Item 8.01. Other Events.
Legal Proceeding Regarding the Business Combination with
As previously disclosed, on
On
On
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Although Spartan believes that no supplemental disclosures are required under applicable law, in order to alleviate the costs, risks and uncertainties inherent in any litigation and to provide additional information to its stockholders, Spartan has determined to voluntarily supplement the definitive proxy statement/prospectus as described in this Current Report on Form 8-K. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, Spartan specifically denies all allegations in the lawsuits and the demand letters, including without limitation that any additional disclosure was or is required.
1 SUPPLEMENT TO THE DEFINITIVE PROXY STATEMENT/PROSPECTUS
Spartan is providing additional information to its stockholders, as described in this Current Report on Form 8-K. These disclosures should be read in connection with the definitive proxy statement/prospectus, which should be read in its entirety. To the extent that the information set forth herein differs from or updates information contained in the definitive proxy statement/prospectus, the information set forth herein shall supersede or supplement the information in the definitive proxy statement/prospectus. Defined terms used but not defined herein have the meanings set forth in the definitive proxy statement/prospectus and all page references are to pages in the definitive proxy statement/prospectus. Without admitting in any way that the disclosures below are material or otherwise required by law, Spartan makes the following amended and supplemental disclosures (with additional language in bold and underlined text below):
The disclosure in the third and fourth paragraphs on Page 131 of the definitive proxy statement/prospectus is hereby supplemented by amending and restating the paragraph to read as follows:
Following the closing of the IPO, Spartan representatives commenced a robust search for businesses or assets to acquire for the purpose of consummating Spartan's Initial Business Combination. Spartan reviewed self-generated ideas, explored ideas with the underwriters from the IPO, and contacted, and were contacted by, a number of individuals and entities with respect to a variety of business combination opportunities. As part of this process, Spartan representatives considered many potential acquisition targets in a wide variety of industry sectors, including targets that were engaged in businesses involving energy sustainability or utilizing technologies that would create a positive impact on the environment. Many of these discussions advanced to the point where the counterparty to such potential acquisition executed a confidentiality agreement; however, none of the confidentiality agreements included a standstill agreement provision that would prevent Spartan from making an offer for the counterparty, or would prevent any party from making an offer for Spartan.
In several cases, Spartan presented term sheets or illustrative transaction
structures (or similar documentation) describing the structure or principal
terms of potential business combinations. In mid-December of 2020, Spartan
executed confidentiality agreements with two private companies to discuss a
potential transaction, and, on
The disclosure in the seventh paragraph on Page 131 and first paragraph on Page 132 of the definitive proxy statement/prospectus is hereby supplemented by amending and restating the paragraph to read as follows:
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The disclosure beginning in the fifth paragraph on Page 132 of the definitive proxy statement/prospectus is hereby supplemented by amending and restating the paragraph to read as follows:
Following the meeting of the Spartan Board, on
? a post-money equity valuation of Sunlight of
? the conversion of all outstanding equity interests of Sunlight into shares of
Class A Common Stock based on a ratio equal to a pre-money equity value of
? the payment of cash consideration of up to
commensurate amount of the share consideration described above, subject to
minimum cash condition above such amount;
? agreement of each of Spartan and Sunlight to terminate any existing discussions
with respect to any proposed transaction similar to the business combination
and to negotiate exclusively with the other until
? transaction financing through a private placement of Class A Common Stock with
anticipated proceeds of
affiliates of Sponsor of up to
? Sponsor to cancel up to 50% of the Founder Shares then held by Sponsor in the
event that there were redemptions by Spartan's stockholders in excess of a 5%
threshold;
? affiliates of Sponsor or Apollo and Sunlight to endeavor to explore a large
loan flow program on mutually attractive terms as referenced above;
? Spartan would be entitled to appoint two directors (one independent director
mutually agreed with Sunlight and one director with knowledge/experience
applicable to Sunlight's business), and Sunlight's current board would be
entitled to appoint up to seven directors; and
? certain other terms customary for a transaction of the type being proposed,
including as to board governance and designation rights and restrictions on the
transfer of shares held by certain Sunlight equityholders (i.e., lock ups).
