DEFM14A
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12

PATTERN ENERGY GROUP INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


Table of Contents

LOGO

February 4, 2020

Dear Stockholder:

You are cordially invited to attend a special meeting of stockholders of Pattern Energy Group Inc. (“Pattern” or the “Company” or “we,” “us,” or “our”) to be held on Tuesday, March 10, 2020, at 8:00 a.m., Pacific Time, at the corporate office of Pattern at 1088 Sansome Street, San Francisco, California 94111.

At the special meeting, you will be asked to consider and vote upon a proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”), dated as of November 3, 2019, among Pattern, Pacific US Inc., a Delaware corporation (“Parent”) that is indirectly wholly owned by Canada Pension Plan Investment Board (“CPPIB”), and Pacific BidCo US Inc., a Delaware corporation and a wholly owned direct subsidiary of Parent (“Merger Sub”). Upon the terms and subject to the conditions of the Merger Agreement, if the merger is completed, Merger Sub will merge with and into Pattern (the “Merger”), and Pattern will continue as the surviving corporation and as a subsidiary of Parent.

The Merger Agreement will be adopted only with the affirmative vote of the holders of a majority of the outstanding shares of our Class A common stock and Series A perpetual preferred stock entitled to vote thereon, voting together as a single class. In addition, under applicable Canadian securities laws, the Merger is also required to be approved by a majority of votes cast by holders of our Class A common stock, other than those holders required to be excluded from such vote under such laws. If our stockholders adopt the Merger Agreement and approve the Merger, and the Merger is completed, each share of our Class A common stock will be converted into the right to receive $26.75 in cash, without interest and less any applicable withholding taxes (unless you have properly demanded your statutory rights of appraisal with respect to the Merger), which represents a premium of approximately 14.8% relative to the unaffected closing price for shares of our Class A common stock on the Nasdaq on August 9, 2019 (the last trading day prior to the publication of market rumors regarding a potential acquisition of the Company) and a premium of approximately 15.1% over the 30-day volume weighted average price on the Nasdaq prior to that date. If the Merger is completed, each share of our Series A perpetual preferred stock, par value $0.01 per share, shall remain outstanding.

Our board of directors (our “Board”) approved the Merger Agreement, the Merger and the other transactions contemplated thereby following the recommendation of a special committee of our Board (the “Special Committee”) consisting solely of independent and disinterested directors, to which our Board had delegated exclusive authority to consider and negotiate the Merger Agreement and the transactions contemplated thereby. Accordingly, our Board has approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, and recommends that you vote:

 

  (1)

“FOR” the proposal to adopt the Merger Agreement and approve the Merger,

 

  (2)

“FOR” the approval, on a non-binding advisory basis, of the compensation that may be paid or become payable to our named executive officers that is based on or otherwise relates to the Merger, and

 

  (3)

“FOR” the proposal to approve the adjournment of the special meeting to a later date or dates, if our Board determines that it is necessary or appropriate and is permitted by the Merger Agreement, to solicit additional proxies if (a) there is not a quorum present or represented by proxy or (b) there are insufficient votes to adopt the Merger Agreement and approve the Merger, in each case, at the time of the then-scheduled special meeting, or to give holders of our Class A common stock and our Series A perpetual preferred stock additional time to evaluate new material information or disclosure.

The enclosed proxy statement provides detailed information about the special meeting, the Merger Agreement, the Merger and the other proposals to be voted on at the special meeting. A copy of the Merger


Table of Contents

Agreement is attached as Annex A to the proxy statement. We encourage you to read the proxy statement carefully in its entirety.

Your vote is very important, regardless of the number of shares you own. The proposal to adopt the Merger Agreement must be approved at the special meeting by the holders of a majority of the shares of our Class A common stock and our Series A perpetual preferred stock entitled to vote thereon, voting together as a single class. In addition, under applicable Canadian securities laws, the Merger is also required to be approved by a majority of votes cast by holders of our Class A common stock, other than those holders required to be excluded from such vote under such laws. Only stockholders who owned shares of our Class A common stock and our Series A perpetual preferred stock as of the close of business on January 31, 2020, the record date for the special meeting, will be entitled to vote at the special meeting.

To vote your shares, you may submit a proxy via the Internet or by telephone, as specified in the Internet and telephone voting instructions on your proxy card, return your proxy card by mail using the postage prepaid envelope provided, or attend the special meeting and vote in person. If your shares are held in the name of a brokerage firm, bank, trust or other nominee, you must instruct the brokerage firm, bank, trust or other nominee how to vote your shares or obtain a legal proxy, executed in your favor, from that record holder in order to vote at the special meeting. Even if you plan to attend the special meeting, we urge you to promptly submit a proxy for your shares via the Internet or by telephone or by completing, signing, dating and returning the enclosed proxy card by mail in the postage paid envelope provided.

If you are a record holder of Pattern shares and fail to submit your proxy via Internet or telephone, return your proxy card by mail or attend the special meeting and vote in person, then your shares will not be counted for determining whether a quorum is present at the special meeting and your decision not to respond will have the same effect as if you voted “AGAINST” the adoption of the Merger Agreement and approval of the Merger. If you are a beneficial owner of Pattern shares and fail to give voting instructions to your brokerage firm, bank, trust or other nominee or you fail to obtain a legal proxy, executed in your favor, from that record holder and vote in person at the special meeting, then your shares will not be counted for determining whether a quorum is present at the special meeting and your decision not to respond will have the same effect as if you voted “AGAINST” the adoption of the Merger Agreement and approval of the Merger.

Even if you have voted by proxy, you may still vote in person if you attend the special meeting. Please note, however, that if your shares are held in the name of your brokerage firm, bank, trust or other nominee and you wish to vote in person at the special meeting, you must instruct the brokerage firm, bank, trust or other nominee how to vote your shares or obtain a legal proxy issued in your name from that record holder.

Thank you for your continued support of Pattern.

 

Sincerely,
LOGO
Michael M. Garland
Chief Executive Officer

Neither the Securities and Exchange Commission nor any state or other securities regulatory agency has approved or disapproved of the Merger, passed upon the merits or fairness of the Merger Agreement or the Merger or determined if the accompanying proxy statement is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated February 4, 2020 and, together with the enclosed form of proxy card, is first being mailed to our stockholders on or about February 5, 2020.

 

2


Table of Contents

LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

Dear Stockholder:

Pattern Energy Group Inc., a Delaware corporation (“Pattern” or the “Company” or “we,” “us,” or “our”), will hold a special meeting of stockholders at the corporate office of Pattern at 1088 Sansome Street, San Francisco, California 94111, at 8:00 a.m., Pacific Time, on Tuesday, March 10, 2020 to consider and vote upon the following proposals:

 

  1.

To adopt the Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”), dated as of November 3, 2019, among Pattern, Pacific US Inc., a Delaware corporation (“Parent”) that is indirectly wholly owned by Canada Pension Plan Investment Board (“CPPIB”), and Pacific BidCo US Inc., a Delaware corporation and a wholly owned direct subsidiary of Parent (“Merger Sub”). Upon the terms and subject to the conditions of the Merger Agreement, if the merger is completed, Merger Sub will merge with and into Pattern (the “Merger”), and Pattern will continue as the surviving corporation and as a subsidiary of Parent. In addition, the Merger must be approved in accordance with applicable Canadian securities laws;

 

  2.

To approve, on a non-binding advisory basis, the compensation that may be paid or become payable to our named executive officers that is based on or otherwise relates to the Merger (the “compensation proposal”); and

 

  3.

To approve the adjournment of the special meeting to a later date or dates, if our board of directors (our “Board”) determines that it is necessary or appropriate and is permitted by the Merger Agreement, to solicit additional proxies if (a) there is not a quorum present or represented by proxy or (b) there are insufficient votes to adopt the Merger Agreement and approve the Merger, in each case, at the time of the then-scheduled special meeting, or to give holders of our Class A common stock and our Series A perpetual preferred stock additional time to evaluate new material information or disclosure (the “adjournment proposal”).

Only record holders of our Class A common stock and our Series A perpetual preferred stock at the close of business on January 31, 2020 are entitled to receive notice of, and will be entitled to vote at, the special meeting, including any adjournments or postponements of the special meeting. Your vote is important, regardless of the number of shares of Class A common stock or Series A perpetual preferred stock you own.

The votes required to approve each proposal are as follows:

 

  1.

The proposal to adopt the Merger Agreement and approve the Merger must be approved by (i) the affirmative vote of the holders of a majority of the shares of our Class A common stock, par value $0.01 per share (the “Company Common Stock”) and the shares of our Series A perpetual preferred stock, par value $0.01 per share (the “Company Preferred Stock”), voting together as a single class, in each case outstanding and entitled to vote thereon and (ii) under applicable Canadian securities laws, a majority of the votes cast by the holders of Company Common Stock, present in person or represented by proxy at the special meeting and entitled to vote, excluding those holders of Company Common Stock whose votes are required to be excluded pursuant to Part 8 of Multilateral Instrument 61-101—Protection of Minority Security Holders in Special Transactions. See “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Canadian Securities Law Matters—Excluded Votes” beginning on page 81 of this proxy statement for more information. Abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and approve the Merger.

 

  2.

The compensation proposal must be approved by a majority of the votes cast by holders of Company Common Stock and Company Preferred Stock, voting together as a single class. Abstentions will not be treated as “votes cast” for purposes of determining the approval of the compensation proposal. This means that abstentions will have no effect on whether the compensation proposal is approved.

 

  3.

The adjournment proposal must be approved by a majority of the votes cast by holders of Company Common Stock and Company Preferred Stock, voting together as a single class. Abstentions will not


Table of Contents
  be treated as “votes cast” for purposes of determining the approval of the adjournment proposal. This means that abstentions will have no effect on whether the adjournment proposal is approved.

If a quorum is not present in person or represented by proxy at the special meeting, it is expected that our Board will recommend adjournment of the special meeting to solicit additional proxies if permitted by the Merger Agreement. If there is not a quorum of stockholders at the special meeting and the vote with respect to the adjournment proposal fails, our Board may set a new record date and meeting date for a special meeting to consider the Merger Agreement, compensation proposal and adjournment proposal, in accordance with the Merger Agreement.

If the Merger is completed, our stockholders who (1) submit a written demand for an appraisal of their shares of Company Common Stock prior to the stockholder vote on the adoption of the Merger Agreement and approval of the Merger, (2) do not submit a proxy or otherwise vote in favor of the adoption of the Merger Agreement and approval of the Merger, (3) continue to hold their shares of Company Common Stock through the Effective Time, (4) do not thereafter withdraw their demand for appraisal of their shares or otherwise lose their appraisal rights, in each case in accordance with the Delaware General Corporation Law (the “DGCL”) and (5) otherwise meet the criteria and follow the procedures set forth in Section 262 of the DGCL, will have the right to have such shares appraised by the Delaware Court of Chancery and to receive payment of the fair value of such shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, if any, as determined by the court. For a more detailed discussion of your appraisal rights, see the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Appraisal Rights” beginning on page 89 of this proxy statement and Annex B to this proxy statement.

You are cordially invited to attend the special meeting in person. Whether or not you expect to attend the special meeting, please submit a proxy via the Internet or by telephone, as specified in the Internet and telephone voting instructions on your proxy card or return your proxy card by mail using the postage prepaid envelope provided as promptly as possible in order to ensure your representation at the special meeting. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the special meeting. Please note, however, that if your shares are held in the name of your brokerage firm, bank, trust or other nominee and you wish to vote in person at the special meeting, you must instruct the brokerage firm, bank, trust or other nominee how to vote your shares or obtain a legal proxy issued in your name from that record holder.

If you sign, date and return your proxy card by mail or submit a proxy via the Internet or by telephone without indicating how you wish to vote, your proxy will be voted “FOR” the proposal to adopt the Merger Agreement and approve the Merger, “FOR” the compensation proposal and “FOR” the adjournment proposal. If you do attend the special meeting and wish to vote in person, you may revoke your proxy and vote in person. You may revoke your proxy in the manner described in the enclosed proxy statement at any time before the polls are closed at the special meeting.

Our Board recommends that you vote “FOR” the proposal to adopt the Merger Agreement and approve the Merger, “FOR” the compensation proposal and “FOR” the adjournment proposal.

The Merger is described in the accompanying proxy statement, which we urge you to read carefully. A copy of the Merger Agreement is attached as Annex A to the proxy statement. If you have any questions or need assistance in voting your shares of Company Common Stock or Company Preferred Stock, please contact our proxy solicitor, Innisfree M&A Incorporated, via telephone toll-free at 1-888-750-5834 (for shareholders) or collect at 1-212-750-5833 (for bankers and brokers).

 

By Order of the Board of Directors,
LOGO
Michael M. Garland
Chief Executive Officer

San Francisco, California

February 4, 2020

 

2


Table of Contents

YOUR VOTE IS IMPORTANT

Your vote is very important, regardless of the number of shares you own. The proposal to adopt the Merger Agreement must be approved at the special meeting by the holders of a majority of the shares of Company Common Stock and Company Preferred Stock, voting together as a single class, in each case outstanding and entitled to vote thereon. In addition, under applicable Canadian securities laws, the Merger is also required to be approved by a majority of votes cast by holders of Company Common Stock, other than those holders required to be excluded from such vote under such laws. To vote your shares, you can submit a proxy via the Internet or by telephone, as specified in the Internet and telephone voting instructions on the proxy card, return your proxy card by mail using the postage prepaid return envelope provided, or attend the special meeting and vote in person. We urge you to promptly submit a proxy for your shares via the Internet or by telephone or by completing, signing, dating and returning the enclosed proxy card by mail in the postage paid envelope provided.

If you are a record holder of Pattern shares and fail to submit your proxy via Internet or telephone, return your proxy card by mail or attend the special meeting and vote in person, then your shares will not be counted for determining whether a quorum is present at the special meeting and your decision not to respond will have the same effect as if you voted “AGAINST” the adoption of the Merger Agreement and approval of the Merger. If you are a beneficial owner of Pattern shares and fail to give voting instructions to your brokerage firm, bank, trust or other nominee or you fail to obtain a legal proxy, executed in your favor, from that record holder and vote in person at the special meeting, then your shares will not be counted for determining whether a quorum is present at the special meeting and your decision not to respond will have the same effect as if you voted “AGAINST” the adoption of the Merger Agreement and approval of the Merger.

If your shares are held in the name of a brokerage firm, bank, trust or other nominee, you must instruct the brokerage firm, bank, trust or other nominee how to vote your shares or obtain a legal proxy, executed in your favor, from that record holder in order to vote at the special meeting.

REFERENCES FOR ADDITIONAL INFORMATION

If you have any questions about this proxy statement, the special meeting, the Merger or need assistance with voting procedures, you should contact:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Shareholders (Toll-Free): 1-888-750-5834

Banks and Brokers (Collect): 1-212-750-5833

 

3


Table of Contents

PATTERN ENERGY GROUP INC.

PROXY STATEMENT

TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     1  

General

     1  

The Special Meeting

     3  

FORWARD-LOOKING INFORMATION

     12  

SUMMARY

     13  

Parties Involved in the Merger

     13  

The Special Meeting

     14  

The Merger

     16  

Treatment of Pattern Equity Awards

     16  

Financing of the Merger

     17  

Limited Guarantee

     17  

Conditions to the Closing of the Merger

     17  

Regulatory Approvals Required for the Merger

     19  

Recommendation of Our Board

     20  

Fairness Opinion of Evercore

     20  

Interests of Our Directors and Executive Officers in the Merger

     21  

Appraisal Rights

     21  

Litigation Relating to the Merger

     21  

Material U.S. Federal Income Tax Consequences of the Merger

     22  

Material Canadian Federal Income Tax Consequences of the Merger

     22  

Delisting and Deregistration of Company Common Stock

     23  

Alternative Acquisition Proposals

     23  

Change in Our Board’s Recommendation

     24  

Termination of the Merger Agreement

     25  

Termination Fees

     26  

Market Prices and Dividend Data

     27  

Effect on Pattern if the Merger is Not Completed

     27  

PARTIES INVOLVED IN THE MERGER

     28  

THE SPECIAL MEETING

     29  

Date, Time and Place

     29  

Purpose of the Special Meeting

     29  

Record Date; Shares Entitled to Vote; Quorum

     29  

Vote Required

     29  

Voting by Holders of Company Preferred Stock

     30  

Voting by Our Directors and Executive Officers

     30  

Voting of Proxies

     31  

Revocability of Proxies

     32  

Our Board’s Recommendations

     32  

Effect of Abstentions and Broker  Non-Votes

     32  

Solicitation of Proxies

     33  

Stockholder List

     33  

Anticipated Date of Completion of the Merger

     33  

Householding of Special Meeting Materials

     34  

Other Matters

     34  

 

i


Table of Contents

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF

THE MERGER

     35  

General

     35  

Background of the Merger

     35  

Recommendation of Our Board and Reasons for the Merger

     54  

Fairness Opinion of Evercore

     59  

Forecasts

     67  

Interests of Our Directors and Executive Officers in the Merger

     69  

Interests of Our Directors and Executive Officers in the Contribution Agreement

     74  

Quantification of Potential Payments and Benefits to Our Named Executive Officers

     77  

Canadian Securities Law Matters

     79  

Financing of the Merger

     86  

Limited Guarantee

     88  

Closing and Effective Time

     89  

Appraisal Rights

     89  

Litigation Relating to the Merger

     96  

Accounting Treatment

     96  

Material U.S. Federal Income Tax Consequences of the Merger

     96  

Material Canadian Federal Income Tax Consequences of the Merger

     99  

Regulatory Approvals Required for the Merger

     102  

Effect on Pattern if the Merger is Not Completed

     104  

Vote Required and Board Recommendation

     104  

THE MERGER AGREEMENT

     106  

Explanatory Note Regarding the Merger Agreement

     106  

Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws

     106  

Closing and Effective Time

     107  

Merger Consideration

     107  

Payment Procedures

     108  

Representations and Warranties

     109  

Conduct of Business Pending the Merger

     112  

Alternative Acquisition Proposals

     115  

Our Board’s Recommendation; Company Board Recommendation Change

     116  

Employee Benefits

     118  

Efforts to Close the Merger

     119  

Director Indemnification and Insurance

     120  

Other Covenants

     120  

Conditions to the Closing of the Merger

     120  

Termination of the Merger Agreement

     122  

Termination Fees

     124  

Specific Performance

     125  

Fees and Expenses

     126  

Amendment

     126  

Governing Law

     126  

MARKET PRICES AND DIVIDEND DATA

     127  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     129  

PROPOSAL 2: THE COMPENSATION PROPOSAL

     133  

Compensation Paid to Named Executive Officers in Connection with the Merger

     133  

Effect of Advisory Vote

     133  

Vote Required and Board Recommendation

     133  

 

ii


Table of Contents

PROPOSAL 3: THE ADJOURNMENT PROPOSAL

     134  

Adjournment of the Special Meeting

     134  

Vote Required and Board Recommendation

     134  

OTHER MATTERS

     135  

FUTURE STOCKHOLDER PROPOSALS

     135  

WHERE YOU CAN FIND MORE INFORMATION

     136  

INCORPORATION BY REFERENCE

     137  

MISCELLANEOUS

     138  

ANNEXES

  

Annex A: Agreement and Plan of Merger

     A-1  

Annex B: Section 262 of the General Corporation Law of the State of Delaware

     B-1  

Annex C: Opinion of Evercore Group L.L.C.

     C-1  

 

iii


Table of Contents

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

Except as otherwise specifically noted in this proxy statement, “Pattern,” the “Company,” “we,” “our,” “us” and similar words in this proxy statement refer to Pattern Energy Group Inc. In addition, throughout this proxy statement, we refer to Pacific US Inc. as “Parent” and Pacific BidCo US Inc. as “Merger Sub.” Parent and Merger Sub are indirectly wholly owned by Canada Pension Plan Investment Board, which we refer to as “CPPIB.” We refer to our shares of Class A common stock, par value $0.01 per share, as the “Company Common Stock” and our shares of the Series A perpetual preferred stock, par value $0.01 per share, as the “Company Preferred Stock.”

The following questions and answers about the special meeting and the Merger (this “Q&A”) is intended to address some commonly asked questions about the special meeting of stockholders and the merger of Merger Sub with and into Pattern (the “Merger”). This Q&A may not address all questions that may be important to you as a Pattern stockholder. We urge you to read carefully the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement.

General

 

Q:

Why am I receiving this proxy statement?

 

A:

You are receiving this proxy statement because you were a Pattern stockholder as of the close of business on January 31, 2020, the record date for the special meeting. To complete the Merger, our stockholders holding a majority of the shares of Company Common Stock and Company Preferred Stock, voting together as a single class, in each case outstanding as of the close of business on January 31, 2020, the record date for the special meeting, must affirmatively vote to adopt the Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”), dated as of November 3, 2019, among Pattern, Parent and Merger Sub. In addition, under applicable Canadian securities laws, the Merger is also required to be approved by a majority of votes cast by holders of Company Common Stock, other than those holders required to be excluded from such vote under such laws. A copy of the Merger Agreement is attached as Annex A to this proxy statement.

You are being solicited to vote in favor of the proposals (1) to adopt the Merger Agreement and approve the Merger, (2) to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to our named executive officers named in our proxy statement filed with the Securities and Exchange Commission (the “SEC”) on April 23, 2019 (the “named executive officers”) that is based on or otherwise relates to the Merger (the “compensation proposal”) and (3) to approve the adjournment of the special meeting to a later date or dates, if our board of directors (“Board”) determines that it is necessary or appropriate and is permitted by the Merger Agreement, to solicit additional proxies if (a) there is not a quorum present or represented by proxy or (b) there are insufficient votes to adopt the Merger Agreement and approve the Merger, in each case, at the time of the then-scheduled special meeting, or to give our stockholders additional time to evaluate new material information or disclosure (the “adjournment proposal”).

 

Q:

What will happen to my Company Common Stock as a result of the Merger?

 

A:

If the Merger is completed, each share of Company Common Stock that you hold at the effective time of the Merger (the “Effective Time”) will be converted into the right to receive $26.75 in cash, without interest and less any withholding taxes required by applicable law (the “Merger Consideration”). This does not apply to shares of Company Common Stock held by any of our stockholders who have properly demanded their appraisal rights under Delaware law. See the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Appraisal Rights” beginning on page 89 of this proxy statement.

 

Q:

What will happen to my Company Preferred Stock as a result of the Merger?

 

A:

If the Merger is completed, each share of Company Preferred Stock that you hold at the Effective Time will remain outstanding. The holder of each share of Company Preferred Stock shall not be entitled to convert its

 

1


Table of Contents
  shares into a right to receive any part of the Merger Consideration. The Merger, if consummated, would result in certain adjustments to the terms of the Company Preferred Stock, including an increase in dividend rate and certain adjustments to the contingent dividends.

 

Q:

What will happen to Pattern generally as a result of the Merger?

 

A:

If the Merger is completed, we will cease to be a stand-alone public company and will become a subsidiary of Parent. As a result, each holder of shares of Company Common Stock will no longer have any ownership interest in Pattern. Upon completion of the Merger, shares of Company Common Stock will no longer be listed on any stock exchange or quotation system, including The Nasdaq Global Select Market (“Nasdaq”) and the Toronto Stock Exchange (“TSX”). In addition, following the completion of the Merger, the registration of our shares of Company Common Stock and our reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will be terminated.

 

Q:

What are the U.S. federal income tax consequences of the Merger to me?

 

A:

The receipt of cash in exchange for shares of Company Common Stock pursuant to the Merger generally will be a taxable transaction for U.S. federal income tax purposes. Generally, you will recognize gain or loss equal to the difference, if any, between the amount of cash you receive and the adjusted tax basis of your shares of Company Common Stock. If you are a U.S. Holder (as defined under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 96 of this proxy statement), you generally will be subject to U.S. federal income tax on any gain recognized in connection with the Merger. If you are a Non-U.S. Holder (as defined under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 96 of this proxy statement), you generally will not be subject to U.S. federal income tax on any gain recognized in connection with the Merger unless you have certain connections to the United States. The tax consequences of the Merger to you will depend on your particular circumstances, and you are urged to consult your own tax advisors to determine how the Merger will affect you.

For a more detailed summary of the material U.S. federal income tax consequences of the Merger, see the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 96 of this proxy statement.

 

Q:

What are the Canadian federal income tax consequences of the Merger to me?

 

A:

The Merger Consideration received as a result of the Merger in exchange for shares of Company Common Stock that are held as capital property for the purposes of the Income Tax Act (Canada) (including the regulations thereunder, the “Tax Act”) will generally be treated as proceeds of disposition of such shares and may result in a capital gain (or a capital loss) for the purposes of the Tax Act to the extent that such proceeds of disposition exceed (or are less than) the total of the adjusted cost base of the shares to you and any reasonable expenses of disposition.

If you are a Canadian Holder (as defined in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material Canadian Federal Income Tax Consequences of the Merger” beginning on page 99 of this proxy statement), you will generally be subject to Canadian federal income tax on the taxable portion of any such capital gain. If you are a Non-Canadian Holder (as defined in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material Canadian Federal Income Tax Consequences of the Merger” beginning on page 99 of this proxy statement), you should generally not be subject to Canadian federal income tax on any such capital gain provided that the shares are not “taxable Canadian property” within the meaning of the Tax Act.

The foregoing is qualified in its entirety by the discussion in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material Canadian Federal Income Tax Consequences

 

2


Table of Contents

of the Merger” beginning on page 99 of this proxy statement, and is subject to all of the limitations and qualifications therein.

 

Q:

Am I entitled to appraisal rights in connection with the Merger?

 

A:

Statutory appraisal rights under Delaware law in connection with the Merger will be available to stockholders who (1) submit a written demand for an appraisal of their shares of Company Common Stock prior to the stockholder vote on the adoption of the Merger Agreement and the approval of the Merger; (2) do not submit a proxy or otherwise vote in favor of the adoption of the Merger Agreement and the approval of the Merger; (3) continue to hold their shares of Company Common Stock through the Effective Time; (4) do not thereafter withdraw their demand for appraisal of their shares or otherwise lose their appraisal rights, in each case in accordance with the Delaware General Corporation Law (the “DGCL”); and (5) otherwise meet the criteria and follow the procedures set forth in Section 262 of the DGCL. For a more detailed discussion of your appraisal rights, see the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Appraisal Rights” beginning on page 89 of this proxy statement.

A copy of the full text of Section 262 of the DGCL is included as Annex B to this proxy statement. Failure to precisely follow any of the statutory procedures set forth in Section 262 of the DGCL will result in the loss of appraisal rights.

 

Q:

When do you expect the Merger to be completed?

 

A:

We are working toward completing the Merger as quickly as possible and expect the Merger to be completed by the second quarter of 2020. However, the Merger continues to be subject to various closing conditions, including our stockholder approval and, therefore, we cannot assure you that all conditions to the Merger will be satisfied or, if satisfied, the date by which they will be satisfied.

 

Q:

When will I receive the Merger Consideration for my Company Common Stock?

 

A:

After the Merger is completed, you will receive written instructions, including a letter of transmittal that explains how to exchange your shares of Company Common Stock for the Merger Consideration. When you properly return and complete the required documentation described in the written instructions, you will receive from the paying agent a payment of the Merger Consideration for your shares of Company Common Stock.

 

Q:

How does the per share Merger Consideration compare to the market price of Company Common Stock prior to the public announcement of the Merger Agreement?

 

A:

The per share Merger Consideration represents a premium of approximately 14.8% relative to the unaffected closing price for shares of Company Common Stock on August 9, 2019 (the last trading day prior to the publication of market rumors regarding a potential acquisition of the Company) and a premium of approximately 15.1% over the 30-day volume weighted average price prior to that date.

The Special Meeting

 

Q:

When and where will the special meeting of stockholders be held?

 

A:

The special meeting of our stockholders will be held at our corporate office at 1088 Sansome Street, San Francisco, California 94111, at 8:00 a.m., Pacific Time, on Tuesday, March 10, 2020.

 

Q:

What are the proposals that will be voted on at the special meeting?

 

A:

You will be asked to consider and vote on (1) a proposal to adopt the Merger Agreement and approve the Merger, (2) the compensation proposal, and (3) the adjournment proposal.

 

3


Table of Contents
Q:

How does our Board recommend that I vote on the proposals?

 

A:

Our Board approved the Merger Agreement, the Merger and the other transactions contemplated thereby following the recommendation of a special committee of our Board (the “Special Committee”) consisting solely of independent and disinterested directors, to which our Board had delegated exclusive authority to consider and negotiate the Merger Agreement and the transactions contemplated thereby, and determined that the Merger Agreement and the Merger are advisable, fair to and in the best interests of Pattern and its stockholders.

Our Board recommends that you vote:

 

   

“FOR” the proposal to adopt the Merger Agreement and approve the Merger;

 

   

“FOR” the compensation proposal; and

 

   

“FOR” the adjournment proposal.

See the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Recommendation of Our Board and Reasons for the Merger” beginning on page 54 of this proxy statement. Our stockholders should carefully read this proxy statement in its entirety for more detailed information concerning the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger. In addition, our stockholders are directed to the Merger Agreement, which is attached as Annex A to this proxy statement.

 

Q:

Who is entitled to attend and vote at the special meeting?

 

A:

The record date for the special meeting is January 31, 2020. If you own shares of Company Common Stock or Company Preferred Stock as of the close of business on the record date, you are entitled to notice of, and to vote at, the special meeting or any adjournment of the special meeting. As of the close of business on the record date, there were approximately 98,218,625 shares of Company Common Stock issued and outstanding, held collectively by approximately 29 stockholders of record, and 10,400,000 shares of Company Preferred Stock issued and outstanding, held collectively by approximately 8 stockholders of record. The Merger Agreement will be adopted only with the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock and Company Preferred Stock entitled to vote thereon, voting together as a single class. In addition, under applicable Canadian securities laws, the Merger is also required to be approved by a majority of votes cast by holders of Company Common Stock, other than those holders required to be excluded from such vote under such laws. As of the close of business on the record date, an aggregate of 1,210,049 votes will be required to be excluded pursuant to Part 8 of Multilateral Instrument 61-101—Protection of Minority Security Holders in Special Transactions (“MI 61-101”). See “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Canadian Securities Law Matters—Excluded Votes” beginning on page 81 of this proxy statement for more information.

Stockholders of record as of the close of business on the record date of the special meeting and their duly appointed proxy holders may attend the meeting. Beneficial owners of shares held in “street name” who wish to attend the meeting should bring a copy of an account statement or other proof of ownership of our stock as of the close of business on the record date and will only be able to vote at the special meeting if they have a “legal proxy,” executed in their favor, from their brokerage firm, bank, trust or other nominee of the stockholder of record of their shares, giving them the right to vote the shares at the special meeting. All attendees will be required to provide a government-issued, current form of photo identification (such as a driver’s license or passport).

No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the special meeting.

 

Q:

Do I need to attend the special meeting?

 

A:

No. While our stockholders of record may exercise their right to vote their shares in person at the special meeting, it is not necessary for you to attend the special meeting in order to vote your shares of our stock.

 

4


Table of Contents
Q:

What constitutes a quorum?

 

A:

The presence at the special meeting, in person or by proxy, of the holders of a majority of Company Common Stock and Company Preferred Stock entitled to vote at the special meeting, aggregated together as a single class, shall constitute a quorum. If you vote in person, by telephone, over the Internet or by returning a properly executed proxy card by mail, your shares will be counted towards the quorum. Abstentions will be treated as present for the purpose of determining a quorum.

 

Q:

How many votes are required to adopt the Merger Agreement?

 

A:

Under the DGCL, adoption of the Merger Agreement requires the affirmative vote of the holders of a majority of the shares of Company Common Stock and Company Preferred Stock, voting together as a single class, in each case outstanding and entitled to vote thereon as of the close of business on the record date. In addition, under applicable Canadian securities laws, the Merger is also required to be approved by a majority of votes cast by holders of Company Common Stock, other than those holders required to be excluded from such vote under such laws.

If you are a record holder of Pattern shares and you abstain from voting or fail to cast your vote, in person or by proxy, it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and approve the Merger. If you are a beneficial owner of Pattern shares and you abstain from voting, fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and approve the Merger.

 

Q:

How many votes are required to approve the compensation proposal?

 

A:

In accordance with the rules of the SEC, stockholders have the opportunity to cast a non-binding, advisory vote to approve compensation that may be paid or become payable to our named executive officers based upon or otherwise relating to the Merger, as described in the table provided in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Quantification of Potential Payments and Benefits to Our Named Executive Officers” and the accompanying footnotes and related narrative discussion beginning on page 77 of this proxy statement. The vote to approve the compensation proposal is advisory and therefore will not be binding on us or Parent, nor will it overrule any prior decision or require our Board (or any committee of our Board) to take any action, regardless of whether the Merger is completed. The compensation that may be paid in connection with the Merger is contractual with respect to our named executive officers. Accordingly, if our stockholders adopt the Merger Agreement and approve the Merger, and the Merger is completed, the compensation based on or otherwise relating to the Merger will be paid to our named executive officers in accordance with the terms of their compensation agreements and arrangements, regardless of whether our stockholders approve the compensation proposal.

Advisory approval of the compensation proposal requires a majority of the votes cast by holders of Company Common Stock and Company Preferred Stock, voting together as a single class.

Abstentions will not be treated as “votes cast” for purposes of determining the approval of the compensation proposal. If you are a record holder of Pattern shares and you abstain from voting or fail to cast your vote, in person or by proxy, it will have no effect on the vote for the compensation proposal, provided that a quorum is present in person or represented by proxy at the special meeting. If you are a beneficial owner of Pattern shares and you abstain from voting, fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have no effect on the vote for the compensation proposal, provided that a quorum is present in person or represented by proxy at the special meeting.

 

Q:

How many votes are required to adopt the adjournment proposal?

 

A:

Approval of the adjournment proposal requires the a majority of the votes cast by holders of Company Common Stock and Company Preferred Stock, voting together as a single class.

 

5


Table of Contents

Abstentions will not be treated as “votes cast” for purposes of determining the approval of the adjournment proposal. If you are a record holder of Pattern shares and you abstain from voting or fail to cast your vote, in person or by proxy, it will have no effect on the vote for the adjournment proposal, even if a quorum is not present in person or represented by proxy at the special meeting. If you are a beneficial owner of Pattern shares and you abstain from voting, fail to cast your vote in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have no effect on the vote for the adjournment proposal, even if a quorum is not present in person or represented by proxy at the special meeting.

 

Q:

How will the holders of Company Preferred Stock vote on the proposals?

 

A:

Pursuant to the Company Preferred Stock Purchase Agreement (defined below), the holders of Company Preferred Stock and Pattern have agreed that the holders of Company Preferred Stock shall vote their 10,400,000 shares of Company Preferred Stock in a manner consistent with the recommendations of the Board, provided that the special meeting takes place on or before May 10, 2021. Additionally, the voting rights of the shares of Company Preferred Stock shall not exceed 9.9% of the outstanding shares of Company Common Stock and Company Preferred Stock, voting together as a single class.

As of the close of business on the record date, there were approximately 108,618,625 shares of Company Common Stock and Company Preferred Stock issued and outstanding, of which 98,218,625 (or 90.4%) were shares of Company Common Stock, held collectively by approximately 29 stockholders of record, and 10,400,000 (or 9.6%) were shares of Company Preferred Stock, held collectively by approximately 8 stockholders of record. Each stockholder is entitled to one vote per share of Company Common Stock and one vote per share of Company Preferred Stock at the special meeting on each of the proposals.

As a result, at least 10,400,000 (or 9.6%) of the outstanding shares of Company Common Stock and Company Preferred Stock, voting together as a single class, shall vote “FOR” each of the three proposals. For the purposes of the “majority of the minority vote” required pursuant to MI 61-101, the Merger is required to be approved by a majority of votes cast by holders of Company Common Stock, other than those holders required to be excluded from such vote pursuant to Part 8 of MI 61-101. Accordingly, the votes of Company Preferred Stock in respect of Proposal 1: Adoption of the Merger Agreement and Approval of the Merger will not be included for the purposes of calculating the “majority of the minority vote” under MI 61-101.

 

Q:

Why is my vote important? How are votes counted? What happens if I abstain?

 

A:

If you do not submit a proxy or voting instructions or vote in person at the special meeting, it will be more difficult for us to obtain the necessary quorum to hold the special meeting.

Votes will be counted by the inspector of election appointed for the special meeting, who will separately count “FOR” and “AGAINST” votes and abstentions.

If you are a stockholder of record and you abstain from voting or fail to cast your vote, in person or by proxy, it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and approve the Merger but will have no effect on the compensation proposal (provided that a quorum is present) or the adjournment proposal (even if a quorum is not present). If you are a beneficial owner and you abstain from voting, fail to cast your vote in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and approve the Merger but will have no effect on the compensation proposal (provided that a quorum is present) or the adjournment proposal (even if a quorum is not present).

 

Q:

Do any our directors or executive officers have interests in the Merger that may differ from those of our stockholders?

 

A:

In considering the recommendation of our Board with respect to the Merger Agreement, you should be aware that our directors and executive officers, and certain additional “officers” (as defined under applicable

 

6


Table of Contents
  Canadian securities laws), have interests in the Merger that may be different from, or in addition to, those of our stockholders generally. These interests may create potential conflicts of interest. Our Board was aware that these interests existed and considered them, among other matters, when it approved the Merger Agreement and the Merger and made its recommendation that our stockholders adopt the Merger Agreement and approve the Merger. You should read the sections captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 69 of this proxy statement, “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement” beginning on page 74 of this proxy statement, “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Quantification of Potential Payments and Benefits to Our Named Executive Officers” beginning on page 77 of this proxy statement and “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Canadian Securities Law Matters” beginning on page 79 of this proxy statement for more information.

 

Q:

What do I need to do now?

 

A:

After carefully reading and considering the information contained in this proxy statement, including the annexes and the other documents referred to in this proxy statement, please vote your shares in one of the manners described below. You have one vote for each share of our stock you own as of the close of business on the record date.

 

Q:

How do I vote if I am a stockholder of record?

 

A:

You may vote:

 

   

by following the Internet voting instructions printed on your proxy card;

 

   

by following the telephone voting instructions printed on your proxy card;

 

   

by completing, signing and dating each proxy card you receive and returning it by mail in the enclosed postage-paid envelope; or

 

   

by appearing and casting your vote in person at the special meeting.

If you are voting via the Internet or by telephone, your voting instructions must be received by the date and time indicated on the applicable proxy card(s).

Voting via the Internet, by telephone or by mailing in your proxy card will not prevent you from attending the special meeting in person. You are encouraged to submit a proxy via the Internet, by telephone or by mail even if you plan to attend the special meeting in person, to ensure that your shares of Company Common Stock or Company Preferred Stock are present in person or represented at the special meeting. If you return a properly signed and dated proxy card but do not mark the box showing how you wish to vote, your shares will be voted “FOR” the proposal to adopt the Merger Agreement and approve the Merger, “FOR” the compensation proposal and “FOR” the adjournment proposal.

 

Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A:

If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, to be the “stockholder of record.” If you are a stockholder of record, this proxy statement and your proxy card have been sent directly to you by or on behalf of Pattern.

If your shares are held through a brokerage firm, bank, trust or other nominee, you are considered the “beneficial owner” of shares of our stock held in “street name.” If you are a beneficial owner of shares of our stock held in “street name,” this proxy statement has been forwarded to you by your bank, broker or

 

7


Table of Contents

other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your brokerage firm, bank, trust or other nominee how to vote your shares by following their instructions for voting on the enclosed voting instruction form. You are also invited to attend the special meeting. However, because you are not the stockholder of record, you may not vote your shares in person by ballot at the special meeting unless you obtain a “legal proxy” from your brokerage firm, bank, trust or other nominee giving you the right to vote your shares at the special meeting.

 

Q:

How do I vote if my shares are held by my brokerage firm, bank, trust or other nominee?

 

A:

If your shares are held in a brokerage account or by another nominee, such as a bank or trust, then the brokerage firm, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares. However, you still are considered to be the beneficial owner of those shares, with your shares being held in “street name.” “Street name” holders generally cannot vote their shares directly and must instead instruct the brokerage firm, bank, trust or other nominee how to vote their shares. Your brokerage firm, bank, trust or other nominee will only be permitted to vote your shares for you at the special meeting if you instruct it how to vote. Therefore, it is important that you promptly follow the directions provided by your brokerage firm, bank, trust or other nominee regarding how to instruct them to vote your shares, which instructions are included on the enclosed voting instruction form. If you wish to vote in person at the special meeting, you must bring a legal proxy from your brokerage firm, bank, trust or other nominee authorizing you to vote at the special meeting and present it to the inspector of elections with your ballot when you vote.

In addition, because any shares you may hold in “street name” will be deemed to be held by a different stockholder than any shares you hold of record, shares held in “street name” will not be combined for voting purposes with shares you hold of record. To be sure your shares are voted, you should instruct your brokerage firm, bank, trust or other nominee to vote your shares that you hold in “street name.” Shares held by a corporation or business entity must be voted by an authorized officer of the entity.

 

Q:

What is a broker non-vote?

 

A:

If you are a beneficial owner of shares held in “street name” and do not provide your brokerage firm, bank, trust or other nominee with specific voting instructions, the brokerage firm, bank, trust or other nominee may generally vote on “routine” matters, but cannot vote on “non-routine” matters. The proposal to adopt the Merger Agreement and approve the Merger, the compensation proposal and the adjournment proposal are considered “non-routine” matters. If the brokerage firm, bank, trust or other nominee does not receive instructions from you on how to vote your shares on a non-routine matter, it will inform the inspector of elections that it does not have authority to vote on this matter with respect to your shares. This is referred to as a “broker non-vote.”

You should instruct your brokerage firm, bank, trust or other nominee how to vote your shares. Under the rules applicable to broker-dealers, your brokerage firm, bank, trust or other nominee does not have discretionary authority to vote your shares on any of the proposals scheduled to be voted on at the special meeting. A broker non-vote will have the same effect as a vote “AGAINST” the adoption of the Merger Agreement and approval of the Merger, but will not have no effect on the vote for the compensation proposal (provided that a quorum is present) and the adjournment proposal (even if a quorum is not present).

 

Q:

What is a proxy?

 

A:

A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of our stock. The written document describing the matters to be considered and voted on at the special meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of our stock is called a “proxy card.”

 

8


Table of Contents
Q:

May I change my vote after I have delivered my proxy?

 

A:

Yes. If you are the stockholder of record of our stock, you have the right to change or revoke your proxy at any time before the polls are closed at the special meeting:

 

   

by delivering to our Corporate Secretary a signed written notice of revocation bearing a date later than the date of the proxy, stating that the proxy is revoked;

 

   

by attending the special meeting and voting in person (your attendance at the meeting will not, by itself, revoke your proxy, so you must vote in person at the meeting to revoke your proxy);

 

   

by signing and delivering a new proxy, relating to the same shares of our stock and bearing a later date; or

 

   

by submitting another proxy by telephone or via the Internet after the date of your prior proxy and by the date and time indicated on the applicable proxy card(s).

If you are a “street name” holder of our stock, you should contact your brokerage firm, bank, trust or other nominee to obtain instructions as to how to change or revoke your proxy.

 

Q:

What happens if I return my proxy card but I do not indicate how to vote?

 

A:

If you properly execute and return your proxy card but do not include instructions on how to vote, your shares of our stock will be voted “FOR” the proposal to adopt the Merger Agreement and approve the Merger, “FOR” the approval of the compensation proposal and “FOR” the approval of the adjournment proposal. We do not currently intend to present any other proposals for consideration at the special meeting.

 

Q:

What is the deadline for voting my shares?

 

A:

If you are a stockholder of record, your proxy must be received via the Internet or by telephone by 11:59 p.m., Eastern Time, on March 9, 2020, in order for your shares to be voted at the special meeting. You may also instead mark, sign, date and return the enclosed proxy card by mail or in person at the special meeting, which must be received before the polls close at the special meeting, in order for your shares to be voted at the special meeting. If you are a beneficial owner, please read the voting instructions provided by your brokerage firm, bank, trust or other nominee for information on the deadline for voting your shares.

 

Q:

Should I send in my stock certificates now?

