EXHIBIT 10.7
 

CONFIDENTIAL TREATMENT REQUESTED
--
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN
SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
 

 
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SECURITY AGREEMENT
 
 

This Security Agreement (this “Agreement”) is executed at San Jose, California
on April 17, 2009 by SUNPOWER CORPORATION, a Delaware corporation (herein called
“Debtor”) for the benefit of UNION BANK, N.A. (herein called “Bank”).

As security for the payment and performance of all of the “Obligations”, as that
term is defined in the Loan Agreement (as defined below), relating to the Term
Loan, as that term is defined in the Loan Agreement, irrespective of the manner
in which or the time at which such Obligations arose or shall arise, and whether
direct or indirect, alone or with others, absolute or contingent, Debtor does
hereby grant, subject to and effective upon the occurrence of the Trigger Event
(as defined below), a continuing security interest in, and assign and transfer
to Bank, the following personal property, whether or not delivered to or in the
possession or control of Bank or its agents, and whether now or hereafter owned
or in existence, and all proceeds thereof (hereinafter called “Collateral”):

The following deposit accounts maintained with Bank: account numbers *** and
***, in the name of Debtor, together with and any sums or other property now or
hereafter on deposit in such accounts and any renewals, extensions, or
replacements of the accounts.

Notwithstanding the foregoing, the Bank’s security interest granted under this
Agreement shall be deemed effective and shall automatically attach, without any
further consent or required action by Debtor or any other person, on April 1,
2010, if, on such date, all of Debtor’s 0.75% Senior Convertible Debentures due
2027 outstanding as of the Closing Date have not been converted or exchanged in
their entirety into Permitted Exchange Consideration (the “Trigger Event”).  As
used herein, “Permitted Exchange Consideration” means cash, equity securities of
Debtor or Permitted Refinancing Indebtedness limited to and consisting
exclusively of:  (A) payment of cash in an aggregate amount not greater than
$50,000,000, (B) distribution of auction-rate securities by Debtor with an
aggregate face value not greater than $20,000,000; and (C) Permitted Refinancing
Indebtedness in an aggregate amount not to exceed the outstanding principal
amount of the debentures being converted or exchanged.

This security interest is granted in conjunction with that certain Loan
Agreement, dated as of the date hereof, by and between Debtor and Bank, as the
same may be amended, renewed, extended, supplemented, restated, replaced or
otherwise modified or in effect from time to time (the “Loan
Agreement”).  Capitalized terms not otherwise defined herein have the meanings
given to such terms in the Loan Agreement.

AGREEMENT

1.           The term “credit” or “indebtedness” is used in this Agreement in
its broadest and most comprehensive sense.  Collateral shall be security for all
Obligations of Debtor to Bank in accordance with the terms and conditions
herein.

*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
 
 
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2.         Debtor covenants and agrees that Debtor will:  (a) pay when due all
Obligations relating to the Term Loan; (b) at all times following the occurrence
of the Trigger Event, (i) execute and deliver such other documents and do such
other acts as Bank may from time to time require to create, establish and
maintain a valid first-priority security interest in Collateral, including
payment of all costs and fees in connection with any of the foregoing when
deemed necessary by Bank; and (ii) cooperate with Bank in perfecting all
security interests granted herein and in obtaining such agreements from third
parties as Bank deems necessary, proper or convenient in connection with the
preservation, perfection or enforcement of any of its rights hereunder; (b)
furnish Bank such information concerning Debtor and Collateral as Bank may from
time to time reasonably request, including but not limited to current financial
statements as required pursuant to the Loan Agreement; (c) not create or permit
to exist any Lien on or security interest in Collateral in favor of anyone other
than Bank, and at Debtor’s expense upon Bank’s request remove any unauthorized
Lien or security interest and defend any claim affecting the Collateral; (d) pay
all charges against Collateral prior to delinquency including but not limited to
taxes, assessments, encumbrances, insurance and diverse claims, and upon
Debtor’s failure to do so Bank may pay any such charge as it deems necessary and
add the amount paid to the indebtedness of Debtor hereunder; (e) protect, defend
and maintain the Collateral and, following the occurrence of the Trigger Event,
the security interest of Bank and initiate, commence and maintain any action or
proceeding to protect the Collateral; (f) pay and reimburse Bank for any
expenses including but not limited to reasonable attorneys’ fees and expenses
incurred by Bank in the perfection of its security interest, the preservation,
protection or collection of the Collateral or Bank’s interest therein and/or the
realization, enforcement and exercise of Bank’s rights, powers and remedies; (g)
perform all of the obligations of the Debtor under the Collateral and save Bank
harmless from the consequence of any failure to do so; (h) permit Bank to
exercise its rights and powers hereunder; and (i) not to permit the value of
Collateral to be less than the Minimum Balance, as and to the extent required
pursuant to Section 4.11 of the Loan Agreement.  Debtor covenants and agrees
that at all times (whether prior to or after the Trigger Event), the Collateral
shall remain subject to Bank’s rights of setoff under applicable law, and, so
long as Debtor is subject to the Minimum Balance requirement of the Loan
Agreement, Bank is hereby authorized to decline to honor any drafts thereon or
any requests, instructions or orders by Debtor or any other Person with respect
to the withdrawal or disposition of any of the funds contained in the accounts
included in the Collateral or with respect to the payment or any other transfer
of any part of such balances if doing so would result in a violation of the
Minimum Balance requirements under the Loan Agreement.