3
The disclosure in the second paragraph on Page 133 of the definitive proxy statement/prospectus is hereby supplemented by amending and restating the paragraph to read as follows:
During the last two weeks of
The placement agents will receive an aggregate fee equal to 3% of the gross
proceeds received by Spartan of any private placement of securities that closes
during the term of the PIPE Engagement Letter. Notwithstanding the foregoing,
pursuant to a conditional waiver letter by and among Spartan, Credit Suisse,
Citi and Cowen, the placement agents will not receive fees in connection with
the private placement of securities to the six individual investors that took
place concurrently with the private placement contemplated by the PIPE
Engagement Letter. The aggregate fee described above for the private placement
is expected to be roughly
The disclosure in the fifth paragraph on page 136 of the definitive proxy statement/prospectus is hereby supplemented by amending and restating the paragraph to read as follows:
In approving the Business Combination, the Spartan Board determined not to obtain a fairness opinion. The officers and directors of Spartan have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and background enabled them to make the necessary analyses and determinations regarding the Business Combination. Spartan's management conducted various valuation analyses based on peer companies with a focus on peers in the distributed solar and unique financial industries, including, among others, SunPower, Sunnova, Sunrun, Open Lending and Rocket Companies. Companies in these industries have businesses that, in Spartan's management's view, were considered similar to that of Sunlight based on business sector, high-growth rates, technology-enabled platforms, channel partner relationships, credit risk, involvement in underpenetrated markets and financial metrics, among other measures. Spartan considered its proposed valuation of Sunlight in the proposed transaction in light of the valuations implied by EBITDA multiples for certain comparable companies and Sunlight's forecasted financial performance and business mix both today and as forecasted by Sunlight management, as well as in comparison to certain comparable companies' price to EPS multiples.
4
The disclosure in the fourth paragraph beginning on Page 140 of the definitive proxy statement/prospectus is hereby supplemented by amending and restating the paragraph to read as follows:
The key elements of the forecasts provided by Sunlight management to Spartan management and the Spartan Board are summarized in the tables below:
Forecast Year Ended December 31, 2021E 2022E 2023E (dollars in millions) Total Revenue$ 123.4 $ 157.0 $ 198.9 Total Expenses (73.1 ) (85.1 ) (96.3 ) Net Income 37.2 53.2 76.0 Adjusted EBITDA(1) 60.2 81.6 111.9 Adjusted EBITDA Margin(2) 48.8 % 52.0 % 56.2 % Free Cash Flow(3) 38.5 55.0 77.8 Funded Volume(4) 2,662 3,332 4,274
(1) Sunlight defines Adjusted EBITDA as net income excluding interest expense
incurred in connection with Sunlight's revolving credit facility, income taxes, amortization and depreciation expense, stock-based compensation expense, non-cash changes in certain financial instruments, fees paid to brokers pursuant to existing contractual arrangements that will terminate pursuant to the contractual terms thereof and relating to certain of Sunlight's capital providers, and certain transaction bonuses and other expenses resulting from the proposed Business Combination. Adjusted EBITDA is not a financial measure prepared in accordance with GAAP and should not be considered a substitute for net income prepared in accordance with GAAP.
(2) Sunlight defines Adjusted EBITDA Margin as Adjusted EBITDA divided by total
revenue, expressed as a percentage of total revenue. Adjusted EBITDA Margin is not a financial measure prepared in accordance with GAAP and should not be considered a substitute for operating margin prepared in accordance with GAAP.
(3) Sunlight defines Free Cash Flow as net income adjusted for the change in
provision for credit closes, amortization and depreciation expense, the change in original issue discount related to loans held on Sunlight's balance sheet, changes in working capital, changes in cash collected in the normal course of Sunlight's business and due to capital partners, changes in the value of instruments on Sunlight's balance sheet that are required to be marked to market, including derivative gains and losses, distributions to Sunlight's equity holders related to their tax obligations pursuant to their contractual rights, capital expenditures primarily related to internally developed software, and other items that management has determined are not reflective of cash generation in Sunlight's business. Free Cash Flow is not a financial measure prepared in accordance with GAAP and should not be considered a substitute for cash flow from operations prepared in accordance with GAAP.
(4) Funded Volume refers to loans processed through Sunlight's financing platform
that have been funded.
