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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-249248

PROXY STATEMENT FOR ANNUAL MEETING OF

PIVOTAL INVESTMENT CORPORATION II

 

 

PROSPECTUS FOR UP TO 100,000,000 SHARES OF CLASS A COMMON STOCK

 

 

The board of directors of Pivotal Investment Corporation II, a Delaware corporation (“Pivotal”), has unanimously approved the Agreement and Plan of Reorganization, dated as of September 17, 2020 (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”), pursuant to which Merger Sub will merge with and into XL, with XL surviving as a wholly owned subsidiary of Pivotal and the securityholders of XL becoming securityholders of Pivotal (the “Merger”). We refer to the Merger and the other transactions contemplated by the Merger Agreement as the “Business Combination.”

Pursuant to the Merger Agreement, each share of XL’s common stock issued and outstanding immediately prior to the effective time of the Merger (including each share of XL’s common stock issued as a result of the conversion of XL’s preferred stock and any conversion or exchange of XL’s convertible promissory notes, each as more fully described in this proxy statement/prospectus) will be automatically converted into the right to receive a number of shares of Pivotal’s Class A common stock equal to the Exchange Ratio. The “Exchange Ratio” is the quotient obtained by dividing 100,000,000 (less 1,125,000 withheld for convertible debt of XL Fleet redeemed) by the fully-diluted number of shares of XL’s common stock outstanding immediately prior to the effective time of the Merger, including shares issuable or treated as issuable upon the conversion of XL’s preferred stock and the exercise, conversion or exchange of XL’s convertible promissory notes, options and warrants (as determined in accordance with the Merger Agreement and more fully described in this proxy statement/prospectus). Assuming that none of XL’s options or warrants are exercised or forfeited prior to the closing of the Business Combination and XL’s convertible promissory notes are converted in whole or in part into shares of XL’s common stock immediately prior to the closing of the Business Combination as described elsewhere in this proxy statement/prospectus, Pivotal presently estimates that the Exchange Ratio will be approximately 0.75644190.

Accordingly, this proxy statement/prospectus covers up to an aggregate of 100,000,000 shares of Pivotal’s Class A common stock to be issued or reserved for issuance to the securityholders of XL at the closing of the Business Combination.

Each of the options to purchase XL’s common stock, whether or not exercisable and whether or not vested, and each of the warrants to purchase XL’s stock, in each case that is outstanding immediately prior to the effective time of the Merger, will be assumed by Pivotal and converted into an option or warrant, as the case may be, to purchase a number of shares of Pivotal’s Class A common stock equal to the number of shares subject to such option or warrant immediately prior to the effective time multiplied by the Exchange Ratio, at an exercise price equal to the exercise price immediately prior to the effective time divided by the Exchange Ratio.

Each of XL’s outstanding convertible promissory notes will be satisfied in full in connection with the Merger. At the option of the holder of each such note, either the entire principal of such note will be converted into shares of XL common stock or the entire principal will be repaid and an additional amount including accrued interest will be converted into shares of XL common stock. All shares of XL’s common stock issued upon such conversion will be entitled to receive shares of Pivotal’s Class A common stock in the Merger as described above. See the section entitled “The Business Combination Proposal—Structure of the Merger—Consideration to XL Securityholders.

In connection with the Merger, Pivotal has entered into subscription agreements with certain investors (the “PIPE Investors”), pursuant to which such PIPE Investors have agreed to purchase an aggregate of 15,000,000 shares of Pivotal’s Class A common stock in a private placement at a price of $10.00 per share for an aggregate commitment of $150,000,000. The closing of the private placement is expected to take place concurrently with the closing of the Business Combination. The subscription agreements are subject to certain conditions, including, among other things, the closing of the Business Combination.

Proposals to approve the Merger Agreement and the other matters discussed in this proxy statement/prospectus will be presented at the annual meeting of stockholders of Pivotal scheduled to be held on December 21, 2020.

Pivotal’s units, Class A common stock and warrants are currently listed on the New York Stock Exchange (the “NYSE”) under the symbols PIC.U, PIC and PIC WS, respectively. Pivotal intends to apply for listing on the NYSE of Pivotal’s Class A common stock and Pivotal’s warrants, under the proposed symbols XL and XL WS, respectively, to be effective at the consummation of the Business Combination. Pivotal’s units will not be listed on the NYSE following consummation of the Business Combination and such units will automatically be separated into their component securities without any action needed to be taken on the part of the holders. Furthermore, each outstanding share of Pivotal’s Class B common stock will convert into one share of Pivotal’s Class A common stock at the closing of the Business Combination, the Class B common stock will cease to exist and Pivotal will thereafter have a single class of common stock. It is a condition to the consummation of the Business Combination that the shares of Pivotal’s Class A common stock to be issued to the stockholders of XL in the Merger be approved for listing on the NYSE (subject only to official notice of issuance thereof and public holder requirements), but there can be no assurance such listing condition will be met. If such listing condition is not met, the Business Combination will not be consummated unless the listing condition is waived by the parties to the Merger Agreement.

Pivotal is an “emerging growth company” and “smaller reporting company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and has elected to comply with certain reduced public company reporting requirements. See “Summary of the Proxy Statement/Prospectus—Emerging Growth Company.”

 

 

This proxy statement/prospectus provides you with detailed information about the Merger and other matters to be considered at the annual meeting of Pivotal’s stockholders. We encourage you to carefully read this entire document. You should also carefully consider the risk factors described in “Risk Factors beginning on page 37 of this proxy statement/prospectus. These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

 

This proxy statement/prospectus incorporates by reference important business and financial information about Pivotal from documents Pivotal has filed with the Securities and Exchange Commission that are not included in or delivered with this proxy statement/prospectus. You can obtain documents incorporated by reference in this proxy statement/prospectus and other filings of Pivotal with the Securities and Exchange Commission by visiting its website at www.sec.gov or requesting them in writing or by telephone from Pivotal at the following address:

Mr. Jonathan J. Ledecky

Pivotal Investment Corporation II

c/o Graubard Miller

The Chrysler Building

405 Lexington Avenue, 11th Floor

New York, NY 10174

Tel: (212) 818-8800

You will not be charged for any of these documents that you request. Stockholders requesting documents should do so by December 15, 2020 in order to receive them before the annual meeting.

 

 

This proxy statement/prospectus is dated December 8, 2020, and is first being mailed to Pivotal security holders on or about such date.


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LOGO

XL Fleet currently provides electrification solutions for a wide range of

Class 2-6 commercial and municipal fleet vehicles.


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PIVOTAL INVESTMENT CORPORATION II

c/o Graubard Miller

The Chrysler Building

405 Lexington Avenue, 11th Floor

New York, NY 10174

NOTICE OF

ANNUAL MEETING

TO BE HELD ON DECEMBER 21, 2020

TO THE STOCKHOLDERS OF PIVOTAL INVESTMENT CORPORATION II:

NOTICE IS HEREBY GIVEN that an annual meeting of stockholders of Pivotal Investment Corporation II (“Pivotal”), a Delaware corporation, will be held at 9:00 a.m. eastern time, on December 21, 2020. Due to health concerns stemming from the COVID-19 pandemic, and to support the health and well-being of our stockholders, the annual meeting will be a virtual meeting. You are cordially invited to attend and participate in the annual meeting online by visiting https://www.cstproxy.com/pivotalic/2020. The annual meeting will be held for the following purposes:

 

  (1)

Proposal No. 1—The Business Combination Proposal—to consider and vote upon a proposal to approve and adopt the Agreement and Plan of Reorganization, dated as of September 17, 2020 (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”), a copy of which is attached to this proxy statement/prospectus as Annex A, and the transactions contemplated thereby (the “Business Combination”), including the merger of Merger Sub with and into XL, with XL surviving as a wholly owned subsidiary of Pivotal (the “Merger”), and the issuance of shares of Pivotal’s Class A common stock to XL’s securityholders in the Merger—we refer to this proposal as the “business combination proposal”;

 

  (2)

Proposal No. 2—The PIPE Proposal—to consider and vote upon a proposal to approve the issuance of an aggregate of 15,000,000 shares of Pivotal’s Class A common stock in a private placement at a price of $10.00 per share, for an aggregate purchase price of $150,000,000 (the “PIPE Transaction”), the closing of which is subject to certain conditions, including, among other things, the closing of the Business Combination—we refer to this proposal as the “PIPE proposal”;

 

  (3)

The Charter Proposals—to consider and vote upon separate proposals to approve amendments to Pivotal’s current amended and restated certificate of incorporation to:

 

  (i)

change the name of Pivotal to “XL Fleet Corp.”, as opposed to the current name of “Pivotal Investment Corporation II” (Proposal No. 3);

 

  (ii)

increase the number of shares of Class A common stock Pivotal is authorized to issue to 350,000,000 shares, as opposed to the current number of 75,000,000 shares, and to remove the provisions for Pivotal’s current Class B common stock (the shares of which will all convert into shares of Class A common stock in connection with the Business Combination) so that the Class B common stock will cease to exist and Pivotal will have a single class of common stock (Proposal No. 4); and

 

  (iii)

remove the various provisions applicable only to special purpose acquisition companies (such as the obligation to dissolve and liquidate if a business combination is not consummated within a certain period of time) and make certain other changes that the Pivotal board deems appropriate for a public operating company (Proposal No. 5)—we refer to Proposals 3, 4 and 5, collectively, as the “charter proposals”;

 

  (4)

Proposal No. 6—The Director Election Proposal—to elect nine directors who, upon the closing of the Business Combination, will be the directors of Pivotal—we refer to this proposal as the “director election proposal”;


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  (5)

Proposal No. 7—The Incentive Plan Proposal—to consider and vote upon a proposal to approve the 2020 Equity Incentive Plan (the “2020 Plan”), which is an incentive compensation plan for employees and other service providers of Pivotal and its subsidiaries, including, after the Merger, XL and its subsidiaries—we refer to this proposal as the “incentive plan proposal”;

 

  (6)

Proposal No. 8—The Adjournment Proposal—to consider and vote upon a proposal to adjourn the annual meeting to a later date or dates if it is determined by the officer presiding over the annual meeting that more time is necessary for Pivotal to consummate the Merger and the other transactions contemplated by the Merger Agreement—we refer to this proposal as the “adjournment proposal.”

We also will transact any other business as may properly come before the annual meeting or any adjournment or postponement thereof.

The items of business listed above are more fully described elsewhere in the proxy statement/prospectus. Whether or not you intend to attend the annual meeting, we urge you to read the attached proxy statement/prospectus in its entirety, including the annexes and accompanying financial statements, before voting. IN PARTICULAR, WE URGE YOU TO CAREFULLY READ THE SECTION IN THE PROXY STATEMENT/PROSPECTUS ENTITLED “RISK FACTORS.

Only holders of record of Pivotal’s Class A and Class B common stock (collectively, “Pivotal common stock”) at the close of business on December 7, 2020 (the “record date”) are entitled to notice of the annual meeting and to vote and have their votes counted at the annual meeting and any adjournments or postponements of the annual meeting.

After careful consideration, Pivotal’s board of directors has determined that each of the business combination proposal, the PIPE proposal, the charter proposals, the election of the nine nominees identified in this proxy statement/prospectus to serve as directors, the incentive plan proposal and the adjournment proposal is fair to and in the best interests of Pivotal and its stockholders and unanimously recommends that you vote or give instruction to vote “FOR” the business combination proposal, “FOR” the PIPE proposal, “FOR” each of the charter proposals, “FOR” the director election proposal, “FOR” the incentive plan proposal and “FOR” the adjournment proposal, if presented. When you consider the recommendations of Pivotal’s board of directors, you should keep in mind that Pivotal’s directors and officers may have interests in the Business Combination that conflict with, or are different from, your interests as a stockholder of Pivotal. See the section entitled “The Business Combination Proposal—Interests of the Sponsor and Pivotal’s Directors and Officers in the Business Combination.”

The closing of the Business Combination is conditioned on approval of the business combination proposal, the PIPE proposal, the charter proposals, the director election proposal and the incentive plan proposal. If any of the proposals is not approved or the nine nominees identified in this proxy statement/prospectus to serve as directors of Pivotal after the closing of the Business Combination are not elected, and the applicable closing condition in the Merger Agreement is not waived, the remaining proposals will not be presented to stockholders for a vote.

All Pivotal stockholders are cordially invited to attend the annual meeting, which will be held virtually over the Internet at https://www.cstproxy.com/pivotalic/2020. To ensure your representation at the annual meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. If you are a holder of record of Pivotal common stock on the record date, you may also cast your vote at the annual meeting. If your Pivotal common stock is held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares or, if you wish to attend the annual meeting, obtain a proxy from your broker or bank.

A complete list of Pivotal stockholders of record entitled to vote at the annual meeting will be available for ten days before the annual meeting at the principal executive offices of Pivotal for inspection by stockholders during business hours for any purpose germane to the annual meeting.

Your vote is important regardless of the number of shares you own. Whether you plan to attend the annual meeting virtually or not, please complete, sign, date and return the enclosed proxy card as soon as possible


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in the envelope provided. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly voted and counted.

If you have any questions or need assistance voting your common stock, please contact D.F. King & Co., Inc., our proxy solicitor, by calling (800) 249-7120, or banks and brokers can call collect at (212) 269-5550. Questions can also be sent by email to XLFleet@dfking.com. This notice of annual meeting is and the proxy statement/prospectus relating to the Business Combination will be available at https://cstproxy.com/pivotalic/2020.

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

By Order of the Board of Directors

/s/ Jonathan J. Ledecky

Jonathan J. Ledecky

Chairman of the Board of Directors and Chief

Executive Officer

December 8, 2020

IF YOU RETURN YOUR SIGNED PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS.

ALL HOLDERS (THE “PUBLIC STOCKHOLDERS”) OF SHARES OF PIVOTAL CLASS A COMMON STOCK ISSUED IN PIVOTAL’S INITIAL PUBLIC OFFERING (THE “PUBLIC SHARES”) HAVE THE RIGHT TO HAVE THEIR PUBLIC SHARES CONVERTED INTO CASH IN CONNECTION WITH THE PROPOSED BUSINESS COMBINATION. PUBLIC STOCKHOLDERS ARE NOT REQUIRED TO AFFIRMATIVELY VOTE FOR OR AGAINST THE BUSINESS COMBINATION PROPOSAL, TO VOTE ON THE BUSINESS COMBINATION PROPOSAL AT ALL, OR TO BE HOLDERS OF RECORD ON THE RECORD DATE IN ORDER TO HAVE THEIR SHARES CONVERTED INTO CASH. THIS MEANS THAT ANY PUBLIC STOCKHOLDER HOLDING PUBLIC SHARES MAY EXERCISE CONVERSION RIGHTS REGARDLESS OF WHETHER THEY ARE EVEN ENTITLED TO VOTE ON THE BUSINESS COMBINATION PROPOSAL.

TO EXERCISE CONVERSION RIGHTS, HOLDERS MUST TENDER THEIR STOCK TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY, PIVOTAL’S TRANSFER AGENT, NO LATER THAN TWO (2) BUSINESS DAYS PRIOR TO THE ANNUAL MEETING. YOU MAY TENDER YOUR STOCK BY EITHER DELIVERING YOUR STOCK CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DEPOSIT WITHDRAWAL AT CUSTODIAN SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE CONVERTED INTO CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR CONVERSION RIGHTS. SEE “ANNUAL MEETING OF PIVOTAL STOCKHOLDERS—CONVERSION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.

 


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LOGO

 

 

 

LOGO


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FREQUENTLY USED TERMS

     ii  

FORWARD-LOOKING STATEMENTS AND RISK FACTOR SUMMARY

     iv  

SUMMARY OF THE MATERIAL TERMS OF THE MERGER

     1  

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

     4  

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

     15  

SELECTED HISTORICAL FINANCIAL INFORMATION

     30  

SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

     32  

COMPARATIVE PER SHARE DATA

     35  

RISK FACTORS

     37  

THE BUSINESS COMBINATION PROPOSAL

     76  

THE MERGER AGREEMENT

     99  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     108  

THE PIPE PROPOSAL

     121  

THE CHARTER PROPOSALS

     123  

EXECUTIVE COMPENSATION

     136  

THE INCENTIVE PLAN PROPOSAL

     142  

THE ADJOURNMENT PROPOSAL

     147  

OTHER INFORMATION RELATED TO PIVOTAL

     148  

BUSINESS OF XL

     157  

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

     170  

BENEFICIAL OWNERSHIP OF SECURITIES

     185  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     189  

DESCRIPTION OF PIVOTAL’S SECURITIES AFTER THE MERGER

     193  

INFORMATION ON PIVOTAL SECURITIES AND DIVIDENDS

     203  

APPRAISAL RIGHTS

     203  

STOCKHOLDER PROPOSALS

     204  

OTHER STOCKHOLDER COMMUNICATIONS

     204  

EXPERTS

     204  

DELIVERY OF DOCUMENTS TO STOCKHOLDERS

     204  

WHERE YOU CAN FIND MORE INFORMATION

     205  

INDEX TO FINANCIAL STATEMENTS

     F-1  

Annexes

 

Annex A – Merger Agreement

     A-1  

Annex B – Second Amended and Restated Certificate of Incorporation

     B-1  

Annex C – 2020 Equity Incentive Plan

     C-1  

You should rely only on the information contained or incorporated by reference in this proxy statement/prospectus in determining whether to vote in favor of the Business Combination and the other proposals. No one has been authorized to provide you with information that is different from that contained in this proxy statement/prospectus. This proxy statement/prospectus is dated December 8, 2020. You should not assume that the information contained or incorporated by reference in this proxy statement/prospectus is accurate as of any date other than that date. Neither the mailing of this proxy statement/prospectus to Pivotal securityholders nor the issuance by Pivotal of Pivotal Class A common stock in connection with the Business Combination will create any implication to the contrary.

 

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FREQUENTLY USED TERMS

As used in this proxy statement/prospectus:

 

   

annual meeting” means the annual meeting of the stockholders of Pivotal that is the subject of this proxy statement/prospectus;

 

   

Business Combination” means the Merger and the other transactions contemplated by the Merger Agreement;

 

   

Charter” means the second amended and restated certificate of incorporation of Pivotal following the Merger;

 

   

Code” means the Internal Revenue Code of 1986, as amended;

 

   

combined company” means Pivotal following the closing of the Business Combination (at which time, subject to stockholder approval, Pivotal will be renamed “XL Fleet Corp.”);

 

   

DGCL” means the Delaware General Corporation Law, as amended;

 

   

Exchange Act” means the Securities Exchange Act of 1934, as amended;

 

   

Exchange Ratio” means the exchange ratio obtained by dividing 100,000,000 by the fully-diluted number of shares of XL’s common stock outstanding immediately prior to the effective time of the Merger, including shares issuable or treated as issuable upon the conversion of XL’s preferred stock and the exercise, conversion or exchange of XL’s convertible promissory notes, options and warrants (as determined in accordance with the Merger Agreement and more fully described in this proxy statement/prospectus);

 

   

HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;

 

   

initial stockholders” means the holders of the sponsor shares prior to Pivotal’s initial public offering;

 

   

JOBS Act” means the Jumpstart Our Business Startups Act of 2012, as amended;

 

   

Marcum” means Marcum LLP, an independent registered public accounting firm serving as auditors for Pivotal and XL;

 

   

Merger” means the merger of Merger Sub with and into XL, with XL surviving as a wholly owned subsidiary of Pivotal;

 

   

Merger Agreement” means the Agreement and Plan of Reorganization, dated as of September 17, 2020, by and among Pivotal, Merger Sub and XL;

 

   

Merger Consideration” means the aggregate number of shares of Pivotal’s Class A common stock that the securityholders of XL have the right to receive upon consummation of the Merger;

 

   

Merger Sub” means PIC II Merger Sub Corp., a Delaware corporation and a wholly owned subsidiary of Pivotal;

 

   

MGG” means MGG Special Opportunities Fund LP, an affiliate of Pivotal SPAC Funding II, LLC, which is a managing member of the Sponsor;

 

   

NYSE” means the New York Stock Exchange;

 

   

Omnibus Note Amendment” means the Omnibus Amendment to Convertible Promissory Notes and Note Purchase Agreement, effective as of September 17, 2020, by and among XL and the noteholders party thereto;

 

   

Pivotal” means Pivotal Investment Corporation II, a Delaware corporation, which is expected to be renamed “XL Fleet Corp.” upon the closing of the Business Combination (unless the context otherwise requires, references to “Pivotal” after the closing of the Business Combination refer to the combined company, including its operating subsidiary, XL);

 

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Pivotal common stock” means, prior to the Merger, Pivotal’s Class A common stock and Class B common stock collectively and, after the Merger, Pivotal’s Class A common stock;

 

   

private warrants” means the 4,233,333 warrants of Pivotal sold to the Sponsor in a private placement that took place simultaneously with Pivotal’s initial public offering;

 

   

public shares” means the shares of Pivotal’s Class A common stock included in the units issued in Pivotal’s initial public offering;

 

   

public stockholders” means holders of public shares, including the Sponsor and Pivotal’s officers and directors to the extent they hold public shares; provided, that the holders of sponsor shares will be considered a “public stockholder” only with respect to any public shares held by them;

 

   

public warrants” means the redeemable warrants exercisable for shares of Pivotal’s Class A common stock included in the units issued in Pivotal’s initial public offering;

 

   

record date” means December 7, 2020;

 

   

SEC” means the Securities and Exchange Commission;

 

   

Securities Act” means the Securities Act of 1933, as amended;

 

   

Sponsor” means Pivotal Investment Holdings II LLC, a Delaware limited liability company and an affiliate of certain of Pivotal’s officers and directors;

 

   

sponsor shares” means the 5,750,000 shares of Pivotal’s Class B common stock outstanding that were issued prior to Pivotal’s initial public offering, each of which will convert into one share of Pivotal’s Class A common stock upon the closing of the Business Combination;

 

   

U.S. GAAP” means generally accepted accounting principles in the United States; and

 

   

XL” means XL Hybrids, Inc., a Delaware corporation.

 

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FORWARD-LOOKING STATEMENTS AND RISK FACTOR SUMMARY

Certain information in this proxy statement/prospectus constitutes forward-looking statements within the definition of the Private Securities Litigation Reform Act of 1995. However, because Pivotal is a “blank check” company, the safe-harbor provisions of that act do not apply to statements made in this proxy statement/prospectus. You can identify these statements by forward-looking words such as “may,” “expect,” “anticipate,” “contemplate,” “believe,” “estimate,” “intends” and “continue” or similar words. You should read statements that contain these words carefully because they:

 

   

discuss future expectations;

 

   

contain projections of future results of operations or financial condition; or

 

   

state other “forward-looking” information.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement/prospectus.

All forward-looking statements included herein attributable to any of Pivotal, XL or any person acting on either party’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, Pivotal and XL undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

Pivotal believes it is important to communicate its expectations to its securityholders. However, there may be events in the future that Pivotal is not able to predict accurately or over which it has no control. The section in this proxy/statement prospectus entitled “Risk Factors” and the other cautionary language discussed in this proxy statement/prospectus provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by Pivotal in such forward-looking statements. Some risk factors that could cause actual results to differ include, among other things:

 

   

the ability to complete the Merger or a delay in the closing of the Business Combination or the PIPE Transaction;

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;

 

   

the ability to maintain the listing of Pivotal’s securities on the New York Stock Exchange or an alternative national securities exchange following the Business Combination;

 

   

the potential liquidity and trading of Pivotal’s public securities;

 

   

the inability to recognize the anticipated benefits of the proposed Business Combination, which may be affected by, among other things, the amount of cash available following any redemption of public shares by Pivotal stockholders;

 

   

XL’s financial and business performance following the Business Combination, including financial projections and business metrics;

 

   

changes in XL’s strategy, future operations, expansion plans and opportunities, financial position, estimated revenues and losses, projected costs, prospects and plans, capital requirements and sources and uses of cash;

 

   

the implementation, market acceptance and success of XL’s business model and its ability to scale in a cost-effective manner;

 

   

cost increases or shortages in the components necessary to support XL’s products and services; the introduction of new technologies;

 

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developments and projections relating to XL’s competitors and industry;

 

   

the ability to obtain financing, in whole or in part from the PIPE Transaction;

 

   

the ability to obtain funding for XL’s operations;

 

   

the ability to operate in highly competitive markets, and potential adverse effects of this competition;

 

   

the ability to attract, motivate and retain qualified employees, including members of its senior management team;

 

   

the expectation that XL will incur significant expenses and continuing losses in future periods, as well as significant fluctuations from period to period in its financial results;

 

   

the possibility that XL may become subject to product liability claims;

 

   

the potential loss of one or more of XL’s significant customers or major suppliers;

 

   

the ability of XL to further penetrate the fleet market, enter into new markets, or expand its business and manage growth as anticipated;

 

   

the ability to maintain effective controls over disclosure and financial reporting that enable XL to comply with regulations and produce accurate financial statements;

 

   

potential failure to comply with privacy and information security regulations;

 

   

the ability to comply with the anti-corruption laws of the United States and various international jurisdictions;

 

   

potential impairment charges related to goodwill, identified intangible assets and fixed assets;

 

   

impacts of tax regulations and laws on XL’s business;

 

   

the effects of the COVID-19 pandemic on XL’s business and the actions XL may take in response thereto;

 

   

a potential litigation, product liability claims, regulatory proceedings and/or adverse publicity involving Pivotal or XL;

 

   

expectations regarding XL’s ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

 

   

costs related to the Business Combination;

 

   

expectations regarding the time during which Pivotal will be an “emerging growth company” under the JOBS Act; and

 

   

other risks and uncertainties indicated in this proxy statement/prospectus, including those set forth under the section entitled “Risk Factors.

Before you grant your proxy or instruct your bank or broker how to vote, or vote on the business combination proposal, the PIPE proposal, the charter proposals, the director election proposal, the incentive plan proposal or the adjournment proposal, you should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this proxy statement/prospectus may adversely affect Pivotal and/or XL.

 

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SUMMARY OF THE MATERIAL TERMS OF THE MERGER

 

   

The parties to the Merger are Pivotal, Merger Sub and XL. Pursuant to the Merger Agreement, Merger Sub will merge with and into XL, with XL surviving as a wholly owned subsidiary of Pivotal and the securityholders of XL becoming securityholders of Pivotal. See the sections entitled “The Business Combination Proposal” and “The Merger Agreement.”

 

   

XL is a leading provider of fleet electrification solutions for commercial vehicles in North America, with over 3,200 electrified powertrain systems sold and driven over 130 million miles by over 200 fleets. XL’s 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.

 

   

Under the Merger Agreement, each share of XL’s common stock issued and outstanding immediately prior to the effective time of the Merger (including each share of XL’s common stock issued as a result of the conversion of XL’s preferred stock and any conversion or exchange of XL’s convertible promissory notes, each as more fully described in this proxy statement/prospectus) will be automatically converted into the right to receive a number of shares of Pivotal’s Class A common stock equal to the Exchange Ratio. See the section entitled “The Business Combination Proposal—Structure of the Merger.

 

   

Each of the options to purchase XL’s common stock, whether or not exercisable and whether or not vested, and each of the warrants to purchase XL’s stock, in each case that is outstanding immediately prior to the effective time of the Merger, will be assumed by Pivotal and converted into an option or warrant, as applicable, to purchase a number of shares of Pivotal’s Class A common stock equal to the number of shares subject to such option or warrant, as applicable, immediately prior to the effective time multiplied by the Exchange Ratio, at an exercise price equal to the exercise price immediately prior to the effective time divided by the Exchange Ratio. See the section entitled “The Business Combination Proposal—Structure of the Merger.

 

   

Each of XL’s outstanding convertible promissory notes will be satisfied in full in connection with the Merger. At the option of the holder of each such note, either (i) the entire principal of such note and accrued interest thereon will be converted into shares of XL’s common stock at a conversion price equal to $5.2662 per share of XL common stock (a “Full Note Conversion”), or (ii) (x) the entire principal amount of such note will be repaid in cash within three business days of the closing of the Business Combination, and (y) the value equal to (A) (I) the principal due under the notes plus any unpaid but accrued interest due under such note, divided by (II) 70%, minus (B) the principal due under the note, shall be converted into shares of XL’s common stock at $7.5232 per share of XL common stock (a “Partial Note Conversion”). Whether a note is converted in full or repaid in part and converted in part will depend on the election of the noteholder (or failure to make an election, in which case such noteholder will be deemed to have made the Full Note Conversion election) under the Omnibus Note Amendment. All shares of XL’s common stock issued under either option will be entitled to receive shares of Pivotal’s Class A common stock in the Merger as described above. See the section entitled “The Business Combination Proposal—Structure of the Merger.

 

   

In connection with the execution of the Merger Agreement, Pivotal entered into subscription agreements with certain investors (the “PIPE Investors”), including MGG, an affiliate of Pivotal SPAC Funding II LLC, which is a managing member of the Sponsor, pursuant to which such PIPE Investors have agreed to purchase an aggregate of 15,000,000 shares of Pivotal’s Class A common stock in a private placement at a price of $10.00 per share for an aggregate commitment of $150,000,000 (the “PIPE Transaction”). The closing of the private placement is expected to take place concurrently with the closing of the Business Combination. The subscription agreements are subject to certain conditions, including, among other things, the closing of the Business Combination. For more information about the subscription agreements and the PIPE Transaction, please see the sections entitled “The Business Combination Proposal—Related Agreements—Subscription Agreements for PIPE Transaction”, “The

 

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the subscription agreements and the PIPE Transaction, please see the sections entitled “The Business Combination Proposal—Related Agreements—Subscription Agreements for PIPE Transaction”, “The PIPE Proposal” and “Certain Relationships and Related Person Transactions—Pivotal Related Person Transactions—Subscription Agreements.”

 

   

Assuming that none of XL’s options or warrants are exercised or forfeited prior to the closing of the Business Combination and XL’s convertible promissory notes are converted in whole or in part into shares of XL’s common stock immediately prior to the closing of the Business Combination as described in “The Business Combination Proposal—Structure of the Merger—Consideration to XL Securityholders,” approximately 85,770,853 shares of Pivotal’s Class A common stock will be issued to XL’s former stockholders and approximately 13,074,449 shares of Pivotal’s Class A common stock will be reserved for issuance upon exercise of XL’s options and warrants assumed by Pivotal. In no event will the aggregate number of shares of Pivotal Class A common stock to be issued in the Merger exceed an amount equal to 100,000,000 less the number of shares reserved for issuance upon the exercise of XL’s options and warrants that are to remain outstanding immediately following the Business Combination and less the number of shares treated as issuable upon the payment of any principal of XL’s convertible promissory notes (as determined in accordance with the Merger Agreement and more fully described in this proxy statement/prospectus). The actual number of shares of Pivotal Class A common stock to be issued in the Merger will depend on the exercise, conversion, exchange or forfeiture of XL’s convertible promissory notes, options and warrants prior to closing and the elections of holders of XL’s convertible promissory notes (or the failure of such holders to make elections) to convert their notes, in whole or in part, in accordance with the Omnibus Note Amendment. See the section entitled “The Business Combination Proposal—Structure of the Merger.

 

   

Based on the assumptions in the preceding paragraph, and further assuming that no holder of Pivotal’s public shares exercises conversion rights as described in this proxy statement/prospectus, immediately after the closing of the Business Combination, XL’s former stockholders will hold approximately 66.2% of the issued and outstanding Pivotal common stock, the PIPE Investors will hold approximately 11.6% of the issued and outstanding Pivotal common stock, and the current stockholders of Pivotal will hold approximately 22.2% of the issued and outstanding Pivotal common stock. See the section entitled “The Business Combination Proposal—Structure of the Merger.

 

   

Certain of XL’s stockholders have entered or will enter into a lock-up agreement (“Lock-Up Agreement”), which provides that shares of Pivotal’s Class A common stock to be issued to them in the Merger will be subject to a 12-month lock-up period, during which they have agreed, subject to certain restrictions, not to, directly or indirectly, sell, transfer or otherwise dispose of their shares to be issued in the Merger, 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 20 trading days during any 30-trading day period commencing at least 150 days following the consummation of the Merger, subject to certain exceptions. In addition, Pivotal has agreed to cause its initial stockholders to amend their existing lock-up restrictions and enter into the Lock-Up Agreement, so that the lock-up restrictions with respect to the initial stockholders’ common stock of Pivotal and warrants of Pivotal will be identical to the lock-up restrictions applicable to XL’s stockholders who have entered, or will enter, into the Lock-Up Agreement. See the section entitled “The Business Combination Proposal—Structure of the Merger.

 

   

The Merger Agreement provides that either Pivotal or XL may terminate the Merger Agreement if the Merger is not consummated on or before January 16, 2021, 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. See the section entitled “The Merger Agreement—Termination.”

 

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In addition to voting on the proposals to approve the Business Combination and the issuance of shares of Pivotal’s Class A common stock in the Merger and the PIPE Transaction, the stockholders of Pivotal will vote on proposals to: approve amendments to Pivotal’s current amended and restated certificate of incorporation to change the name of Pivotal to “XL Fleet Corp.”, increase the number of shares of Class A common stock Pivotal is authorized to issue to 350,000,000 shares and remove the provisions for Pivotal’s current Class B common stock (the shares of which will all convert into shares of Class A common stock in connection with the Business Combination) so that the Class B common stock will cease to exist and Pivotal will have a single class of common stock, and remove the various provisions applicable only to special purpose acquisition companies and make certain other changes that the Pivotal board deems appropriate for a public operating company; elect nine directors who, upon the closing of the Business Combination, will be the directors of Pivotal; approve Pivotal’s 2020 Equity Incentive Plan (the “2020 Plan”); and adjourn the annual meeting to a later date or dates, if it is determined by the officer presiding over the annual meeting that more time is necessary for Pivotal to consummate the Merger and the other transactions contemplated by the Merger Agreement. The approval of these proposals by the stockholders of Pivotal is a condition to the consummation of the Business Combination. See the sections entitled “The Charter Proposals,” “The Director Election Proposal,” “The Incentive Plan Proposal,” and “The Adjournment Proposal.”

 

   

Pursuant to the terms of the Merger Agreement, the parties thereto have agreed to nominate the following persons to serve as the initial directors of Pivotal upon the closing of the Business Combination: as Class A directors serving until Pivotal’s 2021 annual meeting of stockholders, Sarah Sclarsic, who is currently a director of Pivotal, Declan P. Flanagan and Debora M. Frodl; as Class B directors serving until Pivotal’s 2022 annual meeting of stockholders, Kevin Griffin, who is currently a director of Pivotal, Niharika Ramdev and Christopher Hayes; and as Class C directors serving until Pivotal’s 2023 annual meeting of stockholders, Jonathan J. Ledecky, who is currently the Chairman and Chief Executive Officer of Pivotal, Thomas J. Hynes III, who is currently the Founder and Chief Strategy Officer of XL, and Dimitri N. Kazarinoff, who is currently the President and Chief Executive Officer of XL. See the section entitled “The Director Election Proposal.”

 

   

Upon completion of the Merger, the executive officers of Pivotal will include Dimitri N. Kazarinoff, as Chief Executive Officer, Thomas J. Hynes, III, as President, and the other persons described under “The Director Election Proposal—Information about Executive Officers, Directors and Nominees.”

 

   

Certain stockholders of XL and Pivotal have entered or will enter 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 certain shares of Pivotal’s Class A common stock held by them, subject to certain conditions set forth therein. Pivotal has agreed to 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. See the section entitled “The Business Combination Proposal—Related Agreements.”

 

   

In connection with the execution of the Merger Agreement, certain of XL’s officers, directors, founders and their family members and 5% or greater holders of XL’s stock (the “Supporting Holders”), who collectively hold approximately 47% of the issued and outstanding shares of XL’s common stock on an as-converted basis, have entered into agreements with Pivotal (the “Support Agreements”) pursuant to which the Supporting Holders have agreed, among other things, (i) to vote all of their respective shares of XL’s stock in favor of the Merger at a meeting called to approve the Merger by XL’s stockholders (or in an action by written consent approving the Merger) and (ii) to the extent such stockholders are holders of XL’s Series D preferred stock, to deliver a signature to the request for conversion required to effect the conversion of XL’s preferred stock into XL’s common stock immediately prior to the effective time of the Merger. See the section entitled “The Business Combination Proposal—Related Agreements.”

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

The questions and answers below highlight only selected information set forth elsewhere in this proxy statement/prospectus and only briefly address some commonly asked questions about the annual meeting and the proposals to be presented at the annual meeting, including with respect to the proposed Business Combination. The following questions and answers do not include all the information that may be important to Pivotal stockholders. Stockholders are urged to carefully read this entire proxy statement/prospectus, including the annexes and the other documents referred to or incorporated by reference herein, to fully understand the proposed Business Combination and the voting procedures for the annual meeting.

 

Q.

Why am I receiving this proxy statement/prospectus?

 

A.

Pivotal and XL have agreed to a business combination under the terms of the Merger Agreement that is described in this proxy statement/prospectus. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A and Pivotal encourages its stockholders to read it in its entirety. Pivotal’s stockholders are being asked to consider and vote upon a proposal to approve and adopt the Merger Agreement and the Business Combination, including the Merger of Merger Sub with and into XL, with XL surviving as a wholly owned subsidiary of Pivotal and the securityholders of XL becoming securityholders of Pivotal, and the issuance of shares of Pivotal’s Class A common stock to XL securityholders in the Merger. We refer to this proposal as the “business combination proposal.” See the section entitled “The Business Combination Proposal.”

 

Q.

Are there any other matters being presented to stockholders at the meeting?

 

A.

In addition to voting on the business combination proposal, the stockholders of Pivotal will vote on the following:

 

  1.

A proposal to approve the issuance of an aggregate of 15,000,000 shares of Pivotal’s Class A common stock in the PIPE Transaction, the closing of which is subject to certain conditions, including, among other things, the closing of the Business Combination. We refer to this proposal as the “PIPE proposal.” See the section entitled “The PIPE Proposal.”

 

  2.

Separate proposals to approve amendments to Pivotal’s current amended and restated certificate of incorporation to: (i) change the name of Pivotal to “XL Fleet Corp.”, as opposed to the current name of “Pivotal Investment Corporation II”; (ii) increase the number of shares of Class A common stock Pivotal is authorized to issue to 350,000,000 shares, as opposed to the current number of 75,000,000 shares, and remove the provisions for Pivotal’s current Class B common stock (the shares of which will all convert into shares of Class A common stock in connection with the Business Combination) so that the Class B common stock will cease to exist and Pivotal will have a single class of common stock; and (iii) remove the various provisions applicable only to special purpose acquisition corporations (such as the obligation to dissolve and liquidate if a business combination is not consummated within a certain period of time) and make certain other changes that the Pivotal board deems appropriate for a public operating company. We refer to these proposals collectively as the “charter proposals.” A copy of Pivotal’s proposed second amended and restated certificate of incorporation effectuating the foregoing amendments is attached to this proxy statement/prospectus as Annex B. See the section entitled “The Charter Proposals.”

 

  3.

The election of nine directors who, upon the closing of the Business Combination, will be the directors of Pivotal. We refer to this proposal as the “director election proposal.” See the section entitled “The Director Election Proposal.”

 

  4.

A proposal to approve the 2020 Plan. We refer to this proposal as the “incentive plan proposal.” A copy of the 2020 Plan is attached to this proxy statement/prospectus as Annex C. See the section entitled “The Incentive Plan Proposal.”

 

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  5.

A proposal to adjourn the annual meeting to a later date or dates if it is determined by the officer presiding over the annual meeting that more time is necessary for Pivotal to consummate the Merger and the other transactions contemplated by the Merger Agreement. We refer to this proposal as the “adjournment proposal.” See the section entitled “The Adjournment Proposal.”

