DEFM14A 1 d79038ddefm14a.htm DEFM14A DEFM14A
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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

GORES HOLDINGS IV, INC.

(Name of Registrant as Specified In Its Charter)

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

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GORES HOLDINGS IV, INC.

9800 Wilshire Blvd.

Beverly Hills, California 90212

Dear Gores Holdings IV, Inc. Stockholder:

We cordially invite you to attend a special meeting in lieu of the 2021 annual meeting of the stockholders of Gores Holdings IV, Inc., a Delaware corporation (“we,” “us,” “our” or the “Company”), which, in light of public health concerns regarding the coronavirus (COVID-19) pandemic, will be held via live webcast at https://www.cstproxy.com/goresholdingsiv/2021, on January 20, 2021 at 9:00 a.m. Eastern Time (the “Special Meeting”). The Special Meeting can be accessed by visiting https://www.cstproxy.com/goresholdingsiv/2021, where you will be able to listen to the meeting live and vote during the meeting. Additionally, you have the option to listen to the Special Meeting by dialing +1 888-965-8995 (toll-free within the U.S. and Canada) or +1 415-655-0243 (outside of the U.S. and Canada, standard rates apply). The passcode for telephone access is 45561260#, but please note that you cannot vote or ask questions if you choose to participate telephonically. Please note that you will only be able to access the Special Meeting by means of remote communication.

On September 22, 2020, the Company, SFS Holding Corp., a Michigan corporation (“SFS Corp.”), United Wholesale Mortgage, LLC (f/k/a United Shore Financial Services, LLC), a Michigan limited liability company (“UWM”) and UWM Holdings, LLC, a Delaware limited liability company (“UWM LLC”), entered into a Business Combination Agreement (as it may be amended from time to time, the “Business Combination Agreement”). At the closing of the transactions contemplated by the Business Combination Agreement (the “Closing” and, such date, the “Closing Date”), a series of transactions will occur, including the following: (a) UWM LLC will issue to SFS Corp. Class B membership interests in UWM LLC (the “UWM Class B Common Units”) equal to the quotient of the Company Equity Value (as defined below) divided by $10.00, minus the number of shares of the Company’s Class F Common Stock, par value $0.0001 per share (the “Class F Stock”), outstanding immediately prior to the Closing; (b) the Company will contribute to UWM LLC approximately $895,000,000 in cash (which is net of expenses) assuming no redemptions by the Company’s stockholders; (c) UWM LLC will issue to the Company Class A membership interests in UWM LLC (the “UWM Class A Common Units” and, together with the UWM Class B Common Units, the “UWM Common Units”) equal to the number shares of the Company’s Class A Common Stock, par value $0.0001 per share (the “Class A Stock”), outstanding immediately prior to the Closing (after giving effect to (i) redemptions by the Company’s stockholders, if any, (ii) the conversion of shares of the Company’s Class F Stock into shares of Class A Stock and (iii) the issuance of shares of Class A Stock to certain investors who have agreed to purchase from the Company an aggregate of 50,000,000 shares of Class A Stock (the “Private Placement”); and (d) the Company will issue to SFS Corp. shares of the Company’s Class D Common Stock, no par value (the “Class D Stock”), equal to the number of UWM Class B Common Units issued by UWM LLC to SFS Corp. pursuant to clause “(a)” above (collectively, with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”). In addition to the consideration to be paid at the Closing, SFS Corp. may receive earn-out shares from the Company, issuable in shares of Class D Common Stock and UWM Class B Common Units, if the price of the Class A Stock exceeds certain thresholds during the five-year period following the Closing. The maximum number of shares to be issued in connection with the earn-out will not exceed six percent of the Company Equity Value, divided by $10.00. You are being asked to vote on the Business Combination.

Following the Closing, the Company will be organized in an “Up-C” structure in which all of the business of UWM will be held directly or indirectly by UWM LLC, and the Company’s direct assets will consist of the UWM Class A Common Units as well as cash. Following the Closing, the Company is expected to own approximately six percent of the UWM Common Units and will control UWM LLC as the sole manager of UWM LLC in accordance with the terms of the amended and restated limited liability company agreement of UWM LLC (the “UWM A&R LLCA”) to be entered into in connection with the Closing. SFS Corp. is expected to retain approximately 94% of the UWM Common Units. Each UWM Class B Common Unit to be held by SFS Corp. may be exchanged, along with the stapled Class D Stock, for either, at the Company’s option, (a) cash or (b) one share of the Class B Stock, which will be identical to the Class A Stock except that it will entitle the


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holder to ten votes per share. Each share of Class B Stock is convertible into one share of Class A Stock upon the transfer or assignment of such share from SFS Corp. to a non-affiliated third-party.

Following the Closing, the Company will have four classes of authorized common stock. The Class A Stock and the Class C Stock will have one vote per share. The Class B Stock and the Class D Stock will have ten votes per share. The holders of Class C Stock and Class D Stock will not have any of the economic rights (including rights to dividends and distributions upon liquidation) provided to holders of Class A Stock and Class B Stock. SFS Corp., which is controlled by Mat Ishbia, the CEO and President of UWM, and Jeff Ishbia, the founder of UWM, will hold 100% of the Class D Stock and will control 79% of the combined voting power of the capital stock of the Post-Combination Company.

The Company Equity Value is defined in the Business Combination Agreement as $16,052,000,000 minus, as of 5:00 p.m., Eastern Time, on the business day immediately prior to the Closing Date, (a)(i) the amount of cash available to us in the Company’s trust account (the “Trust Account”), plus (ii) the net amount of funds held by the Company from the Private Placement, plus (iii) all funds held by the Company outside of the Trust Account (collectively, the “Available Cash”), minus (b) the amount, if any, by which the Closing Cash is less than $1,400,000,000 (as modified for “Excess Debt Proceeds”, the “Closing Cash Target”), plus (c) an amount, if any, by which the Closing Cash exceeds the Closing Cash Target, provided that such excess shall not exceed $200,000,000 (the “Company Equity Value”). “Closing Cash” is equal to (i) the consolidated unrestricted free cash and cash equivalents of UWM LLC, UWM and UWM’s subsidiaries, plus (ii) the Available Cash, minus (iii) the aggregate amount of incurred and unpaid transaction expenses of the Company. If UWM or its subsidiaries issues unsecured senior debt in excess of $1,200,000,000 prior to the Closing, the Closing Cash Target shall be increased on a dollar for dollar basis equal to the amount of such excess.

In connection with the Closing, the Class F Stock, issued prior to the initial public offering of the Company on January 28, 2020 (the “Founder Shares”), held by our sponsor, Gores Sponsor IV, LLC (the “Sponsor”), and certain other Company stockholders will automatically convert into shares of Class A Stock on a one-for-one basis and will continue to be subject to the transfer restrictions applicable to the Founder Shares.

At the Special Meeting, Company stockholders will be asked to consider and vote upon a proposal (the “Business Combination Proposal” or “Proposal No. 1”) to approve the Business Combination Agreement, a copy of which is attached to the accompanying proxy statement as Annex A, and the transactions contemplated thereby (the “Business Combination”). In addition, you are being asked to consider and vote upon: (i) a proposal to approve, for purposes of complying with applicable Nasdaq listing rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock and voting power in connection with the Business Combination and the Private Placement (the “Nasdaq Proposal” or “Proposal No. 2”); (ii) a proposal to adopt the Second Amended and Restated Certificate of Incorporation (the “Proposed Charter”) in the form attached hereto as Annex B (the “Charter Approval Proposal” or “Proposal No. 3”); (iii) a separate proposal with respect to certain governance provisions in the Proposed Charter, which are being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis (the “Governance Proposal” or “Proposal No. 4”); (iv) a proposal to elect nine directors to serve staggered terms on our Board until the 2022, 2023 and 2024 annual meetings of stockholders, as applicable, and until their respective successors are duly elected and qualified (the “Director Election Proposal” or “Proposal No. 5”); (v) a proposal to approve and adopt the UWM Corporation 2020 Omnibus Incentive Plan, a copy of which is attached hereto as Annex G (the “Incentive Plan”), including the authorization of the initial share reserve under the Incentive Plan (the “Incentive Plan Proposal” or “Proposal No. 6”); and (vi) a proposal to adjourn the Special Meeting to a later date or dates, (A) to ensure that any supplement or amendment to the accompanying proxy statement that the Board has determined in good faith is required by applicable law to be disclosed to the Company stockholders and for such supplement or amendment to be promptly disseminated to Company stockholders prior to the Special Meeting, (B) if, as of the time for which the Special meeting is originally scheduled, there are insufficient shares of Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Special Meeting or (C) to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Director Election Proposal or the Incentive Plan Proposal (the “Adjournment Proposal” or “Proposal No. 7”).


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Each of these proposals is more fully described in the accompanying proxy statement, which each stockholder is encouraged to read carefully.

Our publicly-traded Class A Stock, Public Units and Public Warrants are currently listed on the Nasdaq Capital Market under the symbols “GHIV,” “GHIVU” and “GHIVW,” respectively. We intend to apply to list our publicly-traded Class A Stock and Public Warrants on the NYSE under the symbols “UWMC” and “UWMCW,” respectively, upon the closing of the Business Combination.

Pursuant to our current certificate of incorporation, we are providing our Public Stockholders with the opportunity to redeem, upon the closing of the Business Combination, shares of Class A Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Closing of the Business Combination (which includes any portion of the interest earned on the funds held in the Trust Account and not previously released to us to fund (i) working capital requirements and (ii) regulatory compliance requirements and other costs related thereto (“Regulatory Withdrawals”) (up to an aggregate of $1,100,000 annually) and (iii) to pay our franchise and income taxes). The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commission totaling $14,875,000 that we will pay to the underwriters of our IPO or transaction expenses incurred in connection with the Business Combination. For illustrative purposes, based on the balance of the Trust Account of $425,323,144 as of September 30, 2020, the estimated per share redemption price would have been approximately $10.01. Public Stockholders may elect to redeem their shares even if they vote for or against the Business Combination. A Public Stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 20% of the shares of Class A Stock included in the Public Units sold in our IPO. We refer to this as the “20% threshold.” We have no specified maximum redemption threshold under our current certificate of incorporation, other than the aforementioned 20% threshold. Each redemption of shares of Class A Stock by our Public Stockholders will reduce the amount in the Trust Account. The Business Combination Agreement provides that the obligation of SFS Corp., UWM LLC and UWM (the “UWM Entities”) to consummate the Business Combination is conditioned on the total of (i) the amount in the Trust Account, after giving effect to redemptions of Public Shares, (ii) the proceeds from the Private Placement and (iii) all funds held by us outside of the Trust Account and immediately available to us, equaling or exceeding $712,500,000. This condition to closing in the Business Combination Agreement is for the sole benefit of the UWM Entities and may be waived by the UWM Entities. If, as a result of redemptions of Class A Stock by our Public Stockholders, this condition is not met (or waived), then the UWM Entities may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our Class A Stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001. Holders of our outstanding Public Warrants do not have redemption rights in connection with the Business Combination. Unless otherwise specified, the information in the accompanying proxy statement assumes that none of our Public Stockholders exercise their redemption rights with respect to their shares of Class A Stock.

Our Sponsor and current independent directors (our “Initial Stockholders”), as well as our officers and other current directors, have agreed to waive their redemption rights with respect to their shares of Common Stock in connection with the consummation of the Business Combination, and the Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. Our Initial Stockholders have also agreed to waive their right to a conversion price adjustment with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combination. Currently, our Initial Stockholders own 20% of our issued and outstanding shares of Common Stock, including all of the Founder Shares. Our Initial Stockholders, directors and officers have agreed to vote any shares of the Company’s Common Stock owned by them in favor of the Business Combination. The Founder Shares are subject to transfer restrictions.

We are providing the accompanying proxy statement and accompanying proxy card to our stockholders in connection with the solicitation of proxies to be voted at the Special Meeting (including following any adjournments or postponements of the Special Meeting). Information about the Special Meeting, the Business Combination and other related business to be considered by the Company’s stockholders at the Special Meeting


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is included in the accompanying proxy statement. Whether or not you plan to attend the Special Meeting, we urge all Company stockholders to read the accompanying proxy statement, including the Annexes and the accompanying financial statements of the Company and UWM, carefully and in their entirety. In particular, we urge you to read carefully the section entitled “Risk Factors” beginning on page 59 of the accompanying proxy statement.

After careful consideration, our Board has unanimously approved the Business Combination Agreement and the Business Combination, and unanimously recommends that our stockholders vote “FOR” approval of the Business Combination Agreement and the Business Combination, and “FOR” all other proposals presented to our stockholders in the accompanying proxy statement. When you consider the Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that may conflict with your interests as a stockholder. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—Interests of Certain Persons in the Business Combination” for additional information.

Approval of (i) the Business Combination Proposal, (ii) the Nasdaq Proposal, (iii) the Governance Proposal, (iv) the Incentive Proposal and (v) the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Approval of the Charter Approval Proposal requires the affirmative vote of holders of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting. Directors are elected by a plurality of the votes cast in the Director Election Proposal; this means that the nine individuals nominated for election to the Board who receive the most “FOR” votes (among the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting) will be elected.

Your vote is very important. Whether or not you plan to attend the Special Meeting, please vote as soon as possible by following the instructions in the accompanying proxy statement to make sure that your shares are represented at the Special Meeting. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Special Meeting. Unless waived by the parties to the Business Combination Agreement, the Closing of the Business Combination is conditioned upon the approval of each of the Business Combination Proposal, the Nasdaq Proposal and the Charter Approval Proposal. If any of those proposals are not approved, we will not consummate the Business Combination. The Election of Directors Proposal and the Incentive Plan Proposal are conditioned on the approval of the Business Combination Proposal. The Governance Proposal and the Adjournment Proposal are not conditioned on the approval of any other proposal set forth in this proxy statement.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” each of the proposals presented at the Special Meeting. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the Special Meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting. If you are a stockholder of record and you attend the Special Meeting and wish to vote in person, you may withdraw your proxy and vote in person.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND THAT THE COMPANY REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO THE COMPANY’S TRANSFER AGENT AT LEAST TWO BUSINESS DAYS PRIOR TO THE VOTE AT SUCH MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.


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On behalf of our Board, I would like to thank you for your support of Gores Holdings IV, Inc. and look forward to a successful completion of the Business Combination.

 

  

Sincerely,

December 16, 2020

  

LOGO

  

Alec E. Gores

   Chairman of the Board of Directors

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

The accompanying proxy statement is dated December 16, 2020 and is expected to be first mailed to Company stockholders on or about December 21, 2020.


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NOTICE OF SPECIAL MEETING IN LIEU OF 2021 ANNUAL MEETING OF

STOCKHOLDERS OF GORES HOLDINGS IV, INC.

TO BE HELD JANUARY 20, 2021

To the Stockholders of Gores Holdings IV, Inc.:

NOTICE IS HEREBY GIVEN that a special meeting in lieu of the 2021 annual meeting of the stockholders of Gores Holdings IV, Inc., a Delaware corporation (the “Company”), which, in light of public health concerns regarding the coronavirus (COVID-19) pandemic, will be held via live webcast at https://www.cstproxy.com/goresholdingsiv/2021 on January 20, 2021, at 9:00 a.m. Eastern Time (the “Special Meeting”). The Special Meeting can be accessed by visiting https://www.cstproxy.com/goresholdingsiv/2021, where you will be able to listen to the meeting live and vote during the meeting. Additionally, you have the option to listen to the Special Meeting by dialing +1 888-965-8995 (toll-free within the U.S. and Canada) or +1 415-655-0243 (outside of the U.S. and Canada, standard rates apply). The passcode for telephone access is 45561260#, but please note that you cannot vote or ask questions if you choose to participate telephonically. Please note that you will only be able to access the Special Meeting by means of remote communication.

You are cordially invited to attend the Special Meeting to conduct the following items of business:

 

(1)

Business Combination Proposal—To consider and vote upon a proposal (the “Business Combination Proposal” or “Proposal No. 1”) to approve the Business Combination Agreement, dated as of September 22, 2020 (as it may be amended from time to time, the “Business Combination Agreement”), by and among the Company, SFS Holding Corp., a Michigan corporation (“SFS Corp.”), United Wholesale Mortgage, LLC (f/k/a United Shore Financial Services, LLC), a Michigan limited liability company (“UWM”), and UWM Holdings, LLC, a Delaware limited liability company (“UWM LLC”), a copy of which is attached to this proxy statement as Annex A, and the transactions contemplated thereby. At the closing of the transactions contemplated by the Business Combination Agreement (the “Closing” and, such date, the “Closing Date”), a series of transactions will occur, including the following: (i) UWM LLC will issue to SFS Corp. Class B membership interests in UWM LLC (the “UWM Class B Common Units”) equal to the quotient of the Company Equity Value (as defined below) divided by $10.00, minus the number of shares of the Company’s Class F Common Stock, par value $0.0001 per share (the “Class F Stock”), outstanding immediately prior to the Closing; (b) the Company will contribute to UWM LLC approximately $895,000,000 in cash (which is net of expenses) assuming no redemptions by the Company’s stockholders; (c) UWM LLC will issue to the Company Class A membership interests in UWM LLC (the “UWM Class A Common Units” and, together with the UWM Class B Common Units, the “UWM Common Units”) equal to the number shares of the Company’s Class A Common Stock, par value $0.0001 per share (the “Class A Stock”), outstanding immediately prior to the Closing (after giving effect to (i) redemptions by the Company’s stockholders, if any, (ii) the conversion of shares of the Company’s Class F Stock into shares of Class A Stock and (iii) the issuance of shares of Class A Stock to certain investors who have agreed to purchase from us an aggregate of 50,000,000 shares of Class A Stock); and (d) the Company will issue to SFS Corp. shares of the Company’s Class D Common Stock, no par value (the “Class D Stock”), equal to the number of UWM Class B Common Units issued by UWM LLC to SFS Corp. pursuant to clause “(a)” above (collectively, with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”). In addition to the consideration to be paid at the Closing, SFS Corp. may receive earn-out shares from the Company, issuable in shares of Class D Stock and UWM Class B Common Units, if the price of the Class A Stock exceeds certain thresholds during the five-year period following the Closing. The maximum number of shares to be issued in connection with the earn-out will not exceed six percent of the Company Equity Value, divided by $10.00.

Following the Closing, the Company will have four classes of authorized common stock. The Class A Stock and the Class C Stock will have one vote per share. The Class B Stock and the Class D Stock will have ten votes per share. SFS Corp., which is controlled by Mat Ishbia, the CEO and President of UWM, and Jeff Ishbia, the founder of UWM, will hold 100% of the Class D Stock and will control 79% of the combined voting power of the capital stock of the Post-Combination Company (Proposal No. 1);


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(2)

Nasdaq Proposal—To consider and vote upon a proposal to approve, for purposes of complying with applicable Nasdaq listing rules, the issuance of more than 20% of the issued and outstanding common stock, par value $0.0001 per share, of the Company (the “Class A Stock”) and Class F common stock, par value $0.0001 per share, of the Company (the “Class F Stock” and, prior to the effectiveness of the Proposed Charter, the Class A Stock together with the Class F Stock, and, upon the effectiveness of the Proposed Charter, the Class A Stock, Class B Stock, Class C Stock and Class D Stock, together, the “Common Stock”) and voting power in connection with the Business Combination and the Private Placement (as defined below) (Proposal No. 2);

 

(3)

Charter Approval Proposal—To consider and act upon a proposal to adopt the proposed Second Amended and Restated Certificate of Incorporation of the Company (the “Proposed Charter”) in the form attached hereto as Annex B (Proposal No. 3);

 

(4)

Governance Proposal—To consider and act upon, on a non-binding advisory basis, a separate proposal with respect to certain governance provisions in the Proposed Charter in accordance with United States Securities and Exchange Commission (“SEC”) requirements (Proposal No. 4);

 

(5)

Director Election Proposal—To consider and vote upon a proposal to elect nine directors to serve staggered terms on our Board until the 2022, 2023 and 2024 annual meetings of stockholders, as applicable, and until their respective successors are duly elected and qualified (Proposal No. 5);

 

(6)

Incentive Plan Proposal—To consider and vote upon a proposal to approve and adopt the UWM Corporation 2020 Omnibus Incentive Plan (the “Incentive Plan”), including the authorization of the initial share reserve under the Incentive Plan, a copy of which is attached as Annex G (Proposal No. 6); and

 

(7)

Adjournment Proposal—To consider and vote upon a proposal to approve the adjournment of the Special Meeting to a later date or dates, (A) to ensure that any supplement or amendment to this proxy statement that the Board has determined in good faith is required by applicable law to be disclosed to the Company stockholders and for such supplement or amendment to be promptly disseminated to Company stockholders prior to the Special Meeting, (B) if, as of the time for which the Special meeting is originally scheduled, there are insufficient shares of Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Special Meeting or (C) to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal or the Incentive Plan Proposal. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal or the Incentive Plan Proposal (Proposal No. 7).

The above matters are more fully described in this proxy statement, which also includes, as Annex A, a copy of the Business Combination Agreement. We urge you to read carefully this proxy statement in its entirety, including the Annexes and accompanying financial statements of the Company and UWM.

The record date for the Special Meeting is December 15, 2020. Only stockholders of record at the close of business on that date may vote at the Special Meeting or any adjournment thereof. A complete list of our stockholders of record entitled to vote at the Special Meeting will be available for ten days before the Special Meeting at our principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the Special Meeting.

Gores Sponsor IV, LLC, a Delaware limited liability company (our “Sponsor”), and Mr. Randall Bort, Mr. William Patton and Mr. Jeffrey Rea, the Company’s independent directors (together with the Sponsor, the “Initial Stockholders”), officers and other current directors have agreed to vote any of the shares of Class F Stock that are currently owned by our Initial Stockholders (the “Founder Shares”) and any Public Shares purchased during or after our initial public offering (our “IPO”) in favor of our Business Combination. Currently, our Initial Stockholders own 20% of our issued and outstanding shares of Common Stock, including all of the Founder Shares.


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Pursuant to our current certificate of incorporation, we will provide our Public Stockholders with the opportunity to redeem, upon the closing of the Business Combination, shares of the Company’s Class A Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Closing of the Business Combination (which includes any portion of the interest earned on the funds held in the Trust Account and not previously released to us to fund (i) working capital requirements and (ii) regulatory compliance requirements and other costs related thereto (“Regulatory Withdrawals”) (up to an aggregate of $1,100,000 annually) and (iii) to pay our franchise and income taxes). The per-share amount we will distribute to our stockholders who properly redeem their shares will not be reduced by the deferred underwriting commission totaling $14,875,000 that we will pay to the underwriters of our IPO, as well as other transaction expenses incurred in connection with the Business Combination. For illustrative purposes, based on the balance of our Trust Account of $425,323,144 as of September 30, 2020, the estimated per share redemption price would have been approximately $10.01. Public Stockholders may elect to redeem their shares even if they vote for or against the Business Combination. A Public Stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 20% of the shares of Common Stock included in the Public Units sold in our IPO. We have no specified maximum redemption threshold under our current certificate of incorporation, other than the aforementioned 20% threshold. Each redemption of shares of Class A Stock by our Public Stockholders will reduce the amount in the Trust Account. The Business Combination Agreement provides that the obligation of SFS Corp., UWM LLC and UWM (the “UWM Entities”) to consummate the Business Combination is conditioned on the total of (i) the amount in the Trust Account, after giving effect to redemptions of Public Shares, (ii) the proceeds from the Private Placement and (iii) all funds held by us outside of the Trust Account and immediately available to us, equaling or exceeding $712,500,000. This condition to closing in the Business Combination Agreement is for the sole benefit of the UWM Entities and may be waived by the UWM Entities. If, as a result of redemptions of Class A Stock by our Public Stockholders, this condition is not met (or waived), then the UWM Entities may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our Class A Stock in an amount that would result in the Company’s failure to have net tangible assets in equaling or exceeding $5,000,001. Holders of our outstanding Public Warrants do not have redemption rights in connection with the Business Combination.

Our Initial Stockholders, current officers and other current directors have agreed to waive their redemption rights with respect to their shares of our Common Stock in connection with the consummation of the Business Combination, and the Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. Our Initial Stockholders have also agreed to waive their right to a conversion price adjustment with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combination.

The Closing of the Business Combination is conditioned on the approval of each of the Business Combination Proposal, the Charter Approval Proposal, and the Nasdaq proposal. If any of those proposals are not approved, we will not consummate the Business Combination. The Election of Directors Proposal and the Incentive Plan Proposal are conditioned on the approval of the Business Combination Proposal. The Governance Proposal and the Adjournment Proposal are not conditioned on the approval of any other proposal set forth in this proxy statement.

We anticipate raising additional proceeds to fund the Business Combination and related transactions through a private placement pursuant to which certain investors have agreed to purchase an aggregate of 50,000,000 shares of Class A Stock (the “Private Placement”) for a discounted price of $10.00 per share for an aggregate commitment of approximately $500,000,000.

A majority of the issued and outstanding shares of the Company’s Common Stock entitled to vote as of the record date at the Special Meeting must be present, in person or represented by proxy, at the Special Meeting to constitute a quorum and in order to conduct business at the Special Meeting. Approval of (i) the Business Combination Proposal, (ii) the Nasdaq Proposal, (iii) the Governance Proposal, (iv) the Incentive Proposal and


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(v) the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Approval of the Charter Approval Proposal requires the affirmative vote of holders of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting. Directors are elected by a plurality of the votes cast in the Director Election Proposal; this means that the nine individuals nominated for election to the Board who receive the most “FOR” votes (among the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting) will be elected. The Board unanimously recommends that you vote “FOR” each of these proposals.

 

By Order of the Board of Directors

LOGO

Alec E. Gores

Chairman of the Board of Directors

Beverly Hills, California

December 16, 2020


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TABLE OF CONTENTS

 

SUMMARY TERM SHEET

     1  

FREQUENTLY USED TERMS

     6  

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

     11  

SUMMARY OF THE PROXY STATEMENT

     29  

SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

     49  

SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OTHER INFORMATION OF UWM

     51  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     54  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     56  

RISK FACTORS

     59  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     111  

COMPARATIVE SHARE INFORMATION

     127  

SPECIAL MEETING IN LIEU OF 2021 ANNUAL MEETING OF COMPANY STOCKHOLDERS

     129  

PROPOSAL NO. 1—APPROVAL OF THE BUSINESS COMBINATION

     137  

PROPOSAL NO. 2—APPROVAL OF THE ISSUANCE OF MORE THAN 20% OF THE COMPANY’S ISSUED AND OUTSTANDING COMMON STOCK IN CONNECTION WITH THE BUSINESS COMBINATION AND THE PRIVATE PLACEMENT

     180  

PROPOSAL NO. 3—APPROVAL OF THE PROPOSED CHARTER

     182  

PROPOSAL NO. 4—APPROVAL OF CERTAIN GOVERNANCE PROVISIONS IN THE PROPOSED CHARTER

     188  

PROPOSAL NO. 5—ELECTION OF DIRECTORS TO THE BOARD OF DIRECTORS

     191  

PROPOSAL  NO. 6—APPROVAL OF THE INCENTIVE PLAN, INCLUDING THE AUTHORIZATION OF THE INITIAL SHARE RESERVE UNDER THE INCENTIVE PLAN

     194  

PROPOSAL NO. 7—THE ADJOURNMENT PROPOSAL

     200  

INFORMATION ABOUT THE COMPANY

     201  

THE COMPANY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     214  

UWM’S BUSINESS

     219  

UWM’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     241  

UWM MANAGEMENT

     266  

EXECUTIVE COMPENSATION

     267  

MANAGEMENT AFTER THE BUSINESS COMBINATION

     272  

DESCRIPTION OF SECURITIES

     279  

BENEFICIAL OWNERSHIP OF SECURITIES

     296  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     299  

PRICE RANGE OF SECURITIES AND DIVIDENDS

     303  

INDEPENDENT REGISTERED ACCOUNTING FIRMS

     304  

APPRAISAL RIGHTS

     304  

HOUSEHOLDING INFORMATION

     304  

TRANSFER AGENT AND REGISTRAR

     304  

SUBMISSION OF STOCKHOLDER PROPOSALS

     304  

FUTURE STOCKHOLDER PROPOSALS

     305  

WHERE YOU CAN FIND MORE INFORMATION

     306  

INDEX TO CONSOLIDATED FINANCIAL INFORMATION

     F-1  

 

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SUMMARY TERM SHEET

This summary term sheet, together with the sections entitled “Questions and Answers About the Proposals for Stockholders” and “Summary of the Proxy Statement,” summarizes certain information contained in this proxy statement, but does not contain all of the information that is important to you. You should read carefully this entire proxy statement, including the attached Annexes, for a more complete understanding of the matters to be considered at the Special Meeting. In addition, for definitions used commonly throughout this proxy statement, including this summary term sheet, please see the section entitled “Frequently Used Terms.”

 

   

Gores Holdings IV, Inc., a Delaware corporation, which we refer to as “we,” “us,” “our,” or the “Company,” is a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

 

   

There are currently 53,125,000 shares of Common Stock, par value $0.0001 per share, of the Company, issued and outstanding, consisting of (i) 42,500,000 shares of Class A Stock originally sold as part of the IPO, and (ii) 10,625,000 shares of Class F Stock that were initially issued to our Sponsor, prior to our IPO. There are currently no shares of Company preferred stock issued and outstanding. In addition, we issued 10,625,000 Public Warrants to purchase Class A Stock (originally sold as part of the Public Units issued in our IPO) as part of our IPO along with 5,250,000 Private Placement Warrants issued to our Sponsor in a private placement on January 28, 2020 (the “IPO Closing Date”). Each Public Warrant entitles its holder to purchase one share of our Class A Stock at an exercise price of $11.50 per share, to be exercised only for a whole number of shares of our Class A Stock. The Public Warrants will become exercisable on the later of 30 days after the completion of our initial business combination or 12 months from the closing of the IPO, and they expire five years after the completion of our initial business combination or earlier upon redemption or liquidation. Once the Public Warrants become exercisable, the Company may redeem the outstanding Public Warrants at a price of $0.01 per warrant, if the last sale price of the Company’s Class A Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading day period ending on the third business day before the Company sends the notice of redemption to the warrant holders. The Private Placement Warrants, however, are non-redeemable so long as they are held by our Sponsor or its permitted transferees. For more information regarding the Public Warrants, please see the section entitled “Description of Securities.”

 

   

UWM is currently a wholly owned subsidiary of SFS Corp. Prior to the Closing, SFS Corp. will contribute all of the membership interests of UWM to UWM LLC such that, after the contribution, UWM will be a wholly owned subsidiary of UWM LLC.

 

   

The amount of cash consideration payable to UWM LLC at the Closing is (a) the Available Cash minus (b) certain transaction fees and expenses of the Company and minus (c) additional amounts that may be mutually agreed upon by the Company and UWM. The consideration to be distributed to SFS Corp. at the Closing will consist of (i) a number of UWM Class B Common Units equal to (A) the quotient of the Company Equity Value divided by $10.00, minus (B) the number of outstanding shares of Class F Stock as of immediately prior to the Closing, and (ii) a number of shares of Class D Stock equal to the number of UWM Class B Common Units issued by UWM LLC to SFS Corp. pursuant to clause (i) above. For more information about the Business Combination Agreement, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Business Combination Agreement.”

 

   

The Private Placement Investors have agreed to purchase in the aggregate 50,000,000 shares of Class A Stock, for approximately $500,000,000 of gross proceeds, in the Private Placement. In this proxy statement, we assume that all of the gross proceeds from the Private Placement, in addition to funds from the Company’s trust account (the “Trust Account”) available to the Company, plus any interest accrued thereon, will be used to fund the cash consideration payable pursuant to the Business Combination Agreement and the payment of certain transaction expenses.

 

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It is anticipated that, upon completion of the Business Combination, and assuming that no shares are elected to be redeemed: (i) the Company’s Public Stockholders (other than the Private Placement Investors) will retain an economic interest of approximately 41% of the capital stock of the Post-Combination Company; (ii) the Private Placement Investors will hold an economic interest of approximately 49% of the capital stock of the Post-Combination Company (such that Public Stockholders, including Private Placement Investors, will own approximately 90% of the Post-Combination Company); and (iii) our Initial Stockholders (including our Sponsor) will retain an economic interest of approximately 10% of the capital stock of the Post-Combination Company. SFS Corp. will not have any economic interest in the capital stock of the Post-Combination Company, but will hold 79% of the combined voting power of the capital stock of the Post-Combination Company, through its ownership of Class D Stock, due to the Voting Limitation. Without the Voting Limitation, SFS Corp. would have 99% of the combined voting power capital stock of the Post-Combination Company. It is anticipated that, upon completion of the Business Combination, and assuming that no shares are elected to be redeemed: (a) the Post-Combination Company will hold approximately 6% of the outstanding UWM Common Units and (b) SFS Corp. will hold approximately 94% of the outstanding UWM Common Units. UWM LLC, in turn, will own 100% of UWM, the operating company.

In addition, subject to the approval of the Incentive Plan Proposal and the authorization of the initial share reserve, the Company will have the ability to issue up to 80,000,000 shares of Class A Stock pursuant to awards under the Incentive Plan.

 

   

The ownership percentage with respect to the Post-Combination Company following the Business Combination (i) does not take into account (a) warrants to purchase Class A Stock that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares upon completion of the Business Combination under the Incentive Plan, or (c) any Earn-Out Shares that may be issued to SFS Corp. if the price of the Class A Stock exceeds certain thresholds during the five-year period following the Closing, but (ii) does include Founder Shares, which will be converted into shares of Class A Stock at the closing of the Business Combination on a one-for-one basis. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Company’s existing stockholders in the Post-Combination Company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement—Impact of the Business Combination on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information” and “Proposal No. 6—Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve Under the Incentive Plan.”

 

   

Pursuant to the Proposed Charter, the Class A Stock and Class C Stock will each provide holders with one vote on all matters submitted to a vote of stockholders, and the Class B Stock and Class D Stock will each provide holders with 10 votes on all matters submitted to a vote of stockholders. The holders of Class C Stock and Class D Stock will not have any of the economic rights (including rights to dividends and distributions upon liquidation) provided to holders of Class A Stock and Class B Stock. These attributes are summarized in the following table:

 

Class of Common Stock

   Votes      Economic
Rights

Class A Stock

     1      Yes

Class B Stock

     10      Yes

Class C Stock

     1      No

Class D Stock

     10      No

The Restated Charter provides that, in no event shall a holder of Common Stock, together with one or more other “includable corporations” (as defined in the Code) of such holder or entities disregarded as separate from such holder for U.S federal income tax purposes, be entitled to vote in excess of 79% of the voting power of the holders of the outstanding shares then voting together as a single class on such matter (the “Voting Limitation”).

 

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The Proposed Charter provides that each share of Class B Stock and Class D Stock, as applicable, will automatically convert into one share of Class A Stock or Class C Stock, as applicable, (a) upon any sale or other transfer of such share to a third party other than a permitted transferee or (b) if SFS Corp. owns less than 10% of the outstanding Common Stock.

 

   

Our management and Board considered various factors in determining whether to approve the Business Combination Agreement and the Business Combination, including the size and breadth of UWM’s business, including that UWM is currently the #2 mortgage originator and the #1 wholesale mortgage originator, and UWM’s consistent growth and accelerating scale. For more information about our decision-making process, see the section entitled “Proposal No. 1—Approval of the Business Combination—The Company’s Board of Directors’ Reasons for the Approval of the Business Combination.”

 

   

Pursuant to our current certificate of incorporation, in connection with the Business Combination, holders of our Public Shares may elect to have their Class A Stock redeemed for cash at the applicable redemption price per share calculated in accordance with our current certificate of incorporation. As of September 30, 2020, the redemption price would have been approximately $10.01 per share. If a holder exercises its redemption rights, then such holder will be exchanging its shares of our Class A Stock for cash and will no longer own shares of the Post-Combination Company. Such a holder will be entitled to receive cash for its Public Shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our Transfer Agent, Continental Stock Transfer & Trust Company, at least two business days prior to the Special Meeting. Please see the section entitled “Special Meeting in Lieu of 2021 Annual Meeting of Company Stockholders—Redemption Rights.”

 

   

In addition to voting to approve the Business Combination Proposal at the Special Meeting, the stockholders of the Company will be asked to vote on:

 

   

a proposal to approve, for purposes of complying with applicable Nasdaq Listing Rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock in connection with the Business Combination and the Private Placement (the “Nasdaq Proposal” or “Proposal No. 2”);

 

   

a proposal to adopt the Proposed Charter in the form attached hereto as Annex B (the “Charter Approval Proposal” or “Proposal No. 3”);

 

   

a separate proposal with respect to certain governance provisions in the Proposed Charter, which are being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis (the “Governance Proposal” or “Proposal No. 4”);

 

   

a proposal to elect nine directors to serve staggered terms on our Board until the 2022, 2023 and 2024 annual meetings of stockholders, as applicable, and until their respective successors are duly elected and qualified (the “Director Election Proposal” or “Proposal No. 5”);

 

   

a proposal to approve and adopt the Incentive Plan, including the authorization of the initial share reserve under the Incentive Plan attached hereto as Annex G (the “Incentive Plan Proposal” or “Proposal No. 6”); and

 

   

a proposal to adjourn the Special Meeting to a later date or dates, (A) to ensure that any supplement or amendment to this proxy statement that the Board has determined in good faith is required by applicable law to be disclosed to Company stockholders and for such supplement or amendment to be promptly disseminated to Company stockholders prior to the Special Meeting, (B) if, as of the time for which the Special meeting is originally scheduled, there are insufficient shares of Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Special Meeting or (C) to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the

 

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Director Election Proposal or the Incentive Plan Proposal (the “Adjournment Proposal” or “Proposal No. 7”).

Please see the sections entitled “Proposal No. 1—Approval of the Business Combination,” “Proposal No. 2—Approval of the Issuance of More than 20% of the Company’s Issued and Outstanding Common Stock in Connection with the Business Combination and the Private Placement,” “Proposal No. 3—Approval of the Proposed Charter,” “Proposal No. 4—Approval of Certain Governance Provisions in the Proposed Charter,” “Proposal No. 5—Election of Directors to the Board of Directors,” “Proposal No. 6—Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve under the Incentive Plan,” and “Proposal No. 7—The Adjournment Proposal.” The Business Combination is conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal and the Charter Approval Proposal at the Special Meeting. Each of the proposals other than the Business Combination Proposal, the Nasdaq Proposal and the Charter Approval Proposal is conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal and the Charter Approval Proposal, other than the Governance Proposal and the Adjournment Proposal, which are not conditioned on the approval of any other proposal set forth in this proxy statement.

 

   

Upon consummation of the Business Combination, our Board anticipates increasing its initial size from four directors to nine directors, with each Class I director having a term that expires at the post-combination company’s annual meeting of stockholders in 2022, each Class II director having a term that expires at the Post-Combination Company’s annual meeting of stockholders in 2023 and each Class III director having a term that expires at the Post-Combination Company’s annual meeting of stockholders in 2024, or in each case until their respective successors are duly elected and qualified, or until their earlier resignation, removal or death. Please see the sections entitled “Proposal No. 5—Election of Directors to the Board of Directors” and “Management After the Business Combination” for additional information.

