ESLRD Evergreen Solar, Inc. (MM)

As filed with the Securities and Exchange Commission on January 26, 2011

Registration No. 333-171001

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Post-Effective

Amendment No. 1

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

EVERGREEN SOLAR, INC.

(Exact name of Registrant as specified in its charter)

 

 

 

 

 

138 Bartlett Street

Marlboro, Massachusetts 01752

(508) 357-2221

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

 

 

Michael El-Hillow

President and Chief Executive Officer

Evergreen Solar, Inc.

138 Bartlett Street

Marlboro, Massachusetts 01752

(508) 357-2221

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

 

 

 

Approximate date of commencement of proposed sale to the public:   As soon as practicable after the effectiveness of this registration statement.

 

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.   o

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

SUBJECT TO COMPLETION, DATED JANUARY 26, 2011

PROSPECTUS

 

EVERGREEN SOLAR, INC.

 

Offer to Exchange

up to $100,000,000 of our 4.0% Convertible Subordinated Additional Cash Notes due 2020

for up to $200,000,000 of our 4.0% Senior Convertible Notes due 2013

(CUSIP No. 30033RAC2)

and

up to $165,000,000 of our 7.5% Convertible Senior Secured Notes due 2017

for up to $165,000,000 of our 13.0% Convertible Senior Secured Notes due 2015

(CUSIP No. 30033RAD0)

and

Consent Solicitation

 

 

We are offering to exchange (i) an aggregate principal amount of up to $100,000,000 of new 4.0% Convertible Subordinated Additional Cash Notes due 2020, or the new 4% notes, for an aggregate principal amount of up to $200,000,000 of 4.0% Senior Convertible Notes due 2013, or the existing 4% notes, and (ii) an aggregate principal amount of up to $165,000,000 of new 7.5% Convertible Senior Secured Notes due 2017, or the new 7.5% notes, for an aggregate principal amount of up to $165,000,000 of 13.0% Convertible Senior Secured Notes due 2015, or the existing 13% notes. You may tender all, some or none of your existing 4% notes or your existing 13% notes, subject, in the case of the 4% exchange offer, to the modified “Dutch auction” procedures discussed below. The amount of new 4% notes to be issued will be determined by the modified “Dutch auction” procedures described below. In exchange for each $1,000 principal amount of existing 13% notes that is tendered and accepted, holders of existing 13% notes will receive $1,000 principal amount of our new 7.5% notes.

 

The exchange offer for the existing 4% notes is being conducted as a modified “Dutch auction” pursuant to which holders of such notes will have the opportunity to specify an exchange ratio at which they would be willing to exchange such notes for new 4% notes. Holders must submit tenders in the range from $425 principal amount (referred to as the 4% minimum exchange ratio) to $500 principal amount of new 4% notes that would be issued for each $1,000 principal amount of existing 4% notes surrendered for exchange by such holder. If the 4% clearing exchange ratio is $425, we will issue $85,000,000 aggregate principal amount of new 4% notes, and if the 4% clearing exchange ratio is $500, we will issue $100,000,000 aggregate principal amount of new 4% notes, in each case assuming that $200,000,000 principal amount of existing 4% notes are tendered.

 

We will accept existing 4% notes tendered beginning with the 4% minimum exchange ratio and continuing in order of increasing increments of $2.50 in new 4% notes per $1,000 principal amount of existing 4% notes, until the aggregate principal amount of accepted existing 4% notes tendered equals $200,000,000 (including any subsequent increase in such amount, referred to as the 4% maximum amount). The highest exchange ratio specified with respect to existing 4% notes accepted for exchange in this process is referred to as the 4% clearing exchange ratio. If the aggregate principal amount of existing 4% notes tendered in this exchange offer exceeds the 4% maximum amount, all existing 4% notes tendered at or below the 4% clearing exchange ratio will be accepted on a pro rata basis up to the 4% maximum amount, and existing 4% notes tendered above the 4% clearing exchange ratio will be rejected. If the aggregate principal amount of existing 4% notes tendered in this exchange offer is less than the 4% maximum amount, we will accept all existing 4% notes tendered, and the highest exchange ratio specified with respect to any existing 4% notes tendered will be the 4% clearing exchange ratio. All existing 4% notes tendered that we accept will be paid in new 4% notes based on the same 4% clearing exchange ratio. We reserve the right, but are not obligated, to increase the 4% maximum amount.

 

The exchange offer relating to the existing 4% notes is referred to in this prospectus as the 4% exchange offer, the exchange offer relating to the existing 13% notes is referred to in this prospectus as the 13% exchange offer, and they are collectively referred to as the exchange offers.

 

In all cases, we will make appropriate adjustments to avoid exchanges of existing notes in a principal amount other than $1,000 and integral multiples of $1,000 and issuances of new 4% notes and new 7.5% notes in a principal amount other than $1,000 or integral multiples of $1,000. The aggregate principal amount of existing 4% notes accepted from any holder that is subject to proration will be rounded up to the next $1,000 and the aggregate principal amount of new notes to be issued to any holder in the exchange offers will be rounded down to the nearest $1,000. Any fractional portion of new notes will be paid in cash.

 

All holders whose existing notes are validly tendered and accepted will also receive a cash payment equal to the accrued and unpaid interest on their existing notes accepted for exchange from the last applicable interest payment date to but excluding the settlement date.

 

As part of the exchange offers, we are soliciting the consent of holders of the requisite principal amount outstanding of our existing 13% notes necessary to amend certain terms and conditions of the indenture governing the existing 13% notes (referred to as the consent solicitation). The nature and extent of the proposed amendments will depend on whether we receive the consent of holders of more than fifty percent but less than seventy-five percent of the outstanding principal amount of the existing 13% notes or the consent of holders of at least seventy-five percent of the outstanding principal amount of the existing 13% notes. If we receive the consent of holders of more than fifty percent but less than seventy-five percent of the outstanding principal amount of the existing 13% notes, the proposed amendments will permit us to incur the indebtedness represented by the new 7.5% notes, grant a lien in favor of the holders of the new 7.5% notes and permit the existing 13% notes and the new 7.5% notes to be ratably secured by first-priority liens granted by us and the guarantors on substantially all assets owned by us and the guarantors, other than Excluded Property. If we receive the consent of holders of at least seventy-five percent of the outstanding principal amount of the existing 13% notes, the proposed amendments would release the security interest and all of the collateral securing our obligations under the existing 13% notes, terminate the existing collateral documents and eliminate many of the restrictive covenants and certain events of default in the indenture governing the existing 13% notes. Holders may not deliver consents to the proposed amendments without tendering their existing 13% notes, and holders may not tender their existing 13% notes without delivering consents.

 

The exchange offers and consent solicitation will expire at 11:59 p.m., New York City time, on February 9, 2011. We may extend the expiration date and time of either or both the exchange offers and consent solicitation, and such applicable date and time shall be referred to as the expiration date. We have called a special meeting of our stockholders to be held on January 31, 2011 to approve the issuance of the exchange consideration in these exchange offers under the applicable provisions of Nasdaq Marketplace Rule 5635 and to increase the authorized shares of our common stock (referred to as the special meeting). We intend to adjourn the meeting and reconvene it on February 9, 2011. You may withdraw existing 4% notes and existing 13% notes, or, collectively, the existing notes, tendered in the applicable exchange offer at any time prior to the expiration date. Consents may be revoked at any time prior to the expiration date. Consents may be revoked only by withdrawing the related existing 13% notes tendered in the 13% exchange offer and the withdrawal of any existing 13% notes will automatically constitute a revocation of the related consents.

 

Any note withdrawn pursuant to the terms of these exchange offers shall not thereafter be considered tendered for any purpose of this prospectus unless and until such note is again tendered pursuant to these exchange offers. Existing notes not exchanged in the exchange offers will be returned to the tendering holder at our expense promptly after the expiration or termination of the exchange offers.

 

Our common stock is currently listed on The Nasdaq Capital Market under the symbol “ESLRD.” We submitted an application to Nasdaq to move our common stock from The Nasdaq Global Market to The Nasdaq Capital Market and the move became effective on December 29, 2010. We implemented a 1-for-6 reverse stock split, which became effective on January 1, 2011, and 20 trading days after January 3, 2011, our symbol will revert to “ESLR.” The last reported sale price of our common stock, giving effect to the reverse split, on The Nasdaq Capital Market on January 25, 2011 was $2.53 per share. We do not intend to list either the new 4% notes or the new 7.5% notes on any national securities exchange or include them in any automated quotation system.

 

See “ Risk Factors ” beginning on page 26 for a discussion of risk factors you should consider before deciding to participate in either exchange offer . Neither we, our officers, our board of directors, the dealer manager, the exchange agent, the information agent nor any other person authorized by us is making any recommendation as to whether or not you should tender your notes for exchange pursuant to the exchange offers or deliver a consent pursuant to the consent solicitation.

 

The amounts of our existing 4% notes that are exchanged in the 4% exchange offer may be prorated as set forth herein. See “Description of the Exchange Offers and Consent Solicitation — Proration With Respect to Existing 4% Notes.” Holders should therefore tender the maximum amount of existing 4% notes that they wish to be accepted. We intend to promptly return tendered existing 4% notes which may not be not accepted due to proration to the holders thereof.

 

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. Any representation to the contrary is a criminal offense.

 

The dealer manager for the exchange offers and consent solicitation is:

 

Lazard Capital Markets

 

The date of this prospectus is          .

 

TABLE OF CONTENTS

 

 

 

The information contained or incorporated by reference in this prospectus is part of a registration statement we filed with the U.S. Securities and Exchange Commission (“SEC”). You should rely only on the information and representations contained or incorporated by reference in this prospectus. Neither we, our officers, our board of directors, the dealer manager, the exchange agent, the information agent nor the trustee has authorized any other person to provide you with different information. You should not assume that the information appearing in this prospectus is accurate as of any date other than the date on the front cover of this prospectus. You should not assume that the information contained in the documents incorporated by reference in this prospectus is accurate as of any date other than the respective dates of those documents. Our business, financial condition, results of operations and prospects may have changed since that date. We are not making an offer of these securities in places where we have made good faith efforts to comply with state statutes but have been prohibited by administrative or judicial action from making offers and sales.

 

 

This prospectus incorporates important business and financial information about Evergreen Solar, Inc. that is not included or delivered with this prospectus. Such information is available without charge to holders of existing 4% notes and existing 13% notes upon written or oral request made to the office of the Corporate Secretary, Evergreen Solar, Inc., 138 Bartlett Street, Marlboro, Massachusetts 01752 (Telephone (508) 357-2221). To obtain timely delivery of any requested information, holders of existing 4% notes and existing 13% notes must make any request no later than February 2, 2011 or the date that is no later than five business days prior to the expiration of the exchange offers.

 

This prospectus, and the documents incorporated by reference herein, contain forward-looking statements regarding management’s expectations, beliefs, strategies, goals, outlook and other non-historical matters. They may often be identified with such words as “we expect,” “we believe,” “we anticipate” or similar indications of future expectations. These statements are neither promises nor guarantees and involve risks and uncertainties. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to, statements regarding:

 

 

 

 

 

 

 

There are numerous risks and uncertainties which could cause our actual results to differ materially from such forward-looking statements, including, for example:

 

 

 

 

These and additional risks and uncertainties described under “Risk Factors” are among other risks and uncertainties that could cause forward looking statements to be incorrect and may have a material adverse effect upon our business, results of operations and financial condition. We caution readers not to place undue reliance on any forward-looking statements contained in this prospectus, the documents incorporated by reference herein or any “free writing prospectus” we authorize to be delivered to you. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update any such statements, except as otherwise required by applicable law.

 

We own or have rights to trademarks or trade names that we use in conjunction with the operation of our business. Each trademark, trade name or service mark of any other company appearing in this prospectus or any accompanying prospectus supplement belongs to its holder. Use or display by us of other parties’ trademarks, trade names or service marks is not intended to and does not imply a relationship with, or endorsement or sponsorship by us of, the trademark, trade name or service mark owner.

 

Evergreen Solar, Inc. is subject to the information requirements of the Securities Exchange Act of 1934, or the Exchange Act, and in accordance with the Exchange Act, we file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Our SEC filings are also available to the public from the SEC’s website at http://www.sec.gov.

 

Evergreen Solar, Inc. has a website located at http://www.evergreensolar.com. The information on this website is not incorporated by reference into this prospectus or any prospectus supplement and you should not consider it part of this prospectus or any prospectus supplement.

The letter of transmittal and consent and all correspondence in connection with the exchange offers and consent solicitation should be sent or delivered by each holder of existing 4% notes or existing 13% notes, or a beneficial owner’s broker, dealer, commercial bank, trust company or other nominee, to the exchange agent at its address or facsimile number set forth below.

 

Exchange Agent:

 

U.S. Bank National Association

 

       

 

 

For Information Call:

800-934-6802

 

Questions concerning tender or consent procedures and requests for additional copies of this prospectus or the letter of transmittal and consent or any of the other accompanying documents may be directed to the information agent at the address and telephone number set forth below.

 

Information Agent:

 

The Proxy Advisory Group, LLC ^®

18 East 41st Street, Suite 2000

New York, New York 10017

 

Please Call (212) 616-2180

 

Questions regarding the terms of the exchange offers and consent solicitation should be directed to the dealer manager at the address and telephone number set forth below.

 

Dealer Manager

 

Lazard Capital Markets LLC

30 Rockefeller Plaza

New York, New York 10020

Attention: Susan Schwab

Telephone: (212) 632-1960

 

This prospectus “incorporates by reference” certain information we file with the SEC. The information incorporated by reference is an important part of this prospectus. The incorporated documents contain significant information about us, our business and our finances. Any statement contained in a document which is incorporated by reference into this prospectus is automatically updated and superseded if information contained in this prospectus, or information that we later file with the SEC, modifies or replaces this information. We incorporate by reference the following documents filed with the SEC:

 

 

 

 

 

 

 

We will provide without charge to each person to whom a prospectus is delivered, on written or oral request of that person, a copy of any or all of the documents we are incorporating by reference into this prospectus, other than exhibits to those documents unless those exhibits are specifically incorporated by reference into those documents. A written request should be addressed to:

 

Evergreen Solar, Inc.

138 Bartlett Street

Marlboro, Massachusetts 01752

Attention: Corporate Secretary.

 

To obtain timely delivery of any requested information, holders of existing 4% notes and existing 13% notes must make any request no later than February 2, 2011 or the date that is no later than five business days prior to the expiration of the exchange offers.

 

This prospectus is part of a registration statement we filed with the SEC. We have incorporated exhibits into the registration statement. You should read the exhibits carefully for provisions that may be important to you.

 

You should rely only on the information incorporated by reference or provided in this prospectus or any prospectus supplement. We have not authorized anyone to provide you with different or additional information. We are not making an offer of these securities in any state where we have made good faith efforts to comply with state statutes but have been prohibited by administrative or judicial action from making the offer. You should not assume that the information in this prospectus or in the documents incorporated by reference is accurate as of any date other than the date on the front of this prospectus or the date of the applicable documents.

 

SUMMARY

	•	the exchange offers and consent solicitation described in this prospectus;

	•	implementing the 1-for-6 reverse stock split previously approved by our stockholders at our annual meeting on July 27, 2010, which became effective on January 1, 2011. The primary objective of the 1-for-6 reverse stock split is to raise the per share trading price of our common stock. The Company believes that this will, among other things, better enable us to maintain the listing requirements of our common stock under Nasdaq Marketplace Rules and facilitate higher levels of institutional stock ownership, as investment policies of many institutional investors require minimum securities price points; and

	•	increasing our authorized shares of common stock from 120,000,000 shares to 240,000,000 shares in order to ensure that we have sufficient shares available for future issuances.

	•	approximately $15 million of costs associated with employee severance and out placement services, facility decommissioning and other costs required to close the facility;

	•	non-cash charges of approximately $340 million associated primarily with the write-off of existing building, facilities and equipment of the Devens facility; and

	•	approximately $150 million of intangible and cash-related prepayments associated with various silicon contracts are under review to determine whether additional non-cash charges will be required.

 

THE EXCHANGE OFFERS AND CONSENT SOLICITATION

Offeror		Evergreen Solar, Inc.

The Exchange Offers		We are offering to exchange (i) an aggregate principal amount of up to $100,000,000 of new 4% notes for an aggregate principal amount of up to $200,000,000 of existing 4% notes and (ii) an aggregate principal amount of up to $165,000,000 of new 7.5% notes for an aggregate principal amount of up to $165,000,000 of existing 13% notes. As of the date of this prospectus, there are $249,207,000 aggregate principal amount of existing 4% notes and $165,000,000 aggregate principal amount of existing 13% notes outstanding. You may tender all, some or none of your existing 4% notes or your existing 13% notes, subject, in the case of the 4% exchange offer, to the modified “Dutch auction” procedures discussed below. The amount of new 4% notes to be issued will be determined by the modified “Dutch auction” procedures described below. In exchange for each $1,000 principal amount of existing 13% notes that is tendered and accepted, holders of existing 13% notes will receive $1,000 principal amount of our new 7.5% notes. We refer to the existing 4% notes and the existing 13% notes, collectively, as the existing notes and to the new 4% notes and the new 7.5% notes, collectively, as the new notes.

Modified “Dutch Auction” Procedures for 4% Exchange Offer		The 4% exchange offer is being conducted as a modified “Dutch auction” pursuant to which holders of existing 4% notes will have the opportunity to specify an exchange ratio at which they would be willing to exchange existing 4% notes for new 4% notes. Holders must submit tenders in the range from $425 principal amount (referred to as the 4% minimum exchange ratio) to $500 principal amount of new 4% notes that would be issued for each $1,000 principal amount of existing 4% notes surrendered for exchange by each holder. If the 4% clearing exchange ratio is $425, we will issue $85,000,000 aggregate principal amount of new 4% notes, and if the 4% clearing exchange ratio is $500, we will issue $100,000,000 aggregate principal amount of new 4% notes, in each case assuming that $200,000,000 principal amount of existing 4% notes are tendered.
		We will accept existing 4% notes tendered beginning with the 4% minimum exchange ratio and continuing in order of increasing increments of $2.50 in new 4% notes per $1,000 principal amount of existing 4% notes, until the aggregate principal amount of accepted existing 4% notes tendered equals $200,000,000 (including any subsequent increase in such amount, referred to as the 4% maximum amount). The highest exchange ratio specified with respect to existing 4% notes accepted for exchange in this process is referred to as the 4% clearing exchange ratio. If the aggregate principal amount of existing 4% notes tendered in the 4% exchange offer exceeds the 4% maximum amount, all existing 4% notes

		tendered at or below the 4% clearing exchange ratio will be accepted on a pro rata basis up to the 4% maximum amount, and existing 4% notes tendered above the 4% clearing exchange ratio will be rejected. If the aggregate principal amount of existing 4% notes tendered in this exchange offer is less than the 4% maximum amount, we will accept all existing 4% notes tendered, and the highest exchange ratio specified with respect to any existing 4% notes tendered will be the 4% clearing exchange ratio. All existing 4% notes tendered that we accept will be paid in new 4% notes based on the same 4% clearing exchange ratio. We reserve the right, but are not obligated, to increase the 4% maximum amount.