 

A:

NO. PLEASE DO NOT SEND IN YOUR CERTIFICATES NOW. After the Merger is completed, you will be sent a letter of transmittal with detailed written instructions for exchanging your shares of Company Common Stock for the Merger Consideration. If your shares are held in “street name” by your brokerage firm, bank, trust or other nominee, you will receive instructions from your brokerage firm, bank, trust or other nominee as to how to effect the surrender of your “street name” shares in exchange for the Merger Consideration.

 

Q:

What happens if I sell my shares of Company Common Stock after the record date but before the special meeting?

 

A:

The record date for stockholders entitled to vote at the special meeting is earlier than the date of the special meeting and the Effective Time. If you transfer your shares of Company Common Stock after the record date but before the special meeting, you will, unless special arrangements are made, retain your right to vote at the special meeting but will transfer the right to receive the Merger Consideration to the person to whom you transfer your shares.

In addition, if you sell your shares of Company Common Stock prior to the special meeting or prior to the Effective Time, you will not be eligible to exercise your appraisal rights in respect of the Merger. For a

 

9


Table of Contents

more detailed discussion of your appraisal rights and the requirements for properly demanding your appraisal rights, see the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Appraisal Rights” beginning on page 89 of this proxy statement and Annex B to this proxy statement.

 

Q:

What happens if I sell my shares of Company Preferred Stock after the record date but before the special meeting?

 

A:

The record date for stockholders entitled to vote at the special meeting is earlier than the date of the special meeting and the Effective Time. If you transfer your shares of Company Preferred Stock after the record date but before the special meeting, you will, unless special arrangements are made, retain your right to vote at the special meeting.

 

Q:

What happens if the proposal to adopt the Merger Agreement and approve the Merger is not approved by our stockholders or if the Merger is not completed for any other reason?

 

A:

If the proposal to adopt the Merger Agreement and approve the Merger is not approved by our stockholders (including pursuant to the majority of the minority vote required under MI 61-101), or if the Merger is not completed for any other reason, our stockholders will not receive any payment for their shares in connection with the Merger. Instead, we will remain a stand-alone public company and Company Common Stock will continue to be listed and traded on Nasdaq and the TSX and Company Preferred Stock will also continue to be outstanding. Under specified circumstances, we may be required to pay to Parent a termination fee, as described below under the section captioned “The Merger Agreement—Termination Fees” beginning on page 124 of this proxy statement. Upon termination of the Merger Agreement under certain other specified circumstances, Parent may be required to pay us a termination fee, as described below under the section captioned “The Merger Agreement—Termination Fees” beginning on page 124 of this proxy statement.

 

Q:

How do our directors and executive officers intend to vote their shares of Company Common Stock in respect of the proposal to adopt the Merger Agreement and approve the Merger?

 

A:

As of the close of business on the record date of the special meeting, our directors and executive officers and their respective affiliates beneficially owned and were entitled to vote, in the aggregate, 1,260,921 shares of Company Common Stock and no shares of Company Preferred Stock at the special meeting, or approximately 1.2% of the shares of Company Common Stock and Company Preferred Stock, together as a single class, in each case outstanding on such date. Although they are not obligated to do so, our directors and executive officers have informed us that they intend to vote all of their shares of Company Common Stock “FOR” the proposal to adopt the Merger Agreement and approve the Merger.

As of the close of business on the record date, an aggregate of 1,210,049 votes will be required to be excluded pursuant to Part 8 of MI 61-101. See “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Canadian Securities Law Matters—Excluded Votes” beginning on page 81 of this proxy statement for more information.

 

Q:

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

 

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards, if your shares are registered differently or are held in more than one account. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please sign, date and return (or grant your proxy electronically over the Internet or by telephone for) each proxy card and voting instruction form that you receive to ensure that all of your shares are voted.

 

10


Table of Contents
Q:

What is householding and how does it affect me?

 

A:

The SEC’s proxy rules permit companies and intermediaries, such as brokers and banks, to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing an address by delivering a single proxy statement to those stockholders, unless contrary instructions have been received. This procedure reduces the amount of duplicate information that stockholders receive and lowers printing and mailing costs for companies. Certain brokerage firms, banks, trusts or other nominees may have instituted householding for beneficial owners of our stock held through such firms. If your family has multiple accounts holding stock, you may have already received a householding notification from your broker. You may decide at any time to revoke your decision to household, and thereby receive multiple copies of proxy materials. If you wish to opt out of this procedure and receive a separate set of proxy materials in the future, or if you are receiving multiple copies and would like to receive only one, you should contact your brokerage firm, bank, trustee or other nominee or our Investor Relations Department at the address and telephone number below.

A separate copy of these proxy materials will be promptly delivered upon request by contacting our Investor Relations Department by (1) mail at Pattern Energy Group Inc., Attention: Investor Relations, 1088 Sansome Street, San Francisco, California 94111, (2) telephone at 416-526-1563, or (3) e-mail at ir@patternenergy.com.

 

Q:

Where can I find the voting results of the special meeting?

 

A:

If available, we may announce preliminary voting results at the conclusion of the special meeting. We intend to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the special meeting. All reports that we file with the SEC are publicly available when filed. For more information, see the section captioned “Where You Can Find More Information,” beginning on page 136 of this proxy statement.

 

Q:

Who can answer further questions?

 

A:

For additional questions about the Merger, assistance in submitting proxies or voting shares of Company Common Stock or Company Preferred Stock, or to request additional copies of the proxy statement or the enclosed proxy card, please contact our proxy solicitor at:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Shareholders (Toll-Free): 1-888-750-5834

Banks and Brokers (Collect): 1-212-750-5833

If your brokerage firm, bank, trust or other nominee holds your shares in “street name,” you should also call your brokerage firm, bank, trust or other nominee for additional information.

 

11


Table of Contents

FORWARD-LOOKING INFORMATION

This proxy statement contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, and “forward-looking information” within the meaning of Canadian securities laws. Such statements include statements concerning anticipated future events, projections and expectations that are not historical facts. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible” or “potential,” by future conditional verbs such as “assume,” “will,” “would,” “should,” “could” or “may,” or by variations of such words or by similar expressions or the negative thereof. Actual results may vary materially from those expressed or implied by forward-looking statements based on a number of factors, including, without limitation:

 

   

risks related to the consummation of the Merger, including the risks that (a) the Merger may not be consummated within the anticipated time period, or at all, (b) the parties may fail to obtain shareholder approval of the Merger Agreement and the Merger, (c) the parties may fail to secure applicable regulatory approvals, including from the Federal Energy Regulatory Commission, and (d) other conditions to the consummation of the Merger under the Merger Agreement may not be satisfied;

 

   

the effects that any termination of the Merger Agreement may have on the Company or its business, including the risks that (a) the price of Company Common Stock may decline significantly if the Merger is not completed, (b) the Merger Agreement may be terminated in circumstances requiring the Company to pay Parent a termination fee, or (c) the circumstances of the termination, including the possible imposition of a 12-month tail period during which the termination fee could be payable upon certain subsequent transactions, may have a chilling effect on alternatives to the Merger;

 

   

the effects that the announcement or pendency of the Merger may have on the Company and its business, including the risks that as a result (a) the Company’s business, operating results or stock price may suffer, (b) the Company’s current plans and operations may be disrupted, (c) the Company’s ability to retain or recruit key employees may be adversely affected, (d) the Company’s business relationships (including with suppliers, off-takers, and business partners) may be adversely affected, (e) the Company is not able to access the debt or equity markets on favorable terms, or at all, or (f) the Company’s management’s or employees’ attention may be diverted from other important matters;

 

   

the effect of limitations that the Merger Agreement places on the Company’s ability to operate its business or engage in alternative transactions;

 

   

the nature, cost and outcome of pending and future litigation and other legal proceedings, including any such proceedings related to the Merger and instituted against the Company and others;

 

   

the risk that the Merger and related transactions may involve unexpected costs, liabilities or delays;

 

   

the risk that our financial results differ from those set forth in the projections described in this proxy statement; and

 

   

other economic, business, competitive, legal, regulatory, and/or tax factors detailed in our filings with the SEC and Canadian securities regulatory authorities, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as updated or supplemented by subsequent reports, which discuss these and other important risk factors concerning our operations.

We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We do not assume any obligation to publicly update any forward-looking statement after it is made, whether as a result of new information, future events or otherwise, except as required by law.

All information contained in this proxy statement concerning Parent and Merger Sub has been supplied by Parent and Merger Sub, as applicable, and has not been independently verified by us.

 

12


Table of Contents

SUMMARY

This summary highlights selected information from this proxy statement related to the Merger and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should read carefully this entire proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement. See the section captioned “Where You Can Find More Information” beginning on page 136 of this proxy statement. The Merger Agreement is attached as Annex A to this proxy statement. We encourage you to read the Merger Agreement, which is the legal document governing the Merger. Each item in this summary references another section of this proxy statement with more detailed disclosure about that item. Capitalized terms used in this section but not defined in this proxy statement have the meaning ascribed to them in the Merger Agreement.

Parties Involved in the Merger (see page 28)

Pattern

We are a vertically integrated renewable energy company with a mission to transition the world to renewable energy. Our business consists of both (i) an operating business segment, which is comprised of a portfolio of renewable energy power projects and (ii) a development investment segment, which principally consists of our 29% ownership interest in Pattern Energy Group 2 LP (“Pattern Development”), an upstream development platform. Through our operating business segment, we hold ownership interests in 28 renewable energy projects with a total operating portfolio capacity of approximately 4.4 gigawatts (“GW”) in the United States, Canada and Japan. Projects in which we have an owned interest use proven, best-in-class technology and have generally contracted to sell all or a majority of their output pursuant to fixed-price power sale agreements (“PSAs”). Approximately 90% of the electricity to be generated by our projects will be sold under our PSAs which have a weighted average remaining contract life of approximately 13 years as of September 30, 2019.

Parent

Parent is an entity indirectly wholly owned by CPPIB. CPPIB is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (“CPP”) to pay current benefits in the best interests of 20 million contributors and beneficiaries. In order to build diversified portfolios of assets, CPPIB invests in public equities, private equities, real estate, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPPIB is governed and managed independently of CPP and at arm’s length from governments. On September 30, 2019, the CPP Fund totaled C$409.5 billion. Parent was formed on October 25, 2019, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement. Parent has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement.

Merger Sub

Merger Sub, a Delaware corporation and a subsidiary of Parent, was formed on October 25, 2019, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement. Merger Sub has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement. Upon completion of the Merger, Merger Sub will merge with and into Pattern, and Merger Sub will cease to exist.



 

13


Table of Contents

The Special Meeting (see page 29)

Date, Time and Place

A special meeting of our stockholders will be held on Tuesday, March 10, 2020, at 8:00 a.m., Pacific Time, at our corporate office at 1088 Sansome Street, San Francisco, California 94111. We intend to mail this proxy statement, the proxy card and the notice of special meeting on or about February 5, 2020 to all stockholders of record entitled to vote at the special meeting.

Record Date; Shares Entitled to Vote

You are entitled to vote at the special meeting if you owned shares of Company Common Stock or Company Preferred Stock as of the close of business on January 31, 2020, the record date of the special meeting. You will have one vote at the special meeting for each share of Company Common Stock or Company Preferred Stock that you owned as of the close of business on the record date.

Purpose

At the special meeting, we will ask stockholders to vote on proposals to (1) adopt the Merger Agreement and approve the Merger, (2) approve, on a non-binding advisory basis, the compensation proposal, and (3) approve the adjournment proposal.

Quorum

As of the close of business on the record date, there were an aggregate of 98,218,625 shares of Company Common Stock and 10,400,000 shares of Company Preferred Stock, voting together as a single class, in each case outstanding and entitled to vote at the special meeting. The holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, will constitute a quorum at the special meeting.

Required Vote

The votes required to approve each proposal are as follows:

 

  1.

The proposal to adopt the Merger Agreement and approve the Merger must be approved by (i) the affirmative vote of the holders of a majority of the shares of Company Common Stock and Company Preferred Stock, voting together as a single class, in each case outstanding and entitled to vote thereon and (ii) under applicable Canadian securities laws, a majority of the votes cast by the holders of Company Common Stock, present in person or represented by proxy at the special meeting and entitled to vote, excluding those holders of Company Common Stock whose votes are required to be excluded pursuant to Part 8 of MI 61-101. Abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and approve the Merger.

 

  2.

The compensation proposal must be approved by a majority of the votes cast by holders of Company Common Stock and Company Preferred Stock, voting together as a single class. Abstentions will not be treated as “votes cast” for purposes of determining the approval of the compensation proposal. This means that abstentions will have no effect on whether the compensation proposal is approved.

 

  3.

The adjournment proposal must be approved by a majority of the votes cast by holders of Company Common Stock and Company Preferred Stock, voting together as a single class. Abstentions will not be treated as “votes cast” for purposes of determining the approval of the adjournment proposal. This means that abstentions will have no effect on whether the adjournment proposal is approved.

Stock Ownership of Our Directors and Executive Officers

As of the close of business on the record date of the special meeting, our directors and executive officers and their respective affiliates beneficially owned and were entitled to vote, in the aggregate, 1,260,921 shares of



 

14


Table of Contents

Company Common Stock and no shares of Company Preferred Stock, representing approximately 1.2% of the outstanding shares of Company Common Stock and Company Preferred Stock, together as a single class. Although they are not obligated to do so, our directors and executive officers have informed us of their intent to vote all of their shares of Company Common Stock (1) “FOR” the proposal to adopt the Merger Agreement and approve the Merger, (2) “FOR” the compensation proposal, and (3) “FOR” the adjournment proposal.

As of the close of business on the record date, an aggregate of 1,210,049 votes will be required to be excluded pursuant to Part 8 of MI 61-101. See “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Canadian Securities Law Matters—Excluded Votes” beginning on page 81 of this proxy statement for more information.

Voting by Holders of Company Preferred Stock

As of the close of business on the record date, there were approximately 108,618,625 shares of Company Common Stock and Company Preferred Stock issued and outstanding, of which 98,218,625 (or 90.4%) were shares of Company Common Stock, held collectively by approximately 29 stockholders of record, and 10,400,000 (or 9.6%) were shares of Company Preferred Stock, held collectively by approximately eight stockholders of record. Each stockholder is entitled to one vote per share of Company Common Stock and one vote per share of Company Preferred Stock at the special meeting on each of the proposals.

Pursuant to the Securities Purchase and Rights Agreement by and among Pattern, CBRE Caledon Jupiter II Investments LP, CBRE Caledon Global Infrastructure Fund Holdings I, LP, 1836562 Ontario Inc., CBRE Caledon Trident Infrastructure Investments II LP, Caledon Sirius Investments LP, 1793177 Ontario Inc., CBRE Caledon Nova Investments, L.P. and Caledon Taurus Investments LP, dated as of October 10, 2019 (the “Company Preferred Stock Purchase Agreement”), the holders of Company Preferred Stock and Pattern have agreed that the holders of Company Preferred Stock shall vote their 10,400,000 shares of Company Preferred Stock in a manner consistent with the recommendations of the Board, provided that the special meeting takes place on or before May 10, 2021. Additionally, the voting rights of the shares of Company Preferred Stock shall not exceed 9.9% of the outstanding shares of Company Common Stock and Company Preferred Stock, voting together as a single class. As a result, at least 10,400,000 (or 9.6%) of the outstanding shares of Company Common Stock and Company Preferred Stock, voting together as a single class, shall vote “FOR” each of the three proposals. For the purposes of the “majority of the minority vote” required pursuant to MI 61-101, the Merger is required to be approved by a majority of votes cast by holders of Company Common Stock, other than those holders required to be excluded from such vote pursuant to Part 8 of MI 61-101. Accordingly, the votes of Company Preferred Stock in respect of Proposal 1: Adoption of the Merger Agreement and Approval of the Merger will not be included for the purposes of calculating the “majority of the minority vote” under MI 61-101.

Voting and Proxies

Any stockholder of record entitled to vote may submit a proxy via the Internet or by telephone, as specified in the Internet and telephone voting instructions on your proxy card, return your proxy card by mail using the postage prepaid envelope provided, or may vote in person by appearing at the special meeting. If you are a beneficial owner and hold your shares of our stock in “street name” through a bank, broker or other nominee, you should instruct your bank, broker or other nominee on how you wish to vote your shares of our stock using the instructions provided by your bank, broker or other nominee. Under applicable stock exchange rules, banks, brokers or other nominees have the discretion to vote on routine matters. The proposals to be considered at the special meeting are non-routine matters, and banks, brokers and other nominees cannot vote on these proposals without your instructions. Therefore, it is important that you cast your vote or instruct your bank, broker or nominee on how you wish to vote your shares.



 

15


Table of Contents

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before the polls are closed at the special meeting by (1) signing another proxy card with a later date and returning it by mail prior to the special meeting; (2) submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy; (3) delivering a written notice of revocation to our Corporate Secretary; or (4) attending the special meeting and voting in person by ballot.

If you hold your shares of our stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the special meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

The Merger (see page 35)

Upon the terms and subject to the conditions of the Merger Agreement, if the Merger is completed, Merger Sub will merge with and into Pattern, and Pattern will continue as the surviving corporation and as a subsidiary of Parent (the “Surviving Corporation”). As a result of the Merger, we will cease to be a publicly traded company, all outstanding shares of Company Common Stock will be canceled and converted into the right to receive the Merger Consideration (except for any shares of Company Common Stock owned by stockholders who are entitled to and who properly exercise appraisal rights under the DGCL), while all outstanding shares of Company Preferred Stock will remain outstanding.

After the Merger is completed, each holder of shares of Company Common Stock will have the right to receive the Merger Consideration, but will no longer have any rights as a holder of shares of Company Common Stock (except that such holders of shares of Company Common Stock who properly exercise their appraisal rights may have the right to receive a payment for the “fair value” of their shares of Company Common Stock as determined pursuant to an appraisal proceeding as contemplated by Delaware law, as described below under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Appraisal Rights” beginning on page 89 of this proxy statement).

After the Merger is completed, each holder of shares of Company Preferred Stock will hold preferred securities in the Surviving Corporation with the same rights and obligations as the Company Preferred Stock. The Merger would result in certain adjustments to the terms of the Company Preferred Stock, including an increase in dividend rate and certain adjustments to the contingent dividends.

Treatment of Pattern Equity Awards (see page 69)

Pursuant to the Merger Agreement, except as described in the following sentence, (i) each outstanding restricted share of Company Common Stock, the vesting of which is conditioned solely on the passage of time (each, a “Company Restricted Share”) will be vested and all restrictions will lapse in full as of immediately before the Effective Time, and each such Company Restricted Share will be converted into the right to receive the Merger Consideration, (ii) each outstanding restricted share of Company Common Stock, the vesting of which is conditioned in whole or in part on the satisfaction of performance criteria (each, a “Company Performance Share”) will be vested based on the maximum level of performance and all restrictions will lapse in full as of immediately before the Effective Time, and each such Company Performance Share will be converted into the right to receive the Merger Consideration, (iii) each of our outstanding restricted stock units (each, a “Company RSU”) will be vested and all restrictions will lapse in full as of immediately before the Effective Time and each such Company RSU award will be canceled and converted into the right to receive an amount in cash, without interest, equal in value to the product of (x) the Merger Consideration multiplied by (y) the aggregate number of shares of Company Common Stock subject to such Company RSU award immediately before the Effective Time and (iv) each outstanding option to purchase a share of Company Common Stock (each, a “Company Option”), whether or not exercisable or vested, will be canceled and converted at the Effective Time



 

16


Table of Contents

into the right to receive an amount in cash, without interest, equal to the product of (x) the excess, if any, of the Merger Consideration over the per share exercise price of the applicable Company Option multiplied by (y) the aggregate number of shares of Company Common Stock subject to such Company Option immediately before the Effective Time; provided that any such Company Option with a per share exercise price that is equal to or greater than the Merger Consideration will be canceled for no consideration. Company Restricted Shares and Company Performance Shares held by certain members of management will either (A) be canceled and the holder will be issued units in a newly formed entity or (B) converted into restricted shares of the Surviving Corporation with substantially the same terms and conditions as related to vesting and forfeiture, except that the Company Performance Shares will be deemed satisfied at the maximum level of performance.

Financing of the Merger (see page 86)

Pattern and CPPIB anticipate that the total amount of funds necessary to complete the Merger and the related transactions will be funded via equity financing and debt financing as described below and available cash on our balance sheet, if any. This amount includes amounts needed to (1) pay stockholders the amounts due under the Merger Agreement; (2) make payments in respect of our outstanding equity-based awards pursuant to the Merger Agreement; (3) repay our existing indebtedness, to the extent required under the terms of such indebtedness; and (4) pay costs and expenses in connection with the aforementioned transaction.

In connection with the Merger, Parent and CPPIB entered into an equity commitment letter, dated as of November 3, 2019, pursuant to which CPPIB has committed, subject to the conditions and limitations set forth therein, to provide equity financing in an aggregate amount of up to $2.64 billion. For more information, see the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Financing of the Merger” beginning on page 86 of this proxy statement.

In connection with the Merger, Parent has obtained debt financing commitments from a consortium of financial institutions to provide Merger Sub with (1) up to $650 million of senior secured 364-day bridge term loans and (2) a senior secured 364-day revolving credit facility in a principal amount of not more than $300 million. For more information, see the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Financing of the Merger” beginning on page 86 of this proxy statement.

The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition.

Limited Guarantee (see page 88)

Subject to the terms and conditions set forth in a limited guarantee, dated November 3, 2019 (the “Limited Guarantee”), CPP Investment Board Private Holdings (4) Inc. (the “CPPIB Guarantor”) has guaranteed the full, complete and timely performance by Parent of certain payment obligations under the Merger Agreement, including the payment by Parent of the termination fee of $204.0  million (the “Parent Termination Fee”) if, when and as due in accordance with the Merger Agreement.

Conditions to the Closing of the Merger (see page 120)

Our obligations and the obligations of Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver of certain conditions, including (among other conditions) the following:

 

   

(1) the approval of the adoption of the Merger Agreement by the affirmative vote of the holders of a majority of all of the outstanding shares of Company Common Stock and Company Preferred Stock entitled to vote thereon, voting together as a single class and (2) the approval of the Merger by a



 

17


Table of Contents
 

majority of the votes cast by the holders of Company Common Stock, present in person or represented by proxy at the special meeting and entitled to vote, excluding those holders of Company Common Stock whose votes are required to be excluded pursuant to Part 8 of MI 61-101, in each case at the special meeting (together, the “Requisite Company Approvals”);

 

   

the receipt of certain required governmental and regulatory approvals; and

 

   

the consummation of the Merger not being made illegal or otherwise prohibited by any law or order of any governmental authority of competent jurisdiction.

In addition, Parent and Merger Sub are not obligated to consummate the Merger under the Merger Agreement unless the following conditions are satisfied at or prior to the Effective Time:

 

   

our representations and warranties regarding the absence of a Company Material Adverse Effect (as defined under the section captioned “The Merger Agreement—Representations and Warranties” beginning on page 109 of this proxy statement) are true and correct in all respects as of the Effective Time;

 

   

our representations and warranties regarding certain elements of our capitalization are true and correct as of the date of the Merger Agreement and as of the closing date of the Merger (the “Closing Date”) as though made on and as of such date (except to the extent that any such representation and warranty expressly speaks as of a specified date, in which case such representation and warranty are so true and correct as of such specified date) except for de minimis inaccuracies;

 

   

our representations and warranties regarding certain elements of our organization, certain elements of our corporate authority and the absence of broker’s and finder’s fees are true and correct in all material respects as of the date of the Merger Agreement and as of the Closing Date as though made on and as of such date (except to the extent that any such representation and warranty expressly speaks as of a specified date, in which case such representation and warranty are so true and correct as of such specified date);

 

   

our other representations and warranties set forth in the Merger Agreement (other than those noted in the preceding three bullet points) (without giving effect to any “materiality,” “material adverse effect” or similar qualifications therein), are true and correct as of immediately prior to the Effective Time as if made on and as of such date except to the extent that any such representation and warranty expressly speaks as of a specified date, in which case such representation and warranty are so true and correct as of such specified date), in each case, except for such failures to be so true and correct, individually and in the aggregate, as have not had a Company Material Adverse Effect;

 

   

Parent has received a certificate executed by one of our executive officers certifying that the conditions described in the preceding bullet points have been satisfied; and

 

   

we have performed in all material respects all obligations and agreements contained in the Merger Agreement to be performed or complied with by us prior to or on the Effective Time.

Further, we are not obligated to effect the Merger under the Merger Agreement unless the following conditions are satisfied at or prior to the Effective Time:

 

   

Parent’s and Merger Sub’s representations and warranties regarding certain elements of the capitalization of Merger Sub are true and correct as of the date of the Merger Agreement and as of the Closing Date as though made on and as of such date (except to the extent that any such representation and warranty expressly speaks as of a specified date, in which case such representation and warranty are so true and correct as of such specified date) except for de minimis inaccuracies;

 

   

Parent’s and Merger Sub’s representations and warranties regarding certain elements of their organization, certain elements of their corporate authority and the absence of broker’s and finder’s fees



 

18


Table of Contents
 

are true and correct in all material respects as of the date of the Merger Agreement and as of the Closing Date as though made on and as of such date (except to the extent that any such representation and warranty expressly speaks as of a specified date, in which case such representation and warranty are so true and correct as of such specified date);

 

   

Parent and Merger Sub’s other representations and warranties set forth in the Merger Agreement (other than those noted in the preceding two bullet points) (without giving effect to any “materiality,” “material adverse effect” or similar qualifications therein), are true and correct as of immediately prior to the Effective Time as if made on and as of such date except to the extent that any such representation and warranty expressly speaks as of a specified date, in which case such representation and warranty are so true and correct as of such specified date), in each case, except for such failures to be so true and correct, individually and in the aggregate, as have not had a Parent Material Adverse Effect;

 

   

we have received a certificate executed by one of Parent’s executive officers certifying on behalf of Parent and Merger Sub that the conditions described in the preceding bullet points have been satisfied; and

 

   

Parent and Merger Sub have performed in all material respects all obligations and agreements contained in the Merger Agreement to be performed or complied with by them prior to or on the Effective Time.

The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition.

Regulatory Approvals Required for the Merger (see page 102)

Under the Merger Agreement, the Merger cannot be completed until certain regulatory approvals or consents have been obtained and certain filings have been made with a number of regulatory authorities.

The material regulatory approvals, consents and filings include the following:

 

   

the expiration or early termination of the waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the rules and regulations thereunder;

 

   

(1) the Commissioner of Competition in Canada has issued an “advance ruling certificate” or (2) (x) the expiration, termination or waiver of the applicable waiting period and (y) the Commissioner of Competition in Canada has issued a “no-action” letter with respect to the transaction contemplated by the Merger Agreement, in each case pursuant to the Competition Act (Canada);

 

   

(1) approval by the Antimonopoly Committee of Ukraine (the “AMC”) or (2) the expiration of the applicable time period for approval without any decision being issued by the AMC, in each case pursuant to the Law of Ukraine “On Protection of Economic Competition” No 2210-III of 11 January 2001, as amended (the “Ukraine Competition Act”);

 

   

if applicable, approval by the Japanese Fair Trade Commission, pursuant to the Act Concerning the Prohibition of Private Monopoly and Maintenance of Fair Trade, as amended;

 

   

approval from the Federal Energy Regulatory Commission (“FERC”), pursuant to Section 203 of the Federal Power Act (the “FPA”); and

 

   

completion of review of the Merger by the Committee on Foreign Investment in the United States (“CFIUS”), pursuant to Section 721 of the Defense Production Act of 1950, as amended, resulting in a determination by CFIUS that there are no unresolved national security concerns or, in the case of a CFIUS referral to the President, a decision by the President not to suspend or prohibit the Merger.



 

19


Table of Contents

We and Parent have agreed to use our respective reasonable best efforts to take and cause to be taken all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate the Merger and the other transactions contemplated by the Merger Agreement as soon as reasonably practicable, including obtaining regulatory approvals necessary for the Merger, subject to certain customary limitations.

We and Parent are not currently aware of any material regulatory filings, authorizations, approvals or consents that are required prior to the parties’ consummation of the Merger other than those described in “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Regulatory Approvals Required for the Merger.” There can be no assurance, however, if and when any of the approvals required to be obtained for the Merger and the other transactions contemplated by the Merger Agreement will be obtained or as to the conditions or limitations that such approvals may contain or impose.

Recommendation of Our Board (see page 54)

Our Board, following the recommendation of the Special Committee and after considering various factors described under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Recommendation of Our Board and Reasons for the Merger” beginning on page 54 of this proxy statement has (1) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Pattern and its stockholders and (2) adopted and approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. Our Board recommends that you vote (1) “FOR” the proposal to adopt the Merger Agreement and approve the Merger, (2) “FOR” the compensation proposal and (3) “FOR” the adjournment proposal.

Fairness Opinion of Evercore (see page 59)

The Special Committee retained Evercore Group L.L.C. (“Evercore”) to act as its financial advisor in connection with the Special Committee’s review of strategic alternatives, including the Merger. As part of this engagement, the Special Committee requested that Evercore evaluate the fairness, from a financial point of view, of the Merger Consideration to be received by the holders of Company Common Stock (other than holders of Excluded Shares (as defined in the Merger Agreement)). At a meeting of the Special Committee held on November 3, 2019, Evercore rendered to the Special Committee its oral opinion, which was subsequently confirmed in writing, to the effect that, as of that date and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s opinion, the Merger Consideration of $26.75 per share to be received by the holders of Company Common Stock in the Merger was fair, from a financial point of view, to such holders (other than holders of Excluded Shares).

The full text of the written opinion of Evercore, dated November 4, 2019, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex C to this proxy statement and is incorporated herein by reference. We encourage you to read Evercore’s opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the Special Committee (in its capacity as such) in connection with its evaluation of the Merger. The opinion does not constitute a recommendation to the Special Committee or to any other persons in respect of the Merger, including as to how any holder of shares of Company Common Stock or Company Preferred Stock should vote or act in respect of the Merger. Evercore’s opinion does not address the relative merits of the Merger as compared to other business or financial strategies that might be available to us, nor does it address the underlying business decision to engage in the Merger.



 

20


Table of Contents

Interests of Our Directors and Executive Officers in the Merger (see page 69)

When considering the recommendation of our Board, based on the unanimous recommendation of the Special Committee, that you vote to approve the proposal to adopt the Merger Agreement and approve the Merger, you should be aware that our directors and executive officers and certain additional officers of the Company may have interests in the Merger that are different from, or in addition to, the interests of stockholders generally, including, among other things, the accelerated vesting of equity awards and the preservation of indemnification and insurance protections for service as directors and officers of Pattern and our subsidiaries. For more information, see the sections captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 69 of this proxy statement, “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement” beginning on page 74 of this proxy statement, “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Quantification of Potential Payments and Benefits to Our Named Executive Officers” beginning on page 77 of this proxy statement and “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Canadian Securities Law Matters” beginning on page  79 of this proxy statement.

Appraisal Rights (see page 89)

If the Merger is completed, holders of Company Common Stock who do not vote in favor of the adoption of the Merger Agreement and approval of the Merger and who properly demand appraisal of their shares of Company Common Stock may be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL. This means that holders of Company Common Stock may be entitled to have their shares of Company Common Stock appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Company Common Stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court. Due to the complexity of the appraisal process, holders of Company Common Stock who wish to seek appraisal of their shares of Company Common Stock are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.

Holders of Company Common Stock considering seeking appraisal should be aware that the fair value of their shares of Company Common Stock as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the Merger Consideration (see pages 94–96)

To exercise your appraisal rights, you must (1) submit a written demand for an appraisal of your shares of Company Common Stock prior to the stockholder vote on the adoption of the Merger Agreement and approval of the Merger; (2) not submit a proxy or otherwise vote in favor of the adoption of the Merger Agreement and approval of the Merger; (3) continue to hold your shares of Company Common Stock through the Effective Time; (4) not thereafter withdraw your demand for appraisal of your shares or otherwise lose your appraisal rights, in each case in accordance with the DGCL; and (5) otherwise meet the criteria and follow the procedures set forth in Section 262 of the DGCL. Your failure to follow exactly the procedures specified under the DGCL may result in the loss of your appraisal rights. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced in Annex B to this proxy statement. If you hold your shares of Company Common Stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal on your behalf by your bank, broker or other nominee.

Litigation Relating to the Merger (see page 96)

Several complaints related to the Merger have been filed to date. The complaints are captioned: Stephen Donnell v. Pattern Energy Group Inc. et al., Case No. 1:19-cv-11680, which was filed by a purported Pattern



 

21


Table of Contents

stockholder in the United States District Court for the Southern District of New York on December 20, 2019; Richard Baum v. Pattern Energy Group Inc. et al., Case No. 1:19-cv-02360-UNA, which was filed on behalf of a putative class of Pattern’s public stockholders in the United States District Court for the District of Delaware on December 27, 2019; Phillip Krieger v. Pattern Energy Group Inc. et al., Case No. 3:19-cv-08437, which was filed on behalf of a putative class of Pattern’s public stockholders in the United States District Court for the Northern District of California on December 27, 2019; John Thompson v. Pattern Energy Group Inc. et al., Case No. 1:19-cv-02369-UNA, which was filed on behalf of a putative class of Pattern’s public stockholders in the United States District Court for the District of Delaware on December 30, 2019; David Frieman v. Pattern Energy Group Inc. et al., Case No. 1:20-cv-00171, which was filed by a purported Pattern stockholder in the United States District Court for the Southern District of New York on January 8, 2020; Phil Burge v. Pattern Energy Group Inc. et al., Case No. 1:20-cv-00213, which was filed by a purported Pattern stockholder in the United States District Court for the Eastern District of New York on January 10, 2020; Bushansky v. Pattern Energy Group Inc. et al., Case No. 3:20-cv-00401, which was filed by a purported Pattern stockholder in the United States District Court for the Northern District of California on January 21, 2020; and Timothy Wilhelmson v. Pattern Energy Group Inc., et al., No. 3:20-cv-0797, which was filed by a purported Pattern shareholder in the United States District Court for the Northern District of California on February 3, 2020 (collectively the “Merger Litigations”). The Merger Litigations generally name as defendants Pattern, as well as certain of its officers and directors. The Baum complaint also asserts claims against CPPIB. The Merger Litigations generally allege that defendants violated federal securities laws by failing to disclose material information in the version of its proxy statement filed with the SEC on December 13, 2019. Each of the Merger Litigations seeks, among other things, to enjoin the Merger and recover damages, as well as an award of the plaintiffs’ attorneys’ fees and costs of the litigation. Pattern believes that the claims asserted are wholly without merit.

Material U.S. Federal Income Tax Consequences of the Merger (see page 96)

For U.S. federal income tax purposes, the receipt of cash by a U.S. Holder (as defined under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 96 of this proxy statement) in exchange for such U.S. Holder’s shares of Company Common Stock in the Merger generally will result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of Company Common Stock surrendered in the Merger.

A Non-U.S. Holder (as defined under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 96 of this proxy statement) generally will not be subject to U.S. federal income tax with respect to the exchange of Company Common Stock for cash in the Merger unless such Non-U.S. Holder has certain connections to the United States.

For more information, see the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 96 of this proxy statement. Stockholders are urged to consult their own tax advisors concerning the U.S. federal income tax consequences relating to the Merger in light of their particular circumstances and any consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.

Material Canadian Federal Income Tax Consequences of the Merger (see page 99)

For the purposes of the Tax Act, the receipt of Merger Consideration by a Holder (as defined in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material Canadian Federal Income Tax Consequences of the Merger” beginning on page 99 of this proxy statement) in exchange for such Holder’s shares of Company Common Stock in the Merger will generally be treated as proceeds of disposition of such shares and may result in a capital gain (or a capital loss) for the purposes of the Tax Act to the extent that such proceeds of disposition exceed (or are less than) the total of the adjusted cost base of the shares to you and any reasonable expenses of disposition.



 

22


Table of Contents

A Canadian Holder (as defined in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material Canadian Federal Income Tax Consequences of the Merger” beginning on page 99 of this proxy statement) will generally be subject to Canadian federal income tax on the taxable portion of any such capital gain. A Non-Canadian Holder (as defined in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material Canadian Federal Income Tax Consequences of the Merger” beginning on page 99 of this proxy statement) should generally not be subject to Canadian federal income tax on any such capital gain provided that the shares are not “taxable Canadian property” within the meaning of the Tax Act.

For more information, see the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material Canadian Federal Income Tax Consequences of the Merger” beginning on page 99 of this proxy statement. The foregoing is qualified in its entirety by the discussion in that section. Stockholders are urged to consult their own tax advisors concerning the Canadian federal income tax consequences relating to the Merger in light of their particular circumstances and any consequences arising under the laws of any provincial, local or foreign taxing jurisdiction.

Delisting and Deregistration of Company Common Stock (see page 35)

If the Merger is completed, Company Common Stock will be delisted from the Nasdaq and the TSX and deregistered under the Exchange Act.

Alternative Acquisition Proposals (see page 115)

Pursuant to the Merger Agreement, during the period from November 3, 2019 and continuing until 11:59 p.m., Eastern Time, on December 8, 2019 (the “Go-Shop Period”), we and our directors, officers, employees, investment bankers, attorneys, accountants and other advisors and representatives (collectively, “Representatives”) were permitted to:

 

   

solicit, initiate, knowingly encourage, induce or facilitate any inquiries or the making of any indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, a Company Acquisition Proposal (as defined in the section captioned “The Merger Agreement—Our Board’s Recommendation; Company Board Recommendation Change” beginning on page 116 of this proxy statement);

 

   

engage in, continue or otherwise participate in any discussions with any person or negotiations regarding, or provide any non-public information or data to any person relating to, or cooperate in any way with, any inquiry, indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, a Company Acquisition Proposal;

 

   

except as required by laws, waive, terminate, modify or release any person (other than Parent and its affiliates) from any provision of, or fail to enforce or grant any permission, waiver or request under, any confidentiality or “standstill” or similar agreement or obligation with respect to Pattern or our subsidiaries, subject to certain exceptions; or

 

   

execute or enter into any letter of intent, agreement in principle, term sheet, memorandum of understanding, merger agreement, acquisition agreement or other similar agreement relating to a Company Acquisition Proposal, subject to certain exceptions.

During the Go-Shop Period, the Special Committee, with the assistance of Evercore and Goldman, Sachs & Co. LLC, contacted 16 potential bidders. Each party that was contacted either notified the Special Committee or its advisors that, after further review, it would not be interested in pursuing a potential transaction with Pattern or did not respond.



 

23


Table of Contents

Following the Go-Shop Period and until the Effective Time (or the earlier termination of the Merger Agreement in accordance with its terms), none of us, our subsidiaries, or any of our respective officers, directors and employees may, and we must instruct and direct our and our subsidiaries’ Representatives not to, directly or indirectly:

 

   

solicit, initiate, knowingly encourage, induce or facilitate any inquiries or the making of any indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, a Company Acquisition Proposal;

 

   

engage in, continue or otherwise participate in any discussions with any person or negotiations regarding, or provide any non-public information or data to any person relating to, or cooperate in any way with, any inquiry, indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, a Company Acquisition Proposal;

 

   

except as required by laws, waive, terminate, modify or release any person (other than Parent and its affiliates) from any provision of, or fail to enforce or grant any permission, waiver or request under, any confidentiality or “standstill” or similar agreement or obligation with respect to Pattern or our subsidiaries, subject to certain exceptions; or

 

   

execute or enter into any letter of intent, agreement in principle, term sheet, memorandum of understanding, merger agreement, acquisition agreement or other similar agreement relating to a Company Acquisition Proposal, subject to certain exceptions.

Notwithstanding these restrictions, under certain circumstances, prior to the adoption of the Merger Agreement and approval of the Merger by our stockholders, we may provide non-public information to, and engage or participate in discussions or negotiations with, any third party who has executed an acceptable confidentiality agreement with us and from whom we receive a bona fide written Company Acquisition Proposal from such third party that is not withdrawn and did not result from a material breach of our non-solicitation obligations and that our Board, the Special Committee or any other duly authorized committee of our Board determines in good faith, after consultation with its legal counsel, that (i) failure to take such action could reasonably be expected to be inconsistent with such directors’ fiduciary duties and (ii) such bona fide written Company Acquisition Proposal either constitutes or is reasonably likely to result in a Superior Company Proposal (as defined in the section captioned “The Merger Agreement—Our Board’s Recommendation; Company Board Recommendation Change” beginning on page 116 of this proxy statement). For more information, see the section captioned “The Merger Agreement—Alternative Acquisition Proposals” beginning on page 115 of this proxy statement.

Change in Our Board’s Recommendation (see page 116)

Our Board, based on the unanimous recommendation of the Special Committee, has recommended that Pattern stockholders vote “FOR” the adoption of the Merger Agreement and approval of the Merger. Generally, our Board will not change its recommendation in favor of the Merger.

However, the Merger Agreement permits our Board, the Special Committee or any other duly authorized committee of our Board to effect a change of recommendation (a “Company Recommendation Change”) and/or, in response to a Superior Company Proposal, terminate the Merger Agreement in order to enter into an acquisition agreement providing for such Superior Company Proposal, if we have received a Superior Company Proposal that did not result from a material breach of our non-solicitation obligations, subject to the requirements that:

 

   

we provide prior written notice to Parent, at least five business days in advance, that it intends to effect a Company Recommendation Change and/or terminate the Merger Agreement to enter into a Superior Company Proposal, which notice specifies the identity of the person making such proposal and the



 

24


Table of Contents
 

material terms thereof and included a copy of the proposed Superior Company Proposal, the proposed acquisition agreement with respect thereto and all related documentation;

 

   

during the five business day period following the date on which notice was received (or a three business day period, in the event of any change to the financial terms or other material terms of such Superior Company Proposal), we and our Representatives negotiate with Parent in good faith (if requested by Parent) to make such adjustments to the terms and conditions of the Merger Agreement as Parent may propose; and

 

   

upon the conclusion of the applicable negotiation period with Parent, our Board, the Special Committee or any other duly authorized committee of our Board consider any revisions to the terms of the Merger Agreement proposed in writing by Parent in good faith and determine, after consultation with our financial advisors and outside legal counsel, that the Company Acquisition Proposal constitutes a Superior Company Proposal.

In addition, our Board may also effect a Company Recommendation Change in response to a Company Intervening Event (as defined in the section captioned “The Merger Agreement—Our Board’s Recommendation; Company Board Recommendation Change” beginning on page 116 of this proxy statement) if our Board, the Special Committee or any other duly authorized committee of our Board determines in good faith after consultation with its financial advisors and outside legal counsel that the failure to effect a Company Recommendation Change could reasonably be expected to be inconsistent with the directors’ fiduciary duties under applicable law, subject to a five business day negotiation period with Parent.

