property | 26 | ||||
3.15 |
Intellectual Property | 26 | ||||
3.16 |
Taxes | 26 | ||||
3.17 |
Environmental Matters | 26 | ||||
3.18 |
Brokers | 27 | ||||
3.19 |
Agreements, Contracts and Commitments | 27 | ||||
3.20 |
Insurance | 27 | ||||
3.21 |
Interested Party Transactions | 27 | ||||
3.22 |
Parent Listing | 28 | ||||
3.23 |
Board Approval | 28 | ||||
3.24 |
Trust Fund | 28 | ||||
3.25 |
PIPE Documents | 28 | ||||
3.26 |
No Additional Representations and Warranties; Independent Investigation | 29 | ||||
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME |
29 | |||||
4.1 |
Conduct of Business by the Company, Parent and Merger Sub | 29 | ||||
4.2 |
Confidentiality; Access to Information | 32 | ||||
4.3 |
No Solicitation | 33 | ||||
4.4 |
Certain Financial Information | 33 | ||||
4.5 |
Access to Financial Information | 33 | ||||
4.6 |
Commercially Reasonable Efforts | 34 | ||||
ARTICLE V ADDITIONAL AGREEMENTS |
34 | |||||
5.1 |
Proxy Statement; Special Meeting | 34 | ||||
5.2 |
Directors and Officers of Parent and the Company After Merger | 35 | ||||
5.3 |
HSR Act | 36 | ||||
5.4 |
Public Announcements | 36 | ||||
5.5 |
Required Information | 37 | ||||
5.6 |
No Securities Transactions | 37 | ||||
5.7 |
No Claim Against Trust Fund | 37 | ||||
5.8 |
Disclosure of Certain Matters | 38 | ||||
5.9 |
Securities Listing | 38 |
ii
5.10 |
Charter Protections; Directors and Officers Liability Insurance | 38 | ||||
5.11 |
Insider Loans | 38 | ||||
5.12 |
Parent Borrowings | 38 | ||||
5.13 |
Trust Fund Disbursement | 39 | ||||
5.14 |
Board of Directors | 39 | ||||
5.15 |
Lock-Up Agreement | 39 | ||||
5.16 |
Registration Rights Agreement | 39 | ||||
5.17 |
Intended Tax Treatment; Tax Opinions | 39 | ||||
5.18 |
Incentive Equity Plan | 40 | ||||
5.19 |
PIPE Investment | 40 | ||||
5.20 |
Company Stockholder Approval | 41 | ||||
5.21 |
PPP Loan | 41 | ||||
ARTICLE VI CONDITIONS TO THE TRANSACTION |
41 | |||||
6.1 |
Conditions to Obligations of Each Party to Effect the Merger | 41 | ||||
6.2 |
Additional Conditions to Obligations of the Company | 42 | ||||
6.3 |
Additional Conditions to the Obligations of Parent and Merger Sub | 43 | ||||
ARTICLE VII TERMINATION |
44 | |||||
7.1 |
Termination | 44 | ||||
7.2 |
Notice of Termination; Effect of Termination | 45 | ||||
7.3 |
Fees and Expenses | 45 | ||||
ARTICLE VIII GENERAL PROVISIONS |
45 | |||||
8.1 |
Notices | 45 | ||||
8.2 |
Interpretation | 46 | ||||
8.3 |
Counterparts; Electronic Delivery | 51 | ||||
8.4 |
Entire Agreement; Third Party Beneficiaries | 51 | ||||
8.5 |
Severability | 51 | ||||
8.6 |
Other Remedies; Specific Performance | 51 | ||||
8.7 |
Governing Law | 51 | ||||
8.8 |
Consent to Jurisdiction; WAIVER OF TRIAL BY JURY | 52 | ||||
8.9 |
Rules of Construction | 52 | ||||
8.10 |
Assignment | 52 | ||||
8.11 |
Amendment | 52 | ||||
8.12 |
Extension; Waiver | 52 | ||||
8.13 |
Currency | 52 | ||||
8.14 |
Schedules | 52 | ||||
8.15 |
Nonsurvival of Representations, Warranties and Covenants | 52 | ||||
8.16 |
Non-Recourse | 53 |
iii
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of September 17, 2020, by and among Pivotal Investment Corporation II, a Delaware corporation (Parent), PIC II Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of Parent (Merger Sub), and XL Hybrids, Inc., a Delaware corporation (Company). The term Agreement as used herein refers to this Agreement and Plan of Reorganization, as the same may be amended from time to time, and all schedules hereto (including the Company Schedule and the Parent Schedule, as defined in the preambles to Articles II and III hereof, respectively). Each of Parent, Merger Sub and the Company shall be referred to herein, individually, as a Party and, collectively, as the Parties. Except as otherwise indicated, capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in Section 8.2.
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the DGCL), the Parties intend to enter into a business combination transaction by which Merger Sub will merge with and into the Company (with the Company being the surviving entity of the Merger (Surviving Corporation)) in exchange for the Companys stockholders receiving shares of Class A common stock, par value $0.0001 per share, of the Parent (Parent Common Stock) as provided by this Agreement (the Merger).
B. The boards of directors of each of Parent, Merger Sub and the Company have determined that the Merger is fair to, and in the best interests of, their respective companies and their respective stockholders.
C. The parties intend that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (the Code), and this Agreement is hereby adopted as a plan of reorganization within the meaning of Section 368 of the Code.
NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the DGCL, Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the Surviving Corporation after the Merger and as a wholly owned subsidiary of Parent.
1.2 Effective Time; Closing. Subject to the terms and conditions of this Agreement, as soon as practicable on or after the Closing Date (defined below), the parties hereto shall cause the Merger to be consummated by filing a Certificate of Merger (the Certificate of Merger) with the Secretary of State of the State of Delaware, in accordance with the applicable provisions of the DGCL (the time of such filing, or such later time as may be agreed in writing by Company and Parent and specified in the Certificate of Merger, being the Effective Time). Unless this Agreement shall have been terminated pursuant to Section 7.1, the consummation of the Merger (the Closing), other than the filing of the Certificate of Merger, shall take place at the offices of Graubard Miller, counsel to Parent, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174-1901 at a time and date to be specified by the parties, which shall be no later than the third (3rd) Business Day after the satisfaction or waiver of the conditions set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction thereof at the Closing), or at such other time, date and location as the parties hereto agree in writing (the Closing Date). Closing signatures may be transmitted by facsimile or by email pdf files.
1
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of each of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of each of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Governing Documents. At the Effective Time,
(a) the Certificate of Incorporation of the Surviving Corporation shall be amended and restated to be identical to the Certificate of Incorporation of Merger Sub except that the name of the Surviving Corporation shall be that of the Company; and
(b) the Bylaws of the Surviving Corporation shall be amended and restated to be identical to the Bylaws of Merger Sub except that the name of the Surviving Corporation shall be that of the Company.
1.5 Effect on Securities.
(a) Conversion of Company Preferred Stock. Immediately prior to the Effective Time, the Company shall cause each share of Company Preferred Stock that is issued and outstanding immediately prior to the Effective Time to be automatically converted into a number of shares of the Companys common stock, par value $0.0001 per share (the Company Common Stock and, together with the Company Preferred Stock (as defined below), the Company Stock) in accordance with the terms of Article Fourth, Section C.4(b)(ii) and Section C.4(c) of the Companys amended and restated certificate of incorporation, dated September 28, 2017 (as such may have been amended, supplemented or modified from time to time, the Company Charter). All of the shares of Company Preferred Stock so converted into shares of Company Common Stock shall no longer be issued and outstanding and shall cease to exist, and each holder of Company Preferred Stock shall thereafter cease to have any rights with respect to such shares of Company Preferred Stock.
(b) Conversion of Securities. Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and this Agreement and without any further action on the part of Parent, Merger Sub or the Company or the holders of any of the following securities:
(i) other than shares cancelled pursuant to Section 1.5(e) and Dissenting Shares, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (including, for the avoidance of doubt, each share of Company Common Stock issued as a result of the conversion of Company Preferred Stock pursuant to Section 1.5(a) and any conversion or exchange of Company Convertible Notes pursuant to Section 1.10(c)) will be automatically converted into the right to receive that number of shares of Parent Common Stock (Merger Shares) equal to the Exchange Ratio (the Per Share Merger Consideration) consistent with Schedule 1.5(b) hereto, which sets forth a calculation of the Exchange Ratio as of the date hereof, together with the assumptions related to such calculation; and
(ii) each share of Merger Subs common stock, par value $0.001 per share issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation.
(c) Adjustments to Merger Consideration. The Per Share Merger Consideration issuable pursuant to this Section 1.5 shall be equitably adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into shares of Parent Common Stock), extraordinary cash dividends, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to shares of Parent Common Stock occurring on or after the date hereof but at or prior to the Effective Time.
2
(d) Fractional Shares. No fraction of a share of Parent Common Stock will be issued by virtue of the Merger, and each holder of shares of Company Common Stock who would otherwise be entitled to a fraction of a share of Parent Common Stock any time shares of Parent Common Stock are distributed to any such Person pursuant to this Agreement (after aggregating all fractional shares of Parent Common Stock that otherwise would be received by such holder in connection with such distribution) shall, upon compliance with Section 1.6, receive from Parent, in lieu of such fractional share, one (1) share of Parent Common Stock.
(e) Cancellation of Treasury and Parent-Owned Stock. Each share of Company Stock held by the Company or Parent or any direct or indirect wholly-owned subsidiary of Parent immediately prior to the Effective Time shall be canceled and extinguished without any conversion or payment in respect thereof.
(f) Total Merger Shares. For the avoidance of doubt, in no event shall the aggregate number of Merger Shares to be issued in the Merger exceed an amount equal to 100,000,000 less the Reserved Share Number.
1.6 Merger Consideration Exchange Procedures.
(a) Exchange Procedures. At the Closing, the holders of Company Stock (the Company Stockholders) shall deliver the certificates or notes evidencing their right to shares of Company Stock (including shares of Company Preferred Stock or Company Convertible Notes that have been converted into Company Common Stock pursuant to Section 1.5(a) and Section 1.10(c), respectively) (the Company Certificates) to Parent for cancellation, or in the case of a lost, stolen or destroyed Company Certificate, will deliver to Parent an affidavit (and indemnity if required) in the manner provided in Section 1.7 below), together with a letter of transmittal in substantially the form attached hereto as Exhibit A (Letter of Transmittal), and receive in exchange therefor the Per Share Merger Consideration in book-entry form (unless certificates representing Merger Shares are otherwise requested by Company Stockholders) and the certificates representing the Company Stock shall forthwith be cancelled. Until so surrendered, outstanding Company Certificates will be deemed, from and after the Effective Time, to evidence only the right to receive the Per Share Merger Consideration as prescribed by this Agreement.
(b) Distributions With Respect to Unexchanged Shares. No dividends or other distributions declared or made after the date of this Agreement with respect to Parent Common Stock with a record date after the Effective Time will be paid to the holders of any unsurrendered Company Certificates with respect to the Per Share Merger Consideration to be issued upon surrender thereof until the holders of record of such Company Certificates shall surrender such certificates. Subject to applicable law, following surrender of any such Company Certificates, Parent shall promptly deliver to the record holders thereof, without interest, the Per Share Merger Consideration issued in exchange therefor in book-entry form and the amount of any such dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such Merger Shares.
(c) Transfers of Ownership. If Merger Shares are to be issued in book-entry form in a name other than that in which the Company Certificates surrendered in exchange therefor are registered, it will be a condition of the issuance thereof that the Company Certificates so surrendered will be properly endorsed and otherwise in proper form for transfer and that the persons requesting such exchange will have paid to Parent or any agent designated by it any transfer or other taxes required by reason of the issuance of Merger Shares representing the Per Share Merger Consideration in any name other than that of the registered holder of the Company Certificates surrendered, or established to the satisfaction of Parent or any agent designated by it that such tax has been paid or is not payable.
(d) Required Withholding. Parent shall be entitled to deduct and withhold (or cause to be deducted and withheld) from any consideration payable or otherwise deliverable pursuant to this Agreement such amounts as are required to be deducted or withheld therefrom under the Code or under any provision of state, local or foreign tax law. Parent shall provide notice of any withholding that it intends to make (or cause to be made) in connection with consideration payable or otherwise deliverable pursuant to this Agreement (other than any withholding required in connection with amounts properly treated as compensation for applicable Tax purposes) at least fifteen (15) days prior to the date of the relevant payment, and the Parties shall (and shall cause their Affiliates to) cooperate to minimize or eliminate any potential withholding. To the extent such amounts are so deducted or withheld consistent with the terms of this Section 1.6(d), such amounts shall be treated for all purposes under this Agreement as having been paid to the person to whom such amounts would otherwise have been paid.
3
(e) No Further Ownership Rights in Company Stock. All shares of Parent Common Stock issued in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to the Company Stock and there shall be no further registration of transfers on the records of the Surviving Corporation of the shares of Company Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Company Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article I.
1.7 Lost, Stolen or Destroyed Certificates. In the event that any Company Certificates shall have been lost, stolen or destroyed, Parent shall issue in exchange for such lost, stolen or destroyed Company Certificates, upon the making of an affidavit of that fact by the holder thereof, the aggregate Per Share Merger Consideration into which the shares of Company Stock formerly represented by such Company Certificates was converted into and any dividends or distributions payable pursuant to Section 1.6(b); provided, however, that, as a condition precedent to the delivery of such Per Share Merger Consideration, the owner of such lost, stolen or destroyed Company Certificates shall indemnify Parent against any claim that may be made against Parent or Surviving Corporation with respect to the Company Certificates alleged to have been lost, stolen or destroyed and deliver any Letter of Transmittal reasonably required by Parent.
1.8 Tax Consequences. It is intended by the parties hereto that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code. The parties hereto adopt this Agreement as a plan of reorganization within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a).
1.9 Taking of Necessary Action; Further Action. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, the officers and directors of the Company and Merger Sub will use their reasonable best efforts to take all such lawful and necessary action.
1.10 Outstanding Company Derivative Securities.
(a) Company Options. At the Effective Time, each outstanding option to purchase shares of Company Common Stock, whether or not exercisable and whether or not vested, immediately prior to the Effective Time (a Company Option) shall be assumed by Parent and converted into an option to purchase a number of shares of Parent Common Stock (such option, an Exchanged Option) equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Company Common Stock subject to such Company Option immediately prior to the Effective Time and (y) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Company Option immediately prior to the Effective Time divided by (B) the Exchange Ratio; provided, however, that the exercise price and the number of shares of Parent Common Stock purchasable pursuant to the Exchanged Options shall be determined in a manner consistent with the requirements of Section 409A of the Code; provided, further, that in the case of any Exchanged Option to which Section 422 of the Code applies, the exercise price and the number of shares of Parent Common Stock purchasable pursuant to such option shall be determined in accordance with the foregoing, subject to such adjustments as are necessary in order to satisfy the requirements of Section 424(a) of the Code and the U.S. Department of Treasury regulations thereunder, as applicable. Except as specifically provided above, following the Effective Time, each Exchanged Option shall continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Company Option immediately prior to the Effective Time (without duplication of any right to accelerated vesting that may have been triggered in connection with the transactions contemplated hereby), and subject to the adjustments required by this Section 1.10(a) after giving effect to the Merger). At the Effective Time, each Company restricted stock award (a Company Restricted Stock Award), whether vested or unvested, shall be assumed by Parent and shall be converted into a restricted stock award with respect to a number of shares of Parent Common Stock (such restricted stock award, an Exchanged RSA) equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Company Common Stock subject to such Company Restricted Stock Award immediately prior to the Effective Time and (y) the Exchange Ratio, with the same terms and conditions as were applicable under such Company Restricted Stock Award immediately prior to the Effective Time. Parent shall assume the Company Stock Plan (the Assumed Plan) such that the Exchanged Options and Exchanged RSAs will be issued under the Assumed Plan, and stock options and other equity-based awards may be issued with respect to the shares available
4
for grant thereunder as of immediately prior to the Effective Time (subject to appropriate adjustment pursuant to the Company Stock Plan and all equity-based awards granted thereunder) in respect of Parent Common Stock under such Company Stock Plan, and Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery upon exercise of Company Options and the issuance of stock options and other equity-based awards from the shares available for grant as of immediately prior to the Effective Time under the Company Stock Plan assumed in accordance with this Section 1.10(a). At or prior to the Effective Time, the Parties and their boards, as applicable, shall adopt any resolutions and take any actions that are necessary to effectuate the assumption of the Company Stock Plan and the treatment of the Company Options and Company Restricted Stock Awards pursuant to this subsection, and to cause any disposition or acquisition of equity securities of Parent pursuant to this Section 1.10(a) by each individual who is a director or officer of Parent or who will become a director or officer of Parent at the Effective Time to be exempt under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act). Parent shall file an appropriate registration statement or registration statements with respect to the shares of Parent Common Stock subject to such Exchanged Options (other than any Exchanged Options held by any former employee, director or consultant of the Company immediately prior to the Effective Time) and shall use commercially reasonable efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such awards remain outstanding.
(b) Company Warrants. At the Effective Time, by virtue of the Merger, each warrant, issued by the Company and outstanding, to purchase shares of Company Stock (a Company Warrant) shall be automatically assumed by Parent and shall become a warrant to acquire, on the same terms and conditions as were applicable under each such Company Warrant, a number of shares of Parent Common Stock equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Company Common Stock subject to such Company Warrant immediately prior to the Effective Time (including, with respect to any Company Warrant to purchase shares of Company Preferred Stock, the shares of Company Common Stock issuable upon conversion of the shares of Company Preferred Stock subject to such Company Warrant) as adjusted pursuant to the terms of such Company Warrant and (y) the Exchange Ratio, at an exercise price (rounded up to the nearest whole cent) equal to (A) the exercise price of such Company Warrant immediately prior to the Effective Time as adjusted pursuant to the terms of such Company Warrant divided by (B) the Exchange Ratio (it being understood that the foregoing calculations shall not apply to the extent expressly provided for by the adjustment terms of such Company Warrant). The Company shall, prior to the Effective Time, take all actions necessary or desirable in connection with the treatment of Company Warrants contemplated by this Section 1.10(b). Parent shall take all corporate actions necessary to reserve for issuance shares of Parent Common Stock that will be subject to issuance upon exercise of the Company Warrants, as adjusted in accordance with their terms.
(c) Company Convertible Notes. Immediately prior to the Effective Time, the outstanding principal and unpaid accrued interest due on each convertible promissory note issued by the Company and outstanding (a Company Convertible Note and together with each Company Option and Company Warrant, the Company Derivative Securities) shall be treated as set forth on Schedule 1.10(c). The Company shall, prior to the Effective Time, take all actions necessary or desirable in connection with the treatment of Company Convertible Notes contemplated by this Section 1.10(c).
1.11 Payment of Expenses.
(a) At least three (3) Business Days prior to the Closing Date, the Company shall provide to Parent a written report setting forth a list of all third party fees and expenses incurred by the Company or the Stockholders in connection with or in relation to the preparation, negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby (together with written invoices and wire transfer instructions for the payment thereof), solely to the extent such fees and expenses will be unpaid as of the close of business on the Business Day immediately preceding the Closing Date, including, but not limited to, the: (i) fees and disbursements of outside counsel to the Company and Company management incurred in connection with the transactions contemplated hereby and (ii) fees and expenses of any other agents, advisors, consultants, experts, financial advisors, brokers, finders or investment bankers employed by the Company in connection with the with the transactions contemplated hereby (collectively, the Outstanding Company Expenses). On the Closing Date following the Closing, Parent shall pay or cause the Surviving Corporation to pay by wire transfer of immediately available funds the Outstanding Company Expenses.
5
(b) At least three (3) Business Days prior to the Closing Date, Parent shall provide to the Company a written report setting forth a list of all third party fees and expenses incurred by Parent and Merger Sub in connection with or in relation to the preparation, negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby (together with written invoices and wire transfer instructions for the payment thereof), solely to the extent such fees and expenses will be unpaid as of the close of business on the Business Day immediately preceding the Closing Date, including, but not limited to, the: (i) fees and disbursements of outside counsel to Parent and Merger Sub incurred in connection with the transactions contemplated hereby, (ii) fees and expenses of Parent and Merger Sub for any other agents, advisors, consultants, experts, financial advisors, brokers, finders or investment bankers employed in connection with the with the transactions contemplated hereby, including any financing related to the transactions contemplated hereby, (iii) the aggregate amount of Parent Borrowings and (iv) without duplication, any other amounts described in clauses (ii) and (iii) of Section 5.13 (all of the foregoing, collectively, the Outstanding Parent Expenses). On the Closing Date, Parent shall pay or cause to be paid by wire transfer of immediately available funds the Outstanding Parent Expenses.
1.12 Support Agreements. Concurrently with the execution of this Agreement, the Company Stockholders identified on Schedule 1.12 attached hereto (the Supporting Stockholders) have entered into support agreements with Parent (the Support Agreements), pursuant to which each of the Supporting Stockholders has (i) agreed to, among other things, vote all of the shares of Company Stock beneficially owned by such Supporting Stockholder in favor of the Merger (which vote may be done by executing a written consent as provided for in Section 5.20 hereof) and (ii) delivered a signature to the Request for Conversion, in the case of Supporting Stockholders that are holders of Series D Preferred Stock.
1.13 Private Financing. On or prior to the date hereof, Parent has delivered to the Company true, complete and correct copies of executed subscription agreements or securities purchase agreements from the investors party thereto, together with all exhibits (including documents attached as exhibits), schedules, annexes and other attachments thereto, and any related agreements (collectively, the PIPE Documents) pursuant to which such investors have committed to purchase securities of Parent for an aggregate purchase price of at least $100,000,000 in a private placement or other financing to be consummated simultaneously with the Closing (the PIPE Investment).
1.14 Appraisal Rights.
(a) Notwithstanding any provision of this Agreement to the contrary and to the extent available under the DGCL, shares of Company Common Stock that are outstanding immediately prior to the Effective Time and that are held by stockholders of the Company who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have demanded properly in writing appraisal for such Company Common Stock in accordance with Section 262 of the DGCL and otherwise complied with all of the provisions of the DGCL relevant to the exercise and perfection of dissenters rights (such shares, Dissenting Shares) shall not be converted into, and such stockholders shall have no right to receive, the Per Share Merger Consideration unless and until such stockholder fails to perfect or withdraws or otherwise loses his, her or its right to appraisal and payment under the DGCL. Any stockholder of the Company who fails to perfect or who effectively withdraws or otherwise loses his, her or its rights to appraisal of such Dissenting Shares under Section 262 of the DGCL shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Per Share Merger Consideration, without any interest thereon, upon surrender, if applicable, in the manner provided in Section 1.6, of the Company Certificate or Company Certificates that formerly evidenced such Dissenting Shares.
(b) Prior to the Closing, the Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company and any withdrawals of such demands, and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not, except with the prior written consent of Parent (which consent shall not be unreasonably withheld), make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.
6
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
Subject to the exceptions set forth in Schedule 2 delivered by the Company to Parent and Merger Sub in connection with this Agreement (the Company Schedule), the Company hereby represents and warrants to Parent and Merger Sub as follows:
2.1 Organization and Qualification.
(a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. The Company is in possession of all franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders of or from any federal, state, municipal, foreign or other governmental, administrative or judicial body, agency or authority (Approvals) necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted, except where the failure to have such Approvals would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Complete and correct copies of the certificate of incorporation and by-laws (or other comparable governing instruments with different names) (collectively referred to herein as Charter Documents) of the Company, as amended and currently in effect, have been heretofore made available to Parent or Parents counsel.
(b) The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Each jurisdiction in which the Company is so qualified or licensed is listed in Schedule 2.1(b).
2.2 Subsidiaries.
(a) The Company has no direct or indirect subsidiaries other than those listed in Schedule 2.2 (the Subsidiaries). Except as set forth in Schedule 2.2, the Company owns all of the outstanding equity securities of the Subsidiaries, free and clear of all Liens other than Permitted Liens, either directly or indirectly through one or more other Subsidiaries. Except with respect to the Subsidiaries, the Company does not own, directly or indirectly, any equity or voting interest in any Person or has any agreement or commitment to purchase any such interest, and has not agreed and is not obligated to make nor is bound by any written or oral agreement, contract, subcontract, lease, binding understanding, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan, commitment or undertaking of any nature, as of the date hereof or as may hereafter be in effect, under which it may become obligated to make any future investment in or capital contribution to any other entity.
(b) Each Subsidiary that is a corporation is duly incorporated, validly existing and in good standing (or the equivalent thereof) under the laws of its jurisdiction of incorporation (as listed in Schedule 2.2) and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. Each Subsidiary that is a limited liability company is duly organized or formed, validly existing and in good standing (or the equivalent thereof) under the laws of its jurisdiction of organization or formation (as listed in Schedule 2.2) and has the requisite limited liability company power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. Each Subsidiary is in possession of all Approvals necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted, except where the failure to have such Approvals would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Complete and correct copies of the Charter Documents of each Subsidiary, as amended and currently in effect, have been heretofore delivered to Parent or Parents counsel.
7
(c) Each Subsidiary is duly qualified or licensed to do business as a foreign corporation or foreign limited liability company and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.
2.3 Capitalization.
(a) The authorized capital stock of the Company consists of 130,000,000 shares of Company Common Stock and 99,966,639 shares of the Companys preferred stock (the Company Preferred Stock), consisting of (i) 11,697,818 shares of the Companys preferred stock, par value $0.0001 per share, designated as Series A Convertible Preferred Stock in the Company Charter Documents (the Series A Preferred Stock, (ii) 11,168,788 shares of the Companys preferred stock, par value $0.0001 per share, designated as Series B Convertible Preferred Stock in the Company Charter Documents (the Series B Preferred Stock), (iii) 3,413,461 shares of the Companys preferred stock, par value $0.0001 per share, designated as Series B-1 Convertible Preferred Stock in the Company Charter Documents (the Series B-1 Preferred Stock), (iv) 23,092,403 shares of the Companys preferred stock, par value $0.0001 per share, designated as Series C Preferred Stock in the Company Charter Documents (the Series C Preferred Stock), (v) 43,382,845 shares of the Companys preferred stock, par value $0.0001 per share, designated as Series D-1 Convertible Preferred Stock in the Company Charter Documents (the Series D-1 Preferred Stock), (vi) 1,465,110 shares of the Companys preferred stock, par value $0.0001 per share, designated as Series D-2 Convertible Preferred Stock in the Company Charter Documents (the Series D-2 Preferred Stock), (vii) 223,254 shares of the Companys preferred stock, par value $0.0001 per share, designated as Series D-3 Convertible Preferred Stock in the Company Charter Documents (the Series D-3 Preferred Stock) and (viii) 5,522,960 shares of the Companys preferred stock, par value $0.0001 per share, designated as Series D-4 Convertible Preferred Stock in the Company Charter Documents (the Series D-4 Preferred Stock, and together with the Series D-1 Preferred Stock, the Series D-2 Preferred Stock and the Series D-3 Preferred Stock, the Series D Preferred Stock). As of the date hereof, (1) 11,639,966 shares of Company Common Stock are issued and outstanding, (2) 11,697,818 shares of Series A Preferred Stock are issued and outstanding, (3) 11,168,788 shares of Series B Preferred Stock are issued and outstanding, (4) 3,413,461 shares of Series B-1 Preferred Stock are issued and outstanding, (5) 23,092,403 shares of Series C Preferred Stock are issued and outstanding, (6) 42,897,246 shares of Series D-1 Preferred Stock are issued and outstanding, (7) 1,465,110 shares of Series D-2 Preferred Stock are issued and outstanding, (8) 223,254 shares of Series D-3 Preferred Stock are issued and outstanding, (9) 5,522,960 shares of Series D-4 Preferred Stock are issued and outstanding and (10) no shares of Company Common Stock or Company Preferred Stock are held in the treasury of the Company. Upon the automatic conversion of the Company Preferred Stock pursuant to Section 1.5(a) (without giving effect to the exercise of any Company Warrant), all outstanding shares of Company Preferred Stock shall be converted into an aggregate of 99,481,041 shares of Company Common Stock and no shares of Company Preferred Stock shall be issued and outstanding. Other than Company Stock, the Company has no class or series of securities authorized by its Charter Documents. Schedule 2.3(a) hereto contains a list of all of the stockholders of the Company and the number of shares of Company Stock owned by each stockholder, as of the date of this Agreement.
(b) As of the date of this Agreement, 16,935,517 shares of Company Common Stock are reserved for issuance under the Company Equity Plan, of which (i) 15,900,803 shares are issuable upon the exercise of outstanding, unexercised Company Stock Options and (ii) 808 shares remain available for future grant under the Company Equity Plan. Except as set forth in Schedule 2.3(b) and Schedule 2.3(f) hereto, as of the date of this Agreement, no shares of Company Stock are reserved for issuance upon the exercise of outstanding convertible notes, warrants or other rights to purchase Company Stock. Schedule 2.3(b) hereto sets forth, as of the date of this Agreement, the number of shares of Company Common Stock that are issuable upon the conversion of the Company Convertible Notes, the number of shares of Company Common Stock that are issuable upon the exercise of Company Warrants exercisable into Company Common Stock and the number of shares of Company Preferred Stock that are issuable upon the exercise of Company Warrants exercisable into Company Preferred Stock.
(c) Except as set forth in the PIPE Documents, Schedule 2.3(b), Schedule 2.3(c) and Schedule 2.3(f) hereto or as set forth in Section 2.3(a) hereof, as of the date of this Agreement, there are no subscriptions, options, warrants, equity securities, partnership interests or similar ownership interests, calls, rights (including preemptive rights), commitments or agreements of any character to which the Company is a party or by
8
which it is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or acquisition of, any shares of capital stock, partnership interests or similar ownership interests of the Company or obligating the Company to grant, accelerate the vesting of or enter into any such subscription, option, warrant, equity security, call, right, commitment or agreement.
(d) Except as set forth in Schedule 2.3(d) or as contemplated by this Agreement or the PIPE Documents, there are no registration rights, and there is no voting trust, proxy, rights plan, anti-takeover plan or other agreements or understandings, to which the Company is a party or by which the Company is bound with respect to any equity security of the Company.
(e) Except as provided for in this Agreement or the PIPE Documents or as set forth in Schedule 2.3(e), as a result of the consummation of the transactions contemplated hereby, no shares of capital stock, warrants, options or other securities of the Company are issuable and no rights in connection with any shares, warrants, options or other securities of the Company accelerate or otherwise become triggered (whether as to vesting, exercisability, convertibility or otherwise).
(f) Schedule 2.3(f) sets forth, with respect to each outstanding Company Stock Option as of the date hereof, (1) the name of the holder, the type of entity of such holder, the domicile address of record of such holder, and whether such holder is an employee of the Company, (2) the number and class or series of shares of Company Stock issuable upon the exercise of such Company Stock Option, (3) the date of grant, the exercise price (if any), and the vesting schedule, including the extent vested to date and whether such vesting is subject to acceleration as a result of the Merger or any other events and (4) whether such Company Stock Option qualifies as a nonstatutory option or an incentive stock option (as defined in Section 422 of the Code). Schedule 2.3(f) sets forth, with respect to each Company Warrant as of the date hereof, (A) the name of the holder, (B) the number and class or series of shares of Company Stock issuable upon the conversion or exercise thereof, (C) the date of grant or issuance, as applicable, the exercise price (if any) and (D) any premium or other payment in lieu of, or in addition to, the conversion or exercise thereof (other than any payments that may be due with respect to the value of any fractional shares in the event that fractional shares are not issued upon exercise). Schedule 2.3(f) sets forth, with respect to each outstanding Company Convertible Note as of the date hereof, (I) the name of the holder, (II) the number and class or series of shares of Company Stock issuable upon the exercise of such Company Convertible Note, (III) the date of issuance and (IV) the principal and accrued interest of such Company Convertible Note as of the date hereof. All shares of Company Stock subject to issuance as aforesaid in this Section 2.3(f), upon issuance on the terms and conditions specified in the instrument pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. All outstanding shares of Company Stock have been issued and granted in compliance with (x) all applicable securities laws and (in all material respects) other applicable laws and regulations, and (y) all requirements set forth in any applicable Charter Documents. Except as set forth on Schedule 2.3(f), neither the Company nor any Subsidiary has any outstanding bonds, debentures, notes or other indebtedness obligations the holders of which have the right to vote (or which are convertible into or exercisable or exchangeable for securities having the right to vote) with the stockholders of the Company on any matter.
(g) Except as set forth in Schedule 2.3(g), no outstanding shares of Company Stock are unvested or subjected to a repurchase option, risk of forfeiture or other condition under any applicable agreement with the Company.
2.4 Authority Relative to this Agreement. The Company has all necessary corporate power and authority to: (i) execute, deliver and perform this Agreement and each ancillary document that the Company has executed or delivered or is to execute or deliver pursuant to this Agreement, and (ii) carry out the Companys obligations hereunder and thereunder and, subject to the Company Stockholder Approval, to consummate the transactions contemplated hereby and thereby (including the Merger). The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby (including the Merger) have been, or will be, duly and validly authorized by all necessary corporate action on the part of the Company (including the approval by its board of directors and, prior to the Closing, its stockholders as required by the DGCL), and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. The affirmative vote of the Supporting Stockholders to approve this Agreement, the Merger and the other transactions contemplated by this Agreement will
9
include the approval of the Requisite Holders (as defined in the Company Charter) to effect a mandatory conversion of the Company Preferred Stock under Article Fourth, Section C.4(b)(ii) and Section C.4(c) of the Company Charter. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by the other parties hereto, constitutes the legal and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors rights generally and by general principles of equity.
2.5 No Conflict; Required Filings and Consents. Except as set forth in Schedule 2.5 hereto:
(a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company shall not, (i) conflict with or violate the Charter Documents of the Company or any of its Subsidiaries, (ii) conflict with or violate any Legal Requirements, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or materially impair the Companys or any of its Subsidiaries rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company or any of its Subsidiaries (other than Permitted Liens) pursuant to, any Material Company Contracts or (iv) result in the triggering, acceleration or increase of any payment to any Person pursuant to any Company Contract, including any change in control or similar provision of any Company Contract, except, with respect to clauses (ii), (iii) and (iv), for any such conflicts, violations, breaches, defaults, impairments, alterations, triggerings, accelerations, increases or other occurrences that would not, individually and in the aggregate, have a Material Adverse Effect on the Company.
(b) The execution and delivery of this Agreement by the Company does not, and the performance of its obligations hereunder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or other third party (including, without limitation, lenders and lessors), except (i) for applicable requirements, if any, of the Securities Act of 1933, as amended (Securities Act), the Exchange Act or state securities laws, and the rules and regulations thereunder, and appropriate documents received from or filed with the relevant authorities of other jurisdictions in which the Company is licensed or qualified to do business, (ii) for the filing of any notifications required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), and the expiration of the required waiting period thereunder, (iii) the consents, approvals, authorizations and permits described in Schedule 2.5(b) and (iv) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to (x) have a Material Adverse Effect on the Company or, after the Closing, Parent, or (y) prevent the consummation of the Merger or otherwise prevent the Company from performing its material obligations under this Agreement on a timely basis.
2.6 Compliance. During the past two (2) years and as of the date of this Agreement, the Company and each of its Subsidiaries has complied with in all material respects all, and is not in violation in any material respect of any, Legal Requirements with respect to the conduct of its business, or the ownership or operation of its business. During the past two (2) years and as of the date of this Agreement, the businesses and activities of the Company and of each of its Subsidiaries have not been and are not being conducted in violation in any material respect of any Legal Requirements. Neither the Company nor any of its Subsidiaries is in default or violation in any material respect of any term, condition or provision of any applicable Charter Documents. Except as set forth in Schedule 2.6, within the past two (2) years, no written notice of non-compliance with any Legal Requirements has been received by the Company or any of its Subsidiaries (and the Company has no knowledge of any such notice delivered to any other Person).
2.7 Financial Statements.
(a) The Company has made available to Parent true and complete copies of the audited consolidated financial statements (including any related notes thereto) of the Company and its Subsidiaries for the fiscal years ended December 31, 2019, 2018 and 2017 (the Audited Financial Statements) and the unaudited consolidated financial statements (including any related notes thereto) of the Company and its Subsidiaries for the three-month periods ended June 30, 2020 and 2019 (the Unaudited Financial Statements, and together with the Audited Financial Statements, the Financial Statements).
10
(b) The Financial Statements were prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) applied on a consistent basis in accordance with past practice throughout the periods involved (except as may be indicated therein or in the notes thereto), and fairly present in all material respects the financial position of the Company and its Subsidiaries at the respective dates thereof and the results of their operations and cash flows for the respective periods indicated, except, in the case of the Unaudited Financial Statements, subject to normal audit adjustments and the absence of footnotes.
(c) The Updated Audited Financial Statements to be delivered to Parent pursuant to Section 4.4 shall be consistent in all material respects with the Audited Financial Statements with respect to the fiscal years ended December 31, 2019 and 2018.
(d) The Company has established and maintained a system of internal accounting controls. To the Companys knowledge, such internal controls are sufficient to provide reasonable assurance regarding the reliability of the Companys financial reporting and the preparation of the Companys financial statements for external purposes in accordance with U.S. GAAP.
(e) There are no outstanding loans or other extensions of credit made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has taken any action prohibited by Section 402 of the Sarbanes-Oxley Act.
(f) Except as otherwise noted in the Financial Statements, the accounts and notes receivable of the Company reflected in the Financial Statements: (i) arose from bona fide sales transactions in the ordinary course of business and are payable on ordinary trade terms, (ii) to the Companys knowledge, are legal, valid and binding obligations of the respective debtors enforceable in accordance with their terms, except as such may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting creditors rights generally, and by general equitable principles, (iii) are not subject to any valid set-off or counterclaim to which the Company has been notified in writing as of the date hereof except to the extent set forth in such balance sheet contained therein, and (iv) are not the subject of any actions or proceedings brought by or on behalf of the Company as of the date hereof.
(g) All representations and certifications made by the Company to lenders or any Governmental Entity in connection with the PPP Loan were accurate, true and correct in all material respects when made, and the Company has used the proceeds of the PPP Loan solely for permitted uses under the PPP and any documentation governing the PPP Loan.
2.8 No Undisclosed Liabilities. The Company (including its Subsidiaries) has no liabilities (absolute, accrued, contingent or otherwise) of a nature required under U.S. GAAP, applied on a consistent basis in accordance with past practice, to be disclosed on a consolidated balance sheet or in the related notes to the Financial Statements that are, individually or in the aggregate, material to the business, results of operations or financial condition of the Company and its Subsidiaries, taken as a whole, except: (i) liabilities provided for in or otherwise disclosed in the balance sheet included in the most recent Financial Statements or in the notes to the most recent Financial Statements, (ii) such liabilities arising in the ordinary course of the Companys business since the date of the most recent Financial Statement, (iii) liabilities disclosed in Schedule 2.8 and (iv) liabilities which are not, individually or in the aggregate, material to the Company.
2.9 Absence of Certain Changes or Events. Except as contemplated by this Agreement, since the date of the most recent Financial Statement to the date of this Agreement, there has not been: (i) any Material Adverse Effect on the Company, (ii) any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of the Companys capital stock, or any purchase, redemption or other acquisition by the Company of any of the Companys capital stock or any other securities of the Company or any options, warrants, calls or rights to acquire any such shares or other securities, (iii) any split, combination or reclassification of any of the Companys capital stock, (iv) any granting by the Company or any of its Subsidiaries of any increase in compensation or fringe benefits, except for normal increases of cash compensation in the ordinary course of business consistent with past practice or pursuant to any Plan, or any payment by the Company or any of its Subsidiaries of any bonus, except for bonuses made in the ordinary course of business consistent with past practice or pursuant to any Plan, or any granting by the Company or any of its Subsidiaries of any increase in
11
severance or termination pay or any entry by the Company or any of its Subsidiaries into any currently effective employment, severance, termination or indemnification agreement or any agreement the benefits of which are contingent or the terms of which are materially altered upon the occurrence of a transaction involving the Company of the nature contemplated hereby, (v) entry by the Company or any of its Subsidiaries into any licensing or other agreement with regard to the acquisition or disposition of any material Intellectual Property other than licenses and services agreements in the ordinary course of business consistent with past practice or any amendment or consent with respect to any licensing or services agreement, (vi) any material change by the Company or any of its Subsidiaries in its accounting methods, principles or practices, except as required by concurrent changes in U.S. GAAP, (vii) any change in the auditors of the Company, or (viii) any material revaluation by the Company or any of its Subsidiaries of any of its material assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable or any sale of assets of the Company or any of its Subsidiaries, other than in the ordinary course of business.
2.10 Litigation. Except as disclosed in Schedule 2.10 hereto, there are no, and in the past two (2) years have not been, any claims, suits, actions or proceedings pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries before any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator that, individually or in the aggregate, would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole.
2.11 Employee Benefit Plans.
(a) Schedule 2.11(a) lists all material Plans. Plan means any employee benefit plan as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended and any other material employee compensation, incentive, fringe or employee benefit plan, program, policy or other arrangement (whether or not set forth in a written document) covering any active or former employee, director or consultant of the Company or its Subsidiaries, in each case, with respect to which the Company or its Subsidiaries has liability, other than (i) standard employment agreements that can be terminated at any time without severance or termination pay and upon notice of not more than 60 days or such longer period as may be required by Legal Requirements, (ii) any plan, program, policy or other arrangement that is sponsored or maintained by a Governmental Entity or (iii) any plan, program, policy or other arrangement that covers only former directors, officers, employees, independent contractors and service providers and with respect to which the Company and its Subsidiaries have no remaining liabilities. Except as would not, individually or in the aggregate, be material to the Company and its Subsidiaries, taken as a whole, all Plans have been maintained and administered in all material respects in compliance with their respective terms and with the Legal Requirements which are applicable to such Plans, and all contributions required to be made with respect to the Plans as of the date hereof have been made or, if not yet due, are reflected in the financial statements and records of the Company and its Subsidiaries to the extent required by U.S. GAAP. Except as would not, individually or in the aggregate, be material to the Company and its Subsidiaries, taken as a whole, (i) no suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of Plan activities) has been brought, or, to the knowledge of the Company, is threatened, against or with respect to any Plan and (ii) there are no audits, inquiries or proceedings pending or, to the knowledge of the Company, threatened by any governmental agency with respect to any Plan. Except as disclosed in Schedule 2.11(a), each Plan can be amended, terminated or otherwise discontinued after the Closing in accordance with its terms, without material liability to Parent or the Surviving Corporation (other than ordinary administration expenses and amounts payable for benefits accrued but not yet paid).
(b) Except as disclosed in Schedule 2.11(b) hereto, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including severance, bonus or otherwise) becoming due to any shareholder, director, officer or employee of the Company or its Subsidiaries under any Plan or otherwise, (ii) materially increase any benefits otherwise payable under any Plan, (iii) result in the acceleration of the time of payment or vesting of any such benefits or (iv) result in any amount paid or payable being classified as an excess parachute payment under Section 280G of the Code.
(c) With respect to each Plan, the Company has made available to Parent, where applicable, (i) a true and complete copy of the current Plan documents and all amendments thereto and each trust or other funding arrangement, (ii) copies of the most recent summary plan description and any summaries of material modifications, (iii) a copy of the 2019 filed Internal Revenue Service (IRS) Form 5500 annual report and
12
accompanying schedules, (iv) copies of the most recently received IRS determination, opinion or advisory letter for each such Plan, and (v) any material nonroutine correspondence from any Governmental Authority with respect to any Plan within the past three (3) years. The Company has no express commitment to modify, change or terminate any Plan, other than with respect to a modification, change or termination required by ERISA or the Code, or other applicable Law.