Deciding Whether to Participate in the Exchange Offers		Neither we, our officers, our board of directors, the dealer manager, the exchange agent nor the information agent is making any recommendation as to whether you should tender your existing notes for exchange pursuant to the exchange offers or deliver a consent pursuant to the consent solicitation. Further, neither we nor they have authorized anyone to make any such recommendation. Accordingly, you must make your own determination as to whether to tender your existing notes and, if so, the aggregate principal amount of existing notes to tender, in the case of existing 4% notes, the exchange ratio at which to tender your notes. You should read this prospectus and the letter of transmittal and consent and consult with your financial, legal and tax advisors, if any, to make that decision. In particular, you should know that there are certain significant adverse tax consequences that could result from the exchange of existing notes or the holding, conversion or other disposition of the new notes. Investors considering the exchange of existing notes for new notes should discuss the tax consequences with their own tax advisors. See “Material U.S. Federal Income Tax Considerations.”

The Consent Solicitation		As part of the 13% exchange offer, we are soliciting the consent of holders of the requisite principal amount outstanding of the existing 13% notes necessary to amend certain terms and conditions of the indenture governing the existing 13% notes. For a description of the proposed amendments to the indenture governing the existing 13% notes, see “Description of the Proposed Amendments.” Holders of existing 13% notes may not deliver consents to the proposed amendments without tendering their existing 13% notes for exchange in the 13% exchange offer, nor may they tender their existing 13% notes in the 13% exchange offer without also delivering their consents to the proposed amendments. In connection with a valid tender of existing 13% notes, the completion, execution and delivery of the accompanying letter of transmittal and consent by a holder of existing 13% notes, or the electronic transmittal through The Depository Trust Company’s, or DTC, Automated Tender Offer Program system, or ATOP, which binds holders of existing 13% notes to the terms of the letter of transmittal and consent, will constitute the delivery of consents with respect to the tendered notes.

Purpose of the Exchange Offers and Consent Solicitation		The purpose of the exchange offers is to substantially reduce our outstanding indebtedness and annual interest expense, exchange a portion of our existing debt for new debt with longer maturities

		and create a capital structure that we believe is more likely to cause the holders of our convertible debt to convert into common stock (which would further accomplish our long term goal of substantially reducing outstanding debt). The purpose of the consent solicitation is to adopt the proposed amendments. If we receive the consent of holders of more than fifty percent but less than seventy-five percent of the outstanding principal amount of the existing 13% notes, the proposed amendments will:

		• permit us to incur the indebtedness represented by the new 7.5% notes;

		• grant a lien in favor of the holders of the new 7.5% notes; and

		• permit the existing 13% notes and the new 7.5% notes to be ratably secured by first-priority liens granted by us and the guarantors on substantially all assets owned by us and the guarantors, other than Excluded Property.

		If we receive the consent of holders of at least seventy-five percent of the outstanding principal amount of the existing 13% notes, the proposed amendments will:

		• release the security interest and all of the collateral securing our obligations under the existing 13% notes;

		• terminate the existing collateral documents; and

		• eliminate many of the restrictive covenants and certain events of default in the indenture governing the existing 13% notes.

Amendments		If we receive the consent of holders of more than fifty percent but less than seventy-five percent of the outstanding principal amount of the existing 13% notes, the proposed amendments will:

		• amend the provision titled “Limitation on Debt and Disqualified or Preferred Stock” by permitting the incurrence of the new 7.5% notes;

		• amend the provision titled “Limitation on Liens” by permitting the grant of a first priority perfected Lien in favor of the holders of the new 7.5% notes;

		• amend the provision titled “Limitation on Investments and Restricted Payments” to provide that the new 7.5% notes are subject to the restrictions set forth therein;

		• amend the provision titled “Limitation on Investments and Restricted Payments” to provide that payments in cash are permitted to satisfy any interest payments payable upon conversion of the new 7.5% notes;

		• if we did not receive approval from our stockholders at the special meeting to increase our authorized shares of common stock to 240,000,000 shares, amend the provision titled “Limitation on Investments and Restricted Payments” to provide that if we do not then have a sufficient number of authorized and unissued shares that have not been reserved for other purposes, payments

		in cash are permitted to satisfy any coupon make whole payments payable upon conversion of the new 7.5% notes;

		• amend the collateral documents to permit the Lien granted in favor of the holders of the new 7.5% notes and permit the amended and restated collateral documents described below; and

		• provide for the collateral agent, the trustee under the existing 13% notes and us to enter into amended and restated collateral documents with the trustee under the new 7.5% notes, which will provide for the existing 13% notes and new 7.5% notes to be ratably secured by first-priority liens granted by us and the guarantors on substantially all assets owned by us and the guarantors, other than Excluded Property.

		If we receive the consent of holders of at least seventy-five percent of the outstanding principal amount of the existing 13% notes, the proposed amendments will release the security interest and all of the collateral securing our obligations under the existing 13% notes and terminate the existing collateral documents and will also eliminate the following restrictive covenants and provisions (and any related events of default) from the existing 13% notes indenture:

		• the provision titled “Limitation on Debt and Disqualified or Preferred Stock;”
		• the provision titled “Limitation on Liens;”
		• the provision titled “Limitation on Asset Sales;”
		• the provision titled “Limitation on Investments and Restricted Payments;” and
		• the provision titled “Security Interest.”
		For a detailed discussion of the proposed amendments, see “Description of the Proposed Amendments.”

Consent Vote Required		We must receive consents from holders holding more than $82,500,000 aggregate principal amount of existing 13% notes to approve certain of the proposed amendments, which we refer to as the minimum consent condition. If we satisfy the minimum consent condition, Evergreen Solar and the trustee for the 13% notes indenture intend to execute and deliver a 13% supplemental indenture, which will effect the applicable proposed amendments, on or promptly after the expiration of the 13% exchange offer. The 13% supplemental indenture will not become operative until the settlement date.

Expiration Date		The exchange offers and consent solicitation will expire at 11:59 p.m., New York City time, on February 9, 2011, unless extended by us. We refer to such date and time, as may be extended, as the expiration date. We may extend the 4% exchange offer without also extending the 13% exchange offer or extend the 13% exchange offer without also extending the 4% exchange offer.

Settlement Date		The settlement date will occur promptly following the expiration date. We anticipate that the settlement date will occur on or about the third business day following the expiration date.

Proration with Respect to Existing 4% Notes		As described above with respect to the modified “Dutch auction” procedures to be used in the 4% exchange offer, existing 4% notes may be tendered at or below the 4% clearing exchange ratio in an aggregate principal amount greater than the 4% maximum amount. If this occurs, we will accept only a pro rata portion of the tendered existing 4% notes accepted for exchange, up to the 4% maximum amount.
		Holders of existing 4% notes should therefore tender the maximum amount of existing 4% notes that they wish to be accepted. We will promptly return, at our expense, tendered existing 4% notes that we do not accept due to proration.
Withdrawal and Revocation		You may withdraw existing notes tendered in the applicable exchange offer at any time prior to the expiration date and, if not previously accepted for exchange, after the expiration of 40 business days from January 3, 2011. Consents may also be revoked any time prior to the expiration date, but only by withdrawing the related existing 13% notes. The withdrawal of any existing 13% notes will automatically constitute a revocation of the related consents. If we do not accept any existing notes tendered for exchange, the existing notes will be returned to the registered holder at our expense promptly after the expiration or termination of the exchange offers. Any withdrawn or unaccepted existing notes will be credited to the tendering holder’s account at DTC or, if the withdrawn or unaccepted existing notes are held in physical form, will be returned to the tendering holder.
Conditions to the Exchange Offers and Consent Solicitation		Our obligation to consummate the exchange offers and consent solicitation is conditioned upon:
		• the effectiveness of the registration statement of which this prospectus forms a part;

		• with respect to the 13% exchange offer, our receipt of valid tenders, not validly withdrawn, of more than $82,500,000 in aggregate principal amount of existing 13% notes;

		• the approval by stockholders at a special meeting of certain of the transactions contemplated by our recapitalization plan, including the exchange offers; and
		• the other conditions described in “Description of the Exchange Offers and Consent Solicitation — Conditions to the Exchange Offers and Consent Solicitation — Registration and Combined General Conditions.”
		The consent solicitation is further conditioned upon the minimum consent condition and the other conditions described in “Description of the Exchange Offers and Consent Solicitation — Conditions to the Exchange Offers and Consent Solicitation — Consent General Conditions.” The 13% exchange offer is also conditioned on the minimum consent condition.
		The 4% exchange offer is not conditioned on the consummation of the 13% exchange offer or the minimum consent condition and we may complete the 4% exchange offer without completing the 13% exchange offer or receiving such consents. See “Risk Factors —

		Risks Related to the Exchange Offers and Consent Solicitation — Risks to Holders Tendering in the Exchange Offers — The consummation of the 4% exchange offer is not contingent on the consummation of the 13% exchange offer.” Similarly, the 13% exchange offer is not conditioned on the consummation of the 4% exchange offer and we may complete the 13% exchange offer without completing the 4% exchange offer. See “Risk Factors — Risks Related to the Exchange Offers and Consent Solicitation — Risks to Holders Tendering in the Exchange Offer — The consummation of the 13% exchange offer is not contingent on the consummation of the 4% exchange offer.”
		Subject to applicable law, we may terminate or withdraw the exchange offers or the consent solicitation if any of the conditions are not satisfied or waived by the expiration date. We may also extend the exchange offers and the consent solicitation from time to time until the conditions are satisfied or waived.
		Although we have no present plans or arrangements to do so, we reserve the right to amend, modify or waive, at any time, the terms and conditions of the exchange offers and consent solicitation (other than the registration conditions, the minimum consent condition and the condition relating to receipt of stockholder approval at our special meeting required under Nasdaq rules, referred to as the Nasdaq stockholder approval condition), subject to applicable law. We will give you notice of any amendments, modifications or waivers as and if required by applicable law.

Acceptance of Tenders		Subject to the provisions described above in “— Modified ‘Dutch Auction’ Procedures for 4% Exchange Offer” and “— Proration with Respect to Existing 4% Notes,” all properly completed, executed and delivered letters of transmittal and consent tendered along with existing notes received by the exchange agent on or prior to the expiration date may be accepted.

Procedures for Tendering Outstanding Existing Notes and Delivering Consents		If you are a holder of existing notes and you wish to tender your existing notes for exchange and, with respect to existing 13% notes, deliver consents pursuant to the exchange offers and consent solicitation, on or prior to the expiration date, you must:
		(1) agree to be bound by the letter of transmittal and consent by transmitting either:
		• a computer-generated message transmitted by means of DTC’s ATOP and received by the exchange agent in which you acknowledge and agree to be bound by the terms of the letter of transmittal and consent, which accompanies this prospectus; or
		• a properly completed and duly executed letter of transmittal and consent, which accompanies this prospectus, or a facsimile of the letter of transmittal and consent, with all signature guarantees and other documents required by the letter of transmittal and consent, to the exchange agent at the address set forth on the back cover of this prospectus; and

		(2) deliver the existing notes to the exchange agent by either transmitting a timely confirmation of book-entry transfer of your existing notes into the exchange agent’s account at DTC pursuant to the procedure for book-entry transfers or, if the existing notes are held in physical form, delivering the existing notes to the exchange agent, in either case as described in this prospectus under the heading “Description of the Exchange Offers and Consent Solicitation — Procedures for Tendering Existing Notes and Delivering Consents.”

		With respect to the letter of transmittal and consent or DTC ATOP submission referred to in (1) above, a holder of existing 4% notes should specify the exchange ratio for the existing 4% notes tendered by such holder, as described above under “— Modified ‘Dutch Auction’ Procedures for 4% Exchange Offer.” If a holder of existing 4% notes does not specify the exchange ratio, the holder will be treated as accepting the 4% clearing exchange ratio, which may have the effect of lowering the 4% clearing exchange ratio and could result in a holder’s existing notes being exchanged at the minimum $425 exchange ratio.

		We have not provided guaranteed delivery procedures in connection with the exchange offers and consent solicitation. You must timely tender your existing notes and deliver your consents in accordance with the procedures set forth herein.
Tendering and Consenting Through a Custodian		If you are a beneficial owner of existing notes that are held by or registered in the name of a custodial entity such as a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your existing notes, you should contact your custodial entity promptly and instruct it to tender your existing notes and give consent on your behalf pursuant to the procedures of that custodial entity.
Accrued Interest on Existing Notes		Holders will receive accrued and unpaid interest on any existing notes accepted in the exchange offers. The amount of accrued interest will be calculated from the last interest payment date up to, but excluding, the settlement date of the exchange offers and will be paid in cash.

Trading		Our common stock is currently listed on The Nasdaq Capital Market under the symbol “ESLRD.” We submitted an application to Nasdaq to move our common stock from The Nasdaq Global Market to The Nasdaq Capital Market and the move became effective on December 29, 2010. Our symbol will revert to “ESLR” 20 trading days after January 3, 2011. See “— Recent Events.”

Exchange agent		U.S. Bank National Association
Dealer manager		Lazard Capital Markets LLC
Information agent		The Proxy Advisory Group, LLC ®
Risk Factors		You should carefully consider the matters described under “Risk Factors,” as well as other information set forth in this prospectus and in the letter of transmittal and consent.

Consequences of Not Exchanging Existing Notes		For a description of the consequences of failing to exchange your existing notes, see “Risk Factors” and “Description of the Exchange Offers and Consent Solicitation — Certain Consequences to Holders of Existing Notes Not Participating in the Exchange Offers and Consent Solicitation.”

Use of Proceeds		We will not receive any cash proceeds from the exchange offers or consent solicitation.

Tax Consequences		See “Material U.S. Federal Income Tax Considerations” for a description of certain material U.S. federal income tax consequences associated with the exchange offers.
Further Information		Questions about the terms of the exchange offers or consent solicitation should be directed to the dealer manager. If you have questions regarding tender or consent procedures or require additional copies of this prospectus or the letter of transmittal and consent, please contact the information agent. Contact information for the dealer manager and the information agent are set forth on the back cover of this prospectus.

 

SUMMARY OF THE NEW 4% NOTES

Issuer		Evergreen Solar, Inc.

Securities Offered		Initially up to $100,000,000 aggregate principal amount of 4% Convertible Subordinated Additional Cash Notes due 2020, which we refer to as the new 4% notes.

Stated Maturity		July 15, 2020, unless earlier converted, repurchased or redeemed.
Interest		The new 4% notes will bear interest at a rate of 4% per annum. Interest will be payable semi-annually in arrears in cash on January 15 and July 15 of each year, beginning July 15, 2011.
Ranking		The new 4% notes will be our unsecured subordinated obligations and will:
		•  be contractually subordinated in right of payment to all of our existing and future senior indebtedness;
		•  be effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness; and
		•  be structurally subordinated in right of payment to all existing and future indebtedness and other liabilities of our subsidiaries.

		The existing 4% notes will not constitute senior debt for purposes of the subordination provisions of the new 4% notes and the new 4% notes indenture. As of October 2, 2010, on a pro forma basis as if the exchange offers and consent solicitation had occurred as of such date (assuming that the 4% exchange offer was completed at the 4% maximum amount and at a $500 exchange ratio and that all of the existing 13% notes were tendered in the 13% exchange offer), we would have had $165.0 million of secured indebtedness outstanding, we would have had $49.2 million of existing 4% notes outstanding, which will be pari passu with the new 4% notes, and no other senior unsecured indebtedness outstanding, and our subsidiaries would have had approximately $43.9 million of existing indebtedness and other liabilities outstanding (including trade payables but excluding inter-company obligations). See “Unaudited Pro Forma Financial Data.”

Conversion Rights		You may convert the new 4% notes at any time from the date on which the new 4% notes are originally issued, referred to as the Issue Date, until the close of business on the business day immediately preceding the stated maturity date and subject to the terms of the indenture governing the new 4% notes, in multiples of $1,000 principal amount of new 4% notes. The initial conversion rate is 229.8851 shares of common stock per $1,000 principal amount of new 4% notes (equivalent to an initial conversion price of approximately $4.35 per share), subject to adjustment as described in “Description of New 4% Notes — Conversion Rights — Conversion Rate Adjustments.”

Additional Amount Upon Conversion		You will also receive an Additional Amount upon conversion of $300 per $1,000 principal amount of converted new 4% notes initially paid in shares of our common stock, with such common stock valued, for conversions at your option, at a price per share equal to 90% of the lesser of (i) the average of the daily VWAP for the 10 trading days ending on the date of conversion and (ii) the daily VWAP on the date of conversion (referred to herein as the Trailing Pricing Mechanism) and, for conversions at the option of the Company, at a price per share equal to the average daily VWAP for the 10 trading days beginning two trading days following the notice of conversion (referred to herein as the Subsequent Pricing Mechanism). Notwithstanding the foregoing, in no event will the per share value used to calculate the number of shares issuable in connection with the Additional Amount be less than $3.00, subject to adjustment. For conversions at your option, we may, at our option, pay the Additional Amount in cash, or following any such election to pay in cash, in shares of our common stock, subject to 11 trading days having elapsed following notice of any election to pay in cash or, following any such cash election, notice of any election to pay in shares of our common stock. For conversions at the option of the Company, we may, at our option (with notice of such election in the notice of conversion) pay the Additional Amount in cash. However, we may only pay this Additional Amount in cash after our existing 13% notes and new 7.5% notes are no longer outstanding, and in any event subject to the subordination provisions of the new 4% notes indenture. At any time after the one year anniversary of the Issue Date, we may, at our option, terminate your right to receive the Additional Amount upon conversion, subject to 20 trading days having elapsed following notice of such termination. See “Description of New 4% Notes — Conversion Rights — General.”

Coupon Make Whole Payment in Connection with a Voluntary Conversion		If you elect to convert some or all of your new 4% notes on or prior to January 15, 2015, you will receive a Coupon Make Whole Payment for the new 4% notes being converted. This Coupon Make Whole Payment will be equal to the aggregate amount of interest payments that would have been payable on such converted new 4% notes from the last day through which interest was paid on the new 4% notes, or the Issue Date if no interest has been paid, to and including January 15, 2015.

