Filed
Pursuant to Rule 424(b)(7)
Registration
Statement No. 333-140272
CALCULATION
OF REGISTRATION FEE
|
Title of class of
Securities to be Registered (1)
|
Amount to
be
Registered
|
Proposed
Maximum Offering Price
per
Share
(1)
|
Proposed Maximum
Aggregate Offering
Price
(1)
|
Amount
of
Registration
Fee
(2)
|
|
Class A Common Stock,
par value $0.001 per share
|
55,417
|
$24.82
|
$1,375,449.94
|
$76.75
|
|
|
(1)
Based on the average of the high and low sales price on April 21, 2009 on
the Nasdaq Global Select Market pursuant to Rule 457(c) under the
Securities Act of 1933, as amended.
|
|
|
(2)
Calculated in accordance with Rule 457(r) under the Securities Act of
1933, as amended.
|
PROSPECTUS
SUPPLEMENT
(To
Prospectus dated January 29, 2007)
55,417
Shares
Class A
Common Stock
This
prospectus supplement relates to the offer and sale of 55,417 shares of class A
common stock of SunPower Corporation by the selling stockholders listed under
the heading “Selling Stockholders.” These shares were delivered to the selling
stockholders on April 14, 2009 in a private transaction as described herein
under the heading “Summary of the Underlying Transaction.”
Our class
A common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the
symbol “SPWRA.” The last reported sales price of our class A common stock as
reported on the Nasdaq on April 22, 2009 was $27.30 per share.
We will
not receive any proceeds from the sale by the selling stockholders of shares of
our class A common stock. We are not issuing or selling any shares of our
class A common stock pursuant to this prospectus supplement. Instead, we
are filing this prospectus supplement to satisfy a contractual obligation to the
selling stockholders, who acquired the 55,417 shares of our class A common stock
in connection with SunPower's acquisition of Tilt Solar, LLC on April 14,
2009.
The
selling stockholders identified in this prospectus supplement or their
successors, including their transferees, pledgees or donees or their successors,
may offer the shares from time to time through public or private transactions at
market prices prevailing at the time of sale, at a fixed or fixed prices, at
negotiated prices, at various prices determined at the time of sale or at prices
related to prevailing market prices. The timing and amount of any sale is within
the sole discretion of the selling stockholders, subject to certain
restrictions. See “Plan of Distribution” on page S-5 of this prospectus
supplement.
Investing
in the shares involves risks. See “Risk Factors” on page S-1 of this prospectus
supplement.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus supplement and the accompanying prospectus. Any
representation to the contrary is a criminal offense.
Prospectus
Supplement dated April 23, 2009.
TABLE
OF CONTENTS
Prospectus
Supplement
|
Page
|
|
|
About
This Prospectus Supplement
|
S-1
|
|
Cautionary
Statement Regarding Forward-Looking Statements
|
S-1
|
|
Risk
Factors
|
S-1
|
|
Summary
of the Underlying Transaction
|
S-4
|
|
Use
of Proceeds
|
S-4
|
|
Selling
Stockholders
|
S-4
|
|
Plan
of Distribution
|
S-5
|
|
Validity
of the Common Stock
|
S-7
|
|
Where
You Can Find More Information
|
S-8
|
Prospectus
|
Page
|
|
|
About
This Prospectus
|
1
|
|
Summary
|
1
|
|
Risk
Factors
|
4
|
|
Cautionary
Note Regarding Forward-Looking Statements
|
42
|
|
Ratio
of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
|
44
|
|
Use
of Proceeds
|
45
|
|
Description
of Class A Common Sock
|
46
|
|
Description
of Preferred Stock
|
50
|
|
Description
of Debt Securities
|
51
|
|
Description
of Warrants
|
61
|
|
Plan
of Distribution
|
64
|
|
Experts
|
66
|
|
Legal
Matters
|
66
|
|
Where
You Can Find More Information
|
67
|
You
should rely only on the information contained or incorporated by reference in
this prospectus supplement or the accompanying prospectus. No one is authorized
to provide you with different information.
The
selling stockholders are not making an offer of the shares of class A common
stock covered by this prospectus supplement in any jurisdiction where the offer
is not permitted.
You
should not assume that the information in this prospectus supplement or the
accompanying prospectus is accurate as of any date other than the date on the
front of this prospectus supplement or the date of any documents incorporated by
reference herein
S-i
ABOUT
THIS PROSPECTUS SUPPLEMENT
We
provide information to you about the class A common stock in two separate
documents: (1) this prospectus supplement, which describes the specific terms of
this offering and also adds to and updates information contained in the
accompanying prospectus and the documents incorporated by reference in that
prospectus; and (2) the accompanying prospectus, which provides general
information about securities we may offer from time to time, including
securities other than the class A common stock being offered by this prospectus
supplement. To the extent information in this prospectus supplement is
inconsistent with the accompanying prospectus, you should rely on this
prospectus supplement.
It is
important for you to read and consider all of the information contained in this
prospectus supplement and the accompanying prospectus in making your investment
decision. You also should read and consider the information in the documents we
have referred you to in “Where You Can Find More Information” on page S-8 of
this prospectus supplement and page 67 of the accompanying
prospectus.
We
include cross-references in this prospectus supplement and the accompanying
prospectus to captions in these materials where you can find additional related
discussions. The table of contents in this prospectus supplement provides the
pages on which these captions are located.
Unless
the context requires otherwise, references to “SunPower,” “we,” “our,” or “us”
in this prospectus supplement refer to SunPower Corporation, a Delaware
corporation.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus supplement contains or incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are statements that
do not represent historical facts. We use words such as “may,” “will,” “should,”
“could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“predict,” “potential,” “continue” and similar expressions to identify
forward-looking statements. Forward-looking statements contained or incorporated
by reference in this prospectus supplement include, but are not limited to, our
plans and expectations regarding our ability to obtain financing, future
financial results, operating results, business strategies, projected costs,
products, competitive positions, management’s plans and objectives for future
operations, and industry trends. These forward-looking statements are based on
information available to us as of the date of this prospectus supplement or the
date of the documents incorporated by reference, as the case may be, and
expectations, forecasts and assumptions as of such dates and involve a number of
risks and uncertainties that could cause actual results to differ materially
from those anticipated by these forward-looking statements. Such risks and
uncertainties include a variety of factors, some of which are beyond our
control. Please see “Risk Factors” on page S-1 of this prospectus supplement and
on page 4 of the accompanying prospectus and the other cautionary statements
included in this prospectus supplement, in the accompanying prospectus and in
our other filings with the Securities and Exchange Commission for additional
information on risks and uncertainties that could cause actual results to
differ. These forward-looking statements speak only as of the date that they are
made and should not be relied upon as representing our views as of any
subsequent date, and we are under no obligation to, and expressly disclaim any
responsibility to, update or alter our forward-looking statements, whether as a
result of new information, future events or otherwise.
RISK
FACTORS
Investing
in the class A common stock involves risks, including the risks described below
that are specific to the shares of class A common stock and those that could
affect us and our business. You
S-1
Risks
Relating to the Offering
Conversion
of our outstanding debentures or future substantial issuances or dispositions of
our class A or class B common stock or other securities, could dilute ownership
and earnings per share or cause the market price of our stock to
decrease.
To the
extent we issue class A common stock upon conversion of debentures, the
conversion of some or all of such debentures will dilute the ownership interests
of existing stockholders, including holders who had previously converted their
debentures. Any sales in the public market of the class A and class B common
stock issuable upon such conversion could adversely affect prevailing market
prices of our class A and class B common stock. Sales of our class A or class B
common stock in the public market or sales of any of our other securities could
dilute ownership and earnings per share, and even the perception that such sales
could occur and could cause the market prices of our class A and class B common
stock to decline. In addition, the existence of our outstanding debentures may
encourage short selling of our common stock by market participants who expect
that the conversion of the debentures could depress the prices of our class A
and class B common stock. The market price of our class A common
stock could also decline as a result of sales of shares of our class A common
stock made after this offering or the perception that such sales could
occur.
Approximately
4.7 million shares of class A common stock were lent to underwriters of our
debenture offerings, including approximately 2.9 million shares lent to Lehman
Brothers International (Europe) Limited, or LBIE, and approximately 1.8 million
shares lent to Credit Suisse International, or CSI. Such shares were lent to
facilitate later hedging arrangements of future purchases for debentures in the
after-market. Shares still held by CSI may be freely sold into the market at any
time, and such sales could depress our stock price. In addition, any hedging
activity facilitated by our debenture underwriters would involve short sales or
privately negotiated derivatives transactions. Due to the September 15, 2008
bankruptcy filing of Lehman Brothers and commencement of administrative
proceedings for LBIE in the U.K., we recorded the shares lent to LBIE as issued
and outstanding as of September 15, 2008, for the purpose of computing and
reporting basic and diluted earnings per share. If Credit Suisse Securities
(USA) LLC or its affiliates, including CSI, were to file bankruptcy or commence
similar administrative, liquidating, restructuring or other proceedings, we may
have to consider approximately 1.8 million shares lent to CSI as issued and
outstanding for purposes of calculating earnings per share which would further
dilute our earnings per share. These or other similar transactions could further
negatively affect our stock price.
The price of our
class A common stock may fluctuate significantly.
Our class
A and class B common stock has a limited trading history in the public markets,
and during that period has experienced extreme price and volume fluctuations.
The trading price of our class A and class B common stock could be subject to
wide fluctuations due to the factors discussed in this risk
S-2
The difference in
the voting rights and liquidity could result in different market values for
shares of our class A and our class B common stock.
The
rights of class A and class B common stock are substantially similar, except
with respect to voting. The class B common stock is entitled to eight votes per
share and the class A common stock is entitled to one vote per share.
Additionally, our restated certificate of incorporation imposed certain
limitations on the rights of holders of class B common stock to vote the full
number of their shares. The difference in the voting rights of our class A and
class B common stock could reduce the value of our class A common stock to the
extent that any investor or potential future purchaser of our class A common
stock ascribes value to the right of our class B common stock to eight votes per
share. In addition, the lack of a long trading history and lower trading volume
of the class B common stock, compared to the class A common stock, could result
in lower trading prices for the class B common stock.
Delaware law and
our certificate of incorporation and bylaws contain anti-takeover provisions,
our outstanding debentures provide for a right to convert upon certain events,
and our board of directors entered into a rights agreement and declared a rights
dividend, any of which could delay or discourage takeover attempts that
stockholders may consider favorable.
Provisions
in our restated certificate of incorporation and bylaws may have the effect of
delaying or preventing a change of control or changes in our management. These
provisions include the following:
• the
right of the board of directors to elect a director to fill a vacancy created by
the expansion of the board of directors;
• the
prohibition of cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect director
candidates;
• the
requirement for advance notice for nominations for election to the board of
directors or for proposing matters that can be acted upon at a stockholders’
meeting;
• the
ability of the board of directors to issue, without stockholder approval, up to
approximately 10.0 million shares of preferred stock with terms set by the board
of directors, which rights could be senior to those of common stock;
and
• our
board of directors is divided into three classes of directors, with the classes
to be as nearly equal in number as possible;
• no
action can be taken by stockholders except at an annual or special meeting of
the stockholders called in accordance with our bylaws, and stockholders may not
act by written consent;
• stockholders
may not call special meetings of the stockholders;
• limitations
on the voting rights of our stockholders with more than 15% of our class B
common stock subject to receipt by Cypress Semiconductor Corporation, our former
parent company, of a
S-3
supplemental
ruling from the IRS that the effectiveness of the restriction will not prevent
the favorable rulings received by Cypress with respect to certain tax issues
arising under Section 355 of the Code in connection with the spin-off from
having full force and effect; and
• our
board of directors is able to alter our bylaws without obtaining stockholder
approval.
Certain
provisions of our outstanding debentures could make it more difficult or more
expensive for a third-party to acquire us. Upon the occurrence of certain
transactions constituting a fundamental change, holders of our outstanding
debentures will have the right, at their option, to require us to repurchase, at
a cash repurchase price equal to 100% of the principal amount plus accrued and
unpaid interest on the debentures, all of their debentures or any portion of the
principal amount of such debentures in integral multiples of $1,000. We may also
be required to issue additional shares of our class A common stock upon
conversion of such debentures in the event of certain fundamental changes. In
addition, on August 12, 2008, we entered into a Rights Agreement with
Computershare Trust Company, N.A. and our board of directors declared an
accompanying rights dividend. The Rights Agreement became effective upon
completion of Cypress’ spin-off of our shares of class B common stock to the
holders of Cypress common stock. The Rights Agreement contains specific features
designed to address the potential for an acquirer or significant investor to
take advantage of our capital structure and unfairly discriminate between
classes of our common stock. Specifically, the Rights Agreement is designed to
address the inequities that could result if an investor, by acquiring 20% or
more of the outstanding shares of class B common stock, were able to gain
significant voting influence over our company without making a correspondingly
significant economic investment. Our board of directors determined that the
rights dividend became payable to the holders of record of our common stock as
of the close of business on September 29, 2008. The rights dividend and Rights
Agreement, commonly referred to as a “poison pill,” could delay or discourage
takeover attempts that stockholders may consider favorable.
SUMMARY
OF THE UNDERLYING TRANSACTION
On April
14, 2009 we completed the acquisition of Tilt Solar, LLC, a California limited
liability company, pursuant to a Membership Interest Purchase Agreement, dated
as of April 14, 2009, by and among the selling stockholders and us, which we
refer to as the Purchase Agreement. Under the terms of the Purchase Agreement,
we purchased the outstanding membership interest of Tilt Solar from the selling
stockholders for an aggregate purchase price equal to 55,471 shares of our class
A common stock.
We are
registering the resale by the selling stockholders of the shares of our class A
common stock issued to them upon the closing of the transaction in order to
fulfill our obligation under the Purchase Agreement to cause such resale to be
registered with the Securities and Exchange Commission, or the SEC.
USE
OF PROCEEDS
All
shares of class A common stock sold pursuant to this prospectus supplement and
the accompanying prospectus will be sold by the selling stockholders. We will
not receive any of the proceeds from such sales.
SELLING
STOCKHOLDERS
The
selling stockholders may from time to time offer and sell any or all of the
shares of our class A common stock set forth below pursuant to this prospectus
supplement and the accompanying prospectus. We have agreed to pay all fees and
expenses incident to the registration and listing of the shares of class A
common stock set forth below.
S-4
The
selling stockholders initially acquired the shares covered by this prospectus
supplement and the accompanying prospectus on April 14, 2009, at the closing
under the Purchase Agreement as described above under “Summary of the Underlying
Transaction.” The selling stockholders may at any time and from time to time
offer and sell pursuant to this prospectus supplement and the accompanying
prospectus any or all of the 55,471 shares of our class A common stock in any
type of transaction as more fully described in “Plan of Distribution” in this
prospectus supplement.
The
following table sets forth the aggregate number of shares of our class A common
stock beneficially owned by the selling stockholders as of April 23, 2009, and
the maximum number of shares offered by the selling stockholders pursuant to
this prospectus supplement and accompanying prospectus. Beneficial ownership is
determined in accordance with the rules of the SEC, and includes voting or
investment power with respect to shares of our class A common stock. The
following table may be expanded or supplemented in prospectus supplements if and
when necessary.
The
information provided in the table below with respect to each selling stockholder
has been obtained from that selling stockholder.
|
Shares
of Class A Common Stock Beneficially Owned Prior to
Offering
|
Number
of Shares of Class A Common Stock Being Offered
|
Shares
of Class A Common Stock to be Beneficially Owned After
Offering
|
|||
|
Name
of Selling Stockholder
|
Number
|
Percentage
|
Offered
|
Number
|
Percentage
|
|
Jason
Jones
|
18,639
|
*
|
18,639
|
0
|
0%
|
|
Steven
Kraft
|
18,639
|
*
|
18,639
|
0
|
0
|
|
Jessica
Jones
|
9,547
|
*
|
9,547
|
0
|
0
|
|
Albert
P. Williams
|
3,819
|
*
|
3,819
|
0
|
0
|
|
Robert
E. Kraft
|
1,909
|
*
|
1,909
|
0
|
0
|
|
Eric
Stover
|
1,909
|
*
|
1,909
|
0
|
0
|
|
Matt
Ohline
|
955
|
*
|
955
|
0
|
0
|
* Less
than 1% of our outstanding class A common stock.
We do not
know when or in what amounts the selling stockholders may offer shares for sale.
It is possible that the selling stockholders will not sell any or all of the
shares of class A common stock offered under this prospectus supplement. Because
the selling stockholders may offer all or some of the shares of class A common
stock pursuant to this prospectus supplement, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any such
shares, we cannot estimate the number of shares that will be held by the selling
stockholders after completion of the offering. However, for purposes of this
table, we have assumed that, after completion of the offering, none of the
shares of class A common stock covered by this prospectus supplement will be
held by the selling stockholders.
Based on
the information provided to us by the selling stockholders, none of the selling
stockholders has, nor within the past three years has had, any material
relationship with us or any of our predecessors or affiliates, and we are
advised that none of the selling stockholders is a registered
broker-dealer.
PLAN
OF DISTRIBUTION
The
selling stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of our class A common
stock received after the date of this prospectus supplement from a selling
stockholder as a gift, pledge, partnership distribution or other
S-5
The
selling stockholders may offer and sell the shares of the class A common stock
covered by this prospectus supplement by one or more of the following methods at
various times:
• block
trades in which a broker or dealer will be engaged to attempt to sell the shares
as agent, but may position and resell a portion of the block as principal to
facilitate the transaction;
• purchases
by a broker or dealer as principal and resale by the broker or dealer for its
own account pursuant to this prospectus supplement;
• ordinary
brokerage transactions and transactions in which the broker solicits
purchases;
• “at
the market” transactions to or through market makers or into an existing market
for our class A common stock;
• privately
negotiated transactions;
• short
sales;
• options,
swaps or other derivative transactions that may or may not be listed on an
exchange;
• distributions
to their respective partners, members, managers, directors, employees,
consultants or affiliates; or
• any
combination of the above methods or by any other legally available
means.
The
selling stockholders may engage brokers and dealers, and any brokers or dealers
may arrange for other brokers or dealers to participate in effecting sales of
the shares. These brokers or dealers may act as principals, or as agents of the
selling stockholders. Broker-dealers may agree with the selling stockholders to
sell a specified number of shares of class A common stock at a stipulated price
per share. If a broker-dealer is unable to sell shares acting as agent for the
selling stockholders, it may purchase as principal any unsold shares at the
stipulated price. Broker-dealers who acquire shares of class A common stock as
principals may thereafter resell the shares from time to time in transactions on
any stock exchange on which the shares are then listed, at prices and on terms
then prevailing at the time of sale, at prices related to the then-current
market price or in negotiated transactions. Broker-dealers may use block
transactions and sales to and through broker-dealers, including transactions of
the nature described above.
To the
extent required under the Securities Act of 1933, as amended, which we refer to
as the Securities Act, the names of any agents, underwriters, brokers or dealers
and any applicable commission with respect to a particular offering will be set
forth in an additional prospectus supplement. Any underwriters, dealers, brokers
or agents participating in the distribution of the shares may receive
S-6
Any
brokers, dealers or agents that participate in the distribution of shares of
class A common stock may be deemed to be “underwriters” within the meaning of
the Securities Act, and any discounts, concessions, commissions or fees received
by them and any profit on the resale of shares sold by them may be deemed to be
underwriting discounts and commissions.
We have
agreed to make copies of this prospectus supplement and the accompanying
prospectus available to the selling stockholders and any of their successors in
interest for purposes of satisfying the prospectus delivery requirements of the
Securities Act, if applicable.
The
selling stockholders may enter into hedging transactions with broker-dealers and
the broker-dealers may engage in short sales of shares of class A common stock
in the course of hedging the positions they assume with the selling
stockholders, including, without limitation, in connection with distributions of
shares by those broker-dealers. The selling stockholders may enter into option
or other transactions with broker-dealers that involve the delivery of shares of
class A common stock offered hereby to the broker-dealers, who may then resell
or otherwise transfer those securities.
The
selling stockholders and other persons participating in the sale or distribution
of shares of class A common stock will be subject to applicable provisions of
the Securities Exchange Act of 1934, as amended, which we refer to as the
Exchange Act, and the rules and regulations thereunder, including Regulation M;
and we have advised the selling stockholders that Regulation M may apply. This
regulation may limit the timing of purchases and sales of any shares of class A
common stock by the selling stockholders and any other person. The
anti-manipulation rules under the Exchange Act may apply to sales of shares of
class A common stock in the market and to the activities of the selling
stockholders and their respective affiliates. Furthermore, Regulation M may
restrict the ability of any person engaged in the distribution of shares of
class A common stock to engage in market-making activities with respect to the
particular shares being distributed for a period of up to five business days
before the distribution. These restrictions may affect the marketability of the
class A common stock and the ability of any person or entity to engage in
market-making activities with respect to the securities.
The
selling stockholders may also sell shares of class A common stock in accordance
with Rule 144 under the Securities Act rather than pursuant to this prospectus
supplement, regardless of whether the shares are covered by this prospectus
supplement.
Pursuant
to a registration rights agreement entered into in connection with the Purchase
Agreement, we have agreed in certain circumstances to indemnify, or contribute
to liabilities incurred by, each selling stockholder, their respective officers,
directors, and other controlling persons, against certain liabilities, including
certain liabilities that may arise under the Securities Act and the Exchange
Act. The selling stockholders have agreed, severally and not jointly, to
indemnify us in certain circumstances against certain liabilities. The selling
stockholders may indemnify any broker-dealer that participates in transactions
involving the sale of shares of class A common stock against certain
liabilities, including liabilities arising under the Securities Act and the
Exchange Act.
VALIDITY
OF THE CLASS A COMMON STOCK
The
validity of the shares of class A common stock offered pursuant to this
prospectus supplement and accompanying prospectus will be passed upon for us by
Jones Day.
S-7
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus supplement is part of a registration statement (File No. 333-140272)
we have filed with the SEC under the Securities Act. The registration statement,
including the attached exhibits and schedules, contains additional relevant
information about us and the securities described in this prospectus supplement.
The SEC’s rules and regulations allow us to omit certain information included in
the registration statement from this prospectus. The registration statement may
be inspected by anyone without charge at the SEC’s principal office at 100 F
Street, N.E., Washington, D.C. 20549.
In
addition, we file annual, quarterly, and special reports, proxy statements and
other information with the SEC under the Exchange Act. You may read and copy
this information at the following SEC location: Public Reference Room, 100 F
Street, N.E., Washington, D.C. 20549.
You may also obtain
copies of this information by mail from the SEC’s Public Reference Room, 100 F
Street, N.E., Washington, D.C. 20549, at rates determined by the SEC. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-732-0330. You may also inspect reports, proxy statements and other
information that we have filed electronically with the SEC at the SEC’s web site
at http://www.sec.gov.
The SEC’s
rules allow us to “incorporate by reference” information into this prospectus
supplement. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this prospectus
supplement. Any information incorporated by reference in this prospectus
supplement that we file with the SEC after the date of this prospectus
supplement will automatically update and supersede information contained in this
prospectus supplement. Our SEC file number is 001-34166.
We are
incorporating by reference in this prospectus supplement the documents listed
below and any future filings that we make with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
supplement and prior to the termination of this offering, but only to the extent
the information in such future filings is deemed to have been filed and not
furnished in accordance with SEC rules:
• our
Annual Report on Form 10-K for the fiscal year ended December 28, 2008, filed on
February 26, 2009;
• our
Current Report on Form 8-K filed on March 25, 2009;
• our two Current Reports on Form 8-K filed on April
23, 2009 (other than the portions thereof which have been furnished but not
filed); and
• the
description of the class A common stock included in the Form 8-A filed on
October 31, 2005, and any amendment or report we may file with the SEC for the
purpose of updating such description.
Notwithstanding
the foregoing, we are not incorporating any document or information deemed to
have been furnished and not filed in accordance with SEC rules.
Documents
incorporated by reference in this prospectus supplement are available from us,
without charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference in this prospectus supplement. You can
obtain documents incorporated by reference in this prospectus supplement by
requesting them in writing or by telephone from us at SunPower Corporation,
Attention: Investor Relations, 3939 North First Street, San Jose,
California 95134, telephone (408) 240-5500.
S-8
PROSPECTUS
Class
A Common Stock
Preferred
Stock
Debt
Securities
Warrants
We may
offer and sell, from time to time, in one or more offerings, together or
separately:
(1) class
A common stock;
(2)
preferred stock;
(3) debt
securities, which may be senior debt securities or subordinated debt securities;
and
(4)
warrants.