 

   

Unless waived by the parties to the Business Combination Agreement, and subject to applicable law, the closing of the Business Combination is subject to a number of conditions set forth in the Business Combination Agreement including, among others, receipt of certain state and federal regulatory approvals, receipt of certain stockholder approvals contemplated by this proxy statement and the availability of minimum cash amounts at closing. For more information about the closing conditions to the Business Combination, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Business Combination Agreement—Conditions to Closing of the Business Combination.”

 

   

The Business Combination Agreement may be terminated at any time prior to the consummation of the Business Combination upon agreement of the parties thereto, or by the Company, on the one hand, or SFS Corp. and UWM LLC, on the other hand, in specified circumstances. For more information about the termination rights under the Business Combination Agreement, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Business Combination Agreement—Termination.”

 

   

The proposed Business Combination involves numerous risks. For more information about these risks, please see the section entitled “Risk Factors.”

In considering the recommendation of our Board to vote for the proposals presented at the Special Meeting, including the Business Combination Proposal, you should be aware that aside from their interests as stockholders, our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from, or in addition to, the interests of our stockholders generally. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and transaction agreements and in recommending to our stockholders that they vote in favor of the proposals presented at the Special Meeting, including the Business Combination Proposal. Stockholders should take these interests into account in deciding

 

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whether to approve the proposals presented at the Special Meeting, including the Business Combination Proposal. These interests include, among other things:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the proposed Business Combination;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to conversion price adjustments with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combination;

 

   

the fact that our Sponsor paid an aggregate of $25,000 for 11,500,000 Founder Shares in July, 2019 and, after giving effect to the cancellation of 875,000 Founder Shares on March 9, 2020, the remaining 10,625,000 Founder Shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at approximately $106,250,000 but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by January 28, 2022;

 

   

the fact that our Sponsor paid an aggregate of approximately $10,500,000 for its 5,250,000 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by January 28, 2022;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by January 28, 2022;

 

   

that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees; and

 

   

that our Sponsor has entered into a Subscription Agreement with the Company, pursuant to which the Sponsor has committed to purchase 14,460,000 shares of Class A Stock in the Private Placement for an aggregate commitment of approximately $144,600,000, provided that our Sponsor has the right to syndicate the Class A Common Stock purchased under such Subscription Agreement in advance of the Closing.

 

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FREQUENTLY USED TERMS

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “Gores” refer to Gores Holdings IV, Inc., and the term “Post-Combination Company” refers to the Company following the consummation of the Business Combination. In this proxy statement:

Amended and Restated Bylaws” means the proposed Amended and Restated Bylaws of the Post-Combination Company, a form of which is attached hereto as Annex B, which will become the Post-Combination Company’s bylaws assuming the consummation of the Business Combination.

Board” or “Board of Directors” means the board of directors of the Company.

Business Combination” means the transactions contemplated by the Business Combination Agreement.

Business Combination Agreement” means that certain Business Combination Agreement, dated as of September 22, 2020, by and among the Company, SFS Corp, UWM LLC and UWM, a copy of which is attached to this proxy statement as Annex A.

Class A Stock” means the shares of Class A Common Stock, par value $0.0001 per share, of the Company.

Class B Stock” means the shares of Class B Common Stock, par value $0.0001 per share, of the Company.

Class C Stock” means the shares of Class C Common Stock, no par value, of the Company.

Class D Stock” means the shares of Class D Common Stock, no par value, of the Company.

Class F Stock” means the shares of Class F Common Stock, par value $0.0001 per share, of the Company.

Code” means the Internal Revenue Code of 1986, as amended.

Common Stock” means the shares of common stock of the Company, consisting of Class A Stock and Class F Stock, prior to the effectiveness of the Proposed Charter, and consisting of Class A Stock, Class B Stock, Class C Stock and Class D Stock upon the effectiveness of the Proposed Charter.

Company” means Gores Holdings IV, Inc., a Delaware corporation.

“current certificate of incorporation” means our amended and restated certificate of incorporation, dated January 23, 2020.

Deferred Discount” means any deferred underwriting commissions, which amount will be payable upon consummation of an initial business combination.

DGCL” means the General Corporation Law of the State of Delaware.

DLLCA” means the General Limited Liability Company Act of the State of Delaware.

Earn-Out Shares” means the additional UWM Common Units and shares of Class D Stock that SFS Corp. will be entitled to receive under the Business Combination Agreement if the volume weighted average closing sale price of one share of Class A Stock on Nasdaq exceeds certain thresholds for a period of at least 10 days out of 30 consecutive trading days at any time during the five-year period following the closing of the Business Combination.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

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Fannie Mae” means the Federal National Mortgage Association, a government-sponsored enterprise that purchases qualifying mortgage loans from mortgage lenders, packages them together, and sells them as a mortgage-backed security to investors on the secondary market.

FHA” means the Federal Housing Administration, a governmental agency that provides mortgage insurance on loans made by FHA-approved lenders.

Forward-settling Loan Sales Commitment” or “FLSC” or “TBA” means a forward derivative that requires a mortgage lender to commit to deliver at a specific future date a mortgage-backed security issued by Fannie Mae, Freddie Mac or guaranteed by Ginnie Mae which is collateralized by an undesignated pool of mortgage loans.

Founder Shares” means the 10,625,000 shares of Class F Stock that are currently owned by our Initial Stockholders, of which 10,550,000 shares are held by our Sponsor and an aggregate of 75,000 shares are held by each of Mr. Randall Bort, Mr. William Patton and Mr. Jeffrey Rea.

Freddie Mac” means the Federal Home Loan Mortgage Corporation, a government-sponsored enterprise that purchases qualifying mortgage loans from mortgage lenders, packages them together, and sells them as a mortgage-backed security to investors on the secondary market.

Ginnie Mae” means the Government National Mortgage Association, a government-owned corporation that guarantees mortgage-backed securities that have been guaranteed by a government agency, mainly the Federal Housing Administration and the Veterans Administration.

GSE” means a government-sponsored enterprise, such as Fannie Mae and Freddie Mac.

Incentive Plan” means the UWM Corporation 2020 Omnibus Incentive Plan, a copy of which is attached to this proxy statement as Annex G.

Independent Mortgage Advisors” means licensed residential mortgage officers or entities, including brokers that arrange for funding of mortgage loans, or banks, credit unions or other entities that use their own funds or warehouse facilities to fund mortgage loans, but in any case do not underwrite or otherwise make the credit decision with regard to such mortgage loans.

Initial Stockholders” means our Sponsor and Mr. Randall Bort, Mr. William Patton and Mr. Jeffrey Rea, the Company’s independent directors.

interest rate lock commitment” or “IRLC” means a binding agreement by a mortgage lender with a borrower to extend a mortgage loan at a specified interest rate and term within a specified period of time.

Investment Company Act” means the Investment Company Act of 1940, as amended.

IPO” means the Company’s initial public offering, consummated on January 28, 2020, through the sale of 42,500,000 Public Units (including 2,500,000 units sold pursuant to the underwriters’ partial exercise of their over-allotment option) at $10.00 per unit.

Ishbia Parties” means Jeff Ishbia and Mat Ishbia.

JOBS Act” means the Jumpstart Our Business Startups Act of 2012.

KPMG” means KPMG LLP, an independent registered public accounting firm.

loan officers” means the individual employees of the clients, each of whom is licensed, or exempt from licensure, in the state or states in which he or she operates.

 

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Moelis” means Moelis & Company LLC.

Morrow” means Morrow Sodali, proxy solicitor to the Company.

mortgage-backed securities” or “MBS” means securities that are secured by a pool of mortgage loans, which does not include the MSRs which are separated from the mortgage loans prior to the mortgage loans being placed in the pool and are therefore not part of the collateral.

mortgage servicing rights” or “MSRs” means the right to service a mortgage loan for a fee, which rights are separated from the mortgage loan once the mortgage loan is sold in the secondary market.

Nasdaq” means the Nasdaq Capital Market.

NYSE” means the New York Stock Exchange.

Post-Combination Company’s Board” means the board of directors of the Post-Combination Company.

Private Placement” means the private placement of approximately 50,000,000 shares of Class A Stock with a limited number of qualified institutional buyers and accredited investors (as defined by Rule 501 of Regulation D) pursuant to Section 4(a)(2) of the Securities Act, for gross proceeds to the Company in an aggregate amount of approximately $500,000,000.

Private Placement Investors” means certain “qualified institutional investors” and “accredited investors” (as defined in Rules 144A and 501 under the Securities Act, respectively).

Private Placement Warrants” means the warrants held by our Sponsor that were issued to our Sponsor on the IPO Closing Date, each of which is exercisable for one share of Class A Stock, in accordance with its terms.

Proposed Charter” means the proposed Second Amended and Restated Certificate of Incorporation of the Company, a form of which is attached hereto as Annex B, which will become the Post-Combination Company’s certificate of incorporation upon the approval of the Charter Approval Proposal, assuming the consummation of the Business Combination.

Public Shares” means shares of Class A Stock included in the Public Units issued in the Company’s IPO.

“Public Stockholders” means holders of Public Shares, including our Initial Stockholders to the extent our Initial Stockholders hold Public Shares; provided, that our Initial Stockholders are considered a “Public Stockholder” only with respect to any Public Shares held by them.

Public Units” means one share of Class A Stock and one-fourth of one Public Warrant of the Company, whereby each whole Public Warrant entitles the holder thereof to purchase one share of Class A Stock at an exercise price of $11.50 per share of Class A Stock, sold in the IPO.

Public Warrants” means the warrants included in the Public Units issued in the Company’s IPO, each of which is exercisable for one share of Class A Stock, in accordance with its terms.

Preferred Stock” means the shares of Preferred Stock, par value $0.0001 per share, of the Company.

Qualified Mortgage” loan means a mortgage loan that meets certain borrower and lender standards established by the Consumer Financial Protection Bureau.

Registration Rights Agreement” means that certain Amended and Restated Registration Rights and Lock-Up Agreement to be entered into at the closing of the Business Combination, by the Company, our Sponsor, Mr. Randall Bort, Mr. William Patton, Mr. Jeffrey Rea and SFS Corp, and substantially in the form attached to this proxy statement as Annex E.

 

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Regulatory Withdrawals” means funds released to the Company from the Trust Account to fund regulatory compliance requirements and other costs related thereto, subject to an annual limit of $1,100,000, for a maximum of 24 months.

Related Agreements” means, collectively, the Registration Rights Agreement, the Tax Receivable Agreement and the Subscription Agreement.

residential mortgage loan” means a loan extended by a mortgage lender to a borrower for the purpose of (1) purchasing one to four family residential real property or (2) refinancing an existing loan which was originally extended for such purpose, which loan is secured by the real property.

Restricted Gores Stockholders” means, collectively, our Sponsor, Mr. Randall Bort, Mr. William Patton and Mr. Jeffrey Rea.

Restricted Stockholders” means the Restricted Gores Stockholders and SFS Corp.

Retail Mortgage Lender” means a lender that both offers its mortgage loans directly to individual borrowers and underwrites the mortgage loans. Certain Retail Mortgage Lenders also package the mortgage loans for sale in the secondary market.

SEC” means the United States Securities and Exchange Commission.

Securities Act” means the Securities Act of 1933, as amended.

SFS Corp.” means SFS Holding Corp., a Michigan corporation.

SOX” means the Sarbanes-Oxley Act of 2002.

Special Meeting” means the special meeting in lieu of the 2021 annual meeting of the stockholders of the Company that is the subject of this proxy statement.

Sponsor” means Gores Sponsor IV, LLC, a Delaware limited liability company.

Subscription Agreements” means, collectively, those certain subscription agreements entered into on September 22, 2020, between the Company and the Private Placement Investors, including our Sponsor, pursuant to which such investors have agreed to purchase an aggregate of 50,000,000 shares of Class A Stock in the Private Placement, and substantially in the form attached to this proxy statement as Annex D.

The Gores Group” means The Gores Group LLC, an affiliate of our Sponsor.

Tax Receivable Agreement” means that certain Tax Receivable Agreement between SFS Corp. and Post- Combination Company which will be entered into in connection with and at the time of the closing of the Business Combination, and substantially in the form attached to this proxy statement as Annex F.

To Be Announced market” or “TBA market” means a secondary market where FLSCs or TBAs are sold by lenders seeking to hedge the risk that market interest rates may change and lock in a price for the mortgages they are in the process of originating.

Transfer Agent” means Continental Stock Transfer & Trust Company.

Trust Account” means the trust account of the Company that holds the proceeds from the Company’s IPO.

Trustee” means Continental Stock Transfer & Trust Company.

USDA loans” means mortgage loans guaranteed by the United States Department of Agriculture.

 

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UWM” means United Wholesale Mortgage LLC (f/k/a United Shore Financial Services, LLC), a Michigan limited liability company.

UWM Common Units” means units of membership interests in UWM LLC designated in the UWM A&R LLCA as “Common Units.”

UWM Entities” means, collectively, SFS Corp., UWM LLC and UWM.

UWM LLC” means UWM Holdings, LLC, a Delaware limited liability company.

UWM Stockholders” means the stockholders of UWM, through their ownership of SFS Corp.

UWM Unit Exchange” means the exchange by SFS Corp. (or its transferees or other assignees) of (i) UWM Common Units and the stapled Class D Stock for Class B Stock or (ii) UWM Common Units and the stapled Class C Stock for Class A Stock.

Voting Stock Consideration” means approximately 1,502,042,686 shares of Class D Stock to be issued to SFS Corp. pursuant to the Business Combination Agreement.

warehouse facilities” means loan funding facilities, which are primarily in the form of master repurchase agreements, that are used to fund the origination of mortgage loans.

Weil” means Weil, Gotshal & Manges LLP, counsel to the Company.

Wholesale Mortgage Lender” means a lender that originates (underwrites) mortgage loans arranged by Independent Mortgage Advisors, either by using its own funds to close the loan, or by acquiring such mortgage loan that close in the name, and use the funds, of an Independent Mortgage Advisor shortly after closing.

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

The questions and answers below highlight only selected information from this document and only briefly address some commonly asked questions about the proposals to be presented at the Special Meeting, including with respect to the proposed Business Combination. The following questions and answers do not include all the information that is important to our stockholders. We urge stockholders to read carefully this entire proxy statement, including the Annexes and the other documents referred to herein, to fully understand the proposed Business Combination and the voting procedures for the Special Meeting, which, in light of public health concerns regarding the coronavirus (COVID-19) pandemic, will be held via live webcast at https://www.cstproxy.com/goresholdingsiv/2021 on January 20, 2021, at 9:00 a.m. Eastern Time. The Special Meeting can be accessed by visiting https://www.cstproxy.com/goresholdingsiv/2021, where you will be able to listen to the meeting live and vote during the meeting. Additionally, you have the option to listen to the Special Meeting by dialing +1 888-965-8995 (toll-free within the U.S. and Canada) or +1 415-655-0243 (outside of the U.S. and Canada, standard rates apply). The passcode for telephone access is 45561260#, but please note that you cannot vote or ask questions if you choose to participate telephonically. Please note that you will only be able to access the Special Meeting by means of remote communication.

 

Q:

Why am I receiving this proxy statement?

 

A:

Our stockholders are being asked to consider and vote upon a proposal to approve the Business Combination Agreement and the Business Combination, and other related proposals. We have entered into the Business Combination Agreement and you are being asked to vote on the Business Combination. A copy of the Business Combination Agreement is attached to this proxy statement as Annex A.

This proxy statement and its Annexes contain important information about the proposed Business Combination and the other matters to be acted upon at the Special Meeting. You should read this proxy statement and its Annexes carefully and in their entirety.

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement and its Annexes.

 

Q:

When and where is the Special Meeting?

 

A:

In light of public health concerns regarding the coronavirus (COVID-19) pandemic, the Special Meeting will be held via live webcast at https://www.cstproxy.com/goresholdingsiv/2021 on January 20, 2021, at 9:00 a.m. Eastern Time. The Special Meeting can be accessed by visiting https://www.cstproxy.com/goresholdingsiv/2021, where you will be able to listen to the meeting live and vote during the meeting. Additionally, you have the option to listen to the Special Meeting by dialing +1 888-965-8995 (toll-free within the U.S. and Canada) or +1 415-655-0243 (outside of the U.S. and Canada, standard rates apply). The passcode for telephone access is 45561260#, but please note that you cannot vote or ask questions if you choose to participate telephonically. Please note that you will only be able to access the Special Meeting by means of remote communication.

 

Q:

What are the specific proposals on which I am being asked to vote at the Special Meeting?

 

A:

The Company’s stockholders are being asked to approve the following proposals:

 

1.

Business Combination Proposal—To approve the Business Combination Agreement and the Business Combination (Proposal No. 1);

 

2.

Nasdaq Proposal—To approve, for purposes of complying with applicable Nasdaq Listing Rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock and voting power in connection with the Business Combination and the Private Placement (Proposal No. 2);

 

3.

Charter Approval Proposal—To consider and act upon a proposal to adopt the Proposed Charter (Proposal No. 3);

 

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4.

Governance Proposal—To consider and act upon a separate proposal with respect to certain governance provisions in the Proposed Charter, which are being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis (Proposal No. 4);

 

5.

Director Election Proposal—To elect nine directors to serve staggered terms on our Board until the 2022, 2023 and 2024 annual meetings of stockholders, as applicable, and until their respective successors are duly elected and qualified (Proposal No. 5);

 

6.

Incentive Plan Proposal—To consider and vote upon a proposal to approve and adopt the Incentive Plan, including the authorization of the initial share reserve (Proposal No. 6); and

 

7.

Adjournment Proposal—To consider and vote upon a proposal to approve the adjournment of the Special Meeting to a later date or dates, (A) to ensure that any supplement or amendment to this proxy statement that the Board has determined in good faith is required by applicable law to be disclosed to Company stockholders and for such supplement or amendment to be promptly disseminated to Company stockholders prior to the Special Meeting, (B) if, as of the time for which the Special Meeting is originally scheduled, there are insufficient shares of Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Special Meeting or (C) to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal or the Incentive Plan Proposal. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Incentive Plan Proposal (Proposal No. 7).

 

Q:

Are the proposals conditioned on one another?

 

A:

Yes. The Closing of the Business Combination is conditioned on the approval of each of the Business Combination Proposal, the Charter Approval Proposal, and the Nasdaq proposal. If any of those proposals are not approved, we will not consummate the Business Combination. The Election of Directors Proposal and the Incentive Plan Proposal are conditioned on the approval of the Business Combination Proposal. The Governance Proposal and the Adjournment Proposal are not conditioned on the approval of any other proposal set forth in this proxy statement. If we do not consummate the Business Combination and fail to complete an initial business combination by January 28, 2022, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to the Public Stockholders.

 

Q:

Why is the Company providing stockholders with the opportunity to vote on the Business Combination?

 

A:

Under our current certificate of incorporation, we must provide all holders of Public Shares with the opportunity to have their Public Shares redeemed upon the consummation of our initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. For business and other reasons, we have elected to provide our stockholders with the opportunity to have their Public Shares redeemed in connection with a stockholder vote rather than a tender offer. Therefore, we are seeking to obtain the approval of our stockholders of the Business Combination Proposal in order to allow our Public Stockholders to effectuate redemptions of their Public Shares in connection with the closing of our Business Combination. The approval of the Business Combination is required under our current certificate of incorporation. In addition, approval of the Business Combination Proposal, the Nasdaq Proposal and the Charter Proposal is also a condition to the closing of the Business Combination under the Business Combination Agreement.

 

Q:

What revenues and profits/losses has UWM generated in the last three years?

 

A:

For the years ended December 31, 2017, 2018 and 2019 and the nine months ended September 30, 2020, UWM had total revenue of $495.3 million, $593.3 million, $1.3 billion and $3.1 billion, respectively, and

 

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  net income of $114.6 million, $91.3 million, $415.1 million and $2.0 billion, respectively. For more information, please see the sections entitled “Selected Consolidated Historical Financial and Other Information of UWM,” “UWM’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Pro Forma Condensed Combined Financial Information.”

 

Q:

What will happen in the Business Combination?

 

A:

At the Closing, among other things, (a) UWM LLC will issue to SFS Corp. a number of UWM Class B Common Units equal to the quotient of the Company Equity Value divided by $10.00, minus the number of outstanding shares of Class F Stock as of immediately prior to Closing; (b) the Company will contribute to UWM LLC an amount in cash equal to the Closing Cash Consideration, which is expected to be approximately $895,000,000 (which is net of expenses) assuming no redemptions by the Company’s stockholders; (c) UWM LLC will issue to the Company such number of UWM Class A Common Units equal to the number of shares of Class A Stock outstanding immediately prior to the Closing (after giving effect to (i) redemptions by the Company’s stockholders, if any, (ii) the conversion of shares of the Company’s Class F Stock into shares of Class A Stock and (iii) the issuance of shares of Class A Stock pursuant to the Subscription Agreements); and (d) the Company will issue to SFS Corp. a number of shares of the Class D Stock equal to the number of UWM Class B Common Units issued by UWM LLC to SFS Corp. pursuant to clause “(a)” above.

Following the Closing, the Company will be organized in an “Up-C” structure in which all of the business of UWM will be held directly or indirectly by UWM LLC, and the Company’s only direct assets will consist of the UWM Class A Common Units as well as cash. Following the Closing, the Company is expected to own approximately six percent of the UWM Common Units and will control UWM LLC as the sole manager of UWM LLC in accordance with the terms of the UWM A&R LLCA to be entered into in connection with the Closing. SFS Corp. is expected to retain approximately 94% of the UWM Common Units. Pursuant to the UWM A&R LLCA, each UWM Class B Common Unit to be held by SFS Corp. and its permitted transferees may be exchanged, along with the stapled Class D Stock, for either, at the Company’s option, (a) cash or (b) one share of Class B Stock, which will be identical to the Class A Stock except that it will entitle the holder to ten votes per share. Each share of Class B Stock is convertible into one share of Class A Stock upon the transfer or assignment of such share from SFS Corp. or its permitted transferees to a non-affiliated third-party. If SFS Corp. or its permitted transferee transfers UWM Class B Common Units, along with the stapled Class D Stock, to a non-affiliated third party, the UWM Class B Common Units and Class D Stock will automatically convert into UWM Class C Common Units and Class C Stock, respectively, which share of Class C Stock will entitle the holder to one vote per share. Each UWM Class C Common Unit may be exchanged, along with the stapled Class C Stock, for either, at the Company’s option, (a) cash or (b) one share of Class A Stock. We refer to the exchange by UWM (or its transferees or other assignees) of (i) UWM Common Units and the stapled Class D Stock for Class B Stock or (ii) UWM Common Units and the stapled Class C Stock for Class A Stock as the “UWM Unit Exchanges.

Following the Closing, the Company will have four classes of authorized common stock. The Class A Stock and the Class C Stock will have one vote per share. The Class B Stock and the Class D Stock will have ten votes per share. The holders of Class C Stock and Class D Stock will not have any of the economic rights (including rights to dividends and distributions upon liquidation) provided to holders of Class A Stock and Class B Stock. SFS Corp., will hold 100% of the Class D Stock and will control 79% of the combined voting power of the capital stock of the Post-Combination Company due to the Voting Limitation. Without the Voting Limitation, SFS Corp. would have 99% of the combined voting power of the capital stock of the Post-Combination Company.

 

Q:

Following the Business Combination, will the Company’s securities continue to trade on a stock exchange?

 

A:

Yes. We intend to apply to list the Post-Combination Company’s Class A Stock and Public Warrants on the NYSE under the symbols “UWMC” and “UWMCW,” respectively, upon the closing of the Business Combination.

 

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Q:

How has the announcement of the Business Combination affected the trading price of the Company’s Class A Stock?

 

A:

On September 22, 2020, the trading date before the public announcement of the Business Combination, the Company’s Public Units, Class A Stock and Public Warrants closed at $11.33, $10.81 and $2.20, respectively. On December 15, 2020, the trading date immediately prior to the date of this proxy statement, the Company’s Public Units, Class A Stock and Public Warrants closed at $11.30, $10.89 and $2.63, respectively.

 

Q:

How will the Business Combination impact the shares of the Company outstanding after the Business Combination?

 

A:

As a result of the Business Combination and the Private Placement, the amount of Common Stock outstanding will increase by approximately 3,777% to approximately 1,605,167,686 shares of Common Stock (assuming (i) no Company stockholder has exercised their redemption rights to receive cash from the Trust Account in exchange for their shares of Class A Stock and we have not issued any additional shares of our Class A Stock; (ii) approximately 50,000,000 shares of Class A Stock have been issued in conjunction with the Private Placement; (iii) approximately 1,502,042,686 shares of Class D Stock have been issued to SFS Corp. as part of the Voting Stock Consideration; and (iv) all Public Warrants and Private Placement Warrants have been exercised). Additional shares of Common Stock may be issuable in the future as a result of the issuance of additional shares that are not currently outstanding. The issuance and sale of such shares in the public market could adversely impact the market price of our Common Stock, even if our business is doing well. Subject to the approval of the Incentive Plan Proposal and the authorization of the initial share reserve, the Company will have the ability to issue up to 80,000,000 shares of Class A Stock pursuant to awards under the Incentive Plan.

In addition, we may additionally issue up to approximately 90,760,000 to SFS Corp. as Earn-Out Shares.

 

Q:

How will the Business Combination and Private Placement impact the number of shares of Class A Stock outstanding after the Business Combination?

 

A:

Upon the Closing of the Business Combination and Private Placement, we will have 103,125,000 shares of Class A Stock outstanding, of which only 53,125,000 shares will be freely tradeable as of the Closing and the remainder will become freely tradeable during the six month period following the Closing. In addition, we may issue an additional approximately 1,502,042,686 shares of Class A Stock (or approximately 1,592,802,686 shares of Class A Stock if the full amount of the Earn-Out Shares are issued) to SFS Corp. or its transferees or other assigns in connection with future UWM Unit Exchanges and we may issue up to 80,000,000 shares of Class A Stock under the Incentive Plan, subject to the approval of the Incentive Plan Proposal.

 

Q:

What are the principal differences between Class A Stock and Class D Stock?

 

A:

Each holder of record of Class A Stock on the relevant record date will be entitled to cast one vote for each share of Class A Stock and each holder of record of Class D Stock on the relevant record date will be entitled to cast ten votes for each share of Class D Stock. The holders of Class C Stock and Class D Stock will not have any of the economic rights (including rights to dividends and distributions upon liquidation) provided to holders of Class A Stock and Class B Stock. For more information, please see the section entitled “Description of Securities.”

 

Q:

Is the Business Combination the first step in a “going private” transaction?

 

A:

No. The Company does not intend for the Business Combination to be the first step in a “going private” transaction. One of the primary purposes of the Business Combination is to provide a platform for UWM to access the U.S. public markets.

 

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Q:

Will the management of UWM change in the Business Combination?

 

A:

We anticipate that all of the executive officers of UWM will remain with the Post-Combination Company. In addition, Jeff Ishbia, Mat Ishbia, Justin Ishbia, Kelly Czubak, Alex Elezaj, Laura Lawson, Isiah Thomas, Robert Verdun and Melinda Wilner have each been nominated to serve as directors of the Post-Combination Company upon completion of the Business Combination. Please see the sections entitled “Proposal No. 5—Election of Directors to the Board of Directors” and “Management After the Business Combination” for additional information.

 

Q:

What equity stake will current stockholders of the Company, Private Placement Investors and SFS Corp. hold in the Post-Combination Company after the closing?

 

A:

It is anticipated that, upon completion of the Business Combination, and assuming that no shares are elected to be redeemed: (i) the Company’s Public Stockholders (other than the Private Placement Investors) will retain an economic interest of approximately 41% of the capital stock of the Post-Combination Company; (ii) the Private Placement Investors will hold an economic interest of approximately 49% of the capital stock of the Post-Combination Company (such that Public Stockholders, including Private Placement Investors, will own approximately 90% of the Post-Combination Company); and (iii) our Initial Stockholders (including our Sponsor) will retain an economic interest of approximately 10% of the capital stock of the Post-Combination Company. SFS Corp. will not have any economic interest in the capital stock of the Post-Combination Company, but will hold 79% of the combined voting power of the capital stock of the Post-Combination Company, through its ownership of Class D Stock, due to the Voting Limitation. Without the Voting Limitation, SFS Corp. would have 99% of the combined voting power capital stock of the Post-Combination Company. It is anticipated that, upon completion of the Business Combination, and assuming that no shares are elected to be redeemed: (a) the Post-Combination Company will hold approximately 6% of the outstanding UWM Common Units and (b) SFS Corp. will hold approximately 94% of the outstanding UWM Common Units. UWM LLC, in turn, will own 100% of UWM, the operating company.

In addition, subject to the approval of the Incentive Plan Proposal and the authorization of the initial share reserve, the Company will have the ability to issue up to 80,000,000 shares of Class A Stock pursuant to awards under the Incentive Plan.

The Private Placement Investors have agreed to purchase in the aggregate approximately 50,000,000 shares of Class A Stock, for approximately $500,000,000 of gross proceeds, in the Private Placement. The Company will use the proceeds from the Private Placement, together with the funds in the Trust Account, to fund the cash consideration to be contributed to UWM LLC in the Business Combination, and to pay certain transaction expenses. The ownership percentage with respect to the Post-Combination Company following the Business Combination (i) does not take into account (a) warrants to purchase Class A Stock that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares under the Incentive Plan, or (c) any Earn-Out Shares that may be issued to SFS Corp. if the price of the Class A Stock exceeds certain thresholds during the five-year period following the Closing, but (ii) does include Founder Shares, which will be converted into shares of Class A Stock at the closing of the Business Combination on a one-for-one basis.

If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Company’s existing stockholders in the Post-Combination Company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement—Impact of the Business Combination on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information” and “Proposal No. 6—Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve Under the Incentive Plan.”

As a result of the Business Combination, the Post-Combination Company will be a controlled company within the meaning of the Nasdaq Stock Market listing standards, and, as a result, will qualify for exemptions from certain corporate governance requirements that provide protection to stockholders of other companies. The Post-Combination Company intends to rely on certain of these exemptions. As a result, you

 

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will not have the same protections afforded to stockholders of companies that are subject to such governance requirements. For more information, please see the section entitled “Risk Factors.”

 

Q:

Will the Company obtain new financing in connection with the Business Combination?

 

A:

Yes. The Company will use the proceeds from the Private Placement, together with the funds in the Trust Account, to fund the cash consideration to be contributed to UWM LLC in the Business Combination, and to pay certain transaction expenses. The Private Placement is contingent upon, among other things, stockholder approval of the Business Combination Proposal and the closing of the Business Combination. The Company does not anticipate obtaining any new debt financing to fund the Business Combination.

 

Q:

What conditions must be satisfied to complete the Business Combination?

 

A:

There are a number of closing conditions in the Business Combination Agreement, including the approval by the stockholders of the Company of the Business Combination Proposal, the Nasdaq Proposal and the Charter Approval Proposal. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Business Combination Agreement.”

 

Q:

Are there any arrangements to help ensure that the Company will have sufficient funds, together with the proceeds in its Trust Account and from the Private Placement, to fund the aggregate purchase price?

 

A:

Unless waived by SFS Corp., UWM LLC or UWM (the “UWM Entities”), as applicable, the Business Combination Agreement provides that the obligation of the UWM Entities to consummate the Business Combination is conditioned on the total of (i) the amount in the Trust Account, after giving effect to redemptions of Public Shares, (ii) the proceeds from the Private Placement and (iii) all funds held by us outside of the Trust Account and immediately available to us, equaling or exceeding $712,500,000.

The Private Placement Investors have agreed to purchase approximately 50,000,000 shares of Class A Stock in the aggregate in the Private Placement at a discounted price of $10.00 per share (subject to customary terms and conditions, including the closing of the Business Combination) for gross proceeds to the Company of approximately $500,000,000 pursuant to Subscription Agreements entered into at the signing of the Business Combination Agreement.

The Company will use the proceeds from the Private Placement, together with the funds in the Trust Account, to fund the cash consideration to be contributed to UWM LLC in the Business Combination, and to pay certain transaction expenses. The Private Placement is contingent upon, among other things, stockholder approval of the Business Combination Proposal and the closing of the Business Combination.

 

Q:

Why is the Company proposing the Nasdaq Proposal?

 

A:

We are proposing the Nasdaq Proposal in order to comply with Nasdaq Listing Rules 5635(a) and (d), which require stockholder approval of certain transactions that result in the issuance of 20% or more of the outstanding voting power or shares of common stock outstanding before the issuance of stock or securities.

In connection with the Business Combination, we expect to issue (i) approximately 1,502,042,686 shares of Class D Stock in the Business Combination and (ii) approximately 50,000,000 shares of Class A Stock in the Private Placement. In addition, we may issue up to approximately 90,760,000 shares of Class D Stock as Earn-Out Shares to SFS Corp. Because we may issue 20% or more of outstanding Common Stock and voting power in connection with the Private Placement and the Business Combination, we are required to obtain stockholder approval of such issuance pursuant to Nasdaq Listing Rules 5635(a) and (d). As we are currently listed on Nasdaq, we are required to comply with the Nasdaq Listing Rules even if we are transferring to the NYSE upon the consummation of the Business Combination. For more information,

 

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please see the section entitled “Proposal No. 2—Approval of the Issuance of More than 20% of the Company’s Issued and Outstanding Common Stock in Connection with the Business Combination and the Private Placement.”

 

Q:

Why is the Company proposing the Charter Approval Proposal?

 

A:

The Proposed Charter that we are asking our stockholders to adopt in connection with the Business Combination (the “Charter Approval Proposal” or “Proposal No. 3”) provides for certain amendments to our existing certificate of incorporation. Pursuant to Delaware law and the Business Combination Agreement, we are required to submit the Charter Approval Proposal to the Company’s stockholders for adoption. For additional information please see the section entitled “Proposal No. 3—Approval of the Proposed Charter.”

 

Q:

Why is the Company proposing the Governance Proposal?

 

A:

As required by applicable SEC guidance, the Company is requesting that its stockholders vote upon, on a non-binding advisory basis, a proposal to approve certain governance provisions contained in the Proposed Charter that materially affect stockholder rights. This separate vote is not otherwise required by Delaware law separate and apart from Proposal No. 3, but pursuant to SEC guidance, the Company is required to submit these provisions to its stockholders separately for approval. However, the stockholder vote regarding this proposal is an advisory vote, and is not binding on the Company or its Board (separate and apart from the approval of Proposal No. 3). Furthermore, the Business Combination is not conditioned on the separate approval of the Governance Proposal (separate and apart from approval of Proposal No. 3). For additional information, please see the section entitled “Proposal No. 4—Approval of Certain Governance Provisions in the Proposed Charter.”

 

Q:

Why is the Company proposing the Director Election Proposal?

 

A:

Upon consummation of the Business Combination, our Board anticipates increasing its initial size from four directors to nine directors, with each Class I director having a term that expires at the Post-Combination Company’s annual meeting of stockholders in 2022, each Class II director having a term that expires at the Post-Combination Company’s annual meeting of stockholders in 2023 and each Class III director having a term that expires at the Post-Combination Company’s annual meeting of stockholders in 2024, or in each case until their respective successors are duly elected and qualified, or until their earlier resignation, removal or death. The Company believes it is in the best interests of stockholders to allow stockholders to vote upon the election of newly appointed directors. Please see the section entitled “Proposal No. 5—Election of Directors to the Board of Directors” for additional information.

 

Q:

Why is the Company proposing the Incentive Plan Proposal?

 

A:

The purpose of the Incentive Plan Proposal is to further align the interests of the eligible participants with those of stockholders by providing long-term incentive compensation opportunities tied to the performance of the Company. Please see the section entitled “Proposal No. 6—Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve under the Incentive Plan” for additional information.

 

Q:

Why is the Company proposing the Adjournment Proposal?

 

A:

We are proposing the Adjournment Proposal to allow the adjournment of the Special Meeting to a later date or dates (A) to ensure that any supplement or amendment to this proxy statement that the Board has determined in good faith is required by applicable law to be disclosed to Company stockholders and for such supplement or amendment to be promptly disseminated to Company stockholders prior to the Special Meeting, (B) if, as of the time for which the Special Meeting is originally scheduled, there are insufficient shares of Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Special Meeting or (C) to permit further solicitation of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Director Election Proposal or the

 

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  Incentive Plan Proposal, but no other proposal if the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Director Election Proposal and the Incentive Plan Proposal are approved. Please see the section entitled “Proposal No. 7—The Adjournment Proposal” for additional information.

 

Q:

What happens if I sell my shares of Class A Stock before the Special Meeting?

 

A:

The record date for the Special Meeting is earlier than the date that the Business Combination is expected to be completed. If you transfer your shares of Class A Stock after the record date, but before the Special Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Special Meeting. However, you will not be able to seek redemption of your shares of Class A Stock because you will no longer be able to deliver them for cancellation upon consummation of the Business Combination. If you transfer your shares of Class A Stock prior to the record date, you will have no right to vote those shares at the Special Meeting or redeem those shares for a pro rata portion of the proceeds held in our Trust Account.

 

Q:

What constitutes a quorum at the Special Meeting?

 

A:

A majority of the issued and outstanding shares of the Company’s Common Stock entitled to vote as of the record date at the Special Meeting must be present, in person or represented by proxy, at the Special Meeting to constitute a quorum and in order to conduct business at the Special Meeting. Abstentions will be counted as present for the purpose of determining a quorum. Our Initial Stockholders, who currently own 20% of our issued and outstanding shares of Common Stock, will count towards this quorum. In the absence of a quorum, the chairman of the Special Meeting has power to adjourn the Special Meeting. As of the record date for the Special Meeting, 26,562,501 shares of our Common Stock would be required to achieve a quorum.

 

Q:

What vote is required to approve the proposals presented at the Special Meeting?

 

A:

The approval of the Business Combination Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Since our Sponsor has agreed to vote the shares of Common Stock it owns in favor of the Business Combination (which amount constitutes approximately 20% of our outstanding shares of Common Stock), approximately 37.5% of our Common Stock held by our Public Stockholders will need to vote in favor of the Business Combination Proposal for the Business Combination Proposal to be approved (assuming all of such stockholders are represented in person or by proxy and entitled to vote at the Special Meeting). Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote, with regard to the Business Combination Proposal will have no effect on the Business Combination Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Business Combination Proposal. Our Initial Stockholders have agreed to vote their shares of Common Stock in favor of the Business Combination Proposal.

The approval of the Nasdaq Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Nasdaq Proposal will have no effect on the Nasdaq Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Nasdaq Proposal.

The approval of the Charter Approval Proposal requires the affirmative vote of holders of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Charter Approval Proposal will have the same effect as a vote “AGAINST” such Charter Approval Proposal.

 

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The approval of the Governance Proposal, which is a non-binding advisory vote, requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Governance Proposal will have no effect on the Governance Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Governance Proposal.

Directors are elected by a plurality of all of the votes cast by holders of shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. This means that the nine director nominees who receive the most affirmative votes will be elected. Stockholders may not cumulate their votes with respect to the election of directors. Assuming a valid quorum is established, abstentions and broker non-votes will have no effect on the election of directors.

The approval of the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote will have no effect on the Incentive Plan Proposal or the Adjournment Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Incentive Plan Proposal or the Adjournment Proposal.

 

Q:

What happens if the Business Combination Proposal is not approved?

 

A:

If the Business Combination Proposal is not approved and we do not consummate a business combination by January 28, 2022, we will be required to dissolve and liquidate our Trust Account, unless we amend our current certificate of incorporation (which requires the affirmative vote of the holders of 65% of all then outstanding shares of Common Stock) and amend certain other agreements into which we have entered to extend the life of the Company.