(d) None of the Plans is or was within the past six (6) years, nor does the Company nor any ERISA Affiliate have or reasonably expect to have any liability or obligation under (i) a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA), (ii) a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) subject to Section 412 of the Code and/or Title IV of ERISA, (iii) a multiple employer plan subject to Section 413(c) of the Code, or (iv) a multiple employer welfare arrangement under Section 3(40) of ERISA. ERISA Affiliate means any entity that together with the Company would be deemed a single employer for purposes of Section 4001(b)(1) of ERISA and/or Sections 414(b), (c) and/or (m) of the Code.
(e) None of the Plans provides, nor does the Company have or reasonably expect to have any obligation to provide retiree medical to any current or former employee, officer, director or consultant of the Company after termination of employment or service except as may be required under Section 4980B of the Code and Parts 6 and 7 of Title I of ERISA and the regulations thereunder (or similar state law).
(f) Each Plan that is intended to be qualified under Section 401(a) or Section 401(k) of the Code has (i) timely received a favorable determination letter from the IRS covering all of the provisions applicable to the Plan for which determination letters are currently available that the Plan is so qualified and each trust established in connection with such Plan is exempt from federal income Taxation under Section 501(a) of the Code or (ii) is entitled to rely on a favorable opinion letter from the IRS, and no fact or event has occurred since the date of such determination or opinion letter or letters from the IRS that could reasonably be expected to adversely affect the qualified status of any such Plan or the exempt status of any such trust.
(g) There has not been any non-exempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) nor any reportable events (within the meaning of Section 4043 of ERISA) with respect to any Plan that could reasonably be expected to result in material liability to the Company. There have been no acts or omissions by the Company or any ERISA Affiliate that have given or could reasonably be expected to give rise to any material fines, penalties, Taxes or related charges under Sections 502 or 4071 of ERISA or Chapter 43 of the Code for which the Company may be liable.
(h) The Company and each ERISA Affiliate have each complied in all material respects with the notice and continuation coverage requirements, and all other requirements, of Section 4980B of the Code and Parts 6 and 7 of Title I of ERISA, and the regulations thereunder, with respect to each Plan that is, or was during any Tax year for which the statute of limitations on the assessment of federal income Taxes remains open, by consent or otherwise, a group health plan within the meaning of Section 5000(b)(1) of the Code.
(i) The Company and each Plan that is a group health plan as defined in Section 733(a)(1) of ERISA (each, a Health Plan) is and has been in compliance, in all material respects, with the Patient Protection and Affordable Care Act of 2010 (PPACA), and no event has occurred, and no condition or circumstance exists, that could reasonably be expected to subject the Company to any material liability for penalties or excise Taxes under Code Section 4980D or 4980H or any other provision of the PPACA.
(j) Each Plan that constitutes a nonqualified deferred compensation plan subject to Section 409A of the Code has been administered and operated, in all material respects, in compliance with the provisions of Section 409A of the Code and the Treasury Regulations thereunder, and no additional Tax under Section 409A(a)(1)(B) of the Code has been or could reasonably be expected to be incurred by a participant in any such Plan.
13
2.12 Labor Matters.
(a) Except as set forth on Schedule 2.12, neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or its Subsidiaries nor does the Company have knowledge of any activities or proceedings of any labor union to organize any such employees. Except as would not, individually or in the aggregate, be material to the Company and its Subsidiaries, taken as a whole, (i) there are no pending grievance or similar proceedings involving the Company or its Subsidiaries and any of its employees subject to a collective bargaining agreement or other labor union contract and (ii) there are no continuing obligations of the Company or its Subsidiaries pursuant to the resolution of any such proceeding that is no longer pending.
(b) To the knowledge of the Company, as of the date hereof, none of the officers of the Company or its Subsidiaries presently intends to terminate his or her employment with the Company. The Company and its Subsidiaries are in compliance in all material respects and, to the Companys knowledge, each of its employees and consultants is in compliance in all material respects, with the terms of the respective employment and consulting agreements between the Company (or one of its Subsidiaries) and such individuals.
(c) Except as would not, individually or in the aggregate, be material to the Company and its Subsidiaries, taken as a whole, (i) the Company and its Subsidiaries are in compliance with all Legal Requirements applicable to its employees, respecting employment, employment practices, terms and conditions of employment and wages and hours and is not liable for any arrears of wages or penalties with respect thereto, (ii) all amounts that the Company or any of its Subsidiaries is legally or contractually required either (x) to deduct from its employees salaries or to transfer to such employees pension or provident, life insurance, incapacity insurance, continuing education fund or other similar funds or (y) to withhold from its employees salaries and benefits and to pay to any Governmental Entity as required by applicable Legal Requirements have, in each case, been duly deducted, transferred, withheld and paid, and the Company and its Subsidiaries do not have any outstanding obligation to make any such deduction, transfer, withholding or payment, and (iii) there are no pending, or to the Companys knowledge, threatened or reasonably anticipated claims or actions against the Company or any of its Subsidiaries by any employee in connection with such employees employment or termination of employment by the Company or any of its Subsidiaries.
(d) Except as would not, individually or in the aggregate, be material to the Company and its Subsidiaries, taken as a whole, no employee or former employee of the Company or any of its Subsidiaries is owed any wages, benefits or other compensation for past services that has not yet been paid or reimbursed (other than wages, benefits and compensation accrued in the ordinary course of business during the current pay period and any accrued benefits for services, which by their terms or under applicable law, are payable in the future, such as accrued vacation, recreation leave and severance pay).
2.13 Restrictions on Business Activities. Except as disclosed in Schedule 2.13 hereto, there is no agreement, commitment, judgment, injunction, order or decree binding upon the Company or its Subsidiaries or their respective assets or to which the Company or any of its Subsidiaries is a party which has had or would reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Company or its Subsidiaries, any acquisition of property by the Company or its Subsidiaries or the conduct of business by the Company or its Subsidiaries as currently conducted other than such effects, individually or in the aggregate, which have not had and would not reasonably be expected to have a Material Adverse Effect on the Company.
2.14 Title to Property.
(a) Neither the Company nor any Subsidiary owns any real property. Except as set forth in Schedule 2.14(a), there are no options or other contracts under which the Company or any Subsidiary has a right or obligation to acquire any material interest in real property.
(b) All leases of material real property held by the Company and its Subsidiaries, and all material personal property and other material property and assets of the Company and its Subsidiaries owned, used or held for use in connection with the business of the Company and its Subsidiaries (the Personal Property), are
14
shown or reflected on the balance sheet included in the most recent Financial Statements, to the extent required by U.S. GAAP applied on a consistent basis in accordance with past practice, other than those entered into or acquired on or after the date of the most recent Financial Statements in the ordinary course of business. Schedule 2.14(b) hereto contains a list of all leases of material real property and Personal Property held by the Company or its Subsidiaries. The Company and its Subsidiaries have good and marketable title to the Personal Property owned by them, and all such Personal Property is in each case held free and clear of all Liens, except for Permitted Liens or Liens disclosed in the Audited Financial Statements or in Schedule 2.14(b) hereto, none of which Liens would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on such property or on the present use of such property in the businesses of the Company and its Subsidiaries.
(c) All material leases pursuant to which the Company and/or one of its Subsidiaries leases from others material real property or Personal Property are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing material default or event of default of the Company or its Subsidiaries or, to the Companys knowledge, any other party (or any event which with notice or lapse of time, or both, would constitute a material default), except where the lack of such validity and effectiveness or the existence of such default or event of default would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.
(d) The Company or a Subsidiary is in possession of, or has valid and effective rights to, all properties, assets and rights (other than Intellectual Property, which is governed exclusively by Section 2.18) required, in all material respects, for the effective conduct of its business, as it is currently operated and expected to be operated in the future, in the ordinary course.
2.15 Taxes.
(a) Tax Returns and Audits. Except as set forth in Schedule 2.15 hereto:
(i) The Company and its Subsidiaries have timely filed all federal, state, local and foreign returns, estimates, information statements and reports relating to Taxes (Returns) required to be filed by them with any Tax authority prior to the date hereof, except such Returns that are not material to the Company and its Subsidiaries. All such Returns are true, correct and complete in all material respects. The Company and its Subsidiaries have paid all material Taxes shown to be due and payable on such Returns.
(ii) All material Taxes that the Company and its Subsidiaries are required by law to withhold or collect have been duly withheld or collected, and have been timely paid over to the proper Governmental Entity to the extent due and payable.
(iii) The Company and its Subsidiaries have not been delinquent in the payment of any material Tax nor is there any material Tax deficiency outstanding, proposed or assessed against the Company or any of its Subsidiaries, nor has the Company or any of its Subsidiaries executed any unexpired waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax. The Company and its Subsidiaries have complied in all material respects with all Legal Requirements with respect to payments made to third parties and the withholding of any payment of withheld Taxes and has timely withheld from employee wages and other payments and timely paid over in full to the proper taxing authorities all material amounts required to be so withheld and paid over for all periods.
(iv) No audit or other examination of any Return of the Company or any of its Subsidiaries by any Tax authority is presently in progress, nor has the Company or any of its Subsidiaries been notified in writing of any request for such an audit or other examination.
(v) No material adjustment relating to any Returns filed by the Company or any of its Subsidiaries has been proposed in writing, formally or informally, by any Tax authority to the Company or any of its Subsidiaries or any representative thereof.
15
(vi) Neither the Company nor any of its Subsidiaries has any material liability for any unpaid Taxes which have not been accrued for or reserved on the Companys balance sheets included in the Audited Financial Statements or the Unaudited Financial Statements, whether asserted or unasserted, contingent or otherwise, other than any liability for unpaid Taxes that may have accrued since the end of the most recent fiscal year in connection with the operation of the business of the Company and its Subsidiaries in the ordinary course of business or any liability for unpaid Taxes incurred in connection with the transactions contemplated by this Agreement.
(vii) Neither the Company nor any of its Subsidiaries has taken, intends to take, or has agreed to take any action or is aware of any fact or circumstance that would prevent or impede, or would reasonably be expected to prevent or impede, the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
2.16 Environmental Matters.
(a) Except as disclosed in Schedule 2.16 hereto, and except as would not reasonably be expected, individually or in the aggregate, to result in a material liability of the Company and its Subsidiaries, taken as a whole: (i) the Company and its Subsidiaries are and at all times since January 1, 2017 have been in compliance in all material respects with applicable Environmental Laws (as defined below); (ii) none of the Company or its Subsidiaries or, the knowledge of the Company, any third party has caused any properties currently leased or operated by the Company or its Subsidiaries to be contaminated with any Hazardous Substances (as defined below) in violation of applicable Environmental Law; (iii) to the Companys knowledge the properties formerly leased or operated by the Company or its Subsidiaries were not contaminated with Hazardous Substances during the period of ownership, leasing or operation by the Company or its Subsidiaries; (iv) as of the date hereof, none of the Company or its Subsidiaries has received written notice that it is potentially liable for any Hazardous Substance disposal or contamination on any third party or public property (whether above, on or below ground or in the atmosphere or water); (v) as of the date hereof, none of the Company or its Subsidiaries has received any written notice, demand, letter, claim or request for information alleging that the Company or any Subsidiary may be in material violation of or have material liability under any Environmental Law; and (vi) none of the Company or its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or subject to any contractual indemnity or other agreement with any third party relating to a material liability under any Environmental Law, including in relation to Hazardous Substances.
(b) Schedule 2.16(b) sets forth all Phase I or Phase II environmental site assessment (or equivalent) reports with respect to properties owned, leased or operated by the Company and/or its Subsidiaries as of the date hereof that are known to, and in the possession or reasonable control of, the Company. All such written reports have been made available to Parent.
2.17 Brokers; Third Party Expenses. Except as set forth in Schedule 2.17 hereto, neither the Company nor any of its Subsidiaries has incurred, nor will it incur, directly or indirectly, any liability for brokerage, finders fees, agents commissions or any similar charges in connection with this Agreement or any transactions contemplated hereby.
2.18 Intellectual Property.
(a) Schedule 2.18 hereto contains a true, correct and complete list of all of the following that are owned or purported to be owned, used or held for use by the Company, as of the date of this Agreement: (i) Company Registered Intellectual Property (showing in each, as applicable, the filing date, date of issuance, and registration or application number, and registrar), (ii) all contracts or agreements to use any Company Licensed Intellectual Property, including for Software or Business Systems of any other person (other than unmodified, commercially available, off-the-shelf Software with a replacement cost and aggregate annual license and maintenance fees of less than $50,000); and (iii) any Software or Business Systems constituting Company Intellectual Property that are either (A) incorporated into or used in connection with the Company Products or (B) otherwise material to the business of the Company as currently conducted as of the date hereof. To the knowledge of the Company, the Company Intellectual Property together with the Company Licensed Intellectual Property constitutes all Intellectual Property rights used in, or necessary for, the operation of the business of the Company and is sufficient for the conduct of such business as currently conducted as of the date hereof.
16
(b) To the knowledge of the Company, the Company owns or has enforceable rights to use all Intellectual Property required for the conduct of its business as presently conducted. Except as disclosed in Schedule 2.18 hereto, no Company Intellectual Property or Company Product is subject to any material proceeding or outstanding decree, order, judgment or stipulation restricting in any manner the use, transfer or licensing thereof by the Company, or which would reasonably be expected to negatively affect the validity or enforceability of such Company Intellectual Property, which in any such case would reasonably be expected to have a Material Adverse Effect on the Company.
(c) Except as disclosed in Schedule 2.18 hereto, the Company owns and has good and exclusive title to each material item of Company Intellectual Property free and clear of any Liens (excluding non-exclusive licenses and related restrictions granted by it in the ordinary course of business), except as would not reasonably be expected to be, individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole.
(d) To the knowledge of the Company, (i) within the past three (3) years, the operation of the business of the Company and its Subsidiaries as such business currently is conducted, including the Companys use of any product, device or process, has not and does not infringe or misappropriate the Intellectual Property of any third party or constitute unfair competition or trade practices under the laws of any jurisdiction, (ii) the Company Intellectual Property has not within the past (3) years and does not infringe or misappropriate the Intellectual Property of any third party, (iii) the Company has not within the past three (3) years received any claims or threats from third parties alleging any such infringement, misappropriation or unfair competition or trade practices and (iv) no third party has within the past three (3) years materially infringed or misappropriated any Company Intellectual Property. The Company has taken commercially reasonable actions to ensure that the Company Intellectual Property and the operation of the business of the Company do not infringe or misappropriate the Intellectual Property of any third party or constitute unfair competition or trade practices under the laws of any applicable jurisdiction where the Company has operations.
(e) The Company has taken and take reasonable actions to maintain, protect and enforce Intellectual Property rights, including the secrecy, confidentiality and value of its trade secrets and other confidential information. The Company has not disclosed any trade secrets or other material confidential information that relates to the Company Products or is otherwise material to the business of the Company to any other person other than pursuant to a written confidentiality agreement under which such other person agrees to maintain the confidentiality and protect such confidential information.
(f) All persons who have contributed, developed or conceived any Company Intellectual Property have executed valid and enforceable written agreements with the Company, substantially in the form made available to Parent, and pursuant to which such persons assigned to the Company all of their entire right, title, and interest in and to any Intellectual Property created, conceived or otherwise developed by such person in the course of and related to his, her or its relationship with the Company, without further consideration or any restrictions or obligations whatsoever, including on the use or other disposition or ownership of such Intellectual Property.
(g) Neither the Company nor, to the knowledge of the Company, any other person is in material breach or in material default of any agreement specified in Schedule 2.18.
(h) To the knowledge of the Company, there are no current unresolved material defects, technical concerns or problems in any of the Company Products which are not of the type that are capable of being remediated in the ordinary course of business.
(i) With respect to Business Systems which do not constitute Company Products (the IT Systems), the Company owns, leases, licenses, or otherwise has the legal right to use all such IT Systems, and such IT Systems are sufficient for the current needs of the business of the Company. The Company maintains commercially reasonable disaster recovery, business continuity and risk assessment plans, procedures and facilities. To the knowledge of the Company, during the past three (3) years and as of the date of this Agreement, there has not been any material failure with respect to any of the Business Systems that has not been remedied or replaced in all material respects.
17
(j) The Company currently and previously has complied in all material respects with (i) all applicable Privacy/Data Security Laws, (ii) any applicable privacy or other policies of the Company concerning the collection, dissemination, storage or use of Personal Information or other Business Data, (iii) industry standards to which the Company purports to adhere, and (iv) all contractual commitments that the Company has entered into with respect to privacy and/or data security (collectively, the Data Security Requirements). The Company has implemented reasonable data security safeguards designed to protect the security and integrity of the Business Systems and Business Data. The Companys employees and contractors receive reasonable training on information security issues. During the past three (3) years and as of the date of this Agreement, the Company has not (x) to the knowledge of the Company, experienced any data security breaches, unauthorized access or use of any of the Business Systems, or unauthorized acquisition, destruction, damage, disclosure, loss, corruption, alteration, or use of any Business Data; or (y) been subject to or received written notice of any audits, proceedings or investigations by any Governmental Authority or any customer, or received any material claims or complaints regarding the collection, dissemination, storage or use of Personal Information, or the violation of any applicable Data Security Requirements, and, to the knowledge of the Company, there is no reasonable basis for the same.
(k) The Company (i) exclusively owns and possesses all right, title and interest in and to the Business Data constituting Company Intellectual Property, free and clear of any restrictions other than those imposed by applicable Privacy/Data Security Laws or (ii) has the right to use, exploit, publish, reproduce, distribute, license, sell, and create derivative works of the Business Data, in whole or in part, in the manner in which the Company receives and uses such Business Data prior to the Closing Date. The Company is not subject to any contractual requirements, privacy policies, or other legal obligations, including based on the transactions contemplated hereunder, that would prohibit Merger Sub or Parent from receiving or using Personal Information or other Business Data after the Closing Date, in the manner in which the Company receives and uses such Personal Information and other Business Data prior to the Closing Date or result in liabilities in connection with Data Security Requirements.
(l) All past and current employees and independent contractors of the Company have entered into employee invention assignment and confidentiality agreements with the Company on the Companys standard form of such agreement made available to Parent, except as set forth on Schedule 2.18(l).
(m) The Company is not, nor has it ever been, a member or promoter of, or a contributor to, any industry standards body or similar standard setting organization that could require or obligate the Company to grant or offer to any other person any license or right to any Company Intellectual Property.
2.19 Agreements, Contracts and Commitments.
(a) Schedule 2.19 hereto sets forth a complete and accurate list of all Material Company Contracts (as hereinafter defined) in effect on the date of this Agreement, specifying the parties thereto. For purposes of this Agreement, (i) the term Company Contracts shall mean all legally binding contracts, agreements, purchase orders, leases, mortgages, indentures, notes, and bonds, whether written or oral, to which the Company or any of its Subsidiaries is a party or by or to which any of the properties or assets of the Company or any of its Subsidiaries may be bound (including without limitation notes for borrowed money payable to the Company or any of its Subsidiaries) and (ii) the term Material Company Contracts shall mean (x) each Company Contract (A) providing for expected payments (present or future) to the Company or any of its Subsidiaries in excess of $150,000 in the aggregate or (B) under or in respect of which the Company or any of its Subsidiaries presently is expected to make an expenditure in excess of $150,000 (other than any Company Contract of employment), and (y) the limitations of subclause (x) notwithstanding, each of the following Company Contracts:
(i) any mortgage, indenture, note, installment obligation or other instrument or agreement for or relating to any borrowing of money or guarantee thereof by the Company or any Subsidiary to any Insider, other than in connection with the advancement of expenses to employees in the ordinary course of business;
18
(ii) any mortgage, indenture, note, installment obligation or other instrument or agreement for or relating to any borrowing of money or guarantee thereof from an Insider by the Company or any Subsidiary, other than in connection with the payment of Company expenses (subject to reimbursement) in the ordinary course of business;
(iii) any guaranty, direct or indirect, by the Company or a Subsidiary of any obligation of a third party (other than the Company or any Subsidiary) for borrowings, or otherwise, in excess of $150,000, excluding endorsements made for collection in the ordinary course of business;
(iv) any Company Contract of employment (excluding customary form offer letters entered into in the ordinary course of business) with an employee of the Company or its Subsidiaries that provides for annual base cash compensation in excess of $150,000;
(v) any Company Contract made other than in the ordinary course of business (x) providing for the grant of any preferential rights of first offer or first refusal to purchase or lease any material asset of the Company or any Subsidiary or (y) providing for any exclusive right to sell or distribute, or otherwise relating to the sale or distribution of, any product or service of the Company or any Subsidiary;
(vi) any obligation to register any shares of the capital stock or other securities of the Company with the SEC or any similar Governmental Entity;
(vii) any obligation to make payments, contingent or otherwise, arising out of the prior acquisition of the business, all or substantially all of the assets or stock of other Persons;
(viii) any collective bargaining agreement with any labor union;
(ix) any lease or similar arrangement for the use by the Company or any Subsidiary of real property or Personal Property where the annual lease payments are greater than $150,000 (other than any lease of vehicles, office equipment or operating equipment made in the ordinary course of business);
(x) any Company Contract not terminable in connection with the Closing to which any Insider, or any entity owned or controlled by an Insider, is a party (other than (A) Company Contracts with Affiliates of an Insider that are on arms length terms and (B) employment agreements with employees of the Company and its Subsidiaries);
(xi) any Company Contract relating to the purchase of engineering or design services that involve more than $150,000, other than those contracts and agreements that have been fully performed and under which no further services are due;
(xii) any Company Contract involving use of any Company Licensed Intellectual Property required to be listed in Schedule 2.18(a)(ii);
(xiii) any Company Contract which involves the license or grant of rights to Company Intellectual Property by the Company;
(xiv) any Company Contract under which the Company has agreed to purchase goods or services from a vendor, supplier or other person on a preferred supplier or most favored nation basis or is otherwise subject to restrictions materially limiting the Companys ability to conduct business anywhere in the world; and
(xv) any agreement for the development of Company Intellectual Property for the benefit of the Company (other than employee invention assignment and confidentiality agreements entered into on the Companys standard form of such agreement made available to Parent).
19
(b) Each Material Company Contract is in full force and effect and, to the Companys knowledge, is valid and binding upon and enforceable against each of the parties thereto, except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors rights generally or by principles governing the availability of equitable remedies. To the Companys knowledge, no other party to a Material Company Contract is the subject of a bankruptcy or insolvency proceeding. True, correct and complete copies of all Material Company Contracts have been heretofore made available to Parent or Parents counsel.
(c) Except as set forth in Schedule 2.19, neither the Company nor any Subsidiary party thereto nor, to the Companys knowledge, any other party thereto is in breach of or in default under, and, to the Companys knowledge, no event has occurred which with notice or lapse of time or both would become a breach of or default under, any Material Company Contract, and no party to any Material Company Contract has given any written notice of any claim of any such breach, default or event, in each case, which breach, default or event, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company.
2.20 Insurance. Schedule 2.20 sets forth the Companys and its Subsidiaries material Insurance Policies. The coverages provided by such Insurance Policies are believed by the Company to be reasonably adequate in amount and scope for the Companys and its Subsidiaries business and operations, including any insurance required to be maintained by Material Company Contracts.
2.21 Governmental Actions/Filings.
(a) Except as set forth in Schedule 2.21(a), the Company and its Subsidiaries have been granted and hold, and have made, all Governmental Actions/Filings (including, without limitation, Governmental Actions/Filings required for emission or discharge of effluents and pollutants into the air and the water) necessary to the conduct by the Company and its Subsidiaries of their businesses (as presently conducted) or used or held for use by the Company and its Subsidiaries, except for any of the foregoing that if not granted, held or made would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. The Company and its Subsidiaries are in substantial compliance in all material respects with all of their obligations with respect to such Governmental Actions/Filings. To the knowledge of the Company, no event has occurred and is continuing which requires or permits, or after notice or lapse of time or both would require or permit, and consummation of the transactions contemplated by this Agreement or any ancillary documents will not require or permit (with or without notice or lapse of time, or both), any modification or termination of any such Governmental Actions/Filings except such events which, either individually or in the aggregate, would not have a Material Adverse Effect on the Company.
(b) Except as set forth in Schedule 2.21(b), to the knowledge of the Company, no Governmental Action/Filing is necessary to be obtained, secured or made by the Company or any of its Subsidiaries to enable any of them to continue to conduct its businesses and operations and use its properties after the Closing in a manner which is substantially consistent in all material respects with current practice.
2.22 Interested Party Transactions. Except as set forth in the Schedule 2.22 hereto, no Insider or a member of his or her immediate family is indebted to the Company or any of its Subsidiaries, nor is the Company or any of its Subsidiaries indebted (or committed to make loans or extend or guarantee credit) to any of such Persons, other than (i) for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Company or any of its Subsidiaries, (iii) for other employee benefits made generally available to all employees, and (iv) arms length relationships between the Company or any of its Subsidiaries, on the one hand, and an Affiliate of an Insider, on the other hand.
2.23 Board Approval. The board of directors of the Company (including any required committee or subgroup thereof) has, as of the date of this Agreement, duly approved this Agreement and the transactions contemplated hereby in accordance with the Charter Documents of the Company.
2.24 Proxy Statement. None of the information relating to the Company or its Subsidiaries supplied by the Company, or by any other Person acting on behalf of the Company at its direction, in writing specifically for inclusion in the Proxy Statement/Prospectus will, as of the date the Proxy Statement/Prospectus (or any amendment
20
or supplement thereto) is first mailed to the Parent Stockholders, at the time of the Special Meeting or at the Effective Time, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
2.25 No Additional Representations and Warranties. Except as otherwise expressly provided in this Article II or elsewhere herein, neither the Company, any Subsidiary, any of their respective Affiliates, nor any of their respective directors, officers, employees, stockholders, partners, members or representatives has made, or is making, any other express or implied representation or warranty whatsoever with respect to the Company, its Affiliates, and any matter relating to any of them, including their affairs, the condition, value or quality of their assets, liabilities, financial condition or results of operations, or with respect to the accuracy or completeness of any other information made available to Parent, its Affiliates or any of their respective representatives by, or on behalf of, Company, and any such representations or warranties are expressly disclaimed. Without limiting the generality of the foregoing, except as expressly set forth in this Agreement, neither the Company nor any other person on behalf of Company has made or makes, any representation or warranty, whether express or implied, with respect to any projections, forecasts or estimates or budgets made available to Parent, its Affiliates or any of their respective representatives of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of the Company (including the reasonableness of the assumptions underlying any of the foregoing), whether or not included in any management presentation or in any other information made available to Parent, its Affiliates or any of their respective representatives or any other person, and that any such representations or warranties are expressly disclaimed. The Company is not relying on any statement, representation or warranty, oral or written, express or implied, made by Parent or Merger Sub or any of their respective representatives, except as expressly set forth in Article III (as modified by the Parent Schedule) or in any Parent SEC Report.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Subject to the exceptions set forth in Schedule 3 delivered by Parent and Merger Sub to the Company in connection with this Agreement (the Parent Schedule), each of Parent and Merger Sub represents and warrants to the Company as follows:
3.1 Organization and Qualification.
(a) Each of Parent and Merger Sub is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. Each of Parent and Merger Sub is in possession of all Approvals necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted, except where the failure to have such Approvals would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent or Merger Sub. Complete and correct copies of the Charter Documents of each of Parent and Merger Sub, as amended and currently in effect, have been heretofore delivered to the Company.
(b) Each of Parent and Merger Sub is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent or Merger Sub. Each jurisdiction in which Parent or Merger Sub is so qualified or licensed is listed in Schedule 3.1(b).
3.2 Subsidiaries. Parent has no, and has never had any, direct or indirect subsidiaries or participations in joint ventures or other entities other than Merger Sub, and Merger Sub has no, and has never had any, direct or indirect subsidiaries or participations in joint ventures or other entities. Parent owns all of the outstanding equity securities of Merger Sub, free and clear of all Liens. Except for Parents ownership of Merger Sub, neither Parent nor Merger Sub owns, directly or indirectly, any equity or voting interest in any Person or has any agreement or commitment to purchase any such interest, and has not agreed and is not obligated to make nor is bound by any
21
written or oral agreement, contract, subcontract, lease, binding understanding, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan, commitment or undertaking of any nature, as of the date hereof or as may hereafter be in effect under which it may become obligated to make, any future investment in or capital contribution to any other Person. Merger Sub does not have any assets or properties of any kind, does not now conduct and has never conducted any business, and has and will have at the Closing no obligations or liabilities of any nature whatsoever, except for such obligations as are imposed under this Agreement.
3.3 Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of Parent consists of 75,000,000 shares of Parent Common Stock, 10,000,000 shares of Class B Common Stock, par value $0.0001 per share (Founder Common Stock), and 1,000,000 shares of preferred stock, par value $0.0001 per share (Parent Preferred Stock and together with the Parent Common Stock and Founder Common Stock, the Parent Stock), of which 23,000,000 shares of Parent Common Stock, 5,750,000 shares of Founder Common Stock and no shares of Parent Preferred Stock are issued and outstanding, all of which are validly issued, fully paid and nonassessable. Each share of Founder Common Stock will convert into one share of Parent Common Stock at the Closing.
(b) Except as set forth in Schedule 3.3(b), (i) no shares of Parent Stock are reserved for issuance upon the exercise of outstanding options to purchase Parent Stock granted to employees of Parent or other parties (Parent Stock Options) and there are no outstanding Parent Stock Options; (ii) no shares of Parent Stock are reserved for issuance upon the exercise of outstanding warrants to purchase Parent Stock (Parent Warrants) and there are no outstanding Parent Warrants; and (iii) no shares of Parent Stock are reserved for issuance upon the conversion of the Parent Preferred Stock or any outstanding convertible notes, debentures or securities (Parent Convertible Securities) and there are no outstanding Parent Convertible Securities. All shares of Parent Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instrument pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. All outstanding shares of Parent Stock and all outstanding Parent Warrants have been issued and granted in compliance with (x) all applicable securities laws and (in all material respects) other applicable laws and regulations, and (y) all requirements set forth in any applicable Parent Contracts.
(c) Except as set forth in the PIPE Documents or Schedule 3.3(c) hereto, there are no subscriptions, options, warrants, equity securities, partnership interests or similar ownership interests, calls, rights (including preemptive rights), commitments or agreements of any character to which Parent or Merger Sub is a party or by which it is bound obligating Parent or Merger Sub to issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or acquisition of, any shares of capital stock, partnership interests or similar ownership interests of Parent or Merger Sub or obligating Parent or Merger Sub to grant, extend, accelerate the vesting of or enter into any such subscription, option, warrant, equity security, call, right, commitment or agreement. Neither Parent nor Merger Sub has any outstanding bonds, debentures, notes or other obligations the holders of which have or upon the happening of certain events would have the right to vote (or which are convertible into or exercisable or exchangeable for securities having the right to vote) with the stockholders of Parent or Merger Sub on any matter.
(d) Except as set forth in Schedule 3.3(d) or as contemplated by this Agreement or the PIPE Documents, there are no registration rights, and there is no voting trust, proxy, rights plan, anti-takeover plan or other agreements or understandings to which Parent or Merger Sub is a party or by which Parent or Merger Sub is bound with respect to any equity security of any class of the Parent Stock or any equity securities of Merger Sub.
(e) Except as provided for in this Agreement or the PIPE Documents or as set forth in Schedule 3.3(e), as a result of the consummation of the transactions contemplated hereby, no shares of capital stock, warrants, options or other securities of Parent or Merger Sub are issuable and no rights in connection with any shares, warrants, options or other securities of the Parent or Merger Sub accelerate or otherwise become triggered (whether as to vesting, exercisability, convertibility or otherwise).
22
(f) No outstanding shares of Parent Stock or equity securities of Merger Sub are unvested or subjected to a repurchase option, risk of forfeiture or other condition under any applicable agreement with Parent or Merger Sub.
(g) The shares of Parent Common Stock to be issued by Parent in connection with the Merger, upon issuance in accordance with the terms of this Agreement, will be duly authorized and validly issued and such shares of Parent Common Stock will be fully paid and nonassessable, free and clear of all Liens.
(h) The authorized and outstanding share capital of Merger Sub is 1,000 shares of common stock, par value $0.0001 per share. Parent owns all of the outstanding equity securities of Merger Sub, free and clear of all Liens.
3.4 Authority Relative to this Agreement. Each of Parent and Merger Sub has all necessary corporate power and authority to: (i) execute, deliver and perform this Agreement, and each ancillary document that Parent and Merger Sub has executed or delivered or is to execute or deliver pursuant to this Agreement, and (ii) carry out Parents and Merger Subs obligations hereunder and thereunder and, subject to approval by its stockholders, to consummate the transactions contemplated hereby and thereby (including the Merger). The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby (including the Merger) have been duly and validly authorized by all necessary corporate action on the part of Parent and Merger Sub (including the approval by their respective boards of directors), and no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, other than the Parent Stockholder Approval. This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery thereof by the other parties hereto, constitutes the legal and binding obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors rights generally and by general principles of equity.
3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each of Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub shall not: (i) conflict with or violate Parents or Merger Subs Charter Documents, (ii) conflict with or violate any Legal Requirements, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or materially impair Parents or Merger Subs rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the properties or assets of Parent or Merger Sub (other than Permitted Liens) pursuant to, any Parent Contracts or (iv) result in the triggering, acceleration or increase of any payment to any Person pursuant to any Parent Contract, including any change in control or similar provision of any Parent Contracts, except, with respect to clauses (ii), (iii) and (iv), for any such conflicts, violations, breaches, defaults, impairments, alterations, triggerings, accelerations, increases or other occurrences that would not, individually and in the aggregate, have a Material Adverse Effect on Parent or Merger Sub.
(b) The execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of their respective obligations hereunder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, or other third party (including, without limitation, lenders and lessors), except (i) for applicable requirements, if any, of the Securities Act, the Exchange Act, state securities laws, and the rules and regulations thereunder, and appropriate documents received from or filed with the relevant authorities of other jurisdictions in which Parent is qualified to do business, (ii) for the filing of any notifications required under the HSR Act and the expiration of the required waiting period thereunder, (iii) the qualification of Parent as a foreign corporation in those jurisdictions in which the business of the Company and its Subsidiaries makes such qualification necessary, and (iv) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to (x) have a Material Adverse Effect on Parent or Merger Sub, or (y) prevent the consummation of the Merger or otherwise prevent Parent or Merger Sub from performing their material obligations under this Agreement on a timely basis.
23
3.6 Compliance. During the past two (2) years and as of the date of this Agreement, each of Parent and Merger Sub has complied with all, and is not in violation of any, Legal Requirements with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Parent or Merger Sub. During the past two (2) years and as of the date of this Agreement, the businesses and activities of Parent and Merger Sub have not been and are not being conducted in violation of any Legal Requirements, except for violations which, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Parent or Merger Sub. Neither Parent nor Merger Sub is in default or violation in any material respect of any term, condition or provision of any applicable Charter Documents. Except as set forth in Schedule 3.6, within the past two (2) years, no written notice of non-compliance with any Legal Requirements has been received by Parent or Merger Sub (and Parent has no knowledge of any such notice delivered to any other Person).
3.7 Parent SEC Reports and Financial Statements.
(a) The Parent has timely filed all required registration statements, reports, schedules, forms, statements and other documents filed by Parent with the SEC since its formation (collectively, as they have been amended since the time of their filing and including all exhibits thereto, the Parent SEC Reports). None of the Parent SEC Reports, as of their respective dates (or, if amended or superseded by a filing prior to the date of this Agreement or the Closing Date, then on the date of such filing), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited financial statements of Parent (Parent Audited Financial Statements) and unaudited interim financial statements of Parent (Parent Unaudited Financial Statements and, together with the Parent Audited Financial Statements, the Parent Financial Statements) (including, in each case, the notes and schedules thereto) included in the Parent SEC Reports complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with U.S. GAAP applied on a consistent basis in accordance with past practice during the periods involved (except as may be indicated therein or in the notes thereto and except with respect to unaudited statements as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited interim financial statements included therein, to normal year-end adjustments and the absence of complete footnotes) in all material respects the financial position of Parent and Merger Sub as of the respective dates thereof and the results of their operations and cash flows for the respective periods then ended. Parent has no off-balance sheet arrangements that are not disclosed in the Parent SEC Reports.
(b) Parent has established and maintains disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act). Such disclosure controls and procedures are designed to ensure that material information relating to Parent is made known to Parents principal executive officer and its principal financial officer, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared. To Parents knowledge, such disclosure controls and procedures are effective in timely alerting Parents principal executive officer and principal financial officer to material information required to be included in Parents periodic reports required under the Exchange Act.
(c) Parent has established and maintained a system of internal controls. To Parents knowledge, such internal controls are effective and sufficient to provide reasonable assurance regarding the reliability of Parents financial reporting and the preparation of the Parents financial statements for external purposes in accordance with U.S. GAAP.
(d) There are no outstanding loans or other extensions of credit made by Parent to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of Parent. Parent has not taken any action prohibited by Section 402 of the Sarbanes-Oxley Act.
(e) To the knowledge of Parent, as of the date hereof, there are no outstanding SEC comments from the SEC with respect to the Parent SEC Reports. To the knowledge of Parent, none of the Parent SEC Reports filed on or prior to the date hereof is subject to ongoing SEC review or investigation as of the date hereof.
24
(f) Except as otherwise noted in the Parent Financial Statements, the accounts and notes receivable of Parent and Merger Sub reflected in the Parent Financial Statements: (i) to Parents knowledge, are legal, valid and binding obligations of the respective debtors enforceable in accordance with their terms, except as such may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting creditors rights generally, and by general equitable principles, (ii) are not subject to any valid set-off or counterclaim to which Parent has been notified in writing as of the date hereof except to the extent set forth in such balance sheet contained therein, and (iii) are not the subject of any actions or proceedings brought by or on behalf of Parent or Merger Sub as of the date hereof.
3.8 No Undisclosed Liabilities. Except as set forth in Schedule 3.8 hereto, neither Parent nor Merger Sub has any liabilities (absolute, accrued, contingent or otherwise) of a nature required to be disclosed on a balance sheet or in the related notes to the Parent Financial Statements that are, individually or in the aggregate, material to the business, results of operations or financial condition of Parent or Merger Sub, except: (i) liabilities provided for in or otherwise disclosed in the balance sheet included in the most recent Parent Financial Statements or in the notes to the most recent Parent Financial Statements, and (ii) such liabilities arising in the ordinary course of Parents or Merger Subs business since the date of the most recent Parent Financial Statement, none of which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Parent and Merger Sub, taken as a whole.
3.9 Absence of Certain Changes or Events. Except as contemplated by this Agreement, since the date of the most recent Parent Financial Statement to the date of this Agreement, there has not been: (i) any Material Adverse Effect on Parent or Merger Sub, (ii) any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of Parents capital stock, or any purchase, redemption or other acquisition by Parent of any of Parents capital stock or any other securities of Parent or any options, warrants, calls or rights to acquire any such shares or other securities, (iii) any split, combination or reclassification of any of Parents capital stock, (iv) any granting by Parent of any increase in compensation or fringe benefits, or any payment by Parent of any bonus, or any granting by Parent of any increase in severance or termination pay or any entry by Parent into any currently effective employment, severance, termination or indemnification agreement or any agreement the benefits of which are contingent or the terms of which are materially altered upon the occurrence of a transaction involving Parent of the nature contemplated hereby, (v) entry by Parent into any licensing or other agreement with regard to the acquisition or disposition of any material Intellectual Property other than licenses and services agreements in the ordinary course of business consistent with past practice or any amendment or consent with respect to any licensing or services agreement, (vi) any material change by Parent or Merger Sub in its accounting methods, principles or practices, except as required by concurrent changes in U.S. GAAP, (vii) any change in the auditors of Parent, or (viii) any material revaluation by Parent or Merger Sub of any of its assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable or any sale of assets of Parent or Merger Sub.
3.10 Litigation. There are no, and have never been any, claims, suits, actions or proceedings pending or to Parents knowledge, threatened against either Parent or Merger Sub, before any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator.
3.11 Employee Benefit Plans. Neither Parent nor Merger Sub maintains, and has no liability under, any Plan, and neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, golden parachute, bonus, or otherwise) becoming due to any stockholder, director, or employee of Parent or Merger Sub, or (ii) result in the acceleration of the time of payment or vesting of any such benefits.
3.12 Labor Matters. Neither Parent nor Merger Sub is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by Parent or Merger Sub and neither Parent nor Merger Sub knows of any activities or proceedings of any labor union to organize any such employees.
3.13 Business Activities. Since its organization, neither Parent nor Merger Sub has conducted any business activities other than activities directed toward the accomplishment of a business combination. Merger Sub was created for the purpose of facilitating the Merger and has not conducted any prior business activities, other than any such activities incidental to consummating the Merger. Except as set forth in the Parent Charter Documents,
25
there is no agreement, commitment, exclusive license, judgment, injunction, order, or decree binding upon Parent or Merger Sub or to which Parent or Merger Sub is a party which has or would reasonably be expected to have the effect of prohibiting or materially impairing any business practice of Parent or Merger Sub, any acquisition of property by Parent or Merger Sub, or the conduct of business by Parent or Merger Sub.
3.14 Title to Property. Neither Parent nor Merger Sub owns or leases any real property or personal property. Except as set forth in Schedule 3.14, there are no options or other contracts under which Parent or Merger Sub has a right or obligation to acquire or lease any interest in real property or personal property.
3.15 Intellectual Property. Neither Parent nor Merger Sub owns, licenses, or otherwise has any right, title or interest in any material Intellectual Property.
3.16 Taxes. Except as set forth in Schedule 3.16 hereto:
(a) Each of Parent and Merger Sub has timely filed all Returns required to be filed by Parent and Merger Sub with any Tax authority prior to the date hereof, except such Returns which are not material to Parent. All such Returns are true, correct, and complete in all material respects. Each of Parent and Merger Sub has paid all material Taxes shown to be due and payable on such Returns.
(b) All material Taxes that Parent and Merger Sub are required by law to withhold or collect have been duly withheld or collected, and have been timely paid over to the proper Governmental Entity to the extent due and payable.
(c) Neither Parent nor Merger Sub has been delinquent in the payment of any material Tax, nor is there any material Tax deficiency outstanding, proposed or assessed against Parent, nor has Parent or Merger Sub executed any unexpired waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax. Parent and Merger Sub have complied in all material respects with all Legal Requirements with respect to payments made to third parties and the withholding of any payment of withheld Taxes and has timely withheld from employee wages and other payments and timely paid over in full to the proper taxing authorities all material amounts required to be so withheld and paid over for all periods.
(d) No audit or other examination of any Return of Parent or Merger Sub by any Tax authority is presently in progress, nor has Parent or Merger Sub been notified in writing of any request for such an audit or other examination.
(e) No material adjustment relating to any Returns filed by Parent or Merger Sub has been proposed in writing, formally or informally, by any Tax authority to Parent or Merger Sub or any representative thereof.
(f) Neither Parent nor Merger Sub has any material liability for any unpaid Taxes which have not been accrued for or reserved on Parents balance sheets included in the Parent Audited Financial Statements for the most recent fiscal year ended, whether asserted or unasserted, contingent or otherwise, other than any material liability for unpaid Taxes that may have accrued since the end of the most recent fiscal year in connection with the operation of the business of Parent in the ordinary course of business, none of which is material to the business, results of operations or financial condition of Parent.