		This Coupon Make Whole Payment payable upon a voluntary conversion will initially be paid in shares of our common stock, with

		such common stock valued pursuant to the Trailing Pricing Mechanism. Notwithstanding the foregoing, in no event will the per share value used to calculate the number of shares issuable in connection with the Coupon Make Whole Payment be less than $3.00, subject to adjustment. We may, at our option, pay the Coupon Make Whole Payment payable upon a voluntary conversion in cash or, following any such election to pay in cash, in shares of our common stock, subject to 11 trading days having elapsed following notice of any election to pay in cash or, following any such cash election, notice of any election to pay in shares of our common stock. However, we may only make this Coupon Make Whole Payment in cash after our existing 13% notes and new 7.5% notes are no longer outstanding, and in any event subject to the subordination provisions of the new 4% notes indenture.

		See “Description of New 4% Notes — Coupon Make Whole Payment in Connection with a Voluntary Conversion.”
Conversion at the Option of the Company		We may elect to mandatorily convert some or all of the new 4% notes if the last reported sale price of our common stock is greater than or equal to the Trigger Price (as defined in the “Description of New 4% Notes”) for at least 20 trading days during any 30 consecutive trading day period ending within five trading days prior to the date of the notice of conversion. The Trigger Price is intended to provide that we may only elect to mandatorily convert the new 4% notes when, based on the trading price of our common stock during the measurement period described above, the value of the shares of our common stock issuable to holders of the new 4% notes upon conversion together with the Additional Amount (assuming for such purposes that the Additional Amount is then payable by us) but not including any Coupon Make Whole Payment, is equal to or greater than the face amount of the existing 4% notes tendered by holders in the 4% exchange offer in exchange for each $1,000 principal amount of new 4% notes issued in the 4% exchange offer.
		If we elect to convert some or all of your new 4% notes on or prior to January 15, 2015, you will receive the Coupon Make Whole Payment for the new 4% notes being converted.

		This Coupon Make Whole Payment payable in connection with a mandatory conversion will initially be paid in shares of our common stock, with such common stock valued pursuant to the Subsequent Pricing Mechanism. Notwithstanding the foregoing, in no event will the per share value used to calculate the number of shares issuable in connection with the Coupon Make Whole Payment be less than $3.00, subject to adjustment. We may, at our option (with notice of such election in the notice of conversion), pay the Coupon Make Whole Payment payable in connection with a mandatory conversion in cash. However, we may only make this Coupon Make Whole Payment in cash after our existing 13% notes and new 7.5% notes are no longer outstanding, and in any event subject to the subordination provisions of the new 4% notes indenture.

		See “Description of New 4% Notes — Conversion at the Option of the Company.”

Limitations on Conversion		We will not effect any conversion of the new 4% notes (including any conversion described under “Description of New 4% Notes — Conversion at the Option of the Company”), and holders of the new 4% notes will not have the right to convert any portion of the new 4% notes, in excess of that portion of the new 4% notes on conversion of which the sum of (1) the number of shares of our common stock beneficially owned by a holder and its affiliates (other than shares of our common stock which may be deemed beneficially owned through the ownership of the unconverted portion of the new 4% notes or the unexercised or unconverted portion of any of our other securities beneficially owned by such holder or its affiliates subject to a limitation on exercise or conversion analogous to the limitations described in “Description of New 4% Notes — Limitations on Conversion”) and (2) the number of shares of our common stock issuable upon the conversion of the portion of the new 4% notes with respect to which the determination set forth in this sentence is being made (including any shares related to the settlement of the Coupon Make Whole Payment and the Additional Amount in connection therewith), would result in beneficial ownership by such holder and its affiliates of any amount greater than 9.9% of the then issued and outstanding shares of our common stock.

		Any purported delivery of shares of our common stock upon exercise of the conversion right on the new 4% notes will be void and have no effect to the extent (but only to the extent) that such delivery would result in a holder (including its affiliates) becoming the beneficial owner of more than 9.9% of the shares of our common stock outstanding at such time.

		Notwithstanding anything to the contrary in “Description of New 4% Notes — Limitations on Conversion,” no holder will be entitled, with or without our consent, to waive the restrictions set forth in “Description of New 4% Notes — Limitations on Conversion.”

		In the event we are unable to exercise our option (as described under “Description of New 4% Notes — Conversion at the Option of the Company”) to convert some or all of the new 4% notes of any holder due to the limitations described above, then we will have the right at any time to redeem the new 4% notes held by such holder that we are not permitted to convert; provided, however that we may only redeem the new 4% notes after our existing 13% notes and new 7.5% notes are no longer outstanding, and in any event subject to the subordination provisions of the new 4% notes indenture. If we elect to redeem such new 4% notes from such holder, the redemption shall be made in accordance with and pursuant to the provisions set forth under “Description of New 4% Notes — Optional Redemption.” In addition, the holder will retain its right to voluntarily convert such holder’s new 4% notes.

		See “Description of New 4% Notes — Limitations on Conversion.”

Fundamental Change Permits Holders to Require Us to Purchase New 4% Notes		You may require us to purchase your new 4% notes for cash upon a fundamental change at a purchase price equal to 100% of the principal amount of the new 4% notes, plus accrued and unpaid interest (including additional interest, if any) to, but excluding, the purchase date, subject to certain conditions. See “Description of New 4% Notes — Fundamental Change Permits Holders to Require Us to Purchase New 4% Notes.”

Optional Redemption		Prior to January 15, 2015, we may not redeem the new 4% notes, except in the limited circumstances described under “Description of New 4% Notes — Limitations on Conversion.” On or after January 15, 2015, we may redeem for cash some or all of the new 4% notes at our option at a price equal to 100% of the principal amount of the new 4% notes being redeemed, plus accrued and unpaid interest (including additional interest, if any) to, but excluding, the redemption date. We may only redeem the new 4% notes after our existing 13% notes and new 7.5% notes are no longer outstanding, and in any event subject to the subordination provisions of the new 4% notes indenture. See “Description of New 4% Notes — Optional Redemption.”

Trustee		U.S. Bank National Association
Book-entry Form		The new 4% notes will be issued in book-entry form and will be represented by global certificates deposited with, or on behalf of, DTC, and registered in the name of a nominee of DTC. Beneficial interests in any of the new 4% notes will be shown on, and transfers will be effected only through, records maintained by DTC or its nominee and any such interest may not be exchanged for certificated securities except in limited circumstances. See “Book Entry System.”
Absence of a Public Market for the New 4% Notes		The new 4% notes are new securities and there is currently no established market for them. Accordingly, we cannot assure holders as to the development or liquidity of any market for the new 4% notes. We do not intend to apply for a listing of the new 4% notes on any securities exchange or any automated dealer quotation system.

		The new 4% notes and the common stock issuable upon conversion of the 4% notes are being registered pursuant to a registration statement of which this prospectus forms a part. The new 4% notes are convertible at your option at any time from the Issue Date until the close of business on the business day immediately preceding the stated maturity date.

Nasdaq Symbol for Our Common Stock		Our common stock is currently listed on The Nasdaq Capital Market under the symbol “ESLRD.” We submitted an application to Nasdaq to move our common stock from The Nasdaq Global Market to The Nasdaq Capital Market and the move became effective on December 29, 2010. Our symbol will revert to “ESLR” 20 trading days after January 3, 2011. See “— Recent Events.”

Governing Law		The new 4% notes indenture and the new 4% notes will provide that they will be governed and construed in accordance with the laws of the State of New York.

Material U.S. Federal Income Tax Considerations		Holders are urged to consult their own tax advisors with respect to the federal, state, local and foreign tax consequences of purchasing, owning and disposing of the new 4% notes and common stock issuable upon conversion of the new 4% notes. See “Material U. S. Federal Income Tax Considerations.”

Risk Factors		You should carefully consider the information set forth in the section of this prospectus titled “Risk Factors” beginning on page 26 as well as the other information included and incorporated by reference in this prospectus and any “free writing prospectus” we authorize to be delivered to you before deciding whether to invest in the new 4% notes.

 

SUMMARY OF THE NEW 7.5% NOTES

Issuer		Evergreen Solar, Inc.

Securities Offered		Up to $165,000,000 aggregate principal amount of 7.5% Convertible Senior Secured Notes due 2017, which we refer to as the new 7.5% notes.

Stated Maturity		April 15, 2017, unless earlier converted, repurchased or redeemed.
Interest		The new 7.5% notes will bear interest at a rate of 7.5% per annum. Interest will be payable semi-annually in arrears in cash on April 15 and October 15 of each year, beginning April 15, 2011.

Ranking		The new 7.5% notes and the note guaranties will be our and the guarantors’ general senior secured obligations and will:

		• rank senior in right of payment to all of our and the guarantors’ existing and future indebtedness that is, by its terms, expressly subordinated in right of payment to the new 7.5% notes;

		• rank pari passu in right of payment with all of our and the guarantors’ existing and future indebtedness that is not so subordinated;

		• be effectively senior in right of payment to any of our and the guarantor’s unsecured indebtedness to the extent of the value of the collateral securing the new 7.5% notes and the note guaranties;

		• be effectively pari passu in right of payment to any of our and the guarantor’s secured indebtedness to the extent of a shared security interest in the same collateral securing the new 7.5% notes and the note guaranties; and

		• be structurally subordinated in right of payment to all existing and future indebtedness and other liabilities of our non-guarantor subsidiaries.

		As of October 2, 2010, on a pro forma basis as if the exchange offers and consent solicitation had occurred as of such date (assuming that the 4% exchange offer was completed at the 4% maximum amount and at a $500 exchange ratio and that all of the existing 13% notes were tendered in the 13% exchange offer), we would have had $165.0 million of secured indebtedness outstanding; we would have had approximately $49.2 million of senior unsecured indebtedness (in the form of the existing 4% notes still outstanding); and our subsidiaries would have had approximately $43.9 million of existing indebtedness and other liabilities outstanding

		(including trade payables but excluding inter-company obligations). See “Unaudited Pro Forma Financial Data.”

Conversion Rights		You may convert your new 7.5% notes at any time from the date on which the new 7.5% notes are originally issued, referred to as the Issue Date, until the close of business on the business day immediately preceding the stated maturity date and subject to the terms of the indenture governing the new 7.5% notes, in multiples of $1,000 principal amount of new 7.5% notes. The initial conversion rate is 250 shares of common stock per $1,000 principal amount of new 7.5% notes (equivalent to an initial conversion price of approximately $4.00 per share), subject to adjustment as described in “Description of New 7.5% Notes — Conversion Rights — Conversion Rate Adjustments.”

Coupon Make Whole Payment in Connection with a Voluntary Conversion		If you elect to convert some or all of your new 7.5% notes on or prior to April 15, 2015, you will receive a Coupon Make Whole Payment for the new 7.5% notes being converted. This Coupon Make Whole Payment will be equal to the aggregate amount of interest payments that would have been payable on such converted new 7.5% notes from the last day through which interest was paid on the new 7.5% notes, or the Issue Date if no interest has been paid, to and including April 15, 2015.

		This Coupon Make Whole Payment payable upon a voluntary conversion will initially be paid in shares of our common stock to the extent that, at the time of such conversion, we have a sufficient number of authorized and unissued shares that have not been reserved for other purposes (or in cash if we do not then have a sufficient number of such shares), with such common stock valued at a price per share equal to 90% of the lesser of (i) the average of the daily VWAP for the 10 trading days ending on the date of conversion and (ii) the daily VWAP on the date of conversion (referred to herein as the Trailing Pricing Mechanism). Notwithstanding the foregoing, in no event will the per share value used to calculate the number of shares issuable in connection with the Coupon Make Whole Payment be less than $3.00, subject to adjustment. We may, at our option, pay the Coupon Make Whole Payment payable upon a voluntary conversion in cash or, following any such election to pay in cash, in shares of our common stock, subject to 11 trading days having elapsed following notice of any election to pay in cash or, following any such cash election, notice of any election to pay in shares of our common stock. However, if more than fifty percent but less than seventy-five percent of the existing 13% notes are accepted for exchange in the 13% exchange offer, and if we did receive approval from our stockholders at our special meeting to increase our authorized shares of common stock to 240,000,000 shares, then while our existing 13% notes are outstanding we may not make this Coupon Make Whole payment in cash, and if we did not receive approval from our stockholders at our special meeting to increase our authorized shares of common stock to 240,000,000 shares, while our existing 13% notes are outstanding we may only make this Coupon Make Whole Payment in cash if we do not then have a sufficient number of authorized and unissued shares that have not been reserved for other purposes.

		See “Description of New 7.5% Notes — Coupon Make Whole Payment in Connection with a Voluntary Conversion.”
Conversion at the Option of the Company		We may elect to mandatorily convert some or all of the new 7.5% notes if the last reported sale price of our common stock is greater than or equal to 150% of the conversion price of the new 7.5% notes for at least 20 trading days during any 30 consecutive trading day period ending within five trading days prior to the date of the notice of conversion.
		If we elect to convert some or all of your new 7.5% notes on or prior to April 15, 2015, you will receive the Coupon Make Whole Payment for the new 7.5% notes being converted.

		This Coupon Make Whole Payment payable in connection with a mandatory conversion will initially be paid in shares of our common stock to the extent that, at the time of such conversion, we have a sufficient number of authorized and unissued shares that have not been reserved for other purposes (or in cash if we do not then have a sufficient number of such shares), with such common stock valued at a price per share equal to the average of the daily VWAP for the 10 trading days beginning two trading days following the date of the notice of conversion (referred to herein as the Subsequent Pricing Mechanism). Notwithstanding the foregoing, in no event will the per share value used to calculate the number of shares issuable in connection with the Coupon Make Whole Payment be less than $3.00, subject to adjustment. We may, at our option (with notice of such election in the notice of conversion), pay the Coupon Make Whole Payment payable in connection with a mandatory conversion in cash. However, if more than fifty percent but less than seventy-five percent of the existing 13% notes are accepted for exchange in the 13% exchange offer, and if we did receive approval from our stockholders at our special meeting to increase our authorized shares of common stock to 240,000,000 shares, then while our existing 13% notes are outstanding we may not make this Coupon Make Whole payment in cash, and if we did not receive approval from our stockholders at our special meeting to increase our authorized shares of common stock to 240,000,000 shares, while our existing 13% notes are outstanding we may only make this Coupon Make Whole Payment in cash if we do not then have a sufficient number of authorized and unissued shares that have not been reserved for other purposes.

		See “Description of New 7.5% Notes — Conversion at the Option of the Company.”

Limitations on Conversion		We will not effect any conversion of the new 7.5% notes (including any conversion described under “Description of New 7.5% Notes — Conversion at the Option of the Company”), and holders of the new 7.5% notes will not have the right to convert any portion of the new 7.5% notes, in excess of that portion of the new 7.5% notes on conversion of which the sum of (1) the number of shares of our common stock beneficially owned by a holder and its affiliates (other than shares of our common stock which may be deemed beneficially owned through the ownership of the unconverted portion of the new

		7.5% notes or the unexercised or unconverted portion of any of our other securities beneficially owned by such holder or its affiliates subject to a limitation on exercise or conversion analogous to the limitations described in “Description of New 7.5% Notes — Limitations on Conversion”) and (2) the number of shares of our common stock issuable upon the conversion of the portion of the new 7.5% notes with respect to which the determination set forth in this sentence is being made (including any shares related to the settlement of the Coupon Make Whole Payment in connection therewith), would result in beneficial ownership by such holder and its affiliates of any amount greater than 9.9% of the then issued and outstanding shares of our common stock.

		Any purported delivery of shares of our common stock upon exercise of the conversion right on the new 7.5% notes will be void and have no effect to the extent (but only to the extent) that such delivery would result in a holder (including its affiliates) becoming the beneficial owner of more than 9.9% of the shares of our common stock outstanding at such time.

		Notwithstanding anything to the contrary in “Description of New 7.5% Notes — Limitations on Conversion,” no holder will be entitled, with or without our consent, to waive the restrictions set forth in “Description of New 7.5% Notes — Limitations on Conversion.”

		In the event we are unable to exercise our option (as described under “Description of New 7.5% Notes — Conversion at the Option of the Company”) to convert some or all of the new 7.5% notes of any holder due to the limitations described above, then we will have the right at any time to redeem the new 7.5% notes held by such holder that we are not permitted to convert. However, if less than seventy-five percent of the existing 13% notes are accepted for exchange in the 13% exchange offer, then we may only redeem the new 7.5% notes after our existing 13% notes are no longer outstanding. If we elect to redeem such new 7.5% notes from such holder, the redemption shall be made in accordance with and pursuant to the provisions set forth under “Description of New 7.5% Notes — Optional Redemption.” In addition, the holder will retain its right to voluntarily convert such holder’s new 7.5% notes.

		See “Description of New 7.5% Notes — Limitations on Conversion.”
Fundamental Change Permits Holders to Require Us to Purchase New 7.5% Notes		You may require us to purchase your new 7.5% notes for cash upon a fundamental change at a purchase price equal to 100% of the principal amount of the new 7.5% notes, plus accrued and unpaid interest (including additional interest, if any) to, but excluding, the purchase date, subject to certain conditions. See “Description of New 7.5% Notes — Fundamental Change Permits Holders to Require Us to Purchase New 7.5% Notes.”

Optional Redemption		Prior to April 15, 2015, we may not redeem the new 7.5% notes, except in the limited circumstances described under “Description of New 7.5% Notes — Limitations on Conversion.” On or after April 15, 2015, we may redeem for cash some or all of the new

		7.5% notes at our option at a price equal to 100% of the principal amount of the new 7.5% notes being redeemed, plus accrued and unpaid interest (including additional interest, if any) to, but excluding, the redemption date. However, if less than seventy-five percent of the existing 13% notes are accepted for exchange in the 13% exchange offer, then we may only redeem the new 7.5% notes after our existing 13% notes are no longer outstanding. See “Description of New 7.5% Notes — Optional Redemption.”

Note Guaranties		The new 7.5% notes will be fully and unconditionally guaranteed on a senior secured basis by each of our existing and future direct and indirect wholly owned domestic subsidiaries that are not excluded subsidiaries. ESLR1, LLC, which currently provides a guaranty with respect to the existing 13% notes, will be merged with and into the Company prior to the Issue Date, which means that as of the Issue Date none of our subsidiaries will provide a guaranty of the existing 13% notes or new 7.5% notes.

Security		The new 7.5% notes and any future note guaranties will be secured by a first-priority lien on substantially all of the assets of us and the guarantors, other than Excluded Property. If we do not receive the consent of holders of at least seventy-five percent of the outstanding principal amount of the existing 13% notes in the consent solicitation, the existing 13% notes will continue to be secured obligations, and the existing 13% notes and the new 7.5% notes will be ratably secured by first-priority liens granted by us and the guarantors on substantially all assets owned by us and the guarantors, other than Excluded Property. See “Description of New 7.5% Notes — Security.”

Certain Covenants		The indenture governing the new 7.5% notes will restrict our ability and the ability of our subsidiaries to:

		• incur additional indebtedness and issue certain preferred stock;

		• make certain payments or investments;

		• sell assets;

		• create liens on assets; and

		• consolidate, merge, sell or otherwise dispose of all or substantially all of our and our subsidiaries’ assets taken as a whole.