 

Q:

May the Company, its Sponsor or the Company’s directors or officers or their affiliates purchase shares in connection with the Business Combination?

 

A:

In connection with the stockholder vote to approve the proposed Business Combination, our Sponsor, directors or officers or their respective affiliates may privately negotiate transactions to purchase shares from stockholders who would have otherwise elected to have their shares redeemed in conjunction with a proxy solicitation pursuant to the proxy rules for a per-share pro rata portion of the Trust Account. None of our directors or officers or their respective affiliates will make any such purchases when they are in possession of any material non-public information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such selling stockholder, although still the record holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights, and could include a contractual provision that directs such selling stockholder to vote such shares in a manner directed by the purchaser. In the event that our Sponsor, directors or officers or their affiliates purchase shares in privately negotiated transactions from Public Stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Any such privately negotiated purchases may be effected at purchase prices that are below or in excess of the per-share pro rata portion of the Trust Account.

 

Q:

How many votes do I have at the Special Meeting?

 

A:

Our stockholders are entitled to one vote on each proposal presented at the Special Meeting for each share of Common Stock held of record as of December 15, 2020, the record date for the Special Meeting. As of the close of business on the record date, there were 53,125,000 outstanding shares of our Common Stock.

 

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Q:

How do I vote?

 

A:

If you were a holder of record of our Common Stock on December 15, 2020, the record date for the Special Meeting, you may vote with respect to the proposals in person via the virtual meeting platform at the Special Meeting, or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

Voting by Mail. By signing the proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the proxy card to vote your shares at the Special Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Special Meeting so that your shares will be voted if you are unable to attend the Special Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. Votes submitted by mail must be received by 9:00 a.m. Eastern Time on January 20, 2021.

Voting at the Special Meeting via the Virtual Meeting Platform. If you attend the Special Meeting and plan to vote in person via the virtual meeting platform, you will be provided with explicit instructions on how to vote in person via the virtual meeting platform. If your shares are registered directly in your name, you are considered the stockholder of record and you have the right to vote in person via the virtual meeting platform at the Special Meeting. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the Special Meeting and vote in person via the virtual meeting platform, you will need to contact your broker, bank or nominee to obtain a legal proxy that will authorize you to vote these shares. For additional information, please see the section entitled “Special Meeting in Lieu of 2021 Annual Meeting of Company Stockholders.”

 

Q:

What will happen if I abstain from voting or fail to vote at the Special Meeting?

 

A:

At the Special Meeting, we will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, a failure to vote or an abstention will have no effect on the Business Combination Proposal, the Nasdaq Proposal, the Governance Proposal, the Director Election Proposal, the Incentive Plan Proposal and the Adjournment Proposal, while a failure to vote or abstention will have the same effect as a vote “AGAINST” the Charter Approval Proposal.

 

Q:

What will happen if I sign and return my proxy card without indicating how I wish to vote?

 

A:

Signed and dated proxies received by us without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal presented to the stockholders. The proxyholders may use their discretion to vote on any other matters which properly come before the Special Meeting.

 

Q:

If I am not going to attend the Special Meeting via the virtual meeting platform, should I return my proxy card instead?

 

A:

Yes. Whether you plan to attend the Special Meeting or not, please read the enclosed proxy statement carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

 

Q:

If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

 

A:

No. Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares with respect to non-routine matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. We believe the proposals presented to the stockholders at this Special Meeting will be considered non-routine

 

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  and, therefore, your broker, bank, or nominee cannot vote your shares without your instruction on any of the proposals presented at the Special Meeting. If you do not provide instructions with your proxy, your broker, bank, or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a broker, bank, or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the Special Meeting. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

 

Q:

How will a broker non-vote impact the results of each proposal?

 

A:

Broker non-votes will count as a vote “AGAINST” the Charter Approval Proposal but will not have any effect on the outcome of any other proposals.

 

Q:

May I change my vote after I have mailed my signed proxy card?

 

A:

Yes. You may change your vote by sending a later-dated, signed proxy card to our Secretary at the address listed below so that it is received by our Secretary prior to the Special Meeting or attend the Special Meeting in person and vote. You also may revoke your proxy by sending a notice of revocation to our Secretary, which must be received by our Secretary prior to the Special Meeting.

 

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. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

 

Q:

How will the Company’s Sponsor, directors and officers vote?

 

A:

Prior to our IPO, we entered into agreements with our Sponsor and each of our directors and officers, pursuant to which each agreed to vote any shares of Common Stock owned by them in favor of the Business Combination Proposal. None of our Sponsor, directors or officers has purchased any shares of our Common Stock during or after our IPO and, as of the date of this proxy statement, neither we nor our Sponsor, directors or officers have entered into agreements other than purchases in the Private Placement, and are not currently in negotiations, to purchase shares prior to the consummation of the Business Combination. Currently, our Initial Stockholders own 20% of our issued and outstanding shares of Common Stock, including all of the Founder Shares, and will be able to vote all such shares at the Special Meeting.

 

Q:

What interests do the Sponsor and the Company’s current officers and directors have in the Business Combination?

 

A:

Our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests. You should take these interests into account in deciding whether to approve the Business Combination Proposal. These interests include:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the proposed Business Combination;

 

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the fact that our Initial Stockholders have agreed to waive their rights to conversion price adjustments with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combination;

 

   

the fact that our Sponsor paid an aggregate of $25,000 for 11,500,000 Founder Shares in January 2020 and, after giving effect to the cancellation of 875,000 Founder Shares on March 9, 2020, the remaining 10,625,000 Founder Shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at approximately $106,250,000 but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by January 28, 2022;

 

   

the fact that our Sponsor paid an aggregate of approximately $10,500,000 for its 5,250,000 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by January 28, 2022;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by January 28, 2022;

 

   

that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees; and

 

   

that our Sponsor has entered into a Subscription Agreement with the Company, pursuant to which the Sponsor has committed to purchase 14,460,000 shares of Class A Stock in the Private Placement for an aggregate commitment of approximately $144,600,000, provided that our Sponsor has the right to syndicate the Class A Common Stock purchased under such Subscription Agreement in advance of the Closing.

These interests may influence our directors in making their recommendation that you vote in favor of the approval of the Business Combination.

 

Q:

Did the Company’s Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

 

A:

Yes. Although our current certificate of incorporation does not require our Board to seek a third-party valuation or fairness opinion in connection with a business combination unless the target business is affiliated with our Sponsor, directors or officers, the Board received a fairness opinion from Moelis as to the fairness, from a financial point of view and as of the date of such opinion, of the consideration to be paid by the Company in the Business Combination. Please see the section entitled “Proposal No. 1—Approval of the

 

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  Business Combination—Opinion of the Company’s Financial Advisor” and the opinion of Moelis attached hereto as Annex H for additional information.

 

Q:

What happens if I vote against the Business Combination Proposal?

 

A:

If you vote against the Business Combination Proposal but the Business Combination Proposal still obtains the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting, then the Business Combination Proposal will be approved and, assuming the approval of the Nasdaq Proposal and the Charter Approval Proposal and the satisfaction or waiver of the other conditions to closing, the Business Combination will be consummated in accordance with the terms of the Business Combination Agreement.

If you vote against the Business Combination Proposal and the Business Combination Proposal does not obtain the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting, then the Business Combination Proposal will fail and we will not consummate the Business Combination. If we do not consummate the Business Combination, we may continue to try to complete a business combination with a different target business until January 28, 2022, unless we amend our current certificate of incorporation (which requires the affirmative vote of the holders of 65% of all then outstanding shares of Common Stock) and amend certain other agreements into which we have entered to extend the life of the Company. If we fail to complete an initial business combination by January 28, 2022, then we will be required to dissolve and liquidate the Trust Account by returning the then-remaining funds in such account to our Public Stockholders.

 

Q:

Do I have redemption rights?

 

A:

If you are a holder of Public Shares, you may redeem your Public Shares for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest not previously released to the Company to fund its working capital requirements plus Regulatory Withdrawals and/or to pay its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), by (ii) the total number of then-outstanding Public Shares; provided that the Company will not redeem any shares of Class A Stock issued in the IPO to the extent that such redemption would result in the Company’s failure to have net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) in excess of $5,000,000. A Public Stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 20% of the shares of Class A Stock included in the Public Units sold in our IPO. Holders of our outstanding Public Warrants do not have redemption rights in connection with the Business Combination. Our Sponsor, directors and officers have agreed to waive their redemption rights with respect to their shares of Common Stock in connection with the consummation of the Business Combination, and the Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. Our Initial Stockholders have also agreed to waive their right to a conversion price adjustment with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combination. For illustrative purposes, based on the balance of our Trust Account of $425,323,144 as of September 30, 2020, the estimated per share redemption price would have been approximately $10.01. Additionally, shares properly tendered for redemption will only be redeemed if the Business Combination is consummated; otherwise holders of such shares will only be entitled to a pro rata portion of the Trust Account (including interest not previously released to the Company to fund Regulatory Withdrawals and/or to pay its franchise and income taxes) in connection with the liquidation of the Trust Account, unless we complete an alternative business combination prior to January 28, 2022, unless we amend our current certificate of incorporation (which

 

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  requires the affirmative vote of the holders of 65% of all then outstanding shares of Common Stock) and amend certain other agreements into which we have entered to extend the life of the Company.

 

Q:

Can the Company’s Initial Stockholders redeem their Founder Shares in connection with consummation of the Business Combination?

 

A:

No. Our Initial Stockholders, officers and directors have agreed to waive their redemption rights with respect to their shares of Common Stock in connection with the consummation of our Business Combination. Our Initial Stockholders have also agreed to waive their right to a conversion price adjustment with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combination.

 

Q:

Is there a limit on the number of shares I may redeem?

 

A:

Yes. A Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), is restricted from exercising redemption rights with respect to more than an aggregate of 20% of the shares sold in our IPO. Accordingly, all shares in excess of 20% owned by a holder or “group” of holders will not be redeemed for cash. On the other hand, a Public Stockholder who holds less than 20% of the Public Shares and is not a member of a “group” may redeem all of the Public Shares held by such stockholder for cash.

In no event is your ability to vote all of your shares (including those shares held by you or by a “group” in excess of 20% of the shares sold in our IPO) for or against our Business Combination restricted.

We have no specified maximum redemption threshold under our current certificate of incorporation, other than the aforementioned 20% threshold. Each redemption of shares of Class A Stock by our Public Stockholders will reduce the amount in our Trust Account, which held cash and investment securities with a fair value of $425,323,144 as of September 30, 2020. The Business Combination Agreement provides that the obligation of the UWM Entities to consummate the Business Combination is conditioned on the total of (i) the amount in the Trust Account, after giving effect to redemptions of Public Shares, (ii) the proceeds from the Private Placement and (iii) all funds held by us outside of the Trust Account and immediately available to us, equaling or exceeding $712,500,000. This condition to closing in the Business Combination Agreement is for the sole benefit of the UWM Entities, and may be waived by the UWM Entities. If, as a result of redemptions of Class A Stock by our Public Stockholders, this condition is not met (or waived), then the UWM Entities may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our Class A Stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001.

 

Q:

Is there a limit on the total number of shares that may be redeemed?

 

A:

Yes. Our current certificate of incorporation provides that we may not redeem our Public Shares in an amount that would result in the Company’s failure to have net tangible assets in excess of $5,000,000 (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the Business Combination Agreement. Other than this limitation, our current certificate of incorporation does not provide a specified maximum redemption threshold. In addition, the Business Combination Agreement provides that the obligation of the UWM Entities to consummate the Business Combination is conditioned on the total of (i) the amount in the Trust Account, after giving effect to redemptions of Public Shares, (ii) the proceeds from the Private Placement and (iii) all funds held by us outside of the Trust Account and immediately available to us, equaling or exceeding $712,500,000. In the event the aggregate cash consideration we would be required to pay for all shares of Class A Stock that are validly submitted for redemption plus any amount required to satisfy the cash condition pursuant to the terms of the Business Combination Agreement exceeds the aggregate amount of cash available to us, we may not complete the Business Combination or redeem any shares, all shares of

 

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  Class A Stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.

Based on the amount of $425,323,144 in our Trust Account as of September 30, 2020, and taking into account the anticipated gross proceeds of approximately $500,000,000 from the Private Placement, approximately 21,266,144 shares of Class A Stock may be redeemed and still enable us to have sufficient cash to satisfy the cash closing condition in the Business Combination Agreement. We refer to this as the maximum redemption scenario.

 

Q:

How will the absence of a maximum redemption threshold affect the Business Combination?

 

A:

The Business Combination Agreement provides that the obligation of the UWM Entities to consummate the Business Combination is conditioned on the total of (i) the amount in the Trust Account, after giving effect to redemptions of Public Shares, (ii) the proceeds from the Private Placement and (iii) all funds held by us outside of the Trust Account and immediately available to us, equaling or exceeding $712,500,000. As a result, we may be able to complete our Business Combination even though a substantial portion of our Public Stockholders do not agree with the Business Combination and have redeemed their shares or have entered into privately negotiated agreements to sell their shares to our Sponsor, directors or officers or their affiliates. As of the date of this proxy statement, no agreements with respect to the private purchase of Public Shares by the Company or the persons described above have been entered into with any such investor or holder. We will file a Current Report on Form 8-K with the SEC to disclose private arrangements entered into or significant private purchases made by any of the aforementioned persons that would affect the vote on the Business Combination Proposal or other proposals (as described in this proxy statement) at the Special Meeting.

 

Q:

Will how I vote affect my ability to exercise redemption rights?

 

A:

No. You may exercise your redemption rights whether you vote your shares of Common Stock for or against, or whether you abstain from voting on the Business Combination Proposal or any other proposal described by this proxy statement. As a result, the Business Combination Agreement can be approved by stockholders who will redeem their shares and no longer remain stockholders, leaving stockholders who choose not to redeem their shares holding shares in a company with a potentially less-liquid trading market, fewer stockholders, potentially less cash and the potential inability to meet the listing standards of Nasdaq.

 

Q:

How do I exercise my redemption rights?

 

A:

In order to exercise your redemption rights, you must (i) if you hold Public Units, separate the underlying Public Shares and Public Warrants, and (ii) prior to 5:00 p.m. Eastern Time on January 15, 2021 (two business days before the Special Meeting), tender your shares physically or electronically and submit a request in writing that we redeem your Public Shares for cash to Continental Stock Transfer & Trust Company, our Transfer Agent, at the following address:

Continental Stock Transfer & Trust Company

1 State Street 30th Floor

New York, New York 10004

Attention: Mark Zimkind

Email: mzimkind@continentalstock.com

Please check the box on the enclosed proxy card marked “Stockholder Certification” if you are not acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) with any other stockholder with respect to shares of Common Stock. Notwithstanding the foregoing, a holder of the Public Shares, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) will be restricted from exercising redemption rights with respect to

 

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more than an aggregate of 20% of the shares of Class A Stock included in the Public Units sold in our IPO. Accordingly, all Public Shares in excess of the 20% threshold beneficially owned by a Public Stockholder or group will not be redeemed for cash.

Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the Transfer Agent and time to effect delivery. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, we do not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.

Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name” are required to either tender their certificates to our Transfer Agent prior to the date set forth in these proxy materials, or up to two business days prior to the vote on the Business Combination Proposal at the Special Meeting, or to deliver their shares to the Transfer Agent electronically using Depository Trust Company’s (“DTC”) Deposit/Withdrawal At Custodian (“DWAC”) system, at such stockholder’s option. The requirement for physical or electronic delivery prior to the Special Meeting ensures that a redeeming stockholder’s election to redeem is irrevocable once the Business Combination is approved.

There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The Transfer Agent will typically charge a tendering broker a fee and it is in the broker’s discretion whether or not to pass this cost on to the redeeming stockholder. However, this fee would be incurred regardless of whether or not we require stockholders seeking to exercise redemption rights to tender their shares, as the need to deliver shares is a requirement to exercising redemption rights, regardless of the timing of when such delivery must be effectuated.

 

Q:

What are the U.S. federal income tax consequences of exercising my redemption rights?

 

A:

The U.S. federal income tax consequences of the redemption depends on particular facts and circumstances. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—Material United States Federal Income Tax Considerations for Stockholders Exercising Redemption Rights.” We urge you to consult your tax advisors regarding the tax consequences of exercising your redemption rights.

 

Q:

If I am a Company warrant holder, can I exercise redemption rights with respect to my Public Warrants?

 

A:

No. The holders of our Public Warrants have no redemption rights with respect to our Public Warrants.

 

Q:

Do I have appraisal rights if I object to the proposed Business Combination?

 

A:

No. Appraisal rights are not available to holders of our Common Stock in connection with the Business Combination.

 

Q:

What happens to the funds held in the Trust Account upon consummation of the Business Combination?

 

A:

The funds held in the Trust Account (together with the proceeds from the Private Placement) will be used to: (a) pay the Closing Cash Consideration pursuant to the Business Combination Agreement; (b) pay Company stockholders who properly exercise their redemption rights; and (c) pay certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees and other professional fees) that were incurred by the Company in connection with the Business Combination and pursuant to the terms of the Business Combination Agreement.

 

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Q:

What happens if the Business Combination is not consummated?

 

A:

There are certain circumstances under which the Business Combination Agreement may be terminated. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Business Combination Agreement” for information regarding the parties’ specific termination rights.

If we do not consummate the Business Combination, we may continue to try to complete a business combination with a different target business until January 28, 2022. Unless we amend our current certificate of incorporation (which requires the affirmative vote of the holders of 65% of all then outstanding shares of Common Stock) and amend certain other agreements into which we have entered to extend the life of the Company, if we fail to complete an initial business combination by January 28, 2022, then we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem our Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest not previously released to the Company to fund its working capital requirements plus Regulatory Withdrawals and/or to pay its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish our Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the IPO. Please see the section entitled “Risk Factors—Risks Related to the Company and the Business Combination.”

Holders of our Founder Shares have waived any right to any liquidation distribution with respect to such shares. In addition, if we fail to complete a business combination by January 28, 2022, there will be no redemption rights or liquidating distributions with respect to our outstanding warrants, which will expire worthless.

 

Q:

When is the Business Combination expected to be completed?

 

A:

The closing of the Business Combination is expected to take place on or prior to the third business day following the satisfaction or waiver of the conditions described below in the subsection entitled “Proposal No. 1—Approval of the Business Combination—The Business Combination Agreement—Conditions to Closing of the Business Combination.” The closing is expected to occur in the fourth quarter of 2020. The Business Combination Agreement may be terminated by the Company, on the one hand, or SFS Corp. and UWM, on the other hand if the closing of the Business Combination has not occurred by March 31, 2021.

For a description of the conditions to the completion of the Business Combination, see the section entitled “Proposal No. 1—Approval of the Business Combination—The Business Combination Agreement—Conditions to Closing of the Business Combination.”

 

Q:

What do I need to do now?

 

A:

You are urged to read carefully and consider the information contained in this proxy statement, including the Annexes, and to consider how the Business Combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

 

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Q:

Who will solicit and pay the cost of soliciting proxies for the Special Meeting?

 

A:

The Company is soliciting proxies on behalf of its Board. The Company will pay the cost of soliciting proxies for the Special Meeting. The Company has engaged Morrow to assist in the solicitation of proxies for the Special Meeting. The Company has agreed to pay Morrow a fee of $32,500, plus disbursements, and will reimburse Morrow for its reasonable out-of-pocket expenses and indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. The Company will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of the Company’s Common Stock for their expenses in forwarding soliciting materials to beneficial owners of the Company’s Common Stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q:

Who can help answer my questions?

 

A:

If you have questions about the proposals or if you need additional copies of this proxy statement or the enclosed proxy card you should contact:

Gores Holdings IV, Inc.

9800 Wilshire Blvd.

Beverly Hills, California 90212

(310) 209-3010

Attention: Mark Stone

Email: mstone@gores.com

You may also contact our proxy solicitor at:

Morrow Sodali

470 West Avenue

Stamford, Connecticut 06902

Individuals, please call toll-free: (800) 662-5200

Banks and brokerage, please call: (203) 658-9400

Email: ghiv.info@investor.morrowsodali.com

To obtain timely delivery, our stockholders must request the materials no later than five business days prior to the Special Meeting.

You may also obtain additional information about us from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.”

If you intend to seek redemption of your Public Shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to our Transfer Agent prior to the Special Meeting in accordance with the procedures detailed under the question “How do I exercise my redemption rights?” If you have questions regarding the certification of your position or delivery of your stock, please contact our Transfer Agent:

Continental Stock Transfer & Trust Company

1 State Street 30th Floor

New York, New York 10004

Attention: Mark Zimkind

Email: mzimkind@continentalstock.com

 

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SUMMARY OF THE PROXY STATEMENT

This summary highlights selected information contained in this proxy statement and does not contain all of the information that may be important to you. You should read carefully this entire proxy statement, including the Annexes and accompanying financial statements of the Company and UWM, to fully understand the proposed Business Combination (as described below) before voting on the proposals to be considered at the Special Meeting (as described below). Please see the section entitled “Where You Can Find More Information” beginning on page 306 of this proxy statement.

Unless otherwise specified, all share calculations assume: (i) no exercise of redemption rights by the Company’s Public Stockholders; (ii) no inclusion of any shares of Class A Stock issuable upon the exercise of the Company’s warrants or any shares to be issued pursuant to the Incentive Plan at or following the closing of the Business Combination; and (iii) an equity raise of approximately $500,000,000 of gross proceeds from the Private Placement of 50,000,000 shares of Class A Stock at $10.00 per share.

Parties to the Business Combination

The Company

The Company is a blank check company incorporated on June 12, 2019 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

The Company’s securities are traded on Nasdaq under the ticker symbols “GHIV,” “GHIVU” and “GHIVW.” The Company intends to apply to list its Class A Stock and Public Warrants on the NYSE under the symbols “UWMC” and “UWMCW,” respectively, upon the closing of the Business Combination.

The mailing address of the Company’s principal executive office is 9800 Wilshire Blvd., Beverly Hills, California 90212.

UWM Entities

UWM

UWM is the second largest non-bank residential mortgage lender in the United States, originating mortgage loans exclusively through the wholesale mortgage lending channel. With over 6,700 team members and a culture of continuous innovation of technology and enhanced client experience, UWM leads its market by building upon its proprietary and exclusively licensed technology platforms, superior service and focused partnership with the Independent Mortgage Advisor community. UWM originates primarily conforming and government loans across all 50 states and the District of Columbia.

The mailing address of UWM’s principal executive office is 585 South Blvd E, Pontiac, Michigan 48341.

SFS Corp.

SFS Corp. is a Michigan corporation which was incorporated on January 18, 2012 to serve as the holding company for UWM.

UWM LLC

UWM LLC is a Delaware corporation which was incorporated on September 18, 2020 to serve as the holding company for UWM following the consummation of the transactions contemplated by the Business Combination.



 

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The Business Combination Proposal

On September 22, 2020, the Company entered into the Business Combination Agreement. The Business Combination Agreement provides that, in connection with the Closing, among other things, (a) UWM LLC will issue to SFS Corp. a number of UWM Class B Common Units equal to the quotient of the Company Equity Value divided by $10.00, minus the number of outstanding shares of Class F Stock as of immediately prior to Closing; (b) the Company will contribute to UWM LLC an amount in cash equal to the Closing Cash Consideration, which is expected to be approximately $895,000,000 (which is net of expenses) assuming no redemptions by the Company’s stockholders; (c) UWM LLC will issue to the Company such number of UWM Class A Common Units equal to the number of shares of Class A Stock, outstanding immediately prior to the Closing (after giving effect to (i) redemptions by the Company’s stockholders, if any, (ii) the conversion of shares of the Company’s Class F Stock into shares of Class A Stock and (iii) the issuance of shares of Class A Stock pursuant to the Subscription Agreements); and (d) the Company will issue to SFS Corp. a number of shares of Class D Stock equal to the number of UWM Class B Common Units issued by UWM LLC to SFS Corp. pursuant to clause (a) above. UWM is currently a wholly-owned subsidiary of SFS Corp. Prior to the Closing, SFS Corp. will contribute all of the membership interests of UWM to UWM LLC such that, after such contribution, UWM will be a wholly-owned subsidiary of UWM LLC. For more information about the transactions contemplated by the Business Combination Agreement, please see the section entitled “Proposal No. 1—Approval of the Business Combination.” A copy of the Business Combination Agreement is attached to this proxy statement as Annex A.

Consideration to UWM LLC and SFS Corp. in the Business Combination

Subject to the terms of the Business Combination Agreement, the aggregate cash consideration to be paid in connection with the Business Combination is expected to be approximately $895,000,000 (which is net of expenses). The amount of cash consideration payable to UWM LLC is the sum of: (a) cash available to us from the Trust Account, after giving effect to any redemptions that may be elected by any of our Public Stockholders for their pro rata share of the aggregate amount of funds on deposit in the Trust Account as of two business days prior to the Closing (which instructions to redeem such public shares are further discussed in this proxy statement); plus (b) all of the Company’s other immediately available funds outside of the Trust Account; plus (c) the anticipated gross proceeds of approximately $500,000,000 from the Private Placement (clauses “(a),” “(b)” and “(c)” collectively, the “Available Cash”); and less (d) certain transaction fees and expenses of the Company, which transaction fees and expenses will not exceed $36,000,000 in the aggregate. The consideration to be distributed to SFS Corp. will be in the form of UWM Class B Common Units and Class D Stock. The number of shares of Class D Stock and UWM Class B Common Units issued to SFS Corp. is subject to adjustment based on the amount of cash held by UWM LLC after giving effect to the payment of the Closing Cash Consideration. Following the Closing, SFS Corp. may receive additional consideration in the form of Earn-Out Shares.



 

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The following table sets forth ranges of Earn-Out Shares that SFS Corp. may receive, taking into account the various adjustments discussed above. Capitalized terms used in the following table and the accompanying footnotes have the meanings assigned to them in the Business Combination Agreement.

 

($ and shares in thousands)

   Assume No
Earn-Out
Target
     First
Triggering
Event(2)
Achieved
     Second
Triggering
Event(3)
Achieved
     Third
Triggering
Event(4)
Achieved
     Fourth
Triggering
Event(5)
Achieved
 

Closing Cash Consideration

   $ 895,323      $ 895,323      $ 895,323      $ 895,323      $ 895,323  

Plus: Equity Interest Consideration

     15,020,427        15,020,427        15,020,427        15,020,427        15,020,427  

Consideration to UWM

   $ 15,915,750      $ 15,915,750      $ 15,915,750      $ 15,915,750      $ 15,915,750  

$ Value of Earn Out Shares(1)

   $ 0      $ 294,970      $ 635,320      $ 1,021,051      $ 1,452,161  

Earn Out Shares

     0        22,690        45,380        68,070        90,760  

Aggregate Consideration (inclusive of Earn Out Shares)

   $ 15,915,750      $ 16,210,720      $ 16,551,070      $ 16,936,801      $ 17,367,911  

Total Shares

     1,502,043        1,524,733        1,547,423        1,570,113        1,592,803  

 

(1)

Value of Earn-Out Shares is equal to shares of UWM Class B Common Units (equal to 1.5% of the Company Equity Value (as defined in the Business Combination Agreement) divided by $10.00), multiplied by the trigger price for each Triggering Event. For example, the First Triggering Event will be met when the volume weighted average closing price of a share of Class A Stock is greater than or equal to $13.00 over 10 trading days within any 30 trading day period, at which time approximately 22,690,000 Earn-Out Shares will be issued with an implied value of approximately $294,970,000 (based on a $13.00 stock price).

(2)

“First Triggering Event” means if the volume weighted average closing price of a share of Class A Stock is greater than or equal to $13.00 over 10 trading days within any 30 trading day period, but within the time period between the date of the closing of the Business Combination and the fifth year anniversary of the closing of the Business Combination (such time period, the “Earn-Out Period”).

(3)

“Second Triggering Event” means if the volume weighted average closing price of a share of Class A Stock is greater than or equal to $15.00 over any 10 trading days within any 30 trading day period, but within the Earn-Out Period.

(4)

“Third Triggering Event” means if the volume weighted average closing price of a share of Class A Stock is greater than or equal to $17.00 over any 10 trading days within any 30 trading day period, but within the Earn-Out Period.

(5)

“Fourth Triggering Event” means if the volume weighted average closing price of a share of Class A Stock is greater than or equal to $19.00 over any 10 trading days within any 30 trading day period, but within the Earn-Out Period

Related Agreements

Subscription Agreements

On September 22, 2020, the Company entered into subscription agreements, substantially in the form attached hereto as Annex D to this proxy statement (the “Subscription Agreements”), with certain investors, including our Sponsor, pursuant to which the investors have agreed to purchase an aggregate of 50,000,000 shares of Class A Stock in the Private Placement for an aggregate commitment of approximately $500,000,000. The Subscription Agreements are subject to certain conditions, including the closing of the Business Combination.

The shares of Class A Stock to be issued in connection with the Subscription Agreements have not been registered under the Securities Act, and will be issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. The Subscription Agreements provide that the Company will, within 30 days after the consummation of the transactions contemplated by the Business Combination Agreement, file with the SEC a registration statement registering the resale of such shares of Class A Stock and will use its commercially reasonable efforts to have such registration statement declared effective as soon as practicable after the filing thereof but no later than 60 days following the filing deadline.

The Subscription Agreements will terminate with no further force and effect upon the earlier to occur of: (a) such date and time as the Business Combination Agreement is terminated in accordance with its terms;



 

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(b) upon the mutual written agreement of the parties to such Subscription Agreement; or (c) if any of the conditions to closing set forth in such Subscription Agreement are not satisfied on or prior to the closing and, as a result thereof, the Business Combination fails to occur.

Registration Rights Agreement

At the Closing, the Company will enter into the Registration Rights Agreement, substantially in the form attached as Annex E to this proxy statement, with the Gores Holders (as defined therein) and SFS Corp. (collectively, the “Restricted Stockholders”). Pursuant to the terms of the Registration Rights Agreement, (a) any outstanding share of Class A Stock or any other equity security (including the Private Placement Warrants and including shares of Class A Stock issued or issuable upon the exercise of any other equity security) of the Company held by a Restricted Stockholder as of the date of the Registration Rights Agreement or thereafter acquired by a Restricted Stockholder upon conversion of the Class F Stock, upon exercise of any Private Placement Warrants and upon conversion of any Class B Stock that SFS Corp. may receive in any future UWM Unit Exchanges and (b) any other equity security of the Company issued or issuable with respect to any such share of Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise will be entitled to registration rights (collectively, “Registrable Securities”).

The Registration Rights Agreement provides that the Company will, within 30 days after the consummation of the transactions contemplated by the Business Combination Agreement, file with the SEC a shelf registration statement registering the resale of the shares of Class A Stock held by the Restricted Stockholders and will use its reasonable best efforts to have such registration statement declared effective as soon as practicable after the filing thereof, but in no event later than 60 days following the filing deadline. The Gores Holders and SFS Corp. are each entitled to make up to three demands for registration, excluding short form demands, that the Company register shares of Registrable Securities held by these parties. In addition, the Restricted Stockholders have certain “piggy-back” registration rights. The Company will bear the expenses incurred in connection with the filing of any registration statements filed pursuant to the terms of the Registration Rights Agreement. The Company and the Restricted Stockholders agree in the Registration Rights Agreement to provide customary indemnification in connection with any offerings of Registrable Securities effected pursuant to the terms of the Registration Rights Agreement.

The Registration Rights Agreement further provides that SFS Corp. is subject to restrictions on the transfer of Class A Stock that it owns for 180 days after the completion of the Business Combination.

Our Initial Stockholders entered into a letter agreement pursuant to which they agreed to restrictions on the transfer of their securities issued in the Company’s IPO, which (a) in the case of the Class F Stock and the Class A Stock underlying the Class F Stock is 180 days after the completion of the Business Combination, and (b) in the case of the Private Placement Warrants and the respective Class A Stock underlying the Private Placement Warrants is 30 days after the completion of the Business Combination.

Tax Receivable Agreement

Future exchanges by SFS Corp. (or its transferees or other assignees) of UWM Common Units and the stapled shares of Class D Stock or Class C Stock for shares of our Class B Stock or Class A Stock and future purchases of UWM Common Units (along with the stapled shares of our Class D Stock or Class C Stock) from SFS Corp. (or its transferees or other assignees) are expected to produce favorable tax attributes for us. These tax attributes would not be available to us in the absence of those transactions. The anticipated tax basis adjustments are expected to reduce the amount of tax that we would otherwise be required to pay in the future.



 

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At the Closing, we intend to enter into a tax receivable agreement with SFS Corp. that will provide for the payment by us to SFS Corp. (or its transferees or other assignees) of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of: (a) certain increases in tax basis resulting from exchanges of UWM Common Units; (b) imputed interest deemed to be paid by the Company as a result of payments it makes under the tax receivable agreement; (c) certain increases in tax basis resulting from payments the Company makes under the tax receivable agreement; and (d) disproportionate allocations (if any) of tax benefits to the Company as a result of section 704(c) of the Code (the tax attributes in clauses “(a)” through “(d)” collectively referred to as the “Covered Tax Attributes”). The tax receivable agreement will make certain simplifying assumptions regarding the determination of the cash savings that we realize or are deemed to realize from the Covered Tax Attributes, which may result in payments pursuant to the tax receivable agreement in excess of those that would result if such assumptions were not made.

The actual tax benefit, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including, among others, the timing of exchanges by or purchases from SFS Corp., the price of our Class A Stock at the time of the exchanges or purchases, the extent to which such exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable and the portion of our payments under the tax receivable agreement constituting imputed interest.

Incentive Plan

Our Board approved the Incentive Plan on December 11, 2020, subject to stockholder approval of the Incentive Plan at the Special Meeting. The purpose of the Incentive Plan is to enhance the Post-Combination Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Post-Combination Company by providing these individuals with equity ownership opportunities. These incentives are provided through the grant of stock options, including incentive stock options, and nonqualified stock options, stock appreciation rights, restricted stock, dividend equivalents, restricted stock units, and other stock based awards. For more information about the Incentive Plan, please see the section entitled “Proposal No. 6—Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve under the Incentive Plan—Summary of the Incentive Plan.



 

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Organizational Structure

The following diagram depicts the current ownership structure of UWM:

 

LOGO

 

 

1.

Represents special purpose entities used in loan securitization activities.



 

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The following diagram, which assumes that there are no redemptions by the Company’s current Public Stockholders in connection with the Business Combination, illustrates the ownership structure of the Post-Combination Company immediately following the Business Combination:

 

LOGO

(1)

Includes Class A Stock purchased by our Sponsor in the Private Placement.

(2)

Represents the economic interest in the capital stock of the Post-Combination Company. The Post-Combination Company holds an aggregate of approximately 6.4% of the economic interest in UWM LLC, which holds all of the business of the Post-Combination Company.

Redemption Rights

Pursuant to our current certificate of incorporation, holders of Public Shares may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the



 

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aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest not previously released to the Company to fund its working capital requirements plus Regulatory Withdrawals and/or to pay its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), by (ii) the total number of then-outstanding Public Shares; provided that the Company will not redeem any shares of Class A Stock issued in the IPO to the extent that such redemption would result in the Company’s failure to have net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) in excess of $5,000,000. As of September 30, 2020, the redemption price would have been approximately $10.01 per share. Notwithstanding the foregoing, a holder of the Public Shares, together with any affiliate of his or her or any other person with whom he or she is acting in concert or as a “group” (as defined in Section 13(d)-(3) of the Exchange Act) will be restricted from exercising redemption rights with respect to more than an aggregate of 20% of the shares of Class A Stock included in the units sold in our IPO.

If a holder exercises its redemption rights, then such holder will be exchanging its shares of our Class A Stock for cash and will no longer own shares of the Post-Combination Company. Such a holder will be entitled to receive cash for its Public Shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our Transfer Agent in accordance with the procedures described herein. Please see the section entitled “Special Meeting in Lieu of 2021 Annual Meeting of Company Stockholders—Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

Impact of the Business Combination on the Company’s Public Float

It is anticipated that, upon completion of the Business Combination, and assuming that no shares are elected to be redeemed: (i) the Company’s Public Stockholders (other than the Private Placement Investors) will retain an economic interest of approximately 41% of the capital stock of the Post-Combination Company; (ii) the Private Placement Investors will hold an economic interest of approximately 49% of the capital stock of the Post-Combination Company (such that Public Stockholders, including Private Placement Investors, will own approximately 90% of the Post-Combination Company); and (iii) our Initial Stockholders (including our Sponsor) will retain an economic interest of approximately 10% of the capital stock of the Post-Combination Company. SFS Corp. will not have any economic interest in the capital stock of the Post-Combination Company, but will hold 79% of the combined voting power of the capital stock of the Post-Combination Company, through its ownership of Class D Stock, due to the Voting Limitation. Without the Voting Limitation, SFS Corp. would have 99% of the combined voting power capital stock of the Post-Combination Company. It is anticipated that, upon completion of the Business Combination, and assuming that no shares are elected to be redeemed: (a) the Post-Combination Company will hold approximately 6% of the outstanding UWM Common Units and (b) SFS Corp. will hold approximately 94% of the outstanding UWM Common Units. UWM LLC, in turn, will own 100% of UWM, the operating company.

In addition, subject to the approval of the Incentive Plan Proposal and the authorization of the initial share reserve, the Company will have the ability to issue up to 80,000,000 shares of Class A Stock pursuant to awards under the Incentive Plan.

The Private Placement Investors have agreed to purchase in the aggregate approximately 50,000,000 shares of Class A Stock, for approximately $500,000,000 of gross proceeds, in the Private Placement. In this proxy statement, we assume that approximately $500,000,000 of the gross proceeds from the Private Placement, in addition to funds from the Trust Account (plus any interest accrued thereon), will be used to fund the cash consideration to be contributed to UWM LLC in the Business Combination and to pay certain transaction expenses. The ownership percentage with respect to the Post-Combination Company following the Business Combination (i) does not take into account (a) warrants to purchase Class A Stock that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares upon completion of the Business Combination under the Incentive Plan, or (c) any Earn-Out Shares that may be issued to SFS Corp. if



 

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the price of the Class A Stock exceeds certain thresholds during the five-year period following the Closing, but (ii) does include Founder Shares, which will be converted into shares of Class A Stock at the closing of the Business Combination on a one-for-one basis. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Company’s existing stockholders in the Post-Combination Company will be different. For more information, please see the sections entitled “Unaudited Pro Forma Condensed Combined Financial Information” and “Proposal No. 6—Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve Under the Incentive Plan.”

The following table illustrates varying levels of economics interests and voting power in the capital stock of the Post-Combination Company, assuming no redemptions by the Company’s Public Stockholders and the maximum redemptions by the Company’s stockholders:(1)

 

     No Redemptions     21.3 Million Shares of
Class A Stock Redeemed
 
     Economic
Interest(2)
    Voting
Power
    Economic
Interest(2)
    Voting
Power
 

The Company’s Public Stockholders

         41.2         8.6         25.9         5.4

The Private Placement Investors

     48.5     10.2     61.1     12.8

Initial Stockholders

     10.3     2.2     13.0     2.8

UWM Stockholders

     0.0     79.0     0.0     79.0
  

 

 

   

 

 

   

 

 

   

 

 

 
     100.0     100.0     100.0     100.0
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

This table, other than the maximum redemption scenario wherein 21.3 million shares of Class A Stock are redeemed, reflects the assumptions as set forth in the preceding paragraph.