3.         Debtor represents and warrants to Bank that: (a) Debtor is a
corporation, duly incorporated and validly existing under the laws of the State
of Delaware, Debtor’s legal name is exactly as set forth on the first page of
this Agreement, Debtor’s chief executive office is located at 3939 N. First
Street, San Jose, CA  95134, and all of Debtor’s organizational documents or
agreements previously delivered to Bank are complete and accurate in every
respect; (b) Debtor is the lawful owner and has possession or control of the
Collateral; (c) Debtor has, and at all times hereafter will have and maintain,
the capacity and exclusive right to grant a security interest in the Collateral;
(d) the execution, delivery and performance hereof are within its powers and
have been duly authorized; (e) all Collateral is genuine, free from liens,
adverse claims, setoffs, default, prepayment, defenses and conditions precedent
of any kind or character, except the lien created hereby or as otherwise agreed
to by Bank; (f) all statements contained herein and, where applicable, in the
Collateral are true and complete in all material respects; and (g) no financing
statement covering any of the Collateral, and naming any secured party other
than Bank, is on file in any public office.

 
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4.         Debtor appoints Bank its true attorney in fact to perform any of the
following powers, which are coupled with an interest, are irrevocable until
termination of this Agreement and may be exercised from time to time by Bank’s
officers and employees, or any of them, whether or not Debtor is in
default:  (a) to perform any obligation of Debtor hereunder in Debtor’s name or
otherwise following Debtor’s failure to do so; (b) to exercise all rights,
powers and remedies which Debtor would have, but for this Agreement, with
respect to all Collateral subject hereto; (c) to do all acts and things and
execute all documents in the name of Debtor or otherwise, deemed by Bank as
necessary, proper and convenient in connection with the preservation,
protection, perfection of Collateral or its value or Bank’s security interest
therein or, after default, enforcement of its rights hereunder, including
transferring any Collateral into its own name and receiving the income thereon
as additional security hereunder.  Bank does not assume any of the obligations
arising under the Collateral.  Debtor agrees in general to indemnify Bank
against, and hold Bank harmless from, any and all losses, claims, demands,
liabilities and expenses of every kind caused by property subject hereto.

5.         (a)              The term “default” as used herein, shall mean the
occurrence of: (i) any defined event of default, under the Loan Agreement; (ii)
any representation or warranty made by Debtor herein shall prove to be
incorrect, false or misleading in any material respect when made; (iii) Debtor
shall fail to observe or perform any obligation or agreement contained herein;
or (iv) any impairment of the rights of Bank in any Collateral, or any
attachment or like levy on any Collateral.
 
