Item 1.01. Entry into a Material Definitive Agreement.
Business Combination Agreement
On December 2, 2021, ArcLight Clean Transition Corp. II, an exempted company
incorporated in the Cayman Islands with limited liability ("ArcLight"), Opal
HoldCo LLC, a Delaware limited liability company ("Opal HoldCo"), and Opal Fuels
LLC, a Delaware limited liability company ("Opal Fuels"), entered into a
Business Combination Agreement (as it may be amended, supplemented or otherwise
modified from time to time, the "Business Combination Agreement").
The Business Combination
The Business Combination Agreement and the transactions contemplated thereby
(collectively, the "Business Combination") were unanimously approved by the
boards of directors of each of ArcLight and Opal and also approved by Opal
Holdco, the sole member of Opal Fuels. The Business Combination Agreement
provides for, among other things, the following transactions: (i) each
outstanding Class B ordinary share, par value $0.0001 per share, of ArcLight
will convert into one Class A ordinary share, par value $0.0001 per share, of
ArcLight; (ii) ArcLight will change the jurisdiction of its incorporation by
deregistering as an exempted company in the Cayman Islands and domesticating to,
and continuing as a corporation incorporated under the laws of, the State of
Delaware (the "Domestication") and, in connection with the Domestication,
(A) ArcLight's name will be changed to "Opal Fuels Inc." ("New Opal"), (B) each
outstanding Class A ordinary share of ArcLight will become one share of Class A
common stock, par value $0.0001 per share, of New Opal (the "New Opal Class A
Common Stock"), (C) each outstanding warrant to purchase one Class A ordinary
share of ArcLight will become a warrant to purchase one share of New Opal
Class A common stock and (D) New Opal will file its certificate of incorporation
and adopt bylaws to serve as its governing documents in connection with the
Domestication; and (iii) (A) Opal Fuels will cause its existing limited
liability company agreement to be amended and restated, (B) Opal Fuels will
cause all of its limited liability company interests existing immediately prior
to the closing of the Business Combination (the "Closing") to
be re-classified into a number of common units (collectively, the "Opal Units")
based on a pre-transaction equity value for Opal equal to $1,501,870,000, less
all principal and accrued interest outstanding immediately after the Closing
pursuant to that certain convertible promissory note, dated as of May 1, 2021
(as amended, including that certain First Amendment to Convertible Note, dated
November 29, 2021"), held by ARCC Beacon LLC, a Delaware limited liability
company ("Ares"), (C) ArcLight will contribute the (x) the amount of cash in the
trust account (the "Trust Account") established by ArcLight with the proceeds
from its initial public offering as of immediately prior to the Closing (and
before, for the avoidance of doubt, giving effect to the exercise of redemption
rights by any ArcLight shareholders (the "Public Share Redemptions")), minus
(y) the aggregate amount of cash required to fund the ACT Share Redemptions and
any other obligations to be funded from the Trust Account, plus (z) the
aggregate cash proceeds actually received in respect of the PIPE Investment (as
defined below) and (E) New Opal will issue to Opal Fuels, and Opal Fuels will in
turn distribute to Opal HoldCo and Hillman RNG Investments, LLC ("Hillman") a
number of shares of Class D common stock, par value $0.0001 per share, of New
Opal (the "New Opal Class D Common Stock"), and distribute to Ares (together
with Opal HoldCo and Hillman, collectively, the "Opal Equityholders") shares of
Class B common stock, par value $0.0001 per share, of New Opal (the "New Opal
Class B Common Stock") (neither of which will have any economic value but will
entitle the holder thereof to five votes per share or one vote per share,
respectively), equal to the number of Opal Units held by each of the Opal
Equityholders.
