Item 1.01 Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On February 17, 2021, Sunnova Energy International Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Sunnova Energy Corporation, a Delaware corporation and wholly owned subsidiary of the Company (“Acquiror OpCo”), Moonroad LLC, a Delaware limited liability company and wholly owned subsidiary of Acquiror OpCo (“Merger Sub”), SunStreet Energy Group, LLC, a Delaware limited liability company (“SunStreet”), and Len X, LLC, a Florida limited liability company and the sole member of SunStreet (“Member”), pursuant to which SunStreet will merge with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger as a wholly owned subsidiary of Acquiror OpCo (the “Surviving Entity”).
On the terms and subject to the conditions set forth in the Merger Agreement, upon consummation of the Merger, all of the limited liability interests of SunStreet, issued and outstanding immediately prior to the effective time of the Merger, shall be converted automatically into the right to receive up to 7,222,229 shares of Company common stock, par value $0.0001 (“Common Stock”), which is comprised of (i) 3,333,333 shares of Common Stock in initial consideration payable at closing (the “Base Shares”) and (ii) 3,888,896 million shares of Common Stock (the “Earnout Shares “together with the Base Shares, the “Merger Consideration”). All of the outstanding limited liability company interests in Merger Sub will be converted into 100% of the limited liability interests of the Surviving Entity, with the Acquiror OpCo owning all of the outstanding limited liability interests in the Surviving Entity at the closing of the Merger (the “Closing Date”).
The Merger Agreement contains customary representations and warranties of the Company and Merger Sub, on the one hand, and Member and SunStreet, on the other hand, relating to their respective businesses, in each case generally subject to customary materiality qualifiers. Additionally, the Merger Agreement provides for customary pre-closing covenants of the Company and Member, including covenants relating to conducting their respective businesses in the ordinary course and to refrain from taking certain actions without the other party’s consent.
At least ten business days prior to the Closing Date, the Company will make offers to certain employees related to SunStreet’s business. Upon consummation of the Merger, the Company expects that the combination of such employees and the provision of transition services by Lennar Corporation and its affiliates will allow the Company to operate SunStreet’s business as conducted prior to the Closing Date.
The completion of the Merger is subject to certain customary mutual conditions, including (i) the expiration or termination of the waiting period under the Hart-Scott-Rodino Act, (ii) the absence of any governmental order or law that makes consummation of the Merger illegal or otherwise prohibited, (iii) the Base Shares have been authorized for listing on the New York Stock Exchange, upon official notice of issuance and (iv) the parties entering into (A) a transition services agreement, (B) a stockholders agreement, providing for, among other things, certain registration rights and standstill provisions, (C) a Master Management & Services Agreement to be entered into between an affiliate of Lennar Corporation and the Surviving Entity, (D) initial tax equity fund documents and (E) an exclusivity agreement between Lennar Corporation and the Company, providing for, among other things, a four-year period of exclusivity. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct (subject to certain materiality qualifiers), the absence of a material adverse effect on the other party and the other party having performed in all material respects its obligations under the Merger Agreement. Additionally, consummation of the Merger is conditioned upon certain key employees agreeing to employment at closing, all of whom have accepted their offers of employment to date.
The Merger Agreement contains termination rights for each of the Company and Member, including, among others, if the consummation of the Merger does not occur on or before September 1, 2021.
The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and are qualified in their entirety by reference to the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 and is incorporated herein by reference.