Pivotal will hold the annual meeting of its stockholders to consider and vote upon these proposals. This proxy statement/prospectus contains important information about the proposed Business Combination and the other matters to be acted upon at the annual meeting. Stockholders should read it carefully.

The closing of the Business Combination is conditioned on approval of the business combination proposal, the PIPE proposal, the charter proposals and the incentive plan proposal and on the election of the nine nominees identified in this proxy/statement prospectus to serve as directors of Pivotal. If any of the proposals is not approved or the director nominees are not elected and the applicable closing condition in the Merger Agreement is not waived, the remaining proposals will not be presented to stockholders for a vote.

The vote of stockholders is important. Regardless of how many shares you own, you are encouraged to vote as soon as possible after carefully reviewing this proxy statement/prospectus.

 

Q:

Why is Pivotal providing stockholders with the opportunity to vote on the Business Combination?

 

A:

In connection with the Business Combination and the PIPE Transaction, we may issue up to an aggregate of 115,000,000 shares of Class A common stock, representing up to 400% of the shares of Class A common stock and Class B common stock outstanding on the date of this proxy statement/prospectus. NYSE Listing Rules require stockholder approval of certain transactions that result in the issuance of 20% or more of a company’s outstanding voting power or shares of common stock outstanding before the issuance of stock or securities. Because we may issue 20% or more of our outstanding voting power and outstanding common stock in connection with the Business Combination, we are required to obtain stockholder approval of such issuances pursuant to NYSE Listing Rules. Approval of Pivotal’s stockholders is also required for the adoption of Pivotal’s second amended and restated certificate of incorporation and to enable Pivotal to issue equity awards under the 2020 Plan. The closing of the Business Combination is conditioned on the approval of the business combination proposal, the PIPE proposal, the charter proposals, the director election proposal and the incentive plan proposal at the annual meeting.

 

Q.

I am a Pivotal warrant holder. Why am I receiving this proxy statement/prospectus?

 

A.

The holders of Pivotal warrants are entitled to purchase Pivotal common stock at a purchase price of $11.50 per share beginning 30 days after the closing of the Business Combination. This proxy statement/prospectus includes important information about Pivotal and the business of Pivotal and its subsidiaries following the closing of the Business Combination. Because holders of Pivotal warrants will be entitled to purchase Pivotal common stock beginning 30 days after the closing of the Business Combination, we urge you to read the information contained in this proxy statement/prospectus carefully.

 

Q.

What will happen to Pivotal’s securities upon consummation of the Business Combination?

 

A.

Pivotal’s units, Class A common stock and warrants are currently listed on the NYSE under the symbols PIC.U, PIC and PIC WS, respectively. Pivotal intends to apply for listing on the NYSE of Pivotal’s Class A common stock and Pivotal’s warrants, under the proposed symbols XL and XL WS, respectively, to be effective at the consummation of the Business Combination. The warrants assumed by Pivotal pursuant to the Merger Agreement will not be listed or traded on a national securities exchange and are not expected to be quoted or traded on the over-the-counter markets. Pivotal’s units will not be listed on the NYSE following consummation of the Business Combination and such units will automatically be separated into their component securities without any action needed to be taken on the part of the holders of such units.

 

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  Furthermore, each outstanding share of Pivotal’s Class B common stock will convert into one share of Pivotal’s Class A common stock at the closing, the Class B common stock will cease to exist and Pivotal will have a single class of common stock. It is a condition to the consummation of the Business Combination that the shares of Pivotal’s Class A common stock to be issued to the stockholders of XL in the Merger are approved for listing on the NYSE (subject only to official notice of issuance thereof and public holder requirements), but there can be no assurance such listing condition will be met. If such listing condition is not met, the Business Combination will not be consummated unless the listing condition is waived by the parties to the Merger Agreement. Pivotal warrant holders and those stockholders who do not elect to have their Pivotal shares converted into a pro rata share of the trust account need not submit their Class A common stock or warrant certificates, and such shares and warrants will remain outstanding.

 

Q.

Why is Pivotal proposing the Business Combination?

 

A.

Pivotal was organized to effect a merger, capital stock exchange, asset acquisition or other similar business combination with one or more businesses or entities.

On July 16, 2019, Pivotal completed its initial public offering of units, with each unit consisting of one share of Class A common stock and one-third of one redeemable warrant, with each whole warrant entitling the holder to purchase one share of Class A common stock at a price of $11.50, raising total gross proceeds of approximately $230 million. Since its initial public offering, Pivotal’s activity has been limited to the evaluation of business combination candidates.

XL 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 on-board telematics solution, on thousands of vehicles across hundreds of fleets throughout the United States and Canada. XL’s 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.

Based on Pivotal’s due diligence investigations of XL and the industry in which XL operates, including the financial and other information provided by XL to Pivotal in the course of evaluating a business combination with XL and negotiating the Merger Agreement, Pivotal believes that XL has a very appealing market opportunity and growth profile, strong position in its industry and a compelling valuation. As a result, Pivotal believes that a business combination with XL will provide Pivotal stockholders with an opportunity to participate in the ownership of a company with significant growth potential. See the section entitled “The Business Combination Proposal—Pivotal’s Board of Directors’ Reasons for Approval of the Business Combination.

 

Q.

Did Pivotal’s board of directors obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

 

A.

No. Pivotal’s board of directors did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combination. Accordingly, investors will be relying solely on the judgment of Pivotal’s board of directors in valuing XL and assuming the risk that the Pivotal board may not have properly valued the business. However, Pivotal’s officers and directors have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and have substantial experience with mergers and acquisitions. Furthermore, in analyzing the Business Combination, Pivotal’s board of directors conducted significant due diligence on XL. Based on the foregoing, Pivotal’s board of directors concluded that its members’ collective experience and backgrounds, together with the experience and sector expertise of Pivotal’s advisors, enabled it to make the necessary analyses and determinations regarding the Business Combination, including that the Business Combination was fair from a financial perspective to its stockholders and that XL’s fair market value was at least 80% of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on interest earned

 

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  on the trust account) at the time of the agreement to enter into the Business Combination. There can be no assurance, however, that Pivotal’s board of directors was correct in its assessment of the Business Combination. For a complete discussion of the factors utilized by Pivotal’s board of directors in approving the Business Combination, see the section entitled “The Business Combination Proposal.”

 

Q.

Do I have conversion rights?

 

A.

If you are a holder of public shares, you have the right to demand that Pivotal convert such shares into a pro rata portion of the cash held in Pivotal’s trust account, calculated as of two business days prior to the consummation of the Business Combination. We sometimes refer to these rights to demand conversion of the public shares as “conversion rights.”

Notwithstanding the foregoing, a holder of public shares, together with any affiliate of his or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking conversion rights with respect to 20% or more of the public shares. Accordingly, all public shares in excess of 20% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be converted.

Under Pivotal’s amended and restated certificate of incorporation, the Business Combination may not be consummated if Pivotal has net tangible assets of less than $5,000,001 either immediately prior to or upon consummation of the Business Combination, after taking into account the conversion into cash of all public shares properly demanded to be converted by holders of public shares, the completion of the Business Combination and the completion of the PIPE Transaction. Because the net tangible assets of the combined company will exceed this threshold as a result of the PIPE Transaction, all of the public shares may be converted and Pivotal can still consummate the Business Combination. However, the combined company must meet certain distribution criteria, including having a minimum of 1,100,000 publicly held shares, in order to be listed on the NYSE, which is a condition to closing the Business Combination.

 

Q.

How do I exercise my conversion rights?

 

A.

A holder of public shares may exercise conversion rights regardless of whether it votes for or against the business combination proposal or does not vote on such proposal at all, or if it is a holder of public shares on the record date. If you are a holder of public shares and wish to exercise your conversion rights, you must demand that Pivotal convert your public shares into cash, and deliver your public shares to Pivotal’s transfer agent physically or electronically using The Depository Trust Company’s Deposit/Withdrawal at Custodian (“DWAC”) System no later than two (2) business days prior to the annual meeting. Any holder of public shares seeking conversion will be entitled to a full pro rata portion of the amount then in the trust account (which, for illustrative purposes, was $32,085,237, or $10.09 per share, as of the record date), less any owed but unpaid taxes on the funds in the trust account. Such amount will be paid promptly upon consummation of the Business Combination. There are currently no owed but unpaid income taxes on the funds in the trust account.

Any request for conversion, once made by a holder of public shares, may be withdrawn at any time prior to the time the vote is taken with respect to the business combination proposal at the annual meeting. If you deliver your shares for conversion to Pivotal’s transfer agent and later decide prior to the annual meeting not to elect conversion, you may request that Pivotal’s transfer agent return the shares (physically or electronically). You may make such request by contacting Pivotal’s transfer agent at the address listed at the end of this section.

Any written demand of conversion rights must be received by Pivotal’s transfer agent at least two (2) business days prior to the vote taken on the business combination proposal at the annual meeting. No demand for conversion will be honored unless the holder’s stock has been delivered (either physically or electronically) to the transfer agent.

 

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If you are a holder of public shares (including through the ownership of Pivotal units) and you exercise your conversion rights, it will not result in the loss of any Pivotal warrants that you may hold (including those contained in any units you hold). Your warrants will become exercisable to purchase one share of Pivotal common stock for a purchase price of $11.50 beginning 30 days after consummation of the Business Combination.

 

Q.

Do I have appraisal rights if I object to the proposed Business Combination?

 

A.

No. Neither Pivotal stockholders nor its unit or warrant holders have appraisal rights in connection with the Business Combination under Delaware law. See the section entitled “Appraisal Rights.

 

Q.

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

 

A.

Of the net proceeds of Pivotal’s initial public offering and simultaneous private placement of warrants, $230 million was placed in the trust account immediately following the initial public offering. After consummation of the Business Combination, the funds in the trust account will be used to pay, on a pro rata basis, holders of the public shares who exercise conversion rights, to pay fees and expenses incurred in connection with the Business Combination (including aggregate fees of approximately $8.1 million to the underwriters of Pivotal’s initial public offering as deferred underwriting commissions) and to scale for core profitability, develop new products and services, expand internationally, pay down or prepay debt and for working capital and general corporate purposes.

 

Q.

What happens if a substantial number of public stockholders vote in favor of the business combination proposal and exercise their conversion rights?

 

A.

Pivotal’s public stockholders may vote in favor of the Business Combination and still exercise their conversion rights, although they are not required to vote in any way to exercise such conversion rights. Accordingly, the Business Combination may be consummated even though the funds available from the trust account and the number of public stockholders are substantially reduced as a result of conversion by public stockholders. Although the requirement that Pivotal have at least $5,000,001 of net tangible assets will be satisfied as a result of the PIPE Transaction even if all of the public shares are converted, with fewer public shares and public stockholders, the trading markets for Pivotal common stock and warrants following the closing of the Business Combination may be less liquid than the market for Pivotal common stock and warrants were prior to the Merger, and Pivotal may not be able to meet the listing standards of the NYSE or an alternative national securities exchange. For example, the combined company must meet certain distribution criteria, including having a minimum of 1,100,000 publicly held shares, in order to be listed on the NYSE, which is a condition to closing the Business Combination. In addition, with fewer funds available from the trust account, the capital infusion from the trust account into XL’s business will be reduced and XL may not be able to fully achieve its business plans or goals.

 

Q.

What happens if the Business Combination is not consummated?

 

A.

If Pivotal does not complete the Business Combination with XL for whatever reason, Pivotal would search for another target business with which to complete a business combination. If Pivotal does not complete the Business Combination with XL or another business combination by January 16, 2021 (or such later date as may be approved by Pivotal stockholders in an amendment to its amended and restated certificate of incorporation), Pivotal must redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to an amount then held in the trust account (net of taxes payable and less up to $100,000 of interest to pay dissolution expenses). The Sponsor and Pivotal’s officers and directors have waived their redemption rights with respect to their sponsor shares in the event a business combination is not effected in the required time period, and, accordingly, the sponsor shares held by them will be worthless. Additionally,

 

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  in the event of such liquidation, there will be no distribution with respect to our outstanding warrants. Accordingly, the warrants will expire worthless.

 

Q.

How do the Sponsor and the officers and directors of Pivotal intend to vote on the proposals?

 

A.

The Sponsor, as well as Pivotal’s officers and directors, beneficially own and are entitled to vote an aggregate of 20% of the outstanding Pivotal common stock. These holders have agreed to vote their shares in favor of the business combination proposal. These holders have also indicated that they intend to vote their shares in favor of all other proposals being presented at the meeting. In addition to the shares of Pivotal common stock held by the Sponsor and Pivotal’s officers and directors, Pivotal would need 8,625,001, or 37.5%, of the 23,000,000 public shares sold in Pivotal’s initial public offering to be voted in favor of the business combination proposal and each of the charter proposals in order for them to be approved (assuming all outstanding shares are voted on each proposal).

 

Q.

Will Pivotal enter into any financing arrangements in connection with the Business Combination?

 

A.

Yes. On September 17, 2020, in connection with the execution of the Merger Agreement, Pivotal entered into subscription agreements with the PIPE Investors, including MGG, an affiliate of Pivotal SPAC Funding II LLC, which is a managing member of the Sponsor, pursuant to which such PIPE Investors have agreed to purchase an aggregate of 15,000,000 shares of Pivotal’s Class A common stock in a private placement at a price of $10.00 per share for an aggregate commitment of $150,000,000. The subscription agreements are subject to certain customary conditions, including, among other things, the closing of the Business Combination. The purpose of the PIPE Transaction is to ensure the combined company has a minimum amount of capital to operate its business following the transaction.

 

Q:

What interests do the Sponsor and the current officers and directors of Pivotal have in the Business Combination?

 

A:

In considering the recommendation of our board to vote in favor of the Business Combination, stockholders should be aware that, aside from their interests as stockholders, our Sponsor and certain of our directors and officers have interests in the business combination that are different from, or in addition to, those of other stockholders generally. Our directors were aware of and considered these interests, among other matters, in evaluating the Business Combination, and in recommending to stockholders that they approve the Business Combination and in agreeing to vote their shares in favor of the Business Combination. Stockholders should take these interests into account in deciding whether to approve the Business Combination. These interests include, among other things, the fact that:

 

   

If the Business Combination with XL or another business combination is not consummated by January 16, 2021 (or such later date as may be approved by Pivotal’s stockholders), Pivotal will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, the 5,750,000 sponsor shares held by the Sponsor and Pivotal’s directors and officers, which were acquired for an aggregate purchase price of $25,000 prior to Pivotal’s initial public offering, would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such shares. On the other hand, if the Merger is consummated, each outstanding sponsor share will convert into one share of Pivotal’s Class A common stock at the closing. Such shares had an aggregate market value of $92,000,000 based upon the closing price of $16.00 per share on NYSE on December 7, 2020.

 

   

The Sponsor, which is affiliated with certain of Pivotal’s directors and officers, purchased an aggregate of 4,233,333 private warrants from Pivotal for an aggregate purchase price of approximately $6.35 million (or $1.50 per warrant). These purchases took place on a private placement basis simultaneously with the consummation of Pivotal’s initial public offering. All of the proceeds Pivotal received from these purchases were placed in the trust account. Such warrants had an aggregate market value of

 

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$17,462,499 based upon the closing price of $4.12 per warrant on NYSE on December 7, 2020. The private warrants will become worthless if Pivotal does not consummate a business combination by January 16, 2021 (or such later date as may be approved by Pivotal stockholders in an amendment to its amended and restated certificate of incorporation).

 

   

MGG, which is a managing member of the Sponsor, and of which Kevin Griffin, one of Pivotal’s directors, is the Chief Executive Officer and Chief Investment Officer, has subscribed for shares of Pivotal’s Class A common stock in connection with the PIPE Transaction. MGG has committed to fund $6.3 million of the PIPE Transaction, for which it will receive 630,000 shares of Pivotal’s Class A common stock. Accordingly, MGG may acquire this interest in Pivotal at a discount to the price paid by stockholders of Pivotal who acquire their shares in the after-market. Such shares would have had an aggregate market value of $10,080,000 based upon the closing price of $16.00 per share on NYSE on December 7, 2020.

 

   

If Pivotal is unable to complete a business combination within the required time period, the Sponsor will be personally liable under certain circumstances described herein to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Pivotal for services rendered or contracted for or products sold to Pivotal. If Pivotal consummates a business combination, on the other hand, Pivotal will be liable for all such claims.

 

   

The Sponsor and Pivotal’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on Pivotal’s behalf, such as identifying and investigating possible business targets and business combinations. However, if Pivotal fails to consummate a business combination within the required period, they will not have any claim against the trust account for reimbursement. Accordingly, Pivotal may not be able to reimburse these expenses if the Business Combination with XL or another business combination is not completed by January 16, 2021 (or such later date as may be approved by Pivotal stockholders in an amendment to its amended and restated certificate of incorporation). As of December 7, 2020, the Sponsor and Pivotal’s officers and directors and their affiliates had incurred approximately $237,000 of unpaid reimbursable expenses.

 

   

It is currently contemplated that Jonathan J. Ledecky, Kevin Griffin and Sarah Sclarsic, all of which are currently directors of Pivotal, and will continue to be directors of Pivotal after the closing of the Business Combination (assuming that the director election proposal is approved as described in this proxy statement/prospectus). As such, in the future, each will receive any cash fees, stock options or stock awards that the Pivotal board of directors determines to pay to its non-executive directors.

 

   

The Merger Agreement provides for the continued indemnification of Pivotal’s current directors and officers and the continuation of directors and officers liability insurance covering Pivotal’s current directors and officers.

 

   

Pivotal’s officers and directors (or their affiliates) may make loans from time to time to Pivotal to fund certain capital requirements. As of the date of this proxy statement/prospectus, no such loans have been made, but loans may be made after the date of this proxy statement/prospectus. If the Business Combination is not consummated, the loans will not be repaid and will be forgiven except to the extent there are funds available to Pivotal outside of the trust account.

 

Q.

When do you expect the Business Combination to be completed?

 

A.

It is currently anticipated that the Business Combination will be consummated promptly following the Pivotal annual meeting, which is set for December 21, 2020; however, such meeting could be adjourned or postponed to a later date, as described elsewhere in this proxy statement/prospectus. For a description of the conditions for the completion of the Business Combination, see the section entitled “The Merger Agreement—Conditions to the Closing of the Business Combination.

 

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Q.

What do I need to do now?

 

A.

Pivotal urges you to carefully read and consider the information contained or incorporated by reference in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a stockholder and/or warrantholder of Pivotal. Stockholders should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card.

 

Q.

When and where will the meeting take place?

 

A.

The annual meeting will be held on December 21, 2020, at 9:00 a.m., Eastern time, solely over the Internet by means of a live audio webcast. You may attend the annual meeting webcast by accessing the web portal located at https://www.cstproxy.com/pivotalic/2020 and following the instructions set forth below. Stockholders participating in the annual meeting will be able to listen only and will not be able to speak during the webcast. However, in order to maintain the interactive nature of the annual meeting, virtual attendees will be able to:

 

   

vote via the web portal during the annual meeting webcast; and

 

   

submit questions or comments to Pivotal’s directors and officers during the annual meeting via the annual meeting webcast.

Stockholders may submit questions or comments during the meeting through the annual meeting webcast by typing in the “Submit a question” box.

 

Q.

How do I attend the Annual Meeting?

 

A.

Due to health concerns stemming from the COVID-19 pandemic, and to support the health and well-being of our stockholders, the annual meeting will be a virtual meeting. Any stockholder wishing to attend the annual meeting must register in advance. To register for and attend the annual meeting, please follow these instructions as applicable to the nature of your ownership of Pivotal common stock:

 

   

Shares Held of Record. If you are a record holder, and you wish to attend the virtual annual meeting, go to https://www.cstproxy.com/pivotalic/2020, enter the control number you received on your proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Immediately prior to the start of the annual meeting, you will need to log back into the meeting site using your control number. You must register before the meeting starts.

 

   

Shares Held in Street Name. If you hold your shares in “street” name, which means your shares are held of record by a broker, bank or nominee, and you who wish to attend the virtual annual meeting, you must obtain a legal proxy from the stockholder of record and e-mail a copy (a legible photograph is sufficient) of your proxy to proxy@continentalstock.com. Holders should contact their bank, broker or other nominee for instructions regarding obtaining a proxy. Holders who e-mail a valid legal proxy will be issued a meeting control number that will allow them to register to attend and participate in the annual meeting. You will receive an e-mail prior to the meeting with a link and instructions for entering the annual meeting. “Street” name holders should contact Continental Stock Transfer on or before December 16, 2020.

Stockholders will also have the option to listen to the annual meeting by telephone by calling:

 

   

Within the U.S. and Canada: (888) 965-8995 (toll-free)

 

   

Outside of the U.S. and Canada: (415) 655-0243 (standard rates apply)

The passcode for telephone access: 64681872#. You will not be able to vote or submit questions unless you register for and log in to the annual meeting webcast as described above.

 

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Q.

How do I vote?

 

A.

If you are a holder of record of Pivotal common stock on the record date, you may vote by attending the annual meeting in person and submitting a ballot via the annual meeting webcast or by submitting a proxy for the annual meeting. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope. If you hold your shares in “street name,” you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly voted and counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares or, if you wish to attend the virtual annual meeting and vote through the web portal, obtain a legal proxy from your broker, bank or nominee.

 

Q.

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

 

A.

No. A “broker non-vote” occurs when a broker submits a proxy that states that the broker does not vote for some or all of the proposals because the broker has not received instructions from the beneficial owners on how to vote on the proposals and the broker does not have discretionary authority to vote in the absence of such instructions. Under the applicable NYSE rules and interpretations, brokers do not have discretionary authority to vote on any of the proposals to be considered at the annual meeting. Accordingly, your broker, bank or nominee cannot vote your shares unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee.

 

Q.

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

 

A.

Yes. Stockholders of record may send a later-dated, signed proxy card to Pivotal’s transfer agent at the address set forth below so that it is received prior to the vote at the annual meeting, or submit a ballot through the web portal during the annual meeting webcast. Stockholders of record also may revoke their proxy by sending a notice of revocation to Pivotal’s transfer agent, which must be received prior to the vote at the annual meeting. If you hold your shares in “street name,” you should contact your broker, bank or nominee to change your instructions on how to vote. If you wish to attend the virtual annual meeting and vote through the web portal, you must obtain a legal proxy from your broker, bank or nominee.

 

Q.

What constitutes a quorum for the annual meeting?

 

A:

A quorum is the minimum number of shares of Pivotal common stock that must be present to hold a valid meeting. A quorum will be present at the Pivotal annual meeting if a majority of all the outstanding shares entitled to vote at the meeting are represented at the virtual annual meeting or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum. Pivotal’s Class A common stock and Class B common stock are entitled vote together as a single class on all matters to be considered at the annual meeting.

 

Q.

What stockholder vote thresholds are required for the approval of each proposal brought before the annual meeting?

 

A.

The business combination proposal. The approval of the business combination proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting to approve the Business Combination. The holders of sponsor shares own an aggregate of 5,750,000 shares of Class B common stock of Pivotal, representing 20% of the outstanding Pivotal common stock, and have agreed to vote in favor of the business combination proposal; as a result, only 8,625,001 public shares, or approximately 37.5% of the public shares, are required to be voted in favor of the proposal in order for it to be approved (assuming all outstanding shares are present and entitled to vote).

 

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The PIPE proposal. The approval of the PIPE proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting.

The charter proposals. The approval of each of the charter proposals will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock on the record date.

The director election proposal. The election of directors requires a plurality vote of the Pivotal common stock present and entitled to vote at the annual meeting. A plurality means that the individuals who receive the largest number of votes cast “FOR” are elected as directors.

The incentive plan proposal. The approval of the incentive plan proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting.

The adjournment proposal. The approval of the adjournment proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting.

 

Q.

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

 

A.

If you fail to take any action with respect to the meeting and the Business Combination is approved by stockholders and consummated, you will continue to be a holder of Pivotal common stock or warrants, as applicable, and the business of XL will become the business of Pivotal. As a corollary, failure to deliver your stock certificate(s) to Pivotal’s transfer agent (either physically or electronically) no later than two (2) business days prior to the annual meeting means you will not have any right in connection with the Merger to convert your shares into a pro rata share of the funds held in Pivotal’s trust account.

If you fail to take any action with respect to the annual meeting and the Business Combination is not approved, you will continue to be a stockholder and/or warrant holder of Pivotal, as applicable, and Pivotal will continue to search for another target business with which to complete an initial business combination. If Pivotal does not complete an initial business combination by January 16, 2021 (or such later date as may be approved by Pivotal stockholders in an amendment to its amended and restated certificate of incorporation), Pivotal must cease all operations except for the purpose of winding up, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to an amount then held in the trust account (net of taxes payable and less up to $100,000 of interest to pay dissolution expenses), and as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate.

 

Q.

What should I do with my share and/or warrant certificates?

 

A.

Warrant holders and those stockholders who do not elect to have their Pivotal shares converted into a pro rata share of the trust account need not submit their certificates. Pivotal stockholders who exercise their conversion rights must deliver their share certificates to Pivotal’s transfer agent (either physically or electronically) no later than two (2) business days prior to the annual meeting as described above.

 

Q.

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

 

A.

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

 

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Q.

Who can help answer my questions?

 

A.

If you have questions about the Merger or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact:

Mr. Jonathan J. Ledecky

Pivotal Investment Corporation II

c/o Graubard Miller

The Chrysler Building

405 Lexington Avenue, 11th Floor

New York, NY 10174

Tel: (212) 818-8800

or the proxy solicitor at:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, New York 10005

Shareholders (toll-free): (800) 249-7120

Banks and Brokers: (212) 269-5550

E-mail: XLFleet@dfking.com

You may also obtain additional information about Pivotal from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.” If you are a holder of public shares and you intend to seek conversion of your shares, you will need to deliver your shares (either physically or electronically) to Pivotal’s transfer agent at the address below at least two (2) business days prior to the vote at the annual meeting. If you have questions regarding the certification of your position or delivery of your stock, please contact:

Mr. Mark Zimkind

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, New York 10004

E-mail: mzimkind@continentalstock.com

 

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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

This summary highlights selected information set forth elsewhere in this proxy statement/prospectus and does not purport to contain all of the information that may be important to you. To better understand the proposals to be submitted for a vote at the annual meeting, including the business combination proposal, you should read this entire document and the documents incorporated by reference herein carefully, including the Merger Agreement attached to this proxy statement/prospectus as Annex A. The Merger Agreement is the legal document that governs the Merger that will be undertaken in connection with the Business Combination. It is also described in detail in this proxy statement/prospectus in the section entitled “The Merger Agreement.”

The Parties

Pivotal

Pivotal Investment Corporation II was formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities. Pivotal was incorporated under the laws of the State of Delaware on March 20, 2019.

On July 16, 2019, Pivotal closed its initial public offering of 23,000,000 units, including 3,000,000 units issued upon the exercise in full of the underwriters’ overallotment option, with each unit consisting of one share of Class A common stock and one-third of one redeemable warrant, with each whole warrant entitling the holder to purchase one share of Class A common stock at a price of $11.50 commencing 30 days after the consummation of an initial business combination. The units from Pivotal’s initial public offering (including the units issued upon the exercise in full of the underwriters’ over-allotment option) were sold at an offering price of $10.00 per unit, generating total gross proceeds of $230 million. Simultaneously with the consummation of its initial public offering and the issuance of units upon the exercise in full of the underwriters’ over-allotment option, Pivotal consummated the private sale of 4,233,333 private warrants at $1.50 per warrant generating gross proceeds of $6.35 million. A total of $230 million was deposited into the trust account and the remaining proceeds, net of underwriting discounts and commissions and other costs and expenses, became available to be used as working capital to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. Pivotal’s initial public offering was conducted pursuant to a registration statement on Form S-1 (Registration No. 333-232019) that became effective on July 11, 2019. As of December 7, 2020, the record date, there was approximately $232,085,237 held in the trust account.

Pivotal’s units, Class A common stock and warrants are listed on the NYSE under the symbols PIC.U, PIC and PIC WS, respectively.

The mailing address of Pivotal’s principal executive office is c/o Graubard Miller, The Chrysler Building, 405 Lexington Avenue, 11th Floor, New York, NY 10174, and its telephone number is (212) 818-8800. After the consummation of the Business Combination, Pivotal’s principal executive office will be that of XL.

Merger Sub

PIC II Merger Sub Corp. is a wholly owned subsidiary of Pivotal formed solely for the purpose of effectuating the Merger described herein. Merger Sub was incorporated under the laws of Delaware on September 4, 2020. Merger Sub owns no material assets and does not operate any business.

The mailing address of Merger Sub’s principal executive office is c/o Graubard Miller, The Chrysler Building, 405 Lexington Avenue, 11th Floor, New York, NY 10174, and its telephone number is (212) 818-8800. As a result of the consummation of the Merger, Merger Sub will cease to exist.



 

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XL

XL 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 on-board telematics solution, on thousands of vehicles across hundreds of fleets throughout the United States and Canada. XL’s 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.

The mailing address of XL’s principal executive office is 145 Newton Street, Boston, Massachusetts 02135, and its telephone number is (617) 718-0329. After the consummation of the Business Combination, XL will be a wholly owned subsidiary of Pivotal.

This proxy statement/prospectus includes certain registered trademarks, including trademarks that are the property of XL and its affiliates. This proxy statement/prospectus also includes other trademarks, service marks and trade names owned by XL or other companies. All trademarks, service marks and traded names included herein are the property of their respective owners.

Emerging Growth Company

Pivotal is an “emerging growth company,” as defined under the JOBS Act. As an emerging growth company, Pivotal is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. These include, but are not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and the requirement to obtain stockholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Pivotal has elected to take advantage of such extended transition period.

Pivotal will remain an emerging growth company until the earlier of (1) December 31, 2024 (the last day of the fiscal year following the fifth anniversary of the consummation of Pivotal’s initial public offering), (2) the last day of the fiscal year in which Pivotal has total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which Pivotal is deemed to be a “large accelerated filer,” as defined in the Exchange Act, and (4) the date on which Pivotal has issued more than $1.0 billion in nonconvertible debt during the prior three-year period.

The Business Combination Proposal (Proposal 1)

The stockholders of Pivotal will vote on a proposal to approve and adopt the Merger Agreement and the Business Combination, including the Merger of Merger Sub with and into XL, with XL surviving as a wholly owned subsidiary of Pivotal and the securityholders of XL becoming securityholders of Pivotal, and the issuance of shares of Pivotal’s Class A common stock to XL’s securityholders in the Merger.

After consideration of the factors identified and discussed in the section entitled “The Business Combination Proposal—Pivotal’s Board of Directors’ Reasons for Approval of the Business Combination,” Pivotal’s board of directors concluded that the Merger met all of the requirements disclosed in the prospectus for Pivotal’s initial



 

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public offering, including that XL has a fair market value equal to at least 80% of the balance of the funds in the trust account (excluding the amount of deferred underwriting commissions held in trust) at the time of the execution of the Merger Agreement.

A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A. You are encouraged to read the Merger Agreement in its entirety. See the section entitled “The Business Combination Proposal—Structure of the Merger” for more information.

Consideration to XL Securityholders

Under the Merger Agreement, each share of XL’s common stock issued and outstanding immediately prior to the effective time of the Merger (including each share of XL’s common stock issued as a result of the conversion of XL’s preferred stock and any conversion or exchange of XL’s convertible promissory notes, each as more fully described in this proxy statement/prospectus) will be automatically converted into the right to receive a number of shares of Pivotal’s Class A common stock equal to the Exchange Ratio. The Exchange Ratio is the quotient obtained by dividing 100,000,000 by the fully-diluted number of shares of XL’s common stock outstanding immediately prior to the effective time of the Merger, including shares issuable upon the conversion of preferred stock and the exercise, conversion or exchange of convertible promissory notes, options and warrants (as determined in accordance with the Merger Agreement and more fully described elsewhere in this proxy statement/prospectus).

Each of the options to purchase XL’s common stock, whether or not exercisable and whether or not vested, and each of the warrants to purchase XL’s stock, in each case that is outstanding immediately prior to the effective time of the Merger, will be assumed by Pivotal and converted into an option or warrant to purchase a number of shares of Pivotal’s Class A common stock equal to the number of shares subject to such option or warrant immediately prior to the effective time multiplied by the Exchange Ratio, at an exercise price equal to the exercise price immediately prior to the effective time divided by the Exchange Ratio. XL has agreed in the Merger Agreement to take all actions necessary to effectuate the foregoing treatment of the options and warrants.

Each of XL’s outstanding convertible promissory notes will be satisfied in full in connection with the Merger. At the option of the holder of each such note, either (i) the entire principal of such note and accrued interest thereon will be converted into shares of XL’s common stock at a conversion price equal to $5.2662 per share of XL common stock (a “Full Note Conversion”), or (ii) (x) the entire principal amount of such note will be repaid in cash within three business days of the closing of the Business Combination, and (y) the value equal to (A) (I) the principal due under the notes plus any unpaid but accrued interest due under such note, divided by (II) 70%, minus (B) the principal due under the note, shall be converted into shares of XL’s common stock at $7.5232 per share of XL common stock (a “Partial Note Conversion”). Whether a note is converted in full or repaid in part and converted in part will depend on the election of the noteholder (or failure to make an election, in which case such noteholder will be deemed to have made the Full Note Conversion election) under the Omnibus Note Amendment. All shares of XL’s common stock issued under either option will be entitled to receive shares of Pivotal’s Class A common stock in the Merger as described above.

In no event will the aggregate number of shares of Pivotal Class A common stock to be issued in the Merger exceed an amount equal to 100,000,000 less the number of shares reserved for issuance upon the exercise of XL’s options and warrants that are to remain outstanding immediately following the Business Combination and less the number of shares treated as issuable upon the payment of any principal of XL’s convertible promissory notes (as determined in accordance with the Merger Agreement and more fully described in this proxy statement/prospectus). The actual number of shares of Pivotal Class A common stock to be issued in the Merger will depend on the exercise, conversion, exchange or forfeiture of convertible promissory notes, options and warrants prior to closing and the election of holders of convertible promissory notes (or the failure of such holders to make elections) to convert their notes, in whole or in part, in accordance with the Omnibus Note Amendment.

See the section entitled “The Business Combination Proposal—Structure of the Merger.



 

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PIPE Transaction

In connection with the execution of the Merger Agreement, Pivotal entered into subscription agreements with the PIPE Investors, including MGG, an affiliate of Pivotal SPAC Funding II LLC, which is a managing member of the Sponsor, pursuant to which such PIPE Investors have agreed to purchase an aggregate of 15,000,000 shares of Pivotal’s Class A common stock in the PIPE Transaction at a price of $10.00 per share for an aggregate commitment of $150,000,000. The subscription agreements are subject to certain conditions, including, among other things, the closing of the Business Combination.

See the sections entitled “The Business Combination Proposal—Related Agreements—Subscription Agreements for PIPE Transaction”, “The PIPE Proposal” and “Certain Relationships and Related Person Transactions—Pivotal Related Person Transactions—Subscription Agreements.”

Pro Forma Ownership of Pivotal Upon Closing

Assuming that none of XL’s options or warrants are exercised or forfeited prior to the closing of the Business Combination and all of XL’s convertible promissory notes are converted in whole or in part into shares of XL’s common stock immediately prior to the Business Combination as described in “The Business Combination Proposal—Structure of the Merger—Consideration to XL Securityholders,” approximately 85,770,853 shares of Pivotal’s Class A common stock will be issued to XL’s former stockholders and approximately 13,074,449 shares of Pivotal’s Class A common stock will be reserved for issuance upon exercise of XL’s options and warrants assumed by Pivotal.

Based on the assumptions in the preceding paragraph, and further assuming that no holder of Pivotal’s public shares exercises conversion rights as described in this proxy statement/prospectus, immediately after the closing of the Business Combination, XL’s former stockholders will hold approximately 66.2% of the issued and outstanding Pivotal common stock, the PIPE Investors will hold approximately 11.6% of the issued and outstanding Pivotal common stock, and the current stockholders of Pivotal will hold approximately 22.2% of the issued and outstanding Pivotal common stock.

See the section entitled “The Business Combination Proposal—Structure of the Merger.

Additional Matters Being Voted On

In addition to voting on the business combination proposal, the stockholders of Pivotal will vote on the following proposals.

The PIPE Proposal (Proposal 2)

The stockholders of Pivotal will vote on a proposal to approve the issuance of an aggregate of 15,000,000 shares of Pivotal’s Class A common stock in the PIPE Transaction, the closing of which is subject to certain conditions, including, among other things, the closing of the Business Combination. See the section entitled “The PIPE Proposal.”

The Charter Proposals (Proposals 3-5)

The stockholders of Pivotal will vote on separate proposals to approve amendments to Pivotal’s current amended and restated certificate of incorporation to:

 

  (i)

change the name of Pivotal to “XL Fleet Corp.”, as opposed to the current name of “Pivotal Investment Corporation II” (Proposal 3);



 

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  (ii)

increase the number of shares of Class A common stock Pivotal is authorized to issue to 350,000,000 shares, as opposed to the current number of 75,000,000 shares, and remove the provisions for Pivotal’s current Class B common stock (the shares of which will all convert into shares of Class A common stock in connection with the Business Combination) so that the Class B common stock will cease to exist and Pivotal will have a single class of common stock (Proposal 4); and

 

  (iii)

remove the various provisions applicable only to special purpose acquisition corporations (such as the obligation to dissolve and liquidate if a business combination is not consummated within a certain period of time) and make certain other changes that the Pivotal board deems appropriate for a public operating company (Proposal 5).

A copy of Pivotal’s proposed second amended and restated certificate of incorporation effectuating the foregoing amendments is attached to this proxy statement/prospectus as Annex B. You are encouraged to read the second amended and restated certificate of incorporation in its entirety. See the section entitled “The Charter Proposals.”

The Director Election Proposal (Proposal 6)

The stockholders of Pivotal will vote to elect nine directors who, upon the closing of the Business Combination, will be the directors of Pivotal. If the nominees identified in this proxy statement/prospectus are elected, Sarah Sclarsic, who is currently a director of Pivotal, Declan P. Flanagan and Debora M. Frodl will be Class A directors serving until Pivotal’s 2021 annual meeting of stockholders; Kevin Griffin, who is currently a director of Pivotal, Niharika Ramdev and Christopher Hayes will be Class B directors serving until Pivotal’s 2022 annual meeting of stockholders; and Jonathan J. Ledecky, who is currently the Chairman and Chief Executive Officer of Pivotal, Thomas J. Hynes III, who is the Founder of XL and currently the Chief Strategy Officer of XL, and Dimitri N. Kazarinoff, who is currently the Chief Executive Officer of XL, will be Class C directors serving until Pivotal’s 2023 annual meeting of stockholders, and in each case, until their successors are elected and qualified. See the section entitled “The Director Election Proposal.”

The Incentive Plan Proposal (Proposal 7)

The stockholders of Pivotal will also vote on a proposal to approve the 2020 Plan. The 2020 Plan will initially reserve up to 12,800,000 shares of Pivotal common stock for future issuance in accordance with the 2020 Plan’s terms, subject to certain adjustments. The purpose of the 2020 Plan is to provide Pivotal’s and its subsidiaries’ officers, directors, employees and consultants who, by their position, ability and diligence are able to make important contributions to Pivotal’s growth and profitability, with an incentive to assist Pivotal in achieving its long-term corporate objectives, to attract and retain directors, executive officers and other employees of outstanding competence, to provide such persons with an opportunity to acquire an equity interest in Pivotal and to further align the interests of such persons with the interests of Pivotal’s stockholders. The 2020 Plan is attached to this proxy statement/prospectus as Annex C. You are encouraged to read the proposed 2020 Plan in its entirety. See the section entitled “The Incentive Plan Proposal.”