(g) Neither Parent nor Merger Sub has taken, intends to take, or has agreed to take any action or is aware of any fact or circumstance that would prevent or impede, or would reasonably be expected to prevent or impede, the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
3.17 Environmental Matters. Except for such matters that, individually or in the aggregate, would not reasonably be expected to result in a material liability of Parent and Merger Sub, taken as a whole: (i) Parent and Merger Sub have complied in all material respects with applicable Environmental Laws; (ii) none of Parent or Merger Sub or, the knowledge of Parent, any third party, has caused any properties currently owned, leased or operated by Parent and Merger Sub to be contaminated with any Hazardous Substances; (iii) the properties formerly
26
owned, leased or operated by Parent and Merger Sub were not contaminated with Hazardous Substances during the period of ownership, leasing or operation by Parent or Merger Sub; (iv) as of the date hereof, neither Parent nor Merger Sub has received notice that it is potentially liable for any Hazardous Substance disposal or contamination on any third party or public property (whether above, on, or below ground or in the atmosphere or water); (v) as of the date hereof, neither Parent nor Merger Sub has received any written notice, demand, letter, claim, or request for information alleging that Parent or Merger Sub may be in material violation of or have material liability under any Environmental Law; and (vii) neither Parent nor Merger Sub is subject to any orders, decrees, injunctions, or other arrangements with any Governmental Entity or subject to any contractual indemnity or other agreement with any third party relating to a material liability under any Environmental Law, including in relation to Hazardous Substances.
3.18 Brokers. Except as set forth in Schedule 3.18, neither Parent nor Merger Sub has incurred, and neither will incur, and neither has entered into any contract, agreement, understanding, arrangement or commitment pursuant to which the Surviving Corporation or any of its direct or indirect subsidiaries could incur, directly or indirectly, any liability for brokerage or finders fees or agents commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby.
3.19 Agreements, Contracts and Commitments.
(a) Except as set forth in the Parent SEC Reports filed prior to the date of this Agreement or as set forth on Schedule 3.19(a), other than confidentiality and non-disclosure agreements, there are no contracts, agreements, leases, mortgages, indentures, notes, bonds, Liens, license, permit, franchise, purchase orders, sales orders or other understandings, commitments or obligations (including without limitation outstanding offers or proposals) of any kind, whether written or oral, to which Parent or Merger Sub is a party or by or to which any of the properties or assets of Parent or Merger Sub may be bound, subject or affected, which may not be cancelled without penalty or liability by Parent or Merger Sub on less than 30 days or less prior notice (Parent Contracts). All Parent Contracts are listed in Schedule 3.19 other than those that are exhibits to the Parent SEC Reports.
(b) Except as set forth in the Parent SEC Reports filed prior to the date of this Agreement, each Parent Contract is in full force and effect, and, to the knowledge of Parent, is valid and binding upon and enforceable against each of the parties thereto, except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors rights generally or by principles governing the availability of equitable remedies. True, correct, and complete copies of all Parent Contracts (or written summaries in the case of oral Parent Contracts) have been heretofore made available to the Company or Company counsel.
(c) Neither Parent or Merger Sub nor, to the knowledge of Parent, any other party thereto is in breach of or in default under, and, to the knowledge of Parent, no event has occurred which with notice or lapse of time or both would become a breach of or default under, any Parent Contract, and no party to any Parent Contract has given any written notice of any claim of any such breach, default or event, which, individually or in the aggregate, are reasonably likely to have a Material Adverse Effect on Parent or Merger Sub. Each Parent Contract that has not expired by its terms is in full force and effect, except where such failure to be in full force and effect is not reasonably likely to have a Material Adverse Effect on Parent or Merger Sub.
3.20 Insurance. Except for directors and officers liability insurance, neither Parent nor Merger Sub maintains any Insurance Policy.
3.21 Interested Party Transactions. (a) No employee, officer, director, or stockholder of Parent or Merger Sub or a member of his or her immediate family is indebted to Parent or Merger Sub nor is Parent or Merger Sub indebted (or committed to make loans or extend or guarantee credit) to any of them, other than reimbursement for reasonable expenses incurred on behalf of Parent or Merger Sub; and (b) to Parents knowledge, no employee, officer, director, or stockholder or any member of his or her immediate family is, directly or indirectly, interested in any material contract with Parent or Merger Sub (other than such contracts as relate to the acquisition of such stockholders ownership of capital stock or other securities of Parent).
27
3.22 Parent Listing. The Parent Common Stock and Parent Warrants are listed for trading on the New York Stock Exchange (the NYSE). There is no, and there has never been any, action or proceeding pending or, to the Companys knowledge, threatened against Parent by the NYSE or the SEC with respect to any intention by such entity to prohibit or terminate the listing of Parent Common Stock on the NYSE. Parent is in compliance in all material respects with the applicable listing and corporate governance rules and regulations of the NYSE.
3.23 Board Approval. The board of directors of each of Parent and Merger Sub has, as of the date of this Agreement, unanimously (i) declared the advisability of the Merger and approved this Agreement and the transactions contemplated hereby in accordance with the Charter Documents of Parent and Merger Sub, (ii) determined that the Merger is in the best interests of the stockholders of Parent and Merger Sub, and (iii) determined that the fair market value of the Company is equal to at least 80% of the balance in the Trust Fund (net of amounts previously disbursed to management for tax obligations and excluding the amount of deferred underwriting discounts held in trust).
3.24 Trust Fund. As of the date hereof and immediately prior to the Closing, Parent has and will have no less than $230,000,000 invested in United States Government securities or money market funds meeting the conditions under Rule 2a-7(d) promulgated under the Investment Company Act of 1940, as amended, in a trust account administered by Continental Stock Transfer & Trust Company (Continental, and such trust account, the Trust Fund), less such amounts, if any, as (i) Parent is required to pay to Redeeming Stockholders and (ii) Parent has paid under Section 1.11(b) out of the Trust Fund). Prior to the Closing, none of the funds held in the Trust Fund may be released except in accordance with that certain Investment Management Trust Agreement, dated as of July 11, 2019 (the Trust Agreement), by and between Parent and Continental, Parents Charter Documents and the Final Prospectus. Parent has performed all material obligations required to be performed by it to date under, and is not in material default, breach or delinquent in performance or any other respect (claimed or actual) in connection with, the Trust Agreement, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default or breach thereunder. There are no claims or proceedings pending with respect to the Trust Fund. Since July 11, 2019 through the date hereof, Parent has not released any money from the Trust Fund (other than interest income earned on the principal held in the Trust Fund as permitted by the Trust Agreement). As of the Effective Time, upon approval of the Stockholder Matters, the obligations of Parent to dissolve or liquidate pursuant to Parents Charter Documents shall terminate, and as of the Effective Time, Parent shall have no obligation whatsoever pursuant to Parents Charter Documents to dissolve and liquidate the assets of Parent by reason of the consummation of the transactions contemplated hereby. Following the Effective Time, no Parent Stockholder shall be entitled to receive any amount from the Trust Fund except to the extent such Parent Stockholder is a Redeeming Stockholder. Assuming the accuracy of the representations and warranties of the Company contained herein and the compliance by the Company with its obligations hereunder, neither Parent nor Merger Sub has any reason to believe that any of the conditions to the use of funds in the Trust Fund will not be satisfied or that funds available in the Trust Fund will not be available to Parent and Merger Sub on the Closing Date. Neither Parent nor Merger Sub has any legally binding agreement, arrangement or understanding to enter into or incur, any obligations with respect to or under any indebtedness other than Parent Borrowings in connection with the transactions contemplated herein.
3.25 PIPE Documents. The PIPE Documents are legal, valid and binding obligations of Parent and, to the knowledge of Parent, each other party thereto, enforceable against Parent and, to the knowledge of Parent, each such other party in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization or other similar laws now or hereafter in effect affecting the enforcement of creditors rights generally and by general principles of equity (whether considered in a proceeding at law or in equity) and the discretion of the court before which any proceeding therefor may be brought, and are in full force and effect. No event or circumstance has occurred which, with or without notice, lapse of time or both, could constitute a default on the part of Parent or, to the knowledge of Parent, any of the other parties thereto under any of the PIPE Documents, and Parent and Merger Sub have no reason to believe that Parent will be unable to satisfy on a timely basis any term or condition of closing to be satisfied by Parent contained in any of the PIPE Documents. None of the PIPE Documents have been withdrawn, rescinded or terminated, or otherwise amended or modified in any respect (and no such amendment or modification is contemplated), and Parent and Merger Sub have no reason to believe that any portion of the PIPE Investment contemplated by any of the PIPE Documents will not be available as of the Closing. There are no conditions precedent or other contingencies related to the funding of the full amounts of the PIPE Investment, other than as set forth in the PIPE Documents. There are no agreements, side letters, contracts or arrangements to which Parent or Merger Sub or any of their Affiliates is a party relating to the PIPE Documents or the PIPE Investment that have not been entirely superseded by the PIPE Documents.
28
3.26 No Additional Representations and Warranties; Independent Investigation. Except as otherwise expressly provided in this Article III or elsewhere herein, neither Parent, Merger Sub, any of their respective Affiliates, nor any of their respective directors, officers, employees, stockholders, partners, members or representatives has made, or is making, any other express or implied representation or warranty whatsoever with respect to Parent, Merger Sub, their respective Affiliates, and any matter relating to any of them, including their affairs, the condition, value or quality of their assets, liabilities, financial condition or results of operations, or with respect to the accuracy or completeness of any other information made available to the Company, its Affiliates or any of their respective representatives by, or on behalf of, Parent or Merger Sub, and any such representations or warranties are expressly disclaimed. Each of Parent and Merger Sub is a sophisticated purchaser and has made its own independent investigation, review and analysis regarding the Company and any Subsidiary and the transactions contemplated herein, which investigation, review and analysis were conducted by Parent and Merger Sub together with expert advisors, including legal counsel, that they have engaged for such purpose. Parent, Merger Sub and their representatives have been provided with full and complete access to the representatives, properties, offices, plants and other facilities, books and records of the Company and any Subsidiary and other information that they have requested in connection with their investigation of the Company and its Subsidiary and the transactions contemplated herein. Neither Parent nor Merger Sub is relying on any statement, representation or warranty, oral or written, express or implied, made by the Company or any Subsidiary or any of their respective representatives, except as expressly set forth in Article II (as modified by the Company Schedule).
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by the Company, Parent and Merger Sub. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms and the Closing, each of the Company, the Companys Subsidiaries, Parent and Merger Sub shall, except to the extent that Parent (in the case of a request by the Company) or the Company (in the case of a request by Parent or Merger Sub) shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed) or as set forth in Schedule 4.1 of the Company Schedule or the Parent Schedule (Schedule 4.1) or as contemplated by this Agreement or the PIPE Documents, carry on its business in the usual, regular and ordinary course consistent with past practices, in substantially the same manner as heretofore conducted and in compliance with all applicable laws and regulations (except as expressly contemplated by Schedule 4.1) and use its commercially reasonable efforts consistent with past practices and policies to (i) preserve substantially intact its present business organization, (ii) keep available the services of its present key officers and employees and (iii) preserve its relationships with key customers, suppliers, distributors, licensors, licensees, and others with which it has significant business dealings. In addition, but subject to the foregoing exceptions, without the prior written consent of Parent (in the case of a request by the Company) or the Company (in the case of a request by Parent or Merger Sub) (which consent shall not be unreasonably withheld, conditioned or delayed), during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing, except as set forth in Schedule 4.1, each of the Company (on its behalf and on behalf of its Subsidiaries), Parent and Merger Sub shall not do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the period of exercisability of options or restricted stock, or reprice options granted under any employee, consultant, director or other stock plans or authorize cash payments in exchange for any options granted under any of such plans;
(b) Grant any material severance or termination pay to (i) any officer or (ii) any employee, except pursuant to applicable law, written agreements outstanding, or Plans or policies existing on the date hereof and as previously or concurrently disclosed or made available to the other Party, or in the case of the Company and its Subsidiaries except in connection with the promotion, hiring or firing of any employee in the ordinary course of business consistent with past practice;
29
(c) Transfer or license to any person or otherwise extend, amend or modify any material rights to any Intellectual Property or enter into grants to transfer or license to any person future patent rights, other than in the ordinary course of business consistent with past practices;
(d) Declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock (other than any such dividend or distribution by a Subsidiary of the Company to the Company or another such Subsidiary), or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any shares of capital stock or other equity securities or ownership interests of the Company or Parent, except, in the case of the Company, pursuant to the terms of a Plan or any Company Derivative Securities outstanding on the date hereof in accordance with the applicable terms as of the date hereof;
(f) Issue, deliver, sell, authorize, pledge, amend, exchange, settle or otherwise encumber, or agree to any of the foregoing with respect to, any shares of capital stock or other equity securities or ownership interests or any securities convertible into or exchangeable for shares of capital stock or other equity securities or ownership interests, or subscriptions, rights, warrants or options to acquire any shares of capital stock or other equity securities or ownership interests or any securities convertible into or exchangeable for shares of capital stock or other equity securities or other ownership interests, or enter into other agreements or commitments of any character obligating it to issue any such shares, equity securities or other ownership interests or convertible or exchangeable securities; provided that the foregoing shall not restrict the exercise or settlement of any Company Stock Options in effect on the date of this Agreement or grants of Company Stock Options in the ordinary course of business consistent with past practice and the issuance of shares of Company Common Stock (or other class of equity security of the Company, as applicable) pursuant to the terms of the Company Preferred Stock, the Company Convertible Notes and the Company Warrants, in each case in accordance with the applicable terms as of the date hereof;
(g) Amend its Charter Documents in any material respect;
(h) Acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a material portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire outside the ordinary course of business any assets which are material, individually or in the aggregate, to the business of Parent or the Company and its Subsidiaries, taken as a whole, as applicable, or enter into any joint ventures, strategic partnerships or alliances or other arrangements that provide for exclusivity of territory or otherwise restrict such partys ability to compete or to offer or sell any products or services to other Persons. For purposes of this paragraph, material includes the requirement that, as a result of such transaction, financial statements of the acquired, merged or consolidated entity be included in the Proxy Statement/Prospectus;
(i) Sell, lease, license, encumber or otherwise dispose of any properties or assets, except (A) sales in the ordinary course of business consistent with past practice, (B) the incurrence of Permitted Liens, (C) pursuant to existing Company Contracts delivered or made available to Parent and (D) the sale, lease or disposition of property or assets that are not material, individually or in the aggregate, to the business of such party (measured with all of its Subsidiaries, taken as a whole);
(j) Except incurrences of indebtedness under the Companys existing credit facilities (and, in the case of the Company and its Subsidiaries, extensions of credit in the ordinary course with employees and among the Company and its Subsidiaries) or as set forth on Schedule 4.1(j), incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person or Persons (other than Affiliates), issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of Parent or the Company and its Subsidiaries, as applicable, enter into any keep well or other agreement to maintain any financial statement condition or enter into any arrangement having the economic effect of any of the foregoing;
30
(k) Except as otherwise required by applicable law or pursuant to an existing Plan, policy or Company Contract of the Company or its Subsidiaries, (i) adopt or materially amend any Plan (including any Plan that provides for severance), or enter into any employment contract or collective bargaining agreement (other than in the ordinary course of business consistent with past practice), (ii) pay any special bonus or special remuneration to any director or employee, except in the ordinary course of business consistent with past practices, or (iii) materially increase the salaries or wage rates or fringe benefits (including rights to severance or indemnification) of its directors, officers, employees or consultants, except in the ordinary course of business consistent with past practices;
(l) (i) Pay, discharge, settle or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), or litigation (whether or not commenced prior to the date of this Agreement) other than the payment, discharge, settlement or satisfaction of any claims, liabilities or obligations in the ordinary course of business consistent with past practices or in accordance with their terms, or recognized or disclosed in the Company Financial Statements or in the most recent Parent SEC Reports, as applicable, or incurred since the date of such financial statements, or (ii) waive the benefits of, agree to modify in any material manner, terminate, release any person from or knowingly fail to enforce any material confidentiality or similar agreement to which the Company or any of its Subsidiaries is a party or of which the Company any of its Subsidiaries is a beneficiary (other than with customers and other counterparties in the ordinary course of business consistent with past practices) or to which Parent is a party or of which Parent is a beneficiary, as applicable;
(m) Except in the ordinary course of business consistent with past practices, modify in a manner materially adverse to the Company, Parent or Merger Sub, as applicable, or terminate (other than in accordance with its terms) any Material Company Contract or Parent Contract, as applicable, or waive, delay the exercise of, release or assign any material rights or claims thereunder;
(n) Except as required by law or U.S. GAAP, revalue any of its assets in any material manner or make any material change in accounting methods, principles or practices;
(o) Except in the ordinary course of business consistent with past practices, incur or enter into any agreement, contract or commitment requiring such party to pay in excess of $150,000 in any 12 month period;
(p) Settle any material litigation where the consideration given by the Party is other than monetary or to which an officer, director or employee of such Person is a party in his or her capacity as such;
(q) Make or rescind any Tax elections that, individually or in the aggregate, would be reasonably likely to adversely affect in any material respect the Tax liability or Tax attributes of such party, settle or compromise any material income tax liability outside the ordinary course of business or, except as required by applicable law, change any material method of accounting for Tax purposes or prepare or file any Return in a manner materially inconsistent with past practice;
(r) Form or establish any subsidiary except in the ordinary course of business consistent with prior practice or as contemplated by this Agreement;
(s) Permit, in the case of the Company, the Company, any Subsidiary of Company or the administrator of any Plan of the Company or its Subsidiaries or, in the case of Parent or Merger Sub, Parent, Merger Sub or any of their respective Subsidiaries or the administrator of any Plan of Parent, Merger Sub or any of their respective Subsidiaries, to exercise any of its discretionary rights under any Plan to provide for the automatic acceleration of any outstanding options, the termination of any outstanding repurchase rights or the termination of any cancellation rights issued pursuant to such Plan, except as contemplated by this Agreement;
(t) Make capital expenditures in excess of previously budgeted amounts;
(u) Enter into any material transaction with or distribute or advance any assets or property to any of its officers, directors, partners, stockholders, managers, members or other Affiliates other than (i) the payment of salary and benefits and the advancement of expenses in the ordinary course of business consistent with prior practice or (ii) such distributions or advancements by a Subsidiary of the Company to the Company or another such Subsidiary; or
31
(v) Agree in writing or otherwise agree or commit to take any of the actions described in Section 4.1(a) through (u) above;
provided that, during any period of full or partial suspension of operations related to the coronavirus (COVID-19) pandemic, the Company and its Subsidiaries, may, in connection with the coronavirus (COVID-19) pandemic, take the actions described in clauses (i), (m) and (t) of Section 4.1 solely to the extent the Company reasonably determines in good faith that such actions as are reasonably necessary (1) to protect the health and safety of their respective employees and other individuals with whom they have business dealings or (2) respond to third-party supply or service disruptions caused by the coronavirus (COVID-19) pandemic.
4.2 Confidentiality; Access to Information.
(a) Confidentiality. The parties agree that they shall be bound by that certain Confidentiality Agreement, dated as of July 26, 2020 (the Confidentiality Agreement), by and between the Company and Parent, with respect to all nonpublic information exchanged in connection with this Agreement and the negotiations related thereto. The terms of the Confidentiality Agreement are hereby incorporated herein by reference and shall continue in full force and effect until the Closing, at which time the Confidentiality Agreement shall terminate. If this Agreement is, for any reason, terminated prior to the Closing, the Confidentiality Agreement shall continue in full force and effect, subject to Section 7.2(b) hereof.
(b) Access to Information.
(i) Except for any information which in the opinion of legal counsel of the Company would result in the loss of attorney-client privilege or other privilege from disclosure, the Company will afford Parent and its financial advisors, accountants, counsel and other representatives reasonable access during normal business hours, upon reasonable notice, in such manner as to not interfere with the normal operation of the Company and its Subsidiaries, to the properties, books, records and management personnel of the Company during the period prior to the Closing to obtain all information concerning the business, including the status of business development efforts, properties, results of operations and personnel of the Company, as Parent may reasonably request; provided, that such access shall not include any invasive or intrusive investigations or other testing, sampling or analysis of any properties, facilities or equipment of the Company or its Subsidiaries without the prior written consent of the Company; provided, further that any such access shall be subject to and limited to the extent the Company reasonably determines in good faith, in light of the coronavirus (COVID-19) pandemic (taking into account any shelter-in-place or similar order issued by a Governmental Entity), that such access would jeopardize the health and safety of any employee of the Company or any of its Subsidiaries. The parties hereto shall use commercially reasonable efforts to make alternative arrangements for such disclosure where the restrictions in the preceding sentence apply. No information or knowledge obtained by Parent in any investigation pursuant to this Section 4.2(b)(i) will affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the parties to consummate the Merger.
(ii) Except for any information which in the opinion of legal counsel of the Company would result in the loss of attorney-client privilege or other privilege from disclosure, Parent will afford the Company and its financial advisors, underwriters, accountants, counsel and other representatives reasonable access during normal business hours, upon reasonable notice, in such manner as to not interfere with the normal operation of the Company and its Subsidiaries, to the properties, books, records and personnel of Parent and Merger Sub during the period prior to the Closing to obtain all information concerning the business, including properties, results of operations and personnel of Parent and Merger Sub, as the Company may reasonably request; provided, that any such access shall be subject to and limited to the extent that Parent reasonably determines in good faith, in light of the coronavirus (COVID-19) pandemic (taking into account any shelter-in-place or similar order issued by a Governmental Entity), that such access would jeopardize the health and safety of any employee of Parent or Merger Sub. The parties hereto shall use commercially reasonable efforts to make alternative arrangements for such disclosure where the restrictions in the preceding sentence apply. No information or knowledge obtained by the Company in any investigation pursuant to this Section 4.2(b)(ii) will affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the parties to consummate the Merger.
32
4.3 No Solicitation. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing, (a) the Company will not, and will cause its controlled Affiliates, employees, agents, officers, directors and representatives not to, directly or indirectly, solicit or enter into discussions or transactions with, or encourage, or provide any information to, any corporation, partnership or other entity or group (other than Parent and its designees) concerning any merger, sale of ownership interests in the Company (other than any purchases of equity securities by the Company from employees of the Company or its Subsidiaries) and/or a material portion of the assets of the Company (other than immaterial assets, assets sold in the ordinary course of business or as set forth on Schedule 4.3 of the Company Schedule or the Parent Schedule (Schedule 4.3)) or similar transaction involving the Company and (b) each of Parent and Merger Sub will not, and will cause its respective controlled Affiliates, employees, agents, officers, directors and representatives not to, directly or indirectly, solicit or enter into discussions or transactions with, or encourage, or provide any information to, any corporation, partnership or other entity or group (other than the Company and its designees) concerning any merger, purchase of ownership interests and/or assets, recapitalization or similar business combination transaction. In addition, (i) the Company will, and will cause its controlled Affiliates, employees, agents, officers, directors and representatives to, immediately cease any and all existing discussions or negotiations with any Person conducted heretofore with respect to any alternative merger, sale of ownership interests in and/or a material portion of the assets of the Company (other than immaterial assets, assets sold in the ordinary course of business or as set forth on Schedule 4.3) or recapitalization or similar business combination transaction involving the Company and (ii) each of Parent and Merger Sub will, and will cause its respective controlled Affiliates, employees, agents, officers, directors and representatives to, immediately cease any and all existing discussions or negotiations with any Person conducted heretofore with respect to any alternative merger, purchase of ownership interests and/or assets, recapitalization or similar business combination transaction. The Company will promptly (and in any event within one (1) Business Day of receipt) notify Parent if it receives, or if any of its or its controlled Affiliates, employees, agents, officers, directors or representatives receives, any proposal, offer or submission with respect to a competing transaction after the date of this Agreement. Notwithstanding the foregoing, the Company may respond to any such proposal, offer or submission by indicating only that the Company is subject to an exclusivity agreement and is unable to provide any information related to the Company and its Subsidiaries or entertain any proposals or offers or engage in any negotiations or discussions concerning a competing transaction for as long as that exclusivity agreement remains in effect. The parties agree that the rights and remedies for noncompliance with this Section 4.3 include specific performance, it being acknowledged and agreed that any breach or threatened breach will cause irreparable injury to the non-breaching party and that money damages would not provide an adequate remedy for such injury.
4.4 Certain Financial Information. As soon as reasonably practicable following the date of this Agreement, the Company shall deliver to Parent a true and complete copy of the audited consolidated financial statements (including any related notes thereto) of the Company and its Subsidiaries for the fiscal years ended December 31, 2019 and 2018, audited by Marcum LLP (or such other nationally recognized audit firm, as is reasonably acceptable to Parent), which shall be prepared in accordance with U.S. GAAP applied on a consistent basis in accordance with past practice throughout the periods involved (except as may be indicated therein or in the notes thereto), and shall fairly present in all material respects the financial position of the Company and its Subsidiaries at the respective dates thereof and the results of their operations and cash flows for the respective periods indicated (the Updated Audited Financial Statements). In addition, within twenty-five (25) Business Days after the end of each month between the date hereof and the earlier of the Closing Date and the date on which this Agreement is terminated, the Company shall deliver to Parent unaudited consolidated financial statements for such month, in the format provided to the lenders under the credit agreement facility of the Company.
4.5 Access to Financial Information. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing, the Company will, and will use commercially reasonable efforts to cause its auditors (subject to any required access agreement or arrangement) to (a) continue to provide Parent and its advisors reasonable access to all of the financial information used in the preparation of Company Financial Statements and the financial information furnished pursuant to Section 4.4 hereof and (b) reasonably cooperate with any reviews performed by Parent or its advisors of any such Company Financial Statements or such information.
33
4.6 Commercially Reasonable Efforts. Upon the terms and subject to the conditions set forth in this Agreement, each of the Parties agrees to use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things reasonably necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable but in any event prior to the Outside Date, the Merger and the other transactions contemplated by this Agreement, including using commercially reasonable efforts to accomplish the following: (i) the taking of such reasonable acts necessary to cause the conditions precedent set forth in Article VI to be satisfied, (ii) the obtaining of such reasonably necessary actions, waivers, consents, approvals, orders and authorizations from Governmental Entities and the making of such reasonably necessary registrations, declarations and filings (including registrations, declarations and filings with Governmental Entities, if any) and the taking of such reasonable steps as may be reasonably necessary to avoid any suit, claim, action, investigation or proceeding by any Governmental Entity in connection with the transactions contemplated by this Agreement, (iii) the obtaining of such material consents, approvals or waivers from third parties required as a result of the transactions contemplated in this Agreement, including the consents referred to in Schedules 2.5 and 3.5, (iv) the defending of any suits, claims, actions, investigations or proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed and (v) the execution or delivery of any additional instruments reasonably necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. Notwithstanding anything herein to the contrary, (1) nothing in this Agreement shall be deemed to require Parent or the Company to agree to any divestiture by itself or any of its Affiliates of shares of capital stock or of any business, assets or property, or the imposition of any material limitation on the ability of any of them to conduct their business or to own or exercise control of such assets, properties and stock and (2) in no event shall Parent, Merger Sub, the Company or its Subsidiaries be obligated to bear any material expense or pay any material fee or grant any material concession in connection with obtaining any consents, authorizations or approvals pursuant to the terms of any contract to which the Company or its Subsidiaries is a party in connection with the consummation of the Merger.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement; Special Meeting.
(a) As soon as is reasonably practicable after receipt by Parent from the Company of all financial and other information relating to the Company as is necessary for its preparation (including the Updated Audited Financial Statements), Parent shall prepare and file with the SEC under the Exchange Act, and with all other applicable regulatory bodies, the Proxy Statement/Prospectus to be used for the purpose of soliciting proxies from holders of Parent Common Stock (the Parent Stockholders) to vote in favor of (i) the adoption of this Agreement and the approval of the Merger (the Merger Proposal), (ii) the election to the board of directors of Parent of the individuals identified on Schedule 5.2 of the Parent Schedule for the class of director set forth opposite the name of such individual (the Director Proposal); (iii) the approval of certain changes to Parents Charter Documents, to be effective from and after the Closing, including the change of the name of Parent to a name to be mutually agreed by the parties hereto, an increase in the number of authorized shares of Parent Common Stock to 350,000,000 and other mutually agreed upon changes to Parents capitalization structure and amendments to Article Sixth so that the existence of Parent shall be perpetual and to remove all SPAC-related provisions that will no longer be applicable to Parent following the Closing and such other amendments proposed by the Company that are reasonably acceptable to Parent (the Charter Amendments Proposals), (iv) the adoption of the Parent Plan, (v) approval of the PIPE Investment and (vi) approval of any other proposals reasonably agreed by Parent and the Company to be necessary or appropriate in connection with the transactions contemplated hereby (together with the Merger Proposal, Director Proposal, Charter Amendments Proposals and Plan Proposal, the Stockholder Matters) at a meeting of Parent Stockholders to be called and held for such purpose (the Special Meeting). Without the prior written consent of the Company, the Stockholder Matters shall be the only matters (other than procedural
34
matters) which Parent shall propose to be acted on by the Parent Stockholders at the Special Meeting. The Parent Plan shall provide that not less than 10% of the total number of shares of Parent Common Stock to be issued and outstanding after the Closing (or such other number of shares as Parent and the Company may otherwise agree following the date hereof) shall be reserved for issuance pursuant to the Parent Plan. The Company shall furnish to Parent all information concerning the Company as is necessary in connection with the preparation of the Proxy Statement/Prospectus and shall otherwise assist and cooperate with Parent as reasonably requested by Parent. Parent shall also take all actions required to satisfy the requirements of the Securities Act and the Exchange Act.
(b) As soon as reasonably practicable following the approval of the Proxy Statement/Prospectus by the SEC (the SEC Approval Date) (and in any event, within seven Business Days after the SEC Approval Date), Parent shall (i) distribute the Proxy Statement/Prospectus to the Parent Stockholders, (ii) having, prior to the SEC Approval Date, established the record date therefor, duly call, give notice of, convene and hold the Special Meeting in accordance with the DGCL and, subject to the other provisions of this Agreement, on a date no later than forty-five (45) days following the SEC Approval Date, and (iii) subject to the other provisions of this Agreement, solicit proxies from such holders to vote in favor of the adoption of this Agreement and the approval of the Merger and the other matters presented to the Parent Stockholders for approval or adoption at the Special Meeting, including, without limitation, the Stockholder Matters. Notwithstanding the foregoing provisions of this Section 5.1(b), Parent shall be entitled to make one or more successive postponements or adjournments of the Special Meeting (i) to ensure that any supplement or amendment to the Proxy Statement/Prospectus that Parent has determined in good faith is required to satisfy the conditions of Section 5.1(c) below or any other applicable Legal Requirement or (ii) if on a date for which the Special Meeting is scheduled, Parent reasonably determines that the Merger cannot be consummated for any reason; provided, that (1) Parent continues to satisfy its obligations under Section 5.1(d) below and Parent shall reconvene such Special Meeting as promptly as practicable following such time as the matters described in clauses (i) and (ii) have been resolved and (2) in no event shall the Special Meeting be held later than three (3) Business Days prior to January 16, 2021 (unless the Parties have waived the requirement in Section 1.2 that the Closing Date shall be no later than the third (3rd) Business Day after the satisfaction or waiver of the conditions set forth in Article VI, in which case the Special Meeting shall be held no later than January 16, 2021).
(c) Parent shall comply with all applicable provisions of and rules under the Exchange Act and all applicable provisions of the DGCL in the preparation, filing and distribution of the Proxy Statement/Prospectus, the solicitation of proxies thereunder, and the calling and holding of the Special Meeting. Without limiting the foregoing, Parent represents and warrants that the Proxy Statement/Prospectus shall not, as of the date on which it is first distributed to Parent Stockholders, and as of the date of the Special Meeting, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading (provided that Parent shall not be responsible for the accuracy or completeness of any information relating to the Company or any other information furnished by the Company for inclusion in the Proxy Statement/Prospectus). The Company represents and warrants that all financial and other information relating to the Company provided to Parent in connection with the Proxy Statement/Prospectus shall not, as of the date it is first distributed to Parent Stockholders, and as of the date of the Special Meeting, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. No filing of, or amendment or supplement to the Proxy Statement/Prospectus will be made without the approval of Parent and the Company (such approval not to be unreasonably withheld, conditioned or delayed).
(d) Parent, acting through its board of directors, shall include in the Proxy Statement/Prospectus the recommendation of its board of directors that the Parent Stockholders vote in favor of the adoption of this Agreement and the approval of the Merger and the other matters referred to in Section 5.1(a), and shall otherwise use reasonable best efforts to obtain approval of the matters referred to in Section 5.1(a).
5.2 Directors and Officers of Parent and the Company After Merger. Except as otherwise agreed in writing by the Company and Parent prior to the Closing, the Parties shall take all necessary action so that (a) all of the members of the board of directors of Parent and all officers of Parent resign effective as of the Closing unless such member or officer is included on Schedule 5.2 of the Parent Schedule (Schedule 5.2), (b) the number of directors constituting the board of directors of Parent shall be such number as is specified on Schedule 5.2 and (c) the persons listed in Schedule 5.2 are elected to the positions of officers and directors of Parent and Surviving
35
Corporation, as set forth therein, to serve in such positions effective immediately after the Closing. If any Person listed in Schedule 5.2 is unable to serve, the Party appointing such Person shall designate a successor; provided that, if such designation is to be made after the Closing, any successor to a Person designated by Parent shall be made by the Person serving in the capacity of Chairman of Parent immediately prior to the Closing.
5.3 HSR Act. If required pursuant to the HSR Act, as promptly as practicable but in no event later than ten (10) Business Days after the date of this Agreement, Parent and the Company (i) shall each prepare and file the notification required of it thereunder in connection with the transactions contemplated by this Agreement, (ii) shall promptly and in good faith respond to all information requested of it by the Federal Trade Commission and Department of Justice in connection with such notification and otherwise cooperate in good faith with each other and such Governmental Entities and (iii) shall each request early termination of any waiting period under the HSR Act. Parent and the Company shall (a) promptly inform the other of any communication to or from the Federal Trade Commission, the Department of Justice or any other Governmental Entity regarding the transactions contemplated by this Agreement and permit counsel to the other Party an opportunity to review in advance, and each Party shall consider in good faith the views of such counsel in connection with, any proposed written communications by such party to any Governmental Entity concerning the transactions contemplated by this Agreement, (b) give the other prompt notice of the commencement of any action, suit, litigation, arbitration, proceeding or investigation by or before any Governmental Entity with respect to such transactions and (c) keep the other reasonably informed as to the status of any such action, suit, litigation, arbitration, proceeding or investigation. Each Party agrees to provide, to the extent permitted by the applicable Governmental Entity, the other Party and its counsel the opportunity, on reasonable advance notice, to participate in any substantive meetings or discussions, either in person or by telephone, between such Party and/or any of its Affiliates, agents or advisors, on the one hand, and any Governmental Entity, on the other hand, concerning or in connection with the transactions contemplated hereby; provided, neither Party shall extend any waiting period or comparable period under the HSR Act or enter into any agreement with any Governmental Entity without the written consent of the other Party.
5.4 Public Announcements.
(a) As promptly as practicable after execution of this Agreement, Parent will prepare and file a Current Report on Form 8-K pursuant to the Exchange Act to report the execution of this Agreement (Parent Signing Form 8-K).
(b) Promptly after the execution of this Agreement, Parent and the Company shall also issue a joint press release announcing the execution of this Agreement (the Signing Press Release). Thereafter, prior to the Closing (or the earlier termination of this Agreement in accordance with Article VII), Parent and the Company shall use commercially reasonable efforts to consult with each other before issuing any press release or other public statement (including through social media platforms) with respect to this Agreement or the transactions contemplated hereby, and, except as required by any applicable Legal Requirement, shall not issue any such press release or other public statement without the prior written consent of the other Party (such consent not to be unreasonably withheld, conditioned or delayed) and otherwise complying with Section 5.5.
(c) At least five (5) days prior to Closing, Parent shall prepare a draft Current Report on Form 8-K announcing the Closing, together with, or incorporating by reference, the financial statements prepared by the Company and its accountant, and such other information that may be required to be disclosed with respect to the Merger in any report or form to be filed with the SEC (Closing Form 8-K), which shall be in a form reasonably acceptable to the Company. Prior to Closing, Parent and the Company shall prepare a press release announcing the consummation of the Merger hereunder (Closing Press Release). Concurrently with the Closing, Parent shall distribute the Closing Press Release. Concurrently with the Closing, or as soon as practicable thereafter, Parent shall file the Closing Form 8-K with the Commission.
36
5.5 Required Information.
(a) In connection with the preparation of the Parent Signing Form 8-K, the Signing Press Release, the Proxy Statement/Prospectus, the Closing Form 8-K, the Closing Press Release or any other statement, filing, notice, or application (other than pursuant to the HSR Act, for which Section 5.3 applies) made by or on behalf of Parent or the Company to any Governmental Entity or other third party in connection with Merger and the other transactions contemplated hereby (each, a Reviewable Document), and for such other reasonable purposes, each of the Company and Parent shall, upon request by the other, use commercially reasonable efforts (subject to applicable law and contractual restrictions) to furnish the other with all information concerning themselves, their Subsidiaries, and each of their and their Subsidiaries respective directors, officers, and stockholders (including the directors of Parent and the Company to be elected effective as of the Closing pursuant to Section 5.2 hereof) and such other matters as may be reasonably necessary or advisable in connection with the Reviewable Document. Each Party warrants and represents to the other Party that all such information shall, as of the date of the filing of the Reviewable Document, be true and correct in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading.
(b) At a reasonable time prior to the filing, issuance, or other submission or public disclosure of a Reviewable Document by Parent or the Company, the other party shall each be given a reasonable opportunity to review and comment upon such Reviewable Document and give its consent to the form thereof, such consent not to be unreasonably withheld, and each party shall accept and incorporate all reasonable comments from the other party to any such Reviewable Document prior to filing, issuance, submission or disclosure thereof. Furthermore, Parent and the Company shall cooperate and mutually agree upon (such agreement not to be unreasonably withheld or delayed) any response to any SEC comments on any Reviewable Document and shall otherwise use commercially reasonable efforts to cause the Proxy Statement/Prospectus to be approved by the SEC, in each case, as promptly as practicable.
(c) Any language included in a Reviewable Document that reflects the comments of the reviewing party, as well as any text as to which the reviewing party has not commented upon after being given a reasonable opportunity to comment, shall be deemed to have been approved by the reviewing party and may henceforth be used by other party in other Reviewable Documents and in other documents distributed by the other party in connection with the transactions contemplated by this Agreement without further review or consent of the reviewing party.
(d) Prior to the Closing Date, the Company and Parent shall notify each other as promptly as reasonably practicable (i) upon obtaining knowledge of any event or circumstance which should be described in an amendment of, or supplement to, a Reviewable Document that has been filed with or submitted to the Governmental Authority, and (ii) after the receipt by it of any written or oral comments of the Governmental Authority on, or of any written or oral request by the Governmental Authority for amendments or supplements to, any such Reviewable Document, and shall promptly supply the other with copies of all correspondence between it or any of its representatives and the Governmental Authority with respect to any of the foregoing filings or submissions. Parent and the Company shall use their respective commercially reasonable efforts, after consultation with each other, to resolve all such requests or comments with respect to the any Reviewable Document as promptly as reasonably practicable after receipt of any comments of the Governmental Authority. All correspondence and communications to the Governmental Authority made by Parent or the Company with respect to the transactions contemplated by this Agreement or any agreement ancillary hereto shall, to extent permitted by applicable law, be considered to be Reviewable Documents subject to the provisions of this Section 5.5.
5.6 No Securities Transactions. Neither the Company nor any of its controlled Affiliates, directly or indirectly, shall engage in any purchases or sales of the securities of Parent prior to the Effective Time without the consent of Parent. The Company shall use its commercially reasonable efforts to require each of its Affiliates that it controls to comply with the foregoing requirement.
5.7 No Claim Against Trust Fund. Notwithstanding anything else in this Agreement, the Company acknowledges that it has read Parents final prospectus dated July 11, 2019 (Final Prospectus) and understands that Parent has established the Trust Fund for the benefit of Parents public stockholders and that Parent may disburse monies from the Trust Fund only (a) to Parents public stockholders in the event they elect to convert their shares into cash in accordance with Parents Charter Documents and/or the liquidation of Parent or (b) to Parent after, or concurrently with, the consummation of a business combination. The Company further acknowledges that, if the transactions contemplated by this Agreement, or, upon termination of this Agreement, another business combination, are not consummated by January 16, 2021, or such later date as shall be set forth in an amendment to Parents Amended and Restated Certificate of Incorporation for the purpose of extending the date by which Parent
37
must complete a business combination, Parent will be obligated to return to its stockholders the amounts being held in the Trust Fund. Accordingly, the Company, on behalf of itself and its Affiliates, hereby waives all rights, title, interest or claim of any kind against Parent to collect from the Trust Fund any monies that may be owed to them by Parent for any reason whatsoever, including but not limited to a breach of this Agreement by Parent or any negotiations, agreements or understandings with Parent (whether in the past, present or future), and will not seek recourse against the Trust Fund at any time for any reason whatsoever. This paragraph will survive the termination of this Agreement for any reason, but notwithstanding anything set forth herein will not limit the rights of the Company or its Stockholders at or following the Closing.
5.8 Disclosure of Certain Matters. Each of Parent and the Company will provide the others with prompt written notice of any event, development or condition of which it obtains knowledge that (a) gives such Party any reason to believe that any of the conditions to the obligations of the other Party set forth in Article VI will not be satisfied, or (b) would require any amendment or supplement to the Proxy Statement/Prospectus.
5.9 Securities Listing. Parent and the Company shall use reasonable best efforts to continue the listing for trading of the Parent Common Stock on the NYSE.
5.10 Charter Protections; Directors and Officers Liability Insurance.
(a) All rights to indemnification for acts or omissions occurring through the Closing Date now existing in favor of the current directors and officers of the Company or any of its Subsidiaries under applicable Law or as provided in the Charter Documents of the Company and its Subsidiaries or in any indemnification agreements shall survive the Merger and shall continue in full force and effect in accordance with their terms.
(b) For a period of six (6) years after the Closing Date, each of Parent and the Surviving Corporation shall cause to be maintained in effect the current policies of directors and officers liability insurance maintained by Parent and the Company, respectively (or policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous), with respect to claims arising from facts and events that occurred prior to the Closing Date.
(c) If the Company or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of the Company assume the obligations set forth in this Section 5.10.
(d) The provisions of this Section 5.10 are intended to be for the benefit of, and shall be enforceable by, each Person who will have been a director or officer of the Company for all periods ending on or before the Closing Date and may not be changed without the consent of a majority of those Persons serving on Parents Board after the Closing Date who served on the Companys Board immediately prior to the Closing Date.
5.11 Insider Loans. The Company shall cause each executive officer of the Company or its Subsidiaries to, at or prior to Closing (i) repay to the Company any loan by the Company to such Person and any other amount owed by such Person to the Company; and (ii) cause any guaranty or similar arrangement pursuant to which the Company has guaranteed the payment or performance of any obligations of such Person to a third party to be terminated.