In addition, if New Opal's annual EBITDA for the calendar year 2023 exceeds
$238,000,000 (the "First Earnout Triggering Event"), New Opal will issue to Opal
HoldCo, Ares and Hillman (collectively, the "Earnout Participants") an aggregate
of 5,000,000 shares of New Opal Class B Common Stock and New Opal Class D Common
Stock and corresponding Opal Units (collectively, the "First Earnout Tranche")
in accordance with the allocations set forth in the Business Combination
Agreement. Additionally, if New Opal's annual EBITDA for the calendar year 2024
exceeds $446,000,000 (the "Second Earnout Triggering Event"), New Opal will
issue to the Earnout Participants an aggregate of 5,000,000 additional shares of
New Opal Class B Common Stock and New Opal Class D Common Stock and
corresponding Opal Units (collectively, the "Second Earnout Tranche") in
accordance with the allocations set forth in the Business Combination Agreement.
In the event that the First Earnout Triggering Event does not occur but the
Second Earnout Triggering Event does occur, New Opal will be obligated to issue
both the First Earnout Tranche and the Second Earnout Tranche upon the
occurrence of the Second Earnout Triggering Event.
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A copy of the Business Combination Agreement is filed with this Current Report
on Form 8-K ("Current Report") as Exhibit 2.1 and is incorporated herein by
reference, and the foregoing description of the Business Combination Agreement
is qualified in its entirety by reference thereto.
The Business Combination is expected to close late in first half of 2022,
following the receipt of the required approval by ArcLight's shareholders and
the fulfillment of other customary closing conditions.
Second A&R LLC Agreement of Opal Fuels
Following the Business Combination, the combined company will be organized in an
"Up-C" structure, such that Opal Fuels and the subsidiaries of Opal Fuels will
hold and operate substantially all of the assets and business of New Opal, and
New Opal will be a publicly listed holding company that will hold equity
interests in Opal Fuels. At the Closing, Opal Fuels will amend and restate its
limited liability company agreement (as amended, the "Second A&R LLC Agreement")
in its entirety to, among other things, provide the Opal Equityholders the right
to redeem their Opal Units for cash or, at New Opal's option, Opal Class A
common stock, in each case, subject to certain restrictions set forth therein.
The form of the Second A&R LLC Agreement of the Opal Fuels is filed with this
Current Report as Exhibit F to the Business Combination Agreement, which is
filed with this Current Report as Exhibit 2.1 and is incorporated herein by
reference, and the foregoing description of the Second A&R LLC Agreement of Opal
Fuels is qualified in its entirety by reference thereto.
Tax Receivable Agreement
Concurrent with the Closing, New Opal will enter into the tax receivable
agreement (the "Tax Receivable Agreement") with the persons from time to time
that become a party thereto (such persons, collectively, the "TRA
Participants"). Pursuant to the Tax Receivable Agreement, New Opal will be
required to pay the TRA Participants 85% of the amount of savings, if any, in
U.S. federal, state and local income tax that New Opal actually realizes
(computed using certain simplifying assumptions) as a result of the increases in
tax basis and certain other tax benefits related to any exchanges of Opal Units
(together with voting shares of New Opal) for New Opal Class A common stock or
shares of Class C common stock, par value $0.0001 per share, of New Opal.
The form of the Tax Receivables Agreement is filed with this Current Report as
Exhibit A to the Business Combination Agreement, and the foregoing description
of the Tax Receivables Agreement is qualified in its entirety by reference
thereto.
Representations and Warranties; Covenants
The Business Combination Agreement contains representations and warranties of
each of the parties thereto that are customary for transactions of this type.
The representations and warranties made under the Business Combination Agreement
will not survive the Closing, other than claims against a party that committed
fraud with respect to the making of its applicable representation and warranty.
