Item 1A. Risk Factors.
The following pages discuss the principal risks we face. These include, but are not limited to, risks arising from the bankruptcy of our controlling shareholder, SunEdison. Any of these risk factors could have a significant or material adverse effect on our businesses, results of operations, financial condition or liquidity. They could also cause significant fluctuations and volatility in the trading price of our securities. Readers should not consider any descriptions of these factors to be a complete set of all potential risks and uncertainties that could affect us. These factors should be considered carefully together with the other information contained in this annual report and the other reports and materials filed by us with the SEC. Furthermore, many of these risks are interrelated, and the occurrence of certain of them may in turn cause the emergence or exacerbate the effect of others. Such a combination could materially increase the severity of the impact of these risks on our businesses, results of operations, financial condition and liquidity.
Risks Related to our Proposed Sponsorship Transaction with Brookfield and Certain of its Affiliates
The proposed Sponsorship Transaction is subject to a number of conditions, which may not be satisfied on a timely basis or at all.
On March 6, 2017, we entered into the Merger Agreement with certain affiliates of Brookfield. There can be no assurance that our entry into the Merger Agreement will result in any transaction being consummated, and speculation and uncertainty regarding the outcome of the proposed sponsorship transaction may adversely impact our business. Our Board has determined that the Merger Agreement, the Sponsorship Transaction and the transactions contemplated thereby are fair to, and in the best interests of, the Company and its stockholders and will submit the Merger Agreement to our stockholders for their consideration and will recommend that our stockholders adopt and approve the Merger Agreement and that our stockholders approve an amendment to our charter to reflect certain governance rights of affiliates of Brookfield following the consummation of the merger and other transactions set forth in the Merger Agreement. Approval of the proposal to adopt and approve the Merger Agreement requires (i) the affirmative vote of holders of a majority of the total voting power of the outstanding shares of our Class A common stock and Class B common stock entitled to vote thereon and (ii) the affirmative vote of holders of a majority of the outstanding shares of our Class A common stock entitled to vote thereon (excluding SunEdison, Brookfield and their respective affiliates or any person with whom any of them has formed a group). SunEdison holds a majority of the total voting power of our outstanding shares and has entered into a Voting and Support Agreement pursuant to which it has agreed to vote its shares of our Class B common stock in favor of the Merger Agreement. However, there can be no assurance that the Merger Agreement will be approved by a majority of our stockholders excluding SunEdison, Brookfield and their respective affiliates or any person with whom any of them has formed a group. As described more fully under Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters and the risk factor entitled “Certain of our shareholders have accumulated large concentrations of holdings of our Class A shares” below, certain of our stockholders hold large concentrations of our Class A common stock and may possess the ability to significantly impact the outcome of the requisite majority of the minority approval.
Concurrently with the execution and delivery of the Merger Agreement, SunEdison and the Company, along with certain of their respective subsidiaries, executed and delivered a Settlement Agreement, which, among other things, generally resolves claims, disputes and other issues arising from the historical sponsor relationship between the Company and SunEdison. On June 12, 2017, SunEdison submitted an amended disclosure statement pursuant to section 1125 of the Bankruptcy Code for purposes of soliciting votes to accept or reject a Joint Plan of SunEdison, Inc., et al. (the “Plan of Reorganization”). There is no assurance that the Plan of Reorganization will be approved by the requisite members of the bankruptcy estate of SunEdison or by the Bankruptcy Court. The Merger Agreement may be terminated at any time if the Settlement Agreement is terminated in accordance with its terms.
Completion of the Merger Agreement requires regulatory approvals from certain regulatory agencies, including approval by the Federal Energy Regulatory Commission and approval from certain state and foreign regulatory agencies. While the Company has begun the process of notifying agencies and obtaining approvals and is continuing to take actions to obtain the required regulatory approvals prior to closing or, as appropriate, to confirm that approvals will not be required prior to closing, there is no assurance that we will be able to obtain the requisite regulatory approvals. The waiting period applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has been terminated early.
In addition, certain of our stockholders may file litigation seeking to enjoin or delay the completion of the Merger Agreement. We may be required to expend significant resources, including legal fees and the time and attention of our executive officers and senior management, defending such litigation. The completion of the Merger Agreement may be delayed