Termination of the Merger Agreement (see page 122)

The Merger Agreement may be terminated at any time prior to the Effective Time in the following ways:

 

   

by mutual written consent of Parent and Pattern;

 

   

by either Parent or Pattern, if:

 

     

the Merger shall not have been consummated by August 4, 2020 (the “Termination Date”), provided that the Termination Date may be extended until November 4, 2020 by either party if all conditions to closing other than the receipt of regulatory approvals have been satisfied, provided further that the right to terminate the Merger Agreement as a result of the occurrence of the termination date will not be available to any party whose failure to perform any of its obligations under the Merger Agreement was the principal cause of or resulted in the occurrence of the failure of a condition to the closing of the Merger (the “Closing”) to have occurred by the Termination Date;

 

     

any court of competent jurisdiction or other governmental authority of competent jurisdiction has issued any order or taken any other action permanently restraining, enjoining or otherwise prohibiting the Merger, and such order has become final and non-appealable (provided, that such right to terminate the Merger Agreement will not be available to any party whose failure to perform any of its obligations under the Merger Agreement has been the principal cause of or resulted in the occurrence of the failure of a condition to the Closing to have occurred); or

 

     

our stockholders fail to adopt the Merger Agreement and approve the Merger at the special meeting or any adjournment or postponement thereof;

 

   

by Pattern if:

 

     

our Board, the Special Committee or any other duly authorized committee of our Board determines to accept a Superior Company Proposal in accordance with the terms of the Merger Agreement; provided that, such termination will not be effective unless we (1) pay a $79.0 million



 

25


Table of Contents
 

termination fee to Parent (a reduced termination fee of $52.7 million would have been payable in certain circumstances which are no longer applicable due to the expiration of the Go-Shop Period), prior to or concurrently with such termination and (2) promptly (but in any event within 24 hours of receipt by Parent of the termination fee) enter into such alternative acquisition agreement;

 

     

(1) there has been an inaccuracy in any representation or warranty of Parent or Merger Sub contained in the Merger Agreement or a breach of any covenant of Parent or Merger Sub contained in the Merger Agreement, that, individually or in the aggregate, would result in a condition to our obligation to effect the Merger not being satisfied; (2) we have delivered to Parent written notice of such inaccuracy or breach; and (3) such inaccuracy or breach is not curable or, if curable, not cured before the earlier of (x) 30 days after written notice was delivered to Parent and (y) the Termination Date, provided that the right to terminate the Merger Agreement under this circumstance will not be available if our failure to perform any of our obligations under the Merger Agreement has been the principal cause of or resulted in the occurrence of the failure of a condition to the Closing to have occurred; or

 

     

(1) all of Parent’s, Merger Sub’s and our conditions to the Closing have, in each case, been and continue to be satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing); (2) we have irrevocably notified Parent by written notice that we are prepared, willing and able to consummate the Merger; and (3) Parent and Merger Sub fail to consummate the Merger by the date the Closing is required to have occurred pursuant to the Merger Agreement;

 

   

by Parent if:

 

     

our Board, the Special Committee or any other duly authorized committee of our Board effects a Company Recommendation Change; or

 

     

(1) there has been an inaccuracy in any representation or warranty of Pattern contained in the Merger Agreement or a breach of any covenant of Pattern contained in the Merger Agreement, that, individually or in the aggregate, would result in a condition to our obligation to effect the Merger not being satisfied; (2) Parent has delivered to us written notice of such inaccuracy or breach; and (3) such inaccuracy or breach is not curable or, if curable, not cured before the earlier of (x) 30 days after written notice was delivered to us and (y) the Termination Date, provided that the right to terminate the Merger Agreement under this circumstance will not be available if Parent’s or Merger Sub’s failure to perform any of their respective obligations under the Merger Agreement has been the principal cause of or resulted in the occurrence of the failure of a condition to the Closing to have occurred.

Termination Fees (see page 124)

Whether or not the Merger is completed, we, on the one hand, and Parent and Merger Sub, on the other hand, are each responsible for all of their respective costs and expenses incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement.

If the Merger Agreement is terminated under specified circumstances, we will be required to pay Parent a termination fee of $79.0 million. A reduced termination fee of $52.7 million would have been payable in certain circumstances which are no longer applicable due to the expiration of the Go-Shop Period.

Parent will be required to pay us the Parent Termination Fee of $204.0 million if the Merger Agreement is terminated under certain other specified circumstances.

For more information on these termination fees, see the section captioned “The Merger Agreement—Termination Fees” beginning on page 124 of this proxy statement.



 

26


Table of Contents

Market Prices and Dividend Data (see page 127)

Shares of Company Common Stock are listed on Nasdaq and the TSX under the symbol “PEGI.” On November 1, 2019, the last full trading day before the public announcement of the Merger, the closing price for shares of Company Common Stock was $27.80 per share on Nasdaq and C$36.65 per share on the TSX, and on February 3, 2020, the latest practicable trading day before the printing of this proxy statement, the closing price for shares of Company Common Stock was $26.90 per share on Nasdaq and C$35.78 per share on the TSX.

Since the fourth quarter of 2013, Pattern has paid a regular quarterly dividend on the shares of Company Common Stock. On October 31, 2019, we declared (1) a cash dividend for the fourth quarter of 2019, payable on January 31, 2020 to the holders of record of Company Common Stock on December 31, 2019, in the amount of $0.4220 per share of Company Common Stock, which represents $1.688 on an annualized basis and (2) an aggregate cash dividend, payable on January 31, 2020 to the holders of record of Company Preferred Stock as of January 15, 2020, in the amount of $3.9 million. Following the payment of this dividend, we have agreed in the Merger Agreement to suspend the payment of any future dividends other than (1) regular quarterly dividends on Company Common Stock in an amount not exceeding $0.422 per share of Company Common Stock, (2) ordinary course dividends paid by any subsidiary Pattern or any of its subsidiaries and the other equity holders of such subsidiary, in each case on a pro rata basis according with such subsidiary’s governing documents, (3) dividends paid to tax equity investors in accordance with capital contribution or investment agreements or organizational documents and (4) cash dividends paid in accordance with the Certificate of Designations of Rights and Preferences of the Company Preferred Stock.

Effect on Pattern if the Merger is Not Completed (see page 104)

If the Merger Agreement is not adopted and the Merger is not approved by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of Company Common Stock. Instead, we will remain a stand-alone public company, shares of Company Common Stock will continue to be listed and traded on Nasdaq and the TSX and registered under the Exchange Act, and we will continue to file periodic reports with the SEC. Under specified circumstances, upon the termination of the Merger Agreement, we will be required to pay Parent a termination fee. For more details, see the section captioned “The Merger Agreement—Termination Fees” beginning on page 124 of this proxy statement.

In addition, if the Merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including risks related to the highly competitive industry in which we operate and risks related to adverse economic conditions.



 

27


Table of Contents

PARTIES INVOLVED IN THE MERGER

Pattern Energy Group Inc.

1088 Sansome Street

San Francisco, CA 94111

Telephone: (415) 283-3000

We are a vertically integrated renewable energy company with a mission to transition the world to renewable energy. Our business consists of both (i) an operating business segment, which is comprised of a portfolio of renewable energy power projects and (ii) a development investment segment, which principally consists of our 29% ownership interest in Pattern Development, an upstream development platform. Through our operating business segment, we hold ownership interests in 28 renewable energy projects with a total operating portfolio capacity of approximately 4.4 GW in the United States, Canada and Japan. Projects in which we have an owned interest use proven, best-in-class technology and have generally contracted to sell all or a majority of their output pursuant to fixed-price PSAs. Approximately 90% of the electricity to be generated by our projects will be sold under our PSAs which have a weighted average remaining contract life of approximately 13 years as of September 30, 2019.

Pacific US Inc.

One Queen Street East, Suite 2500

Toronto, Ontario M5C 2W5

Canada

Telephone: (416) 868-4075

Parent is an entity indirectly wholly owned by CPPIB. CPPIB is a professional investment management organization that invests the funds not needed by CPP to pay current benefits in the best interests of 20 million contributors and beneficiaries. In order to build diversified portfolios of assets, CPPIB invests in public equities, private equities, real estate, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPPIB is governed and managed independently of CPP and at arm’s length from governments. At September 30, 2019, the CPP Fund totaled C$409.5 billion. Parent was formed on October 25, 2019, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement. Parent has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement.

Pacific BidCo US Inc.

One Queen Street East, Suite 2500

Toronto, Ontario M5C 2W5

Canada

Telephone: (416) 868-4075

Merger Sub, a Delaware corporation and a subsidiary of Parent, was formed on October 25, 2019, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement. Merger Sub has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement. Upon completion of the Merger, Merger Sub will merge with and into Pattern, and Merger Sub will cease to exist.

 

28


Table of Contents

THE SPECIAL MEETING

The enclosed proxy is solicited on behalf of our Board for use at the special meeting of stockholders or at any adjournment or postponement thereof.

Date, Time and Place

We will hold the special meeting on Tuesday, March 10, 2020, at 8:00 a.m., Pacific Time, at our corporate office at 1088 Sansome Street, San Francisco, California 94111. We intend to mail this proxy statement, the proxy card and the notice of special meeting on or about February 5, 2020 to all stockholders of record entitled to vote at the special meeting.

Purpose of the Special Meeting

At the special meeting of our stockholders, we will ask the holders of Company Common Stock and Company Preferred Stock to (1) adopt the Merger Agreement and approve the Merger; (2) approve, on a non-binding advisory basis, the compensation proposal; and (3) approve the adjournment proposal.

Upon the terms and subject to the conditions of the Merger Agreement, if the Merger is completed, Merger Sub will merge with and into Pattern, and Pattern will continue as the Surviving Corporation.

Record Date; Shares Entitled to Vote; Quorum

Only holders of record of our stock as of the close of business on January 31, 2020, the record date, are entitled to notice of, and to vote at, the special meeting.

As of the close of business on the record date, there were approximately 108,618,625 shares of Company Common Stock and Company Preferred Stock issued and outstanding, of which 98,218,625 (or 90.4%) were shares of Company Common Stock, held collectively by approximately 29 stockholders of record, and 10,400,000 (or 9.6%) were shares of Company Preferred Stock, held collectively by approximately eight stockholders of record. Each stockholder is entitled to one vote per share of Company Common Stock and one vote per share of Company Preferred Stock at the special meeting on each of the proposals.

The presence at the special meeting, in person or by proxy, of the holders of a majority of the outstanding shares of Company Common Stock and Company Preferred Stock, voting together as a single class, entitled to vote at the special meeting shall constitute a quorum. Votes cast at the special meeting, by proxy or in person, will be tabulated by the inspector of elections appointed for the special meeting. If shares are present at the special meeting in person or by proxy, but are not voted, those shares will count toward determining whether or not a quorum is present for the conduct of business at the special meeting, as will all shares voted “FOR,” “AGAINST” or “ABSTAIN” on a proposal.

In the event that a quorum is not present in person or represented by proxy at the special meeting, it is expected that our Board will recommend adjournment of the special meeting to solicit additional proxies if permitted by the Merger Agreement. If there is not a quorum of stockholders at the special meeting and the vote with respect to the adjournment proposal fails, our Board, if permitted by the Merger Agreement, may set a new record date and meeting date for a special meeting to consider the Merger Agreement, compensation proposal and adjournment proposal.

Vote Required

The votes required to approve each proposal are as follows:

 

  1.

The proposal to adopt the Merger Agreement and approve the Merger must be approved by (i) the affirmative vote of the holders of a majority of the shares of Company Common Stock and Company

 

29


Table of Contents
  Preferred Stock, voting together as a single class, in each case outstanding and entitled to vote thereon and (ii) under applicable Canadian securities laws, a majority of the votes cast by the holders of Company Common Stock, present in person or represented by proxy at the special meeting and entitled to vote, excluding those holders of Company Common Stock whose votes are required to be excluded pursuant to Part 8 of MI 61-101. Abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and approve the Merger.

 

  2.

The compensation proposal must be approved by a majority of the votes cast by holders of Company Common Stock and Company Preferred Stock, voting together as a single class. Abstentions will not be treated as “votes cast” for purposes of determining the approval of the compensation proposal. This means that abstentions will have no effect on whether the compensation proposal is approved.

 

  3.

The adjournment proposal must be approved by a majority of the votes cast by holders of Company Common Stock and Company Preferred Stock, voting together as a single class. Abstentions will not be treated as “votes cast” for purposes of determining the approval of the adjournment proposal. This means that abstentions will have no effect on whether the adjournment proposal is approved.

Voting by Holders of Company Preferred Stock

Pursuant to the Company Preferred Stock Purchase Agreement, the holders of Company Preferred Stock and Pattern have agreed that the holders of Company Preferred Stock shall vote their 10,400,000 shares of Company Preferred Stock in a manner consistent with the recommendations of the Board, provided that the special meeting takes place on or before May 10, 2021. Additionally, the voting rights of the shares of Company Preferred Stock shall not exceed 9.9% of the outstanding shares of Company Common Stock and Company Preferred Stock, voting together as a single class. As a result, at least 10,400,000 (or 9.6%) of the outstanding shares of Company Common Stock and Company Preferred Stock, voting together as a single class, shall vote “FOR” each of the three proposals. For the purposes of the “majority of the minority vote” required pursuant to MI 61-101, the Merger is required to be approved by a majority of votes cast by holders of Company Common Stock, other than those holders required to be excluded from such vote pursuant to Part 8 of MI 61-101. Accordingly, the votes of Company Preferred Stock in respect of Proposal 1 will not be included for the purposes of calculating the “majority of the minority vote” under MI 61-101.

Voting by Our Directors and Executive Officers

As of the close of business on the record date of the special meeting, our directors and executive officers and their respective affiliates beneficially owned and were entitled to vote, in the aggregate, 1,260,921 shares of Company Common Stock and no shares of Company Preferred Stock, representing approximately 1.2% of the outstanding shares of Company Common Stock and Company Preferred Stock, together as a single class. Although they are not obligated to do so, our directors and executive officers have informed us of their intent to vote all of their shares of Company Common Stock:

 

  1.

FOR” the proposal to adopt the Merger Agreement and approve the Merger.

 

  2.

FOR” the compensation proposal.

 

  3.

FOR” the adjournment proposal.

Certain members of our management and our Board have interests in the Merger that are in addition to those of stockholders generally and may be different from, or in conflict with, your interests as our stockholder. See the sections captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 69 of this proxy statement, “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement” beginning on page 74 of this proxy statement, “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Quantification of Potential Payments and Benefits to Our

 

30


Table of Contents

Named Executive Officers” beginning on page 77 of this proxy statement and “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Canadian Securities Law Matters” beginning on page 79 of this proxy statement for more information.

As of the close of business on the record date of the special meeting, our directors and executive officers and their respective affiliates beneficially owned and were entitled to vote, in the aggregate, 1,260,921 shares of Company Common Stock and no shares of Company Preferred Stock at the special meeting, or approximately 1.2% of the shares of Company Common Stock and Company Preferred Stock, together as a single class, in each case outstanding on such date. Although they are not obligated to do so, our directors and executive officers have informed us that they intend to vote all of their shares of Company Common Stock “FOR” the proposal to adopt the Merger Agreement and approve the Merger.

As of the close of business on the record date, an aggregate of 1,210,049 votes will be required to be excluded pursuant to Part 8 of MI 61-101. See “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Canadian Securities Law Matters—Excluded Votes” beginning on page 81 of this proxy statement for more information.

Voting of Proxies

If your shares are registered in your name, you may cause your shares to be voted at the special meeting by returning a signed proxy card by mail or voting in person at the meeting. Additionally, you may submit a proxy authorizing the voting of your shares via the Internet or by telephone by following the instructions printed on the proxy card. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to submit a proxy via the Internet or by telephone.

If your shares are registered in your name and you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the special meeting. If your shares are registered in your name, you are encouraged to submit a proxy card even if you plan to attend the special meeting in person.

Voting instructions are included on your proxy card. All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in accordance with the instructions of the stockholder. Properly executed proxies that do not contain voting instructions will be voted “FOR” the proposal to adopt the Merger Agreement and approve the Merger, “FOR” the approval of the compensation proposal and “FOR” the approval of the adjournment proposal.

If your shares are held in “street name” through a brokerage firm, bank, trust or other nominee, you may provide voting instructions by completing and returning the voting form provided by your brokerage firm, bank, trust or other nominee or via the Internet or by telephone through your brokerage firm, bank, trust or other nominee, if such a service is provided. To provide voting instructions via the Internet or telephone, you should follow the instructions on the voting instruction form provided by your brokerage firm, bank, trust or other nominee. If you plan to attend the special meeting, you will need a legal proxy from your brokerage firm, bank, trust or other nominee in order to be given a ballot to vote the shares. If you do not return your brokerage firm, bank, trust or other nominee’s voting form, provide voting instructions via the Internet or by telephone through your brokerage firm, bank, trust or other nominee or attend the special meeting and vote in person with a legal proxy from your brokerage firm, bank, trust or other nominee, it will have the same effect as if you voted “AGAINST” the adoption of the Merger Agreement and approval of the Merger but will have no effect on the compensation proposal (provided a quorum is present) or the adjournment proposal (even if a quorum is not present).

 

31


Table of Contents

Revocability of Proxies

Any proxy you give pursuant to this solicitation may be revoked by you at any time before the polls are closed at the special meeting. Proxies may be revoked as follows:

If you have sent a proxy directly to us, you may revoke it:

 

   

by delivering to our Corporate Secretary a signed written notice of revocation bearing a date later than the date of the proxy, stating that the proxy is revoked;

 

   

by attending the special meeting and voting in person (your attendance at the meeting will not, by itself, revoke your proxy, so you must vote in person at the meeting to revoke your proxy);

 

   

by signing and delivering a new proxy, relating to the same shares of our stock and bearing a later date; or

 

   

by submitting another proxy by telephone or via the Internet after the date of your prior proxy and by the date and time indicated on the applicable proxy card(s).

If you have instructed your brokerage firm, bank, trust or other nominee to vote your shares, you may revoke your proxy only by following the directions received from your brokerage firm, bank, trust or other nominee to change those instructions.

Your attendance at the special meeting does not alone automatically revoke your proxy. If you have instructed your brokerage firm, bank, trust or other nominee how to vote your shares, the above-described options for revoking your proxy do not apply. Instead, you must follow the directions provided by your brokerage firm, bank, trust or other nominee to change your vote.

Our Board’s Recommendations

Our Board approved the Merger Agreement, the Merger and the other transactions contemplated thereby following the recommendation of the Special Committee and determined that the Merger Agreement and the Merger are advisable, fair to and in the best interests of Pattern and its stockholders. Our Board recommends that our stockholders (1) vote “FOR” the proposal to adopt the Merger Agreement and approve the Merger; (2) vote “FOR” the compensation proposal; and (3) vote “FOR” the adjournment proposal. See the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Recommendation of Our Board and Reasons for the Merger” beginning on page 54 of this proxy statement. Our stockholders should carefully read this proxy statement in its entirety for more detailed information concerning the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger. In addition, our stockholders are directed to the Merger Agreement, which is attached as Annex A to this proxy statement.

Effect of Abstentions and Broker Non-Votes

The Merger Agreement must be approved by the affirmative vote of the holders of a majority of the shares of Company Common Stock and Company Preferred Stock, voting together as a single class, in each case outstanding and entitled to vote. In addition, under applicable Canadian securities laws, the Merger is also required to be approved by a majority of votes cast by holders of Company Common Stock, other than those holders required to be excluded from such vote under such laws. If you are a stockholder of record and you abstain from voting or fail to cast your vote, in person or by proxy, it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and approve the Merger. If you are a beneficial owner and you abstain from voting, fail to cast your vote in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and approve the Merger.

 

32


Table of Contents

Each of the compensation proposal and adjournment proposal must be approved by a majority of votes cast by holders of Company Common Stock and Company Preferred Stock, voting together as a single class,.

If you are a stockholder of record and you abstain from voting or fail to cast your vote, in person or by proxy, it will have no effect on the vote for the compensation proposal (provided that a quorum is present) and adjournment proposal (even if a quorum is not present). If you are a beneficial owner and you abstain from voting, fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have no effect on the vote for the compensation proposal (provided that a quorum is present) and adjournment proposal (even if a quorum is not present).

If you are a beneficial owner of shares held in “street name” and do not provide your brokerage firm, bank, trust or other nominee with specific voting instructions, the brokerage firm, bank, trust or other nominee may generally vote on “routine” matters, but cannot vote on “non-routine” matters. The proposal to adopt the Merger Agreement and approve the Merger, the compensation proposal and the adjournment proposal are considered “non-routine” matters. If the brokerage firm, bank, trust or other nominee does not receive instructions from you on how to vote your shares on a non-routine matter, it will inform the inspector of elections that it does not have authority to vote on this matter with respect to your shares. This is referred to as a “broker non-vote.”

You should instruct your brokerage firm, bank, trust or other nominee how to vote your shares. Under the rules applicable to broker-dealers, your brokerage firm, bank, trust or other nominee does not have discretionary authority to vote your shares on any of the proposals scheduled to be voted on at the special meeting. A broker non-vote will have the same effect as a vote “AGAINST” the adoption of the Merger Agreement and approval of the Merger, but will have no effect on the vote for the compensation proposal (provided that a quorum is present) and the adjournment proposal (even if a quorum is not present).

Solicitation of Proxies

This proxy solicitation is being made by Pattern on behalf of our Board and will be paid for by us. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication. These persons will not be paid additional remuneration for their efforts. We have also retained Innisfree M&A Incorporated, a proxy solicitation firm, to assist in the solicitation of proxies for a fee of approximately $50,000 plus the reimbursement of out-of-pocket expenses incurred by it on our behalf. In addition, we may reimburse banks, brokers and other nominees representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. You should not send your certificates of Company Common Stock with your proxy card. A letter of transmittal with instructions for the surrender of such stock certificates, if any, will be mailed to our stockholders as soon as practicable after completion of the Merger.

Stockholder List

A list of our stockholders entitled to vote at the special meeting will be available for examination by any of our stockholders at the special meeting. For 10 days prior to the special meeting, this stockholder list will be available for inspection by any stockholder for any purpose germane to the special meeting during ordinary business hours at our corporate offices located at 1088 Sansome Street, San Francisco, California 94111.

Anticipated Date of Completion of the Merger

We are working toward completing the Merger as quickly as possible and expect the Merger to be completed by the second quarter of 2020. However, the Merger continues to be subject to various closing conditions, including our stockholder approval and, therefore, we cannot assure you that all conditions to the Merger will be satisfied or, if satisfied, the date by which they will be satisfied.

 

33


Table of Contents

Householding of Special Meeting Materials

The SEC’s proxy rules permit companies and intermediaries, such as brokers and banks, to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing an address by delivering a single proxy statement to those stockholders, unless contrary instructions have been received. This procedure reduces the amount of duplicate information that stockholders receive and lowers printing and mailing costs for companies. Certain brokerage firms, banks, trusts or other nominees may have instituted householding for beneficial owners of our stock held through such firms. If your family has multiple accounts holding our stock, you may have already received a householding notification from your brokerage firm, bank, trust or other nominee. You may decide at any time to revoke your decision to household, and thereby receive multiple copies of proxy materials. If you wish to opt out of this procedure and receive a separate set of proxy materials in the future, or if you are receiving multiple copies and would like to receive only one, you should contact your brokerage firm, bank, trust or other nominee or our Investor Relations Department at the address and telephone number below. A separate copy of these proxy materials will be promptly delivered upon request by contacting our Investor Relations Department by (1) mail at Pattern Energy Group Inc., Attention: Investor Relations, 1088 Sansome Street, San Francisco, California 94111, (2) telephone at 416-526-1563, or (3) e-mail at ir@patternenegy.com.

Other Matters

At this time, we know of no other matters to be voted on at the special meeting. If any other matters properly come before the special meeting, your shares of Company Common Stock and Company Preferred Stock, voting together as a single class, will be voted in accordance with the discretion of the appointed proxy holders.

 

34


Table of Contents

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER

The following discussion describes material aspects of the Merger. While we believe that the following description covers the material terms of the Merger, the description may not contain all of the information that may be important to you. The discussion of the Merger in this proxy statement is qualified in its entirety by reference to the Merger Agreement, which is attached as Annex A to this proxy statement and incorporated by reference into this proxy statement. We encourage you to read carefully this entire proxy statement, including the Merger Agreement, for a more complete understanding of the Merger.

General

If the proposal to adopt the Merger Agreement and approve the Merger receives (a) the affirmative vote of the holders of a majority of the shares of Company Common Stock and Company Preferred Stock, voting together as a single class, in each case outstanding and entitled to vote thereon and (b) a majority of the votes cast by the holders of Company Common Stock, present in person or represented by proxy at the special meeting and entitled to vote, excluding those holders of Company Common Stock whose votes are required to be excluded pursuant to Part 8 of MI 61-101, and, upon the terms and subject to the conditions of the Merger Agreement, the Merger is completed, Merger Sub will merge with and into Pattern, and Pattern will continue as the Surviving Corporation and as a subsidiary of Parent.

As a result of the Merger, Pattern will become a subsidiary of Parent, and shares of Company Common Stock will no longer be publicly traded and will be delisted from Nasdaq and the TSX. In addition, shares of Company Common Stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC. If the Merger is completed, each holder of shares of Company Common Stock will not own any shares of common stock of the Surviving Corporation and each holder of shares of Company Preferred Stock will hold preferred securities in the Surviving Corporation with the same rights and obligations as the Company Preferred Stock.

The Effective Time will occur upon the filing of a Certificate of Merger with the Secretary of State of the State of Delaware (or at such later time as Pattern and Parent may agree and specify in the Certificate of Merger).

As a result of the Merger, each outstanding share of Company Common Stock (other than the Excluded Shares) will be converted into the right to receive the Merger Consideration. Each outstanding share of Company Preferred Stock will remain outstanding after the consummation of the Merger. The Merger, if consummated, would result in certain adjustments to the terms of the Company Preferred Stock, including an increase in dividend rate and certain adjustments to the contingent dividends. In addition, the treatment of our outstanding equity awards is described in the section captioned “The Merger Agreement—Merger Consideration—Outstanding Equity Awards” beginning on page 107 of this proxy statement.

After the Merger is completed, holders of Company Common Stock will have the right to receive the Merger Consideration, but will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights may have the right to receive a payment for the “fair value” of their shares of Company Common Stock as determined pursuant to an appraisal proceeding before the Delaware Court of Chancery as contemplated by Delaware law, as described below under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Appraisal Rights” beginning on page 89 of this proxy statement).

Background of the Merger

The following background summarizes the key meetings and events that led to the signing of the Merger Agreement.

During the time periods covered by this section, the members of our Board consisted of Alan R. Batkin, Patricia S. Bellinger (until her resignation from our Board on December 28, 2018), The Lord Browne of

 

35


Table of Contents

Madingley, Michael M. Garland, Richard A. Goodman (since his appointment to our Board on December 30, 2018), Douglas G. Hall, Michael B. Hoffman (until his resignation from our Board on August 6, 2018), Patricia M. Newson, and Mona K. Sutphen (since her appointment to our Board on December 30, 2018). The members of the Special Committee consisted of Messrs. Batkin, Hall, Goodman (since his appointment to the Special Committee on February 22, 2019), and Mses. Bellinger (until her resignation from our Board on December 28, 2018), Newson, and Sutphen (since her appointment to the Special Committee on February 22, 2019).

At the time of Pattern’s 2013 initial public offering, certain affiliates of Riverstone Holdings LLC held greater than 60.0% of the outstanding common stock interests in Pattern. On July 9, 2018, such affiliates of Riverstone Holdings LLC filed with the SEC an amendment to their Form 13D indicating that they owned less than 5.0% of the outstanding shares of Company Common Stock. As of October 2018, Riverstone Holdings LLC and its affiliates no longer held any shares of Company Common Stock. Since Pattern’s initial public offering, pursuant to a set of contractual arrangements, development companies formed and controlled by Riverstone, including Pattern Development, have been the primary source for Pattern to acquire operational projects. These contractual arrangements with Pattern Development also limit Pattern’s ability to merge with, or to transfer its interest in Pattern Development to, any third party without Pattern Development’s consent. Since its initial public offering, pursuant to a set of contractual arrangements, Pattern’s Chief Executive Officer and certain of its other senior officers have been, and are currently also, senior officers of, and hold equity interests in, these development companies, including Pattern Development. Pattern owns approximately 29% of the equity interests of Pattern Development and the remaining equity interests of Pattern Development are owned by Riverstone Pattern Energy Holdings II, L.P. (for purposes of the Background of the Merger section of the proxy statement, “Riverstone”), an affiliate of Riverstone Holdings LLC, and members of Pattern management.

As part of the ongoing evaluation of Pattern’s business, Pattern’s senior management and our Board periodically review Pattern’s performance, future growth prospects, access to capital and overall strategic direction and consider potential opportunities to strengthen its business and enhance stockholder value. These reviews have included consideration of a variety of strategic alternatives, including investments, acquisitions, dispositions, financial and strategic transactions and other business combination transactions with third parties, that could further Pattern’s strategic objectives and enhance its ability to increase stockholder value, and the potential benefits and risks of those alternatives in light of, among other things, the industry and regulatory environment in which Pattern operates and Pattern’s competitive position.

On June 5, 2018, our Board held its annual strategy session to discuss and evaluate Pattern’s business and strategic plan, including strategic opportunities and alternatives. The discussions addressed, among other topics, the performance of Pattern’s business, conditions in public equity markets at the time, Pattern’s ability to raise cost effective capital and potential strategies and options available to Pattern to improve key performance metrics and enhance stockholder value. Our Board recognized that, given the matters discussed above regarding Pattern’s relationship with Pattern Development and the potential conflicts of interest of certain members of its senior management, such issues would need to be considered in evaluating potential strategies and options. For information with respect to the interests of certain members of Pattern’s senior management, see the sections captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 69 of this proxy statement, “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement” beginning on page 74 of this proxy statement, “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Quantification of Potential Payments and Benefits to Our Named Executive Officers” beginning on page 77 of this proxy statement and “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Canadian Securities Law Matters” beginning on page 79 of this proxy statement.

At the conclusion of the June 5, 2018 strategy session our Board decided to establish the Special Committee, composed solely of independent and disinterested directors, to engage in a review of Pattern’s strategic

 

36


Table of Contents

opportunities and alternatives with a view toward strengthening Pattern’s business and growth prospects and enhancing stockholder value. Our Board named Alan Batkin, Patricia Bellinger, Douglas Hall and Patricia Newson, each an independent and disinterested director, to serve as members of the Special Committee with Mr. Batkin to serve as Chairperson. Our Board delegated exclusive authority to the Special Committee to consider and negotiate a potential strategic transaction involving Pattern and, ultimately, to make a recommendation to our Board with regard to any such transaction. In establishing the Special Committee, our Board resolved that it would not recommend to Pattern’s stockholders or otherwise approve a strategic transaction involving Pattern without a prior favorable recommendation of such strategic transaction by the Special Committee. Thereafter, after interviewing multiple law firms, the Special Committee engaged Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul Weiss”) as independent outside legal counsel to the Special Committee.

On July 13, 2018, the Special Committee met telephonically with representatives of Paul Weiss. The Special Committee discussed with Paul Weiss the role of the Special Committee and Paul Weiss reviewed the fiduciary duties applicable to the members of Special Committee in the context of a strategic review process. Members of the Special Committee also discussed the retention of an independent financial advisor, and Messrs. Batkin and Hall informed the Special Committee of recent meetings with potential financial advisors. The Special Committee determined to retain one financial advisor for the purposes of conducting the strategic review and to consider retaining a second financial advisor prior to, and in connection with, a potential strategic transaction. Following these discussions, the Special Committee agreed to engage Evercore as independent financial advisor to the Special Committee for the purposes of the strategic review process. The closing price on that day for a share of Company Common Stock was $17.09.

On August 2, 2018, the Special Committee met with Pattern management and representatives of Paul Weiss to discuss the process for assessing Pattern’s strategic opportunities, options and alternatives, as well as for approaching potential partners in a strategic transaction.

On August 6, 2018, Michael Hoffman resigned from our Board.

On October 29, 2018, representatives of Evercore met with the Special Committee and provided a historical market and financial performance overview of Pattern, an assessment of strategic alternatives with qualitative discussions of benefits and considerations, and valuation ranges for Pattern in different scenarios (including maintaining the status quo). At the meeting, Michael Garland, Chief Executive Officer of Pattern, also summarized the approaches he had received from representatives of a large alternative asset manager (referred to herein as “Party A”) which owns a substantial interest in a company in the alternative energy industry (referred to herein as “Company A”) and separately by a large private equity investment firm that also owns a company in the alternative energy business (referred to herein as “Party B”) with respect to a potential transaction involving Pattern. Paul Weiss outlined a number of process considerations to help the Special Committee in making informed decisions to maximize value for Pattern’s stockholders.

On October 30, 2018, the Special Committee met with Pattern management and representatives of Paul Weiss and Evercore. Following a discussion and evaluation of matters relating to Pattern’s ongoing review of its business and assessment of possible strategic opportunities, members of the Special Committee instructed Mr. Garland to contact senior executives at Party A and Party B to assess whether they would provide a preliminary written proposal for a strategic transaction involving Pattern based on a review of publicly available information.

During early November 2018, the Special Committee provided conduct guidelines to members of Pattern’s management and directors who were not members of the Special Committee with respect to the strategic review process, in order to help ensure that the Special Committee would be able to function independently and effectively execute its mandate. These guidelines included, among other things, a prohibition on members of Pattern management engaging with any potential parties to a strategic transaction without the express consent of

 

37


Table of Contents

the Special Committee and a prohibition on members of management discussing either the participation of, or compensation to be paid to, management by any potential transaction party or the inclusion of Pattern Development until the Special Committee had determined that it had sufficient visibility into the key terms of any such proposed transaction, including price. Thereafter, as authorized by the Special Committee, Mr. Garland and other members of Pattern management reached out to representatives of Party A and Party B.

On November 19, 2018, at a telephonic meeting of our Board, Mr. Garland provided an update to our Board with respect to developments relating to his discussions with representatives of Party A and Party B, as previously authorized by the Special Committee. Mr. Garland indicated that he had scheduled a meeting with representatives of Party A, as authorized by the Special Committee. Mr. Garland also indicated to our Board that, based on a meeting with a representative of Party B, Party B was not interested in pursuing a transaction with Pattern at that time.

On December 28, 2018, Ms. Bellinger resigned from her position on our Board.

On December 30, 2018, Mr. Goodman and Ms. Sutphen were appointed as independent directors of our Board.

On January 14 and January 15, 2019, members of Pattern management met with representatives of Party A to discuss a potential transaction involving Pattern, Party A and Company A. The discussions followed the parameters set forth in the guidelines circulated by the Special Committee in November 2018 and no material confidential information regarding Pattern was shared with representatives of Party A.

On January 16, 2019, our Board met telephonically with Pattern management. Mr. Garland informed our Board that, since the November 19, 2018 Board meeting, he and other members of Pattern management had, at the direction of representatives of the Special Committee, met with representatives of Party A and had engaged in initial discussions regarding a potential strategic transaction involving Pattern, Party A and Company A, but that no material confidential information regarding Pattern had been shared with Party A or Company A. Mr. Garland also indicated his desire to set up a meeting with representatives of a company operating in the alternative energy industry (referred to herein as “Party C”), which might logically be interested in a transaction with Pattern. Our Board instructed Pattern management to keep the Special Committee informed of any discussions and developments in connection with Pattern management’s outreach to Party C.

On January 25, 2019, the Special Committee met telephonically with Pattern management and representatives of Paul Weiss and Evercore. Pattern management summarized recent meetings with Party A and members of the Special Committee reviewed and discussed a presentation prepared by Pattern management that summarized a strawman proposal developed by Pattern management, which involved a stock for stock combination of Pattern and Company A at an at-market exchange ratio (i.e., no premium). Pattern management was then excused from the meeting and the Special Committee met in executive session to further discuss and evaluate the strawman proposal and to consider next steps. The Special Committee asked its advisors to evaluate an at-market share exchange as a potential transaction.

On January 28, 2019, Mr. Garland met with representatives of Party C to discuss a potential transaction involving Party C and Pattern.

On February 7, 2019, Mr. Garland spoke with representatives of Party A and Company A about a potential transaction involving Pattern, Party A and Company A.

On February 15, 2019, at the direction of the Special Committee, Mr. Batkin, Mr. Garland and representatives of Evercore met with representatives of Party A to discuss a potential transaction involving Pattern, Party A and Company A. During those discussions, Party A proposed an at-market all-stock merger of Pattern and Company A.

 

38


Table of Contents

On or about February 20, 2019, Mr. Garland spoke to representatives of Party C who indicated that Party C was unlikely to engage in a transaction with Pattern.

On February 21, 2019, representatives of Party A sent Pattern a preliminary non-binding term sheet outlining high-level proposed terms for a potential transaction involving the acquisition by Company A of the outstanding shares of Company Common Stock in exchange for shares of Company A common stock at an at-market exchange ratio.

Also on February 21, 2019, the Special Committee met with Pattern management and representatives of Paul Weiss and Evercore. During the meeting, members of Pattern management indicated that they believed Party C was unlikely to engage in a transaction with Pattern and summarized other recent developments, including the receipt of the preliminary non-binding term sheet from Party A and recent interest indicated by representatives of an entity controlled by a former member of our Board who later partnered with a private equity investment firm (collectively referred to herein as “Party D”) in evaluating an acquisition of Pattern. The Special Committee discussed the terms of Party A’s proposal, including the fact that Party A’s proposal did not provide for a premium to be paid to the holders of Company Common Stock. Pattern management was then excused from the meeting and the Special Committee met in executive session. After further discussion, the Special Committee directed its outside advisors to analyze the proposed transaction structure and terms, including with respect to issues relating to Pattern’s relationship with Pattern Development and the absence of any premium to be offered to holders of Company Common Stock and to prepare a response to be sent to Party A. The Special Committee authorized the initiation of mutual due diligence between Pattern and Company A, subject to the parties entering into an acceptable confidentiality agreement.

On February 22, 2019, our Board appointed Mr. Goodman and Ms. Sutphen to serve as members of the Special Committee.

On February 28, 2019, Pattern entered into a mutual confidentiality agreement with Party A (which also covered Company A), which included customary standstill provisions, in order to allow the parties to perform mutual due diligence based on confidential information.

On March 9, 2019, the Special Committee met telephonically with Pattern management and representatives of Paul Weiss and Evercore. During the meeting, the Special Committee reviewed the terms of Party A’s non-binding term sheet, including Party A’s proposal for an at-market transaction. Messrs. Batkin and Garland updated the Special Committee regarding recent discussions with Party A. Based on Evercore’s advice, the Special Committee determined to seek a 15.0% premium to the trading price of Company Common Stock in a proposed transaction with Company A. Pattern management was then excused from the meeting and the Special Committee met in executive session. After further consideration of Party A’s non-binding term sheet, the Special Committee determined to deliver to Party A a revised indicative term sheet based on the Special Committee’s discussions. The Special Committee determined that Mr. Batkin would continue to coordinate, and have the option to be involved in, discussions with Party A and any other potential transaction parties and would continue to serve as the representative of the Special Committee with respect to Pattern’s discussions with respect to any potential strategic transaction.

On March 11, 2019, representatives of Pattern sent a revised indicative term sheet to Party A, reflecting a number of revised terms, including a proposal to structure the proposed transaction as an acquisition of Company A by Pattern at an exchange ratio to reflect an implied 15.0% premium to the trading price of Company Common Stock.

On March 12, 2019, Mr. Garland spoke with representatives of Party A and Company A about a potential transaction involving Pattern, Party A and Company A.

On March 20, 2019, as authorized by the Special Committee, Mr. Batkin, Pattern management and representatives of Evercore and Paul Weiss met with representatives of Party A to discuss the terms of a potential transaction involving Pattern and Company A.

 

39


Table of Contents

In late March through April 2019, Pattern management, representatives of the Special Committee and representatives of Party A conducted a mutual due diligence review with respect to a potential transaction involving Pattern and Company A.

In early April 2019, the members of the Special Committee determined to continue to engage Evercore with respect to evaluating proposals with respect to a potential transaction. The Special Committee also determined to retain Goldman Sachs & Co. LLC (“Goldman Sachs”) as a second financial advisor with respect to such evaluation.

On April 11, 2019, Party A, Pattern and an affiliate of Riverstone entered into a three-party side letter to the confidentiality agreement previously entered into between Party A and Pattern in order to facilitate Party A’s due diligence review of the business of Pattern Development. Pattern and such affiliate of Riverstone entered into a mutual confidentiality agreement with respect to the transaction proposed by Party A, which confidentiality agreement included customary standstill provisions.

On April 15, 2019, Mr. Garland met with Riverstone Representatives (as defined below) and CPPIB during which meeting representatives of CPPIB indicated that CPPIB was potentially interested in acquiring Pattern. Mr. Garland informed Mr. Batkin and the Special Committee of his meeting and the substance of these discussions.

On April 16, 2019, Mr. Batkin and members of Pattern management met with representatives of Party A and two representatives of Riverstone who are directors of Pattern Development (references to “Riverstone Representatives” herein refer to one or both of these directors acting in their capacity as unconflicted directors of Pattern Development) to discuss how Pattern Development would be affected by a transaction. The Riverstone Representatives indicated that Riverstone would be open to considering any proposals from Party A involving Pattern Development as well as Pattern. Party A indicated that it would be potentially interested in having the company that survived a combination of Pattern and Company A directly acquire Pattern Development.

In mid-to-late April 2019, at the direction of the Special Committee, representatives of Paul Weiss met with Company A’s outside litigation counsel to discuss certain material outstanding litigation to which Company A was a party (the “Company A Litigation”), as part of Pattern’s due diligence evaluation of Party A’s proposal.

On May 2, 2019, the Special Committee met telephonically with Pattern management and representatives of Paul Weiss, Evercore and Goldman Sachs. During the meeting, Messrs. Batkin and Garland provided an update on recent discussions with Party A and Riverstone, and Mr. Garland provided details of the ongoing due diligence process. Mr. Garland also informed the Special Committee of his recent meeting with Riverstone Representatives and CPPIB. Pattern management was then excused from the meeting and the Special Committee evaluated potential open issues that would need to be addressed in discussions with Party A, including matters related to Pattern Development’s contractual rights with respect to Pattern, the Company A Litigation and considerations with respect to engaging with CPPIB.

On May 8, 2019, representatives of Paul Weiss met telephonically with representatives of outside counsel to Party A to discuss various matters in connection with a potential transaction, including any potential impact on Pattern’s relationship with Riverstone and Pattern Development.

On May 13, 2019, Mr. Batkin met telephonically with Pattern management and representatives of Paul Weiss, Evercore and Goldman Sachs to further discuss and evaluate a potential transaction between Pattern and Company A, including a discussion of several aspects of Party A’s proposal that involved risks to consummation of such a potential transaction.

On May 16, 2019, Mr. Batkin sent a memorandum to members of the Special Committee regarding CPPIB’s expression of interest in a potential transaction involving CPPIB, Pattern and Pattern Development. Mr. Batkin

 

40


Table of Contents

informed members of the Special Committee that, with the Special Committee’s authorization, Pattern Development and CPPIB planned to enter into a confidentiality agreement to allow for CPPIB to receive information regarding Pattern Development. Mr. Batkin requested and received authorization from the Special Committee for Pattern to negotiate a confidentiality agreement between Pattern and CPPIB so that CPPIB could review confidential Pattern information in connection with a potential transaction involving Pattern.

On May 24, 2019, the Special Committee met telephonically with Pattern management and representatives of Paul Weiss, Evercore, and Goldman Sachs. Mr. Garland updated the Special Committee on recent discussions with Party A. The Special Committee discussed and considered different approaches to negotiating with multiple parties simultaneously. Pattern management and the representatives of Evercore and Goldman Sachs were then excused from the meeting. The Special Committee reviewed the foregoing discussions and considered amending its formal engagement of Evercore and formally engaging Goldman Sachs. The Special Committee then adopted resolutions to amend its formal engagement letter with Evercore and to execute an engagement letter with Goldman Sachs with respect to evaluating a potential transaction.

On May 28, 2019, CPPIB and Pattern entered into a confidentiality agreement that included customary standstill provisions. CPPIB, Pattern and Riverstone entered into a side letter to the confidentiality agreement in order to facilitate the sharing of information regarding Pattern Development.

On May 29, 2019, at the direction of the Special Committee, Mr. Garland met with representatives of Party A and Riverstone to provide an overview of Pattern Development and its business plan to Party A and to answer questions.

Also on May 29, 2019, at the direction of the Special Committee, Mr. Garland met with representatives of CPPIB and Riverstone to provide an overview of Pattern Development and its business plan to CPPIB and to answer questions.

On May 30, 2019, Mr. Batkin met with Pattern management and representatives of Paul Weiss, Evercore and Party A to discuss key open issues identified by the Special Committee with respect to a combination of Pattern and Company A, including price and the need to insulate holders of Company Common Stock from the risks associated with the Company A Litigation.

On May 31, 2019, Pattern received a revised indicative term sheet from Party A, which included a non-binding proposal to combine Company A and Pattern, with the holders of Company Common Stock receiving shares of Company A stock at an exchange ratio to reflect an implied 15.0% premium to the trading price of Company Common Stock. The revised indicative term sheet proposed that the combined company would purchase Pattern Development at a price to be negotiated by Pattern and Riverstone with funds financed by the combined company selling shares to Party A.