This
prospectus describes some of the general terms that may apply to these
securities. We will provide the specific terms of the securities and their
offering prices in supplements to this prospectus. You should read this
prospectus and the applicable prospectus supplement carefully before you decide
whether to invest in any of these securities.
Our class
A common stock trades on The Nasdaq Global Market under the symbol “SPWR.” On
January 26, 2007, the last reported sale price of our class A common stock was
$43.30 per share. All of the shares of our class B common stock are owned by
Cypress Semiconductor Corporation, or Cypress, and the class B common stock is
not listed or traded on any exchange. As of January 23, 2007, Cypress held
approximately 70.5% of the total number of outstanding shares of our class A
common stock and class B common stock on a combined basis, and approximately
95.0% of the total combined voting power of our outstanding capital
stock.
Our
securities may be offered directly, through agents designated from time to time
by us, or to or through underwriters or dealers. If any agents, underwriters or
dealers are involved in the sale of any of our securities, their names, and any
applicable purchase price, fee, commission or discount arrangement between or
among them, will be set forth, or will be calculable from the information set
forth, in the applicable prospectus supplement. None of our securities may be
sold without delivery of the applicable prospectus supplement describing the
method and terms of the offering of those securities.
Investing
in our securities involves significant risks. See “ Risk Factors” beginning on
page 4.
Neither
the Securities and Exchange Commission nor any other state securities commission
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
This
prospectus is dated January 29, 2007
TABLE
OF CONTENTS
|
Page
|
|
|
About
This Prospectus
|
1
|
|
Summary
|
1
|
|
Risk
Factors
|
4
|
|
Cautionary
Note Regarding Forward-Looking Statements
|
42
|
|
Ratio
of Earnings to Fixed Charges and Ratio of Earnings to Combined
Fixed
Charges and Preferred Stock Dividends
|
44
|
|
Use
of Proceeds
|
45
|
|
Description
of Class A Common Sock
|
46
|
|
Description
of Preferred Stock
|
50
|
|
Description
of Debt Securities
|
51
|
|
Description
of Warrants
|
61
|
|
Plan
of Distribution
|
64
|
|
Experts
|
66
|
|
Legal
Matters
|
66
|
|
Where
You Can Find More Information
|
67
|
i
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission, or the SEC, using a “shelf” registration process. Under
this shelf registration process, we may from time to time sell shares of class A
common stock, shares of preferred stock, debt securities or warrants, or any
combination of these securities, in one or more offerings. This prospectus
provides a general description of the securities we may offer. Each time we sell
securities under this shelf registration process, we will provide a prospectus
supplement containing specific information about the terms of the securities
being offered and the manner in which they may be offered. The prospectus
supplement may also include a discussion of any risk factors or other special
considerations that apply to those securities. Any prospectus supplement may
also add to, update or change the information in this prospectus. If there is
any inconsistency between the information in this prospectus and the information
in a prospectus supplement, you should rely on the information in that
prospectus supplement. You should read the entire prospectus and the applicable
prospectus supplement, together with the additional information described under
the heading “Where You Can Find More Information,” before making an investment
decision.
You
should rely only on the information provided in this prospectus and the
applicable prospectus supplement, including any information incorporated by
reference. No one is authorized to provide you with information different from
that which is contained, or deemed to be contained, in the prospectus and the
related prospectus supplement. We are not offering securities in any state where
the offer is prohibited. You should not assume that the information in this
prospectus, any prospectus supplement or any document incorporated by reference
is accurate as of any date other than the date of the document in which the
information is contained or other date referred to in that document, regardless
of the time of sale or issuance of any security.
Unless otherwise specified or unless
the context requires otherwise, all references in this prospectus to “SunPower,”
“we,” “us,” “our” or similar references mean SunPower Corporation and its
subsidiaries. On January 10, 2007, we completed our previously announced merger,
or the Merger, with PowerLight Corporation, described below. Unless otherwise
specified or unless the context requires otherwise, all references in this
prospectus to “PowerLight” mean PowerLight Corporation prior to January 10, 2007
and PowerLight Corporation, an indirect wholly owned subsidiary of SunPower, on
or after January 10, 2007.
SUMMARY
SunPower
Business
We
design, develop, manufacture, market and sell solar electric power products,
systems and services. Our products are based on our proprietary processes and
technologies. We have spent more than 15 years developing high performance solar
cells, which are semiconductor devices that directly convert sunlight into
electricity. We believe our solar cells have the highest conversion efficiency,
a measurement of the amount of sunlight converted by the solar cell into
electricity, available for the mass market. We also believe our solar cells
provide the following benefits compared with conventional solar
cells:
• superior
performance, including the ability to generate up to 50% more power per unit
area;
• superior
aesthetics, with our uniformly black surface design which eliminates highly
visible reflective grid lines and metal interconnect ribbons; and
• efficient
use of silicon, a key raw material used in the manufacture of solar
cells.
1
We offer
solar power products, including solar cells, solar panels and inverters, which
convert sunlight to electricity compatible with the utility network. Our solar
sales efforts have been focused on residential and commercial applications where
the high performance and superior aesthetics of our solar power products provide
compelling customer benefits. We also sell products for multi-megawatt solar
power plant applications that mount our products on moving structures that track
the sun. We sell our products in many countries, principally in regions where
government incentives have accelerated solar power adoption.
We
produce our solar cells at our manufacturing facility in the Philippines. We
currently operate four solar cell manufacturing lines in the Philippines, with a
total rated manufacturing capacity of approximately 108 megawatts per year. We
have recently started construction on a second solar cell manufacturing facility
in the Philippines, which is designed to house up to ten additional
manufacturing lines. We expect three manufacturing lines in the new facility to
be operational by the end of 2007, which would give us an aggregate rated
manufacturing capacity of approximately 207 megawatts per year. Currently, most
of our solar panels are assembled for us by a third-party subcontractor in
China. We supplement this capacity with in-house production at our automated
panel assembly factory located in the Philippines. We expect to produce up to 30
megawatts of solar panels per year from our first manufacturing line. The panel
assembly factory has sufficient space to expand capacity to 90 megawatts per
year. Our systems in North America also include branded inverters manufactured
for us by multiple suppliers.
On
January 10, 2007 we completed the Merger with PowerLight, a leading global
provider of large-scale solar power systems. PowerLight designs, manufactures,
markets and sells solar electric power system technology that integrates solar
cells and solar panels manufactured by us and other suppliers to convert
sunlight to electricity compatible with the utility network. PowerLight also
provides solar power systems to end customers on a turn-key, whole-solution
basis by developing, engineering, procuring permits and equipment for, managing
construction of, offering access to financing for, and providing monitoring,
operations and maintenance services for large-scale roof-mounted and
ground-mounted solar power applications. PowerLight’s customers include
industrial, commercial and public sector entities, investors, value-added
resellers, utilities and production home builders. PowerLight’s solar power
systems generate electricity over a system design life typically exceeding 25
years. PowerLight’s solar power systems are principally designed to be used in
large-scale applications exceeding 300 kilowatts, including the development of
solar production home communities. PowerLight has completed or is in the process
of completing over 300 projects worldwide, rated in aggregate at over 100
megawatts peak capacity. In the United States, PowerLight typically sells solar
power systems rated up to one megawatt of capacity to provide a supplemental,
distributed source of electricity for a customer’s facility. In Europe and South
Korea, PowerLight’s products and systems are often purchased by third party
investors as central station solar power plants, typically rated from one to 20
megawatts, which generate electricity for sale under tariff to regional and
public utilities.
Our
Relationship with Cypress Semiconductor Corporation
As
of January 23, 2007, Cypress owned all 52,033,287 shares of our
outstanding class B common stock, which, after giving effect to the issuance of
4,106,884 shares of class A common stock at the closing of the Merger,
represented approximately 70.5% of the total outstanding shares of our common
stock, or approximately 64.5% of such shares on a fully diluted basis after
taking into account outstanding options, and 95.0% of the total voting power of
our outstanding capital stock. Our class B common stock has eight votes per
share while our class A common stock has one vote per share. Cypress may convert
its shares of class B common stock into shares of class A common stock on a
one-for-one basis at any time. Cypress is not obligated to distribute to its
stockholders or otherwise dispose of the shares of our class B common stock that
it beneficially owns, although it might elect to do so in the future. Cypress
announced
2
Cypress
delivers high-performance, mixed-signal, programmable solutions that provide
customers with rapid time-to-market and exceptional system value. Cypress
offerings include the PSoC Programmable System-on-Chip, USB controllers,
general-purpose programmable clocks and memories. Cypress also offers wired and
wireless connectivity solutions ranging from its WirelessUSB radio
system-on-chip, to West Bridge and EZ-USB FX2LP controllers that enhance
connectivity and performance in multimedia handsets. Cypress serves numerous
markets including consumer, computation, data communications, automotive,
industrial and solar power. Cypress trades on the NYSE under the ticker symbol
“CY.”
SunPower
Corporate Information
Our
headquarters are located at 3939 North First Street, San Jose, California 95134,
and our telephone number is (408) 240-5500. Our website is www.sunpowercorp.com.
The information on our website is expressly not incorporated by reference into,
and does not constitute a part of, this prospectus. SunPower and PowerLight are
our registered trademarks and the SunPower and PowerLight logos are our
trademarks. This prospectus also includes trade names, trademarks and service
marks of other companies and organizations.
3
RISK
FACTORS
Investing
in our securities involves risks. You should carefully consider the risks
described below and other information contained or incorporated by reference in
this prospectus before making an investment decision. The risks and
uncertainties described below and in our other filings with the SEC incorporated
by reference herein are not the only ones facing SunPower. Additional risks and
uncertainties not presently known to us or that we currently consider immaterial
may also adversely affect us. If any of the following risks occur, our business,
financial condition or results of operations could be materially harmed. In such
case, the value of our securities could decline and you may lose all or part of
your investment.
In addition, each applicable
prospectus supplement will contain a discussion of risks applicable to the
particular type of securities that we are offering under that prospectus
supplement. Prior to making a decision about investing in our securities, you
should carefully consider the risk factors in this prospectus in addition to the
specific risk factors discussed under the caption “Risk Factors” in the
applicable prospectus supplement, together with all other information contained
in the applicable prospectus supplement or appearing in, or incorporated by
reference in, this prospectus.
Risks
Related to Our Recent Merger with PowerLight
As a result of the significant cash
paid in the Merger, we intend to raise additional funds to support our business,
and if we are unable to secure adequate funds on terms acceptable to us, our
business could suffer.
As of
September 30, 2006, we had approximately $254.0 million of cash and cash
equivalents, and we paid approximately $120.7 million in cash to holders of
PowerLight stock and assumed options in connection with the Merger. We expect to
continue to make significant capital expenditures, particularly in our
manufacturing facilities and anticipate that our expenses will increase
substantially in the foreseeable future as we expand our manufacturing
operations, hire additional personnel, pay more or make advance payments for raw
material, especially polysilicon, increase our sales and marketing efforts,
pursue more large scale solar power plant projects, invest in joint ventures and
acquisitions and continue our research and development efforts with respect to
its products and manufacturing technologies. We expect total capital
expenditures of approximately $170 to $190 million in 2007 as we continue to
increase our manufacturing capacity. These expenditures would be greater if we
decide to bring capacity on line more rapidly. In addition, our PowerLight
business has typically required significant working capital in order to fund
planned projects in advance of the receipt of customer payments and it is
expected to continue to do so.
Given
these capital needs, we intend to seek additional capital in the near future. We
will likely seek to sell additional equity securities or debt securities or
obtain other debt financing. The sale of additional equity securities or
convertible debt securities would result in additional dilution to our
stockholders. Additional debt would result in increased expenses and could
require us to abide by covenants that would restrict our operations. Our $25.0
million three-year revolving credit facility and PowerLight’s $10.0 million
credit facility, which we refer to as our credit facilities, contain customary
covenants and defaults, including, among others, limitations on dividends,
incurrence of indebtedness and liens and mergers and acquisitions and may
restrict our operating flexibility. If adequate funds are not available or not
available on acceptable terms or terms consistent with any new credit agreement
we may enter into, our ability to fund our operations, develop and expand our
manufacturing operations and distribution network, maintain our research and
development efforts or otherwise respond to competitive pressures would be
significantly impaired.
4
Although we expect the Merger to be
beneficial for us, such benefits may not be realized because of integration
difficulties or other challenges.
PowerLight
has global operations that will need to be integrated successfully in order for
us to realize the benefits anticipated from the Merger. Realizing these benefits
will require the meshing of technology, operations and personnel of SunPower and
PowerLight into a single organization. We expect the integration to be a
complex, time-consuming and expensive process that, even with proper planning
and implementation, could cause significant disruption. The challenges that we
may face include, but are not limited to, the following:
• consolidating
operations, including rationalizing corporate information technology and
administrative infrastructures;
• our
management gaining sufficient experience with technologies and markets in which
the PowerLight business is involved, which may be necessary to successfully
operate and integrate the business;
• coordinating
sales and marketing efforts between the two companies;
• overcoming
any perceived adverse changes in business focus or model;
• realizing
synergies necessary to meet our long-term margin targets, given PowerLight’s
historical margins;
• coordinating
and harmonizing research and development activities to accelerate introduction
of new products and technologies with reduced cost;
• preserving
customer, supplier, distribution and other important relationships of SunPower
and PowerLight and resolving any potential conflicts that may
arise;
• retaining
key employees and maintaining employee morale;
• addressing
differences in the business cultures of SunPower and PowerLight;
• coordinating
and combining operations, relationships and facilities outside of the United
States, which may be subject to additional constraints imposed by geographic
distance, local laws and regulations; and
• creating
a consolidated internal control over financial reporting structure so that we
and our independent auditors can report on the effectiveness of our internal
controls over financial reporting.
We may
not be able to successfully integrate the operations of PowerLight in a timely
manner, or at all. In addition, we may not realize the anticipated benefits and
synergies of the Merger to the extent or when anticipated. Even if the
integration of SunPower’s and PowerLight’s operations, products and personnel is
successful, it may place a significant burden on our management resources. The
diversion of management’s attention and any difficulties encountered in the
transition and integration process could harm our business, financial condition
and operating results.
The completion of the Merger could
cause certain solar cell and panel suppliers to reduce or terminate their
business relationship with our PowerLight business, which could adversely affect
the ability of
5
our PowerLight business to meet
customer demand for its solar power systems and materially adversely affect our
results of operations and financial condition.
As a
result of the Merger, we now directly compete with certain suppliers of solar
cells and panels to our PowerLight business. As a result, the Merger could cause
one or more solar cell and panel suppliers to reduce or terminate their business
relationship with our PowerLight business. After the Merger closed, we
discontinued our purchasing relationship with a historically large supplier,
which will not supply solar panels to PowerLight beyond the first quarter. Other
reductions or terminations, which may be significant, could occur. Any such
reductions or terminations could adversely affect the ability of our PowerLight
business to meet customer demand for its solar power systems, and materially
adversely affect its results of operations and financial condition, which would
likely materially adversely affect our results of operations and financial
condition.
We will
use commercially reasonable efforts to replace any lost solar cells or panels
with our own inventory to mitigate the impact on the PowerLight business.
However, such replacements may not be sufficient to fully address solar supply
shortfalls experienced by our PowerLight business, and in any event could
negatively impact our revenue and earnings as it forgoes selling such inventory
to third parties.
The completion of the Merger could
cause our customers to reduce or terminate their business relationship with us,
which could adversely affect our ability to distribute our products and
materially adversely affect our results of operations and financial
condition.
PowerLight
directly competes, as a distributor of solar panels and systems, with many of
our customers. For instance, both Conergy AG and Solon AG, two of our largest
customers, actively compete with our PowerLight business in the large-scale
solar power plant market. The completion of the Merger could cause these
customers to be concerned that we will reduce our level of business with them
and perform a significant portion of our integration activities through our
PowerLight business, thereby competing with certain of our customers. As a
result, customers might reduce or terminate their business relationships with
us, making it more difficult for us to sell our products and expand our
business. Any such outcome could have a material adverse effect on our revenue
and earnings.
We may be harmed by liabilities
arising out of our acquisition of PowerLight and the indemnity they have agreed
to provide may be insufficient to compensate us for these
damages.
PowerLight
has made representations and warranties to us in the Merger Agreement, including
those relating to the accuracy of its financial statements, the absence of
litigation and environmental matters and the consents needed to transfer
permits, licenses and third-party contracts in connection with our acquisition
of PowerLight. To the extent that we are harmed by a breach of these
representations and warranties, PowerLight’s stockholders have agreed to
indemnify us for monetary damages from an escrowed proceeds account. In most
cases we are required to absorb approximately the first $2.4 million before we
are entitled to indemnification. The escrowed proceeds account is limited to
$19.7 million in cash and 840,000 shares of our class A common stock, of which
approximately one-half of the original escrow will be released (less any pending
claims) at the first anniversary of the closing date. Our rights to recover
damages under several provisions of the Merger Agreement will also expire on the
first anniversary of the closing date. After the first anniversary of the
closing date we will be entitled to recover only limited types of losses, and
our recovery will be limited to the amount available in the escrow fund at the
time of a claim. The amount available in the escrow fund will be progressively
reduced to zero over the period from the first to the fifth anniversaries of the
closing date. We may incur liabilities from this acquisition which are not
covered by the representations and warranties set forth in the agreement or
which are non-monetary in nature. Consequently, our acquisition of PowerLight
may
6
PowerLight will need to obtain
certain regulatory and third-party consents as a result of the Merger and, if it
cannot obtain these consents, PowerLight’s and/or SunPower’s business may be
harmed.
PowerLight
is currently attempting to obtain certain regulatory and third-party consents
which are triggered upon a change of control. If PowerLight is unable to do so,
it may be forced to renegotiate these agreements or be exposed to regulatory
sanctions. There can be no assurance that PowerLight will be able to obtain any
required regulatory approvals or renegotiate or to negotiate new agreements on
favorable terms, or at all.
We expect to continue to incur
significant costs in connection with the Merger.
We expect
our direct transaction costs of will total approximately $3.0 million in
connection with the Merger, which costs will be capitalized as purchase price.
We believe that we will also incur charges to operations in the first quarter of
2007 to reflect the costs of integrating the two companies, but cannot
reasonably estimate those costs at this time. There can be no assurance that we
will not incur additional material charges in subsequent quarters to reflect
additional costs associated with the Merger.
Charges
to earnings resulting from the application of the purchase method of accounting
to the Merger may adversely affect the market value of our class A common
stock.
In
accordance with generally accepted accounting principles in the United States,
or U.S. GAAP, we are accounting for the Merger using the purchase method of
accounting, which may require an increase in the value of intangible assets and
inventory to their respective fair values. Further, a portion of the purchase
price paid in the Merger has been allocated to in-process research and
development. These purchase accounting adjustments may result in material
recurring and nonrecurring charges to earnings that could have a material
adverse effect on the market value of our class A common stock. Under the
purchase method of accounting, we will allocate the total purchase price to
PowerLight’s net tangible assets and intangible assets based on their fair
values as of the date of completion of the Merger and record the excess of the
purchase price over those fair values as goodwill. We will incur amortization
expense over the useful lives of amortizable intangible assets acquired in
connection with the Merger. In addition, to the extent the value of goodwill and
long lived assets becomes impaired, we may be required to incur material charges
relating to the impairment of those assets. Further, we may be impacted by
nonrecurring charges related to reduced gross profit margins from the
requirement to adjust PowerLight’s inventory to fair value. Finally, we will
incur ongoing compensation charges associated with assumed options, equity held
by employees of PowerLight and subjected to equity restriction agreements, and
restricted stock granted to employees of our PowerLight business. We estimate
that these charges will aggregate approximately $37 million in each of 2007 and
2008 and lesser amounts in the succeeding two years. Any of the foregoing
charges could have a material impact on our results of operations.
Risks
Related to Our Business
The solar power industry is
currently experiencing an industry-wide shortage of polysilicon. The prices that
we pay for polysilicon have increased recently and we expect prices to remain at
or above current levels for the foreseeable future, which may constrain our
revenue growth and decrease our gross margins and
profitability.
Polysilicon
is an essential raw material in our production of photovoltaic, or solar, cells
and also in the solar cells and modules used by our PowerLight business to
produce solar power systems.
7
There is
currently an industry-wide shortage of polysilicon, which has resulted in
significant price increases. We expect that the average price of polysilicon
will continue to increase. Increases in polysilicon prices have in the past
increased our manufacturing costs and may impact our manufacturing costs and net
income in the future. As demand for solar cells has increased, many of our
principal competitors have announced plans to add additional manufacturing
capacity. As this manufacturing capacity becomes operational, it will increase
the demand for polysilicon and further exacerbate the current shortage.
Polysilicon is also used in the semiconductor industry generally and any
increase in demand from that sector will compound the shortage. The production
of polysilicon is capital intensive and adding additional capacity requires
significant lead time. While we are aware that several new facilities for the
manufacture of polysilicon are under construction, we do not believe that the
supply imbalance will be remedied in the near term. We expect that polysilicon
demand will continue to outstrip supply throughout 2007 and potentially for a
longer period.
Although
we have contracted with vendors for what we believe will be an adequate supply
of silicon ingots through 2007, our estimates regarding our supply needs may not
be correct and our purchase orders and contracts may be cancelled by our
suppliers. The volume and pricing associated with these purchase orders and
contracts may be changed by our suppliers based on market conditions. Our
purchase orders are generally non-binding in nature. If our suppliers were to
cancel our purchase orders or change the volume or pricing associated with these
purchase orders and/or contracts, we may be unable to meet customer demand for
our products, which could cause us to lose customers, market share and revenue.
This would have a material negative impact on our business and operating
results. If our manufacturing yields decrease significantly, we add
manufacturing capacity faster than currently planned or our suppliers cancel or
fail to deliver, we may not have made adequate provision for our polysilicon
needs for the balance of the year. In addition, we currently purchase
polysilicon and make advances to suppliers to secure future polysilicon supply,
which adversely affects our liquidity. These advances may in the future take the
form of equity issuances, which would result in additional dilution to our
stockholders.
In
addition, since some of our silicon ingot and wafer arrangements are with
suppliers who do not themselves manufacture polysilicon but instead purchase
their requirements from other vendors, these suppliers may not be able to obtain
sufficient polysilicon to satisfy their contractual obligations to
us.
There are
a limited number of polysilicon suppliers. Many of our competitors also purchase
polysilicon from our suppliers. Since we have only been purchasing polysilicon
in bulk for slightly more than one year, which is a shorter period than our
competitors, these other competitors have longer and perhaps stronger
relationships with our suppliers than we do. Many of them also have greater
buying power than we do. Some of our competitors also have inter-locking board
members with their polysilicon suppliers or have entered into joint ventures
with their suppliers. Additionally, a substantial amount of our future
polysilicon requirements are expected to be sourced by new suppliers that have
not yet proven their ability to manufacture large volumes of polysilicon. In
some cases we expect that new entrants will provide us with polysilicon and
ingots. The failure of these new entrants to produce adequate supplies of
polysilicon and/or ingots in the quantities and quality we require could
adversely affect our ability to grow production volumes and revenues and could
also result in a decline in our gross profit margin. Since we have committed to
significantly increase our manufacturing output, an inadequate supply of
polysilicon would harm us more than it would harm many of our
competitors.
8
The
inability to obtain sufficient polysilicon, ingots or wafers at commercially
reasonable prices or at all would adversely affect our ability to meet existing
and future customer demand for our products and could cause us to make fewer
shipments, lose customers and market share and generate lower than anticipated
revenue, thereby seriously harming our business, financial condition and results
of operations.
A limited number of our customers
are expected to continue to comprise a significant portion of our revenues and
any decrease in revenue from these customers could have an adverse effect on
us.
Even
though our customer base is expected to increase and our revenue streams to
diversify as a result of the Merger, a large portion of our net revenues will
likely continue to depend on sales to a limited number of customers. During the
first nine months of 2006, sales to our top ten customers accounted for 61.0% of
our revenues. Currently, our largest customers for our solar power products are
Conergy AG, or Conergy, and Solon AG, or Solon. Conergy accounted for
approximately 24% of our revenue for the nine months ended September 30, 2006.