5.12 Parent Borrowings. Through the Closing, Parent shall be allowed to borrow funds from its directors, officers and/or stockholders to meet its reasonable capital requirements, with any such loans to be made only as reasonably required by the operation of Parent in due course on a non-interest bearing basis and repayable in cash at Closing (the Parent Borrowings), and at the option of the lender thereof, up to $1,500,000 of which Parent Borrowings still outstanding may be convertible at the Effective Time into Parent Warrants at a conversion price of $1.50 per warrant, with such Parent Warrants having the same terms as the Parent Warrants registered at the time of Parents initial public offering.
38
5.13 Trust Fund Disbursement. Parent shall cause the Trust Fund to be disbursed as contemplated by this Agreement and the Trust Agreement immediately upon the Closing. All liabilities and obligations of Parent due and owing or incurred at or prior to the Closing Date shall be paid as and when due, including all amounts payable (i) to stockholders who elect to have their shares of Parent Common Stock converted to cash in accordance with the provisions of Parents Charter Documents (such stockholders, Redeeming Stockholders), (ii) for income Tax or other Tax obligations of Parent prior to Closing, and (iii) (A) as repayment of Parent Borrowings, (B) to the underwriters in Parents initial public offering for payment of deferred underwriting commissions and (C) to third parties (e.g., professionals, printers, etc.) who have rendered services to Parent in connection with its operations and efforts to effect the Merger.
5.14 Board of Directors. Prior to the Closing Date, Parent and the Company shall take all action necessary so that immediately after the Effective Time, the board of directors of Parent shall be comprised of the individuals identified on Schedule 5.2 of the Company Schedule for the class of director set forth opposite the name of such individual.
5.15 Lock-Up Agreement. Prior to the Closing Date, the Company will use reasonable best efforts to cause the Company Stockholders to agree not to transfer the shares of Parent Common Stock to be received hereunder as Per Share Merger Consideration for a period of the earlier of twelve (12) months from the Closing or the date on which the reported closing sale price of the Parent Common Stock equals or exceeds $15.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations or other similar actions) for twenty (20) trading days in any thirty (30)-trading day period commencing at least one hundred fifty (150) days following the consummation of the Merger, subject to certain exceptions, which provisions will be set forth in the lock-up agreement in substantially the form attached hereto as Exhibit B (the Lock-Up Agreement) with respect to the Company Stockholders identified in Schedule 5.15 of the Company Schedule or the Lock-Up Agreement or the Letter of Transmittal with respect to all other Company Stockholders. At any time six (6) months after the Closing Date, Parent shall engage, if approved by the board of directors of Parent, in an organized secondary offering of Parent Common Stock held by persons entitled to registration rights pursuant to the Registration Rights Agreement and as otherwise approved by the board of directors of Parent, conducted by an investment bank, whose actual retention and whose proposed transaction will, if prior to the twelve (12) month anniversary of the Closing, require approval of a majority of the Continuing Directors. The Parent Certificates evidencing shares of Parent Common Stock issued hereunder shall each include prominent disclosure or bear a prominent legend evidencing the fact that such shares are subject to such lock-up provisions described in this Section 5.15. Prior to the Closing Date, the holders of Founder Common Stock (or any securities issued upon conversion thereof or exchanged therefor), the holders of Parent Warrants that were not registered for sale in connection with Parents initial public offering (or any securities issued upon exercise thereof or exchanged therefor) and the holders of Parent Warrants issued pursuant to Section 5.12 (or any securities issued upon conversion thereof or exchanged therefor) will agree to amend the lock-up provisions applicable to such Founder Common Stock and Parent Warrants (or any securities issued upon exercise thereof or exchanged therefor) pursuant to the Lock-Up Agreement, which shall be executed and delivered by such holders prior to the Effective Time.
5.16 Registration Rights Agreement. Prior to the Closing Date, Parent shall enter into a registration rights agreement in substantially the form attached hereto as Exhibit C (the Registration Rights Agreement) pursuant to which the Company Stockholders and certain other parties thereto will be granted certain registration rights relating to the aggregate Per Share Merger Consideration to be received by them herein. Parent shall use reasonable best efforts to terminate the Registration Rights Agreement, dated as of July 11, 2019, by and among Parent and the Parent Stockholders party thereto (as amended, the Parent Registration Rights Agreement), prior to the Closing and shall offer the Parent Stockholders who are party to the Parent Registration Rights Agreement prior to the Closing the opportunity to enter into the Registration Rights Agreement in connection with the consummation of the transactions contemplated hereby.
5.17 Intended Tax Treatment; Tax Opinions.
(a) On or after the date hereof, none of the Parties shall take (or cause their Affiliates or subsidiaries to take) any action, or fail (or cause their Affiliates or subsidiaries to fail) to take any action, which action or failure to act would reasonably be expected to prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. The Parties will report the Merger on all Returns
39
in a manner consistent with such tax treatment, including attaching the statement described in Treasury Regulations Section 1.368-3(a) on or with its Return for the taxable year of the Merger, and no Party will take a position inconsistent with such treatment, unless required to do otherwise pursuant to a final determination as defined in Section 1313(a) of the Code (or pursuant to any similar provision of applicable state, local or foreign Law).
(b) The Company shall use best efforts to deliver to Morrison & Foerster LLP (Morrison & Foerster) and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C. (Mintz) a tax representation letter substantially in the form attached hereto as Exhibit D-1, dated as of the date of the tax opinions referenced in Section 5.17(c) and signed by an officer of the Company, containing customary representations of the Company; and Parent (and Merger Sub) shall use best efforts to deliver to Morrison & Foerster and Mintz a tax representation letter substantially in the form attached hereto as Exhibit D-2, dated as of the date of the tax opinions referenced in Section 5.17(c) and signed by an officer of Parent (and Merger Sub), containing customary representations of Parent (and Merger Sub), in each case as shall be reasonably necessary or appropriate to enable Morrison & Foerster and Mintz to render the applicable tax opinions described in Section 5.17(c) (such tax representation letters, the Tax Representation Letters).
(c) The Company shall use best efforts to cause Mintz or other counsel satisfactory to the Company to deliver to the Company an opinion of Mintz or such other counsel substantially in the form attached hereto as Exhibit E-1, dated as of the Closing Date, and based on facts, representations and assumptions set forth or described in such opinion, to the effect that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, Mintz or such other counsel will be entitled to receive and rely upon the representations contained in the Tax Representation Letters of Parent and the Company and upon such other customary certificates and representations as the counsel rendering such tax opinion reasonably deems relevant.
(d) Parent shall use best efforts to cause Morrison & Foerster or other counsel satisfactory to Parent to deliver to Parent an opinion of Morrison & Foerster or such other counsel substantially in the form attached hereto as Exhibit E-2, dated as of the Closing Date, and based on facts, representations and assumptions set forth or described in such opinion, to the effect that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, Morrison & Foerster or such other counsel will be entitled to receive and rely upon the representations contained in the Tax Representation Letters of Parent and the Company and upon such other customary certificates and representations as the counsel rendering such tax opinion reasonably deems relevant.
5.18 Incentive Equity Plan. Prior to the Closing Date, Parent shall cause to be adopted the Parent Plan, the proposed form and terms of which shall be prepared and delivered by the Company and which shall be reasonably acceptable to Parent.
5.19 PIPE Investment. Parent shall use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to arrange and obtain the PIPE Investment on the terms set forth in the PIPE Documents, including using Parents commercially reasonable efforts to (i) maintain in full force and effect the PIPE Documents in accordance with the terms thereof, (ii) satisfy on a timely basis all conditions to obtaining the PIPE Investment set forth in the PIPE Documents that are applicable to Parent or any of its Subsidiaries and within the control of Parent or any of its Subsidiaries, and to consummate the PIPE Investment at or prior to the Closing, including using its commercially reasonable efforts to cause the investor parties thereto to fund the PIPE Investment at the Closing, (iii) comply on a timely basis with Parents obligations under the PIPE Documents and (iv) enforce its rights under the PIPE Documents, including (at the request of the Company and only if Parent and its Subsidiaries have sufficient funds) by filing one or more lawsuits against the investor parties thereto to fully enforce the investors obligations (and the rights of Parent) thereunder or assigning the rights of Parent to bring such lawsuits to the Company so as to enable the Company to file such lawsuits against the investors on behalf of Parent. Parent shall provide the Company with copies of all documents relating to the PIPE Investment and shall give the Company prompt written notice upon becoming aware of (A) any breach or default (or any event or circumstance which, with or without notice, lapse of time or both, could reasonably be expected to give rise to any breach or default) by any party to any of the PIPE Documents, (B) any actual or potential failure to carry out any of the terms of any of the PIPE Documents, (C) any actual or threatened termination or repudiation of any of the PIPE Documents by any party thereto, (D) any material dispute or
40
disagreement between or among any of the parties to any of the PIPE Documents or (E) the occurrence of an event or development that Parent reasonably expects to have a material and adverse impact on the ability of Parent to obtain all or any portion of the PIPE Investment. Without the prior written consent of the Company, Parent shall not permit any material amendment or modification to be made to, or any waiver of any material provision or remedy under, any of the PIPE Documents (including, without limitation, any amendment, modification or waiver that (v) adversely affects the availability of all or any portion of the PIPE Investment, (w) adversely affects the termination provisions of, or would result in the termination of, any of the PIPE Documents, (x) reduces the aggregate amount of the PIPE Investment, (y) imposes additional conditions precedent to the availability of the PIPE Investment or amends or modifies any of the existing conditions to the funding of the PIPE Investment or (z) adversely impacts the ability of Parent to enforce its rights against the investors under any of the PIPE Documents), or release or consent to the termination of the obligations of the investors under any of the PIPE Documents.
5.20 Company Stockholder Approval. The Company shall, as promptly as practicable after the SEC Approval Date, give notice in accordance with the DGCL and the Companys Charter Documents to all of its stockholders calling for a special meeting of such stockholders to consider and vote upon this Agreement and the Merger and the other transactions contemplated hereby, and shall hold such meeting as promptly as practicable after such notice is given (Company Stockholder Meeting). The Company shall timely send copies of the Proxy Statement/Prospectus and all other relevant information and documentation to its stockholders in connection with the Company Stockholder Meeting. The Company and its board of directors shall cause the Company Stockholder Meeting to take place in accordance with the foregoing and in compliance with the DGCL and the Companys Charter Documents and use commercially reasonable efforts to secure the Company Stockholder Approval at the Company Stockholder Meeting. Notwithstanding the foregoing, at the election and option of the Company, the Company shall be permitted to obtain the Company Stockholder Approval, without a need for calling a Company Stockholder Meeting, by obtaining the written consent of holders of shares of Company Stock representing the Company Stockholder Approval that is executed and delivered by such holders after the SEC Approval Date and the Proxy Statement/Prospectus is delivered to such holders; provided, that, in the event that the Company elects to obtain the Company Stockholder Approval pursuant to such written consent, consents with respect to this Agreement, the Merger and the other transactions contemplated hereby will be solicited from all holders of shares of Company Stock. The Company shall use its reasonable best efforts to cause the Company Stockholders to (i) to vote (in person, by proxy or by action by written consent, as applicable) all of their Company Stock in favor of, and adopt, the Merger and to vote in opposition to any and all other proposals that could reasonably be expected to delay or impair the ability of the Company to consummate the Merger and (ii) to execute and deliver all related documentation and take such other action in support of the Merger as shall reasonably be requested by the Company in connection with the Merger.
5.21 PPP Loan. Prior to or at the Effective Time, the Company shall either (i) obtain lender consent under the terms of the PPP Loan to the consummation of the Merger or (ii) (A) repay in full any outstanding principal and accrued interest on the PPP Loan or (B) if elected by Parent, cooperate with Parent and provide information to Parent necessary to enable Parent to make payment, on the Closing Date, to repay in full any outstanding principal and accrued interest on the PPP Loan.
ARTICLE VI
CONDITIONS TO THE TRANSACTION
6.1 Conditions to Obligations of Each Party to Effect the Merger. The respective obligations of each party to this Agreement to effect the Merger shall be subject to the satisfaction as of the Closing Date of the following conditions, any one or more of which may be waived (if legally permitted) in writing by all of such parties:
(a) Parent Stockholder Matters. The Stockholder Matters shall have been duly approved and adopted by the affirmative vote of the Parent Stockholders required under Parents Charter Documents and the DGCL.
41
(b) Parent Net Tangible Assets. Parent shall have, either immediately prior to or upon the Closing, at least $5,000,001 of net tangible assets following the exercise by holders of shares of Parent Common Stock issued in Parents initial public offering of securities and outstanding immediately before the Closing of their right to convert their shares into a pro rata share of the Trust Fund in accordance with Parents Charter Documents.
(c) HSR Act; No Order. All specified waiting periods under the HSR Act shall have expired and no Governmental Entity shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and which has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger, substantially on the terms contemplated by this Agreement.
(d) Proxy Statement. The Proxy Statement/Prospectus (including the Form S-4) shall have become effective in accordance with the provisions of the Securities Act, no stop order shall have been issued by the SEC which remains in effect with respect to the Proxy Statement/Prospectus, and no proceeding seeking such a stop order shall have been threatened or initiated by the SEC which remains pending.
(e) Company Stockholder Approval. The Company Stockholder Approval shall have been obtained.
(f) Merger Shares. The Parent Common Stock comprising the aggregate Per Share Merger Consideration to be issued pursuant to this Agreement shall have been approved for listing on the NYSE, subject only to official notice of issuance thereof and public holder requirements.
(g) PIPE Investment. The PIPE Investment shall have been, or concurrently with the Closing shall be, completed.
6.2 Additional Conditions to Obligations of the Company. The obligations of the Company to consummate and effect the Merger shall be subject to the satisfaction as of the Closing Date of each of the following conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. Each representation and warranty of Parent and Merger Sub (i) contained in Sections 3.3(a), 3.3(b), 3.3(c), 3.3(e), 3.3(g), 3.3(h) and 3.4 shall be true and correct in all respects as of the Closing Date as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be true and correct on and as of such earlier date), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, be reasonably expected to result in more than de minimis additional cost, expense or liability to the Company, Parent, Merger Sub or their Affiliates and (ii) contained in the other Sections of Article III shall be true and correct (without giving any effect to any limitation as to materiality or Material Adverse Effect or any similar limitation set forth therein) as of the Closing Date as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be true and correct on and as of such earlier date), except, in either case, where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to result in, a Material Adverse Effect with respect to Parent. The Company shall have received a certificate with respect to the foregoing signed on behalf of Parent by an authorized officer of Parent (Parent Closing Certificate).
(b) Agreements and Covenants. Parent and Merger Sub shall have performed or complied with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date in all material respects, and the Parent Closing Certificate shall include a provision to such effect.
(c) No Litigation. No action, suit or proceeding shall be pending or threatened by any Governmental Entity which is reasonably likely to (i) prevent consummation of any of the transactions contemplated by this Agreement, (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation or (iii) affect materially and adversely or otherwise encumber the title of the shares of Parent Common Stock to be issued by Parent in connection with the Merger and no order, judgment, decree, stipulation or injunction to any such effect shall be in effect.
42
(d) Material Adverse Effect. No Material Adverse Effect with respect to Parent shall have occurred since the date of this Agreement, and the Parent Closing Certificate shall include a provision to such effect.
(e) Registration Rights Agreement. The Registration Rights Agreement shall have been executed and delivered and shall be in full force and effect.
(f) Governing Documents. The Certificate of Incorporation of Parent, in a form reasonably acceptable to Parent and the Company, shall have been filed with the Secretary of State of the State of Delaware and Parent shall have adopted the Bylaws, in a form reasonably acceptable to Parent and the Company.
(g) Resignations. Other than the persons listed in Schedule 6.2(g) of the Company Schedule, all persons shall have resigned from all of their positions and offices with Parent and Merger Sub.
(h) Parent Registration Rights Agreement. The Parent Registration Rights Agreement shall have been terminated.
(i) Lock-Up Agreement. The Lock-Up Agreement shall have been executed and delivered by the holders specified in the last sentence of Section 5.15 and shall be in full force and effect.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to consummate and effect the Merger shall be subject to the satisfaction as of the Closing Date of each of the following conditions, any of which may be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. Each representation and warranty of the Company and the Stockholders (i) contained in Sections 2.3(a), 2.3(b), 2.3(c), 2.3(e) and 2.4 shall be true and correct in all respects as of the Closing Date as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be true and correct on and as of such earlier date), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, be reasonably expected to result in more than de minimis additional cost, expense or liability to the Company, Parent, Merger Sub or their Affiliates and (ii) contained in the other Sections of Article II shall be true and correct (without giving any effect to any limitation as to materiality or Material Adverse Effect or any similar limitation set forth therein) as of the Closing Date as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be true and correct on and as of such earlier date), except, in either case, where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to result in, a Material Adverse Effect on the Company. Parent shall have received a certificate with respect to the foregoing signed on behalf of the Company by an authorized officer of the Company (Company Closing Certificate).
(b) Agreements and Covenants. The Company and its Subsidiaries shall have performed or complied with all agreements and covenants required by this Agreement to be performed or complied with by them at or prior to the Closing Date in all material respects, and the Company Closing Certificate shall include a provision to such effect.
(c) No Litigation. No action, suit or proceeding shall be pending or threatened by any Governmental Entity which is reasonably likely to (i) prevent consummation of any of the transactions contemplated by this Agreement, (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation or (iii) affect materially and adversely the right of the Surviving Corporation to own, operate or control any of the assets and operations of the Company following the Merger and no order, judgment, decree, stipulation or injunction to any such effect shall be in effect.
(d) Material Adverse Effect. No Material Adverse Effect with respect to the Company shall have occurred since the date of this Agreement, and the Company Closing Certificate shall include a provision to such effect.
43
(e) Updated Audited Financial Statements. The Updated Audited Financial Statements shall have been delivered by the Company to Parent and shall be consistent in all material respects with the Audited Financial Statements with respect to the fiscal years ended December 31, 2019 and 2018.
(f) Lock-Up Agreement. The Lock-Up Agreement shall have been executed and delivered by the Company Stockholders identified in Schedule 5.15 of the Company Schedule and shall be in full force and effect.
(g) Company Stockholders Agreements. Each of the agreements set forth on Schedule 6.3(g) of the Company Schedule shall be terminated or amended as provided on such Schedule 6.3(g).
(h) Conversion of Company Preferred Stock; Treatment of Company Derivative Securities. The Company shall have delivered to Parent a complete and correct copy of the written request for conversion delivered by the Requisite Holders (as defined in the Company Charter) to the Company pursuant to Article Fourth, Section C.4(b)(ii) of the Company Charter (the Request for Conversion), and such other documentation reasonably requested by Parent to evidence the conversion of the Company Preferred Stock pursuant to Section 1.5(a) and the treatment of the Company Derivative Securities contemplated by Section 1.10.
(i) PPP Loan. The Company shall have either (i) obtained lender consent under the terms of the PPP Loan to the consummation of the Merger or (ii) repaid in full any outstanding principal and accrued interest on the PPP Loan.
(j) FIRPTA Tax Certificates. At Closing, the Company shall deliver to Parent a properly executed certification dated as of the Closing Date that meets the requirements of Treasury Regulations Section 1.1445-2(c)(3) and states that shares of the Company are not U.S. real property interests within the meaning of Section 897 of the Code, together with a written authorization for Parent to deliver such certification to the IRS on behalf of the Company after the Closing and a notice to the IRS in accordance with the provisions of Treasury Regulations Section 1.897-2(h)(2).
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written agreement of Parent and the Company at any time;
(b) by either Parent or the Company if the Merger shall not have been consummated by January 16, 2021 (the Outside Date); provided, however, that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any Party whose action or failure to act has been a principal cause of or primarily resulted in the failure of the Merger to occur on or before such date and such action or failure to act constitutes a breach of this Agreement;
(c) by either Parent or the Company if a Governmental Entity shall have issued an order, decree, judgment or ruling or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger, which order, decree, ruling or other action is final and nonappealable;
(d) by the Company, upon a material breach of any representation, warranty, covenant or agreement on the part of Parent or Merger Sub set forth in this Agreement, or if any representation or warranty of Parent or Merger Sub shall have become untrue, in either case such that (i) the conditions set forth in Article VI would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue and (ii) such breach by Parent or Merger Sub is incapable of being cured by the Outside Date or, if curable, is not cured by the Outside Date (it being understood that the Company may not terminate this Agreement pursuant to this Section 7.1(d) if it shall have materially breached this Agreement);
44
(e) by Parent, upon a material breach of any representation, warranty, covenant or agreement on the part of the Company or a Stockholder set forth in this Agreement, or if any representation or warranty of the Company or a Stockholder shall have become untrue, in either case such that (i) the conditions set forth in Article VI would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue and (ii) such breach by the Company or a Stockholder is incapable of being cured by the Outside Date or, if curable, is not cured by the Outside Date (it being understood that Parent may not terminate this Agreement pursuant to this Section 7.1(e) if it shall have materially breached this Agreement);
(f) by Parent, if the Company shall have failed to deliver the Support Agreements within one (1) day following the execution of this Agreement;
(g) by Parent, if the Company fails to obtain the Company Stockholder Approval by written consent within ten (10) Business Days following the SEC Approval Date;
(h) by either Parent or the Company, if, at the Special Meeting (including any adjournments thereof), the Stockholder Matters shall fail to be approved by the affirmative vote of the Parent Stockholders required under Parents Charter Documents and the DGCL; or
(i) by either Parent or the Company if, either immediately prior to or upon the Closing, following consummation of the Merger, Parent will have less than $5,000,001 of net tangible assets following the exercise by the holders of shares of Parent Common Stock issued in Parents initial public offering of their rights to convert the shares of Parent Common Stock held by them into cash in accordance with Parents Charter Documents.
7.2 Notice of Termination; Effect of Termination.
(a) Any termination of this Agreement under Section 7.1 above will be effective immediately upon (or, if the termination is pursuant to Section 7.1(d) or Section 7.1(e), and the proviso therein is applicable, thirty (30) days after) the delivery of written notice of the terminating party to the other parties hereto.
(b) In the event of the termination of this Agreement as provided in Section 7.1, this Agreement shall be of no further force or effect and the Merger shall be abandoned, except for and subject to the following: (i) Sections 4.2(a), 5.7, 7.2 and 7.3 and Article VIII (General Provisions) shall survive the termination of this Agreement, and (ii) nothing herein shall relieve any party from liability for any intentional and willful breach of this Agreement by such party occurring prior to such termination.
7.3 Fees and Expenses. Except as otherwise set forth herein, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses whether or not the Merger is consummated.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Notices. All notices and other communications among the parties hereto shall be in writing and shall be deemed to have been duly given (i) when delivered in person, (ii) when delivered after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, (iii) when delivered by FedEx or other nationally recognized overnight delivery service or (iv) when e-mailed during normal business hours (and otherwise as of the immediately following Business Day), addressed as follows:
if to Parent, to:
Pivotal Investment Corporation II
c/o Graubard Miller
The Chrysler Building
405 Lexington Avenue, 11th Floor
New York, New York 10174
Attention: Jonathan J. Ledecky
E-mail: jledecky@hockeyny.com
45
with copies to:
Graubard Miller
The Chrysler Building
405 Lexington Avenue, 11th Floor
New York, New York 10174
Attention: David Alan Miller / Jeffrey M. Gallant
E-mail: dmiller@graubard.com / jgallant@graubard.com
and:
Morrison & Foerster LLP
250 West 55th Street
New York, New York 10019
Attention: Mitchell S. Presser / Omar E. Pringle
E-mail: mpresser@mofo.com / opringle@mofo.com
if to the Company to:
XL Hybrids, Inc.
145 Newton Street
Boston, Massachusetts 02135
Attention: Tod Hynes
Email: thynes@xlfleet.com
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Tom Burton and Sahir Surmeli
Email: TRBurton@mintz.com; SSurmeli@mintz.com
8.2 Interpretation. The definitions of the terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context shall require, any pronoun shall include the corresponding masculine, feminine and neuter forms. When a reference is made in this Agreement to an Exhibit or Schedule, such reference shall be to an Exhibit or Schedule to this Agreement unless otherwise indicated. When a reference is made in this Agreement to Sections or subsections, such reference shall be to a Section or subsection of this Agreement. Unless otherwise indicated the words include, includes and including when used herein shall be deemed in each case to be followed by the words without limitation. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Reference to the Subsidiaries of an entity shall be deemed to include all direct and indirect Subsidiaries of such entity. References to a document or item of information having been made available will be deemed to include the posting of such document or item of information in an electronic data room accessible by Parent or any of its representatives. For purposes of this Agreement:
(a) the term Affiliate shall mean, as applied to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with, such Person. For purposes of this definition, control (including with correlative meanings, the terms controlling, controlled by and under common control with), as applied to any Person, means the possession, directly or indirectly, of the power to direct
46
or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise;
(b) the term Business Data shall mean all business information and data, including Personal Information (whether of employees, contractors, consultants, customers, consumers, or other persons and whether in electronic or any other form or medium) that is accessed, collected, used, stored, shared, distributed, transferred, disclosed, destroyed, disposed of or otherwise processed by any of the Business Systems or otherwise in the course of the conduct of the business of the Company;
(c) the term Business Day shall mean a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close;
(d) the term Business Systems shall mean all Software (including Company Products), computer hardware (whether general or special purpose), electronic data processing, information, record keeping, communications, telecommunications, networks, interfaces, platforms, servers, peripherals, and computer systems, including any outsourced systems and processes, that are owned or used in the conduct of the business of the Company;
(e) the term Company Equity Plan shall mean the 2010 Equity Incentive Plan of the Company;
(f) the term Company Intellectual Property shall mean any Intellectual Property that is owned by the Company, including Software developed by the Company;
(g) the term Company Licensed Intellectual Property shall mean any Intellectual Property that is owned by a third party and licensed to the Company, including Software developed by the Company;
(h) the term Company Products shall mean all current versions of products or service offerings of the Company;
(i) the term Company Registered Intellectual Property shall mean all of the Registered Intellectual Property owned by the Company;
(j) the term Company Stock Option shall mean an option to purchase shares of Company Stock granted pursuant to the Company Equity Plan;
(k) the term Company Stockholder Approval shall mean approval (including by written consent) of this Agreement and the Merger by holders of a majority of (i) the issued and outstanding shares of Company Stock (on an as converted basis) and (ii) the Series D Preferred Stock (on an as converted basis);
(l) the term Continuing Directors shall mean Jonathan J. Ledecky, Sarah Sclarsic and Kevin Griffin;
(m) the term Copyrights shall mean all copyrights, copyrights registrations and applications therefor, and all other rights corresponding thereto throughout the world;
(n) the term Environmental Law shall mean any federal, state, local or foreign law, regulation, order, decree, permit, or authorization, relating to: (i) releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances; (ii) the handling, use, transport, treatment, storage or disposal of any Hazardous Substance or (iii) pollution or protection of the environment or natural resources;
(o) the term Exchange Ratio shall mean (i) 100,000,000 divided by (ii) the Fully Diluted Share Number;
47
(p) the term Form S-4 shall mean the registration statement on Form S-4 of Parent with respect to registration of the Parent Common Stock to be issued in connection with the Merger;
(q) the term Fully Diluted Share Number shall mean the sum of (i) the number of issued and outstanding shares of Company Common Stock immediately prior to the Effective Time (including, for the avoidance of doubt, all shares of Company Common Stock issued as a result of the conversion or exchange of Company Preferred Stock pursuant to Section 1.5(a) and Company Convertible Notes pursuant to Section 1.10(c) and/or Schedule 1.10(c)) plus (ii) the number of shares of Company Common Stock issuable upon the exercise, conversion or other exchange of Company Derivative Securities which are not converted, exchanged or exercised prior to the Effective Time (including any shares to be treated as included in this clause (ii) pursuant to Schedule 1.10(c)) and are to remain outstanding as of and immediately following the Effective Time plus (iii) the number of shares of Company Common Stock issuable upon the exercise, conversion or other exchange of any other debt or equity securities of the Company outstanding immediately prior to the Effective Time;
(r) the term Governmental Action/Filing shall mean any franchise, license, certificate of compliance, authorization, consent, order, permit, approval, consent or other action of, or any filing, registration or qualification with, any federal, state, municipal, foreign or other governmental, administrative or judicial body, agency or authority;
(s) the term Governmental Entity shall mean any court, administrative agency, commission, governmental or regulatory authority or similar body, domestic or foreign;
(t) the term Hazardous Substance shall mean any substance that is: (i) listed, classified or regulated pursuant to any Environmental Law; (ii) any petroleum product or by-product, asbestos-containing material, polychlorinated biphenyls, radioactive materials or radon; or (iii) any other substance which is regulated by any Governmental Entity pursuant to any Environmental Law;
(u) the term Insider shall mean any individual who is an officer, director or employee of the Company or any of its Subsidiaries;
(v) the term Insurance Policies shall mean all material insurance policies and material fidelity and surety bonds covering the assets, business, equipment, properties, operations, employees, officers and directors;
(w) the term Intellectual Property shall mean any or all of the following and all worldwide common law and statutory rights in, arising out of, or associated therewith: (i) Patents; (ii) inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (iii) Copyrights; (iv) Software; (v) domain names, uniform resource locators and other names and locators associated with the Internet (vi) industrial designs and any registrations and applications therefor; (vii) Trademarks; (viii) all databases and data collections and all rights therein; (ix) all moral and economic rights of authors and inventors, however denominated, and (x) any similar or equivalent rights to any of the foregoing (as applicable);
(x) the term knowledge shall mean actual knowledge or awareness as to a specified fact or event (i) in the case of the Company, of Tod Hynes and Dimitri Kazarinoff, and (ii) in the case of Parent or Merger Sub, Jonathan Ledecky, Kevin Griffin and James Brady;
(y) the term Legal Requirements shall mean any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity;
(z) the term Lien shall mean any mortgage, pledge, security interest, encumbrance, lien, restriction or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof, any sale with recourse against the seller or any Affiliate of the seller, or any agreement to give any security interest);
48
(aa) the term Material Adverse Effect when used in connection with the Company or Parent, as the case may be, shall mean any change, event, occurrence or effect, individually or when aggregated with other changes, events, occurrences or effects, (A) that has a materially adverse effect on the business or financial condition of the Company and its Subsidiaries, taken as whole, or Parent and Merger Sub, taken together, as applicable or (B) would prevent, materially delay or materially impede the performance by the Company or Parent or Merger Sub of their respective obligations under this Agreement or the consummation of the Merger or any of the other transactions contemplated herein, provided however that none of the following (or the effect of any of the following) alone or in combination shall be deemed, in and of itself, to constitute, or be taken into account in determining whether there has been or will be, a Material Adverse Effect: any changes, events, occurrences or effects arising out of, resulting from or attributable to (i) acts of war, sabotage, civil or political unrest or terrorism, or any escalation or worsening of any such acts of war, sabotage, civil or political unrest or terrorism, (ii) earthquakes, hurricanes, tornados or other natural or man-made disasters, acts of God or other force majeure events, (iii) any pandemic, epidemic, plague or other general outbreak of illness (it being understood that any change, event, occurrence or effect resulting from or attributable to actions taken by the Company or its Subsidiaries in response to or as a result of such pandemic, epidemic, plague or other general outbreak of illness (including pursuant to the proviso to Section 4.1) may be taken into account in determining whether there has been a Material Adverse Effect), (iv) any proposal, enactment or change in interpretation of, or other change in, applicable Legal Requirements or U.S. GAAP (or equivalent accounting practice in any other jurisdiction), (v) general conditions in the industries in which the Company or any of its Subsidiaries operate, (vi) the failure, in and of itself, of the Company or any of its Subsidiaries to meet any internal or published projections, forecasts, estimates or predictions in respect of revenue, earnings or other financial or operating metrics before, on or after the date of this Agreement, or changes in the credit rating of the Company or any of its Subsidiaries (it being understood that the underlying facts giving rise or contributing to such failure or change may be taken into account in determining whether there has been a Material Adverse Effect if otherwise contemplated by this definition), (vii) changes attributable to the public announcement or pendency of the transactions contemplated hereby or the performance of this Agreement, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, licensors, distributors, partners, providers and employees, (viii) any change in interest rates or economic, political, business, financial, commodity, currency or market conditions generally or (ix) any actions taken, or failures to take action, or such other changes or events, in each case, by the Company or its Subsidiaries which Parent has requested or to which it has consented, in each case, expressly in writing or which actions are expressly contemplated by this Agreement; provided, however, in the case of the foregoing clauses (i), (ii), (iii), (iv), (v) and (viii), in the event that the Company and its Subsidiaries, taken as a whole, are disproportionately affected by such change, event, occurrence or effect relative to other participants in the business and industries in which the Company and its Subsidiaries operate, the extent (and only the extent) of such adverse effect, relative to such other participants, on the Company or any of its Subsidiaries may be taken into account in determining whether there has been a Material Adverse Effect;
(bb) the term Parent Plan shall mean a management incentive equity plan to be adopted by Parent in connection with the transactions contemplated hereby;
(cc) the term Patents shall mean all patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof;
(dd) the term Permitted Liens shall mean (i) statutory Liens for Taxes, assessments or other governmental charges, in each case, not yet delinquent or the amount or validity of which is being contested in good faith, (ii) mechanics, carriers, workers, repairers and similar Liens arising or incurred in the ordinary course of business, (iii) zoning, entitlement and other land use and environmental regulations promulgated by any Governmental Entity, (iv) Liens of public record, (v) covenants, conditions, restrictions, easements, rights of way, encumbrances, defects, imperfections, irregularities of title or other Liens, if any, that would not reasonably be expected to have a Material Adverse Effect, (vi) with respect to any leased real property, (a) the interests and rights of the respective lessors with respect thereto and (b) any Lien permitted under the applicable lease agreement and any ancillary documents thereto, (vii) Liens created by Parent or its successors and assigns, (viii) Liens disclosed in the Company Schedule or the Parent Schedule, including those listed in Schedule 8.2(dd), (ix) Liens (other than
49
monetary liens) incurred in the ordinary course of business since the date of the most recent Financial Statement, (x) licenses to Intellectual Property granted in the ordinary course of business, (xi) Liens securing the Companys and its Subsidiaries existing credit facilities and (xii) statutory or contractual Liens of lessors or Liens on the lessors or prior lessors interest;
(ee) the term Person shall mean any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization, entity or Governmental Entity;
(ff) the term Personal Information shall mean (i) information related to an identified or identifiable individual (e.g., name, address telephone number, email address, financial account number, government-issued identifier), (ii) any other data used or intended to be used or which allows one to identify, contact, or precisely locate an individual, including any internet protocol address or other persistent identifier, and (iii) any other, similar information or data regulated by Privacy/Data Security Laws;
(gg) the term PPP shall mean the Paycheck Protection Program set forth in the CARES Act (H.R. 748), including all rules and regulations promulgated in connection therewith;
(hh) the term PPP Loan shall mean the U.S. Small Business Administration Payment Protection Program Note, dated April 22, 2020, by and between the Company, as borrower, and Silicon Valley Bank, as lender;
(ii) the term Privacy/Data Security Laws shall mean all Legal Requirements governing the receipt, collection, use, storage, processing, sharing, security, disclosure, or transfer of Personal Information or the security of Companys Business Systems or Business Data;
(jj) the term Proxy Statement/Prospectus shall mean the proxy statement/prospectus included in the Form S-4, including the proxy statement filed by Parent on Schedule 14A with respect to the Special Meeting to approve the Stockholder Matters, relating to the transactions contemplated by this Agreement which shall constitute a proxy statement of Parent to be used for the Special Meeting to approve the Stockholder Matters (which shall also provide the Parent Stockholders with the opportunity to redeem their shares of Parent Stock in conjunction with a stockholder vote on the Merger Proposal) and a prospectus with respect to the Parent Common Stock to be offered and issued to the Company Stockholders in all cases in accordance with and as required by the Parents Charter Documents, applicable Law, and the rules and regulations of the NYSE;
(kk) the term Registered Intellectual Property shall mean all Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded by any government or other legal authority;
(ll) the term Reserved Share Number shall mean (i) the number of shares of Company Common Stock issuable upon the exercise, conversion or other exchange of such Company Derivative Securities as are to remain outstanding as of and immediately following the Effective Time or be treated as such as set forth on Schedule 1.10(c), multiplied by (ii) the Exchange Ratio;
(mm) the term Software shall mean all computer software (in object code or source code format), data and databases, and related documentation and materials;
(nn) the term Tax or Taxes refers to any and all federal, state, local and foreign taxes, including, without limitation, gross receipts, income, profits, sales, use, occupation, value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, assessments, governmental charges and duties together with all interest, penalties and additions imposed with respect to any such amounts and including any liability of a predecessor entity for any such amounts;
50
(oo) the term Trademarks shall mean trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor;
(pp) the term Voting Agreement shall mean the Third Amended and Restated Stockholders Voting Agreement of the Company, dated as of September 29, 2017, by and among the Company and each of the stockholders party thereto; and
(qq) all monetary amounts set forth herein are referenced in United States dollars, unless otherwise noted.
8.3 Counterparts; Electronic Delivery. This Agreement and each other document executed in connection with the transactions contemplated hereby, and the consummation thereof, may be executed in one or more counterparts, all of which shall be considered one and the same document and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. Delivery by electronic transmission to counsel for the other party of a counterpart executed by a party shall be deemed to meet the requirements of the previous sentence.
8.4 Entire Agreement; Third Party Beneficiaries. This Agreement and the documents and instruments and other agreements among the Parties as contemplated by or referred to herein, including the Exhibits and Schedules hereto, and the Confidentiality Agreement (which will terminate at the Closing) (a) constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the Parties and any of their respective Affiliates with respect to the transactions contemplated hereby; and (b) are not intended to confer upon any other person any rights or remedies hereunder (except as specifically provided in this Agreement, including Sections 5.10 and 8.16). No representations, warranties, covenants, understandings, agreements, oral or otherwise, relating to the transactions contemplated by this Agreement exist between the parties except as expressly set forth or referenced in this Agreement and the Confidentiality Agreement.
8.5 Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
8.6 Other Remedies; Specific Performance. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Each Party agrees that it will not oppose the granting of specific performance and other equitable relief on the basis that the other parties have an adequate remedy at law or that an award of specific performance is not an appropriate remedy for any reason at law or equity. The Parties acknowledge and agree that any Party seeking an injunction to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 8.6 shall not be required to provide any bond or other security in connection with any such injunction.
8.7 Governing Law. This Agreement shall be governed by and construed in accordance with the internal law of the State of Delaware regardless of the law that might otherwise govern under applicable principles of conflicts of law thereof.
51
8.8 Consent to Jurisdiction; WAIVER OF TRIAL BY JURY. Each of the parties hereto irrevocably consents to the exclusive jurisdiction and venue of the Delaware Chancery Court (or, if the Delaware Chancery Court shall be unavailable, any other court in the State of Delaware or, in the case of claims to which the federal courts have exclusive subject matter jurisdiction, any federal courts of the United States of America sitting in the State of Delaware) in connection with any matter based upon or arising out of this Agreement or the transactions contemplated hereby, agrees that process may be served upon them in any manner authorized by the laws of the State of Delaware for such persons and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction, venue and manner of service of process. Each party hereto hereby agrees not to commence any legal proceedings relating to or arising out of this Agreement or the transactions contemplated hereby in any jurisdiction or courts other than as provided herein. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
8.9 Rules of Construction. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.
8.10 Assignment. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other parties; provided, however, that the Company and its Subsidiaries may collaterally assign any of its or their rights hereunder to any of its debt financing sources. Subject to the first sentence of this Section 8.10, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
8.11 Amendment. This Agreement may be amended by the parties hereto at any time only by execution of an instrument in writing signed on behalf of each of the parties. The approval of this Agreement by the stockholders of any Party shall not restrict the ability of the board of directors of such Party to terminate this Agreement in accordance with Section 7.1 or to cause such Party to enter into an amendment to this Agreement pursuant to this Section 8.11.
8.12 Extension; Waiver. At any time prior to the Closing, any party hereto may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party. Delay in exercising any right under this Agreement shall not constitute a waiver of such right.
8.13 Currency. All references to currency amounts in this Agreement shall mean United States dollars.
8.14 Schedules. The information furnished in the Schedules is arranged in sections corresponding to the Sections of this Agreement, and the disclosures in any section of the Schedules shall qualify (a) the corresponding Section of this Agreement and (b) other Sections of this Agreement to the extent (notwithstanding the absence of a specific cross-reference), that it is reasonably apparent on its face that such disclosure is also applicable to such other Sections of this Agreement. The Schedules and the information and disclosures contained in such Schedules are intended only to qualify and limit the representations and warranties of the parties contained in this Agreement and shall not be deemed to expand in any way the scope of any such representation or warranty. The inclusion of any information in the Schedules shall not be deemed to be an admission or acknowledgment that such information is material or outside the ordinary course of business. The inclusion of any fact or information in a Schedule is not intended to be construed as an admission or concession as to the legal effect of any such fact or information in any proceeding between any party and any Person who is not a party.
8.15 Nonsurvival of Representations, Warranties and Covenants. None of the representations, warranties, covenants, obligations or other agreements in this Agreement or in any certificate, statement or instrument delivered pursuant to this Agreement, including any rights arising out of any breach of such representations, warranties, covenants, obligations, agreements and other provisions, shall survive the Closing, and they shall terminate and expire upon the occurrence of the Effective Time (and there shall be no liability after the
52
Closing in respect thereof), except for (a) those covenants and agreements contained herein (or in instruments executed pursuant to this Agreement) that by their terms expressly apply in whole or in part after the Closing and then only with respect to any breaches to the extent occurring after the Closing and (b) this Article VIII.
8.16 Non-Recourse. This Agreement may only be enforced against, and any claim or cause of action based upon, arising out of, or related to this Agreement or the transactions contemplated hereby may only be brought against, the Company, Parent and Merger Sub and then only with respect to the specific obligations set forth herein with respect to such Party. No past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney, advisor or representative of any Party hereto, any Affiliate of any Party hereto or any of the foregoing (any of the foregoing, a Nonparty Affiliate) shall have any liability (whether in contract, tort, equity or otherwise) for any one or more of the representations, warranties, covenants, agreements or other obligations or liabilities of any one or more of the Company, Parent or Merger Sub under this Agreement of or for any claim based on, arising out of, or related to this Agreement or the transactions contemplated hereby, except with respect to willful misconduct or common law fraud against the person who committed such willful misconduct or common law fraud.
53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.
PIVOTAL INVESTMENT CORPORATION II | ||
By: |
/s/ Jonathan Ledecky |
|
Name: | Jonathan Ledecky | |
Title: | Chief Executive Officer | |
PIC II MERGER SUB CORP. | ||
By: |
/s/ Jonathan Ledecky |
|
Name: | Jonathan Ledecky | |
Title: | Chief Executive Officer | |
XL HYBRIDS, INC. | ||
By: |
/s/ Dimitri Kazarinoff |
|
Name: | Dimitri Kazarinoff | |
Title: | Chief Executive Officer |
54
Exhibit 10.1
FORM OF
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT (this Subscription Agreement) is entered into this 17th day of September, 2020, by and among Pivotal Investment Corporation II., a Delaware corporation (the Company), and the entity named on the signature page hereto (Subscriber). Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Merger Agreement (as defined below).
