Item 1.01. Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On July 6, 2020, Sunrun Inc., a Delaware corporation ("Sunrun"), Viking Merger
Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of Sunrun
("Merger Sub"), and Vivint Solar, Inc., a Delaware corporation ("Vivint Solar"),
entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant
to which, subject to the terms and conditions set forth in the Merger Agreement,
Merger Sub will merge with and into Vivint Solar (the "Merger"), with Vivint
Solar continuing as the surviving corporation of the Merger as a direct wholly
owned subsidiary of Sunrun (the "Surviving Corporation").
Subject to the terms and conditions set forth in the Merger Agreement, each
share of Vivint Solar common stock, par value $0.01 per share ("Vivint Solar
Common Stock") issued and outstanding immediately prior to the effective time of
the Merger (the "Effective Time") (other than the shares of Vivint Solar Common
Stock owned by Sunrun, Merger Sub, any other wholly owned subsidiary of Sunrun
or Vivint Solar immediately prior the Effective Time, including Vivint Solar
Common Stock held in treasury by Vivint Solar, and in each case not held on
behalf of third parties) will be converted automatically into the right to
receive 0.55 shares (the "Exchange Ratio") of Sunrun common stock, par value
$0.0001 per share ("Sunrun Common Stock"), and, if applicable, an amount in
cash, without interest, rounded down to the nearest cent, in lieu of any
fractional share interest in Sunrun Common Stock to which such holder otherwise
would have been entitled. The shares of Sunrun Common Stock to be issued in
connection with the Merger will be listed on The NASDAQ Stock Market LLC
("NASDAQ"). The Merger is intended to qualify as a reorganization for U.S.
federal income tax purposes.
At the Effective Time, Vivint Solar's equity awards granted under Vivint Solar's
equity compensation plans outstanding as of the Effective Time will, except as
set forth below, be converted into a corresponding award with respect to Sunrun
Common Stock, with the number of shares underlying such award (and, in the case
of stock options, the applicable exercise price) adjusted based on the Exchange
Ratio. Certain options to purchase shares of Vivint Solar Common Stock and
restricted stock units outstanding as of the Effective Time and held by
non-employee directors or current and former employees of Vivint Solar who will
not be employed by Sunrun following the closing of the Merger (the "Closing")
will be cancelled and such holders will have the right to receive an amount in
cash calculated based on the Exchange Ratio. Each award of "LTIP Credits"
pursuant to a Vivint Solar long term incentive pool plan (an "LTIP Award") that
is outstanding as of immediately prior to the Effective Time will be canceled
and terminated, and as soon as practicable following the Effective Time and
Sunrun's filing of a Form S-8 registration statement registering the remaining
share reserves of the Vivint Solar, Inc. 2014 Equity Incentive Plan, each holder
of a cancelled LTIP Award will be granted a restricted stock unit award that can
be settled in shares of Sunrun Common Stock (a "Replacement RSU Award"), with
the number of shares underlying such award (and the applicable exercise price)
calculated as if certain performance hurdles were achieved. The Replacement RSU
Award will vest in three equal installments, subject to the grantee's continued
provision of services to Sunrun or the Surviving Corporation, through each of 30
days, nine months and 18 months following the Closing Date.
The Merger Agreement provides that Sunrun will increase the number of directors
that comprise the Sunrun board of directors at the Effective Time by two
directors and fill such vacancies with (1) one director serving on the board of
directors of Vivint Solar designated by Vivint Solar (which director shall be
designated as a Class III director of Sunrun) and (2) David Bywater, Vivint
Solar's Chief Executive Officer (who shall be designated as a Class I director
of Sunrun).