		However, these limitations will be subject to a number of important qualifications and exceptions as set forth in “Description of New 7.5% Notes — Certain Covenants.”

Trustee and Collateral Agent		U.S. Bank National Association

Book-entry Form		The new 7.5% notes will be issued in book-entry form and will be represented by global certificates deposited with, or on behalf of, DTC, and registered in the name of a nominee of DTC. Beneficial interests in any of the new 7.5% notes will be shown on, and transfers will be effected only through, records maintained by DTC or its nominee and any such interest may not be exchanged for certificated securities except in limited circumstances. See “Book Entry System.”

Absence of a Public Market for the New 7.5% Notes		The new 7.5% notes are new securities and there is currently no established market for the new 7.5% notes. Accordingly, we cannot assure holders as to the development or liquidity of any market for them. We do not intend to apply for a listing of the new 7.5% notes on any securities exchange or any automated dealer quotation system.

		The new 7.5% notes and the common stock issuable upon conversion of the new 7.5% notes are being registered pursuant to a registration statement of which this prospectus forms a part. The new 7.5% notes are convertible at your option at any time from the Issue Date until the close of business on the business day immediately preceding the stated maturity date.

Nasdaq Symbol for Our Common Stock		Our common stock is currently listed on The Nasdaq Capital Market under the symbol “ESLRD.” We submitted an application to Nasdaq to move our common stock from The Nasdaq Global Market to The Nasdaq Capital Market and the move became effective on December 29, 2010. Our symbol will revert to “ESLR” 20 trading days after January 3, 2011. See “— Recent Events.”

Governing Law		The new 7.5% notes indenture and the new 7.5% notes will provide that they will be governed and construed in accordance with the laws of the State of New York.
Material U.S. Federal Income Tax Considerations		Holders are urged to consult their own tax advisors with respect to the federal, state, local and foreign tax consequences of purchasing, owning and disposing of the new 7.5% notes and common stock issuable upon conversion of the new 7.5% notes. See “Material U.S. Federal Income Tax Considerations.”

Risk Factors		You should carefully consider the information set forth in the section of this prospectus titled “Risk Factors” beginning on page 26 as well as the other information included and incorporated by reference in this prospectus and any “free writing prospectus” we authorize to be delivered to you before deciding whether to invest in the new 7.5% notes.

 

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

																						For the Year-to-Date Period Ended
		For the Year Ended December 31,																				October 3,				October 2,
		2005				2006				2007				2008				2009				2009				2010
		(In thousands, except per share data)
Consolidated Statement of Operations Data:
Revenue		$	43,627			$	102,252			$	69,866			$	111,959			$	271,848			$	197,302			$	249,524
Cost of revenue			39,954				90,310				52,838				93,073				253,484				187,842				229,725
Gross profit			3,673				11,942				17,028				18,886				18,364				9,460				19,799
Operating Expenses:
Research and development			10,622				18,390				20,594				22,039				18,058				13,307				15,078
Selling, general and administrative			12,708				21,890				20,608				23,868				26,260				18,990				28,713
Write-off of loan receivable from silicon supplier			—				—				—				—				43,882				43,882				—
Facility start-up and equipment write-offs			—				1,526				1,404				38,657				16,115				6,639				14,481
Restructuring charges			—				—				—				30,413				11,940				3,394				13,780
			—
Total operating expenses			23,330				41,806				42,606				114,977				116,255				86,212				72,052
Operating loss			(19,657	)			(29,864	)			(25,578	)			(96,091	)			(97,891	)			(76,752	)			(52,253	)
Other income (expense):
Foreign exchange gains (losses), net			5				3,322				444				(4,078	)			2,650				3,460				(2,845	)
Gain on investment in Sovello AG			527				—				—				—				—				—				—
Interest income			3,140				4,613				9,774				12,695				4,728				3,672				1,612
Interest expense			(2,526	)			(6,084	)			(3,412	)			(8,874	)			(27,992	)			(20,101	)			(29,002	)
Loss on share lending			—				—				—				(140,706	)			—				—				—
Gain on early extinguishment of debt			—				—				—				—				—				—				24,777

																						For the Year-to-Date Period Ended
		For the Year Ended December 31,																				October 3,				October 2,
		2005				2006				2007				2008				2009				2009				2010
		(In thousands, except per share data)
Other income (expense), net			1,146				1,851				6,806				(140,963	)			(20,614	)			(12,969	)			(5,458	)
Loss before noncontrolling interest, equity income (loss) from interest in Sovello AG, (impairment) recovery of equity investment and income tax benefit			(18,511	)			(28,013	)			(18,772	)			(237,054	)			(118,505	)			(89,721	)			(57,711	)
Equity income (loss) from interest in Sovello AG			—				495				2,170				8,435				(29,748	)			(16,202	)			—
Impairment and other charges associated with equity investment in Sovello AG			—				—				—				—				(126,057	)			(69,713	)			—
Recovery of impairment charges associated with Sovello AG			—				—				—				—				—				—				3,227
Income tax benefit			—				—				—				—				(8,090	)			(7,805	)			—
Net loss including noncontrolling interest			(18,511	)			(27,518	)			(16,602	)			(228,619	)			(266,220	)			(167,831	)			(54,484	)
Net loss attributable to noncontrolling interest			1,195				849				—				—				—				—				—
Net loss attributable to Evergreen Solar, Inc.		$	(17,316	)		$	(26,669	)		$	(16,602	)		$	(228,619	)		$	(266,220	)		$	(167,831	)		$	(54,484	)
Net loss per share attributable to Evergreen Solar, Inc. (basic and diluted), after giving effect to the 1-for-6 reverse stock split, which became effective January 1, 2011		$	(1.74	)		$	(2.44	)		$	(1.15	)		$	(10.50	)		$	(8.51	)		$	(5.53	)		$	(1.59	)
Weighted average shares used in computing basic and diluted net loss per share, after giving effect to the 1-for-6 reverse stock split, which became effective January 1, 2011			9,939				10,944				14,467				21,779				31,296				30,375				34,227

		As of
		December 31,				December 31,				December 31,				December 31,				December 31,				October 3,				October 2,
		2005				2006				2007				2008				2009				2009				2010
		(In thousands)
Consolidated Balance Sheet Data:
Current assets		$	144,853			$	81,994			$	182,190			$	258,319			$	237,638			$	217,481			$	259,330
Non-current assets			84,106				125,257				371,065				750,192				589,995				658,723				575,721
Current liabilities			20,449				24,404				69,962				100,517				65,623				38,585				57,132
Non-current liabilities			109,837				90,000				90,000				320,356				362,824				336,558				429,081
Total stockholders’ equity			98,673				92,847				393,293				587,638				399,186				501,061				348,838

 

																						Year-to-Date
																						Period
		Fiscal Year Ended December 31,																				Ended
		2005				2006				2007				2008				2009				October 2, 2010
		(In thousands)
Loss before noncontrolling interest, equity income (loss), (impairment) recovery of equity investment and income tax benefit		$	(18,511	)		$	(28,013	)		$	(18,772	)		$	(237,054	)		$	(118,505	)		$	(57,711	)
Fixed charges:
Interest portion of operating lease(1)			223				340				383				677				846				606
Debt interest(2)			2,526				6,434				4,395				16,401				30,661				29,865
Total fixed charges		$	2,749			$	6,774			$	4,778			$	17,078			$	31,507			$	30,471
Loss before noncontrolling interest, equity income (loss), (impairment) recovery of equity investment and income tax benefit plus fixed charges		$	(15,762	)		$	(21,589	)		$	(14,977	)		$	(227,503	)		$	(89,667	)		$	(28,103	)
Ratio of earnings to fixed charges			(3	)			(3	)			(3	)			(3	)			(3	)			(3	)
Supplemental Information:
Additional earnings required to achieve 1:1 ratio of earnings to fixed charges		$	18,511			$	28,363			$	19,755			$	244,581			$	121,174			$	58,574

(1)		Represents an approximate interest factor of 1 / 3 of operating rentals.
(2)		Includes interest capitalized.
(3)		Earnings are inadequate to cover fixed charges; additional earnings required presented in supplemental information in above table.

 

Before deciding whether to participate in the exchange offers and consent solicitation, you should read carefully this prospectus, including the risks described below and the documents incorporated by reference herein. In addition, you should carefully consider, among other things, the matters discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, our Quarterly Reports for the periods ended April 3, 2010, July 3, 2010 and October 2, 2010 and in other documents that we subsequently file with the Securities and Exchange Commission, all of which are incorporated by reference in this prospectus. The risks and uncertainties described below or incorporated by reference herein are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the risks described below or incorporated by reference herein actually occur, our business, financial condition and results of operations could be materially and adversely affected. The risks described below or incorporated by reference herein also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See “Forward-Looking Statements.”

 

Risks Related to Our Industry, Products, Financial Results and Operations

 

Our high level of debt could adversely affect our ability to fulfill our obligations under the new notes and may impact our future operations and growth plans.

 

Our current annual cash interest obligations associated with our outstanding convertible debt is approximately $31.4 million. After giving effect to the exchange offers (assuming that the 4% exchange offer was completed at the 4% maximum amount and at a $500 exchange ratio and that all of the existing 13% notes were tendered in the 13% exchange offer), our expected annual cash interest obligations associated with our outstanding convertible debt would be approximately $18.3 million. See “Unaudited Pro Forma Financial Data.” In addition, we must repay $36.8 million of loans and related interest payable to Hubei Science and Technology Investment Co., Ltd., an investment fund sponsored by the government of Hubei, China, or HSTIC, by July 24, 2014, in connection with the financing of our China-based wafer manufacturing facility. We may also incur additional debt from time to time to finance working capital, product development efforts, strategic acquisitions, investments and alliances, capital expenditures or other general corporate purposes, subject to the restrictions contained in the indentures governing the existing notes, the new 7.5% notes and the new 4% notes, and in any other agreements under which we incur indebtedness.

 

Our significant debt and debt service requirements could adversely affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities. For example, our high level of debt presents the following risks:

 

 

 

Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations.

 

A failure to comply with the covenants and other provisions in our debt instruments could result in events of default under such instruments, which could permit acceleration of our various outstanding notes. Any required repayment of our indebtedness as a result of acceleration would reduce the amount of our current cash on hand such that we would not have those funds available for use in our business. In addition, we may not have sufficient cash on hand to pay all such amounts in the event of an acceleration.

 

Although completion of the exchange offers will, overall, substantially reduce our outstanding indebtedness and our cash interest obligations, we will still have a significant amount of indebtedness outstanding. Although our recapitalization plan is intended to create a capital structure that we believe is more likely to cause the holders of our convertible debt to convert their notes into common stock (which would further accomplish our long term goal of substantially reducing outstanding debt), we can provide no assurances that these conversions will occur. If our indebtedness outstanding after the exchange offers is not subsequently substantially reduced by conversions into common stock prior to maturity, we may have to eventually reduce our indebtedness by other means, including further debt restructurings or raising additional funds through new equity financings if we are unable to service our debt or repay principal when due. Our ability to meet our payment and other obligations may depend on our ability to reduce our indebtedness through conversions into common stock or other debt restructurings, and our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors, as well as other factors that are beyond our control. Our business may not generate cash flow in an amount sufficient to enable us to pay the principal of, or interest on, our indebtedness, including the new notes, or to fund our other liquidity needs, including working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances, and other general corporate requirements.

 

We cannot assure you that our total indebtedness will be reduced by conversions into common stock, or that we will be able to reduce our indebtedness by other means, or that our business will generate sufficient cash flows from operations or that future borrowings will be available to us in amounts sufficient and on terms reasonable to us to support our liquidity needs. We cannot assure you that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all, or that they would permit us to meet our scheduled debt service obligations and fund our liquidity needs. In addition, if we incur additional debt, the risks associated with our substantial leverage, including the risk that we will be unable to service our debt or generate enough cash flow to fund our liquidity needs, could intensify. If we are not able to generate sufficient cash flow to service our debt obligations and fund our liquidity needs, we may need to refinance or restructure our indebtedness, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to successfully further refinance or restructure our indebtedness (including through conversions into common stock), sell assets, reduce or delay capital investments or raise additional capital, we may have to seek bankruptcy protection.

 

We may need to raise significant additional capital in order to continue to grow our business and fund our operations as planned, which may not be available on acceptable terms or at all.

 

We will need to generate cash internally or raise significant additional capital to fund our planned expansion of manufacturing facilities beyond the Wuhan facility, to acquire complementary businesses and to obtain raw materials or necessary technologies. As a result of our decision to not consummate the new 4% notes financing of up to $40 million at this time and if other sources of debt and equity financing are unavailable, we may have insufficient liquidity to meet our operational and initial growth needs and may have to take actions such as reducing or delaying capital expenditures, product development efforts, strategic acquisitions, investments and alliances, selling assets, restructuring or refinancing its debt, including the new notes, or seeking additional equity capital. If adequate capital does not become available when needed on

acceptable terms, our ability to fund our operations, further develop and expand our manufacturing operations and distribution network, or otherwise respond to competitive pressures would be significantly limited. In such a case, the stock price of our common stock would likely be materially and adversely impacted.

 

Our ability to raise capital may be severely hampered by adverse changes in general economic market conditions. The U.S. economy has undergone unprecedented turmoil amid stock market volatility, difficulties in the financial services sector, tightening of the credit markets, softness in the housing markets, concerns of inflation and deflation, reduced corporate profits and capital spending, reduced consumer spending, and continuing economic uncertainties. This turmoil and the uncertainty about future economic conditions could negatively impact our ability to obtain debt or equity financing. The cost and availability of credit has been and may continue to be adversely affected as concerns about the stability of the markets generally, and the strength of counterparties specifically, has led many lenders and institutional investors to reduce, and in some cases, cease, to provide funding to borrowers. If these market and economic conditions continue, they may limit our ability to access the capital markets to meet liquidity and capital expenditure requirements. We cannot predict the timing, strength or duration of this severe global economic downturn.

 

If we do not receive approval from our stockholders at the special meeting to increase our authorized shares of common stock to 240,000,000 shares, we may be required to make certain payments on conversion of our new 7.5% notes in cash.

 

We will be required to make certain Coupon Make Whole Payments with respect to the new 7.5% notes upon their conversion. Although we have the option to pay these amounts in cash or shares of common stock, if we do not receive approval from our stockholders at the special meeting to increase our authorized shares of common stock to 240,000,000 shares, under certain circumstances we could be in a position where we do not have sufficient shares to pay all of these amounts by issuing shares, and we would be required to pay these amounts in cash. This could have a material adverse impact on our financial flexibility, our liquidity and our ability to use this cash to fund our operations and expected future growth. In addition, if we did not have sufficient cash to pay these amounts, this non-payment would create an event of default with respect to the new 7.5% notes. See “— Our high level of debt could adversely affect our ability to fulfill our obligations under the new notes and may impact our future operations and growth plans.”

 

We will continue to invest significantly in the research and development of our proprietary wafer technology to develop a commercially successful industry standard size wafer, and these efforts may not result in continued and necessary improvement in our technology or a commercially successful industry standard size wafer and our wafers may not be widely accepted.

 

If our continuing development efforts regarding our wafer manufacturing technologies are not successful, and we are unable to develop a commercially successful industry standard size wafer and continue to decrease manufacturing costs, including further reducing silicon consumption, we may not be able to significantly expand our manufacturing business and sufficiently reduce the price of our products, which might prevent our products from being competitively priced, and our revenues and gross margins may be negatively impacted.

 

Evaluating our business and future prospects may be difficult due to the rapidly changing market landscape.

 

Although we were formed in 1994 to develop crystalline silicon technology for use in manufacturing solar power products and began shipping solar panels in 1997, we first shipped solar panels at commercial scale in September 2001. Relative to the entire solar industry, we have shipped only a limited number of solar panels and have no experience selling or licensing wafers. The solar power market is rapidly evolving and is experiencing technological advances, a growth of manufacturers in low cost manufacturing regions, new market entrants and rapid capacity growth, which may be outpacing growth in short-term demand. Our future success will require us to scale our manufacturing capacity significantly beyond the capacity of our existing Wuhan, China wafer facility, find other third parties to manufacture or purchase our products or license our proprietary technologies. As a result, you should consider our business and prospects in light of the risks, expenses and challenges that we will face in a growing and rapidly evolving market.

We face intense competition from other companies producing solar energy and other renewable energy products. If we fail to adapt to changing market conditions and to compete successfully with existing or new competitors, our business prospects and results of operations could be materially and adversely affected.

 

The PV market is intensely competitive and rapidly evolving. The number of PV product manufacturers rapidly increased over the past few years as demand for PV products grew substantially. If we fail to attract and retain customers in our target markets for our current and future products, we will be unable to maintain or increase our revenues and market share. Some of our competitors have established more prominent market positions, and if we fail to attract and retain customers and establish successful distribution networks in our target markets for our products, we will be unable to increase our sales. Our competitors include PV divisions of large conglomerates such as BP Solar and Sharp Corporation, as well as integrated manufacturers of PV products such as Kyocera Corporation, Suntech Power Holdings Company Ltd., SolarWorld AG, SunPower Corporation, Trina Solar and Yingli Solar. Many of our existing and potential competitors have a stronger market position than we do, have substantially greater financial, technical and manufacturing resources than we do and have substantially greater access to government support than we do.

 

We also face competition from new entrants to the PV market, including those that may offer more advanced technological solutions or that have greater financial resources, such as semiconductor manufacturers, several of which have announced their intention to start production of PV components. A significant number of our competitors are developing or currently producing products based on more advanced PV technologies, including thin films, amorphous silicon and other nanotechnologies, which may eventually offer cost advantages over our proprietary wafer manufacturing technology. A widespread adoption of any of these technologies could result in a rapid decline in demand for our products and a resulting decrease in our revenues if we fail to adopt such technologies or are otherwise unable to compete with them. In addition, some of our competitors have become, or are becoming, vertically integrated in the PV industry value chain, from silicon ingot manufacturing to PV system sales and installation. In addition, our competitors may also enter into the polysilicon manufacturing business, which may provide them with additional cost advantages. Furthermore, the entire PV industry also faces competition from conventional energy and non-solar renewable energy providers.

 

We have a history of losses, expect to incur substantial further losses and may not achieve or maintain profitability in the future, which in turn could materially decrease the value of our common stock.

 

Since our inception, we have incurred significant net losses. We expect to incur additional losses until we achieve substantial manufacturing volumes from our Chinese facility, and if we do not achieve our expected production targets and cost reductions we may not become profitable. Even if we achieve profitability, we may be unable to sustain or increase our profitability in the future if we are not able to sufficiently expand capacity or continue to reduce our costs, which in turn could materially decrease the market value of our common stock. We expect to continue to make significant capital expenditures and anticipate that our expenses will increase as we seek to:

 

 

We do not know whether our revenues will grow rapidly enough to absorb these costs, and our limited operating history makes it difficult to assess the extent of these expenses or their impact on our operating results.

