10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)
R	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 28, 2009
	or
£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                                                         to

Commission file number: 001-33156

First Solar, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-4623678
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

350 West Washington Street, Suite 600

Tempe, Arizona 85281

(Address of principal executive offices, including zip code)

(602) 414-9300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes R No £

Indicate by check mark whether the registrant has submitted electronically and posed on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes £ No £

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):

Large accelerated filer R	Accelerated filer £	Non-accelerated filer £	Smaller reporting company £
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £    No R

As of April 24, 2009 there were 84,466,286 shares of the registrant’s common stock, par value $0.001, outstanding.

FIRST SOLAR, INC. AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 28, 2009

TABLE OF CONTENTS

		Page
Part I.	Financial Information (Unaudited)
Item 1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Statements of Operations for the three months ended March 28, 2009 and March 29, 2008	3
	Condensed Consolidated Balance Sheets as of March 28, 2009 and December 27, 2008	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 28, 2009 and March 29, 2008	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27
Part II.	Other Information	28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 6.	Exhibits	29
Signature		30
Exhibit Index		31

EX-10.1

EX-10.2

EX-31.01

EX-31.02

EX-32.01

2

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	March 28, 2009			March 29, 2008
Net sales	$	418,208		$	196,915
Cost of sales		182,924			92,591
Gross profit		235,284			104,324
Operating expenses:
Research and development		11,704			4,760
Selling, general and administrative		49,315			28,671
Production start-up		6,209			12,761
Total operating expenses		67,228			46,192
Operating income		168,056			58,132
Foreign currency gain		1,834			774
Interest income		2,103			6,685
Interest expense, net		(935	)		(4	)
Other expense, net		(1,326	)		(378	)
Income before income taxes		169,732			65,209
Income tax expense		5,137			18,590
Net income	$	164,595		$	46,619
Net income per share:
Basic	$	2.01		$	0.59
Diluted	$	1.99		$	0.57
Weighted-average number of shares used in per share calculations:
Basic		81,685			79,059
Diluted		82,612			81,607

See accompanying notes to these condensed consolidated financial statements.

3

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

	March 28, 2009			December 27, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	624,932		$	716,218
Marketable securities — current		172,176			76,042
Accounts receivable, net		184,790			61,703
Inventories		131,468			121,554
Deferred project costs		12,259			710
Economic development funding receivable		—			668
Deferred tax asset, net — current		11,658			9,922
Prepaid expenses and other current assets		102,421			90,584
Total current assets		1,239,704			1,077,401
Property, plant and equipment, net		867,660			842,622
Deferred tax asset, net — noncurrent		61,987			61,325
Marketable securities — noncurrent		14,460			29,559
Restricted cash and investments		30,148			30,059
Investment in related party		25,000			25,000
Goodwill		33,829			33,829
Other assets — noncurrent		15,644			14,707
Total assets	$	2,288,432		$	2,114,502
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	41,853		$	46,251
Income tax payable		102,242			99,938
Accrued expenses		86,250			140,899
Current portion of long-term debt		32,952			34,951
Other current liabilities		52,542			59,738
Total current liabilities		315,839			381,777
Accrued collection and recycling liabilities		45,366			35,238
Long-term debt		195,216			163,519
Other liabilities — noncurrent		26,339			20,926
Total liabilities		582,760			601,460
Stockholders’ equity:
Common stock, $0.001 par value per share; 500,000,000 shares authorized; 81,844,290 and 81,596,810 shares issued and outstanding at March 28, 2009 and December 27, 2008, respectively		82			82
Additional paid-in capital		1,194,324			1,176,156
Accumulated earnings		525,820			361,225
Accumulated other comprehensive loss		(14,554	)		(24,421	)
Total stockholders’ equity		1,705,672			1,513,042
Total liabilities and stockholders’ equity	$	2,288,432		$	2,114,502

See accompanying notes to these condensed consolidated financial statements.

4

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	March 28, 2009			March 29, 2008
Cash flows from operating activities:
Cash received from customers	$	325,712		$	194,595
Cash paid to suppliers and associates		(259,726	)		(137,779	)
Interest received		2,885			6,156
Interest paid, net of amounts capitalized		(2,208	)		(4	)
Income taxes paid, net of refunds		658			4,905
Excess tax benefit from share-based compensation arrangements		(3,254	)		(4,255	)
Other		(326	)		(348	)
Net cash provided by operating activities		63,741			63,270
Cash flows from investing activities:
Purchases of property, plant and equipment		(86,404	)		(74,606	)
Purchases of marketable securities		(117,554	)		(57,796	)
Proceeds from maturities of marketable securities		7,000			11,250
Proceeds from sales of marketable securities		29,787			223,902
Investment in note receivable		(13,750	)		—
Increase in restricted investments		(313	)		(12,091	)
Net cash provided by (used in) investing activities		(181,234	)		90,659
Cash flows from financing activities:
Proceeds from issuance of common stock		1,440			5,935
Repayment of long-term debt		(3,858	)		(25,740	)
Proceeds from issuance of debt, net of issuance costs		45,267			57
Excess tax benefit from share-based compensation arrangements		3,254			4,255
Proceeds from economic development funding		615			35,661
Other financing activities		(1	)		(2	)
Net cash provided by financing activities		46,717			20,166
Effect of exchange rate changes on cash and cash equivalents		(20,510	)		12,175
Net increase (decrease) in cash and cash equivalents		(91,286	)		186,270
Cash and cash equivalents, beginning of the period		716,218			404,264
Cash and cash equivalents, end of the period	$	624,932		$	590,534
Supplemental disclosure of noncash investing and financing activities:
Property, plant and equipment acquisitions funded by liabilities	$	(30,687	)	$	26,500

See accompanying notes to these condensed consolidated financial statements.

5

FIRST SOLAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Three Months Ended March 28, 2009

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of First Solar, Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Operating results for the three months ended March 28, 2009 are not necessarily indicative of the results that may be expected for the year ending December 26, 2009, or for any other period. The balance sheet at December 27, 2008 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements and notes should be read in conjunction with the financial statements and notes thereto for the year ended December 27, 2008 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.

We report our results of operations using a 52 or 53 week fiscal year, which ends on the Saturday on or before December 31. Our fiscal quarters end on the Saturday closest to the end of the applicable calendar quarter. Fiscal 2009 will end on December 26, 2009 and will consist of 52 weeks.

Note 2. Summary of Significant Accounting Policies

Our significant accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 27, 2008 filed with the Securities and Exchange Commission.

Note 3. Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS 141R, Business Combinations, which replaces SFAS 141, Business Combinations. SFAS 141R requires most assets acquired and liabilities assumed in a business combination, contingent consideration and certain acquired contingencies to be measured at their fair value as of the date of the acquisition. SFAS 141R also requires that acquisition-related costs and restructuring costs be recognized separately from the business combination. SFAS 141R became effective for us for the year ending December 26, 2009 and therefore  applies to any business combinations that we might enter into after December 27, 2008. SFAS 141R will apply to our recently completed acquisition of the solar power project development business of OptiSolar on April 3, 2009, as further described in Note 19 to our condensed consolidated financial statements.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS 160 amends previous accounting literature to establish new accounting and reporting standards for the noncontrolling interest in a subsidiary (formerly referred to as “minority interest”) and for the deconsolidation of a subsidiary. SFAS 160 became effective for us as of the year ending December 26, 2009. The adoption of SFAS 160 did not have a material impact on our financial position, results of operations or cash flows.

In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 (FSP 157-2), Effective Date of FASB Statement No. 157. FSP 157-2 deferred the effective date of SFAS 157, Fair Value Measurements, for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis, until fiscal years beginning after November 15, 2008. As a result of FSP 157-2, we adopted SFAS 157 for our nonfinancial assets and nonfinancial liabilities as of the beginning of the year ending December 26, 2009. The adoption of SFAS 157 for these assets and liabilities did not have a material impact on our financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS 161, Disclosures About Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133. SFAS 161 expands quarterly disclosure requirements in SFAS 133 about an entity’s derivative instruments and hedging activities. SFAS 161 became effective for us as of the beginning of the year ending December 26, 2009. The adoption of SFAS 161 in the first quarter of 2009 did not have a material impact on our financial position, results of operations or cash flows.

In September 2008, the FASB issued FSP FAS 133-1 and FIN 45-4, Disclosures About Credit Derivatives and Certain Guarantees. FSP FAS 133-1 and FIN 45-4 are intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance and cash flows of the sellers of credit derivatives. FSP FAS 133-1 and FIN 45-4 became effective for us at the beginning of the year ending December 26, 2009. The adoption of FSP FAS 133-1 and FIN 45-4 in the first quarter of 2009 did not have a material impact on our financial position, results of operations or cash flows.

In February 2009, the FASB issued FSP FAS 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. FSP FAS 141R-1 amends the guidance in SFAS 141R about the accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies that would be within the scope of SFAS 5 if not acquired or assumed in a business combination. FSP FAS 141R-1 is effective for us at the beginning of our year ending December 26, 2009 and therefore will apply to any business combination that we might enter into after December 27, 2008. FSP FAS 141R-1 will apply to our recently completed acquisition of the solar power project development business of OptiSolar on April 3, 2009 as further described in Note 19 to our condensed consolidated financial statements. We do not expect that the adoption of FSP FAS 141R-1 will have a material impact on our financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. FSP FAS 107-1 and APB 28-1 amend SFAS 107, Disclosures about Fair Value of Financial Instruments to require disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. This FSP also amends ABP 28 to require those disclosures in summarized financial information at interim reporting periods. We will adopt FSP FAS 107-1 and APB 28-1 in our second fiscal quarter ending on June 27, 2009. We do not expect that the adoption of FSP FAS 107-1 and APB 28-1 will have a material impact on our financial position, results of operations or cash flows.

6

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than Temporary Impairments. FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. We are required to adopt FSP FAS 115-2 and FAS 124-2 in our second fiscal quarter ending on June 27, 2009. We have not yet evaluated the impact, if any, the adoption of this Statement will have on our financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are not Orderly. FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157, Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. We are required to adopt FSP FAS 157-4 in our second fiscal quarter ending on June 27, 2009. We have not yet evaluated the impact, if any, the adoption of this Statement will have on our financial position, results of operations or cash flows.

Note 4. Goodwill and Intangible Assets

Goodwill

On November 30, 2007, we acquired 100% of the outstanding membership interests of Turner Renewable Energy, LLC. Under the purchase method of accounting, we allocated $33.4 million to goodwill through December 29, 2007, which represents the excess of the purchase price over the fair value of the identifiable net tangible and intangible assets of Turner Renewable Energy, LLC. As of March 28, 2009 and December 27, 2008, the carrying amount of goodwill was $33.8 million.

SFAS 142, Goodwill and Other Intangible Assets requires us to test goodwill for impairment at least annually, or sooner if facts or circumstances between scheduled annual tests indicate that it is more likely than not that the fair value of reporting unit that has goodwill might be less than its carrying value. We performed our goodwill impairment tests in the fourth quarter of the year ended December 27, 2008. Based on that test, we concluded that our goodwill was not impaired. We also concluded that there were no changes in facts and circumstances since the date of that test, which would trigger an interim goodwill impairment test.

Acquisition Related Intangible Assets

In connection with the acquisition of Turner Renewable Energy, LLC, we identified intangible assets, that represent customer contracts already in progress at the time of acquisition and future customer contracts not yet started. We amortize the acquisition date fair values of these assets using the percentage of completion method.

Information regarding our acquisition-related intangible assets that are being amortized is as follows (in thousands):

	As of March 28, 2009  (Unaudited)						As of December 27, 2008
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Customer contracts in progress at the acquisition date	$	62	$	62	$	—	$	62	$	58	$	4
Customer contracts executed after the acquisition date		394		303		91		394		242		152
Total	$	456	$	365	$	91	$	456	$	300	$	156

Amortization expense for acquisition-related intangible assets was $0.1 million for the three months ended March 28, 2009 and March 29, 2008, respectively. We expect to amortize the remaining balance of our acquisition related intangible assets during the year ending December 26, 2009.

Note 5. Cash and Investments

Cash, cash equivalents and marketable securities consisted of the following at March 28, 2009 and December 27, 2008 (in thousands):

	March 28, 2009		December 27, 2008
Cash and cash equivalents:
Cash	$	539,642	$	603,434
Cash equivalents:
Federal agency debt		14,998		38,832
Money market mutual fund		70,292		73,952
Total cash and cash equivalents		624,932		716,218
Marketable securities:
Federal agency debt		143,527		68,086
Foreign agency debt		—		6,977
Corporate debt securities		43,109		30,538
Total marketable securities		186,636		105,601
Total cash, cash equivalents and marketable securities	$	811,568	$	821,819

7

We have classified our marketable securities as “available-for-sale.” Accordingly, we record them at fair value and account for net unrealized gains and losses as part of other comprehensive income until realized. We report realized gains and losses on the sale of our marketable securities in earnings, computed using the specific identification method. During the three months ended March 28, 2009, we realized an immaterial amount in gains and did not realize any losses on our marketable securities. During the three months ended March 29, 2008, we realized $0.4 million in gains and $0.1 million in losses on our marketable securities. See Note 8 to our condensed consolidated financial statements for information about the fair value measurement of our marketable securities.

All of our available-for-sale marketable securities are subject to a periodic impairment review. We consider a marketable debt security to be impaired when its fair value is less than its carrying cost. Investments identified as being impaired are subject to further review to determine if the investment is other than temporarily impaired, in which case we write down the investment through earnings to its impaired value and a new cost basis is established. We did not identify any of our marketable securities as other-than-temporarily impaired at March 28, 2009.

The following table summarizes unrealized gains and losses related to our investments in marketable securities designated as available-for-sale by major security type (in thousands):

	As of March 28, 2009 (Unaudited)
Security Type	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Federal agency debt	$	143,209	$	318	$	—	$	143,527
Corporate debt securities		42,863		246		—		43,109
Total	$	186,072	$	564	$	—	$	186,636

	As of December 27, 2008
Security Type	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Federal agency debt	$	67,813	$	273	$	—	$	68,086
Foreign agency debt		6,990		—		13		6,977
Corporate debt securities		30,425		129		16		30,538
Total	$	105,228	$	402	$	29	$	105,601

Contractual maturities of our available-for-sale marketable securities as of March 28, 2009 and December 27, 2008 were as follows (in thousands):

	As of March 28, 2009 (Unaudited)
Maturity	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
One year or less	$	171,816	$	360	$	—	$	172,176
One year to two years		14,256		204		—		14,460
Total	$	186,072	$	564	$	—	$	186,636

	As of December 27, 2008
Maturity	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
One year or less	$	75,856	$	199	$	13	$	76,042
One year to two years		29,372		203		16		29,559
Total	$	105,228	$	402	$	29	$	105,601

The net unrealized gain of $0.6 million and $0.4 million as of March 28, 2009 and December 27, 2008, respectively, on our available for-sale marketable securities was primarily the result of changes in interest rates. We typically invest in highly-rated securities with low probabilities of default. Our investment policy requires investments to be rated single A or better, limits the types of acceptable investments, limits the concentration as to security holder and limits the duration of the investments.

8

Note 6. Consolidated Balance Sheet Details

Accounts receivable, net

Accounts receivable, net consisted of the following at March 28, 2009 and December 27, 2008 (in thousands):

	March 28, 2009		December 27, 2008
Accounts receivable, gross	$	184,790	$	61,703
Allowance for doubtful accounts		—		—
Accounts receivable, net	$	184,790	$	61,703

The increase in accounts receivable was mainly due to the amendment of certain customers' long-term supply contracts, that extended our customers’ payment terms from 10 days to 45 days, net as well as the timing of shipments to customers during the three months ended March 28, 2009.

Inventories

Inventories consisted of the following at March 28, 2009 and December 27, 2008 (in thousands):

	March 28, 2009		December 27, 2008
Raw materials	$	104,763	$	103,725
Work in process		7,562		4,038
Finished goods		19,143		13,791
Total inventories	$	131,468	$	121,554

Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following at March 28, 2009 and December 27, 2008 (in thousands):

	March 28, 2009		December 27, 2008
Prepaid expenses	$	6,193	$	6,699
Prepaid supplies		12,984		12,556
Capitalized equipment spares		14,204		12,900
Prepaid taxes — current		2,028		4
Derivative instruments — current		29,690		34,931
Other receivable from financial institution		9,232		10,764
Note receivable		13,750		—
Costs and estimated earnings in excess of billings		—		114
Other current assets		14,340		12,616
Total prepaid expenses and other current assets	$	102,421	$	90,584

Property, plant and equipment

Property, plant and equipment consisted of the following at March 28, 2009 and December 27, 2008 (in thousands):

	March 28, 2009			December 27, 2008
Buildings and improvements	$	177,791		$	137,116
Machinery and equipment		685,488			559,566
Office equipment and furniture		26,732			22,842
Leasehold improvements		14,555			11,498
Depreciable property, plant and equipment, gross		904,566			731,022
Accumulated depreciation		(125,285	)		(100,939	)
Depreciable property, plant and equipment, net		779,281			630,083
Land		5,658			5,759
Construction in progress		82,721			206,780
Property, plant and equipment, net	$	867,660		$	842,622

Depreciation of property, plant and equipment was $25.8 million and $10.1 million for the three months ended March 28, 2009 and March 29, 2008, respectively.

9

         We incurred interest cost and capitalized a portion of it (into our property, plant and equipment) as follows during the three months ended March 28, 2009 and March 29, 2008 (in thousands):

	Three Months Ended
	March 28, 2009			March 29, 2008
Interest cost incurred	$	2,414		$	1,509
Interest cost capitalized		(1,479	)		(1,505	)
Interest expense, net	$	935		$	4

Accrued expenses

Accrued expenses consisted of the following at March 28, 2009 and December 27, 2008 (in thousands):

	March 28, 2009		December 27, 2008
Product warranty liability — current portion	$	5,311	$	4,040
Accrued compensation and benefits		11,922		32,145
Accrued property, plant and equipment		22,099		44,115
Accrued inventory		19,621		31,438
Accrued utilities and plant services		6,827		5,100
Accrued subcontractor services and materials		582		2,934
Accrued taxes — other		1,406		6,182
Other accrued expenses		18,482		14,945
Total accrued expenses	$	86,250	$	140,899

Other current liabilities

Other current liabilities consisted of the following at March 28, 2009 and December 27, 2008 (in thousands):

	March 28, 2009		December 27, 2008
Derivative instruments — current	$	18,438	$	50,733
Deferred revenue (1)		26,550		—
Billings in excess of costs and estimated earnings		2,919		2,159
Other current liabilities		4,635		6,846
Total other current liabilities	$	52,542	$	59,738

(1)   Deferred revenue relates to solar module shipments that have not met the revenue recognition criteria at March 28, 2009 and are expected to be recognized in the second fiscal quarter of 2009.

Note 7. Derivative Financial Instruments

As a global company, we are exposed in the normal course of business to interest rate risk and foreign currency risk that could affect our net assets, financial position, results of operations and cash flows. We use derivative instruments to hedge against certain risks, such as these, and we only hold derivative instruments for hedging purposes, not for speculative or trading purposes. Our use of derivative instruments is subject to strict internal controls based on centrally defined, performed and controlled policies and procedures.

Depending on the terms of the specific derivative instruments and market conditions, some of our derivative instruments may be assets and others liabilities at any particular point in time. As required by SFAS 133, Accounting for Derivative Instruments and Hedging Activities, we present all of our derivative instruments at fair value on our balance sheet. Depending on the substance of the hedging purpose for our derivative instruments, we account for changes in the fair value of some of them using cash-flow-hedge accounting pursuant to SFAS 133 and of others by recording the changes in fair value directly to current earnings (so-called “economic hedges”). These accounting approaches are described in more detail where we discuss our various types of derivative instruments below.

Various classes of risk that we are exposed to in our business and risk management systems using derivative instruments that we apply to these risks are described below. See Note 8 to our condensed consolidated financial statements for information about the techniques we use to measure the fair value of our derivative instruments.

10

The following table presents the fair values of derivative instruments included in our condensed consolidated balance sheet as of March 28, 2009 (in thousands):

	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments under SFAS 133:
Foreign exchange forward  contracts	Other current assets	$	20,696	Other liabilities - current	$	12,258
	Other non-current assets		171	Other liabilities - non current		278
Interest rate swap contracts			—	Other liabilities - current		539
				Other liabilities - non current		1,616
Total derivatives designated as hedging instruments under SFAS 133		$	20,867		$	14,691
Derivatives not designated as hedging instruments under SFAS 133:
Foreign exchange forward contracts	Other current assets	$	8,733	Other liabilities - current	$	5,502
Credit default swaps	Other current assets		261			—
Total derivatives not designated as hedging instruments under SFAS 133			8,994			5,502
Total derivative instruments		$	29,861		$	20,193

The following table presents the amounts affecting our condensed consolidated statement of operations for the three months ended March 28, 2009 (in thousands):

	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives				Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Derivatives designated under SFAS 133	Three Months Ended March 28, 2009			Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Three Months Ended March 28, 2009
Derivatives designated as cash flow hedges:
Foreign exchange forward contracts	$	23,876		Net sales	$	22,190
Interest rate swaps		(777	)			—
Total derivatives designated as cash flow hedges	$	23,099			$	22,190

	Amount of Gain (Loss) on Derivatives recognized in Income
	Three Months Ended March 28, 2009			Location of Gain (Loss) Recognized in Income on Derivatives
Derivatives designated as cash flow hedges under SFAS 133:
Foreign exchange forward contracts	$	22,190		Net sales
Interest rate swaps	$	(134	)	Interest income (expense)
Derivatives not designated as hedging instruments under SFAS 133:
Foreign exchange forward contracts	$	(4,889	)	Other income (expense)
Foreign exchange forward contracts	$	(1,455	)	Cost of sales
Credit default swaps	$	(1,000	)	Other income (expense)

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Interest Rate Risk

We use interest rate swap agreements to mitigate our exposure to interest rate fluctuations associated with certain of our debt instruments; we do not use interest rate swap agreements for speculative or trading purposes. We have interest rate swap contracts with a financial institution that effectively converts to fixed rates the floating variable rate of the Euro Interbank Offered Rate (Euribor) on certain drawdowns taken on the term loan portion of our credit facility with a consortium of banks for financing our German plant. These interest rate swap contracts are required under the credit facility agreement. The total notional value of the interest rate swap contract was €36.8 million ($48.9 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00) on March 28, 2009. As of March 28, 2009, the weighted average interest rate for the interest rate swap contracts was 4.12%.

         The notional amounts of the interest rate swap contracts are scheduled to decline in correspondence to our scheduled principal payments on the hedged term loan drawdowns. These derivative instruments qualified for accounting as cash flow hedges in accordance with SFAS 133, Accounting for Derivative Instruments and Hedging Activities, and we designated them as such. We determined that our interest rate swap contracts were highly effective as cash flow hedges at March 28, 2009.

Foreign Currency Exchange Risk

Cash Flow Exposure

We expect many of the components of our business to have material future cash flows, including revenues and expenses, that are denominated in currencies other than the relevant component’s functional currencies. Our primary cash flow exposures are customer collections and vendor payments. Changes in the exchange rates between our components’ functional currencies and the other currencies in which they transact will cause fluctuations in the cash flows we expect to receive when these cash flows are realized or settled. Accordingly, we enter into foreign exchange forward contracts to hedge the value of a portion of these forecasted cash flows. As of March 28, 2009, these foreign exchange contracts hedge our forecasted future cash flows for up to 18 months. These foreign exchange contracts qualified for accounting as cash flow hedges in accordance with SFAS 133, and we designated them as such. We initially report the effective portion of the derivative’s gain or loss in accumulated other comprehensive income (loss) and subsequently reclassify amounts into earnings when the hedged transaction is settled. We determined that these derivative financial instruments were highly effective as cash flow hedges at March 28, 2009. In addition, during the three months ended March 28, 2009, we did not discontinue any cash flow hedges because it was probable that a forecasted transaction would not occur.

During the three months ended March 28, 2009, we purchased foreign exchange forward contracts to hedge the exchange risk on forecasted cash flows denominated in euro. As of March 28, 2009, the unrealized gain of these contracts was $8.3 million and the total notional value of the contracts was €471.5 million ($627.1 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00). The weighted average forward exchange rate for these contracts was $1.35/€1.00 at March 28, 2009.

Transaction Exposure

Many components of our business have assets and liabilities (primarily receivables, investments and accounts payable, including inter-company balances) that are denominated in currencies other than their functional currencies. Changes in the exchange rates between our components’ functional currencies and the currencies in which these assets and liabilities are denominated can create fluctuations in our reported consolidated financial position, results of operations and cash flows. We may enter into foreign exchange forward contracts or other financial instruments to hedge these assets and liabilities against the short-term effects of currency exchange rate fluctuations. The gains and losses on the foreign exchange forward contracts will offset all or part of the transaction gains and losses that we recognize in earnings on the related foreign currency assets and liabilities.

During the three months ended March 28, 2009, we purchased forward foreign exchange contracts to hedge balance sheet exposure related to transactions with third parties. We recognize gains or losses from the fluctuation in foreign exchange rates and the valuation of these hedging contracts in foreign currency gain (loss) on our consolidated statements of operations. As of March 28, 2009, the total notional value of our foreign exchange forward contracts to purchase and sell euros with/for U.S. dollars was €162.2 million and €128.5 million, respectively ($215.7 million and $170.9 million, respectively at the balance sheet close rate on March 28, 2009 of $1.33/€1.00); the total notional value of our foreign exchange forward contracts to purchase and sell U.S. dollars with/for euros was $4.3 million and $1.3 million, respectively; the total notional value of our foreign exchange forward contracts to purchase and sell Malaysian ringgit with/for U.S. dollars was MYR 91.0 million and MYR 41.0 million, respectively ($25.5 million and $11.5 million, respectively at the balance sheet close rate on March 28, 2009 of $0.28/MYR1.00); and the total notional value of our foreign exchange forward contracts to purchase and sell Japanese yen with/for U.S. dollars was JPY 140.0 million and JPY 50.0 million, respectively ($1.4 million and $0.5 million, respectively at the balance sheet close rate on March 28, 2009 of $0.01/JPY1.00). As of March 28, 2009, the unrealized gain of these contracts was $3.2 million. These contracts have maturities of two months or less.

Credit Risk

We have certain financial and derivative instruments that subject us to credit risk. These consist primarily of cash, cash equivalents, investments, trade accounts receivable, interest rate swap contracts and foreign exchange forward contracts. We are exposed to credit losses in the event of nonperformance by the counter parties to our financial and derivative instruments. We place cash, cash equivalents, investments, interest rate swap contracts and foreign exchange forward contracts with various high-quality financial institutions and limit the amount of credit risk from any one counterparty. We continuously evaluate the credit standing of our counterparty financial institutions.

In addition, we have certain restricted investments that are exposed to credit risk. These consist primarily of restricted investments, which are held by a financial services company to fund our estimated future product collection and recycling costs. As of March 28, 2009 our restricted investments with a subsidiary of this financial services company were $26.2 million. In October 2008, we entered into credit default swaps (CDS) with J.P. Morgan Chase NA, New York to protect this restricted investment from a significant pre-defined credit event related to the parent of the financial services company. Under a CDS, a third party assumes, for a fee, a portion of the credit risk related to an investment. The CDSs we entered into provide protection for losses in the event of a pre-defined credit event of the parent of the financial services company up to $25.0 million. At March 28, 2009, we had recorded losses related to fair value adjustments on the CDSs of $1.0 million. One of our CDSs expired on March 20, 2009 and the other one will expire on June 20, 2009.

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Note 8. Fair Value Measurement

On December 30, 2007, the beginning of our fiscal year 2008, we adopted SFAS 157. SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands financial statement disclosure requirements for fair value measurements. Our initial adoption of SFAS 157 was limited to our fair value measurements of financial assets and financial liabilities, as permitted by FSP 157-2. On December 28, 2008, the beginning of our fiscal year 2009, we adopted SFAS 157 for the remainder of our fair value measurements. The implementation of the fair value measurement guidance of SFAS 157 did not result in any material changes to the carrying values of our assets and liabilities.

SFAS 157 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. SFAS 157 specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:

• Level 1 — Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.

• Level 2 — Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques.

• Level 3 — Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect our own assumptions about the assumptions that market participants would use in pricing an asset or liability.

When available, we use quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, we measure fair value using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates and currency rates. Following is a description of the valuation techniques that we use to measure the fair value of assets and liabilities that we measure and report on our balance sheet at fair value on a recurring basis:

• Cash Equivalents.  At March 28, 2009, our cash equivalents consisted of federal agency debt and money market mutual funds. We value some of our cash equivalents using observable inputs that reflect quoted prices for securities with identical characteristics, and accordingly, we classify the valuation techniques that use these inputs as Level 1. We also have cash equivalents which we value using other observable inputs (such as interest rates that are observable at commonly quoted intervals) and accordingly, we classify the valuation techniques that use these inputs as Level 2. We consider the effect of our counterparties’ credit standings in our valuations of our marketable securities holdings.

• Marketable securities.  At March 28, 2009, our marketable securities consisted of federal agency debt and corporate debt securities. We value our marketable securities using quoted prices for securities with similar characteristics and other observable inputs (such as interest rates that are observable at commonly quoted intervals), and accordingly, we classify the valuation techniques that use these inputs as Level 2. We also consider the effect of our counterparties’ credit standings in these fair value measurements.

• Derivative assets and liabilities.  At March 28, 2009, our derivative assets and liabilities consist of foreign exchange forward contracts involving major currencies, interest rate swap contracts involving a benchmark interest rate and credit default swaps. Since our derivative assets and liabilities are not traded on an exchange, we value them using valuation models. Interest rate yield curves, foreign exchange rates and credit default swap spreads are the significant inputs into these valuation models. These inputs are observable in active markets over the terms of the instruments we hold, and accordingly, we classify these valuation techniques as Level 2. We consider the effect of our own credit standing and that of our counterparties in our valuations of our derivative financial assets and liabilities.

• Product collection and recycling liability.  We account for our obligation to collect and recycle the solar modules that we sell in a similar manner to the accounting for asset retirement obligations that is prescribed by SFAS 143, Accounting for Asset Retirement Obligations. When we sell solar modules, we initially record our liability for collecting and recycling those particular solar modules at the fair value of this liability, and then in subsequent periods, we accrete this fair value to the estimated future cost of collecting and recycling the solar modules. Therefore, this is a one-time nonrecurring fair value measurement of the collection and recycling liability associated with each particular solar module sold.

Since there is not an established market for collecting and recycling our solar modules, we value our liability using a valuation model (an income approach). This fair value measurement requires us to use significant unobservable inputs, which are primarily estimates of collection and recycling process costs and estimates of future changes in costs due to inflation and future currency exchange rates. Accordingly, we classify these valuation techniques as Level 3. We estimate collection and recycling process costs based on analyses of the collection and recycling technologies that we are currently developing; we estimate future inflation costs based on analysis of historical trends; and we estimate future currency exchange rates based on current rate information. We consider the effect of our own credit standing in our measurement of the fair value of this liability.

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For the three months ended March 28, 2009, information about inputs into the fair value measurements of our assets and liabilities that we make on a recurring basis is as follows (in thousands):

			Fair Value Measurements at Reporting Date Using
	Total Fair Value and Carrying Value on Our Balance Sheet		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Federal agency debt	$	14,998	$	—	$	14,998	$	—
Money market mutual funds		70,292		70,292		—		—
Marketable securities:
Federal agency debt		143,527		—		143,527		—
Corporate debt securities		43,109		—		43,109		—
Derivative assets		29,861		—		29,861		—
Total assets	$	301,787	$	70,292	$	231,495	$	—
Liabilities:
Derivative liabilities	$	20,193	$	—	$	20,193	$	—

Note 9.  Related Party Transactions

In October 2008, we made an investment in preferred stock of a company based in the United States that supplies solar power plants to commercial and residential customers at a total cost of $25.0 million. This investment represents an ownership of approximately 12% of the voting interest in this company and is our only equity interest in that entity. Since our ownership interest in this company is less than 20% and we do not have significant influence over it, we account for this investment using the cost method of accounting.

In the fourth quarter of 2008, we also entered into a long-term solar module supply agreement with this related party. During the three months ended March 28, 2009 we recognized $2.2 million in net sales to this related party. At March 28, 2009 we had accounts receivable from this related party of $1.0 million.

Note 10.  Note Receivable

On April 8, 2009 we entered into a credit facility agreement with a solar project entity of one of our customers for an amount of €17.5 million ($23.3 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00) to provide financing of a photovoltaic facility. The credit facility replaces the outstanding bridge loan of €10.3 million as of March 28, 2009 ($13.7 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00). The bridge loan matured on April 15, 2009. The credit facility bears interest at 8% per annum and is due on December 31, 2026. The remaining balance of the credit facility is expected to be drawn in the second quarter of 2009.

Note 11. Debt

Our long-term debt at March 28, 2009 and December 27, 2008 consisted of the following (in thousands):

	March 28, 2009			December 27, 2008
Euro denominated loan, variable interest Euribor plus 1.6%, due 2008 through 2012	$	48,993		$	54,982
Euro denominated loan, variable interest Euribor plus 0.55%, due 2008 through 2016		85,702			66,975
Euro denominated 4.54% loan, due 2008 through 2016		85,702			66,975
2.25% loan, due 2006 through 2015		11,133			11,694
0.25% — 3.25% loan, due 2007 through 2009		1,250			1,528
Capital lease obligations		4			5
		232,784			202,159
Less unamortized discount		(4,616	)		(3,689	)
Total long-term debt		228,168			198,470
Less current portion		32,952			34,951
Noncurrent portion	$	195,216		$	163,519

As of March 28, 2009 and December 27, 2008, we did not have any short-term debt.

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On May 6, 2008, in connection with the plant expansion at our Malaysian manufacturing center, First Solar Malaysia Sdn. Bhd. (FS Malaysia), our indirect wholly owned subsidiary entered into an export financing facility agreement (Facility Agreement) with IKB Deutsche Industriebank AG (IKB) as arranger NATIXIS Zweigniederlassung Deutschland (NZD) as facility agent and original lender, AKA Ausfuhrkredit-Gesellschaft mbH (AKA), as original lender and NATIXIS Labuan Branch (NLB) as security agent. Pursuant to the terms of the Facility Agreement, the lenders will furnish up to €134.0 million ($178.2 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00) of credit facilities consisting of the following:

(1) Five fixed-rate euro-denominated term loan facilities, which have the following maximum aggregate amounts:

a) €16.9 million ($22.5 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00);

b) €16.3 million ($21.7 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00);

c) €16.3 million ($21.7 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00);

d) €16.3 million ($21.7 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00);

e) €1.2 million ($1.6 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00); and

(2) Five floating-rate euro-denominated term loan facilities, which have the following maximum aggregate amounts:

a) €16.9 million ($22.5 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00);

b) €16.3 million ($21.7 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00);

c) €16.3 million ($21.7 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00);

d) €16.3 million ($21.7 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00); and

e) €1.2 million ($1.6 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00).

The loans under the fixed rate credit facilities bear interest on the outstanding unpaid principal amount at an annual rate of 4.54%. The loans under the floating rate credit facilities bear interest on the outstanding unpaid principal amount at Euribor plus a margin of 0.55%.

These credit facilities are intended to be used by FS Malaysia for the purpose of (1) partially financing the purchase of certain equipment to be used at our Malaysian manufacturing center and (2) financing fees to be paid to Euler-Hermes Kreditversicherungs-AG (Euler-Hermes), the German Export Credit Agency of Hamburg, Federal Republic of Germany, which will guaranty 95% of FS Malaysia’s obligations related to the Facility Agreement (Hermes Guaranty). In addition, FS Malaysia’s obligations related to the Facility Agreement are guaranteed, on an unsecured basis, by First Solar, Inc., pursuant to a guaranty agreement described below.

The Facility Agreement requires FS Malaysia to make 14 equal semi-annual repayments of the total principal borrowed under each of the ten credit facilities. The first of these repayments commences on the earlier of (1) the day that is six months after the date that the Malaysian manufacturing center plant to which the credit facility relates becomes ready for operation and (2) a date specified for each credit facility, the earliest of which is September 30, 2008 for the credit facilities listed as (1) a) and (2) a) above. Principal repayments commenced on September 30, 2008.

FS Malaysia may voluntarily cancel commitments of the credit facilities and may make prepayments of amounts outstanding in whole or in part, subject to minimum prepayment requirements and the payment of break costs. Subject to a limited exception, in the event that the Euler-Hermes Guaranty is (1) fully or partially withdrawn, or otherwise ceases to be in full force and effect or (2) repudiated by Euler-Hermes (or its intention to repudiate is evidenced in writing), or if any of the obligations of Euler-Hermes under the Euler-Hermes Guaranty ceases to be legal, valid, binding or in full force and effect, the loans made by any lender under any of the credit facilities may, at the direction of the lender, be declared immediately due and payable.

FS Malaysia is obligated to pay commitment fees at an annual rate of 0.375% on the unused portions of the fixed rate credit facilities and at an annual rate of 0.350% on the unused portions of the floating rate credit facilities. In addition, FS Malaysia is obligated to pay certain underwriting, management and agency fees in connection with the credit facilities.

In connection with the Facility Agreement, First Solar, Inc. entered into a first demand guaranty agreement dated May 6, 2008 in favor of IKB, NZD, NLB and the other lenders under the Facility Agreement. As stated above, FS Malaysia’s obligations related to the Facility Agreement are guaranteed, on an unsecured basis, by First Solar pursuant to this guaranty agreement.

In connection with the Facility Agreement, all of FS Malaysia’s obligations related to the Facility Agreement are secured by a first party, first legal charge over the equipment financed by the credit facilities and the other documents, contracts and agreements related to that equipment. Also in connection with the Facility Agreement, any payment claims of First Solar, Inc. against FS Malaysia are subordinated to the claims of IKB, NZD, NLB and the other lenders under the Facility Agreement.

The Facility Agreement contains various financial covenants which we must comply with, such as debt to equity ratios, total leverage ratios, interest coverage ratios and debt service coverage ratios. We must submit these ratios related to the financial covenants for the first time at the end of fiscal 2009. The Facility Agreement also contains various customary non-financial covenants which FS Malaysia must comply with, including, submitting various financial reports and business forecasts to the lenders, maintaining adequate insurance, complying with applicable laws and regulations, restrictions on FS Malaysia’s ability to sell or encumber assets and make loan guarantees to third parties. We were in compliance with these covenants through March 28, 2009.

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As of March 28, 2009, we had outstanding borrowings of €126.1 million ($167.7 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00) under the Facility Agreement.

Certain of our debt-financing agreements bear interest at rates based on the Euro Interbank Offered Rate (Euribor). Euribor is the primary interbank lending rate within the Euro zone, with maturities ranging from one week to one year. A disruption of the credit environment as currently experienced could negatively impact interbank lending and therefore negatively impact the Euribor rate. An increase in the Euribor rate would increase our cost of borrowing.

Note 12. Commitments and Contingencies

Financial guarantees

In the normal course of business, we occasionally enter into agreements with third parties where we guarantee the performance of our subsidiaries related to certain service contracts, which may include services such as development, engineering, procurement of permits and equipment, construction management and monitoring and maintenance. These agreements meet the definition of a guarantee according to FASB Interpretation No. (FIN) 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Other. As of March 28, 2009, none of these guarantees were material to our financial position.

Commercial commitments

As of March 28, 2009, we had the following three outstanding commercial commitments in the form of letters of credit and bank guarantees: MYR 4.0 million dated June 2008 for an energy supply agreement ($1.1 million at the balance sheet close rate on March 28, 2009 of $0.28/MYR1.00); MYR 3.0 million dated September 2008 for Malaysian custom and excise tax ($0.8 million at the balance sheet close rate on March 28, 2009 of $0.28/MYR1.00); and MYR 2.2 million dated December 2007 for an energy supply agreement ($0.6 million at the balance sheet close rate on March 28, 2009 of $0.28/MYR1.00).

Product warranties

We offer warranties on our products and record an estimate of the associated liability based on the number of solar modules under warranty at customer locations, our historical experience with warranty claims, our monitoring of field installation sites, our in-house testing of our solar modules and our estimated per-module replacement cost.

Product warranty activity during the three months ended March 28, 2009 and March 29, 2008 was as follows (in thousands):

	Three Months Ended
	March 28, 2009			March 29, 2008
Product warranty liability, beginning of period	$	11,905		$	7,276
Accruals for new warranties issued (warranty expense)		3,091			1,992
Settlements		(208	)		(8	)
Change in estimate of warranty liability		(1,231	)		1
Product warranty liability, end of period	$	13,557		$	9,261
Current portion of warranty liability	$	5,311		$	3,921
Non-current portion of warranty liability	$	8,246		$	5,340

Note 13. Share-Based Compensation

We measure share-based compensation cost at the grant date based on the fair value of the award and recognize this cost as an expense over the grant recipients’ requisite service periods, in accordance with SFAS 123(R), Share-Based Payment. The share-based compensation expense that we recognized in our consolidated statements of operations for the three months ended March 28, 2009 and March 29, 2008 was as follows (in thousands):

	Three Months Ended
	March 28, 2009		March 29, 2008
Share-based compensation expense included in: Cost of sales	$	3,019	$	2,208
Research and development		1,819		965
Selling, general and administrative		9,874		7,400
Production start-up		472		286
Total share-based compensation expense	$	15,184	$	10,859

The increase in share-based compensation expense was primarily the result of new awards.

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The following table presents our share-based compensation expense by type of award for the three months ended March 28, 2009 and March 29, 2008 (in thousands):

	Three Months Ended
	March 28, 2009			March 29, 2008
Stock options	$	2,054		$	5,060
Restricted stock units		13,243			5,528
Unrestricted stock		113			81
Net amount absorbed into inventory		(226	)		190
Total share-based compensation expense	$	15,184		$	10,859

Share-based compensation cost capitalized in our inventory was $0.6 million and $0.4 million at March 28, 2009 and March 29, 2008, respectively. As of March 28, 2009, we had $12.6 million of unrecognized share-based compensation cost related to unvested stock option awards, which we expect to recognize as an expense over a weighted-average period of approximately 1.2 years, and $85.1 million of unrecognized share-based compensation cost related to unvested restricted stock units, which we expect to recognize as an expense over a weighted-average period of approximately 1.9 years.

Note 14. Income Taxes

Our Malaysian subsidiary has been granted a tax holiday for a period of 16.5 years, which was originally scheduled to commence on January 1, 2009, which generally provides for a 100% exemption from Malaysian income tax. On January 9, 2009 we received formal approval granting our request to pull forward this previously approved tax holiday by one year, the result of which was an $11.5 million reduction in the amount of income taxes previously accrued for the year ended December 27, 2008.  As a result we recognized an income tax benefit of $11.5 million during the three months ended March 28, 2009.

Our effective tax rate was 3.0% for the three months ended March 28, 2009. Without the $11.5 million tax benefit discussed above, our effective tax rate would have been 9.8%. Without the beneficial impact of the Malaysian tax holiday on 2009 operations, our effective tax rate would have been 20.8%. The provision for income taxes differs from the amount computed by applying the statutory U.S. federal rate primarily due to the benefit associated with foreign income taxed at lower rates and the beneficial impact of the Malaysian tax holiday discussed above.

Note 15. Net Income per Share

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted net income per share is computed giving effect to all potential dilutive common stock, including employee stock options and restricted stock units.

The calculation of basic and diluted net income per share for the three months ended March 28, 2009 and March 29, 2008 is as follows (in thousands, except per share amounts):

	Three Months Ended
	March 28, 2009		March 29, 2008
Basic net income per share
Numerator:
Net income	$	164,595	$	46,619
Denominator:
Weighted-average shares used in computing basic net income per share		81,685		79,059
Diluted net income per share
Denominator:
Weighted-average shares used in computing basic net income per share		81,685		79,059
Effect of stock options and restricted stock units outstanding		927		2,548
Weighted-average shares used in computing diluted net income per share		82,612		81,607

The following number of outstanding employee stock options and restricted stock units were excluded from the computation of diluted net income per share for the for the three months ended March 28, 2009 and March 29, 2008 as they would have had an antidilutive effect (in thousands):

	Three Months Ended
	March 28, 2009		March 29, 2008
Restricted stock units and options to purchase common stock		261		131

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Note 16. Accumulated Other Comprehensive Income (Loss)

Comprehensive income, which includes foreign currency translation adjustments, unrealized gains and losses on derivative instruments designated and qualifying as cash flow hedges and unrealized gains and losses on available-for-sale securities, the impact of which has been excluded from net income and reflected as components of stockholders’ equity, is as follows (in thousands):

	Three Months Ended
	March 28, 2009			March 29, 2008
Net income	$	164,595		$	46,619
Foreign currency translation adjustments		(13,886	)		9,442
Change in unrealized gain on marketable securities, net of tax of $(59) for 2009		103			288
Change in unrealized gain (loss) on derivative instruments, net of tax of $550 for 2009		23,650			(23,298	)
Comprehensive income	$	174,462		$	33,051

Components of accumulated other comprehensive loss were as follows (in thousands):

	March 28, 2009			December 27, 2008
Foreign currency translation adjustments	$	(21,711	)	$	(7,825	)
Unrealized gain on marketable securities, net of tax of $203 for 2009 and $(144) for 2008		365			262
Unrealized gain (loss) on derivative instruments, net of tax of $(615) for 2009 and $65 for 2008		6,792			(16,858	)
Accumulated other comprehensive loss	$	(14,554	)	$	(24,421	)

Note 17. Statement of Cash Flows

The following table presents a reconciliation of net income to net cash provided by operating activities for the three months ended March 28, 2009 and March 29, 2008 (in thousands):

	Three Months Ended
	March 28, 2009			March 29, 2008
Net income	$	164,595		$	46,619
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization		26,085			9,064
Share-based compensation		15,184			10,859
Remeasurement of debt		(255	)		—
Deferred income taxes		(1,874	)		1,027
Excess tax benefits from share-based compensation arrangements		(3,254	)		(4,255	)
Loss on disposal of property and equipment		294			30
Provision for doubtful accounts receivable		—			669
Provision for excess and obsolete inventories		2,165			82
Gain on sales of investments, net		(7	)		(280	)
Changes in operating assets and liabilities:
Accounts receivable		(93,204	)		(3,000	)
Inventories		(12,649	)		(17,254	)
Deferred project costs		(11,370	)		1,424
Prepaid expenses and other current assets		(6,723	)		(2,031	)
Costs and estimated earnings in excess of billings		114			6
Other noncurrent assets		(1,888	)		(1,761	)
Billings in excess of costs and estimated earnings		951			(909	)
Accounts payable and accrued expenses		(14,423	)		22,980
Total adjustments		(100,854	)		16,651
Net cash provided by operating activities	$	63,741		$	63,270

Note 18. Segment Reporting

SFAS 131, Disclosure about Segments of an Enterprise and Related Information, establishes standards for companies to report in their financial statements information about operating segments, products, services, geographic areas and major customers. The method of determining what information to report is based on the way that management organizes the operating segments within the company for making operating decisions and assessing financial performance.