The completion of the Merger is subject to customary conditions, including:
(1) the adoption of the Merger Agreement by Vivint Solar stockholders and the
approval of the issuance of shares of Sunrun Common Stock in connection with the
Merger by Sunrun stockholders; (2) the expiration or termination of the
applicable waiting period (or any extension thereof) under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended; (3) the absence of any order or
law that has the effect of enjoining or otherwise making illegal the
consummation of the Merger; (4) the approval for listing of the shares of Sunrun
Common Stock that will be issuable pursuant to the Merger Agreement on NASDAQ
and the effectiveness of a registration statement with respect to such Sunrun
Common Stock; (5) subject to certain exceptions, the accuracy of the
representations and warranties of the other party and performance by each party
in all material respects of its obligations under the Merger Agreement; (6) the
absence of a material adverse effect; and (7) receipt by each of Sunrun and
Vivint Solar of an opinion of its respective outside counsel or another
nationally recognized law firm (including outside counsel to the other party) to
the effect that the Merger will qualify as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended.
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The Merger Agreement includes customary representations, warranties and
covenants of Sunrun and Vivint Solar and each party has agreed to customary
covenants, including, among others, covenants relating to (1) the conduct of its
business during the interim period between execution of the Merger Agreement and
the Effective Time, (2) its obligation to call a meeting of its stockholders to
adopt the Merger Agreement (in the case of Vivint Solar) or approve the issuance
of shares of Sunrun Common Stock in connection with the Merger (in the case of
Sunrun) and (3) its non-solicitation obligations in connection with alternative
acquisition proposals (however, under certain circumstances, a party may change
its recommendation to its stockholders in response to a superior proposal or an
intervening event if such party's board of directors determines in good faith
that the failure to take such action would be inconsistent with the directors'
fiduciary duties under Delaware law).
The Merger Agreement provides for certain termination rights for both parties
and provides that, in connection with a termination of the Merger Agreement
under certain specified circumstances, Vivint Solar will be required to pay
Sunrun a termination fee of $54 million or Sunrun will be required to pay Vivint
Solar a termination fee of $45 million or $107 million.
A copy of the Merger Agreement is attached as Exhibit 2.1 to this Current Report
on Form 8-K and is incorporated herein by reference. The foregoing description
of the Merger Agreement does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement. The representations, warranties
and covenants set forth in the Merger Agreement have been made only for the
purposes of the Merger Agreement and solely for the benefit of the parties to
the Merger Agreement, may be subject to limitations agreed upon by the
contracting parties, including being qualified by confidential disclosures made
for the purposes of allocating contractual risk between the parties to the
Merger Agreement instead of establishing these matters as facts, as well as by
information contained in each party's Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q, and may be subject to standards of materiality applicable
to the contracting parties that differ from those applicable to investors. In
addition, such representations and warranties (1) will not survive completion of
the Merger and cannot be the basis for any claims under the Merger Agreement by
the other party after termination of the Merger Agreement, except as a result of
actual fraud or a willful breach and (2) were made only as of the dates
specified in the Merger Agreement. Accordingly, the Merger Agreement is included
with this filing only to provide investors with information regarding the terms
of the Merger Agreement and not to provide investors with any other factual
information regarding the parties or their respective businesses.
Support Agreements
Simultaneously with the execution of the Merger Agreement, Sunrun and 313
Acquisition LLC, an affiliate of The Blackstone Group Inc. ("313 Acquisition"),
have entered into a support agreement (the "Vivint Solar Support Agreement"),
pursuant to which 313 Acquisition agreed, among other things, to vote its shares
of Vivint Solar Common Stock in favor of the adoption of the Merger Agreement
and against any alternative proposal. 313 Acquisition also agreed not to
transfer any shares of Vivint Solar Common Stock, subject to certain exceptions
including for certain permitted transfers from and after the date of Vivint
Solar's stockholder meeting, or any adjournment or postponement thereof, in each
case, at which a vote in favor of the Merger is obtained. The foregoing
description of the Vivint Solar Support Agreement does not purport to be
complete and is qualified in its entirety by reference to the Vivint Solar
Support Agreement, which is attached as Exhibit 10.1 to this Current Report on
Form 8-K and is incorporated herein by reference.