RECITALS
WHEREAS, the Company, substantially concurrently with the execution of this Subscription Agreement, shall enter into an Agreement and Plan of Reorganization (as it may be amended or supplemented from time to time, the Merger Agreement), by and among the PIC II Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of the Company (Merger Sub) and XL Hybrids, Inc., a Delaware corporation (XL Hybrids), in substantially the form previously provided to Subscriber;
WHEREAS, in connection with the transactions contemplated by the Merger Agreement (collectively, the Transactions), Subscriber desires to subscribe for and purchase from the Company in a private placement transaction that number of shares of Class A common stock, par value $0.0001 per share, of the Company (the Shares) set forth on the signature page hereto (the Acquired Shares) for a Subscription Amount of $10.00 per share (the Per Share Subscription Amount), and for the aggregate Subscription Amount set forth on the signature page hereto (the Subscription Amount), and the Company desires to issue and sell to Subscriber the Acquired Shares in consideration for the payment of the Subscription Amount by or on behalf of Subscriber to the Company on or prior to the Subscription Closing (as defined below); and
WHEREAS, in connection with the Transactions, certain other accredited investors (as defined in Rule 501 under the Securities Act), have entered into separate subscription agreements with the Company (the Other Subscription Agreements), pursuant to which such investors have, together with Subscriber pursuant to this Subscription Agreement, agreed to purchase on the Merger Closing (as defined below) an aggregate of 15,000,000 Shares at the Per Share Subscription Amount.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants, and subject to the conditions, herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
1. Subscription. Pursuant to the terms and subject to the conditions set forth herein, Subscriber hereby agrees to subscribe for and purchase from the Company, and the Company hereby agrees to issue and sell to Subscriber, upon the payment of the Subscription Amount, the Acquired Shares (such subscription and issuance, the Subscription).
2. Subscription Closing.
(a) The closing of the Subscription contemplated hereby (the Subscription Closing) is intended to occur substantially concurrently with the closing of the Merger (the Merger Closing), and is contingent upon the occurrence of the Merger Closing. Not less than three (3) Business Days prior to the scheduled date of the Merger Closing (the Merger Closing Date), the Company shall provide written notice to Subscriber (as it may be revised in accordance with this Section 2(a), the Closing Notice) of such scheduled Merger Closing Date; provided, that the Company may delay from time to time the scheduled Merger Closing Date until the Outside Date (as defined in the Merger Agreement) following the original scheduled Merger Closing Date identified in the Closing Notice, or such Merger Closing Date as it may be delayed, by written notice to Subscriber if it provides Subscriber with notice of the revised Merger Closing Date (a Revised Closing Notice) setting forth the revised scheduled Merger Closing Date no later than twenty-four (24) hours prior to the then-scheduled Merger Closing Date; provided further that, in the event the revised scheduled Merger Closing Date set forth in the Revised Closing Notice is a date that is more than five (5) Business Days after the then scheduled Merger Closing Date, any Subscription Amount paid by Subscriber that is held in escrow shall be returned to Subscriber within two (2)
Business Days of the date the Company provides the Revised Closing Notice to the Subscriber. For the avoidance of doubt, the return of any Subscription Amount in connection with a delay in the scheduled Closing Date shall not relieve Subscriber of its obligations to pay the Subscription Amount on the date set forth in a Revised Closing Notice and to otherwise comply with the terms and conditions of this Agreement. Subscriber shall deliver to the Company at least two (2) Business Days prior to the then-scheduled Merger Closing Date identified in the Closing Notice (including any Revised Closing Notice) (unless a later time is otherwise agreed by the Company), to be held in escrow until the Subscription Closing, the Subscription Amount for the Acquired Shares by wire transfer of U.S. dollars in immediately available funds to the account specified by the Company in the Closing Notice (including any Revised Closing Notice). Such funds shall be held on behalf of Subscriber until the Subscription Closing in an escrow account by an escrow agent selected by the Company prior to the date hereof. On the Merger Closing Date, the Company shall deliver to Subscriber (i) the Acquired Shares in book-entry form, free and clear of any liens or other restrictions whatsoever (other than those arising under state or federal securities laws or as set forth herein), in the name of Subscriber (or its nominee in accordance with its delivery instructions) or to a custodian designated by Subscriber, as applicable, with each register and book-entry for the Shares containing a notation and each certificate, if any, evidencing the Shares shall be stamped or otherwise imprinted with a legend, in substantially the form set forth on Exhibit A hereto, and (ii) a copy of the records of the Companys transfer agent (the Transfer Agent) showing Subscriber (or such nominee or custodian) as the owner of the Acquired Shares on and as of such date. If the Merger Closing does not occur on the same day as the Subscription Closing, the Company shall promptly (but not later than one (1) Business Day after the Subscription Closing (or two (2) Business Days after the Subscription Closing if the Company reasonably believes the Merger Closing will occur within two (2) Business Days after the Merger Closing Date identified in the Closing Notice (including any Revised Closing Notice))) return the Subscription Amount to Subscriber by wire transfer of U.S. dollars in immediately available funds to the account specified by Subscriber, and any book-entries shall be deemed repurchased and cancelled; provided, that the return of the funds shall not terminate this Subscription Agreement or otherwise relieve any party of any of its obligations hereunder (including Subscribers obligation to purchase the Acquired Shares at the Subscription Closing).
(b) Conditions to Closing of the Company. The Companys obligations to sell and issue the Shares at the Subscription Closing are subject to the fulfillment or (to the extent permitted by applicable law) written waiver, on or prior to the Merger Closing Date, of each of the following conditions:
(i) Representations and Warranties Correct. The representations and warranties made by Subscriber in Section 4 hereof shall be true and correct in all material respects when made (other than representations and warranties that are qualified as to materiality or Subscriber Material Adverse Effect (as defined below), which representations and warranties shall be true and correct in all respects) and shall be true and correct in all material respects on and as of the Subscription Closing (unless they specifically speak as of another date in which case they shall be true and correct in all material respects as of such date) (other than representations and warranties that are qualified as to materiality or Subscriber Material Adverse Effect, which representations and warranties shall be true and correct in all respects), with the same force and effect as if they had been made on and as of said date, but in each case without giving effect to consummation of the Transactions.
(ii) Closing of the Transactions. The Transactions set forth in the Merger Agreement shall have been or will be consummated substantially concurrently with the Subscription Closing.
(iii) Legality. There shall not be in force any order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any Governmental Entity, statute, rule or regulation enjoining or prohibiting the consummation of the Subscription.
(c) Conditions to Closing of Subscriber. Subscribers obligation to purchase the Acquired Shares at the Subscription Closing is subject to the fulfillment or (to the extent permitted by applicable law) written waiver, on or prior to the Merger Closing Date, of each of the following conditions:
(i) Representations and Warranties Correct. The representations and warranties made by the Company in Section 3 hereof shall be true and correct in all material respects (other than representations and warranties that are qualified as to materiality or Company Material Adverse Effect (as defined below), which representations and warranties shall be true and correct in all respects) on and as of the Subscription Closing (unless they specifically speak as of another date in which case they shall be true and correct in all material respects as of such date) with the same force and effect as if they had been made on and as of said date, but in each
2
case without giving effect to consummation of the Transactions; provided, that in the event this condition would otherwise fail to be satisfied as a result of a breach of one or more of the representations and warranties of the Company contained in this Subscription Agreement and the facts underlying such breach would also cause a condition to the Companys obligations under the Merger Agreement to fail to be satisfied, this condition shall nevertheless be deemed satisfied in the event the Company waives such condition with respect to such breach under the Merger Agreement.
(ii) Closing of the Transactions. The Transactions set forth in the Merger Agreement shall have been or will be consummated substantially concurrently with the Subscription Closing.
(iii) No Amendment to the Merger Agreement. There shall have been no amendment, waiver or modification to the Merger Agreement that would reasonably be expected to materially and adversely affect the economic benefits that the Subscriber would reasonably expect to receive under this Subscription Agreement.
(iv) Legality. There shall not be in force any order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any Governmental Entity, statute, rule or regulation enjoining or prohibiting the consummation of the Subscription.
(d) At the Subscription Closing, the parties hereto shall make reasonable efforts to execute and deliver such additional documents and take such additional actions as the parties reasonably may deem to be necessary in order to consummate the Subscription as contemplated by this Subscription Agreement.
3. Company Representations and Warranties. The Company represents and warrants to the Subscriber that:
(a) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. Subject to obtaining all required approvals necessary in connection with the performance of the Merger Agreement and the consummation of the Transactions (collectively, Required Approvals), the Company has all corporate power and authority to own, lease and operate its properties and conduct its business as presently conducted and to enter into, deliver and perform its obligations under this Subscription Agreement.
(b) As of the Merger Closing, the Acquired Shares will be duly authorized by the Company and, when issued and delivered to Subscriber against full payment for the Acquired Shares in accordance with the terms of this Subscription Agreement and registered with the Transfer Agent, the Acquired Shares will be validly issued, fully paid and non-assessable and will not have been issued in violation of or subject to any preemptive or similar rights created under the Companys Charter Documents (as defined in the Merger Agreement) or under the Delaware General Corporation Law.
(c) This Subscription Agreement has been duly authorized, executed and delivered by the Company and, assuming that this Subscription Agreement constitutes the valid and binding agreement of Subscriber, is the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited or otherwise affected bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors rights generally and by general principles of equity.
(d) As of the date of this Subscription Agreement, the authorized capital stock of the Company consists of (i) 75,000,000 Shares, of which 23,000,000 shares are issued and outstanding, (ii) 10,000,000 shares of the Companys Class B common stock, par value $0.0001 per share, of which 5,750,000 shares are issued and outstanding, and (iii) 1,000,000 shares of the Companys preferred stock, par value $0.0001 per share (Preferred Shares), none of which are issued and outstanding. As of the date of this Subscription Agreement, the Company has 11,900,000 warrants outstanding, each of which entitles to the holder thereof to purchase one Share.
(e) Subject to obtaining the Required Approvals, the execution, delivery and performance by the Company of this Subscription Agreement (including compliance by the Company with all of the provisions hereof), and the issuance and sale by the Company of the Acquired Shares, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of the Company pursuant to the
3
terms of (i) any indenture, mortgage, deed of trust, loan agreement, lease, license or other agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, which would be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on the Company (Company Material Adverse Effect) or materially affect the validity of the Acquired Shares or the legal authority of the Company to comply in all material respects with the Companys obligations under this Subscription Agreement; (ii) the Companys Charter Documents; or (iii) any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Company or any of its properties that would be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect or materially affect the validity of the Acquired Shares or the legal authority of the Company to comply in all material respects with the Companys obligations under this Subscription Agreement.
(f) The Company is not in default or violation (and no event has occurred which, with notice or the lapse of time or both, would constitute a default or violation) of any term, condition or provision of (i) the Company Charter Documents, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, permit, franchise or license to which the Company is now a party or by which the Companys properties or assets are bound or (iii) any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Company or any of its properties, except, in the case of clauses (ii) and (iii), for defaults or violations that have not had and would not be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect.
(g) Other than as set forth in the Merger Agreement, there are no securities or instruments issued by or to which the Company is a party containing anti-dilution or similar provisions that will be triggered by the issuance of (i) the Acquired Shares or (ii) the shares to be issued pursuant to any Other Subscription Agreement that have not been or will not be validly waived on or prior to the Merger Closing; provided, that any such holders will waive any such anti-dilution or similar provisions in connection with the Transactions.
(h) The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority, self-regulatory organization or other person in connection with the execution, delivery and performance by the Company of this Subscription Agreement (including, without limitation, the issuance of the Acquired Shares), other than (i) filings with the Securities and Exchange Commission (the Commission), (ii) filings required by applicable state securities laws, (iii) filings required in accordance with Section 9(p) of this Subscription Agreement; (iv) filings required by the NYSE, including with respect to obtaining stockholder approval; and (v) the failure of which to obtain would not be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect.
(i) The Company has not received any written communication from a governmental entity that alleges that the Company is not in compliance with or is in default or violation of any applicable law, except where such non-compliance, default or violation would not be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect.
(j) There is no suit, action, proceeding or investigation pending or, to the knowledge of the Company, threatened against the Company by the NYSE or the Commission, respectively, to prohibit or terminate the listing of the Shares on the NYSE or to deregister the Shares under the Exchange Act. The Company has taken no action that is designed to terminate the registration of the Shares under the Exchange Act.
(k) Assuming the accuracy of Subscribers representations and warranties set forth in Section 4 of this Subscription Agreement, no registration under the Securities Act is required for the offer and sale of the Acquired Shares by the Company to Subscriber.
(l) Neither the Company nor anyone acting on its behalf has offered the Shares or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than Subscriber and other accredited investors (as defined in Rule 501 of Regulation D of the Securities Act), each of which has been offered Shares at a private sale for investment.
(m) None of the Company nor any of its Affiliates has offered Shares or any similar securities during the six months prior to the date hereof to anyone, other than in connection with the Transactions, as set forth in the Merger Agreement, to Subscriber and other investors in connection with the Other Subscription Agreements. Other than the foregoing, the Company has no intention to offer Shares or any similar security during the twelve (12) months from the date hereof other than in connection with the Transactions, including as referenced in Section 5.15 (Lock-Up Agreements) of the Merger Agreement and the Lock-Up Agreements.
4
(n) Neither the Company nor any person acting on its behalf has offered or sold the Acquired Shares by any form of general solicitation or general advertising, including, but not limited to, the following: (1) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio; (2) any website posting or widely distributed email; or (3) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.
(o) A copy of each form, report, statement, schedule, prospectus, proxy, registration statement and other document, if any, filed by the Company with the Commission since its initial registration of the Shares under the Exchange Act (the SEC Documents) is available to Subscriber via the Commissions EDGAR system. None of the SEC Documents contained, when filed or, if amended, as of the date of such amendment with respect to those disclosures that are amended, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has timely filed each report, statement, schedule, prospectus, and registration statement, as applicable, that the Company was required to file with the Commission since its initial registration of the Shares under the Exchange Act. There are no material outstanding or unresolved comments in comment letters from the Commission with respect to any of the SEC Documents.
(p) Except for such matters as have not had and would not be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect, there is no (i) Governmental Action/Filing (as defined in the Merger Agreement) by or before any Governmental Entity (as defined in the Merger Agreement) pending, or, to the knowledge of the Company, threatened against the Company or (ii) judgment, decree, injunction, ruling or order of any Governmental Entity or arbitrator outstanding against the Company.
(q) Other than the Agent (as defined below), the Company has not dealt with any broker, finder, commission agent, placement agent or arranger in connection with the sale of the Acquired Shares, and the Company is not under any obligation to pay any brokers fee or commission in connection with the sale of the Acquired Shares other than to the Agent. Neither the Company nor any of its Affiliates nor any other person acting on its behalf (other than its officers acting in such capacity) has solicited offers for, or offered or sold, the Acquired Shares other than through the Agent.
(r) Other than the Other Subscription Agreements, the Company has not entered into any side letter or similar agreement with any subscriber in connection with such subscribers direct or indirect investment in the Company or with or any other investor, and such Other Subscription Agreements have not been amended in any material respect following the date of this Subscription Agreement and reflect the same Per Share Subscription Amount and terms with respect to the purchase of the Acquired Shares that are no more favorable to such subscriber thereunder than the terms of this Subscription Agreement, except, in each case, for agreements with the Agent (as defined below), and certain of their respective affiliates and related persons.
4. Subscriber Representations and Warranties. Subscriber represents and warrants that:
(a) Subscriber has been duly organized, formed or incorporated, as the case may be, and is validly existing in good standing under the laws of its jurisdiction of organization, formation or incorporation, as the case may be, with all requisite power and authority to enter into, deliver and perform its obligations under this Subscription Agreement, and (ii) this Subscription Agreement has been duly authorized, executed and delivered by Subscriber.
(b) Assuming that this Subscription Agreement constitutes the valid and binding agreement of the Company, this Subscription Agreement is the valid and binding obligation of Subscriber, enforceable against Subscriber in accordance with its terms, except as may be limited or otherwise affected bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors rights generally and by general principles of equity.
(c) The execution, delivery and performance by Subscriber of this Subscription Agreement and the consummation of the transactions contemplated herein will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of Subscriber or, to the best of Subscribers knowledge, any of its subsidiaries, if applicable, pursuant to the terms of (i) any indenture, mortgage, deed of trust, loan
5
agreement, lease, license or other agreement or instrument to which Subscriber or, if applicable, any of its subsidiaries is a party or by which Subscriber or, if applicable, any of its subsidiaries is bound or to which any of the property or assets of Subscriber or, if applicable, any of its subsidiaries is subject, which would be reasonably likely to have, individually or in the aggregate, a material adverse effect on the business, properties or financial condition of Subscriber, or, if applicable, the stockholders equity or results of operations of Subscriber or, if applicable, any of its subsidiaries, taken as a whole (a Subscriber Material Adverse Effect), or materially affect the legal authority of Subscriber to comply in all material respects with Subscribers obligations under this Subscription Agreement, (ii) the organizational documents of Subscriber if Subscriber is not a natural person, or (iii) any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over Subscriber or, if applicable, any of its subsidiaries or any of their respective properties that would be reasonably likely to have, individually or in the aggregate, a Subscriber Material Adverse Effect or materially affect the legal authority of Subscriber to comply in all material respects with Subscribers obligations under this Subscription Agreement.
(d) Subscriber is qualified institutional buyer (as defined in Rule 144A under the Securities Act) or an institutional accredited investor as defined within the meaning of Rule 501 of the Securities Act), in each case, satisfying the applicable requirements set forth on Schedule A. Subscriber represents that it is purchasing the Acquired Shares for its own account (and not for the account of others) or for one or more separate accounts maintained by it as a fiduciary or agent for the benefit of one or more other accredited investors and not with a view to the distribution thereof in violation of the securities laws; provided, that the disposition of Subscribers property shall at all times be within Subscribers control. Subscriber understands that the Acquired Shares have not been registered under the Securities Act and may not be resold, transferred, pledged or otherwise disposed of by the Subscriber absent an effective registration statement under the Securities Act, except if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the resale of the Acquired Shares other than as provided for in Section 5 below. Subscriber further represents and warrants that it will not sell, transfer, pledge or otherwise dispose of the Acquired Shares or any interest therein except in a registered transaction or in a transaction exempt from or not subject to the registration requirements of the Securities Act and except in accordance with the terms and conditions of this Subscription Agreement.
(e) The purchase of Acquired Shares by Subscriber has not been solicited by or through anyone other than the Company or the Agent.
(f) Subscriber acknowledges that the Acquired Shares will not be eligible for resale pursuant to Rule 144A promulgated under the Securities Act. Subscriber understands and agrees that the Acquired Shares will be subject to transfer restrictions as set forth on Exhibit A to this Subscription Agreement, unless and until such transfer restrictions have been removed in accordance with Section 5 of this Subscription Agreement and, as a result of these transfer restrictions, Subscriber may not be able to readily resell the Acquired Shares and may be required to bear the financial risk of an investment in the Acquired Shares for an indefinite period of time. Subscriber understands that it has been advised to consult legal counsel prior to making any offer, resale, pledge or transfer of any of the Acquired Shares.
(g) Subscriber understands and agrees that Subscriber is purchasing the Acquired Shares directly from the Company. Subscriber further acknowledges that there have been no representations, warranties, covenants and agreements made to Subscriber by the Company or any of its officers, directors or representatives, expressly or by implication, other than those representations, warranties, covenants and agreements made by the Company in this Subscription Agreement.
(h) In making its decision to purchase the Acquired Shares, Subscriber represents that it has relied solely upon independent investigation made by Subscriber. Subscriber acknowledges and agrees that Subscriber has received such information as Subscriber deems necessary in order to make an investment decision with respect to the Acquired Shares, including with respect to the Company, XL Hybrids and the Transactions. Subscriber represents and warrants that Subscriber and Subscribers professional advisor(s), if any, were given the opportunity to ask questions and receive answers concerning the terms and conditions of the Subscription and to obtain any additional information which the Company possessed or could acquire without unreasonable effort or expense. Subscriber acknowledges and agrees that it has not relied on the Agent or any of the Agents Affiliates with respect to its decision to purchase the Acquired Shares. Subscriber further acknowledges that the information provided to Subscriber is preliminary and subject to change, and that any changes to such information, including, without limitation, any changes based on updated information or changes in terms of the Transactions, shall in no way affect the Subscribers obligation to purchase the Shares hereunder.
6
(i) Subscriber became aware of the offering of the Acquired Shares solely by means of direct contact between Subscriber and the Company or by means of contact from BTIG, LLC or PJT Partners LP, each acting as a placement agent for the Company (the Agent), and the Acquired Shares were offered to Subscriber solely by direct contact between Subscriber and the Company or by contact between Subscriber and the Agent. Subscriber did not become aware of this offering of the Acquired Shares, nor were the Acquired Shares offered to Subscriber, by any other means. Subscriber acknowledges that the Company represents and warrants that the Acquired Shares (i) were not offered by any form of general solicitation or general advertising and (ii) are not being offered in a manner involving a public offering under, or in a distribution in violation of, the Securities Act, or any state securities laws.
(j) Subscriber acknowledges that it is aware that there are substantial risks incident to the purchase and ownership of the Acquired Shares. Subscriber has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Acquired Shares, and Subscriber has sought such accounting, legal and tax advice as Subscriber has considered necessary to make an informed investment decision.
(k) Alone, or together with any professional advisor(s), Subscriber represents and acknowledges that Subscriber has adequately analyzed and fully considered the risks of an investment in the Acquired Shares and determined that the Acquired Shares are a suitable investment for Subscriber and that Subscriber is able at this time and in the foreseeable future to bear the economic risk of a total loss of Subscribers investment in the Company. Subscriber acknowledges specifically that a possibility of total loss exists.
(l) Subscriber understands and agrees that no federal or state agency has passed upon or endorsed the merits of the offering of the Acquired Shares or made any findings or determination as to the fairness of this investment.
(m) Subscriber represents and warrants that neither Subscriber nor, in the case Subscriber is not a natural person, any of its officers, directors, managers, managing members, general partners or any other individual acting in a similar capacity or carrying out a similar function, is (i) a person or entity named on the Specially Designated Nationals and Blocked Persons List, the Foreign Sanctions Evaders List, the Sectoral Sanctions Identification List, or any other similar list of sanctioned persons administered by the U.S. Treasury Departments Office of Foreign Assets Control, or any similar list of sanctioned persons administered by the European Union or any individual European Union member state, including the United Kingdom (collectively, Sanctions Lists); (ii) directly or indirectly owned or controlled by, or acting on behalf of, one or more persons on a Sanctions List; (iii) organized, incorporated, established, located, resident or born in, or a citizen, national, or the government, including any political subdivision, agency, or instrumentality thereof, of, Cuba, Iran, North Korea, Syria, Venezuela, the Crimea region of Ukraine, or any other country or territory embargoed or subject to substantial trade restrictions by the United States, the European Union or any individual European Union member state, including the United Kingdom; (iv) a Designated National as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515; or (v) a non-U.S. shell bank or providing banking services indirectly to a non-U.S. shell bank (collectively, a Prohibited Investor). Subscriber represents that if it is a financial institution subject to the Bank Secrecy Act (31 U.S.C. Section 5311 et seq.) (the BSA), as amended by the USA PATRIOT Act of 2001 (the PATRIOT Act), and its implementing regulations (collectively, the BSA/PATRIOT Act), that Subscriber maintains policies and procedures reasonably designed to comply with applicable obligations under the BSA/PATRIOT Act. Subscriber also represents that it maintains policies and procedures reasonably designed to ensure compliance with sanctions administered by the United States, the European Union, or any individual European Union member state, including the United Kingdom, if applicable. Subscriber further represents that the funds held by Subscriber and used to purchase the Acquired Shares were legally derived and were not obtained, directly or indirectly, from a Prohibited Investor.
(n) If Subscriber is or is acting on behalf of (i) an employee benefit plan that is subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA), (ii) a plan, an individual retirement account or other arrangement that is subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the Code), (iii) an entity whose underlying assets are considered to include plan assets of any such plan, account or arrangement described in clauses (i) and (ii) (each, an ERISA Plan), or (iv) an employee benefit plan that is a governmental plan (as defined in Section 3(32) of ERISA), a church plan (as defined in Section 3(33)
7
of ERISA), a non-U.S. plan (as described in Section 4(b)(4) of ERISA) or other plan that is not subject to the foregoing clauses (i), (ii) or (iii) but may be subject to provisions under any other federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, Similar Laws, and together with ERISA Plans, Plans), then Subscriber represents and warrants that (A) neither the Company nor any of its Affiliates (the Transaction Parties) has provided investment advice or has otherwise acted as the Plans fiduciary, with respect to its decision to acquire and hold the Acquired Shares, and none of the Transaction Parties is or shall at any time be the Plans fiduciary with respect to any decision in connection with Subscribers investment in the Acquired Shares; (B) the decision to invest in the Acquired Shares has been made at the recommendation or direction of a fiduciary (for purposes of ERISA and/or Section 4975 of the Code, or any applicable Similar Law) with respect to Subscribers investment in the Acquired Shares who is independent of the Transaction Parties; and (C) its purchase of the Acquired Shares will not result is non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, or any applicable Similar Law.
(o) Subscriber is not currently (and at all times through the Subscription Closing will refrain from being or becoming) a member of a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of equity securities of the Company (within the meaning of Rule 13d-5(b)(1) under the Exchange Act).
(p) No foreign person (as defined in 31 C.F.R. Part 800.224) in which the national or subnational governments of a single foreign state have a substantial interest (as defined in 31 C.F.R. Part 800.244) will acquire a substantial interest in the Company as a result of the purchase and sale of Acquired Shares hereunder such that a declaration to the Committee on Foreign Investment in the United States (CFIUS) would be mandatory under 31 C.F.R. Part 800.401, and no foreign person will have control (as defined in 31 C.F.R. Part 800.208) over the Company from and after the Subscription Closing as a result of the purchase and sale of Acquired Shares hereunder.
(q) If Subscriber will purchase 20% of the Companys securities, Subscriber represents that no disqualifying event described in Rule 506(d)(1)(i)-(viii) under the Securities Act (a Disqualification Event) is applicable to Subscriber or any of its Rule 506(d) Related Parties (as defined below), except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. Subscriber hereby agrees that it shall notify the Company promptly in writing in the event a Disqualification Event becomes applicable to Subscriber or any of its Rule 506(d) Related Parties, except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. For purposes of this Section 2.1.18, Rule 506(d) Related Party shall mean a person or entity that is a beneficial owner of Subscribers securities for purposes of Rule 506(d) under the Securities Act.
(r) At the Subscription Closing, Subscriber will have sufficient funds to pay the Subscription Amount pursuant to Section 2(a) of this Subscription Agreement.
5. Registration Rights.
(a) Shelf Registration Statement. The Company agrees that, as soon as reasonably practicable within thirty (30) calendar days, but no later than forty-five (45) calendar days following the Merger Closing Date (the Filing Date), the Company will file with the Commission (at the Companys sole cost and expense) a registration statement registering the resale of the Acquired Shares and the Shares to be acquired by investors pursuant to the Other Subscription Agreements (the Registration Statement), and the Company shall use its commercially reasonable efforts to have the Registration Statement declared effective as soon as reasonably practicable after the filing thereof, but no later than the earlier of (i) the 60th calendar day following the Filing Date (or the 90th calendar day if the Commission notifies the Company (orally or in writing) that it will review the Registration Statement) and (ii) the 10th Business Day after the date the Company is notified (orally or in writing) by the Commission that the Registration Statement will not be reviewed or will not be subject to further review (such earlier date, the Effectiveness Date); provided, however, that (i) if the Commission is closed for operations due to a government shutdown, the Effectiveness Date shall be extended by the same amount of days that the Commission remains closed for operations and (ii) if the Subscriber fails to provide the Company with any information requested by the Company that is required to be provided in such Registration Statement with respect to the Subscriber, then, for purposes of this Section, the Filing Date or Effectiveness Date, as applicable, shall be extended two (2) Business Days following the date of receipt by the Company of such requested and required information from the Subscriber; provided, further, that the Companys obligations to include the Acquired Shares in the Registration Statement are contingent upon Subscriber furnishing in writing to the Company such information
8
regarding Subscriber, the securities of the Company held by Subscriber and the intended method of disposition of the Acquired Shares as shall be reasonably requested by the Company to effect the registration of the resale of the Acquired Shares, and Subscriber shall execute such documents in connection with such registration as the Company may reasonably request that are customary of a selling stockholder in similar situations, including providing that the Company shall be entitled to postpone and suspend the effectiveness or use of the Registration Statement in accordance with Section 5(c). In no event shall the Subscriber be identified as a statutory underwriter in the Registration Statement unless requested by the Commission. Notwithstanding the foregoing, if the Commission prevents the Company from including any or all of the Acquired Shares proposed to be registered for resale under the Registration Statement due to limitations on the use of Rule 415 of the Securities Act for the resale of the Acquired Shares by the applicable shareholders or otherwise, (i) such Registration Statement shall register for resale such number of Acquired Shares which is equal to the maximum number of Acquired Shares as is permitted by the Commission and (ii) the number of Acquired Shares to be registered for each selling shareholder named in the Registration Statement shall be reduced pro rata among all such selling shareholders. Following the Effectiveness Date, if the transfer restrictions as set forth on Exhibit A to this Subscription Agreement are no longer required by the Securities Act or any applicable state securities laws, upon request of Subscriber, the Company shall use its commercially reasonable efforts to cooperate with Subscriber to have such transfer restrictions removed, including providing authorization to the Transfer Agent.
(b) Registration Cooperation. At its expense the Company shall:
(i) keep the applicable Registration Statement or any subsequent shelf registration statement free of any material misstatements or omissions;
(ii) advise Subscriber within two (2) Business Days:
(1) when a Registration Statement or any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective;
(2) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information;
(3) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for such purpose;
(4) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Acquired Shares included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and
(5) subject to the provisions in this Subscription Agreement, of the occurrence of any event that requires the making of any changes in any Registration Statement or prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading.
Notwithstanding anything to the contrary set forth herein, the Company shall not, when so advising Subscriber of such events, provide Subscriber with any material, nonpublic information regarding the Company other than to the extent that providing notice to Subscriber of the occurrence of the events listed in (1) through (5) above constitutes material, nonpublic information regarding the Company;
(iii) use its commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement as soon as reasonably practicable;
9
(iv) upon the occurrence of any event contemplated in Section 5(b)(ii)(5), except for such times as the Company is permitted hereunder to suspend, and has suspended, the use of a prospectus forming part of a Registration Statement, the Company shall use its commercially reasonable efforts to as soon as reasonably practicable prepare a post-effective amendment to such Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Acquired Shares included therein, such prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(v) use its commercially reasonable efforts to cause all Acquired Shares to be listed on each national securities exchange (within the meaning of the Exchange Act), if any, on which the Shares issued by the Company have been listed;
(vi) use its commercially reasonable efforts to take all other steps necessary to effect the registration of the Acquired Shares as required hereby; and
(vii) use its commercially reasonable efforts to allow Subscriber to review disclosure regarding Subscriber in the Registration Statement.
(c) Suspension Event. Notwithstanding anything to the contrary in this Subscription Agreement, the Company shall be entitled to delay or postpone the filing or effectiveness of the Registration Statement and any other registration statement referred to in this Section 5, and from time to time to require Subscriber not to sell under the Registration Statement or such other registration statement, as applicable, or to suspend the effectiveness thereof, if the negotiation or consummation of a transaction by the Company or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event the Company reasonably believes, upon the advice of legal counsel, would require additional disclosure by the Company in the Registration Statement of material information that the Company has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement would be expected, in the reasonable determination of the Companys board of directors, upon the advice of legal counsel, to cause the Registration Statement or such other registration statement, as applicable, to fail to comply with applicable disclosure requirements (each such circumstance, a Suspension Event); provided, however, that the Company may not delay or suspend a particular registration statement on more than two (2) occasions, for more than sixty (60) consecutive calendar days, or more than ninety (90) total calendar days, in each case during any twelve-month period. Upon receipt of any written notice from the Company of the happening of any Suspension Event during the period that the Registration Statement or such other registration statement, as applicable, is effective or if as a result of a Suspension Event the Registration Statement or such other registration statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, Subscriber agrees that (i) it will immediately discontinue offers and sales of the Acquired Shares under the Registration Statement or such other registration statement (excluding, for the avoidance of doubt, sales conducted pursuant to Rule 144) until Subscriber receives copies of a supplemental or amended prospectus (which the Company agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by the Company that it may resume such offers and sales, and (ii) it will maintain the confidentiality of any information included in such written notice delivered by the Company unless otherwise required by law or subpoena. If so directed by the Company, Subscriber will deliver to the Company or, in Subscribers sole discretion destroy, all copies of the prospectus covering the Acquired Shares in Subscribers possession; provided, however, that this obligation to deliver or destroy all copies of the prospectus covering the Acquired Shares shall not apply (i) to the extent Subscriber is required to retain a copy of such prospectus (a) in order to comply with applicable legal, regulatory, self-regulatory or professional requirements or (b) in accordance with a bona fide pre-existing document retention policy or (ii) to copies stored electronically on archival servers as a result of automatic data back-up.
(d) Opt-Out Notice. Subscriber may deliver written notice (including via email in accordance with Section 9(l) of this Subscription Agreement) (an Opt-Out Notice) to the Company requesting that Subscriber not receive notices from the Company otherwise required by this Section 5; provided, however, that Subscriber may later revoke any such Opt-Out Notice in writing. Following receipt of an Opt-Out Notice from Subscriber (unless subsequently revoked), (i) the Company shall not deliver any such notices to Subscriber and Subscriber shall no
10
longer be entitled to the rights associated with any such notice and (ii) each time prior to Subscribers intended use of an effective registration statement, Subscriber will notify the Company in writing at least two (2) Business Days in advance of such intended use, and if a notice of a Suspension Event was previously delivered (or would have been delivered but for the provisions of this Section 5(d)) and the related suspension period remains in effect, the Company will so notify Subscriber, within one (1) Business Day of Subscribers notification to the Company, by delivering to Subscriber a copy of such notice of Suspension Event that would have been provided, and thereafter will provide Subscriber with the related notice of the conclusion of such Suspension Event immediately upon its availability, and Subscriber shall comply with any restrictions on using such Registration Statement during such Suspension Event.
(e) Subscriber Indemnification. The Company agrees to indemnify and hold Subscriber, each person, if any, who controls Subscriber within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of Subscriber within the meaning of Rule 405 under the Securities Act, and each broker, placement agent or sales agent to or through which Subscriber effects or executes the resale of any Acquired Shares (collectively, the Subscriber Indemnified Parties), harmless against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) incurred by Subscriber directly that are caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any other registration statement which covers Registrable Securities (as defined below) of Subscriber (including, in each case, the prospectus contained therein) or any amendment thereof (including the prospectus contained therein) or caused by any omission or alleged omission to state therein a material fact necessary in order to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made), not misleading, except insofar as the same are caused by or contained in any information or affidavit so furnished in writing to the Company by Subscriber expressly for use therein. For purposes of this Section, Registrable Security shall mean any of the Acquired Shares until the earliest to occur of: (A) a registration statement with respect to the sale of any such Acquired Shares shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such registration statement; (B) any such Acquired Shares shall have ceased to be outstanding; (C) any such Acquired Shares have been sold without registration pursuant to Rule 144 (or any successor rule promulgated thereafter by the Commission); and (D) any such Acquired Shares have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.
(f) Company Indemnification. Subscriber agrees to, severally and not jointly with any other accredited investor that is a party to the Other Subscription Agreements, indemnify and hold harmless the Company, its directors, officers, agents and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of the Company within the meaning of Rule 405 under the Securities Act, and each underwriter pursuant to the applicable underwriting agreement with such underwriter, and each broker, placement agent or sales agent to or through which Subscriber effects or executes the resale of any Acquired Shares (collectively, the Company Indemnified Parties), harmless against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) incurred by the Company directly that are caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any other registration statement which covers Registrable Securities of Subscriber (including, in each case, the prospectus contained therein) or any amendment thereof (including the prospectus contained therein) or caused by any omission or alleged omission to state therein of a material fact necessary in order to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made), not misleading, insofar as the same are caused by or contained in any information or affidavit so furnished in writing to the Company by Subscriber expressly for use therein. In no event shall the liability of any Subscriber be greater in amount than the dollar amount of the net proceeds received by such Subscriber upon the sale of the Acquired Shares giving rise to such indemnification obligation.
6. Termination. This Subscription Agreement shall terminate and be void and of no further force and effect, and all rights and obligations of the parties hereunder shall terminate without any further liability on the part of any party in respect thereof, upon the earliest to occur of (a) such date and time as the Merger Agreement is terminated in accordance with its terms, (b) upon the mutual written agreement of each of the parties hereto to terminate this Subscription Agreement, (c) if any of the conditions to the Subscription Closing set forth in Section 2 of this Subscription Agreement are not satisfied on or prior to the Subscription Closing and, as a result thereof, the transactions contemplated by this Subscription Agreement are not consummated at the Subscription Closing and (d)
11
March 16, 2021, provided, that nothing herein will relieve any party from liability for any willful breach hereof prior to the time of termination, and each party will be entitled to any remedies at law or in equity to recover losses, liabilities or damages arising from such breach. The Company shall promptly notify Subscriber of (i) the termination of the Merger Agreement (other than such a termination as a result of the Merger Closing thereunder) and (ii) any amendment to the Merger Agreement.
7. Trust Fund Waiver. Subscriber acknowledges that the Company is a blank check company with the powers and privileges to effect a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving the Company and one or more businesses. Subscriber further acknowledges that the Company established a Trust Fund for the benefit of the Company, as set forth in Section 3.24 (Trust Fund) of the Merger Agreement, to hold substantially all of the Companys assets consisting of the cash proceeds of the Companys initial public offering and private placements of its securities, and substantially all of those proceeds have been deposited in the Trust Fund for the benefit of the Company, its public stockholders and the underwriters of the Companys initial public offering. For and in consideration of the Company entering into this Subscription Agreement, the receipt and sufficiency of which are hereby acknowledged, Subscriber, on behalf of itself and its Affiliates and representatives, hereby irrevocably waives any and all right, title and interest, or any claim of any kind they have or may have in the future as a result of, or arising out of, this Subscription Agreement, in or to any monies held in the Trust Fund, and agrees not to seek recourse or make or bring any action, suit, claim or other proceeding against the Trust Fund as a result of, or arising out of, this Subscription Agreement, the transactions contemplated hereby or the Acquired Shares, regardless of whether such claim arises based on contract, tort, equity or any other theory of legal liability. Subscriber acknowledges and agrees that it shall not have any redemption rights with respect to the Acquired Shares pursuant to the Companys organizational documents in connection with the Transactions or any other business combination, any subsequent liquidation of the Trust Fund or the Company or otherwise. In the event Subscriber has any claim against the Company as a result of, or arising out of, this Subscription Agreement, the transactions contemplated hereby or the Acquired Shares, it shall pursue such claim solely against the Company and its assets outside the Trust Fund and not against the Trust Fund or any monies or other assets in the Trust Fund; provided, however, that nothing in this Section shall be deemed to limit Subscribers right, title, interest or claim to the Trust Fund by virtue of Subscribers record or beneficial ownership of Shares of the Company acquired by any means other than pursuant to this Subscription Agreement.
8. Companys Covenants. With a view to making available to Subscriber the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the Commission that may at any time permit Subscriber to sell securities of the Company to the public without registration, the Company agrees, until the Acquired Shares are sold by Subscriber, to:
(a) make and keep public information available, as those terms are understood and defined in Rule 144;
(b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144;
(c) in connection with any resale of the Acquired Shares by Subscriber pursuant to Rule 144, if the transfer restrictions as set forth on Exhibit A to this Subscription Agreement are no longer required by the Securities Act or any applicable state securities laws, upon request of Subscriber, the Company shall use its commercially reasonable efforts to cooperate with Subscriber to have such transfer restrictions removed, including providing authorization to the Transfer Agent.
9. Miscellaneous.
(a) Subscriber acknowledges that the Company and the Agent and the Company acknowledges that Subscriber, will rely on the acknowledgments, understandings, agreements, representations and warranties contained in this Subscription Agreement. Prior to the Subscription Closing, Subscriber and the Company agree to promptly notify the other party if it becomes aware that any of the acknowledgments, understandings, agreements, representations and warranties set forth herein are no longer accurate in all material respects.
12
(b) Each of the Company and Subscriber is entitled to rely upon this Subscription Agreement and is irrevocably authorized to produce this Subscription Agreement or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Disclosure of Subscribers name shall be subject to the notice provisions set forth in Section 9(l) of this Subscription Agreement.
(c) Neither this Subscription Agreement nor any rights that may accrue to Subscriber hereunder may be transferred or assigned (other than the transfer and assignment of (i) the Acquired Shares acquired hereunder, if any, subsequent to Subscribers purchase of such Acquired Shares at the Subscription Closing and in accordance with Subscribers representations and warranties herein; (ii) any or all of Subscribers rights and obligations under this Subscription Agreement to its Affiliates, subject to, if such transfer or assignment is prior to the Subscription Closing, such Affiliates executing a subscription agreement in substantially the same form as this Subscription Agreement, including with respect to the Subscription Amount and other terms and conditions; and (iii) after the Subscription Closing, the Subscribers rights pursuant to Section 8 and Section 9 of this Subscription Agreement to any purchaser of the Acquired Shares that receives the Acquired Shares without the removal of the transfer restrictions set forth on Exhibit A of this Subscription Agreement). Neither this Subscription Agreement nor any rights that may accrue to the Company hereunder may be transferred or assigned by the Company without the prior written consent of the Subscriber.
(d) All the agreements, representations and warranties made by each party hereto in this Subscription Agreement shall survive the Subscription Closing.
(e) The Company or the Agent may request from Subscriber such additional information as may be reasonably necessary to evaluate the eligibility of Subscriber to acquire the Acquired Shares and to comply with the Companys registration obligations under Section 5 hereof, and Subscriber shall take commercially reasonable efforts to provide such information as may be reasonably requested, to the extent readily available and to the extent consistent with its internal policies and procedures.
(f) This Subscription Agreement may not be modified, waived or terminated except by an instrument in writing, signed by the party against whom enforcement of such modification, waiver, or termination is sought.
(g) This Subscription Agreement and the documents and instruments and other agreements among the parties as contemplated by or referred to herein, including the Schedules and Exhibits hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings, both written and oral, between the parties and any of their respective Affiliates with respect to the transactions contemplated hereby and the subject matter hereof. This Subscription Agreement shall not confer any rights or remedies upon any person other than the parties hereto, and their respective successors and assigns; provided, that the parties acknowledge and agree that the Agent shall be a third-party beneficiary of the representations and warranties of Subscriber contained in Section 4 of this Subscription Agreement, and in each case with respect thereto shall be entitled to the rights and benefits hereunder.
(h) Subject to Section 9(c), and except as otherwise provided herein, this Subscription Agreement shall be binding upon, and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives, and permitted assigns, and the agreements, representations, warranties, covenants and acknowledgments contained herein shall be deemed to be made by, and be binding upon, such heirs, executors, administrators, successors, legal representatives and permitted assigns.
(i) If any provision of this Subscription Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Subscription Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Subscription Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
13
(j) This Subscription Agreement and each other document executed in connection with the transactions contemplated hereby, and the consummation thereof, may be executed in one or more counterparts, all of which shall be considered one and the same document and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. Delivery by electronic transmission to counsel for the other party of a counterpart executed by a party shall be deemed to meet the requirements of the previous sentence.