We may be subject to certain liabilities based upon our prior ownership of Sovello, which may adversely impact our funds available for our operations.

 

On April 21, 2010, the sale of our interest in Sovello was completed. In connection with such sale, our joint venture agreement concerning Sovello was terminated, as well as our undertaking to certain of Sovello’s lenders to support Sovello’s outstanding indebtedness. However, although we have no remaining contractual obligations, the German government could pursue us for repayment of certain German government grant funding previously issued to Sovello in the event Sovello becomes insolvent prior to the first anniversary of the sale. In the event Sovello becomes insolvent prior to April 21, 2011, and is unable to repay the German grant funding it previously received, we could have significant liability for repayment of such funds.

 

The costs associated with the shutdown of our Devens, Massachusetts manufacturing facility may be greater than expected and the anticipated positive impact on our cash position may not materialize.

 

On January 10, 2011, our board of directors and management committed us to shutdown production at our Devens, Massachusetts manufacturing facility. We intend to complete the shutdown during the first quarter of 2011. See “Summary — Recent Events.” As a result of the closure of the Devens facility, we expect to incur non-cash charges of approximately $340 million associated with the write-off of existing building, facilities and equipment. Furthermore, approximately $150 million of intangible and cash-related prepayments associated with various silicon contracts are under review to determine whether additional non-cash charges will be required. These charges are expected to impact both the fourth quarter of 2010 and the first quarter of 2011, and the amount of the charges will be determined during our preparation of our annual financial statements for the year ended December 31, 2010. We also expect to incur approximately $15 million of costs associated with employee severance and out placement services, facility decommissioning and other costs required to close the facility. These cash charges are expected to be incurred over a twelve month period. In total, we expect that approximately 800 employees will be affected by this action. In addition, as a result of the Devens shutdown, Massachusetts state agencies that provided grant funding to partially finance the build out of our Devens facility in 2007 have indicated they will seek repayment of unearned amounts under our grant agreements. We do not know the amounts, if any, that will ultimately need to be repaid to Massachusetts state agencies or when those payments would become due. Based on our understanding of the grant agreements, we do not believe these amounts will need to be repaid for several years, but we cannot be sure that an adverse determination would not be made if our interpretation of the agreements were challenged. We also cannot assure you that the costs associated with closing the Devens facility will not be greater than currently expected.

 

We expect the shutdown of the Devens facility to eliminate the risks associated with continued manufacturing in a high cost region in a period of rapidly declining prices and that a complete facility shutdown will help preserve cash and facilitate the pursuit of our wafer expansion strategy. However, we cannot assure you that the expected positive impact on our cash position will materialize.

 

Our future success depends on our ability to increase our manufacturing capacity beyond our existing Wuhan, China facility, license our technologies or otherwise outsource the manufacturing of our products. Our inability to increase our production capacity directly or successfully outsource the manufacturing of our products will limit our growth potential and impair our operating results and financial condition.

 

Our ability to plan, construct and equip additional manufacturing facilities is subject to significant risk and uncertainty, including:

 

 

 

If we are unable to develop and successfully operate additional manufacturing facilities, establish contract manufacturing relationships or license our technologies, we may be unable to scale our business to the extent necessary to improve results of operations and achieve profitability. Moreover, there can be no assurance that if we do expand our manufacturing capacity, establish contract manufacturing relationships or license our technologies, we will be able to generate customer demand for our solar power products at these production levels or increase our revenues or achieve profitability.

 

Our dependence on a limited number of suppliers for certain materials, including key components for our solar power products and capital equipment, could adversely affect our ability to manufacture and timely deliver our products.

 

We manufacture products using materials and components procured from a limited number of suppliers, and certain materials and components we use are proprietary or available only from a limited number of sources, primarily our wafer furnaces and high temperature filament. Our materials and components supply chain, therefore, makes us more susceptible to quality issues, shortages and price changes. If we fail to develop, maintain or expand relationships with suppliers, or if our suppliers fail to supply good quality materials on time that meet our cost requirements and we are unable to find alternative sources, we may be unable to manufacture our products in a timely and cost-effective manner.

 

If the market price of polysilicon decreases, we could be at a competitive disadvantage because we have entered into multi-year polysilicon contracts.

 

Polysilicon is the key raw material, and typically the most expensive component for, solar power products utilizing crystalline silicon wafers. The market price for polysilicon steadily decreased from mid-2008 through early 2010. We purchase polysilicon pursuant to long-term supply contracts, which contain fixed pricing and volume requirements. Although we have been able to renegotiate pricing and volumes under our contracts from time to time, other wafer manufacturers may be able to enter into new long-term contracts or purchase polysilicon on the spot market at lower prices than those to which we have agreed with our suppliers. If the price we pay for polysilicon is significantly higher than the price paid by our competitors, our competitive cost advantage of producing wafers could decrease despite using substantially less silicon in our manufacturing process relative to conventional manufacturing processes.

 

Technological changes in the solar power industry could render our solar power products uncompetitive or obsolete, which could reduce our market share and cause our revenues to decline.

 

The solar power market is characterized by continually changing technology requiring improved features, such as increased efficiency, higher power output and lower cost. Our failure to further refine our wafer manufacturing technology and develop and introduce new lower cost solar power products could cause our products to become uncompetitive or obsolete, which could reduce our market share and cause our revenues to decline. A variety of competing solar power technologies are under development by other companies that could result in lower manufacturing costs or higher product performance than those expected for our solar power products. Our development efforts may be rendered obsolete by the technological advances of others, and other technologies may prove more advantageous for the commercialization of solar power products.

 

Our ability to increase market share and revenues depends on our ability to successfully maintain our existing distribution relationships and expand our distribution channels.

 

We currently sell our solar power products primarily to domestic and international distributors, system integrators, project developers and other resellers, which typically resell our products to end users on a global basis. During the year-to-date period ended October 2, 2010, we sold our solar power products to approximately 70 distributors, system integrators, project developers and other resellers. During this period,

approximately 82% of our products were sold to just 10 of these distribution partners. If we are unable to successfully maintain our existing distribution relationships and expand our distribution channels, our revenues and future prospects will be materially harmed. As we seek to grow our revenues by entering new markets in which we have little experience selling our products, our ability to increase market share and revenues will depend substantially on our ability to expand our distribution channels by identifying, developing and maintaining relationships with resellers. We may be unable to enter into relationships with resellers in the markets we target or on terms and conditions favorable to us, which could prevent us from entering these markets or entering these markets in accordance with our plans. Our ability to enter into and maintain relationships with resellers will be influenced by the relationships between these resellers and our competitors, market acceptance of our products and our lower brand recognition as a newer entrant and smaller volume producer.

 

Our dependence on a small number of distribution partners may cause significant fluctuations or declines in our product revenues.

 

As of October 2, 2010, approximately 23%, 18% and 15% of our product revenues were generated from sales to IBC Solar AG, Wagner & Co. Solartechnik GmbH and Donauer Solartechnik Vertriebs GmbH, respectively. These companies are in various stages of development, and the loss of sales to any of them or the decline of any of their businesses could materially adversely affect our business, financial condition and results of operation. We anticipate that sales of our solar power products to a limited number of distribution partners will continue to account for a significant portion of our total product revenues for the foreseeable future. Consequently, any one of the following events may cause material fluctuations or declines in our product revenues and negatively impact our operating results:

 

 

Our current long-term customer contracts for our products will result in a significant portion of our sales being concentrated among a limited number of customers. The failure of one or more customers to purchase or pay for our products in accordance with their contractual commitments could significantly decrease our revenues and harm our business, financial condition and results of operations.

 

In 2008, we entered into long-term sales agreements with several customers that extend until the end of 2013. These customers have agreed to purchase, in the aggregate, a substantial portion of our estimated total manufacturing output.

 

The failure of these customers to purchase product as agreed in our contracts, or pay for purchased product, could significantly harm our business, financial condition and results of operations. Given the nature of the market for our products and the terms of our customer contracts, we were required to reduce our prices, reduce contracted volumes and modify other payment terms on occasion during 2009 and 2010. Further price reductions will result in lower revenues and decreased margins. Our sales contracts allow for customers to request price changes based upon current market conditions, and we may have to amend contracts for volumes or pricing, as we did during 2009 and 2010, in order to remain competitive in the marketplace in the future.

 

As a result of the recent global turmoil in the solar markets generally during 2010, certain of our significant customers have had difficulty meeting their agreed upon payment terms, requiring us to defer certain revenue that we would otherwise have received, and we recorded a doubtful account charge of approximately $6.4 million relating to a receivable from a Korean customer during the third quarter of 2010.

Problems with product quality or product performance may cause us to incur warranty expenses and may damage our market reputation and prevent us from achieving increased sales and market share.

 

Consistent with standard practice in the solar industry, the duration of our product warranties is lengthy. Our current standard product warranty includes a ten-year warranty period for defects in material and workmanship and a 25-year warranty period for declines in power performance beyond specified levels. We believe our warranty periods are consistent with industry practice. Due to the long warranty period, we bear the risk of extensive warranty claims long after we have shipped product and recognized revenues. Although we have sold solar panels since 1997, the substantial majority of them have been operating for less than four years. The possibility of future product failures could cause us to incur substantial expenses 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.

 

Our success depends on the continuing contributions of our key personnel.

 

We rely heavily on the services of our key executive officers and the loss of services of any principal member of our management team could adversely impact our operations. The competition for qualified personnel is intense in our industry. We may not be successful in attracting and retaining sufficient numbers of qualified personnel to support our anticipated growth. However, we cannot guarantee that any employee will remain employed with us for any definite period of time because all of our employees, including our key executive officers, serve at-will and may terminate their employment at any time for any reason.

 

We face particular commercial, jurisdictional and legal risks associated with our proposed expansion in China.

 

We expect the cells and panels made for us by Jiawei Solar (Wuhan) Co., Ltd., or Jiawei, will represent a substantial portion of our annual capacity by early 2011. Accordingly, our financial condition, results of operations, business or prospects could be materially adversely affected if we are not successful in our subcontracting relationship with Jiawei in China. The success of this relationship and our activities in China in general are subject to the economic, political and legal conditions or developments in China.

 

Examples of economic and political developments that could adversely affect us include government control over capital investments or changes in tax regulations that are applicable to us. In addition, a substantial portion of the productive assets in China remain government-owned. The Chinese government also exercises significant control over Chinese economic growth through the allocation of resources, controlling payment of foreign currency denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Additionally, China has historically adopted laws, regulations and policies which impose additional restrictions on the ability of foreign companies to conduct business in China or otherwise place them at a competitive disadvantage in relation to domestic companies. Any adverse change in economic conditions or government policies in China could have a material adverse effect on our overall economic growth and therefore have an adverse effect on our financial condition, results of operations, business or prospects.

 

We also face risks associated with Chinese laws and the Chinese legal system. China’s legal system is rapidly evolving and, as a result, the interpretation and enforcement of many laws, regulations and rules are not always uniform, and legal proceedings in China often involve uncertainties. The legal protections available to us may therefore be uncertain and may be limited. Implementation of Chinese intellectual property-related laws has historically been lacking, primarily because of ambiguities in Chinese laws and difficulties in enforcement. Accordingly, the intellectual property rights and confidentiality protections available to us in China may not be as effective as in the United States or other countries. In addition, any litigation brought by or against us in China may be protracted and may result in substantial costs and diversion of resources and management attention, and the anticipated outcome would be highly uncertain.

 

Although we have entered into agreements with Jiawei and have begun construction of a 100 MW wafer facility in Wuhan, China, we are subject to significant risks associated with expanding production in China requiring substantial management by our employees. The completion and start-up of our wafer manufacturing

facility in Wuhan or Jiawei’s cell and panel manufacturing facilities may take longer or cost more to complete than anticipated. Further, expansion beyond the first 100 MW facility may be dependent upon its successful execution at greater volumes, and funding from the Chinese government may be less than anticipated or may not be available at all, potentially requiring significantly more capital resources by us.

 

As a result of the foregoing factors, our financial condition, results of operations, business or prospects may be materially and adversely affected.

 

Our reliance on Jiawei as a subcontracting manufacturer puts us at risk to the extent that Jiawei cannot manage increasing levels of production and cannot complete the build out of its facilities.

 

Jiawei has needed support from us since we commenced our relationship in 2009. To assist Jiawei in meeting its obligations to us, we loaned Jiawei approximately $12.8 million through October 2, 2010. These loans were made to provide Jiawei with sufficient financing flexibility to establish its cell and panel manufacturing facility as well as for working capital requirements as Jiawei rapidly ramps its operations. If Jiawei is unable to fulfill its obligations to provide cell and panel manufacturing capacity to match our wafer capacity in China, it will negatively impact our ability to increase our production and revenues.

 

Our Agreements with HSTIC and Jiawei subject us to risk of loss of control or ownership of our operations in Wuhan, China if we are not successful in running our operations.

 

If we fail to meet our obligation to repay HSTIC and repurchase its equity interest in our China-based manufacturing affiliate, Evergreen Solar (China) Co., Ltd., or Evergreen China, pursuant to our agreements with HSTIC when due or upon acceleration, we will be required to relinquish our board and management control of, and potentially forfeit our equity interest in, Evergreen China. In addition, if we fail to meet our obligations to Jiawei pursuant to our manufacturing services agreement, we could be required to sell our equity interest in, or the assets of, Evergreen China to Jiawei, or be required to purchase from Jiawei its equity interests in, or the assets of, its Wuhan, China manufacturing subsidiary. As a result of the foregoing factors, our financial condition, results of operations, business or prospects may be materially and adversely affected.

 

Our growing international operations and customer base require us to comply with complex, multi-national income, value-added and other tax rules, for which our accruals may be insufficient.

 

Significant judgment is required in determining our worldwide liability for U.S. federal, state and international taxes, including income tax, value-added tax and import and export tax. Although we believe that our estimates of such provisions and accruals are consistent with applicable laws and our contractual relationships with customers and suppliers, no assurance can be given that our provisions and accruals for such taxes have been and will be sufficient. If they are not sufficient, or if our exposure to taxes substantially increases, our financial condition, results of operation, business or prospects may be adversely affected.

 

Increasing protectionist sentiment in the United States and abroad and the imposition of trade barriers subjects our business to the risk of increased costs and presents other challenges to our ability to effectively compete in the United States and abroad.

 

With the shutdown of our Devens facility, substantially all of our wafer manufacturing will be located in China and certain key materials will continue to be sourced from the United States, Europe and other Asian countries. In addition, we expect the largest markets for our products will continue to be in Europe and the United States. As a result, we are subject to the legal, political, social and regulatory requirements and economic conditions in a variety of jurisdictions, including the United States, and we are subject to the difficulties posed by restrictions on foreign trade imposed by the countries in which we do business. A number of trade actions have recently been brought by parties in the United States which aim to restrict the import of certain materials to the United States. One of those actions led to the imposition by the Department of Commerce of significant countervailing and antidumping duties on the framing material we import to the United States from our China-based supplier. As a result we faced increased costs for these materials until we were able to cease the importation of those materials. Although we are shutting down our Devens facility

which eliminates issues that may arise related to the importation of manufacturing materials to the United States, we expect we will continue to sell our products from Wuhan, China into the United States and we will need to source certain materials in the United States. It is unclear what other trade barriers might be imposed by the United States or other countries, such as export requirements, tariffs, taxes and other restrictions and expenses, and how those actions could increase the prices of our Chinese made products, and the parts and materials used to make our products. Any such increases would make our product offering less competitive in Europe, the United States or in other countries and adversely impact our results of operations.

 

Because we utilize highly flammable materials in our manufacturing processes, we are subject to the risk of losses arising from explosions and fires, which could materially and adversely affect our financial condition and results of operations.

 

We utilize highly flammable materials in our manufacturing processes. By utilizing these materials, we are subject to the risk of losses arising from explosions and fires. Our inability to fill customer orders during an extended business interruption could materially and adversely impact existing distribution partner relationships resulting in market share decreases and reduced revenues.

 

Government subsidies and economic incentives for solar technology distort our marketplace and could cause our revenues to decline, among other reasons, because subsidies and economic incentives we rely on are reduced or our competitors are more successful than we are in obtaining the benefits of government subsidies and economic incentives, which could allow them to sell products at lower costs.

 

We believe that the growth of the majority of our target markets depends on the availability and size of government subsidies and economic incentives for solar technology. Today, while declining, the cost of solar power exceeds the cost of power furnished by the conventional electric utility grid. As a result, federal, state and local governmental bodies in many countries have provided subsidies in the form of cost reductions, tax incentives and other incentives to end users, distributors, systems integrators, other resellers and manufacturers of solar power products to promote the use of solar energy and to reduce dependency on conventional forms of energy. In the future, these government subsidies and economic incentives could be reduced or eliminated altogether. For example, German subsidies are designed to decrease annually, and during 2010, the German government announced additional declines in response to the rapidly declining costs of installing solar systems. In addition, the Emerging Renewables Program in California has finite funds that may not last through the current program period. California subsidies have declined in the past and will continue to decline as cumulative installations exceed stated thresholds. Net metering policies in California, which currently cap net metering based upon aggregate customer peak demand, could also limit the amount of solar power installed within California. The reduction or elimination of government subsidies and economic incentives would likely reduce the size of these markets or result in increased price competition, which could cause our revenues to decline.

 

In addition, China has announced major initiatives to promote the development of its domestic solar industry, including making significant long-term financing available to enable the expansion of local industry participants. By contrast, the Economic Stimulus bill signed by President Obama in February 2009 provides little similar benefits for U.S. solar manufacturers. While we and Jaiwei pursue financing and other incentives available to us in China, we are not significant participants in the Chinese solar industry compared to many of our major competitors. To the extent our competitors are successful in obtaining more assistance from the Chinese government than us, we may be at a disadvantage from a financing standpoint.

 

If the adoption rate for solar power technology does not continue to grow, or sufficient demand for solar power products does not develop or takes longer to develop than we anticipate, our revenues would not significantly increase as we expect and we may be unable to achieve or sustain profitability.

 

The market for solar power products continues to emerge and rapidly evolve, and its future and longer-term success is uncertain. If solar power technology proves unsuitable for widespread commercial deployment, or if demand for solar power products fails to develop sufficiently, we would likely be unable to generate enough revenues to achieve and sustain profitability. In addition, demand for solar power products in the

markets and geographic regions that we target may not develop or may develop more slowly than we anticipate. Many factors will influence the widespread adoption of solar power technology and demand for solar power products, including:

 

 

If we are unable to adequately protect our unique intellectual property, we could lose our competitive advantage in the solar power market.