Also simultaneously with the execution of the Merger Agreement, Tiger Global
Investments, L.P. and Tiger Global Long Opportunities Master Fund, L.P.
. . .
Item 5.03. Amendments to Articles of Incorporation or Bylaws.
Effective July 6, 2020, the Board of Directors of Sunrun adopted resolutions to
amend Sunrun's Amended and Restated Bylaws to provide that unless Sunrun
consents in writing to the selection of an alternative forum, to the fullest
extent permitted by law, the federal district courts of the United States of
America shall be the sole and exclusive forum for the resolution of any
complaint asserting a cause of action arising under the Securities Act of 1933,
as amended. The foregoing description of Sunrun's amendment to the Amended and
Restated Bylaws does not purport to be complete and is qualified in its entirety
by reference to the text of the Amendment to the Amended and Restated Bylaws,
which is attached as Exhibit 3.1 to this Current Report on Form 8-K and is
incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated as of July 6, 2020, by and
among Sunrun Inc., Viking Merger Sub, Inc. and Vivint Solar, Inc.*
3.1 Amendment to Amended and Restated Bylaws
10.1 Support Agreement, dated as of July 6, 2020, by and between Sunrun
Inc. and 313 Acquisition LLC
10.2 Support Agreement, dated as of July 6, 2020, by and among Vivint
Solar, Inc., Tiger Global Investments, L.P. and Tiger Global Long
Opportunities Master Fund, L.P.
10.3 Registration Rights Agreement, dated as of July 6, 2020, by and
among Sunrun Inc., 313 Acquisition LLC, Blackstone VNT Co-Invest
L.P., Blackstone Capital Partners VI L.P., Blackstone Family
Investment Partnership VI-ESC L.P., Blackstone Family Investment
Partnership VI L.P., Summit Partners Growth Equity Fund VIII-A,
L.P., Summit Partners Growth Equity Fund VIII-B, L.P., Summit
Investors I, LLC, Summit Investors I (UK), L.P. and Todd R. Pedersen
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
* The Schedules and exhibits have been omitted from this filing pursuant to Item
601(b)(2) of Regulation S K. A copy of any omitted schedule or exhibit will be
furnished to the Securities and Exchange Commission upon request.
Forward-Looking Statements
This communication contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 including, but not limited to,
statements based upon or relating to Sunrun's and Vivint Solar's expectations or
predictions of future financial or business performance or conditions.
Forward-looking statements generally relate to future events or future financial
or operating performance. In some cases, you can identify forward-looking
statements by terms such as "may," "will," "should," "would," "expects,"
"plans," "anticipates," "could," "intends," "target," "projects,"
"contemplates," "believes," "estimates," "predicts," "potential," "will be,"
"will likely result" or "continue" or the negative of these words or other
similar terms or expressions that concern our expectations, strategy, plans or
intentions. Forward-looking statements may include, but are not limited to,
statements concerning the expected benefits of the transaction; cost synergies
and opportunities resulting from the transaction; Sunrun's leadership position
in the industry; the availability of rebates, tax credits and other financial
incentives including solar renewable energy certificates, or SRECs, and federal
and state incentives; regulations and policies related to net metering and
interconnection limits or caps and decreases to federal solar tax credits;
determinations by the Internal Revenue Service of the fair market value of
Sunrun's and Vivint Solar's solar energy systems; changes in regulations,
tariffs and other trade barriers and tax policy; the retail price of
utility-generated electricity or electricity from other energy sources; federal,
state and local regulations and policies governing the electric utility industry
and developments or changes with respect to such regulations and policies; the
ability of Sunrun and Vivint Solar to manage their supply chains (including the
availability and price of solar panels and other system components and raw
materials) and distribution channels and the impact of natural disasters and
other events beyond their control; the ability of Sunrun and Vivint Solar and
their industry to manage recent and future growth, product offering mix, and
costs (including, but not limited to, equipment costs) effectively, including
attracting, training and retaining sales personnel and solar energy system
installers; Sunrun's and Vivint Solar's strategic partnerships and expected
benefits of such partnerships; the sufficiency of Sunrun's and Vivint Solar's
cash, investment fund commitments and available borrowings to meet anticipated
cash needs; the need and ability of Sunrun and Vivint Solar to raise capital,