(2)

Represents the economic interest in the capital stock of the Post-Combination Company. The Post-Combination Company holds an aggregate of approximately 6.4% of the economic interest in UWM LLC, which holds all of the business of the Post-Combination Company.

Board of Directors of the Company Following the Business Combination

Jeff Ishbia, Mat Ishbia, Justin Ishbia, Kelly Czubak, Alex Elezaj, Laura Lawson, Isiah Thomas, Robert Verdun and Melinda Wilner have each been nominated to serve as directors of the Post-Combination Company upon completion of the Business Combination. Please see the sections entitled “Proposal No. 5—Election of Directors to the Board of Directors” and “Management after the Business Combination” for additional information.

The Charter Approval Proposal

Upon the closing of the Business Combination, our current certificate of incorporation will be amended promptly to reflect the Charter Approval Proposal to:

 

   

change the Post-Combination Company’s name to “UWM Corporation”;

 

   

change the purpose of the Post-Combination Company to “engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware”;

 

   

provide that, following the filing of the Proposed Charter with the Secretary of State of the State of Delaware and immediately prior to the consummation of any business combination, each share of Class F Stock outstanding immediately prior to such filing will automatically be converted into one share of Class A Stock without any action on the part of any person and, concurrently with such conversion, the number of authorized shares of Class F Stock will be reduced to zero;

 

   

(i) increase the Post-Combination Company’s total number of authorized shares of capital stock from 221,000,000 shares to 9,200,000,000 shares of capital stock, (ii) increase the Post-Combination Company’s authorized Class A Stock from 200,000,000 shares to 4,000,000,000 shares of Class A



 

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Stock, (iii) create the Post-Combination Company’s Class B Stock, consisting of 1,700,000,000 authorized shares of Class B Stock, (iv) create the Post-Combination Company’s Class C Stock, consisting of 1,700,000,000 authorized shares of Class C Stock, (v) create the Post-Combination Company’s Class D Stock, consisting of 1,700,000,000 authorized shares of Class D Stock, and (iv) increase the Post-Combination Company’s authorized shares of Preferred Stock from 1,000,000 to 100,000,000 shares of Preferred Stock;

 

   

provide that each share of Class B Stock and Class D Stock, as applicable, will automatically convert into one share of Class A Stock or Class C Stock, as applicable, (a) upon any sale or other transfer of such share to a third party other than a permitted transferee or (b) if SFS Corp. owns less than 10% of the outstanding Common Stock;

 

   

provide that, in no event shall a holder of Common Stock, together with one or more other “includable corporations” (as defined in the Code) of such holder or entities disregarded as separate from such holder for U.S federal income tax purposes, be entitled to vote in excess of 79% of the voting power of the holders of the outstanding shares then voting together as a single class on such matter;

 

   

provide that, subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of outstanding shares of Common Stock of the Post-Combination Company will vote together as a single class on all matters with respect to which stockholders of the Post-Combination Company are entitled to vote under applicable law, the Proposed Charter or the Amended and Restated Bylaws, or upon which a vote of the stockholders generally entitled to vote is otherwise called for by the Post-Combination Company, (i) the holders of Class A Stock and holders of Class C Stock will be entitled to one vote per share of Class A Stock or Class C Stock, respectively, and (ii) holders of Class B Stock and holders of Class D Stock will be entitled to ten votes per share of Class B Stock or Class D Stock, respectively, such that the holders of Class B Stock and the holders of Class D Stock immediately following the closing of the Business Combination will have the ability to control the outcome of matters requiring stockholder approval (even though the holders of Class B Stock and Class D Stock own less than a majority of the outstanding shares of Common Stock), including the election of directors and significant corporate transactions (such as a merger or other sale of the Post-Combination Company or its assets);

 

   

provide that, subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of Class A Stock and the holders of Class B Stock will be entitled to receive dividends with respect to shares of Class A Stock and Class B Stock, respectively, when, as and if declared by the Post-Combination Company’s Board, while holders of Class C Stock and holders of Class D Stock will not be entitled to receive dividends with respect to shares of Class C Stock or Class D Stock, respectively;

 

   

provide that the Post-Combination Company’s Board (other than those directors, if any, elected by the holders of any outstanding series of Preferred Stock) will be divided into three classes, as nearly equal in number as possible, designated as Class I, Class II and Class III, and that with respect to the directors of the Post-Combination Company’s Board (i) the directors of each class the term of which then expires will be elected to hold office for a three-year term or until the election and qualification of their respective successors in office, subject to their earlier death, resignation, disqualification or removal and (ii) in case of any increase or decrease, from time to time, in the number of directors (other than those directors, if any, elected by the holders of any outstanding series of Preferred Stock), the number of directors in each class will be apportioned by resolution of the Post-Combination Company’s Board as nearly equal as possible;

 

   

provide that until any time prior to 5:00 p.m. Eastern Time on the first date following the date on which the voting power of all of the then outstanding shares of Class B Stock and Class D Stock, voting together as a single class, represents less than 50% of the voting power of all of the then outstanding



 

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shares of the Post-Combination Company generally entitled to vote, voting together as a single class (the “Voting Rights Threshold Date”), any director elected by the stockholders generally entitled to vote may be removed with or without cause, and, any time from and after the Voting Rights Threshold Date, any such director may be removed only for cause;

 

   

provide that, with respect to directors elected by the stockholders generally entitled to vote, from and after the Voting Rights Threshold Date, (i) newly created directorships resulting from an increase in the authorized number of directors or any vacancies on the Post-Combination Company’s Board resulting from death, resignation, disqualification, removal or other cause will be filled solely and exclusively by a majority of the directors then in office, although less than a quorum, or by the sole remaining director, and (ii) any director so elected will hold office until the expiration of the term of office of the director whom he or she has replaced and until his or her successor is elected and qualified, subject to such director’s earlier death, resignation, disqualification or removal;

 

   

provide that, prior to the Voting Rights Threshold Date, the affirmative vote of the holders of at least a majority in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote, voting together as a single class, and, from and after the Voting Rights Threshold Date, the affirmative vote of the holders of at least 75% in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote, is required to alter, amend, make or repeal any provision of the Amended and Restated Bylaws;

 

   

provide that special meetings of stockholders for any purpose or purposes may be called at any time, but only by (i) the Chairperson of the Post-Combination Company’s Board, (ii) the Chief Executive Officer of the Post-Combination Company or (iii) the Post-Combination Company’s Board, and may not be called by any other person or persons;

 

   

provide that the Post-Combination Company will have no interests or expectancy in, or in being offered an opportunity to participate in, and renounces, to the fullest extent permitted by applicable law, (i) any corporate opportunity with respect to any lines of business, business activity or business venture conducted by any holder of outstanding shares of Class B Stock or Class D Stock, any affiliate of such holder or any director, officer or stockholder of such holder or any affiliate of such holder (collectively, the “UWM Related Persons”) as of the date of the filing of the Proposed Charter with the Secretary of State of the State of Delaware and (ii) any corporate opportunity received by, presented to, or originated by, a UWM Related Person after the date of the filing of the Proposed Charter with the Secretary of State of the State of Delaware in such UWM Related Person’s capacity as a UWM Related Person (and not in his, her or its capacity as a director, officer or employee of the Post-Combination Company), in each case, other than in any corporate opportunity with respect to residential mortgage lending;

 

   

provide that, unless the Post-Combination Company consents in writing to the selection of an alternative forum, (i) any derivative action brought on behalf of the Post-Combination Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of the Post-Combination Company to the Post-Combination Company or the Post-Combination Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Proposed Charter or the Amended and Restated Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine of the State of Delaware, in each case, will be required to be filed in either (x) the Sixth Judicial Circuit, Oakland County, Michigan (or, if the Sixth Judicial Circuit, Oakland County, Michigan lacks jurisdiction over any such action or proceeding, then another state court of the State of Michigan, or if no state court of the State of Michigan has jurisdiction over any such action or proceeding, then the United Stated District Court for the Eastern District of Michigan) or (y) the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction over any such action or proceeding, then the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware lacks jurisdiction then the United States District Court for the District of Delaware);



 

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require that, from and after the Voting Rights Threshold Date, in addition to any affirmative vote required by applicable law, the affirmative vote of the holders of at least seventy-five percent (75%) in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote is required to make any amendment to Article VII (Board of Directors) or Article VIII (Written Consent of Stockholders) of the Proposed Charter;

 

   

delete the prior provisions under Article IX (Business Combination Requirements; Existence) of the Proposed Charter relating to our status as a blank check company; and

 

   

provide that, from and after the Voting Rights Threshold Date, stockholders may not take action by consent in lieu of a meeting.

Please see the section entitled “Proposal No. 3—Approval of the Proposed Charter” for more information.

Other Proposals

In addition, the stockholders of the Company will be asked to vote on:

 

   

a proposal to approve, for purposes of complying with applicable Nasdaq Listing Rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock pursuant to the Business Combination and the Private Placement (Proposal No. 2);

 

   

a separate proposal to approve, on a non-binding advisory basis, certain governance provisions in the Proposed Charter in accordance with SEC requirements (Proposal No. 4);

 

   

a proposal to approve and adopt the Incentive Plan, a copy of which is attached to this proxy statement as Annex G, including the authorization of the initial share reserve under the Incentive Plan (Proposal No. 6); and

 

   

a proposal to adjourn the Special Meeting to a later date or dates, (A) to ensure that any supplement or amendment to this proxy statement that the Board has determined in good faith is required by applicable law to be disclosed to Company stockholders and for such supplement or amendment to be promptly disseminated to Company stockholders prior to the Special Meeting, (B) if, as of the time for which the Special Meeting is originally scheduled, there are insufficient shares of Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Special Meeting or (C) to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Director Election Proposal or the Incentive Plan Proposal (Proposal No. 7).

Please see the section entitled “Proposal No. 2—Approval of the Issuance of More than 20% of the Company’s Issued and Outstanding Common Stock in Connection with the Business Combination and the Private Placement,” “Proposal No. 4—Approval of Certain Governance Provisions in the Proposed Charter,” “Proposal No. 6—Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve under the Incentive Plan,” and “Proposal No. 7—The Adjournment Proposal” for more information.

Date, Time and Place of Special Meeting

In light of public health concerns regarding the coronavirus (COVID-19) pandemic, the Special Meeting will be held via live webcast at https://www.cstproxy.com/goresholdingsiv/2021 on January 20, 2021, at 9:00 a.m. Eastern Time. The Special Meeting can be accessed by visiting https://www.cstproxy.com/goresholdingsiv/2021, where you will be able to listen to the meeting live and vote during the meeting. Additionally, you have the option to listen to the Special Meeting by dialing +1 888-965-8995 (toll-free within the U.S. and Canada) or +1 415-655-0243 (outside of the U.S. and Canada, standard rates apply). The passcode



 

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for telephone access is 45561260#, but please note that you cannot vote or ask questions if you choose to participate telephonically. Please note that you will only be able to access the Special Meeting by means of remote communication.

Voting Power; Record Date

Only Company stockholders of record at the close of business on December 15, 2020, the record date for the Special Meeting, will be entitled to vote at the Special Meeting. You are entitled to one vote for each share of Company Common Stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were 53,125,000 shares of Company Common Stock outstanding and entitled to vote, of which 42,500,000 are shares of Class A Stock and 10,625,000 are Founder Shares held by our Initial Stockholders.

Accounting Treatment

The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded in accordance with GAAP. Under this method of accounting, the Company will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of UWM issuing stock for the net assets of the Company, accompanied by a recapitalization. The net assets of the Company will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of UWM.

Appraisal Rights

Appraisal rights are not available to our stockholders in connection with the Business Combination.

Proxy Solicitation

The Company is soliciting proxies on behalf of its Board. Proxies may be solicited by mail. The Company has engaged Morrow to assist in the solicitation of proxies.

If a stockholder grants a proxy, it may still vote its shares in person if it revokes its proxy before the Special Meeting. A stockholder may also change its vote by submitting a later-dated proxy, as described in the section entitled “Special Meeting in Lieu of 2021 Annual Meeting of Company Stockholders—Revoking Your Proxy.”

Interests of Certain Persons in the Business Combination

In considering the recommendation of our Board to vote for the proposals presented at the Special Meeting, including the Business Combination Proposal, you should be aware that aside from their interests as stockholders, our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from, or in addition to, the interests of our stockholders generally. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and transaction agreements and in recommending to our stockholders that they vote in favor of the proposals presented at the Special Meeting, including the Business Combination Proposal. Stockholders should take these interests into account in deciding whether to approve the proposals presented at the Special Meeting, including the Business Combination Proposal. These interests include, among other things:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the proposed Business Combination;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to conversion price adjustments with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combination;



 

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the fact that our Sponsor paid an aggregate of $25,000 for 11,500,000 Founder Shares in July, 2019 and, after giving effect to the cancellation of 875,000 Founder Shares on March 9, 2020, the remaining 10,625,000 Founder Shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at approximately $106,250,000 but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by January 28, 2022;

 

   

the fact that our Sponsor paid an aggregate of approximately $10,500,000 for its 5,250,000 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by January 28, 2022;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by January 28, 2022;

 

   

that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees; and

 

   

that our Sponsor has entered into a Subscription Agreement with the Company, pursuant to which the Sponsor has committed to purchase 14,460,000 shares of Class A Stock in the Private Placement for an aggregate commitment of approximately $144,600,000, provided that our Sponsor has the right to syndicate the Class A Common Stock purchased under such Subscription Agreement in advance of the Closing.

Reasons for the Approval of the Business Combination

We were formed for the purpose of effecting an initial business combination with one or more businesses. We sought to do this by utilizing the networks and industry experience of both our Sponsor and our Board to identify, acquire and operate one or more businesses within or outside of the United States, although we were not limited to a particular industry or sector.

In particular, our Board considered the following positive factors, although not weighted or in any order of significance:

 

   

Industry Leadership of UWM. The Board took into account the size and breadth of UWM’s business, including that UWM is currently the #2 mortgage originator and the #1 wholesale mortgage originator.



 

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The Board noted that UWM provides a best-in-class broker experience, which includes providing white-labeled proprietary and exclusively licensed technology and marketing tools to support its brokers, which all help to create a differentiated experience that drives a large and diversified broker customer base. The Board further noted UWM’s accelerating scale with respect to speed from application to ready-to-close, loans per month per production team member, costs to originate and net promoter score, all of which may help to drive faster speed, better service and lower cost than competitors.

 

   

Consistent Growth and Accelerating Scale. The Board took into account UWM’s growth and growth prospects, including UWM’s increasing total originations growth and purchase originations growth rate, which has consistently outpaced its competitors, as well as UWM’s servicing portfolio growth. The Board also noted UWMs potential multiple growth levers, which include sector wide tailwinds, the potential for continued outperformance in the wholesale portion of the market in which UWM has leading market share, the potential for continued market share gains, the potential for continued investment in product offerings and potential ancillary product offerings.

 

   

Technology and Data & Analytics Pricing Support. The Board took into account UWM’s sophisticated and dynamic pricing engine that is customized for various broker cohorts which provides daily market surveillance and monitoring and allows UWM to appropriately price, track and engage with brokers. The Board noted that the UWM management team has created technology and tools that provide advanced data and analytics in order to manage UWM’s business and drive its operational decisions.

 

   

Financial Profile. The Board took into account UWM’s financial profile, which includes strong revenue growth and gain on sale margin, a model that minimizes credit risk, a fully developed technology platform with significant operational leverage, a large and liquid capital markets strategy, minimal incremental borrower acquisition costs and a variable expense structure.

 

   

Experienced and Proven Management Team. The Board considered the fact that the Post-Combination Company will be led by the senior management team of UWM, including Mat Ishbia, which has a proven track record of operational excellence, financial performance, growth and ongoing capabilities for innovation.

 

   

Opinion of the Company’s Financial Advisor. The Board took into account the opinion of Moelis, dated September 22, 2020, addressed to the Board as to the fairness, from a financial point of view and as of the date of such opinion, of the consideration to be paid by the Company in the Business Combination, which opinion was based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications set forth in such opinion as more fully described above under the caption “Proposal No. 1—Approval of the Business Combination—Opinion of the Company’s Financial Advisor.

 

   

Other Alternatives. The Board believed, after a thorough review of other business combination opportunities reasonably available to the Company, that the proposed Business Combination represents the best potential business combination for the Company based upon the process utilized to evaluate and assess other potential acquisition targets. The Board and Company management also believed that such processes had not presented a better alternative.

 

   

Terms of the Business Combination Agreement. The Board considered the terms and conditions of the Business Combination Agreement and the Business Combination.

 

   

Independent Director Role. The Board is comprised of a majority of independent directors who are not affiliated with our Sponsor and its affiliates, including The Gores Group. In connection with the Business Combination, our independent directors, Messrs. Randall Bort, William Patton and Jeffrey Rea, took an active role in evaluating the proposed terms of the Business Combination, the Business Combination Agreement, the Related Agreements and the amendments to our current certificate of incorporation to take effect upon the completion of the Business Combination. Our independent



 

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directors evaluated and unanimously approved, as members of the Board, the Business Combination Agreement and the Business Combination.

The Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination, including, but not limited to, the following:

 

   

Benefits Not Achieved. The risk that the potential benefits of the Business Combination may not be fully achieved, or may not be achieved within the expected timeframe.

 

   

Liquidation of the Company. The risks and costs to the Company if the Business Combination is not completed, including the risk of diverting management focus and resources from other businesses combination opportunities, which could result in the Company being unable to effect a business combination by January 28, 2022 and force the Company to liquidate and the warrants to expire worthless, unless we amend our current certificate of incorporation (which requires the affirmative vote of the holders of 65% of all then outstanding shares of Common Stock) and amend certain other agreements into which we have entered to extend the life of the Company.

 

   

Exclusivity. The fact that the Business Combination Agreement includes an exclusivity provision that prohibits the Company from soliciting other business combination proposals, which restricts the Company’s ability to consider other potential business combinations prior to the earlier of the consummation of the Business Combination and the termination of the Business Combination Agreement.

 

   

Stockholder Vote. The risk that the Company’s stockholders may fail to provide the respective votes necessary to effect the Business Combination.

 

   

Closing Conditions. The fact that completion of the Business Combination is conditioned on the satisfaction of certain closing conditions that are not within the Company’s control.

 

   

Litigation. The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin the consummation of the Business Combination.

 

   

Fees and Expenses. The fees and expenses associated with completing the Business Combination.

 

   

Other Risks. Various other risks associated with the Business Combination, the business of the Company, UWM’s business, UWM’s financing and UWM’s regulatory environment and described under “Risk Factors” beginning on page 59 of this proxy statement.

For more information about our decision-making process, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Company’s Board of Directors’ Reasons for the Approval of the Business Combination.”

Conditions to Closing of the Business Combination

Conditions to Each Party’s Obligations

The respective obligations of the Company and the UWM Entities to consummate and effect the Business Combination are subject to the satisfaction, at or prior to the Closing, of each of the following conditions:

 

   

the required vote of the Company’s stockholders to approve the Business Combination Proposal, the Nasdaq Proposal and the Charter Approval Proposal shall have been duly obtained in accordance with the DGCL, the Company’s current certificate of incorporation and bylaws and the rules and regulations of Nasdaq;

 

   

there must not be in effect any law or regulation enjoining or prohibiting the consummation of the Business Combination;



 

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certain organizational actions shall have been completed by the Company, SFS Corp. and UWM LLC, including the entering into of the UWM A&R LLCA by SFS Corp., the filing of the Second A&R Certificate of Incorporation of the Company with the Delaware Secretary of State and the adoption of the Amended and Restated Bylaws of the Company; and

 

   

certain state and federal regulatory approvals required in connection with the Business Combination shall have been received, as set forth in the Business Combination Agreement

Conditions to the UWM Entities’ Obligations

The obligations of UWM Entities to consummate the Business Combination are subject to the satisfaction, at or prior to the closing of the Business Combination, of each of the following conditions, any of which may be waived, in writing, by SFS Corp.:

 

   

the representations and warranties of the Company, without giving effect to any limitation contained therein as to materiality or material adverse effect or any similar limitation contained therein, must be true and correct in all respects as of the Closing Date, as though made on and as of the Closing Date (or, if given as of an earlier date, as of such earlier date), except where the failure of such representations and warranties of the Company to be so true and correct would not have a Company Material Adverse Effect;

 

   

the Company must have performed or complied in all material respects with all agreements and covenants required to be performed or complied with by it under the Business Combination Agreement at or prior to Closing;

 

   

no Company Material Adverse Effect shall have occurred since the date of the Business Combination Agreement;

 

   

the Company must have delivered to SFS Corp. a certificate executed by an authorized officer of the Company, to the effect that the conditions set forth in the three immediately preceding bullet points have been satisfied;

 

   

the Company must have delivered or stand ready to deliver duly executed copies of all certificates, instruments, contracts, closing deliverables and other documents required to be delivered by it pursuant to the Business Combination Agreement; and

 

   

the amount of Available Cash must equal or exceed $712,500,000.

Conditions to the Company’s Obligations

The obligation of the Company to consummate Business Combination is subject to the satisfaction, at or prior to the closing of the Business Combination, of each of the following conditions, any of which may be waived, in writing, by the Company:

 

   

the representations and warranties of each of the UWM Entities with respect to (a) fundamental representations (i.e., representations related to organization and authority, authorization and enforceability, subsidiaries, capitalization and brokers fees), without giving effect to any limitation as to materiality or material adverse effect or any similar limitation set forth therein, must be true and correct in all material respects as of the Closing Date as if made on and as of the Closing Date (or, if given as of an earlier date, as of such earlier date); (b) there not being a UWM Material Adverse Effect must be true and correct in all respects as of the Closing Date as though made on and as of the Closing Date; and (c) all other representations and warranties, without giving effect to any limitation as to materiality or material adverse effect or any similar limitation contained therein, must be true and correct as of the Closing Date as if made on and as of the Closing Date (or, if given as of an earlier date, as of such earlier date), except where the failure of such representations and warranties to be so true and correct would not have a UWM Material Adverse Effect;



 

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each of SFS Corp. and UWM must have performed or complied in all material respects with all agreements and covenants required to be performed or complied with by it under the Business Combination Agreement at or prior to Closing;

 

   

no UWM Material Adverse Effect shall have occurred since the date of the Business Combination Agreement;

 

   

SFS Corp. must have delivered to the Company a certificate executed by an authorized officer of SFS Corp., to the effect that the conditions set forth in the three immediately preceding bullet points have been satisfied; and

 

   

SFS Corp. must have delivered, or caused to be delivered, or stand ready to deliver duly executed copies of all certificates, instruments, contracts, closing deliverables and other documents required to be delivered by it pursuant to the Business Combination Agreement.

Regulatory Matters

In connection with the Business Combination, UWM must notify certain federal and state regulatory agencies, as well as GSEs, regarding the impact of the transactions contemplated by the Business Combination Agreement prior to Closing. Applicable law and guidelines obligate UWM to provide such notification and, in certain circumstances, secure approval from those agencies and GSEs before the Closing of the Business Combination. Notifications to the regulatory agencies and GSEs consist of notifications, change of ownership applications and/or re-licensing. Receipt of these approvals, unless waived, is a condition to the Closing of the Business Combination.

Quorum and Required Vote for Proposals for the Special Meeting

A quorum of Company stockholders is necessary to hold a valid meeting. A quorum will be present at the Special Meeting if a majority of the Company’s Common Stock outstanding on the record date and entitled to vote at the Special Meeting is represented in person or by proxy. Abstentions will count as present for the purposes of establishing a quorum.

The approval of the Business Combination Proposal, the Nasdaq Proposal, the Governance Proposal, which is a non-binding advisory vote, the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote will have no effect on the Business Combination Proposal, the Nasdaq Proposal, the Governance Proposal, the Incentive Plan Proposal or the Adjournment Proposal. Our Initial Stockholders have agreed to vote their shares of Common Stock in favor of the Business Combination Proposal.

The approval of the Charter Approval Proposal requires (i) the affirmative vote of holders of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting and (ii) the affirmative vote of holders of a majority of our outstanding shares of Class F Stock, voting separately as a single class, entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote, with regard to the Charter Approval Proposal will have the same effect as a vote “AGAINST” such Charter Approval Proposal.

Directors are elected by a plurality of all of the votes cast by holders of shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. This means that the nine director nominees who receive the most affirmative votes will be elected. Stockholders may not cumulate their votes with respect to the election of directors. Assuming a valid quorum is established, abstentions and broker non-votes will have no effect on the election of directors.



 

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The Business Combination is conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal and the Charter Approval Proposal at the Special Meeting. Each of the proposals other than the Business Combination Proposal, the Nasdaq Proposal and the Charter Approval Proposal is conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal and the Charter Approval Proposal, other than the Governance Proposal and the Adjournment Proposal, which are not conditioned on the approval of any other proposal set forth in this proxy statement.

It is important for you to note that in the event that the Business Combination Proposal, the Nasdaq Proposal or the Charter Approval Proposal do not receive the requisite vote for approval, we will not consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by January 28, 2022, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to our Public Stockholders.

Opinion of the Company’s Financial Advisor

At the meeting of the Board on September 22, 2020 to evaluate and approve the Business Combination, Moelis delivered an oral opinion, which was confirmed by delivery of a written opinion, dated September 22, 2020, addressed to the Board to the effect that, as of the date of the opinion and based upon and subject to the assumptions, conditions and limitations set forth in the opinion, the consideration to be paid by the Company in the Business Combination was fair, from a financial point of view, to the Company.

The full text of Moelis’ written opinion, dated September 22, 2020, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion (which are also summarized herein), is attached as Annex H to this proxy statement and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of the Board (in its capacity as such and not in any other capacity) in its evaluation of the Business Combination (and, in its engagement letter, Moelis provided its consent to the inclusion of the text of its opinion as part of this proxy statement). Moelis’ opinion is limited solely to the fairness, from a financial point of view, of the consideration to be paid by the Company in the Business Combination and does not address the Company’s underlying business decision to effect the Business Combination or the relative merits of the Business Combination as compared to any alternative business strategies or initial business combinations that might be available to the Company. Moelis’ opinion does not constitute a recommendation as to how any stockholder of the Company should vote or act with respect to the Business Combination or any other matter. Moelis’ opinion was approved by a Moelis fairness opinion committee.

For more information, see the section entitled “Proposal No. 1—Approval of the Business Combination—Opinion of the Company’s Financial Advisor” on page 156 of this proxy statement and Annex H to this proxy statement.

Independent Director Oversight

Our Board is comprised of a majority of independent directors who are not affiliated with our Sponsor and its affiliates, including The Gores Group. In connection with the Business Combination, our independent directors, Messrs. Randall Bort, William Patton and Jeffrey Rea, took an active role in evaluating the proposed terms of the Business Combination, including the Business Combination Agreement, the Related Agreements and the amendments to our current certificate of incorporation to take effect upon the completion of the Business Combination. As part of their evaluation of the Business Combination, our independent directors were aware of the potential conflicts of interest with our Sponsor and its affiliates, including The Gores Group, that could arise with regard to the proposed terms of the: (i) Business Combination Agreement; (ii) the Private Placement; and (iii) the amendments to our current certificate of incorporation to take effect upon the completion of the Business Combination. The Board did not deem it necessary to, and did not form, a special committee of the Board to



 

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exclusively evaluate and negotiate the proposed terms of the Business Combination, as the Board is comprised of a majority of independent and disinterested directors and did not deem the formation of a special committee necessary or appropriate. Our independent directors reviewed and considered these interests during the negotiation of the Business Combination and in evaluating and unanimously approving, as members of the Board, the Business Combination Agreement and the Business Combination. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—Independent Director Oversight.”

Recommendation to Company Stockholders

Our Board believes that each of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Governance Proposal, the Director Election Proposal, the Incentive Plan Proposal and the Adjournment Proposal to be presented at the Special Meeting is in the best interests of the Company and our stockholders and unanimously recommends that its stockholders vote “FOR” each of the proposals.

When you consider the recommendation of our Board in favor of approval of the Business Combination Proposal, you should keep in mind that our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from or in addition to (or which may conflict with) your interests as a stockholder. Stockholders should take these interests into account in deciding whether to approve the proposals presented at the Special Meeting, including the Business Combination Proposal. Please see “Proposal No. 1—Approval of the Business Combination—Interests of Certain Persons in the Business Combination.”

Risk Factors

In evaluating the Business Combination and the proposals to be considered and voted on at the Special Meeting, you should carefully review and consider the risk factors set forth under the section entitled “Risk Factors” beginning on page 59 of this proxy statement. The occurrence of one or more of the events or circumstances described in that section, alone or in combination with other events or circumstances, may have a material adverse effect on (i) the ability of the Company and UWM Entities to complete the Business Combination, and (ii) the business, cash flows, financial condition and results of operations of UWM prior to the consummation of the Business Combination and the Post-Combination Company following consummation of the Business Combination.



 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

The following table contains summary historical financial data for the Company as of and for the nine months ended September 30, 2020 and for the period from June 12, 2019 (inception) through December 31, 2019. Such data for the period from June 12, 2019 through December 31, 2019 have been derived from the audited financial statements of the Company, which are included elsewhere in this proxy statement. Such data as of and for the nine months ended September 30, 2020 have been derived from the unaudited financial statements of the Company included elsewhere in this proxy statement. Results from interim periods are not necessarily indicative of results that may be expected for the entire year. The information below is only a summary and should be read in conjunction with the sections entitled “The Companys Managements Discussion and Analysis of Financial Condition and Results of Operations” and “Information About the Company” and in our financial statements, and the notes and schedules related thereto, which are included elsewhere in this proxy statement.

Statement of Operations Data:

 

     Nine
Months Ended
September 30,
2020
(unaudited)
     For the Period
from June 12,
2019 (Inception)
to December 31,
2019
 

Professional fees and other expenses

   $ (5,709,435    $ (37,172

State franchise taxes, other than income tax

     (150,000      (1,830
  

 

 

    

 

 

 

Net loss from operations

     (5,859,435      (39,002

Other income—interest and dividend income

     1,092,952        —    
  

 

 

    

 

 

 

Net loss before income taxes

   $ (4,766,483    $ (39,002
  

 

 

    

 

 

 

Income tax expense

     (114,395      —    
  

 

 

    

 

 

 

Net loss attributable to common shares

   $ (4,880,878    $ (39,002
  

 

 

    

 

 

 

Net loss per common share:

     

Class A common shares—basic and diluted

   $ (0.09    $ (0.00
  

 

 

    

 

 

 

Class F common shares—basic and diluted

   $ (0.12    $ (0.00
  

 

 

    

 

 

 

 

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Balance Sheet Data:

 

     September 30, 2020
(unaudited)
    December 31, 2019
(audited)
 

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 222,372     $ 1,120  

Deferred offering costs

     —         411,374  

Prepaid assets

     250,861       —    
  

 

 

   

 

 

 

Total current assets

     473,233       412,494  

Investments and cash held in Trust Account

     425,323,144       —    
  

 

 

   

 

 

 

Total assets

   $ 425,796,377     $ 412,494  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accrued expenses, formation and offering costs

   $ 3,237,605     $ 274,666  

State franchise tax accrual

     150,000       1,830  

Income tax payable

     114,395       —    

Notes payable—related party

     1,000,000       150,000  
  

 

 

   

 

 

 

Total current liabilities

     4,502,000       426,496  

Deferred underwriting compensation

     14,875,000       —    
  

 

 

   

 

 

 

Total liabilities

   $ 19,377,000     $ 426,496  
  

 

 

   

 

 

 

Commitments and Contingencies:

    

Class A subject to possible redemption, 40,141,937 and -0- shares at September 30, 2020 and December 31, 2019, respectively (at redemption value of $10 per share)

     401,419,370       —    

Stockholders’ equity:

    

Preferred stock, $0.0001 par value; 1,000,000 shares authorized, none issued or outstanding

     —         —    

Common stock

    

Class A common stock, $0.0001 par value; 200,000,000 shares authorized, 2,358,063 and -0- shares issued and outstanding (excluding 40,141,937 and -0- shares subject to possible redemption) at September 30, 2020 and December 31, 2019, respectively

     236       —    

Class F common stock, $0.0001 par value; 20,000,000 shares authorized, 10,625,000 and 11,500,000 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

     1,063       1,150  

Additional paid-in-capital

     9,918,588       23,850  

Accumulated deficit

     (4,919,880     (39,002
  

 

 

   

 

 

 

Total stockholders’ equity

     5,000,007       (14,002
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 425,796,377     $ 412,494  
  

 

 

   

 

 

 

 

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OTHER INFORMATION OF UWM

The following tables set forth UWM’s selected consolidated historical financial data as of and for the years ended December 31, 2017, 2018 and 2019, for the nine months ended September 30, 2019 and 2020 and for the twelve months ended September 30, 2020. The financial data as of and for the years ended December 31, 2017, 2018 and 2019 has been derived from UWM’s audited consolidated financial statements included elsewhere in this proxy statement. The financial data as of and for the nine months ended September 30, 2019 and 2020 has been derived from UWM’s unaudited consolidated financial statements included elsewhere in this proxy statement. The financial data as of and for the twelve months ended September 30, 2020 has been derived by adding the financial data from UWM’s audited consolidated financial statements for the year ended December 31, 2019 and from UWM’s unaudited consolidated financial statements for the nine months ended September 30, 2020 and subtracting the financial data from UWM’s unaudited consolidated financial statements for the nine months ended September 2019. The unaudited financial data has been derived from UWM’s books and records without audit and, in the opinion of UWM’s management, includes all adjustments (consisting only of normal, recurring adjustments) that UWM’s management considers necessary for a fair statement of results for these periods. The financial information for the nine months ended September 30, 2020 and prior periods is not necessarily indicative of the results to be expected for the full year or any future period. You should read the information below along with all other financial information and analysis presented in this proxy statement, including “UWM Management’s Discussion and Analysis of Financial Condition and Results of Operations” and UWM’s consolidated financial statements and related notes thereto included elsewhere in this proxy statement.

 

Statement of Operations Data:
($ in thousands)

  For the year ended
December 31,
    For the twelve
months ended
September 30,
    For the nine months
ended September 30,
 
  2017     2018     2019     2020     2019     2020  
          (unaudited)     (unaudited)  

Revenue

           

Loan production income

  $ 337,385     $ 334,197     $ 1,043,483     $ 3,234,858     $ 692,787     $ 2,884,162  

Loan servicing income

    57,291       82,952       102,288       220,680       64,264       182,656  

(Loss) gain on sale of mortgage servicing rights

    39,695       91,130       (22,480     (101,098     12,797       (65,821

Interest income

    60,939       85,018       155,129       160,821       113,616       119,308  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  $ 495,310     $ 593,297     $ 1,278,420     $ 3,515,261     $ 883,464     $ 3,120,305  

Expenses

           

Salaries, commissions and benefits

    176,037       233,125       372,172       582,122       252,756       462,706  

Direct loan production costs

    18,200       24,817       34,434       49,060       25,238       39,864  

Professional services

    10,939       13,943       37,785       35,998       12,608       10,821  

Occupancy and equipment

    14,737       27,018       40,095       52,746       28,666       41,317  

Marketing, travel, and entertainment

    9,494       14,742       23,433       21,239       16,020       13,826  

Depreciation and amortization of premises and equipment

    11,130       5,456       9,405       10,689       6,787       8,071  

Other general and administrative

    33,132       21,372       13,196       23,664       8,316       18,784  

Servicing costs

    13,128       18,458       30,936       50,840       21,382       41,286  

Amortization, impairment and pay-offs of mortgage servicing rights

    40,412       57,406       137,776       369,093       126,411       357,728  

Interest expense

    53,137       85,587       164,131       158,733       119,081       113,683  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    380,346       501,924       863,363       1,354,184       617,265       1,108,086  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

    114,964       91,373       415,057       2,161,077       266,199       2,012,219  

Provision for income taxes

    363       57       —      

 

 

 

1,500

 

 

 

 

 

 

 

 

 

 

 

 

1,500

 

 

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 114,601     $ 91,316     $ 415,057     $ 2,159,577     $ 266,199     $ 2,010,719  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Balance Sheet Data:
($ in thousands)

  As of December 31,     As of September 30,  
  2017     2018     2019     2019     2020  
          (unaudited)  

Assets

         

Cash and cash equivalents

  $ 68,680     $ 42,113     $ 133,283     $ 250,882     $ 755,795  

Mortgage loans at fair value

    1,842,697       2,517,760       5,446,310       4,229,697       5,215,196  

Accounts receivable, net

    39,568       75,430       163,473       97,068       246,862  

Derivative assets

    5,778       17,595       24,689       36,697       51,053  

Mortgage servicing rights, net

    207,521       368,117       731,353       500,544       1,411,272  

Premises and equipment, net

    763       48,580       55,950       56,923       51,548  

Operating lease right-of-use asset, net

    —         —         79,485       73,797       109,680  

Other assets

    7,093       10,500       19,551       16,972       66,397  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 2,172,100     $ 3,080,095     $ 6,654,094     $ 5,262,580     $ 7,907,803  

Liabilities and Member’s Equity

         

Accounts payable and accrued expenses

  $ 149,840     $ 219,095     $ 282,995     $ 273,874     $ 462,074  

Warehouse lines of credit

    1,713,755       2,352,899       5,189,587       4,027,596       4,913,206  

Derivative liabilities

    10,397       28,954       22,409       37,698       41,498  

Operating lines of credit

    65,000       160,096       376,000       265,000       320,300  

Equipment note payable

    —         —         30,000       —         25,925  

Operating lease liability

    —         —         91,780       86,092       122,439  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $ 1,938,992     $ 2,761,044     $ 5,992,771     $ 4,690,260     $ 5,885,442  

Total member’s equity

  $ 233,108     $ 319,051     $ 661,323     $ 572,320     $ 2,022,361  

 

Other Data:
($ in thousands)

  For the year ended December 31,     For the nine months ended
September 30,
    For the twelve
months ended
September 30,
 
  2017     2018     2019     2019     2020     2020  
          (unaudited)     (unaudited)  

Net cash provided by (used in):

           

Operating activities

  $ (754,640   $ (926,173   $ (3,496,012   $ (2,113,781   $ 1,390,158       N/A  

Investing activities

  $ 203,090     $ 170,738     $ 577,375     $ 555,880     $ 214,117       N/A  

Financing activities

  $ 562,108     $ 728,868     $ 3,009,807     $ 1,766,670     $ (981,763     N/A  

Adjusted EBITDA(1)

  $ 128,814     $ 105,040     $ 472,802     $ 346,415     $ 2,096,857     $ 2,223,243  

 

(1)

UWM defines “Adjusted EBITDA” as earnings before interest expense on non-funding debt, income tax, and depreciation and amortization of premises and equipment, net of the impairment or recovery of MSRs and the impact of deferred compensation. Adjusted EBITDA is a supplemental measure of UWM’s performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of UWM’s financial performance under GAAP and should not be considered in isolation or as an alternative to revenue, net income or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Adjusted EBITDA has limitations as analytical tools and they should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. See “UWM Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for more information, including information regarding the utility of Adjusted EBITDA.

