Spark Power Announces up to $30.0 Million Rights Offering and Standby Guarantee and Announces Completion of Special Committee Process

Rhea-AI Summary

Spark Power Group Inc. has announced a Rights Offering to raise up to $30 million, enabling common shareholders to acquire additional shares at a discounted price of $1.20. Each shareholder will receive rights based on their current holdings, with the offering set to commence on December 21, 2021, and expire on January 26, 2022. Major insider participation is anticipated, with commitments totaling approximately $14.8 million. The funds will be used primarily to reduce debt and support operational growth. The offering is subject to regulatory approval.

Positive

• Rights Offering aims to raise up to $30 million.
• Insider commitment of approximately $14.8 million shows strong confidence.
• Funds will be used for debt repayment and operational growth.

Negative

• The offering may dilute existing shareholders' equity.
• Subject to Toronto Stock Exchange approval, adding uncertainty.

NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO UNITED STATES NEWSWIRE SERVICES

OAKVILLE, ON / ACCESSWIRE / December 15, 2021 / Spark Power Group Inc. (TSX:SPG), parent company of Spark Power Corp. ("Spark Power" or the "Company"), is pleased to announce that it is filing today a notice of rights offering (the "Notice") and rights offering circular (the "Circular") in respect of an offering (the "Rights Offering") of rights ("Rights") to acquire common shares of the Company ("Common Shares") to raise gross proceeds of up to $30.0 million.

Pursuant to the Rights Offering, each holder of Common Shares of record as at the close of business on December 22, 2021 (the "Record Date") will receive one Right for each Common Share held. Each Right will entitle the holder to subscribe for 0.4393346119 of a Common Share at a subscription price (the "Subscription Price") of $1.20 per whole Common Share (the "Basic Subscription Privilege"), meaning 2.2761694 Rights will be needed to purchase one Common Share. The Subscription Price represents an approximate 25% discount to the five-day volume-weighted average trading price of the Common Shares on the Toronto Stock Exchange (the "TSX") prior to the date hereof. Holders of Rights who fully exercise their Rights under their Basic Subscription Privilege will also be entitled to subscribe for additional Common Shares, on a pro rata basis, if available as a result of unexercised Rights prior to the Expiry Time (the "Additional Subscription Privilege"), subject to certain limitations as set out in the Circular.

The Rights will trade on the Toronto Stock Exchange under the symbol "SPG.RT" commencing on December 21, 2021 and until 12:00 noon (Toronto time) on January 26, 2022 at which time they will be halted from trading. The Rights will expire at 5:00 p.m. (Toronto time) (the "Expiry Time") on January 26, 2022, after which time unexercised Rights will be void and of no value.

The Company currently has 56,904,235 Common Shares issued and outstanding. If all Rights issued under the Rights Offering are validly exercised, an additional 25,000,000 Common Shares will be issued. Certain insiders of the Company, including each of Jason Sparaga, Andrew Clark, Eric Waxman, Dan Ardila and Richard Jackson, through Red Jar Capital Corp. ("Red Jar") (a company jointly controlled by Messrs. Sparaga, Clark and Waxman), and certain other directors and officers have advised the Company that they intend to participate in the Rights Offering. The intended participation by these insiders represents 5,964,583 Common Shares or approximately 23.86% of the Common Shares offered under the Rights Offering. Red Jar's commitment is for aggregate gross proceeds of $6,800,000. The Company has obtained commitments from certain other arm's-length parties to participate in the Rights Offering, which together with Red Jar's commitment, will amount to aggregate gross proceeds of approximately $14,800,000.

Spark Power intends to use the net proceeds of the Rights Offering to repay certain indebtedness outstanding under the various promissory notes (the "Promissory Notes") issued by the Company to certain vendors in connection with past acquisitions, to satisfy an earn-out payment that is owing by the Company and for working capital purposes. The Company's senior lender is supportive of the Rights Offering and has provided its consent to the proposed use of available funds following the Rights Offering along with the temporary relaxation of certain financial covenants and repayment terms.