The Adjournment Proposal (Proposal 8)

The stockholders of Pivotal may vote on a proposal to adjourn the annual meeting to a later date or dates if it is determined by the officer presiding over the annual meeting that more time is necessary for Pivotal to consummate the Merger and the other transactions contemplated by the Merger Agreement. See the section entitled “The Adjournment Proposal.”



 

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Pivotal Sponsor and Officers and Directors

As of the record date for the Pivotal annual meeting, the Sponsor and Pivotal’s officers and directors beneficially owned and were entitled to vote an aggregate of 5,750,000 shares of Pivotal’s Class B common stock, which we refer to in this proxy/statement prospectus as “sponsor shares.” The sponsor shares currently constitute 20% of the outstanding Pivotal common stock. In connection with the Business Combination, each outstanding share of Pivotal’s Class B common stock will convert into one share of Pivotal’s Class A common stock at the closing, the Class B common stock will cease to exist and Pivotal will thereafter have a single class of common stock. The Sponsor also purchased an aggregate of 4,233,333 private warrants simultaneously with the consummation of Pivotal’s initial public offering.

In connection with Pivotal’s initial public offering, the Sponsor and each of Pivotal’s officers and directors agreed to vote their sponsor shares, as well as any Pivotal common stock acquired in the aftermarket, in favor of the business combination proposal. The Sponsor and each of Pivotal’s officers and directors has also indicated that he, she or it intends to vote his, her or its shares in favor of all other proposals being presented at the annual meeting.

In connection with the Merger, Pivotal has agreed to cause its initial stockholders, including the holders of the sponsor shares and private warrants, to amend the existing lock-up restrictions with respect to the common stock of Pivotal and warrants of Pivotal held by them, and enter into the same Lock-Up Agreement executed or to be executed by certain of XL’s stockholders, so that the lock-up restrictions with respect to such initial stockholders’ securities will be identical to the lock-up restrictions applicable to such stockholders of XL. The Lock-Up Agreement provides that the sponsor shares and the private warrants (and any securities issued upon exercise thereof or exchanged therefor) will be subject to a 12-month lock-up 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 20 trading days during any 30-trading day period commencing at least 150 days following the consummation of the Merger, subject to certain exceptions.

Date, Time and Place of Annual Meeting of Pivotal’s Stockholders

The annual meeting of stockholders of Pivotal will be held at 9:00 a.m., Eastern time, on December 21, 2020, to consider and vote upon the business combination proposal, the PIPE proposal, the charter proposals, the director election proposal, the incentive plan proposal, and/or if necessary, the adjournment proposal if Pivotal is not able to consummate the Merger for any reason. The annual meeting will be held virtually over the Internet at https://www.cstproxy.com/pivotalic/2020.

Voting Power; Record Date

Stockholders will be entitled to vote or direct votes to be cast at the annual meeting if they owned Pivotal common stock at the close of business on December 7, 2020, which is the record date for the annual meeting. Stockholders will have one vote for each share of Pivotal common stock owned at the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly voted and counted. Pivotal warrants do not have voting rights. Pivotal’s Class A common stock and Class B common stock are entitled to vote together as a single class on all matters to be considered at the annual meeting. On the record date, there were 28,750,000 shares of Pivotal common stock entitled to vote at the annual meeting, of which 23,000,000 were public shares (Class A common stock) and 5,750,000 were sponsor shares (Class B common stock).



 

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Quorum and Vote of Pivotal Stockholders

A quorum of Pivotal stockholders is necessary to hold a valid meeting. A quorum will be present at the Pivotal annual meeting if a majority of the outstanding shares entitled to vote at the annual meeting are represented in person via the web portal for the annual meeting webcast or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum. The holders of sponsor shares hold 20% of the outstanding Pivotal common stock. Such shares will be voted in favor of the business combination proposal and are expected to be voted in favor of the other proposals presented at the annual meeting. The proposals presented at the annual meeting will require the following votes:

 

   

The approval of the business combination proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting to approve the Business Combination. There are currently 23,000,000 shares of Class A common stock outstanding and 5,750,000 shares of Class B common stock outstanding; assuming all outstanding shares are present and entitled to vote at the annual meeting to approve the Business Combination, at least 14,375,001 shares of Pivotal common stock must be voted in favor of the business combination proposal. The holders of sponsor shares own an aggregate of 5,750,000 shares of Class B common stock of Pivotal, representing 20% of the outstanding Pivotal common stock, and have agreed to vote in favor of the business combination proposal; as a result, only 8,625,001 public shares, or approximately 37.5% of the public shares, are required to be voted in favor of the business combination proposal in order for it to be approved (assuming all outstanding shares are present and entitled to vote).

 

   

The approval of the PIPE proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting.

 

   

The approval of each of the charter proposals will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock on the record date.

 

   

The election of directors requires a plurality vote of the Pivotal common stock present and entitled to vote at the annual meeting. A plurality means that the individuals who receive the largest number of votes cast “FOR” are elected as directors.

 

   

The approval of the incentive plan proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting.

 

   

The approval of the adjournment proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting.

Abstentions will have the same effect as a vote “against” the business combination proposal, the PIPE proposal, the charter proposals, the incentive plan proposal, and the adjournment proposal, if presented. Broker non-votes will have no effect on the business combination proposal, incentive plan proposal, and adjournment proposal, if presented, and will have the same effect as a vote “against” the charter proposals. For the election of directors, any shares not voted “FOR” a particular nominee (whether as a result of an abstention, a broker non-vote or a direction to withhold authority) will not be counted in the nominee’s favor.

The closing of the Business Combination is conditioned on approval of the business combination proposal, the PIPE proposal, the charter proposals, and the incentive plan proposal and the election of the nine nominees identified in this proxy statement/prospectus. If any such proposal is not approved or the nine nominees are not elected, the other proposals will not be presented to the stockholders for a vote.



 

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Conversion Rights

Pursuant to Pivotal’s amended and restated certificate of incorporation, a holder of public shares may demand that Pivotal convert such shares into cash if the Business Combination is consummated. Holders of public shares will be entitled to receive cash for these shares only if they deliver their stock to Pivotal’s transfer agent no later than two (2) business days prior to the annual meeting. Holders of public shares do not need to affirmatively vote for or against the business combination proposal or vote at all, or be a holder of such public shares as of the record date to exercise conversion rights. If the Business Combination is not completed, no shares will be converted to cash. If a holder of public shares properly demands conversion, Pivotal will convert each such public share into a pro rata portion of the trust account, calculated as of two business days prior to the anticipated consummation of the Business Combination, including interest earned on the trust account and not previously released to Pivotal to pay its tax obligations. As of December 7, 2020, the record date, this would amount to approximately $10.09 per share. If a holder of public shares exercises its conversion rights, then it will be exchanging its shares of Pivotal common stock for cash and will no longer own the shares. See the section entitled “Annual Meeting of Pivotal Stockholders—Conversion Rights” for a detailed description of the procedures to be followed if you wish to exercise conversion rights.

Notwithstanding the foregoing, a holder of public shares, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking conversion rights with respect to 20% or more of the public shares. Accordingly, all public shares in excess of 20% held by a public stockholder will not be converted to cash.

Under Pivotal’s amended and restated certificate of incorporation, the Business Combination may not be consummated if Pivotal has net tangible assets of less than $5,000,001 either immediately prior to or upon consummation of the Business Combination, after taking into account the conversion into cash of all public shares properly demanded to be converted by holders of public shares, the completion of the Business Combination and the completion of the PIPE Transaction. Because the net tangible assets of the combined company will exceed this threshold as a result of the PIPE Transaction, all of the public shares may be converted and Pivotal can still consummate the Business Combination. However, the combined company must meet certain distribution criteria, including having a minimum of 1,100,000 publicly held shares, in order to be listed on the NYSE, which is a condition to closing the Business Combination.

Holders of Pivotal warrants will not have conversion rights with respect to such securities.

Appraisal Rights

Neither stockholders of Pivotal nor holders of units or warrants of Pivotal have appraisal rights in connection with the Merger under Delaware law.

Proxy Solicitation

Proxies may be solicited by mail, telephone or in person. Pivotal has engaged D.F. King & Co., Inc. to assist in the solicitation of proxies. If a stockholder of record grants a proxy, it may still change its vote by sending a later-dated, signed proxy card to Pivotal’s transfer agent so that it is received prior to the vote at the annual meeting, or by submitting a ballot through the web portal during the annual meeting webcast. A stockholder of record also may revoke its proxy by sending a notice of revocation to Pivotal’s transfer agent, which must be received prior to the vote at the annual meeting. If you hold your shares in “street name,” you should contact your broker, bank or nominee to change your instructions on how to vote. See the section entitled “Annual Meeting of Pivotal Stockholders—Revoking Your Proxy.”



 

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Interests of the Sponsor and Pivotal’s Directors and Officers in the Business Combination

When you consider the recommendation of Pivotal’s board of directors in favor of approval of the business combination proposal and the other proposals, you should keep in mind that the Sponsor (which is affiliated with certain of Pivotal’s officers and directors) and Pivotal’s directors and officers have interests in such proposal that may be different from, or in addition to, your interests as a stockholder or warrantholder. These interests include, among other things:

 

   

If the Business Combination with XL or another business combination is not consummated by January 16, 2021 (or such later date as may be approved by Pivotal’s stockholders), Pivotal will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, the 5,750,000 sponsor shares held by the Sponsor and Pivotal’s directors and officers, which were acquired for an aggregate purchase price of $25,000 prior to Pivotal’s initial public offering, would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such shares. On the other hand, if the Merger is consummated, each outstanding sponsor share will convert into one share of Pivotal’s Class A common stock at the closing. Such shares had an aggregate market value of $92,000,000 based upon the closing price of $16.00 per share on NYSE on December 7, 2020.

 

   

The Sponsor, which is affiliated with certain of Pivotal’s directors and officers, purchased an aggregate of 4,233,333 private warrants from Pivotal for an aggregate purchase price of approximately $6.35 million (or $1.50 per warrant). These purchases took place on a private placement basis simultaneously with the consummation of Pivotal’s initial public offering. All of the proceeds Pivotal received from these purchases were placed in the trust account. Such warrants had an aggregate market value of $17,462,499 based upon the closing price of $4.125 per warrant on NYSE on December 7, 2020. The private warrants will become worthless if Pivotal does not consummate a business combination by January 16, 2021 (or such later date as may be approved by Pivotal stockholders in an amendment to its amended and restated certificate of incorporation).

 

   

MGG, an affiliate of Pivotal SPAC Funding II LLC, which is a managing member of the Sponsor, and of which Kevin Griffin, one of Pivotal’s directors, is the Chief Executive Officer and Chief Investment Officer, has subscribed for shares of Pivotal’s Class A common stock in connection with the PIPE Transaction. MGG has committed to fund $6.3 million of the PIPE Transaction, for which it will receive 630,000 shares of Pivotal’s Class A common stock. Accordingly, MGG may acquire this interest in Pivotal at a discount to the price paid by stockholders of Pivotal who acquire their shares in the after-market. Such shares would have had an aggregate market value of $60,080,000 based upon the closing price of $16.00 per share on NYSE on December 7, 2020.

 

   

If Pivotal is unable to complete a business combination within the required time period, the Sponsor will be personally liable under certain circumstances described herein to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Pivotal for services rendered or contracted for or products sold to Pivotal. If Pivotal consummates a business combination, on the other hand, Pivotal will be liable for all such claims.

 

   

The Sponsor and Pivotal’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on Pivotal’s behalf, such as identifying and investigating possible business targets and business combinations. However, if Pivotal fails to consummate an initial business combination within the required period, they will not have any claim against the trust account for reimbursement. Accordingly, Pivotal may not be able to reimburse these expenses if the Business Combination with XL or another business combination is not completed by January 16, 2021 (or such later date as may be approved by Pivotal stockholders in an



 

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amendment to its amended and restated certificate of incorporation). As of the record date, the Sponsor and Pivotal’s officers and directors and their affiliates had incurred approximately $237,000 of unpaid reimbursable expenses.

 

   

It is currently contemplated that Jonathan J. Ledecky, Kevin Griffin and Sarah Sclarsic, all of which are currently directors of Pivotal, and will continue to be directors of Pivotal after the closing of the Business Combination (assuming that the director election proposal is approved as described in this proxy statement/prospectus). As such, in the future, each will receive any cash fees, stock options or stock awards that the Pivotal board of directors determines to pay to its non-executive directors.

 

   

The Merger Agreement provides for the continued indemnification of Pivotal’s current directors and officers and the continuation of directors and officers liability insurance covering Pivotal’s current directors and officers.

 

   

Pivotal’s officers and directors (or their affiliates) may make loans from time to time to Pivotal to fund certain capital requirements. As of the date of this proxy statement/prospectus, no such loans have been made, but loans may be made after the date of this proxy statement/prospectus. If the Business Combination is not consummated, the loans will not be repaid and will be forgiven except to the extent there are funds available to Pivotal outside of the trust account.

At any time prior to the annual meeting, during a period when they are not in possession of any material nonpublic information regarding Pivotal or its securities, the Sponsor, Pivotal’s officers and directors, XL or XL’s stockholders and/or their respective affiliates may purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the business combination proposal, or execute agreements to purchase shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire shares of Pivotal common stock or vote their shares in favor of the business combination proposal. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirement that the holders of a majority of the shares entitled to vote at the annual meeting to approve the business combination proposal vote in its favor and that the conditions to the closing of the Business Combination (such as the condition that the Pivotal common stock be listed on the NYSE) otherwise will be met, where it appears that such requirements or conditions would otherwise not be met. While the exact nature of any such incentives has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options and the transfer to such investors or holders of shares or warrants owned by the Pivotal initial stockholders for nominal value.

Entering into any such arrangements may have a depressive effect on Pivotal common stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than the then-current market price and may therefore be more likely to sell the shares he, she or it owns, either prior to or immediately after the annual meeting.

If such transactions are effected, the consequence could be to cause the Business Combination to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the business combination proposal and the other proposals to be presented at the annual meeting and would likely increase the chances that such proposals would be approved. Moreover, any such purchases may make it more likely that the conditions to the closing of the Business Combination (such as the condition that the Pivotal common stock be listed on the NYSE) are met.

No agreements dealing with the above arrangements or purchases have been entered into as of the date of this proxy statement/prospectus. Pivotal will file a Current Report on Form 8-K to disclose any arrangements entered



 

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into or significant purchases made by any of the aforementioned persons that would affect the vote on the business combination proposal or the satisfaction of any closing conditions. Any such report will include descriptions of any arrangements entered into or significant purchases by any of the aforementioned persons.

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

Recommendation to Stockholders

Pivotal’s board of directors believes that the business combination proposal and the other proposals to be presented at the annual meeting are fair to and in the best interest of Pivotal’s stockholders and unanimously recommends that its stockholders vote “FOR” the business combination proposal, “FOR” the PIPE proposal, “FOR” each of the charter proposals, “FOR” the election of the nine director nominees identified in this proxy/statement prospectus, “FOR” the incentive plan proposal and “FOR” the adjournment proposal, if presented.

Conditions to the Closing of the Business Combination

General Conditions

Consummation of the Business Combination is conditioned on approval of the proposals presented to Pivotal’s stockholders, including the business combination proposal. In addition, the consummation of the Merger is conditioned upon, among other things:

 

   

Pivotal having, either immediately prior to or upon the closing of the Business Combination, at least $5,000,001 of net tangible assets following the exercise by holders of Pivotal’s public shares of their right to convert their public shares into their pro rata share of the trust account;

 

   

all specified waiting periods under the HSR Act having expired;

 

   

no statute, rule, regulation, executive order, decree, injunction or other order being in effect or enforced by any governmental entity and which has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger;

 

   

the registration statement of which this proxy statement/prospectus forms a part having become effective in accordance with the provisions of the Securities Act, no stop order having been issued by the SEC which remains in effect with respect to the registration statement, and no proceeding seeking such a stop order having been threatened or initiated by the SEC which remains pending;

 

   

the approval for listing on the NYSE of Pivotal’s common stock comprising the Merger Consideration to be issued; and

 

   

the PIPE Transaction having been completed or completed concurrently with the closing of the Business Combination.

Company 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);



 

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performance of the agreements and covenants of Pivotal and Merger Sub required by the Merger Agreement to be performed on or prior to the closing of the Merger in all material respects;

 

   

no action, suit or proceeding being pending or threatened by any governmental entity which is reasonably likely to prevent consummation of the transactions contemplated by the Merger Agreement or cause any of the transactions contemplated by the Merger Agreement to be rescinded following consummation, or to materially and adversely affect the title of the shares of Pivotal common stock to be issued in connection with the Merger, and no order, judgment, decree, stipulation or injunction to such effect being in effect;

 

   

no Material Adverse Effect (as defined in the Merger Agreement) with respect to Pivotal having occurred between the date of the Merger Agreement and the closing of the Business Combination;

 

   

Pivotal executing the Registration Rights Agreement;

 

   

the filing of Pivotal’s amended and restated certificate of incorporation with the Secretary of State of the State of Delaware and the adoption of the amended and restated bylaws;

 

   

the resignation of all persons employed by Pivotal, except for those specified in the Merger Agreement or the schedules thereto;

 

   

the termination of the existing registration rights agreement, among Pivotal and the former Pivotal stockholders thereto; and

 

   

Pivotal’s initial stockholders executing the Lock-Up Agreement.

Pivotal’s and Merger Sub’s 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 agreements and covenants of XL and its subsidiaries required by the Merger Agreement to be performed on or prior to the closing of the Merger in all material respects;

 

   

no action, suit or proceeding being pending or threatened by any governmental entity which is reasonably likely to prevent consummation of the transactions contemplated by the Merger Agreement or cause any of the transactions contemplated by the Merger Agreement to be rescinded following consummation, or to materially and adversely affect the right of the surviving corporation to own, operate or control any of the assets of XL following the Merger, and no order, judgment, decree, stipulation or injunction to such effect being in effect;

 

   

no Material Adverse Effect (as defined in the Merger Agreement) with respect to XL having occurred between the date of the Merger Agreement and the closing of the Business Combination;

 

   

delivery of updated audited financial statements by XL to Pivotal, which must be consistent in all material respects with XL’s existing audited financial statements;

 

   

execution and delivery of the Lock-Up Agreement by XL’s stockholders specified in the Merger Agreement or the schedules thereto;

 

   

termination of certain Company agreements, including XL’s existing stockholders’ agreement, specified in the Merger Agreement or the schedules thereto;

 

   

delivery of a written request for conversion by certain Company stockholders to XL and such other documentation reasonably requested by Pivotal evidencing the conversion of the preferred stock of XL and treatment of derivative securities of XL;



 

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receipt of lender consent under the terms of the U.S. Small Business Administration Payment Protection Program Note, dated April 22, 2020 (the “PPP Loan”), in connection with the consummation of the Merger, or the repayment in full of any outstanding principal and accrued interest under the PPP Loan; and

 

   

the delivery by XL to Pivotal of a certificate that meets the requirements of Treasury Regulations Section 1.1445-2(c)(3) and states that shares of XL are not “ U.S. real property interests” within the meaning of Section 897 of the Code, together with a written authorization for Pivotal to deliver such certification to the IRS on behalf of XL after the closing of the Business Combination and a notice to the IRS in accordance with the provisions of Treasury Regulations Section 1.897-2(h)(2).

Termination

The Merger Agreement may be terminated at any time, but not later than the closing of the Business Combination, as follows:

 

   

by mutual written consent of Pivotal and XL;

 

   

by either Pivotal or XL if the Business Combination is not consummated on or before January 16, 2021, 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 representations, warranties, covenants or agreements in any material respect or any has become untrue such that the conditions to the Merger Agreement would not be satisfied as of the time of such breach and such breach is incapable of being cured or is not cured by the Outside Date, provided that the terminating party is itself not in material breach;

 

   

by either Pivotal if XL shall have failed to deliver Support Agreements within one (1) day following the execution of the Merger Agreement;

 

   

by Pivotal if XL fails to obtain the requisite approval of its stockholders to the Merger Agreement and the Merger by written consent within ten (10) business days following the approval of this proxy statement/prospectus by the SEC;

 

   

by either Pivotal or XL if, at the special meeting of stockholders, the proposals to stockholders, including the business combination proposal, 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 prior to or upon the closing, following consummation of the Merger, Pivotal will have less than $5,000,001 of net tangible assets following the exercise by the holders of shares of Pivotal common stock issued in Pivotal’s initial public offering of their conversion rights into cash.

If permitted under applicable law, Pivotal or XL may waive any inaccuracies in the representations and warranties made to such party contained in the Merger Agreement and waive compliance with any agreements or conditions for the benefit of itself or such party contained in the Merger Agreement. However, the condition requiring that Pivotal have at least $5,000,001 of net tangible assets as described above may not be waived.



 

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Lock-Up Agreement

Certain of XL’s stockholders have entered or will enter into the Lock-Up Agreement which provides that shares of Pivotal’s Class A common stock to be issued to them in the Merger will be subject to a 12-month lock-up period, during which they have agreed, subject to certain restrictions, not to, directly or indirectly, sell, transfer or otherwise dispose of their shares to be issued in the Merger, 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 20 trading days during any 30-trading day period commencing at least 150 days following the consummation of the Merger, subject to certain exceptions. In addition, Pivotal has agreed to cause its initial stockholders to amend their existing lock-up restrictions and enter into the Lock-Up Agreement, so that the lock-up restrictions with respect to the initial stockholders’ common stock of Pivotal and warrants of Pivotal will be identical to the lock-up restrictions applicable to XL’s stockholders who have entered, or will enter, into the Lock-Up Agreement.

Subscription Agreements for PIPE Transaction

On September 17, 2020, Pivotal entered into subscription agreements with the PIPE Investors pursuant to which such PIPE Investors (including MGG) have agreed to purchase, and Pivotal agreed to sell to the PIPE Investors, an aggregate of 15,000,000 shares of Pivotal’s Class A common stock in a private placement at a price of $10.00 per share for an aggregate commitment of $150,000,000. The subscription agreements are subject to certain customary conditions, including, among other things, the closing of the Business Combination. The subscription agreements provide for certain registration rights. The subscription agreements will terminate with no further force and effect 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 the parties to such subscription agreement; (c) if any of the conditions to closing set forth in such subscription agreement are not satisfied on or prior to the closing and, as a result thereof, the transactions contemplated by the subscription agreement are not consummated at the subscription closing, and (d) March 16, 2021.

Registration Rights Agreement

Certain stockholders of XL and Pivotal have entered or will enter into 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 certain shares of Pivotal’s Class A common stock held by them, subject to certain conditions set forth therein. Pivotal has agreed to 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.

XL Support Agreements

In connection with the execution of the Merger Agreement, the Supporting Holders, comprised of certain of XL’s officers, directors, founders and their family members and 5% or greater holders of XL’s stock, who collectively hold approximately 47% of the issued and outstanding shares of XL’s common stock on an as-converted basis, have entered into Support Agreements with Pivotal pursuant to which the Supporting Holders have agreed, among other things, (i) to vote all of their respective shares of XL’s stock in favor of the Merger at a meeting called to approve the Merger by XL’s stockholders (or in an action by written consent approving the Merger) and (ii) to the extent such stockholders are holders of XL’s Series D preferred stock, to deliver a signature to the request for conversion required to effect the conversion of XL’s preferred stock into XL’s common stock immediately prior to the effective time of the Merger.



 

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Tax Consequences of the Business Combination

For a description of the material U.S. federal income tax consequences of the Merger and the exercise of conversion rights, please see the information set forth in “The Business Combination Proposal—Material U.S. Federal Income Tax Consequences of the Merger.”

Anticipated Accounting Treatment

The Merger will be accounted for as a reverse merger in accordance with U.S. GAAP. Under this method of accounting, Pivotal will be treated as the “acquired” company for financial reporting purposes. This determination was primarily based on XL comprising the ongoing operations of the combined company, XL senior management comprising the senior management of the combined company, and that the former owners and management of XL will have control of the board of directors of the combined company after the Merger. In accordance with guidance applicable to these circumstances, the Merger will be considered to be a capital transaction in substance. Accordingly, for accounting purposes, the Merger will be treated as the equivalent of XL issuing shares for the net assets of Pivotal, accompanied by a recapitalization. The net assets of Pivotal will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the closing of the Merger will be those of XL.

Regulatory Matters

The Merger is not subject to any additional federal or state regulatory requirement or approval, except for the filings with the State of Delaware necessary to effectuate the Merger and the filing of required notifications and the expiration or termination of the required waiting periods under the HSR Act. On October 14, 2020, the Federal Trade Commission (the “FTC”) notified the parties that their request for early termination of the waiting period under the HSR Act had been granted.

Risk Factors

In evaluating the proposals to be presented at the annual meeting, a stockholder should carefully read this proxy statement/prospectus and especially consider the factors discussed in the sections entitled “Risk Factors” and “Forward-Looking Statements”.



 

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SELECTED HISTORICAL FINANCIAL INFORMATION

Pivotal is providing the following selected historical financial information to assist you in your analysis of the financial aspects of the merger.

The historical financial statements of Pivotal and XL have been prepared in accordance with U.S. GAAP.

Pivotal’s consolidated balance sheet data as of September 30, 2020 and consolidated statement of operations data for the nine months ended September 30, 2020 and the period from March 20, 2019 (inception) through September 30, 2019 are derived from Pivotal’s unaudited financial statements included elsewhere in this proxy statement/prospectus. Pivotal’s consolidated balance sheet data as of December 31, 2019 and consolidated statement of operations data for the period from March 20, 2019 (inception) to December 31, 2019 are derived from Pivotal’s audited financial statements included elsewhere in this proxy statement/prospectus.

XL’s consolidated balance sheet data as of September 30, 2020 and consolidated statement of operations data for the nine months ended September 30, 2020 are derived from XL’s unaudited financial statements included elsewhere in this proxy statement/prospectus. XL’s consolidated balance sheet data as of December 31, 2019 and 2018 and consolidated statement of operations data for the years ended December 31, 2019 and 2018 are derived from XL’s audited financial statements included elsewhere in this proxy statement/prospectus.

The information is only a summary and should be read in conjunction with each of XL’s and Pivotal’s consolidated financial statements and related notes and “Other Information Related to Pivotal—Pivotal’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “XL’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere herein. The historical results included below and elsewhere in this proxy statement/prospectus are not indicative of the future performance of XL or Pivotal. All amounts are in US dollars.

Pivotal’s Selected Financial Information

(dollars in thousands except per share amounts)

Income Statement Data:

 

     Nine Months
Ended
September 30, 2020
     Period from
March 20, 2019
(inception) to
September 30, 2019
     Period from
March 20, 2019
(inception) to
December 31, 2019
 
     (unaudited)      (unaudited)         

Revenue

   $ —        $ —        $ —    

Loss from Operations

     (2,219      (133      (393

Interest

     886        951        1,912  

Unrealized Gain/ (Loss) on marketable securities in Trust Account

     —          23        8  

Net Income (loss) attributable to common shareholders

     (1,417      665        1,206  

Basic and diluted net income (loss) per share

     (0.29      (0.01      (0.03

Weighted average shares outstanding excluding shares subject to possible redemption

     6,969,280        5,756,524        6,141,375  


 

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Balance Sheet Data:

 

     As of
September 30,
2020
     As of
December 31,
2019
 
     (unaudited)         

Working Capital

   $ (1,258    $ 527  

Trust Account, restricted

     232,286        231,920  

Total Assets

     232,960        232,661  

Total Liabilities

     9,982        8,266  

Value of common stock redeemable for cash

     217,978        219,395  

Stockholders’ Equity

     5,000        5,000  

XL’s Selected Financial Information

(dollars in thousands except per share amounts)

Statement of Income Data:

 

     For the Nine Months
ended September 30,
     For the Year Ended
December 31,
 
     2020      2019      2019      2018  
     (unaudited)                

Revenues

   $ 9,472      $ 6,934      $ 7,215      $ 9,545  

Cost of revenues

     8,713        7,191        8,075        11,014  

Gross profit

     759        (257      (860      (1,469

Research and development

     3,297        1,743        4,721        2,101  

Selling, general, and administrative expenses

     10,798        7,690        7,988        9,125  

Interest expense

     2,121        791        2,151        (208

Change in fair value of derivative

     3,532        705        (819      —    

Loss on extinguishment of debt

     1,038        —          —          —    

Net and comprehensive loss

     (20,027      (11,186      (14,901      (12,903

Balance Sheet Data:

 

     As of September 30,
2020
     As of December 31,
2019
 
     (unaudited)         

Cash

   $ 1,583      $ 3,386  

Total Current Assets

     12,830        7,081  

Total Assets

     14,838        9,249  

Total Current Liabilities

     40,474        15,489  

Total Non-Current Liabilities

     6,523        7,460  

Total Liabilities

     46,997        22,949  

Total Shareholders’ Deficit

     (84,048      (64,705


 

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SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Pivotal is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the Business Combination and related transactions.

The unaudited pro forma condensed combined financial statements (which we refer to as the pro forma financial statements) combine the historical consolidated financial statements of Pivotal and the historical consolidated financial statements of XL to illustrate the effect of the Business Combination and related transactions. The pro forma financial statements were based on and should be read in conjunction with:

 

   

The accompanying notes to the unaudited pro forma financial statements;

 

   

Pivotal’s unaudited financial statements for the three and nine months ended September 30, 2020 and the notes relating thereto, included elsewhere in this proxy statement;

 

   

Pivotal’s audited financial statements as of December 31, 2019 and for the period from March 20, 2019 (inception) through September 30, 2019 and the notes relating thereto, included elsewhere in this proxy statement;

 

   

XL’s unaudited consolidated financial statements for the nine months ended September 30, 2020 and the notes relating thereto included elsewhere in this proxy statement; and

 

   

XL’s audited consolidated financial statements for the year ended December 31, 2019 and the notes relating thereto included elsewhere in this proxy statement.

The following unaudited pro forma condensed combined balance sheet combines the unaudited condensed consolidated historical balance sheet of Pivotal as of September 30, 2020 with the unaudited condensed consolidated historical balance sheet of XL as of September 30, 2020, giving effect to the Business Combination and related transactions as if they had been consummated as of September 30, 2020.

The following unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 combines the unaudited condensed statement of operations of Pivotal for the nine months ended September 30, 2020 with the unaudited condensed consolidated statement of operations of XL for the nine months ended September 30, 2020, giving effect to the Business Combination and related transactions as if they had occurred on January 1, 2019.

The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 combines the audited statement of operations of Pivotal for the period from March 20, 2019 (inception) through September 30, 2019 with the audited consolidated statement of operations of XL for the year ended December 31, 2019, giving effect to the Business Combination and related transactions as if they had occurred on January 1, 2019.

The unaudited pro forma condensed combined balance sheet as of September 30, 2020, the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 have been prepared using two different assumptions regarding the number of public shares as to which the Pivotal public stockholders exercise their conversion rights, as follows:

Assuming No Redemption: This presentation assumes that no Pivotal public stockholders exercise their right to have their Pivotal public shares converted into their pro rata share of the trust account; and

Assuming Maximum Redemption: For purposes of the pro forma condensed combined balance sheet, this presentation assumes that holders of no more than 21,582,057 public shares of Pivotal exercise their right to



 

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have their shares converted into their pro rata share of the trust account. For purposes of the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 and for the year ended December 31, 2019, this presentation assumes that holders of no more than 21,768,560 public shares of Pivotal exercise their right to have their shares converted into their pro rata share of the trust account.

The historical financial information of Pivotal and XL has been adjusted to give effect to the expected events that are related and/or directly attributable to the Business Combination and related transactions, are factually supportable and are expected to have a continuing impact on the results of the combined company. The adjustments presented in the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the Business Combination and related transactions.

The historical financial statements of Pivotal and XL have been prepared in accordance with U.S. GAAP.

The historical financial information of Pivotal was derived from the unaudited condensed financial statements of Pivotal for the nine months ended September 30, 2020 and the audited financial statements of Pivotal as of December 31, 2019 and for the period from March 20, 2019 (inception) through September 30, 2019, which are included elsewhere in this proxy statement. The historical financial information of XL was derived from the unaudited condensed consolidated financial statements of XL for the nine months ended September 30, 2020 and the audited consolidated financial statements of XL for the year ended December 31, 2019, included elsewhere in this proxy statement. This information should be read together with Pivotal’s and XL’s financial statements and related notes, “Other Information Related to Pivotal—Pivotal’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “XL’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this proxy statement.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience.

The Business Combination has not been consummated as of the date of the preparation of these pro forma financial statements and there can be no assurances that the Business Combination will be consummated. See “Risk Factors” for additional discussion of risk factors associated with the pro forma financial statements.



 

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Selected Unaudited Pro Forma Financial Information

(dollars in thousands except share and per share amounts)

 

     For the Nine Months Ended September 30, 2020  
     Pivotal Investment
Corporation II
     XL Hybrids, Inc.      No Redemption      Maximum
Redemption
 

Statement of Operations Data

           

Total revenues

   $ —      $ 9,472      $ 9,472      $ 9,472  

Total operating expenses

   $ 2,219      $ 14,095      $ 12,043      $ 12,043  

Operating (loss)

   $ (2,219    $ (13,336    $ (11,284    $ (11,284 )

Interest income on marketable securities

   $ 886           

Net income (loss)

   $ (1,417    $ (20,027    $ (12,607    $ (12,607 )

Net income (loss) per common share—basic and diluted

   $ (0.29    $ (1.73    $ (0.09    $ (0.11

Balance Sheet Data

           

Total current assets

   $ 674      $ 12,830      $ 354,177      $ 144,705  

Total assets

   $ 232,960      $ 14,838      $ 356,185      $ 146,713  

Total current liabilities

   $ 1,932      $ 40,474      $ 13,061      $ 13,061  

Total liabilities

   $ 9,982      $ 46,997      $ 19,584      $ 19,584  

Total stockholders’ equity (deficit)

   $ 5,000      $ (84,048    $ 336,601      $ 127,129  
     For the Year Ended December 31, 2019  
     Pivotal Investment
Corporation II
     XL Hybrids, Inc.      No
Redemption
     Maximum
Redemption
 

Statement of Operations Data

           

Total revenues

   $ —      $ 7,215      $ 7,215      $ 7,215  

Total operating expenses

   $ 393      $ 12,709      $ 13,102      $ 13,102  

Operating (loss) income

   $ (393    $ (13,569    $ (13,962    $ (13,962

Interest income on marketable securities

     1,920        —          —          —    

Net income (loss)

   $ 1,206      $ (14,901    $ (10,225    $ (10,225

Earnings (loss) per common share—basic and diluted

   $ (0.03    $ (1.39)      $ (0.08)      $ (0.09)  


 

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COMPARATIVE PER SHARE DATA

The unaudited pro forma condensed combined balance sheet as of September 30, 2020, the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 have been prepared using two different assumptions regarding the number of public shares as to which the Pivotal public stockholders exercise their conversion rights, as follows:

Assuming No Redemption: This presentation assumes that no Pivotal public stockholders exercise their right to have their Pivotal public shares converted into their pro rata share of the trust account;

Assuming Maximum Redemption: For purposes of the pro forma condensed combined balance sheet, this presentation assumes that holders of no more than 21,582,057 public shares of Pivotal exercise their right to have their shares converted into their pro rata share of the trust account. For purposes of the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 and for the year ended December 31, 2019, this presentation assumes that holders of no more than 21,768,560 public shares of Pivotal exercise their right to have their shares converted into their pro rata share of the trust account.

The historical financial information has been adjusted to give effect to the expected events that are related and/or directly attributable to the transactions, are factually supportable and are expected to have a continuing impact on the combined results. The adjustments presented in the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the transactions.

The historical financial statements of Pivotal and XL have been prepared in accordance with U.S. GAAP.

The historical financial information of Pivotal was derived from the unaudited condensed financial statements of Pivotal for the nine months ended September 30, 2020 and the audited financial statements of Pivotal as of December 31, 2019 and for the period from March 20, 2019 (inception) through September 30, 2019, which are included elsewhere in this proxy statement. The historical financial information of XL was derived from the unaudited condensed consolidated financial statements of XL for the nine months ended September 30, 2020 and the audited consolidated financial statements of XL for the year ended December 31, 2019, included elsewhere in this proxy statement. This information should be read together with Pivotal’s and XL’s financial statements and related notes, “Other Information Related to Pivotal—Pivotal’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “XL’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this proxy statement.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience.



 

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     Pivotal Investment
Corporation II
    XL Hybrids, Inc.     Pro Forma
Combined
Assuming
No Redemption
    Pro Forma
Combined
Assuming
Maximum
Redemption
 

Nine Months Ended September 30, 2020

        

Net income (loss)

   $
(1,417

  $ (20,027   $ (12,607   $ (12,607 )

Stockholders’ equity (deficit) at September 30, 2020

   $ 5,000     $ (84,048   $ 336,601     $ 127,129  

Weighted average shares outstanding:

        

Basic and diluted

     6,969,280       11,555,159       137,795,372       116,026,812  

Basic and diluted net income (loss) per share

   $ (0.29   $ (1.73   $ (0.09   $ (0.11 )

Stockholders’ equity per share—basic and diluted—at September 30, 2020

   $ 0.70       (9.59   $ 2.61     $ 1.18  

 

     Pivotal Investment
Corporation II
    XL Hybrids, Inc.     Pro Forma
Combined
Assuming
No Redemption
    Pro Forma
Combined
Assuming
Maximum
Redemption
 

Year Ended December 31, 2019

        

Net income (loss)

   $ 1,206     $ (14,901   $ (10,225   $ (10,225

Weighted average shares outstanding—Basic and diluted

     6,141,375       10,752,940       132,586,158       110,817,598  

Basic and diluted net (loss) income per share

   $ (0.03     (1.39   $ (0.08   $ (0.09


 

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RISK FACTORS

Stockholders should carefully consider the following risk factors, together with all of the other information included elsewhere in this proxy statement/prospectus, before they decide whether to vote or instruct their vote to be cast to approve the proposals described in this proxy statement/prospectus.

The value of your investment in Pivotal following consummation of the Business Combination will be subject to the significant risks affecting XL and inherent to the industry in which it operates. You should carefully consider the risks and uncertainties described below and other information included elsewhere in this proxy statement/prospectus. If any of the events described below occur, the post-acquisition business and financial results could be adversely affected in a material way. This could cause the trading price of its common stock to decline, perhaps significantly, and you therefore may lose all or part of your investment. Unless the context otherwise requires, all references in these Risk Factors to the “Company,” “we,” “us” or “our” refer to the business of XL prior to the consummation of the Business Combination, which will be the business of Pivotal following the consummation of the Business Combination. Accordingly, the risks described below relating to XL could also materially and adversely affect the combined company after the consummation of the Business Combination.

Risks Related to XL’s Business and Industry

XL is an early stage company with a history of losses, and expects to incur significant expenses and continuing losses.

XL incurred a net loss of approximately $20.0 million for the nine months ended September 30, 2020 and has incurred net losses of approximately $47.8 million from January 1, 2018 through September 30, 2020. XL believes that it will continue to incur operating and net losses until at least such time as its annual revenue reaches over $200 million, which is estimated to occur in 2022, and may occur later or not at all. XL has an established customer base and product line and its potential profitability is dependent upon the continued successful development and successful commercial acceptance of its electrified powertrain solutions, which may occur later than anticipated, if at all. XL’s potential profitability is further contingent on the reduction in product system costs, which also may occur later than anticipated, if at all.