The components segment, which is our principal business, involves the design, manufacture and sale of solar modules, which convert sunlight to electricity. We sell our solar modules to thirteen principal customers, with which we have long term supply contracts. These customers include project developers, system integrators and operators of renewable energy projects.

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We also sell solar power systems directly to system owners. These systems include both our solar modules and balance of system components that we procure from third parties. These sales may also include services such as development, engineering, procurement of permits and equipment, construction management, monitoring and maintenance. We do not recognize revenue from intercompany sales by our components segments to our solar power systems and project development business. Instead, the sale of our solar panels manufactured by the components segment and used for construction projects are included in “net sales” of our solar power system and project development business. Our solar power systems and project development business does not currently meet the quantitative criteria for disclosure as a separate reporting segment and therefore we classify it in the “Other” category in the following tables.

Financial information about our segments is as follows (in thousands):

	Three Months Ended							Three Months Ended
	March 28, 2009							March 29, 2008
	Components		Other			Total		Components		Other			Total
Net sales	$	413,062	$	5,146		$	418,208	$	193,862	$	3,053		$	196,915
Income (loss) before income taxes	$	173,124	$	(3,392	)	$	169,732	$	68,116	$	(2,907	)	$	65,209
Goodwill	$	—	$	33,829		$	33,829	$	—	$	33,829		$	33,829
Assets	$	2,240,394	$	48,038		$	2,288,432	$	1,427,316	$	49,843		$	1,477,159

Note 19. Subsequent Events

On April 3, 2009, we completed the acquisition of the solar power project development business (the “Project Business”) of OptiSolar Inc., a Delaware corporation (“OptiSolar”). Pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated as of March 2, 2009 by and among First Solar, First Solar Acquisition Corp., a Delaware corporation (“Merger Sub”), OptiSolar and OptiSolar Holdings LLC, a Delaware limited liability company (“OptiSolar Holdings”), Merger Sub merged with and into OptiSolar, with OptiSolar surviving as a wholly-owned subsidiary of First Solar (the “Merger”). Pursuant to the Merger, all the outstanding shares of common stock of OptiSolar held by OptiSolar Holdings were exchanged for the Merger Shares (as defined below). The Merger Shares consist of 2,972,420 shares of First Solar common stock, including (i) 732,789 shares that have been deposited with an escrow agent to support certain indemnification obligations of OptiSolar Holdings, and (ii) 355,096 shares that may be issued upon satisfaction of conditions relating to the satisfaction of certain existing liabilities of OptiSolar (the “Holdback Shares”). The total consideration for this acquisition based on the closing price of our common stock on April 3, 2009 of $134.38 per share was $399.4 million. The Merger Shares were issued, and any Holdback Shares will be issued, in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). We have prepared and filed with the Securities and Exchange Commission a registration statement under the Securities Act covering the resale of 2,801,435 of the Merger Shares. We expect to complete our purchase price allocation under SFAS 141R during the second quarter of 2009.

On April 15, 2009, we entered into an agreement with Sempra Generation to build a 48 megawatt (MW) AC ground-mounted photovoltaic (PV) power plant. This project will expand the 10 MW AC power plant completed for Sempra Generation in 2008, which is located near Boulder City, Nevada. We will design, engineer and construct the PV power plant and expect to begin construction in 2009.

On April 21, 2009, we entered into a VAT facility agreement in accordance with the credit facility agreement (as further described in Note 10 to our condensed consolidated financial statements) with the same customer for an amount of €9.0 million ($12.0 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00). The VAT facility agreement is to pre-finance the amounts of German value added tax (VAT) and any other tax obligations of similar nature during the construction phase of the photovoltaic facility. The VAT facility agreement bears interest at the aggregate of Euribor plus 1.2% and matures on December 31, 2010. A portion of the VAT facility is expected to be drawn in the second quarter of 2009.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933, which are subject to risks, uncertainties and assumptions that are difficult to predict. All statements in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. These forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements, among other things, concerning our business strategy, including anticipated trends and developments in and management plans for our business and the markets in which we operate; future financial results, operating results, revenues, gross margin, operating expenses, products, projected costs and capital expenditures; research and development programs; sales and marketing initiatives; and competition. In some cases, you can identify these statements by forward-looking words, such as “estimate”, “expect”, “anticipate”, “project”, “plan”, “intend”, “believe”, “forecast”, “foresee”, “likely”, “may”, “should”, “goal”, “target”, “might”, “will”, “could”, “predict” and “continue,” the negative or plural of these words and other comparable terminology. Forward-looking statements are only predictions based on our current expectations and our projections about future events. All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q. You should not place undue reliance on these forward-looking statements. We undertake no obligation to update any of these forward-looking statements for any reason. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. These factors include the matters discussed in the section entitled “Risk Factors” elsewhere in this Quarterly Report on Form 10-Q. You should carefully consider the risks and uncertainties described under this section.

The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes contained in this Quarterly Report on Form 10-Q. Unless expressly stated or the context otherwise requires, the terms “we,” “our,” “us” and “First Solar” refer to First Solar, Inc. and its subsidiaries.

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Overview

We design and manufacture solar modules using a proprietary thin film semiconductor technology that has allowed us to reduce our average solar module manufacturing costs to among the lowest in the world. Each solar module uses a thin layer of cadmium telluride semiconductor material to convert sunlight into electricity. We manufacture our solar modules on high-throughput production lines and we perform all manufacturing steps ourselves in an automated, proprietary, continuous process, which eliminates the multiple supply chain operators and expensive and time consuming batch processing steps that are used to produce a crystalline silicon solar module. In 2008 and during the three months ended March 28, 2009, we sold most of our solar modules to solar project developers and system integrators headquartered in Germany, France and Spain.

Currently, we manufacture our solar modules at our Perrysburg, Ohio, Frankfurt/Oder, Germany and Kulim, Malaysia manufacturing facilities and conduct our research and development activities at our Perrysburg, Ohio manufacturing facility. We devote a substantial amount of resources to research and development with the objective of lowering the per watt price of solar electricity generated by photovoltaic systems. With the objective of reducing the per watt manufacturing cost of electricity generated by photovoltaic systems using our solar modules, we focus our research and development on increasing the conversion efficiency of our solar modules and on reducing the cost and optimizing the effectiveness of the other components in a photovoltaic system.

        Through our solar power systems and project development business, we also provide comprehensive utility-scale photovoltaic systems solutions that significantly reduce solar electricity costs. We sell solar power systems, which include both our solar modules and balance of system components that we procure from third parties, directly to systems owners. We also provide utility-scale engineering, procurement and construction (EPC) capabilities related to the development of commercial solar projects, including monitoring and maintenance as part of a turnkey system solution delivery.

Market Overview

The solar industry has been moving from a supply driven to a demand driven environment, with increasing competitive pressure as the photovoltaic industry’s total manufacturing capacity to produce solar modules exceeds current demand for those products. Our customers face significant challenges under the current economic conditions, including an increase in interest or lending rates or tightening of the supply of capital to finance solar projects. Our net sales could be adversely impacted if legislation reduces the current subsidy programs in Europe, North America or Asia or if interest rates increase or financing is no longer available, which could impact our end-users’ ability to either meet their target return on investment or finance their projects. In addition, subsidies for our customers, particularly in Germany, are declining at a rate that is greater than the annual contractual price decline we extend under our Long Term Supply Contracts. As result, we may be less competitive and not meet our customers internal rate of return (IRR) requirements or the profit margin of our customers might decline, which could lower demand for our solar modules.

We face intense competition from manufacturers of crystalline silicon solar modules as well as other types of solar modules and photovoltaic systems. Solar module manufacturers compete with one another in several product performance attributes, including module cost-per-watt and levelized cost of electricity, meaning the net present value of total life cycle costs of the solar power project divided by the quantity of energy produced over the system life. We are one of the lowest cost module manufacturers in the solar industry, as evidenced by the further reduction in our average manufacturing cost per watt from $0.98 in the three months ended December 27, 2008 to $0.93 in the three months ended March 28, 2009. This cost advantage is reflected in the price at which we sell our modules or fully integrated systems and enables our systems to compete favorably on the levelized cost of electricity generated by our systems. Our cost competitiveness is based on our proprietary technology, which provides lower cost from a continuous highly automated industrial manufacturing process, our scale and our operational excellence. In addition, our modules use approximately 1% of the amount of semiconductor material that is used to manufacture traditional crystalline silicon solar modules. The cost of polysilicon is a significant driver of the manufacturing cost of crystalline silicon solar modules. The current spot market price of polysilicon of approximately between $80 and $100 per kilogram (Kg) is at a level that enables us to remain one of the lowest cost module manufacturers in the solar industry. However, the timing and velocity of decrease in the cost of silicon feedstock could lead to pricing pressure for solar modules. Although we are not a crystalline silicon module manufacturer, we estimate based on industry research and public disclosures of our competitors, that a $10 per Kg increase or decrease in the price of polysilicon could increase or decrease, respectively, our competitors’ manufacturing cost per watt by approximately $0.07 to $0.08. Given the lower conversion efficiency of our modules compared to crystalline silicon modules, there are higher balance-of-system costs associated with systems using our modules. Thus, to compete effectively on the basis of levelized cost of electricity our modules need to maintain a certain cost advantage per watt compared to crystalline silicon based modules. Our cost reduction roadmap anticipates manufacturing cost per watt reductions for our product of 10% per year. In 2008, we reduced our manufacturing cost per watt by 12%.

While our modules currently enjoy competitive advantages in these product performance attributes, there can be no guarantee that these advantages will continue to exist in the future to the same extent or at all. Any declines in the competitiveness of our products could result in margin compression, a decline in average selling prices of our solar modules, an erosion in our market share for modules, a decrease in the rate of revenue growth and/or a decline in overall revenues. We are taking several actions to mitigate the potential impact resulting from competitive pressures, including continuously making progress along our cost reduction roadmap and focusing our research and development on increasing the conversion efficiency of our solar modules. In addition, we continue to expand our solar power systems and project development business, including through the recent acquisition of the related business of OptiSolar Inc. Through that business we sell solar power systems, which include our solar modules, directly to systems owners and provide comprehensive utility-scale photovoltaic systems solutions that significantly reduce solar electricity costs. Thus, our solar power systems and project development business allows us to play a much more active role than our competitors in managing the demand for, and manufacturing throughput of, our solar modules. Finally, we have formed and continue to develop deep partner relationships with our customers and continue to develop our range of offerings, including engineering, procurement and construction (EPC) capabilities and monitoring and maintenance services, in order to enhance the competitiveness of systems incorporating our solar modules.

Net Sales

Currently, the majority of our net sales is generated from the sale of solar modules. We price and sell our solar modules per watt of power. As a result, our net sales can fluctuate based on our output of sellable watts or price. We currently sell almost all of our solar modules to solar power system project developers, system integrators and operators headquartered in Germany, France and Spain, which either resell our solar modules to end-users or integrate them into power plants that they own or operate or sell.

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Our sales prices under the Long Term Supply Contracts are denominated in euro, exposing us to risks from currency exchange rate fluctuations. During the three months ended March 28, 2009, 93.3% of our sales were denominated in euro and subject to fluctuation in the exchange rate between the euro and U.S. dollar.

In April 2006, we entered into long-term contracts for the purchase and sale of our solar modules with six European solar power system project developers and system integrators, and in 2007, we entered into additional long-term contracts for the purchase and sale of our solar modules with six other European project developers that also own and operate renewable energy projects. In 2008, we entered into long-term contracts with three European project developers, system integrators and operators and increased our contracted volume with four customers. We also entered into a five-year agreement with a solar power system project developer and system integrator in the United States, which is a related party. These contracts account for a significant portion of our planned production over the period from 2009 through 2013, and therefore, will significantly affect our overall financial performance.

During the three months ended March 28, 2009 we amended our Long Term Supply Contracts for certain customers to accelerate the decline in the sales price per watt under such contracts in 2009 and 2010 in exchange for increases in the volume of solar modules to be delivered under such contracts. We also extended the payment terms for certain customers under these contracts from 10 days to 45 days, net.

With our acquisition of Turner Renewable Energy, LLC on November 30, 2007, we began accounting for a portion of our revenues using the percent of completion method of accounting. Net sales for our solar power systems and project development business for the three months ended March 28, 2009 and March 29, 2008 were $5.1 million and $3.1 million, respectively, and were not material to our consolidated results of operations.

Cost of sales

Our cost of sales includes the cost of raw materials and components for manufacturing and installing solar modules, such as tempered back glass, transparent conductive oxide (TCO) coated front glass, cadmium telluride, laminate, connector assemblies, laminate edge seal, inverters and others. Our cost of sales also include direct labor for the manufacturing of solar modules and installation of solar systems and manufacturing overhead such as engineering expense, equipment maintenance, environmental health and safety expenses, quality and production control and procurement. Cost of sales also includes depreciation of manufacturing plants and equipment and facility-related expenses. In addition, we accrue warranty and solar module end-of-life collection and recycling costs to our cost of sales.

We implemented a program in 2005 to collect and recycle our solar modules after their use. Under our collection and recycling program, we enter into an agreement with the end-users of the solar power systems that use our solar modules. In the agreement, we commit, at our expense, to remove the solar modules from the installation site at the end of their life and transport them to a processing center where the solar module materials and components will be either refurbished and resold as used panels or recycled to recover some of the raw materials. In return, the owner agrees not to dispose of the solar modules except through our end-of-life collection and recycling program or another program that we approve of and is responsible for disassembling the solar modules and packaging them in containers that we provide. At the time we sell a solar module, we record an expense in cost of sales equal to the fair value of the estimated future end-of-life collection and recycling obligation. We subsequently record accretion expense on this future obligation, which we classify with selling, general and administrative expense.

Overall, we expect our cost of sales per watt to decrease over the next several years due to an increase of sellable watts per solar module, an increase in unit output per line, geographic diversification into lower-cost manufacturing regions and more efficient absorption of fixed costs driven by economies of scale.

Deferred project costs represent uninstalled materials we have procured for customer projects. We recognize these costs as deferred assets until we install the materials. Deferred project costs were $12.3 million and $1.2 million at March 28, 2009 and March 29, 2008, respectively.

Gross profit

Gross profit is affected by numerous factors, including our average selling prices, foreign exchange rates, our manufacturing costs and the effective utilization of our production facilities. For example, our Long Term Supply Contracts specify a sales price per watt that declines 6.5% annually. Other factors impacting gross profits are the ramp of production on new plants due to a reduced ability to absorb fixed costs until full production volumes are reached as well as the mix of net sales generated by our module and project business coupled with a geographic factor. As a result, gross profits may vary from quarter to quarter and year to year.

Research and development

Research and development expense consists primarily of salaries and personnel-related costs and the cost of products, materials and outside services used in our process and product research and development activities. We continually acquire equipment for general use in further process developments and record the depreciation of this equipment as research and development expense.

Selling, general and administrative

Selling, general and administrative expense consists primarily of salaries and other personnel-related costs, professional fees, insurance costs, travel expense and other selling expenses. We expect these expenses to increase in the near term, both in absolute dollars and as a percentage of net sales, in order to support the growth of our business as we expand our sales and marketing efforts, improve our information processes and systems and implement the financial reporting, compliance and other infrastructure required for an expanding public company. Over time, we expect selling, general and administrative expense to decline as a percentage of net sales and on a cost per watt basis as our net sales and our total watts produced increase.

Production start-up

Production start-up expense consists primarily of salaries and personnel-related costs and the cost of operating a production line before it has been qualified for full production, including the cost of raw materials for solar modules run through the production line during the qualification phase. It also includes all expenses related to the selection of a new site and the related legal and regulatory costs and the costs to maintain our plant replication program, to the extent we cannot capitalize these expenditures. We incurred production start-up expense of $32.5 million during the year ended December 27, 2008 in connection with the planning and preparation of our plants at the

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Malaysian manufacturing center. Production start-up expense for the three months ended March 28, 2009 was $6.2 million and related to plant four of our Malaysian manufacturing center and our Ohio plant expansion. In general, we expect production start-up expense per production line to be higher when we build an entirely new manufacturing facility compared with the addition of new production lines at an existing manufacturing facility, primarily due to the additional infrastructure investment required when building an entirely new facility. Over time, we expect production start-up expense to decline as a percentage of net sales and on a cost per watt basis as a result of economies of scale.

Interest income

Interest income is earned on our cash, cash equivalents, marketable securities and restricted cash.

Interest expense, net

Interest expense, net of amounts capitalized, is incurred on various debt financings.

Foreign currency gain (loss)

Foreign currency gain (loss) consists of gains and losses resulting from holding assets and liabilities and conducting transactions denominated in currencies other than our functional currencies.

Use of estimates

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP for interim financial information. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, net sales and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to inventories, intangible assets, income taxes, warranty obligations, marketable securities valuation, derivative instrument valuation, end-of-life collection and recycling, contingencies and litigation and share-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Results of Operations

The following table sets forth our consolidated statements of operations as a percentage of net sales for the periods indicated:

	Three Months Ended
	March 28, 2009			March 29, 2008
Net sales		100.0	%		100.0	%
Cost of sales		43.7	%		47.0	%
Gross profit		56.3	%		53.0	%
Research and development		2.8	%		2.4	%
Selling, general and administrative		11.8	%		14.6	%
Production start-up		1.5	%		6.5	%
Operating income		40.2	%		29.5	%
Foreign currency gain		0.4	%		0.4	%
Interest income		0.5	%		3.4	%
Interest expense, net		(0.2)	%		0.0	%
Other expense, net		(0.3)	%		(0.2)	%
Income tax expense		1.2	%		9.4	%
Net income		39.4	%		23.7	%

Three Months Ended March 28, 2009 and March 29, 2008

Net sales

	Three Months Ended
(Dollars in thousands)	March 28, 2009		March 29, 2008		Three Month Period Change
Net sales	$	418,208	$	196,915	$	221,293	112	%

The increase in our net sales was due to a 147% increase in the MW volume of solar modules sold during the three months ended March 28, 2009 compared with the three months ended March 29, 2008 due to strong demand for our solar modules in both the U.S. and European markets. The increase in MW volume of solar modules sold is attributable to the full production ramp of the first two plants at our Malaysian manufacturing center, commencement of product shipments at the third plant of our Malaysian manufacturing center and continued improvements to our manufacturing process. In addition, we increased the average number of sellable watts per solar module by 2.5% during the three months ended March 28, 2009 compared with the three months ended March 29, 2008. Our average selling price decreased by approximately 13% during the three months ended March 28, 2009 compared with the three months ended March 29, 2008, mainly due to an 8% reduction in our average selling price due to annual contractual price declines that took effect in the first quarter of 2009 and amendments made to our Long Term Supply contracts with certain customers in the first quarter of 2009. In addition, our average selling price was adversely impacted by 5% due to an unfavorable decline in the foreign exchange rate between the U.S. dollar and the euro. During the three months ended March 29, 2008, 61.8% of our net sales resulted from sales of solar modules to customers headquartered in Germany.

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Cost of sales

	Three Months Ended
(Dollars in thousands)	March 28, 2009			March 29, 2008			Three Month Period Change
Cost of sales	$	182,924		$	92,591		$	90,333	98	%
% of net sales		43.7	%		47.0	%

The increase in our cost of sales was due to higher production and sales volumes, which resulted from the commencement of production at our four plant Malaysian manufacturing center. This increase in production and sales volume caused a $48.1 million increase in direct material expense, a $7.5 million increase in warranty expense and accruals for the costs of the end of life collection and recycling of our solar modules, a $2.2 million increase in sales freight and other costs and a $32.5 million increase in manufacturing overhead costs. The increase in manufacturing overhead costs was due to a $8.3 million increase in salaries and personnel related expenses, including a $1.3 million increase in share-based compensation expense, a $10.8 million increase in facility and related expenses and a $13.4 million increase in depreciation expense, in each case primarily resulting from increased infrastructure associated with the build out of our Malaysian manufacturing center. Our average manufacturing cost per watt declined by $0.21 per watt, or 18%, from $1.14 in the three months ended March 29, 2008 to $0.93 in the three months ended March 28, 2009 and included $0.02 of ramp penalty associated with the ramp and qualification of Malaysian manufacturing center and $0.01 of non-cash stock based compensation.

Gross profit

	Three Months Ended
(Dollars in thousands)	March 28, 2009			March 29, 2008			Three Month Period Change
Gross profit	$	235,284		$	104,324		$	130,960	126	%
% of net sales		56.3	%		53.0	%

As a percentage of sales, gross profit increased 3.3 percentage points for the three months ended March 28, 2009 compared with the three months ended March 29, 2008, representing increased leverage of our fixed cost infrastructure and scalability associated with our Malaysian expansions, which drove a 147% increase in the number of megawatts sold. During the three months ended March 28, 2009, increased leverage of our fixed cost infrastructure contributed approximately 7.4% to our gross profit, which was partially offset by a 13% decline in our average selling prices. Additionally, a decline in the exchange rate between the U.S. dollar and the euro adversely impacted our gross profit by 1.1%. We expect that gross profit will be impacted in future periods by the volatility of the exchange rate between the U.S. dollar and the euro when compared to the same period a year ago.

Research and development

	Three Months Ended
(Dollars in thousands)	March 28, 2009			March 29, 2008			Three Month Period Change
Research and development	$	11,704		$	4,760		$	6,944	146	%
% of net sales		2.8	%		2.4	%

The increase in our research and development expense was due to a $5.6 million increase in personnel related expense, including a $0.9 million increase in share-based compensation expense, due to increased headcount and additional share-based compensation awards. In addition, consulting and other expenses increased by $0.9 million and grants received decreased by $0.4 million during the three months ended March 28, 2009, compared with the three months ended March 29, 2008. Throughout the fiscal period, we continued the development of solar modules with increased efficiencies at converting sunlight into electricity.

Selling, general and administrative

	Three Months Ended
(Dollars in thousands)	March 28, 2009			March 29, 2008			Three Month Period Change
Selling, general and administrative	$	49,315		$	28,671		$	20,644	72	%
% of net sales		11.8	%		14.6	%

The increase in selling, general and administrative expense was due to a $12.1 million increase in salaries and personnel-related expenses, including a $2.5 million increase in share-based compensation. In addition, legal and professional service fees increased by $5.3 million, including $1.5 million of expenses associated with the acquisition of the solar power project development business of OptiSolar, and other expenses increased by $3.2 million during the three months ended March 28, 2009 compared with the three months ended March 29, 2008. The increase resulted primarily from the expansion of our solar power system and project development business and operating a global manufacturing business.

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Production start-up

	Three Months Ended
(Dollars in thousands)	March 28, 2009			March 29, 2008			Three Month Period Change
Production start-up	$	6,209		$	12,761		$	(6,552	)	(51	)%
% of net sales		1.5	%		6.5	%

During the three months ended March 28, 2009, we incurred $6.2 million of production start-up expenses for our Malaysian manufacturing expansion, including legal, regulatory and personnel costs, compared with $12.8 million of production start-up expenses for our Malaysian manufacturing expansion during the three months ended March 29, 2008. Production start-up expenses are comprised of the cost of labor and material and depreciation expense to run and qualify the production lines, related facility expenses, management of our replication process and legal and regulatory costs.

Foreign currency gain

	Three Months Ended
(Dollars in thousands)	March 28, 2009		March 29, 2008		Three Month Period Change
Foreign currency gain	$	1,834	$	774	$	1,060	137	%.

Foreign exchange gain increased by $1.1 million during the three months ended March 28, 2009 compared with the three months ended March 29, 2008 due to a substantial increase in our foreign currency denominated assets and liabilities and the high volatility of the U.S. dollar relative to other currencies, in particular the euro.

Interest income

	Three Months Ended
(Dollars in thousands)	March 28, 2009		March 29, 2008		Three Month Period Change
Interest income	$	2,103	$	6,685	$	(4,582	)	(69	)%

Interest income decreased by $4.6 million during the three months ended March 28, 2009 compared with the three months ended March 29, 2008 as a result of a decline in interest rates.

Interest expense, net

	Three Months Ended
(Dollars in thousands)	March 28, 2009		March 29, 2008		Three Month Period Change
Interest expense, net	$	935	$	4	$	931	N.M.

Interest expense, net of amounts capitalized, increased by $0.9 million during the three months ended March 28, 2009 compared with the three months ended March 29, 2008, primarily as a result of higher amounts of interest expense capitalized during three months ended March 29, 2008 due to the construction of our Malaysian manufacturing center.

Other expense

	Three Months Ended
(Dollars in thousands)	March 28, 2009		March 29, 2008		Three Month Period Change
Other expense	$	1,326	$	378	$	948	251	%

Other expense, net, increased by $0.9 million during the three months ended March 28, 2009 compared with the three months ended March 29, 2008, due to losses associated with our credit default swaps, as described further in “Item 3. Qualitative and Quantitative Disclosures About Market Risk – Credit Risk.”

Income tax expense

	Three Months Ended
(Dollars in thousands)	March 28, 2009			March 29, 2008			Three Month Period Change
Income tax expense	$	5,137		$	18,590		$	(13,453	)	(72	)%
Effective tax rate (%)		3.0	%		28.5	%

Income tax expense decreased by $13.5 million during the three months ended March 28, 2009 compared with the three months ended March 29, 2008, substantially all of which relates to tax benefits from the Malaysian tax holiday granted to our Malaysian subsidiary, including an $11.5 million tax benefit related to the approval of our request to pull forward the previously approved Malaysian tax holiday to 2008. Please refer also to Note 14 to our consolidated financial statements (Income Taxes) for more information.

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Critical Accounting Policies and Estimates

For a description of the critical accounting policies that affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the year ended December 27, 2008 filed with the Securities and Exchange Commission. There have been no changes to our critical accounting policies since December 27, 2008.

Recent Accounting Pronouncements

See Note 3 to our condensed consolidated financial statements included with this Quarterly Report on Form 10-Q for a summary of recent accounting pronouncements.

Liquidity and Capital Resources

As of March 28, 2009, we had $811.6 million in cash, cash equivalents and marketable securities, compared with $821.8 million as of December 27, 2008. We believe that our current cash, cash equivalents, marketable securities, cash flows from operating activities, government grants and low interest debt financings for our German and Malaysian plants will be sufficient to meet our working capital and capital expenditures needs for at least the next 12 months. However, if our financial results or operating plans change from our current assumptions, we may not have sufficient resources to support our business plan. As a result, we may engage in one or more debt or equity financings in the future, which could result in increased expenses or dilution to our existing stockholders. If we are unable to obtain debt or equity financing on reasonable terms, we may be unable to execute our expansion strategy.

The recent and unprecedented disruption in the current credit markets has had a significant adverse impact on a number of financial institutions. As of March 28, 2009, our liquidity and investments have not been materially adversely impacted by the current credit environment and we believe that they will not be materially adversely impacted in the near future. We will continue to closely monitor our liquidity and the credit markets. However, we cannot predict with any certainty the impact to us of any further disruption in the credit environment.

Cash Flows

Operating Activities

Cash provided by operating activities was $63.7 million during the three months ended March 28, 2009 compared with $63.3 million during the three months ended March 29, 2008. Net cash by operating activities during the three months ended March 28, 2009 resulted primarily from an increase in net income, as well as the impact of non-cash items that were recorded on the statements of operations, primarily depreciation and amortization expense and stock-based compensation expense, offset by investments in accounts receivable, deferred project costs and other current assets. Accounts receivable increased by $93.2 million during the three months ended March 28, 2009 mainly due to the amendment of certain customers’ long-term solar supply contracts, that extended our customers’ payment terms from 10 days to 45 days, net as well as the timing of shipments to customers during the three months ended March 28, 2009.

Cash received from customers increased to $325.7 million during the three months ended March 28, 2009 compared with $194.6 million during the three months ended March 29, 2008 primarily due to an increase in net sales. Our net sales increased from $196.9 million during the three months ended March 29, 2008 to $418.2 million during the three months ended March 28, 2009. This increase was partially offset by cash paid to suppliers and associates of $259.7 million during the three months ended March 28, 2009 compared with cash paid to suppliers and associates of $137.8 million during the three months ended March 29, 2008, mainly due to an increase in raw material and component purchases, an increase in personnel-related costs due to higher headcount and other costs supporting our growth.

Investing Activities

Cash used in investing activities was $181.2 million during the three months ended March 28, 2009 compared with cash provided by investing activities of $90.7 million during the three months ended March 29, 2008. Cash used in investing activities during the three months ended March 28, 2009 resulted primarily from capital expenditures of $86.4 million and the net purchase of marketable securities of $80.8 million. Further, we entered into a loan agreement for an amount of $13.7 million with one of our customers to finance a photovoltaic project. See Note 10 to our condensed consolidated financial statements for further information. The increase in capital expenditures was primarily due to our investments related to the construction of our new plants in Malaysia and the expansion of our plant in Perrysburg, Ohio.

Cash provided by investing activities during the three months ended March 29, 2008 resulted primarily from the net sale of marketable securities of $177.4 million, partially offset by capital expenditures of $74.6 million and an increase in our restricted investments of $12.1 million.

Financing Activities

Cash provided by financing activities was $46.7 million during the three months ended March 28, 2009 compared with $20.2 million during the three months ended March 29, 2008. Cash provided by financing activities during the three months ended March 28, 2009 resulted primarily from proceeds from the issuance of debt, net of issuance costs, of $45.3 million related to the equipment export financing agreement for our Malaysian manufacturing center. These cash proceeds were partially offset by the repayment of long-term debt of $3.9 million. Proceeds from the issuance of common stock during the three months ended March 28, 2009 were $1.4 million, mainly due to proceeds received from the exercise of employee stock options. Excess tax benefits from share-based compensation arrangements during the three months ended March 28, 2009 were $3.3 million.

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Cash provided by financing activities during the three months ended March 29, 2008 resulted primarily from investment incentives related to the construction of our plant in Frankfurt/Oder, Germany of $35.7 million, offset by the repayment of long-term debt of $25.7 million. Proceeds from the issuance of common stock during the three months ended March 29, 2008 were $5.9 million mainly due to proceeds received from the exercise of employee stock options. Excess tax benefits from share-based compensation arrangements during the three months ended March 29, 2008 were $4.3 million.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of March 28, 2009.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

Our international operations accounted for 93.3% of our net sales in the three months ended March 28, 2009 and 98.4% of our net sales in the three months ended March 29, 2008; all of these international sales were denominated in euro. As a result, we have exposure to foreign exchange risk with respect to almost all of our net sales. Fluctuations in exchange rates, particularly in the U.S. dollar to euro exchange rate, affect our gross and net profit margins and could result in foreign exchange and operating losses. In the past, most of our exposure to foreign exchange risk has related to currency gains and losses between the times we sign and settle our sales contracts. For example, our Long Term Supply Contracts obligate us to deliver solar modules at a fixed price in euros per watt and do not adjust for fluctuations in the U.S. dollar to euro exchange rate. For the three months ended March 28, 2009, a 10% change in the euro exchange rates would have impacted our net euro sales by $39.0 million. With the expansion of our manufacturing operations into Germany and Malaysia, many of our operating expenses for the plants in these countries are denominated in the local currency.

Our primary foreign currency exposures are transaction, cash flow and translation:

Transaction Exposure:  We have certain assets and liabilities, primarily receivables, investments, accounts payable (including inter-company transactions) and debt that are denominated in currencies other than the relevant entity’s functional currency. In certain circumstances, changes in the functional currency value of these assets and liabilities create fluctuations in our reported consolidated financial position, results of operations and cash flows. We may enter into foreign exchange forward contracts or other instruments to minimize the effect of short-term foreign currency fluctuations on these assets and liabilities. The gains and losses on the foreign exchange forward contracts offset all or part of the transaction gains and losses that we recognize in earnings on these assets and liabilities.

As of March 28, 2009, the total notional value of our foreign exchange forward contracts to purchase and sell euros with/for U.S. dollars was €162.2 million and €128.5 million, respectively ($215.7 million and $170.9 million, respectively at the balance sheet close rate on March 28, 2009 of $1.33/€1.00); the total notional value of our foreign exchange forward contracts to purchase and sell U.S. dollars with/for euros was $4.3 million and $1.3 million, respectively; the total notional value of our foreign exchange forward contracts to purchase and sell Malaysian ringgit with/for U.S. dollars was MYR 91.0 million and MYR 41.0 million, respectively ($25.5 million and $11.5 million, respectively at the balance sheet close rate on March 28, 2009 of $0.28/MYR1.00); and the total notional value of our foreign exchange forward contracts to purchase and sell Japanese yen with/for U.S. dollars was JPY 140.0 million and JPY 50.0 million, respectively ($1.4 million and $0.5 million, respectively at the balance sheet close rate on March 28, 2009 of $0.01/JPY1.00). As of March 28, 2009, the unrealized gain of these contracts was $3.2 million. These contracts have maturities of two months or less.

If the U.S. dollar would have weakened by 10% against the euro, Malaysian ringgit and the Japanese yen, the adverse impact on our income before income taxes related to our foreign exchange contracts to purchase and sell euro, Malaysian ringgit and Japanese yen would have been $5.7 million.

With the acquisition of OptiSolar on April 3, 2009, we will become exposed to currency exchange rate fluctuations between the U.S. dollar and the Canadian dollar in the future.

Cash Flow Exposure:  We have forecasted future cash flows, including revenues and expenses, denominated in currencies other than the relevant entity’s functional currency. Our primary cash flow exposures include future customer collections and vendor payments. Changes in the relevant entity’s functional currency value will cause fluctuations in the cash flows we expect to receive when these cash flows are realized or settled. We may enter into foreign exchange forward contracts or other derivatives to hedge the value of a portion of these cash flows. We account for these foreign exchange contracts as cash flow hedges. We initially report the effective portion of the derivative’s gain or loss as a component of accumulated other comprehensive income (loss) and subsequently reclassify it into earnings when the hedged transaction is settled.

Most of our German plant’s operating expenses are denominated in euros, creating natural hedges against the currency risk in our net sales. In addition, we purchased forward contracts to hedge the exchange risk on forecasted cash flows denominated in euro. As of March 29, 2008, the total notional value of these forward contracts was €471.5 million ($627.1 million the balance sheet close rate on March 29, 2008 of $1.33/€1.00).

Earnings Translation Exposure:  Fluctuations in foreign currency exchange rates create volatility in our reported results of operations because we are required to consolidate financial statements of our foreign currency denominated subsidiaries. We may decide to purchase forward exchange contracts or other instruments to offset this impact from currency fluctuations. These contracts would be marked-to-market on a monthly basis and any unrealized gain or loss would be recorded in interest and other income, net. We do not hedge translation exposure at this time but may do so in the future.

In the past, currency exchange rate fluctuations have had an impact on our business and results of operations. For example, currency exchange rate fluctuations negatively impacted our cash flows by $20.5 million in the three months ended March 28, 2009 and positively impacted our cash flows by $12.2 million during the three months ended March 29, 2008. Although we cannot predict the impact of future currency exchange rate fluctuations on our business or results of operations, we believe that we have increased risk associated with currency exchange rate fluctuations in the future.

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Interest Rate Risk

We are exposed to interest rate risk because many of our customers depend on debt and equity financing to purchase and install a solar power system. Although the useful life of a solar electricity generation system is considered to be approximately 25 years, end-users of our solar modules must pay the entire cost of the system at the time of installation. As a result, many of our customers rely on debt financing to fund their up-front capital expenditure. An increase in interest rates could make it difficult for our end-users to secure the financing necessary to purchase and install a system. This could lower demand for our solar modules and system development services and reduce our net sales. In addition, we believe that a significant percentage of our end-users install solar power systems as an investment, funding the initial capital expenditure through a combination of equity and debt. An increase in interest rates could lower an investor’s return on investment in a system or make alternative investments more attractive relative to solar power systems, which, in each case, could cause these end-users to seek alternative investments that promise higher returns.

During 2006, we entered into a credit facility with a consortium of banks, which bears interest at Euribor plus 1.6%. As of March 28, 2009, we hedged our exposure to changes in Euribor using interest rate swaps with a combined notional value of €36.8 million ($48.9 million at the balance sheet close rate on March 28, 2009 of $1.33/€1.00).

During May 2008, we entered into an euro-denominated credit facility with IKB, Natixis, Natixis Labuan Branch and Ausfuhrkredit-Gesellschaft mbH. The loans under fixed-rate credit facility will bear interest on the outstanding unpaid principal balance at an annual rate of 4.54%. The loans under the floating-rate credit facility bears interest on the outstanding unpaid principal balance at Euribor plus a margin of 0.55%.

In addition, we invest some of our cash in debt securities, which exposes us to interest rate risk. The primary objective of our investment activities is to preserve principal and provide liquidity on demand, while at the same time maximizing the income we receive from our investments without significantly increasing risk. Some of the securities in which we invest may be subject to market risk. This means that a change in prevailing interest rates may cause the market value of the investment to fluctuate. For example, if we hold a security that was issued with an interest rate fixed at the then-prevailing rate and the prevailing interest rate later rises, the market value of our investment will probably decline. To minimize this risk, we maintain our portfolio of cash equivalents and marketable securities in a variety of securities, including money market funds, government and non-government debt securities and certificates of deposit. As of March 28, 2009, our fixed-income investments earned a pretax yield of 1.2%, with a weighted average maturity of 5.3 months. If interest rates were to instantaneously increase (decrease) by 100 basis points, the market value of our total investment portfolio could decrease (increase) by $1.0 million. The direct risk to us associated with fluctuating interest rates is limited to our investment portfolio and we do not believe that a 10% change in interest rates will have a significant impact on our financial position, results of operations or cash flows. As of March 28, 2009, all of our investments were in money market accounts, federal agency debt and corporate debt securities.

Commodity and Component Risk

We are exposed to price risks for the raw materials, components and energy costs used in the manufacture and transportation of our solar modules. Also, some of our raw materials and components are sourced from a limited number of suppliers or a sole supplier. We endeavor to qualify multiple suppliers, a process which could take up to 12 months if successful, but some suppliers are unique and it may not be feasible to qualify second source suppliers. In some cases, we also enter into long term supply contracts for raw materials and components, but these arrangements are normally of shorter duration than the term of our Long Term Supply Contracts with our customers. As a result, we remain exposed to price changes in the raw materials and components used in our solar modules. In addition, a failure by a key supplier could disrupt our supply chain which could result in higher prices for our raw materials and components and even a disruption in our manufacturing process. Since our selling price under our Long Term Supply Contracts does not adjust in the event of price changes in our underlying raw materials or components and since our Long Term Supply Contracts require minimum deliveries of our products during their term, we are unable to pass along changes in the cost of the raw materials and components for our products and may be in default of our delivery obligations if we experience a manufacturing disruption.

Credit Risk

We have certain financial and derivative instruments that subject us to credit risk. These consist primarily of cash, cash equivalents, investments, trade accounts receivable, interest rate swap contracts and foreign exchange forward contracts. We are exposed to credit losses in the event of nonperformance by the counter parties to our financial and derivative instruments. We place cash, cash equivalents, investments, interest rate swap contracts and enter into derivative contracts with high-quality financial institutions, and limit the amount of credit risk from any one counterparty. We continuously evaluate the credit standing of our counterparty financial institutions.

In addition, we have certain restricted investments that are exposed to credit risk. These consist primarily of restricted investments, which are held by a financial services company to fund our estimated future product collection and recycling costs. As of March 28, 2009 our restricted investments with this financial services company were $26.2 million. In October 2008, we entered into credit default swaps (CDS) with J.P. Morgan Chase NA, New York to protect this restricted investment from a significant pre-defined credit event related to the parent of the financial services company. Under a CDS, a third party assumes for a fee, a portion of the credit risk related to an investment. The CDSs we entered into provide protection for losses in the event of a pre-defined credit event of the parent of the financial services company up to $25.0 million. At March 28, 2009, we had recorded losses related to fair value adjustments on the CDSs of $1.0 million. One of our CDSs expired on March 20, 2009, and the other one will expire on June 20, 2009.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of March 28, 2009 of the effectiveness of our “disclosure controls and procedures” as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 28, 2009 our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in rules and forms of the SEC and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

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Changes in Internal Control Over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our “internal control over financial reporting” as defined in Exchange Act Rule 13a-15(f) to determine whether any changes in our internal control over financial reporting occurred during the three months ended March 28, 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there have been no such changes in our internal control over financial reporting during the three months ended March 28, 2009.

CEO and CFO Certifications

We have attached as exhibits to this Quarterly Report on Form 10-Q the certifications of our Chief Executive Officer and Chief Financial Officer, which are required in accordance with the Exchange Act. We recommend that this Item 4 be read in conjunction with those certifications for a more complete understanding of the subject matter presented.

Limitations on the Effectiveness of Controls

Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems’ objectives are being met. Further, the design of any control systems must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary conduct of our business, we are subject to periodic lawsuits, investigations and claims, including, but not limited to, routine employment matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe that any currently pending legal proceeding to which we are a party will have a material adverse effect on our business, results of operations, cash flows or financial condition.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A: Risk Factors” in our Annual Report on Form 10-K for the year ended December 27, 2008, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. There have been no material changes in the risk factors contained in our Annual Report on Form 10-K, other than those set forth below.

We may be unable to acquire or lease land and/or obtain the approvals, licenses and permits necessary to build and operate photovoltaic (PV) power plants in a timely and cost effective manner, and regulatory agencies, local communities or labor unions may delay, prevent or increase the cost of construction and operation of the PV plants we intend to build.

In order to construct and operate our PV plants, we need to acquire or lease land and obtain all necessary local, county, state and federal approvals, licenses and permits. We may be unable to acquire the land or lease interests needed, may not receive or retain the requisite approvals, permits and licenses or may encounter other problems which could delay or prevent us from successfully constructing and operating PV plants. For instance, the California Independent System Operator may modify its rules in a manner that could negatively impact our favorable position in transmission queues, and local labor unions may increase the cost of, and/or lower the productivity of, project development in Canada and California.

Many of our proposed PV plants are located on or require access through public lands administered by federal and state agencies pursuant to competitive public leasing and right-of-way procedures and processes. The authorization for the use, construction and operation of PV plants and associated transmission facilities on federal, state and private lands will also require the assessment and evaluation of mineral rights, private rights-of-way and other easements; environmental, agricultural, cultural, recreational and aesthetic impacts; and the likely mitigation of adverse impacts to these and other resources and uses. The inability to obtain the required permits and, potentially, excessive delay in obtaining such permits due, for example, to litigation, could prevent us from to a given project. Moreover, project approvals subject to project modifications and conditions, including mitigation requirements and costs, could affect the financial success of a given project.

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Lack of transmission capacity availability, potential upgrade costs to the transmission grid and other systems constraints could significantly impact our ability to build PV plants and generate solar electricity power sales.

In order to deliver electricity from our PV plants to our customers, our projects need to connect to the transmission grid. The lack of available capacity on the transmission grid could substantially impact our projects, including causing reductions in project size, delays in project implementation, increased costs from transmission upgrades and potential forfeitures of any deposit we have made with respect to a given project. These transmission issues, as well as issues relating to the availability of large systems such as transformers and switch gear, could significantly impact our ability to build PV plants and generate solar electricity sales.

Our project development business and our engineering, procurement and construction (EPC) business are dependent upon us and third parties obtaining financing from various sources which may not be available or may only be available on unfavorable terms or in insufficient amounts.

Our project development business is dependent on our ability to finance the development of our PV plants. If we are unable to secure such financing or if it is not available on terms that we determine are acceptable to us, we may be unable to fully execute our project development business plan, and our business, financial condition or results of operations may be adversely affected.

Our EPC business is dependent on the ability of third parties to purchase our PV plant projects, which, in turn, is dependent on their ability to obtain financing for such purchases. Depending on prevailing conditions in the credit markets and other factors, such financing may not be available or may only be available on unfavorable terms or in insufficient amounts. If third parties are limited in their ability to access financing to support their purchase of PV plant projects from us, we may not realize the cash flows that we expect from such sales, and this could adversely affect our ability to generate revenue.

Developing solar power projects may require significant upfront investment prior to the signing of a power purchase agreement (PPA) or an EPC contract, which could adversely affect our business and results of operations.