(k) Except as otherwise set forth herein, all fees and expenses incurred in connection with this Subscription Agreement and the transactions contemplated herein shall be paid by the party incurring such expenses.
(l) Notices. All notices and other communications among the parties hereto shall be in writing and shall be deemed to have been duly given (i) when delivered in person, (ii) when delivered after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, (iii) when delivered by FedEx or other nationally recognized overnight delivery service or (iv) when e-mailed during normal business hours (and otherwise as of the immediately following Business Day), addressed as follows:
(1) |
if to Subscriber, to such address or addresses set forth on the signature page hereto; |
(2) |
if to the Company, to: |
Pivotal Investment Corporation II
c/o Graubard Miller
The Chrysler Building
405 Lexington Avenue, 11th Floor
New York, New York 10174
Attention: Jonathan J. Ledecky
E-mail: jledecky@hockeyny.com
with copies to (which copies shall not constitute notice):
Morrison & Foerster LLP
250 West 55th Street
New York, New York 10019
Attention: Mitchell S. Presser / Omar E. Pringle
E-mail: mpresser@mofo.com / opringle@mofo.com
and
Graubard Miller
The Chrysler Building
405 Lexington Avenue, 11th Floor
New York, New York 10174
Attention: David Alan Miller / Jeffrey M. Gallant
E-mail: dmiller@graubard.com / jgallant@graubard.com
(m) This Subscription Agreement shall be governed by and construed in accordance with the internal law of the State of Delaware regardless of the law that might otherwise govern under applicable principles of conflicts of law thereof.
(n) Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Subscription Agreement were not performed in accordance with their specific terms or were otherwise breached. It
14
is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Each party agrees that it will not oppose the granting of specific performance and other equitable relief on the basis that the other parties have an adequate remedy at law or that an award of specific performance is not an appropriate remedy for any reason at law or equity. The parties acknowledge and agree that any party seeking an injunction to prevent breaches of this Subscription Agreement and to enforce specifically the terms and provisions of this Subscription Agreement in accordance with this Section shall not be required to provide any bond or other security in connection with any such injunction.
(o) Each of the parties hereto irrevocably consents to the exclusive jurisdiction and venue of the Delaware Chancery Court (or, if the Delaware Chancery Court shall be unavailable, any other court in the State of Delaware or, in the case of claims to which the federal courts have exclusive subject matter jurisdiction, any federal courts of the United States of America sitting in the State of Delaware) in connection with any matter based upon or arising out of this Subscription Agreement or the transactions contemplated hereby, agrees that process may be served upon them in any manner authorized by the laws of the State of Delaware for such persons and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction, venue and manner of service of process. Each party hereto hereby agrees not to commence any legal proceedings relating to or arising out of this Subscription Agreement or the transactions contemplated hereby in any jurisdiction or courts other than as provided herein. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(p) The Company shall, no later than 9:00 a.m., New York City time, on the first (1st) Business Day immediately following the date of this Subscription Agreement, issue one or more press releases and file with the Commission a Current Report on Form 8-K (collectively, the Disclosure Document) disclosing all material terms of the transactions contemplated hereby and by the Other Subscription Agreements, the Transactions and any other material, nonpublic information that the Company has provided to Subscriber at any time prior to the filing of the Disclosure Document. From and after the issuance of the Disclosure Document, to the Companys knowledge, Subscriber shall not be in possession of any material, non-public information received from the Company or any of its officers, directors or employees. Notwithstanding anything in this Subscription Agreement to the contrary, each party hereto acknowledges and agrees that without the prior written consent of the other party hereto it will not publicly make reference to such other party or any of its Affiliates (i) in connection with the Transactions or this Subscription Agreement or the Other Subscription Agreements or (ii) in any press release, filing with the Commission or any regulatory agency or trading market, promotional materials, media, or similar circumstances, except, in each case, (a) as required by law or regulation or at the request of the staff of the Commission or regulatory agency or under the regulations of the NYSE or (b) as required by the federal securities law, provided, that the Company shall use its commercially reasonable efforts to consult with Subscriber in the case of clauses (a) or (b) of this Section.
(q) Except as expressly set forth in this Subscription Agreement, no former, current or future equity holders, controlling persons, directors, officers, employees, agents, Affiliates, members, managers, general or limited partners, representatives or assignees of Subscriber or any former, current or future equity holder, controlling person, director, officer, employee, agent, Affiliate, member, manager, general or limited partner, representative or assignee of any of the foregoing, shall have any obligation to the Company or to any other person hereunder in connection with the transactions contemplated hereby.
[Signature pages follow]
15
IN WITNESS WHEREOF, each of the Company and Subscriber has executed or caused this Subscription Agreement to be executed by its duly authorized representative as of the date set forth below.
PIVOTAL INVESTMENT CORPORATION II | ||
By: |
|
|
Name: | ||
Title: |
[Signature Page to Subscription Agreement]
SUBSCRIBER: | ||
[] | ||
By: |
|
|
Name: | ||
Title: |
(Please print. Please indicate name and capacity of person signing above) | ||
Address: |
|
|
Facsimile: |
|
|
Email: |
|
|
Attention: |
|
|
EIN: |
|
Aggregate Number of Acquired Shares subscribed for:
Aggregate Subscription Amount: $
Name in which securities are to be registered (if different):
You must pay the Subscription Amount by wire transfer of United States dollars in immediately available funds to the account specified by the Company in the Closing Notice.
[Signature Page to Subscription Agreement]
SCHEDULE A
ELIGIBILITY REPRESENTATIONS OF SUBSCRIBER
This page should be completed by Subscriber
and constitutes a part of the Subscription Agreement.
A. QUALIFIED INSTITUTIONAL BUYER STATUS
(Please check the applicable subparagraphs):
☐ |
We are a qualified institutional buyer (as defined in Rule 144A under the Securities Act of 1933, as amended (the Securities Act)). |
B. ACCREDITED INVESTOR STATUS
(Please check the applicable subparagraphs):
☐ |
We/I are/am an accredited investor (within the meaning of Rule 501(a) under the Securities Act) or an entity in which all of the equity holders are accredited investors within the meaning of Rule 501(a) under the Securities Act, and have marked and initialed the appropriate box or boxes below indicating the provision(s) under which we/I qualify as an accredited investor. |
B. AFFILIATE STATUS
(Please check the applicable box)
SUBSCRIBER:
☐ |
is: |
☐ |
is not: |
an affiliate (as defined in Rule 144 under the Securities Act) of the Company or acting on behalf of an affiliate of the Company.
Rule 501(a), in relevant part, states that an accredited investor shall mean any person who comes within any of the below listed categories, or who the Company reasonably believes comes within any of the below listed categories, at the time of the sale of the securities to that person. Subscriber has indicated, by marking and initialing the appropriate box below, the provision(s) below which apply to Subscriber and under which Subscriber accordingly qualifies as an accredited investor.
☐ |
Any bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; |
☐ |
Any broker or dealer registered pursuant to Section 15 of the Exchange Act; |
☐ |
Any insurance company as defined in Section 2(a)(13) of the Securities Act; |
☐ |
Any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; |
☐ |
Any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; |
☐ |
Any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; |
☐ |
Any employee benefit plan within the meaning of the ERISA if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; |
☐ |
Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; |
☐ |
Any natural person whose individual net worth, or joint net worth with that persons spouse, exceeds $1,000,000, with net worth calculated as set forth by Rule 501(a)(5)(i) under the Securities Act; |
☐ |
Any natural person who has an individual income in excess of $200,000 in each of the two most recent years or joint income with that persons spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; |
☐ |
Any organization described in Section 501(c)(3) of the Code, corporation, or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; or |
☐ |
Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii). |
☐ |
We are an entity in which all of the equity owners are accredited investors. |
Exhibit A
NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE ACQUIRED SHARES OR ANY INTEREST OR PARTICIPATION THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (THE ACT) OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS AND, IN THE CASE OF CLAUSE (B), UNLESS, IF THE COMPANY REQUESTS, THE COMPANY RECEIVES AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.
Any transferee of the Acquired Shares or any interest therein, by its acceptance thereof, shall be deemed to have made the representations set forth in Section 4 of the Subscription Agreement (other than the representations set forth in Section 4(f), Section 4(j) and Section 4(p)). The Company shall not be required to register the transfer of any Acquired Shares to any transferee unless the Company receives from the proposed transferee a written instrument in form and substance reasonably satisfactory to the Company in which such transferee makes the representations and warranties set forth in Section 4 of the Subscription Agreement (other than the representations set forth in Section 4 Section 4(f), Section 4(j) and Section 4(p)) and, if the Company so requests, an opinion of counsel in form and substance reasonably satisfactory to the Company to the effect that registration under the Securities Act is not required in connection with such transfer; provided, that no opinion of counsel will be required for a pledge of the Acquired Shares if the Company receives a representation from the pledgor and pledgee that the pledge is a bona fide pledge and, in the event that the pledgee acquires the shares that are the subject of the pledge, the pledgee agrees to the representations and warranties set forth in Section 4 of the Subscription Agreement. The foregoing shall not apply to any sale of the Acquired Shares made in accordance with Rule 144; provided, that the transferor of the Acquired Shares provides to the Company such representations with respect to compliance as is reasonably requested by the Company
Exhibit 10.2
FORM OF SUPPORT AGREEMENT
This SUPPORT AGREEMENT (this Agreement), dated as of September 16, 2020, is entered into by and among Pivotal Investment Corporation II, a Delaware corporation (Parent), XL Hybrids, Inc., a Delaware corporation (the Company), and each undersigned stockholder (any such stockholder, the Stockholder and, together with Parent, each a Party and collectively, the Parties) of the Company. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Agreement and Plan of Reorganization, dated as of September 16, 2020 (as amended, supplemented or otherwise modified from time to time, the Merger Agreement), by and Parent, PIC II Merger Sub Corp., a Delaware corporation (Merger Sub), and the Company.
RECITALS
WHEREAS, as of the date of this Agreement, the Stockholder is the record holder, beneficial (as such term is defined in Rule 13d-3 under the Exchange Act, which meaning shall apply for all purposes of this Agreement whenever the term beneficial or beneficially is used) owner, and has full voting power over the number of shares of Company Stock (the Shares) set forth on the Stockholders signature page hereto;
WHEREAS, the Company, Parent and Merger Sub have entered into the Merger Agreement in the form attached hereto as Annex A, which provides for the merger of Merger Sub with and into the Company (the Merger), with the Company surviving the Merger, pursuant to the provisions of the DGCL;
WHEREAS, the Stockholder acknowledges that, as a condition and material inducement to Parent and Merger Subs willingness to enter into the Merger Agreement, Parent has required that concurrently with the execution and delivery of the Merger Agreement, certain Company Stockholders specified in the Merger Agreement enter into this Agreement, agreeing to, among other things, (1) vote all of the Stockholders Subject Shares (as defined below) in favor of the adoption of the Merger Agreement (which may be done pursuant to the execution and delivery of a written consent in the form attached hereto as Annex B-1) (each, a Written Merger Consent), (2) vote all of the Stockholders Subject Shares in favor of the termination of the Third Amended and Restated Stockholders Voting Agreement dated as of September 29, 2017, by and among the Company and the Stockholders (as defined therein), as amended by that certain Amendment to Third Amended and Restated Stockholders Voting Agreement, dated as of February 6, 2020 (the Voting Agreement), the Third Amended and Restated Investor Rights Agreement dated as of September 29, 2017, by and among the Company and the Investors (as defined therein) (the Rights Agreement) and the Third Amended and Restated Right of First Refusal and Co-Sale Agreement, dated as of September 29, 2017 by and among the Company, the Investors (as defined therein) and the Common Holders (as defined therein) (the Co-Sale Agreement and together with the Voting Agreement and Rights Agreement, the Financing Documents) (which may be done pursuant to the execution and delivery of a written consent in the form attached hereto as Annex B-2) (each, a Written Termination Consent and, together with the Written Merger Consent, the Written Consents) and (3) to the extent the Stockholder is a holder of Series D Preferred Stock, deliver a signature to the Request for Conversion, and, in order to induce Parent and Merger Sub to enter into the Merger Agreement and consummate the Merger and the other transactions contemplated by the Merger Agreement, the Stockholder is willing to enter into this Agreement;
WHEREAS, Parent desires that the Stockholder agree, and the Stockholder is willing to agree, subject to the limitations herein, (1) not to Transfer (as defined below) any of its Shares, (2) to execute and deliver the Written Consents and otherwise vote its Subject Shares (or cause its Subject Shares to be voted) in a manner so as to facilitate consummation of the Merger and the other transactions contemplated by the Merger Agreement, and (3) to undertake certain additional obligations pursuant to this Agreement;
WHEREAS, to the extent the Stockholder is a holder of Series D Preferred Stock, Parent desires that the Stockholder agree, and the Stockholder is willing to agree, to deliver a signature to the Request for Conversion;
WHEREAS, to the extent the Stockholder is a holder of any Company Convertible Note, Parent desires that the Stockholder agree, and the Stockholder is willing to agree, that the unpaid principal and any unpaid and accrued interest on such Company Convertible Note shall be treated as set forth in Schedule 1.10(c) to the Merger Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement, the Stockholder is executing and delivering the Lock-Up Agreement in the form attached hereto as Annex D; and
WHEREAS, Parent and the Stockholder desire to make certain representations, warranties, covenants and agreements in connection with this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements set forth in this Agreement, the Parties agree as follows:
ARTICLE 1
VOTING AND TRANSFER OF SHARES
Section 1.01 Voting.
(a) The Stockholder irrevocably and unconditionally agrees, during the period beginning on the date of this Agreement and ending on the Expiration Date (the Applicable Period), at each meeting of the Company Stockholders (a Meeting) and at each adjournment or postponement thereof, and in connection with each action or approval by consent in writing of the Company Stockholders (a Consent Solicitation), which written consent shall be delivered promptly, and in any event within twenty four (24) hours, after the Company requests such delivery, to cause to be present in person or represented by proxy and to vote or cause to be voted (or express consent or dissent in writing, as applicable) that number of Shares set forth on the Stockholders signature page hereto and any additional Shares that are hereafter held of record or beneficially owned by the Stockholder (collectively, the Subject Shares) that are entitled to vote (or express consent or dissent in writing, as applicable), in each case as follows:
(i) in favor of any proposal for Company Stockholders to adopt the Merger Agreement (including by executing and delivering, and not revoking or attempting or purporting to revoke, the Written Consents) and approving any other matters necessary for consummation of the transactions contemplated by the Merger Agreement, including the Merger;
(ii) in favor of any proposal to adjourn a Meeting at which there is a proposal for Company Stockholders to adopt the Merger Agreement to a later date if there are not sufficient votes to adopt the Merger Agreement or if there are not sufficient Shares present in person or represented by proxy at such Meeting to constitute a quorum;
(iii) against any proposal, offer or submission with respect to a competing transaction described in Section 4.3 (No Solicitation) of the Merger Agreement (a Competing Transaction) or the adoption of any agreement to enter into a Competing Transaction;
(iv) against any proposal for any amendment or modification of the Companys Charter Documents that would change the voting rights of any Shares or the number of votes required to approval any proposal, including the vote required to adopt the Merger Agreement; and
(v) against any action, transaction, agreement or proposal that would, or would reasonably be expected to (A) result in a breach of any representation, warranty, covenant or any other obligation or agreement of the Company under the Merger Agreement or any agreement ancillary thereto or the Stockholder under this Agreement or any of the conditions to the consummation of the Merger under the Merger Agreement not being fulfilled on a timely basis, (B) prevent, delay or impair consummation of the Merger or dilute, in any material respect, the benefit of the Merger to Parent, or (C) facilitate any proposal, offer or submission with respect to a Competing Transaction or any agreement to enter into a Competing Transaction.
(b) To the extent the Stockholder is a holder of Series D Preferred Stock, the Stockholder irrevocably and unconditionally agrees to deliver to the Company its signature to the Request for Conversion set forth on Annex E hereto and to release such signature prior to the Closing when and as requested by the Company.
2
(c) To the extent the Stockholder is a holder of any Company Convertible Note, the Stockholder irrevocably and unconditionally agrees (i) that the unpaid principal and any unpaid and accrued interest on such Company Convertible Note shall be treated as set forth in Schedule 1.10(c) to the Merger and (ii) to deliver to the Company its signature to the documentation necessary to effect such treatment and to release such signature prior to the Closing when and as requested by the Company.
(d) Any vote required to be cast or consent or dissent in writing required to be expressed pursuant to this Section 1.01 shall be cast or expressed in accordance with the applicable procedures relating thereto so as to ensure that it is duly counted for purposes of determining that a quorum is present (if applicable) and for purposes of recording the results of that vote or Consent Solicitation. For the avoidance of doubt, nothing contained herein requires the Stockholder (or entitles any proxy of the Stockholder) to convert, exercise or exchange any options, warrants or convertible securities in order to obtain any underlying Shares.
(e) The Stockholder agrees not to enter into any commitment, agreement, understanding or similar arrangement with any Person to vote or give voting instructions or express consent or dissent in writing in any manner inconsistent with the terms of this Section 1.01.
Section 1.02 Proxy and Power of Attorney. The Stockholder, with respect to the Subject Shares, irrevocably grants a proxy appointing the Company and any designee of the Company, and each of them individually and with full power of substitution, as the Stockholders true and lawful attorney-in-fact and proxy, for and in the Stockholders name, place and stead, to be counted as represented by proxy and vote, at any time during the Applicable Period, each Subject Share as the Stockholders proxy, at every Meeting (including at any adjournment or postponement thereof) and to execute and deliver on behalf of the Stockholder any written expression of consent or dissent relating to the Subject Shares and the Company Convertible Notes or the rights of a holder thereof in connection with the matters set forth in Section 1.01 hereof in order to cause the Stockholder to perform the covenants set forth in this Agreement. The proxy described in this Section 1.02, if it becomes effective, is limited solely to the voting of Subject Shares or taking actions with respect to the Company Convertible Notes (or, in each case, expressing consent or dissent in writing with respect to such Subject Shares or Company Convertible Notes) solely in order to cause the Stockholder to perform the covenants set forth in this Agreement. The Stockholder hereby affirms that the irrevocable proxy set forth in this Section 1.02, if it becomes effective, is given in connection with the execution of the Merger Agreement and such irrevocable proxy is given to secure the performance of the obligations of the Stockholder under this Agreement. The proxy described in this Section 1.02, if it becomes effective, is coupled with an interest, including for the purposes of Section 212 of the DGCL, revokes all prior proxies granted by the Stockholder with respect to the Subject Shares and the Company Convertible Notes and is irrevocable, provided that this proxy shall automatically terminate at the Expiration Date. The power of attorney granted by the Stockholder, if it becomes effective, is a durable power of attorney and shall survive the bankruptcy, dissolution, death or incapacity of the Stockholder and shall be binding upon the heirs, estate, executors, personal representatives, successors, and assigns of the Stockholder and any other holder of record of the Stockholders Subject Shares as to which this proxy has been granted (including any transferee of any such Subject Shares). For Subject Shares or Company Convertible Notes as to which the Stockholder is the beneficial owner but not the holder of record, the Stockholder shall cause any holder of record of such Subject Shares or Company Convertible Notes to grant to the Company a proxy to the same effect as that described in this Section 1.02.
Section 1.03 No Transfers. During the Applicable Period, the Stockholder shall not, directly or indirectly, in one or more transactions, whether by merger, consolidation, division, operation of law, or otherwise (including by succession or otherwise by operation of applicable Legal Requirements): (a) sell, convey, assign, transfer, exchange, pledge, hypothecate or otherwise encumber or dispose of any Subject Shares (or any right, title or interest therein) or any rights to acquire any securities or equity interests of the Company; (b) deposit any Subject Shares or any rights to acquire any securities or equity interests of the Company into a voting trust or enter into a voting agreement or any other arrangement with respect to any Subject Shares or any rights to acquire any securities or equity interests of the Company or, except as otherwise provided in Section 1.02, grant or purport to grant any proxy or power of attorney with respect thereto; (c) enter into any contract, option, call or other arrangement or undertaking, whether or not in writing, with respect to the direct or indirect sale, conveyance, assignment, transfer, exchange, pledge, hypothecation or other encumbrance or disposition, or limitation on the voting rights, of any Subject Shares (or any right, title or interest therein) or any rights to acquire any securities or equity interests of the Company; (d) otherwise grant, permit or suffer the creation of any Liens on any Subject Shares (other than
3
applicable restrictions on transfer under U.S. state or federal securities or blue sky applicable Legal Requirements) or (e) commit or agree to take any of the foregoing actions, provide any consent or approval of any matter that would result in any of the foregoing actions, or discuss, negotiate or make an offer or enter into a commitment, agreement, understanding or similar arrangement to take any of the foregoing actions (any action described in the immediately preceding sentence, a Transfer); provided, however, that the foregoing shall not prohibit Transfers (i) between the Stockholder and any Affiliate of the Stockholder, (ii) if the Stockholder is an individual, to a trust for the benefit of the Stockholder or to any member of a Stockholders immediate family or a trust for the benefit of such immediate family member or (iii) if the Stockholder is an individual, by will, other testamentary document or under the laws of intestacy upon the death of Stockholder, in each case, so long as, prior to and as a condition to the effectiveness of any such Transfer, such Affiliate or transferee executes and delivers to Parent a joinder to this Agreement in the form attached hereto as Annex C. Any Transfer or action in violation of this Section 1.03 shall be void ab initio. If any involuntary Transfer of any of Subject Shares occurs, the transferee (and all transferees and subsequent transferees of such transferee) shall take and hold such Subject Shares subject to all of the restrictions, liabilities and rights under this Agreement, which shall continue in full force and effect during the Applicable Period.
Section 1.04 Stop Transfer. The Stockholder shall not request that the Company register any transfer of any certificate or book-entry Share or other uncertificated interest representing any Subject Shares made in violation of the restrictions set forth in Section 1.02 during the Applicable Period and hereby authorizes and instructs the Company to instruct its transfer agent to enter a stop transfer order with respect to all of the Subject Shares, subject to the provisions hereof; provided, that any such stop transfer order will immediately be withdrawn and terminated by the Company following the termination of this Agreement.
Section 1.05 Waiver of Appraisal Rights. The Stockholder hereby agrees not to assert, exercise or perfect, directly or indirectly, and irrevocably and unconditionally waives, any appraisal rights (including under Section 262 of the DGCL) with respect to the Merger and any rights to dissent with respect to the Merger (collectively, Appraisal Rights).
Section 1.06 Release of Claims.
(a) Subject to and upon the consummation of the Merger and the receipt of the Per Share Merger Consideration, the Stockholder, and, if the Stockholder is a legal entity, together with the Stockholders officers, directors, stockholders, subsidiaries and Affiliates, and each of their respective heirs, representatives, successors and assigns (such persons, the Releasors), hereby fully and unconditionally (subject to the receipt of the amounts specified in this paragraph) releases, acquits and forever discharges, to the fullest extent permitted by law, each of the Parent, Merger Sub, the Company, each of their subsidiaries and affiliates and their respective past, present or future officers, directors, employees, counsel and agents, and all Company Stockholders prior to Closing (such persons, the Releasees), from and against any and all liabilities, actions, causes of action, claims, demands, damages, judgments, debts, dues and suits of every kind, nature and description whatsoever, whether known or unknown, asserted or unasserted, suspected or unsuspected, absolute or contingent, unmatured or inchoate, both at law and in equity, which the Stockholder or any of the Releasors ever had, now has or may hereafter have against any of the Releasees, on or by reason of any matter, cause or thing whatsoever that arose prior to the Closing; provided, however, that nothing herein shall be deemed to release (a) any right of the Stockholder to receive the Per Share Merger Consideration pursuant to the Merger Agreement in accordance with the terms thereof, (b) any liabilities of a Releasee in connection with any future transactions between the Parties that are not related to the Merger Agreement or the transactions contemplated thereby, (c) any employment compensation or benefits matter affecting any Releasor in his or her capacity as a director, manager, officer or employee of the Company, its Affiliates or its Subsidiaries and (d) any right of Releasor as an indemnitee, and pursuant to the Merger Agreement.
(b) The Stockholder represents that as to each and every claim released hereunder, the Stockholder has received the advice of legal counsel with regard to the releases contained herein, and having been so advised, specifically waives the benefit of the provisions of Section 1542 of the Civil Code of California which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
4
The Stockholder also specifically waives any right or benefits that it has or may have under any similar provision of the statutory or non-statutory law of any other jurisdiction. The Stockholder acknowledges that the Releasors may hereafter discover facts different from or in addition to the facts the Releasors now know or believe to be true with respect to the subject matter of this Agreement; however, the Releasors intend that the general releases herein given shall be and remain in full force and effect, notwithstanding the discovery or existence of any such different or additional facts.
Section 1.07 Public Announcements; Filings; Disclosures.
(a) The Stockholder (and the Stockholders controlled Affiliates) shall not issue any press release or make any other public announcement or public statement (a Public Communication) with respect to this Agreement, the Merger Agreement, or the transactions contemplated hereby or thereby, without the prior written consent of Parent (which consent may be withheld in Parents sole discretion), except as required by applicable Legal Requirements, in which case the Stockholder shall use its reasonable best efforts to provide Parent and Parents legal counsel with a reasonable opportunity to review and comment on such Public Communication in advance of its issuance and shall give reasonable and good faith consideration to any such comments.
(b) The Stockholder hereby consents to and authorizes the Company and Parent to publish and disclose in any Public Communication or in any disclosure required by the SEC and in the Proxy Statement/Prospectus prepared by Parent and filed with the SEC relating to the Special Meeting the Stockholders identity and ownership of Subject Shares and the Stockholders obligations under this Agreement (the Stockholder Information), consents to the filing of this Agreement to the extent required by applicable Legal Requirements to be filed with the SEC or any regulatory authority relating to the Merger, and agrees to cooperate with Parent in connection with such filings, including providing Stockholder Information reasonably requested by Parent.
Section 1.08 Non-Solicitation. The Stockholder acknowledges that the Stockholder has read Section 4.3 of the Merger Agreement. In addition, the Stockholder agrees that the restrictions imposed on the Company pursuant to Section 4.03 of the Merger Agreement shall be binding upon the Stockholder mutatis mutandis and further agrees not to take (and agrees to cause its Affiliates and its and their Representatives not to take), directly or indirectly, any action that would violate Section 4.3 of the Merger Agreement if such action were taken by the Company.
Section 1.09 No Agreement as Director or Officer. The Stockholder is entering into this Agreement solely in the Stockholders capacity as record or beneficial owner of Subject Shares and nothing herein is intended to or shall limit or affect any actions taken by the Stockholder or any employee, officer, director (or person performing similar functions), partner or other Affiliate (including, for this purpose, any appointee or representative of the Stockholder to the board of directors of the Company) of the Stockholder, solely in his or her capacity as a director or officer of the Company (or a Subsidiary of the Company) or other fiduciary capacity for the Company Stockholders.
Section 1.10 Acquisition of Additional Shares. The Stockholder shall promptly notify (and in any event within two Business Days) Parent of the number of any additional Shares with respect to which the Stockholder becomes the holder of record or acquires beneficial ownership, if any, after the execution of this Agreement and before the Expiration Date, which Shares shall, for the avoidance of doubt, automatically become Subject Shares in accordance with Section 1.01.
Section 1.11 No Litigation. The Stockholder hereby agrees not to commence, maintain or participate in, or facilitate, assist or encourage, and agrees to take all actions necessary to opt out of any class in any class action with respect to, any claim, derivative or otherwise, suit, proceeding or cause of action, in law or in equity, in any court or before any Governmental Entity (a) challenging the validity of, or seeking to enjoin or delay the operation of, any provision of this Agreement or the Merger Agreement or the transactions contemplated hereby or thereby (including any claim seeking to enjoin or delay the consummation of the Merger), (b) alleging a breach of any fiduciary duty of any Person or alleging that any Person aided or abetted any breach of any fiduciary duty of any Person in connection with this Agreement or the Merger Agreement or the transactions contemplated thereby or
5
thereby, (c) seeking Appraisal Rights in connection with the Merger or (d) otherwise relating to the Merger Agreement, this Agreement or the Merger or other transactions contemplated hereby or thereby. Notwithstanding the foregoing, nothing herein shall be deemed to prohibit the Stockholder from enforcing the Stockholders rights under this Agreement or the Stockholders right to receive the Per Share Merger Consideration.
Section 1.12 Further Assurances. The Stockholder shall execute and deliver, or cause to be executed and delivered, such further certificates, instruments and other documents and to take such further actions as Parent may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement and the Merger Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent as follows:
Section 2.01 Organization; Authorization. In the event the Stockholder is an individual, the Stockholder has full power, right and legal capacity to execute and deliver this Agreement, to grant the proxy described in Section 1.02, and to perform his or her obligations hereunder. In the event the Stockholder is a legal entity, (a) the Stockholder is a legal entity duly organized, validly existing and in good standing under the applicable Legal Requirements of the Stockholders jurisdiction of its organization, (b) the Stockholder has all requisite corporate or similar power and authority and has taken all corporate or similar action necessary in order to execute and deliver this Agreement, to grant the proxy and power of attorney described in Section 1.02, to perform the Stockholders obligations under this Agreement and consummate the transactions contemplated by this Agreement, and (c) no approval by any holder of the Stockholders equity interests is necessary to approve this Agreement. This Agreement has been duly authorized, executed and delivered by the Stockholder and, in the event the Stockholder is an individual and is married and any of the Stockholders Subject Shares constitute community property or spousal approval is otherwise required in order for this Agreement to be a valid and binding obligation of the Stockholder, this Agreement has been duly authorized, executed and delivered by or on behalf of the Stockholders spouse, and this Agreement constitutes a valid and binding agreement of the Stockholder enforceable against the Stockholder in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors rights generally and by general principles of equity.
Section 2.02 Governmental Filings; No Violations; Certain Contracts. The execution, delivery and performance by the Stockholder of this Agreement and the consummation by the Stockholder of the transactions contemplated hereby do not and will not (i) conflict with or violate any United States or non-United States statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order applicable to the Stockholder, (ii) require any consent, approval or authorization of, declaration, filing or registration with, or notice to, any person or entity, (iii) result in the creation of any encumbrance on any Shares (other than under this Agreement) or (iv) conflict with or result in a breach of or constitute a default under any provision of the Stockholders governing documents or any agreement (including any voting agreement) to which the Stockholder is a party.
Section 2.03 Litigation. As of the date of this Agreement, except as would not, individually or in the aggregate, reasonably be expected to prevent, delay or impair the ability of the Stockholder perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement (a) there is no action, suit, demand, complaint, litigation, review, audit, hearing, arbitration, proceeding, investigation or similar dispute by or before any Governmental Entity or otherwise pending or, to the knowledge of the Stockholder, threatened against the Stockholder or any of its Affiliates and (b) neither the Stockholder nor any of its Affiliates is a party to or subject to the provisions of any judgment, order, writ, injunction, decree or award of any Governmental Entity.
Section 2.04 Ownership of Company Stock; Voting Power. The Stockholders signature page hereto correctly sets forth the number of the Stockholders Subject Shares as of the date of this Agreement and, other than such Subject Shares, as of the date of this Agreement, there are no Company securities (or any securities convertible, exercisable or exchangeable for, or rights to purchase or acquire, any Company securities) held of record or beneficially owned by the Stockholder or in respect of which the Stockholder has full voting power. The Stockholder has not made any Transfer of Subject Shares and the Stockholder is the record holder and beneficial
6
owner of all of its Subject Shares and has, and shall have throughout the Applicable Period, good and valid title to the Subject Shares, full voting power and power of disposition with respect to all such Subject Shares free and clear of any liens, security interests, claims, pledges, proxies, options, right of first refusals, voting restrictions, limitations on dispositions, voting trusts or agreements, options or any other encumbrances or restrictions on title, transfer or exercise of any rights of a stockholder in respect of such Subject Shares (collectively, Encumbrances), except for any such Encumbrance that (a) may be imposed pursuant to (i) this Agreement, the Merger Agreement and the transactions contemplated hereby and thereby, (ii) any applicable restrictions on transfer under U.S. state or federal securities or blue sky applicable Legal Requirements or (iii) the Companys Charter Documents or the terms of any customary custody or similar agreement applicable to Subject Shares held in brokerage accounts or (b) would not, individually or in the aggregate, reasonably be expected to prevent, delay or impair the ability of the Stockholder perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement. No Person has any contractual or other right or obligation to purchase or otherwise acquire any of the Stockholders Subject Shares other than pursuant to the Merger Agreement or as set forth in the Companys Charter Documents.
Section 2.05 Reliance. The Stockholder understands and acknowledges that Parent and Merger Sub are relying upon the Stockholders execution, delivery and performance of this Agreement and upon the representations and warranties and covenants of the Stockholder contained in this Agreement.
Section 2.06 Finders Fees. No agent, broker, investment banker, finder or other intermediary is or shall be entitled to any fee or commission or reimbursement of expenses from Parent, Merger Sub or the Company or any of their respective Affiliates in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Stockholder.
Section 2.07 Proxy Statement. None of the information supplied or to be supplied by the Stockholder for inclusion or incorporation by reference in the Proxy Statement/Prospectus and any amendment or supplement thereto will, at the date of mailing to the Parent Stockholders and at the time of the Special Meeting contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
Section 2.08 Other Agreements. The Stockholder has not taken or permitted any action that would or would reasonably be expected to (a) constitute or result in a breach hereof, (b) make any representation or warranty of the Stockholder set forth herein untrue or inaccurate or (c) otherwise restrict, limit or interfere with the performance of this Agreement, the Merger Agreement or the transactions contemplated by this Agreement or the Merger Agreement.
Section 2.09 Stockholder Has Adequate Information. The Stockholder acknowledges that the Stockholder is a sophisticated investor with respect to the Stockholders Subject Shares and has adequate information concerning the business and financial condition of the Company and Parent to make an informed decision regarding the transactions contemplated by this Agreement and has, independently and without reliance upon Parent, the Company or any Affiliate of Parent and the Company, and based on such information as the Stockholder has deemed appropriate, made the Stockholders own analysis and decision to enter into this Agreement. The Stockholder acknowledges that the Stockholder has received and reviewed this Agreement and the Merger Agreement and has had the opportunity to seek independent legal advice prior to executing this Agreement.
Section 2.10 No Other Representations or Warranties. Except for the representations and warranties made by the Stockholder in this Article 2, neither the Stockholder nor any other Person makes any express or implied representation or warranty to Parent in connection with this Agreement or the transactions contemplated by this Agreement, and the Stockholder expressly disclaims any such other representations or warranties.
7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Stockholder as follows:
Section 3.01 Organization. Parent is a legal entity duly organized, validly existing and in good standing under the laws of the State of Delaware.
Section 3.02 Corporate Authority. Parent has all requisite corporate power and authority and has taken all corporate or similar action necessary in order to execute and deliver this Agreement, to perform its obligations under this Agreement and to consummate the transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by Parent and constitutes a valid and binding agreement of Parent enforceable against Parent in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors rights generally and by general principles of equity.
Section 3.03 No Other Representations or Warranties. Except for the representations and warranties made by Parent in this Article 3, neither Parent nor any other Person makes any express or implied representation or warranty to the Stockholder in connection with this Agreement or the transactions contemplated by this Agreement, and the Stockholder expressly disclaims reliance upon, and the Stockholder acknowledges and agrees that Parent expressly disclaims, any such other representations or warranties.
ARTICLE 4
GENERAL PROVISIONS
Section 4.01 Termination. This Agreement, including the voting agreements contemplated by this Agreement and any proxy granted hereunder if such proxy becomes effective, shall automatically be terminated at the earliest to occur of: (a) the Effective Time; (b) the termination of the Merger Agreement pursuant to Article VII thereof; or (c) the effective date of a written agreement duly executed and delivered by Parent and the Stockholder terminating this Agreement; (the date and time at which the earlier of clause (a), (b), and (c) occurs being, the Expiration Date); provided, however, that in the case of any termination pursuant to clause (a), Section 1.05 (Waiver of Appraisal Rights), Section 1.06 (Release of Claims), Section 1.07 (Public Announcements; Filings; Disclosure), Section 1.11 (No Litigation) and Section 1.12 (Further Assurances) and this Article 4 shall survive such termination. Nothing set forth in this Section 4.01 or elsewhere in this Agreement shall relieve any Party of any liability or damages to any other Party for any breach of this Agreement by such Party prior to such termination or fraud in connection with, arising out of or otherwise related to the representations and warranties set forth in this Agreement or any instrument or other document delivered pursuant to this Agreement.
Section 4.02 Notices. All notices and other communications between the Parties shall be in writing and shall be deemed to have been duly given (i) when delivered in person, (ii) when delivered after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, (iii) when delivered by FedEx or other nationally recognized overnight delivery service or (iv) when e-mailed during normal business hours (and otherwise as of the immediately following Business Day), addressed as follows:
If to Parent:
Pivotal Investment Corporation II
c/o Graubard Miller
The Chrysler Building
405 Lexington Avenue, 11th Floor
New York, New York 10174
Attention: Jonathan J. Ledecky
E-mail: jledecky@hockeyny.com
8
with a copy to (which shall not constitute notice):
Graubard Miller
The Chrysler Building
405 Lexington Avenue, 11th Floor
New York, New York 10174
Attention: David Alan Miller / Jeffrey M. Gallant
E-mail: dmiller@graubard.com / jgallant@graubard.com
and:
Morrison & Foerster LLP
250 West 55th Street
New York, New York 10019
Attention: Mitchell S. Presser / Omar E. Pringle
E-mail: mpresser@mofo.com / opringle@mofo.com
and:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attention: Sahir Surmeli / Thomas Burton III
E-mail: SSurmeli@mintz.com / TBurton@mintz.com
If to the Stockholder, to the Stockholders address set forth on a signature page hereto.
Section 4.03 Expenses. Except as otherwise provided herein or in the Merger Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such costs and expenses, whether or not the Merger is consummated.
Section 4.04 Counterparts; Electronic Delivery. This Agreement and each other document executed in connection with the transactions contemplated hereby, and the consummation thereof, may be executed in one or more counterparts, all of which shall be considered one and the same document and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that all parties need not sign the same counterpart. Delivery by electronic transmission to counsel for the other Party of a counterpart executed by a Party shall be deemed to meet the requirements of the previous sentence.
Section 4.05 Entire Agreement; Third Party Beneficiaries. This Agreement and the documents and instruments and other agreements between the Parties as contemplated by or referred to herein, including the annexes hereto (a) constitute the entire agreement between the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, between the Parties and any of their respective Affiliates with respect to the transactions contemplated hereby; and (b) are not intended to confer upon any other person any rights or remedies hereunder (except as specifically provided in this Agreement. No representations, warranties, covenants, understandings, agreements, oral or otherwise, relating to the transactions contemplated by this Agreement exist between the parties except as expressly set forth or referenced in this Agreement and the Merger Agreement.
Section 4.06 Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The Parties further agree to modify this Agreement to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
9
Section 4.07 Other Remedies; Specific Performance. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy. The Parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Each Party agrees that it will not oppose the granting of specific performance and other equitable relief on the basis that the other Party has an adequate remedy at law or that an award of specific performance is not an appropriate remedy for any reason at law or equity. The Parties acknowledge and agree that any Party seeking an injunction to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section shall not be required to provide any bond or other security in connection with any such injunction.
Section 4.08 Governing Law. This Agreement shall be governed by and construed in accordance with the internal law of the State of Delaware regardless of the law that might otherwise govern under applicable principles of conflicts of law thereof.
Section 4.09 Consent to Jurisdiction; WAIVER OF TRIAL BY JURY. Each of the Parties hereto irrevocably consents to the exclusive jurisdiction and venue of the Delaware Chancery Court (or, if the Delaware Chancery Court shall be unavailable, any other court in the State of Delaware or, in the case of claims to which the federal courts have exclusive subject matter jurisdiction, any federal courts of the United States of America sitting in the State of Delaware) in connection with any matter based upon or arising out of this Agreement or the transactions contemplated hereby, agrees that process may be served upon them in any manner authorized by the laws of the State of Delaware for such persons and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction, venue and manner of service of process. Each Party hereto hereby agrees not to commence any legal proceedings relating to or arising out of this Agreement or the transactions contemplated hereby in any jurisdiction or courts other than as provided herein. Each of the Parties hereto (i) certifies that no representative, agent or attorney of any other Party has represented, expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce that foregoing waiver and (ii) acknowledges that it and the other Party hereto have been induced to enter into this Agreement and the transactions contemplated hereby, as applicable, by, among other things, the mutual waivers and certifications in this Section. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 4.10 Assignment. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party. Subject to the first sentence of this Section, this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and permitted assigns.
Section 4.11 Amendment. This Agreement may be amended by the parties hereto at any time only by execution of an instrument in writing signed on behalf of each of the Parties.
[Signature Page Follows]
10
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
PIVOTAL INVESTMENT CORPORATION II | ||
By: |
|
|
Name: | ||
Title: | ||
XL HYBRIDS, INC. | ||
By: |
|
|
Name: | ||
Title: |
[Signature Page to Support Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
STOCKHOLDER
Signature of Stockholder |
Name of Person Signing for the Stockholder (If signing in a representative capacity for a corporation, trust, partnership or other entity) |
|||
Printed Name of Stockholder |
Title of Person Signing for the Stockholder (If signing in a representative capacity for a corporation, trust, partnership or other entity) |
|||
[Signature of Stockholders Spouse] |
[Printed Name of Stockholders Spouse] |
Address of Stockholder:
Series |
Shares Owned Beneficially |
Shares Held of Record |
Shares Over Which the
Full Voting Power |
|||
Common | [] | [] | [] | |||
Series A | [] | [] | [] | |||
Series B | [] | [] | [] | |||
Series C | [] | [] | [] | |||
Series D | [] | [] | [] |
Note: Please indicate class, series and subseries of Shares, as applicable.
[Signature Page to Support Agreement]
Annex A
ANNEX A
MERGER AGREEMENT
[attached]
A-1
Annex B
ANNEX B-1
ACTION
BY WRITTEN CONSENT
OF THE STOCKHOLDERS
OF
XL HYBRIDS, INC.
APPROVING THE MERGER
[attached]
B-1
Annex B
ANNEX B-2
ACTION
BY WRITTEN CONSENT
OF THE STOCKHOLDERS
OF
XL HYBRIDS, INC.
APPROVING THE TERMINATION OF
THE FINANCING DOCUMENTS
[attached]
B-2
Annex C
ANNEX C
FORM OF JOINDER
This Joinder Agreement (this Joinder Agreement) is made as of the date written below by the undersigned (the Joining Party) in accordance with the Support Agreement dated as of [] [], 2020 (as amended, supplemented or otherwise modified from time to time, the Support Agreement) by and between Parent and the Company Stockholder that is party thereto. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Support Agreement.
The Joining Party hereby acknowledges, agrees and confirms that, by its execution of this Joinder Agreement, the Joining Party shall be deemed to be a party to, and a Stockholder under, the Support Agreement as of the date hereof and shall have all of the rights and obligations of a Stockholder as if it had executed the Support Agreement. The Joining Party hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Support Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Joinder Agreement as of the date written below.