Solon accounted for approximately 27% of our revenue for the nine months ended
September 30, 2006. The loss of sales to any of these customers would have a
significant negative impact on our business. Our agreements with these customers
may be cancelled if we fail to meet certain product specifications or materially
breach the agreement or in the event of bankruptcy, and our customers may seek
to renegotiate the terms of current agreements or renewals. Most of the solar
panels we sell to the European market are sold through our agreement with
Conergy, and we may enter into similar agreements in the future.
We
currently sell to a relatively small number of customers, and we expect our
operating results will likely continue to depend on sales to a relatively small
number of customers for the foreseeable future, as well as the ability of these
customers to sell solar power products that incorporate our solar cells. Our
customer relationships have been developed over a short period of time and are
generally in their preliminary stages. We cannot be certain that these customers
will generate significant revenue for us in the future or if these customer
relationships will continue to develop. If our relationships with our other
customers do not continue to develop, we may not be able to expand our customer
base or maintain or increase our revenue. This is exacerbated by our current
manufacturing constraints for solar cells which limit our ability to sell to
other customers and our contractual arrangements which require us to sell part
of our future output to Conergy and Solon. In addition, our business is affected
by competition in the market for the end products that each of Conergy and Solon
sell, and any decline in their business could harm our business and cause our
revenue to decline.
Our operating results will be
subject to fluctuations and are inherently unpredictable; if we fail to meet the
expectations of securities analysts or investors, our stock price may decline
significantly.
Our
quarterly revenue and operating results will be difficult to predict and
SunPower’s and PowerLight’s results have in the past fluctuated from quarter to
quarter. It is possible that our operating results in some quarters will be
below market expectations. Our quarterly operating results will be affected by a
number of factors, including:
• the
average selling price of SunPower’s solar cells and panels and imaging detectors
and our PowerLight business’ solar power systems;
• the
availability and pricing of raw materials, particularly
polysilicon;
• the
availability, pricing and timeliness of delivery of raw materials and
components, particularly solar panels and balance of systems components,
including steel, necessary for our PowerLight business’ solar power systems to
function;
9
• the
rate and cost at which we are able to expand our manufacturing and product
assembly capacity to meet customer demand, including costs and timing of adding
personnel;
• the
amount and timing of sales of our PowerLight business’ systems, especially
medium and large-scale projects, which may individually cause severe
fluctuations in our revenue;
• our
ability to meet project completion schedules and the corresponding revenue
impact under the percentage-of-completion method of recognizing revenue for
projects of our PowerLight business;
• construction
cost overruns, including those associated with the introduction of new
products;
• the
impact of seasonal variations in demand and/or revenue recognition linked to
construction cycles and weather conditions;
• timing,
availability and changes in government incentive programs;
• unplanned
additional expenses such as manufacturing failures, defects or
downtime;
• acquisition
and investment related costs;
• unpredictable
volume and timing of customer orders, some of which are not fixed by contract
but vary on a purchase order basis;
• the
loss of one or more key customers or the significant reduction or postponement
of orders from these customers;
• geopolitical
turmoil within any of the countries in which we operate or sell
products;
• foreign
currency fluctuations, particularly in the Euro, Philippine peso or South Korean
won;
• the
effect of currency hedging activities;
• our
ability to establish and expand customer relationships;
• changes
in our manufacturing costs;
• changes
in the relative sales mix of our solar cells, solar panels and imaging
detectors;
• the
availability, pricing and timeliness of delivery of other products, such as
inverters necessary for our solar power products to function;
• our
ability to successfully develop, introduce and sell new or enhanced solar power
products in a timely manner, and the amount and timing of related research and
development costs;
• the
timing of new product or technology announcements or introductions by our
competitors and other developments in the competitive environment;
• the
willingness of competing solar cell and panel suppliers to continue product
sales to our PowerLight business;
• increases
or decreases in electric rates due to changes in fossil fuel prices or other
factors; and
10
• shipping
delays.
We will
base our planned operating expenses in part on our expectations of future
revenue, and a significant portion of our expenses will be relatively fixed in
the short term. If revenue for a particular quarter is lower than we expect, we
likely will be unable to proportionately reduce our operating expenses for that
quarter, which would harm our operating results for that quarter. This may cause
us to miss analysts’ guidance or any future guidance announced by us. If we fail
to meet or exceed analyst or investor expectations or our own future guidance,
even by a small amount, our stock price could decline, perhaps
substantially.
We have four solar cell production
lines which are located in our manufacturing facilities in the Philippines, and
if we experience interruptions in the operation of these production lines or are
unable to add additional production lines, it would likely result in lower
revenue and earnings than anticipated.
We
currently operate four solar cell manufacturing lines which are located at our
manufacturing facilities in the Philippines. If our current or future production
lines were to experience any problems or downtime, including those caused by
intermittent electricity supply at our Philippines facilities, we would be
unable to meet our production targets and our business would suffer. If any
piece of equipment were to break down or experience downtime, it could cause our
production lines to go down. We have recently acquired a second solar cell
manufacturing facility nearby our existing facility in the Philippines. This
expansion has required and will continue to require significant management
attention, a significant investment of capital and substantial engineering
expenditures and is subject to significant risks including:
• we
may experience cost overruns, delays, equipment problems and other operating
difficulties;
• we
may experience difficulties expanding our processes to larger production
capacity;
• our
custom-built equipment may take longer and cost more to engineer than planned
and may never operate as designed; and
• we
are incorporating first-time equipment designs and technology improvements,
which we expect to lower unit capital and operating costs, but this new
technology may not be successful.
If we
experience any of these or similar difficulties, we may be unable to complete
the addition of new production lines on schedule in order to expand our
manufacturing facilities and our manufacturing capacity could be substantially
constrained. If this were to occur, our per-unit manufacturing costs would
increase, we would be unable to increase sales as planned and our earnings would
likely be materially impaired.
We
have recently established a captive solar panel assembly factory, and, if this
panel manufacturing factory is unable to produce high quality solar panels at
commercially reasonable costs, our revenue growth and gross margin could be
adversely affected.
We have
constructed a new 30 megawatt automated solar panel assembly factory in the
Philippines. This factory commenced commercial production during the fourth
quarter of 2006. Much of the manufacturing equipment and technology in this
factory is new and unproven in volume production of solar panels. In the event
that this factory is unable to ramp production with commercially reasonable
yields and competitive production costs, our anticipated revenue growth and
gross margin will be adversely affected.
11
If we do not achieve satisfactory
yields or quality in manufacturing our solar cells, our sales could decrease and
our relationships with our customers and our reputation may be
harmed.
The
manufacture of solar cells is a highly complex process. Minor deviations in the
manufacturing process can cause substantial decreases in yield and in some
cases, cause production to be suspended or yield no output. We have from time to
time experienced lower than anticipated manufacturing yields. This often occurs
during the production of new products or the installation and start-up of new
process technologies or equipment. For example, we recently acquired a building
to house our second solar cell manufacturing facility near our existing
facility. As we expand our manufacturing capacity and bring additional lines or
facilities into production, we may experience lower yields initially as is
typical with any new equipment or process. We also expect to experience lower
yields as we continue the initial migration of our manufacturing processes to
thinner wafers. If we do not achieve planned yields, our product costs could
increase, and product availability would decrease resulting in lower revenues
than expected.
The reduction or elimination of
government and economic incentives could cause our revenue to
decline.
We
believe that the near-term growth of the market for on-grid applications, where
solar power is used to supplement a customer’s electricity purchased from the
utility network or sold to a utility under tariff, depends in large part on the
availability and size of government and economic incentives. Because a majority
of our sales are in the on-grid market, the reduction or elimination of
government and economic incentives may adversely affect the growth of this
market or result in increased price competition, both of which could cause our
revenue to decline.
Today,
the cost of solar power exceeds retail electric rates in many locations. As a
result, federal, state and local government bodies in many countries, most
notably Germany, Japan, Spain, Italy, Portugal, South Korea and the United
States, have provided incentives in the form of feed-in tariffs, rebates, tax
credits and other incentives to end users, distributors, system integrators and
manufacturers of solar power products to promote the use of solar energy in
on-grid applications and to reduce dependency on other forms of energy. These
government economic incentives could be reduced or eliminated altogether. For
example, Germany has been a strong supporter of solar power products and systems
and political changes in Germany could result in significant reductions or
eliminations of incentives, including the reduction of feed-in tariffs more
rapidly than required by current law. Some solar program incentives expire,
decline over time, are limited in total funding or require renewal of authority.
Net metering and other operational policies in California, Japan or other
markets could limit the amount of solar power installed there. Reductions in, or
eliminations or expirations of, governmental incentives could result in
decreased demand for and lower revenue from our products. Changes in the level
or structure of a renewable portfolio standard could also result in decreased
demand for and lower revenue from our products.
Existing regulations and policies
and changes to these regulations and policies may present technical, regulatory
and economic barriers to the purchase and use of solar power products, which may
significantly reduce demand for our products.
The
market for electricity generation products is heavily influenced by foreign,
U.S. federal, state and local government regulations and policies concerning the
electric utility industry, as well as policies promulgated by electric
utilities. These regulations and policies often relate to electricity pricing
and technical interconnection of customer-owned electricity generation. In the
U.S. and in a number of other countries, these regulations and policies are
being modified and may continue to be modified. Customer purchases of, or
further investment in the research and development of, alternative energy
sources, including solar power technology, could be deterred by these
regulations and policies, which could result
12
We
anticipate that our solar power products and their installation will be subject
to oversight and regulation in accordance with national and local ordinances
relating to building codes, safety, environmental protection, utility
interconnection and metering and related matters. It is difficult to track the
requirements of individual states and design equipment to comply with the
varying standards. Any new government regulations or utility policies pertaining
to our solar power products may result in significant additional expenses to us
and our resellers and their customers and, as a result, could cause a
significant reduction in demand for our solar power products.
Changes
in tax laws or fiscal policies may decrease the return on investment for
customers of our PowerLight business, and for certain investors in its projects,
which could decrease demand for its products and services and harm its
business.
In the
nine months ended September 30, 2006, 22% of PowerLight’s revenues were derived
from sales of solar power systems to companies formed to develop and operate
solar power generation facilities. Such companies have been formed by third
party investors with some frequency in the United States, Germany, Spain, South
Korea and Portugal, as these investors seek to benefit from government mandated
feed-in tariffs and similar legislation. PowerLight’s business depends in part
on the continuing formation of such companies and the potential revenue source
they represent. In deciding whether to form and invest in such companies,
potential investors weigh a variety of considerations, including their projected
return on investment. Such projections are based on current and proposed
federal, state and local laws, particularly tax legislation. Changes to these
laws, including amendments to existing tax laws or the introduction of new tax
laws, tax court rulings as well as changes in administrative guidelines,
ordinances and similar rules and regulations could result in different tax
assessments and may adversely affect an investor’s projected return on
investment, which could have a material adverse effect on PowerLight’s business
and results of operations.
Problems with product quality or
product performance, including defects, in our solar cells could result in a
decrease in customers and revenue, unexpected expenses and loss of market
share.
Our solar
cells are complex and must meet stringent quality requirements. Products as
complex as ours may contain undetected errors or defects, especially when first
introduced. For example, our solar cells and solar panels may contain defects
that are not detected until after they are shipped or are installed because we
cannot test for all possible scenarios. These defects could cause us to incur
significant re-engineering costs, divert the attention of our engineering
personnel from product development efforts and significantly affect our customer
relations and business reputation. If we deliver solar cells or solar panels
with errors or defects, or if there is a perception that our solar cells or
solar panels contain errors or defects, our credibility and the market
acceptance and sales of our solar power products could be harmed.
The
possibility of future product failures could cause us to incur substantial
expense to repair or replace defective products. Furthermore, widespread product
failures may damage our market reputation and reduce our market share and cause
sales to decline. We have agreed to indemnify our customers and our distributors
in some circumstances against liability from defects in our solar cells. A
successful indemnification claim against us could require us to make significant
damage payments, which would negatively affect our financial
results.
13
If we are subject to warranty and
product liability claims, such claims could adversely affect our business and
results of operations.
Like
other retailers, distributors and manufacturers of products that are used by
consumers, we face an inherent risk of exposure to product liability claims in
the event that the use of the solar power products into which our solar cells
and solar panels are incorporated results in injury. Our PowerLight business may
be subject to warranty and product liability claims in the event that its solar
power systems fail to perform as expected or if a failure of its solar power
systems results, or is alleged to result, in bodily injury, property damage or
other damages. Since our solar power products are electricity producing devices,
it is possible that our products could result in injury, whether by product
malfunctions, defects, improper installation or other causes. In addition, since
we only began selling our solar cells and solar panels in late 2004 and the
products we are developing incorporate new technologies and use new installation
methods, we cannot predict whether or not product liability claims will be
brought against us in the future or the effect of any resulting negative
publicity on our business. Moreover, we may not have adequate resources in the
event of a successful claim against us. We have evaluated the potential risks we
face and believe that we have appropriate levels of insurance for product
liability claims. We rely on our general liability insurance to cover product
liability claims and have not obtained separate product liability insurance.
However, a successful warranty or product liability claim against us that is not
covered by insurance or is in excess of our available insurance limits could
require us to make significant payments of damages. In addition, quality issues
can have various other ramifications, including delays in the recognition of
revenue, loss of revenue, loss of future sales opportunities, increased costs
associated with repairing or replacing products, and a negative impact on our
goodwill and reputation, which could also adversely affect our business and
operating results. Our PowerLight business’ exposure to warranty and product
liability claims is expected to increase significantly in connection with its
planned expansion into the new home development market.
Warranty
and product liability claims may result from defects or quality issues in
certain third party technology and components that our PowerLight business
incorporates into its solar power systems, particularly solar cells and panels,
over which it has no control. While its agreements with its suppliers generally
include warranties, such provisions may not fully compensate us for any loss
associated with third-party claims caused by defects or quality issues in such
products. In the event we seek recourse through warranties, we will also be
dependent on the creditworthiness and continued existence of the suppliers to
our PowerLight business.
Our
PowerLight business’ current standard warranty differs by geography and
end-customer application and includes either a one-, two- or five-year
comprehensive parts and workmanship warranty, after which the customer may
typically extend the period covered by its warranty for an additional fee. Due
to the warranty period, our PowerLight business bears the risk of extensive
warranty claims long after it has completed a project and recognized revenues.
Future product failures could cause our PowerLight business to incur substantial
expenses to repair or replace defective products. While our PowerLight business
generally passes through manufacturer warranties it receives from its suppliers
to its customers, it is responsible for repairing or replacing any defective
parts during its warranty period, often including those covered by manufacturers
warranties. If the manufacturer disputes or otherwise fails to honor its
warranty obligations, our PowerLight business may be required to incur
substantial costs before it is compensated, if at all, by the manufacturer.
Furthermore, the PowerLight business’ warranties may exceed the period of any
warranties from the PowerLight business’ suppliers covering components included
in its systems, such as inverters.
In
February 2004, one of PowerLight’s major panel suppliers at the time,
AstroPower, Inc., filed for bankruptcy. PowerLight had installed systems
incorporating over 30,000 AstroPower panels, and approximately 27,000 of these
panels incorporated into systems that are still under warranty by it.
The
14
We have incurred operating losses
since inception, and may not be able to generate sufficient revenue in the
future to achieve or sustain profitability.
For the
nine months ended September 30, 2006, on a pro forma basis for the Merger, we
would have had net losses of approximately $35.6 million. To achieve
profitability, we will need to generate and sustain higher revenue while
maintaining reasonable cost and expense levels. We do not know if our revenue
will grow, or if it will grow sufficiently to outpace our expenses, which we
expect to increase as we expand our manufacturing capacity. We may not be able
to sustain or increase profitability on a quarterly or an annual basis. If we do
not sustain profitability or otherwise meet the expectations of securities
analysts or investors, the market price of our common stock will likely
decline.
We will continue to be dependent on
a limited number of third-party suppliers for key components for its products,
which could prevent us from delivering our products to our customers within
required timeframes, which could result in installation delays, cancellations,
liquidated damages and loss of market share.
In
addition to our reliance on a small number of suppliers for its solar cells and
panels, our PowerLight business relies on third-party suppliers for key
components for its solar power systems, such as inverters that convert the
direct current electricity generated by solar panels into alternating current
electricity usable by the customer. For the year ended December 31, 2005, one
supplier, Xantrex Technology, Inc., accounted for nearly all of PowerLight’s
inverter purchases for domestic projects and one supplier, Siemens Power
Systems, Inc., accounted for most of the inverter purchases for European
projects. In addition, The Dow Chemical Company supplies all of the foam
required to manufacture PowerLight’s PowerGuard® roof system.
If we
fail to develop or maintain our relationships with these or our other suppliers,
we may be unable to manufacture our products or our products may be available
only at a higher cost or after a long delay, which could prevent us from
delivering our products to our customers within required timeframes and we may
experience order cancellation and loss of market share. To the extent the
processes that our suppliers use to manufacture components are proprietary, we
may be unable to obtain comparable components from alternative suppliers. The
failure of a supplier to supply components in a timely manner, or to supply
components that meet our quality, quantity and cost requirements, could impair
our ability to manufacture our products or decrease their costs. If we cannot
obtain substitute materials on a timely basis or on acceptable terms, we could
be prevented from delivering our products to our customers within required
timeframes, which could result in installation delays, cancellations, liquidated
damages and loss of market share, any of which could have a material adverse
effect on our business and results of operations.
15
Any firm commitment supply
agreements with solar panel manufacturers could result in insufficient or excess
inventory.
PowerLight
recently attempted to address the solar cell and panel shortage by negotiating
certain multi-year contractual commitments from suppliers. Under such
agreements, it is generally required to purchase a specified number of solar
cells or panels at fixed prices. Our PowerLight business’ failure to satisfy its
purchase obligations may result in substantial liquidated or other damages that
we will be required to pay these suppliers. PowerLight did not obtain, and we do
not intend to obtain, contracts or commitments from customers for products
incorporating solar panels prior to the negotiation of such firm commitment
contracts. Instead, PowerLight relies on its long-term internal forecasts to
determine the timing of its production schedules and the volume and mix of its
products to be manufactured, including the estimated number of solar panels
needed. The level and timing of orders placed by customers may vary for many
reasons. As a result, at any particular time, we may have insufficient or excess
inventory, and incur liquidated or other damages with suppliers to our
PowerLight business for failure to satisfy its purchase obligations, any of
which could have a material adverse effect on our business and results of
operations. In addition, if we enter into long-term solar panel purchase
commitments, due to the rapid pace of technological advancements in the solar
power industry, we increase our risk of obsolescence of products that we have
agreed to purchase over extended periods.
Acquisitions of other companies or
investments in joint ventures with other companies could adversely affect our
operating results, dilute our stockholders’ equity, or cause us to incur
additional debt or assume contingent liabilities.
To
increase our business and maintain our competitive position, we may acquire
other companies or engage in joint ventures in the future. Acquisitions and
joint ventures involve a number of risks that could harm our business and result
in the acquired business or joint venture not performing as expected,
including:
• insufficient
experience with technologies and markets in which the acquired business is
involved, which may be necessary to successfully operate and integrate the
business;
• problems
integrating the acquired operations, personnel, technologies or products with
the existing business and products;
• diversion
of management time and attention from the core business to the acquired business
or joint venture;
• potential
failure to retain key technical, management, sales and other personnel of the
acquired business or joint venture;
• difficulties
in retaining relationships with suppliers and customers of the acquired
business, particularly where such customers or suppliers compete with us;
and
• subsequent
impairment of the acquired assets, including intangible assets.
We may
decide that it is in its best interests to enter into acquisitions or joint
ventures that are dilutive to earnings per share or that negatively impact
margins as a whole. In addition, acquisitions or joint ventures could require
investment of significant financial resources and require us to obtain
additional equity financing, which may dilute our stockholders’ equity, or
require us to incur additional indebtedness.
16
To the
extent that we invest in upstream suppliers or downstream channel capabilities,
we may experience competition or channel conflict with certain of our existing
and potential suppliers and customers. Specifically, existing and potential
suppliers and customers may perceive that we are competing directly with them by
virtue of such investments and may decide to reduce or eliminate their supply
volume to us or order volume from us. In particular, any supply reductions from
our polysilicon, ingot or wafer suppliers could materially reduce manufacturing
volume.
We have significant international
activities and customers, and plan to continue these efforts, which subject us
to additional business risks, including logistical complexity, political
instability and currency fluctuations.
For the
nine months ended September 30, 2006, a substantial portion of our sales, on a
pro forma basis for the Merger, were made to customers outside of the United
States. We currently have four solar cell production lines in operation, which
are located at our manufacturing facility in the Philippines. In addition, a
majority of our assembly functions have historically been conducted by a
third-party subcontractor in China. PowerLight has historically had significant
sales in Germany, Portugal and Spain. Risks we face in conducting business
internationally include:
• multiple,
conflicting and changing laws and regulations, export and import restrictions,
employment laws, regulatory requirements and other government approvals, permits
and licenses;
• difficulties
and costs in staffing and managing foreign operations such as our manufacturing
facility in the Philippines, as well as cultural differences;
• difficulties
and costs in recruiting and retaining individuals skilled in international
business operations;
• increased
costs associated with maintaining international marketing efforts;
• potentially
adverse tax consequences;
• inadequate
local infrastructure;
• financial
risks, such as longer sales and payment cycles and greater difficulty collecting
accounts receivable; and
• political
and economic instability, including wars, acts of terrorism, political unrest,
boycotts, curtailments of trade and other business restrictions.
Specifically,
we face risks associated with political and economic instability and civil
unrest in the Philippines. In addition, in the Asia/Pacific region generally, we
face risks associated with a recurrence of SARS, tensions between countries in
that region, such as political tensions between China and Taiwan, the ongoing
discussions with North Korea regarding its nuclear weapons program, potentially
reduced protection for intellectual property rights, government-fixed foreign
exchange rates, relatively uncertain legal systems and developing
telecommunications infrastructures. In addition, some countries in this region,
such as China, have adopted laws, regulations and policies which impose
additional restrictions on the ability of foreign companies to conduct business
in that country or otherwise place them at a competitive disadvantage in
relation to domestic companies.
In
addition, although base wages are lower in the Philippines than in the United
States, wages for our employees in the Philippines are increasing, which could
result in increased costs to employ our
17
A significant portion of our
operations occur outside the United States. Currency fluctuations in the Euro,
Philippine peso or the South Korean won relative to the U.S. dollar could
decrease revenue or increase its expenses.
During
the nine months ended September 30, 2006, approximately 70% of SunPower’s total
revenue, on a pro forma basis for the Merger, was generated outside the United
States. We presently have currency exposure arising from sales, capital
equipment purchases, prepayments and customer advances denominated in foreign
currencies. A majority of SunPower’s total revenue is denominated in Euros,
including fixed price agreements with Conergy and Solon, and a significant
portion is denominated in U.S. dollars, while a portion of SunPower’s costs are
incurred and paid in Euros and a smaller portion of SunPower’s expenses are paid
in Philippine pesos and Japanese yen. In addition, SunPower’s prepayment to
Wacker-Chemie AG, a polysilicon supplier to SunPower, and SunPower’s customer
advances from Solon are denominated in Euros. In 2005 and for the nine months
ended September 30, 2006, approximately 19% and 34%, respectively, of
PowerLight’s total revenue was generated outside the U.S. PowerLight presently
has currency exposure arising from both sales and purchases denominated in
foreign currencies. A large portion of PowerLight’s total revenue is denominated
in Euros, and a significant portion of its costs are incurred and paid in
Euros.
We are
exposed to the risk of a decrease in the value of the Euro relative to the U.S.
dollar, which would decrease our total revenue. Changes in exchange rates
between foreign currencies and the U.S. dollar may adversely affect our
operating margins. For example, if these foreign currencies appreciate against
the U.S. dollar, it will make it more expensive in terms of U.S. dollars to
purchase inventory or pay expenses with foreign currencies. In addition,
currency devaluation can result in a loss to us if we hold deposits of that
currency as well as make our products, which are usually purchased with U.S.
dollars, relatively more expensive than products manufactured locally. An
increase in the value of the U.S. dollar relative to foreign currencies could
make our solar cells more expensive for international customers, thus
potentially leading to a reduction in our sales and profitability. Furthermore,
many of our competitors will be foreign companies that could benefit from such a
currency fluctuation, making it more difficult for us to compete with those
companies. We currently conduct hedging activities, which involve the use of
currency forward contracts. We cannot predict the impact of future exchange rate
fluctuations on our business and operating results. In the past, we have
experienced an adverse impact on our total revenue and profitability as a result
of foreign currency fluctuations.