Standby Guarantee Agreements

In connection with the Rights Offering, the Company has entered into standby guarantee agreements (the "Standby Agreements") with certain holders of the Promissory Notes (which are intended to be repaid with a portion of the net proceeds of the Rights Offering) and Red Jar (collectively, the "Standby Guarantors"). The Standby Guarantors have agreed, subject to certain terms and conditions, to acquire any additional Common Shares available as a result of any unexercised Rights under the Rights Offering (collectively, the "Standby Guarantee"), such that the Company will, subject to the terms of the Standby Agreements, be guaranteed to issue 8,358,779 Common Shares in connection with the Rights Offering for aggregate gross proceeds of $10,030,534.80. In conjunction with the insider participation and other third-party commitments of $14,800,000, the total minimum gross proceeds under the Rights Offering will be $24,830,534.80, with the potential for additional gross proceeds to be realized prior to the Expiry Time, to a total maximum gross proceeds of $30,000,000.

Early Warning Disclosure

Each of Mr. Sparaga, Mr. Clark, Mr. Waxman and Red Jar are acting as "joint actors" (collectively the "Red Jar Parties") in connection with their investment in the Company at this time and are providing the following additional information pursuant to the early warning requirements of applicable Canadian securities laws:

Messrs. Sparaga, Clark, Waxman, together with certain additional shareholders, have agreed to transfer 11,239,523 of the Rights that they will receive in connection with the Rights Offering to Red Jar, which will enable Red Jar to exercise the Rights then held by it (including those received directly in the Rights Offering) for approximately 5,666,667 Common Shares. Messrs. Sparaga, Clark, and Waxman have agreed to transfer 10,416,335 Rights to Red Jar. Red Jar has agreed to exercise, and Messrs. Sparaga, Clark and Waxman, who jointly control Red Jar, have agreed that they will cause Red Jar to exercise, its Basic Subscription Privilege for such Common Shares. Mr. Sparaga and Mr. Clark have also advised the Company that each of them intends to transfer a certain number of Rights that each will receive in connection with the Rights Offering to two arm's-length groups that will enable each group to respectively exercise the Rights then held by it for approximately 4,166,667 Common Shares and approximately 2,500,000 Common Shares. Messrs. Sparaga, Clark, and Waxman have advised that they do not otherwise intend to exercise any of their Rights.

As at the date hereof, Red Jar beneficially owns or exercises control or direction over, directly or indirectly, 1,658,768 Common Shares representing approximately 2.92% of the 56,904,235 issued and outstanding Common Shares, and the Red Jar Parties (including through their joint control and direction over Red Jar), beneficially own or exercise control or direction over, directly or indirectly, 27,249,566 Common Shares, representing approximately 47.89% of the 56,904,235 issued and outstanding Common Shares.

Assuming that Red Jar purchases 5,666,667 Common Shares under the Basic Subscription Privilege (but no Common Shares under the Standby Guarantee), Red Jar would own or exercise control or direction over, directly or indirectly, an aggregate of 7,325,435 Common Shares, representing approximately 8.94% of the issued and outstanding Common Shares upon completion of the Rights Offering for the maximum 25,000,000 Common Shares, an increase in Red Jar's shareholding percentage of approximately 6.02% and the Red Jar Parties would beneficially own or exercise control or direction over, directly or indirectly, an aggregate of 32,916,233 Common Shares, which would represent approximately 40.19% of the issued and outstanding Common Shares upon completion of the Rights Offering for the maximum 25,000,000 Common Shares, a decrease in the Red Jar Parties' shareholding percentage of approximately 7.7%.