In addition, set forth below is a reconciliation, which was not provided by Sunlight, or otherwise made available, to Spartan in connection with the Sunlight internally prepared forecasts provided to Spartan, of projected Adjusted EBITDA to projected Net Income for each of the forecast years 2021E, 2022E and 2023E. This information is being provided in this S-4 solely in response to requests for information raised in certain shareholder litigation relating to the transaction. Neither Sunlight nor Spartan believe that such disclosure is required or material.
Forecast Year Ending December 31, (Dollars in Millions) 2021E 2022E 2023E Net Income(1)$ 37.2 $ 53.2 $ 76.0 Income Taxes(2) 13.1 18.7 26.7 Interest Expense(3) 1.5 1.9 2.3 Fees Paid to Brokers(4) 4.1 3.4 2.4 Depreciation and Amortization(5) 4.2 4.5 4.6 Equity-based Compensation(6) _ _ _ Adjusted EBITDA$ 60.2 $ 81.6 $ 111.9
(1) 2021E-2023E Net Income includes estimated public company costs. Net income
does not include the impact of potential tax payments to certain holders pursuant to the Tax Receivables Agreement to be entered into at the Closing. 5
(2) Sunlight has not historically paid income taxes as an limited liability
company treated for Federal income tax purposes as a tax partnership, but the 2021E-2023E projections illustratively assume a 26% statutory tax rate.Sunlight Financial Holdings' actual future effective tax rate may differ given the Up-C structure, non-cash changes in certain financial instruments, and other items that will impact pre-tax net income such as those referred to in footnote 3 below.
(3) 2021E-2023E interest expense relates to estimated interest expenses incurred
under our revolving credit facility to fund projected working capital advances to contractors.
(4) Estimated fees paid to brokers constitute estimated fees to be paid to
brokers for introductions to capital providers. Fees paid to brokers have sunset provisions, and after theClosing Sunlight Financial Holdings does not expect paying brokers for capital provider introductions to be a regular part of its business, butSunlight Financial Holdings will have remaining obligations to brokers until the applicable sunset provisions apply thereto.
(5) 2021E-2023E Depreciation and Amortization excludes potential future
amortization on purchase price allocation.
(6) 2021E-2023E projections do not include ongoing assumptions for equity based
compensation.
Important Information for Stockholders
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or constitute a solicitation of any vote or approval.
In connection with the Proposed Transactions, Spartan has filed the Registration
Statement with the
Participants in the Solicitation
Spartan and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the stockholders of Spartan in
connection with the Proposed Transactions. Sunlight and its officers and
directors may also be deemed participants in such solicitation. Security holders
may obtain more detailed information regarding the names, affiliations and
interests of certain of Spartan's executive officers and directors in the
solicitation by reading the definitive proxy statement/prospectus, Spartan's
Amendment No. 1 to Annual Report on Form 10-K/A for the year ended
6 Forward-Looking Statements
The information included herein and in any oral statements made in connection herewith include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended. All statements, other than statements of present or historical fact contained herein, regarding the Proposed Transactions or Sunlight's and Spartan's ability to consummate the Proposed Transactions, are forward-looking statements. Forward-looking statements may generally be identified by the use of words such as "could," "should," "would," "will," "may," "believe," "anticipate," "intend," "estimate," "expect," "project," "plan," "continue," "project," or the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, Spartan and Sunlight disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date hereof. Spartan and Sunlight caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of either Spartan or Sunlight. In addition, Spartan cautions you that the forward-looking statements contained herein are subject to the following factors: (i) the occurrence of any event, change or other circumstances that could delay the Proposed Transactions or give rise to the termination of the agreements related thereto; (ii) the outcome of any legal proceedings that may be instituted against Spartan or Sunlight following announcement of the Proposed Transactions; (iii) the inability to complete the Proposed Transactions due to the failure to obtain approval of the stockholders of Spartan, or other conditions to closing of the Proposed Transactions in the agreements related to the Proposed Transactions; (iv) the risk that the Proposed Transactions disrupts Spartan's or Sunlight's current plans and operations as a result of the announcement of the Proposed Transactions; (v) Sunlight's ability to realize the anticipated benefits of the Proposed Transactions, which may be affected by, among other things, competition and the ability of Sunlight to grow and manage growth profitably following the Proposed Transactions; (vi) costs related to the Proposed Transactions; (vii) changes in applicable laws or regulations; and (viii) the possibility that Sunlight may be adversely affected by other economic, business, and/or competitive factors. Should one or more of the risks or uncertainties described . . .
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