The current tax holidays in the
Philippines will expire within the next several years.
We
currently benefit from income tax holiday incentives in the Philippines pursuant
to our Philippine subsidiary’s registrations with the Board of Investments and
Philippine Economic Zone Authority, which provide that we pay no income tax in
the Philippines for four years pursuant to our Board of Investments non-pioneer
status and Philippine Economic Zone Authority registrations, and six years
pursuant to our Board of Investments pioneer status registration. Our current
income tax holidays expire in 2010, and we intend to apply for extensions.
However, these tax holidays may or may not be extended. We believe that as our
Philippine tax holidays expire, (a) gross income attributable to
activities
18
We may not be able to increase or
sustain our recent growth rate, and we may not be able to manage our future
growth effectively.
We may be
unable to continue to expand our business or manage future growth. Our recent
expansion has placed, and our planned expansion and any other future expansion
will continue to place, a significant strain on our management, personnel,
systems and resources. We plan to purchase additional equipment to significantly
expand our manufacturing capacity and to hire additional employees to support an
increase in manufacturing, research and development and our sales and marketing
efforts. To successfully manage our growth and handle the responsibilities of
being a public company, we believe we must effectively:
• hire,
train, integrate and manage additional qualified engineers for research and
development activities, sales and marketing personnel, and financial and
information technology personnel;
• retain
key management and augment our management team, particularly if we lose key
members;
• continue
to enhance our customer resource management and manufacturing management
systems;
• implement
and improve additional and existing administrative, financial and operations
systems, procedures and controls, including the need to integrate our financial
internal control systems in our Philippines facility with those of our San Jose,
California headquarters;
• expand
and upgrade our technological capabilities; and
• manage
multiple relationships with our customers, suppliers and other third
parties.
PowerLight
experienced significant revenue growth due primarily to the development and
market acceptance of its PowerGuard® roof system, the acquisition and
introduction of its PowerTracker® ground and elevated parking systems, its
development of other technologies and increasing global interest and demand for
renewable energy sources, including solar power generation. As a result,
PowerLight increased its revenues in a relatively short period of time. Its
annual revenue increased from $50.9 million in 2003 to $87.6 million in 2004 to
$107.8 million in 2005, and from $66.7 million to $140.1 million for the nine
months ended September 30, 2005 and 2006, respectively. Our PowerLight business
may not experience similar revenue growth in future periods. Accordingly, you
should not rely on the results of any prior quarterly or annual period as an
indication of the future operating performance of our PowerLight
business.
We may
encounter difficulties in effectively managing the budgeting, forecasting and
other process control issues presented by rapid growth. If we are unable to
manage our growth effectively, we may not be able to take advantage of market
opportunities, develop new solar cells and other products, satisfy customer
requirements, execute our business plan or respond to competitive
pressures.
We had
approximately 1,630 full-time employees as of January 1, 2007, on a pro forma
combined basis, and we anticipate that we will need to hire a significant number
of highly skilled technical,
19
The
success of our PowerLight business will depend in part on the continuing
formation of such companies and the potential revenue source they represent. In
deciding whether to form and invest in such companies, potential investors weigh
a variety of considerations, including their projected return on investment.
Such projections are based on current and proposed federal, state and local
laws, particularly tax legislation. Changes to these laws, including amendments
to existing tax laws or the introduction of new tax laws, tax court rulings as
well as changes in administrative guidelines, ordinances and similar rules and
regulations could result in different tax assessments and may adversely affect
an investor’s projected return on investment, which could have a material
adverse effect on our business and results of operations.
The steps we have taken to increase
the efficiency of our polysilicon utilization are unproven at volume production
levels and may not enable us to realize the cost reductions we
anticipate.
Given the
polysilicon shortage, we believe the efficient use of polysilicon will be
critical to our ability to reduce our manufacturing costs. We continue to
implement several measures to increase the efficient use of polysilicon in our
manufacturing process. For example, we are developing processes to utilize
thinner wafers which require less polysilicon and improved wafer-slicing
technology to reduce the amount of material lost while slicing wafers, otherwise
known as kerf loss. Although we have implemented some production on thinner
wafers and anticipate further reductions in wafer thickness, these methods may
have unforeseen negative consequences on our yields or our solar cell efficiency
or reliability once they are put into large-scale commercial production or they
may not enable us to realize the cost reductions we hope to
achieve.
PowerLight recognized revenue on a
“percent completion” basis and upon the achievement of contractual milestones.
We intend to recognize revenue from projects our PowerLight business on a
similar basis, and any delay or cancellation of a project could adversely affect
our business.
PowerLight
recognized revenue on a “percent completion” basis and, as a result, the revenue
from this business was driven by its performance of its contractual obligations,
which is generally driven by timelines for the installation of its solar power
systems at customer sites. We will recognize revenue from projects of the
PowerLight business on a similar basis. As a consequence of the Merger, we will
delay the recognition of revenue from sales of cells and panels to PowerLight
until PowerLight recognizes revenue. This could result in unpredictability of
revenue and, in the near term, a revenue decrease. As with any project-related
business, there is the potential for delays within any particular customer
project. Variation of project timelines and estimates may impact our ability to
recognize revenue in a particular period. In addition, certain customer
contracts may include payment milestones due at specified points during a
project. Because our PowerLight business usually must invest substantial time
and incur significant expense in advance of achieving milestones and the receipt
of payment, failure to achieve such milestones could adversely affect our
business and results of operations.
Our PowerLight business’ sales
cycles can be longer than those of SunPower and may require significant upfront
investment by it which may not ultimately result in signing of a sales contract,
which could materially adversely affect our business and results of
operations.
20
Our
PowerLight business’ sales cycles, which measure the time between its first
contact with a customer and the signing of a sales contract for a particular
project, vary substantially and average approximately eight months. Sales cycles
for the PowerLight business’ systems are lengthy for a number of reasons,
including:
• its
customers often delay purchasing decisions until their eligibility for an
installation rebate is confirmed, which generally takes several
months;
• the
long time required to secure adequate financing for system purchases on terms
acceptable to customers; and
• the
customer’s review and approval processes for system purchases are lengthy and
time consuming.
As a
result of these long sales cycles, our PowerLight business must make significant
upfront investments of resources in advance of the signing of sales contracts
and the receipt of any revenues, most of which are not recognized for several
additional months following contract signing. Accordingly, our PowerLight
business must focus its limited resources on sales opportunities that it
believes it can secure. Its inability to enter into sales contracts with
potential customers after it makes such an investment could have a material
adverse effect on our business and results of operations.
We depend on a combination of our
own wafer-slicing operations and those of other vendors for the wafer-slicing
stage of our manufacturing, and any technical problems, breakdowns, delays or
cost increases could significantly delay our manufacturing operations, decrease
our output and increase our costs.
We have
historically depended on the wafer-slicing operations of third-party vendors to
slice ingots into wafers. We have established our own wafer-slicing operations,
and in the first nine months of 2006, we sliced approximately 61% of our wafers.
If our third-party vendors increase their prices or decrease or discontinue
their shipments to us, as a result of equipment malfunctions, competing
purchasers or otherwise, and we are unable to obtain substitute wafer-slicing
from another vendor on acceptable terms, or increase our own wafer-slicing
operations on a timely basis, our sales will decrease, our costs may increase or
our business will otherwise be harmed.
We obtain capital equipment used in
our manufacturing process from sole suppliers and if this equipment is damaged
or otherwise unavailable, our ability to deliver products on time will suffer,
which in turn could result in order cancellations and loss of
revenue.
Some of
the capital equipment used in the manufacture of our solar power products and in
our wafer-slicing operations has been developed and made specifically for us, is
not readily available from multiple vendors and would be difficult to repair or
replace if it were to become damaged or stop working. In addition, we currently
obtain the equipment for many of our manufacturing processes from sole suppliers
and we obtain our wafer-slicing equipment from one supplier. If any of these
suppliers were to experience financial difficulties or go out of business, or if
there were any damage to or a breakdown of our manufacturing or wafer-slicing
equipment at a time when we are manufacturing commercial quantities of our
products, our business would suffer. In addition, a supplier’s failure to supply
this equipment in a timely manner, with adequate quality and on terms acceptable
to us, could delay our capacity expansion of our manufacturing facility and
otherwise disrupt our production schedule or increase our costs of
production.
21
We generally do not have long-term
agreements with our customers and accordingly could lose customers without
warning.
We do not
have long-term agreements with customers but instead operate on a purchase order
basis. PowerLight is typically contracted to perform large project with no
assurance of repeat business from the same customers in the future. Although we
believe that cancellations on our purchase orders to date have been
insignificant, our customers may cancel or reschedule purchase orders with us on
relatively short notice. Cancellations or rescheduling of customer orders could
result in the delay or loss of anticipated sales without allowing us sufficient
time to reduce, or delay the incurrence of, our corresponding inventory and
operating expenses. In addition, changes in forecasts or the timing of orders
from these or other customers expose us to the risks of inventory shortages or
excess inventory. This, in addition to the completion and non-repetition of
large PowerLight projects, in turn could cause our operating results to
fluctuate.
Sales contracts for PowerLight’s
products with increasing frequency have begun to include provisions regarding
liquidated damages for installation delays, electricity generation or other
solar power system performance guarantees and conditional payments. If they
continue, such provisions will put us at economic risk for future uncertain
events.
Some of
PowerLight’s larger customers require that it pay substantial liquidated damages
for each day or other period its solar installation is not completed beyond an
agreed target date. This is particularly true in Europe, where long-term, fixed
feed-in tariffs available to investors are typically set during the year of
project completion, but the fixed amount declines over time for projects
completed in subsequent years. In addition, investors often require that the
solar power system generate specified levels of electricity in order to maintain
their investment returns, allocating risk and financial penalties to PowerLight
if those levels are not achieved. Furthermore, its customers often require
protections in the form of conditional payments, payment retentions or
holdbacks, and similar arrangements that condition its future payments on
performance. Delays in solar panel or other supply shipments, other construction
delays, unexpected performance problems in electricity generation or other
events could cause our PowerLight business to fail to meet these performance
criteria, resulting in unanticipated revenue and earnings losses and financial
penalties. If the trend for requiring such provisions continues, our PowerLight
business would be subject to the same risks as PowerLight prior to the Merger,
which could have a material adverse effect on our business and results of
operations.
PowerLight prior
to the Merger usually acted as the general contractor for its customers in
connection with the installations of its solar power systems and was subject to
risks associated with cost overruns, delays and other contingencies. We intend
to operate the PowerLight business in the same manner, and will be subject to
the same risks.
PowerLight
prior to the merger acted as the general contractor for its customers in
connection with the installation of its solar power systems. All essential costs
were estimated at the time of entering into the sales contract for a particular
project, and these were reflected in the overall price that it charges its
customers for the project. These cost estimates were preliminary and may or may
not be covered by contracts between PowerLight or the other project developers,
subcontractors, suppliers and other parties to the project. In addition,
PowerLight required qualified, licensed subcontractors to install most of its
systems. Shortages of such skilled labor could significantly delay a project or
otherwise increase PowerLight’s costs. Should miscalculations in planning a
project or defective or late execution occur, PowerLight may not have achieved
its expected margins or cover its costs. In particular, construction delays,
including those caused by inclement weather, failure to timely receive necessary
approvals and permits, or delays in obtaining necessary solar panels, inverters
or other materials. Because we intend to
22
Our PowerLight business could be
adversely affected by seasonal trends and construction
cycles.
Our
PowerLight business is subject to significant industry-specific seasonal
fluctuations. Its sales have historically reflected these seasonal trends with
the largest percentage of total revenues being realized during the last two
calendar quarters. Low seasonal demand normally results in reduced shipments and
revenues in the first two calendar quarters. There are various reasons for this
seasonality, mostly related to economic incentives and weather patterns. For
example, in European countries with feed-in tariffs, the construction of solar
power systems is concentrated during the second half of the calendar year,
largely due to the annual reduction of the applicable minimum feed-in tariff and
the fact that the coldest winter months are January through March. In the United
States, customers will sometimes make purchasing decisions towards the end of
the year in order to take advantage of tax credits or for other budgetary
reasons.
In
addition, to the extent the PowerLight business is successful in implementing
its strategy to enter the new home development market, it expects the
seasonality of its business and financial results to become more pronounced as
sales in this market are often tied to construction market demands which tend to
follow national trends in construction, including declining sales during cold
weather months.
The expansion of our PowerLight
business into the residential market may increase its exposure to certain risks,
including class action product liability claims.
PowerLight
has expanded into the residential market by beginning to sell its systems to
large production homebuilders. It currently expects this new growth strategy to
initially focus on new home development projects in excess or 50 homes, though
it considers projects below this amount. As part of this strategy, PowerLight
developed SunTile®, a product that integrates a solar panel into a roof tile. To
date PowerLight has focused on large-scale commercial applications and has
almost no experience serving the residential market.
Our
PowerLight business’ new residential products and services may not gain market
acceptance and it may not otherwise be successful in entering the residential
market, which would limit its growth and adversely affect our operating results.
Furthermore, the residential construction market has peculiar characteristics
that may increase its exposure to certain risks it currently faces or expose it
to new risks. These risks include increased seasonality, sensitivity to interest
rates and other macroeconomic conditions, as well as enhanced legal exposure. In
particular, new home developments often result in class action litigation when
one or more homes within a development experiences construction problems. Unlike
our PowerLight business’ core activities, where it typically acts as general
contractor, it will be generally acting as subcontractor to homebuilders
overseeing the development projects. In many instances subcontractors may be
held liable for work of the homebuilder or other subcontractors. In addition,
homebuilders often require onerous indemnification obligations that effectively
allocate most of the potential liability from homeowner or class action lawsuits
to subcontractors, including our PowerLight business. Insurance policies for its
residential work have significant limitations on coverage that may render such
policies inapplicable to these lawsuits. If our PowerLight business is not
successful in entering the new residential construction market, or if as a
result of the litigation and indemnification risks associated with such market,
our PowerLight business incurs significant costs, our business and results of
operations could be materially adversely affected.
If we fail to
successfully develop and introduce new products and services, we will not be
able to compete effectively, and our ability to generate revenues will
suffer.
23
As we
introduce new or enhanced products or integrate PowerLight’s or other new
technology into our products, we will face risks relating to such transitions
including, among other things, technical challenges, disruption in customers’
ordering patterns, insufficient supplies of new products to meet customers’
demand, possible product and technology defects arising from the integration of
new technology and a potentially different sales and support environment
relating to any new technology. Our failure to manage the transition to newer
products or the integration of newer technology into our products could
adversely affect our business’ operating results and financial
results.
The solar
power market is characterized by continually changing technology requiring
improved features, such as increased efficiency and higher power output and
improved aesthetics. This will require us to continuously develop new solar
power products and enhancements for existing solar power products to keep pace
with evolving industry standards and changing customer requirements.
Technologies developed by others may prove more advantageous than ours for the
commercialization of solar power products and may render our technology
obsolete. Our failure to further refine our technology and develop and introduce
new solar power products could cause our products to become uncompetitive or
obsolete, which could reduce our market share and cause our sales to decline.
SunPower’s research and development expense was $7.1 million in the nine months
ended September 30, 2006 and $6.5 million in fiscal year 2005. PowerLight’s net
research and development expense after deduction for government funding was $0.5
million in the nine months ended September 30, 2006 and $0.5 million in fiscal
year 2005. PowerLight’s total research and development expense before government
funding was $1.6 million in the nine months ended September 30, 2006 and $2.1
million in fiscal year 2005. We will need to invest significant financial
resources in research and development to maintain our market position, keep pace
with technological advances in the solar power industry and effectively compete
in the future.
Evaluating our business and future
prospects may be difficult due to our limited history in producing and shipping
solar cells and solar panels in commercial volumes.
There is
limited historical information available about our company upon which you can
base your evaluation of our business and prospects. Although we began to develop
and commercialize high-efficiency solar cell technology for use in solar
concentrators in 1988 and began shipping product from our pilot manufacturing
facility in 2003, we shipped our first commercial A-300 solar cells from our
Philippines manufacturing facility in late 2004. Relative to the entire solar
industry, we have shipped only a limited number of solar cells and solar panels
and have recognized limited revenue. Our future success will require us to
continue to scale our Philippines facilities significantly beyond their current
capacity. In addition, our business model, technology and ability to achieve
satisfactory manufacturing yields at higher volumes are unproven at significant
scale. As a result, you should consider our business and prospects in light of
the risks, expenses and challenges that we will face as an early-stage company
seeking to develop and manufacture new products in a rapidly growing
market.
Our reliance on government programs
to partially fund our research and development programs could impair our ability
to commercialize our solar power products and services and increase our research
and development expenses.
We intend
to continue our policy of selectively pursuing contract research, product
development and market development programs funded by various agencies of the
federal and state governments to complement and enhance our own resources.
Funding from government grants is recorded as an offset to our research and
development expense. For the nine months ended September 30, 2006, funding from
government grants offset a majority of PowerLight’s research and development
expense and offset SunPower’s research and development expense by approximately
9.7%.
24
These
government agencies may not continue their commitment to programs relevant to
our development projects. Moreover, we may not be able to compete successfully
to obtain funding through these or other programs. A reduction or discontinuance
of these programs or of our participation in these programs would materially
increase our research and development expenses, which would adversely affect our
profitability and could impair our ability to develop our solar power products
and services. In addition, contracts involving government agencies may be
terminated or modified at the convenience of the agency. Many of our PowerLight
business’ government contracts also contain royalty provisions that require it
to pay certain amounts based on specified formulas. Government contracts are
subject to audit and governmental agencies may dispute its royalty calculations.
Any such dispute could result in fines, increased royalty payments, cancellation
of the agreement or other penalties, which could have material adverse affect on
our business and results of operations.
Our
PowerLight business’ government-sponsored research contracts require that it
provide regular written technical updates on a monthly, quarterly or annual
basis, and, at the conclusion of the research contract, a final report on the
results of its technical research. Because these reports are generally available
to the public, third parties may obtain some aspects of its sensitive
confidential information. Moreover, the failure to provide accurate or complete
reports may provide the government with rights to any intellectual property
arising from the related research.
Funding
from government contracts also may limit when and how we can deploy our products
and services developed under those contracts. In addition, technology and
intellectual property that we develop with government funding provides the
government with “march-in” rights. March-in rights refer to the right of the
government or a government agency to require us to grant a license to the
developed technology or products to a responsible applicant or, if it refuses,
the government may grant the license itself. The government can exercise its
march-in rights if it determines that action is necessary because we fail to
achieve practical application of the technology or because action is necessary
to alleviate health or safety needs, to meet requirements of federal regulations
or to give the United States industry preference.
Since we cannot test our solar
panels for the duration of our standard 25-year warranty period, we may be
subject to unexpected warranty expense.
Our
current standard product warranty for our solar panels includes a 10-year
warranty period for defects in material and workmanship and a 25-year warranty
period for declines in power performance as well as a one-year warranty on the
functionality of our solar cells. We believe our warranty periods are consistent
with industry practice. Due to the long warranty period and our proprietary
technology, we bear the risk of extensive warranty claims long after we have
shipped product and recognized revenue. We have sold solar cells only since late
2004. Any increase in the defect rate of our products would cause us to increase
the amount of warranty reserves and have a corresponding negative impact on our
results. Although we conduct accelerated testing of our solar cells and have
several years of experience with our all back contact cell architecture, our
solar panels have not and cannot be tested in an environment simulating the
25-year warranty period. In the second quarter of 2006, we increased our
estimated warranty provision rate, which increased our warranty reserve by
approximately $1.0 million. This change in estimate was based on results of
recent testing that simulates adverse environmental conditions and potential
failure rates our solar panels could experience during their 25-year warranty
period. As a result of the foregoing, we may be subject to unexpected warranty
expense, which in turn would harm our financial results.
Because the markets in which we
compete are highly competitive and many of our competitors have greater
resources than us, we may not be able to compete successfully and we may lose or
be unable to gain market share.
25
We
compete with a large number of competitors in the solar power market, including
BP Solar International Inc., Evergreen Solar, Inc., Mitsubishi Electric
Corporation, Q-Cells AG, Sanyo Corporation, Sharp Corporation, SolarWorld AG and
Suntech Power Holdings Co., Ltd. In addition, universities, research
institutions and other companies are developing alternative technologies such as
thin films and concentrators, which may compete with our technology. We expect
to face increased competition in the future. Further, many of our competitors
are developing and are currently producing products based on new solar power
technologies that may ultimately have costs similar to, or lower than, our
projected costs.
Our
PowerLight business’ solar power products and services compete against other
power generation sources including conventional fossil fuels supplied by
utilities, other alternative energy sources such as wind, biomass, CSP and
emerging distributed generation technologies such as micro-turbines, sterling
engines and fuel cells. In the large-scale on-grid solar power systems market,
we will face direct competition from a number of companies that manufacture,
distribute, or install solar power systems. Many of these companies sell
PowerLight’s products as well as their own or those of other manufacturers. Our
PowerLight business’ primary competitors in the United States include Arizona
Public Service Company, BP Solar International, Inc., a subsidiary of BP p.l.c.,
Conergy Inc., Dome-Tech Group, Eastwood Energy, EI Solutions, Inc., GE Energy, a
subsidiary of General Electric Corporation, Global Solar Energy, Inc., a
subsidiary of Solon, Power-Fab, Schott Solar, Inc., Solar Integrated
Technologies, Inc., SPG Solar, Inc., Sun Edison LLC, SunTechnics Installation
& Services, Inc., Thompson Technology Industries, Inc. and WorldWater &
Power Corporation. Our PowerLight business’ primary competitors in Europe
include BP Solar, Conergy (through its subsidiaries AET Alternitive Energie
Technik GmbH, SunTechnics Solartechnik GmbH and voltwerk AG), PV-Systemtechnik
Gbr, SAG Solarstrom AG, Solon AG and Taufer Solar GmbH. Additionally, our
PowerLight business will occasionally compete with distributed generation
equipment suppliers such as Caterpillar, Inc. and Cummins Inc. Other existing
and potential competitors in the solar power market include universities and
research institutions. We also expect that future competition will include new
entrants to the solar power market offering new technological solutions. As we
enter new markets and pursues additional applications for our PowerLight
business’ products and services, we expect to face increased competition, which
may result in price reductions, reduced margins or loss of market
share.
Competition
is intense, and many of our competitors have significantly greater access to
financial, technical, manufacturing, marketing, management and other resources
than we do. Many also have greater name recognition, a more established
distribution network and a larger installed base of customers. In addition, many
of our competitors have well-established relationships with our current and
potential suppliers, resellers and their customers and have extensive knowledge
of our target markets. As a result, these competitors may be able to devote
greater resources to the research, development, promotion and sale of their
products and respond more quickly to evolving industry standards and changing
customer requirements than we will be able to. Consolidation or strategic
alliances among such competitors may strengthen these advantages and may provide
them greater access to customers or new technologies. We may also face
competition from some of PowerLight’s resellers, who may develop products
internally that compete with our PowerLight business’ product and service
offerings, or who may enter into strategic relationships with or acquire other
existing solar power system providers. To the extent that government funding for
research and development grants, customer tax rebates and other programs that
promote the use of solar and other renewable forms of energy are limited, we
will compete for such funds, both directly and indirectly, with other renewable
energy providers and their customers.
If we
cannot compete successfully in the solar power industry, our operating results
and financial condition will be adversely affected. Furthermore, we expect
competition in our PowerLight business’ markets to increase, which could result
in lower prices or reduced demand for our PowerLight business’ services and have
a material adverse effect on our business and results of
operations.
26
The demand for products requiring
significant initial capital expenditures such as our solar power products is
affected by general economic conditions.
The
United States and international economies have recently experienced a period of
slow economic growth. A sustained economic recovery is uncertain. In particular,
terrorist acts and similar events, continued turmoil in the Middle East or war
in general could contribute to a slowdown of the market demand for products that
require significant initial capital expenditures, including demand for solar
cells and solar power systems and new residential and commercial buildings. In
addition, increases in interest rates may increase financing costs to customers,
which in turn may decrease demand for our solar power products. If the economic
recovery slows down as a result of the recent economic, political and social
turmoil, or if there are further terrorist attacks in the United States or
elsewhere, we may experience decreases in the demand for our solar power
products, which may harm our operating results.