Date: [][], 20[] | ||||
By: |
|
|||
Name: | ||||
Title: | ||||
Address for Notices: | ||||
With copies to: |
C-1
Annex D
ANNEX D
FORM OF LOCK-UP AGREEMENT
[attached]
D-1
Annex E
ANNEX E
SIGNATURE PAGE TO REQUEST FOR CONVERSION
[attached]
E-1
Exhibit 99.1
XL FLEET, A COMMERCIAL VEHICLE ELECTRIFICATION SOLUTIONS LEADER, TO LIST ON NYSE THROUGH
MERGER WITH PIVOTAL INVESTMENT CORPORATION II
|
XL is a leading provider of electrified powertrain solutions for U.S. and Canadian commercial fleet vehicles built by Ford, Chevrolet, GMC, and Isuzu |
|
Thousands of XL units already on the road and over 130 million miles driven by its more than 200 customers, including FedEx, The Coca-Cola Company, PepsiCo, Verizon, the City of Boston, Seattle Fire Department, Yale University, and Harvard University |
|
XL has strong demand momentum with a $220 million 12-month sales pipeline and forecasted revenue of over $21 million in 2020 and $75 million in 2021 |
|
Pro forma implied enterprise value of the combined company of $1 billion; combined company is expected to have approximately $350 million in net cash at closing, which includes an upsized $150 million fully committed PIPE backed by new and existing strategic and institutional investors |
|
All XL shareholders, including Constellation Technology Ventures, and management will retain 100% of their equity in the combined company |
BOSTON & NEW YORK September 18, 2020 XL Fleet (XL or the Company), a leader in vehicle electrification solutions for commercial and municipal fleets, and Pivotal Investment Corporation II (NYSE: PIC) (Pivotal), a publicly traded special purpose acquisition company, today announced that they have entered into a definitive merger agreement. Upon closing, the combined company will be named XL Fleet and is expected to remain listed on the New York Stock Exchange under a new ticker symbol, XL, with an anticipated implied enterprise value of approximately $1 billion and no material debt expected to be outstanding.
XL is a high-growth industry leader in providing fleet electrification solutions, with proven, proprietary technology and electrified drive systems that work seamlessly across a wide range of vehicle classes and types. XL has become a trusted brand for over 200 of the largest commercial and municipal fleets in North America, with more than 3,200 XL systems deployed and over 130 million miles driven by customers to date. XLs customer base includes FedEx, The Coca-Cola Company, PepsiCo, Verizon, the City of Boston, Seattle Fire Department, Yale University, and Harvard University, among other blue-chip companies, municipalities, and institutions.
The Company has developed a flexible proprietary electrification powertrain platform that transforms traditional fossil fuel-powered fleet vehicles into hybrid and plug-in hybrid electric vehicles as they are manufactured. XL systems are currently available on a wide variety of Class 2-6 vehicles manufactured by Ford, Chevrolet, GMC, and Isuzu, and the Company is on track to provide its systems in Class 7-8 vehicles in 2022.
In addition to its electric powertrain platform, XL provides real-time data monitoring and analytics, and will expand its Electrification-as-a Service solution, which includes power management, charging infrastructure, and onsite power and storage offerings. XL is also developing all electric offerings. The Companys rapidly deployable technology solutions position it for long-term growth in a total addressable market that is greater than $1 trillion, which incorporates the money spent on energy consumption and vehicle costs for commercial fleets globally.
XLs management team, with decades of leading energy innovation, automotive, and electric vehicle (EV) experience, is led by Chief Executive Officer Dimitri Kazarinoff and Founder & Chief Strategy Officer Tod Hynes. Pivotal Chairman and Chief Executive Officer Jon Ledecky will join the combined companys Board of Directors upon completion of the transaction, as will Pivotal Directors Kevin Griffin, Chief Executive Officer and Chief Investment Officer of MGG Investment Group, LP, and Sarah Sclarsic, a technology entrepreneur and carbon removal researcher at Massachusetts Institute of Technology.
Mr. Kazarinoff commented, We believe that this transaction will enable XL Fleet to advance and accelerate the growth of our industry-leading fleet electrification business, including a rapid expansion of our product offerings. With thousands of XL-equipped vehicles already on the road today, we are excited to continue to pave the way for fleets seeking to promote sustainability while improving operational efficiency.
Mr. Hynes stated, XL started its journey more than a decade ago, and today we are proud to be a leader in fleet electrification, enabling commercial businesses and municipalities across North America to perform critical work while driving decarbonization. Todays announcement marks the natural next step in our evolution, and together with Pivotal and support from our extensive strategic investors, we look forward to furthering XLs leadership position as we continue to help our customers save money, improve driver productivity, and reduce emissions.
Mr. Ledecky added, We are pleased that XL Fleet will be merged into Pivotal at an implied valuation that represents a significant discount relative to XLs closest publicly traded peers. XL Fleet is rapidly expanding its substantial existing customer base today versus its competitors, who are merely promising customers and revenues years from now. XLs revenues are expected to more than triple in 2021, cementing its status as the leading provider of vehicle electrification solutions for commercial and municipal fleet vehicles.
Mr. Griffin said, Pivotals focus has always been on partnering with world-class management teams in sectors that have clear and lasting tailwinds. Tod and Dimitris vision in hybrid, plug-in, and EV across all commercial fleet classes provided a unique first-mover advantage that sets XL apart from the competition. Moreover, given Pivotals ESG focus, we are also particularly excited to work closely with XL as they help reduce emissions, lower total cost of vehicle ownership, and produce reliable solutions for a wide range of uses globally.
Transaction Overview
The merger values XL at an implied $1 billion pro forma enterprise value and no material debt is expected to be outstanding at closing.
The combined company expects to receive approximately $350 million of proceeds of cash at closing, assuming no redemptions of Pivotals existing public stockholders, including an upsized, fully committed $150 million private placement of common stock (the PIPE Offering) at $10.00 per share backed by several new and existing strategic and institutional investors. All XL shareholders, including Constellation Technology Ventures, and management are retaining 100% of their equity in the combined company. The funds are expected to be used to scale for core profitability, develop aforementioned new products and services, expand internationally, pay down or prepay debt and for general corporate purposes.
The Pivotal and XL Boards of Directors have unanimously approved the proposed merger and the related transactions, which are expected to be completed in the fourth quarter of 2020, subject to, among other things, the approval by Pivotals and XLs stockholders of the proposed merger and satisfaction or waiver of other customary closing conditions.
Additional information about the proposed business combination, including a copy of the merger agreement and investor presentation, will be provided in a Current Report on Form 8-K to be filed by Pivotal today with the Securities and Exchange Commission and available at www.sec.gov. The investor presentation can also be found on XLs investor website at www.xlfleet.com/investors and Pivotals website at https://www.pivotalic.com.
Investor Conference Call Information
XL and Pivotal will host a joint investor conference call to discuss the proposed transaction today, Friday, September 18, 2020, at 9:00 am ET.
To listen to the prepared remarks via telephone dial 1-877-407-3982 (U.S.) or 1-201-493-6780 (International) and an operator will assist you. A telephone replay will be available at 1-844-512-2921 (U.S.) or 1-412-317-6671 (International), passcode 13710545. The telephone replay will be available through October 2, 2020 at 11:59 pm ET.
Advisors
Canaccord Genuity LLC is acting as financial advisor to XL. BTIG, LLC is acting as financial and capital markets advisor to Pivotal. Cantor Fitzgerald and PJT Partners are also acting as capital markets advisors to Pivotal. BTIG, LLC and PJT Partners acted as placement agents to Pivotal in connection with the PIPE Offering.
Morrison & Foerster LLP and Graubard Miller are acting as legal counsel to Pivotal. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. is acting as legal counsel to XL.
About XL Fleet
XL Fleet is a leading provider of vehicle electrification solutions for commercial and municipal fleets in North America, with more than 130 million miles driven by customers such as The Coca-Cola Company, Verizon, Yale University and the City of Boston. XLs hybrid and plug-in hybrid electric drive systems can increase fuel economy up to 25-50 percent and reduce carbon dioxide emissions up to 20-33 percent, decreasing operating costs and meeting sustainability goals while enhancing fleet operations. XLs plug-in hybrid electric drive system was named one of TIME magazines best inventions of 2019.
For additional information, please visit www.xlfleet.com.
About Pivotal Investment Corporation II
Pivotal Investment Corporation II is a blank check company organized for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization, or other similar business combination with one or more businesses or entities. Pivotal is led by Chairman and CEO Jon Ledecky, a seasoned businessman with over 35 years of investment and operational experience. He has executed hundreds of acquisitions across multiple industries and raised over $20 billion in debt and equity. He is also co-owner of the National Hockey Leagues New York Islanders franchise since 2014 and a prior owner of the Washington Wizards and the Washington Capitals. Additionally, Kevin Griffin, the Chief Executive Officer and Chief Investment Officer of MGG Investment Group, LP, serves as a Pivotal director and CEO of Pivotal Spac Funding II LLC, Pivotals sponsor. MGG is a private investment firm managing long-term committed capital on behalf of leading endowment, foundation, pension, insurance and high net worth investors globally. Over the course of Mr. Griffins 20-year career, he has originated and invested over $4 billion across the capital structure of middle market businesses and has also served on numerous boards of directors. For additional information, please visit https://www.pivotalic.com/
Important Information and Where to Find It
This communication is being made in respect of the proposed merger transaction involving Pivotal and XL. Pivotal intends to file a registration statement on Form S-4 with the Securities and Exchange Commission (the SEC), which will include a proxy statement/prospectus of Pivotal, and certain related documents, to be used at the meeting of shareholders to approve the proposed business combination and related matters. INVESTORS AND SECURITY HOLDERS OF PIVOTAL ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS, AND ANY AMENDMENTS THERETO AND OTHER RELEVANT DOCUMENTS THAT WILL BE FILED WITH THE SEC, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT XL, PIVOTAL AND THE BUSINESS COMBINATION. The definitive proxy statement will be mailed to shareholders of Pivotal as of a record date to be established for voting on the proposed business combination. Investors and security holders will also be able to obtain copies of the registration statement and other documents containing important information about each of the companies once such documents are filed with the SEC, without charge, at the SECs web site at www.sec.gov.
The information contained on, or that may be accessed through, the websites referenced in this press release is not incorporated by reference into, and is not a part of, this press release.
Participants in the Solicitation
Pivotal, XL and certain of their respective directors and executive officers may be deemed participants in the solicitation of proxies from the shareholders of Pivotal in favor of the approval of the business combination and related matters. Shareholders may obtain more detailed information regarding the names, affiliations and interests of certain of Pivotals executive officers and directors in the solicitation by reading Pivotals Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and the proxy statement and other relevant materials filed with the SEC in connection with the business combination when they become available. Information concerning the interests of Pivotals participants in the solicitation, which may, in some cases, be different than those of their stockholders generally, will be set forth in the proxy statement relating to the business combination when it becomes available.
No Offer or Solicitation
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of any securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such other jurisdiction.
Forward Looking Statements
The information in this press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included in this presentation, regarding the proposed business combination, including Pivotals ability to consummate the transaction, the benefits of the transaction and the combined companys future financial performance, as well as the combined companys strategy, future operations, estimated financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management, are forward-looking statements. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. These statements may be preceded by, followed by or include the words anticipates,
believes, estimates, expects, projects, forecasts, may, will, should, seeks, plans, scheduled, anticipates or intends or similar expressions. Such forward-looking statements involve risks and uncertainties that may cause actual events, results or performance to differ materially from those indicated by such statements. Certain of these risks are identified and discussed in Pivotals Annual Report on Form 10-K for the year ended December 31, 2019 under Risk Factors in Part I, Item 1A and in Pivotals Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. These risk factors will be important to consider in determining future results and should be reviewed in their entirety. These forward-looking statements are expressed in good faith, and Pivotal and XL believe there is a reasonable basis for them. However, there can be no assurance that the events, results or trends identified in these forward-looking statements will occur or be achieved. Forward-looking statements speak only as of the date they are made, and neither Pivotal nor XL is under any obligation, and expressly disclaim any obligation, to update, alter or otherwise revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Readers should carefully review the statements set forth in the reports, which Pivotal has filed or will file from time to time with the SEC.
In addition to factors previously disclosed in Pivotals reports filed with the SEC and those identified elsewhere in this communication, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the parties ability to meet the closing conditions to the merger, including approval by stockholders of Pivotal and XL on the expected terms and schedule and the risk that regulatory approvals required for the merger are not obtained or are obtained subject to conditions that are not anticipated; delay in closing the merger or the PIPE Offering; failure to realize the benefits expected from the proposed transaction; the effects of pending and future legislation; risks related to disruption of management time from ongoing business operations due to the proposed transaction; business disruption following the transaction; other consequences associated with mergers, acquisitions and divestitures and legislative and regulatory actions and reforms; risks associated with XLs business, including the highly competitive nature of XLs business and the market for hybrid electric vehicles; litigation, complaints, product liability claims and/or adverse publicity; cost increases or shortages in the components necessary to support XLs products and services; the introduction of new technologies; privacy and data protection laws, privacy or data breaches, or the loss of data; and the impact of the COVID-19 pandemic on XLs business, results of operations, financial condition, regulatory compliance and customer experience.
Any financial projections in this communication are forward-looking statements that are based on assumptions that are inherently subject to significant uncertainties and contingencies, many of which are beyond Pivotals and XLs control. While all projections are necessarily speculative, Pivotal and XL believe that the preparation of prospective financial information involves increasingly higher levels of uncertainty the further out the projection extends from the date of preparation. The assumptions and estimates underlying the projected results are inherently uncertain and are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the projections. The inclusion of projections in this communication should not be regarded as an indication that Pivotal and XL, or their respective representatives and advisors, considered or consider the projections to be a reliable prediction of future events.
This communication is not intended to be all-inclusive or to contain all the information that a person may desire in considering in an investment in Pivotal and is not intended to form the basis of an investment decision in Pivotal. All subsequent written and oral forward-looking statements concerning Pivotal and XL, the proposed transactions or other matters and attributable to Pivotal and XL or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above.
Contacts
For XL Fleet
Media:
Eric Foellmer
(617) 648-8551
efoellmer@xlfleet.com
Investors:
ICR, Inc.
XLFleetIR@icrinc.com
For Pivotal Investment Corporation II
Jonathan Gasthalter/Nathaniel Garnick/Sam Fisher
Gasthalter & Co.
(212) 257-4170
pivotal@gasthalter.com
Exhibit 99.2 XL Fleet September 2020 INVESTOR PRESENTATION Exhibit 99.2 XL Fleet September 2020 INVESTOR PRESENTATION
Disclaimer This presentation (this “Presentation”) is provided for informational purposes only and has been prepared to assist interested parties in making their own evaluation with respect to a potential business combination between XL Hybrids, Inc. (doing business as XL Fleet) (“XL”) and Pivotal Investment Corporation II (“Pivotal”) and certain related transactions (the “Proposed Business Combination”) and for no other purpose. No representations or warranties, express or implied are given in, or in respect of, this Presentation. To the fullest extent permitted by law, in no circumstances will Pivotal, XL or any of their respective subsidiaries, stockholders, affiliates representatives, partners, directors, officers, employees, advisers or agents be responsible or liable for any direct, indirect or consequential loss or loss of profit arising from the use of this Presentation, its contents, its omissions, reliance on the information contained within it, or on opinions communicated in relation thereto or otherwise arising in connection therewith. Industry and market data used in this Presentation have been obtained from third-party industry publications and sources as well as research reports prepared for other purposes. Neither Pivotal nor XL has independently verified the data obtained from these sources and cannot assure of the data’s accuracy or completeness. This data is subject to change. In addition, this Presentation does not purport to be all-inclusive or to contain all of the information that may be required to make a full analysis of XL, Pivotal or the Proposed Business Combination. Viewers of this Presentation should each make their own evaluation of XL, Pivotal, the Proposed Business Combination and of the relevance and adequacy of the information and should make such other investigations as they deem necessary. Forward Looking Statements Certain statements included in this Presentation that are not historical facts may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, each as amended. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of other financial and performance metrics and projections of market opportunity. These statements are based on various assumptions, whether or not identified in this Presentation, and on the current expectations of XL’s and Pivotal’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of XL and Pivotal. These forward-looking statements are subject to a number of risks and uncertainties, including changes in domestic and foreign business, market, financial, political and legal conditions; the inability of the parties to successfully or timely consummate the Proposed Business Combination, including the risk that any required consents or regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect the combined company or the expected benefits of the Proposed Business Combination or that the approval of the stockholders of Pivotal or XL is not obtained; the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement between the parties or the termination of any PIPE investor’s subscription agreement; failure to realize the anticipated benefits of the Proposed Business Combination; the effect of the Proposed Business Combination on XL’s business relationships, operating results, and business generally; potential difficulties in XL’s employee retention as a result of the Proposed Business Combination; risks related to diverting management’s attention from XL’s ongoing business operations in connection with the Proposed Business Combination; potential litigation that may be instituted against Pivotal or XL or their respective directors or officers related to the Proposed Business Combination or the merger agreement or in relation to XL’s business; the amount of the costs, fees, expenses and other charges incurred by the parties in connection with the Proposed Business Combination; risks relating to the uncertainty of the projected financial information with respect to XL and the combined company; XL’s ability to achieve any level of revenue, gross profit or EBITDA margin; risks related to the growth of XL’s business and the timing of expected business milestones; the effects of competition and the pace and depth of electric vehicle adoption generally on XL’s and the combined company’s future business; changes in regulatory requirements, governmental incentives and fuel and energy prices; the amount of redemption requests made by Pivotal’s stockholders; the ability of Pivotal or the combined company to issue equity or equity-linked securities or obtain debt financing in connection with the Proposed Business Combination or in the future; the impact of the global COVID-19 pandemic on any of the foregoing risks; and those factors discussed in Pivotal’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and its subsequent quarterly reports on Form 10-Q, in each case, under the heading “Risk Factors,” and other documents of Pivotal filed, or to be filed from time to time with the Securities and Exchange Commission (“SEC”), which are available via the SEC’s website at www.sec.gov. If any of these risks materialize or the assumptions in this Presentation prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that neither Pivotal nor XL presently anticipate or that Pivotal and XL currently believe are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Pivotal’s and XL’s expectations, plans or forecasts of future events and views as of the date of this Presentation. Pivotal and XL anticipate that subsequent events and developments will cause Pivotal’s and XL’s assessments to change. However, while Pivotal and XL may elect to update these forward-looking statements at some point in the future, Pivotal and XL specifically disclaim any obligation to do so, except as required by law. These forward-looking statements should not be relied upon as representing Pivotal’s and XL’s assessments as of any date subsequent to the date of this Presentation. Accordingly, undue reliance should not be placed upon the forward-looking statements. 2 ConfidentialDisclaimer This presentation (this “Presentation”) is provided for informational purposes only and has been prepared to assist interested parties in making their own evaluation with respect to a potential business combination between XL Hybrids, Inc. (doing business as XL Fleet) (“XL”) and Pivotal Investment Corporation II (“Pivotal”) and certain related transactions (the “Proposed Business Combination”) and for no other purpose. No representations or warranties, express or implied are given in, or in respect of, this Presentation. To the fullest extent permitted by law, in no circumstances will Pivotal, XL or any of their respective subsidiaries, stockholders, affiliates representatives, partners, directors, officers, employees, advisers or agents be responsible or liable for any direct, indirect or consequential loss or loss of profit arising from the use of this Presentation, its contents, its omissions, reliance on the information contained within it, or on opinions communicated in relation thereto or otherwise arising in connection therewith. Industry and market data used in this Presentation have been obtained from third-party industry publications and sources as well as research reports prepared for other purposes. Neither Pivotal nor XL has independently verified the data obtained from these sources and cannot assure of the data’s accuracy or completeness. This data is subject to change. In addition, this Presentation does not purport to be all-inclusive or to contain all of the information that may be required to make a full analysis of XL, Pivotal or the Proposed Business Combination. Viewers of this Presentation should each make their own evaluation of XL, Pivotal, the Proposed Business Combination and of the relevance and adequacy of the information and should make such other investigations as they deem necessary. Forward Looking Statements Certain statements included in this Presentation that are not historical facts may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, each as amended. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of other financial and performance metrics and projections of market opportunity. These statements are based on various assumptions, whether or not identified in this Presentation, and on the current expectations of XL’s and Pivotal’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of XL and Pivotal. These forward-looking statements are subject to a number of risks and uncertainties, including changes in domestic and foreign business, market, financial, political and legal conditions; the inability of the parties to successfully or timely consummate the Proposed Business Combination, including the risk that any required consents or regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect the combined company or the expected benefits of the Proposed Business Combination or that the approval of the stockholders of Pivotal or XL is not obtained; the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement between the parties or the termination of any PIPE investor’s subscription agreement; failure to realize the anticipated benefits of the Proposed Business Combination; the effect of the Proposed Business Combination on XL’s business relationships, operating results, and business generally; potential difficulties in XL’s employee retention as a result of the Proposed Business Combination; risks related to diverting management’s attention from XL’s ongoing business operations in connection with the Proposed Business Combination; potential litigation that may be instituted against Pivotal or XL or their respective directors or officers related to the Proposed Business Combination or the merger agreement or in relation to XL’s business; the amount of the costs, fees, expenses and other charges incurred by the parties in connection with the Proposed Business Combination; risks relating to the uncertainty of the projected financial information with respect to XL and the combined company; XL’s ability to achieve any level of revenue, gross profit or EBITDA margin; risks related to the growth of XL’s business and the timing of expected business milestones; the effects of competition and the pace and depth of electric vehicle adoption generally on XL’s and the combined company’s future business; changes in regulatory requirements, governmental incentives and fuel and energy prices; the amount of redemption requests made by Pivotal’s stockholders; the ability of Pivotal or the combined company to issue equity or equity-linked securities or obtain debt financing in connection with the Proposed Business Combination or in the future; the impact of the global COVID-19 pandemic on any of the foregoing risks; and those factors discussed in Pivotal’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and its subsequent quarterly reports on Form 10-Q, in each case, under the heading “Risk Factors,” and other documents of Pivotal filed, or to be filed from time to time with the Securities and Exchange Commission (“SEC”), which are available via the SEC’s website at www.sec.gov. If any of these risks materialize or the assumptions in this Presentation prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that neither Pivotal nor XL presently anticipate or that Pivotal and XL currently believe are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Pivotal’s and XL’s expectations, plans or forecasts of future events and views as of the date of this Presentation. Pivotal and XL anticipate that subsequent events and developments will cause Pivotal’s and XL’s assessments to change. However, while Pivotal and XL may elect to update these forward-looking statements at some point in the future, Pivotal and XL specifically disclaim any obligation to do so, except as required by law. These forward-looking statements should not be relied upon as representing Pivotal’s and XL’s assessments as of any date subsequent to the date of this Presentation. Accordingly, undue reliance should not be placed upon the forward-looking statements. 2 Confidential
Disclaimer (cont’d) Use of Projections This Presentation contains projected financial information with respect to XL and the combined company. Such projected financial information constitutes forward-looking information, and is for illustrative purposes only and should not be relied upon as necessarily being indicative of future results. Neither Pivotal’s nor XL’s independent auditors have studied, reviewed, complied or performed any procedures with respect to the projections for the purpose of their inclusion in this presentation, and accordingly, neither of them has expressed an opinion or provided any other form of assurance with respect thereto for the purpose of this Presentation. The assumptions and estimates underlying such projections are inherently uncertain and are subject to a wide variety of significant business, economic, competitive and other risks and uncertainties. See “Forward-Looking Statements” above. Actual results may differ materially from the results contemplated by the projections contained in this Presentation, and the inclusion of such information in this Presentation should not be regarded as a representation by any person that the results reflected in such projections will be achieved. Financial Information; Non-GAAP Financial Measures The financial information and data contained in this Presentation is unaudited and does not conform to Regulation S-X. Accordingly, such information and data may not be included in, may be adjusted in or may be presented differently in, any proxy statement/prospectus or registration statement to be filed by Pivotal with the SEC. Some of the financial information and data contained in this Presentation, such as EBITDA and EBITDA margin, has not been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Pivotal and XL believe these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to XL’s financial condition and results of operations. XL’s management uses these non-GAAP measures for trend analyses, and for budgeting and planning purposes. Pivotal and XL believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating projected operating results and trends in and in comparing XL’s financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors. XL’s management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in XL’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these imitations, management presents non-GAAP financial measures in connection with GAAP results. You should review XL’s audited financial statements, which will be included in the Registration Statement (as defined below). Important Information About the Proposed Business Combination and Where to Find It In connection with the Proposed Business Combination, Pivotal intends to file a registration statement on Form S-4 (the “Registration Statement”) with the SEC, which will include a preliminary proxy statement to be distributed to holders of Pivotal’s common stock in connection with Pivotal’s solicitation of proxies for the vote by Pivotal’s stockholders with respect to the Proposed Business Combination and other matters as described in the Registration Statement, as well as the prospectus relating to the offer of the securities to be issued to XL’s stockholders in connection with the completion of the Proposed Business Combination. After the Registration Statement has been filed and declared effective, Pivotal will mail a definitive proxy statement, when available, to its stockholders. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS, ANY AMENDMENTS THERETO AND ANY OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT PIVOTAL, XL AND THE PROPOSED BUSINESS COMBINATION. Investors and security holders may obtain free copies of the preliminary proxy statement/prospectus and definitive proxy statement/prospectus (when available) and other documents filed with the SEC by Pivotal through the website maintained by the SEC at http://www.sec.gov, or by directing a request to Pivotal at c/o Graubard Miller, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174. INVESTMENT IN ANY SECURITIES DESCRIBED HEREIN HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY OTHER REGULATORY AUTHORITY NOR HAS ANY AUTHORITY PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED HEREIN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 3 ConfidentialDisclaimer (cont’d) Use of Projections This Presentation contains projected financial information with respect to XL and the combined company. Such projected financial information constitutes forward-looking information, and is for illustrative purposes only and should not be relied upon as necessarily being indicative of future results. Neither Pivotal’s nor XL’s independent auditors have studied, reviewed, complied or performed any procedures with respect to the projections for the purpose of their inclusion in this presentation, and accordingly, neither of them has expressed an opinion or provided any other form of assurance with respect thereto for the purpose of this Presentation. The assumptions and estimates underlying such projections are inherently uncertain and are subject to a wide variety of significant business, economic, competitive and other risks and uncertainties. See “Forward-Looking Statements” above. Actual results may differ materially from the results contemplated by the projections contained in this Presentation, and the inclusion of such information in this Presentation should not be regarded as a representation by any person that the results reflected in such projections will be achieved. Financial Information; Non-GAAP Financial Measures The financial information and data contained in this Presentation is unaudited and does not conform to Regulation S-X. Accordingly, such information and data may not be included in, may be adjusted in or may be presented differently in, any proxy statement/prospectus or registration statement to be filed by Pivotal with the SEC. Some of the financial information and data contained in this Presentation, such as EBITDA and EBITDA margin, has not been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Pivotal and XL believe these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to XL’s financial condition and results of operations. XL’s management uses these non-GAAP measures for trend analyses, and for budgeting and planning purposes. Pivotal and XL believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating projected operating results and trends in and in comparing XL’s financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors. XL’s management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in XL’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these imitations, management presents non-GAAP financial measures in connection with GAAP results. You should review XL’s audited financial statements, which will be included in the Registration Statement (as defined below). Important Information About the Proposed Business Combination and Where to Find It In connection with the Proposed Business Combination, Pivotal intends to file a registration statement on Form S-4 (the “Registration Statement”) with the SEC, which will include a preliminary proxy statement to be distributed to holders of Pivotal’s common stock in connection with Pivotal’s solicitation of proxies for the vote by Pivotal’s stockholders with respect to the Proposed Business Combination and other matters as described in the Registration Statement, as well as the prospectus relating to the offer of the securities to be issued to XL’s stockholders in connection with the completion of the Proposed Business Combination. After the Registration Statement has been filed and declared effective, Pivotal will mail a definitive proxy statement, when available, to its stockholders. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS, ANY AMENDMENTS THERETO AND ANY OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT PIVOTAL, XL AND THE PROPOSED BUSINESS COMBINATION. Investors and security holders may obtain free copies of the preliminary proxy statement/prospectus and definitive proxy statement/prospectus (when available) and other documents filed with the SEC by Pivotal through the website maintained by the SEC at http://www.sec.gov, or by directing a request to Pivotal at c/o Graubard Miller, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174. INVESTMENT IN ANY SECURITIES DESCRIBED HEREIN HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY OTHER REGULATORY AUTHORITY NOR HAS ANY AUTHORITY PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED HEREIN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 3 Confidential
Disclaimer (cont’d) Participants in the Solicitation Pivotal and XL and their respective affiliates and certain of their respective executive officers and other members of management and employees may be considered participants in the solicitation of proxies with respect to the Proposed Business Combination. Information about the directors and executive officers of Pivotal is set forth in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Additional information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the proxy statement/prospectus and other relevant materials to be filed with the SEC regarding the Proposed Business Combination when they become available. Stockholders, potential investors and other interested persons should read the proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. You may obtain free copies of these documents as indicated above. No Offers or Solicitation This Presentation shad not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. Trademarks This Presentation contains trademarks, service marks, trade names and copyrights of Pivotal, XL and other companies, which are the property of their respective owners. 4 ConfidentialDisclaimer (cont’d) Participants in the Solicitation Pivotal and XL and their respective affiliates and certain of their respective executive officers and other members of management and employees may be considered participants in the solicitation of proxies with respect to the Proposed Business Combination. Information about the directors and executive officers of Pivotal is set forth in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Additional information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the proxy statement/prospectus and other relevant materials to be filed with the SEC regarding the Proposed Business Combination when they become available. Stockholders, potential investors and other interested persons should read the proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. You may obtain free copies of these documents as indicated above. No Offers or Solicitation This Presentation shad not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. Trademarks This Presentation contains trademarks, service marks, trade names and copyrights of Pivotal, XL and other companies, which are the property of their respective owners. 4 Confidential
Transaction Overview XL Leadership Team S S um um m m aa rr yy of of P P rr opos opos ee d T d T rr aa ns ns aa cc titon ion • XL Fleet (XL) is an industry leader in fleet electrification solutions, with proven, proprietary technology Dimitri Kazarinoff and electrification systems and solutions that work across a wide range of vehicle classes and types Chief Executive Officer • Pivotal Investment Corporation II (Pivotal IC) (NYSE:PIC) is a publicly listed Special Purpose Acquisition Company (“SPAC”) • XL and Pivotal are combining to advance and accelerate the market growth of XL’s electrified powertrain Tod Hynes solutions and expand its product offerings Founder, Chief Strategy Officer — XL shareholders are rolling 100% of their equity — Transaction proceeds are being retained in the business Pivotal Investment Corporation II • Pro forma for the transactions (including $150M PIPE investment and assuming no redemptions from SPAC trust): — XL will have ~$350m of cash to fund growth based on cash held in trust and PIPE proceeds Jon Ledecky • Implied ~$1.1b Enterprise Value Chairman, Chief Executive Officer — Represents attractive entry multiples relative to peer group metrics Kevin Griffin Pivotal views XL Fleet as a unique opportunity to invest in the market leader in vehicle Director electrification solutions with a proven management team and strong demonstrated growth 5 ConfidentialTransaction Overview XL Leadership Team S S um um m m aa rr yy of of P P rr opos opos ee d T d T rr aa ns ns aa cc titon ion • XL Fleet (XL) is an industry leader in fleet electrification solutions, with proven, proprietary technology Dimitri Kazarinoff and electrification systems and solutions that work across a wide range of vehicle classes and types Chief Executive Officer • Pivotal Investment Corporation II (Pivotal IC) (NYSE:PIC) is a publicly listed Special Purpose Acquisition Company (“SPAC”) • XL and Pivotal are combining to advance and accelerate the market growth of XL’s electrified powertrain Tod Hynes solutions and expand its product offerings Founder, Chief Strategy Officer — XL shareholders are rolling 100% of their equity — Transaction proceeds are being retained in the business Pivotal Investment Corporation II • Pro forma for the transactions (including $150M PIPE investment and assuming no redemptions from SPAC trust): — XL will have ~$350m of cash to fund growth based on cash held in trust and PIPE proceeds Jon Ledecky • Implied ~$1.1b Enterprise Value Chairman, Chief Executive Officer — Represents attractive entry multiples relative to peer group metrics Kevin Griffin Pivotal views XL Fleet as a unique opportunity to invest in the market leader in vehicle Director electrification solutions with a proven management team and strong demonstrated growth 5 Confidential
Vision To be the world leader in fleet electrification Mission Accelerate fleet electrification through cost effective, customer tailored and comprehensive solutions 6Vision To be the world leader in fleet electrification Mission Accelerate fleet electrification through cost effective, customer tailored and comprehensive solutions 6
Section I Business Overview Section I Business Overview
XL Fleet: Industry Leader Positioned For Long-Term xEV Growth (1) Global TAM >$1 Trillion with ~1 million vehicles sold annually in North Massive 1 America alone; experiencing dramatic demand for more sustainable Market solutions Trusted by over 200 fleet customers with 3,000+ systems deployed, 130+ Market 2 Leader million customer driven miles Broad portfolio of proven, cost-effective solutions for numerous vehicle Proven 3 Technology classes / segments with rapid product development capabilities Highly Established production can scale to 100,000+ units annually and XL’s 4 Scalable capital efficient operating model is ready to scale and drive profitability Uniquely positioned to deliver on “Electrification-as-a-Service” and turbo Future 5 Proof charge growth as market evolves (1) Based on research from NTEA and IHS, as well as Company estimates and analysis 8 ConfidentialXL Fleet: Industry Leader Positioned For Long-Term xEV Growth (1) Global TAM >$1 Trillion with ~1 million vehicles sold annually in North Massive 1 America alone; experiencing dramatic demand for more sustainable Market solutions Trusted by over 200 fleet customers with 3,000+ systems deployed, 130+ Market 2 Leader million customer driven miles Broad portfolio of proven, cost-effective solutions for numerous vehicle Proven 3 Technology classes / segments with rapid product development capabilities Highly Established production can scale to 100,000+ units annually and XL’s 4 Scalable capital efficient operating model is ready to scale and drive profitability Uniquely positioned to deliver on “Electrification-as-a-Service” and turbo Future 5 Proof charge growth as market evolves (1) Based on research from NTEA and IHS, as well as Company estimates and analysis 8 Confidential
Massive 1 Compelling and Massive Market Opportunity in Fleet Electrification Market The problem: Need to reduce emissions now, but virtually all fleet vehicles today are powered by fossil fuel. Fully-EV production capacity has barely started and will take decades to supply the whole market XL Fleet Has The Solution (1) EV share of Global Vehicle Fleet by Segment Cost effective lower emissions options today: XLH & XLP 100% 80% Leveraging existing industry to serve a diverse market EV Share of Global Vehicle Fleet by Segment Broad Opportunity for HEV & 60% PHEV Decades-long growth opportunity 40% 40% for XL’s xEV offerings 20% Plug-In Hybrid creates first-mover advantage in transition to EV 0% 2019 2025 2030 2035 2040 Paving the way for “Electrification Light Commercial Medium Commercial Heavy Commercial as-a-Service” (1) BNEF EV Outlook 2019 9 ConfidentialMassive 1 Compelling and Massive Market Opportunity in Fleet Electrification Market The problem: Need to reduce emissions now, but virtually all fleet vehicles today are powered by fossil fuel. Fully-EV production capacity has barely started and will take decades to supply the whole market XL Fleet Has The Solution (1) EV share of Global Vehicle Fleet by Segment Cost effective lower emissions options today: XLH & XLP 100% 80% Leveraging existing industry to serve a diverse market EV Share of Global Vehicle Fleet by Segment Broad Opportunity for HEV & 60% PHEV Decades-long growth opportunity 40% 40% for XL’s xEV offerings 20% Plug-In Hybrid creates first-mover advantage in transition to EV 0% 2019 2025 2030 2035 2040 Paving the way for “Electrification Light Commercial Medium Commercial Heavy Commercial as-a-Service” (1) BNEF EV Outlook 2019 9 Confidential
Massive 1 XL Fleet Well-Positioned to Electrify a Large Multi-Segmented Market Market Fragmentation of commercial vehicle market creates many long-term opportunities Tremendous diversity “Customization” Key Market OEMs will not enter all in use cases & required Dynamics segments with EVs applications to optimize ROI XL Fleet is Well-Positioned Across Electrification Spectrum XL’s Proprietary HEV PHEV EV FCEV Technologies XL Fleet can cover all Box Truck School Bus Pickup Truck Transit Bus Tow Truck Utility Van platforms and Numerous vehicle Market Segments classes Bucket Truck Step Van Refuse Truck City Delivery Semi Tractor Mini Bus CLASS 2 - 3 CLASS 4 - 6 CLASS 7 - 8 EXISTING APPLICATIONS FUTURE DEVELOPMENT Dramatically increases TAM 10 ConfidentialMassive 1 XL Fleet Well-Positioned to Electrify a Large Multi-Segmented Market Market Fragmentation of commercial vehicle market creates many long-term opportunities Tremendous diversity “Customization” Key Market OEMs will not enter all in use cases & required Dynamics segments with EVs applications to optimize ROI XL Fleet is Well-Positioned Across Electrification Spectrum XL’s Proprietary HEV PHEV EV FCEV Technologies XL Fleet can cover all Box Truck School Bus Pickup Truck Transit Bus Tow Truck Utility Van platforms and Numerous vehicle Market Segments classes Bucket Truck Step Van Refuse Truck City Delivery Semi Tractor Mini Bus CLASS 2 - 3 CLASS 4 - 6 CLASS 7 - 8 EXISTING APPLICATIONS FUTURE DEVELOPMENT Dramatically increases TAM 10 Confidential
Market 2 XL has De-Risked the Road to Electrification Leader Comparing XL to Other Notable Commercial EV Players Established Production Customer Base (1) (1) Models Available & (1,000+ per year) (100+ Customers) (1) Projected Cumulative Units Sold (1) Announced 2020 2021 2024 2020 2021 2024 9 4,284 9,234 üüüüüü 20 3 320 ûûüûûü 400 3 ûüüûûü 2,400 4 ûûüûûü 600 1 ûüüûûü 2,200 - 2,000 4,000 6,000 8,000 10,000 2020 2021 (1) Based on publicly available Investor Presentations and press releases, as well as Management 11 C Conf onfiident dentiial al estimates; Workhorse 2021 unit projections based on analyst estimatesMarket 2 XL has De-Risked the Road to Electrification Leader Comparing XL to Other Notable Commercial EV Players Established Production Customer Base (1) (1) Models Available & (1,000+ per year) (100+ Customers) (1) Projected Cumulative Units Sold (1) Announced 2020 2021 2024 2020 2021 2024 9 4,284 9,234 üüüüüü 20 3 320 ûûüûûü 400 3 ûüüûûü 2,400 4 ûûüûûü 600 1 ûüüûûü 2,200 - 2,000 4,000 6,000 8,000 10,000 2020 2021 (1) Based on publicly available Investor Presentations and press releases, as well as Management 11 C Conf onfiident dentiial al estimates; Workhorse 2021 unit projections based on analyst estimates
Market 2 XL Fleet is the Market Leader in Fleet Electrification Leader Trusted brand helping fleets drive decarbonization today Diverse Base of Customers Operating Over 1 Million Vehicles Globally Established, track-record with many of the largest fleet owners… 200+ 10+ fleet years of experience customers 3,000+ 130+ vehicles on the Million miles driven road Individual Order Sizes Rapidly Growing …Creating strong momentum and Largest Annual Order (# of units) significant long-term growth opportunities 1100 1200 900 600 $220m+ 3x 350 234 300 12-mo sales revenue growth 0 pipeline in 2020 2018 2019 2020 12 ConfidentialMarket 2 XL Fleet is the Market Leader in Fleet Electrification Leader Trusted brand helping fleets drive decarbonization today Diverse Base of Customers Operating Over 1 Million Vehicles Globally Established, track-record with many of the largest fleet owners… 200+ 10+ fleet years of experience customers 3,000+ 130+ vehicles on the Million miles driven road Individual Order Sizes Rapidly Growing …Creating strong momentum and Largest Annual Order (# of units) significant long-term growth opportunities 1100 1200 900 600 $220m+ 3x 350 234 300 12-mo sales revenue growth 0 pipeline in 2020 2018 2019 2020 12 Confidential