XL expects the rate at which it will incur losses to be significantly higher in future periods as XL:

 

   

expands product offerings to include anti-idle technology, onboard power, new versions of plug-in hybrid solutions, full battery electric propulsion, comprehensive charging and power solutions and hydrogen fuel cell enabled hybrid electric systems;

 

   

expands its production capabilities to produce its electrified powertrain solutions, including costs associated with outsourcing the production of its electrified powertrain solutions;

 

   

builds up inventories of parts and components for its fleet electrification solutions;

 

   

produces an inventory of its electrified powertrain solutions;

 

   

expands its design, development, installation and servicing capabilities;

 

   

increases its sales and marketing activities and develops its distribution infrastructure;

 

   

increases its general and administrative functions to support its growing operations; and

 

   

acquire and integrate other businesses.

Because XL will incur the costs and expenses from these efforts before it receives any incremental revenues with respect thereto, XL’s losses in future periods are expected to be significant. In addition, XL may find that these efforts are more expensive than it currently anticipates or that these efforts may not result in revenues, which would have a material adverse effect on its results of operations and further increase XL’s losses.

 

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XL may become subject to product liability claims, which could harm its financial condition and liquidity if it is not able to successfully defend or insure against such claims.

Product liability claims, even those without merit or those that do not involve XL’s products, could harm XL’s business, prospects, financial condition and operating results. The automobile industry in particular experiences significant product liability claims, and XL faces inherent risk of exposure to claims in the event XL’s electric powertrain solutions do not perform or are claimed to not have performed as expected. As is true for other commercial vehicle suppliers, XL expects in the future that its electrified powertrain solutions will be installed on vehicles that will be involved in crashes resulting in death or personal injury. Additionally, product liability claims that affect XL’s competitors may cause indirect adverse publicity for XL and its products.

While XL maintains product liability insurance, its coverage may not be adequate to cover certain product liability claims, and XL may not be able to obtain adequate insurance coverage in the future at acceptable costs. A successful product liability claim that exceeds its policy limits could require XL to pay substantial sums. XL’s risks in this area are particularly pronounced given the relatively limited number of electrified powertrain solutions delivered to date and limited field experience of XL’s products. Moreover, a product liability claim against XL or its competitors could generate substantial negative publicity about XL’s products and business and could have a material adverse effect on XL’s brand, reputation, business, prospects, financial condition and operating results.

XL relies on a limited number of customers for a large portion of its revenues, and the loss of one or more such customers could have a material adverse impact on its business, financial condition and results of operations.

XL depends on a limited number of customers for a significant portion of its revenue. For the fiscal year ended December 31, 2019, XL had two customers that each accounted for over 10% of its revenue. In the aggregate, these customers accounted to 69% of XL’s revenue for the fiscal year ended December 31, 2019. The loss of one or more of these customers could have a significant impact on XL’s revenues and harm its business, results of operations and cash flows.

XL may not be able to further penetrate the fleet market or enter into new markets in the future.

XL’s success, and its ability to increase revenue and operate profitably, depends in part on its ability to expand its customer base, further penetrating the fleet markets comprised of corporations, municipalities and public utilities along with expansion into new markets. XL has an established customer base in the light and medium duty commercial and municipal fleet markets. As part of XL’s growth plan, an increase in revenue is expected to be generated from further market penetration into the light and medium duty commercial and municipal fleet markets. In addition, as XL develops new technologies, part of the growth plan involves expansion into new markets, such as the heavy duty commercial fleet market. If XL is unable to meet its customers’ performance requirements or industry specifications limiting expansion into existing or new markets, XL’s business, prospects, financial condition and operating results would be materially adversely affected.

XL’s financial results may vary significantly from period to period due to fluctuations in its operating costs and other factors.

XL expects its period-to-period financial results to vary based on its operating costs, which XL anticipates will fluctuate as the pace at which it continues to design, develop and produce new products and increase production capacity. Additionally, XL’s revenues from period to period may fluctuate as it introduces existing products to new markets for the first time and as it develops and introduces new products. As a result of these factors, XL believes that quarter-to-quarter comparisons of its financial results, especially in the short term, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance. Moreover, XL’s financial results may not meet expectations of equity research analysts, ratings agencies or investors, who may be focused only on quarterly financial results. If any of this occurs, the trading price of the combined company’s common stock could fall substantially, either suddenly or over time.

 

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XL may be unable to adequately control the costs associated with its operations.

XL will require significant capital to develop and grow its business, including developing and producing its electrified powertrain solutions and building XL’s brand. XL expects to incur significant expenses which will impact its profitability, including research and development expenses, raw material procurement costs, sales and distribution expenses as XL builds its brand and markets its electrified powertrain solutions, and general and administrative expenses as XL scales its operations and incurs costs as a public company. XL’s ability to become profitable in the future will depend on its ability to complete the design and development of additional electrified powertrain solutions to meet projected performance metrics and successfully market its electrified powertrain solutions and services. Additionally, for XL to become profitable, XL must develop powertrain solutions that are cost effective to help achieve its expected margins. If XL is unable to efficiently design, produce, market, sell, distribute and service its electrified powertrain solutions, XL’s margins, profitability and prospects would be materially and adversely affected.

XL’s business model requires further market penetration to drive growth and failure to expand would have a material adverse effect on its operating results and business and could result in substantial liabilities that exceed its resources.

It is difficult to predict XL’s future revenues and appropriately budget for its expenses, and XL has limited insight into trends that may emerge and affect its business. In the event that actual results differ from XL’s estimates or XL adjusts its estimates in future periods, XL’s operating results and financial position could be materially affected. The projected financial information appearing elsewhere in this proxy statement/prospectus has been prepared by XL management and reflects current estimates of further market penetration. The projected results depend on the successful implementation of XL management’s growth strategies and are based on assumptions and events over which XL has only partial or no control. XL will continue to encounter risks and difficulties frequently experienced by early stage companies, including scaling up its infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with its growth. In addition, as a result of the capital-intensive nature of XL’s business, XL can be expected to continue to sustain substantial operating expenses without generating sufficient revenues to cover expenditures. Any investment in XL is therefore highly speculative and could result in the loss of your entire investment.

XL may require continued capital investment

XL should have sufficient capital in the near future for the design, development and manufacture of electrified powertrain solutions. Although XL anticipates that the funding from the Business Combination will provide sufficient capital, to fund the combined company’s business, XL may require additional capital investment in the future to fund operations, continue research and development and improve infrastructure. There can be no assurance that XL will have access to the capital it needs on favorable terms when required or at all. If XL cannot raise additional funds when it needs them, XL’s financial condition and business could be materially adversely affected.

If XL fails to manage its growth effectively, include failing to attract and integrate qualified personnel, it may not be able to develop, produce, market and sell its electrified powertrain solutions successfully.

Any failure to manage XL’s growth effectively could materially and adversely affect XL’s business, prospects, operating results and financial condition. XL intends to expand its operations significantly. XL expects its future expansion to include:

 

   

expanding the management team;

 

   

hiring and training new personnel;

 

   

forecasting production and revenue;

 

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controlling expenses and investments in anticipation of expanded operations;

 

   

establishing or expanding design, production, sales and service facilities;

 

   

implementing and enhancing administrative infrastructure, systems and processes;

 

   

expanding into international markets; and

 

   

acquiring other businesses.

XL intends to continue to hire a significant number of additional personnel, including controls and systems engineers, design and development engineers and production personnel for its electrified powertrain solutions. Because XL’s electrified powertrain solutions are based on a different technology platform than traditional internal combustion engines, individuals with sufficient training in electrified vehicles may not be available to hire, and as a result, XL will need to expend significant time and expense training any newly hired employees. Competition for individuals with experience designing and producing electrified vehicles and their software is intense, and XL may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel. The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm XL’s business, prospects, financial condition and operating results.

XL’s success will depend on its ability to economically source and for upfitter of OEM partners to install electrified powertrain solutions at scale, and its ability to develop and produce electrified powertrain solutions of sufficient quality and appeal to customers on schedule and at scale is unproven.

XL’s business depends in large part on its ability to execute its plans to develop, produce, assemble, market, sell, install and service its electrified powertrain solutions. In particular, XL relies on Parker Hannifin Corporation to supply all of its motors. XL further relies on other third parties to supply wire harnesses and inverters, which in each case are used in XL’s electrified powertrain solutions. XL currently sources all components and assembles them into systems which are sent to XL’s upfitter partners. These upfitter partners then install and commission XL’s electrified powertrain solutions. While these arrangements can lower operating costs and enable rapid increases in installations, they also reduce XL’s direct control over installation. Such diminished control may have an adverse effect on the quality or quantity of products or services, or XL’s flexibility to respond to changing conditions.

XL relies on single-source suppliers to supply and produce certain components and relies on upfitter partners for installation of its electrified powertrain solutions. Any failure of these suppliers or partners to perform could require XL to seek alternative suppliers or to expand its production capabilities, which could incur additional costs and have a negative impact on its cost or supply of components or finished goods. In addition, production, logistics in supply or production areas, or transit to final destinations can be disrupted for a variety of reasons including, but not limited to, natural and man-made disasters, information technology system failures, commercial disputes, military actions, economic, business, labor, environmental, public health or political issues or international trade disputes.

XL, its supply chain and upfitter partners have limited experience to date in high volume production of XL’s electrified powertrain solutions. XL does not know if the sources of component supply and/or upfitters at scale will remain reliable to enable XL to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market XL’s electrified powertrain solutions. Even if XL and its upfitter partners are successful in developing its high volume production capability and processes and in reliably sourcing its component supply, XL does not know whether it will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond its control such as problems with suppliers and vendors, or in time to meet XL’s vehicle commercialization schedules or to satisfy the requirements of customers. Any failure to develop such production processes and capabilities within XL’s projected costs and timelines could have a material adverse effect on its business, prospects, financial condition and operating results. 

 

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XL may experience significant delays in the design, production and launch of its electrified powertrain solutions, which could harm its business, prospects, financial condition and operating results.

Any delay in the financing, design, production and launch of XL’s electrified powertrain solutions could materially damage XL’s brand, business, prospects, financial condition and operating results. There are often delays in the design, production and commercial release of new products, and to the extent XL delays the launch of its electrified powertrain solutions, its growth prospects could be adversely affected as it may fail to grow its market share. XL integrates electrified solutions into original equipment manufacturer (“OEM”) vehicles, and if the OEM makes unexpected changes to the function of the vehicle, this could significantly delay the development and therefore launch of XL’s electrified powertrain solutions. XL will rely on upfitter partners to install XL’s electrified powertrain solution, and if they are not able to produce product at scale or meet XL’s specifications, XL may need to expand its production capabilities, which would cause XL to incur additional costs. Furthermore, XL relies on third-party suppliers for the provision and development of many of the key components and materials used in its electrified powertrain solutions, and to the extent they experience any delays, XL may need to seek alternative suppliers. If XL experiences delays by its suppliers, it could experience delays in delivering on its timelines.

If XL is unable to successfully produce its electrified powertrain solutions, its business will be harmed.

There are numerous potential ways XL could be unable to produce its electrified powertrain solutions. XL’s suppliers’ production facilities, which are used to produce components for XL’s electrified powertrain solutions, would be costly to replace and could require substantial lead time to replace and qualify for use. XL’s suppliers’ production facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, flooding, fire and power outages, or by health epidemics, such as the recent COVID-19 pandemic, which may render it difficult or impossible for XL to produce its electrified powertrain solutions for some period of time. The inability to produce XL’s electrified powertrain solutions or the backlog that could develop if XL’s production facilities and the production facilities of its outsourcing partners and suppliers are inoperable for even a short period of time may result in the loss of customers or harm XL’s reputation. Although XL maintains insurance for damage to its property and the disruption of its business, this insurance may not be sufficient to cover all of XL’s potential losses and may not continue to be available to XL on acceptable terms, if at all.

XL is dependent on vehicle OEMs, upfitters and body builders to bring its electrified powertrain solutions to market, which is subject to risks.

Because XL does not manufacture complete vehicles, it is dependent on vehicle OEMs and body builders to provide vehicle chassis for its electrified powertrain solutions. XL relies on upfitters for the installation of its electrified powertrain solutions. Reliance on OEMs, body builders and upfitters for the production and installation of XL’s electrified powertrain solutions is subject to risks with respect to operations that are outside XL’s control. If OEMs or body builders are not able to produce vehicle chassis and provide them to XL or upfitters, or a change in governmental regulations or policies occurs, XL would need to develop its own vehicle on which to install its electrified powertrain solutions. Either case could have a negative impact on XL’s ability to sell its electrified powertrain solutions at anticipated prices or margins or in expected timeframes. Additionally, XL may permit returns of vehicles installed with XL’s electrified powertrain solutions, which may result in significant additional costs to XL if it is required to convert the vehicles back to their original form. There is risk of potential disputes with XL’s upfitters, and XL could be affected by negative publicity related to its upfitter partners whether or not such publicity is related to their collaboration with XL. XL’s ability to successfully build a premium brand could also be adversely affected by perceptions about the quality of XL’s upfitter partners’ workmanship. In addition, although XL is involved in each step of the supply chain, production and installation processes, because XL also relies on its upfitter partners and suppliers to meet its quality standards, there can be no assurance that the final product will meet expected quality standards.

XL may be unable to enter into new agreements or extend existing agreements with upfitter partners on terms and conditions acceptable to XL and therefore may need to contract with other third parties or significantly add

 

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to its own production capacity. There can be no assurance that in such event XL would be able to engage other third parties or establish or expand its own production capacity to meet its needs on acceptable terms or at all. The expense and time required to complete any transition, and to assure that XL’s electrified powertrain solutions produced at facilities of new producers comply with XL’s quality standards and regulatory requirements, may be greater than anticipated. Any of the foregoing could adversely affect XL’s business, prospects, financial condition and operating results.

XL’s ability to sell electrified powertrain solutions depends on compatibility with various OEM vehicle models and characteristics. The pace of change of these models and changing model availability is outside of XL’s control and could create adverse conditions and materially affect XL’s financial results.

XL is dependent on its suppliers, some of which are single or limited source suppliers, and the inability of these suppliers to deliver necessary components of XL’s systems for powertrains at prices and volumes, performance and specifications acceptable to XL could have a material adverse effect on XL’s business, prospects, financial condition and operating results.

XL relies on third-party suppliers for the provision and development of certain key components and materials used in its electrified powertrain solutions. While XL plans to obtain components from multiple sources whenever possible, some of the critical components used in its vehicles will be purchased by XL from a single source or a limited number of sources. For example, XL purchases all of its motors from a single supplier, Parker Hannifin Corporation.

XL’s third-party suppliers may not be able to meet their product specifications and performance characteristics, which would impact XL’s ability to achieve its product specifications and performance characteristics as well. Additionally, XL’s third-party suppliers may be unable to obtain required certifications for their products for which XL plans to use or provide warranties that are necessary for XL’s solutions. If XL is unable to obtain components and materials used in its electrified powertrain solutions from its suppliers or if its suppliers decide to create or supply a competing product, XL’s business could be adversely affected. While XL believes that it may be able to establish alternate supply relationships and can obtain or engineer replacement components for its single source components, XL may be unable to do so in the short term (or at all) or at prices or quality levels that are favorable to XL, which could have a material adverse effect on its business, prospects, financial condition and operating results.

XL’s future growth is dependent upon the fleet industry’s willingness to adopt hybrid, plug-in hybrid, all electric and fuel cell electric vehicles (“xEVs”).

XL’s growth is highly dependent upon the adoption of xEVs by the commercial and municipal fleet industry. If the market for xEVs and XL’s electrified powertrain solutions does not develop at the rate or in the manner or to the extent that XL expects, or if critical assumptions XL has made regarding the efficiency of its electrified powertrain solutions are incorrect or incomplete, XL’s business, prospects, financial condition and operating results will be harmed. The fleet market for xEVs is characterized by rapidly changing technologies, price competition, numerous competitors including OEMs, evolving government regulation and industry standards and uncertain customer demands and behaviors.

Factors that may influence the fleet market adoption of xEVs vehicles include:

 

   

perceptions about xEV quality, safety, design, performance, reliability and cost, especially if adverse events or accidents occur that are linked to the quality or safety of xEVs;

 

   

perceptions about vehicle safety in general, including the use of advanced technology, such as vehicle electronics, batteries and regenerative braking systems;

 

   

the decline of vehicle efficiency and/or range resulting from deterioration over time in the ability of the battery to hold a charge;

 

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changes or improvements in the fuel economy of internal combustion engines, the vehicle and the vehicle controls or competitors’ electrified systems;

 

   

the availability of service, charging and fueling and other associated costs for xEVs;

 

   

volatility in the cost of energy, electricity, oil and gasoline could affect buying decisions;

 

   

government regulations and economic incentives promoting fuel efficiency and alternate forms of energy, including new regulations mandating zero tailpipe emissions compared to overall carbon reduction;

 

   

the availability of tax and other governmental incentives to purchase and operate xEVs or future regulation requiring increased use of nonpolluting trucks; and

 

   

macroeconomic factors.

As an example, the market price of oil has dropped since January 2020, and it is unknown to what extent any corresponding decreases in the cost of fuel may impact the market for xEVs. Moreover, travel restrictions and social distancing efforts in response to the COVID-19 pandemic may negatively impact the commercial fleet industry, for an unknown, but potentially lengthy, period of time. Additionally, XL may become subject to regulations that may require it to alter the design of its electrified powertrain solutions, which could negatively impact customer interest in XL’s products.

XL may in the future experience additional competition in current and potential future markets.

XL works closely with traditional vehicle manufacturers to provide electrification solutions for their standard gas-powered vehicles. As a result, XL has historically considered its relationship to such companies to be that of a market partner as opposed to a competitor. But as the vehicle electrification market continues to expand, traditional vehicle manufacturers may develop and market xEV solutions in larger vehicles or all electric versions of the same vehicles being deployed with XL’s systems. In particular, Tesla, Inc. (“Tesla”), Hyliion, Inc. (“Hyliion”) and Nikola Corporation (“Nikola”) have announced their plans to bring Class 8 long haul battery electric vehicles and fuel cell electric vehicles to the market over the coming years. Cummins Inc., Daimler AG, Dana Incorporated, Navistar International Corporation, PACCAR Inc., Volvo Group, XOS Trucks and other commercial vehicle manufacturers have also announced their plans to bring Class 8 battery electric vehicles or FCEVs to the market.

In the event that traditional vehicle manufacturers develop xEV solutions that compete with vehicles outfitted with XL’s electrification solutions, XL will experience increased industry competition. Competitors may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their electric vehicles. Additionally, such competitors may have greater name recognition, longer operating histories, larger sales forces, broader customer and industry relationships and other resources than XL does. XL may experience competition with respect to recruiting and retaining qualified research and development, sales, marketing and management personnel, as well as further competition in acquiring technologies complementary to, or necessary for, XL’s products. Additional mergers and acquisitions may result in even more resources being concentrated in XL’s competitors. There are no assurances that customers will choose XL’s electrified systems or vehicles over those of its competitors, and future competition could have a material adverse effect on XL’s business, financial condition and results of operation.

XL, the OEMs and XL’s suppliers are subject to substantial regulation, and unfavorable changes to, or failure by XL, the OEMs or XL’s suppliers to comply with, these regulations could substantially harm XL’s business and operating results.

XL’s electrified powertrain solutions, and the sale of motor vehicles in general, are subject to substantial regulation under international, federal, state and local laws. OEMs and XL’s suppliers also are currently or may

 

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in the future become subject to such regulations. XL continues to evaluate requirements for licenses, approvals, certificates and governmental authorizations necessary to manufacture, sell or service its electrified powertrain solutions in the jurisdictions in which it plans to operate and intends to take such actions necessary to comply. XL may experience difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary to manufacture, sell or service their electrified powertrain solutions in any of these jurisdictions. If XL, OEMs or XL’s suppliers are unable to obtain or comply with any of the licenses, approvals, certifications or other governmental authorizations necessary to carry out its operations in the jurisdictions in which they currently operate, or those jurisdictions in which they plan to operate in the future, XL’s business, prospects, financial condition and operating results could be materially adversely affected. XL expects to incur significant costs in complying with these regulations. Regulations related to the vehicle industry are evolving and XL faces risks associated with changes to these regulations, including but not limited to:

 

   

increased subsidies for corn and ethanol production, which could reduce the operating cost of vehicles that use ethanol or a combination of ethanol and gasoline;

 

   

low oil prices; and

 

   

increased support from local, state and federal governments for other alternative fuel systems, such as but not limited to hydrogen, natural gas and bio-fuels, which could have an impact on the acceptance of XL’s electrified powertrain solutions.

To the extent the laws change, XL’s electrified powertrain solutions and its suppliers’ products may not comply with applicable international, federal, state or local laws, which would have an adverse effect on XL’s business. Compliance with changing regulations could be burdensome, time consuming and expensive. To the extent compliance with new regulations is cost prohibitive, XL’s business, prospects, financial condition and operating results would be adversely affected.

XL is exposed to the credit risk of some of its direct customers, which subjects it to the risk of non-payment for its products.

XL distributes its electrified powertrain solutions through a network of upfitters, OEMs and OEM dealers, some of which may not be well-capitalized and may be of a lower credit quality. This direct customer network subjects XL to the risk of non-payment for its electrified powertrain solutions. In addition, during periods of economic downturn in the global economy, XL’s exposure to credit risks from its direct customers may increase, and XL’s efforts to monitor and mitigate the associated risks may not be effective. In the event of non-payment by one or more direct customers, XL’s business, financial condition and results of operations could be materially adversely affected.

XL may need to raise additional funds, which may not be available to XL on favorable terms or at all. If XL cannot raise additional funds when it needs them, its business, prospects, financial condition and operating results could be negatively affected.

The design, production, sale and servicing of XL’s electrified powertrain solutions is capital-intensive. XL expects that following the closing of the Business Combination, no additional capital will be needed to achieve profitability. However, XL may subsequently determine that additional funds are necessary earlier than anticipated. This capital may be necessary to fund XL’s ongoing operations, continue research, development and design efforts and improve infrastructure. XL may raise additional funds through the issuance of equity, equity related or debt securities or through obtaining credit from government or financial institutions. XL cannot be certain that additional funds will be available to it on favorable terms when required, or at all. If XL cannot raise additional funds when it needs them, its business, prospects, financial condition and operating results could be materially adversely affected.

 

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If XL is unable to establish and maintain confidence in its long-term business prospects among customers and analysts and within its industry or is subject to negative publicity, then XL’s financial condition, operating results, business prospects and access to capital may suffer materially.

Customers may be less likely to purchase XL’s electric powertrain solutions if they are not convinced that XL’s business will succeed or that its service and support and other operations will continue in the long term. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with XL if they are not convinced that its business will succeed. Accordingly, in order to build and maintain its business, XL must maintain confidence among customers, suppliers, analysts, ratings agencies and other parties in its products, long-term financial viability and business prospects. Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of XL’s control, such as customer unfamiliarity with its electric powertrain solutions, any delays in scaling production, delivery and service operations to meet demand, competition and uncertainty regarding the future of hybrid electric vehicles or XL’s other services and its production and sales performance compared with market expectations.

If XL is unable to address the service requirements of its customers, XL’s business, prospects, financial condition and operating results may be materially and adversely affected.

With further market penetration and expansion into new markets, XL plans to increase its servicing network of its electrified powertrain solutions. Servicing xEVs is different than servicing traditional vehicles and requires specialized skills, including high voltage training and servicing techniques. XL partners with upfitters to perform some or all of the servicing on its electrified powertrain solutions, and will need to expand its service network. There can be no assurance that XL will be able to enter into an acceptable arrangement with any such third-party provider. XL’s customers will also depend on XL’s customer support team to resolve technical and operational issues relating to the integrated software underlying XL’s electrified powertrain solutions. XL’s ability to provide effective customer support is largely dependent on its ability to attract, train and retain qualified personnel with experience in supporting customers on platforms such as XL’s. As XL continues to grow, additional pressure may be placed on XL’s customer support team, and XL may be unable to respond quickly enough to accommodate short-term increases in customer demand for technical support. XL also may be unable to modify the future scope and delivery of its technical support to compete with changes in the technical support provided by its competitors. Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect XL’s operating results. If XL is unable to successfully address the service requirements of its customers or establish a market perception that XL does not maintain high-quality support, XL may be subject to claims from its customers, including loss of revenue or damages, and XL’s business, prospects, financial condition and operating results may be materially and adversely affected.

XL is highly dependent on the services of Dimitri N. Kazarinoff, its Chief Executive Officer, and Thomas (Tod) J. Hynes III, its Founder and Chief Strategy Officer, and if XL is unable to retain Mr. Kazarinoff or Mr. Hynes, attract and retain key employees and hire qualified management, technical and vehicle engineering personnel, its ability to compete could be harmed.

XL’s success depends, in part, on its ability to retain its key personnel. XL is highly dependent on the services of Dimitri N. Kazarinoff, its Chief Executive Officer, and Tod Hynes, its Founder and Chief Strategy Officer. Mr. Kazarinoff and Mr. Hynes are the source of many, if not most, of the ideas and execution driving XL. If Mr. Kazarinoff or Mr. Hynes were to discontinue their service to XL due to death, disability or any other reason, XL would be significantly disadvantaged. The unexpected loss of or failure to retain one or more of XL’s key employees could adversely affect XL’s business.

XL’s success also depends, in part, on its continuing ability to identify, hire, attract, train and develop other highly qualified personnel. Experienced and highly skilled employees are in high demand and competition for these employees can be intense, and XL’s ability to hire, attract and retain them depends on its ability to provide competitive compensation. XL may not be able to attract, assimilate, develop or retain qualified personnel in the

 

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future, and its failure to do so could adversely affect XL’s business, including the execution of its global business strategy. XL does not maintain, and XL does not expect to maintain in the future, key man life insurance policies with respect to Dimitri N. Kazarinoff or Tod Hynes. Any failure by XL’s management team and XL’s employees to perform as expected may have a material adverse effect on XL’s business, prospects, financial condition and operating results.

XL faces significant barriers to enter new markets, and if XL cannot successfully overcome those barriers its business will be negatively impacted.

The commercial trucking industry has traditionally been characterized by significant barriers to entry, including the ability to meet performance requirements or industry specifications, acceptance by OEMs and XL’s end users, investment costs of design and production, the need for specialized design and development expertise, regulatory requirements, establishing a brand name and image and the need to establish sales capabilities. If XL is not able to overcome these barriers, its business, prospects, financial condition and operating results will be negatively impacted and XL’s ability to grow its business will be harmed.

Future product recalls could materially adversely affect XL’s business, prospects, financial condition and operating results.

Any product recall in the future, whether it involves XL’s or a competitor’s product, may result in negative publicity, damage XL’s brand and materially adversely affect XL’s business, prospects, financial condition and operating results. For example, in 2019 XL experienced two recalls that were subsequently remediated. In the future, XL may voluntarily or involuntarily initiate a recall if any of its products (including the batteries XL designs, develops and manufactures) prove to be defective or noncompliant with applicable federal motor vehicle safety standards. Such recalls involve significant expense and diversion of management attention and other resources, which could adversely affect XL’s brand image, as well as XL’s business, prospects, financial condition and operating results.

Increases in costs, disruption of supply or shortage of XL’s components, particularly battery cells, could harm its business.

In the production of its electrified powertrain solutions, XL has experienced and in the future may again experience increases in the cost or a sustained interruption in the supply or shortage of its components. Any such increase or supply interruption could materially negatively impact XL’s business, prospects, financial condition and operating results. The prices for XL’s components fluctuate depending on market conditions and global demand and could adversely affect its business, prospects, financial condition and operating results. For instance, XL is exposed to multiple risks relating to price fluctuations for battery cells. These risks include:

 

   

the inability or unwillingness of current battery manufacturers to build or operate battery cell production facilities to supply the numbers of battery cells required to support the growth of the electric vehicle industry as demand for such cells increases;

 

   

disruption in the supply of cells due to quality issues or recalls by the battery cell manufacturers; and

 

   

an increase in the cost of raw materials.

Any disruption in the supply of battery cells could temporarily disrupt production of XL’s electrified powertrain solutions until a different supplier is fully qualified. Moreover, battery cell manufacturers may refuse to supply electric vehicle manufacturers if they determine that the vehicles are not sufficiently safe. Furthermore, fluctuations or shortages in petroleum and other economic conditions have in the past and may again in the future cause XL to experience significant increases in freight charges. Substantial increases in the prices for raw materials have in the past and may again in the future increase the cost of XL’s components and consequently, the costs of products. There can be no assurance that XL will be able to recoup increasing costs of its components by increasing prices, which could reduce its margins.

 

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Vehicles equipped with XL’s electrified powertrain solutions will make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.

The battery packs within XL’s electrified powertrain solutions will make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While the battery pack is designed to contain any single cell’s release of energy without spreading to neighboring cells, a field or testing failure of XL’s vehicles or other battery packs that it produces could occur, which could subject XL to lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications or any future incident involving lithium-ion cells, such as a vehicle or other fire, even if such incident does not involve XL’s vehicles, could seriously harm its business and reputation.

In addition, XL stores battery packs in its facility prior to sending such battery packs to upfitters for installation on vehicles. Any mishandling of battery cells may cause disruption to the operation of XL’s facility. While XL has implemented safety procedures related to the handling of the cells, a safety issue or fire related to the cells could disrupt its operations. Such damage or injury could lead to adverse publicity and potentially a safety recall. Moreover, any failure of a competitor’s electric vehicle or energy storage product may cause indirect adverse publicity for XL and its products. Such adverse publicity could negatively affect XL’s brand and harm its business, prospects, financial condition and operating results.

XL has been, and may in the future be, adversely affected by the global COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, which may significantly harm XL’s business, prospects, financial condition and operating results.

There has been a widespread worldwide impact from the COVID-19 pandemic, and XL has been, and may in the future be, adversely affected as a result. Numerous government regulations and public advisories, as well as shifting social behaviors, have temporarily limited or closed non-essential transportation, government functions, business activities and person-to-person interactions, and the duration of such trends is difficult to predict. Reduced operations and production line shutdowns at vehicle OEMs due to COVID-19, limitations on travel by XL’s personnel and personnel of XL’s customers, and future delays or shutdowns of vehicle OEMs or XL’s suppliers could impact XL’s ability to meet customer orders. XL also instituted certain temporary cost reduction measures such as reducing or deferring discretionary spending.

XL’s operations and timelines may also be affected by global economic markets and levels of consumer comfort and spend, which could impact demand in the worldwide transportation industries. Because the impact of current conditions on an ongoing basis is yet largely unknown, is rapidly evolving and has been varied across geographic regions, this ongoing assessment will be particularly critical to allow XL to accurately project demand and infrastructure requirements globally and deploy its workforce and other resources accordingly. If current global market conditions continue or worsen, or if XL cannot or does not resume reduced operations at a rate commensurate with such conditions or resumes full operational capacity and is later required to or chooses to reduce such operations again, XL’s business, prospects, financial condition and operating results could be materially harmed.

XL’s insurance strategy may not be adequate to protect XL from all business risks.

In the ordinary course of business, XL may be subject to losses resulting from products liability, accidents, acts of God and other claims against it, for which XL may have no insurance coverage. While XL currently carries commercial general liability, commercial automobile liability, excess liability and workers’ compensation policies, XL may not maintain sufficient insurance coverage, and in some cases, XL may not maintain any at all. Additionally, the policies that XL does have may include significant deductibles, and XL cannot be certain that its insurance coverage will be sufficient to cover all future claims against XL. A loss that is uninsured or exceeds policy limits may require XL to pay substantial amounts, which could materially adversely affect its financial condition and operating results.

 

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XL is or may be subject to risks associated with strategic alliances or acquisitions and may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.

XL has entered into strategic alliances, and may in the future enter into additional strategic alliances or joint ventures or minority equity investments, in each case with various third parties for the production of its electrified powertrain solutions as well as with other collaborators with capabilities on data and analytics, engineering and installation channels. These alliances subject XL to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect XL’s business. XL may have limited ability to monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, XL may also suffer negative publicity or harm to its reputation by virtue of its association with any such third party.

Strategic business relationships will be an important factor in the growth and success of XL’s business. However, there are no assurances that XL will be able to continue to identify or secure suitable business relationship opportunities in the future or XL’s competitors may capitalize on such opportunities before XL does. Moreover, identifying such opportunities could require substantial management time and resources, and negotiating and financing relationships involves significant costs and uncertainties. If XL is unable to successfully source and execute on strategic relationship opportunities in the future, its overall growth could be impaired, and its business, prospects, financial condition and operating results could be materially adversely affected.

When appropriate opportunities arise, XL may acquire additional assets, products, technologies or businesses that are complementary to its existing business. In addition to possible stockholder approval, XL may need approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs, and may disrupt XL’s business strategy if it fails to do so. Furthermore, acquisitions and the subsequent integration of new assets and businesses into XL’s own require significant attention from XL’s management and could result in a diversion of resources from XL’s existing business, which in turn could have an adverse effect on XL’s operations. Acquired assets or businesses may not generate the financial results XL expects. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

Work stoppages or similar difficulties could significantly disrupt XL’s operations.

A work stoppage, including due to the COVID-19 pandemic, at one or more of XL’s or its outsourcing partners’, suppliers and vehicle OEMs has in the past due to the COVID-19 pandemic and could again in the future have a material adverse effect on XL’s business. In addition, if a significant customer were to experience a work stoppage, that customer could halt or limit purchases of XL’s products. Also, a significant disruption in the supply of a key component due to a work stoppage at one of XL’s suppliers could have a material adverse effect on XL’s business.

XL is subject to cybersecurity risks to operational systems, security systems, infrastructure, integrated software in its electrified powertrain solutions and customer data processed by XL or third-party vendors or suppliers and any material failure, weakness, interruption, cyber event, incident or breach of security could prevent XL from effectively operating its business.

XL is at risk for interruptions, outages and breaches of: (a) operational systems, including business, financial, accounting, product development, data processing or production processes, owned by XL or its third-party vendors or suppliers; (b) facility security systems, owned by XL or its third-party vendors or suppliers; (c) transmission control modules or other in-product technology, owned by XL or its third-party vendors or suppliers; (d) the integrated software in XL’s electrified powertrain solutions; or (e) customer or driver data that

 

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XL processes or its third-party vendors or suppliers process on its behalf. Such cyber incidents could: materially disrupt operational systems; result in loss of trade secrets or other proprietary or competitively sensitive information; compromise certain information of customers, employees, suppliers, drivers or others; jeopardize the security of XL’s facilities; or affect the performance of transmission control modules or other in-product technology and the integrated software in XL’s electrified powertrain solutions. A cyber incident could be caused by disasters, insiders (through inadvertence or with malicious intent) or malicious third parties (including nation-states or nation-state supported actors) using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, trickery or other forms of deception. The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. Although XL maintains information technology measures designed to protect itself against intellectual property theft, data breaches and other cyber incidents, such measures will require updates and improvements, and XL cannot guarantee that such measures will be adequate to detect, prevent or mitigate cyber incidents. The implementation, maintenance, segregation and improvement of these systems requires significant management time, support and cost. Moreover, there are inherent risks associated with developing, improving, expanding and updating current systems, including the disruption of XL’s data management, procurement, production execution, finance, supply chain and sales and service processes. These risks may affect XL’s ability to manage its data and inventory, procure parts or supplies or produce, sell, deliver and service its electric powertrain solutions, adequately protect its intellectual property or achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts. XL cannot be sure that these systems upon which it relies, including those of its third-party vendors or suppliers, will be effectively implemented, maintained or expanded as planned. If XL does not successfully implement, maintain or expand these systems as planned, its operations may be disrupted, its ability to accurately and timely report its financial results could be impaired, and deficiencies may arise in its internal control over financial reporting, which may impact XL’s ability to certify its financial results. Moreover, XL’s proprietary information or intellectual property could be compromised or misappropriated and its reputation may be adversely affected. If these systems do not operate as XL expects them to, XL may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

A significant cyber incident could impact production capability, harm XL’s reputation, cause XL to breach its contracts with other parties or subject XL to regulatory actions or litigation, any of which could materially affect XL’s business, prospects, financial condition and operating results. In addition, XL’s insurance coverage for cyberattacks may not be sufficient to cover all the losses it may experience as a result of a cyber incident.

XL also collects, stores, transmits and otherwise processes customer, driver and employee and others’ data as part of its business and operations, which may include personal data or confidential or proprietary information. XL also works with partners and third-party service providers or vendors that collect, store and process such data on its behalf and in connection with its products and services. There can be no assurance that any security measures that XL or its third-party service providers or vendors have implemented will be effective against current or future security threats. While XL has developed systems and processes designed to protect the availability, integrity, confidentiality and security of its and its customers’, drivers’, employees’ and others’ data, XL’s security measures or those of its third-party service providers or vendors could fail and result in unauthorized access to or disclosure, acquisition, encryption, modification, misuse, loss, destruction or other compromise of such data. If a compromise of such data were to occur, XL may become liable under its contracts with other parties and under applicable law for damages and incur penalties and other costs to respond to, investigate and remedy such an incident. Laws in all 50 states require XL to provide notice to customers, regulators, credit reporting agencies and others when certain sensitive information has been compromised as a result of a security breach. Such laws are inconsistent and compliance in the event of a widespread data breach could be costly. Depending on the facts and circumstances of such an incident, these damages, penalties, fines and costs could be significant. Such an event could harm XL’s reputation and result in litigation against XL. Any of these results could materially adversely affect XL’s business, prospects, financial condition and operating results.

 

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Any unauthorized control or manipulation of the information technology systems in XL’s electrified powertrain solutions could result in loss of confidence in XL and its electrified powertrain solutions and harm XL’s business.

XL’s electrified powertrain solutions contain complex information technology systems and built-in data connectivity to accept and install periodic remote updates to improve or update functionality. XL has designed, implemented and tested security measures intended to prevent unauthorized access to its information technology networks, its electrified powertrain solutions and related systems. However, hackers may attempt to gain unauthorized access to modify, alter and use such networks and systems to gain control of or to change XL’s electrified powertrain solutions’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the vehicles. Future vulnerabilities could be identified and XL’s efforts to remediate such vulnerabilities may not be successful. Any unauthorized access to or control of XL’s electrified powertrain solutions, or any loss of customer data, could result in legal claims or proceedings and remediation of such problems could result in significant, unplanned capital expenditures. In addition, regardless of their veracity, reports of unauthorized access to XL’s electrified powertrain solutions or data, as well as other factors that may result in the perception that XL’s electrified powertrain solutions or data are capable of being “hacked,” could negatively affect XL’s brand and harm its business, prospects, financial condition and operating results.

XL is subject to evolving laws, regulations, standards and contractual obligations related to data privacy and security, and its actual or perceived failure to comply with such obligations could harm XL’s reputation, subject it to significant fines and liability or adversely affect its business.

XL intends to use its in-vehicle services and functionality to log information about each vehicle’s use in order to aid XL in vehicle diagnostics and servicing. XL’s customers or their drivers may object to the use of this data, which may increase XL’s vehicle maintenance costs and harm its business prospects. Collection of XL’s customers’, employees’ and others’ information in conducting its business may subject XL to various legislative and regulatory burdens related to data privacy and security that could require notification of data breaches, restrict XL’s use of such information and hinder its ability to acquire new customers or market to existing customers. The regulatory framework for data privacy and security is rapidly evolving, and XL may not be able to monitor and react to all developments in a timely manner. For example, California requires connected devices to maintain minimum information security requirements. As legislation continues to develop, XL will likely be required to expend significant additional resources to continue to modify or enhance its protective measures and internal processes to comply with such legislation. In addition, non-compliance with these laws or a significant breach of XL’s third-party service providers’ or vendors’ or its own network security and systems could have serious negative consequences for XL’s business and future prospects, including possible fines, penalties and damages, reduced customer demand for its vehicles and harm to its reputation and brand.