In addition, the parties to the Business Combination Agreement agreed to be
bound by certain covenants customary for transactions of this type, including,
among others, covenants with respect to the conduct of ArcLight, Opal Fuels and
its subsidiaries during the period between signing the Business Combination
Agreement and the Closing. ArcLight and Opal Fuels have also agreed to take all
action within their respective power as may be necessary or appropriate such
that, immediately after the Closing, the New Opal board of directors will
consist of seven directors, six of which will be designated by the Company and
one of which will be designated by ArcLight CTC Holdings II, L.P., a Delaware
limited partnership ("ArcLight Sponsor"), in each case, prior to the
effectiveness of the Registration Statement and in accordance with the
qualifications of the listing rules of Nasdaq and Rule 10A-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Each of the parties to
the Business
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Combination Agreement has also agreed to use its respective reasonable best
efforts to cause the Business Combination to be consummated after the date of
the execution of the Business Combination Agreement as promptly as reasonably
practicable.
. . .
Item 3.02. Unregistered Sales of Equity Securities.
The disclosure set forth above in Item 1.01 of this Current Report on Form 8-K
is incorporated by reference herein. The shares of common stock to be offered
and sold in connection with the PIPE Investment and to the Opal Equityholders in
connection with the Business Combination have not been registered under the
Securities Act in reliance upon the exemption provided in Section 4(a)(2)
thereof.
Important Information and Where to Find It
A full description of the terms of the transaction will be provided in a
registration statement on Form S-4 to be filed with the SEC by ArcLight that
will include a prospectus with respect to the combined company's securities to
be issued in connection with the business combination and a proxy statement with
respect to the shareholders meeting of ArcLight to vote on the business
combination. ArcLight urges its investors, shareholders and other interested
persons to read, when available, the preliminary proxy statement/prospectus as
well as other documents filed with the SEC because these documents will contain
important information about ArcLight, Opal Fuels and the transaction. After the
registration statement is declared effective, the definitive proxy
statement/prospectus to be included in the registration statement will be mailed
to shareholders of ArcLight as of a record date to be established for voting on
the proposed business combination. Once available, shareholders will also be
able to obtain a copy of the S-4, including the proxy statement/prospectus, and
other documents filed with the SEC without charge, by directing a request to:
ArcLight Clean Transition Corp. II, 200 Clarendon Street, 55th Floor, Boston,
Massachusetts 02116. The preliminary and definitive proxy statement/prospectus
to be included in the registration statement, once available, can also be
obtained, without charge, at the SEC's website (www.sec.gov).
Participants in the Solicitation
ArcLight and Opal Fuels and their respective directors and officers may be
deemed to be participants in the solicitation of proxies from ArcLight's
shareholders in connection with the proposed transaction. Information about
ArcLight's directors and executive officers and their ownership of ArcLight's
securities is set forth in ArcLight's filings with the SEC. To the extent that
holdings of ArcLight's securities have changed since the amounts printed in
ArcLight's Registration Statement on Form S-1, such changes have been or will be
reflected on Statements of Change in Ownership on Form 4 filed with the SEC.
Additional information regarding the interests of those persons and other
persons who may be deemed participants in the proposed transaction may be
obtained by reading the proxy statement/consent solicitation
statement/prospectus regarding the proposed transaction when it becomes
available. You may obtain free copies of these documents as described in the
preceding paragraph.