Our solar power project development cycles, which span the time between the identification of land and the commercial operation of a PV power plant project, vary substantially and can take multiple months or years to mature. As a result of these long project cycles, we may need to make significant upfront investments of resources in advance of the signing of PPAs and EPC contracts and the receipt of any revenue, much of which is not recognized for several additional months or years following contract signing. Our potential inability to enter into sales contracts with potential customers after making such upfront investments could adversely affect our business and results of operations.

Item 6. Exhibits

The following exhibits are filed with this Quarterly Report on Form 10-Q:

Exhibit
Number	Exhibit Description
10.1	Agreement and Plan of Merger, dated as of March 2, 2009, by and among First Solar, Inc., First Solar Acquisition Corp., OptiSolar Inc. and OptiSolar Holdings, LLC
10.2*	Amended and Restated 2006 Omnibus Incentive Compensation Plan
31.01	Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.02	Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.01**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* This exhibit is being filed solely to reflect the current share maximum amounts under the Plan.  A stock split effective November1, 2006 (prior to the initial public offering of the Company later in November 2006) resulted in a commensurate increase in theshare maximum amounts set forth in Section 4(a) of the Plan.  Such split-adjusted share maximum amounts have been previously disclosed by the Company, including in the Company’s Annual Report on Form 10-K for the year ended December 27, 2008, and are now reflected in the attached exhibit.

** This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FIRST SOLAR, INC.

By:  /s/ JENS MEYERHOFF                                                  

Jens Meyerhoff

Chief Financial Officer

(Principal Financial Officer and

Duly Authorized Officer)

April 30, 2009

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EXHIBIT INDEX

Exhibit
Number	Exhibit Description
10.1	Agreement and Plan of Merger, dated as of March 2, 2009, by and among First Solar, Inc., First Solar Acquisition Corp., OptiSolar Inc. and OptiSolar Holdings, LLC
10.2*	Amended and Restated 2006 Omnibus Incentive Compensation Plan
31.01	Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.02	Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.01**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* This exhibit is being filed solely to reflect the current share maximum amounts under the Plan.  A stock split effective November1, 2006 (prior to the initial public offering of the Company later in November 2006) resulted in a commensurate increase in theshare maximum amounts set forth in Section 4(a) of the Plan.  Such split-adjusted share maximum amounts have been previously disclosed by the Company, including in the Company’s Annual Report on Form 10-K for the year ended December 27, 2008, and are now reflected in the attached exhibit.

** This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

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EX-10.1

Exhibit 10.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

FIRST SOLAR, INC.,

FIRST SOLAR ACQUISITION CORP.,

OPTISOLAR INC.

AND

OPTISOLAR HOLDINGS LLC

MARCH 2, 2009

TABLE OF CONTENTS

				Page
ARTICLE 1			THE MERGER	2
	1.1	The Merger		2
	1.2	The Closing		2
	1.3	Effects of the Merger		2
	1.4	Effects on Capital Stock		3
	1.5	[Reserved]		5
	1.6	Project Business Payments		5
	1.7	Changes in Capital Structure		5
	1.8	Exchange of Certificates		6
	1.9	Fractional Shares		6
	1.10	Dissenting Shares		6
ARTICLE 2			REPRESENTATIONS AND WARRANTIES OF THE COMPANY	7
	2.1	Organization, Standing and Power		7
	2.2	Capital Structure		8
	2.3	Authority; Noncontravention; Government Authorization		10
	2.4	Financial Statements.		12
	2.5	Absence of Certain Changes; Undisclosed Liabilities		13
	2.6	Litigation		14
	2.7	Restrictions on Business Activities		14
	2.8	Intellectual Property		15
	2.9	Taxes		16
	2.10	Employee Benefit Plans		20
	2.11	Employee Matters		22
	2.12	Related Party Transactions		23
	2.13	Insurance		23
	2.14	Contracts		23
	2.15	Project Development		26
	2.16	Assets		26
	2.17	Real Property		27
	2.18	Environmental		29
	2.19	Permits		31
	2.20	Compliance with Laws		32
	2.21	Topaz		33
	2.22	Minute Books		33
	2.23	Brokers’ and Finders’ Fees		33

TABLE OF CONTENTS

(continued)

				Page
	2.24	Board Approvals		33
	2.25	Stockholder Vote		34
	2.26	Disclosure		35
	2.27	No Other Representations		35
ARTICLE 3			REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB	36
	3.1	Organization, Standing and Power		36
	3.2	Capital Structure		36
	3.3	Authority; Noncontravention		37
	3.4	SEC Documents; Financial Statements		37
	3.5	Board Approval		38
	3.6	Taxes		38
	3.7	Litigation		38
	3.8	Disclosure		39
	3.9	Compliance With Laws		39
	3.10	No Material Adverse Change		39
	3.11	No Other Representations		40
ARTICLE 4			COVENANTS AND OTHER AGREEMENTS	40
	4.1	Conduct of Business of Hold Co, the Company and its Subsidiaries		40
	4.2	Restrictions on Conduct of Business of the Company and its Subsidiaries		41
	4.3	Further Assurances, Regulatory Matters		44
	4.4	No Solicitation		47
	4.5	Securities Laws Matters		48
	4.6	Access to Information		50
	4.7	Confidentiality		51
	4.8	Public Disclosure		51
	4.9	Legal Requirements		51
	4.10	Treatment as Reorganization		51
	4.11	Tax Returns		52
	4.12	Expenses		52
	4.13	Obligations of Merger Sub		52
	4.14	Hold Co Merger		52
	4.15	The Drop Down and the Distribution		53
	4.16	Employment Matters		53
	4.17	Changes after Signing		53
	4.18	Bridge Loan		54

-ii-

TABLE OF CONTENTS

(continued)

				Page
	4.19	Purchase Orders		54
	4.20	Payment Lists		54
	4.21	Tax Information		54
	4.22	HSR Filing Fee		54
	4.23	Closing Registration Statement		54
	4.24	Merger Sub		54
	4.25	Intercompany Arrangements		54
ARTICLE 5			CONDITIONS TO THE MERGER	55
	5.1	Conditions to Obligations of Each Party to Effect the Merger		55
	5.2	Additional Conditions to Obligations of Hold Co and the Company		56
	5.3	Additional Conditions to the Obligations of Parent and Merger Sub		57
ARTICLE 6			TERMINATION, AMENDMENT AND WAIVER	58
	6.1	Termination		58
	6.2	Effect of Termination		59
	6.3	Amendment		59
	6.4	Extension; Waiver		59
ARTICLE 7			ESCROW FUND AND INDEMNIFICATION	60
	7.1	Escrow Fund		60
	7.2	Indemnification		60
	7.3	Limitations on Indemnification		62
	7.4	Escrow Claim Period		63
	7.5	Claims for Indemnification		63
	7.6	Objections to and Payment of Claims		64
	7.7	Resolution of Objections to Claims		65
	7.8	Third-Party Claims		65
	7.9	Stockholders’ Representative		67
	7.10	Exclusive Remedy		67
ARTICLE 8			GENERAL PROVISIONS	68
	8.1	Survival of Representations and Warranties		68
	8.2	Notices		68
	8.3	Terms Generally; Interpretation		70
	8.4	Definitions		71
	8.5	Counterparts		86
	8.6	Entire Agreement; No Third Party Beneficiaries		86
	8.7	Assignment		87

-iii-

TABLE OF CONTENTS

(continued)

		Page
8.8	Severability	87
8.9	Failure or Indulgence Not Waiver; Remedies Cumulative	87
8.10	GOVERNING LAW	87
8.11	Binding Arbitration	88
8.12	WAIVER OF JURY TRIAL	89
8.13	Specific Performance	89

*   *   *   *   *

Exhibit A	Form of Support and Consent Agreement	A-1-1
Exhibit B	Form of Hold Co Merger Agreement	B-1
Exhibit C	Form of Drop Down Agreement	C-1
Exhibit D	Escrow Agreement	D-1
Exhibit E-1	Representation Agreement	E-1-1
Exhibit E-2	Purchaser Representative Agreement	E-2-1
Exhibit F-1	Tax Representations of the Company	F-1-1
Exhibit F-2	Tax Representations of Parent and Merger Sub	F-2-1
Exhibit G	Closing Deliveries	G-1
Exhibit H	Required Consents and Novations	H-1
Exhibit I	Matters to be Covered in Opinion of Counsel to Parent and Merger Sub	I-1
Exhibit J	Matters to be Covered in Farella Braun + Martel LLP Opinion	J-1
Exhibit K	Form of Registration Rights Agreement	K-1

-iv-

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER, dated as of March 2, 2009 (this “Agreement”), is by and among First Solar, Inc., a Delaware corporation (“Parent”), First Solar Acquisition Corp., a Delaware corporation and a direct wholly-owned subsidiary of Parent (“Merger Sub”), OptiSolar Inc., a Delaware corporation (the “Company”), and OptiSolar Holdings, LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of the Company (“Hold Co”).1

BACKGROUND

A.            The board of directors of each of Hold Co, the Company and Parent has determined that it would be advisable and in the best interests of their respective stockholders for Parent to acquire the Company by means of the merger of Merger Sub with and into the Company (the “Merger”), all on the terms and subject to the conditions set forth in this Agreement, and, in furtherance thereof, have approved this Agreement and the transactions contemplated by this Agreement.

B.             In order to induce Parent to enter into this Agreement, concurrently with the execution and delivery of this Agreement, certain Company Stockholders are executing and delivering Support and Consent Agreements in the form attached hereto as Exhibit A (each, a “Support Agreement”), and certain Company Stockholders are executing and delivering written consents in the forms attached to the Support Agreement (each, a “Written Consent”).

C.             Concurrently with the execution and delivery of this Agreement, Hold Co, the Company and Pincer Merger Subsidiary Inc., a newly formed, wholly-owned subsidiary of Hold Co (“Newco”), are entering into an Agreement and Plan of Merger in the form attached hereto as Exhibit B (the “Hold Co Merger Agreement”) pursuant to which, prior to the Merger, Newco will be merged with and into the Company, with the Company being the surviving corporation of such merger, and all outstanding shares of Company Capital Stock will be converted, on a share for membership unit basis, into membership units in Hold Co having rights, preferences and privileges substantially identical to those of the Company Capital Stock and all the capital stock of Hold Co held by the Company will be canceled (the “Hold Co Merger”).

D.             Concurrently with the execution and delivery of this Agreement, the Company and OptiSolar Technologies Inc., a Delaware corporation and a wholly-owned subsidiary of the Company, (the “Spin-Off Subsidiary”) are executing a drop down agreement in the form attached hereto as Exhibit C (the “Drop Down Agreement”) pursuant to which, among other things, the Company will transfer all of the assets and Liabilities of the Company and its Subsidiaries which are not Related to the Project Business to the Spin-Off Subsidiary (the “Drop Down”).

___________________________ 

1 Certain provisions of this Agreement have been conformed to reflect amendments to such provisions pursuant to the Closing Agreement among the parties hereto, OptiSolar Technologies Inc., First Solar Acquisition Corp. and Pincer Merger Subsidiary Inc., dated as of April 3, 2009.

E.              As a condition precedent to the Merger, prior to the Closing, the Company will distribute all of the issued and outstanding capital stock of the Spin-Off Subsidiary to Hold Co (the “Distribution”).

F.              The Company and Parent intend that the Merger will qualify as a “reorganization” under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”) and Hold Co and the Company intend that the Hold Co Merger will be treated as a transaction described in Section 721(a) of the Code.

AGREEMENT

In consideration of the representations, warranties, covenants and other agreements in this Agreement, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE 1

THE MERGER

1.1           The Merger.  Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the “DGCL”), Merger Sub shall be merged with and into the Company at the effective time of the Merger (the “Effective Time”), which shall be the time at which the Certificate of Merger is filed with the Delaware Secretary unless otherwise agreed by both parties and set forth in the certificate of merger, in a form reasonably acceptable to Parent and the Company (the “Certificate of Merger”), to be filed with the Secretary of State of the State of Delaware (the “Delaware Secretary”), if, as and when the Closing occurs.  The Company shall be the surviving corporation (sometimes referred to as the “Surviving Company”) in the Merger and shall succeed to and assume all the rights and obligations of Merger Sub in accordance with the DGCL.

1.2           The Closing.  The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at 10:00 a.m. Pacific time on the third (3rd) Business Day after the satisfaction or waiver of each of the conditions set forth in Article 5 (excluding the Closing Registration Statement Condition and other conditions that, by their terms, are to be satisfied on the Closing Date (which include, for avoidance of doubt, those set forth in Section 5.1(e) (The Hold Co Merger, the Drop Down and the Distribution)), but subject to the satisfaction or waiver of such conditions) or at such other time as the parties agree.  Notwithstanding anything to the contrary in this Agreement, the Closing Registration Statement Condition shall be satisfied after satisfaction or waiver of all other conditions set forth in Article 5 to the Merger.  The Closing shall take place at the offices of Covington & Burling LLP, One Front Street, San Francisco, CA 94111, or at such other location as the parties agree.  The date on which the Closing actually occurs is herein referred to as the “Closing Date.”

1.3           Effects of the Merger.

(a)            At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL.

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(b)            At the Effective Time, the certificate of incorporation of the Surviving Company, as in effect immediately prior to the Effective Time, shall be amended so as to contain only those provisions contained in the certificate of incorporation of Merger Sub until thereafter amended as provided by the DGCL and such certificate of incorporation; provided, however, that the name of the Surviving Company shall be the name of the Merger Sub immediately prior to the Effective Time until otherwise changed as provided by the DGCL and the certificate of incorporation of the Surviving Company.

(c)            At the Effective Time, the by-laws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the by-laws of the Surviving Company until thereafter amended as provided by the DGCL, the certificate of incorporation of the Surviving Company and such by-laws; provided, however, that the name of the Surviving Company shall be the name of the Merger Sub immediately prior to the Effective Time until otherwise changed as provided by the DGCL, the certificate of the incorporation of the Surviving Company and such by-laws.

(d)            At the Effective Time, the officers and directors of Merger Sub, as constituted immediately prior to the Effective Time, shall be the officers and directors of the Surviving Company, for so long as provided under the DGCL, the certificate of incorporation of the Surviving Company and the by-laws of the Surviving Company.

(e)            At the Effective Time, all property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Company and all debts, liabilities and duties of the Company and Merger Sub shall become debts, liabilities and duties of the Surviving Company.

1.4           Effects on Capital Stock.  By virtue of the Merger and without any action on the part of Merger Sub, Parent, the Company or the holders of shares of capital stock of the Company (the “Company Capital Stock”), the following shall occur:

(a)            As of the Effective Time, each share of Company Capital Stock that is issued and outstanding immediately prior to the Effective Time and is owned by the Company, Parent, Merger Sub or any of their respective Subsidiaries shall automatically be canceled and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor.

(b)            As of the Effective Time, each share of common stock of Merger Sub (the “Merger Sub Common Stock”) issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of common stock of the Surviving Company.  Each certificate formerly representing any such shares of Merger Sub Common Stock shall represent ownership of shares of common stock of the Surviving Company.

(c)            All shares of Company Capital Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section 1.4(a)) shall be converted into the right to receive, at the Effective Time, the Closing Shares as and to the extent contemplated by Section 1.4(c)(ii) hereof.  As of the Effective Time, all such shares of Company Capital Stock shall no longer be outstanding and shall automatically be canceled and cease to exist, and each holder of a certificate formerly representing any such shares of Company Capital Stock (“Certificate”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration in respect of such shares as allocated in this Section 1.4 upon surrender of such Certificate in accordance with Section 1.8.  “Merger Consideration” means the Closing Shares.

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(i)                 The maximum aggregate number of shares of the Common Stock, par value $0.001 per share, of Parent (the “Parent Common Stock”) issuable at the Effective Time (the “Closing Shares”), on account of all shares of Company Capital Stock outstanding immediately prior to the Closing (other than shares to be cancelled in accordance with Section 1.4(a)) and all rights (including options and warrants) to acquire shares of Company Capital Stock outstanding immediately prior to the Closing shall equal (a) (x) $400,000,000, plus (y) the aggregate amount of the Closing Project Business Payments plus (z) the French Amount, the Canadian Amount and the Italian Amount, divided by (b) the Parent Trading Price.  Twenty five percent (25%) of the Closing Shares to be issued under clause (i)(a)(x) above (the “Escrow Amount”) shall be withheld from the Merger Consideration payable pursuant to this Section 1.4 and shall be deposited at the Closing with an escrow agent reasonably acceptable to the Company and Parent (the “Escrow Agent”), in accordance with the Escrow Agreement, dated as of the Closing Date, substantially in the form attached hereto as Exhibit D (the “Escrow Agreement”), by and among Parent, the Escrow Agent and Hold Co.  The fund in which the Escrow Amount is held (the “Escrow Fund”) will be held and distributed in accordance with the terms of the Escrow Agreement and Article 7 of this Agreement.  A number of Closing Shares equal to (i) the Closing Payment Amount divided by (ii) the Parent Trading Price (the “Holdback Shares”) shall be withheld from the Merger Consideration by Parent until the 45th day following the Closing Date (the “Holdback Release Date”). On the Holdback Release Date, Parent shall issue, or cause to be issued, to Hold Co, a number of the Holdback Shares equal to (x) the original number of Holdback Shares minus (y) a number of Holdback Shares equal to (i) the Closing Payment Amount minus the Hold Co Payments divided by (ii) the Parent Trading Price.  Any remaining Holdback Shares shall be retained by Parent and shall not be payable hereunder as Merger Consideration and Parent shall have no right to seek indemnification for the accounts payable as to which such shares were retained as Losses pursuant to Article 7 except to the extent such Losses, with respect to a particular account payable, exceed the product of (i) the number of shares of Parent Common Stock reserved against such account payable and (ii) the Parent Trading Price.  With respect to each Holdback Lease, a number of Closing Shares equal to (i) the applicable Lease Holdback Amount divided by (ii) the Parent Trading Price (the “Lease Holdback Shares”) shall be withheld from the Merger Consideration by Parent until such Holdback Lease is terminated, with no remaining liability to the Company, or novated, so as to substitute the Spin-Off Subsidiary or Hold Co for the Company or the applicable Project Company as a party to such Holdback Lease (the date five (5) Business Days following the receipt by Parent of written notice and evidence of such termination or novation from the Spin Off Subsidiary under any such lease, a “Lease Holdback Release Date”).  On a Lease Holdback Release Date, Parent shall issue, or cause to be issued, to Hold Co, a number of the Lease Holdback Shares equal to (i) the Lease Holdback Amount attributable to the applicable Holdback Lease divided by (ii) the Parent Trading Price.  In the event that any Holdback Lease with respect to the McClellan properties has not been terminated, with no remaining liability to the Company, or novated, so as to substitute the Spin-Off Subsidiary or Hold Co for the Company or the applicable Project Company as a party to such Holdback Lease, on or prior to the six-month anniversary of the Closing Date, any remaining Lease Holdback Shares allocable to such McClellan lease minus an amount of such Lease Holdback Shares equal to (x) any amounts actually paid by the Spin-Off Subsidiary to the Company between the date of this Agreement and such six-month anniversary under the Master Sublease in respect of such McClellan lease divided by (y) the Parent Trading Price shall be retained by Parent and shall not be payable hereunder as Merger Consideration and Parent shall have no right to seek indemnification for the aggregate rent payable under the remaining term of such Holdback Lease as Losses pursuant to Article 7, and the remainder of the Lease Holdback Shares allocable to such McClellan lease shall be paid to Hold Co.  Upon the expiration of any other Holdback Leases, Parent shall deliver to Hold Co a number of Lease Holdback Shares allocable to such other Holdback Leases minus an amount of such Lease Holdback Shares equal to (x) any amounts required to be paid by the Spin-Off Subsidiary to the Company under the Master Sublease in respect of such other Holdback Leases and not so paid divided by (y) the Parent Trading Price. If any rent payments are made under the Master Sublease or by the Spin-Off Subsidiary or Hold Co under a Holdback Lease, then within 10 business days of receipt of such payment or notice of such payment, as the case may be, a number of Lease Holdback Shares allocable to the applicable Holdback Lease shall be released to Hold Co equal to (x) the amount of such rent payments divided by (y) the Parent Trading Price. In no event shall Parent or the Company have any right of setoff under this Agreement, the Drop Down Agreement or otherwise with respect to Parent Common Stock to be issued to Hold Co under this Section 1.4(c)(i).

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(ii)               The Merger Consideration shall be allocated as follows:  All 100 shares of Company Capital Stock outstanding immediately prior to the Effective Time held by the Company’s sole stockholder at that time, Hold Co, shall be converted into the right to receive, and shall become exchangeable for the Closing Shares.

1.5           [Intentionally omitted].

1.6           Project Business Payments.  At least three but not more than five Business Days before the Closing, the Company will deliver to Parent a certificate, signed by the Chief Executive Officer of the Company (the “Project Business Payments Certificate”), setting forth the Project Business Payments, including the components thereof and supporting documentation (the “Closing Project Business Payments “).

1.7           Changes in Capital Structure.

(a)            If there is a stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into capital stock), reorganization, reclassification, combination, recapitalization or other like change (other than the Hold Co Merger, the Drop Down or the Distribution) with respect to shares of Parent Common Stock occurring after the date of this Agreement and before the Effective Time, all references in this Agreement to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide to the parties the economic effect contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.

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(b)            If there is a stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into capital stock), reorganization, reclassification, combination, recapitalization or other like change with respect to shares of Parent Common Stock occurring after the Effective Time, all references in this Agreement to the Holdback Shares and the Lease Holdback Shares shall be equitably adjusted to the extent necessary to provide to the parties the economic effect contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.

1.8           Exchange of Certificates.

(a)            At or prior to the Closing, Parent shall deliver to Hold Co instructions for use in surrendering Certificates in exchange for consideration specified and allocated in Section 1.4.  Concurrently with the Closing, Hold Co shall surrender a Certificate for cancellation and, upon surrender of such Certificate for cancellation to Parent, and such other documents as may reasonably be required by Parent, the holder of such Certificate shall receive concurrently with the Closing in exchange therefor the Merger Consideration for which the shares formerly held by such holder are to be exchanged in accordance with Section 1.4 (less any shares of Parent Common Stock deposited in the Escrow Fund, less the Holdback Shares and the Lease Holdback Shares), and the certificates so surrendered shall be canceled.

(b)            All shares of Parent Common Stock issued in accordance with the terms of this Article 1 (including shares of Parent Common Stock deposited into the Escrow Fund) shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Capital Stock represented by such certificates, and there shall be no further registration of transfers on the stock transfer books of the Surviving Company of the shares of Company Capital Stock which were outstanding immediately prior to the Closing.

1.9           Fractional Shares.  No fraction of a share of Parent Common Stock will be issued in connection with the Merger and in lieu thereof Hold Co shall receive from Parent an amount of cash equal to the product (rounded upwards or downwards to the nearest whole cent) of such fraction of a share Hold Co would otherwise receive at the Parent Trading Price.

1.10         Dissenting Shares.

(a)            Shares of Company Capital Stock that are issued and outstanding immediately prior to the effective time of the Hold Co Merger and that are owned by stockholders who have properly perfected their appraisal rights in accordance with the provisions of applicable Law with respect to the Hold Co Merger are referred to herein as “Dissenting Shares”; provided that each such share shall cease to be a Dissenting Share if its holder shall have failed to perfect or shall have effectively withdrawn or lost such appraisal rights.

(b)            The Company shall give Parent (i) prompt notice of any objections to the Hold Co Merger filed in accordance with applicable Law received by the Company, withdrawals of such objections and any other instruments served in connection with such objections in accordance with applicable Law and received by the Company or its representatives, and (ii) the opportunity to participate in, but not direct, all negotiations and proceedings with respect to such objections under applicable Law consistent with the Company’s obligations thereunder.  Following the Closing, Hold Co shall direct all negotiations and proceedings with respect to such objections under applicable Law and the Company shall not, except with the prior written consent of Hold Co (which consent shall not be unreasonably withheld or delayed), (A) voluntarily make any payment or statement against interest with respect to any such objection, (B) offer to settle or settle any such objection, or (C) waive any failure by a former stockholder of the Company to timely deliver a written objection or to perform any other act perfecting appraisal rights in accordance with applicable Law.

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(c)            Each holder of Dissenting Shares who, pursuant to the provisions of the DGCL, becomes entitled to payment of the fair value of such shares after the closing of the Hold Co Merger shall receive payment therefor in accordance with Section 262 of the DGCL (but only after the value therefor shall have been agreed upon or finally determined pursuant to such provisions), and any such payment shall be referred to herein as “Dissenting Shares Excess Payments,” and shall constitute “Losses” for purposes of Article 7.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Subject to the exceptions set forth in the disclosure letter of the Company addressed to Parent, dated as of the date hereof and delivered to Parent concurrently with the parties’ execution of this Agreement (the “Company Disclosure Letter”) (each of which exceptions, in order to be effective, shall indicate the section and, if applicable, the subsection of this Article 2 to which it relates (unless and to the extent the relevance to other representations and warranties is reasonably apparent from the face of the disclosed exception, in which case such exceptions shall apply to such other representations and warranties as is reasonably apparent)), the Company represents and warrants to Parent and Merger Sub as of the date hereof and as of the Closing Date that as follows:

2.1           Organization, Standing and Power.

(a)            Section 2.1(a) of the Company Disclosure Letter sets forth a true, correct and complete list, as of the date hereof, of each Project Company and each other Subsidiary of the Company indicating (i) its jurisdiction of organization, (ii) its officers and directors, and (iii) the record owners of all of its issued and outstanding securities.  All of the outstanding securities of each Project Company are, to the extent applicable, duly authorized, validly issued, fully paid and nonassessable.

(b)            Each of the Company, Hold Co, Newco, the Spin-Off Subsidiary and each Project Company is a corporation, partnership or limited liability company and, where applicable, is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization.

(c)            Each of the Company, Hold Co, Newco, the Spin-Off Subsidiary and each Project Company has the corporate power to own, lease and operate its properties and to conduct its business as currently conducted and the Company and each Project Company is duly qualified to do business and is in good standing in each U.S. jurisdiction set forth opposite the name of  such company in Section 2.1(a) of the Company Disclosure Letter.  Each of the Company, Hold Co, Newco, the Spin-Off Subsidiary and each Project Company is duly qualified to do business and is in good standing in each jurisdiction where the failure to be so qualified and in good standing, individually or in the aggregate with any such other failures, would reasonably be expected to have a Company Material Adverse Effect or a Project Material Adverse Effect.

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(d)            None of the Company, Hold Co, Newco, the Spin-Off Subsidiary or any Project Company is in violation of any of the provisions of its organizational documents.

(e)            Section 2.1(e) of the Company Disclosure Letter sets forth a list of the Company’s officers and directors.

(f)             Other than the Project Companies listed on Section 2.1(a) of the Company Disclosure Letter, Newco, Hold Co and the Spin-Off Subsidiary, the Company does not (and has not) directly or indirectly own any equity or similar interest in, or any interest convertible or exchangeable or exercisable for, any equity or similar interest in, any Person.

(g)            There are no Contracts, to which any Project Company is a party or by which it is bound obligating any Project Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of such Project Company or obligating such Project Company to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such Contract.  There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or other similar rights with respect to any Project Company.

(h)            With respect to each Project Company, since the formation date of such Project Company, such Project Company has engaged solely in the business of developing, financing, constructing and/or operating the Project for which it was formed (such Project Company’s “Project Company Business”), and no Project Company has engaged in any other business, incurred any capital expense or acquired any real or personal property other than specifically Related to the Project Business.

2.2           Capital Structure.

(a)            As of the date hereof and until immediately prior to the closing of the Hold Co Merger, the authorized capital stock of the Company shall consist of (i) 325,000,000 shares of Company Common Stock, (ii) 29,075,000 shares of Senior Convertible Preferred Stock, 3,750,000 shares of which have been designated “Senior Preferred A-1 Stock,” 1,125,000 shares of which have been designated “Senior Preferred A-2 Stock” and 24,200,000 shares of which have been designated “Senior Preferred B-1 Stock,” and (iii) 13,810,000 shares of Junior Convertible Preferred Stock, 4,000,000 shares of which have been designated “Junior Preferred A-1 Stock,” 5,325,000 shares of which have been designated “Junior Preferred A-2 Stock,” 525,000 shares of which have been designated “Junior Preferred A-3 Stock,” 350,000 shares of which have been designated “Junior Preferred A-4 Stock,” 450,000 shares of which have been designated “Junior Preferred A-5 Stock,” 760,000 shares of which have been designated “Junior Preferred A-6 Stock” and 2,400,000 shares of which have been designated “Junior Preferred A-7 Stock.”  As of the date hereof and until immediately prior to the closing of the Hold Co Merger, there shall be issued and outstanding 55,898,640 shares of Company Common Stock, 3,750,000 shares of the Company’s Senior Preferred A-1 Stock, 1,125,000 shares of the Company’s Senior Preferred A-2 Stock, 15,785,932 shares of the Company’s Senior Preferred B-1 Stock, 3,966,437 shares of the Company’s Junior Preferred A-1 Stock, 5,322,382 shares of the Company’s Junior Preferred A-2 Stock, 525,000 shares of the Company’s Junior Preferred A-3 Stock, 350,000 shares of the Company’s Junior Preferred A-4 Stock, 450,000 shares of the Company’s Junior Preferred A-5 Stock, 722,665 shares of the Company’s Junior Preferred A-6 Stock and 2,400,000 shares of the Company’s Junior Preferred A-7 Stock.  As of immediately prior to the Closing and following the closing of the Hold Co Merger, (i) the authorized capital stock of the Company will consist of 100 shares of Company Common Stock, all of which will be issued and outstanding and held by Hold Co and (ii) there will exist no (w) options, warrants, calls, subscription rights or other rights, convertible securities, agreements or commitments of any character obligating the Company or any of its Subsidiaries to issue, transfer or sell any shares of capital stock or other equity interests in, the Company or securities convertible into or exchangeable for such shares or other equity interests, (x) contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of the Company or (y) voting trusts or similar agreements to which the Company or any of its Subsidiaries is a party with respect to the voting of the capital stock of the Company.

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(b)            As of immediately prior to Closing, the outstanding membership units of Hold Co will consist of 55,898,640 common membership units, 3,750,000 Senior Preferred A-1 membership units, 1,125,000 Senior Preferred A-2 membership units, 15,785,932 Senior Preferred B-1 membership units, 3,966,437 Junior Preferred A-1 membership units, 5,322,382 Junior Preferred A-2 membership units, 525,000 Junior Preferred A-3 membership units, 350,000 Junior Preferred A-4 membership units, 450,000 Junior Preferred A-5 membership units, 722,665 Junior Preferred A-6 membership interests and 4,000,000  Junior Preferred A-7 membership units.

(c)            There are no declared or accrued but unpaid dividends with respect to any shares of Company Common Stock or Company Preferred Stock.  Each share of Company Preferred Stock is convertible into Company Common Stock on a one-to-ten basis except for the Senior Preferred B-1 Stock which is convertible into Company Common Stock on a one-to-one basis.  There are not outstanding any adjustments made or required to be made to the conversion rates applicable to Company Preferred Stock set forth in Company’s Eleventh Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”).  Section 2.2(c) of the Company Disclosure Letter sets forth a true, correct and complete list (with names and addresses) of (i) all of the Company’s record holders as of the date hereof, the number of shares, warrants, options or other rights owned of record by each and the total number of shares of Company Common Stock reserved and available for future grant under the Company’s 2006 Incentive Stock Plan (the “Company Stock Plan”), and (ii) any Persons with rights to acquire Company securities (including all holders of outstanding Company Options, whether or not granted under the Company Stock Plan), the exercise or vesting schedule, exercise price, and tax status of such options under Section 422 of the Code.

(d)            All issued and outstanding shares of Company Capital Stock are duly authorized, validly issued, fully paid and non-assessable and are free of any Encumbrances created by statute, the Company’s organizational documents or any Contract to which the Company or any of its Subsidiaries is a party or by which it is bound.  Except for (A) outstanding Company Options to purchase 17,916,770 shares of Company Common Stock under the Company Stock Plan, (B) outstanding Company Options to purchase 11,385,000 shares of Company Common Stock issued outside of the Company Stock Plan, and (C) outstanding shares Company Preferred Stock, there are no Contracts to which the Company or any of its Subsidiaries is a party, or by which it is bound, obligating the Company or any of its Subsidiaries to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of Company Capital Stock and/or Company Options or obligating the Company to grant, extend, accelerate the vesting and/or waive any repurchase rights of, change the price of or otherwise amend or enter into any such Contract.  Except as set forth in Section 2.2(d) of the Company Disclosure Letter and to the knowledge of the Company, there are no Contracts relating to voting, purchase or sale of any Company Capital Stock other than this Agreement and the Support Agreements.  All outstanding Company securities were issued in compliance with all applicable securities Laws.

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(e)            Except for the Company Stock Plan and outside the plan options, the Company has never adopted or maintained any stock option plan or other plan providing for equity compensation of any Person.  The Company has reserved as of the date hereof 40,000,000 shares of Company Common Stock for issuance to employees and directors of, and consultants to, the Company, upon the exercise of options granted under the Company Stock Plan, of which 3,244,000 shares are issuable, as of the date hereof, upon the exercise of outstanding, unexercised, vested options.  The Company Stockholders have properly approved the Company Stock Plan and the grants made thereunder.

(f)             As of the date hereof, the authorized capital stock of Hold Co consists of 100 membership units, all of which are issued and outstanding and owned beneficially and of record by the Company.  As of the date hereof, the authorized capital stock of Newco consists of 100 shares of common stock, all of which are issued and outstanding and owned beneficially and of record by Hold Co.  As of the date hereof, the authorized capital stock of the Spin-Off Subsidiary consists of 100 shares of common stock, all of which are issued and outstanding and owned beneficially and of record by the Company.  Hold Co and Newco were formed for the purpose of effecting the Hold Co Merger. Neither Hold Co nor Newco owns any asset or is subject to any Liability other than those necessary to effect the Hold Co Merger.

2.3           Authority; Noncontravention; Government Authorization.

(a)            Except for the Required Hold Co Merger Vote and the Required Vote, the Company has all requisite corporate power and authority to enter into this Agreement, the Hold Co Merger Agreement and the Drop Down Agreement, to perform its obligations hereunder and thereunder, including entering into and performing any additional Contracts contemplated hereby or thereby to which it is a party, to consummate the transactions contemplated hereby and thereby and to consummate the Distribution.  The execution and delivery of this Agreement, the Hold Co Merger Agreement, the Drop Down Agreement, and any additional Contracts contemplated hereby or thereby to which it is a party, the consummation of the transactions contemplated hereby and thereby by the Company and the consummation of the Distribution have been duly authorized by all necessary corporate action on the part of the Company.  This Agreement, the Hold Co Merger Agreement and the Drop Down Agreement, and any additional Contracts being delivered herewith or therewith to which the Company is a party, have been duly executed and delivered by the Company and, assuming due authorization, execution and delivery by the other parties thereto, each constitute the valid and binding obligation of the Company enforceable against the Company in accordance with their terms, subject to the effect of (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to rights of creditors generally, and (ii) rules of Law and equity governing specific performance, injunctive relief and other equitable remedies.

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(b)            Except for the Required Hold Co Merger Vote, Hold Co and Newco, with respect to the Hold Co Merger Agreement, have all requisite corporate power and authority to enter into this Agreement and the Hold Co Merger Agreement, to perform their obligations hereunder and thereunder, including entering into and performing any additional Contracts contemplated hereby or thereby to which either is a party and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement, the Hold Co Merger Agreement, and any additional Contracts contemplated hereby or thereby to which either is a party and the consummation of the transactions contemplated hereby and thereby by Hold Co and Newco have been duly authorized by all necessary corporate action on the part of Hold Co and Newco.  This Agreement and the Hold Co Merger Agreement, and any additional Contracts being delivered herewith or therewith to which the Company is a party, have been or will be duly executed and delivered by Hold Co and Newco, with respect to the Hold Co Merger Agreement, and, assuming due authorization, execution and delivery by the other parties thereto, each constitute the valid and binding obligation of Hold Co and Newco, with respect to the Hold Co Merger Agreement, enforceable against Hold Co and Newco, with respect to the Hold Co Merger Agreement, in accordance with their terms, subject to the effect of (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to rights of creditors generally, and (ii) rules of Law and equity governing specific performance, injunctive relief and other equitable remedies.

(c)            The execution and delivery by the Company, Newco and Hold Co of this Agreement, the Drop Down Agreement, the Hold Co Merger Agreement (to the extent each is a party to such agreement) and any additional Contracts contemplated hereby or thereby to which the Company, Newco or Hold Co are or will be party do not, and the consummation of the transactions contemplated hereby and thereby by the Company, Newco or Hold Co will not, (i) result in the creation of an Encumbrance on any properties or assets of Hold Co, the Company or any of their respective Subsidiaries, or (ii) conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation, renegotiation or acceleration of any obligation or loss of any benefit under, or require any consent, approval or waiver from any Person in accordance with, (A) any provision of the organizational documents of Hold Co, Newco, the Company or any of their respective Subsidiaries, or (B) any Permit or Law applicable to Hold Co, Newco the Company or any of their respective Subsidiaries or any of their respective properties or assets.  No consent, approval, order or authorization of, or registration, declaration or filing with, any government, court, tribunal, arbitrator, administrative agency, commission or other governmental official, authority or instrumentality, in each case whether domestic or foreign, any stock exchange or similar self-regulatory organization or any quasi-governmental or private body exercising any regulatory, taxing or other governmental or quasi-governmental authority (each a “Governmental Entity”) is required by or with respect to the Company, Newco, Hold Co or any of their respective Subsidiaries in connection with the execution and delivery of this Agreement, the Drop Down Agreement, the Hold Co Merger Agreement, any additional Contracts contemplated hereby or thereby or the consummation of the transactions contemplated hereby or thereby, except for (w) the filing of the Certificate of Merger and the certificate of merger effecting the Hold Co Merger, (x) such filings as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) and any required foreign antitrust filing, and (y) compliance with any applicable requirements of the Securities Act, the Exchange Act, state securities and “blue sky” laws.

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(d)            The execution and delivery by the Company, Newco and Hold Co of this Agreement, the Drop Down Agreement, the Hold Co Merger Agreement and any additional Contracts contemplated hereby or thereby to which the Company, Newco or Hold Co are or will be a party do not, and the consummation of the transactions contemplated hereby and thereby by the Company, Newco or Hold Co will not conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation, renegotiation, payment of additional amounts or acceleration of any obligation or loss of any benefit under, or require any consent, approval or waiver from any Person in accordance with any Contract to which Hold Co, Newco, the Company or any of their respective Subsidiaries is a party.

2.4           Financial Statements.

(a)            The Company has delivered to Parent its consolidated financial statements audited by PriceWaterhouseCoopers as at and for the years ended December 31, 2006 and 2007 and its unaudited consolidated balance sheet and statement of operations as at and for the twelve-month period ended December 31, 2008 (the “Financial Statements”).  The Financial Statements (a) have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of the unaudited financial statements, as permitted by GAAP), and (b) present fairly, in all material respects, the consolidated financial condition and results of operations and cash flows of the Company and each of its Subsidiaries as of the dates, and for the periods, indicated therein, except as otherwise noted therein (subject, in the case of unaudited financial statements, to (i) the absence of footnotes and (ii) year-end adjustments, which may be material).  The Company has made no Accounting Change (as defined in Section 8.4(a)) since December 31, 2007, except as described in the Financial Statements or required by GAAP.

(b)            Section 2.4(b) of the Company Disclosure Letter contains a true and complete list, as of the date hereof, of all pre-payments, deposits, payments for land rights, permits, letters of credit in support of PPA’s, and similar payments made by the Company or any of its Subsidiaries Related to the Project Business (collectively, the “Project Pre-Payments”).

(c)            Section 2.4(c) of the Company Disclosure Letter sets forth a good faith estimate of any Project Business Payments made between January 1, 2009 and the date hereof.

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2.5           Absence of Certain Changes; Undisclosed Liabilities.

(a)            Other than with respect to the Drop Down, the Distribution and the Hold Co Merger, since December 31, 2008 (the “December 31 Balance Sheet Date”) the Company and each of its Subsidiaries has conducted its business only in the ordinary course of business, and there has not occurred any change, event or condition (whether or not covered by insurance) that, individually or in the aggregate with any other changes, events and conditions, has resulted in, or would reasonably be expected to result in, a Company Material Adverse Effect or a Project Material Adverse Effect.  In addition, from the December 31 Balance Sheet Date until the date hereof neither the Company nor any of its Subsidiaries has:

(i)                Caused or permitted any amendments to its organizational documents;

(ii)               Declared or paid any dividends on or made any other distributions, other than cash dividends between the Company and its Subsidiaries (whether in cash, stock or property) in respect of any of its capital stock, or split, combined or reclassified any of its capital stock or issued or authorized the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, except in accordance with the ordinary course of business under the Company Stock Plan;

(iii)              Made any loans or advances (including prepayments) to, or any investments in or capital contributions to, or forgiven or discharged in whole or in part any outstanding loans or advances of, any Person;

(iv)              Granted any exclusive rights of any type or scope with respect to the Project Business;

(v)               Sold, leased, licensed or otherwise disposed of or encumbered any of the Project Assets; or

(vi)              Taken or agreed in writing or otherwise to take, any of the actions described in the foregoing clauses of this Section 2.5(a).

(b)            Neither the Company nor any of its Subsidiaries has any material Financial Liabilities of any nature, whether matured or unmatured, fixed or contingent, determined or undetermined, known or unknown (whether or not required to be reflected in accordance with GAAP) other than (i) those set forth or adequately provided for in the balance sheet as of December 31, 2008 included in the Financial Statements, (ii) those incurred in the ordinary course of business since the December 31 Balance Sheet Date and (iii) those pursuant to the terms of Contracts disclosed in the Company Disclosure Letter or incurred pursuant to the terms of Contracts that are not required to be disclosed in the Company Disclosure Letter.

(c)            Immediately following the Closing, neither the Surviving Company nor any Project Company will have any Financial Liabilities of any nature, whether matured or unmatured, fixed or contingent, determined or undetermined, known or unknown (whether or not required to be reflected in accordance with GAAP) other than those (i) permitted to be incurred in compliance with Section 4.2 and Related to the Project Business, (ii) that Parent and the Company together have agreed in writing should be retained by the Surviving Company or its Subsidiaries (those described in subsection (ii) the “Permitted Retained Liabilities”) and (iii)  those pursuant to the terms of Project Contracts disclosed in the Company Disclosure Letter or incurred pursuant to the terms of Projects Contracts that are not required to be disclosed in the Company Disclosure Letter; provided that, in each case specified in clause (iii), neither the Company nor any of its Subsidiaries is in breach of, or default under, any such Contracts.  For the avoidance of doubt, nothing in this Section 2.5(c) shall limit, adjust or impair the inclusion of Project Business Payments in the calculation of the Merger Consideration as set forth in Section 1.4(c).

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(d)            Section 2.5(b) and Section 2.5(c) do not relate to litigation or environmental matters, which are the subjects of Section 2.6 and Section 2.18, respectively.

2.6           Litigation.  There is no private or governmental action, suit, proceeding, claim, arbitration or, to the knowledge of the Company, investigation pending before any Governmental Entity or arbitrator, or, to the knowledge of the Company, threatened against the Company, any of its Subsidiaries or any of the Project Assets or other assets of the Company or any of its Subsidiaries, or, to the knowledge of the Company, any of their respective officers or directors (in their capacities as such).  There is no judgment, decree or order against the Company or any of its Subsidiaries, any of the Project Assets, or, to the knowledge of the Company, any of the directors or officers of the Company or any of its Subsidiaries (in their capacities as such), that would reasonably be expected to prevent, enjoin, or alter or delay any of the transactions contemplated by this Agreement, the Drop Down Agreement, the Distribution or the Hold Co Merger, or that, individually or in the aggregate with any such other judgments, decrees and orders, would reasonably be expected to have a Company Material Adverse Effect or a Project Material Adverse Effect.  This section does not relate to matters with respect to Taxes, which are the subject of Section 2.9, or to employee matters, which are the subject of Section 2.10 and 2.11.

2.7           Restrictions on Business Activities.  There is no Project Contract (including covenants not to compete), judgment, injunction, order or decree binding upon the Company or any of its Subsidiaries that has or would reasonably be expected to have, whether before or after consummation of the Merger, the effect of prohibiting or expressly restricting (i) any current or currently proposed future business practice of the Company or any Project Company, any acquisition of property (tangible or intangible) by the Company or any Project Company or the conduct of business of the Company or any Project Company, in each case, as currently conducted or as currently proposed to be conducted by the Company or any Project Company, or (ii) the conduct by the Company or any of the Project Companies after the Closing of their respective businesses as conducted as of the date immediately prior to the date hereof, or (iii) the conduct of Parent or any of its Subsidiaries after the Closing of their respective businesses as currently conducted.  Without limiting the generality of the foregoing, neither the Company nor any Project Company has entered into any Contract that includes a “most favored pricing” or similar clause restricting the right of the Company or any Project Company to operate their respective business or that in any manner restricts Company or any Project Company from selling, licensing or otherwise distributing any of their respective technology or products to, or from providing services to, customers or currently proposed customers or any class of customers, in any geographic area, during any period of time or in any segment of the market.

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2.8           Intellectual Property.

(a)            The Company or one of its Subsidiaries, other than the Spin-Off Subsidiary and its Subsidiaries, owns, licenses or otherwise has sufficient rights to use all Intellectual Property used in or necessary for the conduct of the Project Business and each Project Company Business, both as currently conducted (the “Project IP Rights”).  Except as set forth in Section 2.8(b) of the Company Disclosure Letter or provided for under Section 4.8 of the Drop Down Agreement, all Project IP Rights that are owned by the Company or any of its Subsidiaries are owned solely and exclusively and free and clear of any and all Encumbrances.