On June 1, 2019, the Special Committee met telephonically with representatives of Paul Weiss to consider the revised indicative term sheet received from Party A and discussed next steps with respect to Party A’s recent proposal. The Special Committee also discussed CPPIB’s interest in a potential transaction.

On June 4, 2019, at the direction of the Special Committee, Paul Weiss sent a revised draft of Party A’s indicative term sheet to representatives of Party A, along with a request that Party A confirm that the 15.0% premium to the trading price of Company Common Stock proposed to be paid in connection with the potential transaction was not subject to continued due diligence. The revised term sheet also reflected certain structural changes designed to insulate the holders of Company Common Stock from potential liabilities associated with the Company A Litigation.

On June 5, 2019, representatives of Paul Weiss and Pattern management met telephonically with representatives of Party A and outside counsel to Party A to discuss open issues relating to the potential transaction, including the proposed premium to be paid and measures to insulate the holders of Company Common Stock from potential liabilities associated with the Company A Litigation.

 

41


Table of Contents

On June 7, 2019, representatives of Paul Weiss and outside counsel to Party A met telephonically to discuss developments relating to ongoing discussions between Pattern and Party A.

On June 12, 2019, the Special Committee met with Pattern management and representatives of Paul Weiss, Evercore and Goldman Sachs to discuss recent developments, including recent discussions with, and proposals by, Party A, as well as ongoing work by Evercore and Pattern management.

On June 14, 2019, Party D contacted Mr. Batkin to indicate its interest in making an offer to acquire Pattern. On the same day, Mr. Batkin discussed Party D’s approach with representatives of Paul Weiss, Evercore and Goldman Sachs and determined to discuss next steps with the Special Committee.

On June 18, 2019, the Special Committee met telephonically with members of Pattern management to discuss recent outreach from Party D and instructed Mr. Batkin to request that Party D submit an offer that included at least a double-digit premium to the trading price of Company Common Stock. Following the meeting, at the direction of the Special Committee, Mr. Batkin responded to Party D indicating that Pattern was not prepared to engage in discussions unless Party D offered at least a double-digit premium to the trading price of Company Common Stock.

On June 27, 2019, after consulting with its outside advisors, the Special Committee distributed additional instructions to members of Pattern management regarding next steps and guidelines relating to ongoing discussions with various parties. The instructions included an authorization and request for Pattern management to contact CPPIB and Party A to solicit written proposals regarding a potential transaction with Pattern, which proposals were to include each party’s explicit assumptions about the valuation of Pattern and any material conditions relating to a potential transaction involving Pattern. The Special Committee’s instructions reiterated that Pattern management was not authorized to have any discussions regarding Pattern management’s role or compensation arrangements in connection with any potential transaction without specific authorization from the Special Committee, except for limited non-compensation related discussions regarding potential key personnel, operational integration or staffing in the event a transaction were to occur.

On June 28, 2019, representatives of CPPIB sent a non-binding proposal to members of our Board in which it offered to purchase the outstanding shares of Company Common Stock for $25.50 per share in cash, subject to completion of due diligence. CPPIB noted that the proposal was subject to an agreement being reached with respect to the acquisition of Pattern Development, but did not expressly indicate whether the acquisitions of Pattern and Pattern Development would be cross-conditioned.

On July 1, 2019, representatives of Pattern management, Evercore and Goldman Sachs discussed CPPIB’s June 28, 2019 proposal with representatives of CPPIB.

Also on July 1, 2019, Party A submitted a non-binding proposal for a combination of Pattern and Company A, with the holders of Company Common Stock receiving shares of Company A common stock, at an exchange ratio to reflect an implied 15.0% premium to the trading price of Company Common Stock. In its proposal, Party A indicated a willingness to provide holders of Company Common Stock with the option to receive cash consideration in lieu of shares in the combined company, subject to unspecified limitations. Party A indicated that the combined company would issue shares to Party A at an unspecified price to enable Party A to own at least 51% of the combined company after consummation of the proposed transaction, with Party A receiving the right to appoint five of nine members to the combined company’s board of directors. Party A proposed that the combined company would acquire all of the outstanding ownership interests of Pattern Development concurrently with the closing of the combination of Pattern and Company A, but did not expressly indicate whether such transactions would be cross-conditioned.

On July 8, 2019, Party D submitted a non-binding written proposal to Mr. Batkin that included a non-binding offer to acquire the outstanding shares of Company Common Stock for $25.00 per share in cash.

 

42


Table of Contents

Party D’s proposal was conditioned on Party D’s completion of a due diligence review of the business and operations of each of Pattern and Pattern Development but did not expressly indicate whether the acquisitions of Pattern and Pattern Development would be cross-conditioned.

On July 12, 2019, outside counsel to Party A sent Paul Weiss a draft Party A merger agreement. The draft Party A merger agreement provided that Party A, but not Pattern, would have a termination right in the event that a proposed acquisition of Pattern Development failed to close simultaneously or prior to the proposed merger with Pattern.

On July 15, 2019, Mr. Batkin met with representatives of CPPIB who reiterated CPPIB’s interest in pursuing a transaction involving Pattern and discussed potential next steps.

On July 16, 2019, representatives of Party D sent representatives of the Special Committee, Pattern management and Riverstone Representatives a proposal in which Party D offered to acquire the outstanding shares of Company Common Stock for $25.00 per share in cash. Party D’s proposal was conditioned on Party D’s completion of a due diligence review of the business and operations of each of Pattern and Pattern Development but did not expressly indicate whether the acquisitions of Pattern and Pattern Development would be cross-conditioned.

Also on July 16, 2019, Mr Batkin and representatives of Paul Weiss, Pattern management, Evercore and Party A met to discuss the terms of a potential transaction involving Pattern, Party A and Company A. The parties also discussed the pro forma business plan of the combined company that would result from a potential transaction between Pattern, Party A and Company A, including each party’s views on matters such as potential future acquisitions, financing and dividend policy.

Later on July 16, 2019, representatives of the Special Committee and representatives of Party A exchanged revised indicative term sheets relating to the governance of the pro forma combined company that would result from a transaction between Pattern, Party A and Company A based on the discussions that took place during the in-person meetings on July 16, 2019.

On July 17, 2019, at the direction of the Special Committee, members of Pattern management met with Riverstone Representatives and representatives of Party A.

Also on July 17, 2019, representatives of the Special Committee received a further revised indicative term sheet from representatives of Party A, based on the discussions that had taken place during the recent in-person meetings. Representatives of the Special Committee prepared and delivered a revised term sheet to representatives of Party A.

On July 18, 2019, at the direction of the Special Committee, representatives of Pattern management met with representatives of Party A.

On July 19, 2019, Party D and Pattern entered into a confidentiality agreement that included customary standstill provisions. On that same day, Party D, Pattern and an affiliate of Riverstone entered into a side letter to the confidentiality agreement, to facilitate the sharing of information regarding Pattern Development.

During the week of July 22, 2019, at the direction of the Special Committee, representatives of Pattern management, Paul Weiss and Evercore met with representatives of CPPIB to discuss the possibility of pursuing a transaction on the terms outlined in CPPIB’s June 28, 2019 indicative proposal.

On July 23, 2019, Pattern received a revised indicative proposal from Party A, offering to combine Company A and Pattern in an all-stock transaction at an exchange ratio to reflect an implied 15.0% premium to the trading price of Company Common Stock. Party A’s proposal contemplated that the combined entity would

 

43


Table of Contents

purchase Pattern Development in a transaction financed by the sale to Party A of shares in the combined company. Party A’s proposal also indicated that it would be willing to acquire Pattern without also acquiring Pattern Development at an exchange ratio to reflect an implied 20.0% premium to the trading price of Company Common Stock. Party A’s proposal indicated that, for either transaction, Party A would be willing to offer the holders of Company Common Stock up to $750 million of cash consideration to electing holders in lieu of shares in the combined company. Party A’s proposal indicated that, in the first alternative where Pattern Development was included in the potential transaction, the acquisition of Pattern Development would be conditioned upon a transaction between Pattern and Company A, but did not expressly indicate that the transaction between Pattern and Company A would be conditioned upon the acquisition of Pattern Development.

On July 31, 2019, the Special Committee met with Pattern management and representatives of Goldman Sachs to discuss preliminary financial analyses prepared by Evercore and Goldman Sachs with respect to the most recent proposals received from each of Party A, CPPIB and Party D as well as Pattern’s prospects and performance as a stand-alone company. Representatives of Goldman Sachs and the Special Committee reviewed and compared the potential benefits, risks and other considerations involved in engaging in any of the proposed strategic transactions or remaining as a stand-alone company. Matters discussed and evaluated by the Special Committee included the potential value that Pattern would receive from being associated with Party A and questions relating to Party A’s business plan for the combined company, as well as the complexity of Party A’s proposal as compared to the proposals from CPPIB and Party D and the certainty of value of CPPIB’s and Party D’s all-cash proposals relative to Party A’s proposed all-stock transaction with an option to include up to $750 million in cash. The Special Committee determined to continue to assess and evaluate the preliminary financial analyses prepared by Evercore and Goldman Sachs at the Special Committee meeting scheduled for the following day.

On August 1, 2019, the Special Committee met with Pattern management and representatives of Paul Weiss, Evercore and Goldman Sachs. Representatives of Evercore and Goldman Sachs provided an overview of the most recent proposals received from each of Party A, CPPIB and Party D and discussed preliminary financial analyses comparing the recent proposals received from Party A, CPPIB and Party D, including a comparison to Pattern’s projected performance as a standalone company. The Special Committee discussed potential opportunities and risks related to each proposal, including the viability of Party A’s business plan for the combined company, and considered next steps. Pattern management was then excused from the meeting and the Special Committee met in executive session to review and continue its discussions and evaluation of Pattern’s options. The Special Committee determined that Evercore and Goldman Sachs should encourage each of Party A, CPPIB and Party D to improve their offers and to accelerate their work, including any discussions with Riverstone that would be necessary for such party to execute a transaction with Pattern.

Between August 1 and August 12, 2019, at the direction of the Special Committee, representatives of Evercore and Goldman Sachs contacted representatives of Party A, CPPIB and Party D to encourage each potential buyer to improve its previous proposal. During these conversations, representatives of CPPIB requested that Pattern grant CPPIB exclusivity. Representatives of Evercore and Goldman Sachs indicated to CPPIB that the Special Committee would consider CPPIB’s request for exclusivity only if CPPIB raised its offer price. CPPIB declined to raise its offer price.

On August 12, 2019, an article was published indicating that Pattern engaged in discussions relating to a potential strategic transaction including a possible sale of Pattern. The closing price on that day per share of Company Common Stock was $25.15, an increase of $1.85 per share (7.9%) from the closing price per share of Company Common Stock on August 9, 2019, which was the last full trading day prior to publication of the article.

On August 13, 2019, as requested by regulators in Canada, Pattern issued a press release in which it indicated that it had responded to inquiries from third parties, but that no definitive agreement had been reached with respect to a strategic transaction with any party and that there was no assurance that Pattern would agree to any strategic transaction.

 

44


Table of Contents

Later on August 13, 2019, Mr. Batkin met telephonically with Pattern management and representatives of Evercore, Goldman Sachs and Paul Weiss. During the meeting, Mr. Batkin and the Special Committee’s outside advisors discussed potential structuring options for a possible transaction involving Party A, Company A and Pattern, including a transaction that would not involve the acquisition of Pattern Development.

On August 16, 2019, Mr. Batkin met with Pattern management and representatives of Paul Weiss, Evercore and Goldman Sachs to provide a status update and to discuss potential next steps. During the meeting, representatives of Paul Weiss, Evercore and Goldman Sachs discussed certain structuring matters with respect to a transaction between Pattern and Company A and the implications for the combined company’s relationship with Pattern Development after the transaction closed. Mr. Garland reported that, since the August 12, 2019 article, Pattern had received indications of interest from potential buyers including Party B, a publicly listed energy company (referred to herein as “Party E”), a privately owned company involved in developing and operating alternative energy assets (referred to herein as “Party F”), a company operating in the alternative energy industry with a large private equity investor (referred to herein as “Party G”), a large private equity investment firm (referred to herein as “Party H”), a publicly listed manufacturer of wind turbines (“Party I”) and a Canadian alternative energy firm (referred to herein as “Party J”). Representatives of Evercore and Goldman Sachs discussed the possibility of engaging in discussions with each of these parties to potentially acquire or merge with Pattern. Representatives of Evercore and Goldman Sachs indicated that Party A, CPPIB and Party D had not revised their respective proposals. On behalf of the Special Committee, Mr. Batkin authorized Mr. Garland and the Special Committee’s financial advisors to contact the new inbound potential buyers.

Later on August 16, 2019, representatives of the Special Committee received a revised non-binding letter proposal from CPPIB that included an offer to acquire the outstanding shares of Company Common Stock for between $26.25 and $26.50 in cash per share and to purchase the equity interests in Pattern Development not owned by Pattern from Riverstone, subject to completion of due diligence. The proposal did not expressly indicate whether the acquisitions of Pattern and Pattern Development would be cross-conditioned.

On August 19, 2019, the Special Committee met telephonically with Pattern management and representatives of Paul Weiss, Evercore and Goldman Sachs. Pattern management provided the Special Committee with further updates on discussions with Party A, CPPIB, Party D as well as other newly interested parties who had approached Mr. Garland since the August 12, 2019 article. Representatives of Paul Weiss provided an overview of key terms included in a draft merger agreement Paul Weiss had prepared for a possible transaction between CPPIB and Pattern. The Special Committee discussed the CPPIB proposal and the other expressions of interest in Pattern and considered next steps, including delivering draft merger documentation to CPPIB. Pattern management was then excused from the meeting, and the Special Committee met in executive session to further discuss CPPIB’s proposal and evaluate Pattern’s next steps. After further discussion, the Special Committee instructed Paul Weiss to deliver a draft CPPIB merger agreement to CPPIB. The Special Committee also authorized Evercore and Goldman Sachs to request written proposals based on publicly available information from the other parties that had recently expressed interest in engaging in a transaction with Pattern. The Special Committee also discussed whether it would be appropriate to authorize Pattern management to begin discussions of arrangements relating to their compensation and post-transaction roles. After review and discussion, the Special Committee determined that, given CPPIB’s price and in order to advance a potential transaction with CPPIB, it would be appropriate to allow Pattern management to have discussions regarding such matters with CPPIB provided that representatives of financial advisors to the Special Committee were in attendance.

Over the course of the next two days, representatives of Evercore and Goldman Sachs reached out to Party A, CPPIB and Party D. Evercore also reached out to Party B, Party E, Party F, Party G, Party H and Party I – each of whom had approached Pattern after the August 12, 2019 article – to determine each party’s level of interest in a potential transaction with Pattern. Party B requested to pursue a transaction and move forward to negotiate a confidentiality agreement, while Party E, Party F, Party G, Party H, Party I and Party J decided not to pursue a transaction with Pattern.

 

45


Table of Contents

On August 20, 2019, at the direction of the Special Committee, representatives of Paul Weiss sent a draft CPPIB merger agreement to representatives of Shearman & Sterling LLP (“Shearman”), outside counsel to CPPIB. The draft CPPIB merger agreement provided that the closing of the proposed merger would not be conditioned upon the closing of an acquisition of Pattern Development.

Later on August 20, 2019, representatives of Evercore and Goldman Sachs spoke with representatives of CPPIB, who requested that Pattern grant CPPIB exclusivity. Mr. Batkin discussed CPPIB’s request for exclusivity with representatives of Paul Weiss, Evercore and Goldman Sachs and, given the Special Committee’s recent discussions and the number of parties interested in engaging in a potential transaction with Pattern, Mr. Batkin determined on behalf of the Special Committee not to grant exclusivity to CPPIB or any other party at that time.

On August 21, 2019, Pattern management and representatives of Evercore and Goldman Sachs met with representatives of CPPIB to discuss the status of CPPIB’s proposal. During this meeting, the parties had high-level discussions regarding arrangements relating to compensation and post-transaction roles for Pattern management.

On August 23, 2019, representatives of Paul Weiss spoke with representatives of Sullivan & Cromwell LLP (“S&C”), outside counsel to Riverstone. During the meeting, Paul Weiss and S&C discussed the status of various workstreams and issues relating to a potential transaction involving CPPIB, Pattern and Pattern Development. During the meeting, representatives of Paul Weiss reiterated the position that a transaction involving Pattern and CPPIB should not be cross-conditioned with any potential transaction involving Pattern Development.

On August 26, 2019, representatives of Party A sent representatives of the Special Committee a revised non-binding proposal in which Party A offered to acquire Pattern in an all-stock transaction involving the combination of Pattern and Company A, with Pattern Development remaining a separate entity, which did not include a cash option. The proposal included an effective fixed exchange ratio of two shares of Company A common stock per share of Company Common Stock. The effective two for one exchange ratio was estimated, based on analysis by Evercore that was presented to the Special Committee on August 28, 2019, to reflect a range of premiums of between 1.4% and 28.8% to the unaffected closing price for a share of Company Common Stock on August 9, 2019 (the last full trading day prior to publication of the August 12, 2019 article), based on an expected range of trading prices for shares of the combined company’s common stock post-transaction and on certain other assumptions. These estimates did not take into account the potential impact of the Company A Litigation. The proposal also required that amendments be made to certain agreements governing the relationship between Party A and Company A in order to reconcile such relationship with the contractual relationship between Pattern and Pattern Development, which representatives of Party A acknowledged would also require concessions to be made by Pattern Development. Party A’s proposal provided that it would automatically expire if Party A was not granted exclusivity by August 30, 2019.

Also on August 26, 2019, the Special Committee met telephonically with Pattern management and representatives of Paul Weiss, Evercore and Goldman Sachs. Mr. Batkin and representatives of Evercore and Goldman Sachs provided updates on recent contacts with the potential bidders. Pattern management was then excused from the meeting and the Special Committee met in executive session to review the various proposals made by interested parties, including the proposal received from Party A earlier in the day, and to discuss next steps.

On August 27, 2019, Pattern received a non-binding letter of interest from Party B indicating an interest in acquiring the outstanding shares of Company Common Stock for between $25.00 and $28.00 per share in cash, subject to confirmatory due diligence.

On August 28, 2019, the Special Committee met telephonically with Pattern management and representatives of Paul Weiss, Evercore and Goldman Sachs. Representatives of Evercore and Goldman Sachs reviewed with the Special Committee various strategic and financial considerations relating to Party A’s latest proposal. Members of the Special Committee discussed matters relating to the anticipated dividend yield of the

 

46


Table of Contents

combined company, the exposure of Pattern stockholders to potential liabilities associated with the Company A Litigation and the range of potential prices that shares of the combined company might trade based on various assumptions. Members of the Special Committee also noted the uncertain value of the all-stock consideration offered by Party A as compared to the all-cash offers received from other bidders. The Special Committee also discussed next steps with respect to Party B, noting the risk of providing competitively sensitive information to a competitor. Pattern management was then excused from the meeting and the Special Committee met in executive session to review and discuss the Party A proposal and the other matters discussed at the meeting. The Special Committee determined that the Special Committee and its advisors needed to evaluate further the Party A proposal, given the complexity of executing the proposed transaction among Party A, Company A and Pattern, and that it would be premature to grant exclusivity to any party, considering the status of discussions with multiple interested parties. After discussion with representatives of Paul Weiss, the Special Committee determined it would be appropriate for members of Pattern management to obtain their own legal counsel with respect to the proposed potential transactions with CPPIB, including as it relates to Pattern management’s interest in Pattern Development, and to engage in further discussions with CPPIB relating to such interests and management arrangements. After further discussion, the Special Committee authorized Pattern to negotiate a confidentiality agreement with Party B to allow for the sharing of confidential Pattern information that was not competitively sensitive in nature if requested by Party B.

On August 29, 2019, at the direction of the Special Committee, representatives of Evercore and Goldman Sachs spoke to representatives of each of Party A, Party B, and Party D. Representatives of Evercore asked Party A to clarify its proposal with respect to Pattern Development and the combined company’s relationship with Pattern Development. Party B indicated a desire to execute a non-disclosure agreement in order to begin its due diligence. Representatives of Party D indicated that it would be willing to offer up to $26.50 in cash per share of Company Common Stock, subject to approval by its investment committee.

On August 30, 2019, Party A sent a revised proposal, indicating that Party A’s offer would expire unless Pattern granted exclusivity prior to the end of the day on September 4, 2019.

On September 1, 2019, Mr. Batkin met with Pattern management and representatives of Paul Weiss, Evercore and Goldman Sachs to discuss next steps with respect to Party A, CPPIB and Party D.

On September 2, 2019, representatives of Paul Weiss received a revised draft CPPIB merger agreement from representatives of Shearman. The draft CPPIB merger agreement removed the go-shop provision and proposed that Pattern’s damages would be capped in the event that the agreement was terminated for any reason to a reverse termination fee equal to 4.5% of Pattern’s equity value and provided that Pattern would reimburse CPPIB for certain expenses in the event that the agreement was terminated under certain conditions and limited the applicability of covenants to use reasonable best efforts to obtain regulatory approvals to Pattern and its subsidiaries. The draft CPPIB merger agreement did not condition the closing of the proposed merger on the closing of a transaction involving affiliates of CPPIB and Pattern Development.

Also on September 2, 2019, Mr. Batkin spoke with representatives of Party A to discuss and clarify Party A’s recent proposal and to discuss possible next steps. Issues identified and discussed included the value of Party A’s recent proposal, the possibility of adding downside protection for the holders of Company Common Stock in the form of a cash option or exchange ratio collar, the implications for Party A’s proposal if Riverstone was not supportive of the proposed transaction and Party A’s request for exclusivity.

Later on September 2, 2019, Mr. Batkin spoke with representatives of Paul Weiss, Evercore, Goldman Sachs and Pattern management to discuss the draft CPPIB merger agreement, the issues presented therein and the status of discussions with Party A.

On September 3, 2019, Mr. Batkin spoke with representatives of Party A to discuss further Party A’s recent proposal. During the conversation, Mr. Batkin indicated that Paul Weiss would send a revised draft Party A

 

47


Table of Contents

merger agreement to outside counsel to Party A and suggested that representatives of Party A arrange to meet with Pattern management and Riverstone Representatives in New York City to discuss issues and terms relating to Pattern Development in connection with Party A’s proposal.

Later on September 3, 2019, as authorized by the Special Committee, representatives of Paul Weiss sent a revised draft Party A merger agreement to representatives of outside counsel to Party A, which provided that the closing of the proposed transactions with Company A and Pattern would not be conditioned on closing of a transaction with Pattern Development.

On September 4, 2019, as authorized by the Special Committee, Mr. Garland met with the Riverstone Representatives and representatives of Party A and Company A to discuss matters relating to Pattern Development in connection with Party A’s August 26, 2019 proposal and to discuss certain modifications to the agreements governing the relationship between Pattern and Pattern Development, which Riverstone believed would be necessary in connection with a combination of Pattern and Company A. During the meeting, the Riverstone Representatives and representatives of Party A indicated that they would not be supportive of a combination of Pattern and Company A absent certain changes to the agreements governing the commercial relationship between Pattern and Pattern Development. Representatives of Party A indicated that Party A did not intend to proceed with a transaction that Riverstone did not support. Party A offered to consider proposed amendments to the agreements governing the relationship between Pattern and Pattern Development in order to proceed with a potential transaction.

Later on September 4, 2019, Mr. Garland updated Mr. Batkin and representatives of Paul Weiss, Evercore and Goldman Sachs on the meeting with the Riverstone Representatives and Party A. After further discussion, it was determined that Mr. Batkin should contact representatives of Party A for clarification on the status of Party A’s proposal and interest in Pattern and, separately, should contact the Riverstone Representatives to encourage Riverstone to provide proposed modifications to the agreements governing the commercial relationship between Pattern and Pattern Development. Subsequently, Mr. Batkin also received an email from a representative of Party A that its August 30, 2019 non-binding offer letter had expired and that Party A planned to terminate discussions of a potential transaction involving Pattern unless and until it received acceptable proposals regarding Pattern’s relationship with Pattern Development. Mr. Batkin discussed and considered with the Special Committee’s outside advisors whether it would be appropriate to grant exclusivity to Party A at this time. Consistent with the prior directions of and discussions with the Special Committee, Mr. Batkin determined that granting exclusivity would not be prudent at that time.

On September 5, 2019, Party B and Pattern entered into a confidentiality agreement that included customary standstill provisions.

On September 6, 2019, Party B, Pattern and an affiliate of Riverstone entered into a side letter to the confidentiality agreement, to facilitate the sharing of information regarding Pattern Development.

On September 8, 2019, representatives of Paul Weiss sent a revised draft CPPIB merger agreement to representatives of Shearman at the direction of the Special Committee.

On September 10, 2019, representatives of Party A sent a revised proposal to Mr. Batkin. In its proposal, Party A offered to resume discussions with Pattern and commence negotiations among Pattern, Party A, Riverstone and Pattern Development if it was granted exclusivity by each of Pattern Development and Pattern.

On September 12, 2019, Mr. Batkin received a letter from Riverstone Representatives and Pattern Development indicating that Riverstone and Pattern Development would be willing to resume discussions with Party A, including by presenting Party A with suggested amendments to the documents governing the relationship between Pattern Development and Pattern.

On September 13, 2019, at the direction of the Special Committee, representatives of Paul Weiss and representatives of Shearman discussed open issues in the draft CPPIB merger agreement. Issues discussed included the inclusion of a go-shop provision, the status of CPPIB’s discussions with Pattern Development and the status of documentation relating to CPPIB’s debt financing.

 

48


Table of Contents

On September 14, 2019, Mr. Batkin (1) requested that Riverstone Representatives engage with representatives of Party A and submit a written proposal including potential terms that Pattern Development would accept in connection with a combination of Pattern and Company A and (2) informed representatives of Party A that he had made such a request.

On September 18, 2019, at Mr. Batkin’s request, Riverstone Representatives submitted a proposal to representatives of Party A, including a description of proposed amendments to the terms of the agreements governing the commercial relationship between Pattern and Pattern Development, that Riverstone believed necessary in connection with a combination of Pattern and Company A.

On September 19, 2019, representatives of Shearman sent representatives of Paul Weiss a revised draft CPPIB merger agreement. The draft CPPIB merger agreement included a 35-day go-shop period subject to carve-outs for specific parties listed on a schedule to the draft CPPIB merger agreement, which parties included Party A.

On September 20, 2019, representatives of Party D sent Mr. Batkin, Mr. Garland and Riverstone Representatives a non-binding proposal in which Party D offered to acquire the outstanding shares of Company Common Stock at a price of $26.75 per share in cash. Party D’s non-binding proposal contemplated that Party D would acquire Pattern and Pattern Development, but did not expressly indicate whether the acquisitions of Pattern and Pattern Development would be cross-conditioned. Party D requested a 30-day period of exclusivity to negotiate definitive documentation.

On September 22, 2019, representatives of Evercore requested a status update from Party B, including with respect to Party B’s proposed price. Representatives of Party B indicated that Party B was likely in the middle of its $25.00 per share to $28.00 per share range, but that Party B would require additional information to complete its due diligence review of Pattern and Pattern Development.

Also on September 22, 2019, at the direction of the Special Committee, representatives of Evercore spoke to representatives of Party D, who requested access to draft transaction documentation and an in-person meeting with Pattern management and Riverstone Representatives during the following week.

On September 23, 2019, at the direction of the Special Committee, representatives of Paul Weiss spoke with representatives of Shearman to discuss open issues in the draft CPPIB merger agreement, including CPPIB’s proposed carve-outs to the go-shop provision, CPPIB’s progress in its discussions with Pattern Development and the status of CPPIB’s financing papers.

Later on September 23, 2019, at the direction of the Special Committee, Mr. Batkin and representatives of Evercore spoke with representatives of Party A to discuss Party A’s reaction to Riverstone’s recent proposal and to encourage Party A to pursue further discussions with Riverstone. Representatives of Party A indicated that Party A believed that there were realistic options to resolve the issues presented by Riverstone’s recent proposal, but that Party A would only continue discussions regarding a transaction if granted exclusivity by Pattern. With the authorization of the Special Committee, Mr. Batkin informed Party A that Pattern would not grant it exclusivity, but offered that Pattern would cover Party A’s going-forward expenses to entice Party A to advance discussions with Riverstone.

Later on September 23, 2019, representatives of Evercore sent a draft Party D merger agreement prepared by Paul Weiss to representatives of Party D at the direction of the Special Committee.

On September 24 through September 25, 2019, in conversations with Mr. Batkin, representatives of Party A reiterated Party A’s request for exclusivity and Party A’s belief that there were realistic options to resolve the issues presented by Riverstone’s recent proposal. Representatives of Party A informed Mr. Batkin that representatives of Party A would be willing to meet with Riverstone Representatives to discuss Riverstone’s recent written proposal regarding amendments to the agreements governing the commercial relationship between Pattern and Pattern Development.

 

49


Table of Contents

On September 25, 2019, at the direction of the Special Committee, representatives of Evercore and Pattern management met in person with representatives of Party D and Riverstone to discuss terms relating to a potential transaction involving Pattern and Party D as well as a potential transaction involving Pattern and Pattern Development.

Also on September 25, 2019, Mr. Batkin met telephonically with Pattern management and representatives of Paul Weiss, Evercore and Goldman Sachs to receive an update on discussions with Party B and Party D and to provide an update with respect to recent communications with representatives of Party A. Mr. Batkin discussed with representatives of Evercore and Goldman Sachs potential responses to Party A and determined that Mr. Batkin should reach out to representatives of Party A to set up a meeting between Party A and Riverstone to ensure that there was a shared understanding of the terms in Riverstone’s September 18, 2019 proposal to Party A. Pattern management discussed potential approaches to Party B and concerns about sharing competitively sensitive information with Party B, especially in light of Party B’s indicative price. It was determined that the Special Committee would discuss and determine next steps with respect to sharing information with Party B.

Later on September 25, 2019, at the direction of the Special Committee, Mr. Batkin spoke with representatives of Party A. Mr. Batkin requested that Party A meet with Riverstone Representatives to ensure that there was a shared understanding of Riverstone’s September 18, 2019 proposal to Party A. The representatives of Party A agreed to engage in such discussions with Riverstone. Mr. Batkin subsequently contacted Riverstone Representatives to arrange a meeting with representatives of Party A.

On September 26, 2019, Riverstone Representatives and representatives of Party A scheduled a meeting for October 1, 2019 with the intent to clarify if there was a shared understanding of Riverstone’s September 18, 2019 proposal to Party A. However, the meeting was cancelled by Party A on September 27, 2019.

On September 27, 2019, representatives of Evercore and Paul Weiss received a summary of key issues presented by Pattern’s draft of the Party D merger agreement from Party D’s outside counsel. Key issues included Party D’s position that the acquisition of Pattern be cross-conditioned with the closing of a transaction with Pattern Development and that Pattern should be restricted from paying dividends to holders of Company Common Stock between signing and closing.

On September 29, 2019, the Special Committee met telephonically with Pattern management and representatives of Paul Weiss, Evercore and Goldman Sachs to discuss recent developments, including Party D’s recent proposal, and to determine next steps. Mr. Batkin updated the Special Committee on his recent discussions with representatives of Party A and on the progress of Pattern’s ongoing discussions with representatives of each of CPPIB, Party B and Party D. Members of Pattern management discussed Party B’s request for additional information and suggested that Pattern management be made available to Party B to discuss questions, but that Pattern should proceed cautiously in terms of providing potentially competitively sensitive information to Party B given that Party B was a competitor and that Party B’s indicative price did not exceed the prices offered by other potential buyers. Pattern management was then excused from the meeting and the Special Committee met in executive session to review and consider next steps with respect to Party A, Party B, Party D and CPPIB. The Special Committee considered and evaluated CPPIB’s and Party A’s requests for exclusivity and determined not to grant any party exclusivity, given the continued interest in Pattern expressed by multiple credible parties.

Subsequent to the September 29, 2019 telephonic meeting, Pattern management provided Party B with pro forma models and other materials which would allow Party B to estimate a value for Pattern Development without revealing potentially competitively sensitive information in the areas Party B competes with Pattern Development.

On October 2, 2019, at the direction of the Special Committee, representatives of Paul Weiss spoke with representatives of outside counsel to Party D to discuss issues presented by the draft Party D merger agreement, including Party D’s request that a transaction with Pattern be cross-conditioned on the closing of a transaction involving Pattern Development and Party D’s proposed restrictions on Pattern’s dividends.

 

50


Table of Contents

On October 3, 2019, at the direction of the Special Committee, Mr. Batkin spoke with representatives of Party A and again encouraged Party A to engage with Riverstone. Representatives of Party A informed Mr. Batkin that Party A would not be willing to devote time and resources to discussions with Riverstone unless granted exclusivity. Mr. Batkin informed representatives of Party A that Pattern was in discussions with other parties and was not in a position to grant exclusivity.

On October 7, 2019, outside counsel to Party D provided a revised draft Party D merger agreement to Paul Weiss. The draft Party D merger agreement included provisions restricting Pattern’s right to declare and pay dividends to holders of Company Common Stock between signing and closing, provided that closing of the transactions between Pattern and Party D would be cross-conditioned on the closing of a transaction involving Pattern Development and included a 15-day go-shop period.

On October 11, 2019, at the direction of the Special Committee, representatives of Paul Weiss and outside counsel to Party D discussed open issues in the draft Party D merger agreement. Issues discussed included the length of the go-shop period, Party D’s proposal that the transaction between Pattern and Party D be cross-conditioned on the closing of a transaction involving Pattern Development, the proposed restrictions on Pattern paying dividends to holders of Company Common Stock during the period between signing and closing, and provisions relating to regulatory efforts.

Between October 13 and 15, 2019, at the direction of the Special Committee, Mr. Batkin spoke with representatives of Party A on multiple occasions. During the course of these conversations, Mr. Batkin informed representatives of Party A that Party A would have a competitive bid at the exchange ratio proposed in August 2019, but Party A had to confirm either that (1) Party A’s proposal was not conditioned on Party A entering into agreements with Pattern Development and Riverstone or (2) Party A had negotiated definitive drafts of such agreements with Pattern Development and Riverstone, as applicable. Mr. Batkin reiterated to representatives of Party A that other parties had entered advanced stages of negotiations and that Pattern would be seeking definitive offers from all interested parties.

On October 16, 2019, at the direction of the Special Committee, representatives of Paul Weiss called representatives of outside counsel to Party A to request an update on Party A’s interest in pursuing a transaction with Pattern and reiterated that Party A’s August 2019 proposal was competitive, but Party A had to confirm, as it had previously been instructed to confirm, either that (1) Party A’s proposal was not conditioned on Party A entering into agreements with Pattern Development and Riverstone or (2) Party A had negotiated definitive drafts of such agreements with Pattern Development.

On October 17, 2019, at the direction of the Special Committee, representatives of Evercore instructed representatives of Party A, CPPIB and Party D to submit proposed definitive documentation by October 23, 2019 and “best and final” offers by October 28, 2019. After receiving indications that Party B was not willing to submit a final offer, representatives of Evercore did not request that Party B submit a best and final offer.

On October 18, 2019, representatives of Paul Weiss provided representatives of Shearman with a revised draft CPPIB merger agreement as well as other revised ancillary transaction documentation. Paul Weiss also provided representatives of Party D with comments to certain provisions of its draft Party D merger agreement and requested that Party D and its representatives submit a revised draft Party D merger agreement based on the written comments and other feedback previously provided by Paul Weiss.

On October 22, 2019, representatives of Evercore spoke with representatives of Party D, who indicated that Party D was unlikely to submit a definitive bid.

Early on October 24, 2019, Shearman submitted draft transaction documentation to Paul Weiss, in accordance with Evercore’s bid instructions. The revised draft CPPIB merger agreement included restrictions on Pattern engaging in discussions with Party A and Party D during the go-shop period and proposed a CPPIB termination fee equal to 5.5% of Pattern’s implied equity value payable in certain circumstances.

 

51


Table of Contents

On October 28, 2019, representatives of CPPIB submitted an offer to purchase the outstanding shares of Company Common Stock for $26.75 in cash per share.

Also on October 28, 2019, representatives of Party A submitted an acknowledgment reaffirming its prior offer, originally made in August of 2019, without providing any transaction documentation. Party D did not submit a proposal.

Later on October 28, 2019, Mr. Batkin, on behalf of the Special Committee, responded to Party A’s proposal indicating that the Special Committee was willing to extend the deadline for the submission of definitive transaction documentation to 12:00 p.m. Eastern Time on October 30, 2019 and requested that Party A confirm that Party A would be willing to enter into and consummate a definitive agreement with Pattern at the proposed exchange ratio regardless of any agreements (or the lack of any such agreements) between Party A and Riverstone.

On October 29, 2019, representatives of Paul Weiss provided a revised draft CPPIB merger agreement and ancillary transaction documentation to Shearman. The draft CPPIB merger agreement provided that the CPPIB termination fee would be equal to 10% of the implied equity value of Pattern and removed proposed restrictions on Pattern entering into discussions with Party A and Party D during the go-shop period.

On October 30, 2019, representatives of Party A submitted a revised draft Party A merger agreement, which included a condition that Party A be permitted to engage in discussions with Riverstone prior to executing the draft Party A merger agreement and conditioned closing of the transactions contemplated by the draft Party A merger agreement on Riverstone’s consent to certain amendments to Pattern Development’s existing contractual relationships with Pattern. Party A did not submit definitive documentation or terms relating to governance of the combined company or detail any requested arrangements to be made with Pattern Development.

Later on October 30, 2019, the Special Committee met with representatives of Paul Weiss, Evercore and Goldman Sachs to discuss the various proposals submitted to Pattern and to consider next steps. During the meeting, Mr. Batkin noted that representatives of Party D had indicated that Party D had decided not to pursue a transaction with Pattern. After the meeting, representatives of Paul Weiss, on behalf of the Special Committee, communicated to representatives of Party A that Party A would need to finalize any arrangements with Riverstone that Party A believed were necessary in connection with a combination of Pattern and Company A, and to submit executable transaction documentation, prior to November 2, 2019 at 5:00 p.m. Eastern Time.

On October 31, 2019, the Special Committee met with representatives of Paul Weiss, Evercore and Goldman Sachs to discuss the responses to Evercore’s request for best and final offers and to evaluate the proposals and documentation received by Pattern. Members of the Special Committee reviewed and discussed a presentation prepared by Evercore summarizing financial considerations and risks related to the proposed transactions, including a range of valuations for shares of Company Common Stock. Paul Weiss reviewed the fiduciary duties of the Special Committee and provided a summary of the terms of the latest proposals and documentation submitted by CPPIB and Party A, as well as a comparison of the terms of such proposals. The Special Committee determined to further evaluate the proposals submitted by CPPIB and Party A and to reconvene to consider and evaluate potential next steps.

On November 1, 2019, representatives of Party A reaffirmed to representatives of Paul Weiss Party A’s position that amendments to the agreements governing the commercial relationship between Pattern and Pattern Development would be required in connection with a combination of Pattern and Company A. Representatives of Party A indicated that it believed that such amendments could be negotiated between Party A, Pattern, Pattern Development and Riverstone within 30 days. Representatives of Paul Weiss reiterated the Special Committee’s request that Party A finalize any arrangements with Pattern Development that Party A believed were necessary in connection with a combination of Pattern and Company A and for Party A to submit executable transaction documentation, including with respect to any such arrangements with Pattern Development, prior to November 2 at 5:00 p.m. Eastern Time.

 

52


Table of Contents

On November 2, 2019, representatives of Party A indicated to representatives of Paul Weiss that it would not be submitting a final proposal.

Also on November 2, 2019, CPPIB submitted a further revised draft CPPIB merger agreement and ancillary transaction documentation in response to revised drafts provided by Paul Weiss on October 29, 2019. In response to the draft CPPIB merger agreement and with the authorization of the Special Committee, Evercore proposed potentially altering certain terms of the draft CPPIB merger agreement, including provisions relating to Pattern’s ability to engage in discussions regarding a strategic transaction with certain third parties and the termination fee that would be owed by Pattern in the event that Pattern terminated the draft CPPIB merger agreement in order to enter into a definitive agreement with respect to a superior proposal with such parties, if CPPIB were to increase its offer by $0.25 per share. Representatives of CPPIB rejected this offer.

Between November 2 and 3, 2019, representatives of the Special Committee and CPPIB engaged in multiple discussions to negotiate open issues and to finalize transaction documentation. Issues discussed included the size of the CPPIB termination fee, Pattern’s ability to have discussions with certain specified parties during the go-shop period, and the termination fee owed by Pattern in the event it entered into a definitive agreement with respect to superior company proposal with certain parties during the go-shop period.

On November 3, 2019, the Special Committee met telephonically with representatives of Evercore, Goldman Sachs and Paul Weiss at which time Evercore rendered its oral opinion, which was subsequently confirmed in writing, to the effect that, as of that date and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s opinion, the Merger Consideration of $26.75 per share to be received by the holders of shares of Company Common Stock in the Merger was fair, from a financial point of view, to such holders (other than holders of Excluded Shares). For a discussion of Evercore’s opinion, see the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger – Fairness Opinion of Evercore” beginning on page 59 of this proxy statement. Paul Weiss then provided the Special Committee with an update on the documentation that had been prepared to date in connection with the proposed Merger Agreement and ancillary transaction documentation, copies of and a summary of which had been provided in advance of the meeting and at a previous meeting of the Special Committee. The Special Committee then reviewed the interest of Pattern management in connection with the proposed Merger and the proposed transaction involving CPPIB and Pattern Development. After discussion, the Special Committee unanimously determined to recommend to our Board that our Board recommend and declare fair, advisable and in the best interests of the holders of Pattern stock the Merger Agreement and the transactions contemplated thereby, including the Merger, to the holders of Pattern stock and that our Board take such actions to adopt, enter into, deliver and perform the Merger Agreement and the transactions contemplated thereby, including the Merger.

Later on November 3, 2019, our Board met telephonically with representatives of Evercore, Goldman Sachs and Paul Weiss in attendance. Taking into account the recommendation of the Special Committee and after review of the treatment of Pattern management in connection with the Merger Agreement and the proposed transaction involving CPPIB and Pattern Development, our Board determined that it would be in the best interest of Pattern’s stockholders for Pattern to enter into the Merger Agreement. With Mr. Garland abstaining in order to avoid any perception of conflicts of interest arising from his role at Pattern Development, our Board determined that the Merger Agreement and the Transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, Pattern’s stockholders and approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger.

After the meeting of the Special Committee and our Board, representatives of the Special Committee finalized negotiation of the Merger Agreement consistent with the terms approved by the Special Committee and our Board, and Pattern and CPPIB executed the final Merger Agreement and other definitive ancillary transaction documentation. Concurrently with the execution of the Merger Agreement, Pattern management, Pattern Development, Riverstone and CPPIB entered into agreements whereby an affiliate of CPPIB will acquire the interests of Pattern Development not owned by Pattern in exchange for equity interests in such affiliate to be

 

53


Table of Contents

issued to affiliates of Riverstone and members of Pattern management. The consideration to be paid in connection with the acquisition of Pattern Development reflected a valuation within the range of valuations that other bidders had proposed. The closing of the transactions contemplated by the Contribution Agreement is not a condition to closing the Merger and is expected to occur substantially concurrently with the closing of the Merger or at a time after Closing of the Merger. For a discussion of Pattern management’s interest in the Contribution Agreement, see the sections captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement—Pattern Equity Awards and PEGH2 Units—Executive Officer Holdings—PEGH2 Units (Profits Interest)” beginning on page 76 of this proxy statement.

On November 4, 2019, representatives of the Special Committee began contacting potential counterparties to an alternative transaction with Pattern, including Party A, Party B, Party C, Party D, Party E, Party F, Party G and Party H, in connection with the go-shop process.

During the Go-Shop Period (which ran from the signing of the Merger Agreement to 11:59 p.m. Eastern Time on December 8, 2019), the Special Committee, with the assistance of Evercore and Goldman Sachs contacted 16 potential bidders. Each party that was contacted either notified Pattern that, after further review, it would not be interested in pursuing a potential transaction with Pattern or did not respond. Starting immediately after 11:59 p.m. Eastern Time on December 8, 2019 and in accordance with the terms of the Merger Agreement, Pattern became subject to customary non-solicitation restrictions on its ability to solicit third-party proposals relating to alternative transactions or to provide information to and engage in discussions with a third-party in relation to an alternative transaction, subject to certain customary exceptions to permit our Board to comply with their fiduciary duties.