XL is subject to various environmental laws and regulations that could impose substantial costs upon XL and cause delays in building its production facilities.

XL’s operations are and will be subject to international, federal, state and local environmental laws and regulations, including laws relating to the use, handling, storage, disposal of and human exposure to hazardous materials. Environmental and health and safety laws and regulations can be complex, and XL has limited experience complying with them. Moreover, XL expects that it will be affected by future amendments to such laws or other new environmental and health and safety laws and regulations which may require XL to change its operations, potentially resulting in a material adverse effect on its business, prospects, financial condition and operating results. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury, fines and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third-party damages, suspension of production or a cessation of XL’s operations.

Contamination at properties XL will own or operate, properties XL formerly owned or operated or to which hazardous substances were sent by XL, may result in liability for XL under environmental laws and regulations,

 

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including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, which can impose liability for the full amount of remediation-related costs without regard to fault, for the investigation and cleanup of contaminated soil and ground water, for building contamination and impacts to human health and for damages to natural resources. The costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have a material adverse effect on XL’s financial condition or operating results. XL may face unexpected delays in obtaining required permits and approvals that could require significant time and financial resources and delay its ability to operate these facilities, which would adversely impact XL’s business, prospects, financial condition and operating results.

XL’s electrified powertrain solutions could face competition from original equipment manufacturers and other providers of electrification solutions that enter the commercial vehicle electrification market.

The vehicle electrification market has expanded significantly since XL was founded in 2009. While XL currently faces limited direct competition in the commercial vehicle electrification market, which includes companies such as Hyliion, Workhorse Group Inc. (“Workhorse”), Nikola and Lordstown Motors Corp. (“Lordstown”), because XL sources all of its components from third party suppliers, some of which under non-exclusive contracts, it is possible that competitors may enter the market in the future. In addition, OEMs that have traditionally focused on the consumer market may expand into the commercial markets. If these companies or other OEMs or providers of electrification solutions expand into the commercial markets, XL will face increased direct competition, which could have a material adverse effect on XL’s product prices, market share, revenue and profitability.

The performance characteristics of XL’s electrified powertrain solutions, including fuel economy and emissions levels, may vary, including due to factors outside of its control.

The performance characteristics of XL’s electrified powertrain solutions may vary due to factors outside of its control. External factors that may impact the performance characteristics include fuel economy and emissions levels. For instance, the estimated fuel savings and fuel economy of vehicles installed with XL’s electrified powertrain solutions may vary depending on factors including, but not limited to, driver behavior, speed, terrain, hardware efficiency, payload, vehicle and weather conditions. In addition, GHG emissions of vehicles installed with XL’s electrified powertrain solutions may also vary due to external factors, including the type of fuel, driver behavior, the efficiency and certification of the engine and where the engine is being operated. Additionally, the total emissions generated is subject to how the electricity used to charge XL’s plug in products is generated, which is also outside of XL’s control. These external factors, as well as any operation of XL’s electrified powertrain solutions other than as intended, may result in emissions levels that are greater than XL expects. Due to these factors, there can be no guarantee that the operators of vehicles using XL’s electrified powertrain solutions will realize the expected fuel savings and fuel economy and GHG emission reductions.

XL’s suppliers may rely on complex machinery for XL’s component production, which involves a significant degree of risk and uncertainty in terms of operational performance and costs.

XL’s suppliers may rely on complex machinery for the production and assembly of components used in XL’s electrified powertrain solutions, which will involve a significant degree of uncertainty and risk in terms of operational performance and costs. Some of XL’s suppliers’ production facilities consist of large-scale machinery combining many components. These components may suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of these components may significantly affect the intended operational efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of XL’s control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, seismic activity and natural disasters. Should operational risks materialize, they may result in the personal injury to or death of

 

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workers, the loss of production equipment, damage to production facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on XL’s business, prospects, financial condition or operating results.

XL has identified material weaknesses in its internal control over financial reporting which, if not corrected, could affect the reliability of XL’s consolidated financial statements and have other adverse consequences.

As a private company, XL has not been required to document and test its internal controls over financial reporting nor has management been required to certify the effectiveness of its internal controls and its auditors have not been required to opine on the effectiveness of its internal control over financial reporting. Similarly, XL has not been subject to the SEC’s internal control reporting requirements. Following the Business Combination, XL will become subject to these requirements.

In the course of preparing the financial statements that are included in this proxy statement/prospectus, XL has identified a number of adjustments to its financial statements that resulted in a restatement of previously issued financial statements. In addition, XL has identified material weaknesses in internal control over financial reporting, which relate to insufficient technical accounting resources and lack of segregation of duties. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its financial statements would not be prevented or detected on a timely basis. These deficiencies could result in misstatements to XL’s financial statements that would be material and would not be prevented or detected on a timely basis.

XL’s management has concluded that these material weaknesses in XL’s internal control over financial reporting are due to the fact that, prior to this proxy statement/prospectus, XL was a private company with limited resources. XL did not have the necessary business processes and related internal controls, or the appropriate resources or level of experience and technical expertise, that would be required to oversee financial reporting processes or to address the accounting and financial reporting requirements. XL’s management is in the process of developing a remediation plan. The material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. XL’s management will monitor the effectiveness of XL’s remediation plans and will make changes management determines to be appropriate.

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

Insufficient warranty reserves to cover future warranty claims could materially adversely affect XL’s business, prospects, financial condition and operating results.

As XL’s business expands the sale of its electrified powertrain solutions, it will need to increase warranty reserves to cover warranty-related claims. If XL’s warranty reserves are inadequate to cover future warranty claims on its vehicles, XL’s business, prospects, financial condition and operating results could be materially and adversely affected. XL may become subject to significant and unexpected warranty expenses as well as claims from its customers, including loss of revenue or damages. There can be no assurances that then-existing warranty reserves will be sufficient to cover all claims.

 

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Inability to leverage vehicle and customer data could impact XL’s software algorithms and impact research and development operations.

XL relies on data collected from the use of fleet vehicles outfitted with its products, including vehicle data and data related to battery usage statistics. XL uses this data in connection with its software algorithms and the research, development and analysis of its products. XL’s inability to obtain this data or the necessary rights to use this data could result in delays or otherwise negatively impact XL’s research and development efforts.

Interruption or failure of XL’s information technology and communications systems could impact XL’s ability to effectively provide its services.

XL plans to include in-vehicle services and functionality that utilize data connectivity to monitor performance and timely capture opportunities to enhance over-the-road performance for cost-saving preventative maintenance. The availability and effectiveness of XL’s services depend on the continued operation of information technology and communications systems. XL’s systems will be vulnerable to damage or interruption from, among others, physical theft, fire, terrorist attacks, natural disasters, power loss, war, telecommunications failures, viruses, denial or degradation of service attacks, ransomware, social engineering schemes, insider theft or misuse or other attempts to harm XL’s systems. XL utilizes reputable third-party service providers or vendors for all of its data other than its source code, and these providers could also be vulnerable to harms similar to those that could damage XL’s systems, including sabotage and intentional acts of vandalism causing potential disruptions. Some of XL’s systems will not be fully redundant, and XL’s disaster recovery planning cannot account for all eventualities. Any problems with XL’s third-party cloud hosting providers could result in lengthy interruptions in XL’s data services. In addition, XL’s in-vehicle services and functionality are highly technical and complex technology which may contain errors or vulnerabilities that could result in interruptions in XL’s business or the failure of its systems.

XL’s electrified powertrain solutions rely on software and hardware that is highly technical, and if these systems contain errors, bugs or vulnerabilities, or if XL is unsuccessful in addressing or mitigating technical limitations in its systems, XL’s business could be adversely affected.

XL’s electrified powertrain solutions rely on software and hardware, including software and hardware developed or maintained internally or by third parties, that is highly technical and complex and will require modification and updates over the life of the vehicle. In addition, XL’s electrified powertrain solutions depend on the ability of such software and hardware to store, retrieve, process and manage immense amounts of data. XL’s software and hardware may contain errors, bugs, vulnerabilities, design defects or technical limitations, and its systems are subject to certain technical limitations that may compromise XL’s ability to meet its objectives. Some errors, bugs or vulnerabilities within XL’s software or hardware may be difficult to detect and may only be discovered after the code has been released for external or internal use. Although XL attempts to remedy any issues it observes in its products as effectively and rapidly as possible, such efforts may not be timely, may hamper production or may not resolve issues to the satisfaction of XL’s customers. Additionally, even if XL is able to deploy updates to the software addressing any issues, its over-the-air update procedures may fail to properly update the software. In such an instance, affected vehicles would need to be brought to an upfitter or to one of XL’s service team members for updates to be installed, and the software would remain subject to vulnerabilities until such time as the updates are installed. If XL is unable to prevent or effectively remedy errors, bugs, vulnerabilities or defects in its software and hardware, XL may suffer damage to its reputation, loss of customers, loss of revenue or liability for damages, any of which could adversely affect XL’s business and financial results.

If XL’s electrified powertrain solutions fail to perform as expected, XL’s ability to develop, market and sell its electrified powertrain solutions could be harmed.

XL’s electrified powertrain solutions may contain defects in design and production that may cause them not to perform as expected or may require repair. There can be no assurance that XL will be able to detect and fix any defects in its electrified powertrain solutions. XL may experience recalls in the future, which could adversely

 

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affect XL’s brand and could adversely affect its business, prospects, financial condition and operating results. XL’s electrified powertrain solutions may not perform consistent with customers’ expectations or consistent with other vehicles which may become available. Any product defects or any other failure of XL’s electrified powertrain solutions and software to perform as expected could harm XL’s reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, negative publicity, product liability claims and significant warranty and other expenses and could have a material adverse impact on XL’s business, prospects, financial condition and operating results. Additionally, problems and defects experienced by other electrified powertrain fleet solutions could by association have a negative impact on perception and customer demand for XL’s electrified powertrain solutions.

Developments in alternative technology or improvements in the internal combustion engine may adversely affect the demand for XL’s electrified powertrain solutions.

Significant developments in alternative technologies, such as battery cell technology, advanced diesel, ethanol or natural gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect XL’s business, prospects, financial condition and operating results in ways XL does not currently anticipate. Existing and other battery cell technologies, fuels or sources of energy may emerge as customers’ preferred alternative to XL’s electrified powertrain solutions. Any failure by XL to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay XL’s development and introduction of new electrified powertrain solutions, which could result in the loss of competitiveness, decreased revenue and a loss of market share to competitors. XL’s research and development efforts may not be sufficient to adapt to changes in alternate technology. As technologies change, XL plans to upgrade or adapt its electrified powertrain solutions with the latest technology, in particular battery cell technology. However, XL’s electrified powertrain solutions may not compete effectively with alternative systems if XL is not able to source and integrate the latest technology into its electrified powertrain solutions.

XL’s beliefs regarding the ability of its electrified powertrain solutions to limit carbon intensity and reduce GHG emissions and contribute to global decarbonization may be based on materially inaccurate assumptions.

XL believes that its electrified powertrain solutions, to the extent adopted, may have the ability to limit carbon intensity and reduce GHG emissions from fleet operations; however, these beliefs are based on certain assumptions, including, but not limited to, XL’s projections of the fuel types used, driver behavior and XL’s electrified powertrain solutions’ efficiencies and performance. To the extent XL’s assumptions are materially incorrect or incomplete, it could adversely impact XL’s business, prospects, financial condition and operating results. In addition, if XL’s assumptions regarding the ability of its solutions to limit carbon intensity and reduce GHG emissions from trucking operations are materially incorrect or incomplete, or if XL’s beliefs regarding the availability of its products are materially incorrect or incomplete, it is possible that XL’s competitors’ technology may be better at limiting carbon intensity and reducing GHG emissions in certain circumstances and in certain markets.

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

If XL completes the Business Combination and becomes a public company, it will incur significant legal, accounting and other expenses that it did not incur as a private company, and these expenses may increase even more after XL is no longer an emerging growth company, as defined in Section 2(a) of the Securities Act. As a public company, XL will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and the NYSE. XL’s management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, XL expects these rules and regulations to substantially increase its legal and financial compliance costs and to make some activities more time-consuming and costly. The increased costs will increase XL’s net loss. For example, XL expects these rules and regulations to make it more

 

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difficult and more expensive for it to obtain director and officer liability insurance and it may be forced to accept reduced policy limits or incur substantially higher costs to maintain the same or similar coverage. XL cannot predict or estimate the amount or timing of additional costs it may incur to respond to these requirements. The impact of these requirements could also make it more difficult for XL to attract and retain qualified persons to serve on its board of directors, its board advisors or as executive officers.

XL’s management has limited experience in operating a public company.

XL’s executive officers have limited experience in the management of a publicly traded company. XL’s management team may not successfully or effectively manage its transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to the management and growth of the post-combination company. XL may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies in the U.S. XL is in the process of upgrading its finance and accounting systems to an enterprise system suitable for a public company, and a delay could impact its ability or prevent it from timely reporting its operating results, timely filing required reports with the SEC and complying with Section 404 of the Sarbanes-Oxley Act. The development and implementation of the standards and controls necessary for XL to achieve the level of accounting standards required of a public company in the U.S. may require costs greater than expected. It is possible that XL will be required to expand its employee base and hire additional employees to support its operations as a public company, which will increase its operating costs in future periods.

XL’s employees and independent contractors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on XL’s business, prospects, financial condition and operating results.

XL is exposed to the risk that its employees and independent contractors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or other activities that violate laws and regulations, including production standards, U.S. federal and state fraud, abuse, data privacy and security laws, other similar non-U.S. laws or laws that require the true, complete and accurate reporting of financial information or data. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions XL takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting XL from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. In addition, XL is subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against XL, and XL is not successful in defending itself or asserting its rights, those actions could have a significant impact on XL’s business, prospects, financial condition and operating results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of XL’s operations, any of which could adversely affect XL’s business, prospects, financial condition and operating results.

Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, could adversely affect XL’s business, prospects, financial condition and operating results.

The U.S. government has adopted a new approach to trade policy and in some cases has attempted to renegotiate or terminate certain existing bilateral or multi-lateral trade agreements. It has also imposed tariffs on certain foreign goods, including steel and certain commercial vehicle parts, which have begun to result in increased costs for goods imported into the U.S. In response to these tariffs, a number of U.S. trading partners have imposed

 

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retaliatory tariffs on a wide range of U.S. products, which makes it more costly for XL to export its products to those countries. If XL is unable to pass price increases on to its customer base or otherwise mitigate the costs, or if demand for its exported products decreases due to the higher cost, its operating results could be materially adversely affected. In addition, further tariffs have been proposed by the U.S. and its trading partners and additional trade restrictions could be implemented on a broader range of products or raw materials. The resulting environment of retaliatory trade or other practices could have a material adverse effect on XL’s business, prospects, financial condition, operating results, customers, suppliers and the global economy.

XL intends in the future to expand internationally and will face risks associated with its international operations, including unfavorable regulatory, political, tax and labor conditions, which could harm its business.

XL will face risks associated with its future international operations, including possible unfavorable regulatory, political, tax and labor conditions, which could harm its business. XL anticipates having international operations which would subject XL to the legal, political, regulatory and social requirements and economic conditions in any future jurisdictions. Additionally, as part of its growth strategy, XL intends to expand its sales and servicing programs internationally. However, XL has no experience to date selling and servicing its electrified powertrain solutions internationally except for in Canada, and such expansion would require XL to make significant expenditures, including the hiring of local employees and establishing facilities, in advance of generating any revenue. XL is subject to a number of risks associated with international business activities that may increase its costs, impact its ability to sell its electrified powertrain solutions and require significant management attention. These risks include:

 

   

conforming XL’s electrified powertrain solutions to various international regulatory requirements where its electrified powertrain solutions are sold, or homologation;

 

   

difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary to manufacture, sell or service its electrified powertrain solutions in any of these jurisdictions;

 

   

difficulty in staffing and managing foreign operations;

 

   

difficulties attracting customers in new jurisdictions;

 

   

foreign government taxes, regulations and permit requirements, including foreign taxes that XL may not be able to offset against taxes imposed upon XL in the U.S., and foreign tax and other laws limiting XL’s ability to repatriate funds to the U.S.;

 

   

fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or other hedging activities XL undertakes;

 

   

U.S. and foreign government trade restrictions, tariffs and price or exchange controls;

 

   

foreign labor laws, regulations and restrictions;

 

   

changes in diplomatic and trade relationships;

 

   

political instability, natural disasters, global health concerns, including health pandemics such as the COVID-19 pandemic, war or events of terrorism; and

 

   

the strength of international economies.

If XL fails to successfully address these risks, XL’s business, prospects, financial condition and operating results could be materially harmed.

XL is subject to U.S. and foreign anti-corruption and anti-money laundering laws and regulations. XL can face criminal liability and other serious consequences for violations, which could harm its business.

XL is subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act and possibly other anti-bribery and

 

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anti-money laundering laws in countries in which XL conducts or will conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors and other collaborators from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. XL can be held liable for the corrupt or other illegal activities of its employees, agents, contractors and other collaborators, even if XL does not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.

XL is subject to governmental export and import control laws and regulations. XL’s failure to comply with these laws and regulations could have an adverse effect on its business, prospects, financial condition and operating results.

XL’s products and solutions are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. U.S. export control laws and regulations and economic sanctions prohibit the shipment of certain products and services to U.S. embargoed or sanctioned countries, governments and persons. In addition, complying with export control and sanctions regulations for a particular sale may be time-consuming and result in the delay or loss of sales opportunities. Exports of XL’s products and technology must be made in compliance with these laws and regulations. If XL fails to comply with these laws and regulations, XL and certain of its employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, fines, which may be imposed on XL and responsible employees or managers and, in extreme cases, the incarceration of responsible employees or managers.

In addition, changes in XL’s products or solutions or changes in applicable export or import laws and regulations may create delays in the introduction and sale of XL’s products and solutions in international markets, increase costs due to changes in import and export duties and taxes, prevent XL’s customers from deploying XL’s products and solutions or, in some cases, prevent the export or import of XL’s products and solutions to certain countries, governments or persons altogether. Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations, could also result in decreased use of XL’s products and solutions or in XL’s decreased ability to export or sell its products and solutions to customers. Any decreased use of XL’s products and solutions or limitation on its ability to export or sell its products and solutions would likely adversely affect XL’s business, prospects, financial condition and operating results.

Regulatory requirements may have a negative effect upon XL’s business.

All vehicles sold must comply with international, federal, and state motor vehicle safety standards. In the United States, vehicles that meet or exceed all federally mandated safety standards are certified under the federal regulations. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving federal certification. XL’s products may be subject to substantial regulation under federal, state, and local laws and standards. These regulations include those promulgated by the U.S. EPA, the National Highway Traffic Safety Administration, Pipeline and Hazardous Materials Safety Administration and various state boards, and compliance certification is required for each new model year. These laws and standards are subject to change from time to time and XL could become subject to these regulations in the future. In addition, federal, state, and local laws and industrial standards for electric vehicles are still developing. Compliance with these regulations could be challenging, burdensome, time consuming, and expensive. If compliance results in delays or substantial expenses, XL’s business could be materially adversely affected. 

 

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XL may need to defend itself against patent, copyright or trademark infringement claims or trade secret misappropriation claims, which may be time-consuming and cause XL to incur substantial costs.

Companies, organizations or individuals, including XL’s competitors, may own or obtain patents, trademarks or other proprietary rights that would prevent or limit XL’s ability to make, use, develop or sell its electrified powertrain solutions, which could make it more difficult for XL to operate its business. XL may receive inquiries from patent, copyright or trademark owners inquiring whether XL infringes upon their proprietary rights. XL may also be the subject of allegations that XL has misappropriated their trade secrets or other proprietary rights. Companies owning patents or other intellectual property rights relating to battery packs, electric motors, or electronic power management systems may allege infringement or misappropriation of such rights. In response to a determination that XL has infringed upon or misappropriated a third party’s intellectual property rights, XL may be required to do one or more of the following:

 

   

cease development, sales or use of its products that incorporate the asserted intellectual property;

 

   

pay substantial damages;

 

   

obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or at all; or

 

   

redesign one or more aspects or systems of its electrified powertrain solutions.

A successful claim of infringement or misappropriation against XL could materially adversely affect its business, prospects, financial condition and operating results. Any litigation or claims, whether valid or invalid, could result in substantial costs and diversion of resources.

XL’s business may be adversely affected if it is unable to protect its intellectual property rights from unauthorized use by third parties.

Failure to adequately protect XL’s intellectual property rights could result in XL’s competitors offering similar products, potentially resulting in the loss of some of XL’s competitive advantage and a decrease in its revenue, which would adversely affect XL’s business, prospects, financial condition and operating results. For example, XL purchases many of the components for its hybrid systems from third party manufacturers and may not be able to prevent competitors from using these third party components. XL’s success depends, at least in part, on its ability to protect its core technology and intellectual property. To accomplish this, XL will rely on a combination of patents, trade secrets (including know-how), employee and third-party nondisclosure agreements, copyrights, trademarks, intellectual property licenses and other contractual rights to establish and protect XL’s rights in its technology.

The protection of XL’s intellectual property rights will be important to its future business opportunities. However, the measures XL takes to protect its intellectual property from unauthorized use by others may not be effective for various reasons, including the following:

 

   

any patent applications XL submits may not result in the issuance of patents;

 

   

the scope of XL’s issued patents, including its patent claims, may not be broad enough to protect its proprietary rights;

 

   

XL’s issued patents may be challenged or invalidated by its competitors;

 

   

XL’s employees or business partners may breach their confidentiality, non-disclosure and non-use obligations to XL;

 

   

third-parties may independently develop technologies that are the same or similar to XL’s;

 

   

the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make enforcement impracticable; and

 

   

current and future competitors may circumvent XL’s intellectual property.

 

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Patent, trademark, copyright and trade secret laws vary throughout the world. Some foreign countries do not protect intellectual property rights to the same extent as do the laws of the U.S. Further, policing the unauthorized use of XL’s intellectual property in foreign jurisdictions may be difficult. Therefore, XL’s intellectual property rights may not be as strong or as easily enforced outside of the U.S.

Also, while XL has registered trademarks in an effort to protect its investment in its brand and goodwill with customers, competitors may challenge the validity of those trademarks and other brand names in which XL has invested. Such challenges can be expensive and may adversely affect XL’s ability to maintain the goodwill gained in connection with a particular trademark.

XL’s intellectual property applications for registration may not issue or be registered, which may have a material adverse effect on XL’s ability to prevent others from commercially exploiting products similar to XL’s.

XL cannot be certain that it is the first inventor of the subject matter to which it has filed a particular patent application, or if it is the first party to file such a patent application. If another party has filed a patent application to the same subject matter as XL has, XL may not be entitled to the protection sought by the patent application. XL also cannot be certain whether the claims included in a patent application will ultimately be allowed in the applicable issued patent. Further, the scope of protection of issued patent claims is often difficult to determine. As a result, XL cannot be certain that the patent applications that it files will issue, or that its issued patents will afford protection against competitors with similar technology. In addition, XL’s competitors may design around XL’s issued patents, which may adversely affect XL’s business, prospects, financial condition and operating results.

Changes in tax laws may materially adversely affect XL’s business, prospects, financial condition and operating results.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect XL’s business, prospects, financial condition and operating results. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to XL. For example, U.S. federal tax legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act (the “Tax Act”), enacted many significant changes to the U.S. tax laws. Future guidance from the IRS with respect to the Tax Act may affect XL, and certain aspects of the Tax Act could be repealed or modified in future legislation. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) has already modified certain provisions of the Tax Act. In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act or any newly enacted federal tax legislation.

XL’s ability to use net operating loss carryforwards and other tax attributes may be limited in connection with the Business Combination or other ownership changes.

XL has incurred losses during its history and does not expect to become profitable in the near future, and may never achieve profitability. To the extent that XL continues to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire, if at all. As of December 31, 2019, XL had U.S. federal net operating loss carryforwards of approximately $57.4 million.

Under the Tax Act, as modified by the CARES Act, U.S. federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to the Tax Act or the CARES Act.

In addition, XL’s net operating loss carryforwards are subject to review and possible adjustment by the IRS and state tax authorities. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the

 

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

The Merger may not allow us to effectively manage our tax risks and costs.

XL could be subject to audits conducted by tax authorities, and the resolution of such audits could significantly impact its tax costs and rate in future periods, as would any reclassification or other matter (such as changes in applicable accounting rules) that increases the amounts XL has provided for income taxes in its consolidated financial statements. XL may also be exposed to sales tax liability. There can be no assurance that XL would be successful in attempting to mitigate the adverse impacts resulting from any changes in law, audits and other matters. Its inability to mitigate the negative consequences of any changes in the law, audits and other matters could cause XL’s effective tax rate to increase and its results of operations to suffer.

If the Merger does not qualify as a “reorganization” for U.S. federal income tax purposes, U.S. holders of XL common stock will be required to recognize gain or loss for U.S. federal income tax purposes upon the exchange of their XL common stock for Pivotal common stock in the Merger.

The U.S. federal income tax consequences of the Merger to U.S. holders of XL common stock will depend on whether the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code. Although the parties intend that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, no assurances can be given that the Merger will so qualify. In addition, the completion of the Merger is not conditioned on the Merger qualifying for the intended tax treatment, nor upon the receipt of an opinion of counsel or a ruling from the IRS to that effect. Neither Pivotal nor XL Fleet intends to request a ruling from the IRS regarding the U.S. federal income tax treatment of the Merger. Accordingly, even if Pivotal and XL Fleet conclude that the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, no assurance can be given that the IRS will not challenge that conclusion or that a court would not sustain such a challenge. If the Merger fails to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, a U.S. holder of XL common stock may recognize gain or loss for U.S. federal income tax purposes on each share of XL common stock surrendered in the Merger for Pivotal common stock. For a more complete discussion of

the material U.S. federal income tax consequences of the Merger, please carefully review the information set forth in the section titled “The Business Combination Proposal—Material U.S. Federal Income Tax Consequences of the Merger.”

XL may not be able to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans and other incentives for which it may apply. As a result, XL’s business, prospects, financial condition and operating results may be adversely affected.

XL has previously applied and may again in the future apply for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy and support the production of alternative fuel and electric vehicles and related technologies. XL anticipates that in the future there will be new opportunities for

 

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it to apply for grants, loans and other incentives from federal, state and foreign governments. XL’s ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of XL’s applications to participate in such programs. The application process for these funds and other incentives will likely be highly competitive. XL cannot assure you that it will be successful in obtaining any of these additional grants, loans and other incentives.

Risks Related to Ownership of Pivotal Common Stock

Concentration of ownership among XL’s existing executive officers, directors and their respective affiliates may prevent new investors from influencing significant corporate decisions.

Upon completion of the Business Combination, XL’s executive officers, directors and their respective affiliates as a group will beneficially own approximately 27% of the outstanding Pivotal common stock, assuming no conversions of Pivotals’ public shares. As a result, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of Pivotal’s certificate of incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of Pivotal or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.

Pivotal does not expect to declare any dividends in the foreseeable future.

After the completion of the Business Combination, Pivotal does not anticipate declaring any cash dividends to holders of Pivotal common stock in the foreseeable future. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

The price of Pivotal common stock may be volatile.

The price of Pivotal common stock may fluctuate due to a variety of factors, including:

 

   

actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in industry;

 

   

mergers and strategic alliances in the industry in which we operate;

 

   

market prices and conditions in the industry in which we operate;

 

   

changes in government regulation;

 

   

potential or actual military conflicts or acts of terrorism;

 

   

announcements concerning us or our competitors; and

 

   

the general state of the securities markets.

These market and industry factors may materially reduce the market price of Pivotal’s common stock, regardless of Pivotal’s operating performance. Additionally, because XL is a private company whose value is uncertain, there may be a high level of volatility in Pivotal’s share price after consummation of the Business Combination. Furthermore, if a large number of Pivotal stockholders holding public shares demand that Pivotal convert their shares into a pro rata portion of the trust account, it could significantly reduce the public “float” of Pivotal’s common stock after the Business Combination, further exacerbating this volatility.

Reports published by analysts, including projections in those reports that differ from Pivotal’s actual results, could adversely affect the price and trading volume of its common stock.

Pivotal currently expects that securities research analysts will establish and publish their own periodic projections for its business. These projections may vary widely and may not accurately predict the results Pivotal actually

 

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achieves. Its stock price may decline if its actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on Pivotal downgrades our stock or publishes inaccurate or unfavorable research about its business, Pivotal’s stock price could decline. If one or more of these analysts ceases coverage of Pivotal or fails to publish reports on Pivotal regularly, Pivotal’s stock price or trading volume could decline. While Pivotal expects research analyst coverage, if no analysts commence coverage of it, the trading price and volume for Pivotal common stock could be adversely affected.

Pivotal may issue additional shares of common stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of Pivotal common stock.

Upon the closing of the Business Combination, Pivotal will have options and warrants outstanding to purchase up to an aggregate of 14,974,449 shares of Pivotal’s Class A common stock, including public warrants to purchase 7,666,667 shares, private warrants to purchase 4,233,333 shares and options and warrants of XL assumed by Pivotal to purchase up to 13,074,449 shares. Pivotal will also have the ability to initially issue up to 12,800,000 shares under the 2020 Plan (assuming it is approved by stockholders at the meeting). Pursuant to the 2020 Plan, the number of shares available for issuance will automatically increase annually on the first day of each fiscal year during the period beginning with the fiscal year immediately following the fiscal year during which the 2020 Plan is first approved by the Pivotal stockholders, and ending on the second day of fiscal year 2030, in an amount equal to the lesser of: (a) 5% of the number of outstanding shares of common stock on such date; and (b) an amount determined by the plan administrator. In addition, if Pivotal’s Sponsor, officers, directors or their affiliates make any working capital loans prior to the closing of the Business Combination, they may convert up to $1,500,000 of those loans into up to an additional 1,000,000 private warrants, at the price of $1.50 per warrant. The number of warrants that may be issued in such a circumstance cannot be determined at this time. Pivotal may issue additional shares of common stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions or repayment of outstanding indebtedness, without stockholder approval, in a number of circumstances.

Pivotal’s issuance of additional shares of common stock or other equity securities of equal or senior rank would have the following effects:

 

   

Pivotal’s existing stockholders’ proportionate ownership interest in Pivotal will decrease;

 

   

the amount of cash available per share, including for payment of dividends (if any) in the future, may decrease;

 

   

the relative voting strength of each previously outstanding share of common stock may be diminished; and

 

   

the market price of Pivotal’s shares of common stock may decline.

Pivotal’s charter will contain anti-takeover provisions that could adversely affect the rights of its stockholders.

Pivotal’s second amended and restated certificate of incorporation will contain provisions to limit the ability of others to acquire control of XL or cause it to engage in change-of-control transactions, including, among other things:

 

   

provisions that authorize its board of directors, without action by its stockholders, to issue additional shares of common stock and preferred stock with preferential rights determined by its board of directors;

 

   

provisions that permit only a majority of its board of directors to call stockholder meetings and therefore do not permit stockholders to call stockholder meetings;

 

   

provisions that impose advance notice requirements, minimum shareholding periods and ownership thresholds, and other requirements and limitations on the ability of stockholders to propose matters for consideration at stockholder meetings;

 

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provisions limiting stockholders’ ability to act by written consent; and

 

   

a staggered board whereby our directors are divided into three classes, with each class subject to retirement and re-election once every three years on a rotating basis.

These provisions could have the effect of depriving Pivotal’s stockholders of an opportunity to sell their common stock at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. With its staggered board of directors, at least two annual or special meetings of stockholders will generally be required in order to effect a change in a majority of its directors. Pivotal’s staggered board of directors can discourage proxy contests for the election of its directors and purchases of substantial blocks of its shares by making it more difficult for a potential acquirer to gain control of its board of directors in a relatively short period of time.

Pivotal’s second amended and restated certificate of incorporation will provide, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

Pivotal’s second amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought in Pivotal’s name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any action arising under the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of Pivotal’s capital stock shall be deemed to have notice of and consented to the forum provisions in the second amended and restated certificate of incorporation.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with Pivotal or any of Pivotal’s directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. We cannot be certain that a court will decide that this provision is either applicable or enforceable, and if a court were to find the choice of forum provision contained in Pivotal’s second amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, Pivotal may incur additional costs associated with resolving such action in other jurisdictions, which could harm Pivotal’s business, operating results and financial condition.

Pivotal’s second amended and restated certificate of incorporation will provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Notwithstanding the foregoing, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

Future resales of common stock may cause the market price of Pivotal’s securities to drop significantly, even if XL’s business is doing well.

The Sponsor, officers and directors of Pivotal, and the stockholders of XL will be granted certain rights to have registered, in certain circumstances, the resale under the Securities Act of certain shares of Pivotal’s Class A common stock held by them, subject to certain conditions set forth in the Registration Rights Agreement. The

 

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PIPE Investors will have similar rights to have registered, in certain circumstances, the resale under the Securities Act of the shares of Pivotal’s Class A common stock issued to them in the PIPE Transaction. The sale or possibility of sale of these shares could have the effect of increasing the volatility in Pivotal’s share price or putting significant downward pressure on the price of Pivotal’s stock.

Pivotal’s securities may not be listed on a national securities exchange after the Business Combination, which could limit investors’ ability to make transactions in Pivotal’s securities and subject Pivotal to additional trading restrictions.

Pivotal has applied to have its common stock and warrants listed on the NYSE after consummation of the Business Combination. Pivotal will be required to meet the initial listing requirements of the NYSE to be listed. Pivotal may not be able to meet those initial listing requirements (and the related closing condition, which requires the shares of Pivotal’s Class A common stock to be issued to the stockholders of XL in the Merger be approved for listing on the NYSE, may be waived by the parties). Even if Pivotal’s securities are so listed, Pivotal may be unable to maintain the listing of its securities in the future.

If Pivotal fails to meet the initial listing requirements and the NYSE does not list its securities (and the related closing condition is waived by the parties), or if its securities are subsequently delisted, Pivotal could face significant material adverse consequences, including:

 

   

a limited availability of market quotations for its securities;

 

   

a limited amount of news and analyst coverage for XL; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

Risks Related to the Business Combination

Pivotal will not have any right to make damage claims against XL or XL’s stockholders for the breach of any representation, warranty or covenant made by XL in the Merger Agreement.

The Merger Agreement provides that all of the representations, warranties and covenants of the parties contained therein shall not survive the closing of the Merger, except for those covenants that by their terms apply or are to be performed in whole or in part after the closing, and then only with respect to breaches occurring after closing. Accordingly, there are no remedies available to the parties with respect to any breach of the representations, warranties, covenants or agreements of the parties to the Merger Agreement after the closing of the Merger, except for covenants to be performed in whole or in part after the closing. As a result, Pivotal will have no remedy available to it if the Merger is consummated and it is later revealed that there was a breach of any of the representations, warranties and covenants made by XL at the time of the Merger.

If Pivotal’s stockholders fail to properly demand conversion rights, they will not be entitled to have their common stock of Pivotal converted into a pro rata portion of the trust account.

Pivotal stockholders holding public shares may demand that Pivotal convert their shares into their respective pro rata portion of the trust account, calculated as of two (2) business days prior to the anticipated consummation of the Business Combination, including interest earned on the trust account and not previously released to Pivotal to pay its tax obligations. The per-share amount we will distribute to investors who properly convert their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters of Pivotal’s initial public offering. Pivotal stockholders who seek to exercise this conversion right must deliver their shares (either physically or electronically) to Pivotal’s transfer agent two (2) business days prior to the annual meeting. Any Pivotal stockholder who fails to properly deliver their shares will not be entitled to have his or her shares converted. See the section entitled “Annual Meeting of Pivotal Stockholders—Conversion Rights” for the procedures to be followed if you wish to have your shares redeemed for cash.

 

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Public stockholders, together with any affiliates of theirs or any other person with whom they are acting in concert or as a “group,” will be restricted from seeking conversion rights with respect to more than 20% of the public shares.

A public stockholder, together with any affiliate or any other person with whom such stockholder is acting in concert or as a “group,” will be restricted from seeking conversion rights with respect to more than 20% of the public shares. Accordingly, if you hold more than 20% of the public shares and the business combination proposal is approved, you will not be able to seek conversion rights with respect to the full amount of your shares and may be forced to hold the shares in excess of 20% or sell them in the after-market. Pivotal cannot assure you that the value of such excess shares will appreciate over time following the Business Combination or that the market price of Pivotal common stock after the Business Combination will exceed the per-share conversion price.

The Sponsor and Pivotal’s officers and directors own common stock and warrants that will be worthless and have incurred reimbursable expenses that may not be reimbursed or repaid if the Business Combination is not approved. Such interests may have influenced their decision to approve the Business Combination with XL.

The Sponsor and Pivotal’s officers and directors and/or their affiliates beneficially own or have a pecuniary interest in sponsor shares and private warrants that they purchased prior to, or simultaneously with, Pivotal’s initial public offering. The holders have no redemption rights with respect to these securities in the event a business combination is not effected in the required time period. Therefore, if the Business Combination with XL or another business combination is not approved within the required time period, such securities held by such persons will be worthless. Such securities had an aggregate market value of $109,462,499 based upon the closing prices of the shares and warrants on the NYSE on December 7, 2020, the record date. Furthermore, the Sponsor and Pivotal’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on Pivotal’s behalf, such as identifying and investigating possible business targets and business combinations. These expenses will be repaid upon completion of the Business Combination. However, if Pivotal fails to consummate the Business Combination, Pivotal’s Sponsor and its directors and officers will not have any claim against the trust account for reimbursement. Accordingly, Pivotal may not be able to reimburse these amounts if the Business Combination is not completed. In addition, Pivotal’s Sponsor, officers, directors or their affiliates may make working capital loans prior to the closing of the Business Combination, which may not be repaid if the Business Combination is not completed. See the section entitled “The Business Combination Proposal—Interests of the Sponsor and Pivotal’s Directors and Officers in the Business Combination.”

These financial interests may have influenced the decision of Pivotal’s directors to approve the Business Combination with XL and to continue to pursue such Business Combination. In considering the recommendations of Pivotal’s board of directors to vote for the business combination proposal and other proposals, its stockholders should consider these interests.

The Sponsor, which is ultimately controlled by Jonathan J. Ledecky and Kevin Griffin, is liable under certain circumstances to ensure that proceeds of the trust are not reduced by vendor claims in the event the Business Combination is not consummated. Such liability may have influenced the decision of Messrs. Ledecky and Griffin to approve the Business Combination with XL.

If the Business Combination with XL or another business combination is not consummated by Pivotal within the required time period, the Sponsor will be personally liable under certain circumstances described herein to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Pivotal for services rendered or contracted for or products sold to Pivotal. If Pivotal consummates a business combination, on the other hand, Pivotal will be liable for all such claims. See the section entitled “Other Information Related to Pivotal—Financial Condition and Liquidity” for further information.

 

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These personal obligations of the Sponsor may have influenced Pivotal’s board of director’s decision to approve the Business Combination with XL and to continue to pursue such Business Combination. In considering the recommendations of Pivotal’s board of directors to vote for the business combination proposal and the other proposals, Pivotal’s stockholders should consider these interests.

The exercise of Pivotal’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in the best interests of Pivotal’s stockholders.