Increases in interest rates may
decrease the return on investment for certain customers or investors in projects
of our PowerLight business, which could decrease demand for its products and
services and which could have a material adverse effect on our business and
results of operations.
PowerLight’s
business has benefited from historically low interest rates in recent years, as
these rates have made it more attractive for its customers to use debt financing
to purchase its solar power systems. Interest rates have been rising and may
continue to rise, which will likely increase the cost of financing these systems
and may reduce an operating company’s profits and investors’ expected returns on
investment. Rising interest rates may also make certain alternative investments
more attractive to investors, and therefore lead to a decline in demand for our
PowerLight business’ solar power systems, which could have a material adverse
effect on our business and results of operations.
We depend on a third-party
subcontractor in China to assemble a majority of our solar cells into solar
panels and any failure to obtain sufficient assembly and test capacity could
significantly delay our ability to ship our solar panels and damage our customer
relationships.
Historically,
we have relied on Jiawei, a third-party subcontractor in China, to assemble a
majority of our solar cells into solar panels and perform panel testing and to
manage test, packaging, warehousing and shipping of our solar panels. We do not
have a long-term agreement with Jiawei and we typically obtain services from
them based on short-term purchase orders that are generally aligned with timing
specified by our customers’ purchase orders and our sales forecasts. If the
operations of Jiawei were disrupted or their financial stability impaired, or if
they should choose not to devote capacity to our solar panels in a timely
manner, our business would suffer as we may be unable to produce finished solar
panels on a timely basis. In addition, we supply inventory to Jiawei and we bear
the risk of loss, theft or damage to our inventory while it is held in their
facilities.
As a
result of outsourcing this final step in our production, we face several
significant risks, including:
• lack
of assembly and testing capacity and higher prices;
• limited
control over delivery schedules, quality assurance and control, manufacturing
yields and production costs; and
• delays
resulting from an inability to move production to an alternate
provider.
The
ability of our subcontractor to perform assembly and test is limited by their
available capacity. We do not have a guaranteed level of production capacity
with our subcontractor, and it is
27
One of PowerLight’s key products,
PowerTracker®, was acquired through an assignment and acquisition of the patents
associated with the product from a third party individual, and if we are unable
to continue to use this product, our business, prospects, operating results and
financial condition would be materially harmed.
In
September 2002, PowerLight entered into a Technology Assignment and Services
Agreement and other ancillary agreements with Jefferson Shingleton and
MaxTracker Services, LLC, a New York limited liability company controlled by Mr.
Shingleton. These agreements form the basis for its intellectual property rights
in its PowerTracker® products. Under such agreements, as later amended, Mr.
Shingleton assigned to PowerLight his MaxTracker™, MaxRack™, MaxRack Ballast™
and MaxClip™ products and all related intellectual property rights. Mr.
Shingleton is obligated to provide consulting services to PowerLight related to
such technology until December 31, 2012 and is required to assign to PowerLight
any enhancements he makes to the technology while providing such consulting
services. Mr. Shingleton retains a first security interest in the patents and
patent applications assigned until the earlier of the expiration of the patents,
full payment by PowerLight to Mr. Shingleton of all of the royalty obligations
under the Technology Assignment and Services Agreement, or the termination of
the Technology Assignment and Services Agreement. In the event of PowerLight’s
default under the Technology Assignment and Services Agreement, MaxTracker
Services and Mr. Shingleton may terminate the agreements and the related
assignments and cause the intellectual rights assigned to it to be returned to
Mr. Shingleton or MaxTracker Services, including patents related to
PowerTracker®. In addition, upon such termination, PowerLight must grant Mr.
Shingleton a perpetual, non-exclusive, royalty-free right and license to use,
sell, and otherwise exploit throughout the world any intellectual property
MaxTracker Services or Mr. Shingleton developed during the provision of
consulting services to PowerLight. Events of default by PowerLight which could
enable Mr. Shingleton or Max Tracker Services to terminate the agreements and
the related assignments and cause the intellectual rights assigned to it to be
returned to Mr. Shingleton or MaxTracker Services include the
following:
• if
PowerLight files a petition in bankruptcy or equivalent order or petition under
the laws of any jurisdiction;
• if
a petition in bankruptcy or equivalent order or petition under the laws of any
jurisdiction is filed against it which is not dismissed within 60 days of such
filing;
• if
PowerLight’s assets are assigned for the benefit of creditors;
• if
PowerLight voluntarily or involuntarily dissolves (except in connection with the
Merger, for which PowerLight received a waiver of this condition);
28
• if
PowerLight fails to pay any amount due under the agreements when due and does
not remedy such failure to pay within 10 days of written notice of such failure
to pay; or
• if
PowerLight defaults in the performance of any of its material obligations under
the agreements when required (other than payment of amounts due under the
agreements), and such failure is not remedied within 30 days of written notice
to it of such default from Mr. Shingleton or MaxTracker Services. However, if
such a default can reasonably be cured after the 30-day period, and PowerLight
commences cure of such default within 30-day period and diligently prosecutes
that cure to completion, such default does not trigger a termination right
unless and until PowerLight ceases commercially reasonable efforts to cure such
default.
If
PowerLight is unable to continue to use and sell PowerTracker® as a result of
the termination of the agreements and the related assignment or any other
reason, our business, prospects, operating results and financial condition would
be materially harmed.
We are dependent on our intellectual
property, and we may face intellectual property infringement claims that could
be time-consuming and costly to defend and could result in the loss of
significant rights.
From time
to time, we, our customers or third-parties with whom we work may receive
letters, including letters from various industry participants, alleging
infringement of their patents. Although we are not currently aware of any
parties pursuing or intending to pursue infringement claims against us, we
cannot assure you that we will not be subject to such claims in the future.
Also, because patent applications in the United States and many other
jurisdictions are kept confidential for 18 months before they are published, we
may be unaware of pending patent applications that relate to our products. Our
third-party suppliers may also become subject to infringement claims, which in
turn could negatively impact our business. We ceased use of certain licensed
technology for which we have not paid royalties since the second quarter of 2004
because our current products do not use the licensed technology. However, the
licensor could challenge these actions and litigate against us. Intellectual
property litigation is expensive and time-consuming and could divert
management’s attention from our business and could have a material adverse
effect on our business, operating results or financial condition. If there is a
successful claim of infringement against us, our customers or our third-party
intellectual property providers, we may be required to pay substantial damages
to the party claiming infringement, stop selling products or using technology
that contains the allegedly infringing intellectual property, or enter into
royalty or license agreements that may not be available on acceptable terms, if
at all. Parties making infringement claims may also be able to bring an action
before the International Trade Commission that could result in an order stopping
the importation into the United States of our solar cells. Any of these
judgments could materially damage the our business. We may have to develop
non-infringing technology, and our failure in doing so or in obtaining licenses
to the proprietary rights on a timely basis could have a material adverse effect
on our business.
We may file claims against other
parties for infringing our intellectual property that may be very costly and may
not be resolved in our favor.
We cannot
guarantee that infringement of our intellectual property by other parties does
not exist now or that it will not occur in the future. To protect our
intellectual property rights and to maintain our competitive advantage, we may
file suits against parties who we believe infringe our intellectual property.
Intellectual property litigation is expensive and time consuming and could
divert management’s attention from our business and could have a material
adverse effect on our business, operating results or financial condition, and
our enforcement efforts may not be successful. In certain situations, we may
have to bring such suit in foreign jurisdictions, in which case we are subject
to additional risk as to the result of the
29
We may not be able to prevent others
from using the SunPower name or similar mark in connection with their solar
power products which could adversely affect the market recognition of our name
and our revenue.
“SunPower”
is our registered trademark in the United States for use with solar cells and
solar panels. We are seeking similar registration of the “SunPower” trademark in
foreign countries but we may not be successful in some of these jurisdictions.
For example, we have received initial rejection of our application to register
the “SunPower” trademark in Canada and Japan based on prior registration by
other people. In the foreign jurisdictions where we are unable to obtain this
registration or have not tried, others may be able to sell their products using
the SunPower trademark which could lead to customer confusion. In addition, if
there are jurisdictions where someone else has already established trademark
rights in the SunPower name, we may face trademark disputes and may have to
market our products with other trademarks, which also could hurt our marketing
efforts. We may encounter trademark disputes with companies using marks which
are confusingly similar to SunPower which if not resolved favorably could cause
our branding efforts to suffer. In addition, we may have difficulty in
establishing strong brand recognition with consumers if others use similar marks
for similar products.
PowerLight
holds registered trademarks for PowerLight®, PowerGuard®, PowerTracker® and
SunTile® in the United States, registered trademarks for PowerLight® and
PowerGuard® in Europe, and a pending trademark application for PowerTilt™ in the
United States. It has not registered, and may not be able to register, these
trademarks elsewhere.
We rely primarily upon copyright and
trade secret laws and contractual restrictions to protect our proprietary
rights, and, if these rights are not sufficiently protected, our ability to
compete and generate revenue could suffer.
We seek
to protect our proprietary manufacturing processes, documentation and other
written materials primarily under trade secret and copyright laws. We also
typically require employees and consultants with access to our proprietary
information to execute confidentiality agreements. The steps taken by us to
protect our proprietary information may not be adequate to prevent
misappropriation of our technology. In addition, our proprietary rights may not
be adequately protected because:
• people
may not be deterred from misappropriating our technologies despite the existence
of laws or contracts prohibiting it;
• policing
unauthorized use of our intellectual property may be difficult, expensive and
time-consuming, and we may be unable to determine the extent of any unauthorized
use; and
• the
laws of other countries in which we market our solar cells, such as some
countries in the Asia/Pacific region, may offer little or no protection for our
proprietary technologies.
Reverse
engineering, unauthorized copying or other misappropriation of our proprietary
technologies could enable third parties to benefit from our technologies without
paying us for doing so. Any inability to adequately protect our proprietary
rights could harm our ability to compete, to generate revenue and to grow our
business.
30
We may not obtain sufficient patent
protection on the technology embodied in the solar cells we currently
manufacture and market, which could harm our competitive position and increase
our expenses.
Although
we rely primarily on trade secret laws and contractual restrictions to protect
the technology in the solar cells we currently manufacture and market, our
success and ability to compete in the future may also depend to a significant
degree upon obtaining patent protection for our proprietary technology. As of
September 30, 2006, in the United States, SunPower owned seven issued patents
and jointly owned another three patents, and had 18 U.S. and 10 foreign patent
applications pending. These patent applications cover aspects of the technology
in the solar cells we currently manufacture and market. Patents that we
currently own or license-in do not cover the solar cells that we presently
manufacture and market. As of September 30, 2006, including the United States
and foreign countries, PowerLight had a total 61 issued patents and 44 pending
patent applications. PowerLight intends to continue to seek patent protection
for those aspects of its technology, designs, and methodologies and processes
that it believes provide significant competitive advantages. PowerLight’s
material patents primarily relate to PowerGuard®, PowerTilt™ and
PowerTracker®.
Our
patent applications may not result in issued patents, and even if they result in
issued patents, the patents may not have claims of the scope we seek. In
addition, any issued patents may be challenged, invalidated or declared
unenforceable. The term of any issued patents would be 20 years from their
filing date and if our applications are pending for a long time period, we may
have a correspondingly shorter term for any patent that may issue. Our present
and future patents may provide only limited protection for our technology and
may not be sufficient to provide competitive advantages to us. For example,
competitors could be successful in challenging any issued patents or,
alternatively, could develop similar or more advantageous technologies on their
own or design around our patents. Also, patent protection in certain foreign
countries may not be available or may be limited in scope and any patents
obtained may not be as readily enforceable as in the United States, making it
difficult for us to effectively protect our intellectual property from misuse or
infringement by other companies in these countries. Our inability to obtain and
enforce our intellectual property rights in some countries may harm our
business. In addition, given the costs of obtaining patent protection, we may
choose not to protect certain innovations that later turn out to be
important.
If the effective term of our patents
is decreased due to changes in patent laws or if we need to refile some of our
patent applications, the value of our patent portfolio and the revenue we derive
from products protected by the patents may be decreased.
The value
of our patents depends in part on their duration. A shorter period of patent
protection means less value of a patent. For example, the United States patent
laws were amended in 1995 to change the term of patent protection from 17 years
after the date of the patent’s issuance to 20 years after the earliest effective
filing date of the application for a patent, unless the application was pending
on June 8, 1995, in which case the term of a patent’s protection expires either
17 years after its issuance or 20 years after its filing, whichever is later.
Because the time required from the filing of patent application to issuance of a
patent is often longer than three years, a 20-year patent term from the filing
date may result in substantially shorter patent protection. Also, we may need to
refile some of our patent applications and, in these situations, the patent term
will be measured from the date of the earliest priority application to which
benefit is claimed in such a patent application. This would also shorten our
period of patent exclusivity. A shortened period of patent exclusivity may
negatively impact our revenue protected by our patents.
Our intellectual
property indemnification practices may adversely impact our
business.
31
We are
required by contract to indemnify some of our customers and our third-party
intellectual property providers for certain costs and damages of patent
infringement in circumstances where our solar cells are a factor creating the
customer’s or these third-party providers’ infringement liability. This practice
may subject us to significant indemnification claims by our customers and our
third-party providers. We cannot assure you that indemnification claims will not
be made or that these claims will not harm our business, operating results or
financial condition.
The success of our business depends
on the continuing contributions of our key personnel.
We rely
heavily on the services of our key executive officers, including Thomas H.
Werner, our Chief Executive Officer, Emmanuel T. Hernandez, our Chief Financial
Officer, Dr. Richard Swanson, our President and Chief Technology Officer, PM
Pai, our Chief Operating Officer and Thomas L. Dinwoodie, PowerLight’s Chief
Executive Officer. The loss of services of any principal member of our
management team, particularly Thomas H. Werner, Emmanuel T. Hernandez, Dr.
Richard Swanson, PM Pai and Thomas L. Dinwoodie could adversely impact our
operations. In addition, our technical personnel represent a significant asset
and serve as the source of our technological and product innovations. We believe
our future success will depend upon our ability to retain these key employees
and our ability to attract and retain other skilled managerial, engineering and
sales and marketing personnel. However, we cannot guarantee that any employee
will remain employed at the Company for any definite period of time since all of
our employees, including Messrs. Werner, Hernandez, Swanson, Pai and Dinwoodie,
serve at-will and may terminate their employment at any time for any
reason.
Our headquarters, and other
facilities, as well as the facilities of certain of our key subcontractors, are
located in regions that are subject to earthquakes and other natural
disasters.
Our
headquarters, including research and development operations, our manufacturing
facilities and the facilities of our subcontractor upon which we rely to
assemble and test our solar panels are located in countries that are subject to
earthquakes and other natural disasters. Our headquarters and research and
development operations are located in the United States, our manufacturing
facilities is located in the Philippines, and the facilities of our
subcontractor for assembly and test of solar panels is located in China. Since
we do not have redundant facilities, any earthquake, tsunami or other natural
disaster in these countries could materially disrupt our production capabilities
and could result in our experiencing a significant delay in delivery, or
substantial shortage, of our solar cells.
Compliance with environmental
regulations can be expensive, and noncompliance with these regulations may
result in adverse publicity and potentially significant monetary damages and
fines.
We are
required to comply with all foreign, U.S. federal, state and local laws and
regulations regarding pollution control and protection of the environment. In
addition, under some statutes and regulations, a government agency, or other
parties, may seek recovery and response costs from operators of property where
releases of hazardous substances have occurred or are ongoing, even if the
operator was not responsible for such release or otherwise at fault. We use,
generate and discharge toxic, volatile and otherwise hazardous chemicals and
wastes in our research and development and manufacturing activities. Any failure
by us to control the use of, or to restrict adequately the discharge of,
hazardous substances could subject us to potentially significant monetary
damages and fines or suspensions in our business operations. In addition, if
more stringent laws and regulations are adopted in the future, the costs of
compliance with these new laws and regulations could be substantial. To date
such laws and regulations have not had a significant impact on SunPower’s or our
PowerLight business’ operations, and we believe that we have all necessary
permits to conduct their respective operations as they are presently conducted.
If we fail to comply with present or future environmental laws and regulations,
however, we may be required to pay substantial fines, suspend production or
cease operations. Under SunPower’s
32
We
maintain self-insurance for certain indemnities we have made to our officers and
directors.
Our
certificate of incorporation, by-laws and indemnification agreements require us
to indemnify our officers and directors for certain liabilities that may arise
in the course of their service to us. We self-insure with respect to potential
indemnifiable claims. Although we have insured our officers and directors
against certain potential third-party claims for which we are legally or
financially unable to indemnify them, we intend to self-insure with respect to
potential third-party claims which give rise to direct liability to such
third-party or an indemnification duty on our part. If we were required to pay a
significant amount on account of these liabilities for which we self-insure, our
business, financial condition and results of operations could be seriously
harmed.
Changes to financial accounting
standards may affect our results of operations and cause us to change our
business practices.
We
prepare our financial statements to conform with U.S. GAAP. These accounting
principles are subject to interpretation by the American Institute of Certified
Public Accountants, the SEC and various bodies formed to interpret and create
appropriate accounting policies. A change in those policies can have a
significant effect on our reported results and may affect our reporting of
transactions completed before a change is announced. Changes to those rules or
the questioning of current practices may adversely affect our reported financial
results or the way we conducts our business. For example, accounting policies
affecting many aspects of our business, including rules relating to employee
stock option grants, have recently been revised. The Financial Accounting
Standards Board, or the FASB, and other agencies have made changes to U.S. GAAP,
that required U.S. companies, starting in the first quarter of fiscal 2006, to
record a charge to earnings for employee stock option grants and other equity
incentives. We may have significant and ongoing accounting charges resulting
from option grant and other equity awards that could reduce our net income or
increase our net loss. In addition, since SunPower and PowerLight historically
used equity-related compensation as a component of their total employee
compensation program, the accounting change could make the use of equity-related
compensation less attractive to us and therefore make it more difficult to
attract and retain employees.
If we fail to maintain an effective
system of internal controls, we may not be able to accurately report our
financial results or prevent fraud. As a result, current and potential
stockholders could lose confidence in our financial reporting, which could harm
our business and the trading price of our common stock.
Beginning
in connection with our Annual Report on Form 10-K for the fiscal year ended
December 31, 2006, Section 404 of the Sarbanes-Oxley Act of 2002 will require us
to evaluate and report on our internal controls over financial reporting and
have our independent registered public accounting firm annually attest to our
evaluation, as well as issue its own opinion on our internal control over
financial reporting. Because we have not been subject to these requirements
before, we and our independent accountants have not reviewed our internal
controls for purposes of Section 404 in the past, and are now in the process of
doing so for the first time. Although Cypress completed its Section 404
compliance for its Annual Report on Form 10-K for the fiscal years ended
December 31, 2004 and 2005, the review of our internal controls as part of this
process was limited in scope and you should not conclude from this Cypress
process that our internal controls were adequate to the extent required of an
independent public company at that time. We have in the past discovered, and may
in the future discover, areas of our internal controls that need improvement. We
are preparing for compliance with Section 404 by strengthening, assessing and
testing our system of internal controls to provide the basis for our report.
33
Our efforts to establish an
effective, unified system of internal control over financial reporting could
present challenges.
PowerLight
has not been required to prepare a report on the effectiveness of its internal
controls over financial reporting because it was not subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
or the Exchange Act. In August 2006, PowerLight’s audit committee received a
letter from its independent auditors identifying certain material weaknesses in
its internal controls over financial reporting relating to its audits for 2005,
2004 and 2003. These material weaknesses included problems with financial
statement close processes and procedures, inadequate accounting resources,
unsatisfactory application of the percentage of completion accounting method,
inaccurate physical inventory counts, incorrect accounting for complex capital
transactions and inadequate disclosure of related party transactions. In
addition, PowerLight had to restate its 2004 and 2003 financial statements to
correct previously reported amounts primarily related to its contract revenue,
contract costs, accrued warranty, California state sales tax accrual and
inventory items. We have begun remediation efforts with respect to the material
weaknesses identified by PowerLight’s independent auditors. Although initiated,
our plan to improve the effectiveness of the internal controls and processes at
PowerLight is not complete. It will take some time to put in place the rigorous
disclosure controls and procedures desired by our management and our board of
directors. While we expect to complete this remediation process as quickly as
possible, doing so depends on several factors beyond our control, including the
hiring of additional qualified personnel and, as a result, we cannot at this
time estimate how long it will take to complete the steps identified above. Our
management will continue to evaluate the effectiveness of the control
environment at PowerLight and will continue to refine existing controls. We
cannot assure you that the measures we have taken to date or any future measures
will remediate the material weaknesses reported by PowerLight’s independent
auditors. Additional deficiencies in PowerLight’s or our internal controls may
be discovered in the future. Any failure to develop or maintain effective
controls, or any difficulties encountered in their implementation or
improvement, could harm our operating results or cause us to fail to meet our
reporting obligations and may result in a restatement of our prior period
financial statements. Ineffective internal controls could also cause investors
to lose confidence in our reported financial information, which would likely
have a negative effect on the trading price of our securities.
We are
responsible for establishing and maintaining disclosure controls and procedures
as defined in the Exchange Act Rules. We will be required to report on the
effectiveness of our internal controls over financial reporting for the first
time in our annual report on Form 10-K for the fiscal year ended December 31,
2006, although our report on our internal controls over financial reporting will
not include an assessment of PowerLight’s internal controls until our annual
report on Form 10-K for the fiscal year ended December 31, 2007 (the first
fiscal year to end after the date of the Merger), unanticipated factors may
hinder the effectiveness or delay the integration of SunPower’s and PowerLight’s
control systems.
34
We face competition in the market
for our imaging detectors and infrared detectors, and if we fail to compete
effectively, we will lose or fail to gain market share.
We
compete with companies such as Hamamatsu Photonics K.K. and UDT Sensors, Inc. in
the market for high performance imaging detectors. In addition we compete with
companies such as Vishay Intertechnology, Inc., Rohm Co., Ltd. and Agilent
Technologies, Inc. in the market for infrared detectors. We may face competition
in the future from other manufacturers of high performance imaging detectors,
infrared detectors or alternative devices. The use of alternative devices,
including low power, high data rate wireless protocols, may replace existing
detectors and limit our market opportunity. Our current and future competitors
may have longer operating histories, greater name recognition and greater
financial, sales and marketing, technical and other resources than us or may
develop technologies superior to those incorporated in our imaging detectors and
infrared detectors. If we fail to compete successfully, we may be unable to
expand our customer base for our imaging detectors and our business would
suffer.
Because of the lengthy sales cycles
for our imaging detectors and the relatively fixed nature of a significant
portion of our expenses, we may incur substantial expenses before we earn
associated revenue and may not ultimately achieve our forecasted sales for our
imaging detectors.
Our sales
cycles from design to manufacture of our imaging detectors can typically take 12
to 18 months. Sales cycles for our imaging detectors are lengthy for a number of
reasons, including:
• our
customers usually complete an in-depth technical evaluation of our imaging
detectors before they place a purchase order;
• the
commercial adoption of our imaging detectors is typically limited during the
initial release of their products to evaluate performance and consumer
demand;
• failure
to deliver a product in a timely manner can seriously delay or cancel
introduction; and
• the
development and commercial introduction of products incorporating complex
technology frequently are delayed or canceled.
As a
result of our lengthy sales cycles, we may incur substantial expenses before we
earn associated revenue because a significant portion of our operating expenses
is relatively fixed and based on expected revenue. If customer cancellations or
product changes occur, this could result in the loss of anticipated sales
without allowing us sufficient time to reduce our operating
expenses.
We incur substantial compliance
costs as a public company.
As a
public company, we incur significant legal, accounting and other expenses. In
addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently
implemented by the SEC and The Nasdaq Global Market, have required changes in
corporate governance practices of public companies. We expect these new rules
and regulations to increase our legal and financial compliance costs in 2007 and
beyond, and to make some activities more time-consuming and costly. We also
expect these new rules and regulations to make it more difficult and more
expensive for us to obtain director and officer liability insurance in the
future and we may be required to accept reduced policy limits and coverage or
incur substantially higher costs to obtain the same or similar coverage. As a
result, it may be more difficult for us to attract and retain qualified persons
to serve on our board of directors or as executive officers.
35
Risks
Related to Our Relationship with Cypress Semiconductor Corporation
As long as Cypress controls us, the
ability of our other stockholders to influence matters requiring stockholder
approval will be limited.