 

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Loan Production Data:
($ in thousands)

  For the year ended December 31,     For the nine months ended
September 30,
    For the twelve
months ended
September 30,
 
  2017     2018     2019     2019     2020     2020  

Loan origination volume by type

           

Conventional conforming

  $ 23,873,972     $ 33,062,045     $ 76,207,713     $ 53,204,493     $ 105,239,231     $ 128,242,451  

FHA/VA/USDA

    4,574,176       7,683,734       25,563,260       17,941,421       21,149,439       28,771,279  

Non agency

    1,078,169       814,367       5,996,199       4,712,938       1,480,047       2,763,307  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loan origination volume

  $ 29,526,317     $ 41,560,146     $ 107,767,172     $ 75,858,852     $ 127,868,717       159,777,037  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portfolio metrics

           

Average loan amount

  $ 278     $ 285     $ 318     $ 314     $ 327     $ 327  

Weighted average loan-to-value ratio

    78.25     80.23     78.69     79.60     71.89     72.82%  

Weighted average credit score

    747       741       741       741       757       754  

Weighted average note rate

    4.12     4.68     4.04     4.15     3.13     3.26%  

Percentage of loans sold

           

To GSEs

    94     92     93     93     98     97%  

To other counterparties

    6     8     7     7     2     3%  

Servicing-retained

    94     92     96     95     100     99%  

Servicing-released

    6     8     4     5     0     1%  

 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following selected unaudited pro forma condensed combined financial information (the “Selected Pro Forma Information”) gives effect to the Business Combination as described in the section titled “Unaudited Pro Forma Condensed Combined Financial Information” included in this proxy statement. The Business Combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, while the Company is the legal acquirer, it will be treated as the “acquired” company for financial reporting purposes. Accordingly, the transactions contemplated by the Business Combination will be reflected as the equivalent of UWM issuing stock for the net assets of the Company, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded. Operations prior to the Business Combination will be those of UWM. The selected unaudited pro forma condensed combined balance sheet data as of September 30, 2020 gives effect to the Business Combination described above as if they had occurred on September 30, 2020. The selected unaudited pro forma condensed combined statements of operations data for the nine months ended September 30, 2020 and for the year ended December 31, 2019 give effect to the Business Combination described above as if they had occurred on January 1, 2019.

The Selected Pro Forma Information has been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial information of the Post-Combination Company appearing elsewhere in this proxy statement and the accompanying notes to the pro forma financial information. The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with, the historical consolidated financial statements and related notes of the Company and UWM for the applicable periods included in this proxy statement. The Selected Pro Forma Information has been presented for informational purposes only and are not necessarily indicative of what the Post-Combination Company’s financial position or results of operations actually would have been had the Business Combination been completed as of the dates indicated. In addition, the Selected Pro Forma Information does not purport to project the future financial position or operating results of the Post-Combination Company.

The unaudited pro forma condensed combined financial information has been prepared using the assumptions below with respect to the potential redemption into cash of Class A Stock:

 

   

Assuming No Redemptions: This presentation assumes that none of the Company’s stockholders exercise redemption rights with respect to their Public Shares.

 

   

Assuming Maximum Redemptions: This presentation assumes that stockholders holding 21,266,144 of the Company’s Public Shares exercise their redemption rights and that such shares are redeemed for their pro rata share (approximately $10.01 per share) of the funds in the Trust Account. This scenario assumes that there is cash available of $712,500,000 after giving effect to the redemptions of Public Shares and the proceeds from the Private Placement. Furthermore, the Company will not redeem shares of Class A stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001. This scenario assumes that 21,266,144 Public Shares are redeemed for an aggregate redemption payment of approximately $212,823,135 based on $425,323,144 in the Trust Account and 42,500,000 Public Shares outstanding as of September 30, 2020.

 

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     Combined Pro Forma  

(in thousands, except share and per share data)

   Assuming No
Redemptions
    Assuming
Maximum
Redemptions
 

Selected Unaudited Pro Forma Condensed Combined Statement of Operations Data

    

Nine months ended September 30, 2020

    

Revenues

   $ 3,120,305     $ 3,120,305  

Expenses

   $ 1,143,101     $ 1,143,101  

Earning before income taxes

   $ 1,977,204     $ 1,977,204  

Provision for income taxes

   $ (34,334   $ (27,396

Net Income

   $ 1,942,870     $ 1,949,808  

Net income attributable to noncontrolling interests

   $ 1,850,041     $ 1,875,736  

Net income attributable to stockholders

   $ 92,829     $ 74,072  

Net income per ordinary share:

    

Class A ordinary shares - basic and diluted

   $ 0.90     $ 0.90  

Weighted average shares outstanding, basic and diluted:

    

Class A ordinary shares - basic and diluted

     103,125,000       81,858,856  

Year Ended December 31, 2019

    

Revenues

   $ 1,278,420     $ 1,278,420  

Expenses

   $ 909,202     $ 909,202  

Earning before income taxes

   $ 369,218     $ 369,218  

Provision for income taxes

   $ (6,390   $ (5,094

Net Income

   $ 362,828     $ 364,124  

Net income attributable to noncontrolling interests

   $ 345,552     $ 350,351  

Net income attributable to stockholders

   $ 17,276     $ 13,773  

Net income per ordinary share:

    

Class A ordinary shares - basic and diluted

   $ 0.17     $ 0.17  

Weighted average shares outstanding, basic and diluted:

    

Class A ordinary shares - basic and diluted

     103,125,000       81,858,856  

 

     Combined Pro Forma  

(in thousands)

   Assuming No
Redemptions
     Assuming
Maximum
Redemptions
 

Selected Unaudited Pro Forma Condensed Combined Balance Sheet Data

     

As of September 30, 2020

     

Total assets

   $     8,552,259      $   8,339,436  

Total liabilities

   $ 6,682,162      $ 6,681,882  

Total equity attributable to stockholders

   $ 117,783      $ 82,340  

Noncontrolling interests

   $ 1,752,314      $ 1,575,214  

Total equity

   $ 1,870,097      $ 1,657,554  

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business, the business of UWM, the business of the Post-Combination Company and the timing and ability for us to complete the Business Combination. Specifically, forward-looking statements may include statements relating to:

 

   

the benefits of the Business Combination;

 

   

the future financial performance of the Post-Combination Company following the Business Combination;

 

   

changes in the market for UWM’s services;

 

   

expansion plans and opportunities;

 

   

UWM’s future growth, including its 2020 pace of loan originations;

 

   

UWM’s ability to implement its corporate strategy, including retaining its dominant position in the wholesale lending channel, and the impact of such strategy on its future operations and financial and operational results;

 

   

UWM’s strategic advantages and the impact that those advantages will have on future financial and operational results;

 

   

the advantages of the wholesale market;

 

   

industry growth and trends in the wholesale mortgage market and in the mortgage industry generally;

 

   

UWM’s approach and goals with respect to technology;

 

   

UWM’s current infrastructure, client based business strategies, strategic initiatives and product pipeline;

 

   

the impact of various interest rate environments on UWM’s future financial results of operations;

 

   

UWM’s evaluation of competition in its markets and its relative position;

 

   

UWM’s accounting policies;

 

   

macroeconomic conditions that may affect UWM’s business and the mortgage industry in general;

 

   

political and geopolitical conditions that may affect UWM’s business and the mortgage industry in general;

 

   

the impact of the COVID-19 pandemic, or any other similar pandemic or public health situation, on UWM’s business and the mortgage industry in general;

 

   

other statements preceded by, followed by or that include the words “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.

These forward-looking statements are based on information available as of the date of this proxy statement and our management’s current expectations and those of the management of UWM, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

You should not place undue reliance on these forward-looking statements in deciding how your vote should be cast or in voting your shares on the proposals set forth in this proxy statement. As a result of a number of

 

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known and unknown risks and uncertainties, our actual results or performance, as well as that of UWM and the Post-Combination Company, may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

   

the occurrence of any event, change or other circumstances that could delay the Business Combination or give rise to the termination of the Business Combination Agreement;

 

   

the outcome of any legal proceedings that may be instituted against UWM or the Company following announcement of the proposed Business Combination;

 

   

the inability to complete the Business Combination due to the failure to obtain approval of the Business Combination Proposal, the Nasdaq Proposal or the Charter Approval Proposal of the Company, or other conditions to closing in the Business Combination Agreement;

 

   

the inability to obtain or maintain the listing of the Post-Combination Company’s Class A Stock on Nasdaq following the Business Combination;

 

   

the risk that the proposed Business Combination disrupts current plans and operations as a result of the announcement and consummation of the transactions described herein;

 

   

costs related to the Business Combination;

 

   

changes in applicable laws or regulations;

 

   

the possibility that UWM or the Company may be adversely affected by other economic, business, and/or competitive factors;

 

   

UWM’s dependence on macroeconomic and U.S. residential real estate market conditions, including changes in U.S. monetary policies that affect interest rates;

 

   

UWM’s reliance on its warehouse facilities to fund mortgage loans and otherwise operate its business, leveraging of assets under these facilities and the risk of a decrease in the value of the collateral underlying certain of its facilities causing an unanticipated margin call;

 

   

UWM’s ability to sell loans in the secondary market, including to the GSEs, and to securitize its loans into MBS through the GSEs and Ginnie Mae;

 

   

UWM’s dependence on the GSEs and the risk of changes to these entities and their roles, including, as a result of GSE reform, termination of conservatorship or efforts to increase the capital levels of the GSEs;

 

   

changes in the GSEs’, FHA, USDA and VA guidelines or GSE and Ginnie Mae guarantees;

 

   

UWM’s dependence on Independent Mortgage Advisors to originate mortgage loans;

 

   

the unique challenges posed to UWM’s business by the COVID-19 pandemic and the impact of governmental actions taken in response to the pandemic on its ability to originate mortgages, its servicing operations, its liquidity and its team members;

 

   

the risk that an increase in the value of the MBS UWM sells in forward markets to hedge its pipeline may result in an unanticipated margin call;

 

   

UWM’s inability to continue to grow, or to effectively manage the growth of, its loan origination volume;

 

   

UWM’s ability to continue to attract and retain its Independent Mortgage Advisor relationships;

 

   

the occurrence of a data breach or other failure of UWM’s cybersecurity;

 

   

loss of key management;

 

   

reliance on third party software and services;

 

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reliance on third-party sub-servicers to service UWM’s mortgage loans or its MSRs;

 

   

intense competition in the mortgage industry;

 

   

UWM’s ability to implement technological innovation;

 

   

UWM’s ability to continue to comply with the complex state and federal laws regulations or practices applicable to mortgage loan origination and servicing in general, including maintaining the appropriate state licenses, managing the costs and operational risk associated with material changes to such laws;

 

   

fines or other penalties associated with the conduct of Independent Mortgage Advisors;

 

   

errors or the ineffectiveness of internal and external models or data UWM relies on to manage risk and make business decisions;

 

   

loss of intellectual property rights;

 

   

risk of counterparty terminating servicing rights and contracts; and

 

   

other risks and uncertainties indicated in this proxy statement, including those set forth under the section entitled “Risk Factors.”

 

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RISK FACTORS

You should carefully review and consider the following risk factors and the other information contained in this proxy statement, including the financial statements and notes to the financial statements included herein, in evaluating the Business Combination and the proposals to be voted on at the Special Meeting. The following risk factors apply to the business and operations of UWM and will also apply to the business and operations of the Post-Combination Company following the completion of the Business Combination. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination, and may have an adverse effect on the business, cash flows, financial condition and results of operations of the Post-Combination Company. You should also carefully consider the following risk factors in addition to the other information included in this proxy statement, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” We or UWM may face additional risks and uncertainties that are not presently known to us or UWM, or that we or UWM currently deem immaterial, which may also impair our or UWM’s business or financial condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.

Risks Related to UWM’s Business

UWM’s wholesale loan origination and servicing revenues are highly dependent on macroeconomic and U.S. residential real estate market conditions.

UWM’s success depends largely on the health of the U.S. residential real estate industry, which is seasonal, cyclical, and affected by changes in general economic conditions beyond UWM’s control. Economic factors such as increased interest rates, slow economic growth or recessionary conditions, the pace of home price appreciation or the lack of it, changes in household debt levels, and increased unemployment or stagnant or declining wages affect UWM’s borrowers’ income and thus their ability and willingness to make loan payments. National or global events affect all such macroeconomic conditions. Weak or a significant deterioration in economic conditions reduce the amount of disposable income consumers have, which in turn reduces consumer spending and the willingness of qualified potential borrowers to take out loans. Furthermore, several state and local governments in the United States are experiencing, and may continue to experience, budgetary strain. One or more states or significant local governments could default on their debt or seek relief from their debt under the U.S. bankruptcy code or by agreement with their creditors. Any or all of the circumstances described above may lead to further volatility in or disruption of the credit markets at any time and could adversely affect UWM’s financial condition. Such economic factors typically affect buyers’ demand for new homes or their willingness or ability to refinance their current mortgages which could adversely affect the wholesale loan origination market and UWM’s financial results of operations.

Any uncertainty or deterioration in market conditions that leads to a decrease in loan originations will likely result in lower revenue on loans sold into the secondary market. Lower loan origination volumes generally place downward pressure on margins, thus compounding the effect of the deteriorating market conditions. Moreover, any deterioration in market conditions that leads to an increase in loan delinquencies will result in higher expenses for loans UWM services for the GSEs and Ginnie Mae. The increased cost to service loans could decrease the estimated value of UWM’s MSRs, resulting in recognition of losses when it writes down those values. In addition, an increase in delinquencies lowers the interest income UWM receives on cash held in collection and other accounts and may increase UWM’s obligation to advance certain principal, interest, tax and insurance obligations owed by the delinquent mortgage loan borrower. While increased delinquencies generate higher ancillary revenues, including late fees, these fees are likely not sufficient to offset the increased cost of servicing the loans. An increase in delinquencies could therefore be detrimental to UWM’s business.

Any of the circumstances described above, alone or in combination, could lead to volatility in or disruption of the credit markets at any time and have a detrimental effect on UWM’s business. For additional information

 

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on macroeconomic and U.S. residential real estate market conditions, please consider the matters addressed in the section below entitled “—The COVID-19 pandemic and the actions taken by local, state and federal governments have and are expected to continue to adversely affect the national economy and the macroeconomic environment which could adversely affect UWM’s current operations and its ability to continue to grow.

UWM’s business is significantly impacted by interest rates. Changes in prevailing interest rates or U.S. monetary policies that affect interest rates may have a detrimental effect on UWM’s business.

UWM’s financial performance is directly affected by, and subject to substantial volatility from changes in prevailing interest rates. Due to the unprecedented events surrounding the COVID-19 pandemic along with the associated severe market dislocation, there are additional factors that contribute to uncertainty and unpredictability concerning current interest rates, future interest rates and potential negative interest rates.

With regard to the portion of UWM’s business that is centered on refinancing existing mortgages, generally, the refinance market experiences more significant fluctuations than the purchase market as a result of interest rate changes. Long-term residential mortgage interest rates are currently at or near record lows, but they may increase in the future. As interest rates rise, refinancing generally becomes a smaller portion of the market as fewer consumers are interested in refinancing their mortgages. With regard to UWM’s purchase mortgage loan business, higher interest rates may also reduce demand for purchase mortgages as home ownership becomes more expensive. This could adversely affect UWM’s revenues or require it to increase marketing expenditures in an attempt to increase or maintain its volume of mortgages. Decreases in interest rates can also adversely affect UWM’s financial condition, the value of its MSR portfolio, and its results of operations. With sustained low interest rates, such as those UWM has been experiencing, refinancing transactions may decline over time, as many consumers have already taken advantage of the low interest rates.

Changes in interest rates are also a key driver of the performance of UWM’s servicing business, particularly because its portfolio includes MSRs, the values of which are highly sensitive to changes in interest rates. Historically, the value of MSRs has increased when interest rates rise as higher interest rates lead to decreased prepayment rates, and has decreased when interest rates decline as lower interest rates lead to increased prepayment rates. In addition, increased prepayment rates may lead to increased amortization expense and a decrease in servicing fees. As a result, decreases in interest rates could have a detrimental effect on UWM’s business.

Borrowings under some of UWM’s finance and warehouse facilities are at variable rates of interest based on short term rate indexes, whereas its mortgage loans that serve as collateral for such facilities are generally based on long-term interest rates, which also exposes UWM to interest rate risk. If short term interest rates increase, UWM’s debt service obligations on certain of its variable-rate indebtedness will increase and if long-term rates do not increase in kind (i.e., the yield curve flattens or inverts) its net income and cash flows, including cash available for servicing its indebtedness, could correspondingly decrease.

UWM’s business is highly dependent on Fannie Mae and Freddie Mac and certain U.S. government agencies, and any changes in these entities or their current roles could be detrimental to UWM’s business.

UWM originates loans eligible for sale to Fannie Mae and Freddie Mac, and government insured or guaranteed loans, such as the FHA, the Veteran Affairs (“VA”) and the United States Department of Agriculture (“USDA”) loans eligible for Ginnie Mae securities issuance.

In 2008, the Federal Housing Finance Agency (“FHFA”) placed Fannie Mae and Freddie Mac into conservatorship and, as their conservator, controls and directs their operations. There is significant uncertainty regarding the future of the GSEs, including with respect to how long they will continue to be in existence, the extent of their roles in the market and what forms they will have, and whether they will be government agencies, government-sponsored agencies or private for-profit entities. Since they have been placed into conservatorship,

 

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many legislative and administrative plans for GSE reform have been put forth, but all have been met with resistance from various constituencies.

The Trump administration has made reforming Fannie Mae and Freddie Mac, including their relationship with the federal government, a priority. In September 2019, the U.S. Department of the Treasury (the “Treasury”) released a proposal for reform, and, in October 2019, FHFA released a strategic plan regarding the conservatorships, which included a Scorecard that has preparing for exiting conservatorship as one of its key objectives. Among other things, the Treasury recommendations include recapitalizing the GSEs, increasing private-sector competition with the GSEs, replacing GSE statutory affordable housing goals, changing mortgage underwriting requirements for GSE guarantees, revising the Consumer Financial Protection Bureau’s (the “CFPB”) qualified mortgage regulations, and continuing to support the market for 30-year fixed-rate mortgages. Some of the Treasury’s recommendations would require administrative action whereas others would require legislative action. It is uncertain whether these recommendations will be enacted. If these recommendations are enacted, the future roles of Fannie Mae and Freddie Mac could be reduced (perhaps significantly) and the nature of their guarantee obligations could be considerably limited relative to historical measurements. During September 2020, the Treasury’s Financial Services Oversight Council released a statement validating the Treasury’s September 2019 proposal and encouraged action to improve the financial stability of the GSEs. In addition, various other proposals to generally reform the U.S. housing finance market have been offered by members of the U.S. Congress, and certain of these proposals seek to significantly reduce or eliminate over time the role of the GSEs in purchasing and guaranteeing mortgage loans. Any such proposals, if enacted, may have broad adverse implications for the MBS market and UWM’s business. It is possible that the adoption of any such proposals might lead to higher fees being charged by the GSEs or lower prices on UWM’s sales of mortgage loans to them.

The extent and timing of any regulatory reform regarding the GSEs and the U.S. housing finance market, as well as any effect they may have on UWM’s business operations and financial results, are uncertain. It is not yet possible to determine whether such proposals will be enacted and, if so, when they will be enacted, what form any final legislation or policies might take or how proposals, legislation or policies may impact the MBS market and UWM’s business. UWM’s inability to make the necessary adjustments to respond to these changing market conditions or loss of its approved seller/servicer status with the GSEs could have a material adverse effect on its mortgage origination operations and its mortgage servicing operations. If those agencies cease to exist, wind down, or otherwise significantly change their business operations or if UWM loses approvals with those agencies or its relationships with those agencies is otherwise adversely affected, UWM would need to seek alternative secondary market participants to acquire its mortgage loans at a volume sufficient to sustain its business. If such participants are not available or available on reasonably comparable economic terms, the above changes could have a material effect on UWM’s ability to profitably sell loans it originates that are securitized through Fannie Mae, Freddie Mac or Ginnie Mae.

In August 2020, Fannie Mae and Freddie Mac announced that they will impose a 0.5% “adverse market fee” on most refinancings of mortgage loans originated and sold to them. The Federal Housing Finance Agency required Fannie Mae and Freddie Mac to delay their planned September 1, 2020 commencement of such fees and those fees are now expected to commence on December 1, 2020. Such “adverse market fee” and any future increases in guarantee fees or changes to the structure of Fannie Mae, Freddie Mac, or Ginnie Mae structure or increases in the premiums UWM is required to pay to the FHA or private mortgage insurers for insurance or to the VA or the USDA for guarantees could increase mortgage origination costs and insurance premiums for our borrowers. These industry changes could negatively affect demand for UWM’s mortgage services and also the company’s origination volume, which could be detrimental to UWM’s business. Such changes also could have broad adverse market implications.

 

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Changes in the GSEs, FHA, VA, and USDA guidelines or GSE and Ginnie Mae guarantees could adversely affect UWM’s business.

UWM is required to follow specific guidelines and eligibility standards that impact the way it services and originates GSE and U.S. government agency loans, including guidelines and standards with respect to:

 

   

credit standards for mortgage loans;

 

   

its staffing levels and other servicing practices;

 

   

the servicing and ancillary fees that it may charge;

 

   

its modification standards and procedures;

 

   

the amount of reimbursable and non-reimbursable advances that it may make; and

 

   

the types of loan products that are eligible for sale or securitization.

These guidelines provide the GSEs and other government agencies with the ability to provide monetary incentives for loan servicers that perform well and to assess penalties for those that do not. At the direction of the FHFA, Fannie Mae and Freddie Mac have aligned their guidelines for servicing delinquent mortgages, which could result in monetary incentives for servicers that perform well and to assess compensatory penalties against servicers in connection with the failure to meet specified timelines relating to delinquent loans and foreclosure proceedings, and other breaches of servicing obligations. UWM generally cannot negotiate these terms with the agencies and they are subject to change at any time without its specific consent. A significant change in these guidelines, that decreases the fees UWM charges or requires it to expend additional resources to provide mortgage services, could decrease its revenues or increase its costs.

In addition, changes in the nature or extent of the guarantees provided by Fannie Mae, Freddie Mac, Ginnie Mae, the USDA or the VA, or the insurance provided by the FHA, or coverage provided by private mortgage insurers, could also have broad adverse market implications. Any future increases in guarantee fees or changes to their structure or increases in the premiums UWM is required to pay to the FHA or private mortgage insurers for insurance or to the VA or the USDA for guarantees could increase mortgage origination costs and insurance premiums for its borrowers. These industry changes could negatively affect demand for UWM’s mortgage services and consequently its origination volume, which could be detrimental to its business.

To the extent that mortgage loans originated and sold by UWM do not comply with GSE, FHA or VA guidelines, UWM is required to repurchase or substitute mortgage loans or indemnify for losses related to its mortgage loans.

Substantially all of UWM’s mortgage loans are conforming loans sold to GSEs such as Fannie Mae and Freddie Mac or insured by FHA or VA and sold into GNMA securities. In connection with such sales and insuring, UWM makes representations and warranties to the GSE, FHA or VA that the mortgage loans conform to their respective standards. If a mortgage loan does not comply with the representations and warranties that UWM made with respect to it at the time of its sale or insuring, UWM is required to repurchase the loan, replace it with a substitute loan and/or indemnify the applicable agency for losses. In the case of repurchases, UWM typically repurchases such loan and resells it into a non-conforming market at a discount to the repurchase price. As of September 30, 2020, UWM had accrued $63.1 million in expenses in connection with its reserve for repurchase and indemnification obligations. Actual repurchase and indemnification obligations could materially exceed the reserves UWM has recorded in its consolidated financial statements. Any significant repurchases, substitutions, indemnifications or premium recapture could be detrimental to UWM’s business.

All of UWM’s mortgage loans are originated by third parties, which exposes UWM to business, competitive and underwriting risks.

As a Wholesale Mortgage Lender, UWM markets and originates mortgage loans exclusively through independent third-parties, comprised of Independent Mortgage Advisors. While UWM believes using

 

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Independent Mortgage Advisors best serves mortgage consumers, UWM’s reliance on third parties presents risks and challenges, including the following:

 

   

UWM’s business depends in large part on the marketing efforts of its clients and on its ability to offer loan products and services that meet the requirements of its clients and their borrowers. However, loan officers are not obligated to sell or promote UWM’s products and many sell or promote competitors’ loan products in addition to UWM’s products. Some of UWM’s competitors have higher financial strength ratings, offer a larger variety of products, and/or offer higher incentives than UWM does. Therefore, UWM may not be able to continue to attract and retain clients to originate loans for it. The failure or inability of UWM’s clients to successfully market its mortgage products successfully could, in turn, have a material adverse impact on its business, financial condition and results of operations.

 

   

Because of UWM’s focus exclusively on the wholesale channel, communication with borrowers is primarily made through loan officers employed by third parties. Consequently, UWM relies on its clients and their loan officers to provide UWM accurate information on behalf of borrowers, including financial statements and other financial information, for UWM to use in deciding whether to approve loans. If any of this information is intentionally or negligently misrepresented and such misrepresentation is not detected prior to loan funding, the fair value of the loan may be significantly lower than expected. Whether a misrepresentation is made by the borrower, the loan officer or one of UWM’s team members, UWM generally bears the risk of loss associated with the misrepresentation. UWM’s controls and processes may not have detected or may not detect all misrepresented information in its loan originations. Likewise, UWM’s clients may also lack sufficient controls and processes. Any such misrepresented information could have a material adverse effect on UWM’s business and results of operations.

 

   

Because borrowers rely on their loan officer through the entire mortgage process, and some borrowers do not differentiate between their loan officer (or the employer of the loan officer) and their mortgage lender, (i) developing brand recognition can be challenging and requires UWM to coordinate with its clients and (ii) poor customer service, customer complaints or negative word-of-mouth or publicity resulting from the performance of UWM’s clients could severely diminish consumer confidence in and use of its services. To maintain good customer relations, UWM must ensure that its clients provide prompt, accurate and differentiated customer service. Effective customer service requires significant personnel expense and investment in developing programs and technology infrastructure to help UWM’s clients carry out their functions. These expenses, if not managed properly, could significantly impact UWM’s profitability. Failure to properly manage UWM’s clients could compromise its ability to handle customer complaints effectively. If UWM does not handle borrower complaints effectively, its reputation and brand may suffer and it may lose its borrowers’ confidence which could have a material adverse impact on its results of operations and profitability.

 

   

Growth in UWM’s market share is principally dependent on growth in the market share controlled by the wholesale channel. Independent Mortgage Advisors controlled 15.8% of mortgage loan originations in the U.S. as of March 31, 2020, while direct-to-consumer activity represented 57.5% of the loan originations in the U.S. as of that date. Consequently, more competitors have focused on “direct-to-the-customer” distribution models that market digital ease and technological efficiencies. Continued advancements or the perception of efficiency in “direct-to-the-customer” distribution models may impact the overall market share controlled by UWM’s clients and make it more difficult for UWM to grow, or require it to establish relationships with, more clients.

The conduct of the Independent Mortgage Advisors through whom UWM originates mortgage loans could subject it to fines or other penalties.

UWM depends exclusively on Independent Mortgage Advisors for its loan originations. These clients are subject to parallel and separate legal obligations. While these laws may not explicitly hold the originating lenders responsible for the legal violations of such entities, U.S. federal and state agencies increasingly have sought to

 

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impose such liability. For example, the U.S. Department of Justice (“DOJ”), through its use of a disparate impact theory under the Fair Housing Act, is actively holding home loan lenders responsible for the pricing practices of third parties, alleging that the lender is directly responsible for the total fees and charges paid by the borrower even if the lender neither dictated what the third party could charge nor kept the money for its own account. See “—Regulatory agencies and consumer advocacy groups are becoming more aggressive in asserting claims that the practices of lenders and loan servicers result in a disparate impact on protected classes.” In addition, under the TILA-RESPA Integrated Disclosure (“TRID”) rule, UWM may be held responsible for improper disclosures made to borrowers by its clients. While UWM seeks to use technology, such as its loan origination systems (“LOSs”), to monitor whether these clients and their loan officers are complying with their obligations, UWM’s ability to enforce such compliance is extremely limited. Consequently, UWM may be subject to claims for fines or other penalties based upon the conduct of UWM’s clients and their loan officers with whom UWM does business, which could have a material effect on UWM’s operating results and financial condition.

UWM may not be able to continue to grow its mortgage loan origination volume or effectively manage significant increases in that volume, both of which could negatively affect UWM’s business, financial condition and results of operations.

UWM originates mortgage loans exclusively through Independent Mortgage Advisors in the wholesale channel. UWM’s loan origination volume is highly dependent on (1) macroeconomic factors, including interest rates, and U.S. residential real estate market conditions, (2) the efforts of third party Independent Mortgage Advisors and loan officers and (3) the market share controlled by the wholesale channel. Any of these factors could negatively affect UWM’s mortgage loan origination volume and in turn, adversely impact UWM’s business, financial condition and results of operations. UWM’s ability to continue to grow its mortgage loan origination volume will be greatly influenced by residential real estate market conditions, including seasonality, cyclicality and general economic conditions outside of UWM’s control. Furthermore, UWM markets and originates mortgage loans exclusively through Independent Mortgage Advisors who are not contractually obligated to sell or promote UWM’s products and who may also sell or promote competitors’ loan products. UWM’s competitors actively compete for the same Independent Mortgage Advisors, and UWM may not be successful in maintaining its existing relationships or expanding its network of Independent Mortgage Advisors.

UWM’s ability to continue to grow its origination volume will also be significantly impacted by interest rates. For example, higher interest rates may reduce demand for purchase mortgages as home ownership becomes more expensive and reduce demand for refinancing as fewer consumers are interested in refinancing their mortgages. Sustained low interest rates, such as those UWM has been experiencing, could also decrease demand for refinancing transactions over time.

Historically, more competitors have focused on “direct-to-the-customer” distribution models, and continued advancements or the perception of efficiency in these models may impact the overall market share controlled by UWM’s Independent Mortgage Advisor clients in the wholesale channel and make it more difficult for UWM to grow its loan origination volume, or require it to establish relationships with, more clients.

On the other hand, UWM may experience significant growth in its mortgage loan volume. If UWM does not effectively manage its growth, it could have a negative impact on UWM’s business, financial condition and results of operations.

The COVID-19 pandemic and the actions taken by local, state and federal governments have and are expected to continue to adversely affect the national economy and the macroeconomic environment which could adversely affect UWM’s current operations and its ability to continue to grow.

The COVID-19 pandemic has had, and continues to have, a significant impact on the national economy and the communities in which UWM operates. While the pandemic’s effect on the macroeconomic environment has yet to be fully determined and could continue for months or years, UWM expects that the pandemic and

 

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governmental programs created as a response to the pandemic, will affect the core aspects of UWM’s business and the business of its clients, including the origination of mortgages, its servicing operations, its liquidity and its team members. Such effects, if they continue for a prolonged period, may have a material adverse effect on UWM’s business and results of operation. These effects may be exacerbated should there be a second wave of infections or if the pandemic otherwise intensifies.

UWM expects that the COVID-19 pandemic may impact its origination of mortgages. In response to the pandemic, many state and local governments have issued shelter-in-place and other protective orders and have enacted measures requiring closure of businesses and other economically restrictive efforts to combat the COVID-19 pandemic. The scope of the orders varies by locality, and the duration of these orders is currently unknown. While the origination of a mortgage is permitted under most shelter-in-place orders as an essential service, the restrictions have affected UWM’s business operations and those of its clients that depend on third parties such as appraisers, closing agents and others for loan related verifications. Additionally, the home sales process has been affected, and future growth is uncertain. Furthermore, unemployment levels have increased significantly and may remain at elevated levels or continue to rise. If the COVID-19 pandemic leads to a prolonged economic downturn with sustained high unemployment rates, UWM anticipates that real estate transactions will decrease. Furthermore, there may be a significant increase in the rate and number of mortgage payment delinquencies, and house sales, home prices, and multifamily fundamentals may be adversely affected, leading to an overall significant decrease in UWM’s mortgage origination activities. The impact of any of the foregoing may materially decrease the number and volume of mortgages UWM originates and adversely affect its ability to continue to expand its operations.

Moreover, the FHFA establishes certain liquidity requirements for agency and Ginnie Mae loan servicers that are generally tied to the unpaid principal balance of loans serviced by such loan servicer for Fannie Mae, Freddie Mac, Ginnie Mae, FHA and VA. To the extent that the percentage of seriously delinquent loans (“SDQ”), i.e., loans that are 90 days or more delinquent, exceeds defined thresholds, the liquidity requirements for loan servicers could increase materially. Exceeding such SDQ thresholds would result in substantially higher liquidity requirements, as well as a reduction in the advance rates applicable to UWM’s MSR financing structure that are tied to such SDQ thresholds, all of which could materially impact UWM’s results of operations and financial condition.

In addition, UWM’s business could be disrupted if it is unable to operate due to changing governmental restrictions such as travel bans and quarantines placed on its team members, other measures that ensure the protection of its team members’ health, measures aimed at maintaining its information technology infrastructure given the switch to working remotely, or if an outbreak occurs in its headquarters that prevents it from operating.

Finally, the COVID-19 pandemic has contributed to significant volatility and negative pressure in financial markets. UWM funds substantially all of the mortgage loans it closes through borrowings under its warehouse facilities. Given the broad impact of COVID-19 on the financial markets, UWM’s future ability to borrow money to fund its current and future loan origination activities is unknown. UWM’s mortgage origination liquidity could also be affected as its lenders reassess their exposure to the mortgage origination industry and either curtail access to uncommitted mortgage warehouse financing capacity or impose higher costs to access such capacity. In addition, UWM also periodically sells MSRs in the bulk MSR secondary market. As a result of the COVID-19 pandemic, many of the major purchasers in the bulk MSR secondary market experienced liquidity constraints; consequently, the liquidity of the bulk MSR market has been, and may continue to be, adversely affected. This market disruption may adversely affect UWM’s ability to sell MSRs and the pricing that it is able to achieve, which in turn could adversely affect its liquidity and reduce its margins. If UWM is unable to access sources of capital or liquidity as a result of the impact of the COVID-19 pandemic on the financial markets, its ability to maintain or grow its business could be limited.

 

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UWM may not be able to detect or prevent cyberattacks and other data and security breaches, which could adversely affect its business and subject it to liability to third parties.

UWM is dependent on information technology networks and systems, particularly for its loan origination systems and other technology-driven platforms, designed to provide best-in-class service and experience for clients and to ensure adherence to regulatory compliance, operational governance, training and security. In the ordinary course of UWM’s business, it receives, processes, retains and transmits proprietary information and sensitive or confidential data, including the public and non-public personal information of its team members, clients and loan applicants. Despite devoting significant time and resources to ensure the integrity of UWM’s information technology systems, it has not always been able to, and may not be able to in the future, anticipate or implement effective preventive measures against all security breaches or unauthorized access of its information technology systems or the information technology systems of third-party vendors that receive, process, retain and transmit electronic information on its behalf.

Cybersecurity risks for lenders have significantly increased in recent years, in part, because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of computer hackers, organized crime, terrorists, and other external parties, including foreign state actors. UWM, its clients, borrowers and loan applicants, regulators and other third parties have been subject to, and are likely to continue to be the target of, cyberattacks and other security breaches. Security breaches, cyberattacks such as computer viruses, malicious or destructive code, phishing attacks, denial of service or information, acts of vandalism, natural disasters, fire, power loss, telecommunication failures, team member misconduct, human error and developments in computer intrusion capabilities could result in a compromise or breach of the technology that UWM or its third-party vendors use to collect, process, retain, transmit and protect the personal information and transaction data of its team members, clients, borrowers and loan applicants. Similar events outside of UWM’s control can also affect the demands it and its vendors may make to respond to any security breaches or similar disruptive events. UWM invests in industry-standard security technology designed to protect its data and business processes against risk of a data security breach and cyberattack. UWM’s data security management program includes identity, trust, vulnerability and threat management business processes as well as the adoption of standard data protection policies. UWM measures its data security effectiveness through industry-accepted methods and remediates significant findings. The technology and other controls and processes designed to secure UWM’s team member, client, borrower and loan applicant information and to prevent, detect and remedy any unauthorized access to that information were designed to obtain reasonable, but not absolute, assurance that such information is secure and that any unauthorized access is identified and addressed appropriately. Such controls have not always detected, and may in the future fail to prevent or detect, unauthorized access to UWM’s team member, client, borrower and loan applicant information.

The techniques used to obtain unauthorized, improper or illegal access to UWM’s systems and those of its third-party vendors, its data, its team members’, clients’, borrowers’ and loan applicants’ data or to disable, degrade or sabotage service are constantly evolving, and have become increasingly complex and sophisticated. Furthermore, such techniques change frequently and are often not recognized or detected until after they have been launched. Therefore, UWM may be unable to anticipate these techniques and may not become aware of such a security breach in a timely manner, which could exacerbate any damage it experiences. Security attacks can originate from a wide variety of sources, including third parties such as computer hackers, persons involved with organized crime or associated with external service providers, or foreign state or foreign state-supported actors. Those parties may also attempt to fraudulently induce team members, clients, borrowers and loan applicants or other users of UWM’s systems to disclose sensitive information in order to gain access to its data or that of its team members, clients, borrowers and loan applicants. UWM’s failure to detect or prevent a cyberattack or other data or security breach could adversely affect its business.

The occurrence of any of the foregoing events could subject UWM to increased costs, litigation, disputes, damages, and other liabilities. In addition, the foregoing events could result in violations of applicable privacy

 

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and other laws. If this information is inappropriately accessed and used by a third party or a team member for illegal purposes, such as identity theft, UWM may be responsible to the affected individuals for any losses they may have incurred as a result of such misappropriation. In such an instance, UWM may also be subject to regulatory action, investigation or liability to a governmental authority for fines or penalties associated with a lapse in the integrity and security of its team members’, clients’, borrowers’ and loan applicants’ information. UWM may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. In addition, UWM’s remediation efforts may not be successful and it may not have adequate insurance to cover these losses. Furthermore, any publicized security problems affecting UWM’s businesses and/or those of such third parties may negatively impact the market perception of its products and discourage clients or borrowers from doing business with it.

Technology disruptions or failures, including a failure in UWM’s operational or security systems or infrastructure, or those of third parties with whom it does business, could disrupt its business, cause legal or reputational harm and adversely impact its results of operations and financial condition.

UWM is dependent on the secure, efficient, and uninterrupted operation of its technology infrastructure, including computer systems, related software applications and data centers, as well as those of certain third parties and affiliates. UWM’s websites and computer/telecommunication networks must accommodate a high volume of traffic and deliver frequently updated information, the accuracy and timeliness of which is critical to its business. UWM’s technology must be able to facilitate a loan application experience that equals or exceeds the experience provided by its competitors. UWM has or may in the future experience service disruptions and failures caused by system or software failure, fire, power loss, telecommunications failures, team member misconduct, human error, computer hackers, computer viruses and disabling devices, malicious or destructive code, denial of service or information, as well as natural disasters, health pandemics and other similar events and UWM’s disaster recovery planning may not be sufficient for all situations. The implementation of technology changes and upgrades to maintain current and integrate new technology systems may also cause service interruptions. Any such disruption could interrupt or delay UWM’s ability to provide services to its clients and could also impair the ability of third parties to provide critical services to it.

Additionally, the technology and other controls and processes UWM has created to help it identify misrepresented information in its loan origination operations were designed to obtain reasonable, not absolute, assurance that such information is identified and addressed appropriately. Accordingly, such controls may not have detected, and may fail in the future to detect, all misrepresented information in UWM’s loan origination operations. If UWM’s operations are disrupted or otherwise negatively affected by a technology disruption or failure, this could result in client dissatisfaction and damage to its reputation and brand, and have a material impact on its business.