In the period leading up to the closing of the Business Combination, events may occur that, pursuant to the Merger Agreement, would require Pivotal to agree to amend the Merger Agreement, to consent to certain actions taken by XL or to waive rights that Pivotal is entitled to under the Merger Agreement. Such events could arise because of changes in the course of XL’s business, a request by XL to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or the occurrence of other events that would have a material adverse effect on XL’s business and would entitle Pivotal to terminate the Merger Agreement. In any of such circumstances, it would be at Pivotal’s discretion, acting through its board of directors, to grant its consent or waive those rights. The existence of the financial and personal interests of the directors described in the preceding risk factors may result in a conflict of interest on the part of one or more of the directors between what he or they may believe is best for Pivotal and what he or they may believe is best for himself or themselves in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, Pivotal does not believe there will be any material changes or waivers that Pivotal’s directors and officers would be likely to make after the mailing of this proxy statement/prospectus. Pivotal will circulate a supplemental or amended proxy statement/prospectus if changes to the terms of the Merger that would have a material impact on its stockholders are required prior to the vote on the business combination proposal.

If Pivotal is unable to complete the Business Combination with XL or another business combination by January 16, 2021 (or such later date as may be approved by Pivotal’s stockholders), Pivotal will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, third parties may bring claims against Pivotal and, as a result, the proceeds held in the trust account could be reduced and the per-share liquidation price received by stockholders could be less than $10.00 per share.

Under the terms of Pivotal’s amended and restated certificate of incorporation, Pivotal must complete the Business Combination with XL or another business combination by January 16, 2021 (or such later date as may be approved by Pivotal stockholders in an amendment to its amended and restated certificate of incorporation), or Pivotal must cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, third parties may bring claims against Pivotal. Although Pivotal has obtained waiver agreements from certain vendors and service providers it has engaged and owes money to, and the prospective target businesses it has negotiated with, whereby such parties have waived any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, there is no guarantee that they or other vendors who did not execute such waivers will not seek recourse against the trust account notwithstanding such agreements. Furthermore, there is no guarantee that a court will uphold the validity of such agreements. Accordingly, the proceeds held in the trust account could be subject to claims which could take priority over those of Pivotal’s public stockholders. If Pivotal is unable to complete a business combination within the required time period, the Sponsor has agreed that it will be liable under certain circumstances described herein to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Pivotal for services rendered or contracted for or products sold to Pivotal. However, the Sponsor may not be able to meet such obligation as its only assets are securities of Pivotal. Therefore, the per-share distribution from the trust account in such a situation may be less than $10.00 due to such claims.

 

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Additionally, if Pivotal is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, or if Pivotal otherwise enters compulsory or court supervised liquidation, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of its stockholders. To the extent any bankruptcy claims deplete the trust account, Pivotal may not be able to return to its public stockholders at least $10.00.

Pivotal’s board of directors did not obtain a fairness opinion in determining whether or not to proceed with the Business Combination and, as a result, the terms may not be fair from a financial point of view to the public stockholders.

Pivotal’s board of directors did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combination. Accordingly, investors will be relying solely on the judgment of Pivotal’s board of directors in valuing XL and assuming the risk that the Pivotal board may not have properly valued the business. However, Pivotal’s officers and directors have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and have substantial experience with mergers and acquisitions. Furthermore, in analyzing the Business Combination, Pivotal’s board of directors conducted significant due diligence on XL. As a result, Pivotal’s board of directors concluded that its members’ collective experience and backgrounds, together with the experience and sector expertise of Pivotal’s advisors, enabled them to make the necessary analyses and determinations regarding the Business Combination, including that the Business Combination was fair from a financial perspective to its stockholders and that XL’s fair market value was at least 80% of the assets held in the trust account (excluding approximately $8.1 million of deferred underwriting commissions, as well as taxes payable, if any, on interest earned on the trust account) at the time of the agreement to enter into the Business Combination. There can be no assurance, however, that Pivotal’s board of directors was correct in its assessment of the Business Combination. For a complete discussion of the factors utilized by Pivotal’s board of directors in approving the Business Combination, see the section entitled “The Business Combination Proposal.”

Pivotal’s stockholders may be held liable for claims by third parties against Pivotal to the extent of distributions received by them.

If Pivotal is unable to complete the Business Combination with XL or another business combination within the required time period, Pivotal will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, which redemption will completely extinguish the public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of its remaining stockholders and its board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to its obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Pivotal cannot assure you that it will properly assess all claims that may potentially be brought against Pivotal. As such, Pivotal’s stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of its stockholders may extend well beyond the third anniversary of the date of distribution. Accordingly, Pivotal cannot assure you that third parties will not seek to recover from its stockholders amounts owed to them by Pivotal.

If Pivotal is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor, creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by Pivotal’s stockholders. Furthermore, because Pivotal intends to distribute the proceeds held in the trust account to its public stockholders promptly after the expiration of the time period to complete a business combination, this may be viewed or interpreted as giving preference to its public stockholders over any potential creditors with respect to access to or distributions from its assets.

 

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Furthermore, Pivotal’s board of directors may be viewed as having breached its fiduciary duties to its creditors and/or may have acted in bad faith, thereby exposing itself and XL to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. Pivotal cannot assure you that claims will not be brought against it for these reasons.

Activities taken by existing Pivotal stockholders to increase the likelihood of approval of the business combination proposal and the other proposals could have a depressive effect on Pivotal’s shares.

At any time prior to the annual meeting, during a period when they are not then aware of any material nonpublic information regarding Pivotal or its securities, the Sponsor, Pivotal’s officers, directors and stockholders from prior to Pivotal’s initial public offering, XL or XL’s stockholders and/or their respective affiliates may purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the business combination proposal, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire common stock of Pivotal or vote their shares in favor of the business combination proposal. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements to consummate the Business Combination where it appears that such requirements would otherwise not be met. Entering into any such arrangements may have a depressive effect on Pivotal common stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he owns, either prior to or immediately after the annual meeting.

If the adjournment proposal is not approved, and an insufficient number of votes have been obtained to authorize the consummation of the Business Combination, Pivotal’s board of directors will not have the ability to adjourn the annual meeting to a later date in order to solicit further votes, and, therefore, the Business Combination will not be approved.

Pivotal’s board of directors is seeking approval to adjourn the annual meeting to a later date or dates if it is determined by the officer presiding over the annual meeting that more time is necessary for Pivotal to consummate the Merger and the other transactions contemplated by the Merger Agreement. The presiding officer may present the adjournment proposal if, at the annual meeting, Pivotal is unable to consummate the Business Combination for any reason. If the adjournment proposal is not approved, Pivotal’s board will not have the ability to adjourn the annual meeting to a later date and, therefore, the Business Combination would not be completed. However, in addition to an adjournment of the annual meeting upon approval of an adjournment proposal, Pivotal’s board of directors is empowered under Delaware law to postpone the meeting at any time prior to the meeting being called to order.

 

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ANNUAL MEETING OF PIVOTAL STOCKHOLDERS

General

Pivotal is furnishing this proxy statement/prospectus to Pivotal’s stockholders as part of the solicitation of proxies by Pivotal’s board of directors for use at the annual meeting of Pivotal’s stockholders. This proxy statement/prospectus provides Pivotal’s stockholders with the information they need to know to be able to vote or instruct their vote to be cast at the annual meeting.

Date, Time and Place

The annual meeting of stockholders will be held on December 21, 2020, at 9:00 a.m., Eastern time, solely over the Internet by means of a live audio webcast, which may be accessed at https://www.cstproxy.com/pivotalic/2020. Stockholders participating in the annual meeting will be able to listen only and will not be able to speak during the webcast. However, in order to maintain the interactive nature of the annual meeting, virtual attendees will be able to:

 

   

vote via the annual meeting webcast; and

 

   

submit questions or comments to Pivotal’s directors and officers during the annual meeting via the annual meeting webcast.

Any stockholder wishing to attend the annual meeting must register in advance. To register for and attend the virtual annual meeting, please follow these instructions as applicable to the nature of your ownership of Pivotal common stock:

 

   

Shares Held of Record. If you are a record holder, and you wish to attend the virtual annual meeting, go to https://www.cstproxy.com/pivotalic/2020, enter the control number you received on your proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Immediately prior to the start of the annual meeting, you will need to log back into the meeting site using your control number. You must register before the meeting starts.

 

   

Shares Held in Street Name. If you hold your shares in “street” name, which means your shares are held of record by a broker, bank or nominee, and you who wish to attend the annual meeting, you must obtain a legal proxy from the stockholder of record and e-mail a copy (a legible photograph is sufficient) of your proxy to proxy@continentalstock.com. Holders should contact their bank, broker or other nominee for instructions regarding obtaining a proxy. Holders who e-mail a valid legal proxy will be issued a meeting control number that will allow them to register to attend and participate in the annual meeting. You will receive an e-mail prior to the meeting with a link and instructions for entering the annual meeting. “Street” name holders should contact Continental Stock Transfer on or before December 16, 2020.

Stockholders will also have the option to listen to the annual meeting by telephone by calling:

 

   

Within the U.S. and Canada: (888) 965-8995 (toll-free)

 

   

Outside of the U.S. and Canada: (415) 655-0243 (standard rates apply)

The passcode for telephone access: 64681872 #. You will not be able to vote or submit questions unless you register for and log in to the annual meeting webcast as described above.

Purpose of the Pivotal Annual Meeting

At the annual meeting, Pivotal is asking holders of Pivotal common stock to:

 

   

consider and vote upon a proposal to approve and adopt the Merger Agreement and the Business Combination, including the Merger of Merger Sub with and into XL, with XL surviving as a wholly

 

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owned subsidiary of Pivotal, and the issuance of Pivotal’s Class A common stock to XL’s stockholders in the Merger (the business combination proposal);

 

   

consider and vote upon a proposal to approve the issuance of an aggregate of 15,000,000 shares of Pivotal’s Class A common stock in the PIPE Transaction, the closing of which is subject to certain conditions, including, among other things, the closing of the Business Combination (the PIPE proposal);

 

   

consider and vote upon separate proposals to approve amendments to Pivotal’s current amended and restated certificate of incorporation to: (i) change the name of Pivotal to “XL Fleet Corp.”, as opposed to the current name of “Pivotal Investment Corporation II”; (ii) increase the number of shares of Class A common stock Pivotal is authorized to issue to 350,000,000 shares, as opposed to the current number of 75,000,000 shares, and remove the provisions for Pivotal’s current Class B common stock (the shares of which will all convert into shares of Class A common stock in connection with the Business Combination) so that the Class B common stock will cease to exist and Pivotal will have a single class of common stock; and (iii) remove the various provisions applicable only to special purpose acquisition corporations (such as the obligation to dissolve and liquidate if a business combination is not consummated within a certain period of time) and make certain other changes that the Pivotal board deems appropriate for a public operating company (the charter proposals);

 

   

elect nine directors who, upon the closing of the Business Combination, will be the directors of Pivotal (the director election proposal);

 

   

consider and vote upon a proposal to approve the 2020 Plan, which is an incentive compensation plan for employees and other service providers of Pivotal and its subsidiaries, including, after the Merger, XL and its subsidiaries (the incentive plan proposal); and

 

   

consider and vote upon a proposal to adjourn the annual meeting to a later date or dates if it is determined by the officer presiding over the annual meeting that more time is necessary for Pivotal to consummate the Merger and the other transactions contemplated by the Merger Agreement (the adjournment proposal).

Recommendation of Pivotal Board of Directors

Pivotal’s board of directors has unanimously determined that the business combination proposal is fair to and in the best interests of Pivotal and its stockholders and approved the business combination proposal. Pivotal’s board of directors unanimously recommends that stockholders vote “FOR” the business combination proposal, “FOR” the PIPE proposal, “FOR” each of the charter proposals, “FOR” the election of all of the persons nominated by Pivotal’s management for election as directors, “FOR” the incentive plan proposal and “FOR” the adjournment proposal, if presented at the meeting.

Record Date; Persons Entitled to Vote

Pivotal has fixed the close of business on December 7, 2020 as the “record date” for determining Pivotal stockholders entitled to notice of, and to attend and vote at, the annual meeting. As of the close of business on December 7, 2020, there were 23,000,000 shares of Class A common stock outstanding and 5,750,000 shares of Class B common stock outstanding and entitled to vote. Pivotal’s Class A common stock and Class B common stock are entitled to vote together as a single class on all matters to be considered at the annual meeting. Each share of Pivotal common stock is entitled to one vote at the annual meeting.

Pursuant to agreements with Pivotal, the 5,750,000 sponsor shares held by the Sponsor and Pivotal’s officers and directors, and any common stock acquired by them in the aftermarket, will be voted in favor of the business combination proposal. Such holders have indicated they intend to vote their shares in favor of the other proposals presented at the annual meeting.

 

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Quorum

The presence, either by attendance at the virtual annual meeting or by proxy, of a majority of all the outstanding shares of common stock entitled to vote constitutes a quorum at the annual meeting.

Vote Required

The business combination proposal. The approval of the business combination proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting to approve the Business Combination.

The PIPE proposal. The approval of the PIPE proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting.

The charter proposals. The approval of each of the charter proposals will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock on the record date.

The director election proposal. The election of directors requires a plurality vote of the Pivotal common stock present and entitled to vote at the annual meeting. A plurality means that the individuals who receive the largest number of votes cast “FOR” are elected as directors.

The incentive plan proposal. The approval of the incentive plan proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting.

The adjournment proposal. The approval of the adjournment proposal, if presented, will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting.

Abstentions and Broker Non-Votes

Abstentions are considered present for purposes of establishing a quorum but will have the same effect as a vote “against” the business combination proposal, the PIPE proposal, the charter proposals, the incentive plan proposal, and the adjournment proposal, if presented.

Broker non-votes will have no effect on the business combination proposal, the PIPE proposal, incentive plan proposal, and adjournment proposal, if presented, and will have the same effect as a vote “against” the charter proposals. For the election of directors, any shares not voted “FOR” a particular nominee (whether as a result of an abstention, a direction to withhold authority or a broker non-vote) will not be counted in the nominee’s favor.

If a beneficial holder of Pivotal common stock does not give its broker voting instructions, under applicable self-regulatory organization rules, the broker may not vote its shares on “non-routine” proposals, which is referred to as a “broker non-vote.” Because all of the proposals included in this proxy statement/prospectus are deemed “non-routine” in accordance with applicable NYSE rules and interpretations, brokers are not permitted to vote on any of the proposals to be considered at the annual meeting absent such voting instructions.

Voting Your Shares

Each share of Pivotal common stock that you own in your name entitles you to one vote. If you are a stockholder of record, your proxy card shows the number of shares of Pivotal common stock that you own. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted.

 

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If you are a stockholder of record, there are two ways to vote your shares of Pivotal common stock at the annual meeting:

 

   

You Can Vote by Signing and Returning the Enclosed Proxy Card. If you vote by proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted as recommended by Pivotal’s board of directors “FOR” the business combination proposal, each of the charter proposals, each of the nine nominees for director identified in this proxy statement/prospectus, the incentive plan proposal and the adjournment proposal, if presented. Votes received after a matter has been voted upon at the annual meeting will not be counted.

 

   

You Can Attend the Virtual Annual Meeting and Vote Online. Due to health concerns stemming from the COVID-19 pandemic, and to support the health and well-being of our stockholders, the annual meeting will be a virtual meeting. You may vote by attending the virtual annual meeting as described above and submitting a ballot via the annual meeting webcast.

If you hold your shares in “street name,” you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares by returning a completed, signed and dated voter instruction card. If you wish to attend the virtual annual meeting and vote through the web portal for the annual meeting webcast, you must obtain a legal proxy from your broker, bank or nominee. That is the only way Pivotal can be sure that the broker, bank or nominee has not already voted your shares.

Revoking Your Proxy

If you are a stockholder of record and you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:

 

   

you may send another proxy card with a later date;

 

   

you may notify Pivotal’s Secretary in writing before the annual meeting that you have revoked your proxy; or

 

   

you may attend the virtual annual meeting and submit a ballot through the web portal during the annual meeting webcast, as indicated above.

If you hold your shares in “street name,” you should contact your broker, bank or nominee to change your instructions on how to vote.

Who Can Answer Your Questions About Voting Your Shares

If you are a stockholder and have any questions about how to vote or direct a vote in respect of your Pivotal common stock, you may call D.F. King & Co., Inc, Pivotal’s proxy solicitor, at (800) 249-7120.

Conversion Rights

Any holder of public shares may seek to convert their shares into cash in connection with the Business Combination. Holders of public shares are not required to affirmatively vote on the business combination proposal or be holders of public shares on the record date in order to exercise conversion rights with respect to such public shares. Any stockholder holding public shares may exercise conversion rights which will result in them converting their shares into a full pro rata portion of the trust account, calculated as of two business days prior to the anticipated consummation of the Business Combination, including interest earned on the trust account and not previously released to Pivotal to pay its tax obligations, which, for illustrative purposes, was $10.09 per share as of December 7, 2020, the record date. If a holder seeks conversion of their shares as

 

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described in this section and the Business Combination is consummated, Pivotal will convert these shares into a pro rata portion of funds deposited in the trust account and the holder will no longer own these shares following the Business Combination.

Notwithstanding the foregoing, a holder of public shares, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking conversion rights with respect to 20% or more of the public shares. Accordingly, all public shares in excess of 20% held by a public stockholder will not be converted.

The Sponsor and Pivotal’s officers and directors will not have conversion rights with respect to any shares of Pivotal common stock owned by them, directly or indirectly.

Pivotal stockholders who seek to have their public shares converted must deliver their shares, either physically or electronically using The Depository Trust Company’s DWAC System, to Pivotal’s transfer agent no later than two (2) business days prior to the annual meeting. If you hold the shares in street name, you will have to coordinate with your broker to have your shares certificated or delivered electronically. Certificates that have not been tendered (either physically or electronically) in accordance with these procedures will not be redeemed for cash. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $45 and it would be up to the broker whether or not to pass this cost on to the redeeming stockholder. In the event the proposed Business Combination is not consummated, this may result in an additional cost to stockholders for the return of their shares.

Any request to have such shares converted, once made, may be withdrawn at any time prior to the vote on the business combination proposal. Furthermore, if a holder of a public share delivered its certificate in connection with an election of its conversion and subsequently decides prior to the applicable date not to elect to exercise such rights, it may simply request that the transfer agent return the certificate (physically or electronically).

If the Business Combination is not approved or completed for any reason, then Pivotal’s public stockholders who elected to exercise their conversion rights will not be entitled to have their shares converted. In such case, Pivotal will promptly return any shares delivered by public stockholders.

The closing price of the Pivotal Class A common stock on December 7, 2020, the record date, was $16.00. The cash held in the trust account on such date less taxes payable was approximately $232,085,237 ($10.09 per public share). Prior to exercising conversion rights, stockholders should verify the market price of Pivotal Class A common stock as they may receive higher proceeds from the sale of their common stock in the public market than from exercising their conversion rights if the market price per share is higher than the redemption price. Pivotal cannot assure its stockholders that they will be able to sell their common stock in the after-market, even if the market price per share is higher than the conversion price stated above, as there may not be sufficient liquidity in its securities when its stockholders wish to sell their shares.

If a holder of public shares exercises its conversion rights, then it will be exchanging its shares of Pivotal common stock for cash and will no longer own those shares.

Appraisal Rights

None of Pivotal’s stockholders, unitholders or warrant holders have appraisal rights in connection with the Business Combination under Delaware law.

Proxy Solicitation Costs

Pivotal is soliciting proxies on behalf of its board of directors. This solicitation is being made by mail but also may be made by telephone or in person. Pivotal and its directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. Pivotal will bear the cost of the solicitation.

 

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Pivotal has hired D.F. King & Co., Inc. to assist in the proxy solicitation process. Pivotal will pay that firm a fee of $10,000 plus disbursements. Such payment will be made from non-trust account funds.

Pivotal will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. Pivotal will reimburse them for their reasonable expenses.

Pivotal Sponsor and Officers and Directors

As of December 7, 2020, the record date for the Pivotal annual meeting, the Sponsor and Pivotal’s officers and directors beneficially owned and were entitled to vote an aggregate of 5,750,000 shares of Class B common stock, which we refer to in this proxy statement/prospectus as sponsor shares. These individuals and entities also purchased an aggregate of 4,233,333 private warrants simultaneously with the consummation of Pivotal’s initial public offering. These sponsor shares currently constitute 20% of Pivotal’s outstanding common stock. If the Merger is consummated, each outstanding share of Class B common stock will convert into one share of Pivotal’s Class A common stock at the closing.

In connection with Pivotal’s initial public offering, each of the Sponsor and Pivotal’s officers and directors have agreed to vote their sponsor shares, as well as any common stock acquired in the aftermarket, in favor of the business combination proposal. Each has also indicated that he, she or it intends to vote his, her or its shares in favor of all the other proposals being presented at the meeting. There are no redemption rights with respect to the sponsor shares in the event a business combination is not effected in the required time period and Pivotal is forced to redeem all of the public shares. Accordingly, the sponsor shares will be worthless if no business combination is consummated by Pivotal.

In connection with the Merger, Pivotal has agreed to cause its initial stockholders, including the holders of the sponsor shares and private warrants, to amend the existing lock-up restrictions with respect to the common stock of Pivotal and warrants of Pivotal held by them, and enter into the Lock-Up Agreement which has been or will be executed by certain of XL’s stockholders, so that the lock-up restrictions with respect to such initial stockholders’ securities will be identical to the lock-up restrictions applicable to such stockholders of XL. The Lock-Up Agreement provides that the sponsor shares and the private warrants (and any securities issued upon exercise thereof or exchanged therefor) will be subject to a 12-month lock-up 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 20 trading days during any 30-trading day period commencing at least 150 days following the consummation of the Merger, subject to certain exceptions.

At any time prior to the annual meeting, during a period when they are not then in possession of any material nonpublic information regarding Pivotal or its securities, the Sponsor, Pivotal’s officers and directors, XL, XL’s stockholders and/or their respective affiliates may purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the business combination proposal, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire Pivotal common stock or vote their shares in favor of the business combination proposal. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirement that the holders of a majority of the shares entitled to vote at the annual meeting to approve the business combination proposal vote in its favor and that the conditions to the closing of the Business Combination (such as the condition that the Pivotal common stock be listed on the NYSE) otherwise will be met, where it appears that such requirements or conditions would otherwise not be met. While the exact nature of any such incentives has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options and the transfer to such investors or holders of sponsor shares for nominal value.

 

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Entering into any such arrangements may have a depressive effect on the shares of Pivotal common stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than the prevailing market price and may therefore be more likely to sell the shares he owns, either prior to or immediately after the annual meeting.

If such transactions are effected, the consequence could be to cause the Business Combination to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the business combination proposal and the other proposals to be presented at the annual meeting and would likely increase the chances that such proposals would be approved. Moreover, any such purchases may make it more likely that the conditions to the closing of the Business Combination (such as the condition that the Pivotal common stock be listed on the NYSE) are met.

No agreements dealing with the above arrangements or purchases have been entered into as of the date of this proxy statement/prospectus. Pivotal will file a Current Report on Form 8-K to disclose any arrangements entered into or significant purchases made by any of the aforementioned persons that would affect the vote on the business combination proposal or the satisfaction of any closing conditions. Any such report will include descriptions of any arrangements entered into or significant purchases by any of the aforementioned persons.

 

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THE BUSINESS COMBINATION PROPOSAL

The discussion in this proxy statement/prospectus of the Business Combination and the principal terms of the Merger Agreement is subject to, and is qualified in its entirety by reference to, the Merger Agreement. A copy of the Merger Agreement is attached as Annex A to this proxy statement/prospectus.

Structure of the Merger

The Merger Agreement provides, among other things, for Merger Sub to merge with and into XL, with XL surviving as a wholly owned subsidiary of Pivotal and the securityholders of XL becoming securityholders of Pivotal.

Consideration to Company Securityholders

Under the Merger Agreement, each share of XL’s common stock issued and outstanding immediately prior to the effective time of the Merger (including each share of XL’s common stock issued as a result of the conversion of XL’s preferred stock and any conversion or exchange of XL’s convertible promissory notes, each as more fully described below) will be automatically converted into the right to receive a number of shares of Pivotal’s Class A common stock equal to the Exchange Ratio. As of December 7, 2020, the record date, there were 11,669,664 shares of XL’s common stock outstanding.

The Exchange Ratio is the quotient obtained by dividing 100,000,000 by the fully-diluted number of shares of XL’s common stock outstanding immediately prior to the effective time of the Merger. Pursuant to the Merger Agreement, the fully-diluted number of shares outstanding includes the sum of (x) the number of issued and outstanding shares of XL’s common stock immediately prior to the effective time (including all shares of XL’s common stock issued as a result of the conversion of XL’s preferred stock and any conversion or exchange of XL’s convertible promissory notes, each as more fully described below) plus (y) the number of shares of XL’s common stock issuable upon the exercise, conversion or other exchange of XL’s options, warrants and convertible promissory notes which are not converted, exchanged or exercised prior to the effective time and are assumed by Pivotal (including all shares treated as issuable upon conversion of XL’s convertible promissory notes, as more fully described below) plus (z) the number of shares of XL’s 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.

Immediately prior to the effective time of the Merger, XL will cause each share of XL’s preferred stock that is issued and outstanding immediately prior to the effective time to be automatically converted into shares of XL’s common stock, in accordance with the terms of XL’s amended and restated certificate of incorporation. All of the shares of XL’s preferred stock so converted into shares of XL’s common stock will no longer be issued and outstanding and will cease to exist, and each holder of XL’s preferred stock will thereafter cease to have any rights with respect to such shares of XL’s preferred stock. As of December 7, 2020, the record date, there were 99,481,040 shares of XL’s preferred stock outstanding, which will convert into 99,481,040 shares of XL’s common stock.

Each outstanding option to purchase shares of XL’s common stock, whether or not exercisable and whether or not vested, immediately prior to the Effective Time will be assumed by Pivotal and converted into an option to purchase a number of shares of Pivotal’s Class A common stock equal to the product of (x) the number of shares of XL’s common stock subject to such option immediately prior to the effective time of the Merger 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 option immediately prior to the effective time divided by (B) the Exchange Ratio. XL has agreed in the Merger Agreement to take all actions necessary to effectuate the foregoing treatment of the options. As of December 7, 2020, the record date, XL had outstanding options to purchase 15,154,224 shares of XL’s common stock.

 

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Each warrant, issued by XL and outstanding immediately prior to the effective time of the Merger, to purchase shares of XL’s stock 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 warrant, a number of shares of Pivotal’s Class A common stock equal to the product of (x) the number of shares of XL’s stock subject to such warrant immediately prior to the effective time as adjusted pursuant to the terms of such warrant and (y) the Exchange Ratio, at an exercise price equal to (A) the exercise price of such warrant immediately prior to the effective time as adjusted pursuant to the terms of such warrant divided by (B) the Exchange Ratio. XL has agreed in the Merger Agreement to take all actions necessary to effectuate the foregoing treatment of the warrants. As of December 7, 2020, the record date, XL had outstanding warrants to purchase 1,914,440 shares of XL’s common stock and 225,108 shares of XL’s preferred stock.

As of September 30, 2020, XL had $18,099,949 aggregate principal amount of convertible promissory notes outstanding, with $1,463,164 of interest accrued thereon. Each of XL’s outstanding convertible promissory notes will be satisfied in full in connection with the Merger. At the option of the holder of each such note, either (i) the entire principal of such note and accrued interest thereon will be converted into shares of XL’s common stock at a conversion price equal to $5.2662 per share of XL common stock (a “Full Note Conversion”), or (ii) (x) the entire principal amount of such note will be repaid in cash within three business days of the closing of the Business Combination, and (y) the value equal to (A) (I) the principal due under the notes plus any unpaid but accrued interest due under such note, divided by (II) 70%, minus (B) the principal due under the note, shall be converted into shares of XL’s common stock at $7.5232 per share of XL common stock (a “Partial Note Conversion”). Whether a note is converted in full or repaid in part and converted in part will depend on the election of the noteholder (or failure to make an election, in which case such noteholder will be deemed to have made the Full Note Conversion election) under the Omnibus Note Amendment. As of September 30, 2020, Partial Note Conversion elections had been made with respect to $11,250,000 aggregate principal amount of notes and Full Note Conversion elections had been made with respect to $4,500,000 aggregate principal amount of notes. Elections with respect to $2,349,949 aggregate principal amount of notes have not yet been made and XL expects such elections will be made prior to the closing of the Business Combination or, if not made, will be deemed to be treated as Full Note Conversion elections. The discussions herein assume that all such notes with respect to which an election has not been made as of the date hereof will be treated as if Full Note Conversion elections had been made. In determining the fully-diluted number of shares of XL’s common stock outstanding for the purposes of calculating the Exchange Ratio, one share of XL’s common stock will be treated as issuable upon conversion of such notes for each $10.00 of principal that is repaid in cash. Accordingly, to the extent the holders of XL’s convertible promissory notes elect to be repaid in cash, the aggregate number of shares of Pivotal’s Class A common stock issued and reserved for issuance to XL’s other securityholders will be reduced accordingly.

In no event will the aggregate number of shares of Pivotal Class A common stock to be issued in the Merger exceed an amount equal to 100,000,000 less the number of shares reserved for issuance upon the exercise of XL’s options and warrants that are to remain outstanding immediately following the Business Combination and less the number of shares treated as issuable upon the payment of any principal of XL’s convertible promissory notes (as determined in accordance with the Merger Agreement and more fully described in this proxy statement/prospectus). The actual number of shares of Pivotal Class A common stock to be issued at the closing the Merger will depend on the exercise, conversion, exchange or forfeiture of XL’s convertible promissory notes, options and warrants and the election of holders of XL’s convertible promissory notes (or the failure of such holders to make elections) to convert their notes, in whole or in part, in accordance with the Omnibus Note Amendment.

PIPE Transaction

In connection with the execution of the Merger Agreement, Pivotal entered into subscription agreements with the PIPE Investors, including MGG, an affiliate of Pivotal SPAC Funding II LLC, which is a managing member of the Sponsor, pursuant to which such PIPE Investors have agreed to purchase an aggregate of 15,000,000 shares of Pivotal’s Class A common stock in the PIPE Transaction at a price of $10.00 per share for an aggregate commitment of $150,000,000. The closing of the private placement is expected to take place concurrently with

 

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the closing of the Business Combination. The subscription agreements are subject to certain conditions, including, among other things, the closing of the Business Combination.

Pro Forma Ownership of Pivotal Upon Closing

Assuming that none of XL’s options or warrants are exercised prior to the closing of the Business Combination and all of XL’s convertible promissory notes are converted in whole or in part into shares of XL’s common stock immediately prior to the Business Combination as described in “The Business Combination Proposal—Structure of the Merger—Consideration to XL Securityholders,” approximately 85,770,853 shares of Pivotal’s Class A common stock will be issued to XL’s former stockholders and approximately 13,074,449 shares of Pivotal’s Class A common stock will be reserved for issuance upon exercise of XL’s options and warrants assumed by Pivotal.

Based on the assumptions in the preceding paragraph, and further assuming that no holder of Pivotal’s public shares exercises conversion rights as described in this proxy statement/prospectus, immediately after the closing of the Business Combination, XL’s former stockholders will hold approximately 66.2% of the issued and outstanding Pivotal common stock, the PIPE Investors will hold approximately 11.6% of the issued and outstanding Pivotal common stock, and the current stockholders of Pivotal will hold approximately 22.2% of the issued and outstanding Pivotal common stock.

Headquarters; Trading Symbols

After completion of the transactions contemplated by the Merger Agreement:

 

   

the corporate headquarters and principal executive offices of Pivotal will be located at 145 Newton Street, Boston, Massachusetts 02135; and

 

   

Pivotal’s Class A common stock and Pivotal’s warrants are expected to be traded on the NYSE under the symbols XL and XL WS, respectively. The warrants assumed by Pivotal pursuant to the Merger Agreement will not be listed or traded on a national securities exchange and are not expected to be quoted or traded on the over-the-counter markets.

Sale Restrictions

Certain of XL’s stockholders have entered or will enter into a Lock-up Agreement which provides that shares of Pivotal’s Class A common stock to be issued to them in the Merger will be subject to a 12-month lock-up period during which they have agreed, subject to certain restrictions, not to, directly or indirectly, sell, transfer or otherwise dispose of their shares to be issued in the Merger, 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 20 trading days during any 30-trading day period commencing at least 150 days following the consummation of the Merger, subject to certain exceptions.

In connection with the Merger, Pivotal has agreed to cause its initial stockholders, including the holders of the sponsor shares and private warrants, to amend the existing lock-up restrictions with respect to the common stock of Pivotal and warrants of Pivotal held by them, and enter into the Lock-Up Agreement to be executed by certain of XL’s stockholders, so that the lock-up restrictions with respect to such initial stockholders’ securities will be identical to the lock-up restrictions applicable to such stockholders of XL.

Related Agreements

Subscription Agreements for PIPE Transaction

On September 17, 2020, Pivotal entered into subscription agreements with the PIPE Investors pursuant to which such PIPE Investors (including MGG) have agreed to purchase, and Pivotal agreed to sell to the PIPE Investors,

 

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an aggregate of 15,000,000 shares of Pivotal’s Class A common stock in a private placement at a price of $10.00 per share for an aggregate commitment of $150,000,000. The subscription agreements are subject to certain customary conditions, including, among other things, the closing of the Business Combination. The purpose of the PIPE Transaction is to ensure that the combined company has a sufficient amount of capital following the closing of the transaction.

The issuance of the shares of Class A common stock in connection with the subscription agreements has not been registered under the Securities Act, and will be issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

The subscription agreements provide for certain registration rights. In particular, Pivotal will, as soon as practicable within thirty (30) calendar days, but no later than forty-five (45) calendar days following the closing date of the Merger, file with the SEC (at Pivotal’s sole cost and expense) a registration statement registering the resale of the shares issued to the PIPE Investors, and will use its commercially reasonable efforts to have such 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 actual filing date (or the 90th calendar day if the SEC notifies Pivotal (orally or in writing) that it will “review” such registration statement) and (ii) the 10th business day after the date Pivotal is notified (orally or in writing) by the SEC that such registration statement will not be “reviewed” or will not be subject to further review, subject to certain exceptions that provide for extensions, such as a government shutdown or a PIPE Investor’s failure to provide information requested by Pivotal that is required to be provided in such registration statement.

The subscription agreements will terminate with no further force and effect 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 the parties to such subscription agreement; (c) if any of the conditions to closing set forth in such subscription agreement are not satisfied on or prior to the closing and, as a result thereof, the transactions contemplated by the subscription agreement are not consummated at the subscription closing, and (d) March 16, 2021.

For more information about the subscription agreement Pivotal entered into with MGG, please see the section entitled “Certain Relationships and Related Persons Transactions—Pivotal’s Related Party Transactions—Subscription Agreements.”

Registration Rights Agreement

Certain stockholders of XL and Pivotal have entered or will enter into 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 certain shares of Pivotal’s Class A common stock held by them, subject to certain conditions set forth therein. Pivotal has agreed to 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.

XL Support Agreements

In connection with the execution of the Merger Agreement, the Supporting Holders, comprised of certain of XL’s officers, directors, founders and their family members and 5% or greater holders of XL’s stock, who collectively hold approximately 47% of the issued and outstanding shares of XL’s common stock on an as-converted basis, have entered into Support Agreements with Pivotal pursuant to which the Supporting Holders have agreed, among other things, (i) to vote all of their respective shares of XL’s stock in favor of the Merger at a meeting called to approve the Merger by XL’s stockholders (or in an action by written consent approving the Merger) and (ii) to the extent such stockholders are holders of XL’s Series D preferred stock, to deliver a signature to the

 

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request for conversion required to effect the conversion of XL’s preferred stock into XL’s common stock immediately prior to the effective time of the merger.

Background of the Merger

Pivotal is a blank check company incorporated on March 20, 2019 as a Delaware corporation and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. While Pivotal may pursue an initial business combination target in any industry or geographic location, Pivotal has focused on potential acquisition targets in North America in industries ripe for disruption from continuously evolving digital technology and the resulting shift in distribution patterns and consumer purchase behavior.

The Business Combination with XL is the result of an extensive search for a potential transaction utilizing the network and investing and transaction experience of Pivotal’s management team and board of directors. The terms of the Merger Agreement are the result of arm’s-length negotiations between representatives of Pivotal and XL. The following is a brief discussion of the background of these negotiations, the Merger Agreement and the Business Combination.

The following chronology summarizes the key meetings and events that led to the signing of the Merger Agreement, but it does not purport to catalogue every conversation among representatives of Pivotal, XL and their respective advisors.

On July 16, 2019, Pivotal consummated its initial public offering of 23,000,000 units. Each unit consisted of one share of Class A common stock and one-third of one redeemable warrant to purchase one share of Class A common stock. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $230,000,000. Simultaneously with the consummation of the initial public offering, Pivotal consummated a private placement with the Sponsor pursuant to which Pivotal issued the Sponsor 4,233,333 warrants at a price of $1.50 per warrant, generating total proceeds of $6,350,000. A total of $230,000,000 from the net proceeds from the initial public offering and the private placement were placed into a segregated trust account of Pivotal. Prior to the consummation of its initial public offering, neither Pivotal, nor anyone on its behalf, contacted any prospective target businesses or had any substantive discussions, formal or otherwise, with respect to a transaction with Pivotal.

From the date of Pivotal’s initial public offering through the signing of the Merger Agreement with XL on September 17, 2020, representatives of Pivotal, including Jonathan Ledecky, the chief executive officer and chairman of the board of directors of Pivotal, Kevin Griffin, a director of Pivotal, and Gregory Racz, an officer of the Sponsor, commenced an active search for prospective acquisition targets. During this period, these representatives of Pivotal reviewed self-generated ideas, initiated contact and were contacted by a number of individuals and entities with respect to business combination opportunities. Pivotal’s officers and directors ultimately identified and evaluated over 100 potential target businesses from a wide range of industry segments during this period. In connection with such evaluation, representatives of Pivotal had discussions regarding potential transactions with members of management and/or the boards of directors of certain potential acquisition targets. From the date of the initial public offering through September 17, 2020, representatives of Pivotal met with and engaged in substantive discussions with a number of potential acquisition targets with respect to a potential business combination and discussed potential valuations and structures. None of these discussions resulted in an executed letter of intent, other than the discussions with XL. The decision not to pursue any particular target business that Pivotal evaluated generally was the result of one or more of: (i) Pivotal’s determination that such business did not represent an attractive target due to a combination of business and growth prospects, strategic direction, management teams, structure and/or valuation; (ii) a difference in initial valuation expectations between Pivotal, on the one hand, and the target and/or its owners, on the other hand; (iii) a potential target’s unwillingness to engage in substantive discussions with Pivotal given the timing and uncertainty of closing due to the requirement for Pivotal to obtain stockholder approval as a condition to

 

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consummating any business combination; (iv) a potential target’s desire to remain a privately held company; or (v) a potential target’s unwillingness to engage in substantive discussions with Pivotal in light of conflicting business objectives on the target’s side.

Pivotal decided to pursue a combination with XL because it determined that XL represented a compelling opportunity based upon, among other things: Pivotal’s and its advisors’ assessment of XL’s business and growth prospects, including by providing a platform for potential future acquisitions resulting from the Business Combination with XL; the fact that, unlike many of XL’s competitors, XL had already deployed its technology and was generating revenue from a diverse customer base; XL’s experienced management team in XL’s industry; the retention by Company equityholders of 100% of their equity interests in the Business Combination; and the favorable implied valuation of XL in the Business Combination. Compared to XL, Pivotal and its advisors did not consider the other alternative combination targets to be as compelling when taking the foregoing into consideration.