As of
January 23, 2007, Cypress owned all 52,033,287 shares of outstanding SunPower
class B common stock, representing approximately 70.5% of the total outstanding
shares of SunPower common stock, or approximately 64.5% of such shares on a
fully diluted basis after taking into account outstanding options, and 95.0% of
the voting power of SunPower’s outstanding capital stock. Shares of class A
common stock and class B common stock have substantially similar rights,
preferences and privileges except with respect to voting and conversion rights
and other protective provisions. Shares of class B common stock are entitled to
eight votes per share of class B common stock, and shares of class A common
stock are entitled to one vote per share of class A common stock. If Cypress
transfers shares of class B common stock to any party other than a successor in
interest or a subsidiary of Cypress prior to a tax-free distribution to its
stockholders, those shares would automatically convert into shares of class A
common stock. Other than through such transfers or voluntary conversions by
Cypress of shares of class B common stock into shares of class A common stock,
only at such time, if at all, that Cypress, its successors in interest (not
including its stockholders following a dissolution) and its subsidiaries
collectively own less than 40% of the shares of all classes of our common stock
then outstanding will all shares of class B common stock automatically convert
into shares of our class A common stock on a one-for-one basis. Until such time,
by virtue of the voting power afforded the shares of class B common stock,
Cypress will be able to effectively elect all of the members of our board of
directors.
In
addition, until such time as Cypress, its successors in interest and its
subsidiaries collectively own less than 40% of the shares of all classes of our
common stock then outstanding and Cypress is no longer consolidating us for
accounting purposes, Cypress will have the ability to take stockholder action
without the vote of any other stockholder and, by virtue of the voting power
afforded the shares of class B common stock, investors will not be able to
affect the outcome of any stockholder vote during this period. As a result,
Cypress will have the ability to control all matters affecting us,
including:
• the
composition of our board of directors and, through the board of directors, any
determination with respect to the Combined Company’s business plans and
policies, including the appointment and removal of officers;
• any
determinations with respect to mergers and other business
combinations;
• our
acquisition or disposition of assets;
• our
financing activities;
• changes
to the agreements providing for our separation from Cypress;
• the
allocation of business opportunities that may be suitable for us;
• the
payment of dividends on the class A common stock; and
• the
number of shares available for issuance under our stock plans.
Cypress’s
voting control may discourage transactions involving a change of control of
SunPower, including transactions in which holders of class A common stock might
otherwise receive a premium for their shares over the then current market price.
Except for a limited time in connection with the Merger,
36
Our ability to continue to
manufacture our imaging detectors and our solar cells in our current facilities
with our current and planned manufacturing capacities, and therefore to maintain
and increase revenue and achieve profitability, depends to a large extent upon
the continued success of our relationship with Cypress.
Our imaging detectors are
manufactured for us by Cypress and are processed and tested in our San Jose,
California facility. We do not have a long-term fixed-price agreement with
Cypress for the manufacturing of our imaging detectors, but instead operate on a
purchase order basis. The processes for manufacturing our imaging detectors are
highly complex, specialized and proprietary. If Cypress is unable to continue
manufacturing our imaging detectors for us, our manufacturing output would be
interrupted and delayed, and we would incur increased expenses in establishing
relationships with alternative manufacturers at market prices. We may not be
able to find alternative manufacturers on terms acceptable to us, and we may be
unable to establish our own operations in a timely or cost-effective manner, if
at all.
We
manufacture our solar cells in our Philippines manufacturing facility which we
lease from Cypress. We are in the process of expanding existing facilities for
solar and panel assembly. If we are unable to expand in our current facility or
are required to move our manufacturing facility, we would incur significant
expenses as well as lost sales. Furthermore, we may not be able to locate a
facility that meets our needs on terms acceptable to us. Any of these
circumstances would increase our expenses and decrease our total revenue and
could prevent us from sustaining profitability.
Our historical financial information
as a business segment of Cypress prior to our initial public offering may not be
representative of our results as an independent public
company.
The
historical financial information we have incorporated by reference into this
prospectus does not necessarily reflect what our financial position, results of
operations or cash flows would have been had we been an independent entity
during the historical periods presented prior to our initial public offering.
The historical costs and expenses reflected in our audited and unaudited
consolidated financial statements include an allocation for certain corporate
functions historically provided by Cypress prior to our initial public offering,
including centralized legal, tax, treasury, information technology, employee
benefits and other Cypress corporate services and infrastructure costs. These
expense allocations were based on what we and Cypress considered reasonable
reflections of the utilization of services provided or the benefit received by
us. The historical financial information prior to our initial public offering is
not necessarily indicative of what our results of operations, financial
position, cash flows or costs and expenses will be in the future. We have not
made adjustments to such historical financial information to reflect many
significant changes that occurred or may yet occur in our cost structure,
funding and operations as a result of our separation from Cypress, including
changes in our employee base, changes in our tax structure, potential increased
costs associated with reduced economies of scale and increased costs associated
with being a publicly traded, stand-alone company.
Our ability to operate our business
effectively may suffer if we are unable to cost-effectively establish our own
administrative and other support functions in order to operate as a stand-alone
company after the expiration of our services agreements with
Cypress.
37
As a
subsidiary of Cypress, we have relied on administrative and other resources of
Cypress to operate our business. In connection with our initial public offering,
we entered into various service agreements to retain the ability for specified
periods to use these Cypress resources. These agreements will expire upon the
earlier or November 2009 or a change of control of our Company. We need to
create our own administrative and other support systems or contract with third
parties to replace Cypress’ systems. In addition, we recently established
disclosure controls and procedures and internal control over financial reporting
as part of our becoming a separate public company in November 2005. These
services may not be provided at the same level as when we were a wholly owned
subsidiary of Cypress, and we may not be able to obtain the same benefits that
we received prior to the separation. These services may not be sufficient to
meet our needs, and after our agreements with Cypress expire, we may not be able
to replace these services at all or obtain these services at prices and on terms
as favorable as we currently have with Cypress. Any failure or significant
downtime in our own administrative systems or in Cypress’ administrative systems
during the transitional period could result in unexpected costs, impact our
results and/or prevent us from paying our suppliers or employees and performing
other administrative services on a timely basis.
We may experience increased costs
resulting from a decrease in our purchasing power and we may have difficulty
obtaining new customers due to our relatively small size after our separation
from Cypress.
Historically,
we were able to take advantage of Cypress’ size and purchasing power in
procuring goods, technology and services, including insurance, employee benefit
support and audit services. We are a smaller company than Cypress, and we cannot
assure you that we will have access to financial and other resources comparable
to those available to us prior to our separation from Cypress. These risks would
be come more pronounced if Cypress were to cease to own a majority of our stock.
As an independent company, we may be unable to obtain goods, technology and
services at prices or on terms as favorable as those available to us prior to
our separation from Cypress, which could increase our costs and reduce our
profitability. In addition, as a smaller, separate, stand-alone company, we may
encounter more customer concerns about our viability as a separate entity, which
could harm our business, financial condition and results of operations. Our
future success depends on our ability to maintain our current relationships with
existing customers, and we may have difficulty attracting new
customers.
Our agreements with Cypress require
us to indemnify Cypress for certain tax liabilities. These indemnification
obligations may limit our ability to obtain additional financing or participate
in future acquisitions for up to two years.
We have
entered into a tax sharing agreement with Cypress, under which we and Cypress
agree to indemnify one another for certain taxes and similar obligations that
the other party could incur under certain circumstances. In general, we will be
responsible for taxes relating to our business. Furthermore, we may be held
jointly and severally liable for taxes determined on a consolidated basis even
though Cypress is required to indemnify us for its taxes pursuant to the tax
sharing agreement. After the date we cease to be a member of Cypress’
consolidated group for federal income tax purposes or state income tax purposes,
as and to the extent that we become entitled to utilize on our separate tax
returns portions of those credit or loss carryforwards existing as of such date,
we will distribute to Cypress the tax effect (estimated to be 34% for federal
income tax purposes) of the amount of such tax loss carryforwards so utilized
and the amount of any credit carryforwards so utilized. We will distribute these
amounts to Cypress in cash or in our shares, at our option. Upon completion of
our follow-on public offering of class A common stock in June 2006, we were no
longer considered to be a member of Cypress’ consolidated group for federal
income tax purposes. Accordingly, we will be subject to the obligations payable
to Cypress for any federal income tax credit or loss carryforwards utilized in
its federal tax returns. As of December 31, 2005, we had approximately $36.5
million of federal net operating loss carryforwards and
38
If
Cypress distributes our class B common stock to Cypress stockholders in a
transaction intended to qualify as a tax-free distribution under Section 355 of
the Internal Revenue Code, or the Code, Cypress intends to obtain an opinion of
counsel to the effect that such distribution qualifies under Section 355 of the
Code. Despite such an opinion, however, the distribution may nonetheless be
taxable to Cypress under Section 355(e) of the Code if 50% or more of our voting
power or economic value is acquired as part of a plan or series of related
transactions that includes the distribution of our stock. The tax sharing
agreement includes our obligation to indemnify Cypress for any liability
incurred as a result of issuances or dispositions of our stock after the
distribution, other than liability attributable solely to certain dispositions
of our stock by Cypress, that cause Cypress’ distribution of shares of our stock
to its stockholders to be taxable to Cypress under Section 355(e) of the Code.
Under current law, following a distribution by Cypress and for up to two years
thereafter, our obligation to indemnify Cypress will be triggered only if we
issue stock or otherwise participate in one or more transactions other than the
distribution in which 50% or more of our voting power or economic value is
acquired in financing or acquisition transactions that are part of a plan or
series of related transactions that includes the distribution. If such an
indemnification obligation is triggered, the extent of our liability to Cypress
will generally equal the product of (a) Cypress’ top marginal federal and state
income tax rate for the year of the distribution, and (b) the difference between
the fair market value of our class B common stock distributed to Cypress
stockholders and Cypress’ tax basis in such stock as determined on the date of
the distribution. Our ability to use our equity to obtain additional financing
or to engage in acquisition transactions for a period of time after a
distribution will be restricted if we can only sell or issue a limited amount of
our stock before triggering our obligation to indemnify Cypress for taxes it
incurs under Section 355(e) of the Code.
For
example, under the current tax rules, if Cypress were to make a complete
distribution of its class B common stock and our total outstanding capital stock
at the time of such distribution was 69,000,000 shares, unless we qualified for
one of several safe harbor exemptions available under the Treasury Regulations,
in order to avoid our indemnification obligation to Cypress, we could not, for
up two years from the date of Cypress’ distribution, issue 69,000,000 or more
shares of class A common stock, nor could we participate in one or more
transactions (excluding the distribution itself) in which 34,500,000 or more
shares of our then existing class A common stock were to be acquired in
connection with a plan or series of related transactions that includes the
distribution. In addition, these limits could be lower depending on certain
actions that we or Cypress might take before or after a distribution. If we were
to participate in such a transaction, assuming Cypress distributed 52,000,000
shares, Cypress’ top marginal income tax rate is 40% for federal and state
income tax purposes, the fair market value of our class B common stock is $32.00
per share and Cypress’ tax basis in such stock is $5.00 per share on the date of
their distribution, then our liability under our indemnification obligation to
Cypress would be approximately $562.0 million.
Third parties may seek to hold us
responsible for liabilities of Cypress.
Third
parties may seek to hold us responsible for Cypress’ liabilities. Under our
separation agreements with Cypress, Cypress will indemnify us for claims and
losses relating to liabilities related to Cypress’ business and not related to
our business. However, if those liabilities are significant and we are
ultimately held liable for them, we cannot assure you that we will be able to
recover the full amount of our losses from Cypress.
39
Our inability to
resolve any disputes that arise between us and Cypress with respect to our past
and ongoing relationships may result in a significant reduction of our
revenue.
Disputes
may arise between Cypress and us in a number of areas relating to our past and
ongoing relationships, including:
• labor,
tax, employee benefit, indemnification and other matters arising from our
separation from Cypress;
• the
cost of wafers for our imaging detectors;
• employee
retention and recruiting;
• business
combinations involving us;
• pricing
for transitional services;
• sales
or distributions by Cypress of all or any portion of its ownership interest in
us;
• the
nature, quality and pricing of services Cypress has agreed to provide us;
and
• business
opportunities that may be attractive to both Cypress and us.
We may
not be able to resolve any potential conflicts, and even if we do, the
resolution may be less favorable than if we were dealing with an unaffiliated
party.
The
agreements we entered into with Cypress may be amended upon agreement between
the parties. While we are controlled by Cypress, we may not have the leverage to
negotiate amendments to these agreements if required on terms as favorable to us
as those we would negotiate with an unaffiliated third party.
Some of our directors and executive
officers may have conflicts of interest because of their ownership of Cypress
common stock, options to acquire Cypress common stock and positions with
Cypress.
Some of
our directors and executive officers own Cypress common stock and options to
purchase Cypress common stock. In addition, some of our directors are executive
officers and/or directors of Cypress. Ownership of Cypress common stock and
options to purchase Cypress common stock by our directors and officers and the
presence of executive officers or directors of Cypress on our board of directors
could create, or appear to create, conflicts of interest with respect to matters
involving both us and Cypress. For example, corporate opportunities may arise
that concern both of our businesses, such as the potential acquisition of a
particular business or technology that is complementary to both of our
businesses. In these situations, our amended and restated certificate of
incorporation provides that directors and officers who are also directors or
officers of Cypress have no duty to communicate or present such corporate
opportunity to us unless it is specifically applicable to the solar energy
business and not applicable to or reasonably related to any business conducted
by Cypress, have the right to deal with such corporate opportunity in their sole
discretion and shall not be liable to us or our stockholders for breach of
fiduciary duty by reason of the fact that such director or officer pursues or
acquires such corporate opportunity for itself or for Cypress. In addition, we
have not established at this time any procedural mechanisms to address actual or
perceived conflicts of interest of these directors and officers and expect that
our board of directors, in the exercise of its fiduciary duties, will determine
how to address any actual or perceived conflicts of interest on a case-by-case
basis. If any corporate opportunity
40
Because Cypress is not obligated to
distribute to its stockholders or otherwise dispose of our common stock that it
owns, we will continue to be subject to the risks described above relating to
Cypress’ control of us if Cypress does not complete such a
transaction.
Cypress
is not obligated to distribute to its stockholders or otherwise dispose of the
shares of our class B common stock that it beneficially owns, although it might
elect to do so in the future. Cypress announced on October 6, 2006 and
reiterated on October 19, 2006 that it was exploring ways in which to allow its
stockholders to fully realize the value its investment in us. Cypress has made
public statements since October 19, 2006 that were consistent with these
announcements. Moreover, completion of any such transaction could be contingent
upon, among other things, the receipt of a favorable tax ruling from the
Internal Revenue Service and/or a favorable opinion of Cypress’ tax advisor as
to the tax-free nature of such a transaction for U.S. federal income tax
purposes.
Unless
and until such a distribution occurs or Cypress otherwise disposes of shares so
that it, its successors in interest and its subsidiaries collectively own less
than 40% of the shares of all classes of our common stock then outstanding, we
will continue to face the risks described above relating to Cypress’ control of
us and potential conflicts of interest between Cypress and us. We may be unable
to realize potential benefits that could result from such a distribution by
Cypress, such as greater strategic focus, greater access to capital markets,
better incentives for employees and more accountable management, although we
cannot guarantee that we would realize any of these potential benefits if such a
distribution did occur. In addition, speculation by the press, investment
community, our customers, our competitors or others regarding whether Cypress
intends to complete such a distribution or otherwise dispose of its controlling
interest in us could harm our business or lead to volatility in our stock
price.
So long
as Cypress continues to hold a controlling interest in us or is otherwise a
significant stockholder, the liquidity and market price of our class A common
stock may be adversely impacted. In addition, there can be no assurance that
Cypress will distribute or otherwise dispose of any of its shares of our class B
common stock.
Cypress’ ability to replace our
board of directors may make it difficult for us to recruit independent
directors.
Cypress
may at any time replace our entire board of directors. Furthermore, some actions
of our board of directors require the approval of 75% of our directors except to
the extent this condition is waived by Cypress. As a result, unless and until
Cypress, its successors in interest and its subsidiaries collectively own less
than 40% of the shares of all classes of our common stock then outstanding and
Cypress is no longer consolidating us for accounting purposes, Cypress could
exercise significant control over our board of directors. As such, individuals
who might otherwise accept a board position at SunPower may decline to serve,
and Cypress may be able to control important decisions made by our Board of
Directors.
41
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, any accompanying prospectus supplement and the documents
incorporated by reference herein and therein may contain forward-looking
statements that involve risks and uncertainties. All such statements, other than
statements of historical fact, are forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. These
statements involve known and unknown risks, uncertainties and other factors that
may cause actual results, performance or achievements to be materially different
from any future results, performances or achievements expressed or implied by
the forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:
• expectations
regarding expenses, sources of revenues and international sales and
operations;
• anticipated
cash needs and estimates regarding capital expenditures, capital requirements
and needs for additional financing;
• the
performance, features and benefits of products, plans for future products and
for enhancements of existing products and product shipment dates;
• the
supply and price of components and raw materials, including
polysilicon;
• future
pricing of products and systems in which SunPower’s and PowerLight’s products
are incorporated;
• plans
for and timing of expansion of SunPower’s and PowerLight’s production
capacity;
• the
ability to attract customers and develop and maintain customer and supplier
relationships;
• competitive
positions and expectations regarding key competitive factors;
• elements
of SunPower’s and PowerLight’s marketing, growth and diversification strategies,
including SunPower’s strategy to reduce its dependence on market
incentives;
• SunPower’s
and PowerLight’s intellectual property and continued investment in research and
development;
• anticipated
trends and challenges in SunPower’s and PowerLight’s businesses and the markets
in which they operate; and
• statements
regarding potential legal proceedings.
In
addition to the risk factors included elsewhere or incorporated by reference
herein, important factors that could cause actual results to differ materially
from estimates or projections contained in the forward-looking statements
include, without limitation:
• the
ability of SunPower to timely and cost-effectively integrate the operations of
SunPower and PowerLight;
• the
ability of SunPower to realize the synergies and other perceived advantages
resulting from our acquisition of PowerLight;
42
• the
ability of SunPower and PowerLight to retain key personnel;
• the
extent and timing of market acceptance of new products;
• the
ability of SunPower and PowerLight to procure, maintain, enforce and defend
their respective patents and other proprietary rights;
• the
effects of local, national and global economic, credit and capital market
conditions on the economy in general, and on the solar power industry in
particular, and the effects of currency exchange rates and interest
rates;
• litigation
outcomes and judicial actions, including costs of existing litigation
matters;
• the
ability to continue to increase customer loyalty and maintain existing
distributor, subcontractor and supplier relationships;
• the
ability to successfully complete any future acquisitions and integrate any
acquired businesses;
• acts
of war or terrorist incidents;
• the
effects of competition; and
• other
risks referenced from time to time in our filings with the SEC.
In some
cases, you can identify forward-looking statements by such terms as “may,”
“might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,”
“expect,” “believe,” “estimate,” “predict,” “potential,” “plan,” “is designed
to” or the negative of these terms, and similar expressions intended to identify
forward-looking statements. These statements reflect current views with respect
to future events and are based on assumptions and subject to risks and
uncertainties. Given these uncertainties, you should not place undue reliance on
these forward-looking statements. Also, these forward-looking statements
represent estimates and assumptions only as of the date of this prospectus or
any accompanying prospectus supplement. SunPower does not intend to update any
of these forward-looking statements to reflect circumstances or events that
occur after the statement is made.
You
should read this prospectus, any accompanying prospectus supplement and the
documents that are referenced and which have been filed as exhibits to the
registration statement of which this prospectus is a part or incorporated by
reference herein, completely and with the understanding that our actual future
results may be materially different from what we expect. All forward-looking
statements are qualified by these cautionary statements.
43
RATIO
OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
Our ratio
of earnings to fixed charges for the years ended December 31, 2001, 2002 and
2003, for the period from January 1, 2004 to November 8, 2004, for the period
from November 9, 2004 to December 31, 2004, for the year ended December 31, 2005
and for the nine months ended September 30, 2006 is set forth below. We were not
required to pay, nor did we pay, dividends on any preferred stock outstanding
during any of these periods, our ratio of earnings to combined fixed charges and
preferred stock dividends did not differ from the ratio below during any of
these periods.
|
Predecessor
Company
|
Successor
Company
|
||||||
|
Years
Ended Dec. 31,
|
Jan.
1 through Nov. 8,
|
Nov.
9 through Dec. 31,
|
Year
Ended Dec. 31,
|
Nine
Months Ended Sept. 30,
|
|||
|
2001(1)
|
2002(1)
|
2003(1)
|
2004(1)
|
2004(1)
|
2005(1)
|
2006(1)
|
|
|
Ratio
of Earnings to Fixed Charges(2)
|
— (3)
|
— (3)
|
— (3)
|
— (3)
|
— (3)
|
— (3)
|
11.7x
|
(1)
SunPower’s fiscal year consists of 52 or 53 weeks ending on the Sunday closest
to December 31, with quarters of 13 or 14 weeks ending the Sunday closest to
March 31, June 30, September 30 and December 31 of each year. For presentation
purposes only, the ratio of earnings to fixed charges refers to the month end
and calendar year end of each respective period.
(2) For
purposes of calculating the ratio of earnings to fixed charges, fixed charges
are calculated by adding (a) interest on all indebtedness and amortization of
debt discount and expense, (b) interest capitalized and (c) an estimate of the
interest within rental expense. Earnings are calculated by adding (a) pretax
income from continuing operations, (b) fixed charges and (c) amortization of
capitalized interest.
(3)
Earnings were inadequate to cover fixed charges by $2.9 million, $3.5 million,
$14.5 million, $23.3 million, $5.6 million and $15.8 million for the years ended
December 31, 2001, 2002 and 2003, for the period from January 1, 2004 to
November 8, 2004, for the period from November 9, 2004 to December 31, 2004, for
the year ended December 31, 2005 and for the nine months ended September 30,
2006, respectively.
44
USE
OF PROCEEDS
Unless
otherwise described in an applicable prospectus supplement, we intend to use the
net proceeds from any sale of securities under this prospectus for general
corporate purposes, including working capital and capital
expenditures.
45
DESCRIPTION
OF CLASS A COMMON STOCK
From time
to time, we may offer and sell shares of our class A common stock registered
under this prospectus. This section describes the general terms and provisions
of our class A common stock and, where applicable to holders of our class A
common stock, the terms and provisions of our class B common stock. The
prospectus supplement relating to any offering of class A common stock, or other
securities convertible into or exchangeable or exercisable for class A common
stock, will describe more specific terms of the offering of common stock or
other securities, including the number of shares offered, the initial offering
price, and market price and dividend information.
The
summary set forth below does not purport to be complete and is subject to and
qualified in its entirety by reference to our restated certificate of
incorporation and amended and restated bylaws, each of which is incorporated by
reference as an exhibit to the registration statement of which this prospectus
is a part. We encourage you to read our restated certificate of incorporation
and amended and restated bylaws for additional information before you decide
whether to purchase any shares of our class A common stock.
General
Our
restated certificate of incorporation authorizes the issuance of up to
217,500,000 shares of class A common stock, par value $0.001 per share and
157,500,000 shares of class B common stock, par value $0.001 per
share.
Voting
Rights
Shares of
class A common stock and class B common stock have substantially similar rights
except that shares of class A common stock are entitled to one vote per share
while shares of class B common stock are entitled to eight votes per share, on
all matters to be voted on by our stockholders. Holders of shares of our capital
stock are not entitled to cumulate their votes in the election of directors to
our board of directors. Generally, all matters to be voted on by stockholders
must be approved by a majority of the votes entitled to be cast at a meeting by
all shares of class A common stock and class B common stock present in person or
represented by proxy, voting together as a single class, subject to any voting
rights granted to any preferred stock. Except as otherwise provided by law, and
subject to any voting rights granted to holders of any outstanding preferred
stock, amendments to our restated certificate of incorporation generally must be
approved by at least a majority of the combined voting power of all our class A
common stock and class B common stock, voting together as a single class.
However, shares of our class A common stock are not eligible to vote on any
alteration or change in the powers, preferences or special rights of the class B
common stock that would not adversely affect the rights of the class A common
stock.
Conversion
Rights
If
Cypress makes a distribution of its shares of class B common stock to its
stockholders in connection with a tax-free distribution, shares of our class B
common stock will automatically convert into shares of class A common stock.