(b)            Section 2.8(b) of the Company Disclosure Letter sets forth a complete and accurate list, as of the date hereof, of (1) all Intellectual Property that is registered with or issued by a Governmental Entity (or a registrar of domain names) or that is subject to an application for registration with or issuance by a Governmental Entity and included among the Project IP Rights (the “Project Registered Intellectual Property”) and (2) all material unregistered Trademarks included among the Project IP Rights.  For each listed item, Section 2.8(b) of the Company Disclosure Letter indicates, as applicable, the owner of such Intellectual Property, the countries in which such Intellectual Property is registered or application for registration has been filed, registration or application number, and the filing and expiration dates thereof.

(c)            Neither the execution, delivery or performance of this Agreement nor the consummation of the Merger, the Drop Down, the Distribution, the Hold Co Merger or the other transactions contemplated by this Agreement, the Hold Co Merger Agreement or the Drop Down Agreement will impair the rights of the Company or any of its Subsidiaries in any Project IP Right or portion thereof.  Neither the Company nor any of its Subsidiaries is paying any royalties, honoraria, fees or other payments to any third person (other than salaries payable to employees and independent contractors not contingent on or related to use of their work product) as a result of the ownership, use, possession, license-in, sale, marketing, advertising or disposition of any Project IP Rights, and none shall become payable as a result of the consummation of the transactions contemplated by this Agreement or the Drop Down Agreement.

(d)            The operation of the Project Business and each Project Company Business as currently conducted does not (i) violate any Contract between the Company or any of its Subsidiaries and any third party, (ii) infringe or misappropriate any Intellectual Property right of any third party or (iii) constitute unfair competition or trade practices under applicable Law, nor does there exist any Basis therefor.  Neither the Company nor any of its Subsidiaries has received any written notice (or, to the knowledge of the Company, any oral notice) asserting that any of the Project IP Rights or the conduct of the Project Business or any Project Company Business conflicts with or infringes, or would conflict with or infringe, the Intellectual Property of any third party, and neither the Company nor any of its Subsidiaries has received any written notice (or, to the knowledge of the Company, any oral notice) from any third party offering a license under any such third party Intellectual Property or other right to avoid litigation or other claims.  To the knowledge of the Company, there is no unauthorized use, disclosure, infringement or misappropriation of any Project IP Rights owned by the Company or any of its Subsidiaries by any third party, including any employee or former employee of the Company or any of its Subsidiaries.

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(e)            The Company and its Subsidiaries have taken all commercially reasonable steps consistent with industry standard practices to (i) protect, preserve and maintain the secrecy and confidentiality of Trade Secrets in the Project IP Rights, and (ii) preserve and maintain all of the Company’s and its Subsidiaries’ proprietary rights included among Project IP Rights.

(f)             All current employees of the Company and each of its Subsidiaries who contributed to the creation or the development of any Project IP Rights or have access to the same have executed confidentiality agreements for the benefit of the Company or any of its Subsidiaries, as applicable, substantially in the form of the Company’s standard form(s) for the relevant jurisdiction, which forms are attached to Section 2.8(f) of the Company Disclosure Letter (an “IP Agreement”), and all former employees of the Company and each of its Subsidiaries who contributed to, the creation or the development of any Project IP Rights have executed such an agreement in substantially such standard form(s).  No current or former employee, officer, director, consultant or advisor of the Company or any of its Subsidiaries (i) has any right, license, claim or interest whatsoever in or with respect to any Project IP Rights, or (ii) to the knowledge of the Company, is in material violation of any material term of any IP Agreement entered into with the Company or any of its Subsidiaries.  To the knowledge of the Company, no employee, officer, director, consultant or advisor of the Company or any of its Subsidiaries is in material violation of any term of any employment Contract or any other Contract, or any restrictive covenant, relating to the right to use Trade Secrets or proprietary information of others, and the employment of any such Person by the Company or any of its Subsidiaries does not subject any of the Company or any of its Subsidiaries to any Liability to any third party.

(g)            No Governmental Entity, university, college or other education institution or research center has any right to, ownership of or right to royalties for any Project IP Rights.

(h)            No Project IP Rights have been acquired by the Company or any of the Project Companies from any third party.

(i)             To the knowledge of the Company, the Project Registered Intellectual Property (other than applications for Patents or Trademarks) are valid and enforceable, and, to the knowledge of the Company, none of the Project IP Rights has been adjudicated invalid or unenforceable, in whole or in part.  None of the Project IP Rights are subject to any outstanding injunction, judgment, order, decree, ruling, charge, settlement or other disposition of any dispute where the Company or any of its Subsidiaries is a party.  There are no actions that must be taken by the Company or any of its Subsidiaries with any Governmental Entity with respect to any of the Project Registered Intellectual Property within 60 days of the date hereof, including the payment of any registration, maintenance or renewal fees or the filing of any documents, applications or articles, for the purposes of maintaining, preserving or renewing any Project Registered Intellectual Property.

2.9           Taxes.

(a)            “Tax” means (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, estimated, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Entity responsible for the imposition of any such tax (domestic or foreign) (each, a “Tax Authority”), (ii) any Liability for the payment of any amounts of the type described in clause (i) of this sentence as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group for any taxable period, and (iii) any Liability for the payment of any amounts of the type described in clause (i) or (ii) of this sentence as a result of being a transferee of or successor to any Person or as a result of any obligation to indemnify any other Person.  “Tax Return” means any return, statement, report or form (including estimated Tax Returns and reports, withholding Tax Returns and reports and information returns and reports) required to be filed with respect to Taxes.

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(b)            The Company and each of its Subsidiaries, and any consolidated, combined, unitary, aggregate or affiliated group for Tax purposes of which the Company or any of its Subsidiaries is or has been a member, have properly completed and timely filed all income, franchise and other Tax Returns required to be filed by them.  All such Tax Returns are true and correct in all respects and have been completed in accordance with applicable Law and the Company and each of its Subsidiaries have paid or withheld and paid to the appropriate Tax Authority all Taxes due (whether or not shown to be due on such Tax Returns).  The Company has never filed, and is not obligated to file, any consolidated, combined, unitary, aggregate or affiliated Tax return for U.S. federal income Tax or any other Tax purpose.

(c)            The balance sheet as of December 31, 2008 included in the Financial Statements reflects all unpaid Taxes of the Company and/or any of its Subsidiaries for periods (or portions of periods) through the December 31 Balance Sheet Date.  Neither the Company nor any of its Subsidiaries has any Liability for unpaid Taxes accruing after the December 31 Balance Sheet Date except for Taxes arising in the ordinary course of business subsequent to the December 31 Balance Sheet Date.

(d)            There is (i) no claim for Taxes being asserted against the Company or any of its Subsidiaries that has resulted in an Encumbrance against the property of the Company or any of its Subsidiaries, and there is no such Encumbrance for Taxes outstanding, other than Encumbrances for Taxes not yet due and payable, (ii) no audit of any Tax Return of the Company or any of its Subsidiaries being conducted by a Tax Authority and no written notice (and, to the knowledge of the Company, no oral notice) of any such audit being commenced that has been received by the Company or any of its Subsidiaries, and (iii) no extension of any statute of limitations on the assessment of any Taxes granted by the Company or any of its Subsidiaries currently in effect.  Neither the Company nor any of its Subsidiaries has been informed by any jurisdiction that the jurisdiction believes that such entity was required to file any Tax Return that was not filed.

(e)            Neither the Company nor any of its Subsidiaries has (i) been or will be required to include any adjustment in Taxable income for any Tax period (or portion thereof) in accordance with Section 481 or Section 108(i) of the Code or any comparable provision under state or foreign Tax Laws as a result of transactions, events or accounting methods employed prior to the Merger, (ii) filed, or was required to file, any disclosures under Section 6662 of the Code or comparable provisions of state, local or foreign Law to prevent the imposition of penalties with respect to any Tax reporting position taken on any Tax Return, (iii) engaged in a “reportable transaction,” as set forth in Treasury Regulation Section 1.6011-4(b), (iv) ever been a member of a consolidated, combined, unitary aggregate or affiliated group of which the Company was not the ultimate parent company, (v) been the “distributing corporation” or the “controlled corporation” (in each case, within the meaning of Section 355(a)(1) of the Code) with respect to a transaction described in Section 355 of the Code (A) within the two-year period ending as of the date of this Agreement, or (B) in a distribution that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) that includes the transactions contemplated by this Agreement, (vi) ever been a “United States real property holding corporation” within the meaning of Section 897 of the Code, (vii) any actual or potential Liability under Treasury Regulations Section 1.1502-6 (or any comparable or similar provision of federal, state, local or foreign Law) or otherwise, as a transferee or successor, in accordance with any contractual obligation, or otherwise for any Taxes of any person other than the Company or any of its Subsidiaries, or (viii) taken or agreed to take any action not provided for in this Agreement (nor does the Company or any of its Subsidiaries have knowledge of any fact or circumstance whether or not specified or provided for in this Agreement) that is reasonably likely to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

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(f)             Neither the Company nor any of its Subsidiaries is a party to or bound by any Tax sharing or Tax allocation agreement with any party, nor does the Company or any of its Subsidiaries have any Liability or potential Liability to another party under any such agreement.

(g)            Each of the Company and each of its Subsidiaries has withheld or collected and timely paid over to the appropriate Tax Authorities (or are properly holding for such timely payment) all Taxes required by Law to be withheld or collected.

(h)            Neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or any portion thereof) ending after the Closing Date as a result of any: (i) installment sale or other open transaction disposition made on or prior to the Closing Date, (ii) prepaid amount received on or prior to the Closing Date, (iii) closing agreement described in Section 7121 of the Code or any corresponding provision of state or foreign Law executed on or prior to the Closing Date, or (iv) change in method of accounting to a taxable period ending on or prior to the Closing Date.

(i)             Section 2.9(i) of the Company Disclosure Letter lists all income, franchise and similar Tax Returns (federal, state, local and foreign) filed with respect to each of the Company and its Subsidiaries for taxable periods ended on or after January 1, 2005, indicates the most recent income, franchise or similar Tax Return for each relevant jurisdiction for which an audit has been completed or the statute of limitations has lapsed and indicates all Tax Returns that currently are the subject of audit.

(j)             None of the assets of the Company or any of its Subsidiaries is “tax-exempt use property” within the meaning of Section 168(h) of the Code.

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(k)            None of the Real Property as to which the Company or any of its Subsidiaries is obligated, contractually or by Law, to pay ad valorem taxes, (i) is subject to rollback Taxes, Tax penalties, or Tax assessment increases, or (ii) has been or is entitled to a preferential or special real estate Tax assessment or Tax treatment.

(l)             Neither the Company nor any of its Subsidiaries will realize any gain for U.S. federal income Tax purposes or any other Tax purposes, nor will any other Taxes arise, as a result of the Distribution, the Hold Co Merger, any of the transactions contemplated by the Drop Down Agreement or any transfer of assets that is undertaken in order to separate the assets that will be held, directly or indirectly, by the Company or any Project Company following the Distribution from the assets that will not be so held.

(m)           There are no circumstances existing which could result in the application of section 78, section 79, or sections 80 to 80.04 of the Canadian Tax Act, or any equivalent provision under applicable provincial Law, to the Company or any Project Company.  The Company and its Subsidiaries have not claimed nor will they claim any reserve under any provision of the Canadian Tax Act or any equivalent provincial provision, if any amount could be included in the income of the Company or any of its Subsidiaries for any period ending after the Closing Date.

(n)            For all transactions between the Company or any of its Subsidiaries, on the one hand, and any non-resident Person with whom the Company or any of its Subsidiaries were not dealing at arm’s length, for the purposes of the Canadian Tax Act, on the other hand, during a taxation year commencing after 1998 and ending on or before the Closing Date, the Company or any of its Subsidiaries have made or obtained records or documents that satisfy the requirements of paragraphs 247(4)(a) to (c) of the Canadian Tax Act.

(o)            Neither the Company nor any of its Subsidiaries are subject to any joint venture, partnership or other arrangement or contract that is treated as a partnership for Tax purposes in any jurisdiction.

(p)            To the knowledge of the Company and its Subsidiaries, no inquiry or claim has ever been made by a Government Entity in respect of Taxes in a jurisdiction where the Company or its Subsidiaries does not file Tax Returns that the Company or its Subsidiaries are or may be subject to Tax in that jurisdiction.

(q)            The Company and the Project Companies have not, and have not been deemed to have for purposes of the Canadian Tax Act, acquired or had the use of property for proceeds greater than the fair market value thereof from, or disposed of property for proceeds less than the fair market value thereof to, or received or performed services for other than the fair market value from or to, or paid or received interest or any other amount other than at a fair market value rate to or from, any Person, firm or company with whom it does not deal at arm’s length within the meaning of the Canadian Tax Act.

(r)             No stock in the Company is owned by any Subsidiary of the Company.

(s)            Section 351(a) of the Code shall apply to the Drop Down.

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(t)             All U.S. domestic Subsidiaries of the Company are, and have always been disregarded entities for U.S. federal income tax purposes, and no election has been made to change the default classification for U.S. federal income tax purposes of any non-U.S. Subsidiary of the Company.

2.10         Employee Benefit Plans.

(a)            Section 2.10(a) of the Company Disclosure Letter sets forth a complete list, as of the date hereof, of (i) all “employee benefit plans,” as defined in Section 3(3) of ERISA (as defined in Section 8.4), (ii) all other currently effective severance pay, salary continuation, bonus, incentive, stock option, retirement, pension, profit sharing or deferred compensation plans, Contracts, programs, funds or arrangements of any kind, and (iii) all other employee benefit plans, Contracts, programs, funds or arrangements (whether written or oral, qualified or nonqualified, funded or unfunded, foreign or domestic) and any trust, escrow or similar Contract related thereto, whether or not funded, in respect of any present or former employees, directors, officers, stockholders, consultants or independent contractors of the Company or any of its Subsidiaries that are sponsored or maintained by the Company or any of its Subsidiaries or with respect to which the Company or any of its Subsidiaries has made or is required to make payments, transfers or contributions (all of the above being hereinafter individually or collectively referred to as “Employee Plan” or “Employee Plans,” respectively).  The Company has no Liability with respect to any plan, arrangement or practice of the type described in the preceding sentence other than the Employee Plans.  All Employee Plans will be terminated in accordance with their terms or transferred to the Spin-Off Subsidiary at or prior to the Closing, without any Liability to the Company or any of its Subsidiaries (other than the Spin-Off Subsidiary and its Subsidiaries).

(b)            Neither the Company nor any of its Subsidiaries currently has, and at no time in the past has had, an obligation to contribute to a “defined benefit plan” as defined in Section 3(35) of ERISA, a pension plan subject to the funding standards of Section 302 of ERISA or Section 412 of the Code,  a “multiemployer plan” as defined in Section 3(37) of ERISA or Section 414(f) of the Code or a “multiple employer plan” within the meaning of Section 210(a) of ERISA or Section 413(c) of the Code.

(c)            No Employee Plan is or at any time was funded through a “welfare benefit fund” as defined in Section 419(e) of the Code, and no benefits under any Employee Plan are or at any time have been provided through a voluntary employees’ beneficiary association (within the meaning of subsection 501(c)(9) of the Code) or a supplemental unemployment benefit plan (within the meaning of Section 501(c)(17) of the Code).

(d)            Except for the Company’s Subsidiaries, no other entity or trade or business is, or at any time within the past six years has been, treated, together with the Company, as a single employer under Section 414 of the Code or as a controlled group under Section 4001 of ERISA.

(e)            Copies of the following materials have been delivered to Parent:  (i) all current plan documents for each Employee Plan or, in the case of an unwritten Employee Plan, a written description thereof, (ii) the most recent determination letter or opinion letter from the IRS with respect to any of the Employee Plans that have received a determination letter or opinion letter, (iii) all current summary plan descriptions, summaries of material modifications, annual reports, and summary annual reports, and (iv) all current trust agreements, insurance contracts, and other documents relating to the funding or payment of benefits under any Employee Plan.

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(f)             Each Employee Plan has been maintained, operated, and administered in material compliance with its terms and any related documents or agreements and in material compliance with all applicable Laws.

(g)            Each Employee Plan intended to be qualified under Section 401(a) of the Code has been determined by the IRS to be so qualified, and each trust created thereunder has been determined by the IRS to be exempt from tax under the provisions of Section 501(a) of the Code, and nothing has occurred since the date of any such determination that would reasonably be expected to give the IRS grounds to revoke such determination.

(h)            With respect to each group health plan benefiting any current or former employee of the Company or its Subsidiaries that is subject to Section 4980B of the Code, the Company and each Subsidiary has complied in all material respects with the continuation coverage requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA.

(i)             There is no pending or, to the Company’s knowledge, threatened assessment, complaint, proceeding, or, to the knowledge of the Company, investigation of any kind in any court or government agency with respect to any Employee Plan (other than routine claims for benefits).

(j)             Neither the execution and delivery of this Agreement or the Drop Down Agreement nor the consummation of the transactions contemplated hereby or thereby or the consummation of the Distribution or the Hold Co Merger will, alone or in connection with any other event, (i) result in any payment (including severance, unemployment compensation or golden parachute) becoming due under any Employee Plan, (ii) increase any compensation or benefits (including severance, deferred compensation and equity benefits) otherwise payable under any Employee Plan, (iii) result in the acceleration of the time of payment or vesting of any benefits to any extent under any Employee Plan, or (iv) result in the forgiveness in whole or in part of any outstanding loans made by the Company or any of its Subsidiaries to any Person.  No benefit or payment under any Employee Plan or other severance or compensation arrangement that is “contingent” (within the meaning of Section 280G(b)(2)(i) of the Code) on this Agreement, the Drop Down Agreement or the transactions contemplated by this Agreement, the Drop Down Agreement, the Distribution or the Hold Co Merger will, either independently or when aggregated with all other amounts payable to any individual, constitute an “excess parachute payment” (as defined under Section 280G(b)(1) of the Code).

(k)            The term “Foreign Plan” shall mean any Employee Plan that is maintained outside of the United States.  Each Foreign Plan complies with all applicable Law (including, without limitation, applicable Law regarding the form, funding and operation of the Foreign Plan) in all material respects.  All contributions required to have been made to all Foreign Plans as of the Closing will have been made as of the Closing.  There are no actions, suits or claims pending or threatened with respect to the Foreign Plans (other than routine claims for benefits).

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2.11         Employee Matters.

(a)            Neither the Company nor any of its Subsidiaries is liable for any payment to any trust or other fund or to any Governmental Entity, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the normal course of business and consistently with past practice).  The Company has not received written notice (or, to the knowledge of the Company, any oral notice) of any pending claims against the Company and/or any of its Subsidiaries under any workers compensation plan or policy or for long term disability.

(b)            Neither the Company nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement, neutrality agreement, card-check agreement or other labor union Contract, no collective bargaining agreement, neutrality agreement, card-check agreement or other labor union Contract is being negotiated by the Company or any of its Subsidiaries and neither the Company nor any of its Subsidiaries has any duty to bargain with any labor organization.  Neither the Company nor any of its Subsidiaries is aware of any activities or proceedings of any labor union or to organize their respective employees.  To the knowledge of the Company, there is no labor dispute, threatened strike or work stoppage against the Company or any of its Subsidiaries pending or threatened which may interfere with the respective business activities of the Company or any of its Subsidiaries.

(c)            The Company has provided Parent a true, correct and complete list of the names, positions and rates of compensation of each of the employees of the Company or its Subsidiaries whose responsibilities are primarily Related to the Project Business (the “Project Employees”), showing each such person’s name, position, employer, location of employment, status as exempt/non-exempt, bonuses and fringe benefits for the current fiscal year and the most recently completed fiscal year and whether that person has an employment contract with the Company or any of its Subsidiaries.  Copies of all employment contracts entered into by the Company or any of its Subsidiaries have been delivered to Parent.  Except as contemplated by this Agreement or the Drop Down Agreement, no employee of the Company or any of its Subsidiaries has given written notice (or, to the knowledge of the Company, any oral notice) to the Company or any of its Subsidiaries, nor is the Company otherwise aware, that any such employee intends to terminate his or her employment with the Company, any of its Subsidiaries or the Surviving Corporation.  The employment of each of the employees of the Company or any of its Subsidiaries is “at will” and neither the Company nor any of its Subsidiaries has any obligation to provide any particular form or period of notice prior to terminating the employment of any of their respective employees.

(d)            All individuals employed by the Company and its Subsidiaries as of the Closing in the United States will be, and all former employees of the Company and its Subsidiaries in the United States whose employment terminated, voluntarily or involuntarily, within three years prior to the date of this Agreement, were, legally authorized to work in the United States.  The Company has completed and retained the necessary employment verification paperwork under the Immigration Reform and Control Act of 1986 (“IRCA”) for the employees hired prior to the date of this Agreement, and the Company has complied with anti-discrimination provisions of the IRCA.  Further, except to the extent that the statute of limitations under IRCA has lapsed, at all times prior to the date of this Agreement, the Company was in compliance with both the employment verification provisions (including without limitation the paperwork and documentation requirements) and the anti-discrimination provisions of IRCA.

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2.12         Related Party Transactions.  No officer or director or, to the knowledge of the Company, any Company Stockholder (nor, to the knowledge of the Company, any immediate family member of any of such Persons; any trust, partnership or company in which any of such Persons has or has had an interest; or any Affiliated investment fund of any director), has since January 1, 2006, directly or indirectly, any financial interest in (a) any Person that furnished or sold, or furnishes or sells, services, products, land or technology to the Company or any Project Company for use in the Project Business or any Project Company Business, (b) any Person that purchases from or sells or furnishes to the Company or any of its Subsidiaries any goods or services used in the Project Business or any Project Company Business, or (c) any Project Contract, provided, however, that ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded company shall not be deemed to be an “financial interest in any Person” for purposes of this Section 2.12.  No member, officer or director of the Company or any of the Project Companies is an officer or employee of any Governmental Entity.

2.13         Insurance.  Section 2.13 of the Company Disclosure Letter is a true, correct and complete listing as of the date hereof of all policies of insurance and bonds Related to the Project Business currently in effect and issued at the request or for the benefit of the Company or any of the Project Companies.  As of the date hereof, there is no material claim pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds.  The Company and each of its Subsidiaries is in compliance with the terms of such policies and bonds.  The Company has no knowledge of any threatened termination of, or premium increase in an amount greater than 20% of the current annual premium paid with respect to, any of such policies.

2.14         Contracts.

(a)            Section 2.14(a) of the Company Disclosure Letter (as identified in the applicable subsection thereof) contains a complete and accurate list as of the date hereof of each Project Contract of the following types which have not been fully performed:

(i)                any supply Contract, including all purchaser orders other than those in amounts less than $10,000 individually;

(ii)               any power purchase Contract for the sale of the electricity and Environmental Attributes of a Project;

(iii)              any Real Property Agreements;

(iv)             any Contract for the purchase or sale of assets or securities, goods or services, financing agreements, interconnection agreements, applications for interconnection of any Project evidencing an interconnection queue position, equipment supply agreements, consulting agreements, employment and labor agreements, guarantees and bonds (other than purchase orders);

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(v)              any trust indenture, mortgage, promissory note, loan agreement or other Contract for the borrowing of money, any currency exchange, commodities or other hedging arrangement or any leasing transaction;

(vi)             any Contract in accordance with which the Company or any of its Subsidiaries is a lessor or lessee of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal property requiring rental payments in excess of $10,000 annually;

(vii)            any license or other Contract providing rights to, or based upon, any Project IP Rights;

(viii)           any Contract not resulting from arm’s length negotiations;

(ix)              any agreement of guarantee, support, indemnification, assumption or endorsement of, or any similar commitment with respect to, the Liabilities of any other Person;

(x)               any government grants Contract;

(xi)              any Contract with any Governmental Entity;

(xii)             any Contract relating to the disposition or acquisition of assets or any interest in any business enterprise;

(xiii)            any employment Contract (excluding offer letters that have no severance or acceleration provisions triggered by any event) with current employees of the Company or any of the Project Companies as of the date hereof; or

(xiv)           any other Contracts requiring annual payments of more than $10,000 individually or $100,000 in the aggregate.

(b)            Section 2.14(b) of the Company Disclosure Letter (as identified in the applicable subsection thereof) contains a complete and accurate list as of the date hereof of each Transfer Contract of the following types which have not been fully performed:

(i)                any supply Contract, including all purchaser orders other than those in amounts less than $10,000 individually;

(ii)               any trust indenture, mortgage, promissory note, loan agreement or other Contract for the borrowing of money, any currency exchange, commodities or other hedging arrangement or any leasing transaction;

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(iii)              any Contract in accordance with which the Company or any of its Subsidiaries is a lessor or lessee of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal property requiring rental payments in excess of $50,000 annually;

(iv)              any Contract with any Person with whom the Company or any of its Subsidiaries does not deal at arms length;

(v)               except as otherwise set forth on Section 2.14(b) of the Company Disclosure Letter, any agreement of guarantee, support, indemnification (other than Contracts containing ordinary course indemnification provisions), assumption or endorsement of, or any similar commitment with respect to, the Liabilities of any other Person;

(vi)              any government grants Contract;

(vii)             any Contract relating to the disposition or acquisition of assets of or any interest in any business enterprise;

(viii)           any employment Contract (excluding offer letters that have no severance or acceleration provisions triggered by any event under which neither the Company nor any Project Company has any Liabilities) with current employees of the Company as of the date hereof; or

(ix)              any other Contract requiring annual payments of more than $10,000 individually or aggregate payments of more than $100,000.

(c)            All Project Contracts are in executed written form, and the Company or the applicable Project Company has performed all of the obligations therefor required to be performed by it and, subject to the effect of (a) applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to rights of creditors generally, and (b) rules of Law and equity governing specific performance, injunctive relief and other equitable remedies, is entitled to all benefits under, and is not alleged to be in default in respect of, any Project Contract.  Each of the Project Contracts is in full force and effect, and the Company, or the applicable Project Company, and to the knowledge of the Company, any other party to each Project Contract, are not in default of any Project Contract.

(d)            Immediately following the Effective Time, the Surviving Company and each of its Subsidiaries will have no rights or Liabilities under any Contract (other than a Delayed Transferred Asset (as defined in the Drop Down Agreement)) that is not Related to the Project Business.

(e)            Immediately following the Effective Time, the Spin-Off Subsidiary and each of its Subsidiaries will have no rights or Liabilities under any Project Contract.

(f)             Section 2.14(f) of the Company Disclosure Letter contains a true, complete and correct list of all land and power purchase agreements that are under negotiation as of the date hereof, Related to the Project Business (the “Pending Agreements”). As of the date hereof, neither the Company nor any of its Subsidiaries has received any written notice, nor does the Company otherwise have knowledge that, the potential counterparty under any Pending Agreement has terminated or intends to terminate such negotiations or, if a power purchase agreement, has materially delayed or intends to materially delay such negotiation.

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(g)            Without any representation or warranty with respect to the actions or intentions of any counterparty, immediately following the Closing, the Company shall retain the same rights with respect to negotiations regarding the Pending Agreements and the other agreements under negotiation set forth in Section 2.14(f) of the Company Disclosure Letter that it possessed immediately prior to the Closing.

2.15         Project Development.   The interconnection queue positions held by the Company and any Project Company in respect of a Project, and all written agreements, studies and reports entered into or issued by the Cal-ISO or any applicable interconnection provider in connection with such queue positions, are as listed on Section 2.15 of the Company Disclosure Letter.  Other than as disclosed in the documents listed on Section 2.15 of the Company Disclosure Letter, neither the Company nor any Project Company has received written notice (or, to the knowledge of the Company, any oral notice) from the Cal-ISO or any applicable interconnection provider, specific to a Project, that the Cal-ISO or such interconnection provider has taken or has determined to take any action with respect to termination of such queue positions.  The Company or a Project Company, as applicable, has timely made all deposits and other payments, and filed all reports and other information, required in order to maintain such interconnection queue positions.

2.16         Assets.

(a)            Section 2.16(a) of the Company Disclosure Letter contains a true and complete list as of the date hereof of the (i) fixed assets Related to the Project Business with a value greater than $10,000 owned or leased by, in the possession of, or used by the Company or any Project Company and (ii) each other tangible asset Related to the Project Business with a value greater than $20,000 owned or leased by, in the possession of, or used by the Company or any Project Company as of the date hereof (the “Project Fixed Assets”).

(b)            Other than the Project Contracts, the Real Property Rights, the Retained Permit Rights, the Project IP Rights, equity interests in the Project Companies, the Project Pre-Payments, the Project Fixed Assets, the Project Business Information and the assets, properties and rights set forth on Section 2.16(b) of the Company Disclosure Letter, the Company and its Subsidiaries do not, as of the date hereof, have any right, title or interest in, to or under any assets, properties or rights, real or personal, tangible or intangible with an individual value greater than $25,000 or an aggregate value greater than $100,000 that is Related to the Project Business (the “Other Project Assets”).  The Company’s right title and interest in the Projects, Project Contracts, the Real Property Rights, the Retained Permit Rights, the Project IP Rights, equity interests in the Project Companies, the Project Pre-Payments, the Project Fixed Assets, cash held as collateral against the letters of credit set forth on Section 2.14(a)(v) of the Company Disclosure Letter, the Other Project Assets and the Project Business Information, in the case of each such defined term ignoring any monetary limits set forth therein are referred to collectively herein as the “Project Assets.”  The Project Assets shall exclude the Cal-ISO Deposit.

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(c)            Section 2.16(c) of the Company Disclosure Letter contains an accurate and complete list as of the date hereof of each fixed and tangible assets and property with an individual value greater than $10,000 in which the Company or any of its Subsidiaries have, as of the date hereof, any right, title or interest as of the date hereof (collectively, along with real or personal, tangible or intangible assets with an individual value greater than $10,000, other than the Project Assets, the “Non-Project Assets”).

(d)            No Non-Project Asset is Related to the Project Business

(e)            Except as set forth in the reports set forth in Section 2.16(e) of the Company Disclosure Letter, the Company or the applicable Project Company has good title to all Project Fixed Assets, and the Other Project Assets.  All Project Fixed Assets and the Other Project Assets are free and clear of any and all Encumbrances other than Permitted Encumbrances.  The representations set forth in this Section 2.16(e) shall not apply to Real Property Rights, which are separately addressed in Section 2.17 below.

2.17         Real Property.

(a)            Section 2.17(a) of the Company Disclosure Letter lists all Contracts Related to the Project Business (the “Real Property Agreements”) providing the Company or any of its Subsidiaries with rights in the nature of leases, easements (including BLM Easements), rights-of-way, restrictive covenants, options to purchase or lease any interests in real property, or other material interests in real property and any Contracts materially limiting the rights of the Company or its Subsidiaries against owners of real property in which the Company and its Subsidiaries have any interest necessary for the development, construction or operation of a Project as of the date hereof (collectively, the “Real Property Rights”), and the real property subject to such rights (the “Real Property”).  Neither the Company nor any of its Subsidiaries own any real property that is Related to the Project Business.

(b)            Each of the Real Property Agreements constitutes the valid and binding obligation of the Company or its Subsidiary and, to the knowledge of the Company, the other parties thereto, enforceable against the Company or its Subsidiary and, to the knowledge of the Company, the other parties thereto in accordance with their terms, subject to the effect of (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to rights of creditors generally, and (ii) rules of Law and equity governing specific performance, injunctive relief and other equitable remedies.

(c)            The Company and the Project Companies are not and, to the knowledge of the Company, no other party to any of the Real Property Agreements is, in breach or default of the Real Property Agreements, and neither the Company nor any of the Project Companies has failed to cure an event, upon receiving notice that such an event has occurred which, with the giving of notice or lapse of time, or both, would constitute a breach or default by the Company or the Project Companies or permit termination, modification or acceleration under such Real Property Agreement.

(d)            True and correct copies as of the date hereof of the Real Property Agreements (including all amendments thereto) have been delivered to Parent;

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(e)            All amounts currently due under each Real Property Agreement have been paid.

(f)             No party to any of the Real Property Agreements has provided written notice (or, to the knowledge of the Company, any oral notice) to the Company or any of its Subsidiaries that it has repudiated any provision thereof.

(g)            The Company has not received written notice (or to the Company’s knowledge, any oral notice) of any material disputes, and there are no oral agreements, or forbearance programs, to which the Company is a party in effect, as to any of the Real Property Agreements.

(h)            Except for the Permitted Encumbrances (disregarding subsection (ii) of the definition of Permitted Encumbrances with respect to the Shortlisted Projects), the Company has not received written notice (or, to the knowledge of the Company, any oral notice) that, with respect to any Project, any of the following exist which would materially and adversely affect the use and operation of the Real Property Rights, Real Property, or the proposed Project sites for the use currently proposed to be made thereof in connection with any Project:

(i)                any pending or threatened proceedings in eminent domain, for rezoning, or any pending or threatened proceedings in land use or for existing or required entitlements;

(ii)               any plan, study or effort by any Governmental Entity to widen, modify or realign any street or road providing access to the Real Property or any proposed Project site, or any portion thereof;

(iii)              any encroachments of substations, transmission facilities, other improvements, personal property or fixtures located on the Real Property or any proposed Project site on adjoining lands, any easements, or other interest in favor of third parties, nor any encroachments onto the Real Property or any proposed Project site of any substations, transmission facilities, improvements or other personal property or fixtures located on adjoining lands;

(iv)             any mining, mineral or water extraction or development projects in progress or planned or permitted to commence on or under the Real Property or any proposed Project site, or any portion thereof;

(v)              any pending or threatened native land claims; and

(vi)             any commitments or agreements with any Governmental Entity or public or private utility affecting the Real Property or any proposed Project site, or any portion thereof.

(i)             Except as set forth in the Real Property Agreements, there are no rents, royalties, fees or other amounts greater than $100,000 annually payable or receivable by the Company or any Project Company in connection with any Real Property Agreement.

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(j)             This Section 2.17 does not relate to environmental matters, which are the subject of Section 2.18 hereof.

2.18         Environmental.

(a)            With respect to the Project Business:

(i)                The Company and its Subsidiaries have not Released Hazardous Materials at, on, about or under any  proposed Project sites in a manner that has created a condition that has or could require remediation, investigation or other response activity under Environmental Law.  The Company and its Subsidiaries have not generated, transported, treated, stored, or arranged to be disposed of Hazardous Materials on, from, or under any proposed Project site in violation of, or in a manner or to a location that could give rise to Liability under any Environmental Law or Permit.  To the knowledge of the Company, there have been no Hazardous Materials Released on, upon, from, or into any real property in the vicinity of any real property owned, leased or used, currently or in the past, by the Company or any of its Subsidiaries or on a proposed Project site which may be come to be located on such real property owned, leased or used, currently or in the past, by the Company or any of its Subsidiaries or on a proposed Project site.

(ii)              (A) Each of the Company and its Subsidiaries has materially complied with all Environmental Laws, and the Company has not received written notice of any action, suit, proceeding, hearing, charge, complaint, claim, demand, notice or, to the knowledge of the Company, investigation filed or commenced or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries alleging any failure to comply with any applicable Environmental Law, and, to the Company’s knowledge, the real property owned, leased or used, now or in the past, by the Company or any of its Subsidiaries, to the knowledge of the Company, is currently in compliance with all Environmental Laws and (B) the Company and each of its Subsidiaries are in material compliance with all of the terms and conditions of any Permits and other authorizations that have already been obtained under applicable Environmental Laws.

(iii)              To the knowledge of the Company, there is no event that has occurred that would reasonably be expected to result in material noncompliance by the Company or any of its Subsidiaries with any Environmental Laws with respect to the real property owned, leased or used, now or in the past, by the Company or any of its Subsidiaries.

(iv)             Part I of Section 2.18(a)(iv) of the Company Disclosure Letter sets forth a complete list of all reports, studies and assessments commissioned by the Company or any of its Subsidiaries concerning the Environmental Condition of any real property owned, leased or used, currently or in the past, by the Company or any of its Subsidiaries, wildlife habitat, threatened and endangered species, wetlands and cultural resources at the sites, visual impacts of developing solar energy projects at the sites, potential interference of such development with civil and military aviation and radar, archeological resources, historical properties/structures, environmental justice, storm water, traffic impacts, noise impacts, and recreation impacts.  Part II of Section 2.18(a)(iv) of the Company Disclosure Letter sets forth a complete list of all such reports commissioned, but not yet received by the Company or any of its Subsidiaries.  The reports, studies and assessments listed on Parts I and II of Section 2.18(a)(iv) of the Company Disclosure Letter constitute the “ProjectEnvironmental Reports.”  Neither the Company nor any Project Company has received written notice of any event, circumstance or condition that would render any information or conclusions in the Project Environmental Reports untrue or materially misleading.  For purposes of this Section 2.18(a)(iv), “Environmental Condition” shall mean the condition of the real property owned, leased or used, now or in the past, by the Company or any of its Subsidiaries as it relates to the compliance or non-compliance of suchwith Environmental Laws.

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(b)            With respect to any operation or business of the Company or its Subsidiaries other than the Project Business, except as disclosed in the Tech Environmental Reports:

(i)                No Hazardous Materials have been Released at, on, about or under any real property, owned, leased or used, currently or in the past, by the Company or any of its Subsidiaries in a manner that has created a condition that has or could require remediation, investigation or other response activity under Environmental Law.  Hazardous Materials have not been generated, transported, treated, stored, or arranged to be disposed of on, from, or under any real property, owned, leased or used, currently or in the past, by the Company or any of its Subsidiaries in violation of, or in a manner or to a location that could give rise to Liability under any Environmental Law or Environmental Permit (as defined below).  There have been no Hazardous Materials Released on, upon, from, or into any real property in the vicinity of any real property, owned, leased or used, currently or in the past, by the Company or any of its Subsidiaries which may be come to be located on such real property owned, leased or used, currently or in the past, by the Company or any of its Subsidiaries.

(ii)               Each of the Company and its Subsidiaries has complied with all Environmental Laws, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice has been filed or commenced or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries alleging any failure to comply with any applicable Environmental Law, and the real property owned, leased or used, now or in the past, by the Company or any of its Subsidiaries is currently in compliance with all Environmental Laws.

(iii)              As of the date hereof, there have been no environmental investigations, studies, audits, material tests, reviews or other analyses conducted on behalf of or that are in the possession of the Company or any of its Subsidiaries in relation to the real property owned, leased or used, now or in the past, by the Company or any of its Subsidiaries that have not been delivered to Parent.

(iv)              To the knowledge of the Company there is no event that has occurred that would reasonably be expected to result in noncompliance with any Environmental Laws with respect to the real property owned, leased or used, now or in the past, by the Company or any of its Subsidiaries.

(v)               Each of the Company and its Subsidiaries possesses all permits, licenses, variances, exemptions, orders and approvals necessary under Environmental Laws to conduct the business as previously or currently being conducted (“Environmental Permits”), and have complied with all Environmental Permits.

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(vi)              Except in the ordinary course of business, neither the Company nor its Subsidiaries has assumed, by Contract, any liabilities or obligations arising under any Environmental Law .

(vii)             Neither the Company or its Subsidiaries is currently performing any investigation, response or other corrective action under any Environmental Law nor is the Company or its Subsidiaries currently obligated to do so.

(viii)           Part I of Section 2.18(b)(viii) of the Company Disclosure Letter sets forth a complete list of all reports, studies and assessments held by the Company or any of its Subsidiaries concerning the Environmental Condition of any real property owned, leased or used, now or in the past, by the Company or any of its Subsidiaries.  The reports, studies and assessments listed on Part I of Section 2.18(b)(viii) of the Company Disclosure Letter constitute the “Tech Environmental Reports.”  To the knowledge of the Company, no event, circumstance or condition at any of the real property, owned, leased or used, now or in the past, by the Company or any of its Subsidiaries would render any of the information or conclusions contained in the Tech Environmental Reports untrue or misleading.  For purposes of this Section 2.18(b), “Environmental Condition” shall mean the condition of the real property owned, leased or used, now or in the past, by the Company or any of its Subsidiaries as it relates to the compliance or non-compliance of suchwith Environmental Laws.

2.19         Permits. 

(a)            Part I of Section 2.19 of the Company Disclosure Letter sets forth a true, correct and complete list of all Permits relating to the Project Business that have been obtained by the Company or any of its Subsidiaries as of the date hereof.  Part II of Section 2.19 of the Company Disclosure Letter sets forth a true, correct and complete list of all Permits relating to the Project Business that the Company or any of its Subsidiaries has, as of the date hereof, applied for from a Governmental Entity, including all BLM Permit Applications (the “Permit Applications,” and, together with the Permits listed on Part I, the “Retained Permit Rights”).

(b)            Each of the Company or its Subsidiaries (1) owns or validly holds all Permits listed in Part I of Section 2.19 of the Company Disclosure Letter, (2) each such Permit is valid, binding, non-appealable and in full force and effect and has not been terminated, revoked or modified; and (3) no written notice (or, to the Company’s knowledge, oral notice) of noncompliance or default has been received by the Company or any of its Subsidiaries, and the holder of such Permit is in compliance with the requirements thereof.

(c)            The Company has delivered to Parent a true and correct copy of (i) each Permit Application, (ii) all material documents, reports and, to the Company’s knowledge, correspondence of the Company and its Subsidiaries with respect to each Permit Application and, to the extent obtained by the Company or any of its Subsidiaries as of the Closing Date, Required Permits, (iii) all material documents and, to the Company’s knowledge, correspondence provided by the Company or any of its Subsidiaries to any Governmental Entity with respect to the Permit Applications and, to the extent obtained by the Company or any of its Subsidiaries as of the date hereof, Required Permits, and (iv) all material documents and, to the Company’s knowledge, correspondence received by the Company or any of its Subsidiaries from any Governmental Entity, with respect to the Permit Applications and the Required Permits.  To the Company’s knowledge, it has timely filed and submitted all required applications and supporting information, and timely responded to all requests for information from applicable Governmental Entities, necessary to process and maintain the priority of the Permit Applications.  In instances where Governmental Entities have imposed specific and material time deadlines for filings or submitting applications and supporting documentation, the Company has timely filed, submitted and responded to the same.

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(d)            All fees and other charges relating to the Permits and Permit Applications have been paid currently, and there are no fees, charges or other commitments or other arrangements in effect with respect to such Permits and Permit Applications other than the fees and charges normally charged by the Governmental Entity with responsibility for the issuance thereof.

(e)            The Company has not received written notice (or, to the Company’s knowledge, any oral notice) that the rights of the Company or the applicable Project Company to seek Permits on real property administered by the BLM are not prior in time and right to the rights of any other Person seeking Permits on such real property for the development, construction and operation of solar energy generating facilities, and, the Company has not received written notice (or, to the Company’s knowledge, any oral notice) that, as of the date hereof, such real property is subject to any existing Permit or right of way, providing rights to any other Person to develop, construct or operate solar facilities that will or would reasonably be expected to cause a Project Material Adverse Effect.

(f)             Neither the Company nor any Project Company has received written notice (or, to the knowledge of the Company, oral notice) specific to any Project from any Governmental Entity or Person, indicating that such Governmental Entity or Person has taken or intends to take any action with respect to such Project, that would result in a revocation of any Permit or a rejection, withdrawal, termination or material modification of any Permit Application.

(g)            This Section 2.19 does not relate to matters with respect to environmental matters, which are the subject of Section 2.18 hereof.

2.20         Compliance with Laws.

(a)            Each of the Company and each of its Subsidiaries has complied with in all material respects, is not in material violation of, and has not received any written notices (or to the Company’s knowledge, oral notices) of violation with respect to, any federal, state, local or foreign Law.  Each of the Company and its Subsidiaries has complied with in all material respects, is not in material violation of, and has not received any written (or to the Company’s knowledge, oral) notices of material violation with respect to all Laws relating to the Projects.

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(b)            Neither the Company nor any of its Subsidiaries is subject to regulation under PUHCA as a “public utility company” or a “holding company,” or a “subsidiary company” or “affiliate” or “associate company” of a “holding company” within the meaning of PUHCA.  None of the directors, officers, agents or employees of the Company or any of its Subsidiaries has made for the benefit of the Company any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns, or made any bribes or kickback payments.  Neither the Company nor any of its Subsidiaries is a “public utility” under Section 201 of the FPA.  In addition, none of the Projects will be capable of producing power at or before the Effective Time, or will otherwise constitute an “existing generation facility” under Section 203(a) of the FPA.

(c)            This Section 2.20 does not relate to matters with respect to environmental matters and permits, which are the subject of Section 2.18 and 2.19, respectively.

2.21         Topaz.  All amounts required to be deposited by or on behalf of the Topaz Project Company under the Topaz PPA have been deposited.  The Topaz Project Company (or the Company on behalf of the Topaz Project Company) has met and satisfied the requirements of all “Milestone Dates” scheduled to occur under the Topaz PPA as of the date hereof.  Neither the Company, the Topaz Project Company nor any other Subsidiary of the Company has received written notice (or, to the Company’s knowledge, oral notice) from PG&E or the Cal-ISO of the existence of any fact or circumstance specific to the Topaz Project that will result in the Topaz Company’s failure or inability to satisfy or otherwise achieve any Milestone Date scheduled to occur under the Topaz PPA after the date hereof.  Neither the Company nor any of its Subsidiaries has sold or transferred, agreed or committed to sell or transfer, or granted any options or rights to purchase Environmental Attributes related to the electric power to be generated by any Project except as and to the extent provided in the Topaz PPA and any other power purchase agreement included in the Project Contracts and set forth in Section 2.21 of the Company Disclosure Letter.