(b)              Whenever a default exists, Bank, at its option, without notice
or demand, do any one or more or all of the following:  (i) without notice
accelerate the maturity of any part or all of the Obligations and terminate any
agreement for the granting of further credit to Debtor; (ii) sell, lease or
otherwise dispose of Collateral at public or private sale; (iii) transfer any
Collateral into its own name or that of its nominee; (iv) retain Collateral in
satisfaction of obligations secured hereby, with notice of such retention sent
to Debtor as required by law; (v) notify any parties obligated on any Collateral
to make payment to Bank and enforce collection of any Collateral; (vi) file any
action or proceeding which Bank deems necessary or appropriate to protect and
preserve the right, title and interest of Bank in the Collateral; (vii) apply
all sums received or collected from or on account of Collateral, including the
proceeds of any sales thereof, to the payment of the costs and expenses incurred
in preserving and enforcing rights of Bank including reasonable attorneys’ fees
(including the allocated costs of Bank’s in-house counsel and legal staff), and
indebtedness secured hereby in such order and manner as Bank in its sole
discretion determines; Bank shall account to Debtor for any surplus remaining
thereafter, and shall pay such surplus to the party entitled thereto; in like
manner, Debtor agrees to pay to Bank without demand any deficiency after any
Collateral has been disposed of and proceeds applied as aforesaid; (viii) place
a “hold” on any account maintained with Bank; (ix) exercise its banker’s lien or
right of setoff in the same manner as though the credit were unsecured; and (x)
liquidate any time deposits pledged to Bank hereunder and apply the proceeds
thereof to payment of the indebtedness, whether or not said time deposits have
matured and notwithstanding the fact that such liquidation may give rise to
penalties for early withdrawal of funds.  In addition, Bank shall have all the
rights and remedies of a secured party under the Uniform Commercial Code of
California in any jurisdiction where enforcement is sought, whether in said
state or elsewhere.  All rights, powers and remedies of Bank hereunder shall be
cumulative and not alternative.  No delay on the part of Bank in the exercise of
any right or remedy shall constitute a waiver thereof and no exercise by Bank of
any right or remedy shall preclude the exercise of any other right or remedy or
further exercise of the same remedy.

 
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6.         Debtor waives:  (a) all right to require Bank to proceed against any
other person including any other Debtor hereunder or to apply any Collateral
Bank may hold at any time or to pursue any other remedy, Collateral, endorsers
or guarantors may be released, substituted or added without affecting the
liability of Debtor hereunder; (b) the defense of the Statute of Limitations in
any action upon any obligations of Debtor secured hereby; (c) any right of
subrogation and any right to participate in Collateral until all obligations
secured hereby have been paid in full, and (d) to the fullest extent permitted
by law, any right to oppose the appointment of a receiver or similar official to
operate Debtor’s business.

7.         The rights and remedies of Bank with respect to the security interest
granted hereby are in addition to those set forth in the Loan Agreement and the
other Loan Documents, and those which are now or hereafter available to Bank as
a matter of law or equity.  Each right, power and remedy of Bank provided for
herein or in the other Loan Documents, or now or hereafter existing at law or in
equity shall be cumulative and concurrent and shall be in addition to every
right, power or remedy provided for herein and the exercise by Bank of any one
or more of the rights, powers or remedies provided for in this Agreement, the
Loan Agreement or any of the other Loan Documents, or now or hereafter existing
at law or in equity, shall not preclude the simultaneous or later exercise by
any person, including Bank, of any or all other rights, powers or remedies.

8.         The security interest granted herein is irrevocable and shall remain
in full force and effect until such time as the Obligations have been fully and
indefeasibly paid, satisfied and performed and Bank no longer has any commitment
to extend credit to Debtor.

9.         If the Trigger Event occurs giving rise to a security interest
hereunder, Bank shall release such security interest, at Debtor’s sole cost and
expense, after the indefeasible payment and performance in full of the
Obligations.   This Agreement shall become effective on the Closing Date and
shall continue in full force and effect until all Obligations have been
irrevocably and indefeasibly repaid in full.  The obligations of Debtor to
indemnify Bank shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run.

10.         If more than one Debtor executes this Agreement, the obligations
hereunder are joint and several.  All words used herein in the singular shall be
deemed to have been used in the plural when the context and construction so
require.  Any married person who signs this Agreement expressly agrees that
recourse may be had against his/her separate property for all of his/her
obligations to Bank.

11.         This Agreement shall be for the benefit of and bind Bank, its
successors and assigns and each of the undersigned, their respective heirs,
executors, administrators and successors in interest.  Upon transfer by Bank of
any part of the obligations secured hereby, Bank shall be fully discharged from
any liability with respect to Collateral transferred therewith.

12.         Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but, if any provision of this Agreement shall be prohibited or invalid under
applicable law, such provisions shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such or the
remaining provisions of this Agreement.

 
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13.           The grant of a security interest in proceeds does not imply the
right of Debtor to sell or dispose of any Collateral without the express consent
in writing by Bank.

14.           Debtor hereby agrees to give Bank prompt written notice of any
change to its state of organization, chief executive office or name, as
identified below.

 
[Remainder of Page Left Blank]

 
 
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IN WITNESS WHEREOF, intending to be legally bound, the Debtor has caused this
Agreement to be duly executed as of the date first above written.

SUNPOWER CORPORATION

/s/ Dennis V.
Arriola                                                                           
By:         Dennis V.
Arriola                                                        
Title:      CFO & SVP                                                      

 
 

 

 

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