On December 6, 2019, early termination of the waiting period under the HSR Act was granted by the United States Federal Trade Commission (the “FTC”).

Recommendation of Our Board and Reasons for the Merger

Recommendation of Our Board

Our Board, following the unanimous recommendation of the Special Committee, has (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are fair, advisable to and in the best interest of Pattern and our stockholders, and (2) approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger.

OUR BOARD RECOMMENDS THAT YOU VOTE (1) “FOR” THE PROPOSAL TO ADOPT THE MERGER AGREEMENT AND APPROVE THE MERGER; (2) “FOR” THE COMPENSATION PROPOSAL AND (3) “FOR” THE ADJOURNMENT PROPOSAL.

Reasons for the Merger

On November 3, 2019, the Special Committee, after careful consideration, voted unanimously to recommend to our Board that it approve and declare advisable the Merger Agreement and the transactions contemplated thereby, including the Merger, and to take all actions as may be necessary to cause Pattern to enter into the Merger Agreement. Following the unanimous recommendation of the Special Committee, our Board, after careful consideration, voted to (i) approve and declare advisable the Merger Agreement and the transactions contemplated thereby, including the Merger, (ii) declare that it is fair to and in the best interests of Pattern and our stockholders that Pattern enter into the Merger Agreement and consummate the Merger on the terms and subject to the conditions set forth in the Merger Agreement, (iii) direct that the adoption of the Merger Agreement and approval of the Merger be submitted to a vote at a meeting of our stockholders and (iv) recommend to our stockholders that they vote “FOR” the adoption of the Merger Agreement and approval of the Merger.

 

54


Table of Contents

In evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger, the Special Committee and our Board consulted with Pattern’s senior management and outside legal and financial advisors and, in reaching their respective determinations, the Special Committee and our Board considered a number of factors that they believed supported their decision to approve and recommend the Merger Agreement and the transactions contemplated thereby, including the Merger, which factors include, but are not limited to, the following:

 

   

the results of the extensive strategic review process undertaken by the Special Committee, which took place over the course of 16 months and involved extensive efforts to solicit acquisition proposals from numerous potential third parties, including both strategic and financial buyers, during which Pattern received multiple expressions of interest;

 

   

the current and historical market prices of Company Common Stock and recent trading activity, including the fact that the per share Merger Consideration of $26.75 represents a premium of approximately 14.8% relative to the unaffected closing price for shares of Company Common Stock on the Nasdaq on August 9, 2019 (the last trading day prior to the publication of market rumors regarding a potential acquisition of the Company) and a premium of approximately 15.1% over the 30-day volume weighted average price on the Nasdaq prior to that date;

 

   

the opinion of Evercore, dated November 4, 2019, to the Special Committee to the effect that, as of that date and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s opinion, the Merger Consideration of $26.75 per share to be received by the holders of Company Common Stock in the Merger was fair, from a financial point of view, to such holders (other than holders of Excluded Shares), as more fully described in “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger— Fairness Opinion of Evercore” beginning on page 59 of this proxy statement;

 

   

the fact that, following extensive negotiations, the Special Committee was able to increase the per share Merger Consideration offered by CPPIB to $26.75 in cash, which, after consultation with its financial advisors, the Special Committee believed was the highest that CPPIB would be willing to pay and represented the best value reasonably available to our stockholders;

 

   

that the proposed Merger Consideration is all cash so that the Merger provides our stockholders significant, immediate and certain value and liquidity for their shares of Company Common Stock, especially when viewed against Pattern’s competitive positioning and prospects as a standalone company, taking into account the continued costs, risks and uncertainties associated with continuing to operate independently as a public company including the current, historical and projected financial condition and results of operations of Pattern on a standalone basis, including the risks to achieving its projects and long-term results;

 

   

the potential execution risks associated with the likelihood of meeting financial projections and the potential risk associated with the possibility that even if Pattern meets such financial projections, the market may not reflect such execution in the price of Company Common Stock;

 

   

Pattern’s businesses, assets, financial condition, results of operations and prospects (as well as the risks involved in achieving those prospects), the nature of Pattern’s businesses and the industries and regulatory environment in which Pattern operates and competes and the market for Company Common Stock;

 

   

the fact that Pattern’s businesses are subject to extensive government regulation, oversight and frequent audit and that there are risks associated with Pattern’s ability to continue to maintain compliance with all such rules, regulations and laws;

 

   

the competitive nature of the industry in which Pattern operates, including the increasing competition Pattern faces from significant competitors with access to significantly greater capital;

 

55


Table of Contents
   

the current trend of consolidation among participants in the renewables industry, recent and prospective legislative and regulatory changes, and the potential impact of such industry risks and changes on Pattern’s standalone operations;

 

   

the fact that Pattern’s businesses rely significantly on Pattern Development, which exposes Pattern directly and indirectly to project development risks;

 

   

the belief that Pattern is reasonably likely to receive all required regulatory approvals in connection with the transactions contemplated by the Merger Agreement, including the Merger;

 

   

the absence of a financing condition in the Merger Agreement and the fact that Parent has entered into debt and equity commitment letters pursuant to which the commitment parties have committed to provide sufficient financing for the total amount of funds necessary to complete the Merger and the related transactions;

 

   

the fact that the holders of Company Common Stock who do not vote to adopt the Merger Agreement have the right to demand appraisal of their shares in accordance with the procedures of Section 262 of the DGCL;

 

   

the fact that the Merger must be approved by (i) the affirmative vote of the holders of a majority of the shares of Company Common Stock and Company Preferred Stock, voting together as a single class, in each case outstanding and entitled to vote thereon and (ii) under applicable Canadian securities laws, a majority of the votes cast by the holders of Company Common Stock, present in person or represented by proxy at the special meeting and entitled to vote, excluding those holders of Company Common Stock whose votes are required to be excluded pursuant to Part 8 of MI 61-101;

 

   

the belief that the terms of the Merger Agreement would be unlikely to deter third parties from making a superior proposal, including the Merger Agreement’s terms and conditions as they relate to the ability of our Board to change its recommendation with respect to the Merger Agreement (as further described in “The Merger Agreement— Our Board’s Recommendation; Company Board Recommendation Change” beginning on page 116 of this proxy statement); and

 

   

the terms of the Merger Agreement, including:

 

     

Pattern’s ability, for 35 days after the date of the Merger Agreement, to solicit alternative acquisition proposals;

 

     

Pattern’s ability to conduct negotiations with third parties regarding unsolicited acquisition proposals made after the date of the Merger Agreement;

 

     

the ability of our Board and the Special Committee to change their recommendations in the event of a superior proposal or an intervening event;

 

     

our Board’s ability to terminate the Merger Agreement in specified circumstances relating to a superior proposal subject to payment of a termination fee of approximately $79.0 million in most cases or a reduced termination fee of approximately $52.7 million, if terminated within 35 days of the date of the Merger Agreement, except in cases where Pattern terminates the Merger Agreement in order to enter into definitive agreements with respect to a superior acquisition proposal with certain specified parties;

 

     

the Special Committee’s and our Board’s views that the terms of the Merger Agreement, including the termination fees are reasonable and do not preclude third parties from making competing acquisition proposals;

 

     

that Parent is required to use its reasonable best efforts to cause the satisfaction of the conditions in the Merger Agreement, including obtaining regulatory approvals of the transaction;

 

     

that Parent must pay a reverse termination fee of $204.0 million (approximately 7.75% of Pattern’s implied equity value in the Merger) if (a) Pattern terminates the Merger Agreement due

 

56


Table of Contents
 

to Parent’s uncured material breach of the Merger Agreement, (b) Pattern terminates the Merger Agreement because all closing conditions have been satisfied but Parent’s debt financing is unavailable and Parent does not close the Merger, and (c) the Merger Agreement is terminated because of a failure by Parent to take action to receive necessary regulatory approvals;

 

     

that Pattern has third party beneficiary rights against Parent and is entitled to seek an order of specific performance ordering Parent to draw the equity and debt from its financing sources and to fund the closing;

 

     

the Special Committee’s and our Board’s beliefs that the reverse termination fee and Pattern’s right of specific performance reasonably protect Pattern from undue closing risk associated with regulatory and financing matters;

 

     

the retention and employee benefit arrangements provided in the Merger Agreement;

 

     

that, except in the case of a willful and material breach of Pattern’s non-solicitation covenants or actual and intentional fraud, Parent’s sole remedy for the damages is the payment of the termination fee;

 

     

that Pattern is permitted to continue to pay regular quarterly dividends on Company Common Stock prior to closing in an amount not exceeding its current payment rate of $0.422 per share of Company Common Stock;

 

     

that CPPIB is a well-known investor with a proven track record of closing renewable energy acquisitions; and

 

     

the fact that the affirmative vote of our stockholders is a closing condition.

The Special Committee and our Board also evaluated and considered a number of uncertainties and risks in its deliberations concerning the Merger Agreement and the transactions contemplated thereby, including the Merger, which factors included, but were not limited to:

 

   

the fact that our stockholders will not participate in the future earnings or growth of Pattern and will not benefit from any potential appreciation in value of Pattern, including any appreciation in value that could be realized as a result of the acquisition of Pattern by Parent;

 

   

the fact that the Merger Consideration represents (1) a 6.1% discount to the twelve-month high trading price of Company Common Stock on the Nasdaq for the period ended November 3, 2019 of $28.50 per share on October 31, 2019 and (2) a 3.8% discount to our closing price on the Nasdaq on November 1, 2019 (although the Special Committee and our Board considered the fact that both the twelve-month high trading price and the closing price on November 1, 2019 were affected by trading following the publication of market rumors regarding a potential acquisition of the Company on August 12, 2019);

 

   

the fact that Pattern and Parent must obtain clearance from a number of regulatory authorities in order to complete the Merger;

 

   

that the covenants, limitations and restrictions imposed in the Merger Agreement on the conduct by Pattern of its business prior to completion of the Merger could have negative effects on Pattern;

 

   

the fact that, while the Merger is expected to be completed, there is no assurance that all conditions to the parties’ obligations to complete the Merger will be satisfied or waived, and, as a result, it is possible that the Merger might not be completed even if it is approved by the holders of Company Common Stock and Company Preferred Stock;

 

   

restrictions on the ability of Pattern to pursue certain acquisitions without the prior consent of Parent, which could delay or prevent Pattern from undertaking business opportunities that may arise or certain other actions Pattern might otherwise take with respect to the operations of Pattern pending completion of the Merger;

 

57


Table of Contents
   

that certain provisions of the Merger Agreement could have the effect of discouraging third parties from submitting competing acquisition proposals involving Pattern, including (a) the restrictions on Pattern’s ability to solicit proposals for alternative transactions involving Pattern and (b) Parent’s match right, as further described in “The Merger Agreement—Alternative Acquisition Proposals” beginning on page 115 of this proxy statement;

 

   

the negative impact that may result on Pattern’s ability to retain and, if necessary, attract key employees, particularly while the Merger Agreement is pending;

 

   

the potential adverse effect on Pattern’s business and the share price of Company Common Stock due to the risk that the Merger may not be completed on the expected timetable, or at all;

 

   

the potential risks, costs and disruptions to Pattern’s operations in connection with entering into the Merger Agreement, even in the event that the transactions contemplated by the Merger Agreement, including the Merger, are not completed, such as the diversion of management and employee attention, potential employee attrition, and the potential effect on Pattern’s business and relationships with key suppliers, offtakers and other parties;

 

   

the risk that the Merger could be delayed or not completed due to the failure of Pattern or Parent to satisfy the conditions to the Merger, including the failure of the holders of Company Common Stock and Company Preferred Stock to approve the Merger;

 

   

that, under certain circumstances, Pattern may be required to pay Parent a termination fee and the effect such payments may have on a potential buyer considering a competing proposal to acquire Pattern;

 

   

the fact that an all-cash transaction would be taxable to certain of our stockholders for U.S. and Canadian federal income tax purposes;

 

   

the significant costs involved in connection with entering into the Merger Agreement and completing the transactions contemplated thereby, including the Merger, and the substantial time and effort of Pattern’s management required to complete the Merger, which may disrupt Pattern’s business operations;

 

   

that certain directors and executive officers of Pattern have interests in the Merger that are different from, or in addition to, our stockholders; and

 

   

other risks and uncertainties in Pattern’s filings with the SEC, including the risks set forth in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 and our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019. For more information, see “Where You Can Find More Information” beginning on page 136 of this proxy statement.

The Special Committee and our Board determined that the risks and potentially negative factors associated with the Merger Agreement and the transactions contemplated thereby, including the Merger, were outweighed by the potential benefits of the Merger Agreement and the transactions contemplated thereby, including the Merger. Each of the Special Committee and Board determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, Pattern and its stockholders.

The foregoing discussion of the information and factors considered by the Special Committee and our Board is not exhaustive, but is intended to include the material factors considered by the Special Committee and our Board in their consideration of the Merger Agreement and the transactions contemplated thereby, including the Merger, in making their respective determinations. The members of the Special Committee and our Board evaluated the various factors listed above, among other things, in light of their knowledge of the business, financial condition and prospects of Pattern and considered the advice of Pattern’s financial and legal advisors. In view of the complexity, variety and large number of factors considered, the Special Committee and Board,

 

58


Table of Contents

individually and collectively, did not quantify or assign any relative or specific weight to the various factors considered. Rather, the Special Committee and our Board based their respective determinations on the totality of the information presented to and considered by them. In addition, individual members of the Special Committee and our Board may have given different weights to different factors.

The explanations of Pattern’s reasons for the Merger Agreement and the transactions contemplated, including the Merger, and other information presented in this section is forward-looking in nature and, accordingly, should be read in light of the risks described in the section entitled “Forward-Looking Information” beginning on page 12 of this proxy statement.

Fairness Opinion of Evercore

The Special Committee retained Evercore to act as its financial advisor in connection with the Special Committee’s review of strategic alternatives, including the Merger. As part of this engagement, the Special Committee requested that Evercore evaluate the fairness, from a financial point of view, of the Merger Consideration to be received by the holders of Company Common Stock (other than holders of Excluded Shares). At a meeting of the Special Committee held on November 3, 2019, Evercore rendered to the Special Committee its oral opinion, which was subsequently confirmed in writing, to the effect that, as of that date and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s opinion, the Merger Consideration of $26.75 per share to be received by the holders of Company Common Stock in the Merger was fair, from a financial point of view, to such holders (other than holders of Excluded Shares).

The full text of the written opinion of Evercore, dated November 4, 2019, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex C to this proxy statement and is incorporated herein by reference. We encourage you to read Evercore’s opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the Special Committee (in its capacity as such) in connection with its evaluation of the Merger. The opinion does not constitute a recommendation to the Special Committee or to any other persons in respect of the Merger, including as to how any holder of shares of Company Common Stock or Company Preferred Stock should vote or act in respect of the Merger. Evercore’s opinion does not address the relative merits of the Merger as compared to other business or financial strategies that might be available to us, nor does it address the underlying business decision to engage in the Merger.

In connection with rendering its opinion, Evercore, among other things:

 

   

reviewed certain publicly available business and financial information relating to Pattern that it deemed to be relevant, including publicly available research analysts’ estimates;

 

   

reviewed certain non-public internal projected financial statements and other non-public financial and operating data relating to Pattern prepared and furnished to Evercore by management of Pattern, as approved for Evercore’s use by Pattern (the “Forecasts”);

 

   

reviewed certain non-public historical financial statements and other non-public historical financial and operating data relating to Pattern prepared and furnished to Evercore by management of Pattern, as approved for Evercore’s use by Pattern;

 

   

discussed with management of Pattern their assessment of the past and current operations of Pattern, the current financial condition and prospects of Pattern, and the Forecasts;

 

   

discussed the past and current operations, financial projections and current financial condition of Pattern with management of Pattern (including their views on the risks and uncertainties of achieving such projections);

 

59


Table of Contents
   

reviewed the reported prices and the historical trading activity of Company Common Stock;

 

   

compared the financial performance of Pattern and its stock market trading multiples with those of certain other publicly traded companies that it deemed relevant;

 

   

compared the financial performance of Pattern and the valuation multiples relating to the Merger with those of certain other transactions that it deemed relevant;

 

   

reviewed a draft of the Merger Agreement, dated November 1, 2019; and

 

   

performed such other analyses and examinations and considered such other factors that it deemed appropriate.

For purposes of Evercore’s analysis and opinion, Evercore assumed and relied upon the accuracy and completeness of the financial and other information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by Evercore, without any independent verification of such information (and Evercore has not assumed responsibility or liability for any independent verification of such information), and Evercore further relied upon the assurances of the management of Pattern that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the Forecasts, Evercore assumed with the Special Committee’s consent that the Forecasts were reasonably prepared on bases reflecting the best estimates then currently available and the good faith judgments of management of Pattern as to the future financial performance of Pattern and the other matters covered thereby. Evercore expressed no view as to the Forecasts or the assumptions on which they were based.

For purposes of Evercore’s analysis and opinion, Evercore assumed, in all respects material to its analysis, that the final executed Merger Agreement would not differ from the draft agreement reviewed by Evercore, that the representations and warranties of each party contained in the Merger Agreement would be true and correct, that each party would perform all of the covenants and agreements required to be performed by it under the Merger Agreement and that all conditions to the consummation of the Merger would be satisfied without waiver or modification thereof. Evercore further assumed, in all respects material to Evercore’s analysis, that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the Merger would be obtained without any material delay, limitation, restriction or condition that would have an adverse effect on Pattern or the consummation of the Merger or materially reduce the contemplated benefits of the Merger to the holders of Company Common Stock.

Evercore did not conduct a physical inspection of the properties or facilities of Pattern and did not make or assume any responsibility for making any independent valuation or appraisal of the assets or liabilities (including any contingent, derivative or other off-balance sheet assets and liabilities) of Pattern, nor was Evercore furnished with any such valuations or appraisals, nor did Evercore evaluate the solvency or fair value of Pattern under any state or federal laws relating to bankruptcy, insolvency or similar matters. Evercore’s opinion was necessarily based upon information made available to it as of the date of this proxy statement and financial, economic, market and other conditions as they existed and as they could be evaluated on the date of its opinion. It is understood that subsequent developments may affect Evercore’s opinion and that Evercore does not have any obligation to update, revise or reaffirm its opinion.

Evercore was not asked to pass upon, and expressed no opinion with respect to, any matter other than the fairness to the holders of Company Common Stock (other than the holders of Excluded Shares), from a financial point of view, of the Merger Consideration. Evercore did not express any view on, and Evercore’s opinion did not address, the fairness of the proposed transaction to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors or other constituencies of Pattern, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Pattern, or any class of such persons, whether relative to the Merger Consideration or otherwise, nor as to the fairness or any other aspect of any transaction contemplated by the Contribution and Exchange Agreement by

 

60


Table of Contents

and among Parent, Riverstone Pattern Energy II Holdings, L.P. (“RPE II”), Pattern Energy Group Holdings 2 LP (“PEGH2”), Pattern Equity Holdings 2 LLC, certain members of the management team of Pattern Energy Group Holdings 2 LP and Hou-ou LLC, as the management representative entity, dated as of November 3, 2019 (the “Contribution Agreement”), to be entered in connection with the Merger. Evercore was not asked to, nor did it express any view on, and Evercore’s opinion did not address, any other term or aspect of the Merger Agreement or the Merger, including, without limitation, the structure or form of the Merger, or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection with the Merger Agreement, including the Contribution Agreement and the transactions contemplated thereby. Evercore’s opinion did not address the relative merits of the Merger as compared to other business or financial strategies that might be available to Evercore, nor did it address the underlying business decision of Pattern to engage in the Merger. Evercore’s opinion did not constitute a recommendation to the Special Committee or to any other persons in respect of the Merger, including as to how any holder of shares of Company Common Stock or Company Preferred Stock should vote or act in respect of the Merger. Evercore is not a legal, regulatory, accounting or tax expert and have assumed the accuracy and completeness of assessments by Pattern and its advisors with respect to legal, regulatory, accounting and tax matters. Evercore’s opinion was only one of many factors considered by the Special Committee in its evaluation of the Merger and should not be viewed as determinative of the views of the Special Committee with respect to the Merger.

Set forth below is a summary of the material financial analyses performed by Evercore and reviewed with the Special Committee on November 3, 2019 in connection with rendering its opinion to the Special Committee. The following summary, however, does not purport to be a complete description of the analyses performed by Evercore. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances and, therefore, is not readily susceptible to summary description. The order of the analyses described and the results of these analyses do not represent relative importance or weight given to these analyses by Evercore. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on or before November 1, 2019 (the last full trading date prior to the rendering of Evercore’s opinion), and is not necessarily indicative of current market conditions. For purposes of its analyses and reviews, Evercore considered general business, economic, market and financial conditions, industry sector performance, and other matters, as they existed and could be evaluated as of the date of its opinion, many of which are beyond the control of Pattern. The estimates contained in Evercore’s analyses and reviews, and the ranges of valuations resulting from any particular analysis or review, are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by Evercore’s analyses and reviews. In addition, analyses and reviews relating to the value of companies, businesses or securities do not purport to be appraisals or to reflect the prices at which companies, businesses or securities actually may be sold. Accordingly, the estimates used in, and the results derived from, Evercore’s analyses and reviews are inherently subject to substantial uncertainty.

The following summary of Evercore’s financial analyses includes information presented in tabular format. In order to fully understand the analyses, the tables should be read together with the full text of each summary. The tables are not intended to stand alone and alone do not constitute a complete description of Evercore’s financial analyses. Considering the tables below without considering the full narrative description of Evercore’s financial analyses, including the methodologies and assumptions underlying such analyses, could create a misleading or incomplete view of such analyses.

Summary of Evercore’s Financial Analyses

Selected Public Company Trading Analysis

Evercore reviewed and compared certain financial information of Pattern to corresponding financial multiples and ratios for the following selected publicly traded companies (the “selected companies”) which Evercore deemed most relevant to consider in relation to Pattern, based on its professional judgment and

 

61


Table of Contents

experience, because they are public companies with operations that for purposes of its analysis Evercore considered similar to the operations of Pattern:

US YieldCos:

 

   

NextEra Energy Partners LP

 

   

TerraForm Power Inc. (“Terraform Power”)

 

   

Clearway Energy

Canadian YieldCos:

 

   

Brookfield Renewable Partners LP

 

   

Northland Power Inc.

 

   

TransAlta Renewables Inc.

 

   

Innergex Renewable Energy Inc.

International YieldCos (Reference Only):

 

   

Atlantica Yield

For each of the selected companies, Evercore calculated the following trading multiples:

 

   

A multiple of estimated cash available for distribution (“CAFD”), which is defined as the closing share price as of November 1, 2019, as a multiple of CAFD for the fiscal year 2020, which we refer to as the “2020E CAFD.”

 

   

Annualized dividend yield, which is the estimated annual dividend for 2020 divided by the closing share price as of November 1, 2019, which we refer to as the “2020E Dividend.”

 

   

TEV/Adjusted EBITDA, which is defined as equity market capitalization plus total debt (excluding tax equity), plus preferred equity, less cash and cash equivalents, which we refer to as “TEV,” as a multiple of estimated 2020 earnings before interest, taxes, depreciation and amortization and before non-recurring items, which we refer to as “2020E Adjusted EBITDA,” based on closing share prices as of November 1, 2019.

In order to calculate the multiples below, Evercore relied on publicly available filings with the SEC and other regulatory agencies and equity research analyst estimates.

 

62


Table of Contents

This analysis indicated the following:

 

Benchmark

   Low     Median     High  

2020E CAFD

      

US (excluding Pattern)

     12.7x       16.0x       17.7x  

Canadian

     11.6x       15.1x       19.8x  

US & Canadian

     11.6x       14.7x       19.8x  

Low Growth Company

     12.9x       12.9x       12.9x  

Company (prior to the publication of market rumors regarding a potential acquisition of Pattern)

       11.8x    

2020E Dividend Yield

      

US (excluding Pattern)

     4.4     4.8     5.1

Canadian

     4.3     4.9     6.6

US & Canadian

     4.3     4.9     6.6

Low Growth Company

     6.6     6.6     6.6

Company (prior to the publication of market rumors regarding a potential acquisition of Pattern)

       7.3  

Company over past 52 weeks

     6.0     7.6     9.6

2020 Adjusted EBITDA

      

US (excluding Pattern)

     9.5x       11.4x       11.4x  

Canadian

     9.5x       11.8x       15.4x  

US & Canadian

     9.5x       11.4x       15.4x  

Low Growth Company

     10.3x       10.3x       10.3x  

Company (prior to the publication of market rumors regarding a potential acquisition of Pattern)

       12.3x    

Evercore applied a CAFD multiple reference range of 11.5x to 13.5x to Pattern’s 2020E CAFD per share (as provided in the Forecasts). This analysis indicated a range of implied equity values per share of Company Common Stock of $23.84 to $27.98, compared to the Merger Consideration of $26.75 per share of Company Common Stock.

Evercore applied a dividend yield reference range of 7.25% to 6.25% to Pattern’s estimated dividend per share for fiscal year 2020 (as provided in the Forecasts). This analysis indicated a range of implied equity values per share of Company Common Stock of $23.45 to $27.20, compared to the Merger Consideration of $26.75 per share of Company Common Stock.

Evercore applied a TEV/Adjusted EBITDA multiple reference range of 10.5x to 12.0x to Pattern’s 2020E Adjusted EBITDA (as set forth in the Forecasts). Evercore calculated per share prices by (A) taking this range of implied enterprise values, less Pattern’s estimated net debt (calculated as total proportionate debt (calculated based on the portion of project company-level debt of each project company owned by Pattern) less cash and cash equivalents, each as set forth in the Forecasts) as of November 1, 2019, plus an implied value for Pattern’s ownership in Pattern Development and (B) dividing the result by the number of fully diluted shares of Company Common Stock as of November 1, 2019 as set forth in the Forecasts. In arriving at the implied value of Pattern’s ownership in Pattern Development, Evercore discounted to present value the Pattern Development distributions (net of contributions and preferred interest) for 2019 to 2027 provided in the Forecasts using a discount rate of 12.5% to 17.5%. This analysis indicated a range of implied equity values per share of Company Common Stock of $17.53 to $25.24, compared to the Merger Consideration of $26.75 per share of Company Common Stock.

Although none of the selected companies is directly comparable to Pattern, Evercore selected these companies because they are publicly traded, renewable power dividend growth-oriented companies that Evercore, in its professional judgment and experience, considered generally relevant to Pattern for purposes of its

 

63


Table of Contents

financial analyses. In evaluating the selected companies, Evercore made judgments and assumptions with regard to general business, economic and market conditions affecting the selected companies and other matters, as well as differences in the selected companies’ financial, business and operating characteristics. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments regarding many factors that could affect the relative values of the selected companies and the multiples derived from the selected companies. Mathematical analysis, such as determining the mean or median, is not in itself a meaningful method of using the data of the selected companies.

Selected Transactions Analysis

Evercore reviewed, based on publicly available information, financial information related to the following selected transactions involving renewable power dividend growth-oriented companies since 2017 (the “selected transactions”). The selected transactions reviewed by Evercore, and the month and year each was announced, were as follows:

 

Announcement Date

  

Target Name

  

Acquiror

July 22, 2019    AltaGas DG Solar Generation Platform    TerraForm Power Inc
February 12, 2019    Sempra Renewables LLC    American Electric Power
November 6, 2018    Solar / Wind Renewables Portfolio    Ullico
September 20, 2018    Sempra Energy Solar Portfolio    Con Edison
May 9, 2018    Enbridge’s Renewable Portfolio (49% Stake)    Canada Pension Plan Investment Board
February 7, 2018    Clearway Energy (46% Economic Stake)    Global Infrastructure Partners
February 7, 2018    Saeta Yield    TerraForm Power Inc
February 5, 2018    8point3 Energy    Capital Dynamics
November 1, 2017    Atlantica Yield (41.5% stake)    Algonquin
October 30, 2017    Alterra Power Corp.    Innergex
May 4, 2017    Ormat Technologies (22.1% stake)    ORIX Corporation
March 31, 2017    ExGen Renewables Partners (49% stake)    John Hancock Life Insurance
March 7, 2017    TerraForm Power Inc    Brookfield Renewable Partners LP

For each selected transaction, Evercore calculated:

 

   

the equity value of the target as a multiple of estimated CAFD of the target (either for the last 12 months, the calendar year as of the date of the announcement or the next 12 months, depending on the information publicly available for the target), which we refer to as the “CAFD Multiple;” and

 

   

the implied enterprise value (defined as the target’s implied equity value based on the consideration paid in the applicable transaction plus total debt, plus preferred equity, less cash and cash equivalents) as a multiple of TEV/Adjusted EBITDA for the target (either for the last 12 months, the calendar year as of the date of the announcement or the next 12 months, depending on the information publicly available for the target), which we refer to as the “Adjusted EBITDA Multiple.”

This analysis indicated the following:

 

Benchmark

   Low      Median      High  

CAFD Multiple

     8.7x        11.8x        14.4x  

Adjusted EBITDA Multiple

     9.6x        10.7x        14.8x  

Evercore selected a reference range of CAFD Multiples of 11.0x to 12.5x based on the multiples it derived from the selected transactions and based on its professional judgment and experience, and applied this range of multiples to Pattern’s 2020E CAFD per share, as set forth in the Forecasts. This analysis indicated a range of implied equity values per share of Company Common Stock of $22.80 to $25.91, compared to the Merger Consideration of $26.75 per share of Company Common Stock.

 

64


Table of Contents

Evercore selected a reference range of Adjusted EBITDA Multiples of 10.0x to 11.5x based on the multiples it derived from the selected transactions and based on its professional judgment and experience, and applied this range of multiples to Pattern’s 2020E Adjusted EBITDA (as set forth in the Forecasts). Evercore calculated per share prices by (A) taking this range of implied enterprise values, plus an assumed value for Pattern’s ownership in Pattern Development, less Pattern’s estimated net debt (calculated as total proportionate debt (calculated based on the portion of project company-level debt of each project company owned by Pattern) less cash and cash equivalents, in each case, as set forth in the Forecasts) as of November 1, 2019 and (B) dividing by the number of fully diluted shares of Company Common Stock as of November 1, 2019 as set forth in the Forecasts. In arriving at the implied value of Pattern’s ownership in Pattern Development, Evercore discounted to present value the Pattern Development distributions (net of contributions and preferred interest) for 2019 to 2027 provided in the Forecasts using a discount rate of 12.5% to 17.5%. This analysis indicated a range of implied equity values per share of Company Common Stock of $15.20 to $22.91, compared to the Merger Consideration of $26.75 per share of Company Common Stock.

Although none of the target companies or businesses reviewed in the selected transactions analysis is directly comparable to Pattern, and none of the selected transactions is directly comparable to the Merger, Evercore selected these transactions because they involve companies or businesses that Evercore, in its professional judgment and experience, considered generally relevant to Pattern for purposes of its financial analyses. In evaluating the selected transactions, Evercore made judgments and assumptions with regard to general business, economic and market conditions and other factors existing at the time of the selected transactions, and other matters, as well as differences in financial, business and operating characteristics and other factors relevant to the target companies or businesses in the selected transactions. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments regarding many factors that could affect the relative values of the target companies or businesses in the selected transactions and the multiples derived from the selected transactions. Mathematical analysis, such as determining the mean or median, is not in itself a meaningful method of using the data of the selected transactions.

Discounted Cash Flow Analysis

Evercore performed a discounted cash flow analysis of Pattern to calculate the estimated present value of shares of Company Common Stock by discounting back to present value (1) the standalone, levered, after-tax free cash flows to the equity of Pattern (corporate cash flows, excluding Pattern Development) plus (2) distributions from Pattern Development. Pattern Development distributions (net of contributions and preferred interest) for 2019 to 2027 were provided in the Forecasts. The standalone, levered, after-tax free cash flow to equity of Pattern was defined as after-tax project distributions, less corporate general and administrative expense, less corporate interest expense, less asset acquisitions, less proceeds and investments in Gulf Repower project plus cash proceeds from divestitures, plus refinancing proceeds, plus cash proceeds from Nigig loan repayment, plus long-term debt proceeds, less long-term debt paydown, less changes in revolver issuances and paydown that Pattern was forecasted to generate during Pattern’s fiscal years 2019 through 2023 based on the Forecasts.

Evercore calculated terminal values for Pattern (excluding Pattern Development) by (1) applying a range of multiples of estimated CAFD of 11.5x to 13.5x, which range was selected based on Evercore’s professional judgment and experience, to a next 12-month terminal year estimate of the CAFD of Pattern assuming the 2024 CAFD, excluding Pattern Development distributions, based on the model provided by management and (2) applying perpetuity growth rates of (1.00)% to 1.00%, which range was selected based on Evercore’s professional judgment and experience, to a terminal year estimate of the standalone, levered, after-tax free cash flows to equity that Pattern calculated by taking the 2023 after-tax cash flows to equity and excluding any revolver paydown. The after-tax cash flows to equity and terminal values of Pattern (excluding Pattern Development) in each case were then discounted to present value as of November 1, 2019 using discount rates ranging from 7.5% to 9.5%, which were based on an estimate of Pattern’s cost of equity. Pattern Development distributions were discounted to present value by Evercore using a discount rate of 12.5% to 17.5%, based on an estimate of returns expected by Pattern and other investors as publicly available, for development assets of similar nature.

 

65


Table of Contents

The CAFD Multiple terminal value analysis indicated a range of implied equity values per share of Company Common Stock of $23.22 to $28.62, compared to the Merger Consideration of $26.75 per share of Company Common Stock. The perpetuity growth terminal value analysis indicated a range of implied equity values per share of Company Common Stock of $20.80 to $32.89, as compared to the Merger Consideration of $26.75 per share of Company Common Stock.

Other Factors

Evercore also noted certain other factors, which were not considered material to its financial analyses with respect to its opinion, but were referenced for informational purposes only, including, among other things, the following:

 

   

Last 52-Week Trading Range. Evercore reviewed historical trading prices of shares of Company Common Stock during the 12-month period ended November 1, 2019, noting that the low and high closing prices during such period ranged from $17.52 to $28.28 per share of Company Common Stock, respectively.

 

   

Equity Research Analyst Price Targets. Evercore reviewed selected public market trading price targets for the shares of Company Common Stock prepared and published by equity research analysts that were publicly available as of November 1, 2019, the last full trading day prior to the delivery by Evercore of its opinion to the Special Committee. These price targets reflect analysts’ estimates of the future public market trading price of the shares of Company Common Stock at the time the price target was published. As of November 1, 2019, the range of selected equity research analyst price targets per share of Company Common Stock was $21.50 to $28.00. Public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for the shares of Company Common Stock and these target prices and the analysts’ earnings estimates on which they were based are subject to risk and uncertainties, including factors affecting the financial performance of Pattern and future general industry and market conditions.

Miscellaneous

The foregoing summary of Evercore’s financial analyses does not purport to be a complete description of the analyses or data presented by Evercore to the Special Committee. In connection with the review of the Merger by the Special Committee, Evercore performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary described above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Evercore’s opinion. In arriving at its fairness determination, Evercore considered the results of all the analyses and did not draw, in isolation, conclusions from or with regard to any one analysis or factor considered by it for purposes of its opinion. Rather, Evercore made its determination as to fairness on the basis of its professional judgment and experience after considering the results of all the analyses. In addition, Evercore may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above should not be taken to be the view of Evercore with respect to the actual value of the shares of Company Common Stock. Rounding may result in total sums set forth in this section not equaling the total of the figures shown.

Evercore prepared these analyses for the purpose of providing an opinion to the Special Committee as to the fairness, from a financial point of view, of the Merger Consideration to the holders of Company Common Stock (other than Excluded Shares). These analyses do not purport to be appraisals of, or to necessarily reflect, the prices at which the business or securities actually may be sold. Any estimates contained in these analyses are not necessarily indicative of actual future results, which may be significantly more or less favorable than those suggested by such estimates. Accordingly, estimates used in, and the results derived from, Evercore’s analyses

 

66


Table of Contents

are inherently subject to substantial uncertainty, and Evercore assumes no responsibility if future results are materially different from those forecasted in such estimates.

Evercore’s financial advisory services and its opinion were provided for the information and benefit of the Special Committee (in its capacity as such) in connection with its evaluation of the Merger. The issuance of Evercore’s opinion was approved by an Opinion Committee of Evercore.

Evercore did not recommend any specific amount of consideration to the Special Committee or Pattern’s management or that any specific amount of consideration constituted the only appropriate consideration in the Merger for the holders of Company Common Stock.

Pursuant to the terms of Evercore’s engagement letter with the Special Committee, Pattern has agreed to pay Evercore a fee for its services in the amount of approximately $12.5 million, of which $4.0 million was paid upon announcement of the Merger and the balance of which will be payable contingent upon the consummation of the Merger. Pattern has also agreed to pay Evercore a performance fee for its services, contingent upon the consummation of the Merger. The maximum potential performance fee is $5.0 million. Pattern has also agreed to reimburse Evercore for its expenses and to indemnify Evercore against certain liabilities arising out of its engagement.

During the two-year period prior to the date of its opinion, Evercore and its affiliates have provided financial advisory services to Pattern and received fees for the rendering of these services in the amount of approximately $1.5 million. During the two-year period prior to the date of its opinion, Evercore and its affiliates have provided financial advisory services to affiliates of Parent and received fees for the rendering of these services in the amount of approximately $3.1 million. Evercore may provide financial advisory or other services to Pattern, Parent and their respective affiliates in the future, and in connection with any such services Evercore may receive compensation.

Evercore and its affiliates engage in a wide range of activities for its and their own accounts and the accounts of customers, including corporate finance, mergers and acquisitions, equity sales, trading and research, private equity, placement agent, asset management and related activities. In connection with these businesses or otherwise, Evercore and its affiliates and/or its or their respective employees, as well as investment funds in which any of them may have a financial interest, may at any time, directly or indirectly, hold long or short positions and may trade or otherwise effect transactions for their own accounts or the accounts of customers, in debt or equity securities, senior loans and/or derivative products or other financial instruments of or relating to Pattern or its affiliates, Parent or its affiliates, potential parties to the Merger Agreement and their respective affiliates or persons that are competitors, customers or suppliers of Pattern.

The Special Committee engaged Evercore to act as a financial advisor based on Evercore’s qualifications, experience and reputation. Evercore is an internationally recognized investment banking firm and regularly provides fairness opinions to its clients in connection with mergers and acquisitions, leveraged buyouts and valuations for corporate and other purposes.

Forecasts

Pattern does not as a matter of course make public Forecasts as to future revenues, operating income or other results beyond the fiscal year and, in some instances, the subsequent fiscal year. The Forecasts about Pattern are included in this proxy statement only because (1) the Forecasts were made available to CPPIB and other interested parties in connection with the due diligence review of Pattern; (2) the Forecasts were made available to Evercore for use in connection with its financial analysis as described in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Fairness Opinion of Evercore” beginning on page 59 of this proxy statement and (3) the Forecasts were made available to our Board in connection with Pattern’s exploration and evaluation of strategic alternatives to maximize stockholder value,

 

67


Table of Contents

including a sale of Pattern. The Forecasts are not included in this proxy statement to influence any stockholder to make any investment decision with respect to the Merger, including whether or not to seek appraisal rights with respect to the shares of Company Common Stock.

Although the Forecasts are presented with numerical specificity, they reflect numerous estimates and assumptions made by Pattern with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to Pattern’s business, all of which are difficult or impossible to predict accurately and many of which are beyond Pattern’s control. The Forecasts reflect assumptions as to certain potential business decisions that are subject to change. Without limiting the generality of the foregoing, the Forecasts include assumptions relating to revenues generated by Pattern’s operating portfolio, operating and corporate expenses, financing activities and proceeds from Pattern Development, in which Pattern has an unconsolidated investment. The Forecasts cover several years and such information by its nature becomes less reliable with each successive year.

In the view of Pattern’s management, the information was prepared on a reasonable basis, reflected the best estimates and judgments available to Pattern’s management at the time and presented, to the best of Pattern’s management’s knowledge and belief, the expected course of action and Pattern’s expected future financial performance as of the date such information was prepared. In addition, the Forecasts did not take into account any circumstances or events occurring after the date they were prepared, including the transactions contemplated by the Merger Agreement or the announcement thereof. Further, these Forecasts did not take into account the effect of any failure of the Merger to occur, and should not be viewed as applicable or continuing in that context. However, this information is not fact and should not be relied upon as being necessarily indicative of future results. The Forecasts reflect subjective judgment in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the Forecasts constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Forecasts, including, but not limited to, Pattern’s electricity generation, factors affecting production, Pattern’s ability to manage exposure to project development risks, competition from other power project developers, Pattern’s ability to complete acquisitions and dispositions of power projects, fluctuations in supply, demand, prices and other conditions for electricity, other commodities and renewable energy credits, Pattern’s ability to complete construction of construction projects and transition them into financially successful operating projects, conditions in energy markets as well as financial markets generally, changes in law, including applicable tax laws, and the various risks set forth in Pattern’s reports filed with the SEC. There can be no assurance that the Forecasts will be realized or that actual results will not be significantly higher or lower than forecast. In addition, the Forecasts will be affected by Pattern’s ability to achieve strategic goals, objectives and targets over the applicable periods. The Forecasts cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such.

The inclusion of the Forecasts should not be regarded as an indication that Pattern and Evercore or anyone who received this information then considered, or now considers, them a reliable prediction of future events, and this information should not be relied upon as such. The inclusion of the Forecasts herein should not be deemed an admission or representation by Pattern that Pattern views such Forecasts as material information. The inclusion of the Forecasts in this proxy statement should not be regarded as an indication that the Forecasts will be necessarily predictive of actual future events given the inherent risks and uncertainties associated with such long-range forecasts. No representation is made by Pattern or any other person regarding the Forecasts or Pattern’s ultimate performance compared to such information. The Forecasts should be evaluated, if at all, in conjunction with the historical financial statements and other information about us contained in Pattern’s public filings with the SEC. See the section captioned “Where You Can Find More Information” beginning on page 136 of this proxy statement for more information. In light of the foregoing factors, and the uncertainties inherent in the Forecasts, stockholders are cautioned not to place undue, if any, reliance on the Forecasts.

The Forecasts included in this document have been prepared by, and are the responsibility of, Pattern’s management. PricewaterhouseCoopers LLP has not audited, reviewed, examined, compiled nor applied agreed-

 

68


Table of Contents

upon procedures with respect to the accompanying Forecasts and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this proxy statement relates to Pattern’s previously issued financial statements. It does not extend to the Forecasts and should not be read to do so.

The Forecasts are “non-GAAP financial measures,” which are financial performance measures that are not calculated in accordance with the published guidelines of the SEC regarding Forecasts or accounting principles generally accepted in the United States (“GAAP”). These non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures, and may be different from non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures, because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, these non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP.

The Forecasts were not prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation or presentation of prospective financial information.

The following table presents unaudited prospective financial data for the Forecasts (in millions of dollars):

 

Projected Financial Measures    2020     2021     2022     2023  

Adjusted EBITDA

   $ 459     $ 508     $ 547     $ 552  

Project Distributions

     303       301       307       310  

Corporate EBITDA (excluding Pattern Development)

     264       261       268       271  

Corporate Interest

     (58     (63     (58     (56

Pattern Development Distributions(1)

     13       73       48       117  

Cash Available for Distribution

     204       226       248       275  

Other (Acquisitions, Divestitures, Debt Repayments/Proceeds)

     (44     (231     (200     (110

After-Tax Equity Cash Flow(2)

   $ 174     $ 40     $ 58     $ 222  

 

(1)

Net of contributions and preferred contingent dividend.

(2)

After-Tax Equity Cash Flow is calculated as Project Distributions, less corporate general and administrative costs, less corporate interest cost, less acquisition expense, less debt repayments, plus asset divestiture proceeds, plus new debt issuance, plus Pattern Development Distributions. For the last two months of 2019, After-Tax Equity Cash Flow was projected to be $26 million.