2.22         Minute Books.  The minute books of the Company and the Project Companies delivered to Parent contain a complete and accurate summary of all meetings of directors, managers, members and stockholders, as applicable, or actions by written consent by the same since the time of incorporation of the Company and the Project Companies.

2.23         Brokers’ and Finders’ Fees.  Except for the fees payable to Morgan Stanley, the Company has not incurred, nor will it incur, directly or indirectly, any Liability for brokerage or finders’ fees or agents’ commissions or investment bankers’ fees or any similar charges in connection with this Agreement or any transaction contemplated hereby.

2.24         Board Approvals.

(a)            The Company’s board of directors, by resolutions duly adopted (and not thereafter modified or rescinded) by unanimous vote (with no abstentions) at a meeting duly called and held, has (a) approved this Agreement, the Hold Co Merger Agreement and the Drop Down Agreement, and, to the extent applicable, the documents to be entered into in connection therewith, the Merger, the Drop Down, the Distribution and the Hold Co Merger, (b) determined that this Agreement, the Drop Down Agreement, the Hold Co Merger Agreement and the terms and conditions of the Merger, the Drop Down, the Distribution and the Hold Co Merger are fair, advisable and in the best interests of the Company and the Company Stockholders, and (c) directed that the adoption of this Agreement and the Hold Co Merger Agreement and the approval of the Merger and the Hold Co Merger be submitted to the Company Stockholders for consideration and recommended that all of the Company Stockholders adopt this Agreement and approve the Merger.

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(b)            Hold Co’s board of directors, by resolutions duly adopted (and not thereafter modified or rescinded) by unanimous vote (with no abstentions) at a meeting duly called and held, has (a) approved this Agreement and the Hold Co Merger Agreement, and, to the extent applicable, the documents to be entered into in connection therewith and the Merger and the Hold Co Merger, (b) determined that this Agreement and the Hold Co Merger and the terms and conditions of the Merger and Hold Co Merger are fair, advisable and in the best interest of Hold Co and its members, and (c) directed that the adoption of this Agreement and the Hold Co Merger Agreement and the approval of the Merger and the Hold Co Merger be submitted to its members for consideration and recommended that all of its members adopt this Agreement and the Hold Co Merger Agreement and approve the Merger and the Hold Co Merger (to the extent required by applicable Law).

(c)            Newco’s board of directors, by resolutions duly adopted (and not thereafter modified or rescinded) by unanimous vote (with no abstentions) at a meeting duly called and held, has (a) approved the Hold Co Merger Agreement, and, to the extent applicable, the documents to be entered into in connection therewith and the Hold Co Merger, (b) determined that the Hold Co Merger Agreement and the terms and conditions of the Hold Co Merger are fair, advisable and in the best interest of Newco and its stockholders, and (c) directed that the adoption of the Hold Co Merger Agreement and the approval of the Hold Co Merger be submitted to its stockholders for consideration and recommended that all of its stockholders adopt the Hold Co Merger Agreement and approve the Hold Co Merger (to the extent required by applicable Law).

2.25         Stockholder Vote.  (a)  The affirmative votes of the holders of shares of Company Capital Stock representing a majority of the outstanding shares of Company Common Stock and Company Preferred Stock issued and outstanding on the record date set for the meeting of the Company Stockholders to adopt the Hold Co Merger Agreement and approve the Hold Co Merger (the “Company Stockholders Meeting”) or any consent solicitation conducted in lieu thereof with each Class and Series of Company Capital Stock voting together as a single class (with the Company Preferred Stock voting on an as converted to Company Common Stock basis), (the “Required Hold Co Merger Vote”), is the only vote of the holders of Company Capital Stock necessary to adopt the Hold Co Merger Agreement and approve the Hold Co Merger, assuming Hold Co is a limited liability company.  No vote of the holders of Company Capital Stock is required to approve the Hold Co Merger if Hold Co is a corporation.  The Company Stockholders representing the Required Hold Co Merger Vote have executed Support Agreements and Written Consents adopting the Hold Co Merger Agreement and approving the Hold Co Merger.  No Company Stockholder vote is required in order for the Company to adopt the Drop Down Agreement or effect the Drop Down or the Distribution.

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(b)            Following the effective time of the Hold Co Merger, the affirmative votes of the holders of the membership units in Hold Co (i) that were exchanged in the Hold Co Merger for shares of Company Preferred Stock representing seventy-five percent (75%) of the shares of Company Preferred Stock issued and outstanding on the record date set for the meeting of the holders of membership units of Hold Co to approve the Merger as a sale of substantially all the assets of Hold Co or of a Subsidiary of Hold Co holding substantially all the assets of Hold Co and its Subsidiaries (the “Hold Co Interestholder Meeting”) or any consent solicitation conducted in lieu thereof, with all membership units that were exchanged for a class or series of Company Preferred Stock voting together as a single class and on an as converted to Company Common Stock basis and (ii) representing the combined voting power of a majority of the outstanding membership units issued and outstanding on the record date set for the Hold Co Interestholder Meeting or any consent solicitation conducted in lieu thereof with each class and series of membership unit voting together as a single class (with the membership units exchanged for the Company Preferred Stock voting on an as converted basis), (the “Required Vote”), are the only votes of the holders of the membership units of Hold Co after the effective time of the Hold Co Merger necessary to adopt this Agreement and approve the Merger.  The Company Stockholders representing the Required Vote have executed Support Agreements and Written Consents approving the Merger as a sale of substantially all the assets of Hold Co or of a Subsidiary of Hold Co holding substantially all the assets of Hold Co and its Subsidiaries in accordance with its operating agreement or certificate of incorporation, as applicable, and applicable Law.

2.26         Disclosure.  The information supplied by or on behalf of the Company or any of its Subsidiaries for inclusion or incorporation by reference in the Private Placement Information Statement, if a Private Placement Information Statement is mailed to the Company Stockholders and prospective holders of membership units of Hold Co in accordance with Section 4.5, will not, (i) at the time, if any, that the Private Placement Information Statement (or any amendment thereof or supplement thereto) is mailed to the Company Stockholders and prospective holders of membership units of Hold Co, (ii) the time of the Company Stockholders Meeting, if any, or the time at which written consent of the Company Stockholders to the Hold Co Merger Agreement is obtained, (iii) the time of the Hold Co Interestholder Meeting, if any, or the time at which proxies to vote in favor of this Agreement and the Merger are obtained from prospective holders of membership units of Hold Co, (iv) the effective time of the Hold Co Merger, or (v) the Effective Time, contain any untrue statement of a material fact or fail to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  Notwithstanding the foregoing, no representation or warranty is made by the Company with respect to statements made or incorporated by reference in the Private Placement Information Statement based on information supplied by or on behalf of Parent for inclusion or incorporation by reference in the Private Placement Information Statement.

2.27         No Other Representations.  Hold Co and the Company acknowledge that Parent makes no representation or warranty with respect to (i) any projections, estimates or budgets delivered to or made available to Hold Co or the Company of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of Parent and its Subsidiaries or the future business and operations of Parent and its Subsidiaries or (ii) any other information or documents made available to Hold Co or the Company or its counsel, accountants or advisors with respect to Parent or any of its Subsidiaries or their respective businesses or operations, except as expressly set forth in this Agreement.

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent represents and warrants to the Company and Hold Co as of the date hereof and as of the Closing Date as follows:

3.1           Organization, Standing and Power.

(a)            Parent and Merger Sub are duly organized, validly existing and in good standing under the Laws of the State of Delaware.  Neither Parent nor Merger Sub is in violation of any of the provisions of its organizational documents.  Merger Sub was formed by Parent to effect the Merger and, since its date of formation, Merger Sub has not owned any assets or engaged in any activities other than in connection with the transactions contemplated hereby.

(b)            Each of Parent and Merger Sub has the power to own, lease and operate its properties and to conduct its business as currently conducted and is duly qualified to do business and is in good standing in each jurisdiction where the failure to be so qualified and in good standing, individually or in the aggregate with any such other failures, would reasonably be expected to have a Parent Material Adverse Effect.

3.2           Capital Structure.

(a)            The authorized capital stock of Parent consists of 500,000,000 shares of Parent Common Stock, and 30,000,000 shares of Preferred Stock of Parent, par value $0.001 per share (the “Parent Preferred Stock” and, together with the Parent Common Stock, the “Parent Capital Stock”).  As of February 18, 2009, 81,643,905 shares of Parent Common Stock were outstanding and no shares of Parent Preferred Stock outstanding.  All shares of Parent Common Stock have been duly authorized, and all issued and outstanding shares of Parent Common Stock have been validly issued and are fully paid and nonassessable.  As of December 27, 2008 there were an aggregate of 5,291,725 shares of Parent Common Stock available for issuance to employees and directors of, and consultants to Parent under Parent’s 2003 Unit Option Plan and 2006 Omnibus Incentive Compensation Plan (the “Parent Stock Plan”).  As of December 27, 2008, 510,204 shares of Parent Common Stock were issuable upon the exercise of outstanding, unexercised, vested options, including options issued under the Parent Stock Plan, options issued under Parent’s other equity incentive plans and non-plan options.  All outstanding Parent securities and all options issued under the Parent Stock Plan were issued in compliance with all applicable federal and state securities Laws.

(b)            The shares of Parent to be issued in accordance with this Agreement will, upon such issuance, be duly authorized, validly issued, fully paid and non-assessable, free of any Encumbrances and not subject to any preemptive rights or rights of first refusal created by statute, the organizational documents of Parent or Merger Sub or any Contract to which Parent or Merger Sub is a party or is bound.

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3.3           Authority; Noncontravention.

(a)            Each of Parent and Merger Sub has all requisite power and authority to enter into this Agreement, to perform its obligations hereunder and consummate the transactions contemplated hereby.  The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub.  This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming due authorization, execution and delivery by the Company and Hold Co, constitutes the valid and binding obligation of Parent and Merger Sub enforceable against Parent and Merger Sub, as applicable, in accordance with its terms, subject to the effect of (a) applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to rights of creditors generally, and (b) rules of Law and equity governing specific performance, injunctive relief and other equitable remedies.

(b)            The execution and delivery of this Agreement by Parent and Merger Sub does not, and the consummation of the transactions contemplated hereby will not, (i) result in the creation of an Encumbrance on the properties or assets of Parent or Merger Sub, (ii) conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation, renegotiation or acceleration of any obligation or loss of any benefit under, or require any consent, approval or waiver from any Person in accordance with, (a) any provision of the organizational documents of Parent or Merger Sub, (b) any Contract, to which Parent or Merger Sub or any of their respective subsidiaries is a party to or (c) any Law applicable to Parent, Merger Sub or any of their respective Subsidiaries, properties or assets, except, in the case of clauses (ii)(b) and (c), as would not have or would not reasonably be expected to have a Parent Material Adverse Effect.  No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Parent and Merger Sub in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (A) the filing of the Certificate of Merger, (B) such filings as may be required under the HSR Act and any required foreign antitrust filing, and (C) applicable requirements if any, of the Securities Act, the Exchange Act, state securities or the Blue Sky Laws.  The execution and delivery of this Agreement by Parent and Merger Sub does not, as of the date hereof, and the consummation of the transactions contemplated hereby will not, as of the Closing Date (i) require any consent or the delivery of any legal opinion under the Tax Sharing Agreement between Parent and Cypress Semiconductor Corporation, as amended or (ii) constitute a change in control under any employment agreement, offer letter or the management career transition plan with or involving any senior executive officer of Parent.

3.4           SEC Documents; Financial Statements.  Parent has filed all forms, reports and documents required to be filed by it with the SEC from November 17, 2006 until the date of this Agreement (collectively, the “Parent SEC Documents”) and has made available to the Company a true and complete copy of all of the Parent SEC Documents.  As of their respective filing dates, each Parent SEC Document complied (and each document filed with the SEC by Parent after the date hereof and before the Closing Date (“Subsequent SEC Documents”) will comply) in all material respects with the requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) or the Securities Act, as applicable, and each Parent SEC Document, as of its respective filing date and taken together with all other Parent SEC Documents filed prior to such date, did not contain (and each Subsequent SEC Document will not, as of its filing date and taken together with the Parent SEC Documents and Subsequent SEC Documents filed prior to such date, will not contain) any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading, except to the extent modified or corrected in a subsequently filed Parent SEC Document or Subsequent SEC Document, and to the extent based on information (financial or otherwise) provided by the Company or any of its stockholders.  Parent has timely filed and made available to the Company all certifications and statements required by (a) Rule 13a-14 or Rule 15d-14 under the Exchange Act, or (b) Section 906 of the Sarbanes-Oxley Act of 2002 with respect to any Parent SEC Document.  Parent maintains disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act; such controls and procedures are effective to ensure that all material information concerning Parent and its Subsidiaries are made known on a timely basis to the individuals responsible for preparation of Parent SEC Documents and other public disclosure documents.  The Parent SEC Documents contain an audited consolidated balance sheet of Parent as of December 27, 2008 and the related audited consolidated statements of income and cash flow for the year then ended (the “Parent Balance Sheet”) and the related unaudited consolidated statements of income and cash flow for the year then ended (collectively, the “Parent Financials”).  The Parent Financials (i) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), and (ii) present fairly, in all material respects, the consolidated financial condition and results of operations and cash flows of Parent and each of its Subsidiaries as of the dates, and for the periods, indicated therein, except as otherwise noted therein.  Parent has made no Accounting Changes since December 27, 2008,     except as described in the notes to the Parent Financials or required by GAAP. As of the date hereof, Parent is a “well-known seasoned issuer” and is not an “ineligible issuer” as such terms are defined in Rule 405 under the Securities Act.

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3.5           Board Approval.  The Board of Directors of Parent, by resolutions duly adopted (and not thereafter modified or rescinded) by unanimous vote (with no abstentions) at a meeting duly called and held, has (a) approved this Agreement and the Merger, and (b) determined that this Agreement and the terms and conditions of the Merger are fair, advisable and in the best interest of Parent and its stockholders.  No vote of Parent’s stockholders is required in order to consummate the transactions contemplated by this Agreement.

3.6           Taxes.  Neither Parent nor any of its Subsidiaries has taken or agreed to take any action not provided for in this Agreement, or has knowledge of any fact or circumstance whether or not provided for in this Agreement, that is reasonably likely to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.  Parent has no intention to liquidate the Company, convert the Company to a limited liability company or otherwise engage in any transaction that would be treated as a liquidation of the Company for U.S. federal income Tax purposes.

3.7           Litigation.  Except as set forth in Parent’s 10-K filed on February 25, 2009 (excluding the risk factors contained therein the “10-K”) or subsequent filings by Parent with the SEC made on or prior to the date hereof, there is no private or governmental action, suit, proceeding, claim or arbitration or, to the knowledge of Parent, investigation, pending before any Governmental Entity or arbitrator, or, to the knowledge of Parent, threatened against Parent, any of its Subsidiaries or assets of the Parent or any of its Subsidiaries, or, to the knowledge of Parent, any of their respective officers or directors (in their capacities as such) that would reasonably be expected to have a Parent Material Adverse Effect.  Except as set forth in the 10-K or subsequent filings by Parent with the SEC made on or prior to the date immediately prior to the date hereof, there is no judgment, decree or order against Parent or any of its Subsidiaries or, to the knowledge of Parent, any of the directors or officers of Parent or any of its Subsidiaries (in their capacities as such), that would reasonably be expected to prevent, enjoin, or alter or delay any of the transactions contemplated by this Agreement or that, individually or in the aggregate with any such other judgments, decrees and orders, would reasonably be expected to have a Parent Material Adverse Effect.

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3.8           Disclosure.  The information supplied by or on behalf of Parent or any of its Subsidiaries for inclusion or incorporation by reference in the Private Placement Information Statement, if a Private Placement Information Statement is mailed to the Company Stockholders and prospective holders of membership units of Hold Co in accordance with Section 4.5, will not, (i) at the time, if any, that the Private Placement Information Statement (or any amendment thereof or supplement thereto) is mailed to the Company Stockholders and prospective holders of membership units of Hold Co, (ii) the time of the Company Stockholders Meeting, if any, or the time at which written consent of the Company Stockholders to the Hold Co Merger Agreement is obtained, (iii) the time of the Hold Co Interestholder Meeting, if any, or the time at which written consents to this Agreement and the Merger are obtained from prospective holders of membership units of Hold Co, (iv) the effective time of the Hold Co Merger, or (v) the Effective Time, contain any untrue statement of a material fact or fail to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.   Notwithstanding the foregoing, no representation or warranty is made by Parent with respect to statements made or incorporated by reference in the Private Placement Information Statement based on information supplied by or on behalf of Hold Co or the Company for inclusion or incorporation by reference in the Private Placement Information Statement.

3.9           Compliance With Laws.  Except as would not be required to be disclosed in the 10-K if it were filed on the date hereof or the Closing Date and as disclosed in filings by Parent with the SEC subsequent to the 10-K and on or prior to the date immediately prior to the date hereof, and except as would not reasonably be expected to have a Parent Material Adverse Effect, each of Parent and each of its Subsidiaries has complied (and, in the case of Subsequent SEC Documents, will comply) with in all material respects, has not been in material violation of, and has not received any notices of material violation with respect to, any federal, state, local or foreign statute, Law, regulation or Permit issued under such Law.  None of Parent, Merger Sub, or any of their affiliates, subsidiaries or associate companies (within the meaning of the FPA) is a public utility within the meaning of the FPA.  None of Parent, Merger Sub, or any of their affiliates, subsidiaries or associate companies is a holding company in a holding company system that includes a transmitting utility or electric utility within the meaning of section 203(a)(2) of the FPA.

3.10         No Material Adverse Change.  Since February 25, 2009, Parent and each of its Subsidiaries has conducted its business only in the ordinary course of business and there has not occurred: (a) any change, event or condition (whether or not covered by insurance) that, individually or in the aggregate with any other changes, events and conditions, has had, or would reasonably be expected to have, a Parent Material Adverse Effect, (b) any amendment or change in the certificate of incorporation or bylaws of Parent or (c) any damage to, destruction or loss of any assets of Parent (whether or not covered by insurance) that has had or would reasonably be expected to have a Parent Material Adverse Effect, except in each case, as would not be required to be disclosed in the 10-K if filed on the date hereof or on the Closing Date.

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3.11         No Other Representations.  Parent agrees to accept the Company and the Project Companies without reliance on any express or implied representations or warranties of any nature made by or on behalf or imputed to the Company, except as expressly set forth in Article 2 of this Agreement or by the Spin-Off Subsidiary in the Drop Down Agreement.  Without limiting the generality of the foregoing, Parent acknowledges that the Company makes no representation or warranty with respect to (i) any projections, estimates or budgets delivered to or made available to Parent of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of the Company and its Subsidiaries or the future business and operations of the Company and its Subsidiaries or (ii) any other information or documents made available to Parent or its counsel, accountants or advisors with respect to the Company or any of its Subsidiaries or their respective businesses or operations, except as expressly set forth in this Agreement.

ARTICLE 4

COVENANTS AND OTHER AGREEMENTS

4.1           Conduct of Business of Hold Co, the Company and its Subsidiaries.  During the period from the date hereof and continuing until the earlier of the termination of this Agreement and the Effective Time:

(a)            Other than as required by the Drop Down Agreement and the Hold Co Merger Agreement, Hold Co and the Company shall, and shall cause each of their Subsidiaries (other than the Spin-Off Subsidiary and its Subsidiaries) to, (i) use their commercially reasonable efforts to conduct the Project Business and each Project Company Business in the ordinary course of business (except to the extent expressly provided otherwise in this Agreement or as consented to in writing by Parent); (ii) (x) use commercially reasonable efforts to pay all of its debts and Taxes when due, subject to good faith disputes over such debts or Taxes, and (y) to pay or perform its other obligations when due, except, with respect to obligations not Related to the Project Business, to the extent there are negotiations to modify the payment terms of such obligations; and (iii) use commercially reasonable efforts to preserve intact its present business organizations, keep available the services of the Project Employees, preserve its relationships with customers, development partners, suppliers, distributors, licensors, licensees and others having business dealings with it and, subject to compliance with Sections 4.1(d) and 4.1(e), avoid any Project Contract lapses or terminations as a result of a failure of Hold Co, the Company or any of their respective Subsidiaries to take appropriate action in the ordinary course of business;

(b)            The Company shall promptly notify Parent of any event or development, which, individually or in the aggregate with any other event or development, is reasonably likely to cause any of the conditions to closing set forth in Article 5 not to be satisfied; provided that in no event shall Parent be entitled to make a claim for indemnification under Section 7.2(a)(ii) for a breach of this Section 4.1(b) after Closing;

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(c)            Hold Co shall not, and Hold Co and the Company shall cause the Spin-Off Subsidiary not to, enter into any Contract, conduct any business, acquire any asset or incur any Liability that is Related to the Project Business;

(d)            Hold Co and the Company shall not, and shall cause the Spin-Off Subsidiary and its Subsidiaries not to, do, cause or permit any act, including entering into any Contract, that would reasonably be expected to cause the Company, any of its Subsidiaries (other than the Spin-Off Subsidiary and its Subsidiaries) or any of their respective officers, directors or employees to be subject to or responsible for any Liability, other than (i) the Excluded Liabilities (as defined in the Drop Down Agreement) and (ii) with respect to performance obligations pursuant to Contracts (other than Project Contracts) that contain provisions for automatic novation upon the Drop Down Closing so as to substitute the Spin-Off Subsidiary or Hold Co for the Company or the applicable Project Company as a party to such Contracts;

(e)            Hold Co and the Company shall, and shall cause each of their respective Subsidiaries to, cause each Contract entered into by the Company or any of its Subsidiaries on or after the date hereof until the earlier of the termination of this Agreement and the Effective Time to (i) in the case of Contracts that are not Related to the Project Business, contain provisions for automatic novation upon the Drop Down Closing so as to substitute the Spin-Off Subsidiary or Hold Co for the Company or the applicable Project Company as a party to such Contracts and (ii) cause each such Contract that is Related to the Project Business to provide for the prevention of any material change in the rights or obligations of any party in connection with, or termination rights as a result of, the consummation of the transactions contemplated by this Agreement, the Drop Down Agreement, the Distribution or the Hold Co Merger; and

(f)            Neither Hold Co nor the Company will file or become obligated to file any consolidated, combined, unitary, aggregate or affiliated Tax Return for U.S. Federal income Tax or any other Tax purposes.

4.2           Restrictions on Conduct of Business of the Company and its Subsidiaries.

(a)            Without limiting the generality or effect of the provisions of Section 4.1, during the period from the date hereof and continuing until the earlier of the termination of this Agreement and the Effective Time, the Company shall not, and shall cause each of the Project Companies and Newco not to, and Hold Co shall cause the Company not to, do, cause or permit any of the following (except to the extent (w) expressly provided otherwise herein (including on Section 4.2 of the Company Disclosure Letter) or in the Drop Down Agreement, the Hold Co Merger Agreement or the budget provided to Parent prior to the date hereof and as attached in Schedule 8.4(mmmmmm) to this Agreement, (x) as required by applicable Law (in which case the Company will notify Parent before taking any such action to the extent reasonably practicable) or (y) consented to in writing by Parent, such consent not to be unreasonably withheld or delayed, for any of the following that are not Related to the Project Business):

(i)                Cause or permit any amendments to its organizational documents;

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(ii)               Declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock (except for distributions of cash to the Company or any other Subsidiary of the Company), or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, except the issuance of shares of Company Common Stock upon the conversion of Company Preferred Stock issued and outstanding on the date hereof or upon the exercise of Company Options outstanding on the date hereof, or repurchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock except from former employees, non-employee directors and consultants in accordance with agreements existing at the date hereof providing for the repurchase of shares in connection with any termination of service;

(iii)              (A) Enter into any Project Contract that if entered into prior to the date hereof would have been required to be reflected on Section 2.14(a) of the Company Disclosure Letter, or (B) amend or otherwise modify in any material respect or waive any of the material terms of any  Project Contract (except for Project Contracts not required to be set forth on Section 2.14(a) of the Company Disclosure Letter but only to the extent such amendment, had it occurred prior to the date hereof, would not have required such Project Contract (as so amended) to be listed on Section 2.14(a) of the Company Disclosure Letter;

(iv)              Enter into any Contract that is not Related to the Project Business other than (A) Contracts containing provisions for automatic novation upon the Drop Down Closing so as to substitute Hold Co or the Spin-Off Subsidiary for the Company or the applicable Project Company as a party to such Contracts or (B) the Master Sublease;

(v)               Issue or grant any equity-linked securities or agree to issue or grant any equity-linked securities other than (i) the issuance of shares of Company Common Stock upon the conversion of Company Preferred Stock issued and outstanding on the date hereof, and (ii) the issuance of shares of Company Common Stock in accordance with the exercise of stock options outstanding on the date hereof;

(vi)              Make any loans or advances (other than Project Business Payments) to, or any investments in or capital contributions to, or forgive or discharge in whole or in part any outstanding loans or advances of, any Person (other than the Company or a Project Company) other than in the ordinary course of business consistent with current practices as of immediately prior to the date hereof;

(vii)             Transfer or license to any Person any rights to any Project IP Rights;

(viii)            Enter into any employment Contract with a Project Employee or any collective bargaining agreement, unless such contains provisions for automatic consent, waiver or novation and prevention of any material change in the obligations of any party in connection with, or termination rights as a result of the consummation of, the transactions contemplated by this Agreement, the Drop Down Agreement, the Distribution or the Hold Co Merger, or transfer any Project Employee to the Spin-Off Subsidiary or any of its Subsidiaries;

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(ix)              Modify the salary of any Project Employee, grant any severance or termination pay to any Project Employee, or amend or modify any existing severance or termination agreement with any Project Employee;

(x)               Other than in the ordinary course of business consistent with current practices as of immediately prior to the date hereof, adopt or amend any employee or compensation benefit plan, including any stock purchase, stock issuance or stock option plan, or amend any compensation, benefit, entitlement, grant or award provided or made under any such plan, except in each case as required under ERISA or as necessary to maintain the qualified status of such plan under the Code or in a manner that does not apply to any Project Employees, or pay any special bonus or special remuneration to, or increase the salaries or wage rates of, any Project Employee;

(xi)              Grant any exclusive rights of any type or scope that would have any adverse impact or adverse effect on the Company or any of the Project Companies after the Closing;

(xii)             Sell, lease, license or otherwise dispose of or encumber any of the Project Assets;

(xiii)            Incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities or guarantee any debt securities of others, in each case unless such indebtedness, debt securities or guarantee would be repaid and terminated, or automatically novated to Hold Co, as of the Closing, provided that in no event shall the principal amount of the Bridge Loan exceed $75,000,000;

(xiv)            Enter into any material operating lease that would constitute a Project Contract or that does not provide for automatic novation upon the Drop Down Closing so as to substitute Hold Co or the Spin-Off Subsidiary for the Company or the applicable Project Company as a party to such;

(xv)             Other than Project Business Payments, make any capital commitments or enter into any capital leases except for capital leases that are not Related to the Project Business and, if made by the Company or any Project Company, that contain provisions for automatic novation upon the Drop Down Closing so as to substitute Hold Co or the Spin-Off Subsidiary for the Company or the applicable Project Company as a party to such;

(xvi)            Reduce the amount of any insurance coverage, including by way of termination or lapse of coverage, provided by existing insurance policies, other than in the ordinary course of business consistent with current practices as of immediately prior to the date hereof;

(xvii)           Terminate or waive any right or claim of substantial value Related to the Project Business;

(xviii)          Commence a lawsuit other than for a breach of this Agreement;

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(xix)             Acquire or agree to acquire by merging or consolidating with, or by purchasing the assets of, or by any other manner, any business or any company, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets outside the ordinary course of business except pursuant to a Contract that provides for automatic novation upon the Drop Down Closing so as to substitute the Spin-Off Subsidiary or Hold Co for the Company or the applicable Project Company as a party to such Contracts;

(xx)              Make or change any election in respect of Taxes, adopt of change an accounting method in respect of Taxes, file any amendment to a Tax Return, enter into any Tax-related closing agreement, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes;

(xxi)             Enter into any agreement or transaction Related to the Project Business in which any officer or non-employee director of the Company or any of its Subsidiaries (or any member of the immediate family of such officer or director) has an interest; and

(xxii)            Take or agree in writing or otherwise to take, any of the actions described in the foregoing clauses of this Section 4.2.

(b)            Notwithstanding anything to the contrary herein, none of the Company, Hold Co, Newco or the Spin-off Subsidiary shall have any liability hereunder for failure to take any action that results in any breach of a representation, warranty, agreement or covenant herein and for which the Company has made a reasonable request for consent required under Section 4.2 if Parent has unreasonably refused to consent to, or has unreasonably delayed its consent for, such action under Section 4.2, and such breach shall be disregarded for purposes of Article 7 herein (but not for purposes of Articles 5 and 6 herein).

4.3           Further Assurances, Regulatory Matters.  During the period from the date hereof and continuing until the earlier of the termination of this Agreement and the Effective Time:

(a)            On the terms and subject to the conditions set forth in this Agreement, each of the parties hereto shall use commercially reasonable efforts, and shall cooperate with each other party hereto, to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, appropriate or desirable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated hereby, including the satisfaction of the respective conditions set forth in ‎Article 5 (provided that no party shall be required to waive any condition for its benefit).

(b)            Each of Parent, Merger Sub, Hold Co and the Company shall promptly after the execution of this Agreement apply for or otherwise seek, and use commercially reasonable efforts to obtain, all consents, novations and approvals required to be obtained by it for the consummation of the transactions contemplated by this Agreement and the Drop Down Agreement, including the Merger, the Drop Down, the Distribution and the Hold Co Merger.

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(c)            Hold Co, the Company and Parent shall, and shall cause their respective Subsidiaries to: (i) cooperate and consult with each other in connection with the making of all filings, notifications and any other material actions pursuant to this Section 4.3 including, subject to applicable Law, by regulatory and/or permitting counsel, as applicable for the other Parties to review reasonably in advance, and consider in good faith the views of the other Parties in connection with, any proposed written communication to any Governmental Entity and by providing counsel for the other Parties with copies of all filings and submissions made by such Party and all correspondence between such Party (and its advisors) with any Governmental Entity and any other information supplied by such Party and such Party’s subsidiaries to a Governmental Entity or received from such a Governmental Entity in connection with the transactions contemplated by this Agreement; (ii) furnish to the other Parties such information and assistance as such Parties reasonably may request in connection with the preparation of any submissions to, or agency proceedings by, any Governmental Entity; (iii) promptly inform the other Parties of any communications with, and inquiries or requests for information from, such Governmental Entities in connection with the transactions contemplated by this Agreement; and (iv) consult with the other Parties in advance of any meeting or conference, whether in person or by telephone, with any such Governmental Entity or, in connection with any proceeding by a private party related to the Merger, the Hold Co Merger, the Drop Down or the Distribution, with any other Person, and to the extent permitted by such applicable Governmental Entity or other Person, give the other Parties the opportunity to attend and participate in such meetings and conferences.

(d)            Each of Parent, Merger Sub, Hold Co and the Company shall, as soon as practicable, and in any event no later than 15 Business Days from the date of this Agreement, make any initial filings required under the HSR Act.  The parties hereto shall consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the HSR Act or any other federal or state antitrust or fair trade Law.

(e)            Hold Co, the Company and Parent shall cooperate to determine the necessity for (1) any applications, reports or other filings required under any state or local Governmental Rule relating to the ownership and control of the Project Assets or the conduct of the Project Business and each Project Company Business and (2) any further filings that may be necessary, proper or advisable in connection with the matters referred to in clause (1) above; and upon any such determination the Company or Parent, as applicable, shall, or the Company shall cause the applicable Project Company to, file the same.

(f)             Each of Parent, Merger Sub, Hold Co and the Company shall use commercially reasonable efforts to resolve such objections, if any, as may be asserted by any Governmental Entity with respect to the transactions contemplated by this Agreement under the HSR Act, or any other federal, state or foreign statutes, rules, regulations, orders or decrees that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (collectively, “Antitrust Laws”).  Neither Parent, Hold Co nor the Company shall have any obligation to litigate or contest any administrative or judicial action, proceeding or order beyond the earliest of (i) the Termination Date, (ii) the date of a ruling in favor of a Governmental Entity preliminarily enjoining the Merger (excluding temporary restraining orders) issued by a court of competent jurisdiction, or (iii) the date of a ruling in favor of a third party permanently enjoining the Merger issued by a court of competent jurisdiction.  Each of Parent, Hold Co and the Company shall use commercially reasonable efforts to take such action as may be required to cause the expiration of the notice periods under the Antitrust Laws with respect to such transactions as promptly as possible after the execution of this Agreement.  Parent, Hold Co and the Company shall take any and all of the following actions to the extent necessary or appropriate to obtain the approval of any Governmental Entity with jurisdiction over the enforcement of any applicable Antitrust Laws or other Laws regarding the transactions contemplated hereby:  (i) entering into negotiations; (ii) providing information required by Law or governmental regulation; and (iii) substantially complying with any second request for information in accordance with the Antitrust Laws.

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(g)            Following consultation with Parent, the Company and Hold Co will determine strategy, lead all proceedings and coordinate all activities with respect to seeking any actions, consents, approvals or waivers of any Governmental Entity as contemplated pursuant to this Section 4.3, and Parent will reasonably cooperate with the Company and Hold Co in connection with Hold Co and the Company’s activities to obtain such consents, approvals or waivers.  Notwithstanding Hold Co and the Company’s rights to lead all proceedings as provided in the prior sentence, Hold Co and the Company shall not require Parent to, and Parent shall not be required to, take any action with respect to satisfying the closing conditions in this Agreement which would bind Parent irrespective of whether the Closing occurs.

(h)            The Company and Hold Co on one hand and Parent on the other shall keep the other reasonably informed with respect to their knowledge of any private or governmental action, suit, proceeding, claim, arbitration, or investigation that arises relating to the matters described under this Section 4.3, except to the extent necessary to preserve any applicable attorney-client privilege or confidentiality obligations.

(i)             In no event will Parent be obligated to (i) divest any of its or any of its Subsidiaries’ businesses, product lines or assets, or to agree to any divestiture of the Company’s businesses, product lines or assets, or (ii) take or agree to take any other action or agree to any limitation that individually or in the aggregate could reasonably be expected to have a Project Material Adverse Effect or a Parent Material Adverse Effect, before or after the Effective Time.  Neither Hold Co nor the Company nor any of their respective Subsidiaries shall be required to (A) divest or agree to divest any of their respective businesses, product lines or assets, or (B) to take or agree to take any other action or agree to any limitation that individually or in the aggregate could reasonably be expected to have a Project Material Adverse Effect or a material adverse effect on the business of the Company related to the Non-Project Assets.

(j)             Nothing in this Section 4.3 shall (i) limit either Parent’s or the Company’s right to terminate this Agreement pursuant to Section 6.1 so long as such Party has complied in all material respects with its obligations under this Section 4.3, or (ii) require any Party to amend this Agreement or to waive or forbear from exercising any of its rights or remedies hereunder or under this Agreement.

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4.4           No Solicitation.

(a)            From the date hereof until termination of this Agreement pursuant to its terms, Hold Co and the Company shall not, and shall cause each of their respective officers, directors, employees, financial advisors, representatives, agents, Subsidiaries and Affiliates not to, directly or indirectly: (i) solicit, facilitate or encourage any inquiry, proposal or offer from any Person (other than Parent or Merger Sub) in respect of an Acquisition Transaction; (ii) participate in any discussions or negotiations or enter into any agreement with, or provide any non-public information to, any person (other than Parent or Merger Sub) in respect of an Acquisition Transaction; or (iii) accept any proposal or offer from any Person (other than Parent or Merger Sub) in respect of an Acquisition Transaction.  Upon execution of this Agreement, the Company shall immediately cease and cause to be terminated any existing direct or indirect discussions with any Person (other than Parent or Merger Sub) that are in respect of an Acquisition Transaction.  Hold Co and the Company shall promptly (and in no event later than 24 hours after receipt thereof) notify Parent, orally and in writing, of any proposal or offer concerning an Acquisition Transaction, or any request for information from a Person in respect of an Acquisition Transaction (including the identity of the Person making or submitting such proposal, offer or request, and the material terms thereof (including a copy of any written proposal, offer or request)) that is received by the Company or any Affiliate or representative of the Company.  Hold Co and the Company shall keep Parent informed on a reasonably current basis (and, in any event, within 24 hours) of the status and details of any material modifications to any such proposal, offer or request.  “Acquisition Transaction” means any transaction (excluding the Drop Down, the Distribution and the Hold Co Merger, or, as contemplated hereby, by the Drop Down Agreement or by the Hold Co Merger Agreement) involving:  (x) the sale, license, disposition or acquisition of any of the Project Assets, or of all or a substantial portion of the business or assets of Hold Co, the Company or any of their respective Subsidiaries; (y) the issuance, disposition or acquisition of (A) any capital stock or other equity security of Hold Co or the Company (other than Company Capital Stock issued upon exercise of Company Options or conversion of Company Preferred Stock or the equivalent equity interests exchanged therefor in the Hold Co Merger), (B) any option, call, warrant or right (whether or not immediately exercisable) to acquire any capital stock or other equity security of Hold Co or the Company (other than Company Options issued in the ordinary course of business under the Company Stock Plan or the equivalent equity interests exchanged therefor in the Hold Co Merger), or (C) any security, instrument or obligation that is or may become convertible into or exchangeable for any capital stock or other equity security of Hold Co or the Company; or (z) any merger, consolidation, share exchange, business combination, reorganization, recapitalization or similar transaction involving Hold Co or the Company; provided that Acquisition Transaction shall exclude any transaction involving the sale of the Spin-Off Subsidiary, Hold Co, or any or all or substantially all of the Non-Project Assets, so long as:

(i)                such transaction does not include the sale of any of the Project Assets or involve any equity interests in Hold Co or the Company;

(ii)               such transaction does not involve the entry by the Company into any Contract that does not contain a provision for the automatic novation of such Contract to either Hold Co or the Spin-Off Subsidiary as of the Closing, or the imposition of any Liability upon the Company following the Closing; and

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(iii)              no activity that is required or reasonably likely to occur in connection with seeking or consummating such transaction would prevent, interfere with, delay or impede in any material respect the transactions contemplated hereby.

A transaction meeting the description set forth in the preceding proviso is referred to herein as a “Permitted Tech Sale.”  The Company shall not cause or permit any proposed or consummated Permitted Tech Sale to fail or cease to meet the definition of a Permitted Tech Sale in any respect.  Subject to the foregoing, nothing in this Agreement or any Contract executed in connection herewith shall prevent or limit the Company’s or Hold Co’s ability prior to the Effective Time to solicit, negotiate or consummate a Permitted Tech Sale, including providing a copy of this Agreement, the Drop Down Agreement and the Hold Co Merger Agreement to any potential purchaser.

4.5           Securities Laws Matters.

(a)            As soon as practicable after the date hereof, the Company and Hold Co shall use their commercially reasonable efforts to arrange for a purchaser representative (as contemplated by Regulation D under the Securities Act) reasonably satisfactory to Parent (the “Purchaser Representative”) to represent each stockholder of the Company and prospective holder of membership units of Hold Co that is an Unaccredited Investor in connection with the transactions contemplated by the Hold Co Merger Agreement and this Agreement.  The Company and Hold Co shall use their commercially reasonable efforts to obtain a written agreement in a form attached hereto as Exhibit E-1 (a “Stockholders Representation Agreement”) from each Company Stockholder, in which each such stockholder represents in writing that such stockholder either (i) is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, or (ii) has appointed the Purchaser Representative as contemplated by Rule 501 of Regulation D promulgated under the Securities Act by executing and delivering an agreement in a form attached hereto as Exhibit E-2 (a “Purchaser Representative Agreement”).  The Company must obtain a Purchaser Representative Agreement from each Unaccredited Investor prior to 20 Business Days after the Solicitation Date (the “Purchaser Representative Condition”) in order to fulfill the Purchaser Representative Condition.

(b)            As soon as practicable after the date hereof, the parties shall prepare, and, within seven Business Days after the date hereof, deliver to all of the holders of Company Capital Stock and prospective holders of membership units of Hold Co, the Stockholders Representation Agreement, the Purchaser Representative Agreement and an information statement relating to the Hold Co Merger Agreement, this Agreement and the transactions contemplated hereby and thereby (the “Private Placement Information Statement”) (the date of such distribution being referred to herein as the “Solicitation Date”).  Each of Hold Co, the Company, Parent and Merger Sub shall use commercially reasonable efforts to cause the Private Placement Information Statement to comply with all requirements of applicable federal and state securities laws including the requirements of Rules 502 and 506 of Regulation D promulgated under the Securities Act.  The Private Placement Information Statement shall constitute a disclosure document for the offer and issuance of (i) the membership units of Hold Co to be issued in the Hold Co Merger and (ii) the shares of Parent Common Stock to be issued in accordance with this Agreement.  Whenever any event occurs that is required to be set forth in an amendment or supplement to the Private Placement Information Statement, Hold Co, the Company, Parent and Merger Sub shall cooperate in delivering any such amendment or supplement to all the holders of Company Capital Stock and prospective holders of membership units of Hold Co.  Anything to the contrary contained herein notwithstanding, (x) the Company and Hold Co shall not include in the Private Placement Information Statement any information with respect to Parent, Merger Sub or their respective Affiliates or associates, the form and content of which information shall not have been approved by Parent prior to such inclusion; provided, however, that Parent shall not withhold approval of any information required to be included by federal or state law, and (y) Parent shall not include in the Private Placement Information Statement any information with respect to Hold Co, the Company or their respective Affiliates or associates, the form and content of which information shall not have been approved by the Company prior to such inclusion; provided, however, that the Company shall not withhold approval of any information required to be included by federal or state law.  The Private Placement Information Statement shall include the unqualified and unanimous recommendation of Hold Co’s board of directors and the Company’s board of directors (together with Hold Co’s board of directors, the “Company Board”) in favor of adoption of the Hold Co Merger Agreement and this Agreement and approval of the Merger and the Hold Co Merger and the unqualified and unanimous recommendation of the Company Board that the terms and conditions of the Hold Co Merger, the Drop Down, the Distribution, the Merger, the Drop Down Agreement, the Hold Co Merger Agreement and this Agreement are fair, advisable and in the best interests of the Company and its stockholders, Hold Co and the holders of its membership units (the “Company Board Recommendation”).  The Company Board Recommendation shall not be withdrawn or modified in a manner adverse to Parent, and no resolution by the Company Board or any committee thereof to withdraw or modify the Company Board Recommendation in a manner adverse to Parent shall be adopted or proposed.

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(c)            Each of Parent (for itself and Merger Sub), Hold Co and the Company shall provide promptly to the other such information concerning its business and financial statements and affairs as in the reasonable judgment of the providing party or its counsel, may be required or appropriate for inclusion in the Private Placement Information Statement or in any amendments or supplements thereto, and to cause its counsel, auditors and other representatives to cooperate with the other party’s counsel, auditors and other representatives in the preparation of the Private Placement Information Statement.

(d)            If the Purchaser Representative Condition has not been satisfied prior to 20 Business Days after the Solicitation Date, then the Company shall, on the 21st Business Day following the Solicitation Date or such earlier date as may be agreed by Parent and the Company, (i) cause Hold Co to be converted into a Delaware corporation pursuant to the applicable provisions of the DGCL and thereafter (ii) cause the Hold Co Merger to be consummated without any vote of the Company Stockholders pursuant to section 251(g) of the DGCL upon satisfaction of the conditions to closing of the Hold Co Merger set forth in the Hold Co Merger Agreement.  From and after any such conversion, all references to Hold Co, its members, membership units and board of directors in this Agreement shall be deemed to refer to the converted corporation, its stockholders, corresponding capital stock and board of directors, respectively.

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(e)            Following any failure of the Purchaser Representative Condition to be satisfied prior to 20 Business Days after the Solicitation Date, Parent, Merger Sub, Hold Co and the Company shall use commercially reasonable efforts to cause the issuance of Parent Common Stock to Hold Co in the Merger to be exempt from the registration requirements of the Securities Act by reason of Rule 506 of Regulation D promulgated under Section 4(2) of the Securities Act and otherwise to comply with all requirements of applicable federal and state securities laws.

(f)             Parent shall prepare and submit to NASDAQ a notification of listing of additional shares covering the shares of Parent Common Stock to be issued in the Merger and shall use commercially reasonable efforts to obtain, prior to the Effective Time, approval for the quotation of such Parent Common Stock, subject to official notice of issuance to NASDAQ.

(g)            Prior to the Effective Time, Parent shall use commercially reasonable efforts to obtain all regulatory approvals needed to ensure that the Parent Common Stock to be issued in the Merger (to the extent required) is registered or qualified or exempt from registration or qualification under the securities law of every state of the United States and in every foreign jurisdiction in which any registered holder of Company Capital Stock has an address of record on the record date for determining the stockholders entitled to notice of and to vote on the Merger; provided, however, that Parent shall not be required: (i) to qualify to do business as a foreign corporation in any jurisdiction in which it is not now qualified; or (ii) to file a general consent to service of process in any jurisdiction.

(h)            The Company and Hold Co shall take all other action reasonably necessary or advisable in connection with seeking the consent of the Company Stockholders (other than those delivering Written Consents) and Hold Co’s members (other than those delivering Written Consents) required to effect the transactions contemplated by the Hold Co Merger Agreement, this Agreement and the Drop Down Agreement.