Assuming that Red Jar purchases 5,666,667 Common Shares under the Basic Subscription Privilege and 4,500,000 Common Shares under the Standby Guarantee (being the full amount of its guarantee), Red Jar would acquire an aggregate of 10,166,667 Common Shares in connection with the Rights Offering and, following closing of the Rights Offering, Red Jar would beneficially own or exercise control or direction over, directly or indirectly, an aggregate of 11,825,435 Common Shares, which would represent approximately 14.44% of the issued and outstanding Common Shares upon completion of the Rights Offering for the maximum 25,000,000 Common Shares, an increase in Red Jar's shareholding percentage of approximately 11.52%, and the Red Jar Parties would beneficially own or exercise control or direction over, directly or indirectly, an aggregate of 37,416,233 Common Shares, which would represent approximately 45.68% of the issued and outstanding Common Shares, a decrease in the Red Jar Parties' shareholding percentage of approximately 2.21%.

Messrs. Sparaga, Clark and Waxman will not be otherwise participating in the Rights Offering and will not be increasing their ownership or control or direction over, directly or indirectly, any additional Common Shares other than those to be acquired by Red Jar.

The Red Jar Parties currently have no other plans or intentions to dispose of their Spark Power securities or to acquire additional Spark Power securities, other than Spark securities that may be acquired pursuant to existing compensation plans. The Red Jar Parties have no current plans or intentions concerning corporate transactions involving the Company or changes to its capital structure.

A copy of the early warning report filed by the Red Jar Parties will be available under the Company's profile on SEDAR at www.sedar.com or by contacting Jason Sparaga at 905-829-3336, 1315 North Service Road East, Suite 300, Oakville, Ontario L6H 1A7.

"We are pleased to be investing in and backstopping this Rights Offering that will provide the Company with significant equity capital to pay down debt, support growth and drive the business going forward," said Jason Sparaga, Co-Founder and Executive Board Chair of Spark Power. "We continue to believe in the strength of Spark's business and management team and are pleased to step up to provide Spark with capital to allow the Company to execute on its business plan" he added.

"We are fortunate to have the continued support of our shareholders and in particular the Spark Power founders. This significant equity investment, along with the cooperation of the Bank of Montreal in adapting their facilities to meet our needs provides tremendous stability in our balance sheet" said Richard Jackson, President & CEO of Spark Power. "This capital base will allow me and my management team to focus on executing the 2022 business plan, and beyond. It is a huge show of confidence, and we are grateful" he added.

Complete details of the Rights Offering will be set out in the Circular, the Notice, the Notice to Ineligible Shareholders and the Standby Agreements which will be available under Spark Power's profile on SEDAR at www.sedar.com. The Notice and accompanying rights certificate ("Rights Certificate") will be mailed to each registered shareholder of the Company resident in the Eligible Jurisdictions (as defined below) as at the Record Date. Registered shareholders who wish to exercise their Rights must forward the completed Rights Certificate, together with the applicable funds, to the rights agent, TSX Trust Company, on or before the Expiry Time. Shareholders who own their Common Shares through an intermediary, such as a bank, trust company, securities dealer or broker, will receive materials and instructions from their intermediary.

The Rights Offering will be conducted only in the provinces and territories of Canada (the "Eligible Jurisdictions"). Accordingly, and subject to the detailed provisions of the Circular, Rights will not be delivered to, nor will they be exercisable by, persons resident outside of the Eligible Jurisdictions unless such holders can establish that the transaction is exempt under applicable legislation. Rather, such Rights may be sold on their behalf. If you are a holder of Common Shares and reside outside of Canada please review the Notice, the Circular and the Notice to Ineligible Shareholders to determine your eligibility and the process and timing requirements to receive and exercise your Rights. The Company requests that any ineligible shareholder interested in exercising their Rights contact the Company at their earliest convenience.

Neither the Rights being offered or the Common Shares issuable upon exercise of the Rights have been or will be registered under the United States Securities Act of 1933, as amended, and may not be exercised, offered or sold, as applicable, in the United States absent registration or an applicable exemption from the registration requirements. This news release shall not constitute an offer to sell or the solicitation of an offer to buy the securities of the Company. There shall be no offer or sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification of such securities under the laws of any such jurisdiction.

Completion of the Rights Offering is subject to regulatory approval, including the approval of the TSX.