 

Our ability to compete effectively against competing solar power technologies will depend, in part, on our ability to protect our current and future proprietary technology, product designs and manufacturing processes by obtaining, maintaining and enforcing our intellectual property rights through a combination of patents, copyrights, trademarks and trade secrets and also through unfair competition laws. We may not be able to adequately obtain, maintain or enforce our intellectual property rights and information and unauthorized parties may attempt to obtain and use information we regard as proprietary. We also may need to defend our products against infringement or misappropriation claims, either of which could result in the loss of our competitive advantage in the solar power market and materially harm our business and profitability. We face the following risks in protecting our intellectual property and in developing, manufacturing, marketing and selling our products:

 

 

In addition, while we pursue a policy of having our employees, consultants and advisors execute proprietary information and invention agreements when they begin working for us, these agreements may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure. If we fail to maintain trade secrets and patent protection, our potential, future revenues may decrease.

Licenses for technologies and intellectual property may not be available to us.

 

We have entered into license agreements for technologies and intellectual property rights, including an agreement relating to the manufacture of a portion of the high temperature filament we use to produce String Ribbon wafers. Any of our license agreements may be subject to terms and conditions which may limit our ability to use the licensed intellectual property under certain circumstances. For example, our license to manufacture high temperature filament may terminate if we materially breach the license agreement or if we abandon the construction of a manufacturing facility to exploit the licensed technology. We may need to enter into additional license agreements in the future for other technologies or intellectual property rights of third parties. Such licenses, however, may not be available to us on commercially reasonable terms or at all.

 

Existing regulations and changes to such regulations concerning the electrical utility industry 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, federal, state and local government regulations and policies concerning the electric utility industry, as well as internal policies and regulations promulgated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. In the United States 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 in a significant reduction in the potential demand for our solar power products. For example, utility companies commonly charge fees to larger, industrial customers for disconnecting from the electric grid or for having the capacity to use power from the electric grid for back-up purposes. These fees could increase the cost to our customers of using our solar power products and make them less desirable, thereby harming our business, prospects, results of operations and financial condition.

 

We anticipate that our solar power products and their installation will be subject to oversight and regulation in accordance with national, state and local laws and ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters. There is also a burden in having 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, our resellers and their customers and, as a result, could cause a significant reduction in demand for our solar power products.

 

Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in potentially significant monetary damages, penalties, adverse publicity or interruptions to our business.

 

If we fail to comply with present or future environmental laws or regulations we may be required to pay substantial civil or criminal penalties, incur significant capital expenditures, suspend or limit production or cease operations. We use toxic, volatile and otherwise hazardous chemicals in our research and development and manufacturing activities and generate and discharge hazardous emissions, effluents and wastes from these operations. Any failure by us to control the use of or generation of, or to restrict adequately the discharge or disposal of, hazardous substances or wastes or to otherwise comply with the complex, technical environmental regulations governing our activities could subject us to potentially significant monetary damages and penalties, criminal proceedings, third party property damage or personal injury claims, natural resource damage claims, cleanup costs or other costs, or restrictions or suspensions of our business operations. In addition, under some foreign, federal and state statutes and regulations governing liability for releases of hazardous substances or wastes to the environment, a governmental agency or private party may seek recovery of response costs or damages from generators of the hazardous substances or operators of property where releases of hazardous substances have occurred or are ongoing, even if such party was not responsible for the release or otherwise at fault. Also, federal, state or international environmental laws and regulations may ban or restrict the availability and use of certain hazardous or toxic raw materials that are or may be used in producing our products, and

substitute materials may be more costly or unsatisfactory in performance. We believe that we either have all environmental permits necessary to conduct our business or have initiated the process to obtain additional or modified environmental permits needed to conduct our business. While we are not aware of any outstanding, material environmental claims, liabilities or obligations, future developments such as the implementation of new, more stringent laws and regulations, more aggressive enforcement policies, or the discovery of unknown environmental conditions associated with our current or past operations or properties may require expenditures that could have a material adverse effect on our business, results of operations or financial condition. Any noncompliance with or incurrence of liability under environmental laws may subject us to adverse publicity, damage our reputation and competitive position and adversely affect sales of our products.

 

Our Devens, Massachusetts manufacturing facility has been constructed on part of the former Fort Devens Army base, which is associated with contamination caused by prior military activities on and near the site. Fort Devens closed in the early 1990’s and subsequently underwent environmental remediation according to an agreement between the U.S. Environmental Protection Agency and the U.S. Army. As a condition to the lease for the property, we must not disturb existing groundwater monitoring wells and must allow the U.S. Army access to the property to conduct testing and remedial activities. If environmental contamination is found on the Devens site it could be incorrectly attributed to our activities or the U.S. Army could be required to take additional remedial actions on the Devens site. Any such activities could disrupt the operation of our manufacturing facility prior to the impending shutdown or could subject us to liability for environmental remediation.

 

Actions against Lehman Brothers and Barclays to recover damages or shares of our common stock loaned to Lehman Brothers could be expensive, time-consuming and ultimately unsuccessful.

 

In July 2008, we loaned approximately 30 million shares (prior to giving effect to the 1-for-6 reverse stock split) of Evergreen Solar’s common stock to Lehman Brothers International (Europe), or LBIE. None of those shares were returned to us upon demand in September 2008, and 12 million of those shares were ultimately transferred to Lehman Brothers Inc., or LBI, and thereafter to Barclays Capital Inc., or Barclays. We are attempting to recover the value of the 30 million shares as of September 2008 by pursuing a claim against LBIE in its UK insolvency proceedings. LBIE has refused, to date, to acknowledge that this claim has any material value, which may lead to litigation to determine the proper amount of the claim. Whatever the claim amount is ultimately determined to be, that amount would not be paid in full, as LBIE is insolvent. We are also pursuing litigation against LBI and Barclays to recover the 12 million shares that were transferred to them. LBIE and Barclays have moved to dismiss that litigation, and if their motions are denied, we can expect LBIE and Barclays to defend the suit vigorously. We may incur significant legal expenses and allocate management time and attention to the pursuit of the foregoing claim and litigation. Despite our expense and efforts, no assurance can be provided that we will be awarded any damages or recover any of the shares from any Lehman Brothers or Barclays entity.

 

If Lehman Brothers’ claims against us arising out of our capped call agreement are successful, our financial position could be materially and adversely affected.

 

As previously disclosed, we received notification from Lehman Brothers OTC Derivatives Inc. or LOTC, purporting to terminate the capped call transaction that we entered into concurrent with our senior convertible debt offering in June 2008. On September 25, 2009, we received a letter from LOTC demanding payment of $19,992,487 (plus $340,673 in interest) as payment for the purported termination of the capped call transaction. Recently, LOTC increased its demand to no less than $23,643,902 (plus interest). If litigation is commenced, we will likely incur significant legal expenses and allocate management time and attention to defend against these claims, and cannot predict the outcome of any such claims. If LOTC’s claims are successful, our financial position could be materially and adversely affected.

 

Our ability to use net operating loss carryforwards may be subject to limitation.

 

Section 382 of the U.S. Internal Revenue Code of 1986, as amended, imposes an annual limit on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in its stock ownership or equity structure. Our ability to use net operating losses may be limited by prior changes in our ownership, by the issuance of shares of common stock upon conversion

of the existing notes or new notes, or by the consummation of other transactions. As a result, if we earn net taxable income, our ability to use net operating loss carryforwards to offset U.S. federal taxable income may become subject to limitations, which could potentially result in increased future tax liabilities for us.

 

Provisions of our existing notes and new notes could discourage an acquisition of us by a third party.

 

Certain provisions of our existing notes and new notes could make it more difficult or more expensive for a third party to acquire us, or may even prevent a third party from acquiring us. For example, upon the occurrence of certain transactions constituting a fundamental change, holders of the existing notes and new notes will have the right, at their option, to require us to repurchase all of their new notes or any portion of the principal amount of such notes. By discouraging an acquisition of us by a third party, these provisions could have the effect of depriving the holders of our common stock of an opportunity to sell their common stock, as applicable, at a premium over prevailing market prices.

 

Unfavorable changes in foreign currency exchange rates could increase the cost to manufacture our products or result in foreign currency exchange losses, which could adversely affect our profits, product orders and market share.

 

The expansion of our distribution network internationally has increased our exposure to fluctuation in currency exchange rates. A substantial portion of our product revenues have been, and are expected to continue to be, denominated in Euros. As a result, a strengthening of the U.S dollar will decrease our expected U.S. dollar revenue and thereby adversely affect our gross and net profit margins.

 

We often purchase equipment and materials internationally in transactions denominated in foreign currency. As a result of significant currency fluctuations in recent periods that are expected to continue, we are exposed to potential increased costs if the U.S. dollar currency loses value relative to the applicable foreign currency. Such increased costs will adversely impact our future financial condition and results of operations.

 

The Chinese yuan, in which a growing portion of our manufacturing costs are denominated, is subject to somewhat unique potential for valuation changes as the Chinese government is being continually pressured by its trading partners to allow its currency to float in a manner similar to other major currencies. Any increase in the value of the Chinese yuan may impact our ability to control the cost of our products in the world market. Specifically, the decision by the Chinese government to allow the yuan to begin to float against the U.S. dollar could significantly increase the labor and other costs incurred in the operation of our Wuhan facility and the cost of materials, parts, components and subassemblies we source in China, thereby having a material and adverse effect on our costs and, in turn, our financial condition and results of operations.

 

To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited and we may not be able to successfully hedge our exposure at all.

 

Risks Related to the New Notes

 

Servicing our debt, including the new notes, requires a significant amount of cash and our ability to generate cash may be affected by factors beyond our control.

 

Our business may not generate cash flow in an amount sufficient to enable us to pay the principal of, or interest on, our indebtedness, including the new notes offered hereby, or to fund our other liquidity needs, including working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances, and other general corporate requirements.

 

If we cannot fund our liquidity needs, we will have to take actions such as reducing or delaying capital expenditures, product development efforts, strategic acquisitions, investments and alliances, selling assets, restructuring or refinancing our debt, including the new notes, or seeking additional equity capital. Such actions could further negatively impact our ability to generate cash flows. We cannot assure you that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all, or that they would permit us to meet our scheduled debt service obligations. In addition, if we incur additional debt, the risks

associated with our substantial leverage, including the risk that we will be unable to service our debt or generate enough cash flow to fund our liquidity needs, could intensify.

 

Completion of our recapitalization plan may cause fluctuations in the price of our common stock.

 

As part of our recapitalization plan, we have implemented a 1-for-6 reverse stock split previously approved by our stockholders. The primary objective of the 1-for-6 reverse stock split is to have the ability to raise the per share trading price of our common stock. We believe that this will, among other things, better enable us to maintain the listing requirements of our common stock under Nasdaq Marketplace Rules and facilitate higher levels of institutional stock ownership, where investment policies generally prohibit investments in lower-priced securities. We cannot assure you that the reverse stock split will accomplish this objective for any meaningful period of time. While we expect that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of our common stock, we cannot assure you that the reverse stock split will increase the market price of our common stock or result in any permanent or sustained increase in the market price of our stock, which is dependent upon many factors, including our business and financial performance, general market conditions, and prospects for future success. See “— Risks Related to Our Common Stock — The price of our common stock may fluctuate significantly, which could result in substantial losses for our stockholders and subject us to litigation.” In addition, if a large percentage of holders of new notes convert their new notes soon after the settlement of the exchange offers, a significant number of additional shares of our common stock will be in the market, diluting the ownership interest of our existing stockholders which could have an adverse impact on the price of our common stock. We cannot assure you that the price of our common stock will remain at a level above the conversion prices of the new notes.

 

We may in the future depend on cash flow generated by our foreign subsidiaries to service the new notes as we execute our business strategy of focusing on our foreign expansion.

 

As we expand our foreign operations, we may in the future depend on cash flows generated by our foreign subsidiaries to service the new notes and our other indebtedness. The ability of our subsidiaries to pay dividends or make other payments or advances to us will depend upon their operating results and will be subject to applicable laws and the terms of agreements entered into by us or our subsidiaries. For example, Evergreen China is currently prohibited from making dividends or other distributions to us until we have repurchased the equity interests in it held by HSTIC. We cannot assure you that cash flow generated by our foreign subsidiaries will be sufficient to service the new notes.

 

The conversion rate for the new notes may not be adjusted for all dilutive events that may occur.

 

The conversion rate for the new notes will be subject to adjustment for certain events including, but not limited to, the issuance of share dividends on our common stock, the issuance of certain rights or warrants, subdivisions or combinations of our common stock, certain distributions of assets, debt securities, share capital or cash to holders of our common stock and certain issuer tender or exchange offers as described under “Description of New 4% Notes — Conversion Rights — Conversion Rate Adjustments” and “Description of New 7.5% Notes — Conversion Rights — Conversion Rate Adjustments.” Such conversion rates will not be adjusted for other events, such as share issuances for cash or third-party tender offers, that may adversely affect the trading price of the new notes or any shares of common stock. We are not restricted from issuing additional shares of common stock or equity linked securities during the life of the new notes and have no contractual obligation to consider the interests of holders of the new notes in deciding whether to issue shares of common stock. There can be no assurance that an event that adversely affects the value of the new notes, but does not result in an adjustment to the conversion rate, will not occur.

 

Because your right to require us to purchase the new notes is limited, the market price of the new notes may decline if we enter into a transaction that is not a fundamental change under the indenture governing the applicable new notes.

 

Although you will have the right to require us to purchase the new notes upon a fundamental change, the term “fundamental change” is limited and does not include every event that might substantially affect our capital

structure and the value of the new notes and our common stock. A highly leveraged transaction, reorganization, merger, change in control or similar transaction may not necessarily constitute a fundamental change. For example, the term “fundamental change” does not apply to transactions in which 90% of the consideration (excluding cash payments in lieu of fractional shares and cash payments made in respect of dissenters’ appraisal rights) paid for shares of our common stock in a merger or similar transaction which otherwise would constitute a fundamental change consists of publicly traded common stock or if any “person” or “group” of related “persons” becomes the “beneficial owner” of more than 50% of the voting power of our capital stock solely by virtue of ownership of the new 7.5% notes and the new 4% notes, the existing 4% notes and the existing 13% notes.

 

In addition, it is not certain whether we would be required to purchase the new notes upon certain asset sales, because the meaning of “substantially all” assets, the sale of which would constitute a fundamental change, is not established under applicable law. Although there is a developing body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under New York law, which governs the indentures and the new notes, or under the laws of Delaware, our jurisdiction of organization. Accordingly, the ability of a holder of new notes to require us to purchase its notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of our assets and those of our subsidiaries taken as a whole to another person or group may be uncertain. See “Description of New 4% Notes — Fundamental Change Permits Holders to Require Us to Purchase New 4% Notes” and “Description of New 7.5% Notes — Fundamental Change Permits Holders to Require Us to Purchase New 7.5% Notes.”

 

If you hold new notes, you are not entitled to any rights with respect to our common stock, but you are subject to all changes made with respect to our common stock.

 

If you hold new notes, you are not entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on shares of common stock), but you are subject to all changes affecting the common stock. You will only be entitled to rights on the common stock if and when we deliver shares of common stock to you in exchange for your new notes. For example, in the event that an amendment is proposed to our certificate of incorporation or by-laws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to delivery of the shares of common stock, you will not be entitled to vote on the amendment, although you will nevertheless be subject to any changes in the powers, preferences or special rights of our common stock.

 

We may not be able to repay the new notes when due or as otherwise required pursuant to the terms of the applicable indenture.

 

At the applicable maturity, the entire outstanding principal amount of the new notes will become due and payable. In addition, upon the occurrence of a fundamental change, subject to certain conditions, holders of notes may require us to purchase their new notes for cash. It is possible that we would not have sufficient funds to repay the new notes at maturity or make the required purchase of the new notes should we be required to pursuant to the terms of the applicable indenture. We cannot assure you that we would have the financial resources, or would be able to arrange financing on acceptable terms, or at all, to make such payments. A fundamental change may also constitute an event of default under, or result in the acceleration of the maturity of, our other then-existing indebtedness. Our ability to purchase the new notes in cash may be limited by law or the terms of other agreements relating to our indebtedness outstanding at the time. Failure to repay the new notes at maturity or to make the required purchase, as the case may be, would constitute an event of default under the indentures for the new notes, which, in turn, would result in an event of default under certain of our other debt agreements or securities, resulting in acceleration and required repayment of this other debt and further restrict our ability to make payments on, or to purchase, the new notes. See “Description of New 4% Notes — Fundamental Change Permits Holders to Require Us to Purchase New 4% Notes” and “Description of New 7.5% Notes — Fundamental Change Permits Holders to Require Us to Purchase New 7.5% Notes.” Our inability to pay for your new notes at maturity or new notes that are tendered for purchase could result in your receiving substantially less than the principal amount of the new notes. In addition, in certain circumstances we may be required to pay certain Coupon Make Whole Payments with

respect to the new 7.5% notes in cash and we may not have sufficient cash to make such payments. See “— Risks Relating to Our Business — If we do not receive approval from our stockholders at the special meeting to increase our authorized shares of common stock to 240,000,000 shares, we may be required to make certain payments on conversion of our new 7.5% notes in cash.”

 

If an active trading market does not develop for the new notes, you may be unable to sell the new notes or to sell them at a price you deem sufficient.

 

The new notes will constitute new issues of securities with no established trading market, and we do not intend to list them on any securities exchange. Although the dealer manager has advised us that it currently intends to make a market in the new notes, it is not obligated to do so and may discontinue its market-making activities at any time without notice. As a result, the market price of the new notes could be adversely effected. We cannot give you any assurance as to:

 

 

Even if a trading market develops, the new notes may trade at higher or lower prices than their principal amount or purchase price, depending on many factors, including:

 

 

Moreover, the market for non-investment grade debt has historically been subject to disruptions that have caused volatility in prices. It is possible that the market for the new notes will be subject to disruptions. A disruption may have a negative effect on you as a holder of the new notes, regardless of our prospects or performance.

 

Finally, if a large number of holders of the existing notes do not tender their existing notes or tender their existing notes improperly, the limited amount of new notes that would be issued and outstanding after we complete the exchange offers could adversely affect the development of a market for the new notes.

 

If we do not accept for tender more than $199,207,000 aggregate principal amount in existing 4% notes, the right of holders of our existing 13% notes to require us to repurchase their existing 13% notes in 2013 will not terminate.

 

The indenture governing the existing 13% notes provides that a holder of existing 13% notes may require us to repurchase all or a portion of such holder’s notes on April 15, 2013 unless less than $50,000,000 in aggregate principal amount of existing 4% notes and any debt (other than “subordinated debt” (as defined in the indenture for the existing 13% notes for this purpose)) used to refinance the existing 4% notes is outstanding. If we do not accept for tender more than $199,207,000 in aggregate principal amount of existing 4% notes, at least $50,000,000 aggregate principal amount of existing 4% notes will remain outstanding after the close of the exchange offers. If this were to occur, holders of existing 13% notes would continue to be able to require us to repurchase their existing 13% notes in April 2013, which is prior to the maturity of the new notes and the existing 4% notes.