refinance existing debt and finance their respective obligations and solar
energy systems from new and existing investors; the potential impact of interest
rates on Sunrun's and Vivint Solar's interest expense; the course and outcome of
litigation and investigations and the ability of Sunrun and Vivint Solar to
consummate the
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transactions contemplated by the definitive transaction agreement in a timely
manner or at all. These statements are not guarantees of future performance;
they reflect Sunrun's and Vivint Solar's current views with respect to future
events and are based on assumptions and estimates and subject to known and
unknown risks, uncertainties and other factors that may cause actual results,
performance or achievements to be materially different from expectations or
results projected or implied by forward-looking statements. These risks include,
but are not limited to: the occurrence of any event, change or other
circumstances that could give rise to the termination of the definitive
transaction agreement or the failure to satisfy the closing conditions; the
possibility that the consummation of the proposed transactions is delayed or
does not occur, including the failure of the parties' stockholders to approve
the proposed transactions; uncertainty regarding the timing of the receipt of
required regulatory approvals for the merger and the possibility that the
parties may be required to accept conditions that could reduce or eliminate the
anticipated benefits of the merger as a condition to obtaining regulatory
approvals or that the required regulatory approvals might not be obtained at
all; the outcome of any legal proceedings that have been or may be instituted
against the parties or others following announcement of the transactions
contemplated by the definitive transaction agreement; challenges, disruptions
and costs of closing, integrating and achieving anticipated synergies, or that
such synergies will take longer to realize than expected; risks that the merger
and other transactions contemplated by the definitive transaction agreement
disrupt current plans and operations that may harm the parties' businesses; the
amount of any costs, fees, expenses, impairments and charges related to the
merger; uncertainty as to the effects of the announcement or pendency of the
merger on the market price of the parties' respective common stock and/or on
their respective financial performance; uncertainty as to the long-term value of
Sunrun's and Vivint Solar's common stock; the ability of Sunrun and Vivint Solar
to raise capital from third parties to grow their business; any rise in interest
rates which would increase the cost of capital; the ability to meet covenants in
investment funds and debt facilities; the potential inaccuracy of the
assumptions employed in calculating operating metrics; the failure of the energy
industry to develop to the size or at the rate Sunrun and Vivint Solar expect;
and the inability of Sunrun and Vivint Solar to finance their solar service
offerings to customers on an economically viable basis. These risks and
uncertainties may be amplified by the ongoing COVID-19 pandemic, which has
caused significant economic uncertainty and negative impacts on capital and
credit markets. The extent to which the COVID-19 pandemic impacts Sunrun's and
Vivint Solar's businesses, operations, and financial results, including the
duration and magnitude of such effects, will depend on numerous factors, many of
which are unpredictable, including, but not limited to, the duration and spread
of the pandemic, its severity, the actions to contain the pandemic or treat its
impact, and how quickly and to what extent normal economic and operating
conditions can resume.
Any financial projections in this filing are forward-looking statements that are
based on assumptions that are inherently subject to significant uncertainties
and contingencies, many of which are beyond Sunrun's and Vivint Solar's control.
While all projections are necessarily speculative, Sunrun and Vivint Solar
believe that the preparation of prospective financial information involves
increasingly higher levels of uncertainty the further out the projection extends
from the date of preparation. The assumptions and estimates underlying the
projected results are inherently uncertain and are subject to a wide variety of
significant business, economic and competitive risks and uncertainties that
could cause actual results to differ materially from those contained in the
projections. The inclusion of projections in this filing should not be regarded
as an indication that Sunrun and Vivint Solar, or their representatives,
considered or consider the projections to be a reliable prediction of future
events.
