NOVA Sunnova Energy International Inc

Purchase Agreement

On May 17, 2021, Sunnova Energy International Inc. (the “Company”) entered into a purchase agreement (the “Purchase Agreement”) with Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC, as representatives of the several initial purchasers named therein (the “Purchasers”), to issue and sell $500 million aggregate principal amount of 0.25% Convertible Senior Notes due 2026 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Notes were sold to the Purchasers pursuant to an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act. In addition, the Company granted the Purchasers an option to purchase, during a 13-day period beginning on, and including, the date on which the Notes were first issued, up to an additional $75 million aggregate principal amount of Notes on the same terms and conditions. The net proceeds from the sale of the Notes issued on May 20, 2021 (after deducting the Purchasers’ discount and estimated offering expenses) was approximately $487.1 million.

The Purchase Agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. Under the terms of the Purchase Agreement, the Company has agreed to indemnify the Purchasers against certain liabilities.

The foregoing description of the Purchase Agreement is qualified in its entirety by reference to the Purchase Agreement attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

Certain of the Purchasers or their respective affiliates have, from time to time, performed, and may in the future perform, various advisory and investment banking services for the Company, including acting as underwriters, initial purchasers, managers, agents, arrangers or issuing and paying agents, for which they received or will receive customary fees and expenses.

Statements in this Current Report on Form 8-K, including but not limited to those relating to the closing of the offering of the Notes, use of proceeds and sales by the Purchasers and other statements that are not historical facts, are forward looking statements that are based on current expectations. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that these expectations will prove correct. Important factors that could cause actual results to differ materially from those in the forward-looking statements include actions by the Purchasers, market conditions, risks regarding financing and other risks described in the Company’s Form 10-K for the year ended December 31, 2020 and its other filings with the United States Securities and Exchange Commission.

Indenture

On May 20, 2021, the Company entered into an Indenture (the “Indenture”), by and between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”), pursuant to which the Company issued $500 million aggregate principal amount of Notes. The Notes will bear cash interest at a rate of 0.25% per year until maturity. Interest on the notes will accrue from May 20, 2021 or from the most recent date on which interest has been paid or duly provided for. Interest will be payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The Notes will mature on December 1, 2026, unless earlier repurchased by the Company, redeemed by the Company or converted pursuant to their terms.

The initial conversion rate of the Notes is 28.9184 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), per $1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $34.58 per share). The conversion rate will be subject to adjustment upon the occurrence of certain events specified in the Indenture. In addition, upon the occurrence of a make-whole fundamental change (as defined in the Indenture) or an issuance of a notice of redemption, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Notes in connection with such make-whole fundamental change or notice of redemption.

Prior to the close of business on the business day immediately preceding September 1, 2026, the Notes will be convertible only under the following circumstances: (1) during any calendar quarter commencing after September 30, 2021, and only during such calendar quarter, if the last reported sale price of the Common Stock for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business-day period after any ten consecutive trading-day period in which the trading price per $1,000 principal amount of Notes for each such trading day was less than 98% of the product of the last reported sale price of the Common Stock and the conversion rate on each such trading day; (3) with respect to called or deemed to be called Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after September 1, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes regardless of the foregoing conditions. Upon conversion, the Company will pay or deliver, as the case may be, either cash, shares of Common Stock or a combination of cash and shares of Common Stock, at the Company’s election.

The Company may not redeem the Notes prior to June 5, 2024. On or after June 5, 2024, the Company may redeem for cash all or part of the Notes, at its option, if the last reported sale price of the Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid special interest to, but excluding, the redemption date. Upon the occurrence of a fundamental change (as defined in the Indenture) prior to the maturity date, holders may require the Company to repurchase all or part of the Notes for cash at a price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s senior, secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities of current or future subsidiaries of the Company.

The foregoing description of the Indenture is not complete and is qualified in its entirety by reference to the full text of the Indenture and the Form of 0.25% Convertible Senior Notes due 2026, which are filed as Exhibits 4.1 and 4.2, respectively, to this Current Report on Form 8-K and are incorporated into this Item 1.01 herein by reference.

Capped Call Transactions

In connection with the pricing of the Notes, on May 17, 2021, the Company entered into privately negotiated capped call transactions with certain of the Purchasers or their respective affiliates and certain other financial institutions (the “Capped Calls”). The Capped Calls each have an initial strike price of $34.5801 per share, subject to certain adjustments, which corresponds to the approximate initial conversion price of the Notes. The Capped Calls each have an initial cap price of $60.0000 per share. The Capped Calls cover, subject to anti-dilution adjustments, 14,459,200 shares of Common Stock. The Capped Calls are expected generally to reduce the potential dilution to the Common Stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the Notes, as the case may be, in the event the market price per share of Common Stock, as measured under the Capped Calls, is greater than the strike price of the Capped Calls, with such reduction and/or offset subject to a cap. If, however, the market price per share of the Common Stock, as measured under the Capped Calls, exceeds the cap price of the Capped Calls, there would be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that the then-market price per share of the Common Stock exceeds the cap price. The Company used $79.7 million of the net proceeds from the issuance and sale of the Notes to purchase the Capped Calls. The final component of each of the Capped Calls is scheduled to expire in November 2026.

The foregoing description of the Capped Calls is not complete and is qualified in its entirety by reference to the full text of the Form of Capped Call Confirmation, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated into this Item 1.01 by reference.