Our executive officers and directors may have interests that are different from, or in addition to, those of our stockholders generally.
Our executive officers and directors may have interests in the Brookfield Transaction that are different from, or are in addition to, those of our stockholders generally. These interests include direct or indirect ownership of our Class A common stock and restricted stock units and, for executive officers, change of control and severance agreements. In addition, certain of our directors and executive officers are also directors or executive officers of TerraForm Power, Inc. (together with its subsidiaries, “TerraForm Power”), which has also entered into a merger agreement with affiliates of Brookfield.
Risks Related to a Failure to Complete the Brookfield Transaction. The following risk factors assume that we remain a stand-alone company except as otherwise noted.
Failure to complete, or delays in completing, the Brookfield Transaction could materially and adversely affect our business, results of operations and prospects and the price of our Class A common stock.
We believe that the current trading price of our Class A common stock reflects some market assessment of the probability of the closing of the Brookfield Transaction. The loss of the right to receive the merger consideration payable to the holders of our Class A common stock in the event the Brookfield Transaction fails to be completed could negatively impact the price of our Class A common stock.
If we are unable to successfully complete the Brookfield Transaction, it would be necessary for the Company to reevaluate its strategic alternatives. Such reevaluation would likely result in a diversion of the Company’s resources to focus on that reevaluation, including management’s time and attention and increased legal and financial advisor fees and other costs.
Moreover, a failure to complete the Brookfield Transaction would result in the Company operating without a sponsor for, at a minimum, the length of time required to reevaluate our strategic alternatives. Our business, including our growth strategy, was substantially dependent on our sponsor, including our sponsor’s ability to obtain financing and generate sufficient cash to adequately fund its operations and on our sponsor’s ability to fund the construction and development of projects to be dropped down to the Company pursuant to certain contractual arrangements. The Company would likely face difficulties strengthening its operations and acquiring new projects during the pendency of a reevaluation of strategic alternatives or period of stand-alone operations, and the Company’s management and our Board may choose to prioritize stabilization of the Company’s operations and determination of strategic alternatives over pursuing growth opportunities. If we are unable to complete the Brookfield Transaction, current and prospective employees may experience uncertainty and low morale about their future with the Company. This uncertainty may impair our ability to retain, recruit or motivate key personnel and other employees, negatively impact the productivity of our employees and result in an increase in retention costs.
Depending on the circumstances surrounding the failure to complete the Brookfield Transaction, we may face increased exposure to litigation and attendant costs and we may be required to pay a termination fee of $30.0 million to Brookfield. Additionally, in certain circumstances if the Brookfield Transaction is not completed, we may be required to pay Brookfield an expense reimbursement fee of $8.0 million.
If we fail to complete the Brookfield Transaction, the Settlement Agreement entered into with SunEdison and certain of its affiliates in the SunEdison Bankruptcy may be terminated.
Concurrently with the execution and delivery of the Merger Agreement, SunEdison and the Company, along with certain of their respective subsidiaries, executed and delivered the Settlement Agreement, which generally resolves claims, disputes and other issues arising from the historical sponsor relationship between the Company and SunEdison. If the Merger Agreement is terminated, the Settlement Agreement may also be terminated by either party thereto. The Settlement Agreement provides for the resolution of the intercompany claims between the Company and SunEdison in connection with the SunEdison Bankruptcy in exchange for, among other things, a set allocation of the proceeds of the Brookfield Transaction being provided to SunEdison. This allocation results in a significant increase in the consideration payable to the holders of our Class A common stock and a decrease in the consideration payable to SunEdison as compared to the respective consideration they would receive on a pro rata, fully diluted basis. In the event the Settlement Agreement is terminated, there is no guarantee that the Company would be able to enter into a comparable transaction or that the Company would be able to negotiate settlement terms with equal or more favorable terms than those contained in the Settlement Agreement.
Moreover, we believe that the resolution of the intercompany claims is a necessary prerequisite to the execution of any strategic alternative with a third party. The termination of the Settlement Agreement could negatively impact the Company’s ability to engage in a change of control transaction with an alternative third party due to the uncertainty regarding the resolution of the intercompany claims in connection with the SunEdison Bankruptcy.