The existing 4% notes have a maturity date prior to the maturity dates of the existing 13% notes, the new 4% notes and the new 7.5% notes.

 

The existing 4% notes will mature on July 15, 2013. The existing 13% notes will mature on April 15, 2015, the new 7.5% notes will mature on April 15, 2017 and the new 4% notes will mature on July 15, 2020. Therefore, the existing 4% notes will mature prior to the maturity date for the existing 13% notes (subject to the rights of the holders of the existing 13% notes to require us to repurchase their notes in April 2013 described above, unless this right terminates upon completion of the 4% exchange offer as described above), the new 7.5% notes and the new 4% notes. In the event we are unable to repay or refinance the existing 4% notes at or prior to their maturity, we would be in default under the indentures governing the existing 13% notes and the new notes. In addition, we cannot assure you that sufficient assets will remain after paying off the existing 4% notes at maturity to make any payments on the existing 13% notes and the new notes.

 

If we do not consummate the 13% exchange offer or if we receive the consent of more than fifty percent but less than seventy-five percent of the aggregate principal amount of existing 13% notes to the proposed amendments, the existing 13% notes will retain their security interest.

 

The 13% notes indenture requires the consent of holders of at least seventy-five percent of the aggregate principal amount of existing 13% notes then outstanding in order to release the security interest and all of the collateral securing our obligations under the existing 13% notes and terminate the existing collateral documents. If we do not consummate the 13% exchange offer, the existing 13% notes will continue to be secured by a first-priority lien on substantially all assets owned by us and the guarantors and, if we receive the consent of more than fifty percent but less than seventy-five percent of the aggregate principal amount of existing 13% notes then outstanding, will share this lien with holders of our new 7.5% notes.

 

The price of our common stock may be volatile, which may affect the trading price of the new notes.

 

In the past, the price of our common stock has experienced volatility due to a number of factors, some of which are beyond our control. See “— Risks Related to Our Common Stock— The price of our common stock may fluctuate significantly, which could result in substantial losses for our stockholders and subject us to litigation.” Because the conversion value of the new notes will be based upon the value of shares of our common stock, any adverse effect on the trading price of our common stock would, in turn, adversely affect the trading price of the new notes.

 

Conversion of the new notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their new notes, or may otherwise depress the price of our shares of common stock. Any sales in the public market of the common stock issuable upon such conversion of the new notes could adversely affect prevailing market prices of our common stock. In addition, the existence of the new notes may encourage short selling by marker participants because the conversion of the new notes could be used to satisfy short positions, or anticipated conversion of the new notes into shares of our common stock could depress the price of our common stock.

 

We will not effect any conversion of the new notes, and you will not have the right to convert any portion of the new notes in excess of that portion of the new notes on conversion which would result in beneficial ownership by you and your affiliates of any amount greater than 9.9% of the then issued and outstanding shares of our common stock.

 

We will not effect any conversion of the new notes, and you will not have the right to convert any portion of the new notes, in excess of that portion of the new notes on conversion of which the sum of (1) the number of shares of our common stock beneficially owned by a holder and its affiliates (other than shares of our common stock which may be deemed beneficially owned through the ownership of the unconverted portion of the new notes or the unexercised or unconverted portion of any of our other securities beneficially owned by such holder or its affiliates subject to a limitation on exercise or conversion analogous to the limitations described in “Description of New 4% Notes — Limitations on Conversion” and “Description of New 7.5% Notes — Limitations on Conversion”) and (2) the number of shares of our common stock issuable upon the

conversion of the portion of the new notes with respect to which the determination set forth in this sentence is being made (including any shares related to the settlement of the Coupon Make Whole Payment and the Additional Amount, if any, in connection therewith), would result in beneficial ownership by such holder and its affiliates of any amount greater than 9.9% of the then issued and outstanding shares of our common stock, calculated as described in “Description of New 4% Notes — Limitations on Conversion” and “Description of New 7.5% Notes — Limitations on Conversion.” Any purported delivery of shares of our common stock upon exercise of the conversion right on the new notes will be void and have no effect to the extent (but only to the extent) that such delivery would result in a holder (including its affiliates) becoming the beneficial owner of more than 9.9% of the shares of our common stock outstanding at such time. Notwithstanding anything to the contrary in “Description of New 4% Notes — Limitations on Conversion” and “Description of New 7.5% Notes — Limitations on Conversion,” no holder will be entitled, with or without our consent, to waive the restrictions set forth in “Description of New 4% Notes — Limitations on Conversion” and “Description of New 7.5% Notes — Limitations on Conversion.” In the event that we are unable to mandatorily convert any new notes due to this limitation, we will have the right (subject to certain limitations) to redeem the new notes that we are not permitted to convert at a redemption price equal to 100% of the principal amount of such new notes, plus accrued and unpaid interest to, but excluding, the redemption date. See “Description of New 4% Notes — Limitations on Conversion” and “Description of New 7.5% Notes — Limitations on Conversion.” As a result of these limitations, you may not receive the number of shares of our common stock that would otherwise be issuable upon conversion of your new notes, and this may result in a loss by you of substantial economic value attributable to the conversion feature of the new notes. To avoid these limitations, you may need to sell all or a portion of your new notes, convert a portion of your new notes and sell the shares of common stock issuable upon conversion on an accelerated basis, or sell shares of our common stock beneficially owned by you or your affiliates, which you may not wish to do. Even if you choose to sell new notes or shares to avoid this limitation, you may not be able to do so at a price that is acceptable to you, for fair value or at all, given the fluctuations in the prices in our common stock in general and particularly if counterparties to such sales are aware of your need to sell new notes or shares of common stock to avoid these limitations. As a result, you may not realize the full value of your investment in the new notes.

 

Conversion of the new notes at the option of the Company may not adequately compensate you for the lost option time value of your notes as a result of such conversion.

 

The new notes are convertible at our option in certain circumstances as described under “Description of New 4% Notes — Conversion at the Option of the Company” and “Description of New 7.5% Notes — Conversion at the Option of the Company.” Although you will receive a Coupon Make Whole Payment for the New 4% Notes being converted on or prior to January 15, 2015 and for the new 7.5% notes being converted on or prior to April 15, 2015, and, in the case of any conversions of the new 4% notes, the Additional Amount, unless and until we exercise our right to terminate our obligations to pay the Additional Amount, the Coupon Make Whole Payment and the Additional Amount may not adequately compensate you for the lost option value of your notes as a result of the conversion. In addition, the Trigger Price for conversion of the new 4% notes at our option is intended to provide for conversion of the new 4% notes at our option only when, based on the trading price of our common stock for at least 20 trading days during the 30 consecutive trading day period ending within five trading days prior to the date of the notice of conversion, the value of the shares of our common stock issuable to holders of the new 4% notes upon conversion together with the Additional Amount (assuming for such purposes that the Additional Amount is then payable by us) but not including any Coupon Make Whole Payment, is equal to or greater than the face amount of the existing 4% notes tendered by holders in the 4% exchange offer in exchange for each $1,000 principal amount of new 4% notes issued in the 4% exchange offer. We cannot assure you that the Trigger Price will provide holders of new 4% notes with shares of common stock upon conversion with a value equal to the face amount of such holders’ existing 4% notes tendered for exchange.

If we elect to convert the new notes, there is a risk of fluctuation in the price of our common stock from the date we elect to convert the new notes to the conversion date.

 

The new notes are convertible at our option in certain circumstances. We may elect to convert (i) the new 4% notes on or prior to maturity if the last reported sale price of our common stock is greater than or equal to the Trigger Price (as defined in “Description of New 4% Notes”) for at least 20 trading days during any 30 consecutive trading day period ending within five trading days prior to the notice of our election to convert and (ii) the new 7.5% notes on or prior to maturity if the last reported sale price of our common stock has exceeded 150% of the conversion price of the new 7.5% notes then in effect during the measurement period described above. The new notes will not be converted, however, until 20 to 30 days after the date of our notice of conversion. Therefore, there is a risk of fluctuation in the price of our common stock between the time when we may first elect to convert the new notes and the conversion date. As a result of any such fluctuation in the price of our common stock, the aggregate conversion value you actually receive upon any conversion of the new notes at our election may be less than the principal amount of the new notes.

 

The fundamental change purchase feature of the new notes may delay or prevent an otherwise beneficial attempt to take over our company.

 

The terms of the new notes allow holders to require us to purchase the new notes for cash in the event of a fundamental change. A takeover of our company that constitutes a fundamental change would trigger an option of the holder of the new notes to require us to purchase the new notes. This may have the effect of delaying or preventing a takeover of our company that would otherwise be beneficial to investors in the new notes and our common stock.

 

Rating agencies may provide unsolicited ratings on the new notes that could cause the market value or liquidity of the new notes to decline.

 

We have not requested a rating of the new notes from any rating agency and believe it is unlikely that the new notes will be rated. However, if one or more rating agencies rate the new notes and assign the new notes a rating lower than the rating expected by investors, or reduce their rating in the future, the market price or liquidity of the new notes and our common stock could be harmed.

 

The U.S. federal income tax consequences of the exchange of the existing notes for the new notes are uncertain.

 

The U.S. federal income tax consequences of the exchange offers and of the ownership and disposition of the new notes are uncertain. Depending on whether the existing notes and the new notes are “securities” for U.S. federal income tax purposes, the exchange may be a “recapitalization” or a taxable exchange. See “Material U.S. Federal Income Tax Considerations — Tax Consequences to U.S. Holders — Treatment of Exchange Offers.”

 

We will characterize the new notes as contingent payment debt instruments for U.S. federal income tax purposes.

 

The new notes will be characterized by us as contingent payment debt instruments for U.S. federal income tax purposes. U.S. federal income tax regulations applicable to contingent payment debt instruments generally require a holder that is a U.S. taxpayer to accrue original issue discount at a hypothetical interest rate that generally is substantially higher than the actual stated interest rate on the new notes. In addition, these regulations recharacterize as interest income (taxable at ordinary income rates) virtually all of the payments that would be made under the new notes and any gain realized upon the sale or other disposition (including a redemption or conversion) of the new notes.

 

For a more detailed summary of these potential adverse tax consequences, see “Material U.S. Federal Income Tax Considerations — Tax Consequences to U.S. Holders — Treatment of Ownership and Disposition of the New Notes and Common Stock — Characterization as Contingent Payment Debt Instruments.” Investors

considering the exchange of existing notes for new notes should consult with their own tax advisors concerning such consequences and the potential impact in their particular circumstances.

 

We will recognize cancellation of debt income for U.S. federal income tax purposes as a result of the exchange offers.

 

We will recognize cancellation of debt income for U.S. federal income tax purposes upon the issuance of the new notes in satisfaction of the existing notes. We expect that substantially all of such cancellation of debt income will be offset by our available net operating losses for U.S. federal income and state tax purposes. As described above, the use of such net operating losses may be subject to limitations.

 

You may be subject to tax upon an adjustment to, or a failure to adjust, the conversion rate of the new notes even though you do not receive a corresponding cash distribution.

 

The conversion rates of the new notes are subject to adjustment in certain circumstances, including the payment of certain cash dividends. If the conversion rate is adjusted as a result of a distribution that is taxable to our common stockholders, such as a cash dividend, you will be deemed to have received for U.S. federal income tax purposes a taxable dividend to the extent of our earnings and profits without the receipt of any cash. In addition, a failure to adjust (or adjust adequately) the conversion rate after an event that increases your proportionate interest in us could be treated as a deemed taxable dividend to you. Any such deemed dividend may be subject to U.S. federal withholding tax or backup withholding, which may be set off against subsequent payments on the new notes. See “Material U.S. Federal Income Tax Considerations.”

 

The accounting for convertible debt securities is complex and requires significant judgment.

 

The accounting treatment for convertible debt securities that may be settled in cash is complex and impacts our reported interest expense.

 

Based on the cash settlement features of the debt, we must classify a portion of the principal amount of the new notes as debt and a portion of the new notes as equity. Valuation of these components requires us to make certain significant estimates and judgments. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Some of the assumptions are not readily apparent or available and therefore actual results may differ from these estimates under different assumptions or conditions.

 

In addition, the accounting treatment for complex convertible debt securities is subject to frequent scrutiny by the accounting authorities and is subject to change. Currently, we do not expect any changes in the accounting requirements; however, we cannot predict whether or when any change could be made. Any change could have an adverse effect on our reported interest expense, which could adversely affect the trading price of our new notes or our common stock.

 

In addition, if we do not receive approval from our stockholders at the special meeting to increase our authorized shares to 240,000,000 shares, then we may be required to separately account for the holder’s ability to convert the new notes into our shares at the option’s fair value and we would then be required to record mark-to-market adjustments to the carrying value of the option in our financial statements each reporting period. Such mark-to-market adjustments require a significant amount of judgment and could materially impact our reported financial results as long as the new notes are outstanding.

 

We may be unable to deduct for tax purposes the interest or original issue discount, paid or accrued on the new notes.

 

No deduction is allowed for U.S. federal income tax purposes for interest paid on a disqualified debt instrument. A disqualified debt instrument generally includes any indebtedness of a corporation which is payable in equity of the issuer. Although we believe and intend to take the position that the new notes are not disqualified debt instruments, the new notes may be treated as disqualified debt instruments, and we may be prohibited from deducting the interest due on the new notes. In addition, under the rules applicable to certain

high yield debt obligations, deductions for interest expense and original issue discount may be deferred or disallowed for U.S. federal income tax purposes.

 

The new notes initially will be held in book-entry form, and therefore, you must rely on the procedures and the relevant clearing systems to exercise your rights and remedies.

 

Unless certificated new notes are issued in exchange for book-entry interests in the new notes, owners of the book-entry interests will not be considered owners or holders of new notes. Instead, DTC, or its nominee, will be the sole holder of the new notes. Payments of principal, interest and additional amounts or coupon make whole payments owing on or in respect of the new notes in global form will be made to the paying agent, which will make payments to DTC. Thereafter, such payments will be credited to DTC participants’ accounts that hold book-entry interests in the new notes in global form and credited by such participants to indirect participants. Unlike holders of the new notes themselves, owners of book-entry interests will not have the direct right to act upon our solicitations for consents or requests for waivers or other actions from holders of the new notes. Instead, if you own a book-entry interest, you will be permitted to act only to the extent you received appropriate proxies to do so from DTC or, if applicable, a participant. We cannot assure you that procedures implemented for the granting of such proxies will be sufficient to enable you to vote on any requested actions on a timely basis.

 

Risks Related to the New 4% Notes.

 

The new 4% notes will be subordinated to the existing 13% notes, the new 7.5% notes and any other senior indebtedness we may incur and will be structurally subordinated to any existing and future debt and other obligations of our subsidiaries.

 

The new 4% notes are not secured by our assets and will be subordinated to the new 7.5% notes, the existing 13% notes and any other senior indebtedness we may incur. The new 7.5% notes will be secured by a first-priority lien on substantially all of the assets of us and the guarantors, other than Excluded Property, and if we do not receive the consent of holders of at least seventy-five percent of the outstanding principal amount of the existing 13% notes in the consent solicitation, the existing 13% notes will continue to be secured by a first-priority lien on substantially all of the assets of us and the guarantors, other than Excluded Property. The new 4% notes will not be subordinated to the existing 4% notes. The new 4% notes will also be effectively subordinated to the existing 13% notes, in the event that the existing security interest securing the existing 13% notes is not released pursuant to the consent solicitation, and to all of our existing and future secured indebtedness, including the new 7.5% notes, to the extent of the value of the collateral securing such indebtedness. The effect of this subordination is that, in the event of our bankruptcy, liquidation, dissolution, reorganization or similar proceeding, our assets could not be used to pay holders of the new 4% notes until after the claims of the holders of the new 7.5% notes, the existing 13% notes, any other senior indebtedness and any secured indebtedness, to the extent of the value of the collateral securing such indebtedness, outstanding at such time had been fully paid. In addition, the new 4% notes will rank pari passu with the existing 4% notes. As a result, there may not be sufficient assets remaining to pay amounts due on any or all of the outstanding new 4% notes. In addition, the new 4% notes will be subject to certain of the restrictive payment covenants in the new 7.5% notes indenture and, if we do not consummate the 13% exchange offer or if we accept more than fifty percent but less than seventy-five percent of the existing 13% notes for exchange in the 13% exchange offer, in the existing 13% notes indenture. As a result, we may only pay the Additional Amount or make the Coupon Make Whole Payment upon conversion of the new 4% notes in cash or redeem the new 4% notes after our existing 13% notes and new 7.5% notes are no longer outstanding, and subject to the subordination provisions of the new 4% notes indenture.

 

In addition, the new 4% notes are obligations exclusively of Evergreen Solar and, unlike the existing 13% notes and the new 7.5% notes, will not be guaranteed by any of our existing or future subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due with respect to the new notes or to make any funds available therefor, whether by dividends, loans or other payments. Any payment of dividends, distributions, loans or advances by our subsidiaries will also be contingent upon our subsidiaries’ earnings and could be subject to contractual restrictions. In the event of the insolvency, bankruptcy, liquidation, reorganization, dissolution or winding up of the business of any of

our subsidiaries, creditors of our subsidiaries generally will have the right to be paid in full before any distribution is made to us or the holders of the new 4% notes. In addition, even if we were a creditor of any of our subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us. Accordingly, the new 4% notes will be structurally subordinated in right of payment to all of the existing and future debt and other obligations of our subsidiaries. This subordination could adversely affect our ability to pay our obligations on the new 4% notes.

 

As of October 2, 2010, on a pro forma basis as if the exchange offers and consent solicitation had occurred as of such date (assuming that the 4% exchange offer was completed at the 4% maximum amount and at a $500 exchange ratio and that all of the existing 13% notes were tendered in the 13% exchange offer), we would have had $165.0 million of secured indebtedness outstanding, we would have had no senior unsecured indebtedness outstanding (not including the existing 4% notes, which will not constitute senior debt under the new 4% indenture), we would have had $49.2 million of existing 4% notes outstanding, which will be pari passu with the new 4% notes, and our subsidiaries would have had existing indebtedness and other liabilities (including trade payables but excluding intercompany liabilities) of approximately $43.9 million, all of which would be effectively senior in right of payment to the new 4% notes. See “Unaudited Pro Forma Financial Data.”

 

In addition, the indenture governing the new 4% notes does not restrict us or our subsidiaries from incurring debt (including senior debt) in the future. The incurrence by us of additional senior debt or by our subsidiaries of additional debt and other liabilities will increase the risks described above.