Completion of Special Committee Process

Spark also announced today that the Special Committee (the "Special Committee") of the Board of Directors (the "Board") has completed its strategic review process.

The Company initially announced the formation of the Special Committee and launched the strategic review process on February 6, 2020. Following a pause in spring 2020 due to the COVID-19 pandemic crisis, the Company announced that the Special Committee had formally restarted the strategic review in the latter part of 2020. The Special Committed was mandated to undertake a process, with the assistance of independent legal and financial advisers, to identify, evaluate, and consider alternatives available to the Company to acquire the capital required to execute the Company's strategic plan. In furtherance of its mandate, the Special Committee considered various strategic alternatives, including a sale of Spark to third parties and other strategic transactions.

At a meeting held on December 14, 2021, the Special Committee provided its final report to the Board wherein it recommended that Spark approve the Rights Offering as the best available alternative to provide the Company with the capital required to execute the Company's strategic plan. The Special Committee's recommendation has been accepted and endorsed by the Board. Accordingly, the work of the Special Committee has been completed and the committee will be dissolved.

Commenting on the results of the strategic review, Larry Taylor, Chair of the Special Committee said, "Following the exploration of multiple strategic options as part of the strategic review, we believe that the Rights Offering is the best available path forward for Spark and its stakeholders, and will provide the Company with capital to grow the business."

Jason Sparaga, Co-Founder and Executive Board Chair of Spark Power, added "With the strategic review process in the rearview, the Company will focus all of its efforts on driving the success of the business, which will put the Company in a position to execute on strategic transactions in the future".

About Spark Power Group Inc.

Spark Power is a leading independent provider of end-to-end electrical contracting, operations and maintenance services, and energy sustainability solutions to the industrial, commercial, utility, and renewable asset markets in North America. We work to earn the right to be our customers' Trusted Partner in Power^TM. Our highly skilled and dedicated people, located in the communities we serve, combined with our knowledge of the power industry, technology expertise, and commitment to safety, ensures we deliver the right solutions that keep our customers' operations up and running today and better equipped for tomorrow. Learn more at www.sparkpowercorp.com.

Forward-Looking Statements

This news release contains statements which constitute "forward-looking information" within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to future business activities and operating performance. Forward-looking information is often identified by words such as "believe", "anticipate", "project", "expect", "intend", "plan", "will", "may", "estimate" and other similar expressions and includes information regarding the completion of the Rights Offering, the provision of the Standby Guarantee, the anticipated use of proceeds from the Rights Offering, and the intention of certain insiders to participate in the Rights Offering. Investors are cautioned that forward-looking information is not based on historical fact but instead reflects management's expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the Company. Key factors that could cause actual results to differ materially from those projected in the forward-looking information include, but are not limited to, the following: risks that the Rights Offering may not be completed for any reason, risks that the Standby Agreement may be terminated, risks related to the receipt of final approval from the Toronto Stock Exchange in respect of the Rights Offering and the timing thereof, and the additional risk factors set out in the Circular and the Company's AIF, filed with Canadian securities regulators and available on the Company's profile on SEDAR at www.sedar.com. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors that could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.

Media Inquiries:

Kim Samlall, Director, Marketing Communications
media@sparkpowercorp.com
+1 (905) 829-3336 x185

Investor Inquiries:

Richard Perri
Executive Vice President and Chief Financial Officer
richard.perri@sparkpowercorp.com
+1 (416) 388-4546

SOURCE: Spark Power Group Inc.

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FAQ

What is Spark Power Group Inc.'s Rights Offering amount?

The Rights Offering aims to raise up to $30 million.

When does the Spark Power Rights Offering start and end?

It starts on December 21, 2021, and ends on January 26, 2022.

What is the subscription price for shares in the Spark Power Rights Offering?

The subscription price is $1.20 per whole Common Share.

How much of the Rights Offering will insiders purchase?

Insiders have committed approximately $14.8 million to the Rights Offering.

What will the proceeds from the Spark Power Rights Offering be used for?

The proceeds will be used to repay debt and support working capital.