4.6           Access to Information.

(a)            Until the earlier of the termination of this Agreement and the Effective Time, (i) the Company shall afford Parent and its accountants, counsel and other representatives, reasonable access during normal business hours to (A) all of the Company’s and each of its Subsidiaries’ properties, books, Contracts, and records, and (B) all other information concerning the business, properties and personnel of the Company or any of its Subsidiaries as Parent may reasonably request, and (ii) the Company shall provide to Parent and its accountants, counsel and other representatives true, correct and complete copies of such internal financial statements as Parent shall reasonably request.

(b)            Subject to compliance with applicable Law, until the earlier of the termination of this Agreement and the Effective Time, the Company shall confer from time to time as requested by Parent with one or more representatives of Parent to discuss any material changes or developments in the operational matters of the Company and each of its Subsidiaries and the general status of the ongoing business and operations of the Company and each of its Subsidiaries.

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(c)            No information or knowledge obtained in any investigation in accordance with this Section 4.6 shall affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the parties hereto to consummate the Merger.

4.7           Confidentiality.  The parties acknowledge that Parent and the Company have previously executed a non-disclosure agreement dated as of January 6, 2009 and that Parent, the Company, Hold Co and Spin-Off Subsidiary have executed a non-disclosure agreement dated March 9, 2009 (together, the “Confidentiality Agreement”), each of which shall continue in full force and effect in accordance with its terms.

4.8           Public Disclosure.  Prior to the Effective Time, neither Parent nor the Company shall issue any press release or otherwise make any public statement with respect to the Merger, this Agreement or any material transaction involving Parent or the Company without the consent of the other, except as may be required by Law, under this Agreement or any listing agreement with a national securities exchange, as would be required to be disclosed in a registration statement under the Securities Act for the issuance of Parent Common Stock in the Merger, or by Parent or the Company in connection with financing activities permitted, in the case of the Company, by Section 4.2.  With respect to the initial press release announcing the Merger and this Agreement, the parties have agreed to the text of the press release and will announce the Merger and this Agreement.  Parent shall not communicate with any Project customers regarding any Project without the prior consent of the Company, such consent not to be unreasonably withheld or delayed.

4.9           Legal Requirements.  Each of Parent, Merger Sub and the Company shall, and shall cause its Subsidiaries, if any, to, (a) use commercially reasonable efforts to comply promptly with all legal requirements which may be imposed on it with respect to the consummation of the transactions contemplated by this Agreement, the Drop Down Agreement, the Distribution or the Hold Co Merger Agreement, (b) promptly cooperate with and furnish information to any party hereto necessary in connection with any such requirements imposed upon such other party in connection with the consummation of the transactions contemplated by this Agreement, the Drop Down Agreement, the Distribution or the Hold Co Merger Agreement, and (c) subject to Section 4.3, use commercially reasonable efforts to obtain (and shall cooperate with the other parties hereto in obtaining) any consent, approval, order or authorization of, or any registration, declaration or filing with, any Governmental Entity, required to be obtained or made in connection with the taking of any action contemplated by this Agreement.

4.10         Treatment as Reorganization.  Each of Parent, Merger Sub, Hold Co and the Company (and their Affiliates) will use commercially reasonable efforts, and each party agrees to cooperate with the other parties and to provide to the other parties such information and documentation as may be necessary, proper or advisable, to cause the Merger to qualify, and will not knowingly take any action not provided for or contemplated in this Agreement that would cause the Merger to fail to qualify, as a reorganization within the meaning of section 368(a) of the Code.  Each of Parent, Merger Sub, Hold Co and the Company will use commercially reasonable efforts to make the representations to Covington & Burling LLP and Cravath, Swaine & Moore LLP, as applicable, referred to in Section 5.2(c) and Section 5.3(c) respectively.

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4.11         Tax Returns.  Parent shall prepare (or cause the preparation of) all Tax Returns of the Company and its Subsidiaries, other than the Spin-off Subsidiary and its Subsidiaries, whose due date (including extensions) is after the Closing Date and that are with respect to any Tax period, or portion thereof, that ends on or before the Closing Date.  All such Tax Returns shall be prepared in good faith in a manner consistent with the past practices of the Company and its Subsidiaries, unless otherwise required by applicable Law as reasonably determined by Parent in good faith.  Hold Co shall and shall cause the Spin-off Subsidiary and their respective employees shall cooperate with Parent in the preparation of such Tax Returns, including by providing information related to the Spin-Off Subsidiary that is requested by Parent and that is relevant, in the judgment of Parent, to the preparation of such Tax Returns.  Parent shall deliver any Tax Returns based on net income prepared pursuant to this Section 4.11 to Hold Co at least fifteen Business Days before the due date thereof (with extensions) for comment by Hold Co.  Parent shall consider any Hold Co comments in good faith, provided, however, that, subject to the other requirements of this Section 4.11, Parent shall have no obligation to accept any such comments; provided further that the Company shall make an election under Section 362(e)(2)(C) on its Tax Return for the tax year that ends on the Closing Date with respect to the Drop Down.   The Company shall not file a consolidated return with the Spin-Off Subsidiary for the period it owns the Spin-off Subsidiary.

4.12         Expenses.  If the Merger is not consummated, all costs and expenses incurred in connection with this Agreement, the Drop Down Agreement, the Hold Co Merger Agreement and the transactions contemplated hereby and thereby and the Distribution (including the fees and expenses of its advisers, accountants and legal counsel) shall be paid by the party incurring such expense.  If the Merger is consummated Hold Co shall be responsible for all fees,  expenses and Taxes of the Company (including the fees and expenses of its advisers, accountants and legal counsel) incurred in connection with this Agreement, the Drop Down Agreement, the Hold Co Merger Agreement and the transactions contemplated hereby and thereby and the Distribution (the “Company Transaction Expenses”).  To the extent that any Company Transaction Expenses have not been either (i) paid prior to the Closing or (ii) assumed by Hold Co or the Spin-Off Subsidiary, Parent shall be entitled to recover such Company Transaction Expenses, beginning with dollar one, and disregarding the Indemnification Threshold provided for in Section 7.3(a), in accordance with Article 7.

4.13         Obligations of Merger Sub.  Subject to the terms of this Agreement, Parent shall take all action necessary to cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and subject to the conditions set forth in this Agreement.

4.14         Hold Co Merger.  Following the date upon which the Hold Co Merger is approved by the stockholders of the Company, and prior to the Closing, the Company and Hold Co shall, and shall cause Newco to, effect the Hold Co Merger pursuant to the Hold Co Merger Agreement (as executed and delivered on the date hereof) and applicable Law.  So long as Hold Co is a limited liability company, Hold Co shall ensure that the issuance of its membership interests in the Hold Co Merger is a transaction exempt from registration under the Securities Act by reason of Rule 506 of Regulation D promulgated under Section 4(2) of the Securities Act.  Following the Hold Co Merger, Hold Co shall cause the Company to perform all of its obligations under this Agreement and the Drop Down Agreement and Hold Co shall, subject to Section 7.10 hereof, be jointly and severally liable for any failure by the Company to perform such obligations and for any other breach by the Company of this Agreement.

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4.15         The Drop Down and the Distribution.

(a)            Without any action required by Parent, within three Business Days of the satisfaction or waiver of each of the conditions to the Closing set forth in Section 5.1, other than those set forth in Section 5.1(e) and those that by their nature are to be satisfied at the Closing, the Company shall effect and cause the Spin-Off Subsidiary to effect the consummation of the Drop Down and the Distribution in accordance with the Drop Down Agreement (as executed and delivered on the date hereof).

(b)            Without limiting the generality of the foregoing, the Company shall:

(i)                use commercially reasonable efforts to obtain, as soon as reasonably practicable after the date hereof, each of the consents set forth on Sections 2.3 of the Company Disclosure Letter and each of the consents and novations set forth on Exhibit H; and

(ii)               submit, and shall cause the Spin-Off Subsidiary to submit, all UCC (as such term is defined in the Drop Down Agreement) or other governmental filings necessary under applicable Law to (a) change the identity of the debtor on any Contributed Assets (as such term is defined in the Drop Down Agreement) subject to a recorded Encumbrance from the Company or a Project Company to the Spin-Off Subsidiary or one of its Subsidiaries and (b) terminate all Encumbrances other than Permitted Encumbrances (disregarding subsection (ii) of the definition of Permitted Encumbrances) recorded in any jurisdiction on any Retained Assets.

4.16         Employment Matters.  (a)  The Company shall, and shall cause each of the Project Companies, to cause the transfer of the employment of each of its respective employees, other than the Project Employees, to the Spin-Off Subsidiary prior to the Closing in a manner designed to minimize any Liability, cost and payments arising under applicable Law; in the event any non-Project Employee refuses to be transferred to the Spin-Off Subsidiary, such employees shall be terminated by the Company in a manner designed to minimize any Liability, cost and payments arising under applicable Law.

(b)            The Company and Parent shall in good faith endeavor to identify and agree prior to the Closing which employees of the Company constitute Project Employees for purposes of this Agreement, notwithstanding the definition thereof in Section 2.11(c) of this Agreement.

4.17         Changes after Signing.  Parent shall promptly notify the Company of any change, occurrence or event, which, individually or in the aggregate with any other changes, occurrences and events, is reasonably likely to cause any of the conditions to Closing set forth in Article 5 not to be satisfied; provided that in no event shall Hold Co be entitled to make a claim for indemnification under Section 7.2(c)(ii) for a breach of this Section 4.17 after Closing.

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4.18         Bridge Loan.  On or prior to the Closing Date, Hold Co shall repay all amounts outstanding under the Bridge Loan in full or novate the Bridge Loan to Hold Co in a form reasonably acceptable to Parent, and cause all Encumbrances placed on the assets of the Company and any of the Project Companies in connection with the Bridge Loan to be released.

4.19         Purchase Orders.  Prior to Closing, the Company shall cause to be canceled, all purchase orders which (i) are not Project Contracts, (ii) have not have not been novated to the Spin-Off Subsidiary prior to the Drop Down Closing, and (iii) are not fully reflected as accounts payable on the Closing Payment List (the “Open Purchase Orders”).

4.20         Payment Lists.  At least three but no more than five Business Days prior to the Closing Date, the Company shall deliver the Closing Payment List to Parent.  At lease three but no more than five Business Days prior to the Holdback Release Date, Hold Co shall provide the Hold Co Payment List to Parent.  The Closing Payment List need not include any accounts payable for which payment in full shall have been sent or otherwise transmitted by the close of business on the Closing Date.

4.21         Tax Information.  The Company and Hold Co will give Parent reasonable access during regular business hours to the Company’s relevant employees and relevant books and records to assist in Parent’s review of, (i) the limitations, if any, to which the Company’s net operating losses are subject under Section 382 of the Code, (ii) the amount of the Company’s research credits under Section 41 of the Code, and (iii) any other tax positions or attributes of the Company and its Subsidiaries.

4.22         HSR Filing Fee.  Parent shall pay on behalf of the Company its filing fee under the HSR Act.

4.23         Closing Registration Statement.  Parent shall prepare an "automatic shelf registration statement" (as defined in Rule 405 of the Securities Act) on Form S-3 for the purpose of registering under the Securities Act all of the shares of Parent Common Stock issued or issuable in the Merger (other than Escrow Shares) for resale by, and for the account of, Hold Co as the selling stockholder thereunder (the "Closing Registration Statement").  Parent shall ensure that the Closing Registration Statement conforms in all respects to the requirements of the Securities Act and the Rules and Regulations thereunder.  At least three (3) Business Days prior to the Closing, Parent shall furnish to the Company and Hold Co a draft of the Closing Registration Statement, which will be subject to the reasonable review and comment of the Company, Hold Co and their counsel.  Parent shall also cause the Parent Common Stock covered by the Closing Registration Statement to be listed on each securities exchange or quotation system on which similar securities issued by Parent are listed or traded.

4.24         Merger Sub.  Promptly following the execution of this Agreement, Parent shall form Merger Sub and shall cause Merger Sub to, and Merger Sub shall, sign a joiner agreement to this Agreement which shall bind Merger Sub to all of the terms and conditions of this Agreement and the transactions contemplated hereby.

4.25         IntercompanyArrangements.  Parent, Hold Co and the Company acknowledge and agree after the Closing that there shall not exist any intercompany arrangement between Hold Co, the Spin-Off Subsidiary, and their respective Subsidiaries, on the one hand, and the Company and its Subsidiaries, on the other hand, that was entered into prior to the Closing, other than the Drop Down Agreement and the other agreements contemplated hereby and thereby.

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ARTICLE 5

CONDITIONS TO THE MERGER

5.1           Conditions to Obligations of Each Party to Effect the Merger.  The respective obligations of each party to consummate the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, which to the maximum extent permitted by Law may be waived in a written agreement of the Company (for itself and Hold Co) and Parent (for itself and Merger Sub) (each such condition is solely for the benefit of the parties hereto and may be waived without notice, Liability or obligation to any Person):

(a)            Time Since Solicitation.  At least ten (10) days shall have lapsed since the Solicitation Date.

(b)            No Injunctions or Restraints; Illegality.  No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger, the Hold Co Merger, the Distribution or the Drop Down shall be in effect, nor shall any proceeding brought by a Governmental Entity seeking any of the foregoing be pending.  No action taken by any Governmental Entity, and no statute, rule, regulation or order shall have been enacted, entered or enforced, which makes the consummation of the transactions contemplated by this Agreement illegal.  Notwithstanding the foregoing, no party may assert the foregoing condition unless such party shall have used commercially reasonable efforts to (i) prevent the entry of any such injunction or order and to appeal as promptly as possible any such injunction or order that may be entered and (ii) oppose such Governmental Entity’s action or the enactment, entering into or enforcement of such statute, rule, regulation or order, as applicable.

(c)            Antitrust Approvals.  All applicable waiting periods under the HSR Act or required foreign antitrust Laws shall have expired or been terminated.

(d)            NASDAQ Quotation.  The shares of Parent Common Stock to be issued in the Merger shall have been authorized for quotation on NASDAQ, subject to official notice of issuance.

(e)            The Hold Co Merger, the Drop Down and the Distribution.  The Hold Co Merger shall have been consummated pursuant to the Hold Co Merger Agreement as executed and delivered on the date hereof (and which agreement has not been amended, modified or supplemented since such date).  The Drop Down and the Distribution shall have been consummated in accordance with the Drop Down Agreement as executed and delivered on the date hereof (and which agreement has not been amended, modified or supplemented since such date).  The Drop Down Agreement shall be in full force and effect.

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5.2           Additional Conditions to Obligations of Hold Co and the Company.  The obligations of Hold Co and the Company to consummate the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, by the Company (each such condition is solely for the benefit of Hold Co and the Company and may be waived in the Company’s sole discretion (on behalf of itself and Hold Co) without notice, Liability or obligation to any Person):

(a)            Representations, Warranties and Covenants.  Each of the representations and warranties made by each of Parent and Merger Sub in this Agreement (excluding the representations and warranties of Parent and Merger Sub contained in Sections 3.3(a) (Authority) and 3.5 (Board Approval) which will be true and correct in all respects, in each case as of the date of this Agreement and at and as of the Closing Date) will be true and correct in all respects (without giving effect to any limitations as to materiality or Parent Material Adverse Effect as set forth therein), in each case as of the date of this Agreement and at and as of the Closing Date as if made on that date (except in any case that representations and warranties that expressly speak as of a specified date or time need only be true and correct as of such specified date or time), except for such failures to be true and correct as would not, in the aggregate, have or reasonably be expected to have a Parent Material Adverse Effect.  Parent shall have performed and complied in all material respects with all covenants and other obligations of this Agreement required to be performed and complied with by it at or before the Closing.

(b)            Receipt of Closing Deliveries.  The Company shall have received each of the agreements, instruments and other documents required to have been delivered to the Company at or prior to the Closing as set forth in Exhibit G and none of such agreements, instruments and other documents shall have been rescinded, amended or revoked.

(c)            Tax Opinion.  The Company shall have received the opinion of Covington & Burling LLP, counsel to the Company, dated the Closing Date, to the effect that, on the basis of the facts, representations and assumptions set forth in such opinion, the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, and each of Parent and the Company will be treated as a party to the reorganization within the meaning of Section 368(b) of the Code.  In rendering such opinion, Covington & Burling LLP may require and rely on customary representations and covenants, including those in Exhibit F-1 and Exhibit F-2, reasonably satisfactory in form and substance to Covington & Burling LLP.

(d)            No Material Adverse Change.  Since the date of this Agreement there shall not have occurred any events or developments of any character that, individually or in the aggregate, has had or is reasonably likely to have a Parent Material Adverse Effect.

(e)            NASDAQ Listing.  Parent shall have caused the Parent Common Stock covered by the Closing Registration Statement to be listed on each securities exchange or quotation system on which similar securities issued by Parent are listed or traded.

(f)             Registration Statement Effective.  The Closing Registration Statement shall have been filed by Parent in conformity with the requirements of the Securities Act and the rules and regulations thereunder, and shall be effective (the "Closing Registration Statement Condition").

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5.3           Additional Conditions to the Obligations of Parent and Merger Sub.  The obligations of Parent and Merger Sub to consummate the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, by Parent (each such condition is solely for the benefit of Parent and Merger Sub and may be waived by Parent in its sole discretion without notice, Liability or obligation to any Person):

(a)            Representations, Warranties and Covenants.  Each of the representations and warranties made by the Company in this Agreement (excluding the representations and warranties of the Company contained in Sections 2.3(a) and (b) (Authority), 2.24 (Board Approvals) and 2.25 (Stockholder Vote) which will be true and correct in all respects, in each case as of the date of this Agreement and at and as of the Closing Date) will be true and correct in all respects (without giving effect to any limitations as to materiality, Project Material Adverse Effect or Company Material Adverse Effect as set forth therein), in each case as of the date of this Agreement and at and as of the Closing Date (except in any case that representations and warranties that expressly speak as of a specified date or time need only be true and correct as of such specified date or time), except for such failures to be true and correct as would not, in the aggregate, have or reasonably be expected to have a Project Material Adverse Effect or a Company Material Adverse Effect.  Each of the representations and warranties made by the Company or the Spin-Off Subsidiary in the Drop Down Agreement (excluding the representations and warranties of the Company contained in Section 3.3 of the Drop Down Agreement which will be true and correct in all respects, as of the date of this Agreement and at and as of the Closing Date) will be true and correct in all respects (without giving effect to any limitations as to materiality, Project Material Adverse Effect or Company Material Adverse Effect as set forth therein), in each case as of the date of this Agreement and as of the date of the Drop Down Closing, as if made on that date (except in any case that representations and warranties that expressly speak as of a specified date or time need only be true and correct as of such specified date or time), except for such failures to be true and correct as would not, in the aggregate, have or reasonably be expected to have a Project Material Adverse Effect or a Company Material Adverse Effect.  The Company and Hold Co shall have performed and complied in all material respects with all covenants and other obligations of this Agreement required to be performed and complied with by it at or before the Closing.

(b)            Receipt of Closing Deliveries.  Parent and Merger Sub shall have received each of the agreements, instruments and other documents required to have been delivered to Parent and Merger Sub at or prior to the Closing as set forth in Exhibit Gand none of such agreements, instruments and other documents shall have been rescinded, amended or revoked.

(c)            Tax Opinion.  Parent shall have received the opinion of Cravath, Swaine & Moore LLP, counsel to Parent, dated the Closing Date, to the effect that, on the basis of the facts, representations and assumptions set forth in such opinion, the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, and each of Parent and the Company will be treated as a party to the reorganization within the meaning of Section 368(b) of the Code.  In rendering such opinion, Cravath, Swaine & Moore LLP may require and rely on customary representations and covenants, including those in Exhibit F-1 and Exhibit F-2, reasonably satisfactory in form and substance to Cravath, Swaine & Moore LLP.

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(d)            No Material Adverse Change.  Since the date of this Agreement there shall not have occurred any event or development of any character that has had or is reasonably likely to have a Company Material Adverse Effect or a Project Material Adverse Effect.

(e)            Appraisal Rights.  If Hold Co is a limited liability company, holders, in the aggregate, of not greater than five (5) percent of the outstanding voting power of the Company Capital Stock, on an as converted to Company Common Stock basis, shall have exercised and/or hold the right to exercise any appraisal rights under the DGCL with respect to the Hold Co Merger Agreement or the Hold Co Merger.

(f)             Company Capitalization.    The Company shall have no outstanding securities other than 100 shares of Company Common Stock that are owned beneficially and of record by Hold Co.  There shall exist no (i) options, warrants, calls, subscriptions or other rights, convertible securities, agreements or commitments of any character obligating the Company or any of its Subsidiaries to issue, transfer or sell any shares of capital stock or other equity interest in, the Company or securities convertible into or exchangeable for such shares or equity interests, (ii) contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of the Company or (iii) voting trusts or similar agreements to which the Company or any of its Subsidiaries is a party with respect to the voting of the capital stock of the Company.

(g)            Bridge Loan.  All amounts outstanding under the Bridge Loan shall have been repaid in full by, or novated to, Hold Co, and all Encumbrances placed on the assets of the Company and any of the Project Companies in connection with the Bridge Loan shall have been released.

(h)            Master Sublease.  In the event that any of the Contracts set forth in Schedule 8.4(gggg) shall not have been terminated or novated to Hold Co or one of its Subsidiaries, other than the Company and any Project Companies, prior to the Drop Down Closing, the Company and the Spin-Off Subsidiary shall have entered into the Master Sublease.

ARTICLE 6

TERMINATION, AMENDMENT AND WAIVER

6.1           Termination.  At any time prior to the Effective Time, this Agreement may be terminated:

(a)            by mutual written consent duly authorized by the respective boards of directors of Parent (or a committee thereof) and the Company;

(b)            by either Parent or the Company, pursuant to a written notice, if the Closing shall not have occurred on or before July 31, 2009 (the “Termination Date”); provided, however, that the right to terminate this Agreement under this Section 6.1(b) shall not be available to any party whose breach of this Agreement has resulted in the failure of the Closing to occur on or before the Termination Date;

(c)            by either the Company or Parent, pursuant to a written notice, if any permanent injunction or other order of a court or other competent Government Entity preventing the consummation of the transactions contemplated by this Agreement shall have become final and nonappealable;

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(d)            by Parent, pursuant to a written notice, if the Company shall have breached any representation, warranty or covenant contained herein and (i) such breach shall not have been cured prior to the Termination Date (provided, however, that no such cure period shall be available or applicable to any such breach which by its nature cannot be cured) and (ii) if not cured at or prior to the Closing, such breach would result in the failure of any of the conditions set forth in Section 5.1 or Section 5.3(a) or (d) to be satisfied (provided, however, that the termination right under this Section 6.1(d) shall not be available to Parent if Parent or Merger Sub is at that time in material breach of this Agreement); or

(e)            by the Company, pursuant to a written notice, if Parent or Merger Sub shall have breached any representation, warranty or covenant contained herein and (i) such breach shall not have been cured prior to the Termination Date (provided, however, that no such cure period shall be available or applicable to any such breach which by its nature cannot be cured) and (ii) if not cured at or prior to the Closing, such breach would result in the failure of any of the conditions set forth in Section 5.1 or Section 5.2(a) or (d) to be satisfied; provided, however, that the right to terminate this Agreement under this Section 6.1(e) shall not be available to the Company if the Company or Hold Co is at that time in material breach of this Agreement).

6.2           Effect of Termination.  If this Agreement is terminated in accordance with Section 6.1, this Agreement shall forthwith become void and there shall be no Liability on the part of Parent, Merger Sub, Hold Co or the Company or their respective officers, directors, stockholders or Affiliates hereunder; provided, however, that each party hereto shall remain liable for any willful breaches of any representations or warranties under this Agreement and for any willful breaches of covenants or other obligations under this Agreement so long as the party claiming such liability is not in material breach of this Agreement; and provided, further, that the Confidentiality Agreement and the provisions of Sections 4.7, 4.8, 4.12, 6.2 and Article 8 (but excluding Section 8.1) shall remain in full force and effect and survive any termination of this Agreement.

6.3           Amendment.  Subject to the provisions of applicable Law, Parent and Hold Co may amend this Agreement at any time prior to or after the Effective Time in accordance with an instrument in writing signed on behalf of each such party, and such amendment shall be binding on each party hereto; provided, however, that no such amendment shall alter or change the amount or kind of consideration to be received on conversion of the Company Capital Stock in the Merger in accordance with Section 1.4.

6.4           Extension; Waiver.  Any party hereto may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties made to such party herein or in any document delivered pursuant hereto, and (c) waive compliance with any of the agreements or conditions for the benefit of such party contained herein.  Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.  Without limiting the generality or effect of the preceding sentence, no delay in exercising any right under this Agreement shall constitute a waiver of such right, and no waiver of any breach or default shall be deemed a waiver of any other breach or default of the same or any other provision in this Agreement.

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ARTICLE 7

ESCROW FUND AND INDEMNIFICATION

7.1           Escrow Fund.  Subject to Section 7.10 hereof, from and after the Closing, the Escrow Fund will be the sole and exclusive remedy available to compensate Parent (on behalf of itself or any other Indemnified Person) for Losses in accordance with this ‎Article 7; it being understood and agreed and the Company and any Company Indemnified Person shall have all rights set forth in the Drop Down Agreement and the Master Sublease and that this Article 7 shall not affect the rights of the Company or of any Company Indemnified Person thereunder, except as set forth in Section 7.2(d).  The value of any given share of Parent Common Stock held in the Escrow Fund shall, for purposes of this ‎Article 7, be as set forth in the Escrow Agreement.

7.2           Indemnification.

(a)            From and after the Closing, subject to this ‎Article 7, Hold Co shall, out of the Escrow Fund, indemnify and hold harmless Parent, the Surviving Company, the Subsidiaries of Parent and the Surviving Company, their respective officers, directors, agents and employees, and each Person who Controls or may Control Parent and the Surviving Company (each of the foregoing, a “Parent Indemnified Person”) from and against any and all losses, liabilities, damages, claims, suits, settlements, reductions in value, costs and expenses, including reasonable costs of investigation, settlement, and defense and reasonable legal fees, court costs, and any interest costs or penalties (collectively, “Losses”), arising out of, related to or otherwise by virtue of:

(i)                any failure of any representation or warranty made by the Company in ‎Article 2 to be true and correct as of the date of this Agreement and as of the Closing Date (as though such representation or warranty were made on the Closing Date), provided that in the case of any such representation or warranty (other than those contained in Sections 2.1 (Organization, Standing and Power), 2.2 (a) (Capital Structure), 2.4(a) and (b) (Financial Statements), 2.5(a) (Absence of Changes), 2.15 (Project Development), 2.17 (Real Property), 2.18(a) (Environmental), 2.19 (Permits) and 2.26 (Disclosures)) that is limited by “material,” “in all material respects,” “Project Material Adverse Effect” or “Company Material Adverse Effect” or any similar term or limitation (excluding the definition of Permitted Encumbrances), the breach or inaccuracy of such representation or warranty and the amount of such Losses will be determined as if “material,” “in all material respects,” “Project Material Adverse Effect,” “Company Material Adverse Effect” or such similar terms (excluding the definition of Permitted Encumbrances) were not included therein;

(ii)               any breach of any of the covenants or agreements made by the Company or Hold Co in this Agreement;

(iii)              any Taxes of the Company or any of its Subsidiaries attributable to any period on or before the Closing, including any Taxes incurred in connection with (x) the Drop Down, the Distribution or the Hold Co Merger that are not paid before the Closing, or (y) the repayment of the Bridge Loan (collectively, the “Pre-Closing Tax Liabilities”);

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(iv)             any failure of any representation or warranty made by the Spin-Off Subsidiary in the Drop Down Agreement to be true and correct in all respects when made and as of the Drop Down Closing (as though such representation, warranty or certification were made at the Drop Down Closing Date);

(v)              any breach of any of the covenants or agreements made by the Company and to be performed prior to the completion of the Drop Down, or by the Spin-Off Subsidiary or Hold Co, in each case under the Drop Down Agreement;

(vi)             any Dissenting Shares Excess Payments;

(vii)            any Pre-Closing Project Liabilities;

(viii)           any Assumed Liabilities under the Drop Down Agreement; or

(ix)              any inaccuracy, including by way of exclusion, of the amounts set forth on either the Closing Payment List, the Hold Co Payment List or the Lease Holdback Amount Certificate.

(b)            In the case of any Taxable period that includes but does not end on the Closing Date (a “Straddle Period”), the amount of Pre-Closing Tax Liabilities based on or measured by income or receipts will be determined based on an interim closing of the books as of the close of business on the Closing Date, and the amount of any Pre-Closing Tax Liabilities not based on or measured by income or receipts for a Straddle Period will be deemed to be the amount of such Tax for the entire period multiplied by a fraction, the numerator of which is the number of days in the portion of the Straddle Period ending at the end of the day that is the Closing Date and the denominator of which is the number of days in such Straddle Period; provided, however, that any and all Tax Liabilities related to, associated with or arising out of or in connection with the Hold Co Merger, the Drop Down, the Distribution (including for this purpose all Tax Liabilities arising as a result of any transfer of assets that is undertaken in order to separate the assets that are held, directly or indirectly, by the Company or any Project Company following the Distribution from the assets that will not be so held), the assets not held by the Company or any Project Company after the Distribution, or the repayment of the Bridge Loan shall be considered to be Pre-Closing Tax Liabilities.  Any compensation-related Taxes for employees that do not remain employees of the Company after the Merger and any employment-related Taxes on the cash out of all equity compensation on or before the Merger, shall be considered Pre-Closing Tax Liabilities.

(c)            From and after the Closing, subject to this ‎Article 7, Parent shall indemnify and hold harmless Hold Co or, after the assignment contemplated by Section 7.9, the Stockholders’ Representative, and Hold Co’s respective officers, directors, agents and employees, and each Person who Controls or may Control Hold Co (each, a “Company Indemnified Person”, and along with the Parent Indemnified Persons, the “Indemnified Persons”) from and against any and all Losses arising out of, related to or otherwise by virtue of:

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(i)                any failure of any representation or warranty made by Parent in Article 3, to be true and correct as of the date of this Agreement and as of the Closing Date (as though such representation or warranty were made on the Closing Date);

(ii)               any breach of any of the covenants or agreements made by Parent in this Agreement; and

(iii)              any Excluded Liabilities under the Drop Down Agreement (except for the Pre-Closing Project Liabilities).

(d)            If, at any time when a Liability Claim for Alternative Recovery Losses is resolved in accordance with this Article 7, at least seventy five percent (75%) of the shares of Parent Common Stock together with the Escrow Cash then remain in the Escrow Fund (the “Escrow Threshold”) and are not subject to any pending Liability Claims (the excess of any such shares over the Escrow Threshold, the “Available Shares”), such Alternative Recovery Losses shall be satisfied first with Available Shares.  In the event that the amount of Alternative Recovery Losses awarded cannot be fully satisfied with Available Shares, Parent may elect to recover such excess Alternative Recovery Losses under this Agreement or from the Spin-Off Subsidiary under the Drop Down Agreement, but without duplicating any such recovery.  Nothing herein shall limit the ability of Parent Indemnified Parties to seek indemnification under the Drop Down Agreement at any time, so long as Alternative Recovery Losses, when finally determined, are satisfied in accordance with this Section 7.2(d).

7.3           Limitations on Indemnification.

(a)            Subject to the following sentence, each of the Parent Indemnified Persons and the Company Indemnified Persons may not recover Losses from the Escrow Fund or Parent, respectively, in respect of any claim for indemnification under ‎Section 7.2(a)(i), 7.2(a)(iv), 7.2(a)(vii) or 7.2(c)(i), respectively, (A) unless and until Losses have been incurred, paid or properly accrued in an aggregate amount greater than $3,200,000 (the “Indemnification Threshold”) and (B) unless each such claim (when aggregated with all claims arising out of the same facts and circumstances) is in excess of $35,000 (and no claims below such amount shall be included when determining whether the Indemnification Threshold has been met).  Notwithstanding the foregoing sentence, (i) the Parent Indemnified Persons will be entitled to recover for, and the Indemnification Threshold and per-claim threshold will not apply to, any claim for indemnification (x) under ‎Section 7.2(a)(i) or 7.2(a)(iv) for any Losses with respect to any failure of any representation or warranty made by the Company in ‎Section 2.1(a)-(g) (Organization, Standing and Power), 2.2(a) (Capital Structure), 2.3(a) and (b) (Authority), 2.9 (Taxes), 2.24 (Board Approval), or 2.25 (Stockholder Vote) or by the Spin-Off Subsidiary in Section 3.1 (Organization, Standing and Power) and Section 3.3 (Validity and Enforceability) of the Drop Down Agreement to be true, or (y) under Section 7.2(a)(iii), and (ii) the Company Indemnified Persons will be entitled to recover for, and the Indemnification Threshold and per-claim threshold will not apply to, any claim for indemnification under ‎Section 7.2(c)(i) for any Losses with respect to failure of any representation or warranty made by the Parent in ‎Sections 3.1 (Organization, Standing and Power),  3.3(a) (Authority) and 3.5 (Board Approval) to be true.  Once the applicable Indemnification Threshold has been exceeded, the Indemnified Persons will be entitled to recover for all such Losses exceeding the Indemnification Threshold, subject to this ‎Article 7.

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(b)            Subject to Section 7.2(d) and as provided in the Drop Down Agreement, the sole source of recovery by Parent Indemnified Parties for Losses under Section 7.2(a) and (b) shall be the Escrow Fund.  The aggregate liability of Parent for Losses under Section 7.2(c) shall not exceed $80,000,000.

(c)            Hold Co shall not have any right of contribution, right of indemnity or other right or remedy against the Surviving Company,  the Project Companies or any of the Project Employees in connection with any indemnification obligation or any other Liability to which Hold Co may become subject under or in connection with this Agreement.

(d)            No Indemnified Person’s rights under this ‎Article 7 shall be adversely affected by any investigation conducted, or any knowledge acquired or capable of being acquired, by such Indemnified Person at any time, whether before or after the execution or delivery of this Agreement or the Closing, or by the waiver of any condition to Closing.

(e)            The Indemnified Persons shall mitigate, to the extent expressly required by applicable Law, any Losses for which such Indemnified Persons seek indemnification under this ‎Article 7 and shall use commercially reasonable efforts to seek any amounts available under insurance coverage or from any other person alleged to be responsible for any Losses payable under this Article 7; it being understood that making a written request for payment from any such insurer or other party shall constitute compliance with this Section 7.3(e) and that no further efforts, including, without limitation, litigation against such insurer or other party, shall be necessary.

(f)             The amount of any Losses payable under this ‎Article 7 shall be net of any amounts actually recovered under applicable insurance policies.

7.4           Escrow Claim Period.  The period during which claims for indemnification from the Escrow Fund may be initiated (the “Claim Period”) shall commence at the Closing Date and terminate at 11:59 p.m. Pacific time on the second anniversary of the Closing Date.  Notwithstanding anything contained in this Agreement to the contrary, at the conclusion of the Claim Period such portion of the Escrow Fund as may be necessary in the reasonable judgment of Parent to satisfy any unresolved or unsatisfied claims for Losses specified in any Claims Notice delivered to the Escrow Agent prior to expiration of the Claim Period shall remain in the Escrow Fund until such claims for Losses have been resolved or satisfied.

7.5           Claims for Indemnification.  At any time that an Indemnified Person has a claim that has resulted or would reasonably be expected to result in a Loss (a “Liability Claim”) that is indemnifiable under ‎Section 7.2, such Indemnified Person shall promptly deliver a notice of such Liability Claim (a “Claims Notice”) to Hold Co (in the case of a claim by a Parent Indemnified Person) or to Parent (in the case of a claim by a Company Indemnified Person).  With respect to a Liability Claim under ‎Section 7.2(a) against the Escrow Fund, at the same time Parent delivers a Claims Notice to Hold Co, Parent shall deliver a Claims Notice to the Escrow Agent.  A Claims Notice shall (A) be signed by an officer of Parent or by Hold Co, as applicable, (B) describe the Liability Claim in reasonable detail (based upon the information then possessed by Parent or Hold Co, as applicable) and (C) indicate the amount (or a good faith estimate of the amount, if necessary) of the Loss that has been or is reasonably likely to be suffered by the Indemnified Persons.  No delay in or failure to give a Claims Notice by an Indemnified Person to Parent or Hold Co and the Escrow Agent, as applicable, pursuant to this ‎Section 7.5 shall adversely affect any of the other rights or remedies that the Indemnified Person has under this Agreement or alter or relieve any parties to this Agreement of their obligations to indemnify the Indemnified Persons pursuant to this ‎Article 7, except and to the extent that such delay or failure has materially prejudiced such parties.

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7.6           Objections to and Payment of Claims.

(a)            Hold Co or Parent, as applicable, may object to any Liability Claim set forth in such Claims Notice by delivering written notice to Parent or Hold Co, respectively, (with a copy to the Escrow Agent if a Claims Notice was delivered to the Escrow Agent) of any objection (an “Objection Notice”).  Such Objection Notice must describe the grounds for such objection in reasonable detail.

(b)            If an Objection Notice is not delivered by Hold Co to Parent (with a copy of the Escrow Agent if a Claims Notice was delivered to the Escrow Agent) or by Parent to Hold Co, in each case within 30 days after delivery of the Claims Notice, such failure to so object shall be an irrevocable acknowledgment by each party to this Agreement that the Indemnified Persons are entitled to indemnification under ‎Section 7.2 for the Losses set forth in such Claims Notice in accordance with this ‎Article 7.

(c)            If the Claims Notice was delivered to the Escrow Agent and no Objection Notice was delivered to the Escrow Agent within 30 days of the delivery of the Claims Notice with respect to all or a portion of the Losses claimed in the Claims Notice, the Escrow Agent shall deliver to Parent, as soon as practicable, shares of Parent Common Stock and Escrow Cash from the Escrow Fund, as provided for in the Escrow Agreement, having a value equal to the amount of the Losses set forth in such Claims Notice to which no objection was made; provided that, to the extent that the amount of the Losses set forth in the Claims Notice (or portion thereof) is an estimate, Parent (on behalf of itself or any other Parent Indemnified Person) shall not be so entitled to receive any of the amounts set forth above in respect of such portions of such estimated Losses unless and until the amount of such estimated Losses are finally determined.  If the Claims Notice was delivered to Parent and no Objection Notice was delivered to Hold Co within 30 days of the delivery of the Claims Notice with respect to all or a portion of the Losses claimed in the Claims Notice, Parent shall promptly pay Hold Co, on behalf of the Company Indemnified Persons, cash equal to the amount of the Losses set forth in such Claims Notice to which no objection was made); provided that, to the extent that the amount of the Losses set forth in the Claims Notice (or portion thereof) is an estimate, Hold Co (on behalf of itself or any other Company Indemnified Person) shall not be so entitled to receive any of the amounts set forth above in respect of such portions of such estimated Losses unless and until the amount of such estimated Losses are finally determined.

(d)            Notwithstanding anything to the contrary in this Agreement, Indemnified Persons, other than Parent and Hold Co, do not have any individual right to object to any claim made in a Claims Notice under this ‎Article 7 and, except as aforesaid, any and all claims made in Claims Notice on behalf of the Indemnified Persons may be objected to only by Parent or Hold Co, as applicable.

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7.7           Resolution of Objections to Claims.

(a)            If Hold Co or Parent, as applicable, objects in writing to any Liability Claim made in any Claims Notice within 30 days after delivery of such Claims Notice, Hold Co and Parent shall attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims.  If Hold Co and Parent should so agree, a memorandum setting forth such agreement shall be prepared and signed by both parties and, with respect to a Loss suffered by any Company Indemnified Person, within 10 days of entering into such memorandum, Parent shall pay Hold Co in cash (on behalf of the Company Indemnified Persons) for the agreed upon amount of Losses in accordance with Section 7.6(c) as if such Losses had not been objected to.  To the that extent a Liability Claim will be satisfied by the Escrow Fund, a copy of the memorandum setting forth the agreement shall be delivered to the Escrow Agent and the Escrow Agent shall be entitled to rely on any such memorandum and shall distribute the shares of Parent Common Stock and Escrow Cash, if any, as soon as practicable from the Escrow Fund in accordance with the terms thereof.

(b)            If no such agreement can be reached after good-faith negotiation and after 30 days after delivery of an Objection Notice, either Parent or Hold Co may institute arbitration proceedings to resolve such dispute in accordance with Section 8.11.  Upon the final decision by the arbitrator, a memorandum setting forth such decision shall be prepared and signed by both parties and within 30 days of such decision, (i) if any Losses were determined to be suffered by a Company Indemnified Person, Parent shall pay Hold Co in cash (on behalf of the Company Indemnified Persons) for the determined amount of Losses in accordance with Section 7.6(c) as if such Losses had not been objected to and (ii) if any Losses were determined to be suffered by a Parent Indemnified Person, a copy of such memorandum shall be delivered to the Escrow Agent and the Escrow Agent shall be entitled to rely on any such memorandum and shall distribute the shares of Parent Common Stock and Escrow Cash, if any, as soon as practicable from the Escrow Fund in accordance with the terms thereof.

(c)            During the period from the giving of any Claims Notice through the institution of binding arbitration in accordance with Section 7.7(b), each party will be entitled to the timely production by the other party of relevant, non-privileged and non-confidential documents or copies thereof.

7.8           Third-Party Claims.

(a)            If Parent receives written notice of a third-party claim that Parent believes is reasonably likely to result in a claim for indemnification in accordance with Section 7.2 by or on behalf of a Parent Indemnified Person, Parent shall promptly notify Hold Co of such third-party claim and provide Hold Co the opportunity to direct, through counsel of its own choosing (who shall be reasonably acceptable to Parent), at its own cost, the defense or settlement of such claim; provided, that (a) the claim or proceeding solely seeks (and continues to seek) monetary damages; (b) Parent reasonably determines in good faith that there is no reasonable likelihood that such claim will cause the Parent Indemnified Persons to suffer Losses in excess of the amount held in the Escrow Fund from time to time during the pendency of the claim, excluding any amount subject to any other claim; and (c) Hold Co agrees in writing that the Escrow Fund is available to cover any amounts paid in resolution or settlement of the claim subject to the limitations set forth in Section 7.3 (the conditions set forth in clauses (a) through (c) are, collectively, the “Parent Litigation Conditions”).  If the Parent Litigation Conditions are met and Hold Co elects to assume the defense of any such claim or proceeding, Hold Co shall allow Parent to participate in such defense, but in such case the expenses of Parent shall be paid by Parent.  A Parent Indemnified Person shall provide Hold Co and its counsel with reasonable access to its records and personnel relating to any such claim, assertion, event or proceeding during normal business hours and shall otherwise cooperate with Hold Co in the defense or settlement thereof, and the Parent Indemnified Persons shall be reimbursed from the Escrow Fund for all of their reasonable out-of-pocket expenses in connection therewith.  If Hold Co elects to direct the defense of any such claim or proceeding, the Parent Indemnified Persons shall not pay, or permit to be paid, any part of any claim or demand arising from such asserted liability unless (i) Hold Co consents in writing to such payment, (ii) Hold Co withdraws from the defense of such asserted liability and Parent undertakes the defense or settlement of such claim or proceeding and settles such claim or proceeding in accordance with this Section 7.8 or (iii) a final judgment from which no appeal may be taken by or on behalf of Hold Co is entered against Parent Indemnified Persons for such liability.  If Hold Co fails to defend or if, after commencing or undertaking any such defense, Hold Co fails to prosecute or withdraws from such defense, or if any of the Parent Litigation Conditions cease to be met, Parent shall have the right to undertake the defense or settlement thereof (which shall be conducted by Parent diligently and in good faith), and retain counsel, reasonably satisfactory to Hold Co, at Hold Co’s expense; provided, however, that Hold Co shall not be required to pay the fees and expenses of more than one counsel for the Parent Indemnified Persons in any single action, except to the extent that two or more such Parent Indemnified Persons shall have conflicting interests in the outcome of such action and, without the consent of Hold Co in writing, no settlement any such claim with third-party claimants shall be determinative of the amount of Losses relating to such matter.  If Hold Co consents to any such settlement, Hold Co shall not have any power or authority to object to the amount or validity of any claim by or on behalf of any Parent Indemnified Person for indemnity with respect to such settlement except to the extent the limits set forth in Section 7.3 apply.  Notwithstanding any other provision of this Agreement, any costs and expenses of defense and investigation, including court costs and reasonable attorneys fees incurred or suffered by the Parent Indemnified Persons in connection with the defense of any third party claim that, if adversely determined against the Parent Indemnified Person, would be indemnifiable hereunder, shall constitute Losses that shall be indemnifiable under Section 7.2.