In addition, the Forecasts have not been updated or revised to reflect information or results after the date they were prepared or as of the date of this proxy statement, and except as required by applicable securities laws, PATTERN DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE FORECASTS OR THE SPECIFIC PORTIONS PRESENTED TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE UNDERLYING ASSUMPTIONS ARE SHOWN TO BE IN ERROR.

Interests of Our Directors and Executive Officers in the Merger

When considering the recommendation of our Board that you vote to approve the proposal to adopt the Merger Agreement and approve the Merger, you should be aware that our directors and executive officers (as defined under U.S. federal securities laws) have interests in the Merger that are different from, or in addition to, the interests of our stockholders generally, as more fully described below. The Special Committee and our Board were aware of and considered these interests, among other matters, in approving the Merger Agreement and the Merger and recommending that the Merger Agreement be adopted and the Merger be approved by stockholders. The transactions contemplated by the Merger Agreement will be a “change in control” for purposes of our executive compensation and benefit plans and agreements described below.

 

69


Table of Contents

Treatment of Pattern Equity Awards

Our non-employee directors and executive officers hold various types of compensatory awards with respect to Company Common Stock. Our non-employee directors hold awards of Company Restricted Shares and Company RSUs. Our executive officers hold awards of Company Options, Company Restricted Shares and Company Performance Shares. As a result of the Merger, the treatment of the Company Options, Company Restricted Shares, Company Performance Shares and Company RSUs that are outstanding immediately prior to the Effective Time and held by our non-employee directors and executive officers will be as follows:

Treatment of Company Options

At the Effective Time, to the extent not exercised or expired, each outstanding Company Option, whether or not exercisable or vested, will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the excess, if any, of the Merger Consideration over the per share exercise price of the applicable Company Option multiplied by (y) the aggregate number of shares of Company Common Stock subject to such Company Option immediately before the Effective Time. Any Company Option with a per share exercise price that is equal to or greater than the Merger Consideration shall be canceled for no consideration.

Treatment of Company Restricted Shares

At the Effective Time, except as described under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement” beginning on page 74 of this proxy statement, each outstanding Company Restricted Share with vesting conditioned on the passage of time will be vested and all restrictions will lapse in full as of immediately before the Effective Time, and each such Company Restricted Share will be converted into the right to receive the Merger Consideration.

Treatment of Company Performance Shares

At the Effective Time, except as described under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement” beginning on page 74 of this proxy statement, each outstanding Company Performance Share will be vested based on the maximum level of performance and all restrictions will lapse in full as of immediately before the Effective Time, and each such Company Performance Share will be converted into the right to receive the Merger Consideration.

Treatment of Company RSUs

At the Effective Time, each outstanding Company RSU will be vested and all restrictions will lapse in full as of immediately before the Effective Time, and each such Company RSU will be canceled and converted into the right to receive an amount in cash, without interest, equal in value to the product of (x) the Merger Consideration multiplied by (y) the aggregate number of shares of Company Common Stock subject to such Company RSU award immediately before the Effective Time.

Payments with Respect to Equity Awards

The amounts described above with respect to each Company Option, Company Restricted Share, Company Performance Share and Company RSU will be paid at the Effective Time, except that the amounts described above with respect to each Company RSU that has been validly deferred or is otherwise subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), will be paid at the earliest time permitted under Section 409A of the Code.

 

70


Table of Contents

Equity Awards Held by Executive Officers

Assuming that the Effective Time of the Merger is January 31, 2020, the estimated aggregate value of vested Company Options held by our named executive officers is $1,676,679. For an estimate of the amounts that may be paid or become payable to each of our named executive officers with respect to unvested equity awards in connection with the Merger, see the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Quantification of Potential Payments and Benefits to Our Named Executive Officers” beginning on page 77 of this proxy statement. Assuming that the Effective Time of the Merger is January 31, 2020, the estimated aggregate value of vested Company Options held by our executive officers who are not named executive officers is $138,553 and the estimated aggregate value of unvested equity awards held by such executive officers is $1,757,555. The foregoing amounts have been determined using the per share Merger Consideration of $26.75.

Equity Awards Held by Non-Employee Directors

Assuming that the Effective Time of the Merger is January 31, 2020, the estimated aggregate amounts that would become payable to the non-employee directors in respect of their outstanding Company RSUs and Company Restricted Shares is $4,836,472. The foregoing amount has been determined using the per share Merger Consideration of $26.75.

Agreements or Arrangements with Our Executive Officers

Most of our current executive officers are party to an employment agreement with us that provides for certain payments and benefits in the event of certain qualifying terminations of employment, including in connection with a change of control, as further discussed below.

Amended and Restated Employment Agreements

We entered into amended and restated employment agreements with certain of our executive officers, including Messrs. Armistead, Devlin, Elkort, Garland, Lyon, Pedersen and Shugart on November 3, 2019 (the “Employment Agreements”), but not Mr. Ostberg. The Employment Agreements, which were reviewed by CPPIB in advance of executing the Merger Agreement, preserve the cash severance benefits payable under the original employment agreements with each such executive officer and the base salary of each such executive as of immediately prior to the execution of the Employment Agreements. In addition, the Employment Agreements provide for equity incentive award vesting acceleration for each such executive officer upon a change of control and qualifying termination of employment, as described below, and for Mr. Garland, an extended COBRA (as defined below) continuation period.

The Employment Agreements provide, among other things, for a three-year term with automatic renewal for successive one-year periods unless either party provides a timely notice of non-renewal. In the event of a change in control, the employment term will automatically renew for a period of two years beginning on the date of such change in control with the same automatic renewal. The Employment Agreements do not provide for any severance payments upon a termination due to a non-renewal of the agreement at our election, which was a feature that was removed from the original employment agreements.

The Employment Agreements provide that, in the event of a termination by Pattern without cause or by the executive for good reason, in each case, that occurs within 24 months after a change in control, the executives’ outstanding equity grants will vest in full and/or become immediately exercisable as of immediately prior to the executive’s termination of employment. With respect to any such equity grants that vest in whole or in part based on the satisfaction of performance-based or market-based conditions, such equity grants will vest with such conditions deemed to have been satisfied based on achievement as follows: (i) if a change in control and such termination each occur prior to the end of the applicable measurement period, such conditions will be deemed to

 

71


Table of Contents

have been satisfied based on achievement of target performance; and (ii) if the termination occurs following a change in control, but after the end of the applicable measurement period, the satisfaction of such condition will be based on actual achievement. In addition, each executive officer with an Employment Agreement entered into a waiver stating that any changes to each executive’s duties, authorities or responsibilities as of the Closing or as of the closing of the transactions contemplated by the Contribution Agreement, which we refer to as the “PEGH2 Closing,” will not by themselves constitute “good reason” in connection with the Merger or any related transactions. These waivers are conditioned upon the finalization of a profits interest-based management long-term incentive plan within the 60 days following the PEGH2 Closing.

“Cause” is defined for this purpose generally to mean (i) a material breach of the Employment Agreement by the executive that remains uncorrected for 30 days after we provide written notice to the executive, (ii) the executive being the subject of an order obtained or issued by the SEC for any securities violation involving fraud, (iii) the conviction or plea of nolo contendere by the executive to any felony or crime involving moral turpitude or (iv) the executive’s material mismanagement in providing material services to us or our affiliates if such mismanagement is not corrected for 30 days after we provide written notice to the executive. “Good reason” is defined for this purpose generally to mean (i) a material diminution in the executive’s authority, title, position, duties or responsibilities, (ii) a material breach by us of our obligations to the executive under the Employment Agreement or a material breach by us of our bylaws or certificate of incorporation, (iii) the involuntary relocation of the executive’s principal place of employment to a location more than 40 miles from the current location or (iv) a diminution in the executive’s base salary.

The Employment Agreements preserve the severance arrangements with our executive officers contained in arrangements existing prior to the November 3, 2019 amendments and restatements of such agreements. In the event of a termination by us without cause or by the executive for good reason, irrespective of a change in control transaction, severance payable to our executive officers, other than Mr. Garland, will be paid in a lump-sum equal to the sum of (i) 1.0 times the executive’s annual base salary and (ii) 1.8 times the executive’s average cash bonus amount, defined as the average of the two most recent annual cash bonus amounts paid to the executive. Mr. Garland’s Employment Agreement provides that in the event of a termination by us without cause or by Mr. Garland for good reason, irrespective of a change in control transaction, his severance will be paid in a lump sum equal to the sum of (i) 2.8 times his annual base salary and (ii) 2.8 times his average cash bonus amount, defined the same as in the other executives’ Employment Agreements.

In addition, upon a termination by Pattern without cause or by the executive for good reason, each executive may be reimbursed for up to 12 months (or, for Mr. Garland, 18 months) of premiums paid to receive continued benefit coverage under the Consolidated Omnibus Budget Reconciliation Act, or “COBRA.”

The Employment Agreements also include a contingent cutback provision pursuant to which, in the event any payments or benefits received by the executive would be subject to an excise tax under Section 4999 of the Code, the executive will receive the greater of (x) such payments reduced by an amount necessary to prevent any portion of the payments from being nondeductible or (y) the full amount of such payments.

Severance payable under the Employment Agreements is subject to the execution and non-revocation of a general release of claims and is also conditioned on the executive’s compliance for a period of 24 months with an agreement to refrain from soliciting employees to leave their employment relationship with us.

Upon a termination by Pattern without “cause,” Mr. Ostberg would be entitled to receive severance pursuant to our Involuntary Separation Policy for a person at Mr. Ostberg’s job level and tenure. Cash severance payable under the Involuntary Separation Policy is equal to (i) one month of continued base salary, plus an additional month of continued base salary for every year of service and, if such termination occurs prior to the first anniversary of the Effective Time, may also include (ii) a prorated portion of the executive’s annual bonus. In addition, he would be entitled to receive Company-provided COBRA continuation for the duration of the severance period. Severance payable under the Involuntary Separation Policy is subject to the execution

 

72


Table of Contents

and non-revocation of a general release of claims. Prior to the first anniversary of the Effective Time, Pattern is permitted to increase the value of these severance benefits by up to 100% for a limited number of employees.

The severance payments for our named executive officers are further described below under “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Quantification of Potential Payments and Benefits to Our Named Executive Officers” beginning on page 77 of this proxy statement. For our executive officers who are not named executive officers, the severance payments to Messrs. Shugart and Devlin under their Employment Agreements and Mr. Ostberg, assuming that Pattern increases Mr. Ostberg’s severance benefits by 100%, are estimated to not exceed $1,600,000 in the aggregate.

Annual Equity Awards and Bonuses

If the Effective Time has not occurred by March 1, 2020, we may grant additional annual equity-based compensation awards in the form of cash-settled Company RSUs in the ordinary course of business, consistent with past practice. Any such awards are expected to convert to time-vesting cash obligations following the Effective Time and are not expected to be cashed out at the Effective Time.

The Merger Agreement provides that each employee who continues to provide services following the completion of the Merger will continue to be eligible for an annual bonus in respect of calendar year 2019, based on actual achievement of the applicable performance metrics as determined at the discretion of the Nominating, Governance and Compensation Committee. If any such employee experiences a termination without “cause” following the Merger but prior to payment of his or her annual bonus, the employee will be entitled to payment of the bonus to the extent that it would have been earned had the employee remained employed through the payment date. In connection with the Merger, certain executive officers of Pattern may become entitled to payments and benefits that may be treated as “excess parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (“Section 280G”). To mitigate the potential impact of Section 280G on Pattern and the executive officers, on December 19, 2019, the Board (upon recommendation by the Nominating, Governance and Compensation Committee and the Special Committee) approved payment during 2019 of all or a portion of the annual bonus that it expected would otherwise be paid in early 2020 to each of the named executives and Mr. Devlin. Pattern entered into an acknowledgement (“Bonus Acknowledgement”) with such named executive officers and Mr. Devlin pursuant to which each such executive officer agreed that (i) if the final cash bonus amount approved by the Board in early 2020 is less than the amount paid during 2019 for any reason, such executive officer would be obligated to pay back the difference (and similarly, if a larger amount is approved, the difference would be paid to such executive officer) and (ii) if such executive officer was to resign for any reason or be terminated for cause prior to the normal bonus payment date in early 2020, such executive officer would be obligated to repay the full bonus amount to Pattern (subject to certain limited exceptions). Pursuant to the Bonus Acknowledgement letters, each of the named executive officers and Mr. Devlin received the following payments: Mr. Garland, $712,000; Mr. Armistead, $590,000; Mr. Elkort $485,000; Mr. Lyon, $532,000; Mr. Pederson, $532,000; and Mr. Devlin, $285,000. The aggregate annual bonus in respect of calendar year 2019 for our executive officers (other than for our named executive officers and Mr. Devlin whose annual bonuses were accelerated and paid during 2019 as described above), at target, is estimated to equal $350,000.

Insurance and Indemnification of Directors and Executive Officers

The Merger Agreement provides that for a period of at least six years from and after the Effective Time, Parent will and will cause the Surviving Corporation to indemnify and hold harmless (and to also advance expenses as incurred to the fullest extent that Parent or the Surviving Corporation would be permitted to do so under applicable laws if the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined by a final judicial decision from which there is no further right to appeal that such person is not entitled to indemnification) each of our present or former directors or officers and each of the present and former directors or officers of our subsidiaries performing services at our request or the request of

 

73


Table of Contents

our subsidiaries as a director, officer, employee, partner, member, manager, trustee, fiduciary or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other entity or enterprise, including service with respect to an employee benefit plan, in each case determined as of immediately prior to the Effective Time (the “Indemnified Parties”), against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or related to such Indemnified Parties’ service as our director or officer or as a director or officer of any of our subsidiaries or services performed by such Indemnified Parties at our request or the request of any of our subsidiaries at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, including those arising out of or related to the Merger and the other transactions contemplated by the Merger Agreement.

The Merger Agreement also provides that all existing rights to exculpation, indemnification or advancement of expenses to which our present directors and officers are entitled that are contained in our organizational documents prior to the Effective Time will survive the Merger and will be observed by the Surviving Corporation to the fullest extent permitted by applicable law.

The Merger Agreement also provides that, for a period of six years after the Effective Time, the Surviving Corporation will maintain in effect our current insurance coverage with respect to our directors and officers. We will, prior to the Effective Time, bind and purchase a tail policy to our current policy of directors’ and officers’ liability insurance for a period of six years from the Effective Time. If the annual premium for such insurance coverage is in excess of 300% of the last annual premium paid prior to the date of the Merger Agreement, the Surviving Corporation will be obligated to obtain the most advantageous insurance obtainable for an annual premium equal to 300% of the last annual premium paid prior to the date of the Merger Agreement.

Interests of Our Directors and Executive Officers in the Contribution Agreement

As disclosed in the Company’s Current Report on Form 8-K filed on November 4, 2019, Parent, RPE II, PEGH2, Pattern Equity Holdings 2 LLC, certain of our executive officers who also serve as members of the management team of Pattern Energy Group Holdings 2 LP and Hou-ou LLC, as the management representative entity, have entered into the Contribution Agreement. Pursuant to the Contribution Agreement, following the consummation of the Merger and at the closing of the transactions contemplated by the Contribution Agreement, the parties to the Contribution Agreement will make certain contributions contemplated by the Contribution Agreement, including with respect to their interests in PEGH2 in exchange for equity interests in Newco (as defined below) or the Surviving Corporation, and the Company and PEGH2 will be under common ownership.

The Contribution Agreement includes certain covenants relating to the matters set forth in the Merger Agreement, including covenants by the parties thereto to use their respective reasonable best efforts to take or cause to be taken all actions reasonably necessary or advisable on their part under the Contribution Agreement to consummate the Merger and the transactions contemplated by the Contribution Agreement on the same date and as promptly as reasonably practicable and not take any action that would be reasonably expected to prevent, materially delay or materially impair the consummation of the Merger.

Treatment of Pattern Equity Awards

In connection with the consummation of the transactions contemplated by the Contribution Agreement, Company Restricted Shares and Company Performance Shares held by certain of our executive officers, including Messrs. Armistead, Devlin, Elkort, Garland, Lyon, Pedersen and Shugart (“Pattern Rollover Awards”), will not entitle the holder to payment of the Merger Consideration upon the Closing and instead will either, depending on the timing of the PEGH2 Closing (a) be cancelled and the holder will be issued units in a newly formed entity (which we refer to as “Newco” and such units as “Newco Units”) or (b) converted into restricted shares of the Surviving Corporation with substantially the same terms and conditions as relate to vesting and forfeiture, except that the Company Performance Shares will be deemed satisfied at the maximum level of

 

74


Table of Contents

performance. If Pattern Rollover Awards are converted into restricted shares of the Surviving Corporation, and Newco is not formed within a specified time period, our executive officers who received restricted shares in the Surviving Corporation will receive the Merger Consideration in respect of such shares. If Pattern Rollover Awards are converted into Newco Units, the units will vest 50% on January 1, 2021 and 50% on January 1, 2022, if the holder remains employed with Newco or its affiliate on the applicable vesting date, subject to remaining outstanding and continuing to vest upon certain good leaver events, including a termination of employment without cause, resignation of employment for good reason, upon death or disability, following a non-renewal of the holder’s employment agreement prior to 2023 or upon the holder’s retirement. Unvested Newco Units will immediately vest upon certain events constituting a change in control of Newco. We refer to the grant of Newco Units in exchange for Pattern Rollover Awards as a “contribution and exchange” even though in certain circumstances the Pattern Rollover Awards could be cancelled in exchange for the issuance of Newco Units.

The table below in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement—Pattern Equity Awards and PEGH2 Units—Executive Officer Holdings” sets forth, for each executive officer, (i) the estimated number of Pattern Rollover Awards and PEGH2 Units (Capital) and PEGH2 Units (Profits Interest) (as defined below) estimated to be held as of January 31, 2020, (ii) the number of Newco Units that will be issued and / or exchanged for such Pattern Rollover Awards and PEGH2 Units, (iii) the estimated value of such Newco Units held by the executive officers and (iv) the estimated value of the maximum potential earnout payments that may be paid to executive officers in respect of their contributed PEGH2 Units (Capital) and PEGH2 Units (Profits Interest), as described below, which amounts are not reflected in the table provided in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Quantification of Potential Payments and Benefits to Our Named Executive Officers” beginning on page 77 of this proxy statement.

Treatment of Equity Interests in PEGH2

In connection with the PEGH2 Closing, certain executive officers of Pattern who have interests in PEGH2, including Messrs. Armistead, Devlin, Elkort, Garland and Shugart, have agreed to forego certain rights related to their PEGH2 Units (Profits Interest), including accelerated vesting that would have been triggered by the PEGH2 Closing, and to contribute their PEGH2 Units (Capital) and PEGH2 Units (Profits Interest) in exchange for equity interests in Newco. “Units (Profits Interest)” and “Units (Capital)” have the meanings set forth in the Third Amended and Restated Agreement of Limited Partnership of Pattern Energy Group Holdings 2 LP, dated effective as of November 1, 2019 and attached as Exhibit 10.1 to Pattern’s Current Report on Form 8-K previously filed on November 4, 2019.

The executive officers’ PEGH2 Units (Profits Interest) will be exchanged for Newco Units that, if unvested at the time of the PEGH2 Closing, will remain subject to vesting, 50% on each of June 1, 2020 and June 1, 2021, if the holder remains employed with Newco or its affiliate on the applicable vesting date, subject to remaining outstanding and continuing to vest upon certain good leaver events, including a termination of employment without cause, resignation of employment for good reason, upon death or disability, following a non-renewal of the holder’s employment agreement prior to 2023 or upon the holder’s retirement. Unvested Newco Units will immediately vest upon certain events constituting a change in control of Newco. In addition, two named executive officers, Messrs. Lyon and Pedersen, who do not currently hold PEGH2 Units (Profits Interest) will be granted new equity interests in Newco intended to replicate the treatment that the existing PEGH2 Units (Profits Interest) holders will receive upon the PEGH2 Closing, including with respect to the vesting terms described above.

Executive officers and certain other members of management will be eligible to participate in the right to an aggregate earnout payment of up to $50.0 million in respect of contributed PEGH2 Units (Profits Interest) plus an aggregate earnout payment of up to $1.0 million in respect of the executive officers’ contributed PEGH2 Units (Capital). These earnout payments would be earned upon a future sale of RPE II’s equity interests in Newco at specified threshold amounts.

 

75


Table of Contents

The table below in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement—Pattern Equity Awards and PEGH2 Units—Executive Officer Holdings” sets forth, for each executive officer, (i) the estimated number of Pattern Rollover Awards and PEGH2 Units (Capital) and PEGH2 Units (Profits Interest) estimated to be held as of January 31, 2020, (ii) the number of Newco Units that will be issued and / or exchanged for such Pattern Rollover Awards and PEGH2 Units, (iii) the estimated value of such Newco Units held by the executive officers and (iv) the estimated value of the maximum potential earnout payments that may be paid to executive officers in respect of their contributed PEGH2 Units (Capital) and PEGH2 Units (Profits Interest), as described below.

Pattern Equity Awards and PEGH2 Units—Executive Officer Holdings

Following the PEGH2 Closing, it is anticipated that, based on Pattern Rollover Awards and PEGH2 Units (Capital) and PEGH2 Units (Profits Interest) estimated to be held by our executive officers as of January 31, 2020, our executive officers will receive the following number of Newco Units, which number may change if there are subsequent grants or forfeitures of Pattern Rollover Awards, PEGH2 Units (Capital), PEGH2 Units (Profits Interest) or Newco Units, with the associated estimated valuations and estimated potential maximum future earnout payments, if achieved:

Pattern Restricted Shares, Pattern Performance Shares and PEGH2 Units (Capital)

 

    Pattern Restricted Shares and Performance Shares
Contributed and Exchanged
(unvested)(1)
    PEGH2 Units (Capital)—
Contributed and Exchanged
(vested)(1)
 

Name and Title

 

Pattern
Restricted
Shares
Contributed
(#)

   

Pattern
Performance
Shares
Contributed
(#)

   

Newco Units
Received

(#)

   

Estimated
Value of
Newco Units

Received

($)(2)

   

PEGH2 Units
(Capital)
Contributed
(#)

   

Newco Units
Received

(#)

   

Estimated
Value of
Newco
Units

Received

($)(2)

   

Estimated
Potential
Future
Earnout

($)

 

Michael M. Garland

    27,923       85,115       3,023,767       3,023,767       1,403,784       2,157,719       2,157,719       321,191  

Michael J. Lyon

    13,036       39,714       1,411,063       1,411,063       —         —         —         —    

Hunter H. Armistead

    14,321       43,493       1,546,525       1,546,525       1,332,074       2,047,494       2,047,494       304,784  

Daniel M. Elkort

    10,994       33,482       1,189,733       1,189,733       304,567       468,142       468,142       69,686  

Esben W. Pedersen

    13,036       39,714       1,411,063       1,411,063       —         —         —         —    

Aggregate interests held by other executive officers(3)

    9,460       29,179       1,033,567       1,033,567       285,027       438,108       438,108       65,215  

 

(1)

Assumes a closing date of January 31, 2020. In the case of Company Performance Shares granted in 2017, a vested amount was estimated based upon available data and therefore not included in the table. Confirmation by the relevant Board committee of 2017 performance goal achievement is anticipated to occur in February 2020.

(2)

Aggregate value based on agreed upon valuation of Newco by parties to the Contribution Agreement; estimated value per unit equals $1.00, subject to change based on any new issuances and forfeitures.

(3)

Includes interests held by one former executive officer of Pattern, Kevin Deters, who ceased being an executive officer upon his resignation from Pattern in June 2019.

 

76


Table of Contents

PEGH2 Units (Profits Interest)

 

    PEGH2 Units (Profits Interest)—
Contributed and Exchanged
(vested)(1)
    PEGH2 Units (Profits Interest)—
Contributed and Exchanged
(unvested)(1)
 

Name and Title

  PEGH2
Units
(Profits
Interest)
Contributed
(#)
    Newco Units
Received

(#)
    Estimated
Value of
Newco Units

Received
($)(2)
    Estimated
Potential
Future
Earnout

($)
    PEGH2 Units
(Profits
Interest)
Contributed
(#)
    Newco Units
Received

(#)
    Estimated
Value of
Newco Units

Received
($)(2)
    Estimated
Potential
Future
Earnout

($)
 

Michael M. Garland

    123,251       8,227,214       8,227,214       6,765,514       123,249       8,227,114       8,227,114       6,765,432  

Michael J. Lyon

    —         1,214,884       1,214,884       999,040       —         1,214,883       1,214,883       999,039  

Hunter H. Armistead

    116,901       7,803,324       7,803,324       6,416,934       116,900       7,803,257       7,803,257       6,416,879  

Daniel M. Elkort

    42,350       2,826,957       2,826,957       2,324,702       42,350       2,826,924       2,826,924       2,324,674  

Esben W. Pedersen

    —         1,672,134       1,672,134       1,375,052       —         1,672,133       1,672,133       1,375,051  

Aggregate interests held by other executive officers(3)

    15,625       1,042,997       1,042,997       857,691       10,000       667,518       667,518       548,922  

 

(1)

Assumes a closing date of January 31, 2020.

(2)

Aggregate value based on agreed upon valuation of Newco by parties to the Contribution Agreement; estimated value per unit equals $1.00, subject to change based on any new issuances and forfeitures.

(3)

Includes interests held by one former executive officer of Pattern, Kevin Deters, who ceased being an executive officer upon his resignation from Pattern in June 2019.

Long-Term Incentive Plan

In connection with entry into the Contribution Agreement, CPPIB and RPE II have agreed that Newco will establish a management long-term incentive plan (the “LTIP”), with respect to which certain Pattern employees, including our executive officers, will participate following the PEGH2 Closing. As of the date of this proxy statement, no LTIP awards have been granted. It is anticipated that the LTIP will consist of profits-interest based awards that are intended, above certain thresholds, to provide cash payments related to the annual adjusted cash flows of Newco and participants will have the right to request a redemption of their awards at the end of certain periods after the PEGH2 Closing.

Quantification of Potential Payments and Benefits to Our Named Executive Officers

In accordance with Item 402 of Regulation S-K, the table below sets forth the amount of payments and benefits that each of our named executive officers would or may receive in connection with the Merger. The amounts reported below are based on various assumptions that may or may not actually occur or be accurate on the relevant date, including assumptions described in footnotes to the table. For example, we have assumed, among other things, that (1) the Effective Time of the Merger is January 31, 2020, which is the assumed date of the Closing solely for the purposes of disclosure in this section; (2) the Company Performance Shares are based on maximum in accordance with the terms of the Merger Agreement; (3) the employment of each of our named executive officers is terminated by us without “cause” or due to the named executive officer’s resignation for “good reason” (as such terms are defined in the relevant plans and agreements), in either case, immediately following the assumed Effective Time of January 31, 2020; (4) the number of equity awards held by each named executive officer on January 31, 2020 is the same as the number of equity awards that will be held by each such named executive officer at the Effective Time, such that the equity values in the table below do not take into account any vesting or forfeitures that may occur between January 31, 2020 and the Effective Time; (5) no reductions of any payments or benefits would be triggered pursuant to excise tax provisions in any named executive officer’s applicable agreement and (6) confirmation by the relevant Board committee of 2017 performance goal achievement associated with Company Performance Shares granted in 2017 will occur prior to the Effective Time.

 

77


Table of Contents

The actual amounts payable to our named executive officers will depend on whether the named executive officer experiences a qualifying termination, the date of termination (if any) and the terms of the plans or agreements in effect at such time, and accordingly may differ materially from the amounts set forth below.

For purposes of this discussion, “single trigger” refers to benefits that arise solely as a result of the Closing and “double trigger” refers to benefits that arise as a result of the Closing accompanied by a qualifying termination of employment on or following the Closing.

 

Named Executive Officer

   Cash
($)(1)
     Equity
Awards

($)(2)
     Perquisites/
Benefits

($)(3)
     Total
($)
 

Michael M. Garland

     3,010,241        3,023,767        43,089        6,077,097  

Michael J. Lyon

     1,159,197        1,411,063        41,736        2,611,996  

Hunter H. Armistead

     1,275,501        1,546,525        41,736        2,863,762  

Daniel M. Elkort

     1,053,775        1,189,733        41,736        2,285,244  

Esben W. Pedersen

     1,159,197        1,411,063        41,736        2,611,996  

 

(1)

Cash. Pursuant to the terms of the Merger Agreement, each named executive officer who continues to provide services following the completion of the Merger will continue to be eligible for an annual bonus in respect of calendar year 2019, based on actual achievement of the applicable performance metrics. In connection with the Merger, the named executive officers may become entitled to payments and benefits that may be treated as “excess parachute payments” within the meaning of Section 280G. To mitigate the potential impact of Section 280G on Pattern and the named executive officers, on December 19, 2019, the Board (upon recommendation by the Nominating, Governance and Compensation Committee and the Special Committee) approved payment during 2019 of all or a portion of the annual bonus that it presently expects would otherwise be paid to each respective named executive officer in early 2020. In connection with the foregoing, Pattern entered into Bonus Acknowledgements with each named executive officer providing for clawbacks in certain circumstances. The accelerated bonus amounts described under the section captioned “Proposal 1: Adoption of the Merger Agreement—Interests of Our Directors and Executive Officers in the Merger—Agreements or Arrangements with Our Executive Officers—Annual Equity Awards and Bonuses” have been included in the column captioned “Average Bonus Component of Severance” below, but the final cash bonus amount will be approved by the Board in early 2020, and the final cash bonus amount may be more or less than the amount paid during 2019.

In addition, pursuant to the Employment Agreements for the named executive officers (other than Mr. Garland), upon a “double-trigger” termination by Pattern without cause or by the executive for good reason, each named executive officer will become entitled to a lump-sum cash severance payment consisting of (a) 12 months of his base salary plus (b) 1.8 times his average annual cash bonus. Pursuant to Mr. Garland’s employment agreement, upon a “double-trigger” termination by Pattern without “cause” or by Mr. Garland for “good reason,” he will become entitled to a lump-sum cash severance payment equal to 2.8 times the sum of his (x) annual base salary and (y) his average annual cash bonus.

 

Named Executive Officer

   Base Salary
Component of
Severance

($)
     Average
Bonus

Component of
Severance

($)
 

Michael M. Garland

     1,306,441        1,703,800  

Michael J. Lyon

     350,097        809,100  

Hunter H. Armistead

     379,101        896,400  

Daniel M. Elkort

     338,275        715,500  

Esben W. Pedersen

     350,097        809,100  

 

78


Table of Contents
(2)

Equity. The following table sets forth the value of each type of unvested equity-based award subject to “single-trigger” acceleration under the Merger Agreement that is held by our named executive officers, calculated based on the Merger Consideration of $26.75 per share. For a more detailed description of the treatment of equity awards in connection with the Merger, see the sections captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Merger—Treatment of Pattern Equity Awards” beginning on page 69 of this proxy statement and “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Merger—Agreements or Arrangements with Our Executive Officers” beginning on page 71 of this proxy statement. In addition, certain Company Restricted Shares and Company Performance Shares will not receive the Merger Consideration and will be treated as further described above in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement – Pattern Equity Awards and PEGH2 Units – Executive Officer Holdings.”

 

Named Executive Officer

   Company
Restricted
Shares

(#)
     Value of
Company
Restricted
Shares

($)
     Company
Performance
Shares (at
maximum)

(#)
     Value of
Company
Performance
Shares

($)
     Total Value
of Company
Equity
Awards

($)
 

Michael M. Garland

     27,923        746,940        85,115        2,276,826        3,023,767  

Michael J. Lyon

     13,036        348,713        39,714        1,062,350        1,411,063  

Hunter H. Armistead

     14,321        383,087        43,493        1,163,438        1,546,525  

Daniel M. Elkort

     10,994        294,090        33,482        895,644        1,189,733  

Esben W. Pedersen

     13,036        348,713        39,714        1,062,350        1,411,063  

 

(3)

Perquisites/Benefits. Pursuant to their respective employment agreements, upon a “double trigger” termination by Pattern without “cause” or by the executive for “good reason,” each of our named executive officers would be entitled to receive payment for continued healthcare coverage premiums. The amounts reflected are calculated based on the applicable named executive officer’s elected level of coverage for the 2019 plan year, with (a) Mr. Garland eligible to receive 18 months of COBRA premiums (both the employer and employee portion) and (b) all other named executive officers entitled to receive up to 12 months of COBRA premiums (both the employer and employee portion). In addition to the foregoing amounts, Pattern agreed to pay 50% of the cost of the legal fees incurred by our executive officers, including our named executive officers, for outside legal counsel in connection with the Merger (with the other 50% of such cost being paid by Pattern Development, an entity in which Pattern has a 29% ownership interest) and such amounts are not reflected within the table.

Additional Compensation in connection with the PEGH2 Closing

In addition to the amounts described above, our named executive officers will also be entitled to the payments described above under “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement—Pattern Equity Awards and PEGH2 Units—Executive Officer Holdings—PEGH2 Units (Profits Interest)” upon the PEGH2 Closing.

Canadian Securities Law Matters

MI 61-101

Pattern is a reporting issuer (or the equivalent) under applicable Canadian securities laws in each of the provinces and territories of Canada and is, among other things, subject to the provisions of MI 61-101. MI 61-101 is intended to regulate certain transactions to ensure equality of treatment among securityholders, including by requiring, in certain specified circumstances, and subject to certain exceptions, enhanced disclosure, approval by a majority of securityholders excluding interested or related parties, and independent valuations. The protections afforded by MI 61-101 apply to, among other transactions, “business combinations” (as defined in MI 61-101), which are certain transactions that can result in the interests of holders of equity securities of an issuer being terminated without their consent.

 

79


Table of Contents

If any “related party” (as defined in MI 61-101) of Pattern (i) is a party to any “connected transaction” to the Merger, (ii) is entitled to receive, directly or indirectly, as a consequence of the Merger, consideration per equity security that is not identical in amount and form to the entitlement of the general body of holders in Canada of securities of the same class, or (iii) is entitled to receive, directly or indirectly, as a consequence of the Merger, a “collateral benefit” (as defined in MI 61-101), the Merger will constitute a “business combination” for the purposes of MI 61-101 and will require “minority approval” in accordance with MI 61-101. The Merger is a business combination for Pattern under MI 61-101, as certain senior officers of Pattern are participating in a connected transaction and/or receiving different consideration for certain of their equity securities of Pattern (see “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement—Treatment of Pattern Equity Awards” beginning on page 74 of this proxy statement and “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement—Treatment of Equity Interests in PEGH2” beginning on page 75 of this proxy statement), or may be receiving a collateral benefit. As such, the Merger must be approved by a majority of the votes cast by holders of Company Common Stock at the special meeting, excluding those votes attached to shares of Company Common Stock that are beneficially owned, or over which control or direction is exercised, by (i) Pattern, (ii) the related parties of Pattern who are parties to a connected transaction or can be considered to be receiving different consideration or a collateral benefit, (iii) related parties of such related parties and (iv) “joint actors” (as defined in MI 61-101) of persons referred to in (ii) or (iii) above. This approval is in addition to the requirement under Delaware law that the proposal to adopt the Merger Agreement be approved by the affirmative vote of the holders of a majority of Company Common Stock and Company Preferred Stock, voting together as a single class, in each case outstanding and entitled to vote thereon.

Pattern is not required to obtain a formal valuation under MI 61-101 as no “interested party” (as defined in MI 61-101) is, as a consequence of the Merger, directly or indirectly acquiring Pattern or its business or combining with Pattern, whether alone or with joint actors, and no interested party is party to a connected transaction to the Merger that is a “related party transaction” (as defined in MI 61-101) for which Pattern would be required to obtain a formal valuation. To the knowledge of the directors and senior officers of Pattern, there have been no prior valuations in respect of Pattern (as contemplated in MI 61-101) in the 24 months prior to the date of the Merger Agreement, and, except as discussed in this proxy statement under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Background of the Merger,” no bona fide prior offer (as contemplated in MI 61-101) that relates to the transactions contemplated by the Merger has been received by Pattern during the 24 months before the execution of the Merger Agreement.

 

80


Table of Contents

Excluded Votes

Pursuant to Part 8 of MI 61-101, an aggregate of 1,210,049 votes attached to shares of Company Common Stock will be excluded in determining “minority approval” of the Merger (assuming the votes attached to treasury stock held by Pattern are not cast). The votes attached to shares of Company Common Stock beneficially owned, or over which control or direction is exercised, by Pattern and the following “senior officers” (within the meaning of MI 61-101) of Pattern will be excluded in determining whether minority approval of the Merger has been obtained under MI 61-101. To the knowledge of Pattern, any interested party and the directors and senior officers of Pattern, after reasonable inquiry, the share ownership of such persons as of January 31, 2020 is shown in the table below:

 

Name

   Shares of
Company
Common
Stock(1)
     Percent of
Total
Outstanding
Company
Common
Stock
 

Hunter Armistead

     204,171        0.21

Dyann Blaine

     14,647        0.01

Julie Brand

     4,987        0.01

Kevin Devlin

     28,692        0.03

Daniel Elkort

     90,310        0.09

Michael Garland

     388,477        0.40

Kim Liou

     9,643        0.01

Michael Lyon

     185,727        0.19

John Martinez

     10,654        0.01

Richard Ostberg

     31,378        0.03

Esben Pedersen

     155,412        0.16

Christopher Shugart

     70,834        0.07

Sarah Webster

     15,117        0.02

Pattern Energy Group Inc. (Treasury Stock)(2)

     289,690         

 

(1)

Includes Company Common Stock, vested and unvested Company Restricted Shares and vested and unvested Company Performance Shares, as applicable, held by such individual (evaluated at the maximum for unvested Company Performance Shares or, in the case of Company Performance Shares granted in 2017, a vested amount was estimated based on available data and confirmation by the relevant Board committee of 2017 performance goal achievement is anticipated to occur in February 2020).

(2)

Pattern holds 289,690 shares of Company Common Stock as treasury stock. If they were voted at the special meeting, the votes attached to these shares would also be excluded in determining “minority approval” of the Merger. However, these shares are not considered to be “outstanding” under applicable Delaware corporate law, or under SEC rules, and are not permitted to be voted at the special meeting.

Under MI 61-101, a benefit to be received by a related party of an issuer as a consequence of a transaction will not be a “collateral benefit” if, among other things, it is received solely in connection with the related party’s services as an employee, director or consultant of the issuer, an affiliated entity of the issuer or a successor to the business of the issuer where, among other things: (a) the benefit is not conferred for the purpose, in whole or in part, of increasing the value of the consideration paid to the related party for securities relinquished under the transaction; (b) the conferring of the benefit is not, by its terms, conditional on the related party supporting the transaction in any manner; (c) full particulars of the benefit are disclosed in the disclosure document for the transaction; and (d) at the time the transaction is agreed to, the related party and its associated entities beneficially own or exercise control or direction over less than one per cent of the outstanding shares of each class of equity securities of the issuer. None of the non-employee directors of Pattern are party to a connected transaction to the Merger, receiving different consideration in the Merger than the general body of holders of Company Common Stock, or receiving a collateral benefit. Accordingly, the votes attached to shares of Company Common Stock held by such non-employee directors will not be excluded in determining minority approval of the Merger under MI 61-101.

 

81


Table of Contents

Ownership of Securities of Pattern

The following table sets out the number, designation and percentage of the outstanding securities of Pattern beneficially owned, or over which control or direction is exercised, by each of our directors and officers (as defined under Canadian securities laws) as of January 31, 2020:

 

Name

   Shares of
Company
Common
Stock(1)

# / %
    Shares of
Company
Preferred
Stock

# / %
    Company
Options(2)

# / %
    Company
RSUs

# / %
 

Directors

        

Alan R. Batkin

     37,609/0.04     0/0     0/0     70,406/44 %

The Lord Browne of Madingley

     26,461/0.03     0/0     0/0     0/0

Richard A. Goodman

     0/0     0/0     0/0     11,846/7

Douglas G. Hall

     22,614/0.02     0/0     0/0     37,588/23

Patricia M. Newson

     14,557/0.01     0/0     0/0     37,588/23

Mona K. Sutphen

     4,679/0     0/0     0/0     4,659/3

Officers

        

Hunter Armistead
Executive Vice President, Business Development

     204,171/0.21     0/0     60,768/15.9     0/0

Dyann Blaine
Vice President, Assistant General Counsel

     14,647/0.01     0/0     0/0     0/0

John Bodt(3)
Vice President, Strategic Development

     0/0     0/0     0/0     0/0

Julie Brand
Vice President, Controller

     4,987/0.01     0/0     0/0     0/0

Kevin Devlin
Senior Vice President, Project Operations

     28,692/0.03     0/0     0/0     0/0

Daniel Elkort
Executive Vice President and Chief Legal Officer

     90,310/0.09     0/0     44,283/11.6     0/0

Michael Garland
Chief Executive Officer

     388,477/0.40     0/0     175,012/45.8     0/0

Kim Liou
Vice President, General Counsel and Corporate Secretary

     9,643/0.01     0/0     0/0     0/0

Michael Lyon
President

     185,377/0.19     0/0     36,461/9.6     0/0

John Martinez
Vice President, Operations

     10,654/0.01     0/0     0/0     0/0

Richard Ostberg
Senior Vice President, Chief Accounting Officer

     31,378/0.03     0/0     0/0     0/0

Esben Pedersen
Chief Financial Officer

     155,412/0.16     0/0     36,461/9.5     0/0

Christopher Shugart
Senior Vice President, Corporate Operations

     70,834/0.07     0/0     29,169/7.6     0/0

Sarah Webster
Vice President, Investor Relations and Corporate Communications

     15,117/0.02     0/0     0/0     0/0

 

(1)

Includes an aggregate of 424,438 unvested Company Restricted Shares and Company Performance Shares, as applicable. In the case of Company Performance Shares granted in 2017, a vested amount was estimated based on available data, and confirmation by the relevant Board committee of 2017 performance goal achievement is anticipated to occur in February 2020.

(2)

All Company Options have an exercise price of $22.00 per share.

(3)

Mr. Bodt is an officer of Pattern who does not own any equity securities of Pattern; however, Mr. Bodt has been granted certain cash awards which are linked to the share price of Company Common Stock and are expected to be liquidated at the time of the Closing. The aggregate amount of proceeds that are expected to be received by Mr. Bodt at the time of the Closing is $146,124 in connection with the foregoing cash awards, with such amount being determined using the per share Merger Consideration of $26.75.

 

82


Table of Contents

Previous Distributions

During the five-year period prior to the date of this proxy statement, Pattern has not distributed any shares of Company Common Stock, other than as set out below:

 

Date of Distribution

   Number of
Shares
     Price
per Share
    Aggregate Gross
Proceeds to Pattern

2019

       

March 2019

     262,299        N/A(1)     N/A

January 2019

     6,703        N/A(1)     N/A

January 2019

     19,542        N/A(2)     N/A

2018

       

March 2018

     279,416        N/A(1)     N/A

January 2018

     5,817        N/A(1)     N/A

2017

       

October 2017

     9,200,000 (3)       $23.40     $215,280,000

October 2017

     136,700 (4)       $24.01 to $24.91     $3,319,318

September 2017

     624,561 (4)       $24.51 to $25.61     $15,615,268

August 2017

     307,000 (4)       $24.54 to $24.96     $7,626,912

June 2017

     25,251        N/A(1)     N/A

March 2017

     206,957        N/A(1)     N/A

2016

       

August 2016

     11,300,000 (3)       $23.90     $270,070,000

July 2016

     1,240,504 (4)       $23.23 to $24.26     $29,233,095

March 2016

     287,904        N/A(1)     N/A

2015

       

July 2015

     5,435,000 (3)       $23.00     $125,005,000

April 2015

     186,136        N/A(1)     N/A

February 2015

     7,000,000 (3)       $29.25     $204,750,000

 

(1)

Issuance of Company Restricted Shares and/or Company Performance Shares.

(2)

Issuance of shares of Company Common Stock upon conversion of previously granted Company RSUs.

(3)

Shares of Company Common Stock issued in public offering.

(4)

Shares of Company Common Stock issued under Pattern’s “at-the-market” offering program.