Such a conversion will also occur if such shares of class B common stock are
transferred to a person other than Cypress, a successor in interest to Cypress
or one of Cypress’ subsidiaries. Cypress, its successors in interest and its
subsidiaries may also convert shares of class B common stock into shares of
class A common stock at any time. All conversions of shares of class B common
stock into shares of class A common stock will be effected on a one-for-one
basis. Shares of class A common stock are not convertible into any of our other
securities.
46
At such
time, if at all, as Cypress, its successors in interest and its subsidiaries
collectively own less than 40% of the shares of all classes of our common stock
then outstanding, and if Cypress has not effected a tax-free distribution of
class B common stock to its stockholders prior to such time, each outstanding
share of class B common stock will automatically convert into one share of our
class A common stock on a one-for-one basis.
Dividend
Rights
Subject
to preferences that may apply to shares of preferred stock outstanding at the
time, the holders of outstanding shares of class A common stock and class B
common stock are entitled to receive dividends out of assets legally available
at the times and in the amounts that our board of directors may determine from
time to time.
No
Preemptive or Redemption Rights
Class A
common stock and class B common stock are not entitled to preemptive rights and
are not subject to redemption or sinking fund provisions.
Right
to Receive Liquidation Distributions
Upon our
liquidation, dissolution or winding-up, the holders of class A common stock and
class B common stock are entitled to share equally in all of our assets
remaining after payment of all liabilities and the liquidation preferences of
any outstanding preferred stock.
Registration
Rights
We have
entered into an investor rights agreement with Cypress providing for specified
registration and other rights relating to its shares of our common stock. In
connection with the Merger, we agreed to file with the SEC, and keep effective
for a period of up to three years from the effectiveness thereof, a registration
statement covering the resale of the shares of our class A common stock issued
to the former shareholders of PowerLight in the Merger. We have not entered
into, and do not expect to enter into, any other agreements, with any of our
other stockholders obligating or requiring us to register shares of class A
common stock.
Classification
of Our Board of Directors
Our
restated certificate of incorporation and amended and restated bylaws provide
that until such time as Cypress, its successors in interest and its subsidiaries
collectively own less than 40% of the shares of all classes of our common stock
then outstanding and Cypress is no longer consolidating us for accounting
purposes, our board of directors will not be classified; thereafter, our board
of directors will be divided into three classes of directors, with the classes
to be as nearly equal in number as possible. Our amended and restated bylaws
contain a process for determining to which class our incumbent directors will
belong in the event that our board of directors becomes classified.
Membership
on Committees of the Board of Directors
Our
restated certificate of incorporation and amended and restated bylaws provide
that until such time as Cypress, its successors in interest and its subsidiaries
collectively own less than 40% of the shares of all classes of our common stock
then outstanding and Cypress is no longer consolidating us for accounting
purposes, at the request of Cypress, a representative specifically designated by
Cypress shall
47
Calling
of a Special Meeting of Stockholders by a Stockholder
Our
restated certificate of incorporation and amended and restated bylaws provide
that until such time as Cypress, its successors in interest and its subsidiaries
collectively own less than 40% of the shares of all classes of our common stock
then outstanding and Cypress is no longer consolidating us for accounting
purposes, Cypress may call a special meeting of the stockholders; thereafter,
stockholders may not call special meetings of the stockholders.
Action
of the Stockholders by Written Consent
Our
restated certificate of incorporation and amended and restated bylaws provide
that until such time as Cypress, its successors in interest and its subsidiaries
collectively own less than 40% of the shares of all classes of our common stock
then outstanding and Cypress is no longer consolidating us for accounting
purposes, stockholders may act without a meeting by written consent; thereafter,
no action can be taken by stockholders except at an annual or special meeting of
the stockholders called in accordance with our amended and restated bylaws, and
stockholders may not act by written consent.
Super-Majority
Voting of the Board of Directors
Our
restated certificate of incorporation provides that unless and until Cypress,
its successors in interest and its subsidiaries collectively own less than 40%
of the shares of all classes of our common stock then outstanding and Cypress is
no longer consolidating us for accounting purposes, the affirmative vote of at
least 75% of the then-authorized number of members of our board of directors
will be required to: (a) adopt, amend or repeal our amended and restated bylaws
or restated certificate of incorporation; (b) appoint or remove our chief
executive officer; (c) designate, appoint or allow for the nomination or
recommendation for election by our stockholders of an individual to our board of
directors; (d) change the size of our board of directors to be other than five
members; (e) form a committee of our board of directors or establish or change a
charter, committee responsibilities or committee membership of any committee of
our board of directors; (f) adopt any stockholder rights plan, “poison pill” or
other similar arrangement; or (g) approve any transactions that would involve a
merger, consolidation, restructuring, sale of substantially all of our assets or
any of our subsidiaries or otherwise result in any person or entity obtaining
control of us or any of our subsidiaries.
Cypress
may at any time in its sole discretion waive this requirement to obtain such a
super-majority vote of our board of directors.
Provisions
of Our Restated Certificate of Incorporation Governing Corporate
Opportunity
Our
amended and restated certificate of incorporation provides that directors and
officers who are also directors or officers of Cypress have no duty to
communicate or present a corporate opportunity to us unless it is specifically
and primarily applicable to converting solar energy into electrical energy and
using the resulting electrical energy other than in applications for consumers
where photodiode technology is combined with micro-controllers and other
integrated circuits made by Cypress, have the right to deal with such corporate
opportunity in their sole discretion and shall not be liable to us or our
stockholders for breach of fiduciary duty by reason of the fact that such
director or officer pursues or acquires such corporate opportunity for itself or
for Cypress.
Anti-Takeover
Effects of Delaware Law
48
We are
subject to the provisions of Section 203 of Delaware General Corporation Law, or
the DGCL, regulating corporate takeovers. In general, those provisions prohibit
a Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that the
stockholder became an interested stockholder, unless:
• the
transaction is approved by the board before the date the interested stockholder
attained that status;
• upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced; or
• on
or after the date the business combination is approved by the board and
authorized at a meeting of stockholders by at least two-thirds of the
outstanding voting stock that is not owned by the interested
stockholder.
Section
203 defines “business combination” to include the following:
• any
merger or consolidation involving the corporation and the interested
stockholder;
• any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder;
• subject
to certain exceptions, any transaction that results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder;
• any
transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or
• the
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation.
In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of a corporation
and any entity or person affiliated with or controlling or controlled by any of
these entities or persons.
A
Delaware corporation may opt out of this provision either with an express
provision in its original certificate of incorporation or in an amendment to its
certificate of incorporation or bylaws approved by its stockholders. However, we
have not opted out, and do not currently intend to opt out, of this provision.
The statute could prohibit or delay mergers or other takeover or change in
control attempts and, accordingly, may discourage attempts to acquire
us.
Limitation
of Liability and Indemnification Matters
We have
adopted provisions in our restated certificate of incorporation that limit the
liability of our directors for monetary damages for breach of their fiduciary
duty as directors, except for liability that cannot be eliminated under the
DGCL. Delaware law provides that directors of a company will not be personally
liable for monetary damages for breach of their fiduciary duty as directors,
except for liabilities:
• for
any breach of their duty of loyalty to us or our stockholders;
49
• for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law;
• for
unlawful payment of dividend or unlawful stock repurchase or redemption, as
provided under Section 174 of the DGCL; or
• for
any transaction from which the director derived an improper personal
benefit.
Our
restated certificate of incorporation and amended and restated bylaws also
provide that we will indemnify our directors and officers to the fullest extent
permitted by Delaware law. Our amended and restated bylaws also permit us to
purchase insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his actions as our officer, director, employee
or agent, regardless of whether the amended and restated bylaws would permit
indemnification. We have entered into separate indemnification agreements with
our directors and executive officers that could require us, among other things,
to indemnify them against certain liabilities that may arise by reason of their
status or service as directors and to advance their expenses incurred as a
result of any proceeding against them as to which they could be
indemnified.
Nasdaq
Global Market Listing Symbol
Our class
A common stock trades on The Nasdaq Global Market under the symbol
“SPWR.”
Transfer
Agent and Registrar
The
transfer agent and registrar for our class A common stock is ComputerShare
Investor Services.
DESCRIPTION
OF PREFERRED STOCK
This
section describes the general terms and provisions of our preferred stock. The
prospectus supplement relating to any offering of preferred stock, or other
securities convertible into or exchangeable or exercisable for preferred stock,
will describe more specific terms of the preferred stock being offered,
including the designation of the series, the number of shares offered, the
initial offering price and any voting, dividend, and liquidation preference
rights, and any general terms described in this section that will not apply to
those shares of preferred stock.
The
summary set forth below does not purport to be complete and is subject to and
qualified in its entirety by reference to our restated certificate of
incorporation and the certificate of designation relating to the applicable
series of preferred stock that we will file with the Delaware Secretary of
State, each of which is or will be filed with the SEC and incorporated by
reference as an exhibit to the registration statement of which this prospectus
is a part. We encourage you to read our restated certificate of incorporation
and the applicable certificate of designation for additional information before
deciding whether to purchase any shares of our preferred stock or securities
convertible into or exchangeable or exercisable for our preferred
stock.
General
Our
restated certificate of incorporation authorizes the issuance of up to
10,042,490 shares of preferred stock, par value $0.001 per share. The preferred
stock may be issued from time to time in one or more series, each of which is to
have the voting powers, designation, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof as are
50
Our board
of directors, without further action of our stockholders, has the authority to
create one or more series of preferred stock and, with respect to each series,
to fix or alter as permitted by law:
• the
number of shares and the distinctive designation of the series;
• the
dividend rights;
• any
redemption rights, terms and prices;
• the
terms of any retirement or sinking funds;
• the
rights, terms and prices, if any, by which the shares may be convertible into,
or exchangeable for, other shares;
• the
voting power, if any; and
• any
other terms, conditions, special rights and protective provisions.
DESCRIPTION
OF DEBT SECURITIES
This
section describes certain general terms and provisions that we expect would be
applicable to our debt securities. When we offer to sell a particular series of
debt securities, we will describe the specific terms of that series in a
supplement to this prospectus. The following description of debt securities will
apply to the debt securities offered by this prospectus unless we provide
otherwise in the applicable prospectus supplement. The applicable prospectus
supplement for a particular series of debt securities may specify different or
additional terms.
The debt
securities offered hereby may be secured or unsecured, and may be either senior
debt securities, senior subordinated debt securities or subordinated debt
securities. The debt securities offered hereby will be issued under an indenture
between us and a trustee. The indenture will be qualified under, subject to, and
governed by, the Trust Indenture Act of 1939, as amended.
General
The terms
of each series of debt securities will be established by or pursuant to a
resolution of our board of directors and detailed or determined in the manner
provided in a board of directors’ resolution, an officers’ certificate or by a
supplemental indenture. The particular terms of each series of debt securities
will be described in a prospectus supplement relating to the series, including
any pricing supplement.
We can
issue an unlimited amount of debt securities under an indenture that may be in
one or more series with the same or various maturities, at par, at a premium or
at a discount. We will set forth in a prospectus supplement, including any
pricing supplement, relating to any series of debt securities being offered the
initial offering price, the aggregate principal amount and the following terms
of the debt securities:
• the
title of the debt securities;
51
• the
price or prices (expressed as a percentage of the aggregate principal amount) at
which we will sell the debt securities;
• any
limit on the aggregate principal amount of the debt securities;
• the
date or dates on which we will pay the principal on the debt
securities;
• the
rate or rates (which may be fixed or variable) per annum or the method used to
determine the rate or rates (including any commodity, commodity index, stock
exchange index or financial index) at which the debt securities will bear
interest and the right, if any, to extend the maturity of the debt securities,
the date or dates from which interest will accrue, the date or dates on which
interest will commence and be payable and any regular record date for the
interest payable on any interest payment date;
• the
place or places where the principal of, premium, and interest on the debt
securities will be payable;
• the
terms and conditions upon which we may redeem the debt securities;
• any
obligation we have to redeem or purchase the debt securities pursuant to any
sinking fund or analogous provisions or at the option of a holder of debt
securities;
• the
dates on which and the price or prices at which we will repurchase the debt
securities at the option of the holders of debt securities and other detailed
terms and provisions of these repurchase obligations;
• the
denominations in which the debt securities will be issued, if other than
denominations of $1,000 and any integral multiple thereof;
• whether
the debt securities will be issued in the form of certificated debt securities
or global debt securities;
• the
portion of principal amount of the debt securities payable upon declaration of
acceleration of the maturity date, if other than the principal
amount;
• the
currency of denomination of the debt securities;
• the
designation of the currency, currencies or currency units in which payment of
principal of, premium and interest on the debt securities will be
made;
• if
payments of principal of, premium or interest on the debt securities will be
made in one or more currencies or currency units other than that or those in
which the debt securities are denominated, the manner in which the exchange rate
with respect to these payments will be determined;
• the
manner in which the amounts of payment of principal of, premium or interest on
the debt securities will be determined, if these amounts may be determined by
reference to an index based on a currency or currencies other than that in which
the debt securities are denominated or designated to be payable or by reference
to a commodity, commodity index, stock exchange index or financial
index;
• any
provisions relating to any security provided for the debt
securities;
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• any
addition to or change in the events of default described in this prospectus or
in the indenture with respect to the debt securities and any change in the
acceleration provisions described in this prospectus or in the indenture with
respect to the debt securities;
• any
addition to or change in the covenants described in this prospectus or in the
indenture with respect to the debt securities;
• whether
the debt securities will be senior or subordinated and any applicable
subordination provisions;
• any
other terms of the debt securities, which may modify or delete any provision of
the indenture as it applies to that series; and
• any
depositaries, interest rate calculation agents, exchange rate calculation agents
or other agents with respect to the debt securities.
We may
issue debt securities that are exchangeable and/or convertible into shares of
our class A common stock or our preferred stock. The terms, if any, on which the
debt securities may be exchanged for and/or converted will be set forth in the
applicable prospectus supplement. Such terms may include provisions for
conversion, either mandatory, at the option of the holder or at our option, in
which case the number of shares of class A common stock or preferred stock or
other securities to be received by the holders of debt securities would be
calculated as of a time and in the manner stated in the prospectus
supplement.
We may
issue debt securities that provide for an amount less than their stated
principal amount to be due and payable upon declaration of acceleration of their
maturity pursuant to the terms of the indenture. We will provide you with
information on the federal income tax considerations and other special
considerations applicable to any of these debt securities in the applicable
prospectus supplement.
If we
denominate the purchase price of any of the debt securities in a foreign
currency or currencies or a foreign currency unit or units, or if the principal
of and any premium and interest on any series of debt securities is payable in a
foreign currency or currencies or a foreign currency unit or units, we will
provide you with information on the restrictions, elections, general tax
considerations, specific terms and other information with respect to that issue
of debt securities and such foreign currency or currencies or foreign currency
unit or units in the applicable prospectus supplement.
Each debt
security will be represented by either one or more global securities registered
in the name of The Depository Trust Company, as Depositary, or a nominee of the
Depositary (we will refer to any debt security represented by a global debt
security as a book-entry debt security), or a certificate issued in definitive
registered form (we will refer to any debt security represented by a
certificated security as a certificated debt security), as described in the
applicable prospectus supplement. Except as described under “Global Debt
Securities and Book-Entry System” below, book-entry debt securities will not be
issuable in certificated form.
Certificated
Debt Securities
You may
transfer or exchange certificated debt securities at the trustee’s office or
paying agencies in accordance with the terms of the indenture. No service charge
will be made for any transfer or exchange of certificated debt securities, but
we may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with a transfer or
exchange.
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You may
transfer certificated debt securities and the right to receive the principal of,
premium and interest on certificated debt securities only by surrendering the
old certificate representing those certificated debt securities and either we or
the trustee will reissue the old certificate to the new holder or we or the
trustee will issue a new certificate to the new holder.
Global
Debt Securities and Book-Entry System
Each
global debt security representing book-entry debt securities will be deposited
with, or on behalf of, the Depositary, and registered in the name of the
Depositary or a nominee of the Depositary.
The
Depositary has indicated it intends to follow the following procedures with
respect to book-entry debt securities.
Ownership
of beneficial interests in book-entry debt securities will be limited to persons
that have accounts with the Depositary for the related global debt security,
whom we refer to as participants, or persons that may hold interests through
participants. Upon the issuance of a global debt security, the Depositary will
credit, on its book-entry registration and transfer system, the participants’
accounts with the respective principal amounts of the book-entry debt securities
represented by the global debt security beneficially owned by such participants.
The accounts to be credited will be designated by any dealers, underwriters or
agents participating in the distribution of the book-entry debt securities.
Ownership of book-entry debt securities will be shown on, and the transfer of
the ownership interests will be effected only through, records maintained by the
Depositary for the related global debt security (with respect to interests of
participants) and on the records of participants (with respect to interests of
persons holding through participants). The laws of some states may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. These laws may impair the ability to own, transfer or pledge
beneficial interests in book-entry debt securities.
So long
as the Depositary for a global debt security, or its nominee, is the registered
owner of that global debt security, the Depositary or its nominee, as the case
may be, will be considered the sole owner or holder of the book-entry debt
securities represented by such global debt security for all purposes under the
indenture. Except as described herein, beneficial owners of book-entry debt
securities will not be entitled to have securities registered in their names,
will not receive or be entitled to receive physical delivery of a certificate in
definitive form representing securities and will not be considered the owners or
holders of those securities under the indenture. Accordingly, to exercise any
rights of a holder under the indenture, each person beneficially owning
book-entry debt securities will have to rely on the procedures of the Depositary
for the related global debt security and, if that person is not a participant,
on the procedures of the participant through which that person owns its
interest.
We
understand, however, that under existing industry practice, the Depositary will
authorize the persons on whose behalf it holds a global debt security to
exercise certain rights of holders of debt securities, and the indenture will
provide that we, the trustee and our respective agents will treat as the holder
of a debt security the persons specified in a written statement of the
Depositary with respect to that global debt security for purposes of obtaining
any consents or directions required to be given by holders of the debt
securities pursuant to the indenture.
Unless
provided otherwise by the terms of any series of debt securities, we will make
payments of principal of, and premium and interest on book-entry debt securities
to the registered holder of the related global debt security. We, the trustee
and any other agent of ours or agent of the trustee will not have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a global debt
security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
54
We expect
that the Depositary, upon receipt of any payment of principal of, premium or
interest on a global debt security, will immediately credit participants’
accounts with payments in amounts proportionate to the respective amounts of
book-entry debt securities held by each participant as shown on the records of
the Depositary. We also expect that payments by participants to owners of
beneficial interests in book-entry debt securities held through those
participants will be governed by standing customer instructions and customary
practices, as is now the case with the securities held for the accounts of
customers in bearer form or registered in “street name,” and will be the
responsibility of those participants.
We will
issue certificated debt securities in exchange for each global debt security if
the Depositary is at any time unwilling or unable to continue as Depositary or
ceases to be a clearing agency registered under the Exchange Act, and a
successor Depositary registered as a clearing agency under the Exchange Act is
not appointed by us within 90 days. In addition, we may at any time and in our
sole discretion determine not to have any of the book-entry debt securities of
any series represented by one or more global debt securities and, in that event,
we will issue certificated debt securities in exchange for the global debt
securities of that series. Global debt securities will also be exchangeable by
the holders for certificated debt securities if an event of default with respect
to the book-entry debt securities represented by those global debt securities
has occurred and is continuing. Any certificated debt securities issued in
exchange for a global debt security will be registered in such name or names as
the Depositary shall instruct the trustee. We expect that such instructions will
be based upon directions received by the Depositary from participants with
respect to ownership of book-entry debt securities relating to such global debt
security.
We have
obtained the foregoing information in this section concerning the Depositary and
the Depositary’s book-entry system from sources we believe to be reliable. We
take no responsibility for the accuracy of the information or for the
Depositary’s performance of its obligations under the rules and regulations
governing its operations.
No
Protection in the Event of a Change in Control
Unless we
provide otherwise in the applicable prospectus supplement, the debt securities
will not contain any provisions which may afford holders of the debt securities
protection in the event we have a change in control or in the event of a highly
leveraged transaction (whether or not such transaction results in a change in
control).
Covenants
Unless we
provide otherwise in the applicable prospectus supplement, the debt securities
will not contain any restrictive covenants, including covenants restricting us
or any of our subsidiaries from incurring, issuing, assuming or guarantying any
indebtedness secured by a lien on any of our or our subsidiaries’ property or
capital stock, or restricting us or any of our subsidiaries from entering into
any sale and leaseback transactions.
Consolidation,
Merger and Sale of Assets
Unless we
provide otherwise in the applicable prospectus supplement, we may not
consolidate with or merge into, or convey, transfer or lease all or
substantially all of our properties and assets to, any person (a “successor
person”), and we may not permit any person to merge into, or convey, transfer or
lease its properties and assets substantially as an entirety to us,
unless:
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• the
successor person is a corporation, partnership, trust or other entity organized
and validly existing under the laws of any U.S. domestic jurisdiction and
expressly assumes our obligations on the debt securities and under the
indenture;
• immediately
after giving effect to the transaction, no event of default, and no event which,
after notice or lapse of time, or both, would become an event of default, shall
have occurred and be continuing under the indenture; and
• certain
other conditions are met.
Unless we
provide otherwise in the applicable prospectus supplement, “event of default”
will mean, with respect to any series of debt securities, any of the
following:
• default
in the payment of any interest upon any debt security of that series when it
becomes due and payable, and continuance of that default for a period of 60 days
(unless the entire amount of such payment is deposited by us with the trustee or
with a paying agent before the expiration of the 60-day period);
• default
in the payment of principal of or premium on any debt security of that series
within three business days of its maturity;
• default
in the deposit of any sinking fund payment, when and as due in respect of any
debt security of that series;
• default
in the performance or breach of any other covenant or warranty by us in the
indenture (other than a covenant or warranty that has been included in the
indenture solely for the benefit of a series of debt securities other than that
series), which default continues uncured for a period of 90 days after we
receive written notice from the trustee or we and the trustee receive written
notice from the holders of at least 33% in principal amount of the outstanding
debt securities of that series as provided in the indenture;
• certain
events of our bankruptcy, insolvency or reorganization;
• default
under any of our debt with an aggregate principal amount of $100.0 million
(including a default with respect to any debt security of a different series) or
the debt of our subsidiaries, if (1) such default results from the failure to
pay any such debt when it becomes due and (2) such debt is not discharged or
such acceleration is not rescinded or annulled within 30 days after written
notice to us by the holder or holders of such debt in the manner provided for in
the applicable debt instrument; and
• any
other event of default provided with respect to debt securities of that series
that is described in the applicable prospectus supplement accompanying this
prospectus.
No event
of default with respect to a particular series of debt securities (except as to
certain events of bankruptcy, insolvency or reorganization) will necessarily
constitute an event of default with respect to any other series of debt
securities. An event of default may also be an event of default under our bank
credit agreements or other debt securities in existence from time to time and
under certain guaranties by us of any subsidiary indebtedness. In addition,
certain events of default or an acceleration under the indenture may also be an
event of default under some of our other indebtedness outstanding from time to
time.
Unless we
provide otherwise in the applicable prospectus supplement, if an event of
default with respect to debt securities of any series at the time outstanding
occurs and is continuing (other than certain
56
Unless we
provide otherwise in the applicable prospectus supplement, the indenture will
provide that the trustee will be under no obligation to exercise any of its
rights or powers under the indenture at the request of any holder of outstanding
debt securities, unless the trustee receives indemnity satisfactory to it
against any loss, liability or expense. Subject to certain rights of the
trustee, the holders of a majority in principal amount of the outstanding debt
securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee or
exercising any trust or power conferred on the trustee with respect to the debt
securities of that series.
Unless we
provide otherwise in the applicable prospectus supplement, no holder of any debt
security of any series will have any right to institute any proceeding, judicial
or otherwise, with respect to the indenture or for the appointment of a receiver
or trustee, or for any remedy under the indenture, unless:
• that
holder has previously given to the trustee written notice of a continuing event
of default with respect to debt securities of that series; and
• the
holders of at least 33% in principal amount of the outstanding debt securities
of that series have made a written request, and offered reasonable indemnity, to
the trustee to institute such proceeding as trustee, and the trustee shall not
have received from the holders of a majority in principal amount of the
outstanding debt securities of that series a direction inconsistent with that
request and has failed to institute the proceeding within 60 days.