Annualized, pro forma, projected and estimated numbers are used for illustrative
purpose only, are not forecasts and may not reflect actual results.
The foregoing review of important factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary statements that are
included herein and elsewhere, including the risk factors included in Sunrun's
and Vivint Solar's most recent reports on Form 10-K, Form 10-Q, Form 8-K and
other documents on file with the United States Securities and Exchange
Commission ("SEC"). These forward-looking statements represent estimates and
assumptions only as of the date made. Unless required by federal securities
laws, Sunrun and Vivint Solar assume no obligation to update any of these
forward-looking statements, or to update the reasons actual results could differ
materially from those anticipated, to reflect circumstances or events that occur
after the statements are made. Given these uncertainties, investors should not
place undue reliance on these forward-looking statements. Investors should read
this document with the understanding that Sunrun's and Vivint Solar's actual
future results may be materially different from what Sunrun and Vivint Solar
expect. Sunrun and Vivint Solar qualify all of their forward-looking statements
by these cautionary statements.
Additional Information and Where to Find It
In connection with the proposed merger, Sunrun intends to file with the SEC a
registration statement on Form S-4, which will include a document that serves as
a prospectus of Sunrun and a joint proxy statement of Sunrun and Vivint Solar
(the "joint proxy statement/prospectus"). After the registration statement has
been declared effective by the SEC, the joint proxy statement/prospectus will be
delivered to stockholders of Sunrun and Vivint Solar. BEFORE MAKING ANY VOTING
OR INVESTMENT DECISION, SECURITY HOLDERS OF SUNRUN AND VIVINT SOLAR ARE URGED TO
READ THE
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JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS
THERETO) AND OTHER DOCUMENTS RELATING TO THE MERGER THAT WILL BE FILED WITH THE
SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED MERGER. Investors and security holders will be able to obtain
copies of the joint proxy statement/prospectus (when available) and other
documents filed by Sunrun and Vivint Solar with the SEC, without charge, through
the website maintained by the SEC at http://www.sec.gov. Copies of documents
filed with the SEC by Sunrun will be made available free of charge on Sunrun's
website at http://investors.sunrun.com/ under the heading "Filings & Financials"
and then under the subheading "SEC Filings." Copies of documents filed with the
SEC by Vivint Solar will be made available free of charge on Vivint Solar's
website at http://investors.vivintsolar.com/ under the link "Financial
Information" and then under the heading "SEC Filings."
Participants in the Solicitation
Sunrun and Vivint Solar and their respective directors and executive officers
may be deemed to be participants in the solicitation of proxies from the holders
of Sunrun common stock and Vivint Solar common stock in respect of the proposed
transaction. Information about Sunrun's directors and executive officers is set
forth in Sunrun's Form 10-K for the year ended December 31, 2019 and the proxy
statement for Sunrun's 2020 Annual Meeting of Stockholders, which were filed
with the SEC on February 27, 2020 and April 17, 2020, respectively. Information
about Vivint Solar's directors and executive officers is set forth in Vivint
Solar's Form 10-K for the year ended December 31, 2019 and the proxy statement
for Vivint Solar's 2020 Annual Meeting of Stockholders, which were filed with
the SEC on March 10, 2020 and April 24, 2020, respectively. Stockholders may
obtain additional information regarding the interests of such participants by
reading the registration statement and the joint proxy statement/prospectus and
other relevant materials to be filed with the SEC regarding the proposed merger
when they become available. Investors should read the joint proxy
statement/prospectus carefully when it becomes available before making any
voting or investment decisions.
No Offer or Solicitation
This communication shall not constitute an offer to sell or the solicitation of
an offer to buy any securities or a solicitation of any vote or approval, nor
shall there be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the requirements of
Section 10 of the Securities Act of 1933, as amended.
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