Mr. Ledecky and Thomas J. Hynes III, the founder and chief strategy officer of XL, have been business acquaintances for 10 years as a result of Mr. Ledecky’s decades-long relationship with Mr. Hynes’ family. In a telephone conversation on July 24, 2020 requested by Mr. Hynes, Mr. Ledecky and Mr. Hynes updated each other on their respective recent business activities, and Mr. Hynes sought Mr. Ledecky’s general advice regarding the special purpose acquisition company market and its participants. During that telephone conversation, Mr. Ledecky and Mr. Hynes then discussed the possibility of a potential transaction between Pivotal and XL. Following this conversation, Mr. Ledecky and Mr. Hynes made arrangements to further discuss their activities and to determine whether a transaction between Pivotal and XL would be in the best interests of Pivotal, XL and their respective shareholders.

Later in the day on July 24, 2020, XL’s financial advisor, Canaccord Genuity LLC (“Canaccord”), sent a draft non-disclosure agreement to Pivotal in order to allow XL to begin sharing due diligence materials with Pivotal to assist Pivotal in evaluating a potential transaction with XL. Following review and revision by Pivotal’s legal counsel, Graubard Miller (“Graubard”), Pivotal and XL entered into a customary non-disclosure agreement. Promptly thereafter beginning on July 24, 2020, XL began providing financial projections and other due diligence materials to Pivotal, including through an electronic data room maintained by XL’s legal counsel, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz”).

Commencing on July 24, 2020, the date on which Pivotal and its advisors were granted access to materials in accordance with the non-disclosure agreement and continuing through the signing of the Merger Agreement, representatives of Pivotal and its legal counsel, Morrison & Foerster LLP (“Morrison & Foerster”), conducted due diligence of XL through document review and numerous telephone conference calls with representatives of XL and Mintz. Pivotal’s diligence covered various areas, including, among others, commercial operations and contracts, financial results, litigation, legal compliance, intellectual property, tax and general corporate matters, with legal diligence conducted by Morrison & Foerster. In addition, Pivotal conducted further diligence, including calls with XL suppliers, customers, and investors, as well as competitors and industry experts, which diligence focused on, among other things, XL’s products, market share, and future prospects, as well as the outlook for the sector more generally. Based on such diligence, and after internal discussions as well as feedback from its advisors, Pivotal decided to pursue further diligence, discussions, and negotiations.

On July 27, 2020, representatives of Pivotal, XL, Graubard and Mintz held an introductory video conference meeting to discuss the respective businesses of Pivotal and XL, including the business rationale for a business combination and the possibility of a transaction between Pivotal and XL. Present at the meeting were Mr. Ledecky, Mr. Griffin, Sarah Sclarsic, a director of Pivotal, Mr. Racz, Mr. Kazarinoff and Mr. Hynes, among others. Later on July 27, 2020, following the meeting, an initial draft of a letter of intent setting forth the proposed terms of a transaction between Pivotal and XL was sent by Pivotal to XL based on the discussions held between the parties up to such date. The initial draft of the letter of intent contemplated Pivotal issuing to the stockholders of XL an aggregate of 100,000,000 shares of Pivotal common stock. The letter of intent also

 

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included certain other provisions relating to the board of directors, with two out of eight members of the board of directors of the combined company being existing Pivotal directors, including Mr. Ledecky, and the remainder designated by XL, restrictions on the sale of shares of Pivotal’s common stock following consummation of the Business Combination and a contemplated $100,000,000 million private placement at $10.00 per share that would close prior to or substantially concurrently with the closing of the Business Combination for the purpose of providing additional cash to the combined company to provide working capital to execute XL’s business plan and fund the combined company’s growth following the closing of the Business Combination. The draft letter of intent contemplated that the executed letter of intent, if any, would be non-binding other than with respect to certain provisions related to a 15-day automatically renewable exclusivity period, fees and expenses (with each party to bear its own expenses) and confidentiality.

On July 28, 2020, representatives of Pivotal and XL and their respective financial and legal advisors participated in a video conference meeting to discuss the proposed transaction and the draft letter of intent. Present at the meeting were Mr. Ledecky, Mr. Griffin, Ms. Sclarsic, Mr. Racz, Mr. Hynes and Dimitri N. Kazarinoff, the chief executive officer of XL, among others. At the meeting, the parties discussed the operations of Pivotal and XL and the terms of the draft letter of intent, including certain changes thereto that were requested by XL. Those changes included, among other things, a specific reference to the $1,000,000,000 implied valuation of XL based on the number of shares of Pivotal common stock to be issued to the stockholders of XL and XL’s and its financial advisor’s view of the valuations of similarly situated companies, the expansion of the size of the board of directors of the combined company to nine directors, with the additional director to be designated by XL, the ability for the board of directors of the combined company to approve secondary offerings following six months after consummation of the transaction (notwithstanding the transfer restrictions provided for in the draft letter of intent), a carve-out from the exclusivity provisions for XL’s ordinary course financing activities and certain termination provisions. The parties discussed these changes, including Pivotal’s view that the additional director should be a continuing Pivotal director, based in part on the Pivotal directors’ extensive relationships with individuals and companies that might be potential customers or acquisition candidates for the combined company following closing of the transaction and their past experience as advisors to and investors in growth-stage companies.

Later on July 28, 2020, XL convened a special meeting of its board of directors via telephone conference call to discuss the proposed transaction and the draft letter of intent, including the implied valuation of XL, and the underlying rationale for such implied valuation (which was consistent with Pivotal’s evaluation of the business, comparable companies in analogous markets), and the number of shares of Pivotal common stock to be issued to the stockholders of XL. During the board meeting, Mr. Hynes and Mr. Kazarinoff updated XL’s board of directors on the status of discussions with Pivotal, including the principal terms of the transaction and timing considerations. Following discussion and deliberation, XL’s board of directors approved and directed the representatives of XL to continue discussions with Pivotal and enter into the letter of intent, subject to the changes proposed by XL that had been discussed with Pivotal earlier on July 28, 2020, except that the additional director XL proposed would be designated by Pivotal. Following the conclusion of XL’s board meeting, a revised draft of the letter of intent reflecting those changes, among others, was distributed to Pivotal.

On July 29, 2020, representatives of Pivotal and XL and their respective legal advisors participated in a video conference meeting with Marcum LLP, XL’s outside independent audit firm (“Marcum”), to discuss the audit by Marcum of updated audited financial statements of XL prepared by XL for the fiscal years ended December 31, 2019 and 2018, which were to be prepared in connection with this proxy statement/prospectus.

On August 5, 2020, following discussion of the changes to the letter of intent described above by representatives of Pivotal and XL and their respective financial and legal advisors, Pivotal and XL signed the revised letter of intent.

On August 6, 2020, a list of preliminary business diligence requests was submitted to XL by Pivotal. Throughout the period from August 6, 2020 until the signing of the Merger Agreement, representatives of Pivotal and its

 

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advisors conducted further analysis and held conference calls with representatives of XL regarding XL’s business plan, financial projections, technology and addressable market and continued their extensive business, financial, accounting, tax and legal due diligence investigations of XL.

During the weeks of July 27, 2020 and August 3, 2020, representatives of Pivotal began preliminary discussions with BTIG, LLC (“BTIG”) regarding the PIPE Transaction contemplated by the letter of intent. BTIG has previously provided financial advisory services to Pivotal and the Sponsor from time to time, including as an underwriter in connection with Pivotal’s initial public offering, for which BTIG is owed certain deferred underwriting commissions payable upon the consummation of a business combination. On August 6, 2020, BTIG delivered an initial draft engagement letter to Pivotal setting forth the terms of BTIG’s engagement as a non-exclusive placement agent in the PIPE Transaction. Following negotiation between BTIG, on the one hand, and Pivotal and Morrison & Foerster, on the other hand, Pivotal and BTIG signed the engagement letter on August 14, 2020. Pivotal selected BTIG in light of BTIG’s extensive experience in advising special purpose acquisition companies on private placements and because of BTIG’s extensive knowledge of Pivotal as a result of their participation as an underwriter for Pivotal’s initial public offering.

On August 7, 2020, Pivotal circulated an initial draft of the Merger Agreement prepared by Morrison & Foerster, which reflected the terms of the signed letter of intent, to XL and Mintz.

On August 12, 2020, Mintz circulated a revised draft of the Merger Agreement to Pivotal. The revised draft provided for, among other things, the conversion of XL’s preferred stock into shares of common stock immediately prior to the Merger, with the treatment of other Company securities to be determined, an exception to the interim operating covenants for actions reasonably necessary to protect the health and safety of employees and other individuals with whom XL had business dealings and respond to supply or service disruptions caused by COVID-19 during any period of full or partial suspension of operations related to COVID-19, a requirement and closing condition for Pivotal’s initial stockholders to amend their existing lock-up restrictions to be the same the lock-up restrictions applicable to XL’s stockholders and certain other closing conditions in favor of XL.

On August 14, 2020 and August 16, 2020, representatives of Morrison & Foerster and Mintz held telephone conference calls to discuss the revised draft Merger Agreement, including, among other things, the treatment of XL’s different classes of equity and debt securities, the terms and structure of the proposed transaction and certain of the additional closing conditions proposed in the revised draft Merger Agreement.

Also on August 14, 2020, representatives of Pivotal, BTIG and Morrison & Foerster commenced the discussion and preparation of wall crossing procedures to allow potential interested investors to consider participation in the proposed PIPE Transaction in connection with the Business Combination.

During the week of August 17, 2020, representatives of Pivotal and BTIG held telephone conference calls to discuss and revised marketing materials, timing and investor targeting for the proposed PIPE Transaction, including the potential participation by MGG, an affiliate of Pivotal SPAC Funding II, LLC (which is a managing member of the Sponsor), or its affiliate in the PIPE Transaction. Representatives of Pivotal and BTIG also began to hold telephone conference calls to discuss the proposed PIPE Transaction with a certain selected group of wall-crossed investors who agreed to be subject to certain confidentiality and other restrictions in order to gain access to information related to the proposed PIPE Transaction.

Also during the week of August 17, 2020, representatives of Pivotal began preliminary discussions with PJT Partners LP (“PJT”) regarding fundraising from additional investors related to the PIPE Transaction. PJT has previously provided financial advisory services to Pivotal and the Sponsor from time to time. On August 21, 2020, PJT delivered an initial draft engagement letter to Pivotal setting forth the terms of PJT’s engagement as a non-exclusive placement agent in the PIPE Transaction. Following negotiation between PJT, on the one hand, and Pivotal and Morrison & Foerster, on the other hand, Pivotal and PJT signed the engagement letter on August 25, 2020. Pivotal selected PJT in light of PJT’s extensive experience in advising special purpose acquisition companies on private placements.

 

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On August 18, 2020, Morrison & Foerster delivered an initial draft of the form of Subscription Agreement to be used in connection with the PIPE Transaction to representatives of BTIG. Following discussions between BTIG, Pivotal and Morrison & Foerster, an updated draft of the form of Subscription Agreement was provided to representatives of BTIG on August 20, 2020, after which the updated draft of the form of Subscription Agreement was made available, either directly or through an electronic data room, to wall-crossed investors who agreed to be subject to certain confidentiality and other restrictions in order to gain access to information related to the proposed PIPE Transaction. From August 20, 2020 to September 2, 2020, a revised draft of the form of Subscription Agreement was provided to BTIG and a draft of such form of Subscription Agreement was provided to PJT, in each case reflecting comments received from certain potential investors in the PIPE Transaction and Mintz.

On August 18, 2020, Morrison & Foerster circulated a further revised draft of the Merger Agreement to Mintz. The revised draft of the Merger Agreement provided for, among other things, changes to the additional closing conditions in favor of XL, certain additional closing conditions to the benefit of Pivotal and limits on the exception to the interim operating covenants for actions taken in response to the COVID-19 pandemic to specifically enumerated items in the interim operating covenants, such as sales of assets, modifying contracts, and capital expenditures.

From August 21, 2020 to August 28, 2020, representatives of Morrison & Foerster and Mintz, together with Graubard and Pivotal’s and XL’s respective Delaware legal counsel, held a series of additional telephone conference calls to discuss the draft Merger Agreement, including, among other things, the treatment of XL’s different classes of equity and debt securities, the contemplated PIPE Transaction and the closing conditions.

On August 24, 2020, Mintz circulated a further revised draft of the Merger Agreement to Morrison & Foerster, and Morrison & Foerster circulated an initial draft of the Support Agreement to be entered into by certain officers, directors and 5% or greater holders of XL’s stock, to Mintz. The revised draft of the Merger Agreement provided for, among other things, the assumption of XL’s options and warrants by Pivotal, the conversion of XL’s convertible promissory notes into shares of common stock immediately prior to the Merger and certain changes to the closing conditions.

On August 28, 2020, Morrison & Foerster circulated a further revised draft of the Merger Agreement and initial drafts of certain additional ancillary documents, including the Lock-Up Agreement setting forth the lock-up restrictions to be applicable to certain Company stockholders and Pivotal’s initial stockholders and the Registration Rights Agreement providing certain SEC registration rights to such stockholders, to Mintz. The revised draft of the Merger Agreement provided for, among other things, certain clarifying changes to the treatment of XL’s options, warrants and convertible promissory notes and certain changes to the closing conditions. Also on August 28, 2020, Mintz circulated a revised draft of the form of Subscription Agreement to Morrison & Foerster.

On August 30, 2020, Mintz circulated a further revised draft of the Merger Agreement to Morrison & Foerster. The revised draft of the Merger Agreement provided for, among other things, certain clarifying changes to the treatment of XL’s options and certain changes to the closing conditions.

On August 31, 2020, Mintz circulated revised drafts of certain ancillary documents, including the Support Agreement, the Lock-Up Agreement and the Registration Rights Agreement, to Mintz.

On September 2, 2020 and September 3, 2020, Morrison & Foerster and Mintz exchanged further revised drafts of the Merger Agreement and certain ancillary documents, including the Support Agreement, the Lock-Up Agreement and the Registration Rights Agreement. In connection with such revised drafts, Morrison & Foerster and Mintz held additional telephone conference calls to discuss, among other things, the Support Agreements and the specific stockholders to be party thereto in light of existing SEC guidance, certain exceptions to be included in the Lock-Up Agreement and the composition of the initial post-merger board of directors of Pivotal and

 

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exchange their respective clients’ views regarding the identity of the directors of Pivotal who would continue on to serve on the board of directors of the combined company. As a result of these discussions, it was determined that Sarah Sclarsic would serve as a Class A director, Mr. Griffin would serve as a Class B director and Mr. Ledecky would serve as a Class C director. The continued involvement of Ms. Sclarsic, Mr. Griffin and Mr. Ledecky was based in part on their extensive relationships with individuals and companies that might be potential customers or acquisition candidates for the combined company following closing of the transaction and their past experience as advisors to and investors in growth-stage companies.

On September 9, 2020, Mintz circulated a further revised draft of the Merger Agreement and a draft of the Omnibus Note Amendment providing for the conversion and/or repayment of XL’s outstanding convertible promissory notes to Morrison & Foerster. From September 10, 2020 to September 16, 2020, representatives of Pivotal, XL, Morrison & Foerster, Graubard, Mintz and Marcum held a series of additional telephone conference calls to discuss and finalize the Merger Agreement, the Omnibus Note Amendment, the Support Agreements, the Lock-Up Agreement, the Registration Rights Agreement and the specific registration rights to be provided therein and the investor presentation to be disseminated on the date of the announcement of the transaction, as well as to discuss outstanding items with respect to the completion of the updated audited financial statements by Marcum. Also from September 10, 2020, Morrison & Foerster and Mintz continued to exchange revised drafts of the Merger Agreement and ancillary documents until all agreements and documents were finalized on September 17, 2020.

From September 15 until September 17, 2020, representatives of Morrison & Foerster continued to negotiate the terms of the contemplated PIPE Transaction with potential PIPE investors, including, among other things, the conditions to the closing, the registration rights granted to the investors pursuant to the proposed Subscription Agreements, representations of the investors in the PIPE Transaction and the rights of the investors in the PIPE Transaction to terminate the Subscription Agreement under certain circumstances. During this period, Morrison & Foerster exchanged revised drafts of the Subscription Agreements with certain potential investors and their respective advisors until the Subscription Agreements were finalized with each investor on the evening of September 17, 2020. In light of increased demand by investors interested in participating in the PIPE Transaction, representatives of Pivotal, BTIG, PJT and Morrison & Foerster discussed and agreed to increase the size of the PIPE Transaction to an aggregate amount of $150,000,000 from the originally anticipated size of $100,000,000.

On September 15, 2020, the board of directors of XL approved the Merger Agreement and the transactions contemplated thereby, subject to final negotiations and modifications.

On September 16, 2020, Pivotal’s board of directors met via video conference. The entire Pivotal board of directors was present at the meeting. Also participating by invitation were James Brady, the chief financial officer of Pivotal, Mr. Racz, representatives of Morrison & Foerster and Graubard, and Mr. Hynes and Mr. Kazarinoff, who were present only when making a presentation to the Pivotal board of directors relating to XL’s business. The meeting began with such presentation, after which Mr. Hynes and Mr. Kazarinoff were excused from the meeting and the Pivotal board of directors began its deliberations. At the meeting, with the entire board of directors present, Mr. Ledecky gave an extensive presentation about the proposed transaction, including potential risks relevant to XL’s business, the implied valuation of XL, the pro forma ownership of the post-closing combined company, the fairness to Pivotal and its stockholders of the consideration to be paid by Pivotal in the transaction and the value of XL as a whole being at least equal to 80% of the amount held in Pivotal’s trust account (excluding deferred underwriting commissions). Following such presentation, Pivotal’s board of directors engaged in considerable review and discussion of the transaction, after which Katrina Adams, one of Pivotal’s directors, left the meeting due to pre-existing obligations. Representatives of Morrison & Foerster then provided an overview to Pivotal’s board of the directors with respect to their fiduciary duties under Delaware law and the terms of the Merger Agreement and the ancillary documents and responded to questions from the directors on the terms of the Merger Agreement and the ancillary documents. Representatives of Morrison & Foerster also reviewed the matters discussed with the board of directors, including the terms of the

 

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Merger Agreement and ancillary documents, with Ms. Adams and made themselves available for further discussion with the other directors following the meeting.

On September 17, 2020, in consideration of all the factors discussed at various meetings and discussions, Pivotal’s board of directors unanimously declared the Merger Agreement, the Business Combination, the PIPE Transaction and the other transactions contemplated by the Merger Agreement were advisable and in the best interests of Pivotal and its stockholders, and approved the form, terms and provisions of, and the transactions contemplated by, including the matters to be submitted to votes of Pivotal’s stockholders, and authorized Pivotal to enter into the Merger Agreement and the related transaction documentation. In addition, the audit committee of Pivotal’s board of directors, which is comprised entirely of independent directors (in accordance with the listing standards of the NYSE) unanimously approved the investment by MGG in the PIPE Transaction as a related-party transaction.

The Merger Agreement, the Subscription Agreements and other related transaction agreements were signed on September 17, 2020. Prior to the market open on September 18, 2020, Pivotal and XL jointly issued a press release announcing the signing of the Merger Agreement, and Pivotal filed a Current Report on Form 8-K announcing the execution of the Merger Agreement and disclosing the material terms of the Merger Agreement in detail. The investor presentation, investor call script and press release announcing the signing of the Merger Agreement were furnished as exhibits to such Current Report on Form 8-K.

The parties have continued and expect to continue regular discussions in connection with, and to facilitate, the closing.

Pivotal’s Board of Directors’ Reasons for Approval of the Business Combination

In evaluating the Business Combination, Pivotal’s board of directors consulted with Pivotal’s management and legal and financial advisors. Pivotal’s board of directors reviewed various industry and financial data in order to determine that the consideration to be paid was reasonable and that the Business Combination was in the best interests of Pivotal’s stockholders. The financial data reviewed included the historical and projected consolidated financial statements of XL, comparable publicly traded company analyses prepared by management and an analysis of pro forma capital structure and trading multiples prepared by management and Pivotal’s advisors.

Pivotal’s management conducted a due diligence review of XL that included an industry analysis, an analysis of the existing business model of XL and historical and projected financial results. Pivotal’s management, including its directors and advisors, has many years of experience in both operational management and investment and financial management and analysis and, in the opinion of Pivotal’s board of directors, was suitably qualified to conduct the due diligence and other investigations and analyses required in connection with the search for a business combination partner. A detailed description of the experience of Pivotal’s executive officers and directors is included in the section of this proxy statement/prospectus entitled “Other Information Related to Pivotal—Directors and Executive Officers.”

In reaching its unanimous resolution (i) that the terms and conditions of the Merger Agreement, including the proposed Business Combination, are advisable, fair to and in the best interests of Pivotal and its stockholders and (ii) to recommend that stockholders adopt and approve the Merger Agreement and approve the Merger contemplated therein, Pivotal’s board of directors considered a range of factors, including but not limited to, the factors discussed below. In light of the number and wide variety of factors, Pivotal’s board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its determination. Pivotal’s board of directors viewed its position as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors. This explanation of Pivotal’s reasons for the Business Combination and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the section of this proxy statement/prospectus entitled “Forward-Looking Statements.”

 

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In considering the Business Combination, Pivotal’s board of directors gave considerable weight to the following factors:

 

   

Unique Market Position. XL is well-positioned to take advantage of the dramatic shift toward fleet electrification expected over the next two decades and is currently delivering significant revenue compared to its competitors in a fragmented industry;

 

   

Scalable Business Model. XL has developed a scalable, asset-light business model that leverages the existing installation capacity of the industry and provides flexibility to XL’s continued growth;

 

   

Existing Customer and Upfitter Relationships. XL has built a base of over 200 existing customers and a significant network of upfitter partners;

 

   

Experienced Leadership Team with a Proven Track Record. XL is led by an experienced management team in XL’s industry;

 

   

Platform for Future Acquisitions and Expansion. A public company status, combined with the capital to be provided from the PIPE and possibly from Pivotal’s trust, is expected to provide XL with an optimal platform for potential future acquisitions and expanding its current offerings;

 

   

Commitment of Current Stockholders. Certain of XL’s current securityholders holding an aggregate of 53,998,715 shares of common stock of XL on an as converted basis and including shares of common stock of XL issuable in connection with the conversion of convertible notes, which is expected to occur immediately prior to the closing of the Business Combination (which will represent approximately 40,928,099 shares of Pivotal’s Class A common stock to be issued in connection with the closing of the Business Combination assuming the estimated Exchange Ratio of approximately 0.758) have agreed to enter into the Lock-up Agreement pursuant to which they agreed to retain 100% of the shares of Pivotal Class A common stock they receive in the Business Combination for 12 months following the Merger, subject to early termination of such restrictions under certain circumstances (see “The Business Combination Proposal—Sale Restrictions”), which the Pivotal board believed reflects the XL stockholders’ belief in and commitment to the continued growth prospects of the combined company;

 

   

Attractive Valuation. Pivotal’s board of directors believes XL’s implied valuation following the Business Combination relative to the current valuations experienced by comparable publicly traded companies in the electric vehicle sector is favorable for Pivotal;

 

   

Due Diligence. Pivotal’s due diligence examinations of XL and discussions with XL’s management and financial and legal advisors;

 

   

Other Alternatives. Pivotal’s board of directors believes, after a thorough review of other business combination opportunities reasonably available to Pivotal, that the Merger represents the best potential business combination for Pivotal and the most attractive opportunity for Pivotal based upon the process utilized to evaluate and assess other potential combination targets, and Pivotal’s board of directors’ belief that such process has not presented a better alternative; and

 

   

Negotiated Transaction. The financial and other terms of the Merger Agreement and the fact that such terms and conditions are reasonable and were the product of arm’s length negotiations between Pivotal and XL.

Pivotal’s board of directors also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination, including, but not limited to, the following:

 

   

Systems Update. The need to update XL’s financial systems and operations necessary for a public company.

 

   

Competition. Competition in XL’s industry is intense, which may cause reductions in the price XL can charge for its products and services, thereby potentially lowering XL’s profits;

 

   

Loss of Key Personnel. Key personnel in XL’s industry is vital and competition for such personnel is intense. The loss of any key personnel could be detrimental to XL’s operations;

 

   

Macroeconomic Risks. Macroeconomic uncertainty and the effects it could have on the combined company’s revenues;

 

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Benefits Not Achieved. The risk that the potential benefits of the Merger may not be fully achieved or may not be achieved within the expected timeframe;

 

   

Pivotal Stockholders Receiving Minority Position. The fact that existing Pivotal stockholders will hold a minority position in the combined company; and

 

   

Other Risks. Various other risks associated with XL’s business, as described in the section entitled “Risk Factors” appearing elsewhere in this proxy statement/prospectus.

Pivotal’s board of directors concluded that the potential benefits that it expected Pivotal and its stockholders to achieve as a result of the Business Combination outweighed the potentially negative factors associated with the Business Combination. Accordingly, Pivotal’s board of directors unanimously determined that the Merger Agreement and the Merger contemplated therein were advisable, fair to and in the best interests of Pivotal and its stockholders.

Certain Forecasted Financial Information for XL

XL provided Pivotal with its internally prepared forecasts, as described below. These forecasts were prepared by XL solely for internal use, including capital budgeting and other management purposes, are subjective in many respects and are therefore susceptible to varying interpretations and the need for periodic revision based on actual experience and business developments, and were not intended for third-party use, including by investors or holders. You are cautioned not to rely on the forecasts in making a decision regarding the Business Combination, as the forecasts may be materially different than actual results.

The forecasts are based on information provided to Pivotal’s board of directors prior to meeting at which it approved the Merger Agreement and the Business Combination, and reflect numerous assumptions, including assumptions with respect to general business, economic, market, regulatory and financial conditions and various other factors, all of which are difficult to predict and many of which are beyond XL’s control, such as the risks and uncertainties described in the section entitled “Risk Factors” appearing elsewhere in this proxy statement/prospectus.

XL’s management used a number of key assumptions in determining its financial projections. Projected revenue is based on a variety of operational assumptions, including the number of XL hybrid electric, plug-in hybrid electric, electric, and fuel cell electric systems sold, and the average sales price per system. Projected revenue also assumes system sales to international customers and revenue from commissions and services, with both revenue streams commencing in 2021 based on a percentage of forecasted systems sold. In arriving at XL’s projected revenues for 2021, XL management estimated the various drivers of total projected revenues to be 72.5% hybrid system sales, 23.9% plug-in hybrid system sales, 2.4% International sales, and 1.2% from service revenue and commissions. In arriving at XL’s projected revenues for 2024, XL management estimated the various drivers of total projected revenues to be 18% hybrid system sales, 21% plug-in hybrid system sales, 12% plug-in hybrid Class 7 and 8 system sales, 11% XL Electric Class 4-6 sales, 19% XL Hydrogen Fuel Cell Electric sales, 16% international system sales and 3% service revenue and commissions. Underlying XL’s revenue forecasts are management’s assessment of the potential market demand for its fleet electrification solutions, including the increasing market acceptance of electric and hybrid-electric vehicles by commercial fleet customers and the unique attributes and services it intends to incorporate into its offerings.

Projected gross profit is driven by assumptions regarding the expected cost of XL’s electric powertrain solutions, including material, labor and manufacturing overhead, freight, service and warranty costs. Other key assumptions impacting profitability projections include headcount and other selling, general and administrative (“SG&A”) and research and development expenses. While SG&A expenses may increase in absolute dollars as XL grows, such expenses are expected to represent a smaller percentage of revenue contributing to improvements in EBITDA margin in future years. In addition, XL’s forecasts reflect anticipated costs based on its asset-light model utilizing well-established third-party manufacturing and installation partners.

 

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Although the assumptions and estimates on which the forecasts for revenue and costs are based are believed by XL’s management to be reasonable and based on the best then-currently available information, the financial forecasts are forward-looking statements that are based on assumptions that are inherently subject to significant uncertainties and contingencies, many of which are beyond XL’s control. While all forecasts are necessarily speculative, XL believes 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 forecasted results, and actual results may be materially greater or materially less than those contained in the forecasts. The inclusion of the forecasted financial information in this proxy statement/prospectus should not be regarded as an indication that XL, Pivotal or their respective representatives considered or consider the forecasts to be a reliable prediction of future events, and reliance should not be placed on the forecasts.

The forecasts were requested by, and disclosed to, Pivotal for use as a component in its overall evaluation of XL, and are included elsewhere in this proxy statement/prospectus on that account. XL has not warranted the accuracy, reliability, appropriateness or completeness of the forecasts to anyone, including to Pivotal. Neither XL’s management nor any of its representatives has made or makes any representation to any person regarding the ultimate performance of XL compared to the information contained in the forecasts, and none of them intends to or undertakes any obligation to update or otherwise revise the forecasts to reflect circumstances existing after the date when made or to reflect the occurrence of future events in the event that any or all of the assumptions underlying the forecasts are shown to be in error. Accordingly, they should not be looked upon as “guidance” of any sort. XL will not refer back to these forecasts in its future periodic reports filed under the Exchange Act.

XL does not as a matter of course make public projections as to future sales, earnings or other results. However, XL’s management has prepared the prospective financial information set forth below to present the key elements of the forecasts provided to Pivotal. The accompanying prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of XL’s management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management’s knowledge and belief, the expected course of action and the expected future financial performance of XL. However, this information does not reflect statements of fact and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement/prospectus are cautioned not to place undue reliance on the prospective financial information. Neither XL’s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the projected financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the projected financial information.

The key elements of the forecasts provided to Pivotal, which assumes accelerating sales of XL’s existing Class 2-6 hybrid electric vehicle and plug-in hybrid electric vehicle solutions bolstered by the commencement of sales of XL’s all-electric solutions for Class 4-6 vehicles and xEV solutions for Class 7-8 vehicles in 2022, are summarized in the table below:

Key Financial Metrics:

 

     Forecast  
     Year Ended December 31,  
     2020E     2021E     2022E      2023E      2024E  
     (in millions)  

Total Revenue

   $ 21     $ 75     $ 281      $ 648      $ 1,377  

Gross Profit

     2       17       69        158        340  

EBITDA

     (10     (15     31        117        308  

 

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XL defines EBITDA as earnings before interest, taxes, depreciation and amortization. EBITDA, a non-GAAP measure, is an addition to, and not a substitute for or superior to, measure of financial performance prepared in accordance with U.S. GAAP and should not be considered as an alternative to net income, operating income or any other performance measure derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of liquidity.

Financial measures provided to a financial advisor in connection with a business combination transaction are excluded from the definition of non-GAAP financial measures and therefore are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a U.S. GAAP financial measure. Accordingly, neither Pivotal nor XL has provided a reconciliation of the EBITDA to net income, the most directly comparable financial measure prepared in accordance with U.S. GAAP.

This information should be read in conjunction with “XL Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as the audited financial statements of XL included elsewhere in this proxy statement/prospectus.

Key Non-Financial Metrics:

 

     Forecast  
     Year Ended December 31,  
     2020E      2021E      2022E      2023E      2024E  

Class 2-6 hybrid electric vehicle & plug-in hybrid electric systems sold (units)

     1,277        4,950        16,830        29,651        47,754  

Class 4-6 XL EV systems sold (units)

     —          —          306        1,561        2,547  

Class 7-8 XL xEV systems sold (units)

     —          —          158        1,125        6,063  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total vehicles sold (units)

     1,277        4,950        17,294        32,337        56,364  

Satisfaction of 80% Test

It is a requirement under Pivotal’s current amended and restated certificate of incorporation that any business acquired by Pivotal have a fair market value equal to at least 80% of the balance of the funds in the trust account (excluding the deferred underwriting commissions and taxes payable) at the time of the execution of a definitive agreement for an initial business combination. The balance of the funds in Pivotal’s trust account (excluding deferred underwriting commissions and taxes payable) at the time of the execution of the Merger Agreement with XL was approximately $223 million. In determining whether the 80% requirement was met, rather than relying on any one factor, Pivotal’s board of directors concluded that it was appropriate to base such valuation on a number of qualitative factors, such as management strength and depth, competitive positioning, customer relationships and technical skills, as well as quantitative factors, such as the anticipated implied enterprise value of the combined company being approximately $1 billion with no material debt expected to be outstanding, Pivotal’s assessment that XL’s valuation was attractive compared to its competitive peers, the historical performance of XL and the potential for future growth in revenues and profits of XL and a $220 million 12-month sales pipeline. Based on the qualitative and quantitative information used to approve the Business Combination described herein, Pivotal’s board of directors determined that the foregoing 80% fair market value requirement was met. Pivotal’s board of directors believes that the financial skills and background of its members qualify it to conclude that the acquisition met the 80% requirement.

Interests of the Sponsor and Pivotal’s Directors and Officers in the Business Combination

In considering the recommendation of Pivotal’s board of directors to vote in favor of approval of the business combination proposal, the PIPE proposal, the charter proposals and the other proposals, stockholders should keep

 

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in mind that the Sponsor and Pivotal’s directors and executive officers have interests in such proposals that are different from, or in addition to, those of Pivotal’s stockholders generally. In particular:

 

   

If the Business Combination with XL or another business combination is not consummated by January 16, 2021 (or such later date as may be approved by Pivotal’s stockholders), Pivotal will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, the 5,750,000 sponsor shares held by the Sponsor and Pivotal’s directors and officers, which were acquired for an aggregate purchase price of $25,000 prior to Pivotal’s initial public offering, would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such shares. On the other hand, if the Merger is consummated, each outstanding sponsor share will convert into one share of Pivotal’s Class A common stock at the closing. Such shares had an aggregate market value of $92,000,00 based upon the closing price of $16.00 per share on NYSE on December 7, 2020.

 

   

The Sponsor, which is affiliated with certain of Pivotal’s directors and officers, purchased an aggregate of 4,233,333 private warrants from Pivotal for an aggregate purchase price of approximately $6.35 million (or $1.50 per warrant). These purchases took place on a private placement basis simultaneously with the consummation of Pivotal’s initial public offering. All of the proceeds Pivotal received from these purchases were placed in the trust account. Such warrants had an aggregate market value of $17,462,499 based upon the closing price of $4.125 per warrant on NYSE on December 7, 2020. The private warrants will become worthless if Pivotal does not consummate a business combination by January 16, 2021 (or such later date as may be approved by Pivotal stockholders in an amendment to its amended and restated certificate of incorporation).

 

   

MGG, which is a managing member of the Sponsor, and of which Kevin Griffin, one of Pivotal’s directors, is the Chief Executive Officer and Chief Investment Officer, has subscribed for shares of Pivotal’s Class A common stock in connection with the PIPE Transaction. MGG has committed to fund $6.3 million of the PIPE Transaction, for which it will receive 630,000 shares of Pivotal’s Class A common stock. Accordingly, MGG may acquire this interest in Pivotal at a discount to the price paid by stockholders of Pivotal who acquire their shares in the after-market. Such shares would have had an aggregate market value of $10,080,000 based upon the closing price of $16.00 per share on NYSE on December 7, 2020.

 

   

If Pivotal is unable to complete a business combination within the required time period, the Sponsor will be personally liable under certain circumstances described herein to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Pivotal for services rendered or contracted for or products sold to Pivotal. If Pivotal consummates a business combination, on the other hand, Pivotal will be liable for all such claims.

 

   

The Sponsor and Pivotal’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on Pivotal’s behalf, such as identifying and investigating possible business targets and business combinations. However, if Pivotal fails to consummate a business combination within the required period, they will not have any claim against the trust account for reimbursement. Accordingly, Pivotal may not be able to reimburse these expenses if the Business Combination with XL or another business combination is not completed by January 16, 2021 (or such later date as may be approved by Pivotal stockholders in an amendment to its amended and restated certificate of incorporation). As of the record date, the Sponsor and Pivotal’s officers and directors and their affiliates had incurred approximately $237,000 of unpaid reimbursable expenses.

 

   

It is currently contemplated that Jonathan J. Ledecky, Kevin Griffin and Sarah Sclarsic will be directors of Pivotal after the closing of the Business Combination (assuming that the director election proposal is approved as described in this proxy statement/prospectus). As such, in the future, each will receive any

 

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cash fees, stock options or stock awards that the Pivotal board of directors determines to pay to its non-executive directors.

 

   

The Merger Agreement provides for the continued indemnification of Pivotal’s current directors and officers and the continuation of directors and officers liability insurance covering Pivotal’s current directors and officers.

 

   

Pivotal’s officers and directors (or their affiliates) may make loans from time to time to Pivotal to fund certain capital requirements. As of the date of this proxy statement/prospectus, no such loans have been made, but loans may be made after the date of this proxy statement/prospectus. If the Business Combination is not consummated, the loans will not be repaid and will be forgiven except to the extent there are funds available to Pivotal outside of the trust account.

Recommendation of Pivotal’s Board of Directors

After careful consideration of the matters described above, particularly XL’s position in its industry, potential for growth and profitability, the experience of XL’s management and XL’s competitive positioning, its customer relationships and technical skills, Pivotal’s board determined unanimously that each of the business combination proposal and the other proposals to be presented at the annual meeting are fair to and in the best interest of Pivotal’s stockholders is fair to and in the best interests of Pivotal and its stockholders. Pivotal’s board of directors has approved and declared advisable and unanimously recommend that you vote or give instructions to vote “FOR” each of these proposals and “FOR” each of nine director nominees identified in this proxy statement/prospectus to serve as directors of the combined company.

The foregoing discussion of the information and factors considered by Pivotal’s board of directors is not meant to be exhaustive, but includes the material information and factors considered by Pivotal’s board of directors.

Material U.S. Federal Income Tax Consequences of the Merger

The following section is a summary of the material U.S. federal income tax consequences for (i) holders of XL Fleet common stock who exchange shares of XL Fleet common stock for Pivotal common stock of the Merger and (ii) holders of Pivotal common stock and warrants, including holders of Pivotal common stock that elect to have their common stock redeemed for cash. The discussion of the material U.S. federal income tax consequences contained in this proxy statement/prospectus is intended to provide only a general discussion and is not a complete analysis or description of all potential U.S. federal income tax consequences of the Merger.

This discussion addresses only those holders that hold their common stock or warrants as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all the U.S. federal income tax consequences that may be relevant to holders in light of their individual circumstances (including consequences under the alternative minimum tax, the Medicare tax on net investment income, and consequences under Section 451(b) of the Code) and does not address any U.S. federal non-income tax (such as the estate or gift tax), state, local, non-U.S. or other tax laws. This discussion also does not address all aspects of U.S. federal income taxation that may be relevant to holders that are subject to special rules, including (but not limited to):

 

   

financial institutions, insurance companies, mutual funds, real estate investment trusts, and regulated investment companies;

 

   

investors in pass-through entities (such as partnerships, S corporations and disregarded entities for U.S. federal income tax purposes);

 

   

tax-exempt organizations;

 

   

brokers or dealers in securities or currencies;

 

   

traders in securities that elect to use a mark-to-market method of accounting;

 

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persons that hold common stock as part of a straddle, hedge, constructive sale or conversion transaction, or those that purchased or sell their common stock as part of a wash sale;

 

   

Non-U.S. holders (as defined below, and except as otherwise discussed below);

 

   

certain expatriates, former citizens of, or long-term residents of the United States, or persons that have a functional currency other than the U.S. dollar;

 

   

persons that own (or are treated as owning) 5% or more of Pivotal’s or of XL Fleet’s common stock;

 

   

persons who exercise redemption rights but continue to own, actually or constructively, Pivotal common stock following the Merger;

 

   

persons who hold or receive Pivotal common stock as compensation, through a tax-qualified retirement plan or through the exercise of a warrant or conversion rights under convertible instruments;

 

   

persons who hold shares of common stock that may constitute “qualified small business stock” under Section 1202 of the Code or as “Section 1244 stock” for purposes of Section 1244 of the Code;

 

   

persons who acquired common stock in a transaction subject to the gain rollover provisions of Section 1045 of the Code; and

 

   

persons who are making charitable contributions of common stock in connection with the Merger.