Forward Looking Statements
Certain statements included in this Form 8-K may be considered forward-looking
statements. Forward-looking statements are statements that are not historical
facts and generally relate to future events or ArcLight's or Opal Fuels' future
financial or other performance metrics. In some cases, you can identify
forward-looking statements by terminology such as "believe," "may," "will,"
"potentially," "estimate," "continue," "anticipate," "intend," "could," "would,"
"project," "target," "plan," "expect," or the negatives of these terms or
variations of them or similar terminology. Such forward-looking statements,
including the identification of a target business and a potential business
combination or other such transaction are subject to risks and uncertainties,
which could cause actual results to differ materially from those expressed or
implied by such forward looking statements. New risks and uncertainties may
emerge from time to time, and it is not possible to predict all risks and
uncertainties. These
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forward-looking statements are based upon estimates and assumptions that, while
considered reasonable by ArcLight and its management, and Opal Fuels and its
management, as the case may be, are inherently uncertain and subject to material
change. Factors that may cause actual results to differ materially from current
expectations include, but are not limited to, various factors beyond
management's control, including general economic conditions and other risks,
uncertainties and factors set forth in the section entitled "Risk Factors" and
"Cautionary Note Regarding Forward-Looking Statements" in ArcLight's final
prospectus relating to its initial public offering, dated September 22, 2020,
and other filings with the Securities and Exchange Commission (SEC), including
the registration statement on Form S-4 to be filed by ArcLight in connection
with the proposed business combination, as well as (1) the inability to complete
the proposed business combination; (2) the failure to realize the anticipated
benefits of the proposed business combination, which may be affected by, among
other things, competition, the ability of the combined company to grow and
manage growth profitably, maintain relationships with customers and suppliers
and retain key employees; (3) delays in obtaining, adverse conditions contained
in, or the inability to obtain necessary regulatory approvals or complete
regulatory reviews required to complete the proposed business combination;
(4) the outcome of any legal proceedings that may be instituted in connection
with the proposed business combination; the inability to complete the proposed
business combination; (5) macroeconomic conditions related to the global
COVID-19 pandemic; (6) factors associated with companies, such as Opal Fuels,
that are engaged in the production and integration of renewable natural gas
(RNG), including anticipated trends, growth rates and challenges in those
businesses and in the markets in which they operate; (7) the effects of
increased competition; (8) contractual arrangements with, and the cooperation
of, landfill and livestock waste site owners and operators, on which Opal Fuels
operates its landfill gas and livestock waste projects that generate electricity
and RNG prices for environmental attributes, low carbon fuel standard credits
and other incentives; (9) the ability to identify, acquire, develop and operate
renewable projects and RNG fueling stations; (10) the amount of redemption
requests made by ArcLight's public shareholders; and (11) the ability of the
combined company to issue equity or equity-linked securities or obtain debt
financing in connection with the transaction or in the future. Nothing in this
Form 8-K should be regarded as a representation by any person that the
forward-looking statements set forth herein will be achieved or that any of the
contemplated results of such forward-looking statements will be achieved. You
should not place undue reliance on forward-looking statements in this Form 8-K,
which speak only as of the date they are made and are qualified in their
entirety by reference to the cautionary statements herein. Both ArcLight and
Opal Fuels expressly disclaim any obligations or undertaking to release publicly
any updates or revisions to any forward-looking statements contained herein to
reflect any change in ArcLight's or Opal Fuels's expectations with respect
thereto or any change in events, conditions or circumstances on which any
statement is based.
Non-Solicitation
This Form 8-K is not a proxy statement or solicitation of a proxy, consent or
authorization with respect to any securities or in respect of the potential
transaction and shall not constitute an offer to sell or a solicitation of an
offer to buy the securities of ArcLight, Opal Fuels or the combined company, nor
shall there be any sale of any such securities in any state or jurisdiction in
which such offer, solicitation, or sale would be unlawful prior to registration
or qualification under the securities laws of such state or jurisdiction. No
offer of securities shall be made except by means of a prospectus meeting the
requirements of the Securities Act.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
No. Description
2.1† Business Combination Agreement, dated as of December 2, 2021, by and
among ArcLight, Opal HoldCo and Opal Fuels.
10.1 Form of Subscription Agreement.
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Exhibit
No. Description
10.2 Sponsor Letter Agreement, dated as of December 2, 2021, by and among
Opal Fuels, ArcLight, ArcLight Sponsor and the other parties thereto.
10.3 Form of Investor Rights Agreement.
104 Cover Page Interactive Data File - the cover page XBRL tags are
embedded within the Inline XBRL document
† Certain of the schedules to this exhibit have been omitted in accordance with
Regulation S-K Item 601(b)(2). The Registrant agrees to furnish supplementally
a copy of all omitted exhibits and schedules to the SEC upon its request.
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