Previous Purchases and Sales

Excluding the exercise of convertible securities, no Company Common Stock, Company Preferred Stock or other securities of Pattern have been purchased or sold by Pattern during the 12-month period preceding the date of this proxy statement, other than as set out below:

Previous Sales

 

Date of Transaction

  

Type of Security

  

Number of
Securities Sold

   Price per
Security
     Aggregate
Gross Proceeds
 

October 2019(1)

  

Company Preferred Stock

   10,400,000 Shares    $ 24.625      $ 256,100,000  

 

(1)

Private placement.

 

83


Table of Contents

Previous Purchases

 

Date of Transaction

   Type of Security      Number of
Securities
     Average Price
Paid Per
Share
 

December 2019(1)

     Company Common Stock        40,209      $ 27.22  

June 2019(1)

     Company Common Stock        1,486      $ 22.99  

March 2019(1)

     Company Common Stock        24,955      $ 21.70  

 

(1)

Repurchases of Company Common Stock tendered in satisfaction of tax withholding obligations upon the vesting of certain officer and/or director restricted stock grants.

Material Changes in the Affairs of the Corporation

To the knowledge of the directors and executive officers of Pattern and except as publicly disclosed or otherwise described elsewhere in this proxy statement, there are no plans or proposals for material changes in the affairs of Pattern.

Dividend Policy

A summary of the dividends declared and paid on Company Common Stock in the three years preceding the date of this proxy statement is set out under the section entitled “Market Prices and Dividend Data” beginning on page 127 of this proxy statement. On October 31, 2019, we declared (1) a cash dividend for the fourth quarter of 2019, payable on January 31, 2020 to the holders of record of Company Common Stock on December 31, 2019, in the amount of $0.4220 per share of Company Common Stock, which represents $1.688 on an annualized basis and (2) an aggregate cash dividend, payable on January 31, 2020 to the holders of record of Company Preferred Stock as of January 15, 2020, in the amount of $3.9 million. These dividends were paid on January 31, 2020. Following the payment of such dividends, we have agreed in the Merger Agreement to suspend the payment of any future dividends other than (1) regular quarterly dividends on Company Common Stock in an amount not exceeding $0.422 per share of Company Common Stock, (2) ordinary course dividends paid by any subsidiary Pattern or any of its subsidiaries and the other equity holders of such subsidiary, in each case on a pro rata basis according with such subsidiary’s governing documents, (3) dividends paid to tax equity investors in accordance with capital contribution or investment agreements or organizational documents and (4) cash dividends paid in accordance with the Certificate of Designations of Rights and Preferences of the Company Preferred Stock. Declaration and payment of such dividends by Pattern is subject to the applicable requirements of the DGCL and, in the case of dividends on Company Preferred Stock, the Certificate of Designations of Rights and Preferences of the Company Preferred Stock. Prior to completion of the Merger, Pattern does not have any plan or intention to change its dividend policy.

Benefits of the Merger

Our “executive officers” (as defined under U.S. federal securities laws) include our “named executive officers” (as defined under U.S. federal securities laws) (Messrs. Armistead, Elkort, Garland, Lyon and Pedersen) and three additional executive officers (Messrs. Devlin, Ostberg and Shugart). In addition to the disclosure provided in respect of our directors and such executive officers under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 69 of this proxy statement, there are also direct or indirect benefits of the Merger to our additional “officers” (as such term defined under applicable Canadian securities laws, which individuals are listed along with the executive officers in the table above under the caption “—Ownership of Securities of Pattern”) of Pattern, as more fully described below. In this section of the proxy statement, the term “additional officers” refers to such listed persons, other than our executive officers.

 

84


Table of Contents

Treatment of Pattern Equity Awards

In addition to those equity awards held by our executive officers and directors, certain of our additional officers also hold Company Restricted Shares as noted in the section captioned “—Ownership of Securities of Pattern” beginning on page 82 of this proxy statement. The treatment of these equity awards as a result of the Merger held by such additional officers will be as set forth under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Merger—Treatment of Pattern Equity Awards” beginning on page 69 of this proxy statement.

Assuming that the Effective Time of the Merger is January 31, 2020, the estimated aggregate value of unvested equity awards held by our additional officers is $659,456. The foregoing amount has been determined using the per share Merger Consideration of $26.75.

Contribution Agreement

As disclosed in the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Quantification of Potential Payments and Benefits to Our Named Executive Officers” beginning on page 77 of this proxy statement, Pattern has agreed to pay 50% of the cost of the legal fees incurred by our executive officers, including our named executive officers, for outside legal counsel in connection with the Merger, the estimated aggregate value of which is approximately $700,000 as of November 15, 2019 (with the other 50% of such cost being paid by Pattern Development, an entity in which Pattern has a 29% ownership interest). In addition to the named executive officers referred to in the table under the caption “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Contribution Agreement—Pattern Equity Awards and PEGH2 Units—Executive Officer Holdings,” Ms. Blaine, Mr. Bodt and Ms. Webster also hold equity interests in PEGH2, which will be exchanged into indirect Newco Units under the Contribution Agreement. Following completion of the PEGH2 Closing, it is estimated that such additional officers of Pattern together with our executive officers, each of whom is a “related party” (as defined in MI 61-101) of Pattern, will own, in aggregate, less than 2% of Newco.

Additional Agreements or Arrangements with Certain Officers of Pattern

In addition to those agreements or arrangements in respect of our executive officers set forth under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Merger—Agreements or Arrangements with Our Executive Officers” beginning on page 71 of this proxy statement, our additional officers are covered by standard company policies that provide for certain payments and benefits in the event of certain qualifying terminations of employment, including severance payments generally between one and ten months of base salary depending upon such individual’s job level and tenure, which may be increased by up to 100% for a qualifying termination related to the Merger, the payment of COBRA premiums for medical coverage for the duration of the severance period and payment of 2019 bonuses. The value of the payments and benefits to such additional officers, assuming a qualifying termination and that Pattern increases the severance benefits by 100% for each such individual, is estimated not to exceed $3,000,000 in the aggregate. In addition, Pattern approved the payment of additional bonuses to some of these additional officers of Pattern in connection with their services to us relating to the Merger which aggregated less than $200,000 and were paid in December 2019.

Insurance and Indemnification of Certain Persons

For a description of continuing insurance and indemnification of certain persons, including each of our present or former directors or officers, refer to the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interests of Our Directors and Executive Officers in the Merger—Insurance and Indemnification of Directors and Executive Officers” beginning on page 73 of this proxy statement for further information.

 

85


Table of Contents

Financing of the Merger

We anticipate that the total amount of funds necessary to complete the Merger and the related transactions will be funded via equity financing and debt financing as described below, as well as cash on our balance sheet, if any. This amount includes the funds needed to (1) pay stockholders the amounts due under the Merger Agreement, (2) make payments in respect our outstanding equity-based awards pursuant to the Merger Agreement and (3) repay our existing indebtedness, to the extent required under the terms of such indebtedness.

The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition.

Equity Financing

In connection with the Merger, Parent and CPPIB have entered into an equity commitment letter, dated as of November 3, 2019 (the “equity commitment letter”), pursuant to which CPPIB has committed, subject to the conditions and limitations set forth in the equity commitment letter, to provide equity financing in an aggregate amount of up to $2.64 billion, or such lesser amount, together with the debt financing, as may be required by Parent to make the payment of (1) the per share Merger Consideration to our stockholders at the Closing and (2) any fees, costs and expenses required to be paid by Parent or Merger Sub in connection with the consummation of the Merger, in each case as set forth in the Merger Agreement on the terms and subject to the conditions set forth therein.

Funding of the equity financing is subject to the conditions and limitations provided in the equity commitment letter, which include: (1) the satisfaction in full or valid waiver, on or before the Closing, of all of the conditions precedent to Parent’s and Merger Sub’s obligations to consummate the Merger under the Merger Agreement; (2) the substantially concurrent receipt by Parent of the net cash proceeds of the debt financing or confirmation from Parent’s financing sources that such proceeds will be received at the Closing subject only to the consummation of the Closing; and (3) our irrevocable confirmation in writing to Parent that all conditions precedent to our obligations to consummate the Merger under the Merger Agreement have been satisfied or that we would be willing to waive any such conditions that are unsatisfied and that we stand ready, willing and able to consummate the Closing.

The equity commitment letter and CPPIB’s obligation to fund all or any portion of the equity financing will automatically terminate and cease to be of any further force or effect without the need for any further action by any person (at which time the obligations of CPPIB under the equity commitment letter will be immediately discharged in full) upon the earliest of (1) the termination of the Merger Agreement in accordance with its terms; (2) the Closing; and (3) Pattern or any of its affiliates commencing any lawsuit or other proceeding (whether at law or in equity, in tort, contract or otherwise) or asserting any claim under or in respect of the equity commitment letter, the Merger Agreement or any of the documents relating thereto, or the transactions contemplated thereby, with certain limited exceptions.

We are an express third-party beneficiary of the equity commitment letter for the purpose of causing the equity financing to be funded, but solely to the extent that we have been awarded, in accordance with, and subject to, the terms and conditions of the Merger Agreement, specific performance to require Parent to cause the equity financing under the equity commitment letter to be funded. For more information, see the section captioned “The Merger Agreement—Specific Performance” beginning on page 125 of this proxy statement.

Debt Financing

In connection with the Merger, Parent has obtained a debt commitment letter (the “debt commitment letter”) from a consortium of financial institutions (in each case, acting directly or through their respective affiliates or branches, as appropriate, collectively, the “debt commitment parties”) pursuant to which they have committed to

 

86


Table of Contents

provide Merger Sub, severally but not jointly, upon the terms and subject to the conditions set forth in the debt commitment letter, with (1) up to $650.0 million of senior secured 364-day bridge term loans and (2) a senior secured 364-day revolving credit facility in a principal amount of not more than $300.0 million.

The proceeds of the debt financing may be used, among other purposes, (1) to finance, in part, the transactions contemplated by the Merger Agreement; (2) to repay our existing indebtedness, to the extent that repayment of such indebtedness is required under its terms; and (3) to pay costs and expenses in connection with the aforementioned transactions.

The obligations of the debt commitment parties to provide the debt financing under the debt commitment letter are subject to a number of conditions, including (1) the execution and delivery of definitive documentation consistent with the terms of the debt commitment letter; (2) the substantially simultaneous or substantially concurrent consummation of the Merger in accordance with the terms of Merger Agreement (without giving effect to any amendment, waiver, consent or other modification to the Merger Agreement that is materially adverse to the lenders in their capacities as such unless approved by the debt commitment parties); (3) since the date of the Merger Agreement, there not having been a Company Material Adverse Effect; (4) delivery of certain audited and unaudited financial statements; (5) payment of all applicable fees and reasonable and, to the extent invoiced, documented out-of-pocket expenses; (6) the receipt of all documentation and other information about the borrower and guarantors required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations (including the PATRIOT Act); (7) the accuracy of specified representations and warranties in the loan documents under which the debt financing will be provided and the accuracy of certain representations and warranties in the Merger Agreement (but only to the extent that Parent has the right to terminate its obligations under the Merger Agreement as a result of a breach of such representations in the Merger Agreement); (8) the execution and delivery of guarantees by certain guarantors and the taking of certain actions necessary to create and perfect a security interest in specified items of collateral; (9) the substantially simultaneous or substantially concurrent consummation of the equity financing; and (10) delivery of a customary solvency certificate and certain other customary closing documents.

The obligations of the debt commitment parties to provide the debt financing under the debt commitment letter will terminate at the earliest of (1) five business days after the Termination Date (as defined in and, if applicable, extended pursuant to the Merger Agreement and as described in the section captioned “The Merger Agreement—Termination of the Merger Agreement” beginning on page 122 of this proxy statement) if the Closing will not have occurred on or prior to such date, provided that such Termination Date shall not be later than November 3, 2020; (2) the termination of the Merger Agreement without the consummation of the Merger having occurred; or (3) the Closing occurs without the use of the senior secured 364-day term loan facility, and the senior secured 364-day revolving facility.

The definitive documentation governing the debt financing contemplated by the debt commitment letter has not been finalized and, accordingly, the actual terms of the debt financing may differ from those described in this proxy statement.

Parent and Merger Sub are required under the Merger Agreement to use their respective reasonable best efforts to take (or cause to be taken) all actions necessary, proper or advisable to arrange, obtain and consummate the debt financing in an amount required to consummate the transactions contemplated by the Merger Agreement not later than the closing date of the Merger on the terms and conditions of the debt commitment letter and any related fee letter. In the event any portion of the debt financing in an amount required to consummate the transactions contemplated by the Merger Agreement becomes unavailable on the terms and conditions contemplated in the debt commitment letter and any related fee letter for any reason, Parent is required under the Merger Agreement to use its reasonable best efforts to, as promptly as practicable following the occurrence of such event, notify Pattern and to use its reasonable best efforts to take (or cause to be taken) all actions necessary, proper or advisable to arrange to obtain alternative financing on terms and conditions not less favorable to Pattern than the terms and conditions contained in the debt commitment letter in an amount sufficient, when

 

87


Table of Contents

added to the portion of the debt financing that is and remains available, the equity financing and our and our subsidiaries’ available cash, if any, to consummate the transactions contemplated by the Merger Agreement. In no event will the reasonable best efforts of Parent or Merger Sub be deemed to require Parent or Merger Sub to pay any fees in excess of those contemplated by the debt commitment letter. As of the date of this proxy statement, the debt commitment letter remains in effect, and Parent has not notified us of any plans to utilize alternate financing.

Parent’s and Merger Sub’s obligations to consummate the transactions contemplated by the Merger Agreement are not contingent on Parent’s and Merger Sub’s ability to obtain the debt financing (or any alternative financing) or any specific term with respect to such debt financing.

Pattern’s Cooperation

We have agreed to use our reasonable best efforts prior to the Closing to provide, and to cause our Representatives to use reasonable best efforts to provide, in each case at Parent’s sole expense, all cooperation as is reasonably requested by Parent to assist Parent in causing the conditions in the debt commitment letter to be satisfied or as is otherwise reasonably requested by Parent or the debt financing sources and is reasonably necessary or customary for financings similar to the debt financing contemplated by the debt commitment letter (provided that such request does not unreasonably disrupt or interfere with the business or operations of Pattern or its subsidiaries), including, among other things, using reasonable best efforts to:

 

   

assist in preparation for and participate in marketing efforts and a reasonable number of meetings, conference calls, presentations and roadshows, due diligence sessions, drafting sessions and sessions with rating agencies and assist in obtaining ratings in connection with the debt financing;

 

   

(1) reasonably assist with the timely preparation of materials for rating agency presentations and bank information memoranda, lender presentations, investor presentations, offering documents, prospectuses, memoranda and similar documents for the debt financing and (2) request and facilitate Parent’s obtaining of customary auditors’ consents and reports and customary comfort letters of our independent accountants;

 

   

provide information required under applicable “know your customer” and anti-money laundering rules and regulations; and

 

   

execute and deliver, as of the Closing Date, any guarantee, pledge and security documents and other definitive financing documents or other certificates and otherwise reasonably facilitate the pledging of collateral and the granting of security interests in respect of the debt financing.

None of Pattern, our subsidiaries, or our respective directors, officers or employees will be required to enter into or perform any agreement (other than customary representation letters and authorization letters) with respect to the debt financing that is not contingent upon the closing or that would be effective prior to the Effective Time and the directors and managers of our subsidiaries will not be required to adopt resolutions approving the agreements, documents and instruments pursuant to which the debt financing is to be obtained prior to the Effective Time unless such directors and managers are to remain as directors and managers after the Effective Time and such resolutions are contingent upon, or only effective as of, the Effective Time. Parent will promptly reimburse us, upon our request, for all out-of-pocket fees, costs and expenses incurred by us or our subsidiaries in connection with our cooperation with the debt financing and will indemnify and hold harmless each of us, our subsidiaries and our respective affiliates and Representatives against any and all liabilities and losses incurred by us in connection with such cooperation, other than to the extent such liabilities or losses were suffered or incurred as a result of fraud or intentional misrepresentations, misstatements or omissions on the part of Pattern or any of its affiliates.

Limited Guarantee

Subject to the terms and conditions set forth in the Limited Guarantee, the CPPIB Guarantor has guaranteed the full, complete and timely performance by Parent of certain payment obligations under the Merger Agreement,

 

88


Table of Contents

including (1) the payment by Parent of the Parent Termination Fee if, when and as due in accordance with the Merger Agreement and (2) the payment of monetary damages as a result of the willful breach of the Merger Agreement or fraud by Parent or Merger Sub on or before the Closing under and in accordance with the terms of the Merger Agreement.

The CPPIB Guarantor’s obligations under the Limited Guarantee are subject to a maximum aggregate cap of $204.0 million, plus (1) any accrued interest on any fees not paid by Parent and (2) the reimbursement of any expenses payable in connection with our and our subsidiaries’ cooperation with the equity financing and debt financing.

The Limited Guarantee will terminate and be of no further force and effect and the CPPIB Guarantor will have no further obligation or liability under the Limited Guarantee, the Merger Agreement, the equity commitment letter or any other document or instrument delivered in connection therewith or in respect of the transactions contemplated thereby (or the termination or abandonment thereof), upon the earliest to occur of: (1) the Closing; (2) the valid termination of the Merger Agreement in accordance with its terms in any circumstances other than pursuant to which Parent would be required pursuant to the terms and subject to the conditions of the Merger Agreement to make any payment of any guaranteed obligations; (3) the payment of the guaranteed obligations by the CPPIB Guarantor to us pursuant to the Limited Guarantee; (4) the date that is three months after the termination of the Merger Agreement if the Merger Agreement is terminated in any of the circumstances pursuant to which Parent would be required pursuant to the terms and conditions of the Merger Agreement to make a payment of the guaranteed obligations, if (x) by such date we have not commenced a suit, action or other proceeding against Parent alleging that payment is due for such guaranteed obligation (or, if we have commenced a suit, action or other proceeding under the Limited Guarantee prior to such date, the date that such claim is fully and finally satisfied or otherwise resolved and, if applicable, paid in accordance with such full and final resolution).

Except in the case of fraud, our and our affiliates’ sole and exclusive remedy against the CPPIB Guarantor and any related persons of the CPPIB Guarantor in respect of any liabilities or obligations arising under, or in connection with, the Merger Agreement or the transactions contemplated thereby are claims by us (1) against the CPPIB Guarantor and any related persons of the CPPIB Guarantor under the Limited Guarantee, (2) against CPPIB and its Representatives under the confidentiality agreement between us and CPPIB, (3) against Parent or Merger Sub and their respective successors and assigns under and subject to the Merger Agreement or (4) against CPPIB and its successors and assigns under and subject to the equity commitment letter pursuant to the third party beneficiary rights granted thereunder to us.

Closing and Effective Time

The closing of the Merger will take place no later than the fourth business day after the satisfaction or waiver in accordance with the Merger Agreement of all the conditions to the closing of the Merger (as described under the section captioned “The Merger Agreement—Conditions to the Closing of the Merger” beginning on page 120 of this proxy statement), other than conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions.

As soon as reasonably practicable following the Closing, we and Parent will cause a Certificate of Merger (the “Delaware Certificate of Merger”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware as provided in Section 251 of the DGCL. The Merger will become effective at the time when the Delaware Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or at such later time as may be agreed by the parties in writing and specified in the Delaware Certificate of Merger.

Appraisal Rights

If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement and approval of the Merger, who properly demand appraisal of their shares of Company Common Stock, who do

 

89


Table of Contents

not withdraw such demand and who continuously hold such shares through the Effective Time of the Merger may be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL.

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex B and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights under Section 262. All references in Section 262 of the DGCL and in this summary to a “stockholder” or a “holder of shares” are to the record holder of shares of Company Common Stock unless otherwise noted herein. Only a holder of record of shares of Company Common Stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A person having a beneficial interest in shares of Company Common Stock held of record in the name of another person, such as a brokerage firm, bank, trust or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of Company Common Stock through a brokerage firm, bank, trust or other nominee and you wish to exercise appraisal rights, you should consult with your brokerage firm, bank, trust or other nominee.

Any stockholder contemplating the exercise of such appraisal rights should review carefully the provisions of Section 262, which is attached hereto as Annex B, particularly the procedural steps required to properly demand and perfect such rights. Failure to follow the steps required by Section 262 for demanding and perfecting appraisal rights may result in the loss of such rights.

Under Section 262, holders of Company Common Stock who (1) submit a written demand for an appraisal of their shares of Company Common Stock prior to the stockholder vote on the adoption of the Merger Agreement and approval of the Merger; (2) do not submit a proxy or otherwise vote in favor of the adoption of the Merger Agreement and approval of the Merger; (3) continue to hold their shares of Company Common Stock through the Effective Time; and (4) do not thereafter withdraw their demand for appraisal of their shares or otherwise lose their appraisal rights, in each case in accordance with the DGCL; and (5) otherwise meet the criteria and follow the procedures set forth in Section 262 may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive, in lieu of the Merger Consideration, payment in cash of the amount determined by the Delaware Court of Chancery to be the “fair value” of the shares of Company Common Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court (subject, in the case of interest payments), to any voluntary cash payments made by the Surviving Corporation pursuant to subsection (h) of Section 262 of the DGCL. However, after an appraisal petition has been filed, the Delaware Court of Chancery will dismiss appraisal proceedings as to all holders of Company Common Stock who asserted appraisal rights unless (x) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of Company Common Stock as measured in accordance with subsection (g) of Section 262 or (y) the value of the aggregate Merger Consideration in respect of such shares exceeds $1.0 million. We refer to these conditions as the “ownership thresholds.” Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period; provided, however, that at any time before the Delaware Court of Chancery enters judgment in the appraisal proceeding, the Surviving Corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case any such interest will accrue after the time of such payment only on the amount that equals the sum of (1) the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery and (2) any interest accrued prior to the time of such voluntary payment, unless paid at such time. The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the $26.75 per share consideration payable pursuant to the Merger Agreement if they did not seek appraisal of their shares.

 

90


Table of Contents

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders who was such as of the close of business on the record date for notice of such meeting with respect to shares for which appraisal rights are available that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes our notice to the holders of Company Common Stock that appraisal rights are available in connection with the Merger, and the full text of Section 262 is attached to this proxy statement as Annex B. In connection with the Merger, any holder of shares of Company Common Stock who wishes to exercise appraisal rights or who wishes to preserve such holder’s right to do so should review Annex B carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner may result in the loss of appraisal rights under the DGCL. A stockholder who loses his, her or its appraisal rights will be entitled to receive the Merger Consideration described in the Merger Agreement (without interest). Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of Company Common Stock, we believe that if a stockholder considers exercising such rights, that stockholder should seek the advice of legal counsel. A stockholder who loses their appraisal rights will be entitled to receive the Merger Consideration as described in the Merger Agreement upon surrender of the certificates that formerly represented such shares of Company Common Stock.

Stockholders wishing to exercise the right to seek an appraisal of their shares of Company Common Stock must fully comply with Section 262 of the DGCL, which means doing, among other things, ALL of the following:

 

   

the stockholder must not vote in favor of the proposal to adopt the Merger Agreement and approve the Merger;

 

   

the stockholder must deliver to us a written demand for appraisal before the vote on the adoption of the Merger Agreement and approval of the Merger at the special meeting;

 

   

the stockholder must continuously hold the shares from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the Effective Time); and

 

   

the stockholder or the Surviving Corporation must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the Effective Time. The Surviving Corporation is under no obligation to file any petition and has no intention of doing so.

In addition, one of the ownership thresholds must be met.

Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the Merger Agreement and approval of the Merger, a stockholder who votes by proxy and who wishes to exercise appraisal rights should not return a blank proxy, but rather must vote against the adoption of the Merger Agreement and approval of the Merger, abstain or not vote its shares.

Filing Written Demand

Any holder of shares of Company Common Stock wishing to exercise appraisal rights must deliver to us, before the vote on the adoption of the Merger Agreement and approval of the Merger at the special meeting, a written demand for the appraisal of the stockholder’s shares, and that stockholder must not vote or submit a proxy in favor of the adoption of the Merger Agreement and approval of the Merger. A holder of shares of Company Common Stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless timely revoked, be voted in favor of the adoption of the Merger Agreement and approval of the Merger, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing

 

91


Table of Contents

instructions to vote against the adoption of the Merger Agreement and approval of the Merger or abstain from voting on the adoption of the Merger Agreement and approval of the Merger. Neither voting against the adoption of the Merger Agreement and approval of the Merger nor abstaining from voting or failing to vote on the proposal to adopt the Merger Agreement and approve the Merger will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement and approval of the Merger. A proxy or vote against the adoption of the Merger Agreement and approval of the Merger will not constitute a demand. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement and approval of the Merger at the special meeting may constitute a waiver of appraisal rights.

Only a holder of record of shares of Company Common Stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of Company Common Stock should be executed by or on behalf of the holder of record and must reasonably inform us of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the Merger. If the shares are owned of record in a fiduciary or representative capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.

STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS, TRUST OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR BROKERAGE FIRM, BANK, TRUST OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BROKERAGE FIRM, BANK, TRUST OR OTHER NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKERAGE FIRM, BANK, TRUST OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.

All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:

Pattern Energy Group Inc.

Attention: Corporate Secretary

1088 Sansome Street

San Francisco, CA 94111

Any holder of shares of Company Common Stock who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the Merger Agreement by delivering to us a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the Effective Time will require written approval of the Surviving Corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just. However, notwithstanding the foregoing, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw such stockholder’s demand for appraisal and accept the terms offered upon the Merger within 60 days after the Effective Time.

 

92


Table of Contents

Notice by the Surviving Corporation

If the Merger is completed, within 10 days after the Effective Time, the Surviving Corporation will notify each holder of shares of Company Common Stock who has made a written demand for appraisal pursuant to Section 262 and who has not voted in favor of the adoption of the Merger Agreement and approval of the Merger that the Merger has become effective and the effective date thereof.

Filing a Petition for Appraisal

Within 120 days after the Effective Time, but not thereafter, the Surviving Corporation or any holder of shares of Company Common Stock who has complied with Section 262 and is entitled to appraisal rights, or a beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person, under Section 262, may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by all our stockholders entitled to appraisal. The Surviving Corporation is under no obligation, and has no present intention, to file a petition, and holders should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of Company Common Stock. Accordingly, any holders of Company Common Stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of Company Common Stock within the time and in the manner prescribed in Section 262. The failure of a holder of shares of Company Common Stock to file such a petition within the period specified in Section 262 could nullify the stockholder’s previous written demand for appraisal.

Within 120 days after the Effective Time, any holder of shares of Company Common Stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares not voted in favor of the adoption of the Merger Agreement and approval of the Merger and with respect to which we have received demands for appraisal, and the aggregate number of holders of such shares. The Surviving Corporation must mail this statement to the requesting stockholder within 10 days after receipt of the written request for such a statement or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition seeking appraisal or request from the Surviving Corporation the foregoing statement. As noted above, however, the demand for appraisal can only be made by a stockholder of record.

If a petition for an appraisal is duly filed by a holder of shares of Company Common Stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within 20 days after such service to file with the Delaware Register in Chancery a duly verified list (the “Verified List”) containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Delaware Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the Surviving Corporation and all of the stockholders shown on the Verified List at the addresses stated therein. Such notice will also be published at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication determined by the Delaware Court of Chancery. The costs of these notices are borne by the Surviving Corporation.

After notice to the stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded appraisal of their shares to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss that stockholder from the proceedings.

 

93


Table of Contents

The Delaware Court of Chancery will dismiss appraisal proceedings as to all our stockholders who assert appraisal rights unless (1) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of Company Common Stock as measured in accordance with subsection (g) of Section 262 or (2) the value of the aggregate Merger Consideration in respect of the shares for which appraisal rights have been pursued and perfected exceeds $1,000,000.

Determination of Fair Value

After determining the holders of Company Common Stock entitled to appraisal and that at least one of the ownership thresholds above has been satisfied in respect of our stockholders seeking appraisal rights, the Delaware Court of Chancery will determine the “fair value” of the shares of Company Common Stock subject to appraisal, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the court in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. However, the Surviving Corporation has the right, at any point prior to the Delaware Court of Chancery’s entry of judgment in the proceedings, to make a voluntary cash payment to each stockholder seeking appraisal. If the Surviving Corporation makes a voluntary cash payment pursuant to subsection (h) of Section 262, interest will accrue thereafter only on the sum of (1) the difference, if any, between the amount paid by the Surviving Corporation in such voluntary cash payment and the fair value of the shares as determined by the Delaware Court of Chancery and (2) interest accrued before such voluntary cash payment, unless paid at that time.

In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.” In Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd., 177 A.3d 1 (Del. 2017) and DFC Global Corp. v. Muirfield Value Partners, L.P., 172 A.3d 346 (Del. 2017), the Delaware Supreme Court declined to adopt a presumption favoring reliance upon the deal price in determining fair value, but noted that the deal price is one of the relevant factors to be considered, and can often be the best evidence of fair value in arm’s-length mergers with a robust sales process.

Stockholders considering seeking appraisal should be aware that the fair value of their shares of Company Common Stock as so determined by the Delaware Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares of Company Common Stock and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger is not an opinion as to, and may not in any manner address, “fair value” under Section 262 of the DGCL. Although we believe that the Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and holders of Company Common Stock should recognize that such an

 

94


Table of Contents

appraisal could result in a determination of a value higher or lower than, or the same as, the Merger Consideration. Neither we nor Parent anticipates offering more than the Merger Consideration to any holder of shares of Company Common Stock exercising appraisal rights, and we and Parent each reserve the right to make a voluntary cash payment pursuant to subsection (h) of Section 262 of the DGCL and to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of Company Common Stock is less than the Merger Consideration. If a petition for appraisal is not timely filed or if neither of the ownership thresholds is met, then the right to an appraisal will cease.

Upon application by the Surviving Corporation or by any holder of shares of Company Common Stock entitled to participate in the appraisal proceeding, the Delaware Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any holder of shares of Company Common Stock whose name appears on the Verified List and, if such shares are represented by certificates and if so required, who has submitted such stockholder’s certificates of Company Common Stock to the Delaware Register in Chancery, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights or that neither of the ownership thresholds is met. The Delaware Court of Chancery will direct the payment of the fair value of the shares, together with interest, if any, by the Surviving Corporation to the stockholders entitled thereto. Payment will be made to each such stockholder, in the case of holders of uncertificated stock, forthwith, and in the case of holders of shares represented by certificates, upon the surrender to the Surviving Corporation of the certificate(s) representing such stock. The Delaware Court of Chancery’s decree may be enforced as other decrees in such court may be enforced.

The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a holder of shares of Company Common Stock, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by a holder of shares of Company Common Stock in connection with an appraisal, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to appraisal. In the absence of such an order, each party bears its own expenses.

If any stockholder who demands appraisal of his, her or its shares of Company Common Stock under Section 262 fails to perfect, or loses or successfully withdraws, such holder’s right to appraisal, the stockholder’s shares of Company Common Stock will be deemed to have been converted at the Effective Time into the right to receive the consideration payable in the Merger, without interest. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time, if neither of the ownership thresholds is met or if the stockholder delivers to the Surviving Corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the consideration payable in the Merger in accordance with Section 262 of the DGCL.

From and after the Effective Time, no stockholder who has demanded appraisal rights will be entitled to vote such shares of Company Common Stock for any purpose or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holder’s shares of Company Common Stock, if any, payable to stockholders as of a time prior to the Effective Time. If no petition for an appraisal is filed, if neither of the ownership thresholds is met or if the stockholder delivers to the Surviving Corporation a written withdrawal of the demand for an appraisal and an acceptance of the Merger Consideration, either within 60 days after the Effective Time or thereafter with the written approval of the Surviving Corporation, then the right of such stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Delaware Court of Chancery, however, the appraisal proceeding may not be dismissed as to any stockholder who commenced the proceeding or joined that proceeding as a named party without the approval of the court.

Failure to comply strictly with all of the procedures set forth in Section 262 of the DGCL may result in the loss of a stockholder’s statutory appraisal rights. Consequently, any holder of shares of Company Common Stock

 

95


Table of Contents

wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.

Litigation Relating to the Merger

Several complaints related to the Merger have been filed to date. The complaints are captioned: Stephen Donnell v. Pattern Energy Group Inc. et al., Case No. 1:19-cv-11680, which was filed by a purported Pattern stockholder in the United States District Court for the Southern District of New York on December 20, 2019; Richard Baum v. Pattern Energy Group Inc. et al., Case No. 1:19-cv-02360-UNA, which was filed on behalf of a putative class of Pattern’s public stockholders in the United States District Court for the District of Delaware on December 27, 2019; Phillip Krieger v. Pattern Energy Group Inc. et al., Case No. 3:19-cv-08437, which was filed on behalf of a putative class of Pattern’s public stockholders in the United States District Court for the Northern District of California on December 27, 2019; John Thompson v. Pattern Energy Group Inc. et al., Case No. 1:19-cv-02369-UNA, which was filed on behalf of a putative class of Pattern’s public stockholders in the United States District Court for the District of Delaware on December 30, 2019; David Frieman v. Pattern Energy Group Inc. et al., Case No. 1:20-cv-00171, which was filed by a purported Pattern stockholder in the United States District Court for the Southern District of New York on January 8, 2020; Phil Burge v. Pattern Energy Group Inc. et al., Case No. 1:20-cv-00213, which was filed by a purported Pattern stockholder in the United States District Court for the Eastern District of New York on January 10, 2020; Bushansky v. Pattern Energy Group Inc. et al., Case No. 3:20-cv-00401, which was filed by a purported Pattern stockholder in the United States District Court for the Northern District of California on January 21, 2020; and Timothy Wilhelmson v. Pattern Energy Group Inc., et al., No. 3:20-cv-0797, which was filed by a purported Pattern shareholder in the United States District Court for the Northern District of California on February 3, 2020 (collectively the “Merger Litigations”). The Merger Litigations generally name as defendants Pattern, as well as certain of its officers and directors. The Baum complaint also asserts claims against CPPIB. The Merger Litigations generally allege that defendants violated federal securities laws by failing to disclose material information in the version of its proxy statement filed with the SEC on December 13, 2019. Each of the Merger Litigations seeks, among other things, to enjoin the Merger and recover damages, as well as an award of the plaintiffs’ attorneys’ fees and costs of the litigation. Pattern believes that the claims asserted are wholly without merit.

Accounting Treatment

The Merger will be accounted for as a “purchase transaction” for financial accounting purposes.

Material U.S. Federal Income Tax Consequences of the Merger

The following discussion is a summary of material U.S. federal income tax consequences of the Merger that may be relevant to U.S. Holders and Non-U.S. Holders (both as defined below) of shares of Company Common Stock whose shares are converted into the right to receive cash pursuant to the Merger. This discussion is based upon the Code, Treasury Regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service (the “IRS”), and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. This discussion is limited to holders who hold their shares of Company Common Stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment).

This discussion is for general information only and does not address all of the tax consequences that may be relevant to holders in light of their particular circumstances. For example, this discussion does not address:

 

   

tax consequences that may be relevant to holders who may be subject to special treatment under U.S. federal income tax laws, such as, for example, financial institutions; tax-exempt organizations; governmental organizations; holders who acquired shares of Company Common Stock through a 401(k), deferred compensation plan or other retirement plan; S corporations; any entities or arrangements classified as partnerships or pass-through entities for U.S. federal income tax purposes or investors in such pass-through entities; insurance companies; mutual funds; dealers in stocks and

 

96


Table of Contents
 

securities; traders in securities that elect to use the mark-to-market method of accounting for their securities; persons required to conform their tax reporting of income to their financial statements under Section 451(b) of the Code; regulated investment companies; real estate investment trusts; entities that are “controlled foreign corporations” or “passive foreign investment companies” for U.S. federal income tax purposes; or certain former citizens or long-term residents of the United States;

 

   

tax consequences to holders who hold their shares of Company Common Stock as part of a hedging, constructive sale or conversion, straddle or other risk reduction transaction;

 

   

tax consequences to holders that received their shares of Company Common Stock pursuant to the exercise of employee options or other compensation arrangements;

 

   

tax consequences to holders exercising appraisal rights;

 

   

tax consequences to holders who own an equity interest, actually or constructively, in Parent or the Surviving Corporation following the Merger;

 

   

tax consequences to U.S. Holders whose “functional currency” is not the U.S. dollar;

 

   

tax consequences to holders who hold their shares of Company Common Stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States;

 

   

any U.S. federal estate, gift or alternative minimum tax consequences; or

 

   

any state, local or foreign tax consequences.

If a partnership (including an entity or arrangement, domestic or foreign, treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of Company Common Stock, then the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partner and the partnership. Partnerships holding shares of Company Common Stock and partners therein are urged to consult their tax advisors regarding the consequences of the Merger.

No opinion of counsel or ruling from the IRS has been or will be obtained regarding the U.S. federal income tax consequences of the Merger described below. If the IRS contests a conclusion set forth herein, no assurance can be given that a holder would ultimately prevail in a final determination by a court.

A HOLDER IS URGED TO CONSULT ITS OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION.

U.S. Holders

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of shares of Company Common Stock that is for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

   

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

   

a trust (1) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons as defined in Section 7701(a)(30) of the Code; or (2) that has a valid election in effect under applicable Treasury regulations to be treated as a United States person.

 

97


Table of Contents

The receipt of cash by a U.S. Holder in exchange for shares of Company Common Stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, such U.S. Holder’s gain or loss will be equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares surrendered pursuant to the Merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares reduced, but not below zero, by any distributions received that were in excess of Pattern’s current and accumulated earnings and profits. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year at the time of the completion of the Merger. A reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations. If a U.S. Holder acquired different blocks of shares of Company Common Stock at different times or different prices, such U.S. Holder must determine its adjusted tax basis and holding period separately with respect to each block of shares of Company Common Stock (i.e., common stock acquired at the same cost in a single transaction).

U.S. Holders that are individuals, estates or trusts, and whose income exceeds certain thresholds, are required to pay an additional 3.8% tax on their “net investment income.” Net investment income includes, among other items, capital gains recognized on the receipt of cash in exchange for shares of Company Common Stock, subject to certain limitations and exceptions. U.S. Holders are urged to consult their own tax advisors regarding the effect, if any, of the net investment income tax on their exchange of shares of Company Common Stock for cash pursuant to the Merger.

Non-U.S. Holders

For purposes of this discussion, the term “Non-U.S. Holder” means a beneficial owner of shares of Company Common Stock that is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.

Any gain realized by a Non-U.S. Holder as a result of the receipt of cash in exchange for shares of Company Common Stock pursuant to the Merger generally will not be subject to U.S. federal income tax unless:

 

   

the gain, if any, is effectively connected with such Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment (or, in the case of an individual, a fixed base) maintained by such Non-U.S. Holder in the United States), in which case such gain generally will be subject to U.S. federal income tax on a net income basis at rates generally applicable to U.S. persons, and, if the Non-U.S. Holder is a corporation, such gain may also be subject to the branch profits tax at a rate of 30% (or a lower rate under an applicable income tax treaty);

 

   

such Non-U.S. Holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year that includes the Merger, and certain other specified conditions are met, in which case such gain, which may be offset by U.S.-source capital losses recognized in the same taxable year, generally will be subject to U.S. federal income tax at a rate of 30% (or a lower rate under an applicable income tax treaty); or

 

   

we are or have been a “United States real property holding corporation” as such term is defined in Section 897(c)(2) of the Code (“USRPHC”) at any time within the shorter of the five-year period ending on the date of completion of the Merger or such Non-U.S. Holder’s holding period with respect to the applicable shares of Company Common Stock (the “relevant period”) and such Non-U.S. Holder owns (or is deemed to own pursuant to certain attribution rules) more than 5% of the outstanding shares of Company Common Stock at any time during the relevant period, in which case such gain generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons (as described in the first bullet point above), except that the branch profits tax will not apply. Although no assurances can be given in this regard, we believe that we are not, and have not been, a USRPHC at any time during the five-year period preceding the Merger.

 

98


Table of Contents

Information Reporting and Backup Withholding

Information reporting and backup withholding (at a rate of 24%) may apply to proceeds received by a U.S. Holder or Non-U.S. Holder pursuant to the Merger. Backup withholding, however, will not apply to (1) a U.S. Holder that furnishes a correct taxpayer identification number, certifies that such U.S. Holder is not subject to backup withholding on IRS Form W-9 (or a substitute or successor form) and otherwise complies with all applicable requirements of the backup withholding rules; (2) a Non-U.S. Holder that provides a certification of such Non-U.S. Holder’s foreign status on the appropriate IRS Form W-8 (or a substitute or successor form); or (3) a U.S. Holder or Non-U.S. Holder that otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. Each U.S. Holder and Non-U.S. Holder is urged to consult its own tax advisor regarding the information reporting and backup withholding tax rules.

THE DISCUSSION SET FORTH ABOVE IS NOT A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX CONSEQUENCES RELEVANT TO HOLDERS OF COMPANY COMMON STOCK. THE TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR CONCERNING THE U.S. FEDERAL, STATE, LOCAL, NON-U.S. INCOME OR OTHER TAX CONSEQUENCES OF THE MERGER TO YOU.

Material Canadian Federal Income Tax Consequences of the Merger

The following is a summary of the material Canadian federal income tax considerations under the Tax Act, generally applicable to a holder of shares of Company Common Stock who receives Merger Consideration in exchange for such shares pursuant to the Merger, and who, for the purposes of the Tax Act and at all relevant times, holds such shares of Company Common Stock as capital property, deals at arm’s length with us, Parent and Merger Sub and is not affiliated with us, Parent or Merger Sub, which we refer to as a “Holder.” For greater certainty, this summary does not address the Canadian federal income tax considerations to a holder of shares of Company Common Stock who exercises appraisal rights in respect of the Merger. Shares of Company Common Stock will generally be considered to be capital property to a holder unless the holder holds such shares in the course of carrying on a business of buying and selling securities or has acquired them in one or more transactions considered to be an adventure or concern in the nature of trade.

This summary is not applicable to a Holder: (i) with respect to which we are or will be, or that is a corporation that does not deal at arm’s length for the purposes of the Tax Act with a corporation with respect to which we are or will be, at any time, a “foreign affiliate” within the meaning of the Tax Act, (ii) that is a “financial institution” for the purposes of the mark-to-market rules under the Tax Act, (iii) an interest in which is a “tax shelter” or a “tax shelter investment,” each as defined in the Tax Act, (iv) which has made a “functional currency” reporting election under section 261 of the Tax Act to report the Holder’s “Canadian tax results” (as defined in the Tax Act) in a currency other than the Canadian currency, (v) that received such shares pursuant to the exercise of employee stock options or other employment-related arrangements, or (vi) that has entered, or will enter, into a “derivative forward agreement,” as defined in the Tax Act, with respect to shares of Company Common Stock. Any such holder should consult its own tax advisor with respect to the income tax considerations applicable to it in respect of the Merger.

This summary is based on the current provisions of the Tax Act and an understanding of the current published administrative policies and assessing practices of the Canada Revenue Agency, or the “CRA,” made publicly available prior to the date of this proxy statement. This summary also takes into account all proposed amendments to the Tax Act that have been publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date of this proxy statement, which we refer to as the “Proposed Amendments,” and assumes that such Proposed Amendments will be enacted in the form proposed, although no assurance can be

 

99


Table of Contents

given that the Proposed Amendments will be enacted in their current form or at all. Except for the Proposed Amendments, this summary does not take into account or anticipate any other changes in law or any changes in the CRA’s administrative policies or assessing practices, whether by judicial, governmental or legislative action or decision, nor does it take into account other federal or any provincial, territorial or foreign tax legislation or considerations, which may differ from the Canadian federal income tax considerations described herein. The provisions of provincial income tax legislation vary from province to province in Canada and in some cases differ from those in the Tax Act.

THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR HOLDER, AND NO REPRESENTATIONS WITH RESPECT TO THE INCOME TAX CONSIDERATIONS APPLICABLE TO ANY PARTICULAR HOLDER ARE MADE. THIS SUMMARY IS NOT EXHAUSTIVE OF ALL CANADIAN FEDERAL INCOME TAX CONSIDERATIONS. THE RELEVANT TAX CONSIDERATIONS APPLICABLE TO DISPOSING OF SHARES PURSUANT TO THE MERGER MAY VARY ACCORDING TO THE STATUS OF A HOLDER, THE JURISDICTION IN WHICH THE HOLDER RESIDES OR CARRIES ON BUSINESS AND THE HOLDER’S OWN PARTICULAR CIRCUMSTANCES. ACCORDINGLY, HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS ABOUT THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER.

For purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of shares of Company Common Stock (including adjusted cost base and proceeds of disposition) must generally be expressed in Canadian dollars. Amounts denominated in any other currency must be converted into Canadian dollars using the appropriate exchange rate in accordance with the detailed rules in the Tax Act in that regard.

Holders Resident in Canada

The following discussion applies to a Holder who, for the purposes of the Tax Act and any applicable income tax treaty or convention, and at all relevant times, is resident in Canada, which we refer to as a “Canadian Holder.”

Shares of Company Common Stock are not “Canadian securities” for the purpose of the irrevocable election under subsection 39(4) of the Tax Act to treat all “Canadian securities,” as defined in the Tax Act, owned by a Canadian Holder as capital property, and therefore such election will not apply to shares of Company Common Stock. Holders resident in Canada for purposes of the Tax Act that do not hold shares of Company Common Stock as capital property should consult their own tax advisors regarding their particular circumstances.

A Canadian Holder that receives Merger Consideration in respect of a share of Company Common Stock pursuant to the Merger will be considered to have disposed of such share for proceeds of disposition equal to the Merger Consideration. As a result, a Canadian Holder will realize a capital gain (or capital loss) to the extent that such Canadian Holder’s proceeds of disposition, net of any reasonable costs of the disposition, exceed (or are exceeded by) the adjusted cost base to the Canadian Holder of such share of Company Common Stock immediately before the Merger.

Generally, one-half of any capital gain, which we refer to as a “taxable capital gain,” realized by a Canadian Holder will be included in the Canadian Holder’s income for the year of disposition. One-half of any capital loss, which we refer to as an “allowable capital loss,” realized by a Canadian Holder in a taxation year generally must be deducted by the Canadian Holder against taxable capital gains in that year (subject to, and in accordance with, the provisions of the Tax Act). Allowable capital losses in excess of taxable capital gains realized by a Canadian Holder in a taxation year may be carried back up to three taxation years or forward indefinitely and deducted against net taxable capital gains realized in such years, to the extent and under the circumstances described in the Tax Act.

 

100


Table of Contents

Capital gains realized by a Canadian Holder that is an individual or trust, other than certain specified trusts, may give rise to a liability for alternative minimum tax under the Tax Act.

U.S. tax, if any, levied on any gain realized on a disposition of shares of Company Common Stock under the Merger may be eligible for a foreign tax credit under the Tax Act to the extent and under the circumstances described in the Tax Act. Canadian Holders should consult their own tax advisors with respect to the availability of a foreign tax credit, having regard to their particular circumstances.

A Canadian Holder that is, throughout its taxation year, a “Canadian-controlled private corporation” (as defined in the Tax Act) may be subject to pay an additional refundable tax on its “aggregate investment income” (as defined in the Tax Act), including an amount in respect of net taxable capital gains.

Holders Not Resident in Canada

The following portion of this summary is applicable to a Holder who at all relevant times: (i) is not, and will not be, resident or deemed to be resident in Canada for purposes of the Tax Act or any applicable tax treaty or convention; and (ii) does not and will not use or hold, and is not and will not be deemed to use or hold, shares of Company Common Stock in connection with, or in the course of, carrying on a business in Canada, which we refer to as a “Non-Canadian Holder.” Special rules, which are not discussed in this summary, may apply to a non-resident insurer carrying on business in Canada and elsewhere. Such a non-resident insurer should consult its own tax advisors.

A Non-Canadian Holder that receives Merger Consideration in respect of a share of Company Common Stock pursuant to the Merger will not be subject to Canadian income tax in respect of any capital gain realized on the disposition unless the share of Company Common Stock constitutes “taxable Canadian property” of the Non-Canadian Holder for the purposes of the Tax Act and no exemption is available under an applicable income tax treaty or convention between Canada and the jurisdiction in which the Non-Canadian Holder is resident.

Generally, shares of Company Common Stock will not be taxable Canadian property at a particular time of a Non-Canadian Holder provided that such shares are listed on a “designated stock exchange” as defined in the Tax Act (which currently includes the TSX) at that time, unless, at any time during the 60-month period that ends at that time both (a)(i) the Non-Canadian Holder, (ii) persons not dealing at arm’s length with such Non-Canadian Holder, (iii) partnerships in which the Non-Canadian Holder or a person mentioned in (a)(ii) holds a membership interest directly or indirectly through one or more partnerships or (iv) any combination of (a)(i) to (iii), owned 25% or more of the issued shares of any class or series of our capital stock and (b) more than 50% of the fair market value of such shares was derived directly or indirectly from one or any combination of (i) real or immovable property situated in Canada; (ii) “Canadian resource properties” as defined in the Tax Act; (iii) “timber resource properties” as defined in the Tax Act; and (iv) options in respect of, interests in, or for civil law rights in, any property listed in (b)(i) to (iii), whether or not the property exists. Although no assurances can be given in this regard, we do not believe that more than 50% of the fair market value of the shares of Company Common Stock has been or will be derived directly or indirectly from any of items (b)(i)-(iv) listed in the preceding sentence at any time in the 60-month period preceding the Merger, such that Company Common Stock should not be considered to be taxable Canadian property of a Non-Canadian Holder at such time.

If a Non-Canadian Holder’s shares of Company Common Stock are considered to be taxable Canadian property (other than treaty-protected property, within the meaning of the Tax Act), then upon a disposition of such shares such Non-Canadian Holder will realize a capital gain (or capital loss) generally in the circumstances and computed in the manner described above under the heading “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Material Canadian Federal Income Tax Consequences of the Merger—Holders Resident in Canada” as if the Non-Canadian Holder were a resident of Canada. Any such Non-Canadian Holders should consult with their own tax advisors regarding the consequences of such capital gain (or capital loss) to them.

 

101


Table of Contents

Notwithstanding the foregoing, in certain circumstances set out in the Tax Act, shares of Company Common Stock may be deemed to be taxable Canadian property of a Non-Canadian Holder. Non-Canadian Holders whose shares of Company Common Stock are taxable Canadian property should consult their own tax advisors for advice having regard to their particular circumstances.

Regulatory Approvals Required for the Merger

In the Merger Agreement, subject to certain limitations (including those in the immediately subsequent paragraph), we and Parent have agreed to use our respective reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate and make effective the Merger and the other transactions contemplated by the Merger Agreement as promptly as reasonably practicable after the date of the Merger Agreement, including (1) providing to each and every federal, state, local or foreign court or governmental entity with jurisdiction over enforcement of any applicable antitrust, competition or other laws requiring the making of any notices, reports or other filings with, or consents, registrations, approvals, permits or authorizations from, any governmental entity with respect to the Merger of non-privileged information and documents requested by any such governmental entity or that are necessary, proper or advisable to permit prompt consummation of the Merger and (2) avoiding the entry of any permanent, preliminary or temporary injunction or other order, decree, decision, determination or judgment that would materially impede, delay, restrain, prevent, enjoin or otherwise prohibit consummation of the Merger, including the proffer and agreement by Parent of its willingness to sell, lease, license, dispose of, hold separate pending such disposition, restrict, or otherwise limit the freedom of action, and promptly to effect the sale, lease, license, disposal, holding separate of, restriction on, and limitation on such assets, rights, product lines, licenses, categories of assets or businesses or other operations, or interests therein, of Pattern or any of our subsidiaries, if such action would be reasonably necessary or advisable to avoid, prevent, eliminate or remove the actual, anticipated or threatened (x) commencement of any proceeding in any forum or (y) issuance of any order, decree, decision, determination, judgment or laws by any governmental entity that would delay, restrain, prevent, enjoin or otherwise prohibit consummation of the Merger.

Notwithstanding the foregoing, Parent is not required to (1) take or enter into, or cause to be taken or entered into, any defense through litigation; (2) cause its affiliates, including CPPIB, to take or refrain from taking any action, other than the preparing and filing of documentation required for (and responding to any inquiries or information requests from any governmental entities in connection) with the consents, filings, clearances or other approvals set forth in the Merger Agreement; or (3) take any action that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the business, assets, operations or financial condition of us and our subsidiaries, taken as a whole.

HSR Act

Under the HSR Act and the rules promulgated thereunder, the Merger cannot be completed until the expiration of a 30-calendar day waiting period, which cannot expire on a Saturday, Sunday or a U.S. federal holiday, following the filing of Premerger Notification and Report Forms with the FTC and the Antitrust Division of the United States Department of Justice (the “Antitrust Division”), unless such waiting period is earlier terminated by the FTC and the Antitrust Division or extended by a request for additional information and documentary materials.

At any time before or after consummation of the Merger, notwithstanding the termination of the waiting period under the HSR Act, the FTC or the Antitrust Division could take such action under the antitrust laws as it deems necessary under the applicable statutes, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the completion of the Merger, and notwithstanding the termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary. Such action could include seeking to enjoin the completion of the

 

102


Table of Contents

Merger or seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Merger on antitrust or other regulatory grounds will not be made or, if such a challenge is made, what the result of such challenge will be.

On December 6, 2019, early termination of the waiting period under the HSR Act was granted by the FTC.

CFIUS

Under Section 721 of Title VII of the Defense Production Act of 1950, CFIUS has the power to review, and the President has the power to block or unwind on national security grounds, any merger, acquisition or takeover, by or with a foreign person, that could result in foreign control of any U.S. business. Parties to transactions subject to CFIUS’s jurisdiction may voluntarily notify CFIUS of their proposed transactions, seeking the deal certainty provided by a CFIUS clearance. A condition on the completion of the Merger is that CFIUS has concluded its review of the Merger and determined that there are no unresolved national security concerns or, if CFIUS refers the case to the President, the President makes a decision not to suspend or prohibit the Merger.

Canadian Antitrust Approval

Under the Competition Act (Canada), prior to consummating the Merger, either (1) the Commissioner of Competition in Canada must have issued an advance ruling certificate under section 102(1) of the Competition Act (Canada) to the effect that he is satisfied that he would not have sufficient grounds on which to apply to the Competition Tribunal for an order under section 92 of the Competition Act (Canada) with respect to the transactions contemplated by the Merger Agreement or (2) (A) the applicable waiting period, including any extension thereof, under section 123 of the Competition Act (Canada) must have expired or been terminated or the obligation to provide a pre-merger notification in accordance with Part IX of the Competition Act (Canada) must have been waived in accordance with paragraph 113(c) of the Competition Act (Canada) and (B) the Commissioner of Competition in Canada must have issued a “no-action” letter confirming that he does not as of the date of the letter intend to make an application for an order under section 92 of the Competition Act (Canada) in respect of the transactions contemplated by the Merger Agreement.

On November 25, 2019, the Commissioner of Competition in Canada issued an advance ruling certificate under section 102(1) of the Competition Act (Canada). The Commissioner has completed his review and will not be challenging the transactions contemplated by the Merger Agreement.

Ukrainian Antitrust Approval

Under the provisions of the Ukraine Competition Act, prior to consummating the Merger, the AMC must have approved the Merger either by written approval or by expiration of a 45-day waiting period that begins upon submission of a complete application for approval of the Merger. If the AMC opens an investigation, there is an additional waiting period of three months from the date when the AMC receives all additionally requested information. If after this three-month waiting period there is no decision from the AMC, and the investigation is not suspended by the AMC, under certain limited circumstances as provided for by the Ukraine Competition Act, the Merger is deemed to be approved. On December 4, 2019, we and CPPIB submitted an application for approval to the AMC, and on December 26, 2019, we received approval from the AMC.

FERC Approval

Under Section 203 of the FPA, prior to the consummation of the Merger, FERC must have completed its review process and approved the Merger.

 

103


Table of Contents

On November 22, 2019, we and Parent filed with FERC an application for authorization under Section 203 of the FPA.

Other Regulatory Approvals

One or more governmental agencies may impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained and there may be a substantial period of time between the approval by stockholders and the completion of the Merger.

Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the Merger, including the requirement to divest assets, or require changes to the terms of the Merger Agreement. These conditions or changes could result in the conditions to the Merger not being satisfied.

Effect on Pattern if the Merger is Not Completed

If the Merger Agreement is not adopted and the Merger is not approved by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of Company Common Stock. Instead, we will remain a stand-alone public company, our shares of Company Common Stock will continue to be listed and traded on Nasdaq and the TSX and registered under the Exchange Act and we will continue to file periodic reports with the SEC. In addition, if the Merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including risks related to the highly competitive industry in which we operate and risks related to adverse economic conditions.

Furthermore, if the Merger is not completed, and depending on the circumstances that caused the Merger not to be completed, the price of our shares of Company Common Stock may decline significantly. If that were to occur, it is uncertain when, if ever, the price of our shares of Company Common Stock would return to the price at which it trades as of the date of this proxy statement.

Accordingly, if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of Company Common Stock. If the Merger is not completed, our Board will continue to evaluate and review our business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate. If the Merger Agreement is not adopted and the Merger is not approved by stockholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to our Board will be offered or that our business, prospects or results of operation will not be adversely impacted.

In addition, we will be required to pay to Parent a termination fee of up to $79.0 million if the Merger Agreement is terminated under specified circumstances. For more information, please see the section captioned “The Merger Agreement—Termination Fees” beginning on page 124 of this proxy statement.

Vote Required and Board Recommendation

The Merger Agreement must be approved by the affirmative vote of the holders of a majority of the shares of Company Common Stock and Company Preferred Stock, voting together as a single class, in each case

 

104


Table of Contents

outstanding and entitled to vote thereon. In addition, under applicable Canadian securities laws, the Merger is also required to be approved by a majority of votes cast by holders of Company Common Stock, other than those holders required to be excluded from such vote under such laws. If you are a stockholder of record and you abstain from voting or fail to cast your vote, in person or by proxy, it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and approve the Merger. If you are a beneficial owner and you abstain from voting, fail to cast your vote in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and approve the Merger.

Our Board, following the recommendation of the Special Committee, has approved the Merger Agreement and the Merger and determined that the Merger Agreement and the Merger are advisable, fair to and in the best interests of Pattern and our stockholders.

Our Board recommends that you vote “FOR” the proposal to adopt the Merger Agreement and approve the Merger.

 

105


Table of Contents

THE MERGER AGREEMENT

Explanatory Note Regarding the Merger Agreement

The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. We encourage you to read the Merger Agreement carefully and in its entirety because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement. Capitalized terms used in this section but not defined in this proxy statement have the meaning ascribed to them in the Merger Agreement.

The representations, warranties, covenants and agreements described below and included in the Merger Agreement (1) were made only for purposes of the Merger Agreement and as of specific dates; (2) were made solely for the benefit of the parties to the Merger Agreement; and (3) may be subject to important qualifications, limitations and supplemental information agreed to by Pattern, Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to reports and documents filed with the SEC and in some cases were qualified by confidential matters disclosed to Parent and Merger Sub by Pattern in connection with the Merger Agreement. In addition, the representations and warranties may have been included in the Merger Agreement for the purpose of allocating contractual risk between Pattern, Parent and Merger Sub rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Stockholders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of Pattern, Parent or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of Pattern, Parent and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure letter to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Pattern, our business, Parent or Merger Sub. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding Pattern and our business.

Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time, (1) Merger Sub will be merged with and into Pattern, with Pattern becoming a subsidiary of Parent; and (2) the separate corporate existence of Merger Sub will thereupon cease and Pattern will be the surviving corporation in the Merger (sometimes referred to herein as the “Surviving Corporation”). From and after the Effective Time, the Surviving Corporation will possess all properties, rights, privileges, powers and franchises of Pattern and Merger Sub, and all of the debts, liabilities and duties of Pattern and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.

Immediately following the Effective Time, the board of directors of the Surviving Corporation will consist of the directors of Merger Sub at the Effective Time, to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their successors are duly elected or appointed and

 

106


Table of Contents

qualified. From and after the Effective Time, the officers of Merger Sub at the Effective Time will be the officers of the Surviving Corporation, until their successors are duly appointed. At the Effective Time, the certificate of incorporation of Pattern as the Surviving Corporation will be amended and restated in its entirety, and the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, will become the bylaws of the Surviving Corporation, until thereafter amended.

Closing and Effective Time

The closing of the Merger will take place no later than the fourth business day after the satisfaction or waiver in accordance with the Merger Agreement of all the conditions to the closing of the Merger (as described under the section captioned “The Merger Agreement—Conditions to the Closing of the Merger” beginning on page 120 of this proxy statement), other than conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions. The Merger will become effective upon the filing of the Delaware Certificate of Merger, or at such later time as is agreed by the parties and specified in the Delaware Certificate of Merger.

Merger Consideration

Common Stock

At the Effective Time, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Company Common Stock held by Parent or Merger Sub, shares of Company Common Stock owned by us (including shares held in treasury) and shares of Company Common Stock owned by stockholders who have properly made and not withdrawn or lost a demand for appraisal rights under Delaware law)) will be converted into the right to receive the Merger Consideration (which is $26.75 in cash, without interest and subject to applicable withholding taxes). All shares converted into the right to receive the Merger Consideration will automatically be canceled at the Effective Time.

Outstanding Equity Awards

Treatment of Company Options

At the Effective Time, to the extent not exercised or expired, each outstanding Company Option, whether or not exercisable or vested, will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the excess, if any, of the Merger Consideration over the per share exercise price of the applicable Company Option multiplied by (y) the aggregate number of shares of Company Common Stock subject to such Company Option immediately before the Effective Time. Any Company Option with a per share exercise price that is equal to or greater than the Merger Consideration shall be canceled for no consideration.

Treatment of Company Restricted Shares

At the Effective Time, except as described under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interest of Our Directors and Executive Officers in the Contribution Agreement” beginning on page 74 of this proxy statement, each outstanding Company Restricted Share with vesting conditioned on the passage of time will be vested and all restrictions will lapse in full as of immediately before the Effective Time, and each such Company Restricted Share will be converted into the right to receive the Merger Consideration.

Treatment of Company Performance Shares

At the Effective Time, except as described under the section captioned “Proposal 1: Adoption of the Merger Agreement and Approval of the Merger—Interest of Our Directors and Executive Officers in the Contribution

 

107


Table of Contents

Agreement” beginning on page 74 of this proxy statement, each outstanding Company Performance Share will be vested based on the maximum level of performance and all restrictions will lapse in full as of immediately before the Effective Time, and each such Company Performance Share will be converted into the right to receive the Merger Consideration.

Treatment of Company RSUs

At the Effective Time, each outstanding Company RSU will be vested and all restrictions will lapse in full as of immediately before the Effective Time, and each such Company RSU will be canceled and converted into the right to receive an amount in cash, without interest, equal in value to the product of (x) the Merger Consideration multiplied by (y) the aggregate number of shares of Company Common Stock subject to such Company RSU award immediately before the Effective Time.

Payments with Respect to Equity Awards

The amounts described above with respect to each Company Option, Company Restricted Share, Company Performance Share and Company RSU will be paid at the Effective Time, except that the amounts described above with respect to each Company RSU that has been validly deferred or is otherwise subject to Section 409A of the Code will be paid at the earliest time permitted under Section 409A of the Code.

Payment Procedures

Prior to the Closing, Parent will select commercial bank or trust company (the “Paying Agent”) to make payments of the Merger Consideration to stockholders. On the closing date of the Merger, Parent will deposit or cause to be deposited with the Paying Agent cash sufficient to pay the aggregate Merger Consideration to holders of Company Common Stock. In addition, Parent will deposit with the Paying Agent, from time to time as needed, cash sufficient to pay any dividends or other distributions that holders of Company Common Stock have the right to receive.

As soon as reasonably practicable after the Effective Time, the Paying Agent will send to each holder of record of eligible shares of Company Common Stock a letter of transmittal and instructions advising stockholders how to surrender stock certificates (if any) and book-entry shares in exchange for their portion of the Merger Consideration. Upon receipt of (1) surrendered certificates (or affidavits of loss in lieu thereof) or adherence to the procedures set forth in the letter of transmittal with respect to book-entry shares representing Company Common Stock and (2) a duly completed and validly executed letter transmittal and such other documents as may be required pursuant to such instructions, the holder of such shares will be entitled to receive their portion of the Merger Consideration in exchange therefor plus any dividends or other distributions that such holder has the right to receive. The amount of any Merger Consideration paid to the stockholders may be reduced by any applicable withholding taxes.

If any cash deposited with the Paying Agent is not claimed within 365 days following Effective Time, such cash will be returned to Parent, upon demand, and any holders of Company Common Stock who have not complied with the exchange procedures in the Merger Agreement will thereafter look only to Parent for payment of the Merger Consideration. Any cash deposited with the Paying Agent that remains unclaimed three years following the Effective Time (or immediately prior to such earlier date on which the Merger Consideration or such cash would otherwise escheat to or become the property of any governmental entity) will, to the extent permitted by applicable law, become the property of Parent free and clear of any claims or interest of any person previously entitled thereto.

The letter of transmittal will include instructions if a stockholder has lost a share certificate or if such certificate has been stolen or destroyed. In the event any certificates have been lost, stolen or destroyed, then before such stockholder will be entitled to receive the Merger Consideration, such stockholder will have to make

 

108


Table of Contents

an affidavit of the loss, theft or destruction, and if reasonably required by Parent, deliver a bond in such amount as Parent or the Paying Agent may direct as indemnity against any claim that may be made against it with respect to such certificate.

Representations and Warranties

The Merger Agreement contains representations and warranties of Pattern, Parent and Merger Sub.

Some of the representations and warranties in the Merger Agreement made by us are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means, with respect to Pattern, any change, event, effect, circumstance or development that, individually or taken together with other changes, events, effects, circumstances or developments, has a material adverse effect on the financial condition, business, properties, assets, liabilities or results of operations of Pattern and its subsidiaries taken as a whole; provided, however, that none of the following shall constitute or be taken into account in determining whether there has been, is or would be reasonably likely to be a Company Material Adverse Effect:

 

   

any changes in the general economic or political conditions or the securities, credit, currency or other financial markets in general, in each case in the United States or other countries in which Pattern or any of its subsidiaries conducts operations;

 

   

any changes that are the result of factors generally affecting any international, national or regional industry (including the renewable energy industry and the electric generating industry) or market (including any wholesale markets for electric power) in which Pattern or any of its subsidiaries operates, including any changes in legal, political or regulatory conditions impacting any tax or other incentive programs for the renewable energy industry;

 

   

any economic changes in any market for commodities or supplies, including electric power, used in connection with the business of Pattern or any of its subsidiaries;

 

   

any changes or proposed changes in any laws or accounting principles or reporting standards applicable to Pattern or any of its subsidiaries or the enforcement or interpretation thereof after the date of the Merger Agreement;

 

   

any changes or effects resulting from the performance of obligations specifically required by the Merger Agreement, including any actions taken by Pattern or any of its subsidiaries that are expressly requested or consented to by Parent in writing after the date of the Merger Agreement, subject to certain exceptions;

 

   

any change in Pattern’s credit ratings; provided, however, that the exception in this clause shall not prevent or otherwise affect a determination that any change, effect, circumstance or development that caused or contributed to such change (to the extent not otherwise excluded) has resulted in, or contributed to, a Company Material Adverse Effect;

 

   

any litigation or threat of litigation arising from allegations of any breach of fiduciary duty by our Board or violation of laws by our Board in connection with the Merger Agreement or the Merger;

 

   

any failure by Pattern to meet any internal or public projections or forecasts or estimates of revenues, earnings, CAFD or earnings before interest, tax, depreciation and amortization (“EBITDA”) for any period ending on or after the date of the Merger Agreement; provided, however, that the exception in this clause shall not prevent or otherwise affect a determination that any change, effect, circumstance or development that caused or contributed to such failure (to the extent not otherwise excluded) has resulted in, or contributed to, a Company Material Adverse Effect;

 

   

any decline in the price of Company Common Stock; provided, however, that the exception in this clause shall not prevent or otherwise affect a determination that any change, effect, circumstance or development that caused or contributed to such decline (to the extent not otherwise excluded) has resulted in, or contributed to, a Company Material Adverse Effect;

 

109


Table of Contents
   

any escalation or outbreak of hostilities, acts of terrorism (including cyber-terrorism), sabotage, acts of war, civil unrest or military conflicts;

 

   

any epidemic, plague, pandemic or other outbreak or illness (including any non-human epidemic, pandemic or other similar outbreak or illness), flood, earthquake, tornado, hurricane, cyclonic storm, windstorm, volcano, tsunami or other natural disaster or act of God; and

 

   

the entry into, or any announcement or disclosure of, the Merger Agreement, or the pendency of the transactions contemplated by the Merger Agreement, including any effects related to or that arise out of (i) the identity of any of Parent or any of its affiliates or (ii) any loss or threatened loss of, or adverse change or threatened adverse change in, the relationship of Pattern or any of its subsidiaries with a customer, employee, regulator, lender or other financing source, supplier, contractor, service provider, agent or representative;

except, with respect to clauses first, second, third, fourth, tenth and eleventh bullet above, if such changes, events, circumstances or developments have a disproportionate adverse effect on Pattern and its subsidiaries, taken as a whole, relative to the adverse effect that such changes, events, circumstances or developments have on other similarly situated companies in the renewable energy or electric generating industry in the jurisdictions in which Pattern and its subsidiaries operate, then, to the extent not otherwise excluded from the definition of Company Material Adverse Effect, only such incremental disproportionate impact or impacts shall be taken into account in determining whether there has been, is or would be reasonably likely to be a Company Material Adverse Effect.

In the Merger Agreement, we have made customary representations and warranties to Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

   

due organization, valid existence, good standing and qualification to conduct business with respect to us and our subsidiaries;

 

   

the capital structure of Pattern as well as the ownership and capital structure of its subsidiaries;

 

   

the absence of any contract relating to the voting of the capital stock or other equity interests of, restricting the transfer of, or providing for registration rights with respect to any securities of Pattern;

 

   

our corporate power and authority to enter into and perform the Merger Agreement, and the enforceability of the Merger Agreement;

 

   

the necessary vote of stockholders in connection with the Merger Agreement;

 

   

required consents, approvals and regulatory filings in connection with the Merger Agreement and performance thereof;

 

   

the absence of any conflict, violation or material alteration of any organizational documents, existing contracts, applicable laws to Pattern or its subsidiaries or the resulting creation of any lien upon our assets due to the performance of the Merger Agreement;

 

   

the accuracy of our SEC filings and our and our subsidiaries’ financial statements;

 

   

our disclosure controls and procedures;

 

   

our internal accounting controls and procedures;

 

   

the absence of specified undisclosed liabilities;

 

   

the conduct of the business of us and our subsidiaries in the ordinary course of business since December 31, 2018 and the absence of a Company Material Adverse Effect since December 31, 2018;

 

   

legal proceedings and orders;

 

110


Table of Contents
   

employee benefit plans;

 

   

the compliance with, and the absence of any violations, by Pattern, our subsidiaries or any of their respective Representatives of applicable laws and the validity of all material licenses necessary to own, lease and operate their property and assets and conduct their businesses as presently conducted;

 

   

the existence and enforceability of specified categories of our material contracts, and any notices with respect to violation or breach of or default thereunder or intention to terminate or modify those material contracts;

 

   

real property owned, leased or subleased by us and our subsidiaries;

 

   

the absence of any anti-takeover statutes or regulations or any anti-takeover provision in Pattern’s organizational documents that is applicable to Pattern, Company Common Stock, the Merger or the other transactions contemplated by the Merger Agreement;

 

   

environmental matters;

 

   

tax matters;

 

   

labor matters;

 

   

our intellectual property and information technology;

 

   

insurance matters;

 

   

the rendering of Evercore’s fairness opinion to the Special Committee;

 

   

payment of fees to brokers in connection with the Merger Agreement;

 

   

the compliance with, and the absence of any violations, by Pattern, our subsidiaries or any of their respective Representatives of certain anti-corruption laws;

 

   

the absence of any related parties of Pattern (within the meaning of MI 61-101) that own or exercise control or direction over 1% or more of the outstanding Company Common Stock, except for related parties who will not receive a “collateral benefit” (within the meaning of MI 61-101) as a consequence of the transactions contemplated by the Merger Agreement;

 

   

the accuracy of the information supplied in this proxy statement; and

 

   

our acknowledgment as to the absence of any other representations or warranties by Parent, Merger Sub or any other person on behalf of Parent or Merger Sub.

In the Merger Agreement, Parent and Merger Sub have made customary representations and warranties to Pattern that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

   

due organization, good standing and authority and qualification to conduct business with respect to Parent and Merger Sub and availability of these documents;

 

   

the capital structure of Merger Sub;

 

   

Parent’s and Merger Sub’s corporate authority to enter into and perform the Merger Agreement, and the enforceability of the Merger Agreement;

 

   

required consents and regulatory filings in connection with the Merger Agreement;

 

   

the absence of litigation;

 

   

matters with respect to Parent’s financing and sufficiency of funds;

 

   

the absence of stockholder and management arrangements;

 

   

ownership of capital stock of Parent and Merger Sub;

 

111


Table of Contents
   

payment of fees to brokers in connection with the Merger Agreement;

 

   

the accuracy of information supplied by or on behalf of Parent or Merger Sub for inclusion in this proxy statement; and

 

   

reliance upon Parent and Merger Sub’s independent investigation of our business, operations and financial condition and acknowledgment by Parent and Merger Sub as to the absence of any other representations or warranties by Pattern or any other person on behalf of Pattern.

Conduct of Business Pending the Merger

The Merger Agreement provides that, except as (1) disclosed in the confidential disclosure letter to the Merger Agreement; (2) expressly permitted or contemplated by the Merger Agreement or as required by applicable law; or (3) approved by Parent (which approval will not be unreasonably withheld, delayed or conditioned), during the period of time between the date of the Merger Agreement and the Effective Time (or such earlier date as the Merger Agreement may be terminated in accordance with its terms), Pattern will, and will cause each of our subsidiaries (solely to the extent that Pattern controls or has the right to control such subsidiaries’ operations) to:

 

   

conduct the business of it and our subsidiaries (solely to the extent that Pattern controls or has the right to control such subsidiaries’ operations) in all material respects in the ordinary course of business; and

 

   

use their respective commercially reasonable efforts to preserve their business organizations substantially intact and maintain existing or satisfactory relations with governmental entities and customers, suppliers, service providers, creditors, tax equity partners and lessors having significant business dealings with them, and keep available the services of its and our subsidiaries’ key employees.

In addition, we have agreed that, except as (1) expressly contemplated by the Merger Agreement or as required by applicable law; (2) approved by Parent (which approval will not be unreasonably withheld, delayed or conditioned); or (3) as disclosed in the confidential disclosure letter to the Merger Agreement, during the period of time between the date of the signing of the Merger Agreement and the Effective Time, we will not, and will not permit each of our subsidiaries to, among other things:

 

   

(1) adopt any change in the certificate of incorporation or by-laws of Pattern, or (2) adopt any change (other than ministerial or administrative changes that are not adverse to the interests of Parent) in the certificate of incorporation or by-laws or other applicable governing instruments of our subsidiaries;

 

   

(1) merge or consolidate Pattern or any of our subsidiaries with any other person, or restructure, reorganize or completely or partially liquidate Pattern or any of our subsidiaries, except for any such transactions among Pattern’s wholly owned subsidiaries, or (2) commence or file any petition seeking (x) liquidation, reorganization or other relief under any U.S. Federal, U.S. state or other bankruptcy, insolvency, receivership or similar laws or (y) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official;

 

   

make any acquisition of (whether by merger, consolidation, acquisition of stock or assets or otherwise), or make any investment in, assets, securities, properties, operations or projects, in each case, other than (1) acquisitions pursuant to contracts in effect as of the date of the Merger Agreement (true and correct copies of which have been made available to Parent), (2) capital expenditures associated with a specific project or (3) acquisitions that are set forth in the confidential disclosure letter to the Merger Agreement;

 

   

(1) issue, sell, pledge, grant, transfer or encumber or otherwise dispose of or redeem, repurchase or otherwise acquire any shares of capital stock or other equity interests of Pattern or any of our subsidiaries or hybrid securities, profits interests, stock appreciation rights, phantom stock or securities convertible into or exchangeable for, or subscriptions, options, warrants, calls, agreements, arrangements, undertakings, commitments or other rights of any kind to acquire, any shares of capital

 

112


Table of Contents
 

stock of Pattern or any of our subsidiaries (other than (A) the issuance of shares or interests (which include limited liability company and similar interests) by a wholly owned subsidiary of Pattern or an entity associated with a specific project to Pattern or another wholly owned subsidiary of Pattern or entity associated with a specific project, (B) the issuance of shares in respect of Company RSUs or Company Options outstanding as of the date of the Merger Agreement in accordance with their terms and the terms of our equity incentive plan as in effect on the date of the Merger Agreement, (C) the acquisition by Pattern of shares in connection with the surrender of shares by holders of Company Options outstanding as of the date of the Merger Agreement in order to pay the exercise price thereof in accordance with their terms and our equity incentive plan as in effect on the date of the Merger Agreement or in connection with the forfeiture of any Company Restricted Shares, Company Performance Shares, Company RSUs and Company Options (collectively, the “Company Equity Awards”), (D) the withholding of shares to satisfy tax obligations with respect to Company Equity Awards outstanding as of the date of the Merger Agreement in accordance with their terms and our equity incentive plan as in effect on the date of the Merger Agreement) and (E) the issuance of Company Equity Awards as permitted the Merger Agreement or as dividend equivalents in accordance with the applicable Company Equity Award;

 

   

make any loans, advances or capital contributions to or investments in any person (other than among Pattern, any wholly owned subsidiary of Pattern or any entity associated with a specific project or among the wholly owned subsidiaries of Pattern and/or any entities associated with specific projects);

 

   

(1) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock or other equity securities, except for (A) regular quarterly cash dividends on Company Common Stock in an amount not exceeding $0.422 per share of Company Common Stock, (B) dividends paid by any direct or indirect subsidiary to Pattern (or any other direct or indirect subsidiary of Pattern) and the other equity holders of such subsidiary, in each case on a pro rata basis in accordance with such subsidiary’s certificate of incorporation or by-laws or other applicable governing instruments and in the ordinary course consistent with past practice of Pattern, (C) dividends paid to tax equity investors in accordance with capital contribution or investment agreements or organizational documents (in each case, true and correct copies of which have been made available to Parent) or (D) cash dividends paid in accordance with the terms of the Certificate of Designations of Rights and Preferences of the Company Preferred Stock, or (2) enter into any agreement with respect to the voting of its capital stock or other equity securities;

 

   

except for (A) transactions among Pattern, any wholly owned subsidiary of Pattern or any entity associated with a specific project or among the wholly owned subsidiaries of Pattern and/or any entities associated with a specific project to the extent all partners are treated equally or (B) pursuant to contracts in effect as of the date of the Merger Agreement (copies of which have been made available to Parent), reclassify, split, combine, subdivide or redeem, purchase or otherwise acquire any of its capital stock (or other equity securities) or securities convertible or exchangeable into or exercisable for any shares of its capital stock (or other equity securities) (other than as set forth in the Merger Agreement);

 

   

incur, assume or otherwise become liable for any indebtedness for borrowed money or guarantee such indebtedness of another Person (other than a wholly owned subsidiary of Pattern), other than (x) non-recourse project-based financings obtained in the ordinary course of business consistent with past practice or (y) under existing credit facilities or contracts for indebtedness in effect as of the date of the Merger Agreement;

 

   

except (1) in accordance with Pattern’s capital expenditure plan as described in the financial model (a copy of which financial model has been made available to Parent), (2) any additional capital expenditures not to exceed $10,000,000 in the aggregate during any calendar quarter, or (3) expenditures related to operational emergencies, equipment failures or outages make or authorize any capital expenditures;

 

113


Table of Contents
   

make any material changes with respect to financial accounting methods, principles, policies, practices or procedures, except as required by GAAP;

 

   

other than with respect to transaction litigation, which is addressed in Section 5.5, settle any litigation, claim or other pending or threatened proceeding by or before a governmental entity involving Pattern or any of our subsidiaries if such settlement (A) with respect to the payment of monetary damages, involves the payment of monetary damages that exceed $20,000,000 individually or $50,000,000 in the aggregate during any calendar year, net of any amount covered by insurance or third-party indemnification, or (B) with respect to any non-monetary terms or conditions therein, imposes or requires actions that would or would be reasonably likely to have a material effect on the continuing operations of Pattern or any of our subsidiaries (or Parent or any of our subsidiaries after the Closing);

 

   

(A) make, materially change or revoke any material tax election of Pattern or any of our subsidiaries, (B) settle or compromise any audit or proceeding relating to a material amount of taxes of Pattern or any of our subsidiaries, (C) surrender any right to claim a tax refund of Pattern or any of our subsidiaries for a material amount of taxes, (D) agree to an extension or waiver of the statute of limitations period with respect to the assessment or determination of a tax matter of Pattern or any of our subsidiaries for a material amount of taxes (other than pursuant to an extension of time to file tax returns obtained in the ordinary course of business), (E) materially amend any U.S. federal income or other material tax return of Pattern or any of our subsidiaries, (F) make any change in any material tax accounting method or (G) enter into any closing agreement relating to a material amount of taxes of Pattern or any of our subsidiaries;

 

   

except as such action would not result in a material adverse effect on Pattern or a project, transfer, sell, lease, license, mortgage, pledge, surrender, encumber, divest, cancel, abandon or allow to lapse or expire or otherwise dispose of any material assets, licenses, operations, rights, product lines or businesses of Pattern, our subsidiaries or entities associated with a specific project;

 

   

except as may be required by applicable laws, become a party to, establish, adopt, amend, commence participation in or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization;

 

   

other than in the ordinary course of business, including normal vendor renewals, extensions or replacements, and other than would not have a material effect on Pattern (A) (1) modify or amend in any material respect, (2) terminate, fail to renew on no less favorable terms or cancel or (3) waive, release or assign any material rights or claims with respect to, any material contract or (B) enter into any contract that, if entered into prior to the date of the Merger Agreement, would qualify as a material contract, pursuant to the Merger Agreement;

 

   

enter into any new line of business other than any line of business that is reasonably ancillary to any line of business as of the date of the Merger Agreement;

 

   

except as may be required by applicable laws or pursuant to the terms of any compensation plan in effect on the date of the Merger Agreement or as set forth in the confidential disclosure letter to the Merger Agreement, (A) establish, adopt, terminate or amend any material compensation plan; (B) grant to any director or employee with a position at Pattern classified as “Grade Level 17” or higher with total annual target compensation equal to or greater than $400,000 any increase in base salary, wages, bonuses, incentive compensation or severance, retention or other material employee benefits; (C) grant to any director or employee with a position at Pattern classified as “Grade Level 17” or higher with total annual target compensation equal to or greater than $400,000 any equity-based awards (whether under our equity incentive plan or otherwise); (D) accelerate the time of payment for, or vesting of, any compensation or benefits; (E) change any actuarial or other assumption used to calculate funding obligations or liabilities under any compensation plan; (F) other than with respect to any entity associated with a specific project in a manner that does not materially increase compensation costs, promote any employee who is an officer to a position more senior than such employee’s position as of

 

114


Table of Contents
 

the date of the Merger Agreement; (G) hire or terminate without cause any officer, employee, independent contractors or consultant, other than in the ordinary course of business with respect to any such person who has or will have total annual target compensation of less than $400,000; or (H) forgive any loans, or issue any loans, to directors, officers, contractors or employees of Pattern or any of our subsidiaries;

 

   

materially and detrimentally change its environmental policies or practices; or

 

   

agree, authorize or commit to do any of the foregoing.

Alternative Acquisition Proposals

Pursuant to the Merger Agreement, during the period from November 3, 2019 and continuing until 11:59 p.m., Eastern Time, on December 8, 2019 (the “Go-Shop Period”), Pattern and our Representatives were permitted to:

 

   

solicit, initiate, knowingly encourage, induce or facilitate any inquiries or the making of any indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, a Company Acquisition Proposal;

 

   

engage in, continue or otherwise participate in any discussions with any person or negotiations regarding, or provide any non-public information or data to any person relating to, or cooperate in any way with, any inquiry, indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, a Company Acquisition Proposal;

 

   

except as required by laws, waive, terminate, modify or release any person (other than Parent and its affiliates) from any provision of, or fail to enforce or grant any permission, waiver or request under, any confidentiality or “standstill” or similar agreement or obligation with respect to Pattern or our subsidiaries, subject to certain exceptions; or

 

   

execute or enter into any letter of intent, agreement in principle, term sheet, memorandum of understanding, merger agreement, acquisition agreement or other similar agreement relating to a Company Acquisition Proposal, subject to certain exceptions.

During the Go-Shop Period, the Special Committee, with the assistance of Evercore and Goldman Sachs, contacted 16 potential bidders. Each party that was contacted either notified the Special Committee or its advisors that, after further review, it would not be interested in pursuing a potential transaction with Pattern or did not respond.

Following the Go-Shop Period and until the Effective Time (or the earlier termination of the Merger Agreement in accordance with its terms), none of Pattern, our subsidiaries, or any of our respective officers, directors and employees may, and we must instruct and direct our and our subsidiaries’ Representatives not to, directly or indirectly:

 

   

solicit, initiate, knowingly encourage, induce or facilitate any inquiries or the making of any indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, a Company Acquisition Proposal;

 

   

engage in, continue or otherwise participate in any discussions with any person or negotiations regarding, or provide any non-public information or data to any person relating to, or cooperate in any way with, any inquiry, indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, a Company Acquisition Proposal;

 

   

except as required by laws, waive, terminate, modify or release any person (other than Parent and its affiliates) from any provision of, or fail to enforce or grant any permission, waiver or request under, any confidentiality or “standstill” or similar agreement or obligation with respect to Pattern or our subsidiaries, subject to certain exceptions; or

 

115


Table of Contents
   

execute or enter into any letter of intent, agreement in principle, term sheet, memorandum of understanding, merger agreement, acquisition agreement or other similar agreement relating to a Company Acquisition Proposal, subject to certain exceptions.

Notwithstanding these restrictions, under certain circumstances, prior to the adoption of the Merger Agreement and approval of the Merger by our stockholders, we may provide non-public information to, and engage or participate in discussions or negotiations with, any third party who has executed an acceptable confidentiality agreement with us and from whom we receive a bona fide written Company Acquisition Proposal from a third party that is not withdrawn and did not result from a material breach of our non-solicitation obligations and that our Board, the Special Committee or any other duly authorized committee of our Board determines in good faith, after consultation with its legal counsel, that (i) failure to take such action could reasonably be expected to be inconsistent with such directors’ fiduciary duties and (ii) such bona fide written Company Acquisition Proposal either constitutes or is reasonably likely to result in a Superior Company Proposal.

We have agreed that we will promptly (and in any event within two business days) notify Parent if any inquiries, proposals or offers with respect to a Company Acquisition Proposal are received by us or any of our Representatives indicating, in connection with such notice, a copy of the terms and conditions of any proposals, offers or proposed agreements and the identity of the party making such Company Acquisition Proposal and thereafter will keep Parent reasonably informed, on a prompt basis, of the status and terms of any such proposals or offers (including by furnishing copies of any amendments thereto) and the status of any such discussions or negotiations.

Except as permitted in accordance with the above, we have agreed that (1) we and our subsidiaries and our respective officers, directors and employees will, and will instruct and use our reasonable best efforts to cause our Representatives and our subsidiaries’ Representatives to, cease and cause to be terminated any discussions or negotiations with any person with respect to any Company Acquisition Proposal, and (2) we will promptly request of each person that has executed a confidentiality agreement prior to the date of the Merger Agreement in connection with its consideration of a Company Acquisition Proposal to return or destroy all confidential information furnished to such person.

Our Board’s Recommendation; Company Board Recommendation Change

As described above, and subject to the provisions described below, based on the unanimous recommendation of the Special Committee, our Board has recommended that the holders of Company Common Stock and Company Preferred Stock vote “FOR” the proposal to adopt the Merger Agreement and approve the Merger. The Merger Agreement provides that our Board will not effect a Company Recommendation Ch