This discussion is based on the Code, applicable U.S. Treasury Regulations thereunder, published administrative rulings and court decisions, all as currently in effect as of the date hereof, and all of which are subject to change, possibly with retroactive effect. Any such change could affect the continuing validity of this discussion. Tax considerations under state, local and foreign laws, or federal laws other than those pertaining to the income tax (including the impact of the Medicare contribution tax on net investment income) are not addressed. Except as otherwise discussed, this discussion also does not address the tax consequences of transactions occurring prior to, concurrently with or after the Merger (whether or not such transactions are undertaken in connection with the Merger), including, without limitation, the exercise of stock options or warrants in anticipation of the Merger.

For purposes of this discussion, a U.S. holder is a beneficial owner of common stock or warrants that is any of the following for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation, including any entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

   

an estate if its income is subject to U.S. federal income taxation regardless of its source; or

 

   

a trust if (a) a U.S. court can exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or (b) it has in effect a valid election under applicable U.S. Treasury Regulations to be treated as a U.S. person.

For purposes of this discussion, a “Non-U.S. holder” is a beneficial owner of common stock or warrants who is neither a U.S. holder nor an entity that is treated as a partnership for U.S. federal income tax purposes.

If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Partners of a partnership holding such common stock, should consult their own tax advisor regarding the tax consequences of the Merger.

THE FOLLOWING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL OF THE POTENTIAL TAX CONSEQUENCES OF THE MERGER AND EXERCISE

 

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OF CONVERSION RIGHTS. ALL HOLDERS OF PIVOTAL AND XL FLEET COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS AND THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

Tax Consequences of the Merger to Holders of XL Fleet Common Stock if the Merger Qualifies as a Reorganization

It is the opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to XL Fleet, and of Morrison & Foerster LLP, counsel to Pivotal, that, for U.S. federal income tax purposes, the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and that the tax consequences will be as set forth in this section entitled “Material U.S. Federal Income Tax Consequences of the Merger.” In the Merger Agreement, each of Pivotal, Merger Sub and XL Fleet agrees not to take any action or fail to take any action which 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, and each of Pivotal and XL Fleet has agreed to provide a customary tax representation letter in the form set forth in exhibits attached to the Merger Agreement, dated as of the closing date of the Merger, containing representations reasonably necessary to enable counsel to render the tax opinions described herein. Pivotal and XL Fleet have also agreed to report the Merger on all tax returns in a manner consistent with such tax treatment, unless otherwise required by law. Pivotal and XL Fleet have agreed to use best efforts to cause each party’s tax counsel to deliver a tax opinion, dated as of the closing date of the Merger, to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. However, the obligations of Pivotal and XL Fleet to complete the Merger are not conditioned on the receipt of such tax opinions at Closing and the Merger will occur even if it does not so qualify. Any tax opinion delivered will be based on customary assumptions and representations made, as well as certain covenants and undertakings, by Pivotal, Merger Sub and XL Fleet.

An opinion of counsel is not binding on the Internal Revenue Service (the “IRS”) or any court, and neither Pivotal nor XL Fleet intends to request a ruling from the IRS regarding the U.S. federal income tax consequences of the Merger. Consequently, no assurance can be given that the IRS will not assert, or that a court would not sustain, a position contrary to the conclusions reflected in the opinion or any of those set forth below. Accordingly, each holder is urged to consult its tax advisor with respect to the particular tax consequences of the Merger to such holder.

Assuming that the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, the U.S. federal income tax consequences of the Merger to U.S. holders of XL Fleet common stock are as follows:

 

   

a U.S. holder of XL Fleet common stock will not recognize any gain or loss realized on the exchange of shares of XL Fleet common stock for shares of Pivotal common stock;

 

   

the aggregate tax basis of the Pivotal common stock received in the Merger will be the same as the aggregate tax basis of the XL Fleet common stock surrendered in exchange for the Pivotal common stock; and

 

   

the holding period of Pivotal common stock received in exchange for shares of XL Fleet common stock will include the holding period of the XL Fleet common stock surrendered in exchange for the Pivotal common stock.

If a U.S. holder exchanges more than one “block” of XL Fleet common stock (that is, groups of XL Fleet common stock that the U.S. holder acquired at different times or at different prices), tax basis in, and the holding period of, the XL Fleet common stock exchanged for Pivotal common stock in accordance with the preceding rules will be determined separately with respect to each block of such XL Fleet common stock.

 

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As provided in U.S. Treasury Regulations Section 1.368-3(d), each U.S. holder who receives shares of Pivotal common stock in the Merger is required to retain permanent records pertaining to the Merger, and make such records available to any authorized IRS officers and employees. Additional information reporting requirements may apply to certain U.S. holders. U.S. holders are urged to consult their tax advisors as to the potential application of information reporting requirements.

Assuming that the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, a Non-U.S. holder of XL Fleet common stock who exchanges XL Fleet common stock for Pivotal common stock is generally expected to be treated in the same manner as a U.S. holder (except as provided below).

Tax Consequences of the Merger to Holders of XL Fleet Common Stock if the Merger Fails to Qualify as a Reorganization

If any requirement for the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code is not satisfied, a U.S. holder of XL Fleet common stock generally would recognize gain or loss for U.S. federal income tax purposes on each share of XL Fleet common stock surrendered in the Merger in an amount equal to the difference between (1) the fair market value of the Merger consideration received in exchange for such surrendered share upon completion of the Merger and (2) the holder’s basis in the share of XL Fleet common stock surrendered. Gain or loss must be calculated separately for each block of XL Fleet common stock exchanged by such U.S. holder if such blocks were acquired at different times or for different prices. Any gain or loss recognized generally would be long-term capital gain or loss if the U.S. holder’s holding period in a particular block of XL Fleet common stock exceeds one year at the effective time. Long-term capital gain of non-corporate U.S. holders (including individuals) generally is taxed at reduced U.S. federal income tax rates. The deductibility of capital losses is subject to limitations. A U.S. holder’s tax basis in shares of Pivotal common stock received in the Merger would be equal to the fair market value thereof as of the effective time, and such U.S. holder’s holding period in such shares would begin on the day following the Merger.

Subject to the discussion of FATCA below, if the Merger does not qualify as a “reorganization” under Section 368(a) of the Code, a Non-U.S. holder is not generally expected to be subject to U.S. federal income tax on any gain recognized as a result of the Merger unless: (i) any gain recognized in the Merger is treated as effectively connected with a trade or business in the United States or (ii) such holder is an individual who is present in the United States for 183 days or more during the taxable year of the exchange and certain other requirements are met.

Gain described in clause (i) will generally be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items. Gain described in clause (ii) generally will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. holder, provided the Non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.

Tax Considerations for the Holders of Pivotal Common Stock and Warrants

Pursuant to the Merger Agreement, Merger Sub will merge with and into XL Fleet, with XL Fleet surviving as a wholly owned subsidiary of Pivotal and the securityholders of XL Fleet becoming securityholders of Pivotal.

No gain or loss is expected to be recognized for U.S. federal income tax purposes by Pivotal or by the stockholders of Pivotal (whether such holders are U.S. holders or Non-U.S. holders) if their conversion rights are not exercised. No gain or loss is expected to be recognized for U.S. federal income tax purposes by holders of warrants to acquire Pivotal common stock (whether such holders are U.S. holders or Non-U.S. holders) solely as a result of the Merger.

 

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A stockholder of Pivotal that is a U.S. holder who exercises conversion rights and effects a complete termination of the stockholder’s interest in Pivotal is anticipated to be required to recognize gain or loss upon the exchange of that stockholder’s shares of common stock of Pivotal for cash. Such gain or loss will be measured by the difference between the amount of cash received and the tax basis of that stockholder’s shares of Pivotal common stock. This gain or loss will be long-term capital gain or loss if the holding period for the share of Pivotal common stock is more than one year. Gain and loss recognized on a conversion of Pivotal common stock for cash must generally be determined separately for each block of Pivotal shares (i.e., stock acquired at the same cost in a single transaction).

A stockholder of Pivotal that is a Non-U.S. holder who exercises conversion rights and effects a complete termination of the stockholder’s interest in Pivotal is generally expected to be treated in the same manner as a U.S. stockholder for U.S. federal income tax purposes except that (subject to the discussion of FATCA below) such Non-U.S. holder generally is not expected to be subject to U.S. federal income tax on the conversion unless (i) any gain recognized in the conversion is treated as effectively connected with a trade or business in the United States or (ii) such holder is an individual who is present in the United States for 183 days or more during the taxable year of the exchange and certain other requirements are met.

Gain described in clause (i) will generally be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items. Gain described in clause (ii) is expected to be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. holder, provided the Non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.

Information Reporting and Backup Withholding

Information reporting and backup withholding at the applicable rate (currently 24%) may apply in certain circumstances to the proceeds of the sale or other taxable disposition of Pivotal common stock to holders who exercise conversion rights, or in certain circumstances upon the exchange of XL Fleet common shares for Pivotal common shares (for example, in the event that the Merger does not qualify as a “reorganization” under Section 368(a) of the Code). Backup withholding will not apply, however, to a U.S. holder that furnishes a correct taxpayer identification number and makes other required certifications, or who is otherwise exempt from backup withholding and establishes such exempt status. A Non-U.S. holder generally will not be subject to backup withholding provided that the relevant holder certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or otherwise establishing an exemption. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Additional Withholding Tax on Payments Made to Foreign Accounts

Withholding taxes may be imposed under sections 1471 to 1474 of the Code (such sections commonly referred to as the Foreign Account Tax Compliance Act, or “FATCA”) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on (subject to the proposed U.S. Treasury Regulations discussed below) dividends in respect of, and gross proceeds from the sale or other disposition of securities paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury

 

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requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

Under the applicable U.S. Treasury Regulations and administrative guidance, while withholding under FATCA would have applied to payments of gross proceeds from the sale or other disposition of securities on or after January 1, 2019, recently proposed U.S. Treasury Regulations eliminate FATCA withholding on payments of gross proceeds. Taxpayers generally may rely on these proposed U.S. Treasury Regulations until final U.S. Treasury Regulations are issued.

This discussion in this section, “Material U.S. Federal Income Tax Consequences of the Merger,” is intended to provide only a summary of the material U.S. federal income tax consequences of the Merger. It does not address tax consequences that may vary with, or are contingent on, your individual circumstances. In addition, the discussion does not address any non-income tax or any foreign, state or local tax consequences of the Merger or exercise of conversion rights. Accordingly, you are strongly urged to consult with your tax advisor to determine the particular U.S. federal, state, local or foreign income or other tax consequences to you of the Merger and exercise of conversion rights.

Anticipated Accounting Treatment

The Merger will be accounted for as a reverse merger in accordance with U.S. GAAP. Under this method of accounting, Pivotal will be treated as the “acquired” company for financial reporting purposes. This determination was primarily based on XL comprising the ongoing operations of the combined company, XL senior management comprising the senior management of the combined company, and that the former owners and management of XL will have control of the board of directors of the combined company after the Merger. In accordance with guidance applicable to these circumstances, the Merger will be considered to be a capital transaction in substance. Accordingly, for accounting purposes, the Merger will be treated as the equivalent of XL issuing shares for the net assets of Pivotal, accompanied by a recapitalization. The net assets of Pivotal will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the closing of the Merger will be those of XL.

Regulatory Matters

The Merger is not subject to any additional federal or state regulatory requirement or approval, except for the filings with the State of Delaware necessary to effectuate the Merger and the filing of required notifications and the expiration or termination of the required waiting periods under the HSR Act. On October 14, 2020, the FTC notified the parties that their request for early termination of the waiting period under the HSR Act had been granted.

Required Vote

The approval of the business combination proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Pivotal common stock present and entitled to vote at the annual meeting to approve the Business Combination.

Under Pivotal’s amended and restated certificate of incorporation, the Business Combination may not be consummated if Pivotal has net tangible assets of less than $5,000,001, after taking into account the conversion into cash of all public shares properly demanded to be converted by holders of public shares, the completion of the Business Combination and the completion of the PIPE Transaction. Because the net tangible assets of the combined company will exceed this threshold as a result of the PIPE Transaction, all of the public shares may be

 

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converted and Pivotal can still consummate the Business Combination. However, the combined company must meet certain distribution criteria, including having a minimum of 1,100,000 publicly held shares, in order to be listed on the NYSE, which is a condition to closing the Business Combination.

The approval of the business combination proposal is a condition to the consummation of the Business Combination. If the business combination proposal is not approved, the other proposals (except an adjournment proposal, as described below) will not be presented to the stockholders for a vote.

THE PIVOTAL BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE PIVOTAL STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE BUSINESS COMBINATION PROPOSAL.

 

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THE MERGER AGREEMENT

For a discussion of the structure of the transactions and consideration, see the section entitled “The Business Combination Proposal.” Such discussion and the following summary of other material provisions of the Merger Agreement is qualified by reference to the complete text of the Merger Agreement, a copy of which is attached to this proxy statement/prospectus as Annex A. All stockholders are encouraged to read the Merger Agreement in its entirety for a more complete description of the terms and conditions of the transactions.

Closing and Effective Time of the Business Combination

The closing of the Business Combination will take place no later than the third (3rd) business day following the satisfaction or waiver of the conditions described below (other than those conditions that by their nature are to be satisfied at the closing of the Business Combination, but subject to the satisfaction thereof at such closing),under the subsection entitled “Conditions to the Closing of the Business Combination,” unless the parties to the Merger Agreement agree in writing to another time. The Business Combination is expected to be consummated as soon as practicable after the meeting of Pivotal’s stockholders described in this proxy statement/prospectus.

Representations and Warranties

The Merger Agreement contains representations and warranties of XL relating, among other things, to proper organization and qualification; subsidiaries; capitalization; the authorization, performance and enforceability against XL of the Merger Agreement; absence of conflicts; required filings, permits, consent, approval or authorization of governmental authorities; compliance with laws, organizational documents and material contracts; financial statements and internal controls; absence of undisclosed liabilities; absence of certain changes or events; litigation; benefit plans; labor matters; restrictions on business activities; assets and real property; tax matters; environmental matters; brokers’ fees and third-party expenses; intellectual property matters; material contracts; insurance; transactions with affiliates; board approval; and information disclosed in the proxy statement.

The Merger Agreement contains representations and warranties of each of Pivotal and Merger Sub relating, among other things, to proper organization and qualification; subsidiaries; capitalization; the authorization, performance and enforceability against Pivotal and Merger Sub of the Merger Agreement; absence of conflicts; required filings, permits, consent, approval or authorization of governmental authorities; compliance with laws, organizational documents and material contracts; reports filed with the SEC, financial statements and internal controls, compliance under the Sarbanes-Oxley Act; absence of undisclosed liabilities; absence of certain changes or events; litigation; benefit plans; labor matters; restrictions on business activities; assets and real property; intellectual property matters; tax matters; environmental matters; brokers’ fees; material contracts; insurance; transactions with affiliates; NYSE listing; board approval; trust account; and documents related to the PIPE Transaction.

Covenants

Pivotal and XL have each agreed to take such actions as are necessary, proper or advisable to consummate the transactions set forth in the Merger Agreement. Each of them has also agreed to continue to operate their respective businesses in the ordinary course consistent with past practices prior to the closing of the Business Combination and not to take the following actions, among others, except as permitted by the Merger Agreement or the PIPE Documents, without the prior written consent of the other parties:

 

   

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;

 

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grant any material severance or termination pay to officers or employees not in the ordinary course of business consistent with past practice, except pursuant to applicable law or existing agreements, policies or plans;

 

   

transfer or license to any person or otherwise extend, amend or modify any material rights to 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;

 

   

declare, set aside or pay dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock, 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 (other than such dividends or distributions of a subsidiary of XL to XL or another Company subsidiary);

 

   

purchase, redeem or otherwise acquire, directly or indirectly, any shares of capital stock or other equity securities or ownership interests of XL or Pivotal, except in the case of XL, pursuant to the terms of a Company employee benefit plan or any derivative securities of XL outstanding on the date of the Merger Agreement in accordance with the terms of the Merger Agreement;

 

   

issue, deliver, sell, authorize, pledge, amend, exchange, settle or otherwise encumber any shares of capital stock or other equity securities or ownership interests or any securities convertible into or exchangeable capital stock or other equity securities or ownership interests, or enter into other agreements obligating it to issue equity securities or convertible or exchangeable securities (except with respect to the exercise or settlement of any Company stock options in effect as of the date of the Merger Agreement, grants of any Company stock options in the ordinary course of business consistent with past practice or any securities of XL issuable upon the conversion or exchange of any existing Company securities);

 

   

amend its certificate of incorporation or bylaws in any material respect;

 

   

acquire or agree to acquire, whether by merger, stock or asset acquisition, or other transaction any business, entity 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 Pivotal or XL and its subsidiaries, 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 party’s ability to compete or to offer or sell any products or services;

 

   

sell, lease, license, encumber or otherwise dispose of any material properties or assets, except in the ordinary course of business consistent with past practice, the incurrence of permitted liens as specified in the Merger Agreement, pursuant to existing Company agreements made available to Pivotal and those that are not material, individually or in the aggregate, to the business of Pivotal or XL;

 

   

except incurrences of indebtedness under XL’s existing credit facilities and extensions of credit in the ordinary course with employees and among XL and its subsidiaries, incur any indebtedness for borrowed money or guarantee any such indebtedness of another, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of Pivotal or XL 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;

 

   

except as otherwise required by applicable law or pursuant to an existing plan, policy or agreement of XL or its subsidiaries, or in the ordinary course of business consistent with past practice, (i) adopt or materially amend any employee benefit plan (including any plan that provides for severance), or enter into any employment contract or collective bargaining agreement, (ii) pay any special bonus or special remuneration to any director or employee or (iii) materially increase the salaries, wage rates or fringe benefits (including rights to severance or indemnification) of its directors, officers, employees or consultants;

 

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pay, discharge, settle or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), or litigation other than in the ordinary course of business consistent with past practices or as previously disclosed in such party’s 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 it is a party or beneficiary;

 

   

except in the ordinary course of business consistent with past practices, modify in a manner materially adverse to XL, Pivotal or Merger Sub, as applicable, or terminate (other than in accordance with its terms) certain material contracts, or waive, delay the exercise of, release or assign any material rights or claims thereunder;

 

   

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;

 

   

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;

 

   

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;

 

   

make or rescind tax elections that would be reasonably likely to adversely affect in any material respect the tax liability or 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;

 

   

form or establish a subsidiary except in the ordinary course of business consistent with prior practice;

 

   

permit XL, Pivotal, the Merger Sub or their respective subsidiaries, or administrator of any of their respective employee benefit plans, to exercise discretionary rights under any employee benefit 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 plans, except as permitted in the Merger Agreement;

 

   

make capital expenditures in excess of previously budgeted amounts;

 

   

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 XL to XL or another such subsidiary; or

 

   

agree in writing or otherwise commit to take any of the foregoing actions.

Pursuant to the Merger Agreement, exceptions apply to certain of the foregoing actions by XL and its subsidiaries in connection with the suspension of operations related to the coronavirus (COVID-19) pandemic as are reasonably necessary to (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.

The Merger Agreement also contains additional covenants of the parties, including covenants providing that:

 

   

the parties will maintain confidentiality with respect to nonpublic information exchanged in connection with the Merger Agreement and the negotiations related thereto and provide access to any information concerning the business of a party and its subsidiaries;

 

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the parties will not solicit or enter into discussions or transactions with, or encourage or provide any information to any third party, and to immediately cease all existing discussions or negotiations with any third party, regarding any merger, sale of ownership interests or assets;

 

   

XL will provide periodic financial information to Pivotal through the closing date of the Merger and the audited consolidated financial statements of XL and its subsidiaries for the fiscal years ended December 31, 2019 and 2018, audited by Marcum LLP (or such other nationally recognized audit firm reasonably acceptable to Pivotal);

 

   

Pivotal will prepare, file and distribute the registration statement of which this proxy statement/prospectus forms a part;

 

   

XL will give notice in accordance with Delaware Law and its charter documents seeking stockholder approval of the Merger;

 

   

Pivotal will take all actions necessary so that all directors and officers of Pivotal prior to the closing of the Merger resign, except those as set forth in the Merger Agreement, and increase the number of members of its board of directors to nine (9) and the parties will take all necessary action so that those persons specified in the Merger Agreement or the schedules thereto are appointed to the board of directors;

 

   

the parties will prepare and file any required notification pursuant to the HSR Act;

 

   

the parties will prepare and file Current Reports on Form 8-K and issue joint press releases announcing the execution of the Merger Agreement and closing of the Merger, respectively, and consult with each other before issuing any other press release or public statement with respect to the Business Combination;

 

   

the parties will provide all information necessary in order to prepare, update, amend or supplement, to the extent necessary, this proxy statement/prospectus, Current Reports on Form 8-K, press releases or any other filing, notice or application to governmental entities or third parties in connection with the Merger and the transactions contemplated thereby;

 

   

XL and its affiliates shall not engage in any purchases or sales of Pivotal’s securities prior to the Business Combination without Pivotal’s consent;

 

   

XL and its affiliates will waive their rights to make claims against Pivotal to collect from the trust account any monies that may be owed to them by Pivotal;

 

   

the parties will use reasonable best efforts to obtain the listing for trading on the NYSE of the common stock issued in connection with the Business Combination;

 

   

Pivotal will maintain tail directors’ and officers’ liability insurance policies for a period of six years following the Business Combination;

 

   

the executive officers of XL will repay any amounts owed by them to XL and cause any guaranty made by XL for the benefit of them to be terminated;

 

   

Pivotal will be permitted to borrow funds from its directors, officers and/or stockholders to meet its reasonable capital requirements, with up to $1,500,000 of which borrowings may be convertible into private warrants;

 

   

Pivotal will cause the trust account to be distributed immediately upon consummation of the Business Combination and to pay all liabilities and obligations of Pivotal due or incurred at or prior to the date of closing, including (i) payment to the holders of public shares who elect to convert their shares into cash, (ii) payment of Pivotal’s income and other tax obligations, (iii) repayment of loans and reimbursement of expenses to directors and officers of Pivotal, (iv) payments of deferred underwriting commissions incurred in connection with Pivotal’s initial public offering and (v) payment of third-party transaction costs incurred by Pivotal;

 

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certain stockholders of XL as well as the Sponsor and holders of certain Pivotal warrants will agree to additional lock-up restrictions or enter into the Lock-Up Agreements, as applicable;

 

   

Pivotal shall, if approved by Pivotal’s board of directors after the Merger, engage in a secondary offering of Pivotal common stock held by persons entitled to registration rights;

 

   

at or prior to the closing of the Business Combination, Pivotal will execute and deliver the Registration Rights Agreement and use reasonable best efforts to terminate the existing Pivotal registration rights agreement, among Pivotal and the former Pivotal stockholders thereto;

 

   

the parties shall take any action necessary to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code, including that XL shall deliver tax representation letters to Pivotal’s legal counsel and cause counsel to deliver an opinion to such effect;

 

   

Pivotal shall adopt an equity incentive plan as specified in the Merger Agreement;

 

   

Pivotal shall use commercially reasonable efforts to arrange and consummate the PIPE Transaction, including delivering executed subscription agreements to XL, satisfying any conditions pursuant to the subscription agreements, and taking any other actions necessary to consummate the PIPE Transaction;

 

   

XL shall give notice to XL’s stockholders of a special meeting of stockholders to consider the Merger Agreement, the Merger and the transactions contemplated thereby, send copies of this proxy statement/prospectus and other relevant information to XL’s stockholders, and cause such stockholders to affirmatively vote “For” the Merger and in opposition to any other proposal that could reasonably be expected to delay or impair the consummation of the Merger and execute and deliver any related documentation in support of the Merger;

 

   

XL shall give Pivotal notice of any demands for appraisal received by XL and any withdrawals of such demands and the opportunity to participate in all negotiations and proceedings with respect to such demands and shall not, except with the prior written consent of Pivotal, make any payment with respect to such demands or offer to settle or settle any such demands;

 

   

XL shall either (i) obtain lender consent under the terms of the PPP Loan, by and between XL, as borrower, and Silicon Valley Bank, as lender, to the consummation of the Merger or (ii) repay in full of any outstanding principal and accrued interest under the PPP Loan or, if elected by Pivotal, cooperate with Pivotal to enable Pivotal to repay in full any outstanding principal and accrued interest on the PPP Loan;

 

   

Pivotal will enter into the Support Agreements with certain of XL’s stockholders and deliver a signature to any request for conversion by holders of XL’s Series D preferred stock; and

 

   

the parties will use commercially reasonable efforts to do all things necessary, proper or advisable to consummate and make effective the transactions contemplated by the Merger Agreement, including obtaining all necessary approvals from governmental agencies and other third parties.

Conditions to Closing of the Business Combination

General Conditions

Consummation of the Business Combination is conditioned on approval of the proposals to Pivotal’s stockholders, including the business combination proposal. In addition, the consummation of the Merger is conditioned upon, among other things:

 

   

Pivotal having, either immediately prior to or upon the closing of the Business Combination, at least $5,000,001 of net tangible assets following the exercise by holders of Pivotal’s public shares of their right to convert their public shares into their pro rata share of the trust account;

 

   

all specified waiting periods under the HSR Act having expired;

 

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no statute, rule, regulation, executive order, decree, injunction or other order being in effect or enforced by any governmental entity and which has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger;

 

   

the registration statement of which this proxy statement/prospectus forms a part having become effective in accordance with the provisions of the Securities Act, no stop order having been issued by the SEC which remains in effect with respect to the registration statement, and no proceeding seeking such a stop order having been threatened or initiated by the SEC which remains pending;

 

   

approval of the Business Combination by XL’s stockholders;

 

   

the approval for listing on the NYSE of Pivotal’s common stock comprising the Merger Consideration to be issued; and

 

   

the PIPE Transaction having been completed or completed concurrently with the closing of the Business Combination.

Conditions to Closing of XL

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 agreements and covenants of Pivotal and Merger Sub required by the Merger Agreement to be performed on or prior to the closing of the Merger in all material respects;

 

   

no action, suit or proceeding being pending or threatened by any governmental entity which is reasonably likely to prevent consummation of the transactions contemplated by the Merger Agreement or cause any of the transactions contemplated by the Merger Agreement to be rescinded following consummation, or to materially and adversely affect the title of the shares of Pivotal common stock to be issued in connection with the Merger, and no order, judgment, decree, stipulation or injunction to such effect being in effect;

 

   

no Material Adverse Effect (as defined in the Merger Agreement) with respect to Pivotal having occurred between the date of the Merger Agreement and the closing of the Business Combination;

 

   

Pivotal executing the Registration Rights Agreement;

 

   

the filing of Pivotal’s amended and restated certificate of incorporation with the Secretary of State of the State of Delaware and the adoption of the amended and restated bylaws;

 

   

the resignation of all persons employed by Pivotal, except for those specified in the Merger Agreement or the schedules thereto;

 

   

the termination of the existing registration rights agreement, among Pivotal and the former Pivotal stockholders thereto; and

 

   

executing the Lock-Up Agreement.

Pivotal’s and Merger Sub’s 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 agreements and covenants of XL and its subsidiaries required by the Merger Agreement to be performed on or prior to the closing of the Merger in all material respects;

 

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no action, suit or proceeding being pending or threatened by any governmental entity which is reasonably likely to prevent consummation of the transactions contemplated by the Merger Agreement or cause any of the transactions contemplated by the Merger Agreement to be rescinded following consummation, or to materially and adversely affect the right of the surviving corporation to own, operate or control any of the assets of XL following the Merger, and no order, judgment, decree, stipulation or injunction to such effect being in effect;

 

   

no Material Adverse Effect (as defined in the Merger Agreement) with respect to XL having occurred between the date of the Merger Agreement and the closing of the Business Combination;

 

   

delivery of updated audited financial statements by XL to Pivotal, which must be consistent in all material respects with XL’s existing audited financial statements;

 

   

execution and delivery of the Lock-Up Agreement by XL’s stockholders specified in the Merger Agreement or the schedules thereto;

 

   

termination of certain Company agreements, including XL’s existing stockholders’ agreement, specified in the Merger Agreement or the schedules thereto;

 

   

delivery of a written request for conversion by certain Company stockholders to XL and such other documentation reasonably requested by Pivotal evidencing the conversion of the preferred stock of XL and treatment of derivative securities of XL;

 

   

receipt of lender consent under the terms of the PPP Loan, in connection with the consummation of the Merger or the repayment in full of any outstanding principal and accrued interest under the PPP Loan; and

 

   

the delivery by XL to Pivotal of a certificate that meets the requirements of Treasury Regulations Section 1.1445-2(c)(3) and states that shares of XL are not “ U.S. real property interests” within the meaning of Section 897 of the Code, together with a written authorization for Pivotal to deliver such certification to the IRS on behalf of XL after the closing of the Business Combination and a notice to the IRS in accordance with the provisions of Treasury Regulations Section 1.897-2(h)(2).

Waiver

If permitted under applicable law, Pivotal or XL may waive in writing any inaccuracies in the representations and warranties made to such party contained in the Merger Agreement and waive compliance with any agreements or conditions for the benefit of itself or such party contained in the Merger Agreement.

The existence of the financial and personal interests of Pivotal’s directors may result in a conflict of interest on the part of one or more of them between what he or she may believe is best for Pivotal and what he or she may believe is best for himself in determining whether or not to grant a waiver in a specific situation. See the section entitled “Risk Factors” for a fuller discussion of this and other risks.

Termination

The Merger Agreement may be terminated at any time, but not later than the closing of the Business Combination, as follows:

 

   

by mutual written consent of Pivotal and XL;

 

   

by either Pivotal or XL if the Business Combination is not consummated on or before January 16, 2021 (the “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;

 

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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 representations, warranties, covenants or agreements in any material respect or any has become untrue such that the conditions to the Merger Agreement would not be satisfied as of the time of such breach and such breach is incapable of being cured or is 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 Support Agreements within one (1) day following the execution of the Merger Agreement;

 

   

by Pivotal if XL fails to obtain the requisite approval of its stockholders to the Merger Agreement and the Merger by written consent within ten (10) business days following the approval of this proxy statement/prospectus by the SEC;

 

   

by either Pivotal or XL if, at the special meeting of stockholders, the proposals to stockholders, including the business combination proposal, 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 prior to or upon the closing, following consummation of the Merger, Pivotal will have less than $5,000,001 of net tangible assets following the exercise by the holders of shares of Pivotal common stock issued in Pivotal’s initial public offering of their conversion rights into cash.

Effect of Termination

In the event of proper termination by any of the parties, the Merger Agreement will be of no further force or effect (other than with respect to certain surviving obligations specified in the Merger Agreement), without any liability on the part of any party thereto or its respective affiliates, officers, directors or stockholders, other than liability of any party thereto for any intentional and willful breach of the Merger Agreement by such party occurring prior to such termination.

Fees and Expenses

Except as otherwise set forth in the Merger Agreement, all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such expenses whether or not the transactions are consummated.

Confidentiality; Access to Information

Each party to the Merger Agreement will afford to the other parties and their financial advisors, accountants, counsel and other representatives reasonable access during normal business hours, upon reasonable notice, to all of their respective properties, books, records and personnel 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, as each party may reasonably request and which may be limited in light of the coronavirus (COVID-19) pandemic by orders issued by governmental entities or by a party to the extent such access would jeopardize the health and safety of any employee. The parties agree to maintain in confidence any non-public information received from the other party, and to use such non-public information only for purposes of consummating the transactions contemplated by the Merger Agreement.

Amendments

The Merger Agreement may be amended by the parties thereto at any time prior to the closing of the Business Combination by execution of an instrument in writing signed on behalf of each of the parties.

 

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Governing Law; Consent to Jurisdiction

The Merger Agreement is governed by and construed in accordance with the law of the state of Delaware, regardless of the law that might otherwise govern under applicable principles of the conflicts of laws of Delaware. With respect to disputes related to the Merger Agreement, each party irrevocably consents to the exclusive jurisdiction and venue of the courts of the State of Delaware or the federal courts located in the State of Delaware.

 

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PIVOTAL INVESTMENT CORP. II

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Introduction

The unaudited pro forma condensed combined financial statements (which we refer to as the pro forma financial statements) combine the historical consolidated financial statements of Pivotal and the historical consolidated financial statements of XL to illustrate and give effect to the transaction as a reverse acquisition and recapitalization of XL. Notwithstanding the legal form of the Business Combination pursuant to the Merger Agreement, the Business Combination will be accounted for as a reverse recapitalization in accordance with US GAAP. Under this method of accounting, Pivotal will be treated as the acquired company and XL will be treated as the acquirer for financial statement reporting purposes. The pro forma financial statements were based on and should be read in conjunction with:

 

   

The accompanying notes to the unaudited pro forma financial statements;

 

   

Pivotal’s unaudited financial statements for the three and nine months ended September 30, 2020 and the notes relating thereto, included elsewhere in this proxy statement;

 

   

Pivotal’s audited financial statements as of December 31, 2019 and for the period from March 20, 2019 (inception) through September 30, 2019 and the notes relating thereto, included elsewhere in this proxy statement;

 

   

XL’s unaudited consolidated financial statements for the nine months ended September 30, 2020 and the notes relating thereto included elsewhere in this proxy statement; and

 

   

XL’s audited consolidated financial statements for the year ended December 31, 2019 and the notes relating thereto included elsewhere in this proxy statement.

Pivotal is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the Business Combination and the related transactions.

The following unaudited pro forma condensed combined balance sheet combines the unaudited condensed consolidated historical balance sheet of Pivotal as of September 30, 2020 with the unaudited condensed consolidated historical balance sheet of XL as of September 30, 2020, giving effect to the Business Combination and the related transactions as if they had been consummated as of September 30, 2020.

The following unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 combines the unaudited condensed statement of operations of Pivotal for the nine months ended September 30, 2020 with the unaudited condensed consolidated statement of operations of XL for the nine months ended September 30, 2020, giving effect to the Business Combination and the related transactions as if they had occurred on January 1, 2019.

The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 combines the audited statement of operations of Pivotal as of December 31, 2019 and for the period from March 20, 2019 (inception) through September 30, 2019 with the audited consolidated statement of operations of XL for the year ended December 31, 2019, giving effect to the Business Combination and the related transactions as if they had occurred on January 1, 2019.

The unaudited pro forma condensed combined balance sheet as of September 30, 2020, the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 have been prepared using two different assumptions regarding the number of public shares as to which the Pivotal public stockholders exercise their conversion rights, as follows:

Assuming No Redemption: This presentation assumes that no Pivotal public stockholders seek conversion of their Pivotal public shares into pro rata shares of the trust account;

 

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Assuming Maximum Redemption: For purposes of the pro forma condensed combined balance sheet, this presentation assumes that holders of no more than 21,582,057 public shares of Pivotal exercise their right to have their shares converted into their pro rata share of the trust account. For purposes of the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 and for the year ended December 31, 2019, this presentation assumes that holders of no more than 21,768,560 public shares of Pivotal exercise their right to have their shares converted into their pro rata share of the trust account.

The historical financial information has been adjusted to give effect to the expected events that are related and/or directly attributable to the Business Combination and the related transactions, are factually supportable and are expected to have a continuing impact on the combined results. The adjustments presented in the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the Business Combination and the related transactions.

The historical financial statements of Pivotal and XL have been prepared in accordance with U.S. GAAP.

The historical financial information of Pivotal was derived from the unaudited condensed financial statements of Pivotal for the nine months ended September 30, 2020 and the audited financial statements of Pivotal as of December 31, 2019 and for the period from March 20, 2019 (inception) through September 30, 2019, which are included elsewhere in this proxy statement. The historical financial information of XL was derived from the unaudited condensed consolidated financial statements of XL for the nine months ended September 30, 2020 and the audited consolidated financial statements of XL for the year ended December 31, 2019, included elsewhere in this proxy statement. This information should be read together with Pivotal’s and XL’s financial statements and related notes, “Other Information Related to Pivotal—Pivotal’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “XL’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this proxy statement.

The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience.

The Business Combination has not been consummated as of the date of the preparation of these pro forma financial statements and there can be no assurances that the merger will be consummated. See “Risk Factors” for additional discussion of risk factors associated with the pro forma financial statements.

 

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PIVOTAL INVESTMENT CORP. II

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

as of September 30, 2020

 

    Pivotal
Investment

Corp. II
    XL Hybrids,
Inc.
    Pro Forma Adjustments     Pro Forma As
Adjusted

(assuming
no
redemption)
    Pro Forma Adjustments with
Maximum Conversion
    Pro Forma As
Adjusted

(assuming
maximum
redemption)
 
    Debit     Note     Credit     Note     Debit     Note     Credit     Note  
    Note 1     Note 2                                                              
ASSETS                                                                        

Current assets:

                       

Cash and cash equivalents

  $ 535,515     $ 1,583,000     $ 224,236,222       3       1,793,679       5     $ 342,930,379     $ 8,506,000       12     $ 217,978,057       11     $ 133,458,322  
        144,650,000       10       15,030,679       6         —           —        
            11,250,000       8              

Restricted cash

    —         150,000       —           —           150,000       —           —           150,000  

Accounts receivable, net

    —         6,399,000       —           —           6,399,000       —           —           6,399,000  

Inventory

    —         4,553,000       —           —           4,553,000       —           —           4,553,000  

Prepaid expenses and other current assets

    138,381       145,000       —           138,381       5       145,000       —           —           145,000  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

     

 

 

 

Total current assets

    673,896       12,830,000       368,886,222         28,212,739         354,177,379       8,506,000         217,978,057         144,705,322  

Marketable securities held in Trust Account

    232,286,222       —         —           232,286,222       3       —         —           —           —    

Property and equipment, net

    —         678,000       —           —           678,000       —           —           678,000  

Intangible assets, net

    —         659,000       —           —           659,000       —           —           659,000  

Goodwill

    —         489,000       —           —           489,000               489,000  

Other assets

    —         182,000       —           —           182,000       —           —           182,000  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

     

 

 

 

Total assets

  $ 232,960,118     $ 14,838,000     $ 368,886,222       $ 260,498,961       $ 356,185,379     $ 8,506,000       $ 217,978,057       $ 146,713,322  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

     

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

                       

Current liabilities:

                       

Accounts payable and accrued expenses

  $ 1,922,060     $ 10,686,000     $ 1,922,060       5     $ —         $ 8,406,000     $ —         $ —         $ 8,406,000  
        2,280,000       6       —                  

Accrued offering costs

    10,000       —         10,000       5       —           —         —           —           —    

Revolving line of credit

    —         1,854,000       —           —           1,854,000       —           —           1,854,000  

Current portion of long-term debt

    —         2,801,000       —           —           2,801,000       —           —           2,801,000  

Convertible debt derivative liability

    —         5,914,000       5,914,000       7       —           —         —           —           —    

Subordinated convertible promissory notes

    —         19,219,000       7,969,000       7       —           —                 —    
        11,250,000       8       —                  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

     

 

 

 

Total current liabilities

    1,932,060       40,474,000       29,345,060         —           13,061,000       —           —           13,061,000  

Deferred underwriting fee

    8,050,000       —         8,050,000       3       —           —         —           —           —    

Long-term debt, net of current portion

    —         1,128,000       —           —           1,128,000       —           —           1,128,000  

 

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    Pivotal
Investment

Corp. II
    XL Hybrids,
Inc.
    Pro Forma Adjustments     Pro Forma As
Adjusted

(assuming
no
redemption)
    Pro Forma Adjustments with
Maximum Conversion
    Pro Forma As
Adjusted

(assuming
maximum
redemption)
 
    Debit     Note     Credit     Note     Debit     Note     Credit