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(b)            If Hold Co receives written notice of a third-party claim that Hold Co believes is reasonably likely to result in a claim for indemnification in accordance with Section 7.2 by or on behalf of a Company Indemnified Person, Hold Co shall promptly notify Parent of such third-party claim and provide Parent the opportunity to direct, through counsel of its own choosing (who shall be reasonably acceptable to Hold Co), at its own cost, the defense or settlement of such claim; provided that (a) the claim or proceeding solely seeks (and continues to seek) monetary damages; (b) Hold Co reasonably determines in good faith that there is no reasonable likelihood that such claim will cause the Company Indemnified Persons to suffer Losses in excess of the aggregate liability of Parent for Losses under Section 7.2(c) as set forth in Section 7.3(b), excluding any amount subject to any other claim; and (c) Parent agrees in writing to be liable for any amounts paid in resolution or settlement of the claim subject to the limitations set forth in Section 7.3 (the conditions set forth in clauses (a) through (c) are, collectively, the “Hold Co Litigation Conditions”).  If the Hold Co Litigation Conditions are met and Parent elects to assume the defense of any such claim or proceeding, Parent shall allow Hold Co to participate in such defense, but in such case the expenses of Hold Co shall be paid by Hold Co.  The Company Indemnified Persons shall provide Parent and its counsel with reasonable access to its records and personnel relating to any such claim, assertion, event or proceeding during normal business hours and shall otherwise cooperate with Parent in the defense or settlement thereof, and the Company Indemnified Persons shall be reimbursed for all of their reasonable out-of-pocket expenses in connection therewith.  If Parent elects to direct the defense of any such claim or proceeding, the Company Indemnified Persons shall not pay, or permit to be paid, any part of any claim or demand arising from such asserted liability unless (i) Parent consents in writing to such payment, (ii) Parent withdraws from the defense of such asserted liability and Hold Co undertakes the defense or settlement of such claim or proceeding and settles such claim or proceeding in accordance with this Section 7.8 or (iii) a final judgment from which no appeal may be taken by or on behalf of Hold Co is entered against a Company Indemnified Person for such liability.  If Parent fails to defend or if, after commencing or undertaking any such defense, Parent fails to prosecute or withdraws from such defense, or if any of the Hold Co Litigation Conditions are met, Hold Co shall have the right to undertake the defense or settlement thereof (which shall be conducted by Hold Co diligently and in good faith), and retain counsel, reasonably satisfactory to Parent, at Parent’s expense; provided, however, that Parent shall not be required to pay the fees and expenses of more than one counsel for the Company Indemnified Persons in any single action, except to the extent that two or more such Company Indemnified Persons shall have conflicting interests in the outcome of such action and, without the consent of Parent in writing, no settlement of any such claim with third-party claimants shall be determinative of the amount of Losses relating to such matter.  If Parent consents to any such settlement, Parent shall not have any power or authority to object to the amount or validity of any claim by or on behalf of any Company Indemnified Person for indemnity with respect to such settlement except to the extent the limits set forth in Section 7.3 apply.  Notwithstanding any other provision of this Agreement, any costs and expenses of defense and investigation, including court costs and reasonable attorneys fees incurred or suffered by the Company Indemnified Persons in connection with the defense of any third party claim that, if adversely determined against the Company Indemnified Person, would be indemnifiable hereunder, shall constitute Losses that shall be indemnifiable under Section 7.2.

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7.9           Stockholders’ Representative.  In the event that, after Closing, Hold Co will no longer be able to exercise it rights or perform its obligations under this Agreement, Hold Co shall, in connection with such event, appoint a stockholders’ representative and/or a trustee or other agent acting for the benefit of the equity holders of Hold Co, reasonably acceptable to Parent, that shall have the right to act on its behalf from and after such appointment for all purposes under this Agreement, including this Article 7 (the “Stockholders’ Representative”).  In no event shall the appointment of the Stockholders’ Representative confer any right upon the Company Stockholders that they would not have absent such appointment.

7.10         Exclusive Remedy.  Except as otherwise provided in Section 7.1 in relation to rights under the Drop Down Agreement and Section 7.2(d), this Article 7 will provide the exclusive remedy for any misrepresentation, breach of warranty, covenant or other agreement or other claim arising out of this Agreement.  Notwithstanding anything to the contrary contained in this Agreement, nothing herein shall prevent any Indemnified Person from bringing a claim for fraud or intentional misrepresentation against any Person whose intentional misrepresentation in connection with a representation or warranty contained herein, or whose fraud, has caused such Indemnified Person to incur Losses or has limited the Losses recoverable by such Indemnified Person.  If the Merger is not consummated the parties’ Liability with respect to breaches of this Agreement, including breaches of representations and warranties or failure to perform covenants, shall be governed by Section 6.2.  Nothing in this Agreement shall in any way limit the right to recover Losses under the Drop Down Agreement.

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ARTICLE 8

GENERAL PROVISIONS

8.1           Survival of Representations and Warranties.  The representations and warranties made by the Company shall survive the Closing and remain in full force and effect until the second anniversary of the Closing Date, and no claim for indemnification pursuant to Article 7 for breach thereof may be made at any time thereafter.  The representations and warranties made by Parent and Merger Sub in this Agreement shall survive the Closing and remain in full force and effect until the 6 month anniversary of the Closing Date, and no claim for indemnification pursuant to Article 7 for breach thereof may be made at any time thereafter.  The covenants of each party that are to be performed prior to the Closing shall not survive the Closing but the indemnification for breaches of any such covenants shall survive the Closing  until the second anniversary of the Closing Date, and no claim for indemnification pursuant to Article 7 for breach thereof may be made at any time thereafter. Notwithstanding any other provision of this Agreement, no right to indemnification in accordance with Article 7 in respect of any claim based upon any misrepresentation or breach of a representation, warranty or covenant that is set forth in a valid Claim Notice delivered prior to the survival period for such representation, warranty or covenant shall be affected by the expiration of such representations, warranty or covenant.

8.2           Notices.  All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally, one Business Day after having been dispatched by a nationally recognized overnight courier service or when sent via facsimile (with acknowledgement of complete transmission) to the parties hereto at the following address (or at such other addresses for a party as shall be specified by like notice):

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(i)                if to Parent, Merger Sub or the Company (after the Effective Time), to:

First Solar, Inc.

620 Eighth Avenue, Floor 44

New York, NY 10018

Attention: Vice President, General Counsel

Facsimile: 646-366-2248

with a copy (which shall not constitute notice) to:

Cravath, Swaine & Moore LLP

Worldwide Plaza

825 Eighth Avenue

New York, NY 10019

Attention: Erik R. Tavzel, Esq.

Facsimile No.:  (212) 474-3700

(ii)               if to the Company (prior to the Effective Time), to:

OptiSolar Inc.

31302 Huntwood Avenue

Hayward, CA 94544

Attention: Lisa Bodensteiner

Facsimile: (510) 401-5160

with a copy (which shall not constitute notice) to:

Covington & Burling LLP

The New York Times Building

620 Eighth Avenue

New York, NY 10018

Attention:  William Collins

Jack Bodner

Facsimile No.: 212.841.1010

and

Farella Braun + Martel LLP

Russ Building

235 Montgomery Street, 17th floor

San Francisco, CA 94104

Attention: Sam Dibble

Facsimile No.: 415.954.4480

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(iii)              if to the Hold Co, to:

OptiSolar Holdings LLC

c/o OptiSolar Inc.

31302 Huntwood Avenue

Hayward, CA 94544

Attention: Lisa Bodensteiner

Facsimile: (510) 401-5160

with a copy (which shall not constitute notice) to:

Covington & Burling LLP

The New York Times Building

620 Eighth Avenue

New York, NY 10018

Attention:  William Collins

Jack Bodner

Facsimile No.: 212.841.1010

and

Farella Braun + Martel LLP

Russ Building

235 Montgomery Street, 17th floor

San Francisco, CA 94104

Attention: Sam Dibble

Facsimile No.: 415.954.4480

8.3           Terms Generally; Interpretation.  Except to the extent that the context otherwise requires:

(a)            when a reference is made in this Agreement to an Article, Section, Subsection, Exhibit, Schedule or Recitals, such reference is to an Article, Section or Subsection of, an Exhibit or Schedule or the Recitals to, this Agreement unless otherwise indicated;

(b)            the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

(c)            the words “include,” “includes” or “including” (or similar terms) are deemed to be followed by the words “without limitation”;

(d)            the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

(e)            any gender-specific reference in this Agreement include all genders;

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(f)             the definitions contained in this Agreement are applicable to the other grammatical forms of such terms;

(g)            a reference to any legislation or to any provision of any legislation will include any modification, amendment or re-enactment thereof, any legislative provision substituted therefor and all rules, regulations and statutory instruments issued or related to such legislation.

(h)            references to a Person are also to its permitted successors and assigns;

(i)             unless indicated otherwise, mathematical calculations contemplated hereby will be made to the fifth decimal place, but payments will be rounded to the nearest whole cent;

(j)             the parties have participated jointly in the negotiation and drafting hereof; if any ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties, and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any provision hereof; no prior draft of this Agreement nor any course of performance or course of dealing will be used in the interpretation or construction hereof;

(k)            the contents of the Company Disclosure Letter and the Schedules to this Agreement form an integral part of this Agreement and shall have as full effect as if they were incorporated in the body of this Agreement, and any reference to “this Agreement” or described in ‎Section 8.3(d) shall be deemed to include the Schedules to this Agreement, provided that, reference to or disclosure of any item or other matter in the Company Disclosure Letter (including the attachments thereto) is not intended to broaden the scope of any representation or warranty of the Company or Hold Co contained in this Agreement or to create any covenant on the part of the Company or Hold Co;

(l)             no parol evidence will be introduced in the construction or interpretation of this Agreement unless the ambiguity or uncertainty at issue is plainly discernable from a reading of this Agreement without consideration of any extrinsic evidence; and

(m)           the doctrine of election of remedies will not apply in constructing or interpreting the remedies provisions of this Agreement or the equitable power of a court considering this Agreement or the Merger.

8.4           Definitions.

For purposes of this Agreement:

(a)            “Accounting Change” has the meaning set forth in the Financial Accounting Standard Board’s Statement of Financial Accounting Standards No. 154;

(b)            “Acquisition Transaction” has the meaning set forth in Section 4.4(a);

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(c)            an “Affiliate,” when used with reference to any Person, means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such first Person;

(d)            “Agreement” has the meaning set forth in the Preamble;

(e)            “Alternative Recovery Losses” means Losses for which indemnification is available both under this Agreement and under the Drop Down Agreement;

(f)             “Antitrust Laws” has the meaning set forth in Section 4.3(f);

(g)            “BLM” means the Bureau of Land Management of the United States Department of the Interior, or any successor agency thereto;

(h)            “BLM Easements” means all easements and land use rights Related to the Project Business granted to the Company or its Subsidiaries by the BLM;

(i)             “BLM Permit Applications” means Form SF-299’s, Plans of Development, Cost Recovery Agreements, and all other related materials submitted to the BLM, or materials supporting such documents but not submitted to the BLM, for the purpose of obtaining rights-of-way grants for each of the Projects;

(j)             “Bridge Loan” means that certain note offering by and between the Company and certain investors closed as of February 10, 2009 and any further indebtedness incurred by the Company during the period from the date hereof through the Closing;

(k)            “Business Day” means any day on which banks are not required or authorized to be closed in San Francisco, California;

(l)             “Canadian Tax Act” means the Income Tax Act (Canada) and regulations thereunder, as amended;

(m)           “CAL ISO” means the California Independent System Operator;

(n)            “CAL ISO Deposit” means the deposit in the amount of $500,000 plus interest made by the Company or its Subsidiaries with CAL ISO relating to the interconnection applications for the Garnet and Jasper projects.

(o)            “CAMD” has the meaning set forth in Section 8.4(ggg);

(p)            “Certificate” has the meaning set forth in Section 1.4(c);

(q)            “Certificate of Incorporation” has the meaning set forth in Section 2.2(c);

(r)             “Certificate of Merger” has the meaning set forth in Section 1.1;

(s)            “Claim Period” has the meaning set forth in Section 7.4;

(t)             “Claims Notice” has the meaning set forth in Section 7.5;

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(u)            “Closing” has the meaning set forth in Section 1.2;

(v)            “Closing Date” has the meaning set forth in Section 1.2;

(w)           Closing Payment Amount” means the aggregate amount of liabilities set forth on the Closing Payment List to be delivered by the Company to Parent at least three (3) Business Days prior to the Closing Date;

(x)            “Closing Payment List” means a list of all accounts payable of the Company and its Subsidiaries that are not in respect of Project Contracts and are past due pursuant to the terms under which they were incurred that shall not have been paid by the close of business on the Closing Date;

(y)            “Closing Project Business Payments” has the meaning set forth in Section 1.6;

(z)            “Closing Shares” has the meaning set forth in Section 1.4(c)(i);

(aa)          “Code” has the meaning set forth in the Recitals;

(bb)          “Commercial Operation” means, with respect to any Project, that the inverters, solar panels and other equipment and facilities aggregating to the Minimum Installed Capacity of such Project have been installed, are interconnected to a transmission system and are capable of generating and transmitting electrical energy continuously and reliably in accordance with Prudent Industry Practices to such transmission system in connection with commercial sales, excluding, however, electric energy delivered to such transmission system in connection with testing, start-up or commissioning;  provided, however, that Commercial Operation shall not occur before the occurrence of (a) “commercial operation”  (or any similar term or concept) under any Contract consisting of a power purchase agreement, other off-take agreement or contractual arrangement for the sale of energy from such Project, or (b) if there is no such Contract as described in clause (a), then “substantial completion” (or any similar term or concept) under the Contract for installation of the material equipment and balance of plant for such Project;

(cc)          “Company” has the meaning set forth in the Preamble;

(dd)          “Company Board” has the meaning set forth in Section 4.5(b);

(ee)          “Company Board Recommendation” has the meaning set forth in Section 4.5(b);

(ff)            “Company Capital Stock” has the meaning set forth in Section 1.4;

(gg)          “Company Common Stock” means the common stock of the Company par value $0.001 per share;

(hh)          “Company Disclosure Letter” has the meaning set forth in Section 2;

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(ii)            “Company Indemnified Person” has the meaning set forth in Section 7.2(c);

(jj)            “CompanyMaterial Adverse Effect” means any effect that is materially adverse in relation to the condition (financial or otherwise), properties, assets, Liabilities, business, operations or results of operations of the Company and its Subsidiaries, taken as a whole; provided, however, that in no event shall any of the following be deemed, either alone or in combination, to constitute, nor shall any of the following be taken into account in determining whether there has been, a Company Material Adverse Effect:  (i) any effect arising from or relating to changes in general business, economic, or securities markets conditions, (ii) any acts of war or other hostilities or terrorism, (iii) any changes affecting the solar power industry generally, (iv) any effect that results from any action taken pursuant to the express provisions of this Agreement (other than the Drop Down or the Distribution), including any action taken with the written consent or at the written direction of Parent or Merger Sub, or (v) any effect that results from a change in Law or GAAP;

(kk)          “Company Options” means all options exercisable for Company Capital Stock;

(ll)            “Company Preferred Stock” means the preferred stock of the Company par value $0.001 consisting of Senior Preferred A-1 Stock, Senior Preferred A-2 Stock, Senior Preferred B-1 Stock, Junior Preferred A-1 Stock, Junior Preferred A-2 Stock, Junior Preferred A-3 Stock, Junior Preferred A-4 Stock, Junior Preferred A-5 Stock, Junior Preferred A-6 Stock and Junior Preferred A-7 Stock;

(mm)        “Company Stock Plan” has the meaning set forth in Section 2.2(c);

(nn)          “Company Stockholders” means the holders of Company Capital Stock as of the date hereof;

(oo)          “Company Stockholders Meeting” has the meaning set forth in Section 2.25;

(pp)          “Company Transaction Expenses” has the meaning set forth in Section 4.11;

(qq)          “Confidentiality Agreement” has the meaning set forth in Section 4.7;

(rr)            “Contract” means options, warrants, calls, rights, commitments or (written or oral) contracts, agreements, instruments, arrangements, understandings, commitments or undertakings, including leases, licenses, guarantees, sublicenses and subcontracts;

(ss)          “Control” means, as to any Person, the possession of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by Contract or otherwise.  The verb “Control” and the term “Controlled” have correlative meanings;

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(tt)            “December 31 Balance Sheet Date” has the meaning set forth in Section 2.5(a);

(uu)         “Delaware Secretary” has the meaning set forth in Section 1.1;

(vv)         “DGCL” has the meaning set forth in Section 1.1;

(ww)        “DLLCA” means the Delaware Limited Liability Company Act, as amended form time to time.

(xx)           “Dissenting Shares” has the meaning set forth in Section 1.10(a);

(yy)          “Dissenting Shares Excess Payments” has the meaning set forth in Section 1.10(c);

(zz)           “Distribution” has the meaning set forth in the Recitals;

(aaa)        “Drop Down” has the meaning set forth in the Recitals;

(bbb)       “Drop Down Agreement” has the meaning set forth in the Recitals;

(ccc)        “Effective Time” has the meaning set forth in Section 1.1;

(ddd)        “Employee Plan” has the meaning set forth in Section 2.10(a);

(eee)        “Encumbrances” means any mortgage, lien, pledge, hypothecation, right of others, encumbrance, title defect, title retention, retention agreement, interest, option, security interest of any kind, claim, charge, easements, covenants, pledges, licenses, preemptive rights, rights of first refusal or first offer, proxies, levies, voting trusts or agreements, restrictions on title or transfer of any nature whatsoever or any other similar restriction or limitation;

(fff)          “Environment” means all types of soil (saturated or otherwise), surface waters, groundwater, land, stream or other aquatic sediments, surface or subsurface strata, wetlands, ambient air and indoor air;

(ggg)       “Environmental Attributes” means all current attributes of an environmental or other nature that are created or otherwise arise from the generation of electricity from an eligible electric generating facility or the electric energy capacity or other generation-based products produced therefrom.  Forms of such attributes include any and all environmental air quality credits, green credits, including carbon credits, emissions reduction credits, certificates, tags, offsets, allowances, or similar products or rights, howsoever entitled, resulting from the avoidance of the emission of any gas, chemical, or other substance, including mercury, nitrogen oxide, sulfur dioxide, carbon dioxide, carbon monoxide, particulate matter or similar pollutants or contaminants of air, water or soil gas, chemical, or other substance.  Environmental Attributes include those currently existing under local, state, regional, federal, or international legislation or regulation relevant to the avoidance of any emission described in this definition under any governmental, regulatory or voluntary program, including the United Nations Framework Convention on Climate Change (“UNFCCC”) and related Kyoto Protocol or other programs, Laws or regulations involving or administered by the Clean Air Markets Division of the Environmental Protection Agency or successor administrator (collectively with any local, state, regional, or federal entity given jurisdiction over a program involving transferability of Environmental Attributes, the “CAMD”);

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(hhh)       “Environmental Condition” has the meaning set forth in Section 2.18(b);

(iii)           “Environmental Law” means all applicable Laws concerning pollution, protection of human health (as it relates to non-occupational exposures to Hazardous Materials), protection of historic and archaeological resources, protection of natural or wildlife resources, or protection of the Environment including Laws relating to emission, discharges, released, or threatened Releases of Hazardous Materials into the air, surface water, ground water, or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of Hazardous Materials, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act, the Resource Conservation and Recovery Act , the Clean Air Act, the Endangered Species Act and the Clean Water Act, each as amended and in effect on the Closing Date;

(jjj)           “ERISA” means the Employee Retirement Income Security Act of 1974, as amended;

(kkk)        “Escrow Agent” has the meaning set forth in Section 1.4(c)(i);

(lll)           “Escrow Agreement” has the meaning set forth in Section 1.4(c)(i);

(mmm)     “Escrow Amount” has the meaning set forth in Section 1.4(c)(i);

(nnn)       “Escrow Cash” has the meaning set forth in the Escrow Agreement.

(ooo)       “Escrow Fund” has the meaning set forth in Section 1.4(c)(i);

(ppp)       “Exchange Act” has the meaning set forth in Section 3.4;

(qqq)       “Excluded Liabilities” shall have the meaning set forth in the Drop Down Agreement;

(rrr)          “Financial Liabilities” means liabilities that require or may require settlement in cash, excluding any impairment or defect in the quality of any asset;

(sss)        “Financial Statements” has the meaning set forth in Section 2.4(a);

(ttt)          “Foreign Plan” has the meaning set forth in Section 2.10(f);

(uuu)       “FPA” means the Federal Power Act, as amended from time to time;

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(vvv)       “French Amount” means the US dollar equivalent, using the exchange rate published in the Wall Street Journal for the Business Day prior to the Closing Date, of the aggregate amount in the accounts at BNP Paribas of all Subsidiaries of the Company organized in France as of the Closing, as set forth on the certificate delivered pursuant to Exhibit G, Item12.

(www)     “GAAP” has the meaning set forth in Section 2.4(a);

(xxx)         “Governmental Entity” has the meaning set forth in Section 2.3(c);

(yyy)       “Hazardous Material” means (a) any petroleum or petroleum products, flammable explosives, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, paint, mine tailings or other by-products or waste products resulting from mining- and beneficiation-related activities, (b) any chemicals or other materials or substances which are defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes, “ “restricted hazardous wastes,” “toxic substances,” “toxic pollutants” or words of similar import under any Environmental Law, and (c) any other chemical or other material or substance, exposure to which is prohibited, limited or regulated by any Governmental Entity under any Environmental Law as of the Effective Time;

(zzz)         “Hold Co” has the meaning set forth in the Preamble;

(aaaa)      “Hold Co Interestholder Meeting”has the meaning set forth in Section 2.25(b);

(bbbb)     “Hold Co Litigation Conditions” has the meaning set forth in Section 7.8(b);

(cccc)      “Hold Co Merger” has the meaning set forth in the Recitals;

(dddd)     “Hold Co Merger Agreement” has the meaning set forth in the Recitals;

(eeee)      “Hold Co Payment Certificate” means the list of all payments made by Hold Co or any of its Subsidiaries between the Closing Date and the Holdback Release Date against any of the accounts payable set forth on the Closing Payment List;

(ffff)         “Hold Co Payments” means the aggregate amount of payments made by Hold Co or any of its Subsidiaries set forth on the Hold Co Payment Certificate;

(gggg)     “Holdback Leases” means each of the Contracts set forth on Schedule 8.4(gggg) that (i) is assigned to Spin-Off Subsidiary or Hold Co, but without releasing the Company from its obligations thereunder, or (ii) has not been terminated or novated, so as to substitute the Spin-Off Subsidiary or Hold Co for the Company or the applicable Project Company as a party to such Contract, in each case prior to the Drop Down Closing.

(hhhh)     “HSR Act” has the meaning set forth in Section 2.3(c);

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(iiii)          “Indemnified Person” has the meaning set forth in Section 7.2(c)

(jjjj)          “Indemnification Threshold” has the meaning set forth in Section 7.3(a);

(kkkk)      “Intellectual Property” means the rights associated with or arising out of any of the following:  (i) domestic and foreign patents and patent applications, together with all reissuances, divisionals, continuations, continuations-in-part, revisions, renewals, extensions, and reexaminations thereof, (“Patents”); (ii) trade secret rights and corresponding rights in other non-public proprietary information (whether or not patentable), including ideas, formulas, compositions, inventor’s notes, discoveries and improvements, know-how, manufacturing and production processes and techniques, testing information, research and development information, inventions, invention disclosures, blueprints, drawings, specifications, designs, plans, proposals and technical data, business and marketing plans, market surveys, market know-how and customer lists and information (“Trade Secrets”); (iii) all copyrights, copyrightable works, rights in databases, data collections, “moral” rights, mask works, copyright registrations and applications therefor and corresponding rights in works of authorship; (iv) all trademarks, service marks, logos, trade dress and trade names indicating the source of goods or services, and other indicia of commercial source or origin (whether registered, common Law, statutory or otherwise), all registrations and applications to register the foregoing anywhere in the world and all goodwill associated therewith (“Trademarks”); (v) all computer software and code, including assemblers, applets, compilers, source code, object code, development tools, design tools, user interfaces and data, in any form or format, however fixed; and (vi) all domain names, Internet electronic addresses, uniform resource locators and alphanumeric designations associated therewith and all registrations for any of the foregoing;

(llll)          “IP Agreement” has the meaning set forth in Section 2.8(f);

(mmmm)  “IRCA” has the meaning set forth in Section 2.11(d);

(nnnn)     any reference to a Person’s “knowledge” means the actual knowledge, of such Person’s executive officers after due inquiry of their direct reports, provided that with respect to the Company, executive officers shall mean Randall Goldstein, Phil Rettger, Darien Spencer and Lisa Bodensteinerand direct reports shall mean (i) with respect to Randy Goldstein:  Nam Nguyen, Lisa Bodensteiner, Stephen Shulman and Arun Banskota, (ii) with respect to Phil Rettger:  Monica Lamb, Jim Tyler, Michael Garey, John Sakers, Alan Bernheimer and Darien Spencer, (iii) with respect to Darien Spencer:  Stephen Rush, Frank Lazo and Gautam Ganguly, and (iv) with respect to Lisa Bodensteiner:  Gregory Blue and Liz Nevis (it being understood that any representations and warranties given in this Agreement are not given by any such persons, and that such persons shall have no individual Liability whatsoever to any person with respect to any such representations and warranties, and Parent and Merger Sub hereby waive any and all claims they may have against such persons with respect thereto);

(oooo)     “Law” means the law of any jurisdiction, whether international, multilateral, multinational, national, federal, state, provincial, local or common law, act, statute, ordinance, regulation, rule, code, order, judgment, injunction, decree, directive, treaty or official directive promulgated by a Governmental Entity;

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(pppp)     “Lease Holdback Amount” means the aggregate amount of rent, including interest, late fees and any other charges accrued under the applicable Holdback Lease, including any remaining Liability under or related to such Holdback Lease after termination of the same, as of Closing, due over the term of the Contract for each of the Holdback Leases, as set forth in a certificate from the Company delivered to Parent at Closing (the “Lease Holdback Amount Certificate”) it being understood that the aggregate amount of rent due over the term of each potential Holdback Lease as of the date hereof is set forth in Section 2.14(b)(x) of the Company Disclosure Letter;

(qqqq)     “Lease Holdback Amount Certificate” shall have the meaning set forth in Section 8.4(pppp).

(rrrr)         “Lease Holdback Release Date” shall have the meaning set forth in Section 1.4(c)(i).

(ssss)      “Lease Holdback Shares” shall have the meaning set forth in Section 1.4(c)(i).

(tttt)         “Liability” means any and all debts, liabilities and obligations of any kind, whether accrued or fixed, absolute or contingent, matured or unmatured, determined or undetermined or on- or off-balance sheet, known or unknown;

(uuuu)     “Liability Claim” has the meaning set forth in Section 7.5;

(vvvv)     “Losses” has the meaning set forth in Section 7.2(a);

(wwww)  “Master Sublease” has the meaning set forth in the Drop Down Agreement.

(xxxx)        any reference to an event, change, condition or effect being “material” with respect to any Person means any event, change, condition or effect that is material in relation to the condition (financial or otherwise), properties, assets (including intangible assets), Liabilities, business, operations or results of operations of such Person and its Subsidiaries, taken as a whole;

(yyyy)     “Merger” has the meaning set forth in the Recitals;

(zzzz)        “Merger Consideration” has the meaning set forth in Section 1.4(c);

(aaaaa)    “Merger Sub” has the meaning set forth in the Recitals;

(bbbbb)  “Merger Sub Common Stock” has the meaning set forth in Section 1.4(b);

(ccccc)    “Minimum Installed Capacity” means the installed capacity in MW for each Project;

(ddddd)  “MW” means megawatt(s) AC.

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(eeeee)    “Newco” has the meaning set forth in the Recitals;

(fffff)        “Non-Project Assets” has the meaning set forth in Section 2.16(c);

(ggggg)   [Intentionally Omitted];

(hhhhh)   “Objection Notice” has the meaning set forth in Section 7.6(a);

(iiiii)         “Other Project Assets” has the meaning set forth in Section 2.16(b);

(jjjjj)         “Parent” has the meaning set forth in the Preamble;

(kkkkk)    “Parent Balance Sheet” has the meaning set forth in Section 3.4;

(lllll)         “Parent Common Stock” has the meaning set forth in Section 1.4(c)(i);

(mmmmm) “Parent Capital Stock” means the Parent Common Stock and the Parent Preferred Stock;

(nnnnn)   “Parent Financials” has the meaning set forth in Section 3.4;

(ooooo)   “Parent Indemnified Person” has the meaning set forth in Section 7.2(a);

(ppppp)   “Parent Litigation Conditions” has the meaning set forth in Section 7.8(a);

(qqqqq)   “Parent Material Adverse Effect” means any effect that is materially adverse in relation to the condition (financial or otherwise), properties, assets, Liabilities, business, operations or results of operations of Parent and its Subsidiaries, taken as a whole; provided, however, that in no event shall any of the following be deemed, either alone or in combination, to constitute, nor shall any of the following be taken into account in determining whether there has been, a Parent Material Adverse Effect: (i) any effect arising from or relating to changes in general business, economic or securities markets conditions, (ii) any acts of war or other hostilities or terrorism, (iii) any changes affecting the solar power industry generally, (iv) any effect that results from any action taken pursuant to the express provisions of this Agreement, including any action taken with the written consent or at the written direction of the Company or Hold Co, hereby, (v) any change in the trading price of Parent Common Stock (it being understood that the underlying cause of the change in trading may be deemed to constitute and may be taken into account in determining whether there has been a Parent Material Adverse Effect) or (vi) any effect that results from a change in Law or GAAP;

(rrrrr)        “Parent Preferred Stock” means the preferred stock of Parent, par value $0.001 per share;

(sssss)    “Parent SEC Documents” has the meaning set forth in Section 3.4;

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(ttttt)                          “Parent Stock Plan” has the meaning set forth in Section 3.1(a);

(uuuuu)                     “Parent Trading Price” means the volume weighted average price of one share of Parent Common Stock (as reported, absent manifest error, on Bloomberg) for the ten consecutive trading days ending on and including the trading day that is two trading days preceding the Closing Date;

(vvvvv)                     “Patents” has the meaning set forth in Section 8.4(kkkk);

(wwwww)                  “Pending Agreements” has the meaning set forth in Section 2.14(f);

(xxxxx)                         “Permit” means any permit, license, approval, consent or authorization issued by a Governmental Entity;

(yyyyy)                     “Permit Applications” has the meaning set forth in Section 2.19(a).

(zzzzz)                         “Permitted Encumbrances” means (i) liens for taxes not yet due or being contested in good faith, (ii) Encumbrances which do not have a Company Material Adverse Effect or a Project Material Adverse Effect, and (iii) mechanics’, carriers’, workers’, repairers’ and similar statutory liens arising or incurred in the ordinary course of business for amounts that are not delinquent and that are not material, either individually or in the aggregate;

(aaaaaa)                     “Permitted Retained Liabilities” has the meaning set forth in Section 2.5(c);

(bbbbbb)                   “Permitted Tech Sale” has the meaning set forth in Section 4.4(a);

(cccccc)                     a “Person” means any individual, firm, corporation, partnership, company, limited liability company, division, trust, joint venture, association, Governmental Entity or other entity or organization;

(dddddd)                   “PG&E” means Pacific Gas and Electric Company, a California corporation;

(eeeeee)                     “PPA” means any Contract for the sale of the electricity and/or Environmental Attributes of a Project;

(ffffff)                         “Pre-Closing Project Liabilities” shall have the meaning set forth in the Drop Down Agreement.

(gggggg)                   “Pre-Closing Tax Liabilities” has the meaning set forth in Section 7.2(a)(iii) and Section 7.2(b);

(hhhhhh)                   “Private Placement Information Statement” has the meaning set forth in Section 4.5(b);

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(iiiiii)                           “Project” means each of the solar power projects under development by the Company, either directly or through a Subsidiary, identified on Schedule 8.4(iiiiii);

(jjjjjj)                           “Project Assets” has the meaning set forth in Section 2.16(b);

(kkkkkk)                     “Project Business” means the Company’s and its Subsidiaries businesses directly related to the Projects;

(llllll)                           “Project Business Information” means all originals and all copies of the files, documents, ledgers, instruments, papers, financial records, databases, compilations, books and records and similar information, whether in paper, digital or other tangible or intangible form that are Related to the Project Business;

(mmmmmm)               “Project Business Payments” means (I) prepayments, deposits, payments for land rights, permits, letters of credit in support of PPA’s, and similar payments made by the Company or any of its Subsidiaries that (1) are for the Project Business, and (2) (A) were made between January 1, 2009 and the date hereof and are set forth on Section 2.4 of the Company Disclosure Letter, (B) were made between the date hereof and Closing pursuant to the budget set forth on Schedule 8.4(mmmmmm), (C) were approved by Parent in writing prior to such expenditure, or (D) are Project Pre-Payments made between January 1, 2009 and the date hereof, and (II) the pro rata portion, based on the period starting on the Closing Date and ending on July 17, 2010, of the premium paid by OptiSolar Farms Canada Inc. pursuant to the insurance policy numbered “CP 292084867” by and between OptiSolar Farms Canada Inc. and Continental Casualty Company, which policy became effective as of July 17, 2008, plus the pro rata portion, based on the period starting on the Closing Date and ending on July 17, 2010, of the premium paid by OptiSolar Farms Canada Inc. pursuant to the Commercial Wrap-Up Liability Policy by Lloyd’s Underwriters, which policy became effective as of July 17, 2008;

(nnnnnn)                   “Project Business Payments Certificate” has the meaning set forth in Section 1.6;

(oooooo)                   “Project Company” means each of the wholly-owned Subsidiaries of the Company set forth on Section 2.1(a) of the Company Disclosure Letter other than Hold Co, the Spin-Off Subsidiary and Newco;

(pppppp)                   “Project Company Business” has the meaning set forth in Section 2.1(h);

(qqqqqq)                   “Project Contract” means each Contract that is Related to the Project Business to which the Company or any of its Subsidiaries is a party other than those Contracts set forth on Section 2.13 of the Company Disclosure Letter;

(rrrrrr)                         “Project Employees” has the meaning set forth in Section 2.11(c);

(ssssss)                     “Project Environmental Reports” has the meaning set forth in Section ‎2.18(a);

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(tttttt)                         “Project Fixed Assets” has the meaning set forth in Section 2.16(a);

(uuuuuu)                   “Project IP Rights” has the meaning set forth in Section 2.8(a);

(vvvvvv)                   “Project Material Adverse Effect” means (a) with respect to the Topaz Project, receipt by the Company or the Topaz Project Company of written notice (whether directly or, in the case of clause (i), in an administrative or other public record) of any of the following (i) from the Board of Supervisors of San Luis Obispo County in the Topaz Conditional Use Permit (CUP) proceedings, that the issuance of the Topaz CUP is denied; (ii) from any counterparty to the Real Property Agreements related to the Topaz Project, which individually or in the aggregate impacts at least 10% of the aggregate acreage constituting land rights thereunder, terminating such Real Property Agreements or alleging a material default under such Real Property Agreements, unless the Company promptly cures any such alleged default or provides reasonable evidence that such allegation is untrue; (iii) from Cal-ISO or PG&E, that the interconnection queue position is terminated; or (iv) from PG&E, that the Topaz PPA is terminated or alleging that a material default has occurred under the Topaz PPA for which PG&E intends to terminate the Topaz PPA, unless the Company promptly cures any such alleged default or provides reasonable evidence that such allegation is untrue; or (b) any event, occurrence, change or effect that, individually or in the aggregate materially and adversely impacts (financially or otherwise) the Project Business, other than that part of the Project Business relating to the Topaz Project, taken as a whole (taking account of the ability of the Company, the Surviving Company or any Project Company to acquire, permit, develop, finance, construct, interconnect, own, operate and achieve commercial operation of the Projects (exclusive of the Topaz Project); provided, however,  in no event shall any of the following be deemed, either alone or in combination, to constitute, nor shall any of the following be taken into account in determining whether there has been, a Project Material Adverse Effect:  with respect forgoing clause (b), (A) any effect arising from or relating to changes in general business, economic or securities markets conditions, (B) any acts of war or other hostilities or terrorism, (C) any changes affecting the solar power industry generally, (D) any effect that results from any action taken pursuant to the express provisions of this Agreement (other than the Drop Down or the Distribution), including any action taken with consent or the direction of Parent or Merger Sub, or (E) any effect that results from a change in Law or GAAP);

(wwwwww)               “Project Pre-Payments” has the meaning set forth in Section 2.4(b);

(xxxxxx)                       “Project Registered Intellectual Property” has the meaning set forth in Section 2.8(b);

(yyyyyy)                   “Prudent Industry Practices” shall mean the practices, methods, equipment, specifications, and standards of care, skill, safety and diligence, as the same may change from time to time, but applied in light of the facts known at the time, as are generally applied or utilized under comparable circumstances by experienced and prudent professionals in respect of the design, development, permitting, construction, interconnection, commissioning, maintenance, financing and operation of solar generating facilities of comparable type and complexity to a Project.  “Prudent Industry Practices” do not necessarily mean the best practice, method, or standard of care, skill, safety and diligence in all cases, but is instead intended to encompass a range of acceptable practices, methods, and standards;

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(zzzzzz)                       “PUHCA” means Public Utility Holding Company Act of 1935, as amended;

(aaaaaaa)                   “Purchaser Representative” has the meaning set forth in Section 4.5(a);

(bbbbbbb)                 “Purchaser Representative Agreement” has the meaning set forth in Section 4.5(a);

(ccccccc)                   “Purchaser Representative Condition” has the meaning set forth in Section 4.5(a);

(ddddddd)                 “10-K” has the meaning set forth in Section 3.7;

(eeeeeee)                   “Real Property” has the meaning set forth in Section 2.17(a);

(fffffff)                        “Real Property Agreements”has the meaning given to it in Section 2.17(a);

(ggggggg)                 “Real Property Rights” has the meaning given to it in Section 2.17(a);

(hhhhhhh)                 “Registration Rights Agreement” means the Registration Rights Agreement by and between Parent and Hold Co in substantially the form attached hereto as Exhibit K;

(iiiiiii)                          “Related to the Project Business” means related to, used or held for use in the Project Business or any Project Company Business, whether or not related to, used or held for use in any other business or otherwise;

(jjjjjjj)                          “Release” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migrating, disposing or dumping of a Hazardous Material into the Environment (including, without limitation, the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Materials);

(kkkkkkk)                   “Required Permits” has the meaning set forth in Section 2.19;

(lllllll)                          “Required Hold Co Merger Vote” has the meaning set forth in Section 2.25;

(mmmmmmm)            “Required Vote” has the meaning set forth in Section 2.25(b);

(nnnnnnn)                 “Retained Permit Rights” has the meaning set forth in Section 2.19(a);

(ooooooo)                 “SEC” means the United States Securities and Exchange Commission.

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(ppppppp)                 “Securities Act” means the Securities Act of 1933, as amended;

(qqqqqqq)                 “Shortlisted Projects” means the projects set forth on Schedule 8.4(qqqqqqq);

(rrrrrrr)                        “Solicitation Date” has the meaning set forth in Section 4.5(b);

(sssssss)                   “Spin-off Subsidiary” has the meaning set forth in the Recitals;

(ttttttt)                        “Stockholders’ Representation Agreement” has the meaning set forth in Section 4.5(a);

(uuuuuuu)                 “Straddle Period” has the meaning set forth in Section 7.2(b);

(vvvvvvv)                 “Subsequent SEC Documents” has the meaning set forth in Section 3.4;

(wwwwwww)            a “Subsidiary” of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least 50% of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person;

(xxxxxxx)                     “Surviving Company” has the meaning set forth in Section 1.1;

(yyyyyyy)                 “Tax” has the meaning set forth in Section 2.9(a);

(zzzzzzz)                     “Tax Authority” has the meaning set forth in Section 2.9(a);

(aaaaaaaa)                 “Tax Return” has the meaning set forth in Section 2.9(a);

(bbbbbbbb)              “Tech Environmental Reports”has the meaning set forth in Section 2.18(b);

(cccccccc)                 “Termination Date” has the meaning set forth in Section 6.1(b);

(dddddddd)              “Topaz Phase I” means the first phase of the Topaz Project consisting of 210 MW;

(eeeeeeee)                 “Topaz Phase II” means the second phase of the Topaz Project consisting of 340 MW;

(ffffffff)                      “Topaz PPA” means the Power Purchase and Sale Agreement between PG&E and the Topaz Project Company, executed by PG&E on July 1, 2008 and by the Topaz Project Company on June 30, 2008;

(gggggggg)              “Topaz Project” means the 550 MW Project under development by the Company (through the Topaz Project Company) in San Luis Obispo County, California; and

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(hhhhhhhh)              “Topaz Project Company” means Topaz Solar Farms LLC, a Delaware limited liability company and a wholly-owned Subsidiary of the Company;

(iiiiiiii)                         “Trademarks” has the meaning set forth in Section 8.4(kkkk);

(jjjjjjjj)                         “Trade Secrets” has the meaning set forth in Section 8.4(kkkk);

(kkkkkkkk)                 “Transfer Contract” means each Contract that is not Related to the Project Business to which the Company or any of its Subsidiaries is a party;

(llllllll)                         “UNFCCC” has the meaning set forth in Section 8.4(ggg);

(mmmmmmmm)         “Unaccredited Investor” means a Person who is not an “Accredited Investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act;

(nnnnnnnn)              “Support Agreement” has the meaning set forth in the Recitals; and

(oooooooo)              “Written Consent” shall have the meaning set forth in the Recitals.

(pppppppp)              “Canadian Amount” means the US dollar equivalent, using the exchange rate published in the Wall Street Journal for the Business Day two days prior to the Closing Date, of the aggregate amount in the bank accounts in the name of all Subsidiaries of the Company organized in Canada as of the Closing, as set forth on the certificate delivered pursuant to Exhibit G, Item 12.

(qqqqqqqq)              “Italian Amount” means the US dollar equivalent, using the exchange rate published in the Wall Street Journal for the Business Day two days prior to the Closing Date, of the aggregate amount in the bank accounts in the name of all Subsidiaries of the Company organized in Italy as of the Closing, as set forth on the certificate delivered pursuant to Exhibit G, Item 12.

8.5           Counterparts.  This Agreement may be executed in one or more counterparts (whether delivered by facsimile or otherwise, including but not limited to electronic delivery), each of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto; it being understood that all parties hereto need not sign the same counterpart.

8.6           Entire Agreement; No Third Party Beneficiaries.  This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including all the exhibits attached hereto, the Company Disclosure Letter, (a) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, except for the Confidentiality Agreement, which shall continue in full force and effect, and shall survive any termination of this Agreement, in accordance with its terms, and (b) are not intended to confer, and shall not be construed as conferring, upon any Person other than the parties hereto any rights or remedies hereunder (except the provisions of Article 7, which are intended to be for the benefit of the persons covered thereby and may, to the extent provided therein, be enforced by such persons). No covenant or other undertaking in this Agreement shall constitute an amendment to any employee benefit plan, program, policy or arrangement, and any covenant or undertaking that suggests that an employee benefit plan, program, policy or arrangement will be amended shall not be understood to effect such amendment, such amendment becoming effective only upon the adoption of a written amendment in accordance with the amendment procedures of such plan, program, policy or arrangement.

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8.7           Assignment.  Except as set forth in Section 7.9, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties (whether by operation of Law or otherwise) without the prior written consent of the other parties except by Parent after the Effective Time to an Affiliate of Parent or in connection with a merger of Parent or a sale of substantially all of the assets of Parent.  In no event shall such assignment relieve Parent of its obligations hereunder.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.

8.8           Severability.  Any term or provision of this Agreement that is held by a court of competent jurisdiction or arbitrator to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the invalid, void or unenforceable term or provision in any other situation or in any other jurisdiction.  If the final judgment of such court or arbitrator declares that any term or provision hereof is invalid, void or unenforceable, the parties agree to reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the original intention of the invalid or unenforceable term or provision.

8.9           Failure or Indulgence Not Waiver; Remedies Cumulative.  No failure or delay on the part of either party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.  Except as otherwise provided herein all rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

8.10         GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, IRRESPECTIVE OF THE CHOICE OF LAWS PRINCIPLES OF THE STATE OF NEW YORK, AS TO ALL MATTERS, INCLUDING MATTERS OF VALIDITY, CONSTRUCTION, EFFECT, ENFORCEABILITY, PERFORMANCE AND REMEDIES.

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8.11         Binding Arbitration.  From and after the Effective Time, any dispute, claim or controversy arising out of or relating to this Agreement or the Escrow Agreement including, by way of illustration and not limitation, the negotiation, breach, termination, enforcement, interpretation or validity hereof or thereof, including any request for specific performance, claim based on contract, tort, statute or constitution or the determination of the scope or applicability of this agreement to arbitrate, will be determined by arbitration in San Francisco, CA before one arbitrator.  The arbitration will be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures, as modified in this Section.

(a)            The arbitrator will have the power to order hearings and meetings to be held in such place or places as he or she deems in the interests of reducing the total cost to the parties of the arbitration.  The arbitration proceedings will be conducted in English.

(b)            The arbitrator will have the power to order any remedy, including monetary damages, specific performance and all other forms of legal and equitable relief, except that the arbitrator will not have the power to order punitive damages.  The arbitrator may hear and rule on dispositive motions as part of the arbitration proceeding (e.g., motions for summary disposition).

(c)            Each party will be entitled to the timely production by the other party of relevant, non-privileged and non-confidential documents or copies thereof.  If the parties are unable to agree on the scope and/or timing of such document production, the arbitrator will have the power, upon application of any party, to make all appropriate orders for the production of documents by any party.

(d)            Before the arbitrator establishes the facts of the case, each party will be entitled to examine witnesses by deposition to provide non-privileged testimony that is relevant to the controversies, claims or disputes at issue.  If the parties are unable to agree on the propriety, scope or timing of a deposition, the arbitrator, upon the application of any party, may make all appropriate orders in connection with a proposed deposition.

(e)            The arbitrator may appoint expert witnesses only with the consent of all of the parties to the arbitration.

(f)             The arbitrator’s fees and the administrative expenses of the arbitration will be paid equally by the parties to the arbitration.  Each party to the arbitration will pay its own costs and expenses (including attorney’s fees) in connection with the arbitration.

(g)            The award rendered by the arbitrator will be final and binding on the parties.  The award rendered by the arbitrator may be entered into any court having jurisdiction, or application may be made to such court for judicial acceptance of the award and an order of enforcement, as the case may be.  Such court proceeding will disclose only the minimum amount of information concerning the arbitration as is required to obtain such acceptance or order.