Notwithstanding
the foregoing, the holder of any debt security will have an absolute and
unconditional right to receive payment of the principal of, premium and any
interest on that debt security on or after the due dates expressed in that debt
security and to institute suit for the enforcement of payment.
The
indenture will require us, within 120 days after the end of our fiscal year, to
furnish to the trustee a certificate as to compliance with the indenture. The
indenture will provide that the trustee may withhold notice to the holders of
debt securities of any series of any default or event of default (except in
57
Modification
and Waiver
Unless we
provide otherwise in the applicable prospectus supplement, we and the trustee
may modify and amend the indenture with the consent of the holders of at least a
majority in principal amount of the outstanding debt securities of each series
affected by the modifications or amendments. We and the trustee may not make any
modification or amendment without the consent of the holder of each affected
debt security then outstanding if that amendment will:
• change
the amount of debt securities whose holders must consent to an amendment or
waiver;
• reduce
the rate of or extend the time for payment of interest (including default
interest) on any debt security;
• reduce
the principal of or premium on or change the fixed maturity of any debt security
or reduce the amount of, or postpone the date fixed for, the payment of any
sinking fund or analogous obligation with respect to any series of debt
securities;
• reduce
the principal amount of discount securities payable upon acceleration of
maturity;
• waive
a default in the payment of the principal of, premium or interest on any debt
security (except a rescission of acceleration of the debt securities of any
series by the holders of at least a majority in aggregate principal amount of
the then outstanding debt securities of that series and a waiver of the payment
default that resulted from that acceleration);
• make
the principal of or premium or interest on any debt security payable in currency
other than that stated in the debt security;
• make
any change to certain provisions of the indenture relating to, among other
things, the right of holders of debt securities to receive payment of the
principal of, premium and interest on those debt securities, the right of
holders to institute suit for the enforcement of any payment or the right of
holders to waive past defaults, the right of holders of a specified principal
amount of debt securities which are denominated in a foreign currency to be
deemed for the purposes of taking action under the indenture, the amounts of
U.S. dollars at the market exchange rate, certain terms regarding judgments in
foreign currencies or to amend the limitations described in this bullet point;
or
• waive
a redemption payment with respect to any debt security or change any of the
provisions with respect to the redemption of any debt securities.
Except
for certain specified provisions, the holders of at least a majority in
principal amount of the outstanding debt securities of any series may, on behalf
of the holders of all debt securities of that series, waive our compliance with
provisions of the indenture. The holders of a majority in principal amount of
the outstanding debt securities of any series may, on behalf of the holders of
all the debt securities of that series, waive any past default under the
indenture with respect to that series and its consequences, except a default in
the payment of the principal of, premium or any interest on any debt security of
that series; provided, however, that the holders of a majority in principal
amount of the outstanding debt securities of any series may rescind an
acceleration and its consequences, including any related payment default that
resulted from the acceleration.
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Subordination
Provisions
Holders
of subordinated debt securities should recognize that contractual provisions in
the indenture may prohibit us from making payments on those securities. Senior
subordinated debt securities are subordinate and junior in right of payment, to
the extent and in the manner stated in the indenture or any supplement thereto
to all of our senior indebtedness, as defined in the indenture, including all
debt securities we have issued and will issue under the indenture.
Unless
otherwise indicated in the applicable prospectus supplement, the indenture
defines the term “senior indebtedness” with respect to each respective series of
debt securities, unless the instrument creating such indebtedness or obligations
provides that they are subordinated or are not superior in right of payment to
such securities, to mean the principal, premium, if any, unpaid interest and all
fees and other amounts payable in connection with any debt for money borrowed
other than (1) debt incurred (a) with respect to certain elections under the
federal bankruptcy code, (b) debt to our subsidiaries, (c) debt to our
employees, (d) tax liability, and (e) certain trade payables, (2) all
obligations under interest rate, currency and commodity swaps, caps, floors,
collars, hedge arrangements, forward contracts or similar agreements and (3)
renewals, modifications and refunds of any such debt.
Unless
otherwise indicated in the applicable prospectus supplement, we may not pay
principal of, premium, of any, or interest on any subordinated debt securities
or defease, purchase, redeem or otherwise retire such securities
if:
• a
default in the payment of any principal, or premium, if any, or interest on any
senior indebtedness, occurs and is continuing or any other amount owing in
respect of any senior indebtedness is not paid when due; or
• any
other default occurs with respect to any senior indebtedness and the maturity of
such senior indebtedness is accelerated in accordance with its
terms,
unless
and until such default in payment or event of default has been cured or waived
and any such acceleration is rescinded or such senior indebtedness has been paid
in full in cash.
If there
is any payment or distribution of the assets of SunPower to creditors upon a
total or partial liquidation or a total or partial dissolution or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding,
holders of all present and future senior indebtedness (which will include
interest accruing after, or which would accrue but for, the commencement of any
bankruptcy, reorganization, insolvency, receivership or similar proceeding) are
entitled to receive payment in full before any payment or distribution, whether
in cash, securities or other property, in respect of the subordinated
indebtedness. In addition, unless otherwise indicated in the applicable
prospectus supplement, in any such event, payments or distributions which would
otherwise be made on subordinated debt securities will generally be paid to the
holders of senior indebtedness, or their representatives, in accordance with the
priorities existing among these creditors at that time until the senior
indebtedness is paid in full.
After
payment in full of all present and future senior indebtedness, holders of
subordinated debt securities will be subrogated to the rights of any holders of
senior indebtedness to receive any further payments or distributions that are
applicable to the senior indebtedness until all the subordinated debt securities
are paid in full. The indenture provides that the foregoing subordination
provisions may not be changed in a manner which would be adverse to the holders
of senior indebtedness without the consent of the holders of such senior
indebtedness.
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The
prospectus supplement delivered in connection with the offering of a series of
subordinated debt securities will set forth a more detailed description of the
subordination provisions applicable to any such debt securities.
If the
trustee under the indenture or any holders of the subordinated debt securities
receive any payment or distribution that is prohibited under the subordination
provisions, then the trustee or the holders will have to repay that money to the
holders of the senior indebtedness.
Even if
the subordination provisions prevent us from making any payment when due on the
subordinated debt securities of any series, we will be in default on our
obligations under that series if we do not make the payment when due. This means
that the trustee under the indenture and the holders of that series can take
action against us, but they will not receive any money until the claims of the
holders of senior indebtedness have been fully satisfied.
Defeasance
of Debt Securities and Certain Covenants in Certain Circumstances
Legal
Defeasance
Unless
the terms of the applicable series of debt securities provide otherwise, we may
be discharged from any and all obligations in respect of the debt securities of
any series (except for certain obligations to register the transfer or exchange
of debt securities of the series, to replace stolen, lost or mutilated debt
securities of the series, and to maintain paying agencies and certain provisions
relating to the treatment of funds held by paying agents). We will be so
discharged on the 91st day after the deposit with the trustee, in trust, of
money and/or U.S. government obligations or, in the case of debt securities
denominated in a single currency other than U.S. dollars, foreign government
obligations (as described at the end of this section), that, through the payment
of interest and principal in accordance with their terms, will provide money in
an amount sufficient in the opinion of a nationally recognized firm of
independent public accountants to pay and discharge each installment of
principal, premium and interest on and any mandatory sinking fund payments in
respect of the debt securities of that series on the stated maturity of such
payments in accordance with the terms of the indenture and those debt
securities.
This
discharge may occur only if, among other things, we have delivered to the
trustee an officers’ certificate and an opinion of counsel stating that we have
received from, or there has been published by, the U.S. Internal Revenue Service
a ruling or, since the date of execution of the indenture, there has been a
change in the applicable U.S. federal income tax law, in either case to the
effect that holders of the debt securities of such series will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of the
deposit, defeasance and discharge and will be subject to U.S. federal income tax
on the same amount and in the same manner and at the same times as would have
been the case if the deposit, defeasance and discharge had not
occurred.
Defeasance
of Certain Covenants
Unless
the terms of the applicable series of debt securities provide otherwise, upon
compliance with certain conditions, we may omit to comply with certain of the
restrictive covenants contained in the indenture, as well as any additional
covenants contained in a supplement to the indenture, a board resolution or an
officers’ certificate delivered pursuant to the indenture. The conditions
include:
• depositing
with the trustee money and/or U.S. government obligations or, in the case of
debt securities denominated in a single currency other than U.S. dollars,
foreign government obligations, that, through the payment of interest and
principal in accordance with their terms, will provide money in an amount
sufficient in the opinion of a nationally recognized firm of independent public
accountants to pay
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• such
deposit does not result in a breach or constitute a default under the indenture
or any other agreement to which we are a party;
• no
default or event of default with respect to the debt securities shall have
occurred and be continuing on the date of deposit or during the period ending 90
days after such date; and
• the
delivery to the trustee of an opinion of counsel to the effect that the holders
of the debt securities of that series will not recognize income, gain or loss
for U.S. federal income tax purposes as a result of the deposit and related
covenant defeasance and will be subject to U.S. federal income tax in the same
amount and in the same manner and at the same times as would have been the case
if the deposit and related covenant defeasance had not occurred.
Covenant
Defeasance and Events of Default
If we
elect, as described above, not to comply with certain covenants of the indenture
with respect to any series of debt securities, and the debt securities of that
series are declared due and payable because of the occurrence of any event of
default, the amount of money and/or U.S. government obligations or foreign
government obligations on deposit with the trustee will be sufficient to pay
amounts due on the debt securities of that series at the time of their stated
maturity but may not be sufficient to pay amounts due on the debt securities of
that series at the time of the acceleration resulting from the event of default.
However, we will remain liable for those payments.
“Foreign
government obligations” means, with respect to debt securities of any series
that are denominated in a currency other than U.S. dollars:
• direct
obligations of the government that issued or caused to be issued such currency
for the payment of which obligations its full faith and credit is pledged, which
are not callable or redeemable at the option of the issuer thereof;
or
• obligations
of a person controlled or supervised by or acting as an agency or
instrumentality of that government, the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by that
government, which are not callable or redeemable at the option of the issuer
thereof.
Governing
Law
The
indenture and the debt securities will be governed by, and construed in
accordance with, the laws of the State of New York.
DESCRIPTION
OF WARRANTS
We may
issue, either separately or together with other securities, warrants for the
purchase of any of the other types of securities that we may sell under this
prospectus.
The
warrants will be issued under warrant agreements to be entered into between us
and a bank or trust company, as warrant agent, all to be set forth in the
applicable prospectus supplement relating to any or all warrants in respect of
which this prospectus is being delivered. Copies of the form of agreement for
each warrant, which we refer to collectively as “warrant agreements,” including
the forms of certificates
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The
following description sets forth certain general terms and provisions of the
warrants to which any prospectus supplement may relate. The particular terms of
the warrants to which any prospectus supplement may relate and the extent, if
any, to which the general provisions may apply to the warrants so offered will
be described in the applicable prospectus supplement. To the extent that any
particular terms of the warrants, warrant agreements or warrant certificates
described in a prospectus supplement differ from any of the terms described
below, then the terms described below will be deemed to have been superseded by
that prospectus supplement. We encourage you to read the applicable warrant
agreement and certificate for additional information before you decide whether
to purchase any of our warrants.
General
The
prospectus supplement will describe the terms of the warrants in respect of
which this prospectus is being delivered, as well as the related warrant
agreement and warrant certificates, including the following, where
applicable:
• the
principal amount of, or the number of, securities, as the case may be,
purchasable upon exercise of each warrant and the initial price at which the
principal amount or number of securities, as the case may be, may be purchased
upon such exercise;
• the
designation and terms of the securities, if other than common stock, purchasable
upon exercise of the warrants and of any securities, if other than class A
common stock, with which the warrants are issued;
• the
procedures and conditions relating to the exercise of the warrants;
• the
date, if any, on and after which the warrants, and any securities with which the
warrants are issued, will be separately transferable;
• the
offering price, if any, of the warrants;
• the
date on which the right to exercise the warrants will commence and the date on
which that right will expire;
• if
applicable, a discussion of the material U.S. federal income tax considerations
applicable to the exercise of the warrants;
• whether
the warrants represented by the warrant certificates will be issued in
registered or bearer form and, if registered, where they may be transferred and
registered;
• call
provisions, if any, of the warrants;
• antidilution
provisions, if any, of the warrants; and
• any
other material terms of the warrants.
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The
description in the prospectus supplement will not necessarily be complete and
will be qualified in its entirety by reference to the warrant agreement and
warrant certificate relating to the warrants being offered.
Exercise
of Warrants
Each
warrant will entitle the holder to purchase for cash that principal amount of,
or number of, securities, as the case may be, at the exercise price set forth
in, or to be determined as set forth in, the applicable prospectus supplement
relating to the warrants. Unless otherwise specified in the applicable
prospectus supplement, warrants may be exercised at the corporate trust office
of the warrant agent or any other office indicated in the applicable prospectus
supplement at any time up to 5:00 p.m., New York City time, on the expiration
date set forth in the applicable prospectus supplement. After 5:00 p.m., New
York City time, on the expiration date, unexercised warrants will become void.
Upon receipt of payment and the warrant certificate properly completed and duly
executed, we will, as soon as practicable, issue the securities purchasable upon
exercise of the warrant. If less than all of the warrants represented by the
warrant certificate are exercised, a new warrant certificate will be issued for
the remaining amount of warrants.
Modification
of the Warrant Agreement
The
warrant agreements may permit us and the warrant agent, if any, without the
consent of the warrant holders, to supplement or amend the agreement in the
following circumstances:
• to
cure any ambiguity;
• to
correct or supplement any provision which may be defective or inconsistent with
any other provisions; or
• to
add new provisions regarding matters or questions that we and the warrant agent
may deem necessary or desirable and which do not adversely affect the interests
of the warrant holders.
No
Rights of Security Holder Prior to Exercise
Before
the exercise of their warrants, holders of warrants will not have any of the
rights of holders of the securities purchasable upon the exercise of the
warrants, and will not be entitled to:
• in
the case of warrants to purchase debt securities, payments of principal of, or
any premium or interest on, the debt securities purchasable upon exercise;
or
• in
the case of warrants to purchase equity securities, the right to vote or to
receive dividend payments or similar distributions on the securities purchasable
upon exercise.
Exchange
of Warrant Certificates
Warrant
certificates will be exchangeable for new warrant certificates of different
denominations at the corporate trust office of the warrant agent or any other
office indicated in the applicable prospectus supplement.
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PLAN
OF DISTRIBUTION
We may
sell any of the securities being offered hereby in one or more of the following
ways from time to time:
• through
agents;
• through
underwriters or dealers;
• in
short or long transactions;
• in
“at the market offerings,” within the meaning of Rule 415(a)(4) of the
Securities Act, to or through a market maker or into an existing trading market,
on an exchange or otherwise;
• directly
to investors; or
• through
a combination of these methods of sale.
We will
set forth in a prospectus supplement the terms of the offering of securities,
including:
• the
name or names of any agents, underwriters or dealers;
• the
purchase price of the securities being offered and the proceeds we will receive
from the sale;
• any
over-allotment options under which underwriters may purchase additional
securities from us;
• any
agency fees or underwriting discounts or commissions and other items
constituting agents’ or underwriters’ compensation;
• the
public offering price;
• any
discounts or concessions allowed or reallowed or paid to dealers;
and
• any
securities exchanges on which such securities may be listed.
We may
enter into derivative transactions with third parties or sell securities not
covered by this prospectus to third parties in privately negotiated transactions
from time to time. If the applicable prospectus supplement indicates, in
connection with those derivative transactions, such third parties (or affiliates
of such third parties) may sell securities covered by this prospectus and the
applicable prospectus supplement, including in short sale transactions. If so,
such third parties (or affiliates of such third parties) may use securities
pledged by us or borrowed from us or others to settle those sales or to close
out any related open borrowings of stock, and may use securities received from
us in settlement of those derivative transactions to close out any related open
borrowings of stock. The third parties (or affiliates of such third parties) in
such sale transactions will be underwriters and will be identified in an
applicable prospectus supplement (or a post-effective amendment).
We may
loan or pledge securities to a financial institution or other third party that
in turn may sell the securities using this prospectus and an applicable
prospectus supplement. Such financial institution or third party may transfer
its short position to investors in our securities or in connection with a
simultaneous offering of other securities offered by this
prospectus.
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Underwriters,
Agents and Dealers
We may
designate agents who agree to use their reasonable efforts to solicit purchases
for the period of their appointment or to sell our securities for which they
have been appointed an agent on a continuing basis.
If we use
underwriters for a sale of our securities, the underwriters will acquire the
securities for their own account. The underwriters may resell the securities
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale.
Underwriters
may offer securities to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The obligations of the underwriters to purchase
our securities will be subject to the conditions set forth in the applicable
underwriting agreement. The underwriters may change from time to time any
initial public offering price and any discounts or concessions the underwriters
allow or reallow or pay to dealers. We may use underwriters with whom we have a
material relationship. We will describe in an applicable prospectus supplement
the name of the underwriter and the nature of any such
relationship.
If a
dealer is utilized in the sale of securities in respect of which this prospectus
is delivered, we will sell such securities to the dealer as principal. The
dealer may then resell such securities to the public at varying prices to be
determined by such dealer at the time of resale.
Underwriters,
dealers and agents that participate in the distribution of our securities may be
underwriters as defined in the Securities Act, and any discounts or commissions
they receive from us and any profit on their resale of the securities may be
treated as underwriting discounts and commissions under the Securities Act. We
will identify in the applicable prospectus supplement any underwriters, dealers
or agents and will describe their compensation. We may have agreements with the
underwriters, dealers and agents to indemnify them against specified civil
liabilities, including liabilities under the Securities Act. Underwriters,
dealers and agents may engage in transactions with or perform services for us or
our subsidiaries in the ordinary course of their businesses.
Stabilization
Activities
In
connection with an offering through underwriters, an underwriter may purchase
and sell securities in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Shorts sales involve the sale by the underwriters of a greater
number of securities than they are required to purchase in the offering.
“Covered” short sales are sales made in an amount not greater than the
underwriters’ option to purchase additional securities from us in the offering,
if any. If the underwriters have an over-allotment option to purchase additional
securities from us, the underwriters may close out any covered short position by
either exercising their over-allotment option or purchasing securities in the
open market. In determining the source of securities to close out the covered
short position, the underwriters may consider, among other things, the price of
securities available for purchase in the open market as compared to the price at
which they may purchase securities through the over-allotment option. “Naked”
short sales are any sales in excess of such option or where the underwriters do
not have an over-allotment option. The underwriters must close out any naked
short position by purchasing securities in the open market. A naked short
position is more likely to be created if the underwriters are concerned that
there may be downward pressure on the price of the securities in the open market
after pricing that could adversely affect investors who purchase in the
offering.
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Accordingly,
to cover these short sales positions or to otherwise stabilize or maintain the
price of the securities, the underwriters may bid for or purchase securities in
the open market and may impose penalty bids. If penalty bids are imposed,
selling concessions allowed to syndicate members or other broker-dealers
participating in the offering are reclaimed if securities previously distributed
in the offering are repurchased, whether in connection with stabilization
transactions or otherwise. The effect of these transactions may be to stabilize
or maintain the market price of the securities at a level above that which might
otherwise prevail in the open market. The imposition of a penalty bid may also
effect the price of the securities to the extent that it discourages resale of
the securities. The magnitude or effect of any stabilization or other
transactions is uncertain. These transactions may be effected on The Nasdaq
Global Market or otherwise and, if commenced, may be discontinued at any
time.
Any
underwriters who are qualified market makers on The Nasdaq Global Market may
engage in passive market making transactions in the securities on The Nasdaq
Global Market in accordance with Rule 103 of Regulation M. Passive market makers
must comply with applicable volume, price and other limitations of Rule
103.
Direct
Sales
We may
also sell securities directly to one or more purchasers without using
underwriters or agents. In this case, no agents, underwriters or dealers would
be involved. We may sell securities upon the exercise of rights that we may
issue to our securityholders. We may also sell the securities directly to
institutional investors or others who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any sale of those
securities.
Trading
Markets and Listing of Securities
Unless
otherwise specified in an applicable prospectus supplement, each class or series
of securities will be a new issue with no established trading market, other than
our class A common stock, which is listed on The Nasdaq Global Market. We may
elect to list any other class or series of securities on any exchange, but we
are not obligated to do so. It is possible that one or more underwriters may
make a market in a class or series of securities, but the underwriters will not
be obligated to do so and may discontinue any market making at any time without
notice. We cannot give any assurance as to the liquidity of the trading market
for any of the securities.
EXPERTS
The
financial statements of SunPower Corporation as of December 31, 2004 and 2005
and for the year ended December 31, 2003, the period from January 1, 2004 to
November 8, 2004, the period from November 9, 2004 to December 31, 2004 and the
year ended December 31, 2005 incorporated in this prospectus by reference to
SunPower’s annual report on Form 10-K for the fiscal year ended December 31,
2005 have been so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and
accounting.
The
consolidated financial statements of PowerLight Corporation appearing in
SunPower Corporation’s current report on Form 8-K/A dated January 25, 2007
included therein, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein, and are
incorporated herein by reference in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
LEGAL
MATTERS
66
Unless
otherwise indicated in an applicable supplement to this prospectus, the validity
of the securities will be passed upon for us by Jones Day, Palo Alto, California
and for any underwriters or agents by counsel named in the applicable prospectus
supplement.
WHERE
YOU CAN FIND MORE INFORMATION
Available
Information
We file
annual, quarterly and current reports, proxy statements and other information
with the SEC. You may read and copy any of this information at the SEC’s public
reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the
SEC at (800) SEC-0330 or (202) 942-8090 for further
information on the public reference room. The SEC also maintains an Internet
website that contains reports, proxy statements and other information regarding
issuers, including us, who file electronically with the SEC. The address of that
site is www.sec.gov. The information contained on the SEC’s website is expressly
not incorporated by reference into this prospectus.
Our SEC
filings are also available on our website at www.sunpowercorp.com, although the
information on our website is expressly not incorporated by reference into, and
does not constitute a part of, this prospectus.
This
prospectus contains summaries of provisions contained in some of the documents
discussed in this prospectus, but reference is made to the actual documents for
complete information. All of the summaries are qualified in their entirety by
the actual documents. Copies of some of the documents referred to in this
prospectus have been filed or will be filed or incorporated by reference as
exhibits to the registration statement of which this prospectus is a part. If
any contract, agreement or other document is filed or incorporated by reference
as an exhibit to the registration statement, you should read the exhibit for a
more complete understanding of the document or matter involved.
Incorporation
of Documents by Reference
The SEC
allows us to incorporate by reference information into this prospectus. This
means we can disclose information to you by referring you to another document we
filed with the SEC. We will make those documents available to you without charge
upon your oral or written request. Requests for those documents should be
directed to SunPower Corporation, 3939 North First Street, San Jose, California
95134, Attention: Corporate Secretary. In addition, you may obtain copies of
this information by sending an e-mail to publicrelations@sunpowercorp.com or by
calling (408) 240-5588. This prospectus incorporates by reference the
following documents:
• Our
annual report on Form 10-K for the fiscal year ended December 31, 2005 filed on
March 24, 2006;
• Our
quarterly report on Form 10-Q for the quarter ended April 2, 2006 filed on May
16, 2006;
• Our
quarterly report on Form 10-Q for the quarter ended July 2, 2006 filed on August
16, 2006;
• Our
quarterly report on Form 10-Q for the quarter ended October 1, 2006 filed on
November 13, 2006;
• Our
current reports on Form 8-K filed on March 14, 2006, March 24, 2006 (both of the
current reports on Form 8-K filed on this day), May 1, 2006 (only the
information reported under Item 1.01 is incorporated herein by reference), July
10, 2006 (only the information reported under Item 1.01 is
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• the
description of the class A common stock included in the Form 8-A filed on
October 31, 2005, and any amendment or report we may file with the SEC for the
purpose of updating such description.
We are
also incorporating by reference additional documents we may file pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act after the date
of this prospectus until the offering of the particular securities covered by an
applicable prospectus supplement has been completed, other than any portion of
the respective filings furnished, rather than filed, under the applicable SEC
rules.
This
additional information is a part of this prospectus from the date of filing of
those documents.
Any
statements made in this prospectus or in a document incorporated or deemed to be
incorporated by reference into this prospectus will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus or in any other subsequently filed document which
is also incorporated or deemed to be incorporated into this prospectus modifies
or supersedes the statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.
The
information relating to us contained in this prospectus should be read together
with the information in the documents incorporated by reference
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