 

The indenture governing the new 4% notes will not restrict us or our subsidiaries from incurring debt, including secured debt, and the new 4% notes will not be protected by financial or other restrictive covenants.

 

The indenture governing the new 4% notes will not restrict us or our subsidiaries from incurring additional debt, including secured debt. If we or our subsidiaries incur additional indebtedness or liabilities, our ability to pay our obligations on the new 4% notes could be adversely affected. The indenture governing the new 4% notes also will not contain other financial covenants, restrict our ability to repurchase our securities, pay dividends or make restricted payments, or contain covenants or other provisions to afford holders protection in the event of a transaction that substantially increases our level of indebtedness. The indenture governing the new 4% notes also will not contain covenants limiting transactions by us with our affiliates or to restrict our entry into agreements that could negatively impact our ability to obtain cash from our subsidiaries to service our obligations under the new 4% notes. One such existing restriction is that Evergreen China is currently prohibited from making dividends or other distributions to us until we have repurchased the equity interests in it held by HSTIC. The absence of these covenants allows us and our subsidiaries to take actions that may adversely impact our ability to repay the new 4% notes.

 

You may lose the right to receive the Additional Amount upon conversion of the new 4% notes.

 

At any time after the one year anniversary of the date of original issuance of the new 4% notes, we may, at our option, terminate the right of holders of new 4% notes to receive an Additional Amount of $300 for every $1,000 principal amount of new 4% notes converted, subject to 20 trading days prior notice, which notice can be given prior to the one year anniversary of the Issue Date. Therefore, if we elect to terminate this right, you will not be able to receive the Additional Amount unless you convert your new 4% notes prior to such termination.

Risks Related to the New 7.5% Notes

 

Restrictions imposed by the indenture governing the new 7.5% notes may limit our ability to finance future operations or capital needs or engage in other business activities that may be in our interest; however these restrictions will not protect a holder of new 7.5% notes against all activities that we and our subsidiaries may undertake that may be important to them as secured creditors.

 

The indenture governing the new 7.5% notes imposes operating and other restrictions on us and our subsidiaries. The indenture may also limit, among other things, the ability of us and our subsidiaries to:

 

 

 

 

 

 

However, these limitations are subject to a number of important qualifications and exceptions and may permit us and our subsidiaries to take actions that are adverse to your interests as a holder of the new 7.5% notes. For example, we are permitted to use the proceeds of certain capital raises to make investments in our foreign subsidiaries.

 

In addition, the restrictive covenants contained in the indenture governing the new 7.5% notes are limited, and do not include many covenants that a secured creditor would customarily require. For example, the indenture governing the new 7.5% notes will not include a covenant that would limit the ability of our subsidiaries to permit to exist restrictions on their ability to pay dividends, repay intercompany debt and transfer assets to us or another subsidiary, and therefore we may put in place such restrictions which could negatively impact our ability to obtain cash from our subsidiaries to service our obligations under the new 7.5% notes. One such existing restriction is that Evergreen China is prohibited from making dividends or other distributions to us until we have repurchased the equity interests in it held by HSTIC. The indenture governing the new 7.5% notes also will not contain a covenant limiting transactions by us and our affiliates. The absence of these covenants allows us and our subsidiaries to take actions that may adversely impact the collateral and our ability to repay the new 7.5% notes.

 

The value of available collateral may diminish over time, and we may in the future depend on cash flow generated by our foreign subsidiaries to service the new 7.5% notes, as we execute our business strategy of focusing on our foreign expansion.

 

In order for us to effectively execute our foreign expansion plans, the covenants in the indenture provide substantial flexibility for us to make investments, incur debt, acquire assets and conduct our operations through foreign subsidiaries which are not guarantors of the new 7.5% notes. Furthermore, we have disclosed our intention to close our Devens, Massachusetts facility and concentrate on our manufacturing facility in Wuhan, China. As a result, the value of available collateral may diminish over time and we may invest limited capital expenditures domestically to replace aging or older technology equipment. Any of these actions may result in less collateral being available to secure the new 7.5% notes, and could materially adversely affect your ability to be repaid on the new 7.5% notes under certain circumstances.

 

The ability of our subsidiaries to pay dividends or make other payments or advances to us will depend upon their operating results and will be subject to applicable law, if we accept more than fifty percent but less than seventy-five percent of the existing 13% notes for exchange in the 13% exchange offer, the covenants in the indenture governing the existing 13% notes, the covenants in the indenture governing the new 7.5% notes and the terms of agreements entered into by us or our subsidiaries. Currently, Evergreen China is prohibited from making dividends or other distributions to us until we have repurchased the equity interests in it held by HSTIC. Further, if we fail to meet our obligations to HSTIC pursuant to our agreements with HSTIC or to

Jiawei pursuant to our manufacturing services agreement, we could potentially forfeit our equity interest in Evergreen China to HSTIC or we could be required to sell our equity interest in, or the assets of, Evergreen China to Jiawei.

 

The new 7.5% notes will be secured only to the extent of the value of the assets that have been granted as security for the new 7.5% notes.

 

The collateral securing the new 7.5% notes will be subject to liens permitted under the terms of the indenture governing the new 7.5% notes, whether arising on or after the date the new 7.5% notes are issued, including, if we accept more than fifty percent but less than seventy-five percent of the existing 13% notes for exchange in the 13% exchange offer, the first-priority lien in favor of the existing 13% notes. The existence of any permitted liens or failure to perfect the liens could adversely affect the value of the collateral securing the new 7.5% notes as well as the ability of the collateral agent to realize or foreclose on such collateral.

 

The collateral has not been appraised in connection with the issuance of the new 7.5% notes and the fair market value of the collateral is subject to fluctuations based on factors that include, among others, our ability to implement our business strategy, the ability to sell the collateral in an orderly sale, general economic conditions, the availability of buyers and similar factors. The amount to be received upon a sale of the collateral would be dependent on numerous factors, including but not limited to the actual fair market value of the collateral at such time and the timing and the manner of the sale. By its nature, some or all of the collateral may be illiquid and may have no readily ascertainable market value. In the event that we are subject to a bankruptcy case, if the value of the collateral is less than the amount of principal and accrued and unpaid interest, if any, on the new 7.5% notes and all other senior secured obligations, under applicable law interest may cease to accrue on the new 7.5% notes from and after the date the bankruptcy petition is filed. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, we cannot assure you that the proceeds from any sale or liquidation of the collateral will be sufficient to pay our obligations under the new 7.5% notes. Any claim for a deficiency, if any, realized by the holders of the new 7.5% notes from the sale of the collateral and the obligations under the new 7.5% notes will rank equally in right of payment with all of our other unsecured indebtedness and other obligations, including trade payables, unless such indebtedness and other obligations are expressly subordinated to the new 7.5% notes.

 

We will in most cases have control over the collateral, and the sale of particular assets by us could reduce the pool of assets securing the new 7.5% notes.

 

Subject to compliance with the covenants in the indenture governing the new 7.5% notes, the collateral documents allow us to remain in possession of, retain exclusive control over, freely operate, and collect, invest and dispose of any income from, the collateral securing the new 7.5% notes. So long as no default or event of default under the indenture governing the new 7.5% notes would result therefrom, we may, among other things, without any release or consent by the indenture trustee, conduct ordinary course activities with respect to collateral, such as selling, abandoning or otherwise disposing of collateral in the ordinary course of business and making ordinary course cash payments (including repayments of certain indebtedness).

 

There are circumstances other than repayment or discharge of the new 7.5% notes under which the collateral securing the new 7.5% notes will be released automatically without consent of the trustee or the holders.

 

Under various circumstances, collateral securing the new 7.5% notes will be released automatically, including a sale, transfer or other disposal of such collateral (to someone other than us or the guarantors) in transactions not prohibited under the indenture governing the new 7.5% notes and, if we accept more than fifty percent but less than seventy-five percent of the existing 13% notes for exchange in the 13% exchange offer, under the indenture governing the existing 13% notes. Any of these events could reduce the aggregate value of the collateral securing the new 7.5% notes.

 

There are certain categories of property that are excluded from the collateral. The collateral agent may not be able to realize upon collateral securing the new 7.5% notes.

 

Certain categories of assets, certain real property and equity interests of certain subsidiaries, are excluded from the collateral securing the new 7.5% notes. See “Description of New 7.5% Notes— Security.” For example, our equity interests in Evergreen China are pledged to HSTIC pursuant to our agreements with HSTIC, and may not be transferred or pledged until we have met our obligation to repay HSTIC and repurchase its equity interests in Evergreen China. If an event of default occurs and the payment on the new 7.5% notes is accelerated, any claims of the holders of the new 7.5% notes after the collateral is liquidated will be general unsecured claims against us and will rank equally with the holders of other unsecured indebtedness of the relevant entity with respect to such Excluded Property to the extent such other indebtedness is not expressly subordinated to the new 7.5% notes. As a result, if the value of the assets pledged as security for the new 7.5% notes is less than the value of the claims of the holders of the new 7.5% notes and, if we accept more than fifty percent but less than seventy-five percent of the existing 13% notes, the value of the claims of the holders of the existing 13% notes, those claims may not be satisfied in full before the claims of our unsecured creditors receive any payment.

 

In addition, the security interest of the collateral agent will be subject to practical problems generally associated with the realization of security interests in collateral. For example, the collateral agent may need to obtain the consent of a third party to obtain or enforce a security interest in a contract. We cannot assure you that the collateral agent will be able to obtain any such consent. We also cannot assure you that the consents of any third parties will be given when required to facilitate a foreclosure on such assets. Accordingly, the collateral agent may not have the ability to foreclose upon those assets and the value of the collateral may significantly decrease.

 

Perfection of security interests in some of the collateral may not occur for some time or at all, and as a result, holders may lose the benefit of such security interests to the extent a default should occur prior to such perfection or if such security interest is perfected during the period shortly preceding bankruptcy or insolvency.

 

Under the terms of the indenture governing the new 7.5% notes, we have a period of time post-closing to grant (solely in the case of real property) and perfect the security interests in certain collateral, including taking actions to provide control agreements for deposit accounts and securities accounts and to record mortgages with respect to real property collateral. Consequently, if a default should occur prior to the perfection of such security interest, holders may not benefit from such security interest. In addition, if perfection of such security interests were to occur during the 90-day period preceding bankruptcy or insolvency, such security interests may be subject to categorization as a preference and avoided causing the holders to lose the benefit of such security interests. Further, we will not be required under the terms of the security agreement to perfect the security interests in certain collateral, and the failure to perfect such security interest may adversely affect the value of such collateral to the holders.

 

In addition, applicable law requires that a security interest in certain tangible and intangible assets can be properly perfected and such perfection maintained only through certain actions undertaken by the secured party. The liens on the collateral securing the new 7.5% notes may not be perfected if the collateral agent is not able to or does not take the actions necessary to perfect and maintain these liens.

 

Furthermore, the collateral is currently pledged as security for the holders of the existing 13% notes and, until we release their existing security interest (if we accept at least seventy-five percent of the existing 13% notes for exchange in the 13% exchange offer) or perfect the security interests in the collateral pledged as security for the new 7.5% notes, the value of the collateral to the holders of new 7.5% notes may be adversely affected, and to the extent that the holders of the existing 13% notes have a prior, perfected lien on the same collateral, the holders of new 7.5% notes may not benefit from a security interest on the collateral.

 

A note guaranty could be voided if it constitutes a fraudulent transfer under U.S. bankruptcy or similar state law, which would prevent the holders of the new 7.5% notes from relying on that guarantor to satisfy claims.

 

Under U.S. bankruptcy law and comparable provisions of state fraudulent transfer laws, a guaranty can be voided, or claims under the guaranty may be subordinated to all other debts of that guarantor if, among other

things, the guarantor, at the time it incurred the indebtedness evidenced by its guaranty or, in some states, when payments become due under the guaranty, received less than reasonably equivalent value or fair consideration for the incurrence of the guaranty and:

 

 

 

 

A guaranty may also be voided, without regard to these factors, if a court finds that the guarantor entered into the guaranty with the actual intent to hinder, delay or defraud its creditors.

 

A court would likely find that a guarantor did not receive reasonably equivalent value or fair consideration for its guaranty if the guarantor did not substantially benefit directly or indirectly from the issuance of the guarantees. If a court were to void a guarantee, you would no longer have a claim against the guarantor. Sufficient funds to repay the new 7.5% notes may not be available from other sources, including the remaining guarantors, if any. In addition, the court might direct you to repay any amounts that you already received from the subsidiary guarantor. The measures of insolvency for purposes of fraudulent transfer laws vary depending upon the governing law. Generally, a guarantor would be considered insolvent if:

 

 

 

 

The provisions of each note guaranty will contain clauses intended to limit the guarantor’s liability to the maximum amount that it could incur without causing its guaranteed obligations to be voidable as a fraudulent transfer. These saving provisions, however, may not be effective to prevent any note guaranty from being voided under fraudulent transfer law.

 

The grant of collateral on the Issue Date, and any future grant of the collateral pursuant to the collateral documents might be voidable in bankruptcy.

 

The grant of collateral to secure the new 7.5% notes and note guaranties may be subject to review under federal or state fraudulent transfer laws. Both the grant of the collateral on the Issue Date and any future grant of collateral under the terms of the collateral documents may be voidable by a judicial authority on petition of the grantor (as debtor in possession) or a trustee in bankruptcy if certain events or circumstances exist or occur, including, among others, if the grantor is insolvent at the time of the grant, the grant permits the holders of the new 7.5% notes to receive a greater recovery than if the grant had not been given and a bankruptcy proceeding in respect of the grantor is commenced within 90 days following the grant or, in certain circumstances, a longer period. Further, creditors of both us and the guarantors may also challenge the security interests granted to the collateral agent. We cannot predict whether any challenge to the grant of collateral would be successful and whether, as a result thereof, the new 7.5% notes and note guaranties may become unsecured.

 

In the event of our bankruptcy, the ability of the holders of new 7.5% notes to realize upon the collateral will be subject to certain bankruptcy law limitations.

 

The ability of holders of new 7.5% notes to realize upon the collateral will be subject to certain bankruptcy law limitations in the event of our bankruptcy. Under applicable U.S. Federal bankruptcy laws, secured creditors are stayed from exercising remedies, repossessing their collateral from a debtor in a

bankruptcy case, or from disposing of collateral repossessed from such a debtor, without prior bankruptcy court approval. Moreover, even if the secured creditor seeks to lift this automatic stay, applicable U.S. Federal bankruptcy laws generally will permit the debtor to continue to retain collateral even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given “adequate protection.” The meaning of the term “adequate protection” may vary according to the circumstances, but is intended generally to protect the secured creditor from a decline in value of the collateral during the bankruptcy case and may include cash payments or the granting of additional security. In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary powers of a U.S. bankruptcy court in equity, we cannot predict whether payments under the new 7.5% notes would be made following commencement of and during a bankruptcy case, whether or when the collateral agent for the new 7.5% notes could foreclose upon or sell the collateral or whether or to what extent holders would be compensated for any delay in payment or loss of value of the collateral through the requirement of “adequate protection.” Insolvency laws in other jurisdictions may also restrict the ability of holders to proceed against the collateral.

 

The collateral securing the new 7.5% notes may be diluted under certain circumstances.

 

If less than seventy-five percent of the existing 13% notes are accepted for exchange in the exchange offer, the collateral that will secure the new 7.5% notes will continue to secure the existing 13% notes and may also secure additional indebtedness that we or our subsidiaries incur in the future, subject to restrictions on our and their ability to incur debt and liens under the indenture governing the new 7.5% notes. Your rights to the collateral would be diluted by any increase in the indebtedness secured by this collateral.

 

Claims of holders of new 7.5% notes will be structurally subordinate to claims of creditors of non-guarantor subsidiaries.

 

The new 7.5% notes will not be guaranteed by certain of our domestic subsidiaries or any of our foreign subsidiaries. ESLR1, LLC, which currently provides a guaranty with respect to the existing 13% notes, will be merged with and into the Company prior to the Issue Date, which means that as of the Issue Date, none of our subsidiaries will provide a guaranty of the new 7.5% notes. You will not have any claims as a creditor against any subsidiaries that do not guarantee the new 7.5% notes, and the indebtedness and other liabilities, including trade payables, of these subsidiaries will effectively be senior to your claims against these subsidiaries. The indenture governing the new 7.5% notes will permit, subject to certain limitations, non-guarantor subsidiaries to incur debt and will not contain any limitations on the amount of certain liabilities (such as trade payables) that may be incurred by them. All obligations of our non-guarantor subsidiaries will have to be satisfied before any of the assets of these subsidiaries would be available for distribution upon a liquidation, dissolution, reorganization, bankruptcy or similar proceeding to us or a guarantor of the new 7.5% notes.

 

Your interests as a creditor could diverge from the interests of other creditors, such as the holders of the existing 13% notes, that may share a security interest with you in the same collateral.

 

The 13% notes indenture requires the consent of holders of at least seventy-five percent of the aggregate principal amount of existing 13% notes then outstanding to release the security interest and all of the collateral securing our obligations under the existing 13% notes and terminate the existing collateral documents. If less than seventy-five percent of the existing 13% notes are accepted for exchange in the exchange offer, the existing 13% notes will retain their security interest, and our obligations under both the existing 13% notes and the new 7.5% notes will be ratably secured by first-priority liens granted by us and the guarantors on substantially all assets owned by us and the guarantors, other than Excluded Property. Your interests as a creditor could diverge from the interests of other creditors, such as the holders of the existing 13% notes, that share a security interest in the same collateral. Furthermore, a majority of the combined holders of the existing 13% notes and the new 7.5% notes will control actions pursuant to the collateral documents, which means that your interests or directions may not be followed by, or may be contradicted by, the collateral agent if you are not in the majority of such combined holders.

 

In addition, if more than fifty percent but less than seventy-five percent of the existing 13% notes are accepted for exchange in the 13% exchange offer, the proposed amendments to the existing 13% notes

indenture will provide that the new 7.5% notes are subject to certain of the restrictive payment covenants set forth in the existing 13% notes indenture. As a result, we may only redeem the new 7.5% notes after our existing 13% notes are no longer outstanding, while the existing 13% notes would not be subject to similar restrictions under the new 7.5% notes indenture. Furthermore, if more than fifty percent but less than seventy-five percent of the existing 13% notes are accepted for exchange in the 13% exchange offer, and if we did receive approval from our stockholders at our special meeting to increase our authorized shares of common stock to 240,000,000 shares, then while our existing 13% notes are outstanding we may not make this Coupon Make Whole payment in cash, and if we did not receive approval from our stockholders at our special meeting to increase our authorized shares of common stock to 240,000,000 shares, while our existing 13% notes are outstanding we may only make the Coupon Make Whole Payment upon conversion of the new 7.5% notes in cash if we do not then have a sufficient number of authorized and unissued shares that have not been reserved for other purposes.