Loss of UWM’s key management could result in a material adverse effect on its business.

UWM’s future success depends to a significant extent on the continued services of its senior management, including Mat Ishbia, UWM’s President and Chief Executive Officer. The experience of UWM’s senior management is a valuable asset to UWM and would be difficult to replace. The loss of the services of UWM’s President and Chief Executive Officer or other members of senior management could disrupt and have a detrimental effect on its business.

UWM’s products rely on software and services from third-party vendors and if any of these services became unavailable or unreliable, it could adversely affect the quality and timeliness of UWM’s mortgage origination process.

In addition to its proprietary software, UWM licenses third-party software and depends on services from various third parties for use in its products. For example, UWM relies on third-party vendors for its online mortgage application services, to generate the documents required for closing the document, to generate flood

 

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certifications and to confirm employment. While there are other providers of these services in the market, any loss of the right to use any of the software or services could result in decreased functionality of UWM’s products until equivalent technology is either developed by it or, if available from another provider, is identified, obtained and integrated, which could adversely affect its reputation and its future financial results of operations.

Furthermore, UWM remains responsible for ensuring its loans are originated in compliance with applicable laws. Despite UWM’s efforts to monitor such compliance, any errors or failures of such third party vendors or their software to perform in the manner intended could result in loan defects potentially requiring repurchase. In addition, any errors or defects in or failures of the other software or services UWM relies on, whether maintained by it or by third parties, could result in errors or defects in its products or cause its products to fail, which could adversely affect its business and be costly to correct. Many of UWM’s third-party vendors attempt to impose limitations on their liability for such errors, defects or failures, and if enforceable, UWM may have additional liability to its clients, borrowers or other third parties that could harm its reputation and increase its operating costs. Any failure to do so could adversely affect UWM’s ability to deliver effective products to its clients, borrowers and loan applicants and adversely affect its business.

If UWM’s clients are dissatisfied with its services or their compensation, it may lose a number of its clients which would have a negative impact on its business and financial results.

UWM’s business and financial performance is dependent, in large part, on its ability to maintain relationships with a sufficient number of Independent Mortgage Advisors to originate mortgage loans. If UWM is unable to attract Independent Mortgage Advisors to join its network and to provide a level of service such that its clients remain with the network, its ability to originate loans will be significantly impaired. UWM’s ability to attract Independent Mortgage Advisors is dependent on customer service, as well as the rates that its clients can offer borrowers for mortgage loans. In determining with whom to partner, Independent Mortgage Advisors are also focused on the technological services and platforms UWM can provide so that the Independent Mortgage Advisors can best attract and serve consumers. If UWM’s clients are dissatisfied with its services or platform or technological capabilities, or they cannot offer prospective borrowers competitive rates, UWM could lose a number of clients which would have a negative impact on its business, operating results and financial condition.

UWM relies on third party sub-servicers who service all the mortgage loans on which it holds MSRs, and its financial performance may be adversely affected by their inability to adequately perform their servicing functions.

UWM contracts with third party sub-servicers for the servicing of the portion of the mortgage loans in its portfolio for which it retains MSRs. Although it uses third-party servicers, UWM, as master servicer, retain primary responsibility to ensure these loans are serviced in accordance with the contractual and regulatory requirements. Therefore, the failure of UWM’s sub-servicers to adequately perform their servicing obligations may subject it to liability for their improper acts or omissions and adversely affect its financial performance. Specifically, UWM may be adversely affected:

 

   

if its sub-servicers breach their servicing obligations or are unable to perform their servicing obligations properly, which may subject it to damages or termination of the servicing rights, and cause it to lose loan servicing income and/or require it to indemnify an investor or securitization trustee against losses as a result of any such breach or failure;

 

   

by regulatory actions taken against any of its sub-servicers, which may adversely affect their licensing and, as a result, their ability to perform their servicing obligations under GSE and U.S. government agency loans which require such licensing;

 

   

by a default by any of its sub-servicers under their debt agreements, which may impact their access to capital to be able to perform their obligations;

 

   

if any of its sub-servicers were to face adverse actions from the GSEs and are terminated as servicer under their agreements with the GSEs;

 

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if its sub-servicers fail to meet their obligations due to economic or other circumstances that are difficult to anticipate, including as a result of the impact of the COVID-19 pandemic;

 

   

if as a result of poor performance by its sub-servicers, it experiences greater than expected delinquencies and foreclosures on the mortgage loans being serviced, which could lead to liability from third party claims or adversely affect its ability to access the capital and secondary markets for its loan funding requirements;

 

   

if any of its sub-servicers become subject to bankruptcy proceedings; or

 

   

if one or more of its sub-servicers terminate their agreement with it.

Furthermore, UWM utilizes two nationally-recognized sub-servicers to service all of its mortgage loans for which it has retained MSRs. This sub-servicer counterparty concentration subjects UWM to a potentially greater impact if any of the risks described above were to occur, and any delay in transferring servicing to a new sub-servicer could further adversely affect servicing performance and cause financial losses. Any of these risks could adversely affect UWM’s results of operations, including its loan servicing income and the cash flow generated by its MSR portfolio. Any of these risks may be further exacerbated to the extent UWM materially increases its MSR portfolio in the future.

UWM is required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances, and could have a material adverse effect on its cash flows, business and financial condition.

During any period in which one of UWM’s borrowers is not making payments on a loan it services, UWM is required under most of its servicing agreements to advance its own funds to meet some combination of contractual principal and interest remittance requirements, pay property taxes and insurance premiums, legal expenses and other protective advances. UWM also advances funds to maintain, repair and market real estate properties. In certain situations, UWM’s contractual obligations may require it to make certain advances for which it may not be reimbursed. In addition, in the event a loan serviced by UWM defaults or becomes delinquent, or the mortgagee is allowed to enter into a forbearance, the repayment of advances may be delayed, which may adversely affect its liquidity. Any significant increase in required servicing advances or delinquent loan repurchases, could have an adverse impact on UWM’s cash flows, even if they are reimbursable.

With delinquent VA guaranteed loans, the VA guarantee may not make UWM whole on losses or advances it may have made on the loan. In addition, for certain loans sold to Ginnie Mae, UWM, as the servicer, has the unilateral right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets defined criteria, including being delinquent for longer than 90 days. Once UWM has the unilateral right to repurchase the delinquent loan, it has effectively regained control over the loan and it must recognize the loan on its balance sheet and recognize a corresponding financial liability. Any significant increase in seriously delinquent Ginnie Mae loans could have an adverse impact on UWM’s balance sheet, as well as its borrowing covenants that are based on balance sheet ratios.

As part of the federal response to the COVID-19 pandemic, the CARES Act allows borrowers to request a mortgage forbearance. Nevertheless, servicers of mortgage loans are often times contractually bound to advance monthly payments to investors, insurers and taxing authorities regardless of whether the borrower actually makes those payments. UWM expects, however, that such payments may continue to increase throughout the duration of the pandemic. While Fannie Mae and Freddie Mac recently issued guidance limiting the number of payments a servicer must advance in the case of a forbearance, UWM expects that a borrower who has experienced a loss of employment or a reduction of income may not repay the forborne payments at the end of the forbearance period. Additionally, UWM is prohibited from collecting certain servicing related fees, such as late fees, and initiating foreclosure proceedings. Furthermore, there is no assurance that UWM will be successful in utilizing prepayments and mortgage payoffs from other borrowers to fund principal and interest advances relating to

 

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forborne loans in the coming months and UWM will ultimately have to replace such funds to make payments in respect of such prepayments and mortgage payoffs. As a result, UWM may have to use its cash, including borrowings under its debt agreements, to make the payments required under its servicing operation. Moreover, even though delinquencies generate higher ancillary revenues, including late fees, it is not clear if UWM will be able to collect such ancillary fees for delinquencies relating to the COVID-19 pandemic as the federal and state legislation and regulations responding to the COVID-19 pandemic continue to evolve. Approximately 5.5% of UWM’s serviced loans are in forbearance as of September 30, 2020.

Much like what has occurred in response to the COVID-19 pandemic, government intervention also occurs periodically as a result of natural disasters or other events that cause widespread borrower harm. Similar challenges and risks to servicers, including UWM will likely occur when such events transpire in the future.

UWM faces intense competition that could adversely affect it.

Competition in the mortgage lending space is intense. In addition, the mortgage business has experienced substantial consolidation. As UWM depends solely on third-parties to deliver it mortgage loans, it may be at a competitive disadvantage to financial institutions or direct-to-consumer mortgage lenders that market to, and have a direct relationship with, the borrower. In addition, some of UWM’s competitors may have greater financial and other resources than it has (including access to capital) while other of its competitors, such as financial institutions who originate mortgage loans using their own funds, may have more flexibility in holding loans. Additionally, UWM operates at a competitive disadvantage to U.S. federal banks and thrifts and their subsidiaries because they enjoy federal preemption and, as a result, conduct their business under relatively uniform U.S. federal rules and standards and are generally not subject to the laws of the states in which they do business (including state “predatory lending” laws). Unlike its federally chartered competitors, UWM is generally subject to all state and local laws applicable to lenders in each jurisdiction in which it originates and services loans. To compete effectively, UWM must have a very high level of operational, technological and managerial expertise, as well as access to capital at a competitive cost.

Competition in UWM’s industry can take many forms, including the variety of loan programs being made available, interest rates and fees charged for a loan, convenience in obtaining a loan, client service levels, the amount and term of a loan, and marketing and distribution channels. Fluctuations in interest rates and general economic conditions may also affect UWM’s competitive position. During periods of rising rates, competitors that have locked in low borrowing costs may have a competitive advantage. Furthermore, a cyclical decline in the industry’s overall level of originations, or decreased demand for loans due to a higher interest rate environment, may lead to increased competition for the remaining loans. Any increase in these competitive pressures could be detrimental to UWM’s business.

The success and growth of UWM’s business will depend upon its ability to be a leader in technological innovation in its industry.

UWM operates in an industry experiencing rapid technological change and frequent product introductions. In order to succeed, UWM must lead its peers in designing, innovating and introducing new technology and product offerings. The process of developing new technologies and products is complex, and if UWM is unable to successfully innovate and continue to deliver a superior client experience, the demand for its products and services may decrease, it may lose market share and its growth and operations may be harmed.

The origination process is increasingly dependent on technology, and UWM’s business relies on its continued ability to process loan applications over the internet, accept electronic signatures, provide instant process status updates and other client- and loan applicant-expected conveniences. UWM’s proprietary and exclusively licensed technology is integrated into all steps of the loan origination process, from the original submission, to the underwriting to the closing. UWM’s dedication to incorporating technological advancements into its loan origination and servicing platforms requires significant financial and personnel resources. For

 

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example, UWM has, and will continue to, expend significant capital expenditures on its proprietary technology platforms. Maintaining and improving this technology will require significant capital expenditures.

To the extent UWM is dependent on any particular technology or technological solution, it may be harmed if such technology or technological solution becomes non-compliant with existing industry standards, fails to meet or exceed the capabilities of its competitors’ equivalent technologies or technological solutions, becomes increasingly expensive to service, retain and update, becomes subject to third-party claims of intellectual property infringement, misappropriation or other violation, or malfunctions or functions in a way it did not anticipate that results in loan defects potentially requiring repurchase. Additionally, new technologies and technological solutions are continually being released. As such, it is difficult to predict the problems UWM may encounter in improving its websites’ and other technologies’ functionality.

UWM could be adversely affected if it inadequately obtains, maintains, protects and enforces its intellectual property and proprietary rights and may encounter disputes from time to time relating to its use of the intellectual property of third parties.

UWM’s proprietary technology platforms and other proprietary rights are important to UWM’s success and its competitive position. UWM relies on intellectual property to protect its proprietary rights. Despite these measures, third parties may attempt to disclose, obtain, copy or use intellectual property rights owned or licensed by UWM and these measures may not prevent misappropriation, infringement, reverse engineering or other violation of intellectual property or proprietary rights owned or licensed by it. Furthermore, confidentiality procedures and contractual provisions can be difficult to enforce and, even if successfully enforced, may not be entirely effective. In addition, UWM cannot guarantee that it has entered into confidentiality agreements with all team members, partners, independent contractors or consultants that have or may have had access to its trade secrets and other proprietary information. Any issued or registered intellectual property rights owned by or licensed to UWM may be challenged, invalidated, held unenforceable or circumvented in litigation or other proceedings, and such intellectual property rights may be lost or no longer provide UWM meaningful competitive advantages. Third parties may also independently develop products, services and technology similar to or duplicative of UWM’s products and services.

UWM’s success and ability to compete also depends in part on its ability to operate without infringing, misappropriating or otherwise violating the intellectual property or proprietary rights of third parties. UWM may encounter disputes from time to time concerning intellectual property rights of others, including its competitors, and UWM may not prevail in these disputes. Third parties may raise claims against UWM alleging an infringement, misappropriation or other violation of their intellectual property rights, including trademarks, copyrights, patents, trade secrets or other intellectual property or proprietary rights. An assertion of an intellectual property infringement, misappropriation or other violation claim against UWM could result in adverse judgments, settlement on unfavorable terms or cause it to spend significant amounts to defend the claim, even if it ultimately prevails and it may have to pay significant money damages, lose significant revenues, be prohibited from using the relevant systems, processes, technologies or other intellectual property, cease offering certain products or services, or incur significant license, royalty or technology development expenses.

Fraud could result in significant financial losses and harm to UWM’s reputation.

UWM uses automated underwriting engines from Fannie Mae and Freddie Mac to assist it in determining if a loan applicant is creditworthy, as well as other proprietary and third-party tools and safeguards to detect and prevent fraud. UWM is unable, however, to prevent every instance of fraud that may be engaged in by its clients, borrowers or team members, and any seller, real estate broker, notary, settlement agent, appraiser, title agent, or third-party originator that misrepresents facts about a loan, including the information contained in the loan application, property valuation, title information and employment and income stated on the loan application. If any of this information was intentionally or negligently misrepresented and such misrepresentation was not detected prior to the acquisition or closing of the loan, the value of the loan could be significantly lower than

 

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expected, resulting in a loan being approved in circumstances where it would not have been, had UWM been provided with accurate data. A loan subject to a material misrepresentation is typically unsalable or subject to repurchase if it is sold before detection of the misrepresentation. In addition, the persons and entities making a misrepresentation are often difficult to locate and it is often difficult to collect from them any monetary losses UWM has suffered.

High profile fraudulent activity also could negatively impact UWM’s brand and reputation, which could impact its business. In addition, significant increases in fraudulent activity could lead to regulatory intervention, which could increase UWM’s costs and also negatively impact its business.

UWM’s counterparties may terminate its servicing rights, which could have a material adverse effect on its revenues.

The majority of the mortgage loans UWM services are serviced on behalf of Fannie Mae, Freddie Mac and Ginnie Mae. These entities establish the base service fee to compensate UWM for servicing loans as well as the assessment of fines and penalties that may be imposed upon UWM for failing to meet servicing standards.

As is standard in the industry, under the terms of UWM’s master servicing agreements with the GSEs, the GSEs have the right to terminate UWM as servicer of the loans it services on their behalf at any time and also have the right to cause it to sell the MSRs to a third party. In addition, failure to comply with servicing standards could result in termination of UWM’s agreements with the GSEs with little or no notice and without any compensation. If any of Fannie Mae, Freddie Mac or Ginnie Mae were to terminate UWM as a servicer, or increase its costs related to such servicing by way of additional fees, fines or penalties, such changes could have a material adverse effect on the revenue it derives from servicing activity, as well as the value of the related MSRs. These agreements, and other servicing agreements under which UWM services mortgage loans for non-GSE loan purchasers, also require that it service in accordance with GSE servicing guidelines and contain financial covenants. If UWM were to have its servicing rights terminated on a material portion of its servicing portfolio, this could adversely affect its business.

UWM may become subject to legal actions that if decided adversely, could be detrimental to its business.

UWM operates in an industry that is highly sensitive to consumer protection, and it and its clients are subject to numerous local, state and federal laws that are continuously changing. Remediation for non-compliance with these laws can be costly and significant fines may be incurred. UWM is routinely involved in consumer complaints, regulatory actions and legal proceedings in the ordinary course of its business and may become subject to class action suits alleging non-compliance with these laws. UWM is also routinely involved in state regulatory audits and examinations, and occasionally involved in other governmental proceedings arising in connection with its respective businesses. UWM is also subject to various other laws, regulations and rules that are not industry specific, including employment laws related to employee hiring and termination practices, health and safety laws, environmental laws and other federal, state and local laws, regulations and rules in the jurisdictions in which it operates, and it may become subject to legal actions with respect to these other laws, regulations and rules. UWM may incur costs, fines and legal expenses in connection with these matters.

If UWM is unable to hire, train and retain qualified personnel to support its growth, it could disrupt UWM’s operations and adversely affect its ability to deliver superior customer service its long-term growth.

UWM currently has over 6,700 team members and its ability to continue to grow and succeed will depend on its ability to continue to hire, integrate, develop and retain highly-qualified personnel for all areas of its organization. Any talent acquisition and retention challenges could reduce UWM’s operating efficiency, increase its costs of operations and harm its overall financial condition. UWM could face these challenges if competition for qualified personnel intensifies or the pool of qualified candidates becomes more limited. Additionally, UWM invests heavily in training its team members, which increases their value to competitors who may seek to recruit

 

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them. The inability to attract or retain qualified personnel could disrupt UWM’s operations and adversely affect its ability to deliver superior customer service and its long-term growth.

If UWM cannot maintain its corporate culture, it could lose the innovation, collaboration and focus on the mission that contribute to its business.

UWM believes that a critical component of its success is its corporate culture and its deep commitment to its mission. UWM believes this mission-based culture fosters innovation, encourages teamwork and cultivates creativity. UWM’s mission defines its business philosophy as well as the emphasis that it places on its clients, its people and its culture and is consistently reinforced to and by its team members. As a result of COVID-19, a significant portion of UWM’s team members are working remotely and there is a risk that over time such remote operations may decrease the cohesiveness of its teams and its ability to maintain its culture, both of which are integral to its success. If UWM is unable to preserve its culture, this could negatively impact its future success, including its ability to attract and retain team members, encourage innovation and teamwork, and effectively focus on and pursue its mission and corporate objectives.

Substantially all of UWM’s operations are housed in one location, and if the facilities are damaged or rendered inoperable by natural or man-made disasters, UWM’s business may be negatively impacted.

Substantially all of UWM’s operations are housed on one campus in Pontiac, Michigan. UWM’s campus could be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, fires, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, extreme weather conditions, medical epidemics, and other natural or man-made disasters, pandemics, epidemics, or other business interruptions, including as a result of COVID-19. If due to such disaster a significant portion of UWM’s team members must work remotely for an extended period of time, UWM’s business may be negatively impacted. See “—If UWM cannot maintain its corporate culture, it could lose the innovation, collaboration and focus on the mission that contribute to its business.” In addition, it could be costly and time-consuming to repair or replace UWM’s campus.

In certain circumstances, UWM LLC will be required to make distributions to us and SFS Corp. and the distributions that UWM LLC will be required to make may be substantial and in excess of our tax liabilities and obligations under the tax receivable agreement. To the extent we do not distribute such excess cash, SFS Corp. would benefit from any value attributable to such cash balances as a result of their ownership of Class B Stock (or Class A Stock, as applicable) following an exchange of their UWM Common Units and the stapled shares of Common Stock.

UWM LLC will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to us and SFS Corp., as holders of UWM Common Units. Accordingly, we will incur income taxes on our allocable share of any net taxable income of UWM LLC. Under the UWM A&R LLCA, UWM LLC will generally be required from time to time to make pro rata distributions in cash to its equityholders, SFS Corp. and us, in amounts sufficient to cover the taxes on their allocable share of the taxable income of UWM LLC. As a result of (i) potential non pro rata allocations of net taxable income allocable to us and SFS Corp., (ii) the lower tax rate applicable to corporations as compared to individuals and (iii) the favorable tax benefits that we anticipate receiving from (a) the exchange of UWM Common Units from SFS Corp. and (b) payments under the tax receivable agreement, we expect that these tax distributions will be in amounts that exceed our tax liabilities and obligations to make payments under the tax receivable agreement. Our board of directors will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, any potential dividends, stock buybacks, the payment obligations under the tax receivable agreement and the payment of other expenses. We will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders. No adjustments to the exchange ratio for UWM Common Units and the stapled shares of Common Stock will be made as a result of (x) any cash distribution by UWM LLC or (y) any cash that we retain and do not distribute to our stockholders, and in any event the ratio will remain one-to-one.

 

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We are required to pay SFS Corp. for certain tax benefits we may claim, and the amounts we may pay could be significant.

We intend to enter into a tax receivable agreement with SFS Corp. that will provide for the payment by us to SFS Corp. (or its transferees or other assignees) of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (i) certain increases in tax basis resulting from exchanges of UWM Common Units; (ii) imputed interest deemed to be paid by the Company as a result of payments it makes under the tax receivable agreement; (iii) certain increases in tax basis resulting from payments the Company makes under the tax receivable agreement; and (iv) disproportionate allocations (if any) of tax benefits to the Company as a result of section 704(c) of the Code (the tax attributes in clauses “(i)” through “(iv)” collectively referred to as the “Covered Tax Attributes”). The tax receivable agreement will make certain simplifying assumptions regarding the determination of the cash savings that we realize or are deemed to realize from the Covered Tax Attributes, which may result in payments pursuant to the tax receivable agreement in excess of those that would result if such assumptions were not made.

The actual tax benefit, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including, among others, the timing of exchanges by or purchases from SFS Corp., the price of our Class A Stock at the time of the exchanges or purchases, the extent to which such exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable, and the portion of our payments under the tax receivable agreement constituting imputed interest.

Future payments under the tax receivable agreement could be substantial. Assuming that all UWM Common Units eligible to be exchanged for cash or Class A Stock would be exchanged for Class A Stock by SFS Corp. at the time of the Business Combination and that we will have sufficient taxable income to utilize all of the tax attributes covered by the tax receivable agreement when they are first available to be utilized under applicable law, we estimate that payments to SFS Corp. under the tax receivable agreement would aggregate to approximately $3.6 billion over the next 25 years and for yearly payments over that time to range between approximately $15.8 million to $304.1 million per year, based on an assumed price per share of Class A Stock of $10 (the estimated redemption price for a holder of Class A Stock that elects to exercise its redemption rights). The payments under the tax receivable agreement are not conditioned upon SFS Corp.’s continued ownership of us.

We are not required to make a payment of the 85% applicable tax savings to SFS Corp. unless and until at least one of the payment conditions has been satisfied (the “Payment Conditions”). One condition is a requirement that we have received a tax opinion that provides that the applicable assets of UWM LLC giving rise to the payment are “more likely than not” amortizable (the “Indemnifiable Condition”). If we determine that none of the Payment Conditions have been satisfied with respect to all or a portion of such applicable tax savings, we will pay such applicable tax savings (or portion thereof) at the time we reasonably determine a Payment Condition has been satisfied.

If we make a payment and the applicable tax savings are subsequently disallowed, we may deposit future payments due under the tax receivable agreement in an escrow account up to an amount necessary to cover 85% of the estimated additional taxes due by us as a result of the disallowance until such time as there has been a conclusive determination as to the validity of the disallowance. Upon a conclusive determination of the validity of the disallowance, we may recover from the escrow account any excess payments paid to SFS Corp. (or its transferees or assignees), and to the extent the amounts in the escrow account are insufficient, we may net any additional excess payments paid to SFS Corp. (or its transferees or assignees) against future payments that would otherwise be made under the tax receivable agreement. In addition, if we make a payment pursuant to the satisfaction of the Indemnifiable Condition and the applicable tax savings are subsequently disallowed, SFS Corp. will be required to indemnify us for 85% of the taxes and any additional losses attributable to the disallowance. At our election, SFS Corp. may satisfy all or a portion of this indemnity by transferring UWM

 

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Common Units held by it. There is no guarantee that SFS Corp. will hold UWM Common Units with a value sufficient to satisfy this indemnity or that the escrow account will hold sufficient funds to cover the cost of any disallowed tax savings. We could make payments to SFS Corp. under the tax receivable agreement that are greater than our actual cash tax savings and may not be able to recoup those payments, which could negatively impact our liquidity.

In addition, the tax receivable agreement will provide that in the case of a change in control of the Company or a material breach of our obligations under the tax receivable agreement, we will be required to make a payment to SFS Corp. in an amount equal to the present value of future payments (calculated using a discount rate equal to the lesser of 6.50% or LIBOR plus 100 basis points, which may differ from our, or a potential acquirer’s, then-current cost of capital) under the tax receivable agreement, which payment would be based on certain assumptions, including those relating to our future taxable income. For additional discussion of LIBOR, see “—Risks Related to UWM’s Financing—UWM is exposed to risk relating to the transition from LIBOR and the volatility of LIBOR or any replacement reference rate, which can result in higher than market interest rates and may have a detrimental effect on its business.” In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our, or a potential acquirer’s, liquidity and could have the effect of delaying, deferring, modifying or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. These provisions of the tax receivable agreement may result in situations where SFS Corp. has interests that differ from or are in addition to those of our other stockholders. In addition, we could be required to make payments under the tax receivable agreement that are substantial, significantly in advance of any potential actual realization of such further tax benefits, and in excess of our, or a potential acquirer’s, actual cash savings in income tax.

Decisions we make in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments made under the tax receivable agreement. For example, the earlier disposition of assets following an exchange or purchase of UWM Common Units (along with the stapled shares of Class D Stock or Class C Stock) may accelerate payments under the tax receivable agreement and increase the present value of such payments, and the disposition of assets before such an exchange or purchase may increase the tax liability of SFS Corp. (or its direct or indirect owners) without giving rise to any rights to receive payments under the tax receivable agreement. Such effects may result in differences or conflicts of interest between the interests of SFS Corp. and the interests of other stockholders.

Finally, because we are a holding company with no operations of our own, our ability to make payments under the tax receivable agreement is dependent on the ability of our subsidiaries to make distributions to us. Our debt agreements restrict the ability of our subsidiaries to make distributions to us, which could affect our ability to make payments under the tax receivable agreement. To the extent that we are unable to make payments under the tax receivable agreement as a result of restrictions in our debt agreements, such payments will be deferred and will accrue interest until paid, which could negatively impact our results of operations and could also affect our liquidity in periods in which such payments are made.

Risks Related to UWM’s Financing

UWM relies on its short-term warehouse facilities to finance its loan originations and its inability to access such funding could have a material adverse effect on its results of operations, financial condition and business.

UWM funds substantially all of the mortgage loans it originates through borrowings under its short-term warehouse facilities and funds generated by its operations. UWM’s ability to fund its loan originations may be impacted by its ability to secure further such borrowings on acceptable terms. As of September 30, 2020, $10.3 billion of UWM’s warehouse facilities generally provide financing for one to two years, with maturities staggered in 2020 and 2021, and $9.8 billion of its warehouse facilities are uncommitted and can be

 

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terminated by the applicable lender at any time. UWM’s use of this short-term financing exposes it to the risk that its lenders may respond to market conditions by making it more difficult for it to renew or replace on a continuous basis its maturing short-term warehouse facility borrowings. If UWM is not able to renew its then existing warehouse facilities or arrange for new financing on terms acceptable to it, or if it defaults on its covenants or is otherwise unable to access funds under this type of financing, it may have to curtail its loan origination activities and/or dispose of assets.

It is possible that the warehouse lenders that will provide UWM with financing could experience changes in their ability to advance funds to it, independent of its performance or the performance of its portfolio of assets. Further, if many of UWM’s potential warehouse lenders are unwilling or unable to provide it with financing, it could be forced to sell its assets at an inopportune time when prices are depressed. In addition, if the regulatory capital requirements imposed on UWM’s warehouse lenders change, they may be required to significantly increase the cost of the financing that they provide to it.

UWM’s warehouse lenders also may revise their eligibility requirements for the types of assets they are willing to finance or the terms of such financings, based on, among other factors, the regulatory environment and their management of perceived risk, particularly with respect to assignee liability. Moreover, the amount of financing UWM receives under its warehouse facilities will be directly related to the lenders’ valuation of its assets that cover the outstanding borrowings.

In the event that any of UWM’s warehouse facilities is terminated or is not renewed, or if the principal amount that may be drawn under its funding agreements that provide for immediate funding at closing were to significantly decrease, it may be unable to find replacement financing on commercially favorable terms, or at all, which could be detrimental to its business. Further, if UWM is unable to obtain additional funds for borrowing, its ability to maintain or grow its business could be limited.

In addition, UWM’s ability to refinance existing debt and borrow additional funds is affected by a variety of factors including (1) limitations imposed on UWM under the indenture governing its 5.500% Senior Notes due 2025 and other existing and future financing facilities that contain restrictive covenants and borrowing conditions that may limit its ability to raise additional debt, (2) a decline in liquidity in the credit markets, (3) prevailing interest rates, (4) the financial strength of the lenders from whom UWM borrows, and (5) the decision of lenders from whom UWM borrows to reduce their exposure to mortgage loans due to a change in such lenders’ strategic plan, future lines of business or otherwise.

UWM depends on its ability to sell loans in the secondary market to a limited number of investors and to the GSEs, and to securitize its loans into MBS through the GSEs and Ginnie Mae. If UWM’s ability to sell or securitize mortgage loans is impaired, it may not be able to originate mortgage loans, and if the GSEs and Ginnie Mae become less competitive, it could affect UWM’s volume and margins.

Substantially all of UWM’s loan originations are sold into the secondary market. UWM securitizes loans into MBS through Fannie Mae, Freddie Mac and Ginnie Mae. Loans originated outside of Fannie Mae, Freddie Mac, and the guidelines of the FHA, USDA, or VA (for loans securitized with Ginnie Mae) are sold to private investors and mortgage conduits.

The gain recognized from sales in the secondary market represents a significant portion of UWM’s revenues and net earnings. A decrease in the prices paid to UWM upon sale of its loans could be detrimental to its business, as UWM is dependent on the cash generated from such sales to fund its future loan closings and repay borrowings under its warehouse facilities. If it is not possible or economical for UWM to complete the sale or securitization of certain of its mortgage loans, UWM may lack liquidity to continue to fund such loans and its revenues and margins on new loan originations could be materially and negatively impacted. The severity of the impact would be most significant to the extent UWM were unable to sell conforming home loans to the GSEs or securitize such loans pursuant to the GSEs and government agency-sponsored programs. UWM also derives

 

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other material financial benefits from these relationships, including the assumption of credit risk on securitized loans in exchange for UWM’s payment of guarantee fees and the ability to avoid certain loan inventory finance costs through streamlined loan funding and sale procedures, which benefits UWM would lose if it were unable to complete the sale or securitization of its loans.

Further, there may be shifts in the marketplace such that the GSEs or Ginnie Mae are less competitive than private label securitization or other forms of mortgage finance which may lead to delays in UWM’s ability to sell future mortgage loans which it originates. These market shifts can be caused by factors outside of UWM’s control, including, but not limited to, market shifts in response to the COVID-19 pandemic that affect investor appetite for such non-GSE products. To the extent that happens, UWM may need to change its business model to accommodate such shifts and its origination volume and margins would likely be adversely affected.

The value of UWM’s MSRs can be highly variable and these changes in value, or inaccuracies in the estimates of their value, could adversely affect UWM’s financial condition.

The value of UWM’s MSRs is based on the cash flows projected to result from the servicing of the related mortgage loans and continually fluctuates due to a number of factors. The primary factor driving the value of MSRs is interest rates, which impact the likelihood of loan prepayments through refinancing. In periods of rising interest rates, the fair value of the MSRs generally increases as prepayment expectations decrease, consequently extending the estimated life of the MSRs resulting in expected increases in cash flows. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayment expectations increase consequently truncating the estimated life of the MSRs resulting in expected decreases in cash flows. Other market conditions also affect the number of loans that are refinanced and thus no longer result in cash flows, and the number of loans that become delinquent.

A substantial portion of UWM’s assets are measured at fair value, and if UWM’s estimates with respect to the determination of the fair value of those assets prove to be incorrect, it may be required to write down the value of such assets, which could adversely affect its earnings, financial condition and liquidity.

UWM measures the fair value of its mortgage loans and derivatives on a recurring basis and it measures the fair value of other assets on a nonrecurring basis. Fair value determinations require many assumptions, especially to the extent there are not active markets for identical assets. For example, UWM generally estimates the fair value of loans at fair value based on quoted market prices for securities backed by similar types of loans. If quoted market prices are not available, fair value is estimated based on other relevant factors, including dealer price quotations and prices available for similar instruments, to approximate the amounts that would be received from a third party. In addition, the fair value of IRLCs are measured based upon the difference between the current fair value of similar loans (as determined generally for mortgages at fair value) and the price at which UWM has committed to originate the loans, subject to the pull-through factor. If UWM’s estimates of fair value prove to be incorrect, it may be required to write down the value of such assets, which could adversely affect its financial condition and results of operations.

UWM’s hedging strategies may not be successful in mitigating its risks associated with changes in interest rates.

UWM’s profitability is directly affected by changes in interest rates. The market value of closed mortgage loans and interest rate locks generally change along with interest rates. The value of such assets moves opposite of interest rate changes. For example, as interest rates rise, the value of existing mortgage assets falls.

UWM employs various economic hedging strategies to mitigate the interest rate and the anticipated loan financing probability or “pull-through risk” inherent in such mortgage assets. UWM’s use of these hedge instruments may expose UWM to counterparty risk as they are not traded on regulated exchanges or guaranteed by an exchange or its clearinghouse and, consequently, there may not be the same level of protections with

 

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respect to margin requirements and positions and other requirements designed to protect both UWM and its counterparties. Furthermore, the enforceability of agreements underlying hedging transactions may depend on compliance with applicable statutory, commodity and other regulatory requirements and, depending on the domicile of the counterparty, applicable international requirements. Consequently, if a counterparty fails to perform under a derivative agreement UWM could incur a significant loss.

UWM’s hedge instruments are accounted for as free-standing derivatives and are included on its consolidated balance sheet at fair market value. UWM’s operating results could be negatively affected because the losses on the hedge instruments it enters into may not be offset by a change in the fair value of the related hedged transaction.

UWM’s hedging strategies also require it to provide cash margin to its hedging counterparties from time to time. The Financial Industry Regulatory Authority (FINRA) requires UWM to provide daily cash margin to (or receive daily cash margin from, depending on the daily value of related MBS) its hedging counterparties from time to time. The collection of daily margins between UWM and its hedging counterparties could, under certain MBS market conditions, adversely affect its short-term liquidity and cash-on-hand. Additionally, UWM’s hedge instruments may expose it to counterparty risk—the possibility that a loss may occur from the failure of another party to perform in accordance with the terms of the contract, which loss exceeds the value of existing collateral, if any.

UWM’s hedging activities in the future may include entering into interest rate swaps, caps and floors, options to purchase these items, purchasing or selling U.S. Treasury securities, and/or other tools and strategies. These hedging decisions will be determined in light of the facts and circumstances existing at the time and may differ from UWM’s current hedging strategy. These hedging strategies may be less effective than UWM’s current hedging strategies in mitigating the risks described above, which could be detrimental to its business and financial condition.

Substantially all of UWM’s warehouse facilities are structured as repurchase agreements, which operate differently and subject UWM to various risks different from other types of credit facilities, which may materially and adversely affect its business, financial condition, liquidity and results of operations.

UWM’s warehouse facilities are generally structured in the form of repurchase agreements. UWM currently leverages and, to the extent available, intends to continue to leverage the mortgage loans it originates with borrowings under these repurchase agreements. When UWM enters into repurchase agreements, it sells mortgage loans to other lenders, which are the repurchase agreement counterparties, and receives cash from these lenders. These lenders are obligated to resell the same assets back to UWM at the end of the term of the transaction, which typically ranges from 30 to 90 days, but which may have terms of up to 364 days or longer. These repurchase agreements subject UWM to various risks:

 

   

The warehouse facilities subject UWM to counterparty risk. The amount of cash that UWM receives from a lender when it initially sells the mortgage loans to that lender is less than the fair value of those loans (this difference is referred to as the “haircut”). If the lender defaults on its obligation to resell the loans back to UWM, UWM could incur a loss on the transaction equal to the amount of the haircut (assuming that there was no change in the fair value of the loans, which the lenders are generally permitted to revalue to reflect current market conditions).

 

   

UWM would incur losses on a repurchase transaction if the value of the underlying assets has declined as of the end of the transaction term (including as a result of a lender counterparty revaluing the assets), as it would have to repurchase the assets for their initial value but would receive assets worth less than that amount.

 

   

If UWM defaults on one of its obligations under a repurchase transaction, the lender will be able to terminate the transaction and cease entering into any other repurchase transactions with it. UWM’s

 

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repurchase agreements also typically contain cross default provisions, so that if a default occurs under any one agreement, the lenders under its other agreements could also declare a default. If a default occurs under any of UWM’s repurchase agreements and the lenders terminate one or more of its repurchase agreements, UWM may need to enter into replacement agreements with different lenders. There can be no assurance that UWM will be successful in entering into such replacement repurchase agreements on the same terms as the repurchase agreements that were terminated or at all.

 

   

If the market value of the assets pledged or sold by UWM under a repurchase agreement borrowing to a counterparty lender declines, the lender may initiate a margin call and require UWM to either post additional collateral to cover such decrease or repay a portion of the outstanding borrowing. UWM may not have the funds available to do so, and UWM may be required to liquidate assets at a disadvantageous time to avoid a default, which could cause it to incur further losses and limit its ability to leverage its assets. If UWM is unable to satisfy a margin call, its counterparty may accelerate repayment of its indebtedness, increase interest rates, liquidate the collateral (which may result in significant losses to it) or terminate its ability to borrow. Such a situation would likely result in a rapid deterioration of UWM’s financial condition and possibly necessitate a filing for bankruptcy protection. The recent and potential future changes in the interest rate market due to COVID-19 may increase the likelihood of additional margin calls that could impact UWM’s liquidity.

UWM may in the future utilize other sources of borrowings, including term loans, bank credit facilities and structured financing arrangements, among others. The amount of leverage UWM employs will vary depending on the asset class being financed, its available capital, its ability to obtain and access financing arrangements with lenders and the lenders’ and rating agencies’ estimate of, among other things, the stability of its cash flows. UWM can provide no assurance that it will have access to any debt or equity capital on favorable terms or at the desired times, or at all. UWM’s inability to raise such capital or obtain financing on favorable terms could materially and adversely impact its business, financial condition, liquidity and results of operations.

UWM’s rights under its repurchase agreements may be subject to the effects of bankruptcy laws in the event of the bankruptcy or insolvency of UWM or its lenders under the repurchase agreements, which may allow its lenders to repudiate its repurchase agreements.

In the event of insolvency or bankruptcy, repurchase agreements normally qualify for special treatment under the U.S. bankruptcy code, the effect of which, among other things, would be to allow the lender under the applicable repurchase agreement to avoid the automatic stay provisions of the U.S. bankruptcy code and to foreclose on the collateral agreement without delay. In the event of the insolvency or bankruptcy of a lender during the term of a repurchase agreement, the lender may be permitted, under applicable insolvency laws, to repudiate the contract, and UWM’s claim against the lender for damages may be treated simply as an unsecured creditor. In addition, if the lender is a broker or dealer subject to the Securities Investor Protection Act of 1970, or an insured depository institution subject to the Federal Deposit Insurance Act, UWM’s ability to exercise its rights to recover its securities under a repurchase agreement or to be compensated for any damages resulting from the lender’s insolvency may be further limited by those statutes. These claims would be subject to significant delay and, if and when received, may be substantially less than the damages UWM actually incurs.