Proven 3 XL Powertrain Platform is Proven, Flexible and Scalable Technology Leading technology developed over the last decade Key Highlights Battery Pack Traction Motor TM XL Link In XLH a 40 kW/1 kWh Regenerative braking ü Significant technology library and TM Enables remote commissioning, lithium battery and in XLP and electrical assist know-how backed by deep bench of upgrades and reporting an 18 kWh battery engineers and powertrain specialists ü Unique rapid integration of new hardware and software — <1 month to integrate new OEM battery into vehicles — <3 months to production (including crash testing) OEM Vehicle ü Quickly scaling across vehicle OEM’s engine, classes, OEM platforms and transmission, fuel applications and exhaust systems stay Motor Drive — <1 month to develop HEV completely intact Controls current flow and unmodified. for new OEM chassis between battery and OEM warranty also electric traction motor stays intact — <6 months to production 13 ConfidentialProven 3 XL Powertrain Platform is Proven, Flexible and Scalable Technology Leading technology developed over the last decade Key Highlights Battery Pack Traction Motor TM XL Link In XLH a 40 kW/1 kWh Regenerative braking ü Significant technology library and TM Enables remote commissioning, lithium battery and in XLP and electrical assist know-how backed by deep bench of upgrades and reporting an 18 kWh battery engineers and powertrain specialists ü Unique rapid integration of new hardware and software — <1 month to integrate new OEM battery into vehicles — <3 months to production (including crash testing) OEM Vehicle ü Quickly scaling across vehicle OEM’s engine, classes, OEM platforms and transmission, fuel applications and exhaust systems stay Motor Drive — <1 month to develop HEV completely intact Controls current flow and unmodified. for new OEM chassis between battery and OEM warranty also electric traction motor stays intact — <6 months to production 13 Confidential
Proven 3 XL Tech Works With Current Industry Standard Manufacturing Process Technology Almost all US commercial vehicles are built in two stages XL Powertrain Custom Body (Upfitter) XL Fleet Vehicle XL Link XL HEV or PHEV OEM UPFITTER CUSTOMER 14 ConfidentialProven 3 XL Tech Works With Current Industry Standard Manufacturing Process Technology Almost all US commercial vehicles are built in two stages XL Powertrain Custom Body (Upfitter) XL Fleet Vehicle XL Link XL HEV or PHEV OEM UPFITTER CUSTOMER 14 Confidential
Proven 3 Differentiated Product Portfolio Suits Customers’ Diverse Use Cases Technology Flexible platform and rapid development capabilities • Improve MPG (~25%) & meet sustainability • Innovative plug-in hybrid system that is • Zero emissions offering goals without compromising performance revolutionary in its simplicity • XL propulsion systems will enable fast-to- • No operational risk or infrastructure required • Highly-efficient – capable of driving up to 50% market, very competitive EV offerings for fleet operators savings in MPG Available Vehicles Plus Near-Term Roadmap Chevy Express & Chevy & GMC Ford F-150 Pickup Ford F-250 Pickup Ford Transit Vans GMC Savana Vans Ford E-350/450 3500/4500 Ford F-59 Super Duty Currently Available In Development Currently Available In Development In Development In Development 15 ConfidentialProven 3 Differentiated Product Portfolio Suits Customers’ Diverse Use Cases Technology Flexible platform and rapid development capabilities • Improve MPG (~25%) & meet sustainability • Innovative plug-in hybrid system that is • Zero emissions offering goals without compromising performance revolutionary in its simplicity • XL propulsion systems will enable fast-to- • No operational risk or infrastructure required • Highly-efficient – capable of driving up to 50% market, very competitive EV offerings for fleet operators savings in MPG Available Vehicles Plus Near-Term Roadmap Chevy Express & Chevy & GMC Ford F-150 Pickup Ford F-250 Pickup Ford Transit Vans GMC Savana Vans Ford E-350/450 3500/4500 Ford F-59 Super Duty Currently Available In Development Currently Available In Development In Development In Development 15 Confidential
Proven 3 Proven Results and Value in Demanding Environments Technology Reliability, Sustainability, and Financial Benefit in Critical Applications Results Results Results Seattle Fire Department Puget Sound Energy Last Mile Delivery • 550 HEV Transits and E-350 step • 27 HEV Ford E-450 ambulances used • 110 HEV Transits and F-250 pickups for 911 response for Washington state’s largest utility vans used for daily mail delivery • Same or better torque than stock • Used for natural gas first responders • Over 1.6 million miles driven since February 2019 ambulances and inspectors • $98,000 lifetime operational savings & • Supporting PSE’s goal of reducing • 21% fuel savings with Transit on (1) 294 MT of CO2 emissions eliminated CO2 footprint by 50% by 2040 urban drive cycle (1) Based on UDDS drive cycle. Actual results vary based on drive cycle. 16 ConfidentialProven 3 Proven Results and Value in Demanding Environments Technology Reliability, Sustainability, and Financial Benefit in Critical Applications Results Results Results Seattle Fire Department Puget Sound Energy Last Mile Delivery • 550 HEV Transits and E-350 step • 27 HEV Ford E-450 ambulances used • 110 HEV Transits and F-250 pickups for 911 response for Washington state’s largest utility vans used for daily mail delivery • Same or better torque than stock • Used for natural gas first responders • Over 1.6 million miles driven since February 2019 ambulances and inspectors • $98,000 lifetime operational savings & • Supporting PSE’s goal of reducing • 21% fuel savings with Transit on (1) 294 MT of CO2 emissions eliminated CO2 footprint by 50% by 2040 urban drive cycle (1) Based on UDDS drive cycle. Actual results vary based on drive cycle. 16 Confidential
Highly 4 Unique Model – Highly Scalable & Capital Efficient Production Capacity Scalable Network of qualified production partners who already produce 100,000+ commercial vehicles per year Key Highlights XL Fleet Installation Partners ü World-class partnerships ü Able to meet demand in US and Canada ü Rapid scale with minimal capital expense: — Current production capacity of ~6,000/yr. — Incremental installation capacity: • 10,000 – 100,000 units/year • $500,000 – $5 Million • 6 months – 18 months Distributed and Remote Production Management System Installation Process Platform – Remote Commissioning App - provides step-by-step instructions and allows technicians to verify proper tracks technician progress operation of installed system 17 ConfidentialHighly 4 Unique Model – Highly Scalable & Capital Efficient Production Capacity Scalable Network of qualified production partners who already produce 100,000+ commercial vehicles per year Key Highlights XL Fleet Installation Partners ü World-class partnerships ü Able to meet demand in US and Canada ü Rapid scale with minimal capital expense: — Current production capacity of ~6,000/yr. — Incremental installation capacity: • 10,000 – 100,000 units/year • $500,000 – $5 Million • 6 months – 18 months Distributed and Remote Production Management System Installation Process Platform – Remote Commissioning App - provides step-by-step instructions and allows technicians to verify proper tracks technician progress operation of installed system 17 Confidential
Highly 4 Low Risk Path to Dramatic Growth Scalable Selling existing products to existing customers through existing channels Well-Established, Multi-Channel Approach Accelerating Unit Sales Supported by Robust Pipeline ü $220+ million sales pipeline for next 12 months, 2020F 95% booked ü De-risked growth plan supported by existing offering XL Direct Sales OEM Partners ü Increasing TAM through transition to all-electric and launch of class 7/8 by 2023 $ Millions XL Fleet Revenue Forecast $1,600 $1,400 $1,200 $1,000 $800 $600 FMC Partners Upfitter Partners $400 $200 $0 2020 2021 2022 2023 2024 CL 2-6 HEV & PHEV XL EV Class 4-6 XL xEV Class 7-8 International & Other 18 ConfidentialHighly 4 Low Risk Path to Dramatic Growth Scalable Selling existing products to existing customers through existing channels Well-Established, Multi-Channel Approach Accelerating Unit Sales Supported by Robust Pipeline ü $220+ million sales pipeline for next 12 months, 2020F 95% booked ü De-risked growth plan supported by existing offering XL Direct Sales OEM Partners ü Increasing TAM through transition to all-electric and launch of class 7/8 by 2023 $ Millions XL Fleet Revenue Forecast $1,600 $1,400 $1,200 $1,000 $800 $600 FMC Partners Upfitter Partners $400 $200 $0 2020 2021 2022 2023 2024 CL 2-6 HEV & PHEV XL EV Class 4-6 XL xEV Class 7-8 International & Other 18 Confidential
Future 5 XL is Creating a Fully Integrated Platform for Fleet Electrification Proof Expanding integrated product and service offering to enable “Electrification-as-a-Service” Real Time Data Proprietary Electric Power Management, Monitoring & Analytics Powertrain Platform Charging & Storage Fully Integrated & Proprietary Fleet Electrification Platform • Broad xEV product offering with • Proprietary, cloud-based vehicle • Comprehensive charging and established production connectivity platform power management solutions • Proven path to commercialization • Rapid reporting & remote • Onsite storage and power upgrading generation • All electric platform in development • Actionable intelligence • Optimized electrification strategies 19 ConfidentialFuture 5 XL is Creating a Fully Integrated Platform for Fleet Electrification Proof Expanding integrated product and service offering to enable “Electrification-as-a-Service” Real Time Data Proprietary Electric Power Management, Monitoring & Analytics Powertrain Platform Charging & Storage Fully Integrated & Proprietary Fleet Electrification Platform • Broad xEV product offering with • Proprietary, cloud-based vehicle • Comprehensive charging and established production connectivity platform power management solutions • Proven path to commercialization • Rapid reporting & remote • Onsite storage and power upgrading generation • All electric platform in development • Actionable intelligence • Optimized electrification strategies 19 Confidential
XL Leadership Team Overview Seasoned and talented management team dedicated to executing the Company’s vision Leadership Team Advisors Board of Directors Dimitri Kazarinoff Chief Executive Officer & Board Member Rick Wagoner Former Chief Deb Frodl Board Chair Accomplished transportation industry executive. Led the Executive Officer of General Former Exec. Director of GE Ecomagination with an hybrid powertrain systems division of Eaton and was President Motors additional 20 years of management experience in of AVL Powertrain Engineering. GE Capital. Ambassador for the Clean Energy, Education & Empowerment for Women Initiative Dennis Beal Former Vice Tod Hynes Founder, Chief Strategy Officer Brian Piern VP of Sales & Marketing President of Global Vehicles at & Board Member FedEx 17+ years of experience in energy innovation Experienced leader with 25+ years of sales and and fleet electrification. Tod is also a Senior marketing experience. Brian has previously Richard Canny Board Member Lecturer at MIT, where he received his B.S. in held positions at Element Fleet Management, President of Ultimation Industries. Has held multiple management science. GE Capital and Schneider National. roles within Ford including CEO of Ford South Milo Werner Former Senior America. Former CEO of Think EVs. Manager of New Products at Mike Kenhard CTO, VP of Engineering Tesla Rob Kisiel VP, Supply Chain & Production 20+ years of automotive product development 20+ years in Operations & Supply Chain with experience with leading OEMs and Tier 1s, emphasis on cost down and ERP for multi- including Ford and Denso. Mike has an nationals, including HP and Philips. Holds an extensive background in engineering EV Teasha Feldman-Fitzthum Chris Hayes Board Member MBA and a Six Sigma Blackbelt. propulsion systems for scale. Former Director of Engineering Founder and Managing Partner at Alturus. Deeply at Ultra Capital involved in the clean energy and sustainability sectors. Previously founded and sold Altenex. Pierre Auguste Executive Controller Hanyun Yang Dir. Global Business Development 20+ years of financial services experience. Held More than 25 years of global commercial Rick Cutright Former Director of positions at State Street Global Advisors and vehicle industry experience, including Product at General Electric Enterprise Holdings, Ltd. Holds a BS in Finance business development and global sourcing and an MBA with a Finance concentration. for vehicle electrification. Scott Dupcak Board Member Managing Director at Constellation Technology Colin Filthaut Dir. Program Management Zhanjiang Zou Dir. Global New Ventures. Oversees venture investing and the Jim Lyons Former Chief Applications commercialization of new energy technologies within Engineer at General Electric 20+ years of automotive project management Exelon. 25+ years of experience in automotive product Global Research experience. Responsible for new product development. Previously held engineering development efforts and process optimization. management positions with Eaton and AVL Has a ME degree from U. of Waterloo, Canada. with a focus on vehicle electrification. 20 ConfidentialXL Leadership Team Overview Seasoned and talented management team dedicated to executing the Company’s vision Leadership Team Advisors Board of Directors Dimitri Kazarinoff Chief Executive Officer & Board Member Rick Wagoner Former Chief Deb Frodl Board Chair Accomplished transportation industry executive. Led the Executive Officer of General Former Exec. Director of GE Ecomagination with an hybrid powertrain systems division of Eaton and was President Motors additional 20 years of management experience in of AVL Powertrain Engineering. GE Capital. Ambassador for the Clean Energy, Education & Empowerment for Women Initiative Dennis Beal Former Vice Tod Hynes Founder, Chief Strategy Officer Brian Piern VP of Sales & Marketing President of Global Vehicles at & Board Member FedEx 17+ years of experience in energy innovation Experienced leader with 25+ years of sales and and fleet electrification. Tod is also a Senior marketing experience. Brian has previously Richard Canny Board Member Lecturer at MIT, where he received his B.S. in held positions at Element Fleet Management, President of Ultimation Industries. Has held multiple management science. GE Capital and Schneider National. roles within Ford including CEO of Ford South Milo Werner Former Senior America. Former CEO of Think EVs. Manager of New Products at Mike Kenhard CTO, VP of Engineering Tesla Rob Kisiel VP, Supply Chain & Production 20+ years of automotive product development 20+ years in Operations & Supply Chain with experience with leading OEMs and Tier 1s, emphasis on cost down and ERP for multi- including Ford and Denso. Mike has an nationals, including HP and Philips. Holds an extensive background in engineering EV Teasha Feldman-Fitzthum Chris Hayes Board Member MBA and a Six Sigma Blackbelt. propulsion systems for scale. Former Director of Engineering Founder and Managing Partner at Alturus. Deeply at Ultra Capital involved in the clean energy and sustainability sectors. Previously founded and sold Altenex. Pierre Auguste Executive Controller Hanyun Yang Dir. Global Business Development 20+ years of financial services experience. Held More than 25 years of global commercial Rick Cutright Former Director of positions at State Street Global Advisors and vehicle industry experience, including Product at General Electric Enterprise Holdings, Ltd. Holds a BS in Finance business development and global sourcing and an MBA with a Finance concentration. for vehicle electrification. Scott Dupcak Board Member Managing Director at Constellation Technology Colin Filthaut Dir. Program Management Zhanjiang Zou Dir. Global New Ventures. Oversees venture investing and the Jim Lyons Former Chief Applications commercialization of new energy technologies within Engineer at General Electric 20+ years of automotive project management Exelon. 25+ years of experience in automotive product Global Research experience. Responsible for new product development. Previously held engineering development efforts and process optimization. management positions with Eaton and AVL Has a ME degree from U. of Waterloo, Canada. with a focus on vehicle electrification. 20 Confidential
Introduction to the Pivotal II Team Jon Ledecky, Chairman & CEO Kevin Griffin, Director James Brady, CFO • 35+ years of investment and operational experience • Founded MGG Investment Group in 2014; CEO and CIO • Founder and owner of Brady Enterprises, which provides financial, legal and strategic services to growth companies – Co-Founder, Chairman and CEO of Pivotal I • Originated and invested $4B+ across the capital structure of middle market businesses • Brings experience in financial mgmt., business dev., corporate – Executed hundreds of acquisitions across multiple dev. & capital transactions for growth companies industries, raised over $20B in debt and equity • Co-Founder & Director of Pivotal I • Select prior experience: – Co-owner NHL’s New York Islanders since 2014. Prior • Highbridge Principal Strategies from inception to $6B+ owner Washington Wizards & Washington Capitals – CFO of Pivotal I • Head of Private Investing at Octavian (2007–2009) – Director of 12+ public companies during his career – CFO and General Counsel Sweetgreen (2013–2014) • Key member of Drawbridge fund at Fortress as AUM grew from – Founded U.S. Office Products; CEO & Chairman $1B - $10B (2003–2007) – Finance & Legal Executive VP Audax Health Solutions • B.A. Harvard University & M.B.A. Harvard Business School • Winner: M&A Advisor “40 under 40 Emerging Leaders” 2015 • B.A. College of William and Mary, J.D. George Washington National Law Center & M.B.A. The University of Virginia • Former Member of NCOE & U.S. Chamber of Commerce • Received a BSBA in Finance from Georgetown University Sarah Sclarsic, Director Efrat Epstein, Director Katrina Adams, Director • Conducting research at the MIT Media Lab, an interdisciplinary • Director of Pivotal I • Director of Pivotal I research lab since September 2018 • MD of Sound Ventures since November 2016 • Chairman & President US Tennis Association (2015 – 2018) • VP of Operations of Sentieo Inc., producer of software for – Leads investing, strategy & the day-to-day mgmt. of the fund – Served as Chairman of the US Open investors to research and analyze information on public • Led Global Strategy at Marsh (January 2016 - November 2016) – First African-American, former pro tennis player & youngest companies, from (2016 – 2018) person to serve as President in 135-year history • SVP of Planning and Head of IR at iHeartMedia (2013 - 2016) • Business Director at Modern Meadow Inc (2013 – 2016) nd – First to serve a 2 two-year term as Chairman & President • Head of Bus. Dev. & Strategy at CLEAR (2011 - 2013) • Independent consultant from 2011 to 2013 • VP of the International Tennis Federation in 2015 • Earlier in career, part of Merrill Lynch’s Global Energy & Power • Co-founder of Getaround Inc., a carsharing company in 2009 IB group as well as the Global Strategy team at NYSE Euronext • Chairman of the Fed Cup Committee since 2016 – Director of Operations from 2009 to 2010 • BA University of Texas & MBA from Harvard Business School • Serves BoD Int. Tennis Hall of Fame & Women’s Tennis Assoc. • BA in Bioethics from Harvard University • “25 Influential Black Women in Business” & “Game Changers” 21 ConfidentialIntroduction to the Pivotal II Team Jon Ledecky, Chairman & CEO Kevin Griffin, Director James Brady, CFO • 35+ years of investment and operational experience • Founded MGG Investment Group in 2014; CEO and CIO • Founder and owner of Brady Enterprises, which provides financial, legal and strategic services to growth companies – Co-Founder, Chairman and CEO of Pivotal I • Originated and invested $4B+ across the capital structure of middle market businesses • Brings experience in financial mgmt., business dev., corporate – Executed hundreds of acquisitions across multiple dev. & capital transactions for growth companies industries, raised over $20B in debt and equity • Co-Founder & Director of Pivotal I • Select prior experience: – Co-owner NHL’s New York Islanders since 2014. Prior • Highbridge Principal Strategies from inception to $6B+ owner Washington Wizards & Washington Capitals – CFO of Pivotal I • Head of Private Investing at Octavian (2007–2009) – Director of 12+ public companies during his career – CFO and General Counsel Sweetgreen (2013–2014) • Key member of Drawbridge fund at Fortress as AUM grew from – Founded U.S. Office Products; CEO & Chairman $1B - $10B (2003–2007) – Finance & Legal Executive VP Audax Health Solutions • B.A. Harvard University & M.B.A. Harvard Business School • Winner: M&A Advisor “40 under 40 Emerging Leaders” 2015 • B.A. College of William and Mary, J.D. George Washington National Law Center & M.B.A. The University of Virginia • Former Member of NCOE & U.S. Chamber of Commerce • Received a BSBA in Finance from Georgetown University Sarah Sclarsic, Director Efrat Epstein, Director Katrina Adams, Director • Conducting research at the MIT Media Lab, an interdisciplinary • Director of Pivotal I • Director of Pivotal I research lab since September 2018 • MD of Sound Ventures since November 2016 • Chairman & President US Tennis Association (2015 – 2018) • VP of Operations of Sentieo Inc., producer of software for – Leads investing, strategy & the day-to-day mgmt. of the fund – Served as Chairman of the US Open investors to research and analyze information on public • Led Global Strategy at Marsh (January 2016 - November 2016) – First African-American, former pro tennis player & youngest companies, from (2016 – 2018) person to serve as President in 135-year history • SVP of Planning and Head of IR at iHeartMedia (2013 - 2016) • Business Director at Modern Meadow Inc (2013 – 2016) nd – First to serve a 2 two-year term as Chairman & President • Head of Bus. Dev. & Strategy at CLEAR (2011 - 2013) • Independent consultant from 2011 to 2013 • VP of the International Tennis Federation in 2015 • Earlier in career, part of Merrill Lynch’s Global Energy & Power • Co-founder of Getaround Inc., a carsharing company in 2009 IB group as well as the Global Strategy team at NYSE Euronext • Chairman of the Fed Cup Committee since 2016 – Director of Operations from 2009 to 2010 • BA University of Texas & MBA from Harvard Business School • Serves BoD Int. Tennis Hall of Fame & Women’s Tennis Assoc. • BA in Bioethics from Harvard University • “25 Influential Black Women in Business” & “Game Changers” 21 Confidential
Summary Massive Market Opportunity with Accelerating Adoption & Long Runway for Growth Trusted Name in Fleet Electrification with Strong Customer Validation Extensive Blue-Chip Customer Base with Significant Expansion Opportunities Asset-Light & Highly Scalable Business Leveraging Existing Production Channels Lower Risk and Faster Path to Electrification-as-a-Service Offering 22 ConfidentialSummary Massive Market Opportunity with Accelerating Adoption & Long Runway for Growth Trusted Name in Fleet Electrification with Strong Customer Validation Extensive Blue-Chip Customer Base with Significant Expansion Opportunities Asset-Light & Highly Scalable Business Leveraging Existing Production Channels Lower Risk and Faster Path to Electrification-as-a-Service Offering 22 Confidential
Award Winning Company & Technology NEVCA Award 2018: Finalist, Time Magazine: Best Real Leaders: 100 Top Impact S&P Global Platts: Commercial Boston Business Journal 2018: Clean Tech & Energy Company Inventions of 2019 Companies of 2020 Technology of 2018 Best Places to Work of the Year Inc. Magazine 2014 Best- Boston Business Journal 2012 – Electronic Designs 2011 – Best CERAWeek 2004 – Energy Fast Company 2014 – Energy Designed American-Made Best Green Practices Award of New Technologies / Innovation Pioneer Innovation Pioneer Product: Transportation Winner Components 23 ConfidentialAward Winning Company & Technology NEVCA Award 2018: Finalist, Time Magazine: Best Real Leaders: 100 Top Impact S&P Global Platts: Commercial Boston Business Journal 2018: Clean Tech & Energy Company Inventions of 2019 Companies of 2020 Technology of 2018 Best Places to Work of the Year Inc. Magazine 2014 Best- Boston Business Journal 2012 – Electronic Designs 2011 – Best CERAWeek 2004 – Energy Fast Company 2014 – Energy Designed American-Made Best Green Practices Award of New Technologies / Innovation Pioneer Innovation Pioneer Product: Transportation Winner Components 23 Confidential
Section II FinancialsSection II Financials
Implies 6% penetration of Summary Financials North American Class 2 – 8 commercial vehicle market (1) (in millions) 2019A 2020E 2021E 2022E 2023E 2024E Revenue $7.2 $21.0 $75.3 $281.1 $647.7 $1,377.1 % Growth NA 192% 258% 273% 130% 113% Cost of Goods Sold $8.1 $18.6 $58.2 $212.6 $490.1 $1,037.1 Gross Profit ($0.9) $2.4 $17.1 $68.5 $157.6 $340.0 % Margin (12%) 12% 23% 24% 24% 25% EBITDA ($13.1) ($9.9) ($15.4) $30.7 $117.3 $308.1 % Margin (182%) (47%) (20%) 11% 18% 22% (1) 2019 financials reflect the Company’s AICPA audit for fiscal year ended December 31, 2019 25 ConfidentialImplies 6% penetration of Summary Financials North American Class 2 – 8 commercial vehicle market (1) (in millions) 2019A 2020E 2021E 2022E 2023E 2024E Revenue $7.2 $21.0 $75.3 $281.1 $647.7 $1,377.1 % Growth NA 192% 258% 273% 130% 113% Cost of Goods Sold $8.1 $18.6 $58.2 $212.6 $490.1 $1,037.1 Gross Profit ($0.9) $2.4 $17.1 $68.5 $157.6 $340.0 % Margin (12%) 12% 23% 24% 24% 25% EBITDA ($13.1) ($9.9) ($15.4) $30.7 $117.3 $308.1 % Margin (182%) (47%) (20%) 11% 18% 22% (1) 2019 financials reflect the Company’s AICPA audit for fiscal year ended December 31, 2019 25 Confidential
Anticipated Use of Funds • Increased organization capacity $25M Scale For Core Profitability • Scale up sourcing and operations • Anti idle & export power • Class 4-6 EV $50M Product Development • Class 7&8 xEV • Secure distribution partners $350M internationally $25M International Expansion (Estimated Cash in Trust • Adapt systems to local chassis requirements and PIPE Proceeds) • Roll out to attractive applications $80M Electrification-as-a-Service segments and finance vehicles and infrastructure • Buy versus make opportunities to $170M Corporate Development / accelerate xEV products and growth General Corporate • Pay down / pre-pay debt 26 ConfidentialAnticipated Use of Funds • Increased organization capacity $25M Scale For Core Profitability • Scale up sourcing and operations • Anti idle & export power • Class 4-6 EV $50M Product Development • Class 7&8 xEV • Secure distribution partners $350M internationally $25M International Expansion (Estimated Cash in Trust • Adapt systems to local chassis requirements and PIPE Proceeds) • Roll out to attractive applications $80M Electrification-as-a-Service segments and finance vehicles and infrastructure • Buy versus make opportunities to $170M Corporate Development / accelerate xEV products and growth General Corporate • Pay down / pre-pay debt 26 Confidential
Transaction Overview Commentary Pro Forma Valuation • XL equity holders will receive stock in public company (no cash paid to XL ($ in millions except per share data) shareholders at closing) • Proceeds for the transaction will be used to capitalize balance sheet for Share Price $10.00 development of new products, working capital, general corporate purpose, pay down or prepay debt and to pay transaction expenses (1) Pro Forma Shares Outstanding 143.8 • Completion of the transaction is expected to occur around Q4 2020 Equity Value $1,438 • Transaction includes an upsized $150M fully committed PIPE priced at $10 / share backed by strategic and institutional investors Less: Net Cash to Balance Sheet (350) • Pivotal Chairman and CEO Jon Ledecky and Pivotal Directors Kevin Griffin and Sarah Sclarsic will join the merged company’s Board of Directors upon completion Implied Enterprise Value $1,087 of the transaction (4) Cash Sources and Uses Post Money Ownership ($ in millions) $ % Seller Rollover $1,000 72% 10% 16% (2) Pivotal Shareholders Estimated Cash in Trust 232 17% PIPE Proceeds 150 11% 4% Pivotal Sponsor Total Sources $1,382 100% Equity Consideration to XL Shareholders $1,000 72% Existing XL Shareholders Cash to Sellers 0 0% (3) Cash to Balance Sheet 350 25% PIPE Shareholders 70% Estimated transaction costs 32 2% Total Uses $1,382 100% (1) Shares outstanding and ownership at close includes 23.0M PIC shares outstanding, 5.75M Pivotal Sponsor’s shares, 100.0M shares issued to existing XL shareholders, and 15.0M shares issued to the PIPE investors. (2) Cash in trust assumes no redemptions in connection with the business combination. (3) Does not reflect potential repayment / pre-payment of outstanding debt up to $20M. (4) Post money equity ownership assumes no redemptions. 27 ConfidentialTransaction Overview Commentary Pro Forma Valuation • XL equity holders will receive stock in public company (no cash paid to XL ($ in millions except per share data) shareholders at closing) • Proceeds for the transaction will be used to capitalize balance sheet for Share Price $10.00 development of new products, working capital, general corporate purpose, pay down or prepay debt and to pay transaction expenses (1) Pro Forma Shares Outstanding 143.8 • Completion of the transaction is expected to occur around Q4 2020 Equity Value $1,438 • Transaction includes an upsized $150M fully committed PIPE priced at $10 / share backed by strategic and institutional investors Less: Net Cash to Balance Sheet (350) • Pivotal Chairman and CEO Jon Ledecky and Pivotal Directors Kevin Griffin and Sarah Sclarsic will join the merged company’s Board of Directors upon completion Implied Enterprise Value $1,087 of the transaction (4) Cash Sources and Uses Post Money Ownership ($ in millions) $ % Seller Rollover $1,000 72% 10% 16% (2) Pivotal Shareholders Estimated Cash in Trust 232 17% PIPE Proceeds 150 11% 4% Pivotal Sponsor Total Sources $1,382 100% Equity Consideration to XL Shareholders $1,000 72% Existing XL Shareholders Cash to Sellers 0 0% (3) Cash to Balance Sheet 350 25% PIPE Shareholders 70% Estimated transaction costs 32 2% Total Uses $1,382 100% (1) Shares outstanding and ownership at close includes 23.0M PIC shares outstanding, 5.75M Pivotal Sponsor’s shares, 100.0M shares issued to existing XL shareholders, and 15.0M shares issued to the PIPE investors. (2) Cash in trust assumes no redemptions in connection with the business combination. (3) Does not reflect potential repayment / pre-payment of outstanding debt up to $20M. (4) Post money equity ownership assumes no redemptions. 27 Confidential
Valuation Benchmarking (1)(2) Based on $1B EV Notable EV Players 10.5x 5.5x 6.9x 6.4x 6.4x 5.5x Median 3.0x 2.9x 1.5x 1.5x 1.2x 1.1x XL Velodyne Hyllion Nikola Tesla Workhorse Canoo Fisker Lordstown 6.3x 5.4x 2.7x 3.4x 3.3x 2.7x Median 1.8x 1.8x 0.7x 0.7x 0.7x 0.7x 0.4x XL Velodyne Tesla Hyllion Nikola Workhorse Canoo Lordstown Fisker 75.9x 53.6x 35.2x 33.1x 33.1x Median 12.8x 8.0x 8.7x (3) (3) NMF NMF XL Velodyne Workhorse Tesla Hyllion Lordstown Fisker Nikola Canoo 29.2x 29.0x 23.0x 12.6x 13.4x 11.8x Median 6.4x 6.4x (3) 3.0x 3.0x 1.9x 1.9x NMF NMF XL Tesla Velodyne Workhorse Canoo Hyllion Lordstown Fisker Nikola (1) In instances where SPAC transaction has not yet closed, financial projections based on Investor Presentations; Market Data based on current SPAC share value as of 9/16/20 applied to Pro Forma Shares Outstanding & Pro Forma Net Cash. (2) For Public Companies, financial projections based on consensus Analyst estimates; Market Data from Capital IQ as of 9/16/20. (3) Consensus analyst estimates and/or management forecasts project negative EBITDA values or EV / EBITDA multiple >100x. 28 Confidential EV / EBITDA EV / Revenue 2024 2023 2024 2023Valuation Benchmarking (1)(2) Based on $1B EV Notable EV Players 10.5x 5.5x 6.9x 6.4x 6.4x 5.5x Median 3.0x 2.9x 1.5x 1.5x 1.2x 1.1x XL Velodyne Hyllion Nikola Tesla Workhorse Canoo Fisker Lordstown 6.3x 5.4x 2.7x 3.4x 3.3x 2.7x Median 1.8x 1.8x 0.7x 0.7x 0.7x 0.7x 0.4x XL Velodyne Tesla Hyllion Nikola Workhorse Canoo Lordstown Fisker 75.9x 53.6x 35.2x 33.1x 33.1x Median 12.8x 8.0x 8.7x (3) (3) NMF NMF XL Velodyne Workhorse Tesla Hyllion Lordstown Fisker Nikola Canoo 29.2x 29.0x 23.0x 12.6x 13.4x 11.8x Median 6.4x 6.4x (3) 3.0x 3.0x 1.9x 1.9x NMF NMF XL Tesla Velodyne Workhorse Canoo Hyllion Lordstown Fisker Nikola (1) In instances where SPAC transaction has not yet closed, financial projections based on Investor Presentations; Market Data based on current SPAC share value as of 9/16/20 applied to Pro Forma Shares Outstanding & Pro Forma Net Cash. (2) For Public Companies, financial projections based on consensus Analyst estimates; Market Data from Capital IQ as of 9/16/20. (3) Consensus analyst estimates and/or management forecasts project negative EBITDA values or EV / EBITDA multiple >100x. 28 Confidential EV / EBITDA EV / Revenue 2024 2023 2024 2023
Exhibit 99.3
|
|
XL Fleet Merger with Pivotal Investment Corporation II
Investor Conference Call Transcript
September 18, 2020
Operator
Good morning, and welcome to the XL Fleet and Pivotal Investment Corporation II Transaction Conference Call.
I would like to first remind everyone that this call may contain forward-looking statements including, but not limited to, XL Fleets and Pivotal Investment Corporation IIs expectations or predictions of financial and business performance and conditions, expectations or assumptions as to completion of the proposed transaction between the parties, product development and performance, including but not limited to the timing of development milestones, competitive and industry outlook and the timing and completion of the transaction. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions and they are not guarantees of performance. I encourage you to read the press release issued today and Pivotal Investment Corporation IIs filings with the SEC, which will include an investor presentation, for a discussion of the risks that can affect the business combination, XLs business and the business of the combined company after completion of the proposed business combination.
Pivotal Investment Corporation and XL Fleet are under no obligation and expressly disclaim any obligation to update, alter or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. I will now turn the call over to Mr. Jon Ledecky. Please go ahead, sir.
Jon Ledecky, Chairman & CEO, Pivotal Investment Corporation II
Good morning, Im Jon Ledecky, Chairman and CEO of Pivotal Investment Corporation II. Its a pleasure to announce today that we are merging with XL Fleet, a leader in fleet electrification.
We believe XL is the most proven and most trusted company in fleet electrification today, with more commercial customers, more miles driven and a broader product offering than anyone else in the market. By leveraging its proprietary technology and first-mover advantage, XL is experiencing significant growth. We believe XL Fleet is best positioned to take advantage of the dramatic shift toward fleet electrification expected over the next two decades. XL will take many of their existing 200 plus customers on the journey to full electrification.
|
|
XL Fleet is led by a world-class management team, including Tod Hynes, Founder and Chief Strategy Officer, and Dimitri Kazarinoff, Chief Executive Officer. Tod and Dimitri have rich backgrounds spanning automotive and clean energy, and together, are making their mark on the electrification of the commercial fleet.
Pivotal feels fortunate to be partnering with XL Fleet as they transition to becoming a public company. Pivotal sourced the mandate based on part on a multiple-decade long relationship between myself and Tod Hynes. I look forward to serving on the combined companys board and bringing my extensive network of potential new customers to XLs sales and marketing efforts.
Compared to others in the burgeoning EV and electrification space, XL Fleet is delivering significant revenue today versus others who are years behind. In fact, XL Fleets current revenues are multiples of its nearest competitors, while the combined companys pro-forma valuation reflects an attractive discount versus its publicly traded peer group.
We are pleased that many top institutional investors have committed to the PIPE that will close simultaneously with the transaction. XL Fleet will be armed with the capital necessary to make the journey to approximately 1.5 billion dollars of expected revenue in 2024.
Tod, over to you.
Tod Hynes, Founder & Chief Strategy Officer, XL Fleet
Thanks, Jon. I am excited to be here to tell you about XL Fleet, our mission of accelerating fleet electrification through cost-effective solutions, and our tremendous opportunities for further growth.
We started XL in 2009 with the goal of capitalizing on one of the largest opportunities in energy the electrification of the commercial fleet industry. Today, we are proud to be a leader in the U.S., with more than 3,200 units on the road and over 130 million customer miles driven. I am excited to walk through how we achieved this, and our plans for continued growth and innovation over the long-term.
Ill start by framing the market landscape. The opportunity for fleet electrification is massive, as fleets spend over 1 trillion dollars per year on fuel, new vehicle procurement and other expenses. 1 million commercial vehicles are sold annually just in North America and the commercial fleet accounts for over 20 percent of transportation fuel demand. While the market is comprised of a range of different vehicle types and customer requirements, it has one thing in common a significant increase in the demand for more sustainable vehicle solutions.
Today, electric vehicles account for an immaterial portion of the total commercial market. While the scale and trajectory towards electrification is clear, the one question that often comes up is when do electric vehicles take over?
2
|
|
We believe this is the future of our industry, but even the most aggressive projections have it taking decades. In addition to the electrification of the vehicle base, this shift will require a significant build-out to the charging infrastructure and energy supply around the world, so the industry will take time to adapt to such a drastic shift.
Its this dynamic that provides XL with a significant advantage, driven by our ability to offer a wide range of fleet electrification solutions. As the industry evolves to its increasingly electric future, hybrids and plug-in hybrids will play an essential role in rapidly reducing emissions for commercial vehicle applications which are too demanding for all electric solutions.
Given our firmly-established presence in the U.S. and Canada, XL is positioned to leverage the production, supply chain and customer base we have in place today to bring all-electric systems to market in the right segments where the economics make the most sense. Additionally, our low-cost, adaptable business model enables us to effectively navigate this transition.
We are also well positioned to bundle electrified vehicles, charging infrastructure and energy supply to provide electrification as-a-service and leverage the significant amounts of clean infrastructure capital looking for attractive returns. We are excited to have a significant first-mover advantage in delivering this value to customers.
Ill now pass things over to Dimitri to further discuss the market backdrop and the competitive landscape.
Dimitri Kazarinoff, Chief Executive Officer, XL Fleet
Thanks, Tod. I echo Tod and Jons excitement in the transaction we have announced today.
The commercial fleet market is highly fragmented, introducing significant obstacles to the implementation of more effective, sustainable solutions. There are many different types of commercial vehicles with lots of different equipment hydraulic buckets, welding equipment, and lots more. The requirements in each these applications is highly variable, so a single technology will not solve the needs of them all.
Thats why XL has a very differentiated and advantaged approach, given our focus on the electrified drivetrain. We have hybrid and plug-in hybrid units in the market today, working for satisfied customers, and scaling every day. Looking ahead, we plan to bring to market all electric drive systems in class 4 and up. We believe our strategy of working with existing industry players advances us to market more quickly, helps to deliver cost-effective solutions tailored to the applications, and will enable XL to drive further transformation of the industry.
3
|
|
Turning to the competitive landscape there have been a number of recent SPAC transactions in the broader EV space. We are proud of our differentiated position, with more units sold and more models available to meet customer needs. We have more than 3,200 units on the road today and are experiencing great momentum. We are shipping hundreds of additional units every month, putting us on target to deploy more than 4,000 systems by year-end and almost 10,000 units by the end of 2021. Additionally, our 9 available models today means we are more than double our closest competitor in offering the optionality and customization that the customer base really requires. Together with our scaled production capacity and significant customer base, we believe this establishes our leadership position in the market and a de-risked path to electrification.
Building customer trust in this industry is critically important and takes time, and we are proud of our track-record. We have been on the road with our major customers for years, including through hurricanes and blizzards, and our solutions have delivered the reliability and value customers require.
Thanks in part to this track-record, we are realizing great traction in the marketplace today. We have a 12-month rolling sales pipeline of more than 220 million dollars in potential new business opportunities, and we are on target to triple our 2020 revenues versus last year. More importantly from our perspective is the growth weve been realizing in average order size, with our largest order in 2020 growing by more than 3x versus last year. This is reflective of what we refer to as a transition from trial to adoption. Traditionally, this is a very conservative industry only adopting new technology after its been proven and is trusted, and we believe our order momentum is indicative of this transition for us and our customers.
Ill now pass it back over to Tod for a discussion on our proven technology.
Tod Hynes, Founder & Chief Strategy Officer, XL Fleet
Thanks, Dimitri.
We have developed an electric powertrain platform which can be rapidly integrated into a range of commercial vehicles. Our singular focus is on the electric powertrain, and we are on our fourth generation hybrid system and second generation plug-in hybrid system. We are leveraging our technology supply chain to launch an all-electric offering targeted for 2022. To us, its not just about getting powertrains integrated into a range of vehicles, its also about rapidly evolving and deploying that powertrain over time.
Its equally as important to ensure that the system is produced in a cost-effective manner. To accomplish this, we have created a production process that leverages the existing installation capacity of the industry. Almost all commercial vehicles are built in a two stage process. The OEM creates an incomplete vehicle which is sent to an upfitter who completes assembly by adding specialized equipment such as the body for a shuttle bus, the box for a box truck or a bucket system for a bucket truck. Its at this second stage that our electric powertrains are added to the vehicle. Once installed, vehicles are sent anywhere in the country to the end customer.
4
|
|
This is how commercial vehicles have been built in the U.S. for over 100 years to meet the various needs of fragmented markets, and is a critical way in which we differentiate ourselves in the market. By comparison, others are spending billions of dollars trying to build vehicles from scratch or take other approaches.
Our production portfolio includes XLhybrid and XLplug-in, both of which are available on a range of models today, and in time, will include XLelectric, which is currently under development for larger applications.
The hybrid platform was our initial product and represents our broadest offering today from class 2 to class 6. This was the best way to enter the market for a number of reasons. First, it was where the economics made the most sense, as battery technology was still expensive. It also provided ease of adoption, as customers did not need to worry about factors such as driving range or charging infrastructure. They were able to very rapidly deploy hybrid systems across their fleet and immediately start reducing fuel consumption and reducing emissions.
As battery costs came down and the market evolved around the 2017/2018 timeframe, we launched our plug-in offering. We currently provide solutions to the class 2 market, and we are introducing our next gen plug-in solution for larger vehicles within the next 6 months.
As battery costs continue to fall, we are positioned to also be an early and leading supplier of all electric systems, which we plan to have available to the market in 2022.
As youd imagine, as you go up in class size, the number of vehicles in the market goes down. In fact, class 8 accounts for less than 2 percent of all vehicles sold per year in the U.S., however, they account for more than 20 percent of all transportation fuel consumption and therefore provide the greatest opportunity for cost and emissions reductions. We expect to introduce a class 8 offering in 2022 to help customers reduce fuel usage and emissions across the commercial vehicle market.
With that, Ill pass it back over to Dimitri to discuss the importance of reliability, expand more on our highly-scalable network, and highlight our world-class leadership team.
Dimitri Kazarinoff, Chief Executive Officer, XL Fleet
Thanks, Tod.
As noted earlier, one of the principal barriers to adoption across the commercial fleet industry is reliability. In addition to reliability, its critically important that solutions provide attractive financial return, while also delivering the sustainability benefits our customers really want. Its this triple play value proposition that XL is focused on day in and day out.
5
|
|
Our ability to do drive adoption in critical use and mission critical applications evidences the reliability we have established where there is little margin for error, while also delivering the financial benefit and sustainability components of our proposition. An example of this is the Seattle Fire Department, who currently uses 27 XL equipped ambulances, where they are seeing strong vehicle performance, positive operational savings and significant emissions reductions.
We have developed a significant network of upfitter partners across the U.S. who together, are already producing over 100 thousand commercial vehicles per year. By utilizing our Installation Process Platform, we provide step-by-step instructions and training to the technician and are able to track every detail of the installation to ensure quality is upheld throughout. Once complete, we utilize a remote commissioning app to ensure the systems are functioning properly as they leave the facilities.
Through our approach, we can significantly increase our own production capacity in very little time. For example, we can obtain an additional 10,000 units of capacity for less than 500 thousand dollars in about 6 months and we can get up to 100,000 units of capacity for under 5 million dollars in less than 18 months. This is tremendous leverage, allows us to scale at a rapid pace, and differentiates us versus the competition.
Turning to our marketing approach, XL started with direct sales. Over time, we began to partner with channels including large OEMs and upfitters, allowing us to leverage the sales teams of our partners and magnify opportunities for our systems.
Over the next couple of years, we forecast significant growth in the products we have released. With the capital raised as part of this transaction, we expect to drastically improve our product development capabilities, while also expanding and growing internationally. This includes the transition to all-electric and the launch of heavy duty products expected by 2023.
We forecast to scale our revenue up to approximately 1.5 billion dollars by 2024, which reflects approximately 6 percent of the total market.
XL is creating a fully integrated platform for total fleet electrification. We started this business by installing data collection devices in customer vehicles to understand usage patterns and help to inform optimal electrification technology solutions. We started with our hybrid offering before expanding to the plug-in market, and will soon introduce our all-electric solution. XL has accumulated over 130 million miles of real world operating data, providing critical insight into technology development and its deployment.
6
|
|
Providing charging infrastructure for the end user is an incredibly important piece of the electrification puzzle. Our customers and their vehicles and facilities are spread out across the country, and we plan to effectively electrify their fleet through providing charging infrastructure, onsite power and storage and power management services.
We plan to offer this service to all of our customers on an a la carte basis, and we see a tremendous opportunity in wrapping this suite into electrification-as-a-service through a financed offering.
Turning to our leadership team. Any great business idea needs a great team. Our executive leadership team has great industry and technology experience and we have a seasoned Board with deep experience across automotive and energy. Advisors include a former CEO of General Motors, and Dennis Beal, Former Vice President of Global Vehicles at FedEx, among others. With this transaction, we look forward to adding more talent across the organization including additional key leadership positions.
Briefly on the anticipated use of funds. A key differentiator for XL is that we require a nominal investment of about 25 million dollars to achieve profitability in our core business. We expect to allocate 50 million dollars towards growth and product development, including our all-electric offering and our xEV platform for heavy duty applications. We expect to invest 25 million dollars towards our goal of international expansion, as we build off of our base of global customers, partners and investors. We expect to allocate roughly 80 million dollars towards our electrification-as-a-service initiative, which we see as one of the great long term opportunities to drive growth. We anticipate allocating the balance of transaction proceeds towards corporate development, as certain aspects of our growth may make more sense to buy rather than make.
Ill now pass it to Tod for some closing comments.
Tod Hynes, Founder & Chief Strategy Officer, XL Fleet
Thanks, Dimitri.
In summary, Ill highlight several key points:
We are going after a significant market, and with our diverse portfolio of offerings, we have a very long runway regardless of how the industry transforms. We have built a very trusted name in the industry, which remains paramount in the commercial vehicle space. We are proud to be a leader in the U.S., with more than 200 customers, 3,200 units on the road and over 130 million customer miles driven.
7
|
|
We have intentionally developed a very scalable, asset-light business model that leverages the existing installation capacity of the industry and provides maximum flexibility to our continued growth. Overall, we believe this positions us as a lower-risk path to electrification, providing electrification-as-a-service to our customers as we deliver reliability, sustainability and financial returns.
For additional details, including our financials, we would encourage you to review the investor presentation that will be filed by Pivotal in connection with this transaction.
Thank you for your interest and for your time today.
Operator
That concludes todays conference call. Thank you, you may now disconnect.
8