(h)            Except as required by Law, neither party nor the arbitrator may disclose the existence, content or results of an arbitration brought in accordance with this Agreement.

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(i)             Each party to this Agreement hereby agrees that in connection with any such action process may be served in the same manner as notices may be delivered under ‎‎Section 8.2 and irrevocably waives any defenses it may have to service in such manner.

8.12         WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

8.13         Specific Performance.  The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at Law or in equity.

[Signatures begin on the next page]

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Each of Parent, the Company and Hold Co have caused this Agreement to be executed and delivered as of the date first written above.

FIRST SOLAR, INC.
By:	/s/ Michael J. Ahearn
Name:   Michael J. Ahearn
Title:     Chief Executive Officer
FIRST SOLAR ACQUISITION CORP.
By:	/s/ Mary Beth Gustafsson
Name:   Mary Beth Gustafsson
Title:     Vice President and General Counsel
OPTISOLAR INC.
By:	/s/ Randall S. Goldstein
Name:   Randall S. Goldstein
Title:     President and Chief Executive Officer
OPTISOLAR HOLDINGS LLC
By:	/s/ Randall S. Goldstein
Name:   Randall. S. Goldstein
Title:     President and Chief Executive Officer

EX-10.2

Exhibit 10.2

FIRST SOLAR, INC.

AMENDED & RESTATED 2006 OMNIBUS

INCENTIVE COMPENSATION PLAN

SECTION 1.  Purpose.  The purpose of this First Solar, Inc. Amended & Restated 2006 Omnibus Incentive Compensation Plan is to promote the interests of First Solar, Inc., a Delaware corporation (the “Company”), and its stockholders by (a) attracting and retaining exceptional directors, officers, employees and consultants (including prospective directors, officers, employees and consultants) of the Company and its Affiliates (as defined below) and (b) enabling such individuals to participate in the long-term growth and financial success of the Company.

SECTION 2.  Definitions.  As used herein, the following terms shall have the meanings set forth below:

“Affiliate” means (a) any entity that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (b) any entity in which the Company has a significant equity interest, in either case as determined by the Committee.

“Award” means any award that is permitted under Section 6 and granted under the Plan.

“Award Agreement” means any written agreement, contract or other instrument or document evidencing any Award, which may, but need not, require execution or acknowledgment by a Participant.

“Board” means the Board of Directors of the Company.

“Cash Incentive Award” shall have the meaning specified in Section 6(f).

“Change of Control” shall (a) have the meaning set forth in an Award Agreement or (b) if there is no definition set forth in an Award Agreement, mean the occurrence of any of the following events, not including any events occurring prior to or in connection with the initial public offering of Shares (including the occurrence of such initial public offering):

(i)  during any period of 24 consecutive months, individuals who were members of the Board at the beginning of such period (the “Incumbent Directors”) cease at any time during such period for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the beginning of such period whose appointment or election, or nomination for election, by the Company’s stockholders was approved by a vote of at least a majority of the Incumbent Directors shall be considered as though such individual were an Incumbent Director, but excluding, for purposes of this proviso, any such individual whose initial

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assumption of office occurs as a result of an actual or threatened proxy contest with respect to election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (as such term is used in Section 13(d) of the Exchange Act) (each, a “Person”), other than the Board or any Specified Shareholder;

(ii)  the consummation of (A) a merger, consolidation, statutory share exchange or similar form of corporate transaction involving (x) the Company or (y) any of its Subsidiaries, but in the case of this clause (y) only if Company Voting Securities (as defined below) are issued or issuable in connection with such transaction (each of the transactions referred to in this clause (A), being hereinafter referred to as a “Reorganization”) or (B) a sale or other disposition of all or substantially all the assets of the Company (a “Sale”), unless, immediately following such Reorganization or Sale, (1) all or substantially all the individuals and entities who were the “beneficial owners” (as such term is defined in Rule 13d-3 under the Exchange Act (or a successor rule thereto)) of shares of the Company’s common stock or other securities eligible to vote for the election of the Board outstanding immediately prior to the consummation of such Reorganization or Sale (such securities, the “Company Voting Securities”) beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities of the corporation or other entity resulting from such Reorganization or Sale (including a corporation or other entity that, as a result of such transaction, owns the Company or all or substantially all the Company’s assets either directly or through one or more subsidiaries) (the “Continuing Entity”) in substantially the same proportions as their ownership, immediately prior to the consummation of such Reorganization or Sale, of the outstanding Company Voting Securities (excluding any outstanding voting securities of the Continuing Entity that such beneficial owners hold immediately following the consummation of such Reorganization or Sale as a result of their ownership prior to such consummation of voting securities of any corporation or other entity involved in or forming part of such Reorganization or Sale other than the Company or a Subsidiary), (2) no Person (excluding (x) any employee benefit plan (or related trust) sponsored or maintained by the Continuing Entity or any corporation or other entity controlled by the Continuing Entity and (y) any Specified Shareholder beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities of the Continuing Entity and (3) at least a majority of the members of the board of directors or other governing body of the Continuing Entity were Incumbent Directors at the time of the execution of the definitive agreement providing for such Reorganization or Sale or, in the absence of such an agreement, at the time at which approval of the Board was obtained for such Reorganization or Sale;

(iii)  the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, unless such liquidation or dissolution is part of

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a transaction or series of transactions described in paragraph (ii) above that does not otherwise constitute a Change of Control; or

(iv)  any Person, corporation or other entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) other than any Specified Shareholder becomes the beneficial owner, directly or indirectly, of securities of the Company representing a percentage of the combined voting power of the Company Voting Securities that is equal to or greater than the greater of (x) 20% and (y) the percentage of the combined voting power of the Company Voting Securities beneficially owned directly or indirectly by the Specified Shareholders at such time; provided, however, that for purposes of this subparagraph (iv) (and not for purposes of subparagraphs (i) through (iii) above), the following acquisitions shall not constitute a Change in Control:  (A) any acquisition by the Company or any Subsidiary, (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) any acquisition by an underwriter temporarily holding such Company Voting Securities pursuant to an offering of such securities or (D) any acquisition pursuant to a Reorganization or Sale that does not constitute a Change in Control for purposes of subparagraph (ii) above.

 “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder.

“Committee” means the compensation committee of the Board, or such other committee of the Board as may be designated by the Board to administer the Plan.

 “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute thereto.

“Exercise Price” means (a) in the case of Options, the price specified in the applicable Award Agreement as the price-per-Share at which Shares may be purchased pursuant to such Option or (b) in the case of SARs, the price specified in the applicable Award Agreement as the reference price-per-Share used to calculate the amount payable to the Participant.

“Fair Market Value” means (a) with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee and (b) with respect to the Shares, as of any date, (i) the closing per share sales price of the Shares (A) as reported by NASDAQ for such date or (B) if the Shares are listed on any other national stock exchange, as reported on the stock exchange composite tape for securities traded on such stock exchange for such date or, with respect to each of clauses (A) and (B), if there were no sales on such date, on the closest preceding date on which there were sales of Shares

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or (ii) in the event there shall be no public market for the Shares on such date, the fair market value of the Shares as determined in good faith by the Committee.

“Incentive Stock Option” means an option to purchase Shares from the Company that (a) is granted under Section 6 and (b) is intended to qualify for special Federal income tax treatment pursuant to Sections 421 and 422 of the Code, as now constituted or subsequently amended, or pursuant to a successor provision of the Code, and which is so designated in the applicable Award Agreement.

“Independent Director” means a member of the Board who is neither (a) an employee of the Company nor (b) an employee of any Affiliate, and who, at the time of acting, is a “Non-Employee Director” under Rule 16b-3.

“IRS” means the Internal Revenue Service or any successor thereto and includes the staff thereof.

“NASDAQ” means the National Association of Securities Dealers Autmomated Quotation system.

“Nonqualified Stock Option” means an option to purchase Shares from the Company that (a) is granted under Section 6 and (b) is not an Incentive Stock Option.

“Option” means an Incentive Stock Option or a Nonqualified Stock Option or both, as the context requires.

“Participant” means any director, officer, employee or consultant (including any prospective director, officer, employee or consultant) of the Company or its Affiliates who is eligible for an Award under Section 5 and who is selected by the Committee to receive an Award under the Plan or who receives a Substitute Award pursuant to Section 4(c).

“Performance Compensation Award” means any Award designated by the Committee as a Performance Compensation Award pursuant to Section 6(e).

“Performance Criteria” means the criterion or criteria that the Committee shall select for purposes of establishing a Performance Goal for a Performance Period with respect to any Performance Compensation Award, Performance Unit or Cash Incentive Award under the Plan.

“Performance Formula” means, for a Performance Period, the one or more objective formulas applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award, Performance Unit or Cash Incentive

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Award of a particular Participant, whether all, a portion or none of the Award has been earned for the Performance Period.

“Performance Goal” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria.

“Performance Period” means the one or more periods of time as the Committee may select over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Compensation Award, Performance Unit or Cash Incentive Award.

“Performance Unit” means an Award under Section 6(f) that has a value set by the Committee (or that is determined by reference to a valuation formula specified by the Committee or the Fair Market Value of Shares), which value may be paid to the Participant by delivery of such property as the Committee shall determine, including without limitation, cash or Shares, or any combination thereof, upon achievement of such Performance Goals during the relevant Performance Period as the Committee shall establish at the time of such Award or thereafter.

“Plan” means this First Solar Holdings, Inc. 2006 Omnibus Incentive Compensation Plan, as in effect from time to time.

“Restricted Share” means a Share delivered under the Plan that is subject to certain transfer restrictions, forfeiture provisions and/or other terms and conditions specified herein and in the applicable Award Agreement.

“RSU” means a restricted stock unit Award that is designated as such in the applicable Award Agreement and that represents an unfunded and unsecured promise to deliver Shares, cash, other securities, other Awards or other property in accordance with the terms of the applicable Award Agreement.

“Rule 16b-3” means Rule 16b-3 as promulgated and interpreted by the SEC under the Exchange Act or any successor rule or regulation thereto as in effect from time to time.

“SAR” means a stock appreciation right Award that represents an unfunded and unsecured promise to deliver Shares, cash, other securities, other Awards or other property equal in value to the excess, if any, of the Fair Market Value per Share over the Exercise Price per Share of the SAR, subject to the terms of the applicable Award Agreement.

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“SEC” means the Securities and Exchange Commission or any successor thereto and shall include the staff thereof.

“Shares” means shares of common stock of the Company, $0.001 par value, or such other securities of the Company (a) into which such shares shall be changed by reason of a recapitalization, merger, consolidation, split-up, combination, exchange of shares or other similar transaction or (b) as may be determined by the Committee pursuant to Section 4(b).

“Specified Shareholder” means JWMA Partners, LLC and, following the dissolution of JWMA Partners, LLC, any of (i) the Estate of John T. Walton and its beneficiaries, (ii) JCL Holdings, LLC and its beneficiaries, (iii) Michael J. Ahearn and any of his immediate family, (iv) any Person directly or indirectly controlled by any of the foregoing and (v) any trust for the direct or indirect benefit of any of the foregoing.

 “Subsidiary” means any entity in which the Company, directly or indirectly, possesses 50% or more of the total combined voting power of all classes of its stock.

“Substitute Awards” shall have the meaning specified in Section 4(c).

SECTION 3.  Administration.  a)Composition of Committee.  The Plan shall be administered by the Committee, which shall be composed of one or more directors, as determined by the Board; provided that after the date of the consummation of the initial public offering of Shares, to the extent necessary to comply with the rules of NASDAQ and Rule 16b-3 and to satisfy any applicable requirements of Section 162(m) of the Code and any other applicable laws or rules, the Committee shall be composed of two or more directors, all of whom shall be Independent Directors and all of whom shall (i) qualify as “outside directors” under Section 162(m) of the Code and (ii) meet the independence requirements of NASDAQ.

(b)  Authority of Committee.  Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have sole and plenary authority to administer the Plan, including, but not limited to, the authority to (i) designate Participants, (ii) determine the type or types of Awards to be granted to a Participant, (iii) determine the number of Shares to be covered by, or with respect to which payments, rights or other matters are to be calculated in connection with, Awards, (iv) determine the terms and conditions of any Awards, (v) determine the vesting schedules of Awards and, if certain performance criteria must be attained in order for an Award to vest or be settled or paid, establish such performance criteria and certify whether, and to what extent, such

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performance criteria have been attained, (vi) determine whether, to what extent and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended, (vii) determine whether, to what extent and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee, (viii) interpret, administer, reconcile any inconsistency in, correct any default in and supply any omission in, the Plan and any instrument or agreement relating to, or Award made under, the Plan, (ix) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan, (x) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards, (xi) amend an outstanding Award or grant a replacement Award for an Award previously granted under the Plan if, in its sole discretion, the Committee determines that (A) the tax consequences of such Award to the Company or the Participant differ from those consequences that were expected to occur on the date the Award was granted or (B) clarifications or interpretations of, or changes to, tax law or regulations permit Awards to be granted that have more favorable tax consequences than initially anticipated and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.

(c)  Committee Decisions.  Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole and plenary discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of any Award and any stockholder.

(d)  Indemnification.  No member of the Board, the Committee or any employee of the Company (each such person, a “Covered Person”) shall be liable for any action taken or omitted to be taken or any determination made in good faith with respect to the Plan or any Award hereunder.  Each Covered Person shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or incurred by such Covered Person in connection with or resulting from any action, suit or proceeding to which such Covered Person may be a party or in which such Covered Person may be involved by reason of any action taken or omitted to be taken under the Plan or any Award Agreement and (ii) any and all amounts paid by such Covered Person, with the Company’s approval, in settlement thereof, or paid by such Covered Person in satisfaction of any judgment in any such action, suit or proceeding against such Covered Person; provided that the Company shall have the right, at its own expense, to assume and defend any such action,

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suit or proceeding, and, once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice.  The foregoing right of indemnification shall not be available to a Covered Person to the extent that a court of competent jurisdiction in a final judgment or other final adjudication, in either case not subject to further appeal, determines that the acts or omissions of such Covered Person giving rise to the indemnification claim resulted from such Covered Person’s bad faith, fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Company’s Certificate of Incorporation or Bylaws.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which Covered Persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such persons or hold them harmless.

(e)  Delegation of Authority to Senior Officers.  The Committee may delegate, on such terms and conditions as it determines in its sole and plenary discretion, to one or more senior officers of the Company the authority to make grants of Awards to officers (other than executive officers), employees and consultants of the Company and its Affiliates (including any prospective officer, employee or consultant) and all necessary and appropriate decisions and determinations with respect thereto.

(f)  Awards to Independent Directors.  Notwithstanding anything to the contrary contained herein, the Board may, in its sole and plenary discretion, at any time and from time to time, grant Awards to Independent Directors or administer the Plan with respect to such Awards.  In any such case, the Board shall have all the authority and responsibility granted to the Committee herein.

SECTION 4.  Shares Available for Awards.  b)Shares Available.  Subject to adjustment as provided in Section 4(b), (i) the aggregate number of Shares that may be delivered pursuant to Awards granted under the Plan shall be 5,820,000, of which the maximum number of Shares that may be delivered pursuant to Incentive Stock Options granted under the Plan shall be 5,820,000 and the maximum number of Shares that may be delivered pursuant to Awards of Restricted Shares under the Plan shall be 2,910,000, provided that each such number of Shares does not reflect, and shall automatically be adjusted to take into account any stock distribution or stock split that occurs in connection with the initial public offering of Shares.  If, after the effective date of the Plan, any Award granted under the Plan is forfeited, or otherwise expires, terminates or is canceled without the delivery of Shares, then the Shares covered by such forfeited, expired, terminated or canceled Award shall again become available to be delivered pursuant to Awards under the Plan.  If Shares issued upon exercise, vesting or settlement of an Award, or Shares owned by a Participant (which are not subject to any pledge or other security interest), are surrendered or tendered to the Company in payment of the

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Exercise Price of an Award or any taxes required to be withheld in respect of an Award, in each case, in accordance with the terms and conditions of the Plan and any applicable Award Agreement, such surrendered or tendered Shares shall again become available to be delivered pursuant to Awards under the Plan; provided, however, that in no event shall such Shares increase the number of Shares that may be delivered pursuant to Incentive Stock Options granted under the Plan.  Subject to adjustment as provided in Section 4(b), (i) the maximum aggregate number of Shares with respect to which Awards may be granted to any Participant in any fiscal year of the Company shall be 679,000, provided that such number of Shares does not reflect, and shall automatically be adjusted to take into account any stock distribution or stock split that occurs in connection with the initial public offering of Shares, and (ii) the maximum aggregate amount of cash and other property (valued at its Fair Market Value) other than Shares that may be paid or delivered pursuant to Awards under the Plan to any Participant in any fiscal year of the Company shall be $20,000,000.

(b)  Adjustments for Changes in Capitalization and Similar Events.  c) In the event of any extraordinary dividend or other extraordinary distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, split-up or spin-off, the Committee shall, in order to preserve the value of the Award and in the manner determined by the Committee, adjust any or all of (A) the number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted, including (1) the aggregate number of Shares that may be delivered pursuant to Awards granted under the Plan, as provided in Section 4(a) and (2) the maximum number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted to any Participant in any fiscal year of the Company and (B) the terms of any outstanding Award, including (1) the number of Shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards or to which outstanding Awards relate and (2) the Exercise Price with respect to any Award.

(ii)  In the event that the Committee determines that any reorganization, merger, consolidation, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee in its discretion to be appropriate or desirable, then the Committee may (A) in such manner as it may deem equitable or desirable, adjust any or all of (1) the number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted, including (X) the aggregate number of Shares that may be delivered pursuant to Awards granted under the Plan, as provided in Section 4(a) and (Y) the maximum number of Shares or other securities of the Company (or number and

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kind of other securities or property) with respect to which Awards may be granted to any Participant in any fiscal year of the Company and (2) the terms of any outstanding Award, including (X) the number of Shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards or to which outstanding Awards relate and (Y) the Exercise Price with respect to any Award, (B) if deemed appropriate or desirable by the Committee, make provision for a cash payment to the holder of an outstanding Award in consideration for the cancelation of such Award, including, in the case of an outstanding Option or SAR, a cash payment to the holder of such Option or SAR in consideration for the cancelation of such Option or SAR in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the Shares subject to such Option or SAR over the aggregate Exercise Price of such Option or SAR and (C) if deemed appropriate or desirable by the Committee, cancel and terminate any Option or SAR having a per Share Exercise Price equal to, or in excess of, the Fair Market Value of a Share subject to such Option or SAR without any payment or consideration therefor.

(c)  Substitute Awards.  Awards may, in the discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by the Company or any of its Affiliates or a company acquired by the Company or any of its Affiliates or with which the Company or any of its Affiliates combines (“Substitute Awards”).  The number of Shares underlying any Substitute Awards shall be counted against the aggregate number of Shares available for Awards under the Plan; provided, however, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding awards previously granted by an entity that is acquired by the Company or any of its Affiliates or with which the Company or any of its Affiliates combines shall not be counted against the aggregate number of Shares available for Awards under the Plan; provided further, however, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding stock options intended to qualify for special tax treatment under Sections 421 and 422 of the Code that were previously granted by an entity that is acquired by the Company or any of its Affiliates or with which the Company or any of its Affiliates combines shall be counted against the aggregate number of Shares available for Incentive Stock Options under the Plan.

(d)  Sources of Shares Deliverable Under Awards.  Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares.

SECTION 5.  Eligibility.  Any director, officer, employee or consultant (including any prospective director, officer, employee or consultant) of the Company or any of its Affiliates shall be eligible to be designated a Participant.

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SECTION 6.  Awards.  d)Types of Awards.  Awards may be made under the Plan in the form of (i) Options, (ii) SARs, (iii) Restricted Shares, (iv) RSUs, (v) Performance Units, (vi) Cash Incentive Awards and (vii) other equity-based or equity-related Awards that the Committee determines are consistent with the purpose of the Plan and the interests of the Company.  Awards may be granted in tandem with other Awards.  No Incentive Stock Option (other than an Incentive Stock Option that may be assumed or issued by the Company in connection with a transaction to which Section 424(a) of the Code applies) may be granted to a person who is ineligible to receive an Incentive Stock Option under the Code.

(b)  Options.  e)Grant.  Subject to the provisions of the Plan, the Committee shall have sole and plenary authority to determine the Participants to whom Options shall be granted, the number of Shares to be covered by each Option, whether the Option will be an Incentive Stock Option or a Nonqualified Stock Option and the conditions and limitations applicable to the vesting and exercise of the Option.  In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code and any regulations related thereto, as may be amended from time to time.  All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option.  If an Option is intended to be an Incentive Stock Option, and if for any reason such Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan; provided that such Option (or portion thereof) otherwise complies with the Plan’s requirements relating to Nonqualified Stock Options.

(ii)  Exercise Price.  Except as otherwise established by the Committee at the time an Option is granted and set forth in the applicable Award Agreement, the Exercise Price of each Share covered by an Option shall be not less than 100% of the Fair Market Value of such Share (determined as of the date the Option is granted); provided, however, that (A) except as otherwise established by the Committee at the time an Option is granted and set forth in the applicable Award Agreement, the Exercise Price of each Share covered by an Option that is granted effective as of the Company’s initial public offering of Shares shall be the initial public offering price per Share and (B) in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Affiliate, the per Share Exercise Price shall be no less than 110% of the Fair Market Value per Share on the date of the grant.  Options are intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code.

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(iii)  Vesting and Exercise.  Each Option shall be vested and exercisable at such times, in such manner and subject to such terms and conditions as the Committee may, in its sole and plenary discretion, specify in the applicable Award Agreement or thereafter.  Except as otherwise specified by the Committee in the applicable Award Agreement, an Option may only be exercised to the extent that it has already vested at the time of exercise.  Except as otherwise specified by the Committee in the Award Agreement, Options shall become vested and exercisable with respect to one-fourth of the Shares subject to such Options on each of the first four anniversaries of the date of grant.  An Option shall be deemed to be exercised when written or electronic notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment pursuant to Section 6(b)(iv) for the Shares with respect to which the Award is exercised has been received by the Company.  Exercise of an Option in any manner shall result in a decrease in the number of Shares that thereafter may be available for sale under the Option and, except as expressly set forth in Section 4(c), in the number of Shares that may be available for purposes of the Plan, by the number of Shares as to which the Option is exercised.  The Committee may impose such conditions with respect to the exercise of Options, including, without limitation, any relating to the application of Federal or state securities laws, as it may deem necessary or advisable.

(iv)  Payment.  i)No Shares shall be delivered pursuant to any exercise of an Option until payment in full of the aggregate Exercise Price therefor is received by the Company, and the Participant has paid to the Company an amount equal to any Federal, state, local and foreign income and employment taxes required to be withheld.  Such payments may be made in cash (or its equivalent) or, in the Committee’s sole and plenary discretion, (1) by exchanging Shares owned by the Participant (which are not the subject of any pledge or other security interest) or (2) if there shall be a public market for the Shares at such time, subject to such rules as may be established by the Committee, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate Exercise Price, or by a combination of the foregoing; provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Shares so tendered to the Company as of the date of such tender is at least equal to such aggregate Exercise Price and the amount of any Federal, state, local or foreign income or employment taxes required to be withheld.

(B)  Wherever in the Plan or any Award Agreement a Participant is permitted to pay the Exercise Price of an Option or taxes relating to the exercise of an Option by delivering Shares, the Participant may, subject to procedures satisfactory to the Committee, satisfy such delivery requirement by presenting proof of beneficial ownership of such Shares, in which case the Company shall treat the Option as exercised

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without further payment and shall withhold such number of Shares from the Shares acquired by the exercise of the Option.

(v)  Expiration.  Except as otherwise set forth in the applicable Award Agreement, each Option shall expire immediately, without any payment, upon the earlier of (A) the tenth anniversary of the date the Option is granted and (B) either (x) 180 days after the date the Participant who is holding the Option ceases to be a director, officer, employee or consultant of the Company or one of its Affiliates for any reason other than the Participant's death or (y) six months after the date the Participant who is holding the Option ceases to be a director, officer, employee or consultant of the Company or one of its Affiliates by reason of the Participant's death.  In no event may an Option be exercisable after the tenth anniversary of the date the Option is granted.

(c)  SARs.  f)Grant.  Subject to the provisions of the Plan, the Committee shall have sole and plenary authority to determine the Participants to whom SARs shall be granted, the number of Shares to be covered by each SAR, the Exercise Price thereof and the conditions and limitations applicable to the exercise thereof.  SARs may be granted in tandem with another Award, in addition to another Award or freestanding and unrelated to another Award.  SARs granted in tandem with, or in addition to, an Award may be granted either at the same time as the Award or at a later time.

(ii)  Exercise Price.  Except as otherwise established by the Committee at the time a SAR is granted and set forth in the applicable Award Agreement, the Exercise Price of each Share covered by a SAR shall be not less than 100% of the Fair Market Value of such Share (determined as of the date the SAR is granted).  SARs are intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code.

(iii)  Exercise.  A SAR shall entitle the Participant to receive an amount equal to the excess, if any, of the Fair Market Value of a Share on the date of exercise of the SAR over the Exercise Price thereof.  The Committee shall determine, in its sole and plenary discretion, whether a SAR shall be settled in cash, Shares, other securities, other Awards, other property or a combination of any of the foregoing.

(iv)  Other Terms and Conditions.  Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine, at or after the grant of a SAR, the vesting criteria, term, methods of exercise, methods and form of settlement and any other terms and conditions of any SAR.  Any such determination by the Committee may be changed by the Committee from time to time and may govern the exercise of SARs granted or exercised thereafter.  The Committee may impose such conditions or restrictions on the exercise of any SAR as it shall deem appropriate or desirable.

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(d)  Restricted Shares and RSUs.  g)Grant.  Subject to the provisions of the Plan, the Committee shall have sole and plenary authority to determine the Participants to whom Restricted Shares and RSUs shall be granted, the number of Restricted Shares and RSUs to be granted to each Participant, the duration of the period during which, and the conditions, if any, under which, the Restricted Shares and RSUs may vest or may be forfeited to the Company and the other terms and conditions of such Awards.

(ii)  Transfer Restrictions.  Restricted Shares and RSUs may not be sold, assigned, transferred, pledged or otherwise encumbered except as provided in the Plan or as may be provided in the applicable Award Agreement; provided, however, that the Committee may in its discretion determine that Restricted Shares and RSUs may be transferred by the Participant.  Certificates issued in respect of Restricted Shares shall be registered in the name of the Participant and deposited by such Participant, together with a stock power endorsed in blank, with the Company or such other custodian as may be designated by the Committee or the Company, and shall be held by the Company or other custodian, as applicable, until such time as the restrictions applicable to such Restricted Shares lapse.  Upon the lapse of the restrictions applicable to such Restricted Shares, the Company or other custodian, as applicable, shall deliver such certificates to the Participant or the Participant’s legal representative.

(iii)  Payment/Lapse of Restrictions.  Each RSU shall be granted with respect to one Share or shall have a value equal to the Fair Market Value of one Share.  RSUs shall be paid in cash, Shares, other securities, other Awards or other property, as determined in the sole and plenary discretion of the Committee, upon the lapse of restrictions applicable thereto, or otherwise in accordance with the applicable Award Agreement.  If a Restricted Share or an RSU is intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code, all requirements set forth in Section 6(i) must be satisfied in order for the restrictions applicable thereto to lapse.

(e)  Performance Units.  i)Grant.  Subject to the provisions of the Plan, the Committee shall have sole and plenary authority to determine the Participants to whom Performance Units shall be granted and the terms and conditions thereof.

(ii)  Value of Performance Units.  Each Performance Unit shall have an initial value that is established by the Committee at the time of grant.  The Committee shall set Performance Goals in its discretion which, depending on the extent to which they are met during a Performance Period, will determine the number and value of Performance Units that will be paid out to the Participant.

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(iii)  Earning of Performance Units.  Subject to the provisions of the Plan, after the applicable Performance Period has ended, the holder of Performance Units shall be entitled to receive a payout of the number and value of Performance Units earned by the Participant over the Performance Period, to be determined by the Committee, in its sole and plenary discretion, as a function of the extent to which the corresponding Performance Goals have been achieved.

(iv)  Form and Timing of Payment of Performance Units.  Subject to the provisions of the Plan, the Committee, in its sole and plenary discretion, may pay earned Performance Units in the form of cash or in Shares (or in a combination thereof) that has an aggregate Fair Market Value equal to the value of the earned Performance Units at the close of the applicable Performance Period.  Such Shares may be granted subject to any restrictions in the applicable Award Agreement deemed appropriate by the Committee.  The determination of the Committee with respect to the form and timing of payout of such Awards shall be set forth in the applicable Award Agreement.  If a Performance Unit is intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code, all requirements set forth in Section 6(i) must be satisfied in order for a Participant to be entitled to payment.

(f)  Cash Incentive Awards.  Subject to the provisions of the Plan, the Committee, in its sole and plenary discretion, shall have the authority to grant Cash Incentive Awards.  The Committee shall establish Cash Incentive Award levels to determine the amount of a Cash Incentive Award payable upon the attainment of Performance Goals.  If a Cash Incentive Award is intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code, all requirements set forth in Section 6(i) must be satisfied in order for a Participant to be entitled to payment.

(g)  Other Stock-Based Awards.  Subject to the provisions of the Plan, the Committee shall have the sole and plenary authority to grant to Participants other equity-based or equity-related Awards (including, but not limited to, fully-vested Shares) in such amounts and subject to such terms and conditions as the Committee shall determine.  If such an Award is intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code, all requirements set forth in Section 6(i) must be satisfied in order for a Participant to be entitled to payment.

(h)  Dividend Equivalents.  In the sole and plenary discretion of the Committee, an Award, other than an Option, SAR or Cash Incentive Award, may provide the Participant with dividends or dividend equivalents, payable in cash, Shares, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee in its sole and plenary discretion, including, without limitation, payment directly to the Participant, withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional Shares, Restricted Shares or other Awards.

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(i)  Performance Compensation Awards.  ii) General.  The Committee shall have the authority, at the time of grant of any Award, to designate such Award (other than Options and SARs) as a Performance Compensation Award in order to qualify such Award as “qualified performance-based compensation” under Section 162(m) of the Code.  Options and SARs granted under the Plan shall not be included among Awards that are designated as Performance Compensation Awards under this Section 6(i).

(ii)  Eligibility.  The Committee shall, in its sole discretion, designate within the first 90 days of a Performance Period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code) which Participants will be eligible to receive Performance Compensation Awards in respect of such Performance Period.  However, designation of a Participant eligible to receive an Award hereunder for a Performance Period shall not in any manner entitle the Participant to receive payment in respect of any Performance Compensation Award for such Performance Period.  The determination as to whether or not such Participant becomes entitled to payment in respect of any Performance Compensation Award shall be decided solely in accordance with the provisions of this Section 6(i).  Moreover, designation of a Participant eligible to receive an Award hereunder for a particular Performance Period shall not require designation of such Participant eligible to receive an Award hereunder in any subsequent Performance Period and designation of one person as a Participant eligible to receive an Award hereunder shall not require designation of any other person as a Participant eligible to receive an Award hereunder in such period or in any other period.

(iii)  Discretion of Committee with Respect to Performance Compensation Awards.  With regard to a particular Performance Period, the Committee shall have full discretion to select the length of such Performance Period, the types of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goals, the kinds and levels of the Performance Goals that are to apply to the Company or any of its Subsidiaries, Affiliates, divisions or operational units, or any combination of the foregoing, and the Performance Formula.  Within the first 90 days of a Performance Period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence and record the same in writing.

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(iv)  Performance Criteria.  Notwithstanding the foregoing, the Performance Criteria that will be used to establish the Performance Goals shall be based on the attainment of specific levels of performance of the Company or any of its Subsidiaries, Affiliates, divisions or operational units, or any combination of the foregoing, and shall be limited to the following:  (A) net income before or after taxes, (B) earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization), (C) operating income, (D) earnings per share, (E) return on shareholders’ equity, (F) return on investment or capital, (G) return on assets, (H) level or amount of acquisitions, (I) share price, (J) profitability and profit margins, (K) market share (in the aggregate or by segment), (L) revenues or sales (based on units or dollars), (M) costs, (N) cash flow, (O) working capital, (P) cost per watt, (Q) megawatts produced, (R) watts per module, (S) conversion efficiency, (T) modules produced (U) produced production throughput rates, (V) bill of material costs, (W) production yields, (X) production expansion build and ramp times, (Y) module field performance, (Z) average sales price, (AA) budgeted expenses (operating and capital), (BB) inventory turns and (CC) accounts receivable levels.  Such performance criteria may be applied on an absolute basis and/or be relative to one or more peer companies of the Company or indices or any combination thereof.  To the extent required under Section 162(m) of the Code, the Committee shall, within the first 90 days of the applicable Performance Period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code), define in an objective manner the method of calculating the Performance Criteria it selects to use for such Performance Period.

(v)  Modification of Performance Goals.  The Committee is authorized at any time during the first 90 days of a Performance Period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code), or any time thereafter (but only to the extent the exercise of such authority after such 90-day period (or such shorter period, if applicable) would not cause the Performance Compensation Awards granted to any Participant for the Performance Period to fail to qualify as “qualified performance-based compensation” under Section 162(m) of the Code), in its sole and plenary discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period to the extent permitted under Section 162(m) of the Code (A) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development affecting the Company or any of its Affiliates, Subsidiaries, divisions or operating units (to the extent applicable to such Performance Goal) or (B) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company or any of its Affiliates, Subsidiaries, divisions or operating units (to the extent applicable to such Performance Goal), or the financial statements of the Company or any of its Affiliates, Subsidiaries, divisions or operating units (to the extent applicable to such Performance Goal), or of changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles, law or business conditions.

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(vi)  Payment of Performance Compensation Awards.  (1)Condition to Receipt of Payment.  A Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.  Notwithstanding the foregoing, in the discretion of the Committee, Performance Compensation Awards may be paid to Participants who have retired or whose employment has terminated prior to the last day of the Performance Period for which a Performance Compensation Award is made or to the designee or estate of a Participant who died prior to the last day of a Performance Period.

(B)  Limitation.  A Participant shall be eligible to receive payments in respect of a Performance Compensation Award only to the extent that (1) the Performance Goals for such period are achieved and certified by the Committee in accordance with Section 6(i)(vi)(C) and (2) the Performance Formula as applied against such Performance Goals determines that all or some portion of such Participant’s Performance Compensation Award has been earned for the Performance Period.

(C)  Certification.  Following the completion of a Performance Period, the Committee shall meet to review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, to calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula.  The Committee shall then determine the actual size of each Participant’s Performance Compensation Award for the Performance Period and, in so doing, may apply negative discretion as authorized by Section 6(i)(vi)(D).

(D)  Negative Discretion.  In determining the actual size of an individual Performance Compensation Award for a Performance Period, the Committee may, in its sole and plenary discretion, reduce or eliminate the amount of the Award earned in the Performance Period, even if applicable Performance Goals have been attained.

(E)  Timing of Award Payments.  The Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively possible following completion of the certifications required by Section 6(i)(vi)(C), unless the Committee shall determine that any Performance Compensation Award shall be deferred.

(F)  Discretion.In no event shall any discretionary authority granted to the Committee by the Plan be used to (1) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained, (2) increase a Performance Compensation Award for any Participant at any time after the first 90 days of the Performance Period (or, if shorter, the maximum period allowed under Section 162(m)) or (3) increase a Performance Compensation Award above the maximum amount payable under Section 4(a) of the Plan.

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SECTION 7.  Amendment and Termination.  h)Amendments to the Plan.  Subject to any applicable law or government regulation, to any requirement that must be satisfied if the Plan is intended to be a shareholder approved plan for purposes of Section 162(m) of the Code and to the rules of NASDAQ or any successor exchange or quotation system on which the Shares may be listed or quoted, the Plan may be amended, modified or terminated by the Board without the approval of the stockholders of the Company except that stockholder approval shall be required for any amendment that would (i) increase the maximum number of Shares for which Awards may be granted under the Plan or increase the maximum number of Shares that may be delivered pursuant to Incentive Stock Options granted under the Plan; provided, however, that any adjustment under Section 4(b) shall not constitute an increase for purposes of this Section 7(a) or (ii) change the class of employees or other individuals eligible to participate in the Plan.  No modification, amendment or termination of the Plan may, without the consent of the Participant to whom any Award shall theretofor have been granted, materially and adversely affect the rights of such Participant (or his or her transferee) under such Award, unless otherwise provided by the Committee in the applicable Award Agreement.

(b)  Amendments to Awards.  The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate any Award theretofor granted, prospectively or retroactively; provided, however, that, except as set forth in the Plan, unless otherwise provided by the Committee in the applicable Award Agreement, any such waiver, amendment, alteration, suspension, discontinuance, cancelation or termination that would materially and adversely impair the rights of any Participant or any holder or beneficiary of any Award theretofor granted shall not to that extent be effective without the consent of the impaired Participant, holder or beneficiary.

(c)  Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4(b) or the occurrence of a Change of Control) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles or law (i) whenever the Committee, in its sole and plenary discretion, determines that such adjustments are appropriate or desirable, including, without limitation, providing for a substitution or assumption of Awards, accelerating the exercisability of, lapse of restrictions on, or termination of, Awards or providing for a period of time for exercise prior to the occurrence of such event, (ii) if deemed appropriate or desirable by the Committee, in its sole and plenary discretion, by providing for a cash payment to the holder of an Award in consideration for the cancelation of such Award, including, in the case of an outstanding Option or SAR, a cash payment to the holder of such Option or SAR in consideration for the cancelation of such Option or SAR in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the Shares subject to such Option or SAR over the aggregate Exercise Price of such Option or SAR and (iii) if deemed appropriate or desirable by the Committee, in its sole and plenary discretion, by canceling and terminating any Option or SAR having a per Share Exercise Price equal to, or in excess of, the Fair Market Value of a Share subject to such Option or SAR without any payment or consideration therefor.

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SECTION 8.  Change of Control.  Unless otherwise provided in the applicable Award Agreement, in the event of a Change of Control after the date of the adoption of the Plan, unless provision is made in connection with the Change of Control for (a) assumption of Awards previously granted or (b) substitution for such Awards of new awards covering stock of a successor corporation or its “parent corporation” (as defined in Section 424(e) of the Code) or “subsidiary corporation” (as defined in Section 424(f) of the Code) with appropriate adjustments as to the number and kinds of shares and the Exercise Prices, if applicable, (i) any outstanding Options or SARs then held by Participants that are unexercisable or otherwise unvested shall automatically be deemed exercisable or otherwise vested, as the case may be, as of immediately prior to such Change of Control, (ii) all Performance Units and Cash Incentive Awards shall be paid out as if the date of the Change of Control were the last day of the applicable Performance Period and “target” performance levels had been attained and (iii) all other outstanding Awards (i.e., other than Options, SARs, Performance Units and Cash Incentive Awards) then held by Participants that are unexercisable, unvested or still subject to restrictions or forfeiture, shall automatically be deemed exercisable and vested and all restrictions and forfeiture provisions related thereto shall lapse as of immediately prior to such Change of Control.

SECTION 9.  General Provisions.  2)Nontransferability.  Except as otherwise specified in the applicable Award Agreement, during the Participant’s lifetime each Award (and any rights and obligations thereunder) shall be exercisable only by the Participant, or, if permissible under applicable law, by the Participant’s legal guardian or representative, and no Award (or any rights and obligations thereunder) may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that (i) the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance and (ii) the Board or the Committee may permit further transferability, on a general or specific basis, and may impose conditions and limitations on any permitted transferability; provided, however, that Incentive Stock Options granted under the Plan shall not be transferable in any way that would violate Section 1.422-2(a)(2) of the Treasury Regulations.  All terms and conditions of the Plan and all Award Agreements shall be binding upon any permitted successors and assigns.

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(b)  No Rights to Awards.  No Participant or other Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards.  The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated.

(c)  Share Certificates.  All certificates for Shares or other securities of the Company or any Affiliate delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award Agreement or the rules, regulations and other requirements of the SEC, NASDAQ or any other stock exchange or quotation system upon which such Shares or other securities are then listed or reported and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(d)  Withholding.  A Participant may be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to a Participant, the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in respect of an Award, its exercise or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such taxes.

(e)  Award Agreements.  Each Award hereunder shall be evidenced by an Award Agreement, which shall be delivered to the Participant and shall specify the terms and conditions of the Award and any rules applicable thereto, including, but not limited to, the effect on such Award of the death, disability or termination of employment or service of a Participant and the effect, if any, of such other events as may be determined by the Committee.

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(f)  No Limit on Other Compensation Arrangements.  Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, restricted stock, shares and other types of equity-based awards (subject to stockholder approval if such approval is required), and such arrangements may be either generally applicable or applicable only in specific cases.

(g)  No Right to Employment.  The grant of an Award shall not be construed as giving a Participant the right to be retained as a director, officer, employee or consultant of or to the Company or any Affiliate, nor shall it be construed as giving a Participant any rights to continued service on the Board.  Further, the Company or an Affiliate may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.

(h)  No Rights as Stockholder.  No Participant or holder or beneficiary of any Award shall have any rights as a stockholder with respect to any Shares to be distributed under the Plan until he or she has become the holder of such Shares.  In connection with each grant of Restricted Shares, except as provided in the applicable Award Agreement, the Participant shall not be entitled to the rights of a stockholder in respect of such Restricted Shares.  Except as otherwise provided in Section 4(b), Section 7(c) or the applicable Award Agreement, no adjustments shall be made for dividends or distributions on (whether ordinary or extraordinary, and whether in cash, Shares, other securities or other property), or other events relating to, Shares subject to an Award for which the record date is prior to the date such Shares are delivered.

(i)  Governing Law.  The validity, construction and effect of the Plan and any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Delaware, without giving effect to the conflict of laws provisions thereof.

(j)  Severability.  If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

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(k)  Other Laws.  The Committee may refuse to issue or transfer any Shares or other consideration under an Award if, acting in its sole and plenary discretion, it determines that the issuance or transfer of such Shares or such other consideration might violate any applicable law or regulation or entitle the Company to recover the same under Section 16(b) of the Exchange Act, and any payment tendered to the Company by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary.  Without limiting the generality of the foregoing, no Award granted hereunder shall be construed as an offer to sell securities of the Company, and no such offer shall be outstanding, unless and until the Committee in its sole and plenary discretion has determined that any such offer, if made, would be in compliance with all applicable requirements of the U.S. Federal and any other applicable securities laws.

(l)  No Trust or Fund Created.  Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate, on one hand, and a Participant or any other Person, on the other hand.  To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or such Affiliate.

(m)  No Fractional Shares.  No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.

(n)  Requirement of Consent and Notification of Election Under Section 83(b) of the Code or Similar Provision.  No election under Section 83(b) of the Code (to include in gross income in the year of transfer the amounts specified in Section 83(b) of the Code) or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award Agreement or by action of the Committee in writing prior to the making of such election.  If an Award recipient, in connection with the acquisition of Shares under the Plan or otherwise, is expressly permitted under the terms of the applicable Award Agreement or by such Committee action to make such an election and the Participant makes the election, the Participant shall notify the Committee of such election within ten days of filing notice of the election with the IRS or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code or other applicable provision.

(o)  Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code.  If any Participant shall make any disposition of Shares delivered pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions) or any successor provision of the Code, such Participant shall notify the Company of such disposition within ten days of such disposition.

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(p)  Headings.  Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

SECTION 10.  Term of the Plan.  a)Effective Date.  The Plan shall be effective as of the date of its adoption by the Board and approval by the Company's stockholders; provided, however, that no Incentive Stock Options may be granted under the Plan unless it is approved by the Company’s stockholders within twelve (12) months before or after the date the Plan is adopted by the Board.

(b)  Expiration Date.  No Award shall be granted under the Plan after the tenth anniversary of the date the Plan is approved under Section 10(a).  Unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award granted hereunder may, and the authority of the Board or the Committee to amend, alter, adjust, suspend, discontinue or terminate any such Award or to waive any conditions or rights under any such Award shall, nevertheless continue thereafter.

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EX-31.01

EXHIBIT 31.01

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 15 U.S.C. SECTION 7241, AS

ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Ahearn, certify that:

1. I have reviewed the quarterly report on Form 10-Q of First Solar, Inc., a Delaware corporation, for the period ended March 28, 2009, as filed with the Securities and Exchange Commission;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 30, 2009                                                                           /s/ MICHAEL J. AHEARN                                                                           

Michael J. Ahearn

Chief Executive Officer

EX-31.02

EXHIBIT 31.02

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 15 U.S.C. SECTION 7241, AS

ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jens Meyerhoff, certify that:

1. I have reviewed the quarterly report on Form 10-Q of First Solar, Inc., a Delaware corporation, for the period ended March 28, 2009, as filed with the Securities and Exchange Commission;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 30, 2009                                                                           /s/ JENS MEYERHOFF

Jens Meyerhoff

Chief Financial Officer

EX-32.01

EXHIBIT 32.01

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of First Solar, Inc., a Delaware corporation, for the period ended March 28, 2009, as filed with the Securities and Exchange Commission, each of the undersigned officers of First Solar, Inc. certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his respective knowledge:

(1) the quarterly report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of First Solar, Inc. for the periods presented therein.

Date: April 30, 2009                                                                           /s/ MICHAEL J. AHEARN

Michael J. Ahearn

Chief Executive Officer

Date: April 30, 2009                                                                           /s/ JENS MEYERHOFF

Jens Meyerhoff

Chief Financial Officer