UWM leverages certain of its MSRs secured financing arrangements, which exposes it to risks and may materially and adversely affect its business, financial condition, liquidity and results of operations.

UWM currently leverages certain of its MSRs under secured financing arrangements, which UWM refers to as MSR facilities. Similar to UWM’s repurchase agreements, the cash that it receives under these MSR facilities is less than the fair value of the assets and a decrease in the fair value of the pledged collateral can result in a margin call. The MSR facilities are further subject to the terms of an acknowledgement agreement with Fannie Mae, Freddie Mac or Ginnie Mae, as applicable, pursuant to which its and the secured parties’ rights are subordinate in all respects to the rights of the applicable agency. Accordingly, the exercise by any of Fannie Mae,

 

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Freddie Mac or Ginnie Mae of its rights under the applicable acknowledgment agreement could result in the extinguishment of UWM’s and the secured parties’ rights in the related collateral and result in significant losses to UWM.

UWM’s financing arrangements contain, and the government agencies impose, certain financial and restrictive covenants that limit its ability to operate its business and a default under such agreements or requirements could have a material adverse effect on its business, liquidity, financial condition, cash flows and results of operations.

UWM’s warehouse facilities and MSR facilities contain, and its other current or future debt agreements may contain, covenants imposing operating and financial restrictions on its business, including requirements to maintain a certain minimum tangible net worth, minimum liquidity, maximum total debt or liabilities to net worth ratio, pre-tax net income requirements, litigation judgment thresholds, and other customary debt covenants. UWM is also subject to minimum financial eligibility requirements established by the FHA, VA, GSEs and Ginnie Mae, including net worth, capital ratio and/or liquidity criteria in order to set a minimum level of capital needed to adequately absorb potential losses and a minimum amount of liquidity needed to service such agency mortgage loans and MBS and cover the associated financial obligations and risks. In addition, the indenture governing UWM’s 5.500% Senior Notes due 2025 contains covenants imposing operating and financial restrictions on its business. As a result, UWM may not be able to leverage its assets as fully as it would choose, which could reduce its return on equity, and could significantly impede it from growing its business and place it at a competitive disadvantage in relation to federally chartered banks and certain other financial institutions.

A breach of the covenants under UWM’s warehouse facilities and MSR facilities can result in an event of default under these facilities and as such allow the lenders to pursue certain remedies. In addition, each of these facilities includes cross default or cross acceleration provisions that could result in most, if not all, facilities terminating if an event of default or acceleration of maturity occurs under any facility. To the extent that the minimum financial requirements imposed by the agencies are not met, the agencies may suspend or terminate UWM’s agency approvals or agreements, which could cause it to cross default under its warehouse facilities arrangements, could have adversely affect its ability to access these markets and could have a material adverse effect on its liquidity and future growth.

In addition, the covenants and restrictions in UWM’s warehouse facilities, MSR facilities and UWM’s indenture governing its 5.500% Senior Notes due 2025 may restrict its ability to, among other things:

 

   

make certain investments;

 

   

declare or pay dividends on capital stock;

 

   

redeem or purchase capital stock and certain debt obligations;

 

   

incur liens;

 

   

enter into transactions with affiliates;

 

   

enter into certain agreements restricting its subsidiaries’ ability to pay dividends;

 

   

incur indebtedness; and

 

   

consolidate, merge, make acquisitions and sell assets.

These restrictions may interfere with UWM’s ability to obtain financings or to engage in other business activities, which could have a material adverse effect on its business, liquidity, financial condition, cash flows and results of operations. In addition, if UWM is unable to meet or maintain the necessary covenant requirements or satisfy, or obtain waivers for, the continuing covenants, it may lose the ability to borrow under all of its financing facilities, which could be detrimental to its business. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for more information about UWM’s financing arrangements.

 

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UWM is exposed to risk relating to the transition from LIBOR and the volatility of LIBOR or any replacement reference rate, which can result in higher than market interest rates and may have a detrimental effect on its business.

The interest rate of UWM’s variable-rate indebtedness and the interest rate on the adjustable rate loans it originates and services is based on the London Interbank Offered Rate (“LIBOR”). In July 2017, the U.K. Financial Conduct Authority announced that it intends to stop collecting LIBOR rates from banks after 2021. The announcement indicates that LIBOR will not continue to exist on the current basis. U.S.-dollar LIBOR is expected to be replaced with the Secured Overnight Financing Rate (“SOFR”), a new index calculated by reference to short-term repurchase agreements for U.S. Treasury securities. Although there have been a few issuances utilizing SOFR or the Sterling Over Night Index Average, an alternative reference rate that is based on transactions, it is unknown whether any of these alternative reference rates will attain market acceptance as replacements for LIBOR. There is currently no definitive successor reference rate to LIBOR and various industry organizations are still working to develop workable transition mechanisms. As part of this industry transition, UWM will be required to migrate any current adjustable rate loans it services to any such successor reference rate. Until a successor rate is determined, UWM cannot implement the transition away from LIBOR for the adjustable rate loans it services. As such, UWM is unable to predict the effect of any changes to LIBOR, the establishment and success of any alternative reference rates, or any other reforms to LIBOR or any replacement of LIBOR that may be enacted in the United States or elsewhere. Such changes, reforms or replacements relating to LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, derivatives or other financial instruments or extensions of credit held by UWM. LIBOR-related changes could affect UWM’s overall results of operations and financial condition.

Risks Related to UWM’s Regulatory Environment

UWM operates in a heavily regulated industry, and its mortgage loan origination and servicing activities expose it to risks of noncompliance with an increasing and inconsistent body of complex laws and regulations at the U.S. federal, state and local levels.

Due to the heavily regulated nature of the mortgage industry, UWM and its clients are required to comply with a wide array of U.S. federal, state and local laws and regulations that regulate, among other things, the manner in which UWM conducts its loan origination and servicing businesses and the fees that it may charge, and the collection, use, retention, protection, disclosure, transfer and other processing of personal information by UWM and its clients. Governmental authorities and various U.S. federal and state agencies have broad oversight and supervisory authority over UWM’s business.

Because UWM originates mortgage loans and provides servicing activities nationwide, it must be licensed in all relevant jurisdictions that require licensure and comply with each such jurisdiction’s respective laws and regulations, as well as with judicial and administrative decisions applicable to it. Such licensing requirements also generally require the submission of information regarding any person who has 10% or more of the combined voting power of UWM’s outstanding equity interests. In addition, UWM and its clients are currently subject to a variety of, and may in the future become subject to additional U.S. federal, state and local laws that are continuously evolving and developing, including laws on advertising, as well as privacy laws, including the Telephone Consumer Protection Act (“TCPA”), the CAN-SPAM Act, and the recently enacted and newly effective California Consumer Privacy Act (“CCPA”). UWM expects more states to enact legislation similar to the CCPA, which provides consumers with new privacy rights such as the right to request deletion of their data, the right to receive data on record for them and the right to know what categories of data (generally) are maintained about them, and increases the privacy and security obligations of entities handling certain personal information of such consumers. These regulations directly impact UWM’s business and require ongoing compliance, monitoring and internal and external audits as they continue to evolve, and may result in ever-increasing public scrutiny and escalating levels of enforcement and sanctions. Subsequent changes to data protection and privacy laws could also impact how UWM processes personal information, and therefore limit the effectiveness of its products or services or its ability to operate or expand its business, including limiting strategic partnerships that may involve the sharing of personal information.

 

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UWM and its clients must also comply with a number of federal, state and local consumer protection laws including, among others, the Truth in Lending Act (“TILA”), the Real Estate Settlement Procedures Act (“RESPA”), the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Housing Act, the TCPA, the Gramm-Leach-Bliley Act, the Servicemembers Civil Relief Act, the Homeowners Protection Act, the Home Mortgage Disclosure Act, the SAFE Act, the Federal Trade Commission Act, the TRID rules, the Dodd-Frank Act, the Bank Secrecy Act, U.S. federal and state laws prohibiting unfair, deceptive, or abusive acts or practices, and state foreclosure laws. These statutes apply to loan origination, marketing, use of credit reports, safeguarding of non-public, personally identifiable information about borrowers, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features, and mandate certain disclosures and notices to borrowers.

In particular, various federal, state and local laws have been enacted that are designed to discourage predatory lending and servicing practices. The Home Ownership and Equity Protection Act of 1994 (“HOEPA”) prohibits inclusion of certain provisions in residential loans that have mortgage rates or origination costs in excess of prescribed levels and requires that borrowers be given certain disclosures prior to origination. Some states have enacted, or may enact, similar laws or regulations, which in some cases impose restrictions and requirements greater than those in HOEPA. In addition, under the anti-predatory lending laws of some states, the origination of certain residential loans, including loans that are not classified as “high cost” loans under applicable law, must satisfy a net tangible benefits test with respect to the related borrower. This test may be highly subjective and open to interpretation. As a result, a court may determine that a residential loan, for example, does not meet the test even if the related originator reasonably believed that the test was satisfied. UWM’s failure to comply with these laws, or the failure of residential loan originators or servicers to comply with these laws, to the extent any of their residential loans are or become part of its mortgage-related assets, could subject it, as an originator or a servicer, as applicable, or, in the case of acquired loans, as an assignee or purchaser, to monetary penalties and could result in the borrowers rescinding the affected loans. Lawsuits have been brought in various states making claims against originators, servicers, assignees and purchasers of high cost loans for violations of state law. Named defendants in these cases have included numerous participants within the secondary mortgage market. If UWM’s loans are found to have been originated in violation of predatory or abusive lending laws, it could be subject to lawsuits or governmental actions, or it could be fined or incur losses.

Both the scope of the laws and regulations and the intensity of the supervision to which UWM’s business is subject have increased over time, in response to the financial crisis as well as other factors such as technological and market changes. Regulatory enforcement and fines have also increased across the banking and financial services sector. UWM expects that its business and that of its clients will remain subject to extensive regulation and supervision. These regulatory changes could result in an increase in UWM’s regulatory compliance burden and associated costs and place restrictions on its origination and servicing operations. UWM’s failure to comply with applicable U.S. federal, state and local consumer protection and data privacy laws could lead to:

 

   

loss of its licenses and approvals to engage in its servicing and lending businesses;

 

   

damage to its reputation in the industry;

 

   

governmental investigations and enforcement actions;

 

   

administrative fines and penalties and litigation;

 

   

civil and criminal liability, including class action lawsuits;

 

   

increased costs of doing business;

 

   

diminished ability to sell loans that it originates or purchases, requirements to sell such loans at a discount compared to other loans or repurchase or address indemnification claims from purchasers of such loans, including the GSEs;

 

   

reduced payments by borrowers;

 

   

modification of the original terms of mortgage loans;

 

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permanent forgiveness of debt;

 

   

delays in the foreclosure process;

 

   

increased servicing advances;

 

   

inability to raise capital; and

 

   

inability to execute on its business strategy, including its growth plans.

As these U.S. federal, state and local laws evolve, it may be more difficult for UWM to identify these developments comprehensively, to interpret changes accurately and to train its team members effectively with respect to these laws and regulations. These difficulties potentially increase UWM’s exposure to the risks of noncompliance with these laws and regulations, which could be detrimental to its business. In addition, UWM’s failure to comply with these laws, regulations and rules may result in reduced payments by borrowers, modification of the original terms of loans, permanent forgiveness of debt, delays in the foreclosure process, increased servicing advances, litigation, enforcement actions, and repurchase and indemnification obligations. A failure to adequately supervise UWM’s clients, service providers and vendors, including outside foreclosure counsel, may also have these negative results.

The laws and regulations applicable to UWM are subject to administrative or judicial interpretation, but some of these laws and regulations have been enacted only recently and may not yet have been interpreted or may be interpreted infrequently. Ambiguities in applicable laws and regulations may leave uncertainty with respect to permitted or restricted conduct and may make compliance with laws, and risk assessment decisions with respect to compliance with laws difficult and uncertain. In addition, ambiguities make it difficult, in certain circumstances, to determine if, and how, compliance violations may be cured. The adoption by industry participants of different interpretations of these statutes and regulations has added uncertainty and complexity to compliance. UWM may fail to comply with applicable statutes and regulations even if acting in good faith due to a lack of clarity regarding the interpretation of such statutes and regulations, which may lead to regulatory investigations, governmental enforcement actions or private causes of action with respect to its compliance.

To resolve issues raised in examinations or other governmental actions, UWM may be required to take various corrective actions, including changing certain business practices, making refunds or taking other actions that could be financially or competitively detrimental to it. UWM expects to continue to incur costs to comply with governmental regulations. In addition, certain legislative actions and judicial decisions can give rise to the initiation of lawsuits against UWM for activities it conducted in the past. Furthermore, provisions in UWM’s mortgage loan documentation, including but not limited to the mortgage and promissory notes it uses in loan originations, could be construed as unenforceable by a court. UWM has been, and expects to continue to be, subject to regulatory enforcement actions and private causes of action from time to time with respect to its compliance with applicable laws and regulations.

The recent influx of new laws, regulations, and other directives adopted in response to the recent COVID-19 pandemic exemplifies the ever-changing and increasingly complex regulatory landscape UWM operates in. While some regulatory reactions to COVID-19 relaxed certain compliance obligations, the forbearance requirements imposed on mortgages servicers in the recently passed CARES Act added new regulatory responsibilities. The GSEs and the FHFA, Ginnie Mae, the U.S. Department of Housing and Urban Development (“HUD”), various investors and others have also issued guidance relating to COVID-19. Future regulatory scrutiny and enforcement resulting from COVID-19 is unknown.

Although UWM has systems and procedures directed to comply with these legal and regulatory requirements, it cannot assure you that more restrictive laws and regulations will not be adopted in the future, or that governmental bodies or courts will not interpret existing laws or regulations in a more restrictive manner, which could render its current business practices non-compliant or which could make compliance more difficult or expensive. Any of these, or other, changes in laws or regulations could have a detrimental effect on UWM’s business.

 

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The CFPB continues to be active in its monitoring of the loan origination and servicing sectors, and its recently issued rules increase UWM’s regulatory compliance burden and associated costs.

UWM is subject to the regulatory, supervisory and examination authority of the CFPB, which has oversight of federal and state non-depository lending and servicing institutions, including residential mortgage originators and loan servicers. The CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, including TILA and RESPA and the Fair Debt Collections Practices Act. The CFPB has issued a number of regulations under the Dodd-Frank Act relating to loan origination and servicing activities, including ability-to-repay and “Qualified Mortgage” standards and other origination standards and practices as well as servicing requirements that address, among other things, periodic billing statements, certain notices and acknowledgements, prompt crediting of borrowers’ accounts for payments received, additional notice, review and timing requirements with respect to delinquent borrowers, loss mitigation, prompt investigation of complaints by borrowers, and lender-placed insurance notices. The CFPB has also amended provisions of HOEPA regarding the determination of high-cost mortgages, and of Regulation B, to implement additional requirements under the Equal Credit Opportunity Act with respect to valuations, including appraisals and automated valuation models. The CFPB has also issued guidance to loan servicers to address potential risks to borrowers that may arise in connection with transfers of servicing. Additionally, through bulletins 2012-03 and 2016-02, the CFPB has increased the focus on lender liability and vendor management across the mortgage and settlement services industries, which may vary depending on the services being performed.

For example, the CFPB iteratively adopted rules over the course of several years regarding mortgage servicing practices that required UWM to make modifications and enhancements to its mortgage servicing processes and systems. While the CFPB recently announced its flexible supervisory and enforcement approach during the COVID-19 pandemic on certain consumer communications required by the mortgage servicing rules, managing to the CFPB’s loss mitigation rules with mounting CARES Act forbearance requests is particularly challenging. The intersection of the CFPB’s mortgage servicing rules and COVID-19 is evolving and will pose new challenges to the servicing industry. The CFPB’s recent publication of COVID-19-related FAQs did not resolve potential conflicts between the CARES Act with respect to reporting of consumer credit information mandated by the Fair Credit Reporting Act. There are conflicting interpretations of the CARES Act amendment of the Fair Credit Reporting Act with regards to delinquent loans entering a forbearance.

The mortgage lending sector is currently relying, for a significant portion of the mortgages originated, on a temporary CFPB regulation, commonly called the “QM Patch”, which permits mortgage lenders to comply with the CFPB’s ability to repay requirements by relying on the fact that the mortgage is eligible for sale to Fannie Mae or Freddie Mac. Reliance on the QM Patch has become widespread due to the operational complexity and practical inability for many mortgage lenders to rely on other ways to show compliance with the ability to repay regulations. The QM Patch is scheduled to expire on January 10, 2021 or sooner if Fannie Mae and Freddie Mac exit FHFA conservatorship. In June 2020, the CFPB issued proposed rules to revise its ability to repay requirements and to extend the QM Patch until those revisions are effective. UWM cannot predict what final actions the CFPB will take and how it might affect UWM and other mortgage originators.

The CFPB’s examinations have increased, and will likely continue to increase, UWM’s administrative and compliance costs. They could also greatly influence the availability and cost of residential mortgage credit and increase servicing costs and risks. These increased costs of compliance, the effect of these rules on the lending industry and loan servicing, and any failure in UWM’s ability, or its clients’ ability, to comply with the new rules by their effective dates, could be detrimental to its business. The CFPB also issued guidelines on sending examiners to banks and other institutions that service and/or originate mortgages to assess whether consumers’ interests are protected. The CFPB has conducted routine examinations of UWM’s business and will conduct future examinations.

The CFPB also has broad enforcement powers, and can order, among other things, rescission or reformation of contracts, the refund of moneys or the return of real property, restitution, disgorgement or compensation for

 

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unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, limits on activities or functions, remediation of practices, external compliance monitoring and civil money penalties. The CFPB has been active in investigations and enforcement actions and, when necessary, has issued civil money penalties to parties the CFPB determines has violated the laws and regulations it enforces. UWM’s failure to comply with the federal consumer protection laws, rules and regulations to which it is subject, whether actual or alleged, could expose it to enforcement actions or potential litigation liabilities.

In addition, the occurrence of one or more of the foregoing events or a determination by any court or regulatory agency that UWM’s policies and procedures do not comply with applicable law could impact its business operations. For example, if the violation is related to UWM’s servicing operations it could lead to a transfer of UWM’s servicing responsibilities, increased delinquencies on mortgage loans it services or any combination of these events. Such a determination could also require UWM to modify its servicing standards. The expense of complying with new or modified servicing standards may be substantial. Any such changes or revisions may have a material impact on UWM’s servicing operations, which could be detrimental to its business.

UWM is required to hold various agency approvals in order to conduct its business and there is no assurance that it will be able to obtain or maintain those agency approvals or that changes in agency guidelines will not materially and adversely affect its business, financial condition, liquidity and results of operations.

UWM is required to hold certain agency approvals in order to sell mortgage loans to GSEs and service such mortgage loans on their behalf. UWM’s failure to satisfy the various requirements necessary to obtain and maintain such agency approvals over time would restrict its direct business activities and could materially and adversely impact its business, financial condition, liquidity and results of operations.

UWM is also required to follow specific guidelines that impact the way that it originates and services such agency loans. A significant change in these guidelines that has the effect of decreasing the fees UWM charges or requires it to expend additional resources in providing mortgage services could decrease its revenues or increase its costs, which would also adversely affect its business, financial condition, liquidity and results of operations.

In addition, the FHFA has directed the GSEs to align their guidelines for servicing delinquent mortgages and assess compensatory penalties against servicers in connection with the failure to meet specified timelines relating to delinquent loans and foreclosure proceedings, and other breaches of servicing obligations. UWM’s failure to operate efficiently and effectively within the prevailing regulatory framework and in accordance with the applicable origination and servicing guidelines and/or the loss of UWM’s seller/servicer license approval or approved issuer status with the agencies could result in its failure to benefit from available monetary incentives and/or expose it to monetary penalties and curtailments, all of which could materially and adversely affect its business, financial condition, liquidity and results of operations.

The executive, legislative and regulatory reaction to COVID-19, including the passage of the CARES Act, poses new and quickly evolving compliance obligations on UWM’s business, and UWM may experience unfavorable changes in or failure to comply with existing or future regulations and laws adopted in response to COVID-19.

Due to the unprecedented pause of major sectors of the U.S. economy from COVID-19, numerous states and the federal government adopted measures requiring mortgage servicers to work with consumers negatively impacted by COVID-19. The CARES Act imposes several new compliance obligations on UWM’s mortgage servicing activities, including, but not limited to mandatory forbearance offerings, altered credit reporting obligations, and moratoriums on foreclosure actions and late fee assessments. Many states have taken similar measures to provide mortgage payment and other relief to consumers, which create additional complexity around UWM’s mortgage servicing compliance activities.

 

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With the urgency to help consumers, the expedient passage of the CARES Act increases the likelihood of unintended consequences from the legislation. An example of such unintended consequences is the liquidity pressure placed on mortgage servicers given UWM’s contractual obligation to continue to advance payments to investors on loans in forbearance where consumers are not making their typical monthly mortgage payments. Moreover, certain provisions of the CARES Act are subject to interpretation given the existing ambiguities in the legislation, which creates class action and other litigation risk.

Although much of the executive, legislative and regulatory actions stemming from COVID-19 are servicing-centric, regulators are adjusting compliance obligations impacting UWM’s mortgage origination activities. Many states have adopted temporary measures allowing for otherwise prohibited remote mortgage loan origination activities. While these temporary measures allow UWM to continue to do business remotely, they impose notice, procedural, and other compliance obligations on its origination activity.

Federal, state, and local executive, legislative and regulatory responses to COVID-19 are rapidly evolving, not consistent in scope or application, and subject to change without advance notice. Such efforts may impose additional compliance obligations, which may negatively impact UWM’s mortgage origination and servicing business. Any additional legal or regulatory responses to COVID-19 may unfavorably restrict UWM’s business operations, alter its established business practices, and otherwise raise its compliance costs.

The state regulatory agencies continue to be active in their supervision of the loan origination and servicing sectors and the results of these examinations may be detrimental to UWM’s business.

UWM is also supervised by regulatory agencies under state law. State attorneys general, state licensing regulators, and state and local consumer financial protection offices have authority to examine and/or investigate consumer complaints and to commence investigations and other formal and informal proceedings regarding UWM’s operations and activities. In addition, the GSEs and the FHFA, Ginnie Mae, the U.S. Federal Trade Commission (“FTC”), HUD, various investors, non-agency securitization trustees and others subject UWM to periodic reviews and audits. A determination of UWM’s failure to comply with applicable law could lead to enforcement action, administrative fines and penalties, or other administrative action.

If UWM does not obtain and maintain the appropriate state licenses, it will not be allowed to originate or service loans in some states, which would adversely affect its operations.

UWM’s operations are subject to regulation, supervision and licensing under various federal, state and local statutes, ordinances and regulations. In most states in which UWM operates, a regulatory agency regulates and enforces laws relating to mortgage lenders and mortgage loan servicing companies such as UWM. In most states, UWM is subject to periodic examination by state regulatory authorities. Some states in which UWM operates require special licensing or provide extensive regulation of its business.

As part of licensing requirements, UWM is typically required to designate individual licensees of record. UWM cannot ensure that it is, and will always remain, in full compliance with all state licensing laws and regulations, and it may be subject to fines or penalties, including license revocation, for any non-compliance. If UWM loses a license or is otherwise found to be in violation of a law or regulation, its business operations in that state may be suspended until it obtains the license or otherwise remedy the compliance issue.

UWM may not be able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory requirements could restrict its ability to originate, purchase, sell or service loans. In addition, UWM’s failure to satisfy any such requirements relating to servicing of loans could result in a default under its servicing agreements and have a material adverse effect on its operations. Those states that currently do not provide extensive regulation of UWM’s business may later choose to do so, and if such states so act, UWM may not be able to obtain or maintain all requisite licenses and permits. The failure to satisfy those and other regulatory requirements could limit UWM’s ability to originate, purchase, sell or service loans in a certain state,

 

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or could result in a default under its financing and servicing agreements and have a material adverse effect on its operations. Furthermore, the adoption of additional, or the revision of existing, rules and regulations could have a detrimental effect on UWM’s business.

If new laws and regulations lengthen foreclosure times or introduce new regulatory requirements regarding foreclosure procedures, UWM’s operating costs could increase and it could be subject to regulatory action.

When a mortgage loan UWM services is in foreclosure, it is generally required to continue to advance delinquent principal and interest to the securitization trust and to make advances for delinquent taxes and insurance and foreclosure costs and the upkeep of vacant property in foreclosure to the extent that it determines that such amounts are recoverable. These servicing advances are generally recovered when the delinquency is resolved. Regulatory actions that lengthen the foreclosure process will increase the amount of servicing advances that UWM is required to make, lengthen the time it takes for UWM to be reimbursed for such advances and increase the costs incurred during the foreclosure process.

The CARES Act paused all foreclosures from March 18, 2020 until May 17, 2020. Many state governors issued orders, directives, guidance or recommendations halting foreclosure activity including evictions. In addition, on August 8, 2020, President Trump issued an executive order setting forth recommendations and instructions for government agencies to assist borrowers facing foreclosure as a result of the COVID-19 pandemic, which may have an impact on foreclosure and eviction activity. These regulatory actions and similar actions that may be passed in the future could increase UWM’s operating costs and negatively impact its liquidity, as they may extend the period for which it is required to make advances for delinquent principal and interest, taxes and insurance, and could delay its ability to seek reimbursement from the investor to recoup some or all of the advances.

Increased regulatory scrutiny and new laws and procedures could cause UWM to adopt additional compliance measures and incur additional compliance costs in connection with its foreclosure processes. UWM may incur legal and other costs responding to regulatory inquiries or any allegation that it improperly foreclosed on a borrower. UWM could also suffer reputational damage and could be fined or otherwise penalized if it is found to have breached regulatory requirements.

UWM’s servicing policies and procedures are subject to examination by its regulators, and the results of these examinations may be detrimental to its business.

As a loan servicer, UWM is examined for compliance with U.S. federal, state and local laws, rules and guidelines by numerous regulatory agencies. It is possible that any of these regulators will inquire about UWM’s servicing practices, policies or procedures and require UWM to revise them in the future. The occurrence of one or more of the foregoing events or a determination by any court or regulatory agency that UWM’s servicing policies and procedures do not comply with applicable law could lead to a transfer of its servicing responsibilities, increased delinquencies on mortgage loans it services or any combination of these events. Such a determination could also require UWM to modify its servicing standards.

Regulatory agencies and consumer advocacy groups are becoming more aggressive in asserting claims that the practices of lenders and loan servicers result in a disparate impact on protected classes.

Antidiscrimination statutes, such as the FHA and the Equal Credit Opportunity Act, prohibit creditors from discriminating against loan applicants and borrowers based on certain characteristics, such as race, religion and national origin. Various federal regulatory agencies and departments, including the DOJ and CFPB, take the position that these laws apply not only to intentional discrimination, but also to neutral practices that have a disparate impact on a group that shares a characteristic that a creditor may not consider in making credit decisions (i.e., creditor or servicing practices that have a disproportionate negative effect on a protected class of individuals).

 

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These regulatory agencies, as well as consumer advocacy groups and plaintiffs’ attorneys, are focusing greater attention on “disparate impact” claims. The U.S. Supreme Court recently confirmed that the “disparate impact” theory applies to cases brought under the FHA, while emphasizing that a causal relationship must be shown between a specific policy of the defendant and a discriminatory result that is not justified by a legitimate objective of the defendant. Although it is still unclear whether the theory applies under the Equal Credit Opportunity Act, regulatory agencies and private plaintiffs can be expected to continue to apply it to both the FHA and the Equal Credit Opportunity Act in the context of home loan lending and servicing. To extent that the “disparate impact” theory continues to apply, UWM may be faced with significant administrative burdens and potential liability for failures to comply.

Furthermore, many industry observers believe that the “ability to repay” rule issued by the CFPB, discussed above, will have the unintended consequence of having a disparate impact on protected classes. Specifically, it is possible that lenders that make only qualified mortgages may be exposed to discrimination claims under a disparate impact theory.

In addition to reputational harm, violations of the Equal Credit Opportunity Act and the Fair Housing Act can result in actual damages, punitive damages, injunctive or equitable relief, attorneys’ fees and civil money penalties.

Risks Related to the Company and the Business Combination

Following the consummation of the Business Combination, our only significant asset will be our ownership interest in UWM. Such ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Common Stock or satisfy our other financial obligations.

Following the consummation of the Business Combination, we will have no direct operations and no significant assets other than our limited liability company interest in UWM LLC, the sole shareholder of UWM. We and certain investors, UWM Stockholders, and directors and officers of UWM and its affiliates will become stockholders of the Post-Combination Company through their ownership of SFS Corp., at that time. We will depend on UWM LLC and UWM for distributions, loans and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company and to pay any dividends with respect to our Common Stock and to satisfy our obligations under the Tax Receivable Agreement. The financial condition and operating requirements of UWM LLC, UWM and its subsidiaries may limit our ability to obtain cash from UWM and to satisfy our obligations under the Tax Receivable Agreement. The earnings from, or other available assets of, UWM LLC and UWM may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Common Stock should we decide to do so or satisfy our other financial obligations and to satisfy our obligations under the Tax Receivable Agreement. In addition, the covenants and restrictions in UWM’s warehouse facilities and MSR facilities and future indebtedness that we or UWM and its subsidiaries may incur, as well as the laws of the applicable jurisdictions of organization and agreements of UWM and its subsidiaries, may result in restrictions on UWM’s ability to make distributions to us or the ability of UWM’s subsidiaries to make distributions to it.

Our Initial Stockholders have agreed to vote in favor of the Business Combination described in this proxy statement, regardless of how our Public Stockholders vote.

Unlike many other blank check companies in which the founders agree to vote their founder shares in accordance with the majority of the votes cast by the holders of public stock in connection with an initial business combination, our Initial Stockholders have agreed to vote any shares of Common Stock owned by them in favor of the Business Combination Proposal. As of the date hereof, our Initial Stockholders own shares equal to 20% of our issued and outstanding shares of Common Stock. Accordingly, it is more likely that the necessary stockholder approval will be received for the Business Combination than would be the case if our Initial Stockholders agreed to vote any shares of Common Stock owned by them in accordance with the majority of the votes cast by our Public Stockholders.

 

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Our Sponsor, certain members of our Board and our officers have interests in the Business Combination that are different from or are in addition to other stockholders in recommending that stockholders vote in favor of approval of the Business Combination Proposal and approval of the other proposals described in this proxy statement.

In considering the recommendation of our Board to vote for the proposals presented at the Special Meeting, including the Business Combination Proposal, you should be aware that aside from their interests as stockholders, our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from, or in addition to, the interests of our stockholders generally. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and transaction agreements and in recommending to our stockholders that they vote in favor of the proposals presented at the Special Meeting, including the Business Combination Proposal. Stockholders should take these interests into account in deciding whether to approve the proposals presented at the Special Meeting, including the Business Combination Proposal. These interests include, among other things:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the proposed Business Combination;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to conversion price adjustments with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combination;

 

   

the fact that our Sponsor paid an aggregate of $25,000 for 11,500,000 Founder Shares in July, 2019 and, after giving effect to the cancellation of 875,000 Founder Shares on March 9, 2020, the remaining 10,625,000 Founder Shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at approximately $106,250,000 but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by January 28, 2022;

 

   

the fact that our Sponsor paid an aggregate of approximately $10,500,000 for its 5,250,000 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by January 28, 2022;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by January 28, 2022;

 

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that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees; and

 

   

that our Sponsor has entered into a Subscription Agreement with the Company, pursuant to which the Sponsor has committed to purchase 14,460,000 shares of Class A Stock in the Private Placement for an aggregate commitment of approximately $144,600,000, provided that our Sponsor has the right to syndicate the Class A Common Stock purchased under such Subscription Agreement in advance of the Closing.

The personal and financial interests of the Sponsor and our officers and directors may have influenced their motivation in identifying and selecting UWM and completing a business combination with UWM. This risk may become more acute as the deadline of January 28, 2022 for completing an initial business combination nears, unless we amend our current certificate of incorporation (which requires the affirmative vote of the holders of 65% of all then outstanding shares of Common Stock) and amend certain other agreements into which we have entered to extend the life of the Company.

Our Sponsor, directors or officers or their affiliates or officers of UWM may elect to purchase shares from Public Stockholders, which may influence a vote on a proposed Business Combination and the other proposals described in this proxy statement and reduce the public “float” of our Class A Stock.

Our Sponsor, directors or officers or their affiliates or officers of UWM may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of the Business Combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Sponsor, directors, officers or their affiliates or officers of UWM purchase shares in privately negotiated transactions from Public Stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination or to satisfy the closing conditions in the Business Combination Agreement that require that the total of (i) the amount in the Trust Account, after giving effect to redemptions of Public Shares, (ii) the proceeds from the Private Placement and (iii) all funds held by us outside of the Trust Account and immediately available to us, equaling or exceeding certain thresholds where it appears that such requirements would otherwise not be met. This may result in the completion of the Business Combination that may not otherwise have been possible.

In addition, if such purchases are made, the public “float” of our Class A Stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities on Nasdaq or another national securities exchange or reducing the liquidity of the trading market for our Class A Stock.

After completion of the Business Combination, we will be controlled by SFS Corp., whose interests may conflict with our interests and the interests of other stockholders.

Upon completion of the Business Combination, SFS Corp. will hold all of our issued and outstanding Class D Stock, which has ten votes per share, and will control approximately 79% of the combined voting power of our Common Stock due to the Voting Limitation. Without the Voting Limitation, SFS Corp. would have 99% of the combined voting power of the capital stock of the Post-Combination Company. As long as SFS Corp. owns at least 10% of the outstanding Common Stock, SFS Corp. will have the ability to determine all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our Board, any amendment to our certificate of incorporation or bylaws, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. This could have the effect of delaying or

 

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preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of the Post-Combination Company, which could cause the market price of our Class A Stock to decline or prevent stockholders from realizing a premium over the market price for Class A Stock. SFS Corp.’s interests may conflict with our interests as a company or the interests of our other stockholders.

Our Public Stockholders will experience substantial dilution as a consequence of, among other transactions, the issuance of Common Stock in the Business Combination and the Private Placement.

It is anticipated that, upon completion of the Business Combination, and assuming that no shares are elected to be redeemed: (i) the Company’s Public Stockholders (other than the Private Placement Investors) will retain an economic interest of approximately 41% of the capital stock of the Post-Combination Company; (ii) the Private Placement Investors will hold an economic interest of approximately 49% of the capital stock of the Post-Combination Company (such that Public Stockholders, including Private Placement Investors, will own approximately 90% of the Post-Combination Company); and (iii) our Initial Stockholders (including our Sponsor) will retain an economic interest of approximately 10% of the capital stock of the Post-Combination Company. SFS Corp. will not have any economic interest in the capital stock of the Post-Combination Company, but will hold 79% of the combined voting power of the capital stock of the Post-Combination Company, through its ownership of Class D Stock, due to the Voting Limitation. Without the Voting Limitation, SFS Corp. would have 99% of the combined voting power capital stock of the Post-Combination Company. It is anticipated that, upon completion of the Business Combination, and assuming that no shares are elected to be redeemed: (a) the Post-Combination Company will hold approximately 6% of the outstanding UWM Common Units and (b) SFS Corp. will hold approximately 94% of the outstanding UWM Common Units. UWM LLC, in turn, will own 100% of UWM, the operating company.

In addition, subject to the approval of the Incentive Plan Proposal and the authorization of the initial share reserve, the Company will have the ability to issue up to 80,000,000 shares of Class A Stock pursuant to awards under the Incentive Plan.

The Private Placement Investors have agreed to purchase in the aggregate approximately 50,000,000 shares of Class A Stock, for approximately $500,000,000 of gross proceeds, in the Private Placement. In this proxy statement, we assume that approximately $500,000,000 of the gross proceeds from the Private Placement, in addition to funds from the Trust Account (plus any interest accrued thereon), will be used to fund the cash consideration to be contributed to UWM LLC in the Business Combination and to pay certain transaction expenses. The ownership percentage with respect to the Post-Combination Company following the Business Combination (i) does not take into account (a) warrants to purchase Class A Stock that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares upon completion of the Business Combination under the Incentive Plan, or (c) any Earn-Out Shares that may be issued to SFS Corp. if the price of the Class A Stock exceeds certain thresholds during the five-year period following the Closing, but (ii) does include Founder Shares, which will be converted into shares of Class A Stock at the closing of the Business Combination on a one-for-one basis. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Company’s existing stockholders in the Post-Combination Company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement—Impact of the Business Combination on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information” and Proposal No. 6—Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve Under the Incentive Plan.”

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our Class A Stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of Class A Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A Stock. After the Business Combination, our Initial Stockholders,

 

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including our Sponsor, will hold approximately 1.6% of our Class A Stock. 1,502,042,686 shares of Class A Stock may be issued to SFS Corp. upon conversion of any Class B Stock that SFS Corp. may receive if it elects to exchange its UWM Class B Units, along with the stapled Class D Stock it receives as Voting Stock Consideration or Earn-Out Shares, together with UWM Common Units. In addition, at the closing of the Business Combination, the Company will enter into the Registration Rights Agreement, substantially in the form attached as Annex E to this proxy statement, with the Restricted Stockholders. Pursuant to the terms of the Registration Rights Agreement, (i) any outstanding share of Class A Stock or any other equity security (including the Private Placement Warrants and including shares of Class A Stock issued or issuable upon the exercise of any other equity security) of the Company held by a Restricted Stockholder as of the date of the Registration Rights Agreement or thereafter acquired by a Restricted Stockholder upon conversion of the Class F Stock and upon exercise of any Private Placement Warrants and shares of Class A Stock issued or issuable upon exchange of UWM Common Units together with Class D Stock (including Class D Stock issued as Earn-Out Shares) to SFS Corp. and (ii) any other equity security of the Company issued or issuable with respect to any such share of Class A Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise will be entitled to registration rights. In addition, our Initial Stockholders entered into a letter agreement pursuant to which they agreed that, with certain limited exceptions, the Founder Shares (which will be converted into shares of Class A Stock at the closing of the Business Combination) may not be transferred until 180 days after the closing of the Business Combination. In addition, given that the lock-up period on the Founder Shares is potentially shorter than most other blank check companies, these shares may become registered and available for sale sooner than Founder Shares in such other companies.

Resales of the shares of Class A Stock issued in connection with the Private Placement or in connection with future UWM Unit Exchanges could depress the market price of our Class A Stock.

We will have approximately 103,125,000 shares of Class A Stock outstanding immediately following the Business Combination and Private Placement, and there may be a large number of shares of Class A Stock sold in the market following the completion of the Business Combination or shortly thereafter. In addition, 1,502,042,686 shares of Class A Stock (or approximately 1,592,802,686 shares of Class A Stock if the full amount of the Earn-Out Shares are issued) may be issued to SFS Corp. or its transferees or assigns in connection with future UWM Unit Exchanges. The shares held by the Company’s Public Stockholders are freely tradable, and the shares of Class A Stock held by the Private Placement Investors will be freely tradable following effectiveness of the registration statement that we have agreed to file within 30 days after the completion of the Business Combination covering the resales of such shares. In addition, the Restricted Stockholders will be able to sell shares of Class A Stock following the effectiveness of the registration statement that we have agreed to file within 30 days after the completion of the Business Combination covering the resales of such shares, subject to the lock-up periods applicable to the such Restricted Stockholders. Also, at any time following the closing of the Business Combination, the Restricted Stockholders will also be able to make a demand request, subject to certain conditions, that a registration statement be filed covering the resales of shares of Class A Stock held by such restricted Stockholders. We also expect that the Restricted Stockholders and Private Placement Investors will also be able to resell shares of Class A Stock held by them under Rule 144 once one year has elapsed from the date that we file the Current Report on Form 8-K following the closing of the Business Combination that includes the required Form 10 information that reflects we are no longer a shell company.

Such sales of shares of Class A Stock or the perception of such sales may depress the market price of our Class A Stock.

As a “controlled company” within the meaning of NYSE listing standards, the Post-Combination Company will qualify for exemptions from certain corporate governance requirements. The Post-Combination Company has the opportunity to elect any of the exemptions afforded a controlled company.

Because SFS Corp. will control more than a majority of the total voting power of the Post-Combination Company, the Post-Combination Company will be a “controlled company” within the meaning of NYSE listing

 

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standards. Under NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a “controlled company” and may elect not to comply with the following NYSE rules regarding corporate governance:

 

   

the requirement that a majority of its board of directors consist of independent directors;

 

   

the requirement that compensation of its executive officers be determined by a majority of the independent directors of the board or a compensation committee comprised solely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

the requirement that director nominees be selected, or recommended for the board’s selection, either by a majority of the independent directors of the board or a nominating committee comprised solely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

The Post-Combination Company currently expects that upon consummation of the Business Combination, three of its nine directors will be independent directors and the Post-Combination Company’s Board will have an independent audit committee. However, it does not anticipate that the Post-Combination Company’s Board will consist of a majority of independent directors, that it will have a compensation committee comprised of solely independent directors or a nominating committee. Rather, actions with respect to executive compensation (other than compensation of the CEO) are expected to be taken by a compensation committee on which Mr. Mat Ishbia sits, and compensation decisions with respect to Mr. Ishbia’s compensation as well as director nominations will be taken by the full Post-Combination Company’s Board. We anticipate that Kelly Czubak, Isiah Thomas and Robert Verdun will be “independent directors,” as defined in the NYSE listing standards and applicable SEC rules.

There can be no assurance that our Class A Stock will be approved for listing on the NYSE following the closing of the Business Combination, or that we will be able to comply with the continued listing standards of the NYSE.

Our Class A Stock, Public Units and Public Warrants are currently listed on Nasdaq. However, we intend to apply to list the Class A Stock and Public Warrants on the NYSE. Our eligibility for listing may depend on, among other things, the number of our shares that are redeemed. If, after the Business Combination, we are unable to list on the NYSE or Nasdaq delists our Class A Stock from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including:

 

   

a limited availability of market quotations for our securities;

 

   

reduced liquidity for our securities;

 

   

a determination that our Class A Stock is a “penny stock” which will require brokers trading in our Class A Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

 

   

a limited amount of news and analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” To the extent our Class A Stock, Public Units and Public Warrants are listed on Nasdaq or the NYSE, they are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state, other than the State of Idaho, having used these powers to prohibit or restrict the sale of securities issued by blank check companies, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on Nasdaq or the NYSE, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.

 

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We have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement. As such, there is a risk that we will be unable to continue as a going concern if we do not consummate an initial business combination by January 28, 2022. If we are unable to effect an initial business combination by January 28, 2022, we will be forced to liquidate and our warrants will expire worthless.

We are a blank check company, and as we have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement, there is a risk that we will be unable to continue as a going concern if we do not consummate an initial business combination by January 28, 2022. Unless we amend our current certificate of incorporation (which requires the affirmative vote of the holders of 65% of all then outstanding shares of Common Stock) and certain other agreements into which we have entered to extend the life of the Company, if we do not complete an initial business combination by January 28, 2022, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest not previously released to the Company to fund its working capital requirements plus Regulatory Withdrawals and/or its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses) divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under the DGCL to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per Public Unit in the IPO. In addition, if we fail to complete an initial business combination by January 28, 2022, there will be no redemption rights or liquidating distributions with respect to our Public Warrants or the Private Placement Warrants, which will expire worthless. We expect to consummate the Business Combination and do not intend to take any action to extend the life of the Company beyond January 28, 2022 if we are unable to effect an initial business combination by that date.

Our ability to successfully effect the Business Combination and to be successful thereafter will be dependent upon the efforts of our key personnel, including the key personnel of UWM whom we expect to stay with the Post-Combination Company. The loss of key personnel could negatively impact the operations and profitability of the Post-Combination Company and its financial condition could suffer as a result.

Our ability to successfully effect the Business Combination is dependent upon the efforts of our key personnel and the key personnel of UWM. It is possible that we will lose some key personnel, the loss of which could negatively impact the operations and profitability of the Post-Combination Company. We anticipate that some or all of the management of UWM will remain in place.

UWM’s success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace. Departure by certain of UWM’s officers could have a material adverse effect on UWM’s business, financial condition, or operating results. UWM does not maintain key-man life insurance on any of its officers. The services of such personnel may not continue to be available to the Post-Combination Company.

The Company and UWM will be subject to business uncertainties and contractual restrictions while the Business Combination is pending.

Uncertainty about the effect of the Business Combination on UWM’s team members and third parties may have an adverse effect on the Company and UWM. These uncertainties may impair our or UWM’s ability to retain and motivate key personnel and could cause third parties that deal with any of us or them to defer entering into contracts or making other decisions or seek to change existing business relationships. If key team members

 

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depart because of uncertainty about their future roles and the potential complexities of the Business Combination, our or UWM’s business could be harmed.

We may waive one or more of the conditions to the Business Combination.

We may agree to waive, in whole or in part, one or more of the conditions to our obligations to complete the Business Combination, to the extent permitted by our current certificate of incorporation and bylaws and applicable laws. However, if our Board determines that a failure to satisfy the condition is not material, then the Board may elect to waive that condition and close the Business Combination. We may not waive the condition that our stockholders approve the Business Combination. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Business Combination Agreement—Conditions to Closing of the Business Combination” for additional information.

The exercise of discretion by our directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the Business Combination Agreement may result in a conflict of interest when determining whether such changes to the terms of the Business Combination Agreement or waivers of conditions are appropriate and in the best interests of our stockholders.

In the period leading up to the closing of the Business Combination, other events may occur that, pursuant to the Business Combination Agreement, would require the Company to agree to amend the Business Combination Agreement, to consent to certain actions or to waive rights that we are entitled to under those agreements. Such events could arise because of changes in the course of UWM’s business, a request by UWM to undertake actions that would otherwise be prohibited by the terms of the Business Combination Agreement or the occurrence of other events that would have a material adverse effect on UWM’s business and would entitle the Company to terminate the Business Combination Agreement. In any of such circumstances, it would be in the discretion of the Company, acting through the Board, to grant its consent or waive its rights. The existence of the financial and personal interests of the directors described elsewhere in this proxy statement may result in a conflict of interest on the part of one or more of the directors between what he or she may believe is best for the Company and our stockholders and what he or she may believe is best for himself or herself or his or her affiliates in determining whether or not to take the requested action. As of the date of this proxy statement, we do not believe there will be any changes or waivers that our directors and officers would be likely to make after stockholder approval of the Business Combination has been obtained. While certain changes could be made without further stockholder approval, if there is a change to the terms of the Business Combination that would have a material impact on the stockholders, we will be required to circulate a new or amended proxy statement or supplement thereto and resolicit the vote of our stockholders with respect to the Business Combination Proposal.

We and UWM will incur significant transaction and transition costs in connection with the Business Combination.

We and UWM have both incurred and expect to incur significant, non-recurring costs in connection with consummating the Business Combination as well as ongoing costs related to operating as a public company following the consummation of the Business Combination. We and UWM may also incur additional costs to retain key team members. All expenses incurred in connection with the Business Combination Agreement and the Business Combination, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs or paid by the Company following the closing of the Business Combination.

The Company’s transaction expenses as a result of the Business Combination are currently estimated at approximately $30,000,000, including $14,875,000 in deferred underwriting commissions to the underwriter of our IPO. The amount of the deferred underwriting commissions will not be adjusted for any shares that are redeemed in connection with an initial business combination. The per-share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting

 

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commissions and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the deferred underwriting commissions.

If we are unable to complete an initial business combination, our Public Stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that our Sponsor is unable to indemnify), and our warrants will expire worthless.

If we are unable to complete an initial business combination by January 28, 2022, our Public Stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third-party brings a claim against us that our Sponsor is unable to indemnify (as described herein)) and our warrants will expire worthless, unless we amend our current certificate of incorporation (which requires the affirmative vote of the holders of 65% of all then outstanding shares of Common Stock) and amend certain other agreements into which we have entered to extend the life of the Company.

If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share.

Our placing of funds in the Trust Account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any funds held in the Trust Account for the benefit of our Public Stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the funds held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third-party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.

Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of our Public Shares, if we are unable to complete our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. Accordingly, the per-share redemption amount received by Public Stockholders could be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors.

Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor (other than our independent public accountants) for services rendered or products sold to us, or a prospective target business with which we have entered into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under indemnity of the

 

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underwriter of our IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of the Company. We have not asked our Sponsor to reserve for such indemnification obligations. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for the Business Combination and redemptions could be reduced to less than $10.00 per Public Share. In such event, we may not be able to complete the Business Combination, and you would receive such lesser amount per share in connection with any redemption of your Public Shares. None of our officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our Public Stockholders.

In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per public share or (ii) other than due to the failure to obtain a waiver to seek access to the Trust Account, such lesser amount per share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to fund our working capital requirements, Regulatory Withdrawals and/or to pay our franchise and income tax obligations (less up to $100,000 of such net interest to pay dissolution expenses), and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine a favorable outcome is unlikely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in our Trust Account available for distribution to our Public Stockholders may be reduced below $10.00 per share.

If, before distributing the proceeds in the Trust Account to our Public Stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

If, before distributing the proceeds in the Trust Account to our Public Stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

Subsequent to our completion of the Business Combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.

Although we have conducted due diligence on UWM, we cannot assure you that this diligence will surface all material issues that may be present in UWM’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of UWM’s business and outside of our and UWM’s control will not later arise. As a result of these factors, we may be forced to later write down or

 

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write off assets, restructure operations, or incur impairment or other charges that could result in losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about the Post-Combination Company or its securities. Accordingly, any of our stockholders who choose to remain stockholders following the Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.

We have no operating or financial history and our results of operations and those of the Post-Combination Company may differ significantly from the unaudited pro forma financial data included in this proxy statement.

We are a blank check company and we have no operating history and no revenues. This proxy statement includes unaudited pro forma condensed combined financial statements for the Post-Combination Company. The unaudited pro forma condensed combined statement of operations of the Post-Combination Company combines the historical audited results of operations of the Company for the year ended December 31, 2019 and the unaudited results of the Company for the nine months ended September 30, 2020, with the historical audited results of operations of UWM for the year ended December 31, 2019 and the unaudited results of UWM for the nine months ended September 30, 2020, respectively, and gives pro forma effect to the Business Combination as if it had been consummated on January 1, 2019. The unaudited pro forma condensed combined balance sheet of the Post-Combination Company combines the historical balance sheets of the Company as of September 30, 2020 and of UWM as of September 30, 2020 and gives pro forma effect to the Business Combination as if it had been consummated on September 30, 2020.

The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, are based on certain assumptions, address a hypothetical situation and reflect limited historical financial data. Therefore, the unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations and financial position that would have been achieved had the Business Combination been consummated on the dates indicated above, or the future consolidated results of operations or financial position of the Post-Combination Company. Accordingly, the Post-Combination Company’s business, assets, cash flows, results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma condensed combined financial statements included in this document. For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

We will be subject to income taxes in the United States and other jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

 

   

changes in the valuation of our deferred tax assets and liabilities;

 

   

expected timing and amount of the release of any tax valuation allowances;

 

   

tax effects of stock-based compensation;

 

   

changes in tax laws, regulations or interpretations thereof; or

 

   

lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.

In addition, we may be subject to audits of our income, sales and other transaction taxes by taxing authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.

 

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A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

Following the Business Combination, the price of our securities may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for our securities following the Business Combination may never develop or, if developed, it may not be sustained. In addition, the price of our securities after the Business Combination can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities are not listed on, or become delisted from, Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

If the Business Combination’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of the Company’s securities prior to the closing of the Business Combination may decline. The market values of our securities at the time of the Business Combination may vary significantly from their prices on the date the Business Combination Agreement was executed, the date of this proxy statement, or the date on which our stockholders vote on the Business Combination.

In addition, following the Business Combination, fluctuations in the price of our securities could contribute to the loss of all or part of your investment. Immediately prior to the Business Combination, there has not been a public market for UWM’s stock and trading in the shares of our Class A Stock has not been active. Accordingly, the valuation ascribed to UWM and our Class A Stock in the Business Combination may not be indicative of the price of the Post-Combination Company that will prevail in the trading market following the Business Combination. If an active market for our securities develops and continues, the trading price of our securities following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

Factors affecting the trading price of the Post-Combination Company’s securities following the Business Combination may include:

 

   

our reliance on our warehouse facilities to fund mortgage loans and otherwise operate our business;

 

   

our ability to sell loans in the secondary market to a limited number of investors and to the GSEs (Fannie Mae and Freddie Mac), and to securitize our loans into MBS through the GSEs and Ginnie Mae;

 

   

disruptions in the secondary home loan market, including the MBS market;

 

   

changes in the GSEs, FHA, USDA and VA guidelines or GSE and Ginnie Mae guarantees;

 

   

actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

 

   

changes in the market’s expectations about our operating results;

 

   

the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

 

   

speculation in the press or investment community;

 

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success of competitors;

 

   

our operating results failing to meet the expectation of securities analysts or investors in a particular period;

 

   

changes in financial estimates and recommendations by securities analysts concerning the Post-Combination Company or the market in general;

 

   

operating and stock price performance of other companies that investors deem comparable to the Post-Combination Company;

 

   

our ability to market new and enhanced products on a timely basis;

 

   

changes in laws and regulations affecting our business;

 

   

commencement of, or involvement in, litigation involving the Post-Combination Company;

 

   

changes in the Post-Combination Company’s capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

the volume of shares of our Class A Stock available for public sale;

 

   

our dual class structure;

 

   

any major change in the Post-Combination Company’s Board or management;

 

   

sales of substantial amounts of Common Stock by our directors, officers or significant stockholders or the perception that such sales could occur;

 

   

the realization of any of the risk factors presented in this proxy statement;

 

   

additions or departures of key personnel;

 

   

failure to comply with the requirements of Nasdaq;

 

   

failure to comply with SOX or other laws or regulations;

 

   

actual, potential or perceived control, accounting or reporting problems;

 

   

changes in accounting principles, policies and guidelines; and

 

   

general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and health epidemics and pandemics (including the ongoing COVID-19 public health emergency), acts of war or terrorism.

Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies that investors perceive to be similar to the Post-Combination Company could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.

 

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Past performance by The Gores Group, including our management team, may not be indicative of future performance of an investment in the Company or the Post-Combination Company.

Past performance by The Gores Group and by our management team, including with respect to Gores Holdings, Inc., a Delaware corporation (“Gores Holdings I”), Gores Holdings II, Inc., a Delaware corporation (“Gores Holdings II”), Gores Holdings III, Inc., a Delaware corporation (“Gores Holdings III”), and Gores Metropoulos, Inc., a Delaware corporation (“Gores Metropoulos”), is not a guarantee of success with respect to the Business Combination. You should not rely on the historical record of The Gores Group or our management team’s, Gores Holdings I’s, Gores Holdings II’s, Gores Holdings III’s or Gores Metropoulos’, performance as indicative of the future performance of an investment in the Company or Post-Combination Company or the returns the Company or Post-Combination Company will, or is likely to, generate going forward.

If, following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about the Post-Combination Company, its business, or its market, or if they change their recommendations regarding our Class A Stock adversely, then the price and trading volume of our Class A Stock could decline.

The trading market for our Class A Stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on the Company or the Post-Combination Company. If no securities or industry analysts commence coverage of the Post-Combination Company, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the Post-Combination Company change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our Class A Stock would likely decline. If any analyst who may cover the Company were to cease coverage of the Post-Combination Company or fail to regularly publish reports on it, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

We may be unable to obtain additional financing to fund the operations and growth of the Post-Combination Company.

We may require additional financing to fund the operations or growth of the Post-Combination Company. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the Post-Combination Company. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after our Business Combination.

Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations.

We are subject to laws, regulations and rules enacted by national, regional and local governments and Nasdaq. In particular, we are required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations or rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations or rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.

We have not registered the shares of Class A Stock issuable upon exercise of the Public Warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise Public Warrants, thus precluding such investor from being able to exercise its Public Warrants except on a cashless basis and potentially causing such Public Warrants to expire worthless.

We have not registered the shares of Class A Stock issuable upon exercise of the Public Warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement dated

 

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January 23, 2020, between Continental Stock Transfer & Trust Company, as warrant agent, and us (the “Warrant Agreement”), we have agreed to use our best efforts to file a registration statement under the Securities Act covering such shares and maintain a current prospectus relating to the Class A Stock issuable upon exercise of the Public Warrants, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in such registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the Public Warrants are not registered under the Securities Act, we will be required to permit holders to exercise their Public Warrants on a cashless basis. However, no Public Warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from registration is available. Notwithstanding the above, if our Class A Stock is at the time of any exercise of a Public Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Public Warrants who exercise their Public Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will be required to use our best efforts to register the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any Public Warrant, or issue securities or other compensation in exchange for the Public Warrants in the event that we are unable to register or qualify the shares underlying the Public Warrants under applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the Public Warrants is not so registered or qualified or exempt from registration or qualification, the holder of such Public Warrant shall not be entitled to exercise such Public Warrant and such Public Warrant may have no value and expire worthless. In such event, holders who acquired their Public Warrants as part of a purchase of Public Units will have paid the full unit purchase price solely for the shares of Class A Stock included in the Public Units. If and when the Public Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of Class A Stock for sale under all applicable state securities laws.

The exercise price for our Public Warrants is higher than in many similar blank check company offerings in the past, and, accordingly, the Public Warrants are more likely to expire worthless.

The exercise price of our Public Warrants is higher than is typical with many similar blank check companies in the past. Historically, with regard to units offered by blank check companies, the exercise price of a Public Warrant was generally a fraction of the purchase price of the units in the initial public offering. The exercise price for our Public Warrants is $11.50 per share, subject to adjustment as provided herein. As a result, the Public Warrants are less likely to ever be in the money and more likely to expire worthless, even if we consummate the Business Combination.

We may amend the terms of the Public Warrants in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then-outstanding Public Warrants. As a result, the exercise price of a holder’s Public Warrants could be increased, the exercise period could be shortened and the number of shares of our Common Stock purchasable upon exercise of a Public Warrant could be decreased, all without the approval of that warrant holder.

Our Public Warrants were issued in registered form under the Warrant Agreement. The Warrant Agreement provides that the terms of the Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then-outstanding Public Warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding Public Warrants approve of such amendment. Although our ability to amend the terms of the Public Warrants with the consent of at least 50% of the then-outstanding Public Warrants is

 

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unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Public Warrants, shorten the exercise period or decrease the number of shares of Class A Stock purchasable upon exercise of a Public Warrant.

We may redeem unexpired Public Warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their Public Warrants worthless.

We have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per Public Warrant; provided that the last reported sales price of our Class A Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption to the warrant holders and provided certain other conditions are met. If and when the Public Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Public Warrants could force the warrant holders: (i) to exercise their Public Warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so; (ii) to sell their Public Warrants at the then-current market price when they might otherwise wish to hold their Public Warrants; or (iii) to accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, is likely to be substantially less than the market value of their Public Warrants. None of the Private Placement Warrants will be redeemable by us so long as they are held by our Sponsor or its permitted transferees.

Because each Public Unit contains one-fourth of one Public Warrant and only a whole Public Warrant may be exercised, the Public Units may be worth less than Public Units of other blank check companies.

Each Public Unit contains one-fourth of one Public Warrant. Because, pursuant to the Warrant Agreement, the Public Warrants may only be exercised for a whole number of shares, only a whole Public Warrant may be exercised at any given time. This is different from other offerings similar to ours whose public units include one share of common stock and one public warrant to purchase one whole share. We have established the components of the Public Units in this way in order to reduce the dilutive effect of the Public Warrants upon completion of an initial business combination since the Public Warrants will be exercisable in the aggregate for one-fourth of the number of shares compared to Public Units that each contain a Public Warrant to purchase one whole share, thus making us, we believe, a more attractive merger partner for target businesses. Nevertheless, this unit structure may cause our Public Units to be worth less than if they included a Public Warrant to purchase one whole share.

Warrants will become exercisable for our Class A Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

We issued Public Warrants to purchase 10,625,000 shares of Class A Stock as part of our IPO and, on the IPO closing date, we issued Private Placement Warrants to our Sponsor to purchase 5,250,000 shares of our Class A Stock, in each case with a strike price of $11.50 per share. In addition, prior to consummating an initial business combination, nothing prevents us from issuing additional securities in a private placement so long as they do not participate in any manner in the Trust Account or vote as a class with the Common Stock on an initial business combination. We expect to issue approximately 50,000,000 shares of our Class A Stock to the Private Placement Investors in the Private Placement upon consummation of the Business Combination. The shares of Class A Stock issued in the Private Placement and additional shares of our Class A Stock issued upon exercise of our warrants will result in dilution to the then existing holders of Class A Stock of the Company and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Class A Stock.

The Private Placement Warrants are identical to the Public Warrants sold as part of the Public Units issued in our IPO except that, so long as they are held by our Sponsor or its permitted transferees: (i) they will not be

 

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redeemable by us; (ii) they (including the Class A Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our Sponsor until 30 days after the completion of an initial business combination; (iii) they may be exercised by the holders on a net share (cashless) basis; and (iv) are subject to registration rights.

Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of the Trust Account distributed to our Public Stockholders upon the redemption of our Public Shares in the event we do not complete an initial business combination by January 28, 2022 may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our Public Shares as soon as reasonably possible following January 28, 2022 in the event we do not complete an initial business combination and, therefore, we do not intend to comply with the foregoing procedures.

Because we will not be complying with Section 280 of the DGCL, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the ten years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations are limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our Trust Account distributed to our Public Stockholders upon the redemption of our Public Shares in the event we do not complete an initial business combination by January 28, 2022 is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.

If, after we distribute the proceeds in the Trust Account to our Public Stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our Board may be exposed to claims of punitive damages.

If, after we distribute the proceeds in the Trust Account to our Public Stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. In addition, our Board may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying Public Stockholders from the Trust Account prior to addressing the claims of creditors.

 

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Anti-takeover provisions contained in our Proposed Charter and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Assuming the passage of Proposal Nos. 1 through 3 of this proxy statement, the Post-Combination Company’s Proposed Charter will contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions will include:

 

   

a capital structure where holders of Class B Stock and holders of Class D Stock will each have ten votes per share of Class B Stock and Class D Stock (as compared with holders of Class A Stock and holders of Class C Stock, who will each have one vote per share of Class A Stock and Class C Stock, respectively) and consequently have a greater ability to control the outcome of matters requiring stockholder approval, even when the holders of Class B Stock and Class D Stock own significantly less than a majority of the outstanding shares of Common Stock;

 

   

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect candidates to serve as a director of the Post-Combination Company’s Board;

 

   

a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Post-Combination Company’s Board;

 

   

the requirement that, at any time from and after the Voting Rights Threshold Date, directors elected by the stockholders generally entitled to vote may be removed from the Post-Combination Company’s Board solely for cause;

 

   

the exclusive right of the Post-Combination Company’s Board, from and after the Voting Rights Threshold Date, to fill newly created directorships and vacancies with respect to directors elected by the stockholders generally entitled to vote, which prevents stockholders from being able to fill vacancies on the Post-Combination Company’s Board;

 

   

the prohibition on stockholder action by written consent from and after the Voting Rights Threshold Date, which forces stockholder action from and after the Voting Rights Threshold Date to be taken at an annual or special meeting of stockholders;

 

   

the requirement that special meetings of stockholders may only be called by the Chairperson of the Post-Combination Company’s Board, the Chief Executive Officer of the Post-Combination Company or the Post-Combination Company’s Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

 

   

the requirement that, from and after the Voting Rights Threshold Date, amendments to certain provisions of the Proposed Charter and amendments to the Amended and Restated Bylaws must be approved by the affirmative vote of the holders of at least seventy-five percent (75%) in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote;

 

   

our authorized but unissued shares of Common Stock and Preferred Stock are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans; the existence of authorized but unissued and unreserved shares of Common Stock and Preferred Stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise;

 

   

advance notice procedures set forth in the Amended and Restated Bylaws that stockholders must comply with in order to nominate candidates to the Post-Combination Company’s Board or to propose other matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Post-Combination Company; and

 

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an exclusive forum provision which will provide that, unless the Post-Combination Company consents in writing to the selection of an alternative forum, (i) any derivative action brought on behalf of the Post-Combination Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of the Post-Combination Company to the Post-Combination Company or the Post-Combination Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Proposed Charter or the Amended and Restated Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine of the State of Delaware, in each case, will be required to be filed in either (x) the Sixth Judicial Circuit, Oakland County, Michigan (or, if the Sixth Judicial Circuit, Oakland County, Michigan lacks jurisdiction over any such action or proceeding, then another state court of the State of Michigan, or if no state court of the State of Michigan has jurisdiction over any such action or proceeding, then the United Stated District Court for the Eastern District of Michigan) or (y) the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction over any such action or proceeding, then the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware lacks jurisdiction then the United States District Court for the District of Delaware).

The Proposed Charter will contain a provision renouncing our interest and expectancy in certain corporate opportunities.

The Proposed Charter will provide that the Post-Combination Company will have no interests or expectancy in, or being offered an opportunity to participate in any corporate opportunity, to the fullest extent permitted by applicable law, with respect to any lines of business or business activity or business venture conducted by any UWM Related Persons as of the date of the filing of the Proposed Charter with the Secretary of State of the State of Delaware or received by, presented to or originated by UWM Related Persons after the date of the filing of the Proposed Charter with the Secretary of State of the State of Delaware in such UWM Related Person’s capacity as a UWM Related Person (and not in his, her or its capacity as a director, officer or employee of the Post-Combination Company), in each case, other than any corporate opportunity with respect to residential mortgage lending. These provisions of the Proposed Charter create the possibility that a corporate opportunity of ours may be used for the benefit of the UWM Related Persons.

The provision of our Proposed Charter requiring exclusive forum in the state courts in the State of Michigan or the State of Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.

The Proposed Charter will require that, unless the Post-Combination Company consents in writing to the selection of an alternative forum, (i) any derivative action brought on behalf of the Post-Combination Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of the Post-Combination Company to the Post-Combination Company or the Post-Combination Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Proposed Charter or Amended and Restated Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine of the State of Delaware, in each case, to be filed in either (x) the Sixth Judicial Circuit, Oakland County, Michigan (or, if the Sixth Judicial Circuit, Oakland County, Michigan lacks jurisdiction over any such action or proceeding, then another state court of the State of Michigan, or if no state court of the State of Michigan has jurisdiction over any such action or proceeding, then the United Stated District Court for the Eastern District of Michigan) or (y) the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction over any such action or proceeding, then the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware lacks jurisdiction then the United States District Court for the District of Delaware). The exclusive forum provision described above does not apply to actions arising under the Securities Act or the Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

 

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Although we believe these exclusive forum provisions benefit us by providing increased consistency in the application of Delaware law, the exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers or stockholders, which may discourage lawsuits with respect to such claims. Further, in the event a court finds the exclusive forum provision contained in the Proposed Charter to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

We currently qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, which we refer to as the “JOBS Act.” As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including: (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of SOX; (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements; and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year: (a) following January 28, 2025, the fifth anniversary of our IPO; (b) in which we have total annual gross revenue of at least $1.07 billion; or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A Stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

We cannot predict if investors will find our Class A Stock less attractive because we rely on these exemptions. If some investors find our Class A Stock less attractive as a result, there may be a less active trading market for our Class A Stock and our stock price may be more volatile. UWM had total annual gross revenue for the year ended December 31, 2019 of approximately $1.3 billion and, as a result, we do not expect the Company to qualify as an emerging growth company after the last day of the fiscal year in which the Business Combination is consummated and may incur increased legal, accounting and compliance costs associated with Section 404 of SOX.

Our internal control over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of SOX, which require management to certify financial and other information in our quarterly and annual reports

 

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and provide an annual management report on the effectiveness of internal control over financial reporting. To comply with the requirements of being a public company, the Post-Combination Company will be required to provide the management report on internal controls commencing with the annual report for fiscal year ended December 31, 2021, and we may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. The standards required for a public company under Section 404 of SOX are significantly more stringent than those required of UWM as a privately-held company. Further, as an emerging growth company, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company. We do expect the Company will no longer qualify as an emerging growth company after the last day of the fiscal year in which the Business Combination is consummated. As a result, beginning with the annual report for fiscal year ended December 31, 2021, our independent registered public accounting firm will be required to issue a report based on its audit of our internal control over financial reporting. Our independent registered public accounting firm may issue a report that is adverse in the event that it is not satisfied with the level at which the controls of the Post-Combination Company are documented, designed or operating.

Testing and maintaining these controls can divert our management’s attention from other matters that are important to the operation of our business. If we identify material weaknesses in the internal control over financial reporting of the Post-Combination Company or are unable to comply with the requirements of Section 404 or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we no longer qualify as an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.

Risks Related to the Redemption

We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete a Business Combination with which a substantial majority of our stockholders do not agree.

Our current certificate of incorporation does not provide a specified maximum redemption threshold, except that we will not redeem our Public Shares in an amount that would result in the Company’s failure to have net tangible assets in excess of $5,000,000 (such that we are not subject to the SEC’s “penny stock” rules). The Business Combination Agreement provides that the obligation of the UWM Entities to consummate the Business Combination is conditioned on the total of (i) the amount in the Trust Account, after giving effect to redemptions of Public Shares, (ii) the proceeds from the Private Placement and (iii) all funds held by us outside of the Trust Account and immediately available to us, equaling or exceeding $712,500,000. As a result, we may be able to complete our Business Combination even though a substantial portion of our Public Stockholders do not agree with the transaction and have redeemed their shares or have entered into privately negotiated agreements to sell their shares to our Sponsor, directors or officers or their affiliates. As of the date of this proxy statement, no agreements with respect to the private purchase of Public Shares by the Company or the persons described above have been entered into with any such investor or holder. We will file a Current Report on Form 8-K with the SEC to disclose private arrangements entered into or significant private purchases made by any of the aforementioned persons that would affect the vote on the Business Combination Proposal or other proposals (as described in this proxy statement) at the Special Meeting.

In the event the aggregate cash consideration we would be required to pay for all shares of Class A Stock that are validly submitted for redemption plus any amount required to satisfy the cash condition pursuant to the terms of the Business Combination Agreement exceeds the aggregate amount of cash available to us, we may not complete the Business Combination or redeem any shares, all shares of Class A Stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate initial business combination.

 

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If you or a “group” of stockholders of which you are a part are deemed to hold an aggregate of more than 20% of our Class A Stock issued in the IPO, you (or, if a member of such a group, all of the members of such group in the aggregate) will lose the ability to redeem all such shares in excess of 20% of our Class A Stock issued in the IPO.

A Public Stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 20% of the shares of Class A Stock included in the Public Units sold in our IPO. In order to determine whether a stockholder is acting in concert or as a group with another stockholder, the Company will require each Public Stockholder seeking to exercise redemption rights to certify to the Company whether such stockholder is acting in concert or as a group with any other stockholder. Such certifications, together with other public information relating to stock ownership available to the Company at that time, such as Section 13D, Section 13G and Section 16 filings under the Exchange Act, will be the sole basis on which the Company makes the above-referenced determination. Your inability to redeem any such excess shares will reduce your influence over our ability to consummate the Business Combination and you could suffer a material loss on your investment in us if you sell such excess shares in open market transactions. Additionally, you will not receive redemption distributions with respect to such excess shares if we consummate the Business Combination. As a result, you will continue to hold that number of shares aggregating to more than 20% of the shares sold in our IPO and, in order to dispose of such excess shares, would be required to sell your stock in open market transactions, potentially at a loss. We cannot assure you that the value of such excess shares will appreciate over time following the Business Combination or that the market price of our Class A Stock will exceed the per-share redemption price. Notwithstanding the foregoing, stockholders may challenge the Company’s determination as to whether a stockholder is acting in concert or as a group with another stockholder in a court of competent jurisdiction.

However, our stockholders’ ability to vote all of their shares (including such excess shares) for or against the Business Combination is not restricted by this limitation on redemption.

There is no guarantee that a stockholder’s decision whether to redeem its shares for a pro rata portion of the Trust Account will put the stockholder in a better future economic position.

We can give no assurance as to the price at which a stockholder may be able to sell its Public Shares in the future following the completion of the Business Combination or any alternative business combination. Certain events following the consummation of any initial business combination, including the Business Combination, may cause an increase in our share price, and may result in a lower value realized now than a stockholder of the Company might realize in the future had the stockholder not redeemed its shares. Similarly, if a stockholder does not redeem its shares, the stockholder will bear the risk of ownership of the Public Shares after the consummation of any initial business combination, and there can be no assurance that a stockholder can sell its shares in the future for a greater amount than the redemption price set forth in this proxy statement. A stockholder should consult the stockholder’s own tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.

Stockholders of the Company who wish to redeem their shares for a pro rata portion of the Trust Account must comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline. If stockholders fail to comply with the redemption requirements specified in this proxy statement, they will not be entitled to redeem their shares of our Class A Stock for a pro rata portion of the funds held in our Trust Account.

Public Stockholders who wish to redeem their shares for a pro rata portion of the Trust Account must, among other things (i) submit a request in writing and (ii) tender their certificates to our Transfer Agent or deliver their shares to the Transfer Agent electronically through the DWAC system at least two business days prior to the

 

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Special Meeting. In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and our Transfer Agent will need to act to facilitate this request. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, because we do not have any control over this process or over the brokers, which we refer to as “DTC,” it may take significantly longer than two weeks to obtain a physical stock certificate. If it takes longer than anticipated to obtain a physical certificate, stockholders who wish to redeem their shares may be unable to obtain physical certificates by the deadline for exercising their redemption rights and thus will be unable to redeem their shares.

Stockholders electing to redeem their shares will receive their pro rata portion of the Trust Account less Regulatory Withdrawals and franchise and income taxes payable, calculated as of two business days prior to the anticipated consummation of the Business Combination. Please see the section entitled “Special Meeting in Lieu of 2021 Annual Meeting of Company Stockholders—Redemption Rights” for additional information on how to exercise your redemption rights.

If a stockholder fails to receive notice of our offer to redeem our Public Shares in connection with the Business Combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.

If, despite our compliance with the proxy rules, a stockholder fails to receive our proxy materials, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the proxy materials that we are furnishing to holders of our Public Shares in connection with the Business Combination describes the various procedures that must be complied with in order to validly redeem Public Shares. In the event that a stockholder fails to comply with these procedures, its shares may not be redeemed.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Defined terms included below have the same meaning as terms defined and included elsewhere in this proxy statement.

Introduction

Pursuant to the Business Combination Agreement, (a) SFS Corp. will contribute UWM into UWM LLC, (b) the Company will acquire Class A Common Units in UWM LLC and SFS Corp. will acquire Class B Common Units in UWM LLC, and (c) the Company will issue to SFS Corp. shares of a new non-economic Class D Stock of the Company, which will entitle the holder to 10 votes per share. Following the consummation of the Business Combination Agreement, the Company will be organized in an “Up-C” structure in which all of UWM will be wholly owned by UWM LLC and the Company’s only direct asset will consist of the UWM Class A Common Units. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. The following unaudited pro forma condensed combined financial statements of the Company presents the combination of the financial information of the Company and UWM, adjusted to give effect to the Business Combination including:

 

   

the reverse recapitalization between UWM and the Company, whereby no goodwill or other intangible assets are recorded, in accordance with GAAP;

 

   

the consummation of the transactions contemplated by the Private Placement; and

 

   

the liability contemplated by the Tax Receivable Agreement.

The Company is a blank check company incorporated on June 12, 2019 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On January 28, 2020 or the IPO Closing Date, the Company consummated its IPO of 42,500,000 units at $10.00 per unit, generating gross proceeds of $425,000,000. Simultaneously with the closing of its IPO, the Company consummated the sale of 5,250,000 private placement warrants at a price of $2.00 per warrant in a private placement to the Sponsor, generating gross proceeds of $10,500,000. On the IPO Closing Date, $425,000,000 of the gross proceeds from the IPO and the sale of the Private Placement Warrants were deposited in the Trust Account with the Trustee. As of September 30, 2020, there was approximately $425,323,144 held in the Trust Account. The Company has until January 28, 2022 (24 months from the IPO Closing Date) to complete an initial business combination.

UWM was incorporated under the laws of the State of Michigan on July 16, 1986, primarily doing business as United Wholesale Mortgage. UWM engages in the origination, sale and servicing of residential mortgage loans. UWM is based in Michigan but originates and services loans throughout the United States. UWM is approved as a Title II, non-supervised direct endorsement mortgagee with the United States Department of Housing and Urban Development (HUD). In addition, UWM is an approved issuer with the Government National Mortgage Association (Ginnie Mae), as well as an approved seller and servicer with the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac).

The following unaudited pro forma condensed combined balance sheet as of September 30, 2020 assumes that the Business Combination occurred on September 30, 2020. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 and for the year ended December 31, 2019 present pro forma effect to the Business Combination as if they have been completed on January 1, 2019.

The unaudited pro forma combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what the Post-Combination Company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. Further, the pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations

 

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of the Post-Combination Company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

The historical financial information of the Company was derived from the unaudited and audited financial statements of the Company as of and for the nine months ended September 30, 2020 and for the year ended December 31, 2019, included elsewhere in this proxy statement. The historical financial information of UWM was derived from the unaudited and audited consolidated financial statements of UWM as of and for the nine months ended September 30, 2020 and for the year ended December 31, 2019, included elsewhere in this proxy statement. This information should be read together with the Company’s and UWM’s audited and unaudited financial statements and related notes, the sections titled “The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “UWM’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this proxy statement.

Under both the no redemption and maximum redemption scenarios, the Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with United States generally accepted accounting principles (“GAAP”). SFS Corp. continues to control UWM LLC before and after the Business Combination. As there is no change in control, UWM LLC has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

   

SFS Corp. will have a majority of the voting power of the Post-Combination Company under both the no redemption and maximum redemption scenarios;

 

   

SFS Corp. will have the ability to nominate and represent majority of the Post-Combination Company’s Board;

 

   

UWM’s former management will comprise the vast majority of the management and executive positions of the Post-Combination Company

Under this method of accounting, the Company will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of UWM issuing stock for the net assets of the Company, accompanied by a recapitalization. The net assets of the Company will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of UWM.

Description of the Business Combination

On September 22, 2020, the Company entered into the Business Combination Agreement. The consideration to be paid in connection with the Business Combination will consist of the Closing Cash Consideration and Voting Stock Consideration. At the closing of the Business Combination, a series of transactions will occur, including the following: (a) UWM